TRUSTCO BANK CORP N Y [TRST] Filings

10-Q 1 ef20030086_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 June 30, 2024

☐ 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 July 31, 2024
$1 Par Value	19,010,433

TrustCo Bank Corp NY

INDEX

DESCRIPTION		PAGE NO.

Forward-Looking Statements		3

Part I.	FINANCIAL INFORMATION

Item 1.	Consolidated Interim Financial Statements (Unaudited):

	Consolidated Statements of Income for the three-month and six-month periods ended June 30, 2024 and 2023	6

	Consolidated Statements of Comprehensive Income for the three-month and six-month periods ended June 30, 2024 and 2023	7

	Consolidated Statements of Financial Condition as of June 30, 2024 and December 31, 2023	8

	Consolidated Statements of Changes in Shareholders’ Equity for the three-month and six-month periods ended June 30, 2024 and 2023	9

	Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2024 and 2023	10

	Notes to Consolidated Interim Financial Statements	11-49

	Report of Independent Registered Public Accounting Firm	50

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	51-71

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	72

Item 4.	Controls and Procedures	72

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	73

Item 1A.	Risk Factors	73

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75

Item 3.	Defaults Upon Senior Securities	75

Item 4.	Mine Safety Disclosures	75

Item 5.	Other Information	75

Item 6.	Exhibits	76

Index

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 have impacted and may continue to impact our financial condition and results of operations;

•

ongoing inflationary pressures and continued elevated prices have affected and may continue to 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 have been and may in the future be 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;

Index

•

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

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;

Index

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.

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Income (Unaudited)

(dollars in thousands, except per share data)

	Three months ended					Six months ended
	June 30,					June 30,
	2024		2023			2024		2023

Interest and dividend income:
Interest and fees on loans	$	50,660	$	46,062		$	100,464	$	90,334
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		909		691			1,815		1,383
State and political subdivisions		1		1			1		1
Mortgage-backed securities and collateralized mortgage obligations - residential		1,451		1,543			2,945		3,128
Corporate bonds		362		516			838		1,037
Small Business Administration-guaranteed participation securities		94		111			194		228
Other securities		2		3			5		5
Total interest and dividends on securities available for sale		2,819		2,865			5,798		5,782

Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential		65		75			133		153
Total interest on held to maturity securities		65		75			133		153

Federal Home Loan Bank stock		147		110			299		220
Interest on federal funds sold and other short-term investments		6,894		6,970			13,644		13,525
Total interest income		60,585		56,082			120,338		110,014

Interest expense:
Interest on deposits:
Interest-bearing checking		288		49			528		115
Savings accounts		675		655			1,387		1,185
Money market deposit accounts		2,228		1,756			4,570		2,570
Time deposits		19,400		9,291			39,077		14,563
Interest on short-term borrowings		206		279			410		564
Total interest expense		22,797		12,030			45,972		18,997

Net interest income		37,788		44,052			74,366		91,017
Provision (Credit) for credit losses		500		(500	)		1,100		(200	)
Net interest income after provision (credit) for credit losses		37,288		44,552			73,266		91,217

Noninterest income:
Trustco financial services income		1,609		1,412			3,425		3,186
Fees for services to customers		2,399		2,847			5,144		5,495
Unrealized gain recognized on equity securities		1,360		-			1,360		-
Other		283		339			565		586
Total noninterest income		5,651		4,598			10,494		9,267

Noninterest expenses:
Salaries and employee benefits		12,520		13,122			23,947		26,405
Net occupancy expense		4,375		4,262			8,986		8,860
Equipment expense		1,990		1,873			3,728		3,835
Professional services		1,570		1,360			3,030		2,967
Outsourced services		2,755		2,491			5,256		4,787
Advertising expense		466		518			874		908
FDIC and other insurance		797		1,085			1,891		2,137
Other real estate expense, net		16		148			90		373
Other		1,970		2,468			3,560		4,734
Total noninterest expenses		26,459		27,327			51,362		55,006

Income before taxes		16,480		21,823			32,398		45,478
Income taxes		3,929		5,451			7,721		11,360

Net income	$	12,551	$	16,372		$	24,677	$	34,118

Net income per share:
- Basic	$	0.66	$	0.86		$	1.30	$	1.79

- Diluted	$	0.66	$	0.86		$	1.30	$	1.79

See accompanying notes to unaudited consolidated interim financial statements.

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Comprehensive Income (Unaudited)

(dollars in thousands)

	Three months ended					Six months ended
	June 30,					June 30,
	2024		2023			2024			2023

Net income	$	12,551	$	16,372		$	24,677		$	34,118

Net unrealized holding gain (loss) on securities available for sale		860		(3,718	)		(1,012	)		1,533