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TrustCo Announces Third Quarter Earnings; Year-to-Date Net Income Up 14.9% Over Prior Year

Executive Snapshot:

  • Continued strong financial results:
    • Year-to-Date 2014 compared to the same period in 2013:
      • Net income up 14.9%
      • Diluted EPS up 14.2%
      • Return on average assets (ROA) rose 9 basis points to 0.98%
      • Return on average equity (ROE) rose 90 basis points to 11.84%
      • Improvement in the efficiency ratio from 52.99% in 2013 to 52.35% in 2014
    • Third quarter 2014 compared to third quarter 2013:
      • Net income up 4.5%
      • Diluted EPS up 3.7%
      • Return on average assets (ROA) up an additional basis point to 0.92%
  • Asset quality improvement:
    • Virtually every measure of asset quality improved during the third quarter
    • Nonperforming assets (NPAs) fell $8.0 million or 16% to $43.6 million at September 30, 2014 compared to $51.6 million at September 30, 2013
    • NPAs to total assets improved from 1.16% to 0.95% over the last year
  • Continued expansion of customer base:
    • Focus on capitalizing on opportunities presented by expanded branch network
    • Deposits per branch grew $634 thousand from September 30, 2013 to September 30, 2014 on a same store basis
    • Average core deposits grew $88.7 million for the first nine months of 2014 compared to the same period in 2013
  • Loan portfolio reaches all-time high:
    • Average loans were up $238 million for the first nine months of 2014 compared to the same period in 2013
    • At $3.08 billion at September 30, 2014, loans reached an all-time historic high

TrustCo Announces Third Quarter Earnings;
Year-to-Date Net Income Up 14.9% Over Prior Year

GLENVILLE, N.Y., Oct. 21, 2014 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced that net income rose to $10.7 million for the quarter ended September 30, 2014 from $10.3 million for the quarter ended September 30, 2013. For the first nine months of 2014, net income rose 14.9% to $33.5 million compared to $29.2 million for the first nine months of 2013.

Robert J. McCormick, President and Chief Executive Officer noted, "Our results for the third quarter and for the first nine months of 2014 continued our solid bottom line growth while we continued to position 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. We look forward to the remainder of the year and to 2015 with optimism. We will continue taking advantage of opportunities as they are presented."

TrustCo saw continued strong loan growth in the third quarter of 2014. The gains continue to be primarily funded by expansion of retail deposits as well as proceeds from cash flow from the lower yielding investment securities portfolios. 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 third quarter of 2014 from 3.12% in the third quarter of 2013. Our strong liquidity position continues to allow us to take advantage of opportunities when interest rate conditions change. The increase in margin, along with control of operating expenses 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. We are particularly pleased with the significant improvement in our asset quality during the quarter. 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 0.92% and 10.96%, respectively for the third quarter of 2014, compared to 0.91% and 11.64% for the third quarter of 2013. Diluted earnings per share were $0.113 for the third quarter of 2014, up 3.7% from $0.109 for the third quarter of 2013.

For the first nine months of 2014, return on average assets and return on average equity were 0.98% and 11.84%, respectively, compared to 0.89% and 10.94% for the first nine months of 2013. Diluted earnings per share were $0.354 for the first nine months of 2014, up 14.2% from $0.310 over the same period a year earlier.

On a year-over-year basis, average loans were up $243.0 million or 8.7% in the third quarter of 2014, over the same period in 2013. Average deposits were up $110.5 million for the third 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 increased $83.8 million from the third quarter of 2013 to the third quarter of 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 two new offices during the third quarter, in Lake Nona, Florida and Amsterdam, New York. 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 entire branch network. We expect that trend to continue as the new branches continue to mature. For the first nine months of 2014, our average branch size increased $82 thousand to $28.0 million compared to the same period in the prior year, despite having opened up four branches during 2014. On a same store basis, our average branch size grew by $634 thousand from September 30, 2013 to September 30, 2014. We have always designed our branches to be smaller and 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 the 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 and the allowance for loan losses coverage of nonperforming loans (NPLs) improved from September 30, 2013 to September 30, 2014. NPLs declined to $37.1 million at September 30, 2014, compared to $41.7 million at September 30, 2013 and nonperforming assets (NPAs) declined to $43.6 million from $51.6 million over the same period. NPLs were equal to 1.20% of total loans at September 30, 2014, compared to 1.47% a year earlier. The coverage ratio, or allowance for loan losses to NPLs, was 125.3% at September 30, 2014, compared to 114.4% at September 30, 2013. Overall, virtually every asset quality indicator improved during the third quarter of 2014 relative to the third quarter of 2013. The ratio of loan loss allowance to total loans was 1.51% as of September 30, 2014, compared to 1.68% at September 30, 2013. The allowance for loan losses ended the third quarter at $46.5 million compared to $46.9 million at the end of the second quarter.

The net interest margin for the third quarter of 2014 was 3.16%, compared to 3.12% in the third quarter of 2013, as previously noted.

At September 30, 2014 the tangible equity ratio was 8.49% compared to 8.38% at June 30, 2014 and 7.94% at September 30, 2013. Tangible book value per share ended the third quarter at $4.10 compared to $3.75 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 143 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at September 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 third quarter 2014 results will be held at 9:00 a.m. Eastern Time on October 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 10054134. The call will also be audio webcast at: https://services.choruscall.com/links/trst141022.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 2015 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
09/30/14 06/30/14 09/30/13
Summary of operations
Net interest income (TE) $ 35,676 35,513 34,180
Provision for loan losses 1,100 1,500 1,500
Net securities transactions 376 -- --
Noninterest income, excluding net securities transactions 4,514 4,505 4,414
Noninterest expense 22,192 19,437 20,688
Net income 10,714 11,808 10,252
Per common share
Net income per share:
- Basic $ 0.113 0.125 0.109
- Diluted 0.113 0.125 0.109
Cash dividends 0.066 0.066 0.066
Tangible Book value at period end 4.10 4.06 3.75
Market price at period end 6.44 6.68 5.95
At period end
Full time equivalent employees 733 747 708
Full service banking offices 143 141 139
Performance ratios
Return on average assets 0.92% 1.03% 0.91
Return on average equity 10.96 12.50 11.64
Efficiency (1) 52.73 53.00 51.15
Net interest spread (TE) 3.11 3.11 3.06
Net interest margin (TE) 3.16 3.16 3.12
Dividend payout ratio 58.05 52.62 60.38
Capital ratio at period end
Consolidated tangible equity to tangible assets (2) 8.49 8.38 7.94
Asset quality analysis at period end
Nonperforming loans to total loans 1.20 1.36 1.47
Nonperforming assets to total assets 0.95 1.07 1.16
Allowance for loan losses to total loans 1.51 1.56 1.68
Coverage ratio (3) 1.3x 1.1x 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 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)
Nine Months Ended
09/30/14 09/30/13
Summary of operations
Net interest income (TE) $ 105,890 101,517
Provision for loan losses 4,100 5,500
Net securities transactions 382 1,434
Noninterest income, excluding net securities transactions 14,772 13,488
Noninterest expense 62,430 64,114
Net income 33,533 29,183
Per common share
Net income per share:
- Basic $ 0.354 0.310
- Diluted 0.354 0.310
Cash dividends 0.197 0.197
Tangible Book value at period end 4.10 3.75
Market price at period end 6.44 5.95
Performance ratios
Return on average assets 0.98% 0.89
Return on average equity 11.84 10.94
Efficiency (1) 52.35 52.99
Net interest spread (TE) 3.09 3.08
Net interest margin (TE) 3.15 3.14
Dividend payout ratio 55.58 63.55
(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
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Interest and dividend income:
Interest and fees on loans $ 34,421 33,614 32,874 32,658 32,166
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 297 381 506 586 571
State and political subdivisions 38 44 68 96 127
Mortgage-backed securities and collateralized mortgage obligations-residential 3,040 3,299 3,078 3,027 2,888
Corporate bonds 2 2 59 138 223
Small Business Administration-guaranteed participation securities 535 539 556 562 558
Mortgage-backed securities and collateralized mortgage obligations-commercial 38 38 38 38 39
Other securities 4 4 4 4 5
Total interest and dividends on securities available for sale 3,954 4,307 4,309 4,451 4,411
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 545 577 625 649 686
Corporate bonds 153 154 154 153 154
Total interest on held to maturity securities 698 731 779 802 840
Federal Reserve Bank and Federal Home Loan Bank stock 127 128 133 129 121
Interest on federal funds sold and other short-term investments 374 376 351 324 344
Total interest income 39,574 39,156 38,446 38,364 37,882
Interest expense:
Interest on deposits:
Interest-bearing checking 94 89 84 83 84
Savings 644 592 763 790 798
Money market deposit accounts 648 618 599 611 590
Time deposits 2,213 2,035 1,951 1,982 1,937
Interest on short-term borrowings 327 342 393 382 370
Total interest expense 3,926 3,676 3,790 3,848 3,779
Net interest income 35,648 35,480 34,656 34,516 34,103
Provision for loan losses 1,100 1,500 1,500 1,500 1,500
Net interest income after provision for loan losses 34,548 33,980 33,156 33,016 32,603
Noninterest income:
Trustco Financial Services income 1,471 1,405 1,510 1,276 1,317
Fees for services to customers 2,838 2,732 2,521 2,917 2,903
Net gain on securities transactions 376 -- 6 188 --
Other 205 368 1,722 467 194
Total noninterest income 4,890 4,505 5,759 4,848 4,414
Noninterest expenses:
Salaries and employee benefits 8,272 8,012 7,592 8,664 7,935
Net occupancy expense 4,013 4,110 4,259 4,226 3,911
Equipment expense 1,725 1,823 1,752 1,514 1,567
Professional services 1,547 1,438 1,286 1,409 1,255
Outsourced services 1,375 1,425 1,325 1,075 1,350
Advertising expense 629 657 599 835 548
FDIC and other insurance 1,054 1,000 904 952 1,009
Other real estate (income) expense, net 1,001 (1,688) 855 430 946
Other 2,576 2,660 2,229 1,786 2,167
Total noninterest expenses 22,192 19,437 20,801 20,891 20,688
Income before taxes 17,246 19,048 18,114 16,973 16,329
Income taxes 6,532 7,240 7,103 6,344 6,077
Net income $ 10,714 11,808 11,011 10,629 10,252
Net income per Common Share:
- Basic $ 0.113 0.125 0.116 0.113 0.109
- Diluted 0.113 0.125 0.116 0.112 0.109
Average basic shares (thousands) 94,628 94,559 94,452 94,347 94,228
Average diluted shares (thousands) 94,752 94,675 94,581 94,472 94,275
Note: Taxable equivalent net interest income $ 35,676 35,513 34,701 34,577 34,180
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Nine Months Ended
9/30/2014 9/30/2013
Interest and dividend income:
Interest and fees on loans $ 100,909 95,286
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 1,184 2,014
State and political subdivisions 150 466
Mortgage-backed securities and collateralized mortgage obligations-residential 9,417 8,358
Corporate bonds 63 674
Small Business Administration-guaranteed participation securities 1,630 1,618
Mortgage-backed securities and collateralized mortgage obligations-commercial 114 106
Other securities 12 13
Total interest and dividends on securities available for sale 12,570 13,249
Interest on held to maturity securities:
Mortgage-backed securities-residential 1,747 2,191
Corporate bonds 461 680
Total interest on held to maturity securities 2,208 2,871
Federal Reserve Bank and Federal Home Loan Bank stock 388 361
Interest on federal funds sold and other short-term investments 1,101 916
Total interest income 117,176 112,683
Interest expense:
Interest on deposits:
Interest-bearing checking 267 246
Savings 1,999 2,543
Money market deposit accounts 1,865 1,905
Time deposits 6,199 5,640
Interest on short-term borrowings 1,062 1,101
Total interest expense 11,392 11,435
Net interest income 105,784 101,248
Provision for loan losses 4,100 5,500
Net interest income after provision for loan losses 101,684 95,748
Noninterest income:
Trust department income 4,386 4,025
Fees for services to customers 8,091 8,758
Net gain on securities transactions 382 1,434
Other 2,295 705
Total noninterest income 15,154 14,922
Noninterest expenses:
Salaries and employee benefits 23,876 23,760
Net occupancy expense 12,382 11,874
Equipment expense 5,300 4,867
Professional services 4,271 4,240
Outsourced services 4,125 4,050
Advertising expense 1,885 1,992
FDIC and other insurance 2,958 3,023
Other real estate expense, net 168 3,168
Other 7,465 7,140
Total noninterest expenses 62,430 64,114
Income before taxes 54,408 46,556
Income taxes 20,875 17,373
Net income $ 33,533 29,183
Net income per Common Share:
- Basic $ 0.354 0.310
- Diluted 0.354 0.310
Average basic shares (thousands) 94,562 94,096
Average diluted shares (thousands) 94,685 94,115
Note: Taxable equivalent net interest income $ 105,890 101,517
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
ASSETS:
Cash and due from banks $ 43,724 48,034 46,127 46,453 45,088
Federal funds sold and other short term investments 586,931 573,514 687,003 536,591 510,561
Total cash and cash equivalents 630,655 621,548 733,130 583,044 555,649
Securities available for sale:
U. S. government sponsored enterprises 83,087 103,340 92,708 198,829 193,614
States and political subdivisions 2,769 3,921 4,968 7,758 11,199
Mortgage-backed securities and collateralized mortgage obligations-residential 523,779 589,517 524,197 532,449 534,301
Corporate bonds 1,401 1,402 6,402 10,471 53,094
Small Business Administration-guaranteed participation securities 100,491 102,367 101,821 103,029 104,863
Mortgage-backed securities and collateralized mortgage obligations-commercial 10,417 10,544 10,543 10,558 10,715
Other securities 679 679 653 660 660
Total securities available for sale 722,623 811,770 741,292 863,754 908,446
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 64,223 67,974 72,188 76,270 81,337
Corporate bonds 9,956 9,952 9,948 9,945 9,941
Total held to maturity securities 74,179 77,926 82,136 86,215 91,278
Federal Reserve Bank and Federal Home Loan Bank stock 9,228 10,951 10,500 10,500 10,500
Loans:
Commercial 219,825 222,655 220,443 223,481 212,833
Residential mortgage loans 2,510,151 2,437,500 2,374,874 2,338,944 2,279,064
Home equity line of credit 346,496 339,897 339,971 340,489 337,178
Installment loans 6,557 6,098 5,714 5,895 5,894
Loans, net of deferred fees and costs 3,083,029 3,006,150 2,941,002 2,908,809 2,834,969
Less:
Allowance for loan losses 46,512 46,935 47,035 47,714 47,722
Net loans 3,036,517 2,959,215 2,893,967 2,861,095 2,787,247
Bank premises and equipment, net 37,455 36,658 35,267 34,414 34,559
Other assets 71,609 71,061 82,445 82,430 71,728
Total assets $ 4,582,266 4,589,129 4,578,737 4,521,452 4,459,407
LIABILITIES:
Deposits:
Demand $ 327,527 324,277 327,779 318,456 314,660
Interest-bearing checking 646,862 643,473 628,752 611,127 591,590
Savings accounts 1,215,087 1,233,347 1,236,331 1,218,038 1,221,791
Money market deposit accounts 655,646 651,367 648,244 648,402 650,688
Certificates of deposit (in denominations of $100,000 or more) 449,832 436,785 432,168 419,301 405,575
Other time accounts 690,087 705,938 713,944 711,747 710,064
Total deposits 3,985,041 3,995,187 3,987,218 3,927,071 3,894,368
Short-term borrowings 179,957 181,516 195,411 204,162 185,226
Accrued expenses and other liabilities 27,781 27,409 24,329 28,406 25,425
Total liabilities 4,192,779 4,204,112 4,206,958 4,159,639 4,105,019
SHAREHOLDERS' EQUITY:
Capital stock 98,942 98,927 98,927 98,927 98,912
Surplus 172,598 172,769 172,964 173,144 173,408
Undivided profits 162,326 157,832 152,237 147,432 143,015
Accumulated other comprehensive income (loss), net of tax (3,508) (2,611) (9,452) (13,803) (15,923)
Treasury stock at cost (40,871) (41,900) (42,897) (43,887) (45,024)
Total shareholders' equity 389,487 385,017 371,779 361,813 354,388
Total liabilities and shareholders' equity $ 4,582,266 4,589,129 4,578,737 4,521,452 4,459,407
Outstanding shares (thousands) 94,785 94,665 94,564 94,463 94,334
NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
09/30/14 06/30/14 03/31/14 12/31/13 09/30/13
New York and other states*
Loans in nonaccrual status:
Commercial $ 4,226 5,132 4,853 6,952 5,436
Real estate mortgage - 1 to 4 family 29,736 31,433 34,597 31,045 30,643
Installment 95 87 103 93 71
Total non-accrual loans 34,057 36,652 39,553 38,090 36,150
Other nonperforming real estate mortgages - 1 to 4 family 155 159 162 166 170
Total nonperforming loans 34,212 36,811 39,715 38,256 36,320
Other real estate owned 5,238 3,930 4,707 3,348 3,011
Total nonperforming assets $ 39,450 40,741 44,422 41,604 39,331
Florida
Loans in nonaccrual status:
Commercial $ 517 517 517 -- --
Real estate mortgage - 1 to 4 family 2,395 3,578 4,668 5,137 5,406
Installment 1 1 7 -- --
Total non-accrual loans 2,913 4,096 5,192 5,137 5,406
Other nonperforming real estate mortgages - 1 to 4 family -- -- -- -- --
Total nonperforming loans 2,913 4,096 5,192 5,137 5,406
Other real estate owned 1,188 4,365 4,300 5,381 6,816
Total nonperforming assets $ 4,101 8,461 9,492 10,518 12,222
Total
Loans in nonaccrual status:
Commercial $ 4,743 5,649 5,370 6,952 5,436
Real estate mortgage - 1 to 4 family 32,131 35,011 39,265 36,182 36,049
Installment 96 88 110 93 71
Total non-accrual loans 36,970 40,748 44,745 43,227 41,556
Other nonperforming real estate mortgages - 1 to 4 family 155 159 162 166 170
Total nonperforming loans 37,125 40,907 44,907 43,393 41,726
Other real estate owned 6,426 8,295 9,007 8,729 9,827
Total nonperforming assets $ 43,551 49,202 53,914 52,122 51,553
Quarterly Net Chargeoffs (Recoveries)
09/30/14 06/30/14 03/31/14 12/31/13 09/30/13
New York and other states*
Commercial $ 124 13 242 176 585
Real estate mortgage - 1 to 4 family 1,105 1,496 851 1,194 1,215
Installment 57 24 44 (2) 25
Total net chargeoffs $ 1,286 1,533 1,137 1,368 1,825
Florida
Commercial $ (1) (2) 612 (1) (502)
Real estate mortgage - 1 to 4 family 242 59 428 138 41
Installment (4) 10 2 3 3
Total net chargeoffs $ 237 67 1,042 140 (458)
Total
Commercial $ 123 11 854 175 83
Real estate mortgage - 1 to 4 family 1,347 1,555 1,279 1,332 1,256
Installment 53 34 46 1 28
Total net chargeoffs $ 1,523 1,600 2,179 1,508 1,367
Asset Quality Ratios
09/30/14 06/30/14 03/31/14 12/31/13 09/30/13
Total nonperforming loans(1) $ 37,125 40,907 44,907 43,393 41,726
Total nonperforming assets(1) 43,551 49,202 53,914 52,122 51,553
Total net chargeoffs(2) 1,523 1,600 2,179 1,508 1,367
Allowance for loan losses(1) 46,512 46,935 47,035 47,714 47,722
Nonperforming loans to total loans 1.20% 1.36% 1.53% 1.49% 1.47%
Nonperforming assets to total assets 0.95% 1.07% 1.18% 1.15% 1.16%
Allowance for loan losses to total loans 1.51% 1.56% 1.60% 1.64% 1.68%
Coverage ratio(1) 125.3% 114.7% 104.7% 110.0% 114.4%
Annualized net chargeoffs to average loans(2) 0.20% 0.22% 0.30% 0.21% 0.20%
Allowance for loan losses to annualized net chargeoffs(2) 7.6x 7.3x 5.4x 7.9x 8.7x
* 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)
(Unaudited)
Three months ended
September 30, 2014
Three months ended
September 30, 2013
Average
Balance
Interest
Average
Rate
Average
Balance
Interest
Average
Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises $ 93,098 297 1.27% $ 197,336 571 1.16%
Mortgage backed securities and collateralized mortgage obligations-residential 569,352 3,040 2.14 534,773 2,888 2.16
State and political subdivisions 3,307 60 7.26 11,272 197 7.01
Corporate bonds 1,403 2 0.48 53,238 223 1.68
Small Business Administration-guaranteed participation securities 106,109 535 2.02 113,298 558 1.97
Mortgage backed securities and collateralized mortgage obligations-commercial 10,803 38 1.40 11,070 39 1.41
Other 685 4 2.34 660 5 3.03
Total securities available for sale 784,757 3,976 2.03 921,647 4,481 1.94
Federal funds sold and other short-term Investments 598,318 374 0.25 551,409 344 0.25
Held to maturity securities:
Corporate bonds 9,954 153 6.18 9,939 154 6.19
Mortgage backed securities and collateralized mortgage obligations-residential 66,206 545 3.29 85,388 686 3.21
Total held to maturity securities 76,160 698 3.67 95,327 840 3.52
Federal Reserve Bank and Federal Home Loan Bank stock 9,884 127 5.14 10,500 121 4.61
Commercial loans 220,347 2,842 5.16 213,541 2,785 5.22
Residential mortgage loans 2,473,857 28,315 4.58 2,245,284 26,325 4.69
Home equity lines of credit 342,456 3,102 3.59 335,391 2,892 3.42
Installment loans 6,048 168 11.02 5,494 171 12.33
Loans, net of unearned income 3,042,708 34,427 4.52 2,799,710 32,173 4.59
Total interest earning assets 4,511,827 39,602 3.51 4,378,593 37,959 3.46
Allowance for loan losses (47,115) (48,649)
Cash & non-interest earning assets 134,110 122,130
Total assets $ 4,598,822 $ 4,452,074
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts $ 650,132 94 0.06% $ 592,264 84 0.06%
Money market accounts 656,935 648 0.39 641,597 590 0.36
Savings 1,229,712 644 0.21 1,233,284 798 0.26
Time deposits 1,148,419 2,213 0.76 1,121,737 1,937 0.69
Total interest bearing deposits 3,685,198 3,599 0.39 3,588,882 3,409 0.38
Short-term borrowings 180,063 327 0.72 183,414 370 0.80
Total interest bearing liabilities 3,865,261 3,926 0.40 3,772,296 3,779 0.40
Demand deposits 322,083 307,910
Other liabilities 23,783 22,435
Shareholders' equity 387,695 349,433
Total liabilities and shareholders' equity $ 4,598,822 $ 4,452,074
Net interest income, tax equivalent 35,676 34,180
Net interest spread 3.11% 3.06%
Net interest margin (net interest income to total interest earning assets) 3.16% 3.12%
Tax equivalent adjustment (28) (77)
Net interest income 35,648 34,103
(dollars in thousands)
(Unaudited)
Nine months ended
September 30, 2014
Nine months ended
September 30, 2013
Average
Balance
Interest
Average
Rate
Average
Balance
Interest
Average
Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises $ 124,133 1,184 1.27% $ 228,560 2,014 1.17%
Mortgage backed securities and collateralized mortgage obligations-residential 568,257 9,417 2.21 545,974 8,358 2.04
State and political subdivisions 4,411 235 7.10 14,282 713 6.66
Corporate bonds 3,758 63 2.23 51,795 674 1.74
Small Business Administration-guaranteed participation securities 108,078 1,630 2.01 109,297 1,618 1.97
Mortgage backed securities and collateralized mortgage obligations-commercial 10,870 114 1.40 10,204 106 1.39
Other 670 12 2.39 660 13 2.63
Total securities available for sale 820,177 12,655 2.06 960,772 13,496 1.87
Federal funds sold and other short-term Investments 593,577 1,101 0.25 496,211 916 0.25
Held to maturity securities:
Corporate bonds 9,950 461 6.18 15,340 680 5.91
Mortgage backed securities and collateralized mortgage obligations-residential 70,273 1,747 3.31 94,146 2,191 3.10
Total held to maturity securities 80,223 2,208 3.67 109,486 2,871 3.50
Federal Reserve Bank and Federal Home Loan Bank stock 10,438 388 4.96 10,192 361 4.72
Commercial loans 221,492 8,481 5.11 214,626 8,444 5.25
Residential mortgage loans 2,410,435 82,845 4.59 2,186,574 77,875 4.75
Home equity lines of credit 341,014 9,102 3.57 334,119 8,498 3.40
Installment loans 5,825 502 11.52 4,988 491 13.16
Loans, net of unearned income 2,978,766 100,930 4.52 2,740,307 95,308 4.64
Total interest earning assets 4,483,181 117,282 3.49 4,316,968 112,952 3.49
Allowance for loan losses (47,570) (48,469)
Cash & non-interest earning assets 133,456 140,432
Total assets $ 4,569,067 $ 4,408,931
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts $ 629,542 267 0.06% $ 575,687 246 0.06%
Money market accounts 652,886 1,865 0.38 650,501 1,905 0.39
Savings 1,231,761 1,999 0.22 1,218,625 2,543 0.28
Time deposits 1,144,164 6,199 0.72 1,110,229 5,640 0.68
Total interest bearing deposits 3,658,353 10,330 0.38 3,555,042 10,334 0.39
Short-term borrowings 190,599 1,062 0.74 177,173 1,101 0.83
Total interest bearing liabilities 3,848,952 11,392 0.40 3,732,215 11,435 0.41
Demand deposits 318,306 298,986
Other liabilities 23,074 21,087
Shareholders' equity 378,735 356,643
Total liabilities and shareholders' equity $ 4,569,067 $ 4,408,931
Net interest income, tax equivalent 105,890 101,517
Net interest spread 3.09% 3.08%
Net interest margin (net interest income to total interest earning assets) 3.15% 3.14%
Tax equivalent adjustment (106) (269)
Net interest income 105,784 101,248

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)
09/30/14 06/30/14 09/30/13
Tangible Book Value Per Share
Equity $ 389,487 385,017 354,388
Less: Intangible assets 553 553 553
Tangible equity 388,934 384,464 353,835
Shares outstanding 94,785 94,665 94,334
Tangible book value per share 4.10 4.06 3.75
Book value per share 4.11 4.07 3.76
Tangible Equity to Tangible Assets
Total Assets 4,582,266 4,589,129 4,459,407
Less: Intangible assets 553 553 553
Tangible assets 4,581,713 4,588,576 4,458,854
Tangible Equity to Tangible Assets 8.49% 8.38% 7.94%
Equity to Assets 8.50% 8.39% 7.95%
3 Months Ended 9 Months Ended
Efficiency Ratio 09/30/14 06/30/14 09/30/13 09/30/14 09/30/13
Net interest income (fully taxable equivalent) $ 35,676 35,513 34,180 105,890 101,517
Non-interest income 4,890 4,505 4,413 15,154 14,921
Less: Net gain on sale of building and net gain on sale of nonperforming loans -- 163 -- 1,719 --
Less: Net gain on securities 376 -- -- 382 1,434
Recurring revenue 40,190 39,855 38,593 118,943 115,004
Total Noninterest expense 22,192 19,437 20,688 62,430 64,114
Less: Other real estate (income) expense, net 1,001 (1,688) 946 168 3,168
Recurring expense 21,191 21,125 19,742 62,262 60,946
Efficiency Ratio 52.73% 53.00% 51.15% 52.35% 52.99%

CONTACT: Kevin T. Timmons Vice President/Treasurer (518) 381-3607

Source:TrustCo Bank Corp NY