TrustCo Announces Solid Third Quarter 2015 Earnings

Executive Snapshot:

  • Continued solid financial results:
    • Net income for the third quarter of 2015 compared to the same period in 2014:
      • Net income of $10.6 million in third quarter of 2015 compared to $10.7 million in third quarter of 2014
      • Operating expenses increased $1.3 million in the third quarter of 2015 compared to the third quarter of 2014
      • Return on average assets (ROA) of 0.88%
      • Return on average equity (ROE) of 10.35%
      • Efficiency ratio of 56.04%
  • Asset quality improvement:
    • Asset quality measures continued to improve compared to both the third quarter of 2014 and the second quarter of 2015
    • Nonperforming assets (NPAs) fell by $5.7 million when compared to September 30, 2014.
    • NPAs to total assets improved from 0.95% to 0.80% when compared to September 30, 2014.
    • Quarterly net chargeoffs declined to 0.15% of average loans on an annualized basis, compared to 0.20% for the third quarter of 2014.
  • Continued expansion of customer base:
    • Focus on capitalizing on opportunities presented by expanded branch network
    • Average deposits per branch grew $751 thousand from September 30, 2014 to September 30, 2015 on a same store basis
    • Average core deposits were $103 million higher in the third quarter of 2015 compared to the third quarter of 2014
  • Loan portfolio reaches all-time high:
    • Average loans were up $218 million for the third quarter of 2015 compared to third quarter of 2014
    • At $3.28 billion as of September 30, 2015, loans reached an all-time high

GLENVILLE, N.Y., Oct. 21, 2015 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced that third quarter of 2015 net income was $10.6 million compared to $10.7 million for the third quarter of 2014. Despite added operating costs during the third quarter in response to recent regulatory concerns, net income for the quarter was virtually unchanged.

TrustCo saw continued strong loan growth in the third quarter of 2015. Loan portfolio expansion was funded by utilization of a portion of the cash flow from the Bank’s investment portfolio. The rate of growth in average core deposits exceeded the growth rate of total deposit and cash management accounts, which are significantly more costly than core deposits. The continued shift toward loans helped offset the margin impact from continued comparatively low yields on cash and investments. TrustCo’s strong liquidity position continues to allow the Company to take advantage of opportunities when interest rate conditions change.

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased with the continued improvement in our asset quality during both the third quarter and over the last year. Our long-term focus on traditional lending criteria and conservative balance sheet management has enabled us to maintain strong liquidity and capital and allowed us to continue to grow our business and take advantage of changes in market and competitive conditions.”

Mr. McCormick also noted, “We consider our third quarter 2015 results to be solid as we were able to report roughly flat net income despite increased operating costs in response to regulatory concerns. As we noted in our second quarter earnings press release and related SEC filings, we anticipated higher expenses to fulfill operating and regulatory requirements. We have taken aggressive action to meet these requirements, resulting in added costs in the third quarter. While some of these costs will be recurring, others will diminish over time. In terms of our core business, we continue to make solid progress, adding customer relationships which ultimately position our business well for the future. 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 balance of 2015 and 2016 with optimism. We will continue taking advantage of opportunities as they are presented.”

For the third quarter of 2015, return on average assets and return on average equity were 0.88% and 10.35%, respectively, compared to 0.92% and 10.96% for the third quarter of 2014. Reported diluted earnings per share were $0.111 for the third quarter of 2015, compared to $0.113 for the third quarter of 2014.

For the first nine months of 2015, core diluted net income per share was $0.336, compared to $0.326 for the first nine months of 2014. GAAP diluted net income per share was $0.337 for the first nine months of 2015, compared to $0.354 for the first nine months of 2014. Return on average assets and equity were 0.91% and 10.64% for the first nine months of 2015, compared to 0.98% and 11.84% for the first nine months of 2014, all on a GAAP basis. Non-GAAP measures are defined on pages 13 and 14.

Average loans were up $218.1 million or 7.2% in the third quarter of 2015, over the same period in 2014. Average deposits were up $144.7 million or 3.6% for the third quarter of 2015 over the same period a year earlier. Most of the increase in deposits came from core deposit accounts. Average core deposits increased $103.3 million from the third quarter of 2014 to the third quarter of 2015. 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 continue to make significant progress expanding loans and deposits throughout our entire branch network. We expect that trend to continue as the newer branches continue to mature.

At September 30, 2015, our average branch size was $28.1 million. On a same store basis, our average deposits per branch grew by $751 thousand from September 30, 2014 to September 30, 2015. 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 newer branches will take time and continued work. We believe success in growing customer relationships provides basic building blocks that will help drive profit growth for the coming years.”

Asset quality and the allowance for loan losses coverage of nonperforming loans (NPLs) improved from both September 30, 2014 and June 30, 2015 to September 30, 2015. NPLs declined to $31.9 million at September 30, 2015, compared to $37.1 million at September 30, 2014 and $32.5 million at June 30, 2015. NPLs were equal to 0.97% of total loans at September 30, 2015, compared to 1.20% a year earlier and 1.00% at June 30, 2015. The coverage ratio, or allowance for loan losses to NPLs, was 141.4% at September 30, 2015, compared to 140.3% at June 30, 2015 and 125.3% at September 30, 2014. Nonperforming assets (NPAs) declined to $37.8 million at September 30, 2015 from $38.6 million at June 30, 2015 and $43.6 million at September 30, 2014. Overall, virtually every asset quality indicator improved during the third quarter of 2015 relative to the second quarter of 2015 and the third quarter of 2014. The ratio of loan loss allowance to total loans was 1.38% as of September 30, 2015, compared to 1.41% at June 30, 2015 and to 1.51% at September 30, 2014 and reflects both the improvement in asset quality and economic conditions in our lending areas. The allowance for loan losses was $45.1 million at September 30, 2015 compared to $45.6 million at June 30, 2015 and $46.5 million at September 30, 2014.

The net interest margin for the third quarter of 2015 was 3.08% compared to 3.07% in the second quarter of 2015 and 3.16% in the third quarter of 2014.

At September 30, 2015 the tangible equity ratio was 8.71% compared to 8.48% at June 30, 2015 and 8.49% at September 30, 2014. The equity to asset ratio was 8.72% at September 30, 2015, compared to 8.49% at June 30, 2015 and 8.50% at September 30, 2014. Tangible book value per share at September 30, 2015 was $4.33 compared to $4.10 a year earlier and GAAP book value per share was $4.33 and $4.11, respectively. Non-GAAP measures are defined on pages 13 and 14.

TrustCo Bank Corp NY is a $4.7 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 146 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at September 30, 2015.

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 2015 results will be held at 9:00 a.m. Eastern Time on October 22, 2015. 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 10074396. The call will also be audio webcast at: http://services.choruscall.com/links/trst151022.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 2015 and for the growth of loans and deposits throughout our branch network, our ability to capitalize on economic changes in the areas in which we operate and the extent to which higher expenses to fulfill operating and regulatory requirements recur or diminish over time. 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; our ability to comply with the supervisory agreement entered into with Trustco Bank’s regulator and potential regulatory actions if we fail to comply; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of Trustco Bank and the continued ability of Trustco Bank under regulatory rules and the supervisory agreement to distribute capital to TrustCo, which could affect our ability to pay dividends; results of examinations of Trustco Bank and TrustCo by our respective regulators; 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; 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, 2014, 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
09/30/1506/30/1509/30/14
Summary of operations
Net interest income (TE)$ 36,069 35,690 35,676
Provision for loan losses 800 800 1,100
Net securities transactions - - 376
Noninterest income, excluding net securities transactions 4,365 4,454 4,514
Noninterest expense 23,464 22,131 22,192
Net income 10,616 10,727 10,714
Per common share
Net income per share:
- Basic$ 0.112 0.113 0.113
- Diluted 0.111 0.113 0.113
Cash dividends 0.066 0.066 0.066
Tangible Book value at period end 4.33 4.23 4.10
Market price at period end 5.84 7.03 6.44
At period end
Full time equivalent employees 778 760 733
Full service banking offices 146 146 143
Performance ratios
Return on average assets 0.88% 0.91 0.92
Return on average equity 10.35 10.66 10.96
Efficiency (1) 56.04 54.71 52.73
Net interest spread (TE) 3.02 3.01 3.11
Net interest margin (TE) 3.08 3.07 3.16
Dividend payout ratio 58.82 58.15 58.05
Capital ratio at period end
Consolidated tangible equity to tangible assets (2) 8.71 8.48 8.49
Asset quality analysis at period end
Nonperforming loans to total loans 0.97 1.00 1.20
Nonperforming assets to total assets 0.80 0.81 0.95
Allowance for loan losses to total loans 1.38 1.41 1.51
Coverage ratio (3) 1.4x 1.4 1.3
(1) Calculated as noninterest expense (excluding ORE income/expense) divided by
taxable equivalent net interest income plus noninterest income (excluding
net securities transactions, the net gain on sale of building, and the net sale of nonperforming loans).
(2) The tangible equity ratio excludes $553 of intangibles from both equity and assets.
(3) Calculated as allowance for loan losses divided by total nonperforming loans.
TE = Taxable equivalent.
FINANCIAL HIGHLIGHTS, Continued
(dollars in thousands, except per share data)
(Unaudited)
Nine Months Ended
09/30/1509/30/14
Summary of operations
Net interest income (TE)$ 106,944 105,890
Provision for loan losses 2,400 4,100
Net securities transactions 249 382
Noninterest income 13,193 14,772
Noninterest expense 67,452 62,430
Net income 32,058 33,533
Per common share
Net income per share:
- Basic$ 0.337 0.354
- Diluted 0.337 0.354
Cash dividends 0.197 0.197
Tangible Book value at period end 4.33 4.10
Market price at period end 5.84 6.44
Performance ratios
Return on average assets 0.91% 0.98
Return on average equity 10.64 11.84
Efficiency (1) 54.98 52.35
Net interest spread (TE) 3.01 3.09
Net interest margin (TE) 3.08 3.15
Dividend payout ratio 58.36 55.58
(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
9/30/20156/30/20153/31/201512/31/20149/30/2014
Interest and dividend income:
Interest and fees on loans$ 35,631 35,343 34,983 35,051 34,421
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 584 366 212 233 297
State and political subdivisions 23 23 25 29 38
Mortgage-backed securities and collateralized mortgage obligations-residential 2,230 2,276 2,393 2,733 3,040
Corporate bonds - - 1 2 2
Small Business Administration-guaranteed participation securities 497 503 522 524 535
Mortgage-backed securities and collateralized mortgage obligations-commercial 37 38 37 37 38
Other securities 4 4 4 4 4
Total interest and dividends on securities available for sale 3,375 3,210 3,194 3,562 3,954
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 461 480 478 512 545
Corporate bonds 153 154 154 154 153
Total interest on held to maturity securities 614 634 632 666 698
Federal Reserve Bank and Federal Home Loan Bank stock 113 118 116 123 127
Interest on federal funds sold and other short-term investments 408 423 400 363 374
Total interest income 40,141 39,728 39,325 39,765 39,574
Interest expense:
Interest on deposits:
Interest-bearing checking 117 111 105 98 94
Savings 603 599 658 663 644
Money market deposit accounts 537 547 617 634 648
Time deposits 2,544 2,500 2,434 2,366 2,213
Interest on short-term borrowings 290 300 346 335 327
Total interest expense 4,091 4,057 4,160 4,096 3,926
Net interest income 36,050 35,671 35,165 35,669 35,648
Provision for loan losses 800 800 800 1,000 1,100
Net interest income after provision for loan losses 35,250 34,871 34,365 34,669 34,548
Noninterest income:
Trustco Financial Services income 1,351 1,478 1,653 1,451 1,471
Fees for services to customers 2,770 2,691 2,524 2,753 2,838
Net gain on securities transactions - - 249 335 376
Other 244 285 197 213 205
Total noninterest income 4,365 4,454 4,623 4,752 4,890
Noninterest expenses:
Salaries and employee benefits 7,834 8,164 8,481 9,003 8,272
Net occupancy expense 3,929 3,878 4,108 3,869 4,013
Equipment expense 1,596 1,803 1,942 1,919 1,725
Professional services 2,238 2,066 1,507 1,536 1,547
Outsourced services 1,425 1,425 1,425 1,225 1,375
Advertising expense 668 733 600 602 629
FDIC and other insurance 2,202 1,017 1,065 949 1,054
Other real estate expense, net 806 201 424 841 1,001
Other 2,766 2,844 2,305 2,296 2,576
Total noninterest expenses 23,464 22,131 21,857 22,240 22,192
Income before taxes 16,151 17,194 17,131 17,181 17,246
Income taxes 5,535 6,467 6,416 6,521 6,532
Net income$ 10,616 10,727 10,715 10,660 10,714
Net income per common share:
- Basic$ 0.112 0.113 0.113 0.113 0.113
- Diluted 0.111 0.113 0.113 0.112 0.113
Average basic shares (in thousands) 95,149 95,056 94,947 94,681 94,628
Average diluted shares (in thousands) 95,234 95,190 95,074 94,813 94,752
Note: Taxable equivalent net interest income$ 36,069 35,690 35,185 35,693 35,676
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Nine Months Ended
9/30/20159/30/2014
Interest and dividend income:
Interest and fees on loans$ 105,957 100,909
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 1,162 1,184
State and political subdivisions 71 150
Mortgage-backed securities and collateralized mortgage obligations-residential 6,899 9,417
Corporate bonds 1 63
Small Business Administration-guaranteed participation securities 1,522 1,630
Mortgage-backed securities and collateralized mortgage obligations-commercial 112 114
Other securities 12 12
Total interest and dividends on securities available for sale 9,779 12,570
Interest on held to maturity securities:
Mortgage-backed securities-residential 1,419 1,747
Corporate bonds 461 461
Total interest on held to maturity securities 1,880 2,208
Federal Reserve Bank and Federal Home Loan Bank stock 347 388
Interest on federal funds sold and other short-term investments 1,231 1,101
Total interest income 119,194 117,176
Interest expense:
Interest on deposits:
Interest-bearing checking 333 267
Savings 1,860 1,999
Money market deposit accounts 1,701 1,865
Time deposits 7,478 6,199
Interest on short-term borrowings 936 1,062
Total interest expense 12,308 11,392
Net interest income 106,886 105,784
Provision for loan losses 2,400 4,100
Net interest income after provision for loan losses 104,486 101,684
Noninterest income:
Trust department income 4,482 4,386
Fees for services to customers 7,985 8,091
Net gain on securities transactions 249 382
Other 726 2,295
Total noninterest income 13,442 15,154
Noninterest expenses:
Salaries and employee benefits 24,479 23,876
Net occupancy expense 11,915 12,382
Equipment expense 5,341 5,300
Professional services 5,811 4,271
Outsourced services 4,275 4,125
Advertising expense 2,001 1,885
FDIC and other insurance 4,284 2,958
Other real estate expense, net 1,431 168
Other 7,915 7,465
Total noninterest expenses 67,452 62,430
Income before taxes 50,476 54,408
Income taxes 18,418 20,875
Net income$ 32,058 33,533
Net income per Common Share:
- Basic$ 0.337 0.354
- Diluted 0.337 0.354
Average basic shares (thousands) 95,051 94,562
Average diluted shares (thousands) 95,167 94,685
Note: Taxable equivalent net interest income$ 106,944 105,890
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
9/30/20156/30/20153/31/201512/31/20149/30/2014
ASSETS:
Cash and due from banks$ 42,560 37,574 44,853 43,505 43,724
Federal funds sold and other short term investments 655,512 641,011 705,273 627,943 586,931
Total cash and cash equivalents 698,072 678,585 750,126 671,448 630,655
Securities available for sale:
U. S. government sponsored enterprises 103,492 152,082 108,248 77,800 83,087
States and political subdivisions 1,963 1,969 1,974 2,271 2,769
Mortgage-backed securities and collateralized mortgage obligations-residential 413,878 429,205 445,273 483,560 523,779
Corporate bonds - - 1,500 1,500 1,401
Small Business Administration-guaranteed participation securities 94,038 95,323 98,668 100,496 100,491
Mortgage-backed securities and collateralized mortgage obligations-commercial 10,491 10,399 10,503 10,447 10,417
Other securities 685 685 685 685 679
Total securities available for sale 624,547 689,663 666,851 676,759 722,623
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 50,027 53,576 57,296 60,986 64,223
Corporate bonds 9,971 9,967 9,964 9,960 9,956
Total held to maturity securities 59,998 63,543 67,260 70,946 74,179
Federal Reserve Bank and Federal Home Loan Bank stock 9,480 9,480 9,228 9,228 9,228
Loans:
Commercial 208,794 209,399 212,145 223,382 219,825
Residential mortgage loans 2,707,944 2,669,929 2,620,925 2,575,222 2,510,151
Home equity line of credit 356,337 354,946 352,552 352,134 346,496
Installment loans 8,930 8,674 8,003 7,594 6,557
Loans, net of deferred fees and costs 3,282,005 3,242,948 3,193,625 3,158,332 3,083,029
Less:
Allowance for loan losses 45,149 45,571 45,944 46,327 46,512
Net loans 3,236,856 3,197,377 3,147,681 3,112,005 3,036,517
Bank premises and equipment, net 37,506 38,100 38,812 38,565 37,455
Other assets 59,358 64,589 60,698 65,488 71,609
Total assets$ 4,725,817 4,741,337 4,740,656 4,644,439 4,582,266
LIABILITIES:
Deposits:
Demand$ 354,162 355,783 347,315 331,425 327,527
Interest-bearing checking 719,071 713,001 696,137 682,210 646,862
Savings accounts 1,237,549 1,250,154 1,237,115 1,216,831 1,215,087
Money market deposit accounts 617,103 633,239 640,368 638,542 655,646
Time deposits 1,168,908 1,185,264 1,196,233 1,163,233 1,139,919
Total deposits 4,096,793 4,137,441 4,117,168 4,032,241 3,985,041
Short-term borrowings 184,405 170,750 194,738 189,116 179,957
Accrued expenses and other liabilities 32,327 30,687 28,274 29,638 27,781
Total liabilities 4,313,525 4,338,878 4,340,180 4,250,995 4,192,779
SHAREHOLDERS' EQUITY:
Capital stock 98,964 98,964 98,964 98,945 98,942
Surplus 171,788 171,988 172,237 172,353 172,598
Undivided profits 180,093 175,721 171,232 166,745 162,326
Accumulated other comprehensive loss, net of tax (1,174) (5,927) (2,687) (4,509) (3,508)
Treasury stock at cost (37,379) (38,287) (39,270) (40,090) (40,871)
Total shareholders' equity 412,292 402,459 400,476 393,444 389,487
Total liabilities and shareholders' equity$ 4,725,817 4,741,337 4,740,656 4,644,439 4,582,266
Outstanding shares (in thousands) 95,149 95,056 94,956 94,857 94,785

NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
09/30/1506/30/1503/31/1512/31/1409/30/14
New York and other states*
Loans in nonaccrual status:
Commercial$ 3,699 3,263 2,489 3,835 4,226
Real estate mortgage - 1 to 4 family 26,059 27,366 28,215 27,221 29,736
Installment 69 79 77 77 95
Total non-accrual loans 29,827 30,708 30,781 31,133 34,057
Other nonperforming real estate mortgages - 1 to 4 family 50 74 75 125 155
Total nonperforming loans 29,877 30,782 30,856 31,258 34,212
Other real estate owned 5,893 5,833 6,288 5,533 5,238
Total nonperforming assets$ 35,770 36,615 37,144 36,791 39,450
Florida
Loans in nonaccrual status:
Commercial$ - - - - 517
Real estate mortgage - 1 to 4 family 2,054 1,678 2,608 2,740 2,395
Installment 9 10 20 13 1
Total non-accrual loans 2,063 1,688 2,628 2,753 2,913
Other nonperforming real estate mortgages - 1 to 4 family - - - - -
Total nonperforming loans 2,063 1,688 2,628 2,753 2,913
Other real estate owned - 275 670 908 1,188
Total nonperforming assets$ 2,063 1,963 3,298 3,661 4,101
Total
Loans in nonaccrual status:
Commercial$ 3,699 3,263 2,489 3,835 4,743
Real estate mortgage - 1 to 4 family 28,113 29,044 30,823 29,961 32,131
Installment 78 89 97 90 96
Total non-accrual loans 31,890 32,396 33,409 33,886 36,970
Other nonperforming real estate mortgages - 1 to 4 family 50 74 75 125 155
Total nonperforming loans 31,940 32,470 33,484 34,011 37,125
Other real estate owned 5,893 6,108 6,958 6,441 6,426
Total nonperforming assets$ 37,833 38,578 40,442 40,452 43,551
Quarterly Net Chargeoffs (Recoveries)
09/30/1506/30/1503/31/1512/31/1409/30/14
New York and other states*
Commercial$ 3 50 34 (16) 124
Real estate mortgage - 1 to 4 family 1,159 933 1,004 1,591 1,105
Installment 26 24 37 48 57
Total net chargeoffs$ 1,188 1,007 1,075 1,623 1,286
Florida
Commercial$ (3) (1) (1) (476) (1)
Real estate mortgage - 1 to 4 family 33 167 109 37 242
Installment 4 - - 1 (4)
Total net chargeoffs$ 34 166 108 (438) 237
Total
Commercial$ - 49 33 (492) 123
Real estate mortgage - 1 to 4 family 1,192 1,100 1,113 1,628 1,347
Installment 30 24 37 49 53
Total net chargeoffs$ 1,222 1,173 1,183 1,185 1,523
Asset Quality Ratios
09/30/1506/30/1503/31/1512/31/1409/30/14
Total nonperforming loans(1)$ 31,940 32,470 33,484 34,011 37,125
Total nonperforming assets(1) 37,833 38,578 40,442 40,452 43,551
Total net chargeoffs(2) 1,222 1,173 1,183 1,185 1,523
Allowance for loan losses(1) 45,149 45,571 45,944 46,327 46,512
Nonperforming loans to total loans 0.97% 1.00% 1.05% 1.08% 1.20%
Nonperforming assets to total assets 0.80% 0.81% 0.85% 0.87% 0.95%
Allowance for loan losses to total loans 1.38% 1.41% 1.44% 1.47% 1.51%
Coverage ratio(1) 141.4% 140.3% 137.2% 136.2% 125.3%
Annualized net chargeoffs to average loans(2) 0.15% 0.15% 0.15% 0.15% 0.20%
Allowance for loan losses to annualized net chargeoffs(2) 9.3x 9.7x9.6x9.8x7.6x
* 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) September 30, 2015 September 30, 2014
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$ 157,454 584 1.48%$ 93,098 297 1.27%
Mortgage backed securities and
collateralized mortgage obligations-residential 425,092 2,230 2.10 569,352 3,040 2.14
State and political subdivisions 1,937 34 7.02 3,307 60 7.26
Corporate bonds - - 0.00 1,403 2 0.48
Small Business Administration-guaranteed participation securities 96,109 497 2.07 106,109 535 2.02
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,532 37 1.41 10,803 38 1.40
Other 685 4 2.34 685 4 2.34
Total securities available for sale 691,809 3,386 1.96 784,757 3,976 2.03
Federal funds sold and other
short-term Investments 652,274 408 0.25 598,318 374 0.25
Held to maturity securities:
Corporate bonds 9,969 153 6.17 9,954 153 6.18
Mortgage backed securities and
collateralized mortgage obligations-residential 51,928 461 3.55 66,206 545 3.29
Total held to maturity securities 61,897 614 3.97 76,160 698 3.67
Federal Reserve Bank and Federal Home Loan Bank stock 9,480 113 4.77 9,884 127 5.14
Commercial loans 208,492 2,688 5.15 220,347 2,842 5.16
Residential mortgage loans 2,689,072 29,617 4.41 2,473,857 28,315 4.58
Home equity lines of credit 354,552 3,151 3.53 342,456 3,102 3.59
Installment loans 8,678 183 8.33 6,048 168 11.02
Loans, net of unearned income 3,260,794 35,639 4.37 3,042,708 34,427 4.52
Total interest earning assets 4,676,254 40,160 3.43 4,511,827 39,602 3.51
Allowance for loan losses (45,829) (47,115)
Cash & non-interest earning assets 133,241 134,110
Total assets$ 4,763,666 $ 4,598,822
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$ 727,693 117 0.06%$ 650,132 94 0.06%
Money market accounts 623,381 537 0.34 656,935 648 0.39
Savings 1,251,031 603 0.19 1,229,712 644 0.21
Time deposits 1,189,763 2,544 0.85 1,148,419 2,213 0.76
Total interest bearing deposits 3,791,868 3,801 0.40 3,685,198 3,599 0.39
Short-term borrowings 177,230 290 0.65 180,063 327 0.72
Total interest bearing liabilities 3,969,098 4,091 0.41 3,865,261 3,926 0.40
Demand deposits 360,080 322,083
Other liabilities 27,524 23,783
Shareholders' equity 406,964 387,695
Total liabilities and shareholders' equity$ 4,763,666 $ 4,598,822
Net interest income, tax equivalent 36,069 35,676
Net interest spread 3.02% 3.11%
Net interest margin (net interest income
to total interest earning assets) 3.08% 3.16%
Tax equivalent adjustment (19) (28)
Net interest income 36,050 35,648
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands) Nine months ended Nine months ended
(Unaudited) September 30, 2015 September 30, 2014
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$ 116,824 1,162 1.33%$ 124,133 1,184 1.27%
Mortgage backed securities and
collateralized mortgage obligations-residential 448,223 6,899 2.05 568,257 9,417 2.21
State and political subdivisions 1,989 108 7.32 4,411 235 7.10
Corporate bonds 813 1 0.16 3,758 63 2.23
Small Business Administration-guaranteed participation securities 98,868 1,522 2.05 108,078 1,630 2.01
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,600 112 1.41 10,870 114 1.40
Other 685 12 2.34 670 12 2.39
Total securities available for sale 678,002 9,816 1.93 820,177 12,655 2.06
Federal funds sold and other
short-term Investments 662,879 1,231 0.25 593,577 1,101 0.25
Held to maturity securities:
Corporate bonds 9,965 461 6.17 9,950 461 6.18
Mortgage backed securities and
collateralized mortgage obligations-residential 55,569 1,419 3.41 70,273 1,747 3.31
Total held to maturity securities 65,534 1,880 3.83 80,223 2,208 3.67
Federal Reserve Bank and Federal Home Loan Bank stock 9,392 347 4.93 10,438 388 4.96
Commercial loans 212,617 8,194 5.14 221,492 8,481 5.11
Residential mortgage loans 2,644,216 87,946 4.44 2,410,435 82,845 4.59
Home equity lines of credit 353,630 9,304 3.52 341,014 9,102 3.57
Installment loans 8,236 534 8.66 5,825 502 11.52
Loans, net of unearned income 3,218,699 105,978 4.39 2,978,766 100,930 4.52
Total interest earning assets 4,634,506 119,252 3.43 4,483,181 117,282 3.49
Allowance for loan losses (46,203) (47,570)
Cash & non-interest earning assets 136,906 133,456
Total assets$ 4,725,209 $ 4,569,067
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$ 704,323 333 0.06%$ 629,542 267 0.06%
Money market accounts 632,143 1,701 0.36 652,886 1,865 0.38
Savings 1,243,544 1,860 0.20 1,231,761 1,999 0.22
Time deposits 1,186,846 7,478 0.84 1,144,164 6,199 0.72
Total interest bearing deposits 3,766,856 11,372 0.40 3,658,353 10,330 0.38
Short-term borrowings 184,079 936 0.68 190,599 1,062 0.74
Total interest bearing liabilities 3,950,935 12,308 0.42 3,848,952 11,392 0.40
Demand deposits 344,606 318,306
Other liabilities 26,689 23,074
Shareholders' equity 402,979 378,735
Total liabilities and shareholders' equity$ 4,725,209 $ 4,569,067
Net interest income, tax equivalent 106,944 105,890
Net interest spread 3.01% 3.09%
Net interest margin (net interest income
to total interest earning assets) 3.08% 3.15%
Tax equivalent adjustment (58) (106)
Net interest income 106,886 105,784

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 revenue from net interest income and fee income. We calculate the efficiency ratio by dividing total noninterest expenses as determined under GAAP, but excluding other real estate expense, net, by net interest income (fully taxable equivalent) and total noninterest income as determined under GAAP, but excluding net gains on the sale of a building, nonperforming loans and securities from this calculation. We believe that this provides a reasonable measure of primary banking expenses relative to primary banking revenue.

Core net income (“core earnings”) and core net income (“core earnings”) per share are non-GAAP financial measures derived from GAAP-based amounts. We calculate core earnings by excluding the net after-tax gain on the sale of the proposed Florida operations building, the net after-tax gain on a significant sale of an ORE property and net after-tax gains on the sale of non-performing loans from net income and from net income per share. We believe that this provides a reasonable measure of core net income (earnings).

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, efficiency ratio, net income and net income per share to the underlying GAAP numbers is set forth below.

NON-GAAP FINANCIAL MEASURES RECONCILIATION
(dollars in thousands, except per share amounts)
(Unaudited)
09/30/1506/30/1509/30/14
Tangible Book Value Per Share
Equity$ 412,292 402,459 389,487
Less: Intangible assets 553 553 553
Tangible equity 411,739 401,906 388,934
Shares outstanding 95,149 95,056 94,785
Tangible book value per share 4.33 4.23 4.10
Book value per share 4.33 4.23 4.11
Tangible Equity to Tangible Assets
Total Assets 4,725,817 4,741,337 4,582,266
Less: Intangible assets 553 553 553
Tangible assets 4,725,264 4,740,784 4,581,713
Tangible Equity to Tangible Assets 8.71% 8.48% 8.49%
Equity to Assets 8.72% 8.49% 8.50%
3 Months Ended 9 Months Ended
Efficiency Ratio 09/30/1506/30/1509/30/14 09/30/1509/30/14
Net interest income$ 36,050 35,671 35,648 106,886 105,784
Taxable equivalent adjustment 19 19 28 58 106
Net interest income (fully taxable equivalent) 36,069 35,690 35,676 106,944 105,890
Non-interest income 4,365 4,454 4,890 13,442 15,154
Less: Net gain on sale of building and nonperforming loans - 60 - 60 1,719
Less: Net gain on securities - - 376 249 382
Revenue used for efficiency ratio 40,434 40,084 40,190 120,077 118,943
Total noninterest expense 23,464 22,131 22,192 67,452 62,430
Less: Other real estate expense, net 806 201 1,001 1,431 168
Expense used for efficiency ratio 22,658 21,930 21,191 66,021 62,262
Efficiency Ratio 56.04% 54.71% 52.73% 54.98% 52.35%
3 Months Ended 9 Months Ended
Core Net Income 09/30/1506/30/1509/30/14 09/30/1509/30/14
Net income$ 10,616 10,727 10,714 32,058 33,533
Less: Gain on sale of building, nonperforming loans, and significant ORE gain, net of tax - 37 - 37 2,684
Core net income 10,616 10,690 10,714 32,021 30,849
Average basic shares outstanding (in thousands) 95,149 95,056 94,628 95,051 94,562
Average diluted shares outstanding (in thousands) 95,234 95,190 94,752 95,167 94,685
Net income per common share:
- Basic$ 0.112 0.113 0.113 0.337 0.355
- Diluted 0.111 0.113 0.113 0.337 0.354
Core net income per common share:
- Basic$ 0.112 0.112 0.113 0.337 0.326
- Diluted 0.111 0.112 0.113 0.336 0.326


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

Source:TrustCo Bank Corp NY