Hook / Thesis
TrustCo Bank (TRST) is turning a simple, repeatable playbook into a measurable earnings lever: mortgage repricing is lifting interest income while credit costs remain negligible, and management has announced a two-million-share buyback that reduces the float by more than 10% if fully executed. That combination - improving net interest income (NII) plus meaningful share reduction - creates an attractive near-term EPS runway and supports both the dividend and valuation.
We like TRST as a position trade (3-9 months) at current levels. The bank's Q3 2025 results show sequential revenue and earnings momentum, provisions remain tiny (Q3 provision $250k), equity is solid ($692.0M), and the announced repurchase (12/19/2025) shifts capital allocation decisively toward shareholders. At a last trade around $46.26 the stock is cheap relative to its ability to convert repriced mortgages into sustainable NII and buybacks into EPS accretion.
What the business is and why you should care
TrustCo Bank Corp N Y is a regional savings & loan holding company that takes deposits and makes loans in New York, Florida, Massachusetts, New Jersey and Vermont. The core economics are straightforward: collect low-cost deposits and earn a spread on loans and securities. The two items investors care about right now are (1) mortgage repricing into a higher-rate environment that boosts NII and (2) capital return to shareholders via an unusually large buyback for this franchise.
Why that matters: small regional banks with high concentrations in residential mortgages and short-duration liabilities can see NII accelerate quickly as loans reprice. TrustCo's quarterly interest income metrics are moving in the right direction - and management is returning excess capital to shareholders rather than letting it sit on the balance sheet.
Evidence from the numbers
- Revenue and NII trend: Revenues for Q3 2025 were $66.03M and interest income (operating) was $66.03M with interest income/expense operating, net of $43.12M. That compares to Q2 2025 net interest income of $41.75M and Q1 2025 of $40.37M. The sequential rise in net interest income shows accelerating benefit from repriced loans.
- Profitability: Net income attributable to parent in Q3 2025 was $16.26M (diluted EPS ~ $0.86). Q2 and Q1 2025 net income were $15.04M and $14.28M, respectively - a steady quarter-to-quarter climb.
- Asset quality: Provision for loan losses in Q3 2025 was immaterial at $250k, indicating currently benign credit trends and room to let NII flow to the bottom line.
- Capital and buyback: Equity attributable to parent on the Q3 2025 balance sheet is $692.01M. Management announced a two-million-share repurchase program on 12/19/2025. Using the latest basic average shares (18,755,000), that repurchase equals roughly 10.6% of shares outstanding if fully executed - a substantial reduction that materially increases EPS per share.
- Dividend policy / yield: TrustCo pays regular quarterly dividends. The most recent declared quarterly payment was $0.38 (11/18/2025). Annualized that is ~$1.52, which at a $46.26 price implies a dividend yield of ~3.3%.
- Balance sheet scale: Total assets on Q3 2025 were $6.349B, funded primarily by liabilities of $5.657B. Tangible equity of ~$692M equates to a book value per share of roughly $36.9 (692,013,000 / 18,755,000). The stock at $46.26 trades at about 1.25x book.
Valuation framing
There is no peer table in this write-up, but a few straightforward metrics make the case: market-cap implied math and book multiples. Using the latest reported basic average shares (18.755M) and a last trade near $46.26, implied market capitalization is approximately $868M (46.26 * 18.755M). That puts price-to-book at ~1.25x (price $46.26 / book ~$36.9).
That multiple is reasonable for a small regional bank that is earning a mid-to-high single-digit ROE (approximate annualized net income run-rate ~ $65M on $692M equity implies ROE ~9.4%). A ~10% share repurchase, if executed, should lift ROE and EPS materially and justify multiple expansion, particularly if NII continues to reprice and credit remains benign.
Trade idea - actionable plan
Position: Long TRST (ticker: TRST)
Time horizon: Position trade - 3 to 9 months. Risk level: Medium.
Entry: 44.50 - 47.00 (current prints around 46.26; building a position through this band reduces single-price timing risk).
Initial stop: 41.50 (about 10% below 46.26, close enough to respect noise but wide enough to avoid getting stopped by short-term volatility). If you prefer tighter risk, a short stop at 43.00 is an alternative for a smaller allocation.
Targets:
- Near-term target 1: $55.00 (roughly +19% from 46.26). This would reflect partial multiple expansion toward 1.5x book and buyback progress.
- Medium-term target 2: $62.00 (roughly +34%). This would assume complete buyback execution (full 2M shares) and continued NII tailwind with stable credit metrics.
Position sizing: Given the small market cap and reduced float (post-buyback), keep individual position size moderate (e.g., 1-3% of portfolio) unless you are comfortable with small-cap liquidity and the risks that come with regional banks.
Catalysts to watch (2-5)
- Buyback execution: monitoring repurchase cadence and dollar volume after the 12/19/2025 announcement. Each incremental share repurchased is direct EPS accretion.
- Quarterly earnings and guidance: the company released Q4 2025 results on 01/21/2026. Future releases that show continued sequential NII growth and low provisioning will validate the thesis.
- Net interest margin (NIM) trajectory: continued rehypothecation/repricing of variable-rate loans or the replacement of maturing lower-rate mortgages will sustain NII gains.
- Deposit trends and cost of funds: any signs of aggressive deposit competition or rising funding costs could blunt the repricing benefit.
Risks and counterarguments
- Rate risk / deposit pressure - If market rates fall or competitors raise deposit rates to attract balances, TrustCo's cost of funds could rise and compress the NII gains from mortgage repricing. A turn in deposit costs would materially weaken the thesis.
- Buyback execution risk - The announced two-million-share program is meaningful, but timing matters. If management repurchases slowly or halts the program for capital reasons, the expected EPS lift will be delayed or reduced.
- Credit shock - The bank's provisions are currently tiny (Q3 2025 provision $250k). A deterioration in borrower credit or a regional economic slowdown could force higher provisions and hit earnings.
- Small-cap liquidity and sentiment - TrustCo's market cap is sub-$1B; shares can gap on small news, and institutional coverage is limited. That increases volatility and execution risk for larger positions.
- Valuation already reflects improvements - One counterargument is that the market has already priced much of the repricing and buyback (the stock ran from the low $30s into the $40s over the past year). If investors expected these moves, upside could be limited unless buybacks are executed aggressively and NII outperforms expectations.
Conclusion and what would change my mind
Stance: Long (position trade). TrustCo has a clean, measurable path to EPS growth: mortgage repricing is lifting NII, credit costs remain minimal, and a two-million-share buyback (~10.6% of shares outstanding) provides a large mechanical EPS boost if executed. The stock trades at ~1.25x book and yields ~3.3% on the current dividend - a reasonable entry for a multi-month position given the risk/reward.
What would change my mind:
- If management delays or materially scales back the repurchase program, the primary capital return catalyst is gone and I'd downgrade the trade.
- A sustained rise in deposit costs that materially narrows NIM would invalidate the repricing thesis.
- A spike in loan loss provisions or meaningful deterioration in asset quality would force a reset of valuation and likely require a stop-out.
Note: This is an actionable trade idea based on reported financials, the announced repurchase program (12/19/2025), recent dividend declarations and sequential quarter trends. Manage position size to the volatility and liquidity of a sub-$1B bank stock and respect your stop policy.