Executive Snapshot:
GLENVILLE, N.Y., Jan. 22, 2019 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo, Nasdaq: TRST) today announced fourth quarter 2018 net income of $16.0 million compared to $7.4 million for the fourth quarter 2017, an increase of 118%. For the full year 2018, net income rose from $43.1 million to $61.4 million or 42.4% driven by strong performance and the lower tax rate from the Tax Cuts and Jobs Act during 2018. Income before taxes increased $2.9 million over prior year or 3.8%.
Summary
Robert J. McCormick, Chairman, President and Chief Executive Officer, noted, “We are pleased to be reporting strong 2018 performance, with an increase of over 40% in net income as compared to 2017. Our focus on traditional lending criteria and conservative balance sheet management has enabled us to produce consistent earnings, maintain solid liquidity and grow capital. Our strong financial condition is evidenced by our continued recognition as a BauerFinancial, Inc. 5-Star Superior Bank rating. These strategies have allowed us to continue to grow our business and take advantage of changes in market and competitive conditions. We continue to achieve new records in residential loan balances through our customer relationships, driving our growth. Our Board’s decision to increase our quarterly cash dividend by 3.8% to $0.2725 per share reinforces our financial strength. A meaningful and growing dividend is part of our commitment to provide consistent and favorable long-term shareholder return. We will continue to take advantage of opportunities as they are presented during the coming year and beyond.â€
TrustCo continued to see solid loan growth throughout 2018 compared to the prior year, led by an increase in residential mortgages. Loan portfolio expansion was funded by a combination of utilizing portions of our strong cash balances and cash flow from our loan and investment portfolios. The continued shift toward loans helped expand the margin despite higher deposit rates. We note that current mortgage rates exceed the yield on our existing portfolio of mortgages, which, if sustained, will be a positive factor for net interest margin going forward. The Federal Reserve decision to raise the target Federal Funds rate throughout the course of the year has contributed to our results as our cash position immediately repriced upward.
Total average deposits were up $77.1 million in the fourth quarter 2018 versus the fourth quarter 2017. Interest bearing checking accounts and demand deposits increased $42.8 million in the fourth quarter 2018 versus 2017. The overall cost of funds increased 23 basis points to 0.61% from the fourth quarter 2017 to the fourth quarter 2018. The shift towards loans in the asset mix, coupled with a 93 basis-point increase in the yield on Federal Funds more than offset the higher cost of funds, resulting in a 9 basis-point gain in net interest margin to 3.38%.
Details
Average loans were up $244 million or 6.8% in the fourth quarter 2018 over the same period in 2017. Average residential loans, our primary lending focus, were up $256 million or 8.2% in the fourth quarter 2018, over the same period in 2017. Total loan growth was offset by a $19.2 million decline in average outstanding home equity lines of credit over the same period. Mr. McCormick noted, “The growth of our loans and our focus to strengthen the core deposit base reflect the long term strategic focus of our Company.â€
Average deposits were up $77.1 million or 1.9% for the fourth quarter 2018 over the same period a year earlier. Average Core deposits excluding money market deposit accounts declined by $16 million or 0.6%, in fourth quarter 2018 verses 2017. Money market deposits, our highest costing core deposit declined $59.7 million. The cost of total deposits increased to 0.60% in the fourth quarter 2018 from 0.36% in the fourth quarter 2017.
For the fourth quarter 2018, return on average assets and return on average equity were 1.30% and 13.18%, respectively, compared to 0.60% and 6.38% for the fourth quarter 2017. Diluted earnings per share were $0.166 for the fourth quarter 2018, compared to $0.076 for the fourth quarter 2017. Total operating expenses increased by $1.4 million in the fourth quarter 2018 as compared to the fourth quarter 2017, with the most significant increases coming in infrastructure investment and professional services. The increase in expenses was offset with a $1.7 million increase in revenue (net interest income plus non-interest income). The effective tax rate was 18.9% in the fourth quarter of 2018, compared to 62.6% in the same period a year ago. This was partially driven by implementation of a tax planning strategy that reduced taxes on a one time basis of $880 thousand.
For 2018, return on average assets and return on average equity were 1.25% and 13.05%, respectively, compared to 0.88% and 9.64% for the year ended 2017. Diluted earnings per share were $0.636 through December of 2018, compared to $0.448 for the same time period in 2017.
“TrustCo strives to maximize customer relationships through attracting and increasing core deposit balances. We have always designed our branches to be smaller and more cost effective than those built by many of our competitors. We use open floor plans that help maximize the value of our branches. We remain mindful that fully achieving our goals for newer branches will take time and continued work. We believe success in growing customer relationships provides basic building blocks that will help drive profit growth for the coming years.â€
Nonperforming loans (NPLs) were $25.0 million at December 31, 2018, compared to $24.4 million at December 31, 2017. NPLs were equal to 0.64% of total loans at December 31, 2018, compared to 0.67% at December 31, 2017. The coverage ratio, or allowance for loan losses to NPLs, was 179.2% at December 31, 2018, compared to 181.2% at December 31, 2017. Nonperforming assets (NPAs) were $26.7 million at December 31, 2018 compared to $27.6 million at December 31, 2017. The ratio of allowance for loan losses to total loans was 1.16% as of December 31, 2018, compared to 1.21% at December 31, 2017 and reflects both the continued improvement in asset quality and the economic conditions in our primary markets. The allowance for loan losses was $44.8 million at December 31, 2018 compared to $44.2 million at December 31, 2017. The provision for loan losses was $1.4 million for 2018, compared to $2.0 million in 2017. Net chargeoffs decreased to $803 thousand for 2018 from $1.7 million for 2017. The annualized net chargeoff ratio was 0.05% for 2018, compared to 0.02% in 2017.
The net interest margin for the fourth quarter 2018 was 3.38%, up 9 basis points versus the fourth quarter 2017, as increases in short term interest rates led to significantly higher earnings on Federal Funds, while slightly better returns were also achieved in the loan and investment portfolios. Higher loan volumes also increased interest income. During the same period, the cost of interest bearing liabilities increased 23 basis points.
At December 31, 2018 the equity to asset ratio was 9.88%, compared to 9.34% at December 31, 2017. Book value per share at December 31, 2018 was $5.06 compared to $4.75 a year earlier.
TrustCo Bank Corp NY is a $5.0 billion savings and loan holding company and through its subsidiary, TrustCo Bank, operated 148 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at December 31, 2018.
In addition, the Bank’s Financial Services Department offers a full range of investment services, retirement planning and trust and estate administration services. The common shares of TrustCo are traded on the NASDAQ Global Select Market under the symbol TRST.
A conference call to discuss fourth quarter 2018 results will be held at 9:00 a.m. Eastern Time on January 23, 2019. Those wishing to participate in the call may dial toll‑free 1‑888‑339‑0764. International callers must dial 1‑412‑902‑4195. Please ask to be joined into the TrustCo Bank Corp NY / TRST call. A replay of the call will be available for thirty days by dialing 1‑877‑344‑7529 (1‑412‑317‑0088 for international callers), Conference Number 10127907. The call will also be audio webcast at https://services.choruscall.com/links/trst190123.html and will be available for one year.
Safe Harbor Statement
All statements in this news release that are not historical are
forward-looking statements within the meaning of the Securities
Exchange Act of 1934, as amended. Forward-looking statements
can be identified by words such as "anticipate," "intend," "plan,"
"goal," "seek," "believe," "project," "estimate," "expect,"
"strategy," "future," "likely," "may," "should," "will" and similar
references to future periods. Examples of forward-looking
statements include, among others, statements we make regarding our
expectations for our performance during 2018, the impact of Federal
Reserve actions regarding interest rates and the growth of loans
and deposits throughout our branch network, our ability to
capitalize on economic changes in the areas in which we operate and
the extent to which higher expenses to fulfill operating and
regulatory requirements recur or diminish over time. Such
forward-looking statements are subject to factors that could cause
actual results to differ materially for TrustCo from those
discussed. TrustCo wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only
as of the date made. The following important factors, 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: our ability to continue to
originate a significant volume of one-to-four family mortgage loans
in our market areas; our ability to continue to maintain
noninterest expense and other overhead costs at reasonable levels
relative to income; our ability to comply with the supervisory
agreement entered into with Trustco Bank’s regulator and potential
regulatory actions if we fail to comply; restrictions or conditions
imposed by our regulators on our operations that may make it more
difficult for us to achieve our goals; the future earnings and
capital levels of Trustco Bank and the continued ability of Trustco
Bank under regulatory rules and the supervisory agreement to
distribute capital to TrustCo, which could affect our ability to
pay dividends; results of supervisory monitoring or examinations of
Trustco Bank and TrustCo by our respective regulators; our ability
to make accurate assumptions and judgments regarding the credit
risks associated with lending and investing activities; the effect
of changes in financial services laws and regulations and the
impact of other governmental initiatives affecting the financial
services industry; the effects of, and changes in, trade, monetary
and fiscal policies and laws, including interest rate policies of
the Federal Reserve Board, inflation, interest rates, market and
monetary fluctuations; adverse conditions on the securities markets
that lead to impairment in the value of securities in our
investment portfolio; changes in law and policy accompanying the
new presidential administration and uncertainty or speculation
pending the enactment of such changes; the perceived overall value
of our products and services by users, including in comparison to
competitors’ products and services and the willingness of current
and prospective customers to substitute competitors’ products and
services for our products and services; changes in consumer
spending, borrowing and saving habits; technological changes and
electronic, cyber, and physical security breaches; real estate and
collateral values; changes in accounting policies and practices, as
may be adopted by the bank regulatory agencies, the FASB or PCAOB;
changes in local market areas and general business and economic
trends, as well as changes in consumer spending and saving habits;
our success at managing the risks involved in the foregoing and
managing our business; and other risks and uncertainties under the
heading “Risk Factors†in our most recent annual report on Form
10-K and, if any, in our subsequent quarterly reports on Form 10-Q
or other securities filings.
| FINANCIAL HIGHLIGHTS | ||||||||||||
| (dollars in thousands, except per share data) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three months ended | ||||||||||||
| 12/31/2018 | 9/30/2018 | 12/31/2017 | ||||||||||
| Summary of operations | ||||||||||||
| Net interest income (TE) | $ | 40,740 | 40,526 | 39,259 | ||||||||
| Provision for loan losses | 500 | 300 | 300 | |||||||||
| Noninterest income | 4,452 | 4,455 | 4,288 | |||||||||
| Noninterest expense | 24,919 | 24,544 | 23,536 | |||||||||
| Net income | 16,033 | 15,199 | 7,362 | |||||||||
| Per common share | ||||||||||||
| Net income per share: | ||||||||||||
| - Basic | $ | 0. | ||||||||||