TrustCo Bank Corp. NY (NASDAQ:TRST) Q1 2018 Earnings Conference Call - Final Transcript
Apr 24, 2018 • 09:00 am ET
Robert J. McCormick
coverage ratio of 179%. Our return on assets and return on average equity were 1.23% and 13% respectively, both better than the first quarter of 2017. Our efficiency ratio was 54%, also better than the first quarter of 2017. We are able to expand the margin since the first quarter of '17 3.29. We continue to operate a full service Financial Services Department.
We did not open any new offices during the quarter, but did relocate one. We have two new and two relocations on the horizon. Our first quarter was a pretty good one. We look forward to the rest of the year.
Now, Mike will go over the numbers. Scot will detail the loan portfolio and operation and then we're going to have time for questions. Mike?
Thank you, Rob, and good morning, everyone. I will now review TrustCo's financial results for the first quarter of 2018. As we noted in the press release, the Company saw an increase in net income to $14.8 million, up 35.3% compared to $10.9 million for the first quarter of 2017 and $7.4 million in the fourth quarter of 2017. Net income yielded a return on average assets and average equity of 1.23% and 13.07%, compared 0.91% and 10.17% in the first quarter of 2017.
On December 22nd, the Tax Cuts and Jobs Act was signed into law, which included a reduction in the federal statutory corporate tax rate from 35% to 21% effective January 1st 2018. The lower tax rate will have a significant beneficial impact on the results going forward. For 2018, the Company is expecting its combined effective tax rate be approximately 24% based on currently known information.
Now onto changes in the balance sheet. We saw continued strong loan growth during the first quarter of 2018. Average loans were up $211 million or 6.1% for the first quarter of 2018 compared to the same period in 2017. As expected, the growth continues to be concentrated within our primary lending focus, the residential real estate portfolio. That portfolio increased by $236.7 million or 8.1% in the first quarter over the same period in 2017.
This continues the positive shift in the balance sheet from lower-yielding overnight investments, the higher-yielding core loan relationships. Our loan portfolio expansion was funded by a combination of utilizing a portion of our strong cash balances, cash flow from our loan and investment portfolios as well as growth in core funding from customers.
Total average investment securities, which included the AFS and HTM portfolios, decreased $78 million or 11.37% from the first quarter of 2017. As discussed in prior calls, our focus continues to be on traditional lending and conservative balance sheet management, which has continued to enable us to produce consistent high quality reoccurring earnings.
Our investment portfolio is and has always been a source of liquidity to fund the loan growth and provide flexibility for balance sheet management, keeping in mind the current environment that has seen forward (ph) rate hikes in the