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TRUSTCO BANK CORP N Y (TRST)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered steady performance: net income rose to $11.3M ($0.59 diluted EPS) vs $9.8M ($0.52) in Q4 2023, with net interest income at $38.9M and efficiency ratio of 65.0% .
  • Margin trends are stabilizing: net interest margin was 2.60% (vs 2.61% in Q3 and 2.60% in Q4 2023) while net interest spread was 2.15% (vs 2.17% in Q3 and 2.21% in Q4 2023); management expects flattening and sees potential margin tailwinds if the Fed cuts further .
  • Credit quality remained solid: NPLs were 0.37% of loans; allowance/loans held at 0.99%; coverage stood at 267% .
  • Capital and book value advanced: equity/assets reached 10.84% and BVPS increased to $35.56 (+4.8% YoY) .
  • Potential stock catalysts: deposit repricing discipline and home equity momentum, plus new cannabis banking deposits initiative, with management entering 2025 “liquid, well‑capitalized and ready to lend” .

What Went Well and What Went Wrong

  • What Went Well

    • Net income grew YoY despite rate pressure; Q4 net income $11.3M vs $9.8M in Q4 2023; ROAA improved to 0.73% and ROAE to 6.70% .
    • Loan growth remained resilient, led by HELOCs; average HELOCs +17.9% YoY; average total loans +2.1% YoY .
    • Management emphasized strong positioning and discipline: “we enter 2025 liquid, well‑capitalized and ready to lend,” highlighting efficiency, capital strength, and relationship-driven growth .

  • What Went Wrong

    • Margin still compressed vs prior year: net interest spread 2.15% vs 2.21% in Q4 2023, reflecting ongoing deposit/asset yield dynamics .
    • Noninterest expense ticked higher sequentially (to $28.2M vs $26.2M in Q3) due to equipment/outsourced and ORE expense; management does not expect those higher equipment/outsourced costs to persist .
    • Efficiency ratio worsened QoQ (65.0% vs 60.1%) amid higher operating costs and slightly lower noninterest income, though still manageable .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Net Interest Income ($MM)$38.607 $38.671 $38.902
Noninterest Income ($MM)$4.474 $4.931 $4.409
Provision for Credit Losses ($MM)$1.350 $0.500 $0.400
Net Income ($MM)$9.848 $12.875 $11.281
Diluted EPS ($)$0.52 $0.68 $0.59
Net Interest Margin (%)2.60% 2.61% 2.60%
Net Interest Spread (%)2.21% 2.17% 2.15%
Efficiency Ratio (%)66.92% 59.65% 65.03%
ROAA (%)0.64% 0.84% 0.73%
ROAE (%)6.21% 7.74% 6.70%

KPIs and Balance Sheet

KPIQ4 2023Q3 2024Q4 2024
Loans Outstanding, period-end ($B)$5.003B $5.071B $5.098B
Deposits, period-end ($B)$5.351B $5.264B $5.391B
Average Loans ($B)$4.984B $5.050B $5.089B
Equity/Assets (%)10.46% 10.95% 10.84%
Book Value/Share ($)$33.92 $35.19 $35.56
NPLs/Total Loans (%)0.35% 0.38% 0.37%
NPLs ($MM)$17.666 $19.444 $18.800
ACL/Loans (%)0.97% 0.99% 0.99%
Coverage Ratio (ACL/NPLs) (%)275.0% 256.9% 267.3%

Segment breakdown: Not applicable; TRST reports as a single banking franchise.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Recurring Noninterest Expense (ex-ORE), $MMQuarterly run-rateN/A$27.5–$28.0M per quarter (management expectation) New framework
Net Interest Margin TrajectoryNear-termN/AMargin erosion “flattening”; further Fed cuts would help margin expansion Qualitative
Time Deposit PricingCurrent offersN/A6–9 mo at 4.15%; 12 mo at 4.00% (as of January) Informational
Dividend per ShareQuarterly$0.36 (historical) $0.36 declared 2/19/2025 (annualized $1.44) Maintained

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
Net Interest Margin & Deposit CostsNIM up 9 bps QoQ to 2.53%; cost of interest-bearing liabilities fell to 1.97% NIM up to 2.61%; cost of bearing liabilities down to 1.94% NIM 2.60%; spread 2.15%; deposit cost rose modestly to 1.97%; margin “flattening,” Fed cuts a tailwind Stabilizing
Home Equity & Residential LendingAvg HELOC +20.1% YoY; residential +2.1% YoY Avg HELOC +18.7% YoY; residential +1.2% YoY Avg HELOC +17.9% YoY; residential +0.8% YoY; “spring market” optimism for purchase mortgages Continued strength; potential purchase uptick
Asset QualityNPLs 0.38% of loans; strong coverage 259% NPLs 0.38%; coverage 257% NPLs 0.37%; coverage 267%; management “not concerned” Stable/Solid
Capital & Book ValueEquity/assets 10.73%; BVPS $34.46 Equity/assets 10.95%; BVPS $35.19 Equity/assets 10.84%; BVPS $35.56 Strong/steady
Efficiency & ExpensesEfficiency ratio 62.8% (higher QoQ), expenses up on comp Efficiency ratio 59.7% (improved), expenses down QoQ Efficiency ratio 65.0% (worse QoQ), expenses up on equipment/outsourced/ORE; 2025 run-rate $27.5–$28.0M ex-ORE Mixed; selective cost pressure
Technology & InitiativesNot highlightedNot highlightedInvesting in technology to enhance efficiency/customer experience; launching cannabis banking (deposit focus) New initiatives

Management Commentary

  • CEO framing: “The story of Trustco Bank for 2024 is one of efficiency, strength, and shareholder value… We come into 2025 well‑capitalized, liquid, and ready to lend.” .
  • Strategic emphasis: Leveraging customer relationships and branch network to drive home equity volume where purchase mortgage volume lagged; home equity exceeded purchase volume in 2024 .
  • Outlook on real estate: “Optimism is coming back… we may end up with a spring market again” as the bank targets purchase money mortgages and refinances programs .
  • Balance sheet discipline: Continued lowering of CD rates while retaining/growing balances; margin “flattening” with potential benefit from further rate cuts .

Q&A Highlights

  • NIM path and deposit pricing: Management is repricing CDs lower (6–9 mo at 4.15%; 12 mo at 4.00%), expects NIM to flatten; further Fed cuts would likely aid margin expansion .
  • Expense lines: Equipment and outsourced services jumped due to branch clean-ups, new ATMs, and write-offs; not expected to persist at elevated levels .
  • Credit risk: Management remains comfortable; conservative underwriting and modest commercial exposure underpin benign credit outlook .
  • Growth optionality in CRE: Willing to grow commercial loans opportunistically (long-term target up to ~$300–$325M) as peers pull back, but will proceed “slow and steady” .
  • Cannabis banking: Focused on deposits from small retail operators, most activity in NY and MA; FL medical-only at present .

Estimates Context

  • Wall Street consensus estimates (EPS, revenue) via S&P Global were unavailable at the time of this analysis; therefore, no beat/miss comparison is provided. If required, we can refresh and add the comparisons once data access resumes.

Key Takeaways for Investors

  • Loan growth resilience with HELOC-led momentum and a potentially improving purchase mortgage backdrop into 2025 supports stable core earnings power .
  • Margin appears near an inflection: disciplined CD repricing and prospective Fed cuts could aid spread expansion after a year of compression; monitor deposit beta and asset yield progression .
  • Credit quality remains a core strength with low NPLs, minimal charge-offs, and robust coverage—mitigating downside risk in a softening rate environment .
  • Operating cost control is a watch item after Q4’s sequential uptick; management’s $27.5–$28.0M ex-ORE quarterly run-rate is the new yardstick for 2025 .
  • Capital strength and BVPS growth (10.84% equity/assets; $35.56 BVPS) underpin ongoing dividend sustainability ($0.36/qtr) and strategic flexibility .
  • New initiatives (technology upgrades, cannabis banking deposits) expand funding channels and service capabilities without stretching credit risk appetite .
  • Near-term setup: narrative catalysts include confirmation of NIM stabilization, tangible evidence of purchase mortgage pickup, and expense run-rate adherence; any acceleration in deposit cost relief or HELOC utilization would be incrementally positive .

Additional Supporting Data (YoY and Sequential Context)

  • Q4 vs Q4: Net interest income +0.8% YoY; net income +14.6% YoY; ROAA 0.73% vs 0.64%; ROAE 6.70% vs 6.21% .
  • Sequential (Q4 vs Q3): Net interest income +$0.231M; NIM 2.60% vs 2.61%; efficiency ratio 65.0% vs 60.1% .
  • Year-end 2024: Full-year net income $48.8M; NIM 2.54%; efficiency ratio 61.55%; BVPS $35.56 .