10-K: TrustCo Bank Corp NY Reports Solid Performance Amidst Economic Volatility in 2024

Sentiment:

Annual Report 14 March 2025 4:28 PM

TrustCo Bank Corp NY demonstrates resilience with steady growth in loans and deposits, maintaining a strong capital position despite a challenging economic landscape in 2024.

Worse than expectedNet income decreased from $58.6 million in 2023 to $48.8 million in 2024.Net interest income decreased by $19.9 million from 2023 to 2024.Return on average equity decreased from 9.46% in 2023 to 7.43% in 2024.Return on average assets decreased from 0.97% in 2023 to 0.80% in 2024.

Summary

TrustCo Bank Corp NY reported a net income of $48.8 million, or $2.57 diluted earnings per share, for 2024.
The company experienced a $95.2 million increase in period-end loans and a $40.2 million increase in period-end deposits compared to the previous year.
GAAP net interest income was $151.9 million in 2024.
The company's efficiency ratio (GAAP) and adjusted efficiency ratio (non-GAAP) remained strong at 61.55% and 61.60%, respectively.
The company's regulatory capital levels remained strong, with the bank meeting the definition of 'well capitalized' for regulatory purposes.
The FOMC reduced the federal funds rate by 50 basis points in September 2024 and by an additional 25 basis points in November 2024, to a range of 4.50 percent to 4.75 percent.
The company rolled out a new business line providing banking services to the cannabis industry and renewed its contract with Fiserv for back-office support.
The company purchased a new building in Longwood, Florida, to accommodate existing operations and provide room for future growth.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While it highlights the company's resilience and growth in certain areas, it also acknowledges a decrease in net income and profitability metrics. The overall tone is cautiously optimistic, reflecting the challenges and opportunities in the current economic environment.

Positives

The company experienced growth in both its loan and deposit portfolios.
The company maintained strong regulatory capital levels.
The company's efficiency ratio remained competitive compared to its peers.
The company expanded its services by entering the cannabis banking sector.
The company invested in future growth by purchasing a new facility in Florida.

Negatives

Net income decreased from $58.6 million in 2023 to $48.8 million in 2024.
Net interest income decreased by $19.9 million from 2023 to 2024.
Return on average equity decreased from 9.46% in 2023 to 7.43% in 2024.
Return on average assets decreased from 0.97% in 2023 to 0.80% in 2024.

Risks

Changes in interest rates may significantly impact the company's financial condition and results of operations.
External economic factors, such as changes in monetary policy and inflation, may have an adverse effect on the company's business.
Weakness in the residential real estate markets could adversely affect the company's performance.
The strict enforcement of federal laws and regulations regarding cannabis could result in the company's inability to continue providing financial products and services to customers in that industry.
The company is exposed to climate risk, which could impact its costs, facilities, and the value of mortgage collateral.

Future Outlook

While the FOMC has initiated a rate easing cycle, the range of potential rate paths over the coming year is wide and will ultimately be driven by the path of inflation, labor market performance and economic growth.

Management Comments

Robert J. McCormick, Chairman, President, and Chief Executive Officer, stated that the essence of being an independent and strong hometown bank is having solid fundamentals.
He also noted the team's unwavering commitment to excellence and dedication to treating all stakeholders fairly and with respect.

Industry Context

The report provides insights into how TrustCo is navigating the current economic environment, characterized by fluctuating interest rates, inflation, and geopolitical uncertainties, while maintaining a focus on traditional banking services and community commitment.

Comparison to Industry Standards

The company's Tier 1 risk-based capital ratio of 19.30% for 2024 and 18.90% for 2023, compared favorably to peer medians of 12.41% in 2024 and 12.01% in 2023 for publicly traded banks and thrifts with assets of $2 billion to $10 billion.
The company's efficiency ratio and adjusted efficiency ratio of 61.55% and 61.60% for 2024, and 58.53% and 56.72% for 2023, respectively, were competitive compared to peer medians of 61.84% in 2024 and 60.85% in 2023.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Operating Officer	NA	Robert Leonard	2024	Promotion
Chief Banking Officer	NA	Kevin Curley	2024	Promotion

Legal Proceedings

Trustco Bank has reached an agreement to settle all claims thus asserted. That settlement agreement, which is subject to court approval, calls for the creation of a fund (Fund) to be overseen by a court-supervised administrator that will determine which Trustco Bank customers and former customers meet the criteria for participation in the settlement.
The total liability of TrustCo and Trustco Bank in connection with this settlement will be $2.75 million.

Related Party Transactions

A member of the Board of Directors has an ownership interest in five entities that own commercial real estate leased by the Company for use as branch locations.
Total future lease payments from the Company to those entities, which are included in the table above, at December 31, 2024, were $2.3 million, which includes interest in the amount of $236 thousand.
The Company paid total rent and fees to these entities in the amounts of $564 thousand, $534 thousand, and $500 thousand for the years ended December 31, 2024, 2023, and 2022, respectively.
As of December 31, 2024 and 2023, the Company had amounts no amounts outstanding due to the entities.

Stakeholder Impact

Shareholders: The company's performance impacts shareholder value, including stock price and dividend payments.
Employees: The company's financial health affects employee compensation, benefits, and job security.
Customers: The company's ability to provide competitive rates and services impacts customers.
Communities: The company's lending and community involvement support local economies.

Next Steps

The company will continue to focus on building customer relationships and expanding its branch network.
The company will monitor and manage its liquidity position and asset/liability mix.
The company will evaluate opportunities to deploy capital through organic growth, stock repurchases, and acquisitions.
The company will monitor the implementation of the Dodd-Frank Act and assess the effect of new regulations on its business.

Key Dates

Date	Description
1981	TrustCo was incorporated under the laws of New York.
1993	TrustCo created ORE Subsidiary Corp.
1995	Private Securities Litigation Reform Act of 1995.
March 5, 1987	Date relevant to activities permissible for multiple savings and loan holding companies.
November 12, 1999	Date relevant to activities permitted for bank holding companies.
2002	The Sarbanes-Oxley Act of 2002.
2011	Standard & Poor's lowered its long-term sovereign credit rating on the U.S. from AAA to AA+.
2014	FinCEN published guidelines for financial institutions servicing state-legal cannabis businesses.
December 2017	The Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms.
May 2018	The Economic Growth, Regulatory Relief and Consumer Protection Act (the 'Regulatory Relief Act') was enacted.
January 1, 2020	The new rule regarding the Community Bank Leverage Ratio was effective.
September 30, 2020	The FDIC was required to attain the 1.35 percent ratio by this date.
March 31, 2021	The Marijuana Regulation and Taxation Act was signed into law in New York.
January 1, 2022	The final rule rescinding its June 2020 Community Reinvestment Act Rule and replacing it with the rules that were jointly adopted by the federal bank regulatory agencies became effective.
January 1, 2022	TrustCo adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL) effective.
May 1, 2022	Compliance with the new rules requiring banking organizations to notify their primary regulator within 36 hours of becoming aware of a computer-security incident was required.
June 2022	The FDIC projected that the reserve ratio was at risk of not reaching the statutory minimum of 1.35 percent by September 30, 2028.
October 2022	The FDIC Board finalized the increase with an effective date of January 1, 2023, applicable to the first quarterly assessment period of 2023 (i.e., January 1 through March 31, 2023).
October 2022	The SEC adopted a final rule implementing the incentive-based compensation recovery (clawback) provisions of the Dodd-Frank Act.
August 16, 2022	The U.S. government enacted the Inflation Reduction Act of 2022.
December 27, 2022	The Internal Revenue Services issued Notice 2023-2 which provides interim guidance on the implementation of the excise tax on stock repurchases.
January 1, 2023	The FDIC Board finalized the increase with an effective date of January 1, 2023, applicable to the first quarterly assessment period of 2023 (i.e., January 1 through March 31, 2023).
January 1, 2023	Under the Basel framework, these standards generally became effective on January 1, 2023, with an aggregate output floor phasing in through January 1, 2028.
June 9, 2023	The SEC approved the Nasdaq proposed clawback listing standards, including the amendments that delay the effective date of the rules to October 2, 2023.
June 9, 2023	The OCC, Federal Reserve, and FDIC issued final interagency guidance on risk management of third-party relationships, including third-party lending relationships.
June 29, 2023	The federal banking agencies issued a final Interagency Policy Statement on prudent Commercial Real Estate Loan Accommodations and Workouts.
July 26, 2023	The SEC adopted final rules that require public companies to promptly disclose material cybersecurity incidents on Form 8-K and detailed information regarding their cybersecurity risk management and governance on an annual basis on Form 10-K.
August 1, 2023	Fitch Ratings also downgraded its U.S. long-term sovereign credit rating from AAA to AA+.
October 2, 2023	The SEC approved the Nasdaq proposed clawback listing standards, including the amendments that delay the effective date of the rules to October 2, 2023.
October 17, 2023	Amended and Restated Bylaws of TrustCo Bank Corp NY, dated October 17, 2023.
October 24, 2023	The federal banking agencies, including the OCC, issued a final rule designed to strengthen and modernize the regulations implementing the CRA.
November 16, 2023	The FDIC approved a final rule to implement a special assessment on certain banking organizations with financial institution subsidiaries with more than $5 billion in assets.
December 18, 2023	The FDIC issued an advisory on Managing Commercial Real Estate Concentrations in a Challenging Economic Environment.
December 31, 2024	The Bank operated 154 automatic teller machines and 136 banking offices.
December 21, 2024	President Biden signed a bipartisan continuing resolution to extend federal spending and avert a government shutdown through March 14, 2025.
January 21, 2025	The U.S. Treasury began taking extraordinary measures to prevent a default on U.S. government debt.
February 2025	President Trump took significant actions affecting the CFPB.
February 2025	The court granted a joint motion to temporarily stay the litigation proceedings and tolled the compliance deadlines under Section 1033 of the Dodd-Frank Act by 30 days.
February 28, 2025	The Federal Reserve Boards Vice Chair of Supervision, Michael Barr, stepped down from the position, effective February 28, 2025.
March 2025	The FDIC proposed rescinding its 2024 Statement of Policy on Bank Merger Transactions and indicated that it will conduct a broader review of its bank merger process.
March 2025	A preliminary injunction was granted that provides a day-for-day extension for each day the injunction remains in place.
March 7, 2025	The number of shares outstanding of the registrants common stock as of March 7, 2025 was 19,019,749.
March 14, 2025	Executive officers as of March 14, 2025, are listed.
March 14, 2025	President Biden signed a bipartisan continuing resolution to extend federal spending and avert a government shutdown through March 14, 2025.
April 2024	The SEC stayed the effectiveness of the final rules pending the outcome of certain legal challenges.
April 1, 2028	TrustCo required to be in compliance by April 1, 2028.
March 29, 2024	The Companys Board authorized, and the Company announced, another share repurchase program of up to 200,000 shares, or approximately 1% of its currently outstanding common stock. The program expires on March 29, 2025.
April 24, 2024	The rule became effective on April 24, 2024.
January 1, 2026	Most provisions of the final rule are expected to apply beginning January 1, 2026.
January 1, 2027	The remaining provisions are expected to apply beginning January 1, 2027.
March 14, 2025	Date of report.
March 14, 2025	Date of signatures.

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