TRUSTCO BANK CORP N Y
For the period ended Sep 30, 2024. Filed Nov 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 8, 2024
TRST$57.30+1.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001140361-24-036598
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0001140361-24-045861
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 139 previous paragraphs and 136 current paragraphs.
73 unchanged; 59 reworded; 4 added; 7 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 27 previous and 29 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
Hurricane Helene made landfall along Florida’s “Big Bend” coast in September, 2024 ultimately impacting parts of the Southeastern United States. The impact of Hurricane Helene on TrustCo’s operations was not significant, and is not expected to be significant to our financial condition or results of operations. Hurricane Milton made landfall near Siesta Key, Florida in October 2024, bringing heavy rain, hurricane or tropical storm force winds, storm surge and power outages to portions of central Florida. All of our branches and office locations have re-opened for business, and damage from the storm was negligible. There were no significant impacts to banking operations. We are still in the process of finalizing our assessment of the potential impact of Hurricane Milton on our customers, credit portfolio, and future lending activity, although we do not expect it to have a significant impact.
Current report
For the nine months ended September 30, 2024, the net interest margin was 2.52%, down 49 basis points versus the prior year. The nine month results reflect the following significant factors:
Current report
Total noninterest expenses were $77.6 million for the nine months ended September 30, 2024, compared to $82.5 million for the nine months ended September 30, 2023. Significant changes included an decrease of $2.7 million in salaries and employee benefits primarily as a result of fewer employees and lower employee benefits. Other significant changes were a decrease in equipment expense of $273 thousand, a decrease in advertising expense of $281 thousand, a decrease in other expense of $1.7 million, a decrease in FDIC and other insurance of $212 thousand, and a decrease in other real estate expense, net, of $242 thousand partially offset by an increase in professional services of $209 thousand and an increase in outsourced services of $300 thousand.
Current report
(Consolidated)
Removed paragraphs (7)
Previous report
There were three significant bank failures in the first five months of 2023, primarily due to the failed banks’ lack of liquidity as depositors sought to withdraw their deposits. Due to rising interest rates, the failed banks were unable to sell investment securities held to meet liquidity needs without realizing substantial losses. As a result of the recent bank failures and in an effort to strengthen public confidence in the banking system and protect depositors, in November 2023, the FDIC adopted a final rule to implement a special assessment on banks with total assets greater than $5 billion and uninsured deposits in excess of $5 billion, to recover the cost associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. The special assessment is being collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods, which it estimates will result in total revenue of $16.3 billion. Because (i) the estimated loss pursuant to the systemic risk determination will be periodically adjusted and (ii) assessments collected may change due to corrective amendments to the amount of uninsured deposits reported for the December 31, 2022 reporting period, the FDIC has retained the ability to cease collection early, extend the special assessment collection period one or more quarters beyond the initial eight-quarter collection period to collect the difference between actual or estimated losses and the amounts collected, or impose a final shortfall special assessment on a one-time basis after the receiverships for SVB and Signature Bank terminate. The final rule became effective on April 1, 2024, and payment for the first collection for the special assessment was due on June 28, 2024. There will be no additional cost to TrustCo as a result of uninsured deposits being under $5 billion.
Previous report
Allowance for credit losses on loans: As described in Note 5 of the consolidated financial statements, the Company enhanced its ACLL calculation. The enhancement was completed on the heels of our previously utilized forecast period and continued periods of minimal losses. The enhancement produces more granular results of expected loan loss, incorporates more extensive peer historical loss data, and allows for a more efficient process. This change did not result in a material impact to the Company’s financial statements.
Previous report
The primary reason for the Company’s change in methodology relates to continued periods of low to minimal losses and to gain operational efficiencies in the allowance process. The Company did not change how quantitative losses are calculated, i.e. utilizing a discounted cash flow approach, rather we enhanced the discounted cash flow calculation to incorporate peer data and updated our forecast and reversion periods. Since the adoption of CECL, the Company has been estimating the quantitative reserves based on internal data and an 8-quarter forecast and immediate reversion. As described above, we are now utilizing peer data, given our continued low to minimal loss history, and using baseline scenario with a 4-quarter forecast and 4-quarter straight line reversion to produce reasonable and supportable results. We continue to use the regulatory interagency qualitative framework, however during the quarter ended June 30, 2024, we now utilize a weighted scorecard approach. The weighted scorecard approach considers each qualitative factor with respect to risks in our portfolio and the economic environment, weighting is assigned based on our evaluation and understanding of the underlying risks and economic conditions within each portfolio segment.
Previous report
We enhanced our qualitative framework given the incorporation of peer data in our quantitative model and to gain operational efficiencies. This change did not result in a material impact to the Company’s financial statements.
Previous report
The following table presents the net charge-off ratio for the three and six months ended June 30, 2024 and 2023:
Previous report
Total noninterest expenses were $51.4 million for the six-months ended June 30, 2024, compared to $55.0 million for the six-months ended June 30, 2023. Significant changes included a decrease of $2.5 million in salaries and employee benefits primarily as a result less full time equivalents as well as lower employee benefits, and a $1.2 million decrease in other expenses, partially offset by an increase of $469 thousand in outsourced services.
Reworded paragraphs (59)
Previous wording
The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the three month and six month periods ended June 30, 2024, with comparisons to the corresponding period in 2023, as applicable. Unless otherwise indicated, net interest income and interest margin are presented in this discussion on a non-GAAP taxable equivalent basis. For the periods presented, there is no difference between these measures and GAAP net interest income and GAAP net interest margin. The consolidated interim financial statements and related notes, as well as the Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 11, 2024 (the “2023 Form 10-K”), should also be read in conjunction with this review. Amounts in prior period consolidated interim financial statements are reclassified whenever necessary to conform to the current period’s presentation.
Current wording
The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the three month and nine month periods ended September 30, 2024, with comparisons to the corresponding period in 2023, as applicable. Unless otherwise indicated, net interest income and interest margin are presented in this discussion on a non-GAAP taxable equivalent basis. For the periods presented, there is no difference between these measures and GAAP net interest income and GAAP net interest margin. The consolidated interim financial statements and related notes, as well as the Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 11, 2024 (the “2023 Form 10-K”), should also be read in conjunction with this review. Amounts in prior period consolidated interim financial statements are reclassified whenever necessary to conform to the current period’s presentation.
Previous wording
Following this Management’s Discussion and Analysis are the “Distribution of Assets, Liabilities and Shareholders’ Equity: Interest Rates and Interest Differential” tables, which give a detailed breakdown of TrustCo’s average interest earning assets and interest bearing liabilities for the three and six month periods ended June 30, 2024 and 2023.
Current wording
Following this Management’s Discussion and Analysis are the “Distribution of Assets, Liabilities and Shareholders’ Equity: Interest Rates and Interest Differential” tables, which give a detailed breakdown of TrustCo’s average interest earning assets and interest bearing liabilities for the three and nine month periods ended September 30, 2024 and 2023.
Previous wording
During the second quarter of 2024, financial markets got off to a slow start as investors were gauging whether the Federal Reserve might lower interest rates. For the second quarter of 2024, the S&P 500 Index was up 3.92%, Nasdaq was up 8.3%, and the Dow Jones Industrial Average was down 1.7% compared to the first quarter of 2024. The 10‑year Treasury bond averaged 4.45% during Q2 2024 compared to 4.16% in Q1 2024, a increase of 29 basis points. The 2‑year Treasury bond average rate increased 35 basis points to 4.83%, which slightly increased the inverted yield curve over the prior quarter. The spread between the 10‑year and the 2-year Treasury bonds increased from a -0.33% on average in Q1 2024 to -0.38% in Q2 2024. Generally, steeper yield curves are favorable for portfolio mortgage lenders like TrustCo, and the table below illustrates the range of rate movements for both short term and longer-term rates. Commencing in March 2022, the Federal Open Market Committee (“FOMC”) increased the target range for the Federal Funds rate seven times in 2022 and four times in 2023 by a total of 525 basis points, to a range of 5.25% to 5.50%, which is where it remains as of June 30, 2024. All of these increases were expressly made in response to inflationary pressures. Spreads of most asset classes to the comparative treasury yield, including agency securities, corporates, municipals and mortgage-backed securities, continue to be down as compared to the levels seen before the pandemic. Additionally, changes in rates and spreads continue to be affected by global economic concerns.
Current wording
During the third quarter of 2024, financial markets got off to a good start as investors were gauging whether the Federal Reserve might lower interest rates, which it did by 50 basis points in September 2024. For the third quarter of 2024, the S&P 500 Index was up 5.5%, Nasdaq was up 2.6%, and the Dow Jones Industrial Average was up 8.2% compared to the second quarter of 2024. The 10‑year Treasury bond averaged 3.95% during Q3 2024 compared to 4.45% in Q2 2024, a decrease of 50 basis points. The 2‑year Treasury bond average rate decreased 79 basis points to 4.04%, which eased the inverted yield curve over the prior quarter. The spread between the 10‑year and the 2-year Treasury bonds decreased from a -0.38% on average in Q2 2024 to -0.09% in Q3 2024. Generally, steeper yield curves are favorable for portfolio mortgage lenders like TrustCo, and the table below illustrates the range of rate movements for both short term and longer-term rates. The Federal Open Market Committee (“FOMC”) increased the target range for the Federal Funds rate eleven times in 2022 and 2023, by a total of 525 basis points, to a range of 5.25% to 5.50%, then lowered it in September 2024 by 50 basis points to a range of 4.75% to 5.00%. All of the increases prior to 2024 were expressly made in response to inflationary pressures. Spreads of most asset classes to the comparative treasury yield, including agency securities, corporates, municipals and mortgage-backed securities, continue to be down as compared to the levels seen before the pandemic. Additionally, changes in rates and spreads continue to be affected by global economic concerns.
Previous wording
The United States economy proved to be resilient in 2023 and has also seen improvements as we continue into 2024. Economic conditions can vary significantly over geographic areas, with strength concentrated in and around major population centers on the coasts and in certain areas where economic activity has been driven by specific regional factors.
Current wording
The United States economy proved to be resilient in 2023 and has also seen improvements as we continue through 2024. Economic conditions can vary significantly over geographic areas, with strength concentrated in and around major population centers on the coasts and in certain areas where economic activity has been driven by specific regional factors.
Previous wording
TrustCo recorded net income of $12.6 million, or $0.66 of diluted earnings per share, for the three months ended June 30, 2024, compared to net income of $16.4 million, or $0.86 of diluted earnings per share, in the same period in 2023. Return on average assets was 0.82% and 1.09%, respectively, for the three-months ended June 30, 2024 and 2023. Return on average equity was 7.76% and 10.61%, respectively, for the three-months ended June 30, 2024 and 2023.
Current wording
TrustCo recorded net income of $12.9 million, or $0.68 of diluted earnings per share, for the three months ended September 30, 2024, compared to net income of $14.7 million, or $0.77 of diluted earnings per share, in the same period in 2023. Return on average assets was 0.84% and 0.96%, respectively, for the three months ended September 30, 2024 and 2023. Return on average equity was 7.74% and 9.32%, respectively, for the three months ended September 30, 2024 and 2023.
Previous wording
TrustCo recorded net income of $24.7 million, or $1.30 of diluted earnings per share, for the six‑months ended June 30, 2024, compared to net income of $34.1 million, or $1.79 of diluted earnings per share, in the same period in 2023. Return on average assets was 0.81% and 1.14%, respectively, for the six-months ended June 30, 2024 and 2023. Return on average equity was 7.65% and 11.22%, respectively, for the six-months ended June 30, 2024 and 2023.
Current wording
TrustCo recorded net income of $37.6 million, or $1.97 of diluted earnings per share, for the nine months ended September 30, 2024, compared to net income of $48.8 million, or $2.57 of diluted earnings per share, in the same period in 2023. Return on average assets was 0.82% and 1.08%, respectively, for the nine months ended September 30, 2024 and 2023. Return on average equity was 7.68% and 10.57%, respectively, for the nine months ended September 30, 2024 and 2023.
Previous wording
The primary factors accounting for the change in net income for the six months ended June 30, 2024 compared to the same period of the prior year were:
Current wording
The primary factors accounting for the change in net income for the nine months ended September 30, 2024 compared to the same period of the prior year were:
Previous wording
During the second quarter of 2024, Visa Inc. accepted the Company’s tender of its 6,528 shares of Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock. As a result of the exchange, the Company marked its Visa Class C common stock to fair value and recorded a gain of $1.4 million based on the conversion privilege of the Visa Class C common stock and the closing price of Visa Class A common stock on June 28, 2024 of $262.47 per share. The Company’s Visa Class C shares are expected to continue to be marked to fair value on a recurring basis using the Visa Class A shares as evidence of orderly transactions between market participants for similar securities issued by Visa. The Company originally obtained the shares in 2008. The carrying value of the Visa B-2 shares is nominal as of June 30, 2024.
Current wording
During the second quarter of 2024, Visa Inc. accepted the Company’s tender of its 6,528 shares of Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock. As a result, during the second quarter of 2024, the Company marked it Visa Class C common stock to fair value and recorded an unrealized gain of $1.4 million. The Company then sold them all in the third quarter of 2024 and recorded an additional gain of $23 thousand, thus resulting in no remaining carrying value on the Company’s Statement of Financial Condition. Once the Company is able to convert the remaining shares of Visa Class B-2 common stock to Visa Class C shares, the Company will mark these shares to fair value on a recurring basis using the Visa Class A shares as evidence of orderly transactions between market participants for similar securities issued by Visa. The Company originally obtained the shares in 2008. The carrying value of Visa B-2 shares is nominal as of September 30, 2024.
Previous wording
TrustCo’s results are affected by a variety of factors including competitive and economic conditions in the specific markets in which the Company operates and, more generally, in the national economy, financial markets and the regulatory environment. Each of these factors is dynamic, and changes in any area can have an impact on TrustCo’s results. Included in the 2023 Form 10-K is a description of the effect interest rates had on the results for the year 2023 compared to 2022. Many of the same market factors discussed in the 2023 Annual Report, including instability in the financial services sector and heightened global economic concerns, continued to have a significant impact on results through the second quarter of 2024. In addition, as we move forward for the remainder of 2024, the uncertainty surrounding the U.S. Presidential election and the potential of changes in regulatory and economic policy could give rise to interest rate volatility
Current wording
TrustCo’s results are affected by a variety of factors including competitive and economic conditions in the specific markets in which the Company operates and, more generally, in the national economy, financial markets and the regulatory environment. Each of these factors is dynamic, and changes in any area can have an impact on TrustCo’s results. Included in the 2023 Form 10-K is a description of the effect interest rates had on the results for the year 2023 compared to 2022. Many of the same market factors discussed in the 2023 Annual Report, including instability in the financial services sector and heightened global economic concerns, continued to have a significant impact on results through the third quarter of 2024. In addition, as the fourth quarter of 2024 progresses, the potential changes in regulatory and economic policy following the U.S. presidential election could give rise to interest rate volatility.
Previous wording
Interest rates have a significant impact on the operations and financial results of all financial services companies. One of the most important interest rates used to control national economic policy is the “Federal Funds” rate. This is the interest rate utilized within the banking system for overnight borrowings for institutions with the highest credit rating. Beginning in the second half of 2019, the Federal Reserve Board began lowering the rate in response to a slowing economy. During the first quarter of 2020, the target range for the Federal Funds rate was significantly decreased to 0.00% to 0.25% as a result of the COVID-19 pandemic. However, as discussed above, the FOMC increased the target range for the federal funds rate seven times in 2022 and four times in 2023 by a total of 525 basis points, to a range of 5.25% to 5.50% by the end of 2023 where it remains as of June 30, 2024.
Current wording
Interest rates have a significant impact on the operations and financial results of all financial services companies. One of the most important interest rates used to control national economic policy is the “Federal Funds” rate. This is the interest rate utilized within the banking system for overnight borrowings for institutions with the highest credit rating. As discussed above, the FOMC increased the target range for the federal funds rate eleven times in 2022 and 2023 by a total of 525 basis points, to a range of 5.25% to 5.50% by the end of 2023. In September 2024 the FOMC met and lowered the federal funds rate by 50 basis points, to a range of 4.75% to 5.00% where it remains as of September 30, 2024.
Previous wording
The interest rate on the 10-year Treasury bond and other long-term interest rates have significant influence on the rates for new residential real estate loans. These changes in interest rates have an effect on the Company relative to the interest income on loans, securities, and Federal Funds sold and other short-term instruments as well as the interest expense on deposits and borrowings. Residential real estate loans and longer‑term investments are most affected by the changes in longer term market interest rates such as the 10‑year Treasury. The Federal Funds sold portfolio and other short‑term investments are affected primarily by changes in the Federal Funds target rate. Deposit interest rates are most affected by short term market interest rates. Also, changes in interest rates have an effect on the recorded balance of the securities available for sale portfolio, which are recorded at fair value. Generally, as market interest rates increase, the fair value of the securities will decrease and the reverse is also generally applicable. Interest rates on new residential real estate loan originations are also influenced by the rates established by secondary market participants such as Freddie Mac and Fannie Mae. The Company establishes rates that management determines are appropriate in light of the long-term nature of residential real estate loans while remaining competitive. Higher market interest rates also generally increase the value of retail deposits.
Current wording
The interest rate on the 10-year Treasury bond and other long-term interest rates have significant influence on the rates for new residential real estate loans and longer term investments. These changes in interest rates have an effect on the Company relative to the interest income on loans, securities, and Federal Funds sold and other short-term instruments as well as the interest expense on deposits and borrowings. The Federal Funds sold portfolio and other short‑term investments are affected primarily by changes in the Federal Funds target rate. Deposit interest rates are most affected by short term market interest rates. Also, changes in interest rates have an effect on the recorded balance of the securities available for sale portfolio, which are recorded at fair value. Generally, as market interest rates increase, the fair value of the securities will decrease and the reverse is also generally applicable. Interest rates on new residential real estate loan originations are also influenced by the rates established by secondary market participants such as Freddie Mac and Fannie Mae. The Company establishes rates that management determines are appropriate in light of the long-term nature of residential real estate loans while remaining competitive. Higher market interest rates also generally increase the value of retail deposits.
Previous wording
TrustCo’s principal loan products are residential real estate loans. As noted above, residential real estate loans and longer‑term investments are most affected by the changes in longer term market interest rates such as the 10-year Treasury. The 10‑year Treasury yield increased 29 basis points, on average, during the second quarter of 2024 compared to the first quarter of 2024 and increased 85 basis points as compared to the second quarter of 2023.
Current wording
TrustCo’s principal loan products are residential real estate loans. As noted above, residential real estate loans and longer‑term investments are most affected by the changes in longer term market interest rates such as the 10-year Treasury. The 10‑year Treasury yield decreased 50 basis points, on average, during the third quarter of 2024 compared to the second quarter of 2024 and decreased 20 basis points as compared to the third quarter of 2023.
Previous wording
A fundamental component of TrustCo’s strategy has been to grow customer relationships and the deposits and loans that are part of those relationships. The Company has significant capacity to grow its balance sheet given its extensive branch network. The Company expects that growth to be profitable. The current interest rate environment, however, has narrowed the margin on incremental balance sheet expansion. While the Company has not changed its fundamental long term strategy in regard to utilizing its excess capacity, management continually evaluates changing conditions and may seek to limit growth or reduce the size of the balance sheet if its analysis indicates that doing so would be beneficial.
Current wording
A fundamental component of TrustCo’s strategy has been to grow customer relationships and the deposits and loans that are part of those relationships. Management believes that the Company has significant capacity to grow its balance sheet given its extensive branch network and it expects that growth to be profitable. The current interest rate environment, however, has narrowed the margin on incremental balance sheet expansion. While the Company has not changed its fundamental long-term strategy in regard to utilizing its excess capacity, management continually evaluates changing conditions and may seek to limit growth or reduce the size of the balance sheet if its analysis indicates that doing so would be beneficial.
Previous wording
For the second quarter of 2024, the net interest margin was 2.53%, down 45 basis points versus the prior year’s second quarter. The quarterly results reflect the following significant factors:
Current wording
For the third quarter of 2024, the net interest margin was 2.61%, down 24 basis points versus the prior year’s quarter. The quarterly results reflect the following significant factors:
Previous wording
During the second quarter of 2024, the Company continued to focus on its strategy to expand its loan portfolio by offering competitive interest rates. Management believes the TrustCo residential real estate loan product is very competitive compared to local and national competitors. Competition remains strong in the Company’s market areas.
Current wording
During the third quarter of 2024, the Company continued to focus on its strategy to expand the loan portfolio by offering competitive interest rates. Management believes the TrustCo residential real estate loan product is very competitive compared to local and national competitors. Competition remains strong in the Company’s market areas.
Previous wording
The strategy on the funding side of the balance sheet was to offer competitive core shorter term CD rates. This strategy should sustain TrustCo’s strong liquidity position and continue to allow us to cross sell products to new and existing relationships and take advantage of opportunities as they arise.
Current wording
The strategy on the funding side of the balance sheet was to offer competitive core deposit products coupled with short term time accounts. This strategy has sustained TrustCo’s strong liquidity position and continues to allow us to cross sell products to new and existing relationships and take advantage of opportunities as they arise.
Previous wording
Total average interest earning assets increased from $5.91 billion in the second quarter of 2023 to $5.98 billion in the same period of 2024 with an average yield of 4.06% in the second quarter of 2024 and 3.80% in the second quarter of 2023. The mix of assets invested in Federal Funds sold and other short-term investments and securities available for sale decreased while loans increased over the prior year period. Interest income on average earning assets increased from $56.1 million in the second quarter of 2023 to $60.6 million in the second quarter of 2024, on a tax equivalent basis. This increase was primarily driven by an increase in interest income on loans due to higher interest rates on loan originations over the last year and variable rate loans repricing upwards, which resulted from the continued increases in the Federal Funds target rate throughout 2023.
Current wording
Total average interest earning assets increased from $5.92 billion in the third quarter of 2023 to $5.94 billion in the same period of 2024 with an average yield of 4.11% in the third quarter of 2024 and 3.88% in the third quarter of 2023. The mix of assets invested in Federal Funds sold and other short-term investments and securities available for sale decreased while loans increased over the prior year period. Interest income on average earning assets increased from $57.6 million in the third quarter of 2023 to $61.1 million in the third quarter of 2024, on a tax equivalent basis. This increase was primarily driven by an increase in interest income on loans due to higher interest rates on loan originations over the last year and variable rate loans repricing upwards, which resulted from the continued increases in the Federal Funds target rate throughout 2023 before it was reduced in September 2024.
Previous wording
The average balance of loans was $5.02 billion in the second quarter of 2024 and $4.84 billion in the comparable period in 2023. The yield on loans was up 23 basis points to 4.04%. Interest income on loans was $50.7 million in the second quarter of 2024 up $4.6 million from the same period in 2023.
Current wording
The average balance of loans was $5.05 billion in the third quarter of 2024 and $4.92 billion in the comparable period in 2023, and the yield on loans was up 23 basis points to 4.12%. Interest income on loans was $52.1 million in the third quarter of 2024 up $4.2 million from the same period in 2023. The increase in the yield on loans is a result of the higher interest rate environment during the third quarter.
Previous wording
Compared to the second quarter of 2023, the average balance of residential mortgage loans, home equity lines of credit, and commercial loans, all increased, while the average balance of installment loans decreased. The average balance of residential mortgage loans was $4.36 billion in the second quarter of 2024 compared to $4.27 billion in 2023, an increase of 2.1%. The average yield on residential mortgage loans increased by 19 basis points to 3.75% in the second quarter of 2024 compared to 2023.
Current wording
Compared to the third quarter of 2023, the average balance of residential mortgage loans, home equity lines of credit, and commercial loans all increased. The average balance of residential mortgage loans was $4.38 billion in the third quarter of 2024 compared to $4.33 billion in 2023, an increase of 1.2%. The average yield on residential mortgage loans increased by 18 basis points to 3.82% in the third quarter of 2024 compared to 2023.
Previous wording
Commercial loans, which consist primarily of loans secured by commercial real estate, increased $31.5 million to an average balance of $280.6 million in the second quarter of 2024 compared to the same period in the prior year. The average yield on this portfolio was up 8 basis points to 5.37% compared to the prior year period, primarily as a result of the continued elevated interest rates on new originations and variable rate loans repricing. The Company has sought to remain selective in underwriting commercial loans in pursuit of a favorable risk/reward balance.
Current wording
Commercial loans, which consist primarily of loans secured by commercial real estate, increased $18.1 million to an average balance of $279.2 million in the third quarter of 2024 compared to the same period in the prior year. The average yield on this portfolio was up 24 basis points to 5.45% compared to the prior year period, primarily as a result of the continued elevated interest rates on new originations and variable rate loans repricing. The Company has sought to remain selective in underwriting commercial loans in pursuit of a favorable risk/reward balance.
Previous wording
The average yield on home equity credit lines increased 42 basis points to 6.42% during the second quarter of 2024 compared to the year earlier period. The average balances of home equity credit lines increased 20.1% to $364.2 million in the second quarter of 2024 as compared to the prior year.
Current wording
The average yield on home equity credit lines increased 41 basis points to 6.53% during the third quarter of 2024 compared to the year earlier period. The average balances of home equity credit lines increased 18.7% to $380.4 million in the third quarter of 2024 as compared to the prior year.
Previous wording
The average balance of the securities available for sale portfolio for the second quarter of 2024 was $437.6 million compared to $505.8 million for the comparable period in 2023. The decrease in the balance reflects routine paydowns, calls and maturities, partially offset by new investment purchases. The average yield was 2.58% for the second quarter of 2024 compared to 2.27% for the second quarter of 2023. The increase in average yield is a result of higher yields on bonds purchased as well as lower rate bonds maturing since the prior year quarter. This portfolio is primarily comprised of agency issued residential mortgage backed securities, bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank, and Freddie Mac), Small Business Administration participation certificates, corporate bonds and municipal bonds. These securities are recorded at fair value with any adjustment in fair value included in other comprehensive loss, net of tax.
Current wording
The average balance of the securities available for sale portfolio for the third quarter of 2024 was $409.3 million compared to $489.8 million for the comparable period in 2023. The decreasing balance reflects routine paydowns, calls and maturities, partially offset by new investment purchases. The average yield was 2.51% for the third quarter of 2024 compared to 2.24% for the third quarter of 2023. The increase in average yield is a result of higher yields on bonds purchased as well as lower yielding bonds maturing since the prior year quarter. This portfolio is primarily comprised of agency issued residential mortgage backed securities, bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank, and Freddie Mac), Small Business Administration participation certificates, corporate bonds and municipal bonds. These securities are recorded at fair value with any adjustment in fair value included in other comprehensive loss, net of tax.
Previous wording
The net unrealized loss in the available for sale securities portfolio was $33.2 million as of June 30, 2024 compared to a net unrealized loss of $32.2 million as of December 31, 2023. The net unrealized losses in the portfolio are the result of changes in market interest rate levels.
Current wording
The net unrealized loss in the available for sale securities portfolio was $22.7 million as of September 30, 2024 compared to a net unrealized loss of $32.2 million as of December 31, 2023. The net unrealized losses in the portfolio is the result of changes in market interest rate levels.
Previous wording
The average balance of held to maturity securities was $6.1 million for the second quarter of 2024 compared to $7.2 million in the second quarter of 2023. The decrease in balances reflects routine paydowns. No new securities were added to this portfolio during the period. The average yield was 4.28% for the second quarter of 2024 compared to 4.17% for the year earlier period. TrustCo expects to hold the securities in this portfolio until they mature or are called.
Current wording
The average balance of held to maturity securities was $5.8 million for the third quarter of 2024 compared to $6.9 million in the third quarter of 2023. The decrease in balances reflects routine paydowns. No new securities were added to this portfolio during the period. The average yield was 4.29% for the third quarter of 2024 up from 4.22% for the year earlier period. TrustCo expects to hold the securities in this portfolio until they mature or are called.
Previous wording
The net unrecognized loss in the held to maturity securities portfolio was $102 thousand as of June 30, 2024 compared to a net unrealized loss of $62 thousand as of December 31, 2023. The decrease in the net unrealized losses in the portfolio is the result of changes in market interest rate levels.
Current wording
The net unrecognized gain in the held to maturity securities portfolio was $9 thousand as of September 30, 2024 compared to a net unrecognized loss of $62 thousand as of December 31, 2023. The increase in the net unrecognized gain in the portfolio is the result of changes in market interest rate levels.
Previous wording
As of June 30, 2024, this portfolio consisted solely of agency issued mortgage-backed securities and collateralized mortgage obligations. The balances for these securities are recorded at amortized cost.
Current wording
As of September 30, 2024, this portfolio consisted solely of agency issued residential mortgage-backed securities and collateralized mortgage obligations. The balances for these securities are recorded at amortized cost.
Previous wording
The 2024 second quarter average balance of Federal Funds sold and other short-term investments was $506.5 million, a $44.6 million decrease from the $551.1 million average for the same period in 2023. The yield was 5.48% for the second quarter of 2024 and 5.07% for the comparable period in 2023. Interest income from this portfolio decreased $76 thousand from $7.0 million in 2023 to $6.9 million in 2024. The increase in the yield was not enough to offset the decrease in average balances over the same period.
Current wording
The average balance of Federal Funds sold and other short‑term investments was $465.9 million for the third quarter of 2024 compared to $494.6 million in the third quarter of 2023. The yield was 5.27% for the third quarter of 2024 and 5.37% for the comparable period in 2023. Consequently, interest income from this portfolio decreased $514 thousand from $6.7 million in 2023 to $6.2 million in 2024.
Previous wording
Total average interest bearing deposit accounts (which includes interest bearing checking, money market accounts, savings and time deposits) increased $130.7 million to $4.55 billion for the second quarter of 2024 versus the second quarter in the prior year, and the average rate paid increased from 1.07% for 2023 to 2.00% for 2024. Total interest expense on these deposits increased from $11.8 million to $22.6 million in the second quarter of 2024 compared to the year earlier period. From the second quarter of 2023 to the second quarter of 2024, interest bearing demand account average balances were down 6.9%, certificates of deposit average balances were up 36.5%, non-interest demand average balances were down 6.8%, average savings balances decreased 15.3% and money market balances were down 14.5%. Overall, average balances are up from a year ago as we continue to encourage customers to retain their funds in the expanded product offerings of the Bank through aggressive marketing and product differentiation.
Current wording
Total average interest bearing deposit accounts (which includes interest bearing checking, money market accounts, savings and time deposits) increased $50.0 million to $4.50 billion for the third quarter of 2024 versus the third quarter in the prior year, and the average rate paid increased from 1.34% for 2023 to 1.96% for 2024. Total interest expense on these deposits increased from $15.1 million to $22.2 million in the third quarter of 2024 compared to the year earlier period. From the third quarter of 2023 to the third quarter of 2024, interest bearing checking account average balances were down 4.8%, certificates of deposit average balances were up 25.8%, non-interest demand average balances were down 4.5%, average savings balances decreased 12.5% and money market balances were down 20.1%. Overall, average balances are up from a year ago as we continue to encourage customers to retain their funds in the expanded product offerings of the Bank through aggressive marketing and product differentiation.
Previous wording
As of June 30, 2024, the maturity of total time deposits is as follows:
Current wording
At September 30, 2024, the maturity of total time deposits is as follows:
Previous wording
As of June 30, 2024 and December 31, 2023, approximately $1.02 billion and $1.03 billion, respectively, of our deposit portfolio were uninsured. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.
Current wording
As of September 30, 2024 and December 31, 2023, approximately $1.05 billion and $1.03 billion, respectively, of our deposit portfolio were uninsured. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.
Previous wording
Average short-term borrowings for the second quarter were $93.7 million in 2024 compared to $124.1 million in 2023. The average rate decreased during this time period from 0.90% in 2023 to 0.89% in 2024. The short-term borrowings of the Company are cash management accounts, which represent retail accounts with customers for which the Bank has pledged certain assets as collateral. The customer account balances changed based on the needs of the underlying retail customers.
Current wording
Average short-term borrowings for the third quarter were $87.7 million in 2024 compared to $110.0 million in 2023. The average rate remained the same at 0.88% during this time period. The short-term borrowings of the Company are cash management accounts, which represent retail accounts with customers for which the Bank has pledged certain assets as collateral.
Previous wording
The Company has a number of contingent funding alternatives available in addition to the large cash and cash equivalents position and the investment securities positions it maintains on its balance sheet. The Bank is a member of the Federal Home Loan Bank of New York (“FHLBNY”) and is an eligible borrower at the Federal Reserve Bank of New York (“FRBNY”) and has the ability to borrow utilizing securities and/or loans as collateral at either. The Bank does not utilize brokered deposits as a part of its funding strategy, but does incorporate them as a potential contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered deposits may be tested from time to time to ensure operational and market readiness. As of June 30, 2024 the Company also has borrowing capacity of $895.6 million available with the Federal Home Loan Bank of New York. The borrowings capacity is secured by the loans pledged by the Company. As of June 30, 2024 and December 31, 2023, the Company had no outstanding borrowings with the Federal Home Loan Bank of New York.
Current wording
The Company has a number of contingent funding alternatives available in addition to the large cash and cash equivalents position and the investment securities positions it maintains on its balance sheet. The Bank is a member of the Federal Home Loan Bank of New York (“FHLBNY”) and is an eligible borrower at the Federal Reserve Bank of New York (“FRBNY”) and has the ability to borrow utilizing securities and/or loans as collateral at either institution. The Bank does not utilize brokered deposits as a part of its funding strategy, but does incorporate them as a potential contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered deposits may be tested from time to time to ensure operational and market readiness. As of September 30, 2024 the Company also has borrowing capacity of $930.2 million available with the FHLBNY. The borrowings capacity is secured by the loans pledged by the Company. As of September 30, 2024 and December 31, 2023, the Company had no outstanding borrowings with the FHLBNY.
Previous wording
Tax equivalent net interest income decreased by $6.3 million to $37.8 million in the second quarter of 2024 compared to the same period in 2023. The net interest spread was down 65 basis points to 2.09% in the second quarter of 2024 compared to the same period in 2023. As previously noted, the net interest margin was down 45 basis points to 2.53% for the second quarter of 2024 compared to the same period in 2023. The Bank experienced margin compression as some funding shifted from demand deposits and savings to higher rate time deposits in a rising interest rate market. Management expects some additional compression to occur in the near-term as time deposits reprice and the FRB has delayed the anticipated rate decreases. The Company has seen the erosion of margin begin to slow when comparing the decrease to prior quarters and management believes that we are nearing the bottom of this rate cycle. The Federal Reserve’s decision regarding whether to cut or hold rates in the upcoming meetings will have an effect on the Company’s ability to decrease deposit costs which should help margin in future quarters. During the second quarter of 2024, the Company has been able to lower the rates offered on our time deposits while continuing to retain and grow that product. This is expected bring down the cost of time deposits over time.”
Current wording
Taxable equivalent net interest income decreased by $3.6 million to $38.7 million in the third quarter of 2024 compared to the same period in 2023. The net interest spread was down 38 basis points to 2.17% in the third quarter of 2024 compared to the same period in 2023. As previously noted, the net interest margin was also down 24 basis points to 2.61% for the third quarter of 2024 compared to the same period in 2023. The Bank experienced some margin compression as funding shifted from demand deposits and savings to higher rate time deposits during the rising interest rate market. Management notes that margin compression has eased over the last quarter as maturing time deposits have been repriced lower due to the recent rate cut by the FRB. The Company has seen the erosion of margin stop when comparing the increase of net interest income to the prior quarter and management believes that we have reached the bottom of this rate cycle. Taxable equivalent net interest income has increased by $883 thousand as compared to the second quarter of 2024, and net interest margin has also increased 8 basis points compared to the second quarter of 2024. The Federal Reserve’s decision regarding whether to further cut or hold rates in the upcoming meetings will have an effect on the Company’s ability to continue to decrease deposit costs which will continue to help margin in future quarters. During the second and third quarters of 2024, the Company has been able to lower the rates offered on our time deposits while continuing to substantially retain that product. This is expected bring down the cost of time deposits in future periods.
Previous wording
Taxable equivalent net interest income decreased by $16.7 million to $74.4 million in the first six-months of 2024 compared to the same period in 2023. The net interest spread was down 85 basis points to 2.05% in the first six-months of 2024 compared to the same period in 2023. Net interest margin decreased 62 basis points to 2.48% for the first six‑months of 2024 compared to the same period in 2023.
Current wording
Taxable equivalent net interest income decreased by $20.2 million to $113.0 million in the first nine months of 2024 compared to the same period in 2023. The net interest spread was down 70 basis points to 2.08% in the first nine months of 2024 compared to the same period in 2023. Net interest margin was down 49 basis points to 2.52% for the first nine months of 2024 compared to the same period in 2023.
Previous wording
Nonperforming loans and foreclosed real estate: Total NPLs were $19.2 million at June 30, 2024, compared to $17.7 million at December 31, 2023 and $19.4 million at June 30, 2023. There were no loans as of June 30, 2024 and 2023 and December 31, 2023 that were past due 90 days or more and still accruing interest. The coverage ratio, or allowance for credit losses on loans to NPLs, was 259.4% as of June 30, 2024, compared to 275.0% as of December 31, 2023.
Current wording
Nonperforming loans and foreclosed real estate: Total NPLs and non-accrual loans were $19.4 million at September 30, 2024 compared to $17.7 million at December 31, 2023. There were no loans at September 30, 2024 and December 31, 2023 that were past due 90 days or more and still accruing interest. The coverage ratio, or allowance for credit losses on loans to NPLs, was 256.9% at September 30, 2024 compared to 275.0% at December 31,2023.
Previous wording
At June 30, 2024, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of $19.2 million at June 30, 2024, $18.0 million were residential real estate loans, $1.1 million were commercial loans and mortgages and $153 thousand were installment loans, compared to $16.6 million, $850 thousand and $166 thousand, respectively, at December 31, 2023.
Current wording
At September 30, 2024, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of $19.4 million at September 30, 2024, $18.5 million were residential real estate loans, $780 thousand were commercial loans and mortgages and $168 thousand were installment loans, compared to $16.6 million, $850 thousand and $166 thousand, respectively, at December 31, 2023.
Previous wording
A significant percentage of nonperforming loans are residential real estate loans, which are historically lower-risk than most other types of loans. Net recoveries were $57 thousand on residential real estate loans (including home equity lines of credit) for the second quarter of 2024 compared to net recoveries $161 thousand for the second quarter of 2023. Management believes that these loans have been appropriately written down where required.
Current wording
A significant percentage of nonperforming loans are residential real estate loans, which are historically lower-risk than most other types of loans. Net chargeoffs were $104 thousand on residential real estate loans (including home equity lines of credit) for the third quarter of 2024 compared to net recoveries of $26 thousand for the third quarter of 2023. Management believes that these loans have been appropriately written down where required.
Previous wording
The Company originates loans throughout its branch franchise area. At June 30, 2024, 64.8% of its gross loan portfolio balances were in New York State and the immediately surrounding areas (including New Jersey, Vermont and Massachusetts), and 35.2% were in Florida. Those figures compare to 65.1% and 34.9%, respectively at December 31, 2023.
Current wording
The Company originates loans throughout its branch franchise area. At September 30, 2024, 64.5% of its gross loan portfolio balances were in New York State and the immediately surrounding areas (including New Jersey, Vermont and Massachusetts), and 35.5% were in Florida. Those figures compare to 65.1% and 34.9%, respectively, at December 31, 2023.
Previous wording
Economic conditions vary widely by geographic location. As a percentage of the total nonperforming loans as of June 30, 2024, 17.3% were to Florida borrowers, compared to 82.7% to borrowers in New York and surrounding areas. For the three months ended June 30, 2024, New York and surrounding areas experienced net recoveries of approximately $76 thousand and there were net charge-offs of $24 thousand in Florida for the second quarter of 2024.
Current wording
Economic conditions vary widely by geographic location. As a percentage of the total nonperforming loans as of September 30, 2024, 18.0% were to Florida borrowers, compared to 82.0% to borrowers in New York and surrounding areas. For the three months ended September 30, 2024, New York and surrounding areas experienced net charge-offs of approximately $180 thousand and Florida experienced net chargeoffs of $42 thousand for the third quarter of 2024.
Previous wording
Loans individually evaluated for impairment are non-accrual loans delinquent greater than 180 days, non-accrual commercial loans, as well as loans classified as loan modifications. There were $1.2 million of commercial mortgages and commercial loans classified as individually evaluated as of June 30, 2024 compared to $957 thousand classified as individually evaluated at December 31, 2023. There were $24.1 million of individually evaluated residential loans at June 30, 2024 compared to $23.6 million classified as individually evaluated at December 31, 2023.
Current wording
Loans individually evaluated for impairment are non-accrual loans delinquent greater than 180 days, non-accrual commercial loans, as well as loans classified as loan modifications. There were $882 thousand of commercial mortgages and commercial loans classified as individually evaluated as of September 30, 2024 compared to $957 thousand classified as individually evaluated at December 31, 2023. There were $24.0 million of individually evaluated residential loans at September 30, 2024 compared to $23.6 million classified as individually evaluated at December 31, 2023.
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