TrustCo (TRST) Q4 2025 Earnings Call Transcript

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DATE

Thursday, January 22, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

• Chairman, President, and CEO — Robert J. McCormick
• Executive Vice President, Chief Financial Officer, and Treasurer — Michael M. Ozimek
• Executive Vice President, Chief Banking Officer and Corporate Secretary — Kevin M. Curley

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TAKEAWAYS

• Net Income -- $15,600,000 for the quarter, up 38% year over year, driving a return on average assets of 0.978% and return on average equity of 9.99%.
• Book Value Per Share -- $38.08 at year-end, a 7.1% increase from $35.56 one year ago.
• Stock Repurchase Program -- 1,000,000 shares or 5.3% of outstanding common stock repurchased during the year, utilizing the maximum allowed; program renewed to permit repurchase of up to 2,000,000 shares (11.1%) in 2026.
• Net Interest Income -- $43,700,000, a 12.4% increase from the same quarter in 2024.
• Net Interest Margin -- 2.82%, improving by 22 basis points year over year.
• Loan Growth -- Average total loans increased by $126,800,000 or 2.5%, reaching an all-time high of $5,200,000,000.
• Home Equity Lines of Credit -- Grew $54,100,000 or 13.5% year over year, leading segment expansion.
• Commercial Loans -- Average balances rose by $24,500,000 or 8.6% year over year.
• Residential Real Estate Loans -- Increased $50,600,000 or 1.2% year over year.
• Total Deposits -- $5,600,000,000 at quarter end, up $166,000,000 from the prior year.
• Non-Performing Loans -- $20,700,000, up from $18,800,000 in the prior year; ratio to total loans rose to 0.39% from 0.37%.
• Allowance for Credit Losses -- $52,200,000 with a coverage ratio of 253% at quarter end.
• Non-Interest Expense -- $26,500,000, a decrease of $1,500,000 compared to the same quarter in 2024.
• Guidance for 2026 Non-Interest Expense -- Management expects recurring non-interest expense, excluding ORE expense, to be $27,700,000–$28,200,000 per quarter.
• Wealth Management Division -- $1,270,000,000 in assets under management; fee income comprises 44% of non-interest income.
• Non-Performing Assets -- $22,100,000 at quarter end, with ratio to total assets stable at 0.34% year over year.
• Branch Network -- Declined by two branches during the quarter, with ongoing efforts to expand in Pasco County, Florida.

SUMMARY

The company achieved record-high average loans and improved deposit levels while returning significant capital to shareholders, including reaching the stock repurchase program’s annual maximum. Net interest margin and net interest income expansion reflect successful execution of management's deposit and loan strategies amid a competitive market. Wealth management remains a growing, recurring income driver, now accounting for nearly half of non-interest income. Management renewed and expanded its stock buyback authorization, signaling ongoing capital return priorities. Ongoing expense management remains a focus with projected 2026 non-interest expense guidance set above 2025’s quarterly average, primarily as a strategic buffer rather than cost pressure escalation.

• Michael M. Ozimek said, We remain committed to returning value to shareholders through a disciplined share repurchase program which reflects our confidence in the long-term strength of the franchise and our focus on capital optimization.
• Non-performing loans rose sequentially, partly due to two multi-family relationships in New York, but all such loans remain fully guaranteed.
• Total net charge-offs for the quarter were a net recovery of $14,000, with net recoveries maintained over the full year.
• Commercial loans constitute about 10% of the loan portfolio, focus remains on collateralized, relationship-based lending within the bank’s core markets.

INDUSTRY GLOSSARY

• ORE: Other Real Estate (a category of bank-owned property acquired via foreclosure or similar processes).
• Net Interest Margin: The difference between interest earned on assets and interest paid on liabilities, expressed as a percentage of average earning assets.
• Coverage Ratio: The ratio of allowance for credit losses to non-performing loans, indicating loss absorption capacity.

Full Conference Call Transcript

At this time, I would like to turn the conference call over to Mr. Robert J. McCormick, Chairman, President, and CEO to begin. Please go ahead, Robert.

Robert J. McCormick: Good morning, everyone, and thank you for joining the call. I'm Rob McCormick, the Chairman of TrustCo Bank. I'm joined today as usual by Mike Ozimek, our CFO, who will go through the numbers, and Kevin Curley, our Chief Banking Officer, will talk about lending. Results announced yesterday are the culmination of years of strategic long-term planning and nimble near-term execution. We resisted risky lending concentrations, borrowing, and other gimmicks in favor of building solid customer relationships through the delivery of top-notch loan and deposit products and services. This enabled us to keep our cost of funds low and grow loans, leading to a healthy margin expansion.

We deployed capital through the continuation of our century-long dividend payout, a robust stock repurchase program, and our bedrock practice of lending gathered deposits right back in the communities we serve. All of these factors together contributed to a 38% increase in net income and a return on average assets of almost 33% for the quarter. Total shareholder value returned three times that of our proxy peers year over year, stellar performance by any measure. Now Mike will go through the details, and Kevin will provide some color on lending.

Michael M. Ozimek: Thank you, Rob, and good morning, everyone. I will now review TrustCo's financial results for the 2025. As we noted in the press release, the company continued to see strong financial results for the 2025, marked by increases in both net income and net interest income TrustCo Bank during the '25 compared to the 2024. Performance is underscored by rising net interest income, continued margin expansion, and sustained loan and deposit growth across key portfolios. This resulted in a fourth-quarter net income of $15,600,000, an increase of 38% over the prior year quarter, which yielded a return on average assets and average equity of 0.978% and 9.99%, respectively. Capital remains strong.

Consolidated equity to assets ratio was 10.66% for the 2025, compared to 10.84% in the 2024. Book value per share at 12/31/2025 was $38.08, up 7.1% compared to $35.56 a year earlier. During the 2025, TrustCo repurchased 533,000 shares of common stock under the previously announced stock repurchase program, resulting in 1,000,000 shares or 5.3% of common stock repurchase year to date. The maximum allowable under the stock repurchase program. And we have also renewed the stock repurchase program, which now allows for the repurchase of up to 2,000,000 shares or another 11.1% during 2026.

We remain committed to returning value to shareholders through a disciplined share repurchase program which reflects our confidence in the long-term strength of the franchise and our focus on capital optimization. Credit quality continues to be consistent as we saw non-performing loans modestly increase to $20,700,000 in the 2025 from $18,800,000 in the '24. Non-performing loans to total loans increased to 0.39% in the '25 from 0.37% in the fourth quarter of 2024. Non-performing assets to total assets was 0.34% for both the fourth quarter of 2025 and 2024. Our continued focus on solid underwriting within our loan portfolio and conservative lending standards positions us to manage credit risk effectively in the current environment.

Average loans for the '25 grew 2.5% or $126,800,000 to $5,200,000,000 for the '24, an all-time high. Consequently, overall loan growth has continued to increase, and leading the charge was home equity lines of credit, which increased by $54,100,000 or 13.5% in the fourth quarter of 2025 over the same period of '24. The residential real estate portfolio increased $50,600,000 or 1.2%. Average commercial loans increased $24,500,000 or 8.6%. And installment loans decreased $2,400,000 or 17.3% over the same period of '24. This uptick continues to reflect a strong local economy and increased demand for credit. For the '25, the provision for credit losses was $400,000. Retaining deposits has been a key focus as we navigated through 2025.

Total deposits ended the quarter at $5,600,000,000, up $166,000,000 compared to the prior year quarter. We believe the increase in these deposits compared to the same period in '24 continues to indicate strong customer confidence in the bank's competitive deposit offerings. The bank's continued emphasis on relationship banking combined with competitive product offerings and digital capabilities has contributed to a stable deposit base that supports ongoing loan growth and expansion. Net interest income was $43,700,000 for the '25, an increase of $4,800,000 or 12.4% compared to the prior year quarter. Net interest margin for the '25 was 2.82%, up 22 basis points from the prior year quarter.

Yield on interest-earning assets increased to 4.24%, up 12 basis points from the prior year quarter. And the cost of interest-bearing liabilities decreased to 1.84% from the fourth quarter of 2025 from 1.97%. The bank is well-positioned to continue delivering strong net interest income performance even as the Federal Reserve contemplates rate changes in the months ahead. The bank remains committed to maintaining competitive deposit offerings while ensuring financial stability and continued support for our community's banking needs. Our wealth management division continues to be a significant recurring source of non-interest income. At approximately $1,270,000,000 of assets under management as of December 31, non-interest income attributable to wealth management and financial services fees represent 44% of non-interest income.

The majority of this fee income is recurring, supported by long-term advisory relationships and a growing base of managed assets. Now on to non-interest expense. Total non-interest expense, net of ORE expense, came in at $26,500,000, down $1,500,000 from the prior year quarter. ORE expense net came in at an expense of $161,000 for the quarter, as compared to $476,000 in the prior year. We are going to continue to hold the anticipated level of expense not to exceed $250,000 per quarter. All the other categories of non-interest expense were in line with our expectations for the fourth quarter.

We would expect 2026 total recurring non-interest expense, net of ORE expense, to be in the range of $27.7 to $28,200,000 per quarter. Now Kevin will review the loan portfolio and non-performing loans.

Kevin M. Curley: Thanks, Mike, and good morning to everyone. Our average loans grew by $120,800,000 or 2.5% year over year. The growth was centered in our residential loan portfolio, with our first mortgage segment growing by $50,600,000 or 1.2%, our home equity loans growing $54,100,000 or 13.5% over last year. In addition, our commercial loans grew by $24,500,000 or 8.6% over last year. For the fourth quarter, actual loans increased by $60,700,000 compared to the third quarter. Purchase mortgage loans, including refinances, grew by $42,400,000. Home equity loans increased by $17,000,000, and commercial loans were up by $2,000,000 for the quarter. Overall, residential activity improved during the quarter.

For purchase and refinances, we did see a slight uptick in activity, and we were able to close more loans during the quarter. As we have said in the past, we are well situated in the market and will capture more growth as these segments pick up. Also, as a portfolio lender, we are uniquely positioned to manage pricing and promotions to increase lending volume. Our home equity products continue to see consistent demand as customers continue to use their equity in their home for home improvements or paying off loans at high rates such as credit cards. In all our markets, rates continue to be moving in approximately 25 basis points range.

Our current rate is 5.875% for our base thirty-year fixed-rate loan. We also offer a low-rate five-one arm and a very competitive home equity credit line product. Overall, we are positive about our loan growth in the quarter and remain focused on driving strong results this year. Now moving to asset quality, at TrustCo, we work hard to maintain strong credit quality in our loan portfolio. As a portfolio lender, we have consistently used prudent underwriting standards to build our loan portfolio. Our residential loans originated in-house, on key underwriting factors that have proven to lead to sound credit decisions. These loans originated with the intent to be held by us for the full term rather than originated for sale.

In addition, we have no foreign or subprime loans in our residential loan portfolio. In our commercial loan portfolio, which makes up about 10% of our total loans, we focus on relationship-based loans secured mostly by real estate within our primary market areas. We also avoid concentration of any credit to any single borrower or business and continue to require personal guarantees on all of our loans. Now for our numbers. Asset quality for the bank remains very strong. Early-stage delinquencies for our portfolio continue to be steady. Charge-offs for the quarter amounted to a net recovery of $14,000, which follows a net recovery of $176,000 in the third quarter, and $457,000 over the past year.

Non-performing loans were $20,700,000 at this quarter end, $18,500,000 last quarter, and $18,800,000 a year ago. Non-performing loans to total loans was 0.39% at this quarter end, compared to 0.36% last quarter and 0.37% a year ago. Non-performing assets were $22,100,000 at quarter end versus $19,700,000 last quarter and $21,000,000 a year ago. At quarter end, our allowance for credit losses remained solid at $52,200,000 with a coverage ratio of 253%, compared to $51,900,000 with a coverage ratio of 281% last quarter, and $58,200,000 with a coverage ratio of 267% a year ago. Rob?

Robert J. McCormick: Thanks, Kevin. We're happy to answer any questions. That's our story.

Operator: Thank you very much. If you change your mind, please press star followed by 2. I'll pause for any questions to come through. Our first question comes from Ian Lapey from Gabelli Funds. Your line is open, Ian. Please go ahead.

Ian Lapey: Good morning, gentlemen. Congratulations on a great quarter and year.

Robert J. McCormick: Thank you.

Ian Lapey: Just a few questions. Maybe start with asset quality. Obviously, it's great to see another quarter of net recoveries. But I did notice an increase in the New York commercial NPLs of about $1,700,000. Was that one relationship or a couple? Maybe you could expand a little bit on what happened there.

Kevin M. Curley: I think it's two relationships, Ian. And they're multi-families. Like, one is in the city of Schenectady, and one is in the city of Albany.

Ian Lapey: Are those typical where you have good collateral and personal guarantees?

Kevin M. Curley: Oh, yeah. We don't have an unguaranteed loan in our portfolio, Ian.

Ian Lapey: Okay. Good. These particular cases, it's they're both retirees who are knowledgeable with regard to this and think they've relocated to Florida. At least one of them has.

Ian Lapey: Okay. And then a couple on expenses. First, the other expense was up a little bit 2.55 versus 1.7 in 3Q. Anything in particular driving that?

Michael M. Ozimek: No. I mean, just at the end of the year, we just, you know, there's some of the benefit plans that we look at. We also took the opportunity for tax purposes to, you know, fund the TrustCo Foundation for about a half $1,000,000 just to be able to take the tax benefit of that. So there's a few larger expenses that we put through in the fourth quarter, but nothing really notable.

Ian Lapey: Okay. And then for the I thought I heard for the guidance for the '26 expenses, you said 27.7 to 28.2. Excluding other real estate. Is that right?

Michael M. Ozimek: Yeah. Yeah. It just gives us a little breathing room going into next year. But there's nothing really that's really driving us up.

Ian Lapey: Okay. So because that is a decent uptick from the run rate this year. Is that anything in particular? Or is that sort of across the board?

Michael M. Ozimek: It's really just across the board. There's nothing really standing out there. Just like I said, just kinda give us a little bit of room for next year. Okay. I would expect us to probably be on the lower end of that range.

Ian Lapey: Okay. And then lastly for me, for the branches, they declined by two. What's the outlook? I know you've mentioned last call, Rob. You were looking at Pasco County in Florida. What sort of your expectation for branch growth or declines in the '26?

Robert J. McCormick: You touched on the expenses earlier, Ian, and we are pretty cheap people when it comes to that. So we want to get in at the right price and who knew Pasco would be as difficult it would be to find a location as it is. But we are still actively looking in Pasco. There's a lot of mortgage business there. There's a market change down there. They're pushing people further north. And as Tampa becomes less affordable and some of the other West Coast cities become unaffordable, they move into Pasco. So we are still looking for a location there. We want to do it the right way.

Ian Lapey: Okay. Great. Again, congratulations. A great year.

Robert J. McCormick: Thanks for your interest, Ian.

Operator: As a reminder, to ask a question, please press star followed by 1. This concludes our question and answer session. I would like to turn the conference back over to Robert J. McCormick for any closing remarks.

Robert J. McCormick: Thank you for your interest in our company. We hope you have a great day.

Operator: Thank you. The conference call has now concluded. Thank you for everyone attending. You may now disconnect your lines.

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