A Homewn Dividend Payer: TrustCo Bank (TRST)

The global financial crisis has seen many big banks around the world. Despite the tough economic conditions, several small-scale "local" banks have weathered the storm just fine.

"In these uncertain times, now may be the time to come home to a hometown bank with a history of financial strength."

That is the message that low-cost community banking group TrustCo Bank (TRST) is promoting to its customers following the fallout of the global financial crisis.

Established in 1902, TrustCo Bank (TRST) provides a full suite of banking services including checking accounts, savings accounts, retirement accounts, time deposits, money market accounts, and credit cards. It also has a loan portfolio comprising residential and commercial mortgages.

Low-cost does not mean poor shareholder return. The company offers an attractive 4.9% dividend yield to shareholders and a long-standing tradition of paying dividends. This was further boosted in August 2010 when the company announced it would be lifting its yield by 5% for an annualized dividend of approximately $0.26 per share.

Chairman, President and Chief Executive Officer Robert J. McCormick noted, “We are very pleased to be able to provide our shareholders with an increased cash dividend, reflecting our improved earnings in recent quarters. The higher cash dividend will improve shareholder returns on their investment in TrustCo (TRST), regardless of the stock price. Our cash dividend continues a tradition that extends back over 100 years."

This year the ABA Banking Journal recently ranked TrustCo (TRST) 13th on its list of top performing banks with at least $3 billion of assets. TrustCo (TRST) was one of only six banks in the top fifteen that repeated this achievement from the prior year.

Reporting second quarter earnings for the year the company delivered a 32.4% year on year increase in net income of $7.1 million and diluted earnings per share of $0.093. Return on average equity and return on average assets were 11.34% and 0.75% for the second quarter respectively, compared to 9.10% and 0.61% for the second quarter of 2009.

Year on year average loans were up $121.1 million or 5.5%, while average deposits were up $217.7 million or 6.8%.

McCormick was upbeat in his commentary but indicated the company would be sticking to its core customer centric values. He told investors: "“TrustCo (TRST) continues to focus on traditional lending criteria and conservative balance sheet management, an approach that has helped us minimize the impact of ongoing economic issues and allowed us to direct our efforts towards conducting business and expanding our loan and deposit base. Growth of loans and deposits, and the customer relationships that they represent, is fundamental to the long term success of the Company.”

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Comments

  • John from Schenectady

    August 25, 2010

    It is easy to offer a "great" dividend when the stock price has collapsed, as is the case with TrustCo. The stock has lost about half its value in the past 18 months. How is this a deal for the investor? Of course the dividend percentage will increase when the price of the stock goes down. Trustco, in fact, has reduced its dividend as the stock price has declined. For example, the bank paid about 40 cents a share during the boom era. You need to offer a more far and balanced report. This reeks of public relations.

  • Sean Riskowitz

    August 27, 2010

    Thanks for the comment. The fact that the stock price has decreased over the past 18 months may in fact mean the company is cheap, as it certainly appears to be on a dividend yield and fundamental basis.
    The yield for new investors sits at 4.48%, which is based on a quarterly dividend of $0.06.
    This is a company that has increased NAV year on year and did not report any losses over the past four years. Compared to most of its peers its been the standout performer and when the market recovers it will probably recover too.

    I'm not advocating investors to buy shares in this or any company. Rather, I'm drawing attention to high paying dividend stocks. Investing in any company poses risks and all investors should do their own thorough research.

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