[Part I. FINANCIAL INFORMATION](index=4&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Interim Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Interim%20Financial%20Statements%20(Unaudited)) The unaudited Q1 2020 financial statements show decreased net income and initial COVID-19 impacts, including higher loan loss provisions [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income for Q1 2020 decreased to $13.3 million, primarily due to a higher provision for loan losses and lower net interest income Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Net Interest Income | $38,553 | $39,732 | | Provision for loan losses | $2,000 | $300 | | Noninterest Income | $5,334 | $4,637 | | Noninterest Expenses | $24,268 | $24,867 | | Net Income | $13,313 | $14,558 | | Diluted EPS | $0.138 | $0.150 | - The provision for loan losses significantly increased to **$2.0 million** in Q1 2020 from **$300 thousand** in Q1 2019, reflecting anticipated economic impacts from the COVID-19 pandemic[7](index=7&type=chunk) - Noninterest income increased, largely due to a **$1.155 million** net gain on securities transactions in Q1 2020, which was absent in the prior-year period[7](index=7&type=chunk) [Consolidated Statements of Financial Condition](index=7&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) As of March 31, 2020, total assets increased to $5.26 billion, primarily driven by a rise in net loans Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Assets | $5,256,647 | $5,221,322 | | Net Loans | $4,053,237 | $4,017,879 | | Securities Available for Sale | $503,166 | $573,823 | | Total Deposits | $4,481,828 | $4,450,016 | | Total Shareholders' Equity | $548,185 | $538,257 | [Notes to Consolidated Interim Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Interim%20Financial%20Statements) The notes detail accounting policies, investment and loan portfolios, and the significant impact of COVID-19, including loan deferrals and CECL adoption delay - The loan portfolio totaled **$4.1 billion**, with the vast majority (**$3.54 billion**) in 1-to-4 family first mortgages[40](index=40&type=chunk) - The allowance for loan losses increased to **$46.2 million** at March 31, 2020, from **$44.3 million** at year-end 2019, with a provision of **$2.0 million** taken during the quarter[48](index=48&type=chunk) - Due to the COVID-19 pandemic, the company has provided loan modifications and payment deferrals totaling approximately **$4.9 million** through March 31, 2020[102](index=102&type=chunk) - The Company elected to delay its adoption of the new credit loss standard (ASU 2016-13 / CECL) as permitted by the CARES Act, until the national emergency concerning COVID-19 is terminated or December 31, 2020, whichever is first[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2020 net income decline to lower net interest margin and increased loan loss provisions due to COVID-19, while maintaining strong capital [COVID-19 Impact](index=45&type=section&id=COVID-19%20Impact) The company responded to COVID-19 by providing loan deferrals and participating in the PPP, while increasing loan loss provisions COVID-19 Loan Deferrals as of April 28, 2020 | Loan Type | Number of Loans | Outstanding Balance (in thousands) | | :--- | :--- | :--- | | Commercial | 70 | $40,489 | | Residential mortgage loans | 494 | $110,430 | | Home equity line of credit | 34 | $2,433 | | Installment loans | 5 | $197 | | **Total** | **603** | **$153,549** | - The company is participating in the Paycheck Protection Program (PPP) and had processed **405 loans** totaling **$33.8 million** as of April 28, 2020[120](index=120&type=chunk) [Financial Overview](index=50&type=section&id=Financial%20Overview) Q1 2020 net income decreased to $13.3 million due to lower net interest income and a higher provision for loan losses Key Performance Metrics | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Income | $13.3 million | $14.6 million | | Diluted EPS | $0.138 | $0.150 | | Return on Average Assets | 1.03% | 1.17% | | Return on Average Equity | 9.87% | 11.93% | [Nonperforming Assets and Allowance for Loan Losses](index=56&type=section&id=Nonperforming%20Assets%20and%20Allowance%20for%20Loan%20Losses) Nonperforming loans remained stable, while the allowance for loan losses increased significantly due to COVID-19 uncertainty - Total NPLs were **$20.7 million** at March 31, 2020, a slight decrease from **$20.9 million** at December 31, 2019[160](index=160&type=chunk) - The allowance for loan losses was **$46.2 million**, or **1.13%** of total loans, as of March 31, 2020[170](index=170&type=chunk) - The provision for loan losses increased to **$2.0 million** for Q1 2020, primarily driven by uncertainty from the COVID-19 pandemic, compared to **$300 thousand** in Q1 2019[171](index=171&type=chunk) [Capital Resources](index=60&type=section&id=Capital%20Resources) The company maintained strong capital ratios well above regulatory minimums, while suspending its share repurchase program Consolidated Capital Ratios (as of March 31, 2020) | Ratio | Actual | Minimum for Capital Adequacy + Buffer | | :--- | :--- | :--- | | Tier 1 leverage ratio | 10.316% | 4.000% | | Common equity tier 1 capital | 18.943% | 7.000% | | Tier 1 risk-based capital | 18.943% | 8.500% | | Total risk-based capital | 20.198% | 10.500% | - The company repurchased **489,000 shares** at an average price of **$7.11 per share** during Q1 2020 but suspended the program on April 16, 2020[189](index=189&type=chunk)[212](index=212&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with sensitivity analysis showing potential impacts on capital fair value from rate fluctuations Interest Rate Sensitivity Analysis (as of March 31, 2020) | Rate Shock Scenario | Estimated Percentage of Fair Value of Capital to Fair Value of Assets | | :--- | :--- | | +400 BP | 19.80% | | +300 BP | 20.20% | | +200 BP | 20.50% | | +100 BP | 20.60% | | Current rates | 20.00% | | -100 BP | 16.30% | [Item 4. Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal controls during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2020[199](index=199&type=chunk) - No material changes to internal control over financial reporting occurred during the first quarter of 2020[201](index=201&type=chunk) [Part II. OTHER INFORMATION](index=67&type=section&id=Part%20II.%20OTHER%20INFORMATION) [Item 1A. Risk Factors](index=67&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors highlight significant uncertainties from COVID-19, including increased loan delinquencies, collateral value declines, and PPP participation risks - The COVID-19 outbreak is identified as a significant risk that could adversely affect business activities, financial condition, and results of operations through increased loan delinquencies, defaults, and declines in collateral value[204](index=204&type=chunk) - Participation in the SBA's Paycheck Protection Program (PPP) introduces new risks, including potential litigation over application processing and the possibility of the SBA denying its guaranty on certain loans[208](index=208&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) - Significant reductions in the federal funds rate and other market interest rates are expected to adversely affect the company's net interest income and margins[206](index=206&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 489,000 shares for $3.5 million in Q1 2020 under an existing program, which was subsequently suspended Share Repurchases for Q1 2020 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January 2020 | 75,000 | $8.04 | | February 2020 | 225,000 | $7.50 | | March 2020 | 189,000 | $6.28 | | **Total** | **489,000** | **$7.11** |

Start Time: 09:00 January 1, 0000 9:24 AM ET TrustCo Bank Corp NY (NASDAQ:TRST) Q1 2020 Earnings Conference Call April 22, 2020, 09:00 AM ET Company Participants Robert McCormick - Chairman, President and CEO Michael Ozimek - EVP and CFO Scot Salvador - EVP and Chief Lending Officer Conference Call Participants Alex Twerdahl - Piper Sandler Operator Good day, and welcome to the TrustCo Bank Corp First Quarter Earnings Call and Webcast. All participants will be in listen-only mode. [Operator Instructions]. A ...

PART I [Business](index=4&type=section&id=Item%201.%20Business) TrustCo Bank Corp NY, a savings and loan holding company, provides general banking, trust, and wealth management services through its subsidiary Trustco Bank across five states, focusing on residential mortgages [General and Subsidiaries](index=4&type=section&id=General%20and%20Subsidiaries) TrustCo Bank Corp NY, a holding company for Trustco Bank, operates 148 banking offices and manages $927.5 million in trust assets with 814 employees - TrustCo's principal subsidiary is Trustco Bank, a federal savings bank providing general banking services[12](index=12&type=chunk)[14](index=14&type=chunk) - At year-end 2019, the Bank operated **148 banking offices** and **162 ATMs** across New York, Florida, Vermont, Massachusetts, and New Jersey[14](index=14&type=chunk) - The trust department, operating as Trustco Financial Services, had approximately **$927.5 million in assets under management** as of December 31, 2019[16](index=16&type=chunk) - The company had **814 full-time equivalent employees** at the end of 2019[13](index=13&type=chunk) [Competition](index=5&type=section&id=Competition) The company faces intense competition for deposits and loans from diverse financial institutions, competing on pricing, service, and location - The company faces intense competition from commercial banks, savings associations, credit unions, and non-bank entities in its market areas of New York and Central Florida[19](index=19&type=chunk) - Competition for loans and deposits is based on interest rates, fees, service quality, and convenience[20](index=20&type=chunk) [Supervision and Regulation](index=5&type=section&id=Supervision%20and%20Regulation) TrustCo and its bank subsidiary are highly regulated by the Federal Reserve and OCC, subject to capital, dividend, and consumer protection rules - TrustCo, as a savings and loan holding company, is supervised by the Federal Reserve Board, while its subsidiary, Trustco Bank, is primarily regulated by the OCC[21](index=21&type=chunk) - The Dodd-Frank Act and the subsequent Regulatory Relief Act have significantly changed the financial regulatory landscape, impacting consumer protection, capital requirements, and mortgage lending[24](index=24&type=chunk)[25](index=25&type=chunk) Regulatory Capital Ratios as of December 31, 2019 | Ratio | Trustco Bank | TrustCo (Company) | Minimum Requirement (Well-Capitalized) | | :--- | :--- | :--- | :--- | | Tier 1 Leverage Ratio | 9.94% | 10.25% | > 5.0% | | CET1 Capital Ratio | 18.41% | 18.99% | > 6.5% | | Tier 1 Capital Ratio | 18.41% | 18.99% | > 8.0% | | Total Capital Ratio | 19.67% | 20.24% | > 10.0% | FDIC Deposit Insurance Expense | Year | Expense (in thousands) | | :--- | :--- | | 2019 | $624 | | 2018 | $1,500 | | 2017 | $2,900 | - The Bank must comply with the Community Reinvestment Act (CRA) and received a "satisfactory" rating in its last examination[58](index=58&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks from interest rate fluctuations, credit defaults, regulatory changes, operational failures, cybersecurity threats, and economic downturns in key markets [Market and Economic Risks](index=15&type=section&id=Market%20and%20Economic%20Risks) Earnings are sensitive to interest rate changes and economic downturns, particularly in New York and Florida, due to concentrated residential real estate lending - Net interest income is subject to risk from changes in market interest rates, which could compress the interest rate spread and negatively affect profitability[86](index=86&type=chunk) - The company has a geographic concentration of loans, with **74.4% secured by property in New York** and **25.6% in Florida**, making it vulnerable to local economic downturns[97](index=97&type=chunk) - Market volatility could adversely affect the company's ability to access capital and impact its overall business and financial condition[114](index=114&type=chunk) [Credit and Lending Risks](index=16&type=section&id=Credit%20and%20Lending%20Risks) Inherent credit risk from lending activities and potential insufficiency of the allowance for loan losses (ALLL) pose a threat, with CECL adoption expected to impact ALLL methodology - The company is exposed to credit risk, as adverse changes in borrowers' ability to repay loans could materially impact earnings and financial condition[89](index=89&type=chunk) - The allowance for loan losses (ALLL) may be insufficient if management's assumptions about the loan portfolio's collectability prove incorrect, potentially requiring material additions to the allowance[90](index=90&type=chunk) - The adoption of the CECL accounting standard in 2020 will change the method for calculating credit loss allowances and may require an increase in the ALLL[91](index=91&type=chunk) [Regulatory, Legal, and Compliance Risks](index=16&type=section&id=Regulatory%2C%20Legal%2C%20and%20Compliance%20Risks) Operating in a highly regulated environment, the company faces risks from changing laws, stringent capital rules, dividend limitations, and potential litigation - Stringent regulatory capital rules could limit growth, require raising additional capital, or result in restrictions on dividends and compensation if not met[92](index=92&type=chunk)[93](index=93&type=chunk) - Changes in banking laws and regulations could have a material impact on operations, compliance costs, and the products and services offered[98](index=98&type=chunk)[103](index=103&type=chunk) - The ability to pay dividends is limited by regulations and the financial condition of the subsidiary bank, Trustco Bank[102](index=102&type=chunk) - The company's subsidiary, Trustco Realty Corp., must maintain its status as a REIT; failure to do so would increase the company's effective tax rate[119](index=119&type=chunk)[123](index=123&type=chunk) [Operational and Technology Risks](index=19&type=section&id=Operational%20and%20Technology%20Risks) Significant operational risks include third-party vendor dependency, cybersecurity threats, data breaches, and system failures, potentially causing financial and reputational harm - The company is dependent on third-party vendors for business infrastructure, creating risk of operational disruption from vendor failure[106](index=106&type=chunk)[133](index=133&type=chunk) - Cyber-attacks and data breaches pose a significant risk, potentially leading to financial loss, litigation, reputational damage, and increased regulatory scrutiny[107](index=107&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) - A failure in operational or security systems, whether internal or from third parties, could disrupt business, impact financial condition, and cause reputational harm[108](index=108&type=chunk) [Unresolved Staff Comments](index=24&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[136](index=136&type=chunk) [Properties](index=24&type=section&id=Item%202.%20Properties) The company operates 148 banking offices, with 25 owned and 123 leased, and its executive offices are company-owned - The company operates **148 banking offices**, of which **25 are owned** and **123 are leased**[137](index=137&type=chunk) [Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course litigation, but management believes no pending proceedings are materially adverse - In the opinion of management, there are no pending legal proceedings that would be material to the Company's financial condition[138](index=138&type=chunk) [Mine Safety Disclosure](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This item is not applicable to the company - Not applicable[139](index=139&type=chunk) PART II [Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) TrustCo's common stock trades on NASDAQ under "TRST", with no equity security purchases under public programs in Q4 2019 - The company's common stock is traded on The NASDAQ Stock Market under the symbol "TRST"[143](index=143&type=chunk) - There were no shares purchased as part of publicly announced plans or programs in the fourth quarter of 2019[144](index=144&type=chunk)[145](index=145&type=chunk) [Selected Financial Data](index=26&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected financial data is incorporated by reference from the Annual Report to Shareholders (Exhibit 13) - Information is incorporated by reference from the Annual Report to Shareholders (Exhibit 13)[147](index=147&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's Discussion and Analysis is incorporated by reference from the Annual Report to Shareholders (Exhibit 13) - Information is incorporated by reference from the Annual Report to Shareholders (Exhibit 13)[148](index=148&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=26&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Quantitative and qualitative disclosures about market risk are incorporated by reference from the Annual Report to Shareholders (Exhibit 13) - Information is incorporated by reference from the Annual Report to Shareholders (Exhibit 13)[149](index=149&type=chunk) [Financial Statements and Supplementary Data](index=27&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Consolidated financial statements, auditor's report, and supplementary data are incorporated by reference from the Annual Report to Shareholders (Exhibit 13) - The consolidated financial statements and auditor's report are incorporated by reference from the Annual Report to Shareholders (Exhibit 13)[151](index=151&type=chunk) [Changes in and Disagreements with Accountants On Accounting and Financial Disclosure](index=27&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20On%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[152](index=152&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%209A.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting in Q4 2019 - Management concluded that the Company's disclosure controls and procedures are effective[153](index=153&type=chunk) - No material changes were made to the company's internal control over financial reporting during the fourth quarter of 2019[155](index=155&type=chunk) [Other Information](index=27&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[156](index=156&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=27&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the Company's Proxy Statement[158](index=158&type=chunk) [Executive Compensation](index=27&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the Company's Proxy Statement[159](index=159&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=28&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference, detailing outstanding options and available securities under equity compensation plans Equity Compensation Plan Information as of December 31, 2019 | Plan Category | Securities to be issued upon exercise (a) | Weighted-average exercise price (b) | Securities remaining available for future issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 519,091 | $6.67 | 1,696,794 | [Certain Relationships and Related Transactions and Director Independence](index=28&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the Company's Proxy Statement[164](index=164&type=chunk) [Principal Accountant Fees and Services](index=28&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accountant fees and services information is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the Company's Proxy Statement[165](index=165&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=28&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits, including the Annual Report to Shareholders and officer certifications - The Annual Report to Shareholders for the year ended December 31, 2019 is filed as Exhibit 13[180](index=180&type=chunk) - Certifications by the principal executive officer and principal financial officer under Rule 13a-14(a)/15d-14(a) and Section 1350 are included as exhibits[180](index=180&type=chunk)

Financial Data and Key Metrics Changes - TrustCo Bank Corp reported total assets exceeding $5.2 billion, driven by strong loan growth [5] - Net income for 2019 was $57.8 million, down from a record in 2018 due to increased deposit costs [5][7] - The return on assets and equity were 1.06% and 10.41% respectively [6] Business Line Data and Key Metrics Changes - Total loans surpassed $4 billion, with the residential portfolio growing to over $3.5 billion [5] - Average loans for Q4 2019 increased by 4.4% year-over-year, primarily in the residential real estate portfolio [7] - Non-interest income for Q4 2019 was $4.1 million, down from the previous quarter due to prior year legal settlements [13] Market Data and Key Metrics Changes - Interest-bearing deposits reached nearly $4 billion, with significant growth in money market and time deposit categories [6] - Total average deposits increased by 5.2% year-over-year, driven by time deposits and money market deposits [10] - The cost of interest-bearing deposits rose to 90 basis points from 60 basis points [11] Company Strategy and Development Direction - The company continues to focus on traditional lending and conservative balance sheet management to produce consistent earnings [9] - TrustCo is exploring options for acquisitions, emphasizing that any deal must be accretive for shareholders [27] - The bank aims to stem the runoff in home equity lines of credit and is testing new ideas to reverse trends in that area [5][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in capital levels and indicated that they are exploring various options for capital management [26] - The bank anticipates continued loan growth in 2020, despite a slower loan cycle in the first quarter [19] - Non-performing loans decreased year-over-year, reflecting improved asset quality and economic conditions [20] Other Important Information - The efficiency ratio for Q4 2019 was 57.31%, up from 55.17% in the previous quarter [15] - The consolidated equity to assets ratio improved to 10.31% at the end of Q4 2019 [16] - The bank's tangible book value per share increased by 9.68% year-over-year to $5.55 [16] Q&A Session Summary Question: Capital management and buyback program - Management acknowledged the strong capital levels and indicated that the buyback program has not been heavily utilized due to share price considerations [25][26] Question: Potential for M&A activity - Management stated that any acquisition would need to be beneficial for shareholders and mentioned interest in a potential deal in Columbia County [27][28] Question: Margin outlook and yield compression - Management discussed the impact of refinancing activity on yield and indicated that the first quarter typically sees slower loan production [29][34] Question: CD repricing and retention strategies - Management confirmed that some CDs have repriced lower, and they have had success retaining a significant portion of the portfolio [39][41]

Part I. FINANCIAL INFORMATION [Item 1. Consolidated Interim Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Interim%20Financial%20Statements%20(Unaudited)) This section presents TrustCo Bank Corp NY's unaudited consolidated interim financial statements and related notes for Q3 2019 and 2018 [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Statements of Income (Unaudited) - Key Figures (dollars in thousands, except per share data) | Metric | Three months ended Sep 30, 2019 | Three months ended Sep 30, 2018 | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | |:---|:---|:---|:---|:---| | Total interest income | $48,528 | $45,738 | $144,605 | $134,050 | | Total interest expense | $9,885 | $5,215 | $27,039 | $14,103 | | Net interest income | $38,643 | $40,523 | $117,566 | $119,947 | | Provision (Credit) for loan losses | $- | $300 | $(41) | $900 | | Total noninterest income | $4,925 | $4,455 | $14,476 | $13,629 | | Total noninterest expenses | $24,070 | $24,544 | $73,839 | $72,794 | | Income before taxes | $19,498 | $20,134 | $58,244 | $59,882 | | Income taxes | $4,790 | $4,935 | $14,311 | $14,470 | | Net income | $14,708 | $15,199 | $43,933 | $45,412 | | Basic EPS | $0.152 | $0.157 | $0.454 | $0.471 | | Diluted EPS | $0.152 | $0.157 | $0.453 | $0.470 | - **Net income decreased by $491 thousand (3.23%)** for the three months ended September 30, 2019, and **by $1,479 thousand (3.26%)** for the nine months ended September 30, 2019, compared to the respective prior year periods[9](index=9&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Statements of Comprehensive Income (Unaudited) - Key Figures (dollars in thousands) | Metric | Three months ended Sep 30, 2019 | Three months ended Sep 30, 2018 | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | |:---|:---|:---|:---|:---| | Net income | $14,708 | $15,199 | $43,933 | $45,412 | | Net unrealized gain (loss) on securities available for sale, net of tax | $1,790 | $(3,010) | $10,499 | $(9,556) | | Other comprehensive income (loss), net of tax | $1,703 | $(3,204) | $10,238 | $(9,848) | | Comprehensive income | $16,411 | $11,995 | $54,171 | $35,564 | - **Comprehensive income significantly increased** for both the three-month and nine-month periods ended September 30, 2019, primarily due to a positive shift in net unrealized holding gains on securities available for sale, net of tax, compared to losses in the prior year[12](index=12&type=chunk) [Consolidated Statements of Financial Condition](index=7&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Consolidated Statements of Financial Condition (Unaudited) - Key Figures (dollars in thousands) | Metric | September 30, 2019 | December 31, 2018 | |:---|:---|:---| | Total assets | $5,222,469 | $4,958,913 | | Loans, net of deferred net costs | $3,985,319 | $3,874,096 | | Allowance for loan losses | $44,329 | $44,766 | | Net loans | $3,940,990 | $3,829,330 | | Total deposits | $4,461,167 | $4,274,247 | | Total liabilities | $4,696,306 | $4,469,042 | | Total shareholders' equity | $526,163 | $489,871 | - **Total assets increased by $263,556 thousand (5.31%)** from December 31, 2018, to September 30, 2019, driven by increases in loans and securities available for sale[14](index=14&type=chunk) - **Total deposits increased by $186,920 thousand (4.37%)** from December 31, 2018, to September 30, 2019[14](index=14&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - Key Figures (dollars in thousands) | Metric | Balance at Jan 1, 2019 | Net income | Other comprehensive income, net of tax | Cash dividend declared | Stock options exercised | Purchase of treasury stock | Sale of treasury stock | Stock based compensation expense | Balance at Sep 30, 2019 | |:---|:---|:---|:---|:---|:---|:---|:---|:---|:---| | Capital Stock | $100,175 | - | - | - | $20 | - | - | - | $100,200 | | Surplus | $176,710 | - | - | - | $98 | - | $(443) | $(12) | $176,395 | | Undivided Profits | $256,397 | $43,933 | - | $(19,788) | - | - | - | - | $280,542 | | Accumulated Other Comprehensive (Loss) Income, net of tax | $(10,309) | - | $10,238 | - | - | - | - | - | $(71) | | Treasury Stock | $(33,102) | - | - | - | - | $(35) | $2,234 | - | $(30,903) | | Total Shareholders' Equity | $489,871 | $43,933 | $10,238 | $(19,788) | $118 | $(35) | $1,791 | $(6) | $526,163 | - **Total shareholders' equity increased by $36,292 thousand** from January 1, 2019, to September 30, 2019, primarily driven by net income and other comprehensive income, partially offset by cash dividends[16](index=16&type=chunk)[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows (Unaudited) - Key Figures (dollars in thousands) | Cash Flow Activity | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | |:---|:---|:---| | Net cash provided by operating activities | $49,771 | $48,833 | | Net cash used in investing activities | $(261,063) | $(139,421) | | Net cash provided by (used in) financing activities | $158,260 | $(56,703) | | Net decrease in cash and cash equivalents | $(53,032) | $(147,291) | | Cash and cash equivalents at end of period | $450,677 | $465,449 | - **Net cash used in investing activities significantly increased to $(261,063) thousand** in 2019 from **$(139,421) thousand** in 2018, primarily due to higher purchases of securities available for sale and net increase in loans[20](index=20&type=chunk) - **Net cash provided by financing activities turned positive at $158,260 thousand** in 2019, compared to net cash used of **$(56,703) thousand** in 2018, mainly driven by a net increase in deposits[20](index=20&type=chunk) [Notes to Consolidated Interim Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Interim%20Financial%20Statements) [(1) Financial Statement Presentation](index=12&type=section&id=(1)%20Financial%20Statement%20Presentation) - **The unaudited Consolidated Interim Financial Statements include the accounts of TrustCo Bank Corp NY and its principal subsidiary, Trustco Bank, with significant intercompany accounts and transactions eliminated**[23](index=23&type=chunk) - **Prior period amounts are reclassified when necessary to conform to the current period presentation**[23](index=23&type=chunk) [(2) Earnings Per Share](index=12&type=section&id=(2)%20Earnings%20Per%20Share) Earnings Per Share Reconciliation (in thousands, except per share data) | Metric | Three months ended Sep 30, 2019 | Three months ended Sep 30, 2018 | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | |:---|:---|:---|:---|:---| | Net income | $14,708 | $15,199 | $43,933 | $45,412 | | Weighted average common shares | 96,907 | 96,555 | 96,825 | 96,453 | | Stock Options | 70 | 134 | 72 | 134 | | Weighted average common shares including potential dilutive shares | 96,977 | 96,689 | 96,897 | 96,587 | | Basic EPS | $0.152 | $0.157 | $0.454 | $0.471 | | Diluted EPS | $0.152 | $0.157 | $0.453 | $0.470 | [(3) Benefit Plans](index=13&type=section&id=(3)%20Benefit%20Plans) Net Periodic Benefit (dollars in thousands) | Metric | Three months ended Sep 30, 2019 (Pension) | Three months ended Sep 30, 2018 (Pension) | Three months ended Sep 30, 2019 (Other Postretirement) | Three months ended Sep 30, 2018 (Other Postretirement) | |:---|:---|:---|:---|:---| | Net periodic benefit | $(367) | $(446) | $(303) | $(538) | | Metric | Nine months ended Sep 30, 2019 (Pension) | Nine months ended Sep 30, 2018 (Pension) | Nine months ended Sep 30, 2019 (Other Postretirement) | Nine months ended Sep 30, 2018 (Other Postretirement) | |:---|:---|:---|:---|:---| | Net periodic benefit | $(1,100) | $(1,336) | $(911) | $(891) | - **The Company does not expect to make contributions to its pension and postretirement benefit plans in 2019**[26](index=26&type=chunk) [(4) Investment Securities](index=14&type=section&id=(4)%20Investment%20Securities) [(a) Securities available for sale](index=14&type=section&id=(a)%20Securities%20available%20for%20sale) Securities Available for Sale (dollars in thousands) | Metric | September 30, 2019 | December 31, 2018 | |:---|:---|:---| | Amortized Cost | $662,642 | $515,531 | | Gross Unrealized Gains | $3,199 | $58 | | Gross Unrealized Losses | $3,082 | $14,126 | | Fair Value | $662,759 | $501,463 | - **Total securities available for sale increased by $161,296 thousand (32.16%)** in fair value from December 31, 2018, to September 30, 2019[28](index=28&type=chunk) Proceeds from Sales and Calls of Securities Available for Sale (dollars in thousands) | Metric | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | |:---|:---|:---| | Proceeds from calls/paydowns | $101,306 | $64,925 | | Proceeds from maturities | $10,052 | $45,000 | | Gross realized gains | $- | $- | | Gross realized losses | $- | $- | [(b) Held to maturity securities](index=17&type=section&id=(b)%20Held%20to%20maturity%20securities) Held to Maturity Securities (dollars in thousands) | Metric | September 30, 2019 | December 31, 2018 | |:---|:---|:---| | Amortized Cost | $19,705 | $22,501 | | Gross Unrecognized Gains | $1,131 | $577 | | Gross Unrecognized Losses | $- | $154 | | Fair Value | $20,836 | $22,924 | - **The held to maturity portfolio consists solely of residential mortgage-backed securities and collateralized mortgage obligations**[33](index=33&type=chunk) [(c) Other-Than-Temporary Impairment](index=19&type=section&id=(c)%20Other-Than-Temporary%20Impairment) - **Management evaluates securities for other-than-temporary impairment (OTTI) at least quarterly**, considering factors like the extent and duration of fair value decline, issuer's financial condition, macroeconomic conditions, and intent/likelihood of selling the security[36](index=36&type=chunk)[37](index=37&type=chunk) - **As of September 30, 2019, the Company does not consider its U.S. government sponsored enterprises, residential mortgage-backed securities, corporate bonds, or SBA-guaranteed participation securities to be other-than-temporarily impaired**, as declines in fair value are attributed to interest rate changes, not credit quality, and there is no intent or requirement to sell before recovery[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) [(5) Loans and Allowance for Loan Losses](index=20&type=section&id=(5)%20Loans%20and%20Allowance%20for%20Loan%20Losses) Recorded Investment in Loans by Loan Class (dollars in thousands) | Loan Class | September 30, 2019 | December 31, 2018 | |:---|:---|:---| | Commercial real estate | $173,267 | $171,553 | | Other Commercial | $19,176 | $24,593 | | First mortgages (1-4 family) | $3,418,907 | $3,287,877 | | Home equity loans | $89,740 | $88,831 | | Home equity lines of credit | $273,526 | $289,540 | | Installment | $10,703 | $11,702 | | Total loans, net | $3,985,319 | $3,874,096 | | Less: Allowance for loan losses | $44,329 | $44,766 | | Net loans | $3,940,990 | $3,829,330 | Non-Accrual Loans by Loan Class (dollars in thousands) | Loan Class | September 30, 2019 | December 31, 2018 | |:---|:---|:---| | Commercial real estate | $852 | $639 | | Other Commercial | $36 | $6 | | First mortgages (1-4 family) | $16,495 | $20,014 | | Home equity loans | $337 | $247 | | Home equity lines of credit | $3,252 | $4,027 | | Installment | $13 | $19 | | Total non-accrual loans | $20,985 | $24,952 | | Total nonperforming loans | $21,015 | $24,986 | Allowance for Loan Losses Activity (dollars in thousands) | Metric | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | |:---|:---|:---| | Balance at beginning of period | $44,766 | $44,170 | | Total loan chargeoffs | $934 | $660 | | Total recoveries | $538 | $326 | | Net loans charged off | $396 | $334 | | (Credit) provision for loan losses | $(41) | $900 | | Balance at end of period | $44,329 | $44,736 | - **NPLs decreased by $4.0 million (16.0%)** from December 31, 2018, to September 30, 2019. Residential real estate loans constituted the majority of NPLs (**$20.1 million**) at September 30, 2019[47](index=47&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - **The allowance for loan losses decreased slightly** from **$44,766 thousand** at December 31, 2018, to **$44,329 thousand** at September 30, 2019, with a credit provision for loan losses of **$(41) thousand** for the nine months ended September 30, 2019[53](index=53&type=chunk) [(6) Fair Value of Financial Instruments](index=35&type=section&id=(6)%20Fair%20Value%20of%20Financial%20Instruments) - **Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)**[76](index=76&type=chunk)[77](index=77&type=chunk) - **Securities available for sale are primarily classified as Level 2**, valued using independent pricing services and models[78](index=78&type=chunk)[82](index=82&type=chunk) - **Other Real Estate Owned (OREO) and Impaired Loans are classified as Level 3**, with fair values commonly based on recent real estate appraisals and adjustments for differences between comparable sales and income data[79](index=79&type=chunk)[80](index=80&type=chunk) Fair Value Measurements at September 30, 2019 (dollars in thousands) | Asset/Liability | Carrying Value | Level 1 | Level 2 | Level 3 | Total Fair Value | |:---|:---|:---|:---|:---|:---| | **Financial Assets:** | | | | | | | Cash and cash equivalents | $450,677 | $450,677 | - | - | $450,677 | | Securities available for sale | $662,759 | - | $662,759 | - | $662,759 | | Held to maturity securities | $19,705 | - | $20,836 | - | $20,836 | | Net loans | $3,940,990 | - | - | $3,990,429 | $3,990,429 | | **Financial Liabilities:** | | | | | | | Demand deposits | $453,439 | $453,439 | - | - | $453,439 | | Interest bearing deposits | $4,007,728 | $2,550,505 | $1,456,107 | - | $4,006,612 | | Short-term borrowings | $151,095 | - | $151,095 | - | $151,095 | [(7) Accumulated Other Comprehensive Income (Loss)](index=40&type=section&id=(7)%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) Accumulated Other Comprehensive Income (Loss) Balances (dollars in thousands) | Component | Balance at Jan 1, 2019 | Other Comprehensive Income (loss)- Before Reclassifications (9M 2019) | Amount reclassified from Accumulated Other Comprehensive Income (9M 2019) | Balance at Sep 30, 2019 | |:---|:---|:---|:---|:---| | Net unrealized holding loss on securities available for sale, net of tax | $(10,416) | $10,499 | - | $83 | | Net change in overfunded position in pension and postretirement plans | $423 | - | - | $423 | | Net change in net actuarial loss and prior service credit on pension and postretirement benefit plans, net of tax | $(316) | - | $(261) | $(577) | | Total Accumulated other comprehensive loss, net of tax | $(10,309) | $10,499 | $(261) | $(71) | - **Accumulated other comprehensive loss significantly improved** from **$(10,309) thousand** at January 1, 2019, to **$(71) thousand** at September 30, 2019, primarily due to a positive change in net unrealized holding loss on securities available for sale[88](index=88&type=chunk) [(8) Revenue from Contracts with Customers](index=42&type=section&id=(8)%20Revenue%20from%20Contracts%20with%20Customers) Non-Interest Income (dollars in thousands) | Source | Three months ended Sep 30, 2019 | Three months ended Sep 30, 2018 | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | |:---|:---|:---|:---|:---| | Overdraft fees | $931 | $935 | $2,630 | $2,586 | | Other Service Charges on Deposits | $124 | $125 | $343 | $335 | | Interchange Income | $970 | $1,003 | $3,785 | $3,478 | | Wealth management fees | $1,517 | $1,516 | $4,933 | $4,927 | | Other (a) | $1,383 | $876 | $2,785 | $2,303 | | Total non-interest income | $4,925 | $4,455 | $14,476 | $13,629 | - **Revenue from contracts with customers, recognized within Non-Interest Income, includes service charges on deposits (transaction-based, account maintenance, overdraft fees), interchange income (card-issuing bank fees, volume incentives, ATM charges), and wealth management fees (financial/estate planning, trustee, investment management)**[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) [(9) Operating Leases](index=43&type=section&id=(9)%20Operating%20Leases) - **The Company adopted ASU 2016-02 (Leases) effective January 1, 2019**, recognizing a lease liability of approximately **$58.2 million** and a ROU asset of approximately **$53.0 million**, with no material impact on key performance metrics or operating results[97](index=97&type=chunk)[98](index=98&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) Operating Lease Costs (dollars in thousands) | Metric | Three months ended Sep 30, 2019 | Three months ended Sep 30, 2018 | |:---|:---|:---| | Operating lease cost | $2,007 | $1,954 | | Variable lease cost | $497 | $492 | | Total Lease costs | $2,504 | $2,446 | | Metric | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | |:---|:---|:---| | Operating lease cost | $5,828 | $5,794 | | Variable lease cost | $1,472 | $1,546 | | Total Lease costs | $7,300 | $7,340 | Future Minimum Lease Payments (dollars in thousands) | Year ending December 31, | Amount | |:---|:---| | 2019 | $1,967 | | 2020 | $7,820 | | 2021 | $7,818 | | 2022 | $7,300 | | 2023 | $6,978 | | Thereafter | $32,600 | | Total lease payments | $64,483 | | Less: Interest | $9,752 | | Present value of lease liabilities | $54,731 | [(10) Regulatory Capital Requirements](index=45&type=section&id=(10)%20Regulatory%20Capital%20Requirements) - **The Company and Bank are subject to Basel III rules**, with full compliance phased in by January 1, 2019, including a **2.5%** capital conservation buffer[103](index=103&type=chunk) - **As of September 30, 2019, both the Company and Bank meet all capital adequacy requirements and the Bank is categorized as 'well capitalized' under prompt corrective action regulations**[103](index=103&type=chunk)[104](index=104&type=chunk) Bank Only Capital Ratios (dollars in thousands) | Metric | As of Sep 30, 2019 (Amount) | As of Sep 30, 2019 (Ratio) | Well Capitalized Minimum | Adequately Capitalized Minimum | |:---|:---|:---|:---|:---| | Tier 1 leverage capital | $509,531 | 9.751% | 5.000% | 4.000% | | Common equity tier 1 capital | $509,531 | 18.202% | 6.500% | 7.000% | | Tier 1 risk-based capital | $509,531 | 18.202% | 8.000% | 8.500% | | Total risk-based capital | $544,641 | 19.456% | 10.000% | 10.500% | Consolidated Capital Ratios (dollars in thousands) | Metric | As of Sep 30, 2019 (Amount) | As of Sep 30, 2019 (Ratio) | Minimum for Capital Adequacy plus Capital Conservation Buffer | |:---|:---|:---|:---| | Tier 1 leverage capital | $525,680 | 10.057% | 4.000% | | Common equity tier 1 capital | $525,680 | 18.767% | 7.000% | | Tier 1 risk-based capital | $525,680 | 18.767% | 8.500% | | Total risk-based capital | $560,811 | 20.021% | 10.500% | [(11) New Accounting Pronouncements](index=46&type=section&id=(11)%20New%20Accounting%20Pronouncements) - **The Company adopted ASU 2016-02 (Leases) on January 1, 2019**, recognizing a lease liability of approximately **$58.2 million** and a ROU asset of approximately **$53.0 million**, with no material impact on key performance metrics or operating results[106](index=106&type=chunk)[107](index=107&type=chunk) - **The Company is evaluating the impact of ASU 2016-13 (CECL) on its consolidated financial statements**, with plans to finalize its methodology and internal controls in Q4 2019. The impact on the allowance for credit losses for the investment portfolio is not expected to be significant[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) - **The Company is also evaluating ASU 2019-04 and ASU 2019-05**, which provide clarification and targeted transition relief for CECL[111](index=111&type=chunk)[112](index=112&type=chunk) [Report of Independent Registered Public Accounting Firm](index=50&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - **Crowe LLP, the independent registered public accounting firm, has reviewed** the consolidated interim financial information and is not aware of any material modifications needed for conformity with GAAP[114](index=114&type=chunk) - **Crowe LLP expressed an unqualified opinion** on the Company's consolidated financial statements for the year ended December 31, 2018[115](index=115&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses TrustCo Bank Corp NY's financial condition and operating results for Q3 2019, including economic context and key financial metrics [Forward-looking Statements](index=51&type=section&id=Forward-looking%20Statements) - **The report contains forward-looking statements** subject to risks and uncertainties that could cause actual results to differ materially from projections[119](index=119&type=chunk) - **Key factors that could affect results include the ability to originate mortgage loans, maintain noninterest expense levels, make accurate credit risk judgments, and the effects of trade, monetary, fiscal policies, and regulatory changes**[120](index=120&type=chunk) [Introduction](index=53&type=section&id=Introduction) - **Financial markets in Q3 2019 were influenced** by trade negotiations and political developments, with US equity markets showing strength (S&P 500 up **1.7%**, Dow Jones up **1.2%**)[124](index=124&type=chunk) - **The yield curve remained flat**, with the 10-year Treasury bond averaging **1.80%** (down **54 bps** QoQ) and the 2-year Treasury bond averaging **1.69%** (down **44 bps** QoQ). **The Federal Reserve decreased the target federal funds rate by 50 basis points** during Q3 2019[124](index=124&type=chunk) - **The spread between the 3-month and 10-year Treasury yields averaged a negative 23 basis points** in Q3 2019, indicating an inverted yield curve[124](index=124&type=chunk) [Overview](index=55&type=section&id=Overview) Key Financial Performance (dollars in millions, except per share data) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | |:---|:---|:---|:---|:---| | Net Income | $14.7 | $15.2 | $43.9 | $45.4 | | Diluted EPS | $0.152 | $0.157 | $0.453 | $0.470 | | Return on Average Assets (ROAA) | 1.12% | 1.24% | 1.14% | 1.24% | | Return on Average Equity (ROAE) | 11.19% | 12.84% | 11.56% | 13.00% | - **Net interest margin decreased to 3.04%** in Q3 2019 from **3.35%** in Q3 2018, leading to a **$1.9 million** decrease in taxable equivalent net interest income[130](index=130&type=chunk) - **Salaries and employee benefits increased by $964 thousand** in Q3 2019, while FDIC and other insurance, advertising, and other real estate expense decreased[130](index=130&type=chunk) [Asset/Liability Management](index=56&type=section&id=Asset%2FLiability%20Management) - **TrustCo aims to generate earnings** through core deposits funding a prudent mix of interest-earning assets, maintaining adequate liquidity, and reducing interest rate sensitivity[132](index=132&type=chunk) - **The Company's traditional underwriting process and retention of originated loans in its portfolio incentivize conservative credit decisions**[138](index=138&type=chunk) - **The net interest margin for Q3 2019 was 3.04%**, down **31 basis points** from the prior year's quarter, influenced by increased interest-bearing deposits and a narrowed margin on balance sheet expansion[139](index=139&type=chunk)[140](index=140&type=chunk)[143](index=143&type=chunk) [Earning Assets](index=58&type=section&id=Earning%20Assets) Average Interest Earning Assets (dollars in millions) | Metric | Q3 2019 | Q3 2018 | YoY Change | |:---|:---|:---|:---| | Total Average Interest Earning Assets | $5,082.7 | $4,838.1 | +$244.6 | | Average Yield | 3.82% | 3.78% | +4 bps | Average Loan Portfolio (dollars in millions) | Loan Type | Q3 2019 Average Balance | Q3 2018 Average Balance | YoY Change | Q3 2019 Yield | Q3 2018 Yield | |:---|:---|:---|:---|:---|:---| | Total Loans | $3,940.7 | $3,782.3 | +$158.4 | 4.26% | 4.23% | | Residential Mortgage Loans | $3,465.1 | $3,289.5 | +$175.6 | 4.13% | 4.13% | | Commercial Loans | $190.5 | $188.8 | +$1.7 | 5.45% | 5.25% | | Home Equity Lines of Credit | $275.0 | $294.5 | $(19.5) | 4.95% | 4.60% | Securities and Short-term Investments (dollars in millions) | Asset Type | Q3 2019 Average Balance | Q3 2018 Average Balance | YoY Change | Q3 2019 Yield | Q3 2018 Yield | |:---|:---|:---|:---|:---|:---| | Securities Available for Sale | $647.5 | $536.2 | +$111.3 | 2.34% | 2.18% | | Held to Maturity Securities | $20.2 | $24.1 | $(3.9) | 3.70% | 3.86% | | Federal Funds Sold & Other Short-term Investments | $465.3 | $486.6 | $(21.3) | 2.19% | 1.98% | - **The net unrealized gain** in the available for sale securities portfolio was **$117 thousand** as of September 30, 2019, a significant improvement from a net unrealized loss of **$14.1 million** as of December 31, 2018, primarily due to changes in market interest rates[149](index=149&type=chunk) [Funding Opportunities](index=60&type=section&id=Funding%20Opportunities) Average Interest Bearing Accounts (dollars in millions) | Metric | Q3 2019 Average Balance | Q3 2018 Average Balance | YoY Change | Q3 2019 Average Rate Paid | Q3 2018 Average Rate Paid | |:---|:---|:---|:---|:---|:---| | Total Interest Bearing Accounts | $4,026.2 | $3,823.3 | +$202.9 | 0.95% | 0.51% | | Interest Bearing Checking | $874.2 | $913.2 | $(39.0) | 0.02% | 0.05% | | Money Market Accounts | $567.6 | $508.8 | +$58.8 | 0.83% | 0.42% | | Savings Accounts | $1,126.9 | $1,244.9 | $(118.0) | 0.11% | 0.13% | | Time Deposits | $1,457.5 | $1,156.4 | +$301.1 | 2.19% | 1.33% | - **Total interest expense on deposits increased by $4.6 million** to **$9.5 million** in Q3 2019 compared to the prior year, reflecting higher average balances and increased rates paid[155](index=155&type=chunk) Average Short-term Borrowings (dollars in millions) | Metric | Q3 2019 Average Balance | Q3 2018 Average Balance | YoY Change | Q3 2019 Average Rate | Q3 2018 Average Rate | |:---|:---|:---|:---|:---|:---| | Short-term Borrowings | $160.2 | $183.8 | $(23.6) | 0.90% | 0.60% | - **The Company maintains contingent funding alternatives**, including FHLBNY and FRBNY borrowing capacity, and considers brokered deposits as a contingent source[156](index=156&type=chunk) [Net Interest Income](index=61&type=section&id=Net%20Interest%20Income) Net Interest Income, Spread, and Margin | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | |:---|:---|:---|:---|:---| | Taxable Equivalent Net Interest Income | $38.6 million | $40.5 million | $117.6 million | $119.9 million | | Net Interest Spread | 2.88% | 3.26% | 2.98% | 3.24% | | Net Interest Margin | 3.04% | 3.35% | 3.13% | 3.32% | - **Taxable equivalent net interest income decreased by $1.9 million (4.69%)** for the three months and **$2.4 million (2.00%)** for the nine months ended September 30, 2019, compared to the prior year periods[159](index=159&type=chunk)[160](index=160&type=chunk) [Nonperforming Assets](index=61&type=section&id=Nonperforming%20Assets) Nonperforming Assets (dollars in millions) | Metric | Sep 30, 2019 | Dec 31, 2018 | Sep 30, 2018 | |:---|:---|:---|:---| | Total Nonperforming Loans (NPLs) | $21.0 | $25.0 | $23.8 | | Non-accrual loans | $21.0 | $25.0 | $23.8 | | Other Real Estate Owned (OREO) | $2.4 | $1.7 | N/A | | Allowance for Loan Losses (ALL) | $44.3 | $44.8 | $44.7 | | ALL as % of Loan Portfolio | 1.11% | 1.16% | 1.17% | - **NPLs decreased by $4.0 million (16.0%)** from December 31, 2018, to September 30, 2019. Residential real estate loans constituted the majority of NPLs (**$20.1 million**) at September 30, 2019[163](index=163&type=chunk)[164](index=164&type=chunk) - **There was no provision for loan losses for Q3 2019, compared to $300 thousand for Q3 2018. Net chargeoffs for Q3 2019 were $36 thousand**[174](index=174&type=chunk) - **At September 30, 2019, 75.1% of the gross loan portfolio was in New York and surrounding areas, and 24.9% in Florida. Florida borrowers accounted for 8.6% of total nonperforming loans**[167](index=167&type=chunk)[168](index=168&type=chunk) [Liquidity and Interest Rate Sensitivity](index=64&type=section&id=Liquidity%20and%20Interest%20Rate%20Sensitivity) - **TrustCo actively manages liquidity** through target ratios and contingency plans, utilizing its strong capital position and contingent funding alternatives like FHLBNY and FRBNY borrowing capacity[177](index=177&type=chunk) - **The Company uses an external model** to project changes in interest rates and prepayment speeds, incorporating historical behavior of deposit rates and balances[178](index=178&type=chunk) Estimated Percentage of Fair Value of Capital to Fair Value of Assets (as of Sep 30, 2019) | Interest Rate Scenario | Estimated Percentage | |:---|:---| | +400 BP | 18.30% | | +300 BP | 18.90% | | +200 BP | 19.40% | | +100 BP | 19.80% | | Current rates | 19.70% | | -100 BP | 17.40% | [Noninterest Income](index=65&type=section&id=Noninterest%20Income) Total Noninterest Income (dollars in millions) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | |:---|:---|:---|:---|:---| | Total Noninterest Income | $4.9 | $4.5 | $14.5 | $13.6 | - **Noninterest income for Q3 2019 increased by $400 thousand**, primarily due to a **$560 thousand** increase in other income, including a **$350 thousand** recovery from a prior year legal judgment[181](index=181&type=chunk) - For the nine months ended September 30, 2019, **noninterest income increased by $847 thousand**, driven by the sale of the credit card portfolio (**$176 thousand gain**), sale of non-performing loans (**$349 thousand gain**), and the legal judgment recovery (**$350 thousand**)[182](index=182&type=chunk) [Noninterest Expenses](index=65&type=section&id=Noninterest%20Expenses) Total Noninterest Expenses (dollars in millions) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | |:---|:---|:---|:---|:---| | Total Noninterest Expenses | $24.1 | $24.5 | $73.8 | $72.8 | - **Noninterest expenses decreased by $400 thousand** for Q3 2019, with decreases in FDIC and other insurance, advertising, and other real estate expense, partially offset by a **$964 thousand** increase in salaries and employee benefits[183](index=183&type=chunk) - **Full-time equivalent headcount increased from 807** at September 30, 2018, to **823** at September 30, 2019[183](index=183&type=chunk) [Income Taxes](index=66&type=section&id=Income%20Taxes) Income Tax Expense and Effective Tax Rates (dollars in millions) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | |:---|:---|:---|:---|:---| | Income Tax Expense | $4.8 | $4.9 | $14.3 | $14.5 | | Effective Tax Rate | 24.6% | 24.5% | 24.6% | 24.2% | [Capital Resources](index=66&type=section&id=Capital%20Resources) Shareholders' Equity and Dividend (dollars in millions) | Metric | Sep 30, 2019 | Sep 30, 2018 | |:---|:---|:---| | Total Shareholders' Equity | $526.2 | $477.1 | | Dividend Declared (per share) | $0.068125 | $0.068125 | | Dividend Payout Ratio (Q3) | 44.85% | 43.29% | Consolidated Capital Ratios (dollars in thousands) | Metric | As of Sep 30, 2019 (Amount) | As of Sep 30, 2019 (Ratio) | Minimum for Capital Adequacy plus Capital Conservation Buffer | |:---|:---|:---|:---| | Tier 1 leverage capital | $525,680 | 10.057% | 4.000% | | Common equity tier 1 capital | $525,680 | 18.767% | 7.000% | | Tier 1 risk-based capital | $525,680 | 18.767% | 8.500% | | Total risk-based capital | $560,811 | 20.021% | 10.500% | - **Both TrustCo and Trustco Bank exceeded minimum capital standards**, including the fully phased-in capital conservation buffer, as of September 30, 2019[190](index=190&type=chunk) - **The Company is evaluating the new community bank leverage ratio framework**, effective January 1, 2020, which simplifies capital requirements for qualifying banks[191](index=191&type=chunk)[196](index=196&type=chunk) [Critical Accounting Policies](index=69&type=section&id=Critical%20Accounting%20Policies) - **Management considers the accounting policy related to the allowance for loan losses** to be a critical accounting policy due to the inherent uncertainty in evaluating required allowance levels and its material effect on operating results[199](index=199&type=chunk)[200](index=200&type=chunk) [STATISTICAL DISCLOSURE I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY: INTEREST RATES AND INTEREST DIFFERENTIAL](index=70&type=section&id=STATISTICAL%20DISCLOSURE%20I.%20DISTRIBUTION%20OF%20ASSETS,%20LIABILITIES%20AND%20SHAREHOLDERS'%20EQUITY:%20INTEREST%20RATES%20AND%20INTEREST%20DIFFERENTIAL) Average Balance Sheet, Interest Income/Expense, and Rates/Yields (3 Months Ended Sep 30, 2019 vs 2018) (dollars in thousands) | Metric | 2019 Average Balance | 2019 Interest | 2019 Average Rate | 2018 Average Balance | 2018 Interest | 2018 Average Rate | Change in Interest | |:---|:---|:---|:---|:---|:---|:---|:---| | Total interest earning assets | $5,082,743 | $48,529 | 3.82% | $4,838,082 | $45,741 | 3.78% | $2,788 | | Total interest bearing liabilities | $4,186,340 | $9,885 | 0.94% | $4,007,052 | $5,215 | 0.52% | $4,670 | | Net interest income, tax equivalent | | $38,644 | | | $40,526 | | $(1,882) | | Net interest spread | | | 2.88% | | | 3.26% | | | Net interest margin | | | 3.04% | | | 3.35% | | Average Balance Sheet, Interest Income/Expense, and Rates/Yields (9 Months Ended Sep 30, 2019 vs 2018) (dollars in thousands) | Metric | 2019 Average Balance | 2019 Interest | 2019 Average Rate | 2018 Average Balance | 2018 Interest | 2018 Average Rate | Change in Interest | |:---|:---|:---|:---|:---|:---|:---|:---| | Total interest earning assets | $5,013,737 | $144,608 | 3.85% | $4,822,537 | $134,060 | 3.71% | $10,548 | | Total interest bearing liabilities | $4,143,267 | $27,039 | 0.87% | $4,009,878 | $14,103 | 0.47% | $12,936 | | Net interest income, tax equivalent | | $117,569 | | | $119,957 | | $(2,388) | | Net interest spread | | | 2.98% | | | 3.24% | | | Net interest margin | | | 3.13% | | | 3.32% | | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=76&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company's primary market risk is interest rate risk, actively managed to meet earning goals and respond to future interest rate changes - **Interest rate risk is the Company's principal market risk**[209](index=209&type=chunk) - **The Company manages interest rate risk** to meet short-term earning goals and respond to future changes in interest rates[209](index=209&type=chunk) - **Management plans to invest funds** from the Federal Funds sold and other short-term investment portfolio into the securities available for sale, securities held to maturity, and loan portfolios[209](index=209&type=chunk) [Item 4. Controls and Procedures](index=76&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of disclosure controls and procedures, concluding they were effective with no material changes in internal control - **The Company's disclosure controls and procedures were evaluated and deemed effective** as of September 30, 2019[210](index=210&type=chunk)[211](index=211&type=chunk) - **No changes in internal control over financial reporting materially affected** or are reasonably likely to materially affect internal control over financial reporting during the quarter[213](index=213&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=77&type=section&id=Item%201.%20Legal%20Proceedings) No legal proceedings to report for the period - **No legal proceedings**[214](index=214&type=chunk) [Item 1A. Risk Factors](index=77&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors in the Company's Annual Report on Form 10-K for 2018 - **No material changes to the risk factors** previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2018[214](index=214&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=77&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds to report for the period - **No unregistered sales of equity securities and use of proceeds**[214](index=214&type=chunk) [Item 3. Defaults Upon Senior Securities](index=77&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities to report for the period - **No defaults upon senior securities**[214](index=214&type=chunk) [Item 4. Mine Safety](index=77&type=section&id=Item%204.%20Mine%20Safety) No information to report regarding mine safety - **No mine safety information**[214](index=214&type=chunk) [Item 5. Other Information](index=77&type=section&id=Item%205.%20Other%20Information) No other information to report for the period - **No other information**[214](index=214&type=chunk) [Item 6. Exhibits](index=77&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including certifications and XBRL taxonomy documents - **Exhibits include Crowe LLP Letter, Rule 13a-15(e)/15d-15(e) Certifications of Robert J. McCormick and Michael M. Ozimek, Section 1350 Certifications, and XBRL Taxonomy Extension Documents**[214](index=214&type=chunk) [SIGNATURES](index=78&type=section&id=SIGNATURES) The report is signed by the Chairman, President, CEO, and Executive Vice President, CFO on November 7, 2019 - **The report is signed by Robert J. McCormick, Chairman, President and Chief Executive Officer, and Michael M. Ozimek, Executive Vice President and Chief Financial Officer, on November 7, 2019**[215](index=215&type=chunk)[216](index=216&type=chunk)

TrustCo Bank Corp NY (NASDAQ:TRST) Q3 2019 Earnings Conference Call October 22, 2019 9:00 AM ET Company Participants Robert J. McCormick - Chairman, President and CEO Michael M. Ozimek - EVP and CFO Scot R. Salvador - EVP and Chief Lending Officer Conference Call Participants Alex Twerdahl - Sandler O'Neill Operator Good morning and welcome to the TrustCo Bank Corp Third Quarter 2019 Earnings Call and Webcast. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to _________ Commission File Number 000-10592 TRUSTCO BANK CORP N Y (Exact name of registrant as specified in its charter) New York 14-1630287 Securities regis ...

TrustCo Bank Corp NY (NASDAQ:TRST) Q2 2019 Earnings Conference Call July 23, 2019 9:00 AM ET Company Participants Robert McCormick - Chairman, President and CEO Mike Ozimek - EVP and CFO Scot Salvador - EVP and Chief Lending Officer Conference Call Participants Alex Twerdahl - Sandler O'Neill Operator Good day and welcome to the TrustCo Bank Corp Second Quarter 2019 Earnings Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an op ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Registrant's telephone number, including area code: (518) 377‑3311 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and ( ...

Financial Data and Key Metrics Changes - The company reported net income of $14.6 million for Q1 2019, which is essentially flat compared to Q1 2018, resulting in a return on assets of 1.17% and return on equity of 11.93% [4][8] - The efficiency ratio for the quarter was 66.1%, an increase from 55.06% in the previous quarter, primarily due to new hires [28] - The net interest margin decreased to 3.24% from 3.29% year-over-year, attributed to increased funding costs [20] Business Line Data and Key Metrics Changes - Average loans grew by 6% year-over-year, reaching $3.9 billion, with significant growth in the residential real estate portfolio, which increased by 7.2% [9][10] - Non-interest income was reported at $4.6 million, slightly up from the previous quarter, with the Financial Services division being the main contributor [24] Market Data and Key Metrics Changes - Total average deposits increased by $156.6 million or 3.8% year-over-year, driven by a 25.2% increase in average signed deposits [15][16] - The cost of interest-bearing deposits rose to 76 basis points from 41 basis points, while the average cost of time deposits increased to 1.79% from 1.07% year-over-year [16][18] Company Strategy and Development Direction - The company continues to focus on traditional lending and conservative balance sheet management, aiming for consistent high-quality recurring earnings [12] - The strategy of offering competitive shorter-term rates has allowed the company to gain market share and retain existing time deposits [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in loan growth for the upcoming quarters, citing increased application volume and a solid backlog [45][47] - The company expects margins to stabilize in the latter part of 2019 as shorter-term deposits reprice [19] Other Important Information - The company adopted a new lease accounting standard, resulting in additional net lease assets and liabilities of approximately $51.6 million and $56.7 million, respectively, without materially impacting consolidated net earnings [29][30] - The capital ratios improved, with the consolidated equity to assets ratio at 9.73%, up from 9.36% year-over-year [32] Q&A Session Summary Question: Confidence in Loan Growth - Management indicated that seasonal demand and increased application volume give them confidence in loan growth, positioning themselves for a more aggressive approach moving forward [45] Question: Margin Stability - The expectation for margin stability is due to the backlog building and the strategy of keeping deposits short-term to allow for repricing opportunities later in the year [46][47] Question: Expense Guidance - The increase in expense guidance is attributed to inflation, cybersecurity, and technology expenses, with management maintaining a focus on efficiency [51][53]