TRUSTCO BANK CORP N Y annual report, FY2022

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TrustCo Bank Corp NY — 2022 Form 10-K

Business context and reporting period: TrustCo is a New York savings and loan holding company whose principal subsidiary, Trustco Bank, provides personal and business banking, lending, deposit, trust and investment services. This annual report covers the fiscal year ended December 31, 2022. The Bank operated 143 offices and 158 ATMs and had 754 full-time-equivalent employees at year-end. Its loan portfolio was concentrated in properties in New York (approximately 68%) and Florida (approximately 32%).

Financial condition and key metrics

  • Earnings, revenue, margins and cash flow: The filing text provided does not include the consolidated financial statements or a clear value for revenue, net income, net interest income, net interest margin, operating cash flow or other core earnings measures. Those statements and management’s discussion are incorporated by reference from the 2022 Annual Report to Shareholders (Exhibit 13).
  • Capital: At December 31, 2022, the Bank reported a 10.12% Tier 1 leverage ratio, 18.43% CET1 and Tier 1 risk-based capital ratios, and 19.68% total capital ratio. TrustCo reported 10.39%, 18.93%, 18.93% and 20.18%, respectively. The Bank was categorized as “well capitalized” under prompt corrective action rules.
  • Debt and liquidity: The Bank reported no FHLB advances at year-end and had access to an FHLB credit line, subject to pledged collateral. The filing describes securities, non-core deposits and potential debt or equity issuance as additional liquidity sources; it does not provide a clear year-end liquidity balance in the supplied text.
  • Other disclosed costs: FDIC deposit insurance expense was $1.8 million in both 2022 and 2021, compared with $1.0 million in 2020. OCC assessments were approximately $845,000 in 2022.
  • Share repurchases: The Company repurchased 32,786 shares in the fourth quarter at an average price of $38.17, for approximately $1.2 million. The full 200,000-share authorization announced in March 2022 had been used by year-end.

Changes versus prior periods

  • The FOMC raised its target federal funds rate by a total of 425 basis points during 2022, ending the year at 4.25%–4.50%; a further 25-basis-point increase occurred in February 2023. Management identifies higher rates as a source of both potential asset-yield benefit and funding, credit and securities-valuation risk.
  • TrustCo adopted the current expected credit losses (CECL) accounting standard effective January 1, 2022. The supplied filing text does not give the adoption impact on earnings or allowance balances.
  • Deposit insurance assessment rates increased by 2 basis points effective January 1, 2023. The Company stated its FDIC insurance expense was unchanged from 2021 to 2022.
  • Comparable-period changes in revenue, profit, loan growth, deposits, margins and cash flows cannot be quantified from the supplied text; consult the incorporated annual report.

Outlook, risks and other notable items

  • No specific earnings or financial guidance is provided in the supplied filing text. The Company cautions that forward-looking statements are subject to risks and should not be relied on as predictions.
  • Key risks include interest-rate changes and deposit pricing competition; inflation and economic weakness; credit losses and real-estate collateral values; concentration in New York and Florida; liquidity access; securities valuation; cybersecurity and third-party service disruptions; regulatory and compliance costs; and climate-related physical and credit risks.
  • Management said it currently anticipates the Company and Bank will remain well capitalized. The Bank met applicable capital requirements at year-end; dividend capacity remains subject to regulatory limits and the Bank’s ability to upstream dividends.
  • Trustco Realty met the disclosed REIT asset, income and distribution tests for 2022. Failure to maintain REIT qualification could increase the Company’s effective tax rate.
  • Management reported effective disclosure controls as of December 31, 2022, with no material change in internal control over financial reporting during the fourth quarter. Management stated that no pending legal proceeding was expected to be material to consolidated equity or financial condition.

Important facts for investors to verify

  1. Review Exhibit 13 for audited financial statements and the full MD&A, including net income, net interest income and margin, loan and deposit balances, cash flows, allowance for credit losses, and year-over-year trends.
  2. Check the detailed liquidity, uninsured deposit, securities portfolio and interest-rate sensitivity disclosures, particularly in light of rapid rate increases.
  3. Assess CECL adoption effects, credit quality, delinquency trends, allowance coverage and geographic/property concentration using the incorporated notes and schedules.
  4. Confirm current capital ratios, regulatory dividend capacity and any subsequent changes in repurchases or capital-return plans.
  5. Review subsequent filings for developments affecting deposit costs, FDIC assessments, economic conditions, cybersecurity, regulation or the REIT subsidiary.