TrustCo Bank outlines continued margin expansion and strong loan growth into 2026

Earnings Call Insights: TrustCo Bank Corp NY (TRST) Q2 2025

Management View

• Robert Joseph McCormick, President, CEO & Chairman, highlighted "outstanding year-to-date and year-over-year performance results," emphasizing "net income of $15 million for the quarter and nearly $30 million year-to-date," and called the period "nothing short of stellar." He noted that TrustCo's capital accumulation strategy provided "low-cost funds available to lend out exactly at this moment," resulting in a "solid 7%" margin increase year-over-year and a residential home equity product that offers "a closing within 7 days of application." Management also reported a commercial loan portfolio growth of 11% year-over-year and stressed that all achievements were accomplished "while preserving credit quality" with net recoveries for the second consecutive quarter. McCormick also stated, "All return metrics are up significantly. Return on assets, return on equity, earnings per share and efficiency ratio all saw double-digit improvement from this time last year."
• Michael M. Ozimek, CFO, stated, "the company saw a standout results for the second quarter of 2025 marked by increases in both net income and net interest income," reporting net income of $15 million for the quarter, a 19.8% increase over the prior year quarter. He said, "Book value per share at June 30, '25, was $36.75, up 6.6% compared to $34.46 a year earlier." Ozimek added, "Average loans for the second quarter of '25 grew 2.3% or $115.6 million to $5.1 billion from the second quarter of '24, an all-time high." He confirmed TrustCo repurchased 169,000 shares of common stock during the quarter under its authorized buyback program.
• Kevin M. Curley, Chief Banking Officer, reported that "home equity loans increased by $64.7 million or 17.8% over last year," residential mortgages by $27.9 million, and commercial loans by $25.8 million or 9.2%. He confirmed that "asset quality at the bank remains very strong" and "charge-offs for the quarter amounted to a net recovery of $9,000."

Outlook

• McCormick concluded that "the results in the first half of 2025 established positive momentum that we believe may extend into 2026."
• Ozimek stated, "The bank is well positioned to continue delivering strong net interest income performance, even as the Federal Reserve signals a potential easing cycle in the months ahead."
• Management reiterated its commitment to "maintaining a competitive deposit offerings, while ensuring financial stability and continued support for our communities' banking needs."

Financial Results

• TrustCo reported net income of $15 million for Q2 2025, an increase of 19.8% over the prior year quarter.
• Net interest income was $41.7 million, up $4 million or 10.5% year-over-year.
• Net interest margin was 2.71%, up 18 basis points from the prior year quarter.
• Book value per share at the end of the quarter was $36.75.
• Average loans for the quarter reached an all-time high of $5.1 billion, with the home equity lines of credit portfolio growing by $64.7 million or 17.8%, residential real estate by $27.9 million, and commercial loans by $25.8 million or 9.2% year-over-year.
• The provision for credit losses was $650,000 for the quarter.
• Noninterest income from wealth management and financial services fees increased 13% to $1.8 million, representing 37.5% of noninterest income.
• Total noninterest expense net of ORE expense was $25.7 million, down $600,000 year-over-year.
• Nonperforming loans to total loans decreased to 0.35% this quarter compared to 0.37% last quarter and 0.38% a year ago.
• Allowance for credit losses was $51.3 million with a coverage ratio of 286%.

Q&A

• John Dundee Lapey, Gabelli Funds: "Is the strong local demand that you referred to, is that in Florida as well as in the Northeast?" Robert Joseph McCormick: "It's across the markets, yes. The best demand -- the better of the 2 categories has been Florida, Ian, but we've had very strong demand locally as well."
• John Dundee Lapey: "What is the rate for maturing CDs as opposed to the ones you're currently issuing?" Michael M. Ozimek: "what's coming due is about -- the average rate is 3.91%." McCormick: "The highest is 4%, but that's for 3 months."
• John Dundee Lapey: "In terms of the strong commercial loan growth, what types of borrowers are you lending? And what's the rough mix between secured and unsecured?" McCormick: "The vast majority, Ian, probably in the 90% -- over 90% range is real estate related in commercial loans."

Sentiment Analysis

• Analysts expressed positive sentiment, congratulating management and focusing on geographic demand and funding costs, with no overt skepticism or pressing challenges.
• Management's tone remained confident and upbeat throughout both prepared remarks and Q&A, reiterating positive momentum and emphasizing robust loan demand and asset quality.
• Compared to the previous quarter, management’s confidence increased, and analysts continued to express optimism without raising material concerns.
• McCormick emphasized, "performance has been stellar" and that "results in the first half of 2025 established positive momentum that we believe may extend into 2026."

Quarter-over-Quarter Comparison

• Guidance language shifted from cautious optimism about navigating a "complex economic environment" in Q1 to expressing "positive momentum" expected to extend into 2026 in Q2.
• Strategic focus intensified on capital optimization, with share repurchases executed in Q2 following the Q1 plan announcement.
• Key metrics including net income, net interest income, margin, and loan growth all improved quarter-over-quarter.
• Management’s tone was more assertive in Q2, highlighting "stellar" performance and strong competitive positioning.
• Analysts’ focus remained on regional demand, funding costs, and the loan mix, similar to Q1.
• Management’s confidence in sustained growth and ability to support lending and shareholder returns increased in Q2.

Risks and Concerns

• Management acknowledged monitoring the interest rate environment, stating the bank is positioned for potential Federal Reserve easing.
• Deposit retention remains a focus as maturing CDs are repriced, with management detailing current and maturing rates.
• Asset quality risks continue to be monitored, but metrics indicate stability and improvement in nonperforming loans and allowance coverage.

Final Takeaway

TrustCo Bank’s management underscored a quarter marked by strong profitability, margin expansion, and robust loan growth across key portfolios, driven by a well-capitalized balance sheet and disciplined lending strategy. The company’s ability to execute on share repurchases, maintain stable asset quality, and support continued growth amid evolving interest rates forms the foundation for its positive outlook into 2026.

Read the full Earnings Call Transcript