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TrustCo Demonstrates Strength and Stability; Reports First Quarter

Net Income of $17.7 Million and 7.0% Average Loan Growth – Both Up Year Over Year

Executive Snapshot:

Glenville, New York –April 24, 2023

TrustCo Bank Corp NY (TrustCo, NASDAQ: TRST) today announced first quarter 2023 net income of $17.7 million or $0.93 diluted earnings per share, compared to net income of $17.1 million or $0.89 diluted earnings per share for the first quarter 2022. Average loan growth increased 7.0% or $312.0 million for the first quarter 2023 over the same period in 2022.

Overview

Chairman, President, and CEO, Robert J. McCormick said “Our first quarter results, which build upon the Company’s record year in 2022, demonstrate that TrustCo is a pillar of strength and a model of stability.  The biggest challenge presented by great performance is maintaining momentum.  This quarter, TrustCo did not just equal last year’s results, but improved upon them in the key areas of average loan growth, diluted earnings per share, and net income, among others.  That we have been able to improve upon our performance in the present challenging environment is a testament to the skill of our bankers and the soundness of our strategy.  Careful expansions of our areas of operation and mortgage product offerings, resting upon a solid foundation devoid of risky gimmicks and dangerous concentrations, position us well for sustained success.”

TrustCo saw deposit balances rebound from the end of the year with net deposit inflows during the first quarter of 2023.  Loan growth continued in the first quarter 2023 compared to the prior year first quarter, led by an increase in residential mortgages. Loan portfolio expansion was funded by a combination of utilizing a portion of our strong cash balances and by cash flow from investments and the existing loan portfolio.  The Federal Reserve decision to raise the target Federal Funds rate multiple times since March 2022 has contributed to our results in the first quarter 2023, as our cash position and other variable rate products continue to reprice upward, and are likely to continue to do so to the extent there are additional rate increases.  We also note that current mortgage rates significantly exceed the yield on our existing portfolio of mortgages, which, if sustained, should be positive to net interest margin going forward.  TrustCo’s strong liquidity position continues to allow us to take advantage of opportunities as they arise.

Details

As discussed, average loans were up $312.0 million or 7.0% in the first quarter 2023 over the same period in 2022.  Average residential loans, our primary lending focus, were up $205.0 million or 5.1%, in the first quarter 2023 over the same period in 2022.  Average commercial loans and home equity lines of credit also increased $43.9 million or 22.5% and $58.8 million or 25.3%, respectively, over the same period in 2022.

We are now actively retaining deposits which is evident in the quarter over quarter results.  Total deposits as of March 31, 2023 increased $19.6 million to $5.2 billion from December 31, 2022.  As we move forward, our objective is to continue to encourage customers to retain these funds in the expanded product offerings of the Bank through aggressive marketing and product differentiation.  We understood the big inflows of deposits during the pandemic were temporary and that is why we did not invest that liquidity into securities or loans, but retained that liquidity on the balance sheet for when the depositors would start to absorb the funds.  This gave us flexibility to strategically price deposits while retaining core customers.

Net interest income was $47.0 million for the first quarter 2023, an increase of $6.9 million or 17.1% compared to the same period in 2022, driven by solid liquidity, loan growth, and the recent increases in the Federal Funds target rate.  The net interest margin for the first quarter 2023 was 3.21%, up 55 basis points from 2.66% in the first quarter of 2022.   The yield on interest earnings assets increased to 3.69%, up 95 basis points from 2.74% in the first quarter of 2022.  At the same time the cost of interest bearing liabilities only increased to 0.63% in the first quarter 2023 from 0.10% in the first quarter 2022.  The increase in net interest income of $6.9 million is primarily a result of our ability to maintain a $576.9 million average cash balance at the Federal Reserve Bank during the first quarter of 2023 and being able to retain low cost deposit balances at competitive market rates.

Asset quality remains strong and loan loss reserve measures are consistent over the past twelve months.  The Company recorded a provision for credit losses of $300 thousand in the first quarter of 2023, which includes a provision for credit losses on loans of $600 thousand and a benefit for credit losses on unfunded commitments of $300 thousand as a result of a corresponding decrease in unfunded loan commitments.  The ratio of allowance for credit losses on loans to total loans was 0.97% and 1.03% as of March 31, 2023 and 2022, respectively.  The allowance for credit losses on loans was $46.7 million at March 31, 2023, compared to $46.2 million at March 31, 2022.  Nonperforming loans (NPLs) were $19.2 million at March 31, 2023, compared to $19.4 million at March 31, 2022.  NPLs were 0.40% and 0.43% of total loans at March 31, 2023 and 2022, respectively.  The coverage ratio, or allowance for credit losses on loans to NPLs, was 243.6% at March 31, 2023, compared to 237.8% at March 31, 2022.  Nonperforming assets (NPAs) were $21.0 million at March 31, 2023, compared to $19.7 million at March 31, 2022.

At March 31, 2023 our equity to asset ratio was 10.17%, compared to 9.44% at March 31, 2022.  Book value per share at March 31, 2023 was $32.31, up 4.7% compared to $30.85 a year earlier.

A conference call to discuss first quarter 2023 results will be held at 9:00 a.m. Eastern Time on April 25, 2023.  Those wishing to participate in the call may dial toll-free for the United States at 1-833-470-1428, and for Canada at 1-833-950-0062, Access code 576267.  A replay of the call will be available for thirty days by dialing toll-free for the United States at 1-866-813-9403, for Canada at 1-226-828-7578, and all other locations at +44-204-525-0658, Access code 635945.  The call will also be audio webcast at https://events.q4inc.com/attendee/162588284, and will be available for one year.

About TrustCo Bank Corp NY

TrustCo Bank Corp NY is a $6.0 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 143 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at March 31, 2023.

In addition, the Bank’s Financial Services Department offers a full range of investment services, retirement planning and trust and estate administration services.  The common shares of TrustCo are traded on the NASDAQ Global Select Market under the symbol TRST.

Forward-Looking Statements

All statements in this news release that are not historical are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future development, results or periods. Examples of forward-looking statements include, among others, statements we make regarding our expectations for our performance during 2023, including our expectations regarding the effects of the economic environment on our financial results, our ability to retain customers and the amount of customers’ business, including deposit balances, with us, the impact of the Federal Reserve’s actions regarding interest rates, the growth of loans and deposits throughout our branch network, the increase in residential mortgage rates, and our ability to capitalize on economic changes in the areas in which we operate.  Forward-looking statements are based on management’s current expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Such forward-looking statements are subject to factors and uncertainties that could cause actual results to differ materially for TrustCo from the views, beliefs and projections expressed in such statements, and many of the risks and uncertainties are heightened by or may, in the future, be heightened by the effects of the COVID-19 pandemic and macroeconomic or geopolitical concerns related to inflation, rising interest rates and the war in Ukraine. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement:  changes in interest rates, including recent and possible future increases fueled by inflation; inflationary pressures and rising prices; exposure to credit risk in our lending activities; the sufficiency of our allowance for credit losses on loans to cover actual loan losses; our ability to meet the cash flow requirements of our depositors or borrowers or meet our operating cash needs to fund corporate expansion and other activities; claims and litigation pertaining to fiduciary responsibility and lender liability; our dependency upon the services of the management team; our disclosure controls and procedures’ ability to prevent or detect errors or acts of fraud; the adequacy of our business continuity and disaster recovery plans; the effectiveness of our risk management framework; the chance of a prolonged economic downturn, especially one affecting our geographic market area; instability in global economic conditions and geopolitical matters, as well as volatility in financial markets; the COVID-19 pandemic; the soundness of other financial institutions; fluctuations in the trust wealth management fees we receive as a result of investment performance; the impact of regulatory capital rules on our growth; changes in laws and regulations; our compliance with the USA PATRIOT Act, Bank Secrecy Act, and other laws and regulations that could result in fines or sanctions; changes in tax laws; limitations on our ability to pay dividends; TrustCo Realty Corp.’s ability to qualify as a real estate investment trust; changes in accounting standards; competition within our market areas; consumers and businesses’ use of non-banks to complete financial transactions; our reliance on third-party service providers; the risk of data breaches and cyber-attacks; the risk of an unauthorized disclosure of sensitive or confidential client or customer information; the impact of any expansion by us into new lines of business or new products and services; the impact of severe weather events and climate change on us and the communities we serve, including societal responses to climate change; and other risks and uncertainties under the heading “Risk Factors” in our most recent annual report on Form 10-K and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings. The forward-looking statements contained in this news release represent TrustCo management’s judgment as of the date of this news release. TrustCo disclaims, however, any intent or obligation to update forward-looking statements, either as a result of future developments, new information or otherwise, except as may be required by law.

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(1)	Non-GAAP measure; calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income. See Non-GAAP Financial Measures Reconciliation.

(2)	Non-GAAP measure; calculated as total shareholders' equity less $553 of intangible assets divided by total assets less $553 of intangible assets.  See Non-GAAP Financial Measures Reconciliation.

(3)	Calculated as allowance for credit losses on loans divided by total nonperforming loans.

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* Includes New York, New Jersey, Vermont and Massachusetts.

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY -