Ian Lapey

Ian Lapey asked about the increase in New York commercial non-performing loans (NPLs), the drivers behind the uptick in "other expense" for the quarter, clarification on the 2026 expense guidance, and the outlook for branch growth or declines, particularly regarding expansion in Pasco County, Florida.

Answer

CFO Mike Ozimek clarified that the NPL increase was due to two multi-family relationships with typical collateral and personal guarantees, and attributed the "other expense" rise to year-end benefit adjustments and a $500,000 TrustCo Foundation funding for tax benefits. He confirmed the 2026 expense guidance of $27.7-$28.2 million (excluding ORE) as an across-the-board adjustment for "breathing room," expecting the lower end of the range. Chairman, President, and CEO Robert J. McCormick stated that while they are actively seeking a location in Pasco County, Florida, due to market demand, they are proceeding cautiously to secure the right price and location for new branches.

Ian Lapey from Gabelli Funds inquired about the expected net interest income upside, specifically asking for details on maturing Certificates of Deposit (CDs), including their average rates and comparison to current new CD offerings. He also asked for clarification on the nature of loan recoveries, particularly the $194,000 in New York, and the bank's branch expansion strategy, focusing on potential growth in Florida and New York.

Answer

President and CEO Robert McCormick explained that the highest current CD rate is 4% for a three-month term, and approximately $1 billion in CDs are maturing over the next four to six months at an average rate of 3.75%, presenting repricing opportunities. Regarding recoveries, Mr. McCormick attributed the $194,000 recovery to about five properties (one commercial, four residential) in a strong upstate real estate market, where transactions often occur before the bank repossesses. For branch expansion, Mr. McCormick confirmed interest in Pasco County, Florida, due to market dynamics, and other strategic "infill locations" in Florida and downstate New York, emphasizing a selective approach to new locations.

Ian Lapey inquired about the expected net interest income upside, specifically asking for quantification regarding maturing certificates of deposit (CDs). He sought details on the average rate of the $1 billion in CDs maturing over the next six months compared to current new CD rates. He also asked for clarification on the $194,000 in net recoveries for the quarter, specifically how many properties it represented and if it was due to significant borrower equity. Finally, he asked about future branch expansion plans, particularly in Florida and other potential infill locations, given the flat branch count.

Answer

Robert McCormick, President and CEO, explained that the highest new CD rate offered is 4% for a three-month term, while the $1 billion in CDs maturing over the next four to six months have an average rate of approximately 3.75%, indicating repricing opportunities. Regarding recoveries, Mr. McCormick attributed the $194,000 to about five properties (one commercial, four residential), noting that the strong upstate real estate market often leads to transactions before properties are repossessed. For branch expansion, he confirmed interest in Pasco County, Florida, due to observed loan demand and other infill opportunities in Florida and downstate New York, emphasizing a selective approach for the right locations and transactions.

Ian Lapey of Gabelli Funds asked about the geographic source of strong loan demand, comparing Florida to the Northeast. He also inquired about the interest rates on maturing CDs versus new offerings and the composition of the commercial loan portfolio.

Answer

President, CEO & Chairman Robert McCormick confirmed strong loan demand in both Florida and the Northeast, with Florida being slightly stronger. EVP & CFO Michael Ozimek noted that maturing CDs average a 3.91% rate, while new CDs are being issued around 4%. McCormick added that over 90% of the commercial loan portfolio is secured by real estate, focusing on smaller multifamily and office projects.

Ian Lapey from Gabelli Funds inquired about the drivers for the quarter's higher capital expenditures and whether spending would return to lower, more typical levels in the future.

Answer

President and CEO William Boor and EVP and CFO Allison Aden clarified that the increased CapEx was not related to the recent brand realignment but was driven by a series of successful, high-return investments in plant modernization and efficiency. They indicated that while spending can be lumpy based on project timing, the Q1 level does not signal a new, sustained upward trend in capital spending.