TrustCo Bank Corp NY Aktie

Good day, and welcome to the TrustCo Bank Corp Earnings Call and webcast. [Operator Instructions] Before proceeding, we would like to mention that this presentation may contain forward-looking information about TrustCo Bank Corp NY that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Actual results, performance or achievements could differ materially from those expressed in 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 on Form 10-K and as updated by our quarterly reports on Form 10-Q. The forward-looking statements made on this call are valid only as of the date hereof, and the company disclaims any obligation to update this 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 with U.S. 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 Investor Relations tab of our website at trustcobank.com. Please also note that today's event is being recorded. A replay of the call will be available for 30 days, and an audio webcast will be available for 1 year as described in our earnings press release. At this time, I would like to turn the conference over to Mr. Robert J. McCormick, Chairman, President and CEO. Please go ahead.

Good morning, everyone, and thank you for joining the call. As Chase said, I'm Rob McCormick, President of TrustCo Bank. I'm joined today as usual by Mike Ozimek, our CFO, who will go through the numbers; and Kevin Curley, our Chief Banking Officer, will talk about lending. We think it's best to describe the results this quarter as a result of positive financial momentum. Looking at year-over-year results, deposits have grown each quarter, average loans have grown each quarter and net income has grown each quarter. For the same period, return on average assets has improved each quarter, return on average equity has improved each quarter and net interest margin has improved each quarter.

This is not happening by accident. Our team has worked diligently in all areas to solidify customer relationships. We have reached out to customers with deposits and no loans to encourage equity borrowing and refinancing. We have provided incentives to loan customers to utilize our deposit products and become real customers of TrustCo Bank. And we've taken a fresh look at our loan and deposit offerings and the systems that deliver them. We've made enhancements to improve the customer service experience as well. With all those factors coming together and trending favorably, we are optimistic about the company's ability to maintain positive momentum into 2027. Investors and customers can be on the lookout for exciting announcement about our lending operation in the coming months.

We are also very pleased to have 2 new directors on board. Patty Fusco is likely known to many people in the New York market, provides expertise in human resources, and Brian Gunter is a highly experienced real estate professional from the West Coast of Florida. His addition to the Board expands our geographic diversity. Now Mike is going to talk about the numbers. Kevin will touch on the loan portfolio, and then we can take your questions.

Thank you, Rob, and good morning, everyone. I will now review TrustCo's financial results for the third quarter of 2026. As we noted in the press release, the company continued to see strong financial results from the third quarter of 2026, marked by increases in both net income and net interest income during the third quarter of 2026 compared to the third quarter of 2025. This performance is underscored by rising net interest income and sustained loan and deposit growth across core lending and deposit categories. This resulted in the third quarter net income of $17.3 million, an increase of 6.5% over the prior year quarter, which yielded a return on average assets and average equity of 1.05% and 10.57%, respectively.

Capital remains strong. Consolidated equity to asset ratio was 9.72% for the third quarter of 2026 compared to 10.9% in the third quarter of 2025. Book value per share at September 30, '26, was $38.20, up 2.4% compared to $37.30 a year earlier. Driving these changes, TrustCo repurchased 13.2% of outstanding common stock under the 2025 and 2026 stock repurchase programs through the acquisition of over 1.5 million shares in 2026, following the purchase of 1 million shares in 2025, reinforcing a disciplined long-term capital allocation strategy. We remain committed to returning value to shareholders through a disciplined share repurchase program, which reflects our confidence in the long-term strength of our franchise and the focus on capital optimization. Additionally, during the third quarter, the bank declared an increased quarterly cash dividend of $0.40 per share or $1.60 per share on an annualized basis.

The declared dividend represents an increase of 5.3% over the prior dividend amount, which continues the bank's commitment in paying dividends for over a century. Credit quality continues to be stable as we saw nonperforming loans modestly increased to $21.1 million in the third quarter of '26 from $18.5 million in the third quarter of '25. Our continued focus on solid underwriting within our loan portfolio and conservative lending standards positions us to manage credit risk effectively in the current environment. Average loans for the third quarter of '26 grew 4.6% or $238 million to $5.4 billion from the third quarter of '25. This loan growth continues to reflect the strength of our local markets and ongoing demand for credit.

For the third quarter of '26, the provision for credit losses was $850,000. The increase in the overall provision expense is being driven by loan growth and changes in economic forecast rather than the softening in the underlying credit performance. The ratio for the allowance for loan losses to total loans was 1.01% as of September 30, '26, and 1% as of September 2025. Our focus continues to be on traditional lending and conservative balance sheet management, which has continued to enable us to produce consistent high-quality recurring earnings. Retaining and growing deposits has been a key focus as we finish up 2026. Total deposits ended the quarter at $5.7 billion, was up $203 million compared to the prior year quarter. We believe the increase in these deposits compared to the same period in '25 continues to indicate strong customer confidence in the bank's competitive deposit offerings.

The bank's continued emphasis on relationship banking, combined with competitive product offerings and digital capabilities, have contributed to a stable deposit base that supports ongoing loan growth and expansion. Net interest income was $47 million for the third quarter of '26, an increase of $3.9 million or 9.1% compared to the prior year quarter. The net interest margin for the quarter -- third quarter of '26 was 2.95%, up 16 basis points from the prior year quarter. Yield on interest-earning assets increased to 4.35%, up 10 basis points from the prior year quarter. The cost of interest-bearing liabilities decreased to 1.79% in the third quarter of '26 from 1.9% in the third quarter of '25.

The bank is well positioned to continue delivering strong net interest income performance even as the Federal Reserve contemplates further rate changes in the months ahead. The bank remains committed to maintaining competitive deposit offerings while ensuring financial stability and continued support for our community banking needs. Our Wealth Management division continues to be a significant recurring source of noninterest income. They had approximately $1.37 billion of assets under management as of September 30, '26. The majority of this fee income is recurring, supported by long-term advisory relationships and a growing base of managed assets. Now on to noninterest expense. Total noninterest expense net of ORE income came in at $28 million, down $300,000 from the prior quarter.

ORE income net came in at a credit of $12,000 for the quarter as compared to an expense of $8,000 in the prior year quarter. We're going to continue to guide the anticipated level of expense not to exceed $200,000 per quarter. All the other categories of noninterest expense were in line with our expectations for the third quarter. We would expect 2026 total recurring noninterest expense net of ORE expense to be in the range of $27.8 million to $28.2 million per quarter. Now Kevin will review the loan portfolio and nonperforming loans.

Thanks, Mike, and good morning to everyone. Our average loans grew by $238.1 million or 4.6% year-over-year. This is an improvement over last quarter's report of year-over-year growth of $197.5 million. The growth was centered in our residential loan portfolio with our first mortgage segment growing by $177.3 million or 4% and our home equity loans growing $50 million or 11.4% over last year. In addition, our commercial loans grew by $13.5 million or 4.3% over last year. For the third quarter, actual loans increased $77.1 million compared to the second quarter. Purchase mortgage loans, including refinances grew by $53.6 million. Home equity loans grew by $13.9 million and commercial loans were higher by $10 million for the quarter. During the third quarter, mortgage rates were below 6.5% at the beginning of the quarter and then increased to over 7% by the end of the quarter.

As noted previously, we have the flexibility to strategically manage pricing and introduce targeted promotions to drive lending volume. Our mortgage origination activity as well as our purchase loan volume was steady throughout the quarter. In addition, our home equity products continue to produce consistent demand as customers are able to use their equity to meet their borrowing needs. Overall, we are pleased with the loan growth during the quarter and remain committed to delivering strong results moving forward. Moving to asset quality. As a portfolio lender, we originate loans through maturity. This reinforces our disciplined approach to underwriting and risk management. Asset quality at the bank remains very strong. Our early-stage delinquencies in our portfolio continue to remain within the normal range. Charge-offs for the quarter amounted to a net recovery of $30,000, which follows a net recovery of $88,000 in the second quarter and a total of $171,000 in recoveries over the past year.

Overall, we have had 7 straight quarters of net recoveries. Nonperforming loans were $21.1 million at this quarter end, $21.8 million last quarter and $18.5 million a year ago. Nonperforming loans to total loans was 0.39% for quarter end compared to 0.4% last quarter and 0.36% a year ago. Nonperforming assets were $22.3 million at quarter end, $23 million last quarter and $19.7 million a year ago. At quarter end, our allowance for credit losses remained solid at $55.2 million with a coverage ratio of 262% compared to $54.1 million with a coverage ratio of 249% at the end of the second quarter and $51.9 million and a coverage ratio of 281% a year ago. Rob?

Thanks, Kevin. That's our story. We're happy to answer any questions anybody might have.

Your first question comes from the line of Ian Lapey from Gabelli Funds.

Congratulations on another strong quarter. Can you just talk about, obviously, during the quarter, there was a sharp increase in interest rates, particularly the 10-year mortgage rates. Can you just talk about the impact that, that had on the -- both the loan and deposit business?

Certainly, the change affected us in some ways, Ian, but we've always maintained a pretty liquid position and stay well capitalized. So we kind of let some of it run off a little bit and work our way the higher-priced stuff and work our way back into it. So I think it's been a very effective thing for us. Some people are going a little bit longer on CDs and some of the loan volumes are down. But as I said in my introduction was that we're trying to pick up more equity loans and do more business that way. And we've been successful at it so far.

Did you see sort of just a in terms of customer behavior, just any type of like freezing in terms of plans to either refi or purchase a new home?

No. You're talking about encouraging people to refi or...

Yes. What you're seeing in terms of customer behavior given the sharp increase in rates.

We operate in pretty conservative areas, especially in upstate New York. So we have not seen a real change in customer behavior.

Okay. And then next, on credit. First, congratulations on another quarter of net recoveries. Very impressive. Just given -- and you mentioned the allowance -- the increase in the allowance was driven mostly by sort of a deteriorating economic outlook. Can you just talk about sort of how you're positioning the loan portfolio for a more challenging environment and what you're sort of focused most on in terms of potential risk there?

I mean, our underwriting is always conservative, Ian. So we're staying the course and trying not to get crazy with regard to any of the loans are being made. We're watching everybody around us kind of change their stripes to kind of do think different things. We're trying to stay the course. And part of that allowance increase is driven by loan growth so that we're back funding that through the CECL model. So between the combination of the 2 factors, and Mike can tell you 100x more than I can tell you about it. But between a combination of a few factors and the loan growth, that's how we ended up. But our customers have come to know us and come to know what to expect of us, and we're pretty comfortable with where we're at.

This concludes our question-and-answer session. I would like to turn the conference back over to Robert J. McCormick for any closing remarks.

Thank you for your interest in our company. I hope you have a great day.

This concludes today's call. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the TrustCo Bank Corp Earnings Call and Webcast. [Operator Instructions] Before proceeding, we would like to mention that this presentation may contain forward-looking information about TrustCo Bank Corp New York that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Actual results, performance or achievements could differ materially from those expressed in 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 on Form 10-K and as updated by our quarterly reports on Form 10-Q. The forward-looking statements made on this call are valid only as of the date hereof, and the company disclaims any obligation to update this 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 with U.S. 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 Investor Relations tab of our website at trustcobank.com.

Please also note that today's event is being recorded. A replay of the call will be available for 30 days, and an audio webcast will be available for 1 year as described in our earnings press release.

At this time, I would like to turn the conference call over to Mr. Robert J. McCormick. Please go ahead.

Good morning, everyone, and thank you for joining the call. I'm Rob McCormick, the Chairman of TrustCo Bank. I'm joined today, as usual, by Mike Ozimek, our CFO, who will go through the numbers; and Kevin Curley, our Chief Banking Officer, who will talk about lending.

Like a well-oiled and efficiently operating machine, all of the elements of the time-tested TrustCo Bank business model work together in a favorable market environment to produce another quarter of stellar financial results. Our loan and investment portfolios continue to reprice favorably as lower-yielding assets matured and were replaced by higher loan originations and better-yielding investments. The machine was fueled by growth in lower-cost deposits.

Increased loan origination provided the outlet for the machine's production. In combination, these elements resulted in an increased net interest margin year-over-year. And of course, this was done without compromising credit quality. While all of that good work was being done, we continue to execute on our capital deployment strategy, primarily through share buybacks. Our buyback program began in 2020 and to date has seen the reacquisition of more than 2.3 million shares of company stock. The current phase of the program is expected to continue on pace. And if completed, we will have repurchased nearly 16% of TrustCo's outstanding shares during '25 and '26.

It is plain to see that we remain committed to the generation of meaningful and sustainable shareholder value. It is also plain to see that we remain convinced that the best acquisition we can make is TrustCo Bank. We are also very pleased to have moved into the building in Longwood that we repurposed into our new regional headquarters for our operation in the Sunshine State. The great state of Florida is a key part of our success, and this new building enhances our visibility there and provides a foundation on which more great things can be grown.

Now Mike is going to go into details on the numbers, and then Kevin will take care of loans, and then we can answer questions if you have them.

Thank you, Rob, and good morning, everyone. I will now review TrustCo's financial results for the second quarter of '26. As we noted in the press release, the company continued to see strong financial results for the second quarter of '26, marked by increases in both net income and net interest income of Trustco Bank during the second quarter of '26 compared to the second quarter of '25. This performance is underscored by rising net interest income and sustained loan and deposit growth across core lending and deposit categories.

This resulted in second quarter net income of $17 million, an increase of 12.8% over the prior year quarter, which yielded a return on average assets and average equity of 1.04% and 10.22%, respectively. Capital remains strong. Consolidated equity to assets ratio was 10.05% for the second quarter of '26 compared to 10.91% in the second quarter of '25. Book value per share at June 30, '26 was $38.53, up 4.8% compared to $36.75 a year earlier.

TrustCo has also repurchased 10.5% of TrustCo outstanding common stock under the 2025 and 2026 Stock Repurchase Programs through the acquisition of over 1 million shares in '26 following the purchase of 1 million shares in 2025, reinforcing a disciplined long-term capital allocation strategy. We remain committed to returning value to shareholders through a disciplined Share Repurchase Program, which reflects our confidence in the long-term strength of the franchise and our focus on capital optimization.

Credit quality continues to be consistent as we saw nonperforming loans modestly increase to $21.8 million in the second quarter of '26 from $17.9 million in the second quarter of '25. Our continued focus on solid underwriting within our loan portfolio and conservative lending standards positions us to manage credit risk effectively in the current environment. Average loans for the second quarter of '26 grew 3.8% or $197.5 million to $5.3 billion from the second quarter of '25, another all-time high. This uptick continues to reflect the strong local economy and increased demand for credit.

For the second quarter of '26, the provision for credit losses was $650,000. The ratio of the allowance for loan losses to total loans was 1.01% as of June of '26 and 0.99% for June of '25. Our focus continues to be on traditional lending, which has enabled us to produce consistent high-quality recurring earnings. Retaining and growing deposits has been a key focus as we navigated through 2026. Total deposits ended the quarter at $5.7 billion and was up $191 million compared to the prior year quarter. We believe the increase in these deposits compared to the same period in '25 continues to indicate strong customer confidence in the bank's competitive deposit offerings.

The bank's continued emphasis on relationship banking, combined with the competitive product offerings and digital capabilities has contributed to a stable deposit base that supports ongoing loan growth and expansion. Net interest income was $45.6 million for the second quarter of '26, an increase of $3.8 million or 9.2% compared to the prior year quarter. Net interest margin for the second quarter of '26 was 2.87%, up 16 basis points from the prior year quarter. Yield on interest-earning assets increased to 4.27%, up 8 basis points from the prior year quarter. And then the cost of interest-bearing liabilities decreased to 1.79% in the second quarter of '26 from 1.91% in the second quarter of '25.

The bank is well positioned to continue delivering strong net interest income performance even as the Federal Reserve contemplates rate changes in the months ahead. The bank remains committed to maintaining competitive deposit offerings while ensuring financial stability and continued support for our community banking needs.

Our Wealth Management division continues to be a significant recurring source of noninterest income. They had approximately $1.39 billion of assets under management as of June 30, '26. The majority of this fee income is recurring, supported by long-term advisory relationships and a growing base of managed assets. Additionally, as mentioned in the press release, the company marked its Visa Class C common stock to fair value and recorded a gain of $844,000 based on the conversion privilege of the Visa Class C common stock.

Now on to noninterest expense. Total noninterest expense net of ORE expense came in at $28.2 million, up $1.3 million from the prior quarter. The increase is primarily the result of higher employee benefit costs and professional fees in the current quarter. These expense categories are expected to return to normalized levels next quarter, consistent with historical quarterly trends. ORE expense net came in at an expense of $112,000 for the quarter as compared to $28,000 in the prior quarter.

We're going to continue to hold the anticipated level of expense to not exceed $250,000 per quarter, and all of the other categories of noninterest expense were in line with our expectations for the second quarter. We would expect '26 total recurring noninterest expense net of ORE expense to be in the range of $27.3 million to $27.8 million per quarter.

Now Kevin will review the loan portfolio and nonperforming loans.

Thanks, Mike, and good morning to everyone. Our average loans grew by $197.5 million or 3.8% year-over-year. This is an improvement over last quarter's report of year-over-year growth of $158.9 million. The growth was centered in our residential loan portfolio with our first mortgage segment growing by $142 million or 3.2% and our home equity loans growing by $44.8 million or 10.4% over last year. In addition, our commercial loans grew by $13.4 million or 4.4% over last year.

For the second quarter, actual loans increased by $87.1 million compared to the first quarter. Purchased mortgage loans, including refinances grew by $62.8 million. Home equity loans grew by $19.3 million and commercial loans were higher by $5.7 million for the quarter. During the second quarter, mortgage rates were lower in the beginning of the quarter. They increased slightly and have leveled off to a 6.25% to 6.5% range over the past few weeks.

Our mortgage origination activity showed solid momentum during the quarter. Purchase loan volume was steady throughout the quarter. Refinance activity was strongest earlier in the period as customers moved to lock in lower rates before market rates increased. As rates moved higher later in the quarter, refinance activity moderated. Our home equity loan products produced consistent demand in all our markets throughout the quarter. We continue to offer highly competitive mortgage products with our 30-year fixed rate loans and various ARM options.

In addition, our home equity products continue to offer customers low-cost alternatives to other forms of credit, such as personal loans and credit cards. Overall, we are pleased with the loan growth during the quarter and remain committed to delivering strong results moving forward.

Now moving to asset quality. As a portfolio lender, we originate loans to hold through maturity. This reinforces our disciplined approach to underwriting and risk management. Asset quality at the bank remains very strong. Our early-stage delinquencies in our portfolio continue to remain within their normal range. Charge-offs for the quarter amounted to a net recovery of $88,000, which follows a net recovery of $39,000 in the first quarter and a total of $317,000 in recoveries over the past year. Overall, we've had 6 straight quarters of net recoveries.

Nonperforming loans were $21.8 million at this quarter end, $21.5 million last quarter and $17.9 million a year ago. Nonperforming loans to total loans was 0.4% for the quarter end compared to 0.41% last quarter and 0.35% a year ago. Nonperforming assets were $23 million at quarter end versus $22.8 million last quarter and $19 million a year ago. At quarter end, our allowance for credit losses remained solid at $54.1 million with a coverage ratio of 249% compared to $53 million with a coverage ratio of 240% at the end of the first quarter and $51.3 million and a coverage ratio of 286% a year ago. Rob?

Sorry, I'm hacking a little bit, but that's our story, and we're happy to take any questions you might have.

[Operator Instructions] Your first question comes from the line of Ian Lapey with Gabelli Funds.

Can we start with the -- I just want to make sure, Rob, that I understood what you said. So the increase -- last quarter, you had guided to $26.7 million to $27.3 million and it came in at $28.2 million. And you said that was mostly nonrecurring things. Could you just go in again to what the extra expense was for this quarter?

Yes, absolutely. So I mean, 2 big lines, salary and employee benefits. About half of that was some salary increases that we pushed through and that will be recurring. About half of that increase in salary benefits are related to incentive comp programs that -- as the large piece of that. As our stock price continues to go up, we revalue those plans and some of that expense flushes through that first quarter. So if stock price keeps going up, we would see that. But if it remains steady, that line item will go down to a more normalized level. Same thing with professional fees, that popped a little bit in the quarter for some consulting, legal and accounting fees that won't continue to recur.

Okay. And then you said, now the guidance is $27.3 million to $27.8 million. And so is that increase? Is that basically what you said about the salary increases?

Yes, absolutely. And when you compare that really to the end of the year, that's about a 3% guided increase compared to where we were. So that's kind of where we think is a steady kind of growth in the expenses up [indiscernible] of line. You'll have blips from here and there, but that's what we're seeing.

Okay. And then pulling back maybe a big picture question. I guess, with potential indications that rates may start moving up, short-term rates. Could you just talk about sort of how you're positioning the company now as compared to maybe before we had the last big set of Fed rate increases in '22. Obviously, in '23 and '24, you had pretty significant declines in earnings. Is that -- is there anything different now that you're doing to sort of protect against that type...

We are offering a little longer CD product and making it a little bit more attractive, trying to push the maturities out a little bit further, get away from the 3-month repricings and moving on from there. We are attempting to be somewhat aggressive or reasonably aggressive in our mortgage portfolio to gain some ground there. And our home equity loans, we're very proud of the activity we've had there.

The closed loans are much higher than the outstandings would show, which is pretty common in the industry, but that's a prime-based or a lot of times a floating product, which is very attractive for us as well. So we've been incentivizing people in a variety of ways to use the home equity credit lines more and to grow that product line. And then on the investment side, we always stay relatively short on our investment maturities. We have a tremendous amortization and opportunities to reprice our securities as they come due. So that's the other side of the balance sheet, if you will.

Okay. Great. That's it from me. Again, congratulations.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Robert J. McCormick for any closing remarks.

Thank you for your interest in our company. We hope you have a great day.

This concludes today's call. You may now disconnect.

Good day, and welcome to the TrustCo Bank Corp Earnings Call and Webcast. [Operator Instructions] Before proceeding, we would like to mention that this presentation may contain forward-looking information about the TrustCo Bank Corp New York that is intended to be covered by the safe harbor for 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 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 on Form 10-K as updated by our quarterly reports on Form 10-Q.

The forward-looking statements made on this call are valid only as date hereof, and the company disclaims any obligation to update this 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 with U.S. GAAP. A reconciliation of such non-GAAP financial measures to the most comparable GAAP figures are included in our earnings press release, which is available under the Investor Relations tab of our website at trustcobank.com.

Please also note that today's event is being recorded. A replay of this call will be available for 30 days, and an audio webcast will be available for 1 year as described in our earnings press release. At this time, I would like to turn the conference call over to Mr. Robert J. McCormick, Chairman, President, CEO. Please go ahead.

Good morning, everyone, and thank you for joining the call. I'm Rob McCormick, the President of TrustCo Bank Corp. I'm joined today, as usual, by Mike Ozimek, our CFO, who will go through the numbers; and Kevin Curley, our Chief Banking Officer, who will talk about lending. We're pleased to report that 2026 is off to a great start with net income of over $16 million, improving margin, positive return metrics and building momentum in our share buyback program. Net income improved in part because of strategic pricing of our time deposit products, which had the effect of reducing our cost of funds.

Also, contributing to this growth was noninterest income generated by our wealth management department, which increased 9% quarter-over-quarter. The most meaningful part of the story and a matter of significant shareholder interest is that the loan portfolio is, as expected, repricing as loans booked at lower rates over the past few years are replaced by higher earning loans. As the loan portfolio reaches another all-time high this quarter, the positive effect of repricing is becoming more pronounced and is having a meaningful impact on our financials.

The great results announced yesterday are further bolstered by our stock buyback program. As investors will recall, we repurchased 1 million shares during 2025 and have received authorization to buy another 2 million shares this year. In the first quarter of 2026, we purchased over 500,000 shares, putting us on pace to fully execute. We continue to believe that the best acquisition we can make is TrustCo Bank, and we expect that share repurchase will remain the centerpiece of our capital deployment strategy. Each of these pieces of our company strategy over the quarter generated significant improvement in our return metrics, highlighting our profitability, efficiency and capital leverage.

Year-over-year, we saw return on average assets increased 10% to 1.02%. Return on average equity grew 14% to 9.66%. Our efficiency ratio was lower by 6% to 54%. Now Mike will get into the details. Mike?

Thank you, Rob, and good morning, everyone. I'll now review TrustCo's financial results for the first quarter '26. As we noted in the press release, the company continued to see strong financial results for the first quarter of 2026, marked by increases in both net income and net interest income of the bank during the first quarter compared to the first quarter of 2025. This performance is underscored by rising net interest income, continued margin expansion and sustained loan and deposit growth across key portfolios.

This resulted in first quarter net income of $16.3 million, an increase of 14.1% over the prior year quarter, which yielded a return on average assets and average equity of 1.02% and 9.66%, respectively. Capital remains strong. Consolidated equity to assets ratio was 10.31% for the first quarter of '26 compared to 10.85% in the first quarter of '25. Book value per share at March 31, '26 was $38.32, up 6% compared to $36.16 a year earlier.

During the first quarter of 2026, TrustCo repurchased 522,000 shares of common stock or 2.9% of TrustCo's outstanding common stock under its previously announced repurchase program that allows the company to repurchase up to 2 million shares or 11.1% of TrustCo common stock in 2026. We remain committed to returning value to shareholders through a disciplined share repurchase program, which reflects our confidence in the long-term strength of the franchise and our focus on capital optimization.

Credit quality continues to be consistent as we saw nonperforming loans modestly increased to $21.5 million in the first quarter of '26 from $18.8 million in the first quarter of '25. Nonperforming loans to total loans increased to 41 basis points in the first quarter of '26 from 37 basis points in the first quarter of '25. Nonperforming assets to total assets was 35 basis points, up from 33 basis points in the first quarter of '25.

Our continued focus on solid underwriting within our loan portfolio and conservative lending standards positions us to manage credit risk effectively in the current environment. Average loans for the first quarter of '26 grew 3.1% or $158.9 million to $5.3 billion from the first quarter of '25, an all-time high. Consequently, overall loan growth has continued to increase and leading the charge was the home equity lines of credit portfolio, which increased $50.8 million or 12.3% in the first quarter of '26 over the same period in '25 and the residential real estate portfolio, which increased $93.2 million or 2.1%.

Average commercial loans also increased $17.1 million or 5.8%. This uptick continues to reflect our local -- very strong local economy and increased demand for debt. For the first quarter of '26, the provision for credit losses was $950,000. Retaining deposits has also been a key focus as we begin '26. Total deposits ended the quarter at $5.7 billion and was up $156 million compared to the prior year quarter. We believe the increase in these deposits compared to the same period in '25 continues to indicate strong customer confidence in the bank's competitive deposit offerings.

The bank's continued emphasis on relationship banking, combined with competitive product offerings and digital capabilities has contributed to a stable deposit base that supports ongoing loan growth and expansion. Net interest income was $44.7 million for the first quarter of '26, an increase of $4.3 million or 10.7% compared to the prior year quarter. The net interest margin for the first quarter of '25 was 2.84%, up 20 basis points from the prior year quarter.

Yield on interest-earning assets increased to 4.23%, up 10 basis points from the prior year quarter, and the cost of interest-bearing liabilities decreased to 1.79% in the first quarter of '26 from 1.92% in the first quarter of '25. The bank is well positioned to continue delivering strong net interest income performance even as the Federal Reserve contemplates whether or not to make rate changes in the months ahead. The bank remains committed to maintaining competitive deposit offerings while ensuring financial stability and continued support for our community banking needs.

Our Wealth Management division continues to be a significant recurring source of noninterest income. It had approximately about $1.26 billion of assets under management as of March 31, 2026. Noninterest income attributable to wealth management and financial services fees represent 44.1% of noninterest income. The majority of this fee income is recurring, supported by long-term advisory relationships and a growing base of managed assets.

Now on to noninterest expense. Total noninterest expense net of ORE expense came in at $26.9 million, up $631,000 from the prior year quarter. ORE expense net came in at an expense of $50,000 for the quarter as compared to $28,000 in the prior year quarter. We're going to continue to hold the anticipated level of expense not to exceed $250,000 per quarter. All the other categories of noninterest expense were in line with our expectations for the first quarter. We would expect 2026 total recurring noninterest expense net of ORE expense to be in the range of $26.7 million to $27.3 million.

Now Kevin will review the loan portfolio and nonperforming loans.

Thanks, Mike, and good morning to everyone. Our average loans grew by $158.9 million or 3.1% year-over-year. This is an improvement over last quarter's report of year-over-year growth of $126.8 million. The growth was centered in our residential loan portfolio with our first mortgage segment growing by $93.2 million or 2.1% and our home equity loans growing $50.8 million or 12.3% over last year.

In addition, our commercial loans grew by $17.1 million or 5.8% over last year. For the first quarter, actual loans increased by $37.7 million compared to the fourth quarter. Purchased mortgage loans, including refinances and home equity loans grew by $35.3 million and commercial loans were up by $3.3 million for the quarter. Our mortgage origination activity showed solid improvement during the quarter and year-over-year. Purchase loan volume was steady throughout the quarter. Refinance activity picked up earlier in the period with lower rates, then eased as market rates moved higher during the second half of the quarter.

In all of our markets, rates were lower in the beginning of the quarter, decreased closer to 6.75% and have recently receded to 6% to 6.25% range. We continue to offer highly competitive mortgage rates with our 30-year fixed rate at 5.99%. In addition, our home equity products continue to offer customers lower cost alternatives to other forms of credit. Overall, we are positive about our loan growth in the quarter and remain focused on driving stronger results moving forward.

Now on to asset quality. As a portfolio lender, we originate loans to hold for the full term, reinforcing our disciplined underwriting standards. Asset quality at the bank remains very strong. Our early-stage delinquencies for our portfolio continue to remain stable. Charge-offs for the quarter amounted to a net recovery of $39,000, which follows a net recovery of $14,000 in the fourth quarter and a total of $238,000 in recoveries over the past year.

Nonperforming loans were $21.5 million at this quarter end, $20.7 million last quarter and $18.8 million a year ago. Nonperforming loans to total loans was 0.41% at this quarter end compared to 0.39% last quarter and 0.37% a year ago. Nonperforming assets were $22.8 million at quarter end versus $22.1 million last quarter and $20.9 million a year ago. At quarter end, our allowance for credit losses remained solid at $53 million with a coverage ratio of 247% compared to $52.2 million with a coverage ratio of 253% at year-end and $50.6 million with a coverage ratio of 270% a year ago.

Rob, that's our story. We're happy to answer any questions you may have.

[Operator Instructions]

And our first question comes from the line of Ian Lapey with Gabelli Funds.

Congratulations. Just a couple. So the provision more than tripled compared to a year ago despite really solid metrics in terms of your portfolio, and you mentioned stable early-stage delinquencies. So are you still -- you mentioned in the release a more cautious economic outlook. Are you still using the baseline Moody's forecast or are you doing something else?

Yes. So we are still using the baseline Moody's forecast. And I mean, what's really driving that increase in the provision, I mean, about half of it is loan growth and about half of it is that forward-looking component of the Moody's forecast that does have some of the economic factors looking slightly negative on the go forward. So that's what drives that calculation.

Okay. And then the release mentions competitive pressure on deposit pricing. Can you just talk about is anything new, any new entrants or anything changing there? And what's your -- it seems like you're doing quite well in...

I don't think there's anything new, Ian, but it's the same old, same old. A lot of the consumers are pushing for obviously higher CD rates. I think more than I've ever never seen before in my career anyway. Consumers have a magic number in their mind that they're pushing for. And you also have the natural competitors from the credit unions that we compete against. So they're tough competitors from a rate perspective. They don't have the same motivation and same issues that we have. So nothing really new, just those 2 popping up.

Okay. And then lastly, on capital, what was the Tier 1 common equity ratio? And as you continue to repurchase shares, -- where -- what's your comfort level in terms of where you'd like to see -- where you'd be comfortable with that settling out? I know it was 18.4% at year-end.

Yes. The share repurchase, we're taking it kind of one bite at a time and slower. Mike can comment on this if he wants. But we're taking it as we possibly can. We are fully committed and believe in the share repurchase, but we're certainly not going to jeopardize our capital position or our liquidity position to repurchase shares. We've always been known, you know, you've seen the way we run the place. We've always been known as well capitalized and very liquid by all measures, and we certainly wouldn't want to do anything to disrupt that.

Okay. Good. And then do you have the CET1 ratio? I know it will be in the queue.

We haven't disclosed it yet, but I mean it's trending down the same way that the leverage ratio is trending. So we're putting that capital to work.

Okay, great and congrats again.

This concludes our question-and-answer session. I would like to turn the conference back over to Robert McCormick for any closing remarks.

Thank you for your interest in our company, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day. and welcome to TrustCo Bank Corp New York Fourth Quarter Earnings Call. [Operator Instructions] Before proceeding, we would like to mention that this presentation may contain forward-looking information about TrustCo Bank Corp New York that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Actual results, performance or achievements could differ materially from those expressed in 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 Risk Factors and Forward-Looking Statements section of our annual report on Form 10-K and 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 the 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 search financial measures derived from our financial statements that are not determined in accordance with U.S. GAAP. The reconciliations of such GAAP non-GAAP measures to the most comparable GAAP figures are included in our earnings release, which is available under the Investor Relations tab of our website at trustcobank.com. Please also note that today's event is being recorded. A replay of the call will be available for 30 days and an audio webcast will be available for 1 year, as described in our earnings press release.

At this time, I would like to turn the conference call over to Mr. Robert J. McCormick, Chairman, President and CEO, to begin. Please go ahead, Robert.

Good morning, everyone, and thank you for joining the call. I'm Rob McCormick, the Chairman of TrustCo Bank. I'm joined today, as usual, by Mike Ozimek, our CFO, who will go through the numbers; and Kevin Curley; our Chief Banking Officer, will talk about lending. The results announced yesterday are the culmination of years of strategic long-term planning and nimble near-term execution. We resisted risky lending concentrations borrowing and other gimmicks in favor of building solid customer relationships through the delivery of top notch loan and deposit products and services.

This enabled us to keep our cost of funds low and grow loans, leading to a healthy margin expansion. We deployed capital through the continuation of our Century long dividend payout, a robust stock repurchase program and our bedrock practice of lending gathered deposits right back in the communities we serve. All of these factors together contributed to a 38% increase in net income and a return on average assets of almost 33% for the quarter. Total shareholder value returned 3x that of our proxy peers year-over-year, stellar performance by any measure. Now Mike will go through the details and Kevin will provide some color on lending.

Thank you, Rob, and good morning, everyone. I will now review TrustCo's financial results for the fourth quarter of 2025. As we noted in the press release, the company continued to see strong financial results for the fourth quarter of 2025. marked by increases in both net income and net interest income of TrustCo Bank during the fourth quarter of '25 compared to the fourth quarter of 2024. This performance is underscored by rising net interest income, continued margin expansion and sustained loan and deposit growth across key portfolios.

This resulted in our fourth quarter net income of $15.6 million, an increase of 38% over the prior year quarter, which yielded a return on average assets and average equity of 0.97% and 8.99% respective. Capital remains strong. Consolidated equity to assets ratio was 10.66% for the fourth quarter of 2025 compared to 10.84% in the fourth quarter of 2024. Book value care at December 31, 2025, was $38.8, up 7.1% compared to $35.56 a year earlier. During the fourth quarter of 2025, TrustCo repurchased 530,000 shares of common stock under the previously announced stock repurchase program, resulting in 1 million shares or 5.3% of common stock repurchased year-to-date, the maximum allowable under the stock repurchase program.

And we have also renewed the stock repurchase program, which now allows for the repurchase of up to 2 million shares or another 11.1% during 2026. We remain committed to returning value to shareholders through a disciplined share repurchase program, which reflects our confidence in the long-term strength of the franchise and our focus on capital optimization. Credit quality continues to be existing, as you saw, nonperforming loans modestly increased to $20.7 million in the fourth quarter of 2025 from $18.8 million in the fourth quarter of '24.

Performing loans -- total loans increased to 0.39% in the fourth quarter '25 from 0.37% in the fourth quarter '24. Nonperforming assets to total assets was 0.34% for both the fourth quarter '25 and 2024. Our continued focus on solid underwriting within our loan portfolio and conservative lending standards positions us to manage credit risk effectively in the current environment. Average loans for the fourth quarter of '25 grew 2.5% or $126.8 million to $5.2 billion from the fourth quarter of '24, an all-time high.

Consequently, overall loan growth has continued to increase in leading the charge as home equity lines of credit, which increased by $54.1 million or 13.5% in the fourth quarter 25% over the same period in '24. The residential real estate portfolio increased $50.6 million or 1.2%. Average commercial loans increased $24.5 million or 8.6% and installment loans decreased $2.4 million or 17.3% over the same period in '24. This uptick continues to reflect a strong local economy and increased demand for credit. For the fourth quarter '25, the provision for credit losses was $400,000.

Retaining deposits has been a key focus as we navigated through 2025. Total deposits ended the quarter at $5.6 billion was up $166 million compared to the prior year quarter. We believe the increase in these deposits compared to the same period in '24 continues to indicate strong customer confidence in the bank's competitive deposit offerings. Bank's continued emphasis on relationship banking, combined with competitive product offerings and digital capabilities has continued through a stable deposit base that supports ongoing loan growth and expansion.

Net interest income was $43.7 million from the fourth quarter '25, an increase of $4.8 million or 12.4% compared to the prior year quarter. Net interest margin for the fourth quarter of '25 was 2.82%, up 22 basis points from the prior year quarter. The yield on interest-earning assets increased to 4.24%, up 12 basis points from the prior year quarter. and the cost of interest-bearing liabilities decreased to 1.84% from the fourth quarter '25 from 1.97%.

The bank is well positioned to continue delivering strong net interest income performance even as the Federal Reserve contemplates rate changes in the months ahead. The bank remains committed to maintaining competitive deposit offerings while ensuring financial stability and continued support for our communities banking needs. Our Wealth Management division continues to be a significant recurring source of noninterest income. They had approximately $1.27 billion of assets under management as of December 31. Noninterest income attributable to Wealth Management and Financial Services Fees represent 44% of noninterest income.

The majority of this fee income is recurring, supported by long-term advisory relationships and a growing base of managed assets. Now on to noninterest expense. Total noninterest expense net of ORE expense came in at $26.5 million, down $1.5 million from the prior year quarter. ORE expense net came in an expense of $161,000 for the quarter as compared to $476,000 in the prior year quarter. We're going to continue to hold the anticipated level of expense not to exceed $250,000 per quarter. All the other categories of noninterest expense were in line with our expectations for the fourth quarter. We would expect 2026 total recurring noninterest expense net of ORE expense to be in the range of $27.7 million to $28.2 million per quarter.

Now Kevin will review the loan portfolio and nonperforming loans.

Thanks, Mike, and good morning to everyone. Our average loans grew by $126.8 million or 2.5% year-over-year. The growth was centered in our residential loan portfolio with our first mortgage segment growing by $50.6 million or 1.2%, and our home equity loans growing $54.1 million or 13.5% over last year. In addition, our commercial loans grew by $24.5 million or 8.6% over last year. For the fourth quarter, actual loans increased by $60.7 million compared to the third quarter. purchased mortgage loans, including refinances grew by $42.4 million. .

Home equity loans increased by $17 million and commercial loans were up by $2 million for the quarter. Overall, residential activity improved during the quarter. For purchase and refinances, we did see a slight uptick in activity, and we were able to close more loans during the quarter. As we have said in the past, we are well situated in the market and will capture more growth as these segments pick up. Also as a portfolio lender, we're uniquely positioned to manage pricing and offer promotions to increase lending volume. Our home equity products continue to see consistent demand as customers continue to use their equity in their home for home improvements are paying off loans with high rates such as credit cards.

And all our markets rates continue to be moving an approximately 25 basis point range. Our current rate is 5.875% for our base 30-year fixed rate loan. We also offer a low rate [ 51 ] arm and a very competitive home equity credit line products. Overall, we are positive about our loan growth in the quarter and remain focused on driving strong results this year.

Now moving to asset quality. At TrustCo, we work hard to maintain strong credit quality in our loan portfolio. As a portfolio lender, we have consistently used prudent underwriting standards to build our loan portfolios. Our residential loan originated in-house focused on key underwriting factors that have proven to lead to sound credit decisions. These loans are originated with the intent to be held by us for the full term rather than originated for sale. In addition, we have no foreign or subprime loans in our residential loan portfolio.

In our commercial loan portfolio, which makes up about 6% of our total loans, we focus on relationship-based loans, secured mostly by real estate within our primary market areas. We also avoid concentrations of any credit to any single borrower or business and continue to require personal [indiscernible] is very strong. Early stage delinquencies for our portfolio continue to be steady. Charge-offs for the quarter amounted to a net recovery of $14,000 which follows a net recovery of $176,000 in the third quarter and $457,000 over the past year. Nonperforming loans were $20.7 million at this quarter end, $18.5 million last quarter and $18.8 million a year ago. Nonperforming loans to total loans was 0.39% at this quarter end compared to 0.36% last quarter and 0.37% a year ago.

Nonperforming assets were $22.1 million at quarter end versus $19.7 million last quarter and $20 million -- $21 million a year ago. At quarter end, our allowance for credit losses remained solid at $52.2 million with a covered ratio of 253% compared to $51.9 million with a coverage ratio of 281% last quarter and $50.2 million and a coverage ratio of 267% a year ago. Rob?

Thanks, Kevin. We're happy to answer any questions. That's our story. .

[Operator Instructions] Our first question comes from Ian Lapey from Gabelli Funds.

Congratulations on the great quarter and year. A few, maybe start with asset quality. Obviously, it's great to see another quarter of net recoveries. But I did notice an increase in the New York commercial NPL of about $1.7 million [indiscernible] One relationship or a couple of maybe you could just expand a little bit what happened there?

I think it's 2 relationships, Ian. And they're multifamilies. One is in the city of Schenectady and 1 is in the city of Albany.

And are those typical where you have good collateral and personal guarantees?

Oh, yes. We don't have an unguaranteed loan in our portfolio, Ian, again. These particular cases, they're both retirees who are knowledgeable with regard to this. And I think they've relocated it to Florida, at least 1 of them has.

Okay. And then on the -- a couple on expenses. First, the other expense was up a little bit, 2.55% versus 1.7% in 3Q. Anything in particular driving that?

No. I mean just at the end of the year, we just -- there are some of the benefit plans that we look at. We also took the opportunity for tax purposes to fund the TrustCo Foundation for about $0.5 million, just be able to take the tax benefit of that. So there's a few larger expenses that we put through in the fourth quarter, but nothing really notable.

Okay. And then for the I thought I heard for the guidance for '26 expenses, $27.7 million to $28.2 million, excluding other real estate. Is that right?

Yes. Yes. It just gives us a little breathing room going into next year. But there's nothing really that's really driving us up.

Okay. So because that is a decent uptick from the run rate this year. Is that anything in particular? Or is that sort of across the board?

That's really just across the board. There's nothing really that's standing out there. Just like I said, just kind of give us a little bit of room for next year. I would expect this to probably be on the lower end range of that.

Okay. And then lastly for me, for the branches, they declined by 2%. What's the outlook? I know you mentioned last call, Rob, you were looking at Pascal County in Florida. What's sort of your expectation for branch growth or declines in...

You touched on the expenses earlier, Ian, and we are pretty cheap people when it comes to that. So we want to get in at the right price and who new Pascal would be as difficult it would be to find a location as it is. But we are still actively looking in Pascal. There's a lot of mortgage business, there's the market changes down there, they're pushing people further north. And as Tampa becomes less affordable and some of the other West Coast cities become unaffordable, they move into Pascal. So we are still looking for a location there, but we want to do it the right way.

[Operator Instructions] This concludes our question-answer session. I'd like to turn the conference back over to Robert J. McCormick for any closing remarks.

Thank you for your interest in our company, and we hope you have a great day. Thank you.

The conference call has now concluded. Thank you for everyone attending. You may now disconnect your lines.

Good day, and welcome to TrustCo Bank Corp Earnings Call and Webcast. [Operator Instructions] Before proceeding, we would like to mention this presentation may contain forward-looking information about TrustCo Bank Corp New York that is intended to be covered by the safe harbor for 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 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 on Form 10-K and as updated by our quarterly reports on Form 10-Q.

Forward-looking statements made on this call are valid only as of this date hereof, and the company disclaims any obligation to update the information to reflect the 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 with U.S. 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 Investor Relations tab of our website at trustcobank.com.

Please also note that today's event is being recorded. A replay of the call will be available for 30 days, and the audio webcast will be available for 1 year as described in our earnings press release. At this time, I'd like to turn the conference call over to Mr. Robert J. McCormick, Chairman, President and CEO. Please go ahead.

Good morning, everyone, and thank you for joining the call. I'm Rob McCormick, President of TrustCo Bank. I'm joined today, as usual, by Mike Ozimek, our CFO, who will go through the numbers; and Kevin Curley, our Chief Banking Officer, who will talk about lending.

It is often said that actions speak louder than words. TrustCo's performance this quarter and year-to-date speaks volumes about the tactical effective application of our corporate strategic vision. TrustCo Bank's mission is to deliver the best possible loan and deposit products, making the dream of home ownership come true for customers who we treat with respect. It is a fundamental principle of our company that loans are underwritten with professionalism and care to ensure fair lending outcomes and solid credit quality. This is true both in our residential and commercial lending areas.

Looking back just 5 years, we have never exceeded annualized net charge-offs of more than 0.02% compared to our average loan portfolio. Throughout this year, our strong customer relations have enabled us to grow deposits and loans while holding the line on cost of funds as the loan portfolio repriced. All of these elements have combined to generate these stellar financial results that we proudly announce today. Both our profitability and efficiencies improved greatly over the quarter compared to this time last year.

Our return on average assets increased 21.4%. Return on average equity grew 20%, and our efficiency ratio decreased by almost 9%. This is all done while staying focused on high-quality underwriting standards and loan processing functions, sticking to our lending philosophy by never sacrificing credit quality. We improved our nonperforming loans to total loans by 5% over the quarter, and our coverage ratio increased to over 280%, up 9% from the third quarter last year.

Also part of our long-standing TrustCo tradition that we do not rest upon our successes. Throughout this year, our management team has demonstrated that we are not satisfied with simply delivering outstanding corporate performance in the present term. We always have an eye on building long-term shareholder value. Toward that end, we sought and received approval to repurchase 1 million shares of our company's stock. So far, we have repurchased nearly half of that number.

Further, we anticipate that the company will complete the currently authorized buyback and expect to seek approval for further substantial repurchase. It is our view that the stock is significantly undervalued and presents an outstanding investment opportunity without exposing us to the risks inherent with other investments. We could not be more pleased with the driving corporate value in a safe, sound and strategically purposeful manner.

Now Mike will go over the details with the numbers and some impressive numbers. Mike?

Thank you, Rob, and good morning, everyone. I will now review TrustCo's financial results for the third quarter of 2025. As we noted in the press release, once again, the company saw strong financial results for the third quarter of 2025, marked by increases in both net income and net interest income of TrustCo Bank during the third quarter of '25 compared to the third quarter of 2024. This performance is underscored by rising net interest income, continued margin expansion and sustained loan and deposit growth across key portfolios.

This resulted in third quarter net income of $16.3 million, an increase of 26.3% over the prior year quarter, which yielded a return on average assets and average equity of 1.02% and 9.29%, respectively. Capital remains strong. Consolidated equity to assets ratio was 10.90% for the third quarter of 2025 compared to 10.95% in the third quarter of 2024. Book value per share at September 30, 2025, was $37.30, up 6% compared to $35.19 a year earlier.

During the third quarter of 2025, TrustCo repurchased 298,000 shares of common stock under the previously announced stock repurchase program, resulting in 467,000 shares repurchased year-to-date, and we have the ability to repurchase another 533,000 shares under the repurchase program. And as always, we remain committed to returning value to shareholders through a disciplined share repurchase program, which reflects our confidence in the long-term strength of the franchise and our focus on capital optimization.

Credit quality continues to improve as we saw nonperforming loans decline to $18.5 million in the third quarter of 2025 from $19.4 million in the third quarter of 2024. Additionally, nonperforming loans to total loans also decreased to 0.36% in the third quarter of 2025 from 0.38% in the third quarter of 2024. Nonperforming assets to total assets also reduced to 0.31% in the third quarter of '25 compared to 0.36% in the third quarter of '24. Our continued focus on solid underwriting within our loan portfolio and conservative lending standards positions us to manage credit risk effectively in the current environment.

Average loans for the third quarter of 2025 grew 2.5% or $125.9 million to $5.2 billion from the third quarter of '24, an all-time high. Consequently, overall loan growth has continued to increase and leading the charge was home equity credit lines portfolio, which increased by $59.9 million or 15.7% in the third quarter of '25 over the same period in '24. The residential real estate portfolio increased $34 million or 0.8% of average commercial loans, which also increased $34.6 million or 12.4% over the same period in 2024. This uptick continues to reflect a strong local economy and increased demand for credit.

For the third quarter of 2025, the provision for credit losses was $250,000. Retaining deposits has been a key focus as we navigate through 2025. Total deposits ended the quarter at $5.5 billion and was up $217 million compared to the prior year quarter. We believe the increase in these deposits compared to the same period in 2024 continues to indicate strong customer confidence in the bank's competitive deposit offerings. The bank's continued emphasis on relationship banking, combined with competitive product offerings and digital capabilities has continued to a stable deposit base that supports ongoing loan growth and expansion.

Net interest income was $43.1 million for the third quarter of 2025, an increase of $4.4 million or 11.5% compared to the prior year quarter. Net interest margin for the third quarter of '25 was 2.79%, up 18 basis points from the prior year quarter. The yield on interest-earning assets increased to 4.25%, up 14 basis points from the prior year quarter. And the cost of interest-bearing liabilities decreased to 1.9% in the third quarter of '25 from 1.94% in the third quarter of '24.

The bank is well positioned to continue delivering strong net interest income performance even as the Federal Reserve signals a continued potential easing cycle in the months ahead. The bank remains committed to maintaining competitive deposit offerings while ensuring financial stability and continued support for our community's banking needs. Our Wealth Management division continues to be a significant recurring source of noninterest income. They had approximately $1.25 billion of assets under management as of September 30, '25.

Noninterest income attributable to wealth management and financial services fees represent 41.9% of noninterest income. The majority of this fee income is recurring, supported by long-term advisory relationships and a growing base of managed assets. Now on to noninterest expense. Total noninterest expense net of ORE expense came in at $26.2 million, down $42,000 from the prior year quarter. ORE expense net came in at an expense of $8,000 for the quarter as compared to $204,000 in the prior year quarter. We are going to continue to hold the anticipated level of ORE expense to not exceed $250,000 per quarter. All the other categories of noninterest expense were in line with our expectations for the third quarter.

Now Kevin will review the loan portfolio and nonperforming loans.

Thanks, Mike, and good morning to everyone. Our loans grew by $125.9 million or 2.5% year-over-year. The growth was centered on our home equity loans, which increased by $59.9 million or 15.7% over last year and residential mortgages, which increased by $34 million. In addition, our commercial loans grew by $34.6 million or 12.4% over last year.

For the second quarter, actual loans increased by $35.1 million as total residential loans grew by $38.5 million and commercial loans were slightly lower for the quarter. Overall, residential activity is picking up, and we are seeing additional refinance volume as mortgage rates remain in the 6% range. Our home equity lending also continues to grow steadily as customers continue to use their equity for home improvements, education expenses or paying off higher cost loans such as credit cards.

In all our markets, rates have fluctuated within a 25 basis point range with our current 30-year fixed rate mortgage at 6.125%. In addition, our home equity products are very competitive with rates starting below 6.75%. Our products are well situated across our markets as we are ready to capture more growth as activity picks up. As a portfolio lender, we have the flexibility to manage pricing and implement targeted promotions to increase loan volume. Overall, we are encouraged by the loan growth in the quarter and remain focused on driving stronger results moving forward.

Moving to asset quality. Asset quality of the bank remains very strong. At TrustCo, we work hard to maintain strong credit quality throughout our loan portfolio. As a portfolio lender, we have consistently used prudent underwriting standards to build our loan portfolio. Our residential loans originated in-house, focusing on key underwriting factors that have proven to lead to sound credit decisions. These loans are originated with the intent to be held in our portfolio for the full term rather than originated for sale. In addition, we have no foreign or subprime loans in our residential portfolio.

In our commercial loan portfolio, which makes up just about 6% of our total loans, we focus on relationship-based loans secured mostly by real estate within our primary market areas. We also avoid concentrations of credit to any single borrower or business and continue to require personal guarantees on all our loans. Overall, our disciplined underwriting approach has produced strong credit quality across our entire loan portfolio. Here are the key metrics.

Our early-stage delinquencies for our portfolio continue to be steady. Charge-offs for the quarter amounted to a net recovery of $176,000, which follows a net recovery of $9,000 in the second quarter and $258,000 in the recovery in the first quarter, totaling a year-to-date net recovery of $443,000. Nonperforming loans were $18.5 million at this quarter end, $17.9 million last quarter and $19.4 million a year ago.

Nonperforming loans to total loans was 0.36% at this quarter end compared to 0.35% last quarter and 0.38% a year ago. Nonperforming assets were $19.7 million at quarter end versus $19 million last quarter and $21.9 million a year ago. At quarter end, allowance for credit losses remained solid at $51.9 million with a coverage ratio of 281% compared to $51.3 million with a coverage ratio of 286% at year-end and $49.95 million with a coverage ratio of 257% a year ago.

Bob.

That's our story. We're happy to answer any questions you might have.

[Operator Instructions] Our first question comes from Ian Lapey from Gabelli Funds.

Rob and team, congratulations on the great financial results. I was hoping maybe you could quantify a little bit. The release mentions that you expect meaningful net interest income upside for quarters to come. You mentioned the rates on the fixed rate and home equity. What about the CDs that are going to be maturing over the next quarter? What's sort of the average rate for that compared to what you're paying on new CDs that you're issuing?

The highest rate we're offering right now, Ian, is 4%, and that's a 3-month rate. And there's about $1 billion in CDs that are coming due over the next 6 months, 4 to 6 months. So we expect -- based on what happens with the Fed and some competition, we would expect there should be opportunity in that CD portfolio to reprice.

What's roughly the average -- so for the $1 billion coming due, what is the average roughly rate on those?

The average rate on the $1 billion coming due is about 3.75%.

3.75%. Okay. And then on the recoveries, obviously, very impressive. I was just hoping you could unpack that a little bit. For example, for the quarter in New York, you had $194,000 in recoveries. Just curious, like how many homes typically would that relate to? Is this just a function of borrowers defaulting with significant equity still in the home? Maybe you can just explain a little bit...

A lot of that, as you can imagine, Ian -- as you can imagine, in the real estate market, upstate is still very, very strong, and there's still great demand with relatively limited inventory. So a lot of the transactions happen before we even end up taking the property back, which is the best possible scenario. But the $194,000 is probably around 5 properties that we've taken back. And I think there was 1 commercial property in there and 4 residentials.

Okay. Great. And then I guess my only follow-up, my only remaining question. So it looked like branches were flat at 136 sequentially. What are you thinking about in terms of expansion, if at all? And would Florida still be sort of your targeted range for growth?

We're looking at -- well, Pasco County is something that we're very interested in, Ian. I'm sure you're tracking this, but on the West Coast of Florida, because of development and prices and things like that, people are being pushed further and further out from Tampa. So we're seeing opportunity in loan demand in Pasco County.

And then there are a couple of other infill locations that we would like to find something in Florida. But we are pretty cheap people, so we want the right transaction if we can in the right location. So -- and then there's always opportunity throughout Downstate New York as things open up there as well. So those would be the 2 opportunities we're seeing right now.

[Operator Instructions] We currently have no further questions at this time. Now I'd like to turn the conference back to Robert J. McCormick for any closing remarks.

Thank you for your interest in our company, and we hope you have a great day. Thank you.

The conference call has now concluded. Thank you very much for attending. You may now disconnect your lines.