10-Q 1 ef20026316_10q.htm 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________

Commission File Number 000-10592

TRUSTCO BANK CORP NY
(Exact name of registrant as specified in its charter)

NEW YORK
14-1630287
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

5 SARNOWSKI DRIVE, GLENVILLE, NEW YORK
12302
(Address of principal executive offices)
(Zip Code)
 
(518) 377-3311
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol (s)
Name of each exchange on which registered
Common Stock, $1.00 par value
TRST
Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.  (Check one):

Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock
Number of Shares Outstanding
as of April 30, 2024
$1 Par Value
19,024,433



TrustCo Bank Corp NY

INDEX

DESCRIPTION
PAGE NO.
     
3
   
Part I.
FINANCIAL INFORMATION

   
Item 1.
Consolidated Interim Financial Statements (Unaudited):

 
 

 
6
 
 
 
 
7
 
 
 
 
8
 
 
 
 
9
 
 
 
 
10
 
 
 
 
11-44
 
 
 
 
45
 
 
 
Item 2.
46-62
 
 
 
Item 3.
63
 
 
 
Item 4.
63
 
 
 
Part II.
OTHER INFORMATION
 
 
 
 
Item 1.
64
 
 
 
Item 1A.
64
 
 
 
Item 2.
64
 
 
 
Item 3.
65
 
 
 
Item 4.
65
 
 
 
Item 5.
65
 
 
 
Item 6.
65

2

Forward Looking Statements
Statements included in this report and in future filings by TrustCo with the Securities and Exchange Commission, in TrustCo’s press releases, and in oral statements made with the approval of an authorized executive officer that are not historical or current facts, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected.  Forward-looking statements can be identified by the use of such words as may, will, should, could, would, estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions.  TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

In addition to factors described under Part II, Item 1A, Risk Factors, and under the Risk Factor discussion in TrustCo’s Annual Report on Form 10-K for the year ended December 31, 2023, the factors listed below, 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.  Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be heightened by volatility in financial markets and macroeconomic or geopolitical concerns related to ongoing inflation, continued elevated interest rates and ongoing armed conflicts (including the Russia/Ukraine conflict and the conflict in Israel and surrounding areas).
 
Risks Related to Our Operations
 

changes in interest rates may significantly impact our financial condition and results of operations;

ongoing inflationary pressures and continued elevated prices may affect our results of operations and financial condition;

exposure to credit risk in our lending activities;

our commercial loan portfolio is increasing and the inherently higher risk of loss may lead to additional provisions for credit losses or charge-offs, which would negatively impact earnings and capital;

the allowance for credit losses on loans (“ACLL”) is not sufficient to cover expected loan losses, resulting in a decrease in earnings;

our inability to meet the cash flow requirements of our depositors or borrowers or meet our operating cash needs to fund corporate expansion and other activities;

we are subject to claims and litigation pertaining to fiduciary responsibility and lender liability;

our dependency upon the services of the management team;

our disclosure controls and procedures may not prevent or detect all errors or acts of fraud;

if the business continuity and disaster recovery plans that we have in place are not adequate to continue our operations in the event of a disaster, the business disruption can adversely impact its operations;

our risk management framework may not be effective in mitigating risk and loss;

new lines of business or new products and services may subject us to additional risks;

we are exposed to climate risk;

societal responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers;

increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks
 
3

Risks Related to Market Conditions
 

a prolonged economic downturn, especially one affecting our geographic market area, will adversely affect our operations and financial results;

instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a material adverse effect on our results of operations and financial condition;

any downgrade in the credit rating of the U.S. government or default by the U.S. government as a result of political conflicts over legislation to raise the U.S. government’s debt limit may have a material adverse effect on us;

the soundness of other financial institutions could adversely affect us;

any government shutdown could adversely affect the U.S. and global economy and our liquidity, financial condition and earnings;

the trust wealth management fees we receive may decrease as a result of poor investment performance, in either relative or absolute terms, which could decrease our revenues and net earnings;
 
Risks Related to Compliance and Regulation
 

regulatory capital rules could slow our growth, cause us to seek to raise additional capital, or both;

changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and our income;

changes in cybersecurity or privacy regulations may increase our compliance costs, limit our ability to gain insight from data and lead to increased scrutiny;

restrictions on data collection and use may limit opportunities to gain business insights useful to running our business and offering innovative products and services;

non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions;

changes in tax laws may adversely affect us, and the Internal Revenue Service or a court may disagree with our tax positions, which may result in adverse effects on our business, financial condition, and results of operations or cash flows;

our ability to pay dividends is subject to regulatory limitations and other limitations that may affect our ability to pay dividends to our stockholders or to repurchase our common stock;

we may be subject to a higher effective tax rate if Trustco Realty Corp. (“Trustco Realty”) fails to qualify as a real estate investment trust (“REIT”);

changes in accounting standards could impact reported earnings;
 
4

Risks Related to Competition
 

strong competition within the Bank’s market areas could hurt profits and slow growth;

consumers and businesses are increasingly using non-banks to complete their financial transactions, which could adversely affect our business and results of operations;
 
Risks Related to Cybersecurity, Third Parties, and Technology
 

our business could be adversely affected by third-party service providers, data breaches, and cyber-attacks;

a failure in or breach of our operational or security systems or infrastructure, or those of third parties, could disrupt our businesses, and adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm;

unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, could severely harm our business;

we could suffer a material adverse impact from interruptions in the effective operation of, or security breaches affecting, our computer systems;
 
Risks Related to Ownership of Our Securities
 

provisions in our articles of incorporation and bylaws and New York law may discourage or prevent takeover attempts, and these provisions may have the effect of reducing the market price of our stock; and

we cannot guarantee that the allocation of capital to various alternatives, including stock repurchase plans, will enhance long-term stockholder value.
 
You should not rely upon forward-looking statements as predictions of future events.  Although TrustCo believes that the expectations reflected in the forward‑looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur.  The foregoing list should not be construed as exhaustive, and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events, except to the extent required by law.

5

TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share data)

    Three months ended  
 
March 31,
 
   
2024
   
2023
 
             
Interest and dividend income:
           
Interest and fees on loans
 
$
49,804
   
$
44,272
 
Interest and dividends on securities available for sale:
               
U. S. government sponsored enterprises
   
906
     
692
 
Mortgage-backed securities and collateralized mortgage obligations - residential
   
1,494
     
1,585
 
Corporate bonds
   
476
     
521
 
Small Business Administration-guaranteed participation securities
   
100
     
117
 
Other securities
   
3
     
2
 
Total interest and dividends on securities available for sale
   
2,979
     
2,917
 
                 
Interest on held to maturity securities:
               
Mortgage-backed securities and collateralized mortgage obligations-residential
   
68
     
78
 
Total interest on held to maturity securities
   
68
     
78
 
                 
Federal Home Loan Bank stock
   
152
     
110
 
Interest on federal funds sold and other short-term investments
   
6,750
     
6,555
 
Total interest income
   
59,753
     
53,932
 
                 
Interest expense:
               
Interest on deposits:
               
Interest-bearing checking
   
240
     
66
 
Savings accounts
   
712
     
530
 
Money market deposit accounts
   
2,342
     
814
 
Time deposits
   
19,677
     
5,272
 
Interest on short-term borrowings
   
204
     
285
 
Total interest expense
   
23,175
     
6,967
 
                 
Net interest income
   
36,578
     
46,965
 
Provision for credit losses
   
600
     
300
 
Net interest income after provision for credit losses
   
35,978
     
46,665
 
                 
Noninterest income:
               
Trustco financial services income
   
1,816
     
1,774
 
Fees for services to customers
   
2,745
     
2,648
 
Other
   
282
     
247
 
Total noninterest income
   
4,843
     
4,669
 
                 
Noninterest expenses:
               
Salaries and employee benefits
   
11,427
     
13,283
 
Net occupancy expense
   
4,611
     
4,598
 
Equipment expense
   
1,738
     
1,962
 
Professional services
   
1,460
     
1,607
 
Outsourced services
   
2,501
     
2,296
 
Advertising expense
   
408
     
390
 
FDIC and other insurance
   
1,094
     
1,052
 
Other real estate expense, net
   
74
     
225
 
Other
   
1,590
     
2,266
 
Total noninterest expenses
   
24,903
     
27,679
 
                 
Income before taxes
   
15,918
     
23,655
 
Income taxes
   
3,792
     
5,909
 
                 
Net income
 
$
12,126
   
$
17,746
 
                 
Net income per share:
               
- Basic
 
$
0.64
   
$
0.93
 
                 
- Diluted
 
$
0.64
   
$
0.93
 

See accompanying notes to unaudited consolidated interim financial statements.

6

TRUSTCO BANK CORP NY
Consolidated Statements of Comprehensive Income (Unaudited)
(dollars in thousands)

   
Three months ended
 
 
March 31,
 
   
2024
   
2023
 
             
Net income
 
$
12,126
   
$
17,746
 
                 
Net unrealized holding (loss) gain on securities available for sale
   
(1,872
)
   
5,251
 
Tax effect
   
494
     
(1,350
)
                 
Net unrealized (loss) gain on securities available for sale, net of tax
   
(1,378
)
   
3,901
 
                 
Amortization of net actuarial gain
   
(203
)
   
(114
)
Amortization of prior service cost
   
3
     
3
 
Tax effect
   
52
     
29
 
Amortization of net actuarial gain and prior service cost on pension and postretirement plans, net of tax
   
(148
)
   
(82
)
                 
Other comprehensive (loss) income, net of tax
   
(1,526
)
   
3,819
 
Comprehensive income
 
$
10,600
   
$
21,565
 

See accompanying notes to unaudited consolidated interim financial statements.

7

TRUSTCO BANK CORP NY
Consolidated Statements of Financial Condition (Unaudited)
(dollars in thousands, except share and per share data)

 
March 31, 2024
   
December 31, 2023
 
ASSETS:
           
             
Cash and due from banks
 
$
44,868
   
$
49,274
 
Federal funds sold and other short term investments
   
564,815
     
528,730
 
Total cash and cash equivalents
   
609,683
     
578,004
 
                 
Securities available for sale
   
426,241
     
452,289
 
Held to maturity securities ($6,108 and $6,396 fair value at March 31, 2024 and December 31, 2023, respectively)
    6,206       6,458  
                 
Federal Home Loan Bank stock    
6,203
     
6,203
 
Loans, net of deferred net costs
    5,005,506       5,002,879  
Less:
               
Allowance for credit losses on loans
   
49,220
     
48,578
 
Net loans
   
4,956,286
     
4,954,301
 
                 
Bank premises and equipment, net
   
33,423
     
34,007
 
Operating lease right-of-use assets
   
39,647
     
40,542
 
Other assets
   
101,881
     
96,387
 
                 
Total assets
 
$
6,179,570
   
$
6,168,191
 
                 
LIABILITIES:
               
Deposits:
               
Demand
 
$
742,997
   
$
754,532
 
Interest-bearing checking
   
1,020,136
     
1,015,213
 
Savings accounts
   
1,155,517
     
1,179,241
 
Money market deposit accounts
   
532,611
     
565,767
 
Time deposits
   
1,903,908
     
1,836,024
 
Total deposits
   
5,355,169
     
5,350,777
 
                 
Short-term borrowings
   
94,374
     
88,990
 
Operating lease liabilities
   
43,438
     
44,471
 
Accrued expenses and other liabilities
   
37,399
     
38,668
 
                 
Total liabilities
   
5,530,380
     
5,522,906
 
                 
SHAREHOLDERS’ EQUITY:
               
Capital stock par value $1.00; 30,000,000 shares authorized; 20,058,142 shares issued at March 31, 2024 and December 31, 2023, and 19,024,433 shares outstanding at March 31, 2024 and December 31, 2023, respectively
   
20,058
     
20,058
 
Surplus
   
257,335
     
257,181
 
Undivided profits
   
430,346
     
425,069
 
Accumulated other comprehensive loss, net of tax
   
(14,763
)
   
(13,237
)
Treasury stock at cost - 1,033,709 shares at March 31, 2024 and December 31, 2023, respectively
   
(43,786
)
   
(43,786
)
                 
Total shareholders’ equity
   
649,190
     
645,285
 
                 
Total liabilities and shareholders’ equity
 
$
6,179,570
   
$
6,168,191
 

See accompanying notes to unaudited consolidated interim financial statements.

8

TRUSTCO BANK CORP NY
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(dollars in thousands, except per share data)

                     
Accumulated
             
                     
Other
             
   
Capital
         
Undivided
   
Comprehensive
   
Treasury
       
   
Stock
   
Surplus
   
Profits
   
Loss
   
Stock
   
Total
 
                                     
Beginning balance, January 1, 2023
 
$
20,058
   
$
257,078
   
$
393,831
   
$
(27,194
)
 
$
(43,786
)
 
$
599,987
 
Net income
   
-
     
-
     
17,746
     
-
     
-
     
17,746
 
Other comprehensive income, net of tax
   
-
     
-
     
-
     
3,819
     
-
     
3,819
 
Cash dividend declared, $0.36 per share
   
-
     
-
     
(6,849
)
   
-
     
-
     
(6,849
)
 
                                               
Ending balance, March 31, 2023
 
$
20,058
   
$
257,078
   
$
404,728
   
$
(23,375
)
 
$
(43,786
)
 
$
614,703
 
 
                                               
Beginning balance, January 1, 2024
 
$
20,058
   
$
257,181
   
$
425,069
   
$
(13,237
)
 
$
(43,786
)
 
$
645,285
 
Net income
   
-
     
-
     
12,126
     
-
     
-
     
12,126
 
Other comprehensive loss, net of tax
   
-
     
-
     
-
     
(1,526
)
   
-
     
(1,526
)
Stock Based Compensation Expense
    -       154       -       -       -       154  
Cash dividend declared, $0.36 per share
   
-
     
-
     
(6,849
)
   
-
     
-
     
(6,849
)
 
                                               
Ending balance, March 31, 2024
 
$
20,058
   
$
257,335
   
$
430,346
   
$
(14,763
)
 
$
(43,786
)
 
$
649,190
 

See accompanying notes to unaudited consolidated interim financial statements.

9

TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)


 
Three months ended March 31,
 
   
2024
   
2023
 
             
Cash flows from operating activities:
           
Net income
 
$
12,126
   
$
17,746
 
                 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
   
1,085
     
1,008
 
Amortization of right-of-use asset
   
1,654
     
1,634
 
Net gain on sale of other real estate owned
   
-
     
(148
)
   Provision for credit losses
   
600
     
300
 
Deferred tax expense
   
1,447
     
1,816
 
Net amortization of securities
   
346
     
460
 
   Stock based compensation expense
    154       -  
Decrease in taxes receivable
   
3,844
     
5,456
 
Increase in interest receivable
   
(777
)
   
(198
)
Increase in interest payable
   
288
     
842
 
Increase in other assets
   
(4,224
)
   
(3,583
)
Decrease in operating lease liabilities
   
(1,792
)
   
(1,722
)
Decrease in accrued expenses and other liabilities
   
(4,855
)
   
(4,831
)
Total adjustments
   
(2,230
)
   
1,034
 
Net cash provided by operating activities
   
9,896
     
18,780
 
                 
Cash flows from investing activities:
               
Proceeds from sales, paydowns and calls of securities available for sale
   
8,841
     
14,659
 
Proceeds from paydowns of held to maturity securities
   
241
     
311
 
Purchases of securities available for sale
   
(20,000
)
   
(5,000
)
Proceeds from maturities of securities available for sale
   
35,000
     
-
 
Net increase in loans
   
(4,793
)
   
(66,328
)
Proceeds from dispositions of other real estate owned
   
68
     
340
 
Purchases of bank premises and equipment
   
(501
)
   
(757
)
Net cash provided by (used in) investing activities
   
18,856
     
(56,775
)
                 
Cash flows from financing activities:
               
Net increase in deposits
   
4,392
     
19,648
 
Net change in short-term borrowings
   
5,384
     
11,593
 
Dividends paid
   
(6,849
)
   
(6,861
)
Net cash provided by financing activities
   
2,927
     
24,380
 
Net increase (decrease) in cash and cash equivalents
   
31,679
     
(13,615
)
Cash and cash equivalents at beginning of period
   
578,004
     
650,599
 
Cash and cash equivalents at end of period
 
$
609,683
   
$
636,984
 
                 
Supplemental Disclosure of Cash Flow Information:
               
Cash paid during the year for:
               
Interest paid
 
$
22,887
   
$
6,125
 
Income taxes paid
   
494
     
471
 
Other non cash items:
               
Transfer of loans to other real estate owned
    2,208       -  
Increase (decrease) in dividends payable
    -       (12 )
Change in unrealized (loss) gain on securities available for sale-gross of deferred taxes
   
(1,872
)
   
5,251
 
Change in deferred tax effect on unrealized loss (gain) on securities available for sale
    494       (1,350 )
Amortization of net actuarial gain and prior service cost on pension and postretirement plans
   
(200
)
   
(111
)
Change in deferred tax effect of amortization of net actuarial gain postretirement benefit plans
   
52
     
29
 

See accompanying notes to unaudited consolidated interim financial statements.

10

TRUSTCO BANK CORP NY
Notes to Consolidated Interim Financial Statements
(Unaudited)

(1) Financial Statement Presentation


The unaudited Consolidated Interim Financial Statements of TrustCo Bank Corp NY (the “Company” or “TrustCo”) include the accounts of the Company’s subsidiary, Trustco Bank (also referred to as the “Bank”) and other subsidiaries after elimination of all significant intercompany accounts and transactions. Prior period amounts are reclassified when necessary to conform to the current period presentation. The net income reported for the three months ended March 31, 2024 is not necessarily indicative of the results that may be expected for the year ending December 31, 2024, or any interim periods. These financial statements consider events that occurred through the date of filing.



In the opinion of the management of the Company, the accompanying unaudited Consolidated Interim Financial Statements contain all recurring adjustments necessary to present fairly the financial position as of March 31, 2024, the results of operations and cash flows for the three months ended March 31, 2024 and 2023. The accompanying unaudited Consolidated Interim Financial Statements should be read in conjunction with the Company’s year‑end Consolidated Financial Statements, including notes thereto, which are included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2023. The accompanying unaudited Consolidated Interim Financial Statements have been prepared in accordance with the applicable rules of the Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States. Results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.



The accounting policies of the Company, as applied in the Consolidated Interim Financial Statements presented herein, are substantially the same as those followed on an annual basis in the Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 11, 2024.



Risks and Uncertainties: Industry events have led to a greater focus by financial institutions, investors and regulators on liquidity positions of and funding sources for financial institutions, the composition of their deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management. Present economic conditions have caused disruption to the banking system and any additional implications are uncertain. The Company believes that it has sufficient liquid assets and borrowing sources should there be a liquidity need.

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(2) Earnings Per Share

The Company computes earnings per share in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share (“ASC 260”). A reconciliation of the component parts of earnings per share for the three months ended March 31, 2024 and 2023 is as follows:

(in thousands, except per share data)   For the three months ended  

 
March 31,
 
   
2024
   
2023
 
Net income
 
$
12,126
   
$
17,746
 
Weighted average common shares
   
19,024
     
19,024
 
Stock Options and Restricted Stock Units
   
8
     
3
 
Weighted average common shares including potential dilutive shares
   
19,032
     
19,027
 
                 
Basic EPS
 
$
0.64
   
$
0.93
 
                 
Diluted EPS
 
$
0.64
   
$
0.93
 

For the three months, ended March 31, 2024 and 2023 there were approximately