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TrustCo Announces Strong Second Quarter Earnings; Up 20.9% Over Prior Year

Executive Snapshot:

  • Continued strong financial results:
    • Second quarter 2014 compared to 2013:
      • Net income up 20.9%
      • Diluted EPS up 20.2%
      • Return on average assets (ROA) rose 15 basis points to 1.03%
      • Return on average equity (ROE) rose 167 basis points to 12.50%
      • Improvement in the efficiency ratio from 53.51% in Q2 2013 to 53.00% in Q2 2014
  • Continued expansion of customer base:
    • Focus on capitalizing on opportunities presented by expanded branch network
    • Deposits per branch grew to $28.3 million at June 30, 2014 from $28.2 million a year earlier despite three new branches being opened during that period
    • Average core deposits grew $91.7 million from Q2 2013 to Q2 2014
  • Loan portfolio reaches all-time high:
    • Average loans were up $238.8 million or 8.7% from Q2 2013 to Q2 2014
    • Residential mortgage loans comprised $223.8 million of the increase
    • At $3.01 billion at June 30, 2014, loans reached an all-time high, exceeding $3 billion for the first time in Company history
  • Asset quality improvement:
    • Nonperforming assets (NPAs) fell $4.7 million to $49.2 million at June 30, 2014 compared to $53.9 million at March 31, 2014
    • NPAs to total assets improved from 1.21% to 1.07% over the last year
    • Net chargeoffs (NCOs) to average loans improved from 0.29% in Q2 2013 to 0.22% in Q2 2014

TrustCo Announces Strong Second Quarter Earnings; Up 20.9% Over Prior Year

GLENVILLE, N.Y., July 21, 2014 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced that net income rose to $11.8 million in the quarter ended June 30, 2014, up 20.9% from $9.8 million for the quarter ended June 30, 2013.

Robert J. McCormick, President and Chief Executive Officer noted, "Our results for the second quarter of 2014 continued our solid bottom line growth and positioning our business for the future. In addition to the significant increase in net income, we continued to add profitable customer relationships on both the loan and deposit sides of the Bank. Our highly liquid balance sheet continues to allow us to fund our loan growth without having to overpay for deposits. The Company had a strong first half of 2014 and we look forward to the remainder of the year with optimism. We will continue taking advantage of opportunities as they are presented."

TrustCo saw continued strong loan growth in the second quarter of 2014. The gains were primarily funded by continued expansion of retail deposits as well as proceeds from cash flow from the lower yielding investment securities portfolio. The shift toward loans helped offset part of the impact from continued low yields on cash and securities and contributed to an improvement in net interest margin to 3.16% in the second quarter from 3.13% in the first quarter of 2014 and 3.10% in the second quarter of 2013. Our strong liquidity position continues to be available to allow us to take advantage of opportunities when interest rate conditions change. The increase in margin, along with control of operating expenses and gains on the sale of ORE enabled the Company to achieve bottom line objectives without having to deploy liquidity into the current low rate investment environment.

Mr. McCormick also noted, "We are encouraged by the continued economic improvements where we operate, particularly Florida, and believe we are well positioned to capitalize on these changes. Our long-term focus on traditional lending criteria and conservative balance sheet management has enabled us to maintain strong liquidity and capital and report continued profit improvements. As a result, we have been able to focus on conducting business, which has significantly enhanced our reputation and put us in a position to take advantage of changes in market and competitive conditions."

Return on average assets and return on average equity were 1.03% and 12.50%, respectively for the second quarter of 2014, compared to 0.88% and 10.83% for the second quarter of 2013. Diluted earnings per share were $0.125 for the second quarter of 2014, up 20.2% from $0.104 for the second quarter of 2013.

For the first half of 2014, return on average assets and return on average equity were 1.01% and 12.30%, respectively, compared to 0.87% and 10.60% for the first half of 2013. Diluted earnings per share were $0.241 for the first half of 2014, up 19.9% from $0.201 over the same period a year earlier.

On a year-over-year basis, average loans were up $238.8 million or 8.7% in the second quarter of 2014, over the same period in 2013. Average deposits were up $116.1 million for the second quarter of 2014 over the same period a year earlier. Most of the gain in deposits came from core deposit accounts, customers also continued to move some funds into certificates with slightly longer maturities, which may help TrustCo if rates rise, without having a material impact on the current cost of funds. Average core deposits rose $91.7 million from Q2 2013 to Q2 2014. Core deposits typically represent longer term customer relationships and are generally lower cost than time deposits. Mr. McCormick noted that, "The year-over-year growth of our loans and core deposit base reflect the long term strategic focus of the Company.

While some banks have backed away from branches, a customer friendly branch franchise continues to be the key to our long term plans. We opened our 140th and 141st offices, in Stuart, Florida and Warrensburg, New York, during the second quarter. During 2013 we celebrated the ten year anniversary of our expansion into Florida, while at the same time making significant progress expanding loans and deposits throughout our branch network. We expect that trend to continue as the new branches continue to mature. At June 30, 2014, our average branch had $28.3 million of deposits, up $125 thousand compared to the prior year, despite having opened up three branches during that time frame. We have always designed our branches to be smaller, more cost effective than those built by many of our competitors. We use open floor plans that help maximize the value of our branches. We remain mindful that fully achieving our goals for newer branches will take time and continued work. We believe success in growing customer relationships provides the basic building blocks that help drive profit growth for the coming years."

Asset quality, the allowance for loan losses coverage of nonperforming loans (NPLs) and net charge-offs all improved from June 30, 2013 to June 30, 2014. NPLs declined to $40.9 million at June 30, 2014, compared to $43.4 million at June 30, 2013 and nonperforming assets (NPAs) declined to $49.2 million from $53.8 million over the same period. NPLs were equal to 1.36% of total loans at June 30, 2014, compared to 1.57% a year earlier. The coverage ratio, or allowance for loan losses to NPLs, was 114.7% at June 30, 2014, compared to 109.5% at June 30, 2013. Overall, virtually every asset quality indicator improved during the second quarter of 2014 relative to the second quarter of 2013. The ratio of loan loss allowance to total loans was 1.56% as of June 30, 2014, compared to 1.72% at June 30, 2013. This decline was due primarily to new loan growth and improved economic conditions over the last year. The allowance for loan losses ended the second quarter at $46.9 million compared to $47.0 million at the end of the first quarter.

The net interest margin for the second quarter of 2014 was 3.16%, compared to 3.10% in the second quarter of 2013, as noted. Included in second quarter of 2014 results was a gain of $2.4 million on the previously disclosed sale of owned real estate. This gain is included in the "Other real estate (income) expense, net" line on the Consolidated Statement of Income. Second quarter results also reflect the sale of approximately $1.8 million of NPAs to a third party at a gain of $164 thousand, included in "Other" noninterest income. Property tax expense of $151 thousand associated with the sold assets was recorded during the quarter and is included in "Other" noninterest expense.

At June 30, 2014 the tangible equity ratio was 8.38% compared to 8.11% at March 31, 2014 and 7.83% at June 30, 2013. Tangible book value per share ended the second quarter at $4.06 compared to $3.69 in the year-ago period.

"American Banker Magazine's" July 2014 issue recently ranked TRST shares as having the 25th highest dividend yield for all U.S. banks and thrifts.

TrustCo Bank Corp NY is a $4.6 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 141 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at June 30, 2014.

In addition, the Bank's Financial Services Department offers a full range of investment services, retirement planning and trust and estate administration services. The common shares of TrustCo are traded on the NASDAQ Global Select Market under the symbol TRST.

A conference call to discuss second quarter 2014 results will be held at 9:00 a.m. Eastern Time on July 22, 2014. Those wishing to participate in the call may dial toll-free 1-888-339-0764. International callers must dial 1-412-902-4195. Please ask to be joined into the TrustCo Bank Corp NY / TRST call. A replay of the call will be available for thirty days by dialing 1-877-344-7529 (1-412-317-0088 for international callers), Conference Number 10049252. The call will also be audio webcast at: https://services.choruscall.com/links/trst140722.html, and will be available for one year.

Safe Harbor Statement

All statements in this news release that are not historical are forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding our expectations for our performance during the remainder of 2014 and for the growth of loans and deposits throughout our branch network and our ability to capitalize on economic changes in the areas in which we operate. Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo's actual results and could cause TrustCo's actual financial performance to differ materially from that expressed in any forward-looking statement: our ability to continue to originate a significant volume of one-to-four family mortgage loans in our market areas; our ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income; the future earnings and capital levels of Trustco Bank and the continued ability of Trustco Bank under regulatory rules to distribute capital to TrustCo, which could affect our ability to pay dividends; our ability to make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; results of examinations of Trustco Bank and TrustCo by our respective regulators; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; the perceived overall value of our products and services by users, including in comparison to competitors' products and services and the willingness of current and prospective customers to substitute competitors' products and services for our products and services; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2013, as amended, and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.

TRUSTCO BANK CORP NY
GLENVILLE, NY
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
06/30/14 03/31/14 06/30/13
Summary of operations
Net interest income (TE) $ 35,513 34,701 33,630
Provision for loan losses 1,500 1,500 2,000
Net securities transactions -- 6 1,432
Noninterest income, excluding net securities transactions 4,505 5,753 4,484
Noninterest expense 19,437 20,801 21,869
Net income 11,808 11,011 9,763
Per common share
Net income per share:
- Basic $ 0.125 0.116 0.104
- Diluted 0.125 0.116 0.104
Cash dividends 0.066 0.066 0.066
Tangible Book value at period end 4.06 3.93 3.69
Market price at period end 6.68 7.04 5.44
At period end
Full time equivalent employees 747 709 710
Full service banking offices 141 139 138
Performance ratios
Return on average assets 1.03% 0.99 0.88
Return on average equity 12.50 12.09 10.83
Efficiency (1) 53.00 51.28 53.51
Net interest spread (TE) 3.11 3.08 3.04
Net interest margin (TE) 3.16 3.13 3.10
Dividend payout ratio 52.62 56.36 63.33
Capital ratio at period end
Consolidated tangible equity to tangible assets (2) 8.38 8.11 7.83
Asset quality analysis at period end
Nonperforming loans to total loans 1.36 1.53 1.57
Nonperforming assets to total assets 1.07 1.18 1.21
Allowance for loan losses to total loans 1.56 1.60 1.72
Coverage ratio (3) 1.1x 1.0 1.1
(1) Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income (excluding net securities transactions and the net gain on sale of building).
(2) The tangible equity ratio excludes $553,000 of intangibles from both equity and assets.
(3) Calculated as allowance for loan losses divided by total nonperforming loans.
TE = Taxable equivalent.
FINANCIAL HIGHLIGHTS, Continued
(dollars in thousands, except per share data)
(Unaudited)
Six Months Ended
06/30/14 06/30/13
Summary of operations
Net interest income (TE) $ 70,214 67,337
Provision for loan losses 3,000 4,000
Net securities transactions 6 1,434
Noninterest income 10,258 9,074
Noninterest expense 40,238 43,426
Net income 22,819 18,931
Per common share
Net income per share:
- Basic $ 0.241 0.201
- Diluted 0.241 0.201
Cash dividends 0.131 0.131
Tangible Book value at period end 4.06 3.69
Market price at period end 6.68 5.44
Performance ratios
Return on average assets 1.01% 0.87
Return on average equity 12.30 10.60
Efficiency (1) 52.15 53.92
Net interest spread (TE) 3.09 3.09
Net interest margin (TE) 3.15 3.15
Dividend payout ratio 54.42 65.27
(1) Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income (excluding net securities transactions).
TE = Taxable equivalent.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
Interest and dividend income:
Interest and fees on loans $ 33,614 32,874 32,658 32,166 31,639
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 381 506 586 571 627
State and political subdivisions 44 68 96 127 148
Mortgage-backed securities and collateralized mortgage obligations-residential 3,299 3,078 3,027 2,888 2,701
Corporate bonds 2 59 138 223 233
Small Business Administration-guaranteed participation securities 539 556 562 558 564
Mortgage-backed securities and collateralized mortgage obligations-commercial 38 38 38 39 38
Other securities 4 4 4 5 3
Total interest and dividends on securities available for sale 4,307 4,309 4,451 4,411 4,314
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 577 625 649 686 716
Corporate bonds 154 154 153 154 214
Total interest on held to maturity securities 731 779 802 840 930
Federal Reserve Bank and Federal Home Loan Bank stock 128 133 129 121 121
Interest on federal funds sold and other short-term investments 376 351 324 344 327
Total interest income 39,156 38,446 38,364 37,882 37,331
Interest expense:
Interest on deposits:
Interest-bearing checking 89 84 83 84 82
Savings 592 763 790 798 829
Money market deposit accounts 618 599 611 590 630
Time deposits 2,035 1,951 1,982 1,937 1,883
Interest on short-term borrowings 342 393 382 370 367
Total interest expense 3,676 3,790 3,848 3,779 3,791
Net interest income 35,480 34,656 34,516 34,103 33,540
Provision for loan losses 1,500 1,500 1,500 1,500 2,000
Net interest income after provision for loan losses 33,980 33,156 33,016 32,603 31,540
Noninterest income:
Trustco Financial Services income 1,405 1,510 1,276 1,317 1,287
Fees for services to customers 2,732 2,521 2,917 2,903 2,968
Net gain on securities transactions -- 6 188 -- 1,432
Other 368 1,722 467 194 229
Total noninterest income 4,505 5,759 4,848 4,414 5,916
Noninterest expenses:
Salaries and employee benefits 8,012 7,592 8,664 7,935 7,647
Net occupancy expense 4,110 4,259 4,226 3,911 3,910
Equipment expense 1,823 1,752 1,514 1,567 1,582
Professional services 1,438 1,286 1,409 1,255 1,565
Outsourced services 1,425 1,325 1,075 1,350 1,350
Advertising expense 657 599 835 548 714
FDIC and other insurance 1,000 904 952 1,009 1,004
Other real estate (income) expense, net (1,688) 855 430 946 1,473
Other 2,660 2,229 1,786 2,167 2,624
Total noninterest expenses 19,437 20,801 20,891 20,688 21,869
Income before taxes 19,048 18,114 16,973 16,329 15,587
Income taxes 7,240 7,103 6,344 6,077 5,824
Net income $ 11,808 11,011 10,629 10,252 9,763
Net income per Common Share:
- Basic $ 0.125 0.116 0.113 0.109 0.104
- Diluted 0.125 0.116 0.112 0.109 0.104
Average basic shares (thousands) 94,559 94,452 94,347 94,228 94,204
Average diluted shares (thousands) 94,675 94,581 94,472 94,275 94,211
Note: Taxable equivalent net interest income $ 35,513 34,701 34,577 34,180 33,630
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Six Months Ended
6/30/2014 6/30/2013
Interest and dividend income:
Interest and fees on loans $ 66,488 63,120
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 887 1,443
State and political subdivisions 112 339
Mortgage-backed securities and collateralized mortgage obligations-residential 6,377 5,470
Corporate bonds 61 451
Small Business Administration-guaranteed participation securities 1,095 1,060
Mortgage-backed securities and collateralized mortgage obligations-commercial 76 67
Other securities 8 8
Total interest and dividends on securities available for sale 8,616 8,838
Interest on held to maturity securities:
Mortgage-backed securities-residential 1,202 1,505
Corporate bonds 308 526
Total interest on held to maturity securities 1,510 2,031
Federal Reserve Bank and Federal Home Loan Bank stock 261 240
Interest on federal funds sold and other short-term investments 727 572
Total interest income 77,602 74,801
Interest expense:
Interest on deposits:
Interest-bearing checking 173 162
Savings 1,355 1,745
Money market deposit accounts 1,217 1,315
Time deposits 3,986 3,703
Interest on short-term borrowings 735 731
Total interest expense 7,466 7,656
Net interest income 70,136 67,145
Provision for loan losses 3,000 4,000
Net interest income after provision for loan losses 67,136 63,145
Noninterest income:
Trust department income 2,915 2,708
Fees for services to customers 5,253 5,855
Net gain on securities transactions 6 1,434
Other 2,090 511
Total noninterest income 10,264 10,508
Noninterest expenses:
Salaries and employee benefits 15,604 15,825
Net occupancy expense 8,369 7,963
Equipment expense 3,575 3,300
Professional services 2,724 2,985
Outsourced services 2,750 2,700
Advertising expense 1,256 1,444
FDIC and other insurance 1,904 2,014
Other real estate (income) expense, net (833) 2,222
Other 4,889 4,973
Total noninterest expenses 40,238 43,426
Income before taxes 37,162 30,227
Income taxes 14,343 11,296
Net income $ 22,819 18,931
Net income per Common Share:
- Basic $ 0.241 0.201
- Diluted 0.241 0.201
Average basic shares (thousands) 94,536 94,134
Average diluted shares (thousands) 94,658 94,141
Note: Taxable equivalent net interest income $ 70,214 67,337
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
ASSETS:
Cash and due from banks $ 48,034 46,127 46,453 45,088 40,580
Federal funds sold and other short term investments 573,514 687,003 536,591 510,561 588,252
Total cash and cash equivalents 621,548 733,130 583,044 555,649 628,832
Securities available for sale:
U. S. government sponsored enterprises 103,340 92,708 198,829 193,614 188,133
States and political subdivisions 3,921 4,968 7,758 11,199 12,159
Mortgage-backed securities and collateralized mortgage obligations-residential 589,517 524,197 532,449 534,301 504,793
Corporate bonds 1,402 6,402 10,471 53,094 53,053
Small Business Administration-guaranteed participation securities 102,367 101,821 103,029 104,863 108,665
Mortgage-backed securities and collateralized mortgage obligations-commercial 10,544 10,543 10,558 10,715 10,725
Other securities 679 653 660 660 660
Total securities available for sale 811,770 741,292 863,754 908,446 878,188
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 67,974 72,188 76,270 81,337 88,852
Corporate bonds 9,952 9,948 9,945 9,941 9,937
Total held to maturity securities 77,926 82,136 86,215 91,278 98,789
Federal Reserve Bank and Federal Home Loan Bank stock 10,951 10,500 10,500 10,500 10,500
Loans:
Commercial 222,655 220,443 223,481 212,833 216,977
Residential mortgage loans 2,437,500 2,374,874 2,338,944 2,279,064 2,205,334
Home equity line of credit 339,897 339,971 340,489 337,178 334,571
Installment loans 6,098 5,714 5,895 5,894 5,544
Loans, net of deferred fees and costs 3,006,150 2,941,002 2,908,809 2,834,969 2,762,426
Less:
Allowance for loan losses 46,935 47,035 47,714 47,722 47,589
Net loans 2,959,215 2,893,967 2,861,095 2,787,247 2,714,837
Bank premises and equipment, net 36,658 35,267 34,414 34,559 38,301
Other assets 71,061 82,445 82,430 71,728 73,757
Total assets $ 4,589,129 4,578,737 4,521,452 4,459,407 4,443,204
LIABILITIES:
Deposits:
Demand $ 324,277 327,779 318,456 314,660 314,985
Interest-bearing checking 643,473 628,752 611,127 591,590 591,844
Savings accounts 1,233,347 1,236,331 1,218,038 1,221,791 1,228,281
Money market deposit accounts 651,367 648,244 648,402 650,688 634,804
Certificates of deposit (in denominations of $100,000 or more) 436,785 432,168 419,301 405,575 397,707
Other time accounts 705,938 713,944 711,747 710,064 725,255
Total deposits 3,995,187 3,987,218 3,927,071 3,894,368 3,892,876
Short-term borrowings 181,516 195,411 204,162 185,226 176,325
Accrued expenses and other liabilities 27,409 24,329 28,406 25,425 25,380
Total liabilities 4,204,112 4,206,958 4,159,639 4,105,019 4,094,581
SHAREHOLDERS' EQUITY:
Capital stock 98,927 98,927 98,927 98,912 98,912
Surplus 172,769 172,964 173,144 173,408 173,897
Undivided profits 157,832 152,237 147,432 143,015 138,953
Accumulated other comprehensive income (loss), net of tax (2,611) (9,452) (13,803) (15,923) (16,831)
Treasury stock at cost (41,900) (42,897) (43,887) (45,024) (46,308)
Total shareholders' equity 385,017 371,779 361,813 354,388 348,623
Total liabilities and shareholders' equity $ 4,589,129 4,578,737 4,521,452 4,459,407 4,443,204
Outstanding shares (thousands) 94,665 94,564 94,463 94,334 94,204
NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
06/30/14 03/31/14 12/31/13 09/30/13 06/30/13
New York and other states*
Loans in nonaccrual status:
Commercial $ 5,132 4,853 6,952 5,436 5,891
Real estate mortgage - 1 to 4 family 31,433 34,597 31,045 30,643 30,736
Installment 87 103 93 71 36
Total non-accrual loans 36,652 39,553 38,090 36,150 36,663
Other nonperforming real estate mortgages - 1 to 4 family 159 162 166 170 174
Total nonperforming loans 36,811 39,715 38,256 36,320 36,837
Other real estate owned 3,930 4,707 3,348 3,011 3,918
Total nonperforming assets $ 40,741 44,422 41,604 39,331 40,755
Florida
Loans in nonaccrual status:
Commercial $ 517 517 -- -- 583
Real estate mortgage - 1 to 4 family 3,578 4,668 5,137 5,406 6,022
Installment 1 7 -- -- --
Total non-accrual loans 4,096 5,192 5,137 5,406 6,605
Other nonperforming real estate mortgages - 1 to 4 family -- -- -- -- --
Total nonperforming loans 4,096 5,192 5,137 5,406 6,605
Other real estate owned 4,365 4,300 5,381 6,816 6,427
Total nonperforming assets $ 8,461 9,492 10,518 12,222 13,032
Total
Loans in nonaccrual status:
Commercial $ 5,649 5,370 6,952 5,436 6,474
Real estate mortgage - 1 to 4 family 35,011 39,265 36,182 36,049 36,758
Installment 88 110 93 71 36
Total non-accrual loans 40,748 44,745 43,227 41,556 43,268
Other nonperforming real estate mortgages - 1 to 4 family 159 162 166 170 174
Total nonperforming loans 40,907 44,907 43,393 41,726 43,442
Other real estate owned 8,295 9,007 8,729 9,827 10,345
Total nonperforming assets $ 49,202 53,914 52,122 51,553 53,787
Quarterly Net Chargeoffs
06/30/14 03/31/14 12/31/13 09/30/13 06/30/13
New York and other states*
Commercial $ 13 242 176 585 49
Real estate mortgage - 1 to 4 family 1,496 851 1,194 1,215 1,885
Installment 24 44 (2) 25 13
Total net chargeoffs $ 1,533 1,137 1,368 1,825 1,947
Florida
Commercial $ (2) 612 (1) (502) (1)
Real estate mortgage - 1 to 4 family 59 428 138 41 123
Installment 10 2 3 3 --
Total net chargeoffs $ 67 1,042 140 (458) 122
Total
Commercial $ 11 854 175 83 48
Real estate mortgage - 1 to 4 family 1,555 1,279 1,332 1,256 2,008
Installment 34 46 1 28 13
Total net chargeoffs $ 1,600 2,179 1,508 1,367 2,069
Asset Quality Ratios
06/30/14 03/31/14 12/31/13 09/30/13 06/30/13
Total nonperforming loans(1) $ 40,907 44,907 43,393 41,726 43,442
Total nonperforming assets(1) 49,202 53,914 52,122 51,553 53,787
Total net chargeoffs(2) 1,600 2,179 1,508 1,367 2,069
Allowance for loan losses(1) 46,935 47,035 47,714 47,722 47,589
Nonperforming loans to total loans 1.36% 1.53% 1.49% 1.47% 1.57%
Nonperforming assets to total assets 1.07% 1.18% 1.15% 1.16% 1.21%
Allowance for loan losses to total loans 1.56% 1.60% 1.64% 1.68% 1.72%
Coverage ratio(1) 114.7% 104.7% 110.0% 114.4% 109.5%
Annualized net chargeoffs to average loans(2) 0.22% 0.30% 0.21% 0.20% 0.29%
Allowance for loan losses to annualized net chargeoffs(2) 7.3x 5.4x 7.9x 8.7x 6.0x
* Includes New York, New Jersey, Vermont and Massachusetts.
(1) At period-end
(2) For the period ended
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands) Three months ended Three months ended
(Unaudited) June 30, 2014 June 30, 2013
Average Interest Average Average Interest Average
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises $ 110,783 381 1.38% $ 218,199 627 1.15%
Mortgage backed securities and collateralized mortgage obligations-residential 589,334 3,299 2.24 545,989 2,701 1.98
State and political subdivisions 3,823 70 7.32 13,098 231 7.05
Corporate bonds 1,403 2 0.48 54,724 233 1.70
Small Business Administration-guaranteed participation securities 108,072 539 1.99 114,760 564 1.97
Mortgage backed securities and collateralized mortgage obligations-commercial 10,871 38 1.40 11,136 38 1.36
Other 665 4 2.41 660 3 1.82
Total securities available for sale 824,951 4,333 2.10 958,566 4,397 1.83
Federal funds sold and other short-term Investments 606,809 376 0.25 529,672 327 0.25
Held to maturity securities:
Corporate bonds 9,950 154 6.18 13,947 214 6.14
Mortgage backed securities and collateralized mortgage obligations-residential 70,377 577 3.28 93,644 716 3.06
Total held to maturity securities 80,327 731 3.64 107,591 930 3.46
Federal Reserve Bank and Federal Home Loan Bank stock 10,937 128 4.68 10,434 121 4.64
Commercial loans 221,819 2,842 5.12 214,158 2,812 5.25
Residential mortgage loans 2,401,020 27,548 4.59 2,177,171 25,866 4.75
Home equity lines of credit 339,884 3,064 3.62 333,510 2,806 3.37
Installment loans 5,827 167 11.47 4,930 162 13.16
Loans, net of unearned income 2,968,550 33,621 4.53 2,729,769 31,646 4.64
Total interest earning assets 4,491,574 39,189 3.49 4,336,032 37,421 3.45
Allowance for loan losses (47,389) (48,298)
Cash & non-interest earning assets 135,326 146,387
Total assets $ 4,579,511 $ 4,434,121
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts $ 632,266 89 0.06% $ 581,785 82 0.06%
Money market accounts 655,009 618 0.38 650,927 630 0.39
Savings 1,240,158 592 0.19 1,218,683 829 0.27
Time deposits 1,144,165 2,035 0.71 1,119,710 1,883 0.67
Total interest bearing deposits 3,671,598 3,334 0.36 3,571,105 3,424 0.38
Short-term borrowings 189,802 342 0.72 179,878 367 0.82
Total interest bearing liabilities 3,861,400 3,676 0.38 3,750,983 3,791 0.41
Demand deposits 316,759 301,123
Other liabilities 22,325 20,590
Shareholders' equity 379,027 361,425
Total liabilities and shareholders' equity $ 4,579,511 $ 4,434,121
Net interest income , tax equivalent 35,513 33,630
Net interest spread 3.11% 3.04%
Net interest margin (net interest income to total interest earning assets) 3.16% 3.10%
Tax equivalent adjustment (33) (90)
Net interest income 35,480 33,540
(dollars in thousands) Six months ended Six months ended
(Unaudited) June 30, 2014 June 30, 2013
Average Interest Average Average Interest Average
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises $ 139,907 887 1.27% $ 244,430 1,443 1.18%
Mortgage backed securities and collateralized mortgage obligations-residential 567,700 6,377 2.25 551,667 5,470 1.98
State and political subdivisions 4,971 175 7.04 15,812 516 6.53
Corporate bonds 4,956 61 2.47 51,061 451 1.76
Small Business Administration-guaranteed participation securities 109,079 1,095 2.01 107,263 1,060 1.98
Mortgage backed securities and collateralized mortgage obligations-commercial 10,904 76 1.39 9,764 67 1.37
Other 662 8 2.42 660 8 2.42
Total securities available for sale 838,179 8,679 2.07 980,657 9,015 1.84
Federal funds sold and other short-term Investments 591,167 727 0.25 468,154 572 0.25
Held to maturity securities:
Corporate bonds 9,948 308 6.18 18,086 526 5.81
Mortgage backed securities and collateralized mortgage obligations-residential 72,340 1,202 3.32 98,598 1,505 3.05
Total held to maturity securities 82,288 1,510 3.67 116,684 2,031 3.48
Federal Reserve Bank and Federal Home Loan Bank stock 10,720 261 4.87 10,035 240 4.78
Commercial loans 222,074 5,639 5.08 215,178 5,659 5.26
Residential mortgage loans 2,378,199 54,530 4.59 2,156,733 51,550 4.79
Home equity lines of credit 340,281 6,000 3.56 333,472 5,606 3.39
Installment loans 5,712 334 11.78 4,730 320 13.65
Loans, net of unearned income 2,946,266 66,503 4.52 2,710,113 63,135 4.67
Total interest earning assets 4,468,620 77,680 3.48 4,285,643 74,993 3.51
Allowance for loan losses (47,802) (48,377)
Cash & non-interest earning assets 132,906 149,670
Total assets $ 4,553,724 $ 4,386,936
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts $ 619,076 173 0.06% $ 567,261 162 0.06%
Money market accounts 650,828 1,217 0.38 655,027 1,315 0.40
Savings 1,232,803 1,355 0.22 1,211,173 1,745 0.29
Time deposits 1,142,001 3,986 0.70 1,104,379 3,703 0.68
Total interest bearing deposits 3,644,708 6,731 0.37 3,537,840 6,925 0.39
Short-term borrowings 195,954 735 0.76 174,001 731 0.85
Total interest bearing liabilities 3,840,662 7,466 0.39 3,711,841 7,656 0.42
Demand deposits 316,386 294,449
Other liabilities 22,499 20,339
Shareholders' equity 374,177 360,307
Total liabilities and shareholders' equity $ 4,553,724 $ 4,386,936
Net interest income , tax equivalent 70,214 67,337
Net interest spread 3.09% 3.09%
Net interest margin (net interest income to total interest earning assets) 3.15% 3.15%
Tax equivalent adjustment (78) (192)
Net interest income 70,136 67,145

Non-GAAP Financial Measures Reconciliation

Tangible book value per share and tangible equity as a percentage of tangible assets at period end are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders' equity and total assets, respectively. We calculate tangible book value per share by dividing tangible equity by common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders' equity by common shares outstanding. We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end. We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.

The efficiency ratio is a non-GAAP measure of expense control relative to recurring revenue. We calculate the efficiency ratio by dividing total noninterest expenses as determined under GAAP, but excluding other real estate expense, net, which we refer to below as recurring expense, by net interest income (fully taxable equivalent) and total noninterest income as determined under GAAP, but excluding net gains on securities from this calculation, which we refer to below as recurring revenue. We believe that this provides one reasonable measure of core expenses relative to core revenue.

We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios. Our management internally assesses our performance based, in part, on these measures. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titled measures reported by other companies. A reconciliation of the non-GAAP measures of tangible common equity, tangible book value per share and efficiency ratio to the underlying GAAP numbers is set forth below.

NON-GAAP FINANCIAL MEASURES RECONCILIATION
(dollars in thousands, except per share amounts)
(Unaudited)
06/30/14 03/31/14 06/30/13
Tangible Book Value Per Share
Equity $ 385,017 371,779 348,623
Less: Intangible assets 553 553 553
Tangible equity 384,464 371,226 348,070
Shares outstanding 94,665 94,564 94,204
Tangible book value per share 4.06 3.93 3.69
Book value per share 4.07 3.93 3.70
Tangible Equity to Tangible Assets
Total Assets 4,589,129 4,578,737 4,443,204
Less: Intangible assets 553 553 553
Tangible assets 4,588,576 4,578,184 4,442,651
Tangible Equity to Tangible Assets 8.38% 8.11% 7.83%
Equity to Assets 8.39% 8.12% 7.85%
3 Months Ended 6 Months Ended
Efficiency Ratio 06/30/14 03/31/14 06/30/13 06/30/14 06/30/13
Net interest income (fully taxable equivalent) $ 35,513 34,701 33,630 70,214 67,337
Non-interest income 4,505 5,759 5,916 10,264 10,508
Less: Net gain on sale of building and net gain on sale of nonperforming loans 163 1,556 -- 1,719 --
Less: Net gain on securities -- 6 1,432 6 1,434
Recurring revenue 39,855 38,898 38,114 78,753 76,411
Total Noninterest expense 19,437 20,801 21,869 40,238 43,426
Less: Other real estate (income) expense, net (1,688) 855 1,473 (833) 2,222
Recurring expense 21,125 19,946 20,396 41,071 41,204
Efficiency Ratio 53.00% 51.28% 53.51% 52.15% 53.92%

CONTACT: Kevin T. Timmons Vice President/Treasurer (518) 381-3607Source:TrustCo Bank Corp NY