Robert Mccormick; Chairman of the Board, President, Chief Executive Officer of TrustCo and Trustco Bank; TrustCo Bank Corp NY
Michael Ozimek; Executive Vice President, Chief Financial Officer of TrustCo and Trustco Bank; TrustCo Bank Corp NY
Kevin Curley; Executive Vice President - Retail Banking of TrustCo and Trustco Bank; TrustCo Bank Corp NY
Ian Lapey; Analyst; Gabelli Funds
Presentation
Operator
Good day and welcome to the TrustCo Bank Corp earnings call webcast. (Operator Instructions) Before proceeding, we would like to mention that this presentation may contain forward-looking information about TrustCo Bank Corp., New York, and this is intended to be covered by the Safe Harbor forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Actual results, performance or achievements could differ materially from those expressed or implied by such statements due to various risks, uncertainties, and other factors. More detailed information about these and other risk factors can be found in our press release that preceded this call, and in the Risk Factors and Forward-Looking Statements section of our annual report Form 10-K as updated by our quarterly reports on Form 10-Q. The forward-looking statements made on this call are only valid as of the date hereof. and the company disclaims any obligation to update information to reflect events or developments after the date of this call, except as may be required by applicable law. During today's call, we will discuss certain financial measures derived from our financial statements that are not determined in accordance to the US GAAP. The reconciliations of such non-GAAP financial measures to the most comparable GAAP figures are included in our earnings press release, which is available under the Investors Relations tab on our website at TrustCoBank.com. Please also note that today's event is being recorded. A replay of today's call will be available for 30 days and audio webcast will be available for one year as described in our earnings press release. At this time, I would like to turn over the conference call to Mr. Robert J. Mccormick, Chairman, President, CEO. Please go ahead.
Robert Mccormick
Morning, everyone, and thank you for joining the call. I'm Rob Mccormick, President of the bank. I'm joined today as usual by Mike Ozimek, our CFO. Also joining me today is Kevin Curley, Governance and Executive Vice President and newly promoted Chief Banking Officer. Kevin has been with bank for over 30 years and brings a wealth of experience to his new position. He will give color on lending, and Mike will give detail on the numbers. I believe we're seeing early signs of return to normalcy in the housing markets. In our experience, Florida's leading the way on this with new construction seeming to catch up with demand. Inventory is still tight in the Northeast. In New York, we are seeing some loosening in the downstate market with median days in the market declining over the last year and the number of new listings increasing, suggesting that sellers are coming off the sidelines and buyers are active again. Up-to-date is essentially flat year-over-year. Indicators suggest the heckle volume will trend down while purchase volume trends up. Overall, we believe the trend is positive. As Kevin will detail, average loans are up and this has contributed positively to net income and net interest margin, which improved 4% and 3.7% respectively. We also have retained competitively priced time deposits. Our strategy with respect to pricing, both in terms of loans and deposits is showing signs of success and what we have seen margin improvement, with some expected contraction. Good strategy, well executed, yields favorable outcomes. Several other measures also very were very favorable this quarter. Earnings per share grew and book value was up almost $2 over this time last year. We also saw improvements in our return metrics, ROAA and ROAE both grew over the quarter. These strong results, increase income and value differentials for many institutions in our sector. TrustCo's thoughtful and conservative strategy has proven successful over the long haul. Although it is something we mentioned quarter-after-quarter, the recurring themes have excellent liquidity, strong capital and superior credit quality weren't repeating. TrustCo consistently performs well with regard to these measures. We are proud to report about them and our shareholders realize the value they generate. It also bears emphasis that all these results were achieved without resorting to broker deposits or borrowings. We have no debt on our books at a time when some banks struggle to turn a profit. We believe that the skies are beginning to clear and as we look forward to the balance of the year might bring. Now Mike will detail, give us detail on the numbers, Kevin will give us color on the loan portfolio, then we will take your questions if you have any. Mike?
Michael Ozimek
Thank you, Rob, and good morning, everyone. I will now review TrustCo's financial results for the second quarter of 2024. As we noted in the press release, the company saw second quarter net income of $12.6 million, an increase of 3.5% over the prior quarter, which yielded a return on average assets and average equity 0.82% and 7.76%, respectively. Capital remained strong, consolidated equity to assets ratio was 10.73% for the second quarter of 2024, compared to 10.23% the second quarter of 2023. Book value per share at June 30th, '24 was $34.46, up 5.5% compared to $32.66 a year earlier. Average loans for the second quarter of 24 grew 3.8% or $182.2 million to $5 billion in the second quarter of '23 hit all-time high. Consequently, overall loan growth has continued to increase in leading the charge for the residential real estate portfolio, as usual, which increased by $89.9 million or 2.1% in the second quarter of '24 over the same period in '23. Average commercial loans increased $31.5 million or 12.7%. From equity, lines of credit increased $61.1 million or 20.1%. Installment loans decreased 339,000 or 2.2% over the same period 23. For the second quarter of '24, the provision for credit losses was $500,000. Retaining deposits continues to be a focus in 2024. Total deposits ended the quarter at $5.3 billion and were up 18.5 million compared to the prior year. As we move forward, our objective is to continue to offer competitive product offerings of the bank through aggressive marketing and product differentiation. Net income was $37.8 million for the second quarter of 2024, an increase of $1.2 million or 3.3% compared to the prior quarter. Net interest margin for the second quarter of 2024 was 2.53%, up nine basis points from the first quarter of '24. Yield on earning assets increased to 4.06%, up seven basis points from 3.99% the first quarter of '24. Cost of interest-bearing liabilities increased to 1.97% in the second quarter of 2024 from 1.99% the first quarter of 2024. Our wealth management division continues to be a significant recurring source of non-interest income. At approximately 1.1 billion of assets under management as of June 30, 2024. Additionally, as mentioned in the press release, the company markets Visa Class C common stock to fair value recorded a gain of $1.4 million based on the conversion privilege of the Visa Class C common stock. Now on to non-interest expense, total noninterest expense, net of ORE expense came in at $26.4 million, up $1.4 million from the prior quarter. The increase was primarily the result of higher employee benefit costs in the current quarter. ORE expense net came in at $16,000 for the quarter as compared to $74,000 in the prior quarter. Given the continued low level of ORE expenses, we are going to continue to hold anticipated level of expenses, not exceed $250,000 per quarter. All the other categories of noninterest expense were in line with our expectations for the second quarter. Now Kevin will review the loan portfolio and nonperforming loans.
Kevin Curley
Thanks, Mike, and good morning to everyone. Our average loans grew by $182 million or 3.8% year over year. The growth centered on residential mortgages, which increased by $89.9 million over last year. For home equity loans also increased by $61 million or 20.1%, and our commercial loans grew by $31.5 million or 12.7% over last year. The second quarter actual loans increased by $33 million, residential loans increased by $31 million with both first mortgages and home equity products posting increases. In addition, our commercial loans increased by $3.3 million. We remain well positioned in the market and seek to capitalize as market activity develops. Our portfolio product, combined with the flexibility to utilize various promotions and the control we have on pricing, allows us to be in a great position. Rates in the market, a decrease in recent weeks, and we currently stand at 6.375% for our base 30-year fixed-rate loan. We have been keeping our rates very competitive with the goal of increasing volume. More recent market activity on the purchase side has seen steady progress and we continue to focus our efforts on capturing a larger piece of the current market. Overall, we are pleased with our loan growth in the quarter and year-over-year. And moving to asset quality, asset quality at the bank remains remains strong. Nonperforming loans decreased to $19.2 million versus $19.4 million last year. Nonperforming loans now stand now stand at 0.38% of total loans versus 0.40% a year ago. Nonperforming assets totaled $21.5 million as of June 30th, versus $20.8 million a year ago. Our early-stage delinquencies also continue to be steady, and charge-offs for the quarter amounted to a net recovery of 52,000. At quarter end, the allowance for credit losses was $49.8 million with a coverage ratio of 259.4% compared to $46.9 million and a coverage ratio of 241.6% in 2023. Rob.
Robert Mccormick
That's our story, and we're happy to answer any questions you might have.
Question and Answer Session
Operator
We'll now begin the Q and A segment of the conference. (Operator Instructions) Our first question comes from Ian Lapey of Gabelli Funds. And your line is now open.
Ian Lapey
Hi, good morning, Rob and team. Congrats on a good quarter. I guess, first of all, on the great to see the NIM expanding after obviously dropping several quarters in a row. Just curious, you benefited from a lower cost of deposits. Assuming no fedding our rate decreases this quarter. Do you think you can it will still drive that cost of deposits down this quarter, based on sort of what repricing trends seeing?
Robert Mccormick
That's the goal, Ian. We're watching that very, very closely, and we're maintaining the balance between what we have to do to keep our liquidity at an acceptable level. Now going into positive borrowing markets of funding our loans and requirements and cash we needed. So that would be the goal to continue to transmit drag that number down.
Ian Lapey
Okay. I know. The fees for services to customers was down sequentially and year over year fairly significantly double digit and anything unusual going on there?
Robert Mccormick
The only outlier, I think would be NSF fees. And you recall that we were caught in that trap with via in a NSF fees, we have we would calculate on NSF fees and how we collect NSF fees. Some of the other fees dollar, our wealth management has been on a great pair of growth and a couple of other areas, and I'm making up for that. Some months we were not NSF fees are still a little bit higher or share than prior months. But it's I would say that's really the only impact we've had on directly on fees over the period.
Ian Lapey
Okay. And then great growth in the Healon portfolio. Just curious, what percent roughly is going to existing customers? And then what is the loan to value, if you include, obviously the first lien debt,
Robert Mccormick
If you have your first mortgage with TrustCo, you can get up to a 90% loan-to-value. And I think it's about 60-40 split between existing TrustCo customers and new customers (multiple speakers) I think that's about the split, Ian. We've been known for a very long time to build strong home equity lender. We were an early adopter years and years and years ago and have always maintained that strong reputation. So we draw from that. We do draw from the greater market and now with some of the bigger banks, not offering home equity, credit lending, it kind of drives people to us. We do get non-cost appliance.
Ian Lapey
Okay, great. And then last question, Rob, you mentioned the housing market is starting to show some signs of life. Are you seeing any increase in payoffs or refies of your existing residential mortgage book?
Robert Mccormick
No. I would say stable to down, Ian. We're still experiencing were not not huge percentages, but it's very stable and trending a little bit down.
Ian Lapey
Okay, great. And congratulations again.
Robert Mccormick
Thank you.
Operator
We currently have no further questions and therefore, I will hand back to our speaker, Robert Mccormick for closing remarks.
Robert Mccormick
Thanks for joining us this morning. Special shout out to Troy Heidelberg by the way on the call. Have a great day.
Operator
This concludes today's call and thank you to everyone for joining. You may now disconnect.
