TrustCo Bank Corp. NY :TRST-US: Earnings Analysis: Q4, 2015 By the Numbers

TrustCo Bank Corp. NY reports financial results for the quarter ended December 31, 2015.

We analyze the earnings along side the following peers of TrustCo Bank Corp. NY – New York Community Bancorp, Inc. (NYCB-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 40.69 million, Net Earnings of USD 10.18 million.
  • Net interest income margins widened from 88.24% to 89.11% compared to the same period last year.
  • Net loan assets changed 4.39% compared to same period last year and 0.36% from previous period, total deposits changed 1.69% compared to same period last year and 0.09% from previous period.
  • Year-on-year change in operating cash flow of 17.39% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline from worsening in operating margins as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2014-12-31 2015-03-31 2015-06-30 2015-09-30 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 40.42 39.79 40.13 40.42 40.69
Revenue Growth (%YOY) 3.51 2.51 0.35 -5.88 0.67
Earnings (mil) 10.66 10.72 10.73 10.62 10.18
Earnings Growth (%YOY) 0.36 -2.58 -9.05 -0.8 -4.46
Net Margin (%) 26.36 26.93 26.73 26.27 25.02
EPS 0.11 0.11 0.11 0.11 0.11
Return on Equity (%) 10.89 10.8 10.69 10.42 9.86
Return on Assets (%) 0.92 0.91 0.91 0.9 0.86

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Market Share Versus Profits

Revenues History
Earnings History

TRST-US‘s change in revenue this period compared to the same period last year of 0.67% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that TRST-US is holding onto its market share. Also, for comparison purposes, revenues changed by 0.69% and earnings by -4.11% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Earnings Growth Analysis

The company’s year-on-year earnings decline has not come as a result of decline in net interest income margins or because of any loan loss provisions. Both net interest income margins and net interest income after provisions margins have actually improved. In fact, net interest income margins went from 88.24% to 89.11% and net interest income after provisions margins improved from 85.77% to 85.92% over this period. In addition, loan loss provisions as a percentage of net interest income were 3.59% this period , and 2.80% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

TRST-US‘s improvement in net interest income margins came in spite of relative drops in the levels of net loan assets and total deposits. On an absolute basis, net loan assets changed 4.39% compared to the same period last year and 0.36% from the previous period. Total deposits changed 1.69% compared to the same period last year and 0.09% from the previous period.

Cash Versus Earnings – Sustainable Performance?

TRST-US‘s change in operating cash flow of 17.39% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 43.99% to 40.02% and (2) One-time items that contributed to a decrease in pretax margins from 42.51% to 40.02%

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

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Company Profile

TrustCo Bank Corp. NY operates as a holding company for TrustCo Bank, which engages in the provision of banking and financial services to individuals, partnerships, and corporations. The company offers checking accounts, savings accounts, retirement accounts, time deposits, money market accounts, and credit cards. It also provides asset and wealth management services, estate planning and related advice, credit cards, trust and investment services, custodial services, and online banking services. The company was founded in 1981 and is headquartered in Glenville, NY.

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