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TrustCo Announces Solid Fourth Quarter 2015 Earnings; Full Year Core Earnings Rise

Executive Snapshot:

  • Continued solid financial results:
    • Core net income for 2015 rose to $42.2 million from $41.5 million in 2014
    • Key metrics for fourth quarter of 2015 results:
      • Net income of $10.2 million in fourth quarter of 2015 compared to $10.7 million in fourth quarter of 2014
      • Operating expenses increased $868 thousand in the fourth quarter of 2015 compared to the fourth quarter of 2014
      • Return on average assets (ROA) of 0.86%
      • Return on average equity (ROE) of 9.75%
      • Efficiency ratio of 55.37%
  • Asset quality improvement:
    • Most asset quality measures continued to improve compared to both the fourth quarter of 2014 and the third quarter of 2015
    • Nonperforming assets (NPAs) fell by $5.7 million compared to December 31, 2014
    • NPAs to total assets improved from 0.87% to 0.73% compared to December 31, 2014
    • Quarterly net chargeoffs increased to 0.21% of average loans on an annualized basis, compared to 0.15% for the fourth quarter of 2014
  • Continued expansion of customer base:
    • Focus on capitalizing on opportunities presented by expanded branch network
    • Average deposits per branch grew $452 thousand from December 31, 2014 to December 31, 2015 on a same store basis
    • Average core deposits were $109 million higher in the fourth quarter of 2015 compared to the fourth quarter of 2014
  • Loan portfolio reaches all-time high:
    • Average loans were up $163 million for the fourth quarter of 2015 compared to fourth quarter of 2014
    • At $3.29 billion as of December 31, 2015, loans reached an all-time high


Note: See non-GAAP financial measures reconciliation for information on core income

GLENVILLE, N.Y., Jan. 21, 2016 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced that fourth quarter of 2015 GAAP net income was $10.2 million compared to $10.7 million for the fourth quarter of 2014. Despite added operating costs during the second half of 2015 in response to recent regulatory concerns, core net income for the full year 2015 increased to $42.2 million from $41.5 million in 2014.

Robert J. McCormick, President and Chief Executive Officer noted, “We continue to be pleased with the ongoing improvement in our asset quality during both the fourth 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 fourth quarter 2015 results to be solid and were encouraged by the increase in pre-tax earnings from the third quarter to the fourth quarter. As we discussed in recent quarters, increased operating costs in response to regulatory concerns have hampered earnings. Higher expenses were anticipated in order to fulfill operating and regulatory requirements. We took aggressive action to meet these requirements during the second half of 2015, resulting in added costs in both the third and the fourth quarters. 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 2016 with optimism. We will continue taking advantage of opportunities as they are presented.”

TrustCo saw continued strong loan growth in the fourth quarter of 2015. Loan portfolio expansion was funded by a combination of deposit growth and cash flow from the Bank’s investment portfolio. The continued shift toward loans helped offset the margin impact from continued comparatively low yields on cash and investments. The growth in average deposits was led by lower cost core deposits. TrustCo’s strong liquidity position continues to allow the Company to take advantage of opportunities when interest rate conditions change.

For the fourth quarter of 2015, return on average assets and return on average equity were 0.86% and 9.75%, respectively, compared to 0.92% and 10.70% for the fourth quarter of 2014. GAAP diluted earnings per share were $0.107 for the fourth quarter of 2015, compared to $0.112 for the fourth quarter of 2014.

For the full year 2015, core diluted net income per share was up slightly to $0.443, compared to $0.438 for 2014. GAAP diluted net income per share was $0.444 for 2015, compared to $0.466 for 2014. Return on average assets and equity were 0.89% and 10.41% for 2015, compared to 0.97% and 11.54% for 2014, all on a GAAP basis. Non-GAAP measures are discussed on pages 13 and 14.

Average loans were up $162.8 million or 5.2% in the fourth quarter of 2015, over the same period in 2014. Average deposits were up $94.0 million or 2.4% for the fourth quarter of 2015 over the same period a year earlier. Most of the increase in deposits came from core deposit accounts, which consist of checking, savings and money market deposits. Average core deposits increased $108.7 million from the fourth quarter of 2014 to the fourth 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 December 31, 2015, our average branch size was $28.1 million. On a same store basis, our average deposits per branch grew by $452 thousand from December 31, 2014 to December 31, 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 December 31, 2014 and September 30, 2015 to December 31, 2015. NPLs declined to $28.3 million at December 31, 2015, compared to $34.0 million at December 31, 2014 and $31.9 million at September 30, 2015. NPLs were equal to 0.86% of total loans at December 31, 2015, compared to 1.08% a year earlier and 0.97% at September 30, 2015. The coverage ratio, or allowance for loan losses to NPLs, was 158.4% at December 31, 2015, compared to 141.4% at September 30, 2015 and 136.2% at December 31, 2014. Nonperforming assets (NPAs) declined to $34.7 million at December 31, 2015 from $37.8 million at September 30, 2015 and $40.5 million at December 31, 2014. Overall, virtually every asset quality indicator improved during the fourth quarter of 2015 relative to the third quarter of 2015 and the fourth quarter of 2014. The ratio of loan loss allowance to total loans was 1.36% as of December 31, 2015, compared to 1.38% at September 30, 2015 and to 1.47% at December 31, 2014 and reflects both the improvement in asset quality and economic conditions in our lending areas. The allowance for loan losses was $44.8 million at December 31, 2015 compared to $45.1 million at September 30, 2015 and $46.3 million at December 31, 2014.

The net interest margin for the fourth quarter of 2015 was 3.14% compared to 3.08% in the third quarter of 2015 and 3.17% in the fourth quarter of 2014.

At December 31, 2015 the tangible equity ratio was 8.72% compared to 8.71% at September 30, 2015 and 8.46% at December 31, 2014. The equity to asset ratio was 8.73% at December 31, 2015, compared to 8.72% at September 30, 2015 and 8.47% at December 31, 2014. Tangible book value per share at December 31, 2015 was $4.33 compared to $4.14 a year earlier and GAAP book value per share was $4.34 and $4.15, respectively. Non-GAAP measures are discussed 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 December 31, 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 fourth quarter 2015 results will be held at 9:00 a.m. Eastern Time on January 22, 2016. 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 10079078. The call will also be audio webcast at: http://services.choruscall.com/links/trst160122.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 2016 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 most recent annual report on Form 10-K, 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
12/31/1509/30/1512/31/14
Summary of operations
Net interest income (TE)$ 36,278 36,069 35,693
Provision for loan losses 1,300 800 1,000
Net securities transactions 2 - 335
Noninterest income, excluding net securities transactions 4,428 4,365 4,417
Noninterest expense 23,108 23,464 22,240
Net income 10,180 10,616 10,660
Per common share
Net income per share:
- Basic$ 0.107 0.112 0.113
- Diluted 0.107 0.111 0.112
Cash dividends 0.066 0.066 0.066
Tangible Book value at period end 4.33 4.33 4.14
Market price at period end 6.14 5.84 7.26
At period end
Full time equivalent employees 787 778 737
Full service banking offices 146 146 144
Performance ratios
Return on average assets 0.86% 0.88 0.92
Return on average equity 9.75 10.35 10.70
Efficiency (1) 55.37 56.04 53.35
Net interest spread (TE) 3.08 3.02 3.11
Net interest margin (TE) 3.14 3.08 3.17
Dividend payout ratio 61.54 58.82 58.55
Capital ratio at period end
Consolidated tangible equity to tangible assets (2) 8.72 8.71 8.46
Asset quality analysis at period end
Nonperforming loans to total loans 0.86 0.97 1.08
Nonperforming assets to total assets 0.73 0.80 0.87
Allowance for loan losses to total loans 1.36 1.38 1.47
Coverage ratio (3) 1.6x 1.4 1.4
(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 $553 of intangibles from both equity and assets.
(3) Calculated as allowance for loan losses divided by total nonperforming loans.
TE = Taxable equivalent.
FINANCIAL HIGHLIGHTS, Continued
(dollars in thousands, except per share data)
(Unaudited)
Years Ended
12/31/1512/31/14
Summary of operations
Net interest income (TE)$ 143,222 141,583
Provision for loan losses 3,700 5,100
Net securities transactions 251 717
Noninterest income 17,621 19,189
Noninterest expense 90,560 84,670
Net income 42,238 44,193
Per common share
Net income per share:
- Basic$ 0.444 0.467
- Diluted 0.444 0.466
Cash dividends 0.263 0.263
Tangible Book value at period end 4.33 4.14
Market price at period end 6.14 7.26
Performance ratios
Return on average assets 0.89% 0.97
Return on average equity 10.41 11.54
Efficiency (1) 55.08 52.60
Net interest spread (TE) 3.03 3.10
Net interest margin (TE) 3.09 3.16
Dividend payout ratio 59.13 56.30
(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
12/31/20159/30/20156/30/20153/31/201512/31/2014
Interest and dividend income:
Interest and fees on loans$ 35,930 35,631 35,343 34,983 35,051
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 256 584 366 212 233
State and political subdivisions 16 23 23 25 29
Mortgage-backed securities and collateralized mortgage obligations-residential 2,233 2,230 2,276 2,393 2,733
Corporate bonds - - - 1 2
Small Business Administration-guaranteed participation securities 482 497 503 522 524
Mortgage-backed securities and collateralized mortgage obligations-commercial 37 37 38 37 37
Other securities 4 4 4 4 4
Total interest and dividends on securities available for sale 3,028 3,375 3,210 3,194 3,562
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 425 461 480 478 512
Corporate bonds 154 153 154 154 154
Total interest on held to maturity securities 579 614 634 632 666
Federal Reserve Bank and Federal Home Loan Bank stock 120 113 118 116 123
Interest on federal funds sold and other short-term investments 494 408 423 400 363
Total interest income 40,151 40,141 39,728 39,325 39,765
Interest expense:
Interest on deposits:
Interest-bearing checking 115 117 111 105 98
Savings 608 603 599 658 663
Money market deposit accounts 513 537 547 617 634
Time deposits 2,375 2,544 2,500 2,434 2,366
Interest on short-term borrowings 278 290 300 346 335
Total interest expense 3,889 4,091 4,057 4,160 4,096
Net interest income 36,262 36,050 35,671 35,165 35,669
Provision for loan losses 1,300 800 800 800 1,000
Net interest income after provision for loan losses 34,962 35,250 34,871 34,365 34,669
Noninterest income:
Trustco Financial Services income 1,489 1,351 1,478 1,653 1,451
Fees for services to customers 2,704 2,770 2,691 2,524 2,753
Net gain on securities transactions 2 - - 249 335
Other 235 244 285 197 213
Total noninterest income 4,430 4,365 4,454 4,623 4,752
Noninterest expenses:
Salaries and employee benefits 8,042 7,834 8,164 8,481 9,003
Net occupancy expense 3,884 3,929 3,878 4,108 3,869
Equipment expense 1,530 1,596 1,803 1,942 1,919
Professional services 2,067 2,238 2,066 1,507 1,536
Outsourced services 1,585 1,425 1,425 1,425 1,225
Advertising expense 592 668 733 600 602
FDIC and other insurance 2,055 2,202 1,017 1,065 949
Other real estate expense, net 570 806 201 424 841
Other 2,783 2,766 2,844 2,305 2,296
Total noninterest expenses 23,108 23,464 22,131 21,857 22,240
Income before taxes 16,284 16,151 17,194 17,131 17,181
Income taxes 6,104 5,535 6,467 6,416 6,521
Net income$ 10,180 10,616 10,727 10,715 10,660
Net income per common share:
- Basic$ 0.107 0.112 0.113 0.113 0.113
- Diluted 0.107 0.111 0.113 0.113 0.112
Average basic shares (in thousands) 95,256 95,149 95,056 94,947 94,681
Average diluted shares (in thousands) 95,349 95,234 95,190 95,074 94,813
Note: Taxable equivalent net interest income$ 36,278 36,069 35,690 35,185 35,693
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Years Ended
12/31/201512/31/2014
Interest and dividend income:
Interest and fees on loans$ 141,887 135,960
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 1,418 1,417
State and political subdivisions 87 179
Mortgage-backed securities and collateralized mortgage obligations-residential 9,132 12,150
Corporate bonds 1 65
Small Business Administration-guaranteed participation securities 2,004 2,154
Mortgage-backed securities and collateralized mortgage obligations-commercial 149 151
Other securities 16 16
Total interest and dividends on securities available for sale 12,807 16,132
Interest on held to maturity securities:
Mortgage-backed securities-residential 1,844 2,259
Corporate bonds 615 615
Total interest on held to maturity securities 2,459 2,874
Federal Reserve Bank and Federal Home Loan Bank stock 467 511
Interest on federal funds sold and other short-term investments 1,725 1,464
Total interest income 159,345 156,941
Interest expense:
Interest on deposits:
Interest-bearing checking 448 365
Savings 2,468 2,662
Money market deposit accounts 2,214 2,499
Time deposits 9,853 8,565
Interest on short-term borrowings 1,214 1,397
Total interest expense 16,197 15,488
Net interest income 143,148 141,453
Provision for loan losses 3,700 5,100
Net interest income after provision for loan losses 139,448 136,353
Noninterest income:
Trust department income 5,971 5,837
Fees for services to customers 10,689 10,844
Net gain on securities transactions 251 717
Other 961 2,508
Total noninterest income 17,872 19,906
Noninterest expenses:
Salaries and employee benefits 32,521 32,879
Net occupancy expense 15,799 16,251
Equipment expense 6,871 7,219
Professional services 7,878 5,807
Outsourced services 5,860 5,350
Advertising expense 2,593 2,487
FDIC and other insurance 6,339 3,907
Other real estate expense, net 2,001 1,009
Other 10,698 9,761
Total noninterest expenses 90,560 84,670
Income before taxes 66,760 71,589
Income taxes 24,522 27,396
Net income$ 42,238 44,193
Net income per Common Share:
- Basic$ 0.444 0.467
- Diluted 0.444 0.466
Average basic shares (thousands) 95,103 94,628
Average diluted shares (thousands) 95,213 94,753
Note: Taxable equivalent net interest income$ 143,222 141,583
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
12/31/20159/30/20156/30/20153/31/201512/31/2014
ASSETS:
Cash and due from banks$ 41,698 42,560 37,574 44,853 43,505
Federal funds sold and other short term investments 676,458 655,512 641,011 705,273 627,943
Total cash and cash equivalents 718,156 698,072 678,585 750,126 671,448
Securities available for sale:
U. S. government sponsored enterprises 86,737 103,492 152,082 108,248 77,800
States and political subdivisions 1,290 1,963 1,969 1,974 2,271
Mortgage-backed securities and collateralized mortgage obligations-residential 411,729 413,878 429,205 445,273 483,560
Corporate bonds - - - 1,500 1,500
Small Business Administration-guaranteed participation securities 90,416 94,038 95,323 98,668 100,496
Mortgage-backed securities and collateralized mortgage obligations-commercial 10,180 10,491 10,399 10,503 10,447
Other securities 685 685 685 685 685
Total securities available for sale 601,037 624,547 689,663 666,851 676,759
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 46,490 50,027 53,576 57,296 60,986
Corporate bonds 9,975 9,971 9,967 9,964 9,960
Total held to maturity securities 56,465 59,998 63,543 67,260 70,946
Federal Reserve Bank and Federal Home Loan Bank stock 9,480 9,480 9,480 9,228 9,228
Loans:
Commercial 203,415 208,794 209,399 212,145 223,382
Residential mortgage loans 2,721,173 2,707,944 2,669,929 2,620,925 2,575,222
Home equity line of credit 359,325 356,337 354,946 352,552 352,134
Installment loans 9,391 8,930 8,674 8,003 7,594
Loans, net of deferred fees and costs 3,293,304 3,282,005 3,242,948 3,193,625 3,158,332
Less:
Allowance for loan losses 44,762 45,149 45,571 45,944 46,327
Net loans 3,248,542 3,236,856 3,197,377 3,147,681 3,112,005
Bank premises and equipment, net 37,643 37,506 38,100 38,812 38,565
Other assets 63,669 59,358 64,589 60,698 65,488
Total assets$ 4,734,992 4,725,817 4,741,337 4,740,656 4,644,439
LIABILITIES:
Deposits:
Demand$ 365,081 354,162 355,783 347,315 331,425
Interest-bearing checking 754,347 719,071 713,001 696,137 682,210
Savings accounts 1,262,194 1,237,549 1,250,154 1,237,115 1,216,831
Money market deposit accounts 610,826 617,103 633,239 640,368 638,542
Time deposits 1,107,930 1,168,908 1,185,264 1,196,233 1,163,233
Total deposits 4,100,378 4,096,793 4,137,441 4,117,168 4,032,241
Short-term borrowings 191,226 184,405 170,750 194,738 189,116
Accrued expenses and other liabilities 30,078 32,327 30,687 28,274 29,638
Total liabilities 4,321,682 4,313,525 4,338,878 4,340,180 4,250,995
SHAREHOLDERS' EQUITY:
Capital stock 98,973 98,964 98,964 98,964 98,945
Surplus 171,443 171,788 171,988 172,237 172,353
Undivided profits 184,009 180,093 175,721 171,232 166,745
Accumulated other comprehensive loss, net of tax (4,781) (1,174) (5,927) (2,687) (4,509)
Treasury stock at cost (36,334) (37,379) (38,287) (39,270) (40,090)
Total shareholders' equity 413,310 412,292 402,459 400,476 393,444
Total liabilities and shareholders' equity$ 4,734,992 4,725,817 4,741,337 4,740,656 4,644,439
Outstanding shares (in thousands) 95,262 95,149 95,056 94,956 94,857

NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
12/31/1509/30/1506/30/1503/31/1512/31/14
New York and other states*
Loans in nonaccrual status:
Commercial$ 3,024 3,699 3,263 2,489 3,835
Real estate mortgage - 1 to 4 family 23,273 26,059 27,366 28,215 27,221
Installment 90 69 79 77 77
Total non-accrual loans 26,387 29,827 30,708 30,781 31,133
Other nonperforming real estate mortgages - 1 to 4 family 48 50 74 75 125
Total nonperforming loans 26,435 29,877 30,782 30,856 31,258
Other real estate owned 6,120 5,893 5,833 6,288 5,533
Total nonperforming assets$ 32,555 35,770 36,615 37,144 36,791
Florida
Loans in nonaccrual status:
Commercial$ - - - - -
Real estate mortgage - 1 to 4 family 1,817 2,054 1,678 2,608 2,740
Installment 8 9 10 20 13
Total non-accrual loans 1,825 2,063 1,688 2,628 2,753
Other nonperforming real estate mortgages - 1 to 4 family - - - - -
Total nonperforming loans 1,825 2,063 1,688 2,628 2,753
Other real estate owned 335 - 275 670 908
Total nonperforming assets$ 2,160 2,063 1,963 3,298 3,661
Total
Loans in nonaccrual status:
Commercial$ 3,024 3,699 3,263 2,489 3,835
Real estate mortgage - 1 to 4 family 25,090 28,113 29,044 30,823 29,961
Installment 98 78 89 97 90
Total non-accrual loans 28,212 31,890 32,396 33,409 33,886
Other nonperforming real estate mortgages - 1 to 4 family 48 50 74 75 125
Total nonperforming loans 28,260 31,940 32,470 33,484 34,011
Other real estate owned 6,455 5,893 6,108 6,958 6,441
Total nonperforming assets$ 34,715 37,833 38,578 40,442 40,452
Quarterly Net Chargeoffs (Recoveries)
12/31/1509/30/1506/30/1503/31/1512/31/14
New York and other states*
Commercial$ 672 3 50 34 (16)
Real estate mortgage - 1 to 4 family 963 1,159 933 1,004 1,591
Installment 35 26 24 37 48
Total net chargeoffs$ 1,670 1,188 1,007 1,075 1,623
Florida
Commercial$ (2) (3) (1) (1) (476)
Real estate mortgage - 1 to 4 family 6 33 167 109 37
Installment 13 4 - - 1
Total net chargeoffs$ 17 34 166 108 (438)
Total
Commercial$ 670 - 49 33 (492)
Real estate mortgage - 1 to 4 family 969 1,192 1,100 1,113 1,628
Installment 48 30 24 37 49
Total net chargeoffs$ 1,687 1,222 1,173 1,183 1,185
Asset Quality Ratios
12/31/1509/30/1506/30/1503/31/1512/31/14
Total nonperforming loans(1)$ 28,260 31,940 32,470 33,484 34,011
Total nonperforming assets(1) 34,715 37,833 38,578 40,442 40,452
Total net chargeoffs(2) 1,687 1,222 1,173 1,183 1,185
Allowance for loan losses(1) 44,762 45,149 45,571 45,944 46,327
Nonperforming loans to total loans 0.86% 0.97% 1.00% 1.05% 1.08%
Nonperforming assets to total assets 0.73% 0.80% 0.81% 0.85% 0.87%
Allowance for loan losses to total loans 1.36% 1.38% 1.41% 1.44% 1.47%
Coverage ratio(1) 158.4% 141.4% 140.3% 137.2% 136.2%
Annualized net chargeoffs to average loans(2) 0.21% 0.15% 0.15% 0.15% 0.15%
Allowance for loan losses to annualized net chargeoffs(2) 6.6x 9.3x 9.7x9.6x9.8x
* 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) December 31, 2015 December 31, 2014
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$ 80,605 256 1.27%$ 80,520 233 1.16%
Mortgage backed securities and
collateralized mortgage obligations-residential 412,193 2,233 2.17 517,694 2,733 2.11
State and political subdivisions 1,280 25 7.78 2,436 45 7.32
Corporate bonds - - 0.00 1,261 2 0.54
Small Business Administration-guaranteed participation securities 93,329 482 2.07 103,846 524 2.02
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,464 37 1.41 10,737 37 1.40
Other 685 4 2.34 685 4 2.34
Total securities available for sale 598,556 3,037 2.03 717,179 3,578 2.00
Federal funds sold and other
short-term Investments 669,545 494 0.29 579,870 363 0.25
Held to maturity securities:
Corporate bonds 9,973 154 6.17 9,958 154 6.18
Mortgage backed securities and
collateralized mortgage obligations-residential 48,275 425 3.52 62,720 512 3.27
Total held to maturity securities 58,248 579 3.97 72,678 666 3.67
Federal Reserve Bank and Federal Home Loan Bank stock 9,480 120 5.06 9,228 123 5.33
Commercial loans 202,854 2,667 5.26 220,516 2,847 5.16
Residential mortgage loans 2,714,016 29,874 4.40 2,543,869 28,875 4.54
Home equity lines of credit 357,990 3,204 3.55 349,984 3,161 3.58
Installment loans 9,126 192 8.37 6,861 176 10.19
Loans, net of unearned income 3,283,986 35,937 4.37 3,121,230 35,059 4.49
Total interest earning assets 4,619,815 40,167 3.47 4,500,185 39,789 3.53
Allowance for loan losses (45,467) (46,902)
Cash & non-interest earning assets 136,209 140,041
Total assets$ 4,710,557 $ 4,593,324
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$ 721,150 115 0.06%$ 656,694 98 0.06%
Money market accounts 615,815 513 0.33 644,676 634 0.39
Savings 1,250,127 608 0.19 1,214,885 663 0.22
Time deposits 1,133,396 2,375 0.83 1,148,055 2,366 0.82
Total interest bearing deposits 3,720,488 3,611 0.39 3,664,310 3,761 0.41
Short-term borrowings 186,462 278 0.59 185,577 335 0.72
Total interest bearing liabilities 3,906,950 3,889 0.39 3,849,887 4,096 0.42
Demand deposits 360,916 323,070
Other liabilities 28,570 25,214
Shareholders' equity 414,121 395,153
Total liabilities and shareholders' equity$ 4,710,557 $ 4,593,324
Net interest income, tax equivalent 36,278 35,693
Net interest spread 3.08% 3.11%
Net interest margin (net interest income
to total interest earning assets) 3.14% 3.17%
Tax equivalent adjustment (16) (24)
Net interest income 36,262 35,669
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands) Year ended Year ended
(Unaudited) December 31, 2015 December 31, 2014
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$ 107,436 1,418 1.32%$ 113,563 1,417 1.25%
Mortgage backed securities and
collateralized mortgage obligations-residential 439,343 9,132 2.08 555,430 12,150 2.19
State and political subdivisions 1,812 133 7.40 3,924 280 7.14
Corporate bonds 613 1 0.16 3,156 65 2.04
Small Business Administration-guaranteed participation securities 97,496 2,004 2.06 107,029 2,154 2.01
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,566 149 1.41 10,837 151 1.40
Other 685 16 2.34 674 16 2.37
Total securities available for sale 657,951 12,853 1.95 794,613 16,233 2.04
Federal funds sold and other
short-term Investments 664,516 1,725 0.26 589,873 1,464 0.25
Held to maturity securities:
Corporate bonds 9,967 615 6.17 9,952 615 6.18
Mortgage backed securities and
collateralized mortgage obligations-residential 53,763 1,844 3.43 68,404 2,259 3.30
Total held to maturity securities 63,730 2,459 3.86 78,356 2,874 3.67
Federal Reserve Bank and Federal Home Loan Bank stock 9,414 467 4.96 10,135 511 5.04
Commercial loans 210,210 10,861 5.17 221,251 11,328 5.12
Residential mortgage loans 2,661,421 117,820 4.43 2,443,558 111,720 4.57
Home equity lines of credit 354,718 12,508 3.53 343,264 12,263 3.57
Installment loans 8,457 726 8.59 6,083 678 11.14
Loans, net of unearned income 3,234,806 �� 141,915 4.39 3,014,156 135,989 4.51
Total interest earning assets 4,630,417 159,419 3.44 4,487,133 157,071 3.50
Allowance for loan losses (46,023) (47,409)
Cash & non-interest earning assets 136,752 135,217
Total assets$ 4,721,146 $ 4,574,941
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$ 708,331 448 0.06%$ 636,140 365 0.06%
Money market accounts 628,096 2,214 0.35 650,779 2,499 0.38
Savings 1,245,100 2,468 0.20 1,227,473 2,662 0.22
Time deposits 1,173,426 9,853 0.84 1,145,118 8,565 0.75
Total interest bearing deposits 3,754,953 14,983 0.40 3,659,510 14,091 0.39
Short-term borrowings 184,725 1,214 0.66 189,430 1,397 0.74
Total interest bearing liabilities 3,939,678 16,197 0.41 3,848,940 15,488 0.40
Demand deposits 348,552 319,458
Other liabilities 27,155 23,733
Shareholders' equity 405,761 382,810
Total liabilities and shareholders' equity$ 4,721,146 $ 4,574,941
Net interest income, tax equivalent 143,222 141,583
Net interest spread 3.03% 3.10%
Net interest margin (net interest income
to total interest earning assets) 3.09% 3.16%
Tax equivalent adjustment (74) (130)
Net interest income 143,148 141,453

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)
12/31/1509/30/1512/31/14
Tangible Book Value Per Share
Equity$ 413,310 412,292 393,444
Less: Intangible assets 553 553 553
Tangible equity 412,757 411,739 392,891
Shares outstanding 95,262 95,149 94,857
Tangible book value per share 4.33 4.33 4.14
Book value per share 4.34 4.33 4.15
Tangible Equity to Tangible Assets
Total Assets 4,734,992 4,725,817 4,644,439
Less: Intangible assets 553 553 553
Tangible assets 4,734,439 4,725,264 4,643,886
Tangible Equity to Tangible Assets 8.72% 8.71% 8.46%
Equity to Assets 8.73% 8.72% 8.47%
3 Months Ended Years Ended
Efficiency Ratio 12/31/1509/30/1512/31/14 12/31/1512/31/14
Net interest income$ 36,262 36,050 35,669 143,148 141,453
Taxable equivalent adjustment 16 19 24 74 130
Net interest income (fully taxable equivalent) 36,278 36,069 35,693 143,222 141,583
Non-interest income 4,430 4,365 4,752 17,872 19,906
Less: Net gain on sale of building and nonperforming loans - - - 60 1,719
Less: Net gain on securities 2 - 335 251 717
Revenue used for efficiency ratio 40,706 40,434 40,110 160,783 159,053
Total noninterest expense 23,108 23,464 22,240 90,560 84,670
Less: Other real estate expense, net 570 806 841 2,001 1,009
Expense used for efficiency ratio 22,538 22,658 21,399 88,559 83,661
Efficiency Ratio 55.37% 56.04% 53.35% 55.08% 52.60%
3 Months Ended Years Ended
Core Net Income 12/31/1509/30/1512/31/14 12/31/1512/31/14
Net income$ 10,180 10,616 10,660 42,238 44,193
Less: Gain on sale of building, nonperforming loans, and significant ORE gain, net of tax - - - 37 2,684
Core net income 10,180 10,616 10,660 42,201 41,509
Average basic shares outstanding (in thousands) 95,256 95,149 94,681 95,103 94,628
Average diluted shares outstanding (in thousands) 95,349 95,234 94,813 95,213 94,753
Net income per common share:
- Basic$ 0.107 0.112 0.113 0.444 0.467
- Diluted 0.107 0.111 0.112 0.444 0.466
Core net income per common share:
- Basic$ 0.107 0.112 0.113 0.444 0.439
- Diluted 0.107 0.111 0.112 0.443 0.438



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

Source:TrustCo Bank Corp NY