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TrustCo Announces Second Quarter 2016 Earnings

Executive Snapshot:

  • Continued solid financial results:
    • Key metrics for second quarter of 2016 results:
      • Net income of $10.5 million in the second quarter of 2016 compared to $10.4 million in the first quarter of 2016 and $10.7 million in the second quarter of 2015
      • Operating expenses increased $1.8 million in the second quarter of 2016 compared to the second quarter of 2015
      • Return on average assets (ROA) of 0.88%
      • Return on average equity (ROE) of 9.88%
      • Efficiency ratio of 57.70%
  • Asset quality remains solid:
    • Asset quality measures improved compared to the second quarter of 2015
    • Nonperforming assets (NPAs) fell by $5.7 million compared to June 30, 2015
    • NPAs to total assets improved from 0.81% to 0.68% compared to June 30, 2015
    • Quarterly net chargeoffs decreased to 0.14% of average loans on an annualized basis, compared to 0.15% for the second quarter of 2015
  • Continued expansion of customer base:
    • Focus on capitalizing on opportunities presented by expanded branch network
    • Average deposits per branch grew $493 thousand from June 30, 2015 to June 30, 2016 on a same store basis
    • Average deposits per branch were $28.8 million at June 30, 2016
    • Average core deposits were $47 million higher in the second quarter of 2016 compared to the second quarter of 2015
  • Loan portfolio reaches all-time high:
    • Average loans were up $100 million for the second quarter of 2016 compared to second quarter of 2015
    • At $3.34 billion as of June 30, 2016, loans reached an all-time high


TrustCo Announces Second Quarter 2016 Earnings

GLENVILLE, N.Y., July 21, 2016 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced second quarter of 2016 net income of $10.5 million compared to $10.4 million for the first quarter of 2016 and $10.7 million for the second quarter of 2015.

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased to be able to report stable earnings despite added operating costs related to regulatory issues and a difficult operating environment. Our continued focus on traditional lending criteria and conservative balance sheet management has enabled us to produce stable earnings, 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 second quarter 2016 results to be solid and are encouraged by the increase in pre-tax earnings from the first quarter of 2016. In terms of our core business, we continue to make progress by adding the customer relationships which ultimately drive future growth. Our highly liquid balance sheet continues to allow us to fund our loan growth without having to overpay for deposits. We will continue taking advantage of opportunities as they are presented during the balance of 2016. Recent merger activity between our competitors may provide us with additional opportunities to add customers.”

TrustCo saw continued solid loan growth in the second quarter of 2016 compared to the prior year. Loan portfolio expansion was funded by deposit growth and capital expansion. The continued shift toward loans helped offset the margin impact from continued comparatively low yields on cash and investments. The growth in average deposits in the second quarter of 2016 versus the prior year 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 second quarter of 2016, return on average assets and return on average equity were 0.88% and 9.88%, respectively, compared to 0.91% and 10.66% for the second quarter of 2015. Diluted earnings per share were $0.109 for the second quarter of 2016, compared to $0.113 for the second quarter of 2015. As 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 2015 and costs related to those actions have continued into 2016. While some of these costs will be recurring, others will diminish over time.

For the first six months of 2016, diluted net income per share was $0.219, compared to $0.225 for the first six months of 2015. Return on average assets and equity were 0.88% and 9.93% for the first six months of 2016, compared to 0.92% and 10.78% for the first six months of 2015.

Average loans were up $100.2 million or 3.1% in the second quarter of 2016, over the same period in 2015. Loan growth was constrained by an $11.5 million decline in commercial loans, which have become less attractive on a risk adjusted basis. Average residential loans, our primary lending focus, were up $110.7 million or 4.2% in the second quarter of 2016, over the same period in 2015. Average deposits were up $33.9 million or 0.8% for the second quarter of 2016 over the same period a year earlier. The increase in deposits came from core deposit accounts, which consist of checking, savings and money market deposits. Average core deposits increased $47.0 million from the second quarter of 2015 to the second quarter of 2016, while average time deposit balances declined $13.2 million. 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 good progress expanding loans and deposits throughout our entire branch network. We expect that trend to continue as the newer branches continue to mature.”

“At June 30, 2016, our average branch size was $28.8 million. 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 loan loss reserve measures mostly improved versus both June 30, 2015 and as compared to December 31, 2015. Nonperforming loans (NPLs) were $28.2 million at June 30, 2016, compared to $32.5 million at June 30, 2015 and $28.3 million at December 31, 2015. During the quarter, $1.2 million of nonperforming loans were sold. NPLs were equal to 0.84% of total loans at June 30, 2016, compared to 1.00% a year earlier and 0.86% at December 31, 2015. The coverage ratio, or allowance for loan losses to NPLs, was 156.0% at June 30, 2016, compared to 140.3% at June 30, 2015 and 158.4% at December 31, 2015. Nonperforming assets (NPAs) were at $32.8 million at June 30, 2016 compared to $38.6 million at June 30, 2015 and $34.7 million at December 31, 2015. The ratio of loan loss allowance to total loans was 1.32% as of June 30, 2016, compared to 1.41% at June 30, 2015 and to 1.36% at December 31, 2015 and reflects both the improvement in asset quality and economic conditions in our lending areas. The allowance for loan losses was $44.1 million at June 30, 2016 compared to $45.6 million at June 30, 2015 and $44.8 million at December 31, 2015. Net chargeoffs for the second quarter of 2016 decreased nominally versus both the second quarter of 2015 and the first quarter of 2016, to $1.1 million. The net chargeoff ratio was 0.14% for the second quarter of 2016. The provision for loan losses was flat versus both the second quarter of 2015 and the first quarter of 2016.

The net interest margin for the second quarter of 2016 was 3.09% compared to 3.13% in the first quarter of 2016 and 3.07% in the second quarter of 2015.

At June 30, 2016 the equity to asset ratio was 8.91%, compared to 8.49% at June 30, 2015 and 8.73% at December 31, 2015. The tangible equity ratio was 8.90% compared to 8.48% at June 30, 2015 and 8.72% at December 31, 2015. GAAP book value per share at June 30, 2016 was $4.51 compared to $4.23 a year earlier and tangible book value per share was $4.50 and $4.23, respectively. Non-GAAP measures are discussed on page 13.

TrustCo Bank Corp NY is a $4.8 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 145 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at June 30, 2016.

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

A conference call to discuss Second Quarter 2016 results will be held at 9:00 a.m. Eastern Time on July 22, 2016. Those wishing to participate in the call may dial toll-free 1-888-3339-0764. 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 10089498. The call will also be audio webcast at: http://services.choruscall.com/links/trst160722.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 and in our subsequent quarterly reports on Form 10-Q or other securities filings.


TRUSTCO BANK CORP NY
GLENVILLE, NY
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
06/30/1603/31/1606/30/15
Summary of operations
Net interest income (TE)$ 36,311 36,196 35,690
Provision for loan losses 800 800 800
Net gain on securities transactions 668 - -
Noninterest income, excluding net gain on securities transactions 4,531 4,572 4,454
Noninterest expense 23,974 23,439 22,131
Net income 10,464 10,409 10,727
Per common share
Net income per share:
- Basic$ 0.110 0.109 0.113
- Diluted 0.109 0.109 0.113
Cash dividends 0.066 0.066 0.066
Tangible Book value at period end 4.50 4.43 4.23
Market price at period end 6.41 6.06 7.03
At period end
Full time equivalent employees 801 784 760
Full service banking offices 145 145 146
Performance ratios
Return on average assets 0.88% 0.89 0.91
Return on average equity 9.88 9.98 10.66
Efficiency (1) 57.70 56.22 54.71
Net interest spread (TE) 3.03 3.07 3.01
Net interest margin (TE) 3.09 3.13 3.07
Dividend payout ratio 59.89 60.13 58.15
Capital ratio at period end
Consolidated tangible equity to tangible assets (2) 8.90 8.87 8.48
Asset quality analysis at period end
Nonperforming loans to total loans 0.84 0.92 1.00
Nonperforming assets to total assets 0.68 0.76 0.81
Allowance for loan losses to total loans 1.32 1.34 1.41
Coverage ratio (3) 1.6x 1.5 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 and gain on sale of nonperforming loans).
(2) The tangible equity ratio excludes $553 of intangibles from both equity and assets.
(3) Calculated as allowance for loan losses divided by total nonperforming loans.
TE = Taxable equivalent.
FINANCIAL HIGHLIGHTS, Continued
(dollars in thousands, except per share data)
(Unaudited)
Six Months Ended
06/30/16 06/30/15
Summary of operations
Net interest income (TE)$ 72,508 70,875
Provision for loan losses 1,600 1,600
Net gain on securities transactions 668 249
Noninterest income, excluding net gain on securities transactions 9,103 8,828
Noninterest expense 47,412 43,988
Net income 20,875 21,442
Per common share
Net income per share:
- Basic$ 0.219 0.226
- Diluted 0.219 0.225
Cash dividends 0.131 0.131
Tangible Book value at period end 4.50 4.23
Market price at period end 6.41 7.03
Performance ratios
Return on average assets 0.88% 0.92
Return on average equity 9.93 10.78
Efficiency (1) 56.96 54.45
Net interest spread (TE) 3.05 3.02
Net interest margin (TE) 3.11 3.08
Dividend payout ratio 60.00 58.14
(1) Calculated as noninterest expense (excluding ORE income/expense) divided by
taxable equivalent net interest income plus noninterest income (excluding
net securities transactions and gain on sale of nonperforming loans).
TE = Taxable equivalent.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
6/30/20163/31/201612/31/20159/30/20156/30/2015
Interest and dividend income:
Interest and fees on loans$ 35,652 35,605 35,930 35,631 35,343
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 404 255 256 584 366
State and political subdivisions 13 14 16 23 23
Mortgage-backed securities and collateralized mortgage obligations-residential 2,169 2,116 2,233 2,230 2,276
Corporate bonds - - - - -
Small Business Administration-guaranteed participation securities 450 476 482 497 503
Mortgage-backed securities and collateralized mortgage obligations-commercial 38 36 37 37 38
Other securities 4 4 4 4 4
Total interest and dividends on securities available for sale 3,078 2,901 3,028 3,375 3,210
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 374 402 425 461 480
Corporate bonds 154 154 154 153 154
Total interest on held to maturity securities 528 556 579 614 634
Federal Reserve Bank and Federal Home Loan Bank stock 118 120 120 113 118
Interest on federal funds sold and other short-term investments 832 844 494 408 423
Total interest income 40,208 40,026 40,151 40,141 39,728
Interest expense:
Interest on deposits:
Interest-bearing checking 116 114 115 117 111
Savings 604 604 608 603 599
Money market deposit accounts 467 496 513 537 547
Time deposits 2,460 2,373 2,375 2,544 2,500
Interest on short-term borrowings 262 257 278 290 300
Total interest expense 3,909 3,844 3,889 4,091 4,057
Net interest income 36,299 36,182 36,262 36,050 35,671
Provision for loan losses 800 800 1,300 800 800
Net interest income after provision for loan losses 35,499 35,382 34,962 35,250 34,871
Noninterest income:
Trustco Financial Services income 1,512 1,605 1,489 1,351 1,478
Fees for services to customers 2,737 2,661 2,704 2,770 2,691
Net gain on securities transactions 668 - 2 - -
Other 282 306 235 244 285
Total noninterest income 5,199 4,572 4,430 4,365 4,454
Noninterest expenses:
Salaries and employee benefits 8,934 9,003 8,042 7,834 8,164
Net occupancy expense 3,918 4,088 3,884 3,929 3,878
Equipment expense 1,840 1,514 1,530 1,596 1,803
Professional services 2,098 2,146 2,067 2,238 2,066
Outsourced services 1,425 1,551 1,585 1,425 1,425
Advertising expense 570 729 592 668 733
FDIC and other insurance 1,949 1,990 2,055 2,202 1,017
Other real estate expense, net 423 519 570 806 201
Other 2,817 1,899 2,783 2,766 2,844
Total noninterest expenses 23,974 23,439 23,108 23,464 22,131
Income before taxes 16,724 16,515 16,284 16,151 17,194
Income taxes 6,260 6,106 6,104 5,535 6,467
Net income$ 10,464 10,409 10,180 10,616 10,727
Net income per common share:
- Basic$ 0.110 0.109 0.107 0.112 0.113
- Diluted 0.109 0.109 0.107 0.111 0.113
Average basic shares (in thousands) 95,487 95,365 95,256 95,149 95,056
Average diluted shares (in thousands) 95,580 95,412 95,349 95,234 95,190
Note: Taxable equivalent net interest income$ 36,311 36,196 36,278 36,069 35,690
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Six Months Ended
6/30/2016 6/30/2015
Interest and dividend income:
Interest and fees on loans$ 71,257 70,326
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 659 578
State and political subdivisions 27 48
Mortgage-backed securities and collateralized mortgage obligations-residential 4,285 4,669
Corporate bonds - 1
Small Business Administration-guaranteed participation securities 926 1,025
Mortgage-backed securities and collateralized mortgage obligations-commercial 74 75
Other securities 8 8
Total interest and dividends on securities available for sale 5,979 6,404
Interest on held to maturity securities:
Mortgage-backed securities-residential 775 958
Corporate bonds 308 308
Total interest on held to maturity securities 1,083 1,266
Federal Reserve Bank and Federal Home Loan Bank stock 238 234
Interest on federal funds sold and other short-term investments 1,677 823
Total interest income 80,234 79,053
Interest expense:
Interest on deposits:
Interest-bearing checking 230 216
Savings 1,208 1,257
Money market deposit accounts 962 1,164
Time deposits 4,833 4,934
Interest on short-term borrowings 519 646
Total interest expense 7,752 8,217
Net interest income 72,482 70,836
Provision for loan losses 1,600 1,600
Net interest income after provision for loan losses 70,882 69,236
Noninterest income:
Trust department income 3,117 3,131
Fees for services to customers 5,398 5,215
Net gain on securities transactions 668 249
Other 588 482
Total noninterest income 9,771 9,077
Noninterest expenses:
Salaries and employee benefits 17,937 16,645
Net occupancy expense 8,006 7,986
Equipment expense 3,354 3,745
Professional services 4,244 3,573
Outsourced services 2,976 2,850
Advertising expense 1,299 1,333
FDIC and other insurance 3,939 2,082
Other real estate (income) expense, net 942 625
Other 4,715 5,149
Total noninterest expenses 47,412 43,988
Income before taxes 33,241 34,325
Income taxes 12,366 12,883
Net income$ 20,875 21,442
Net income per Common Share:
- Basic$ 0.219 0.226
- Diluted 0.219 0.225
Average basic shares (thousands) 95,426 95,002
Average diluted shares (thousands) 95,496 95,132
Note: Taxable equivalent net interest income$ 72,508 70,875
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
6/30/20163/31/201612/31/20159/30/20156/30/2015
ASSETS:
Cash and due from banks$ 39,787 37,373 41,698 42,560 37,574
Federal funds sold and other short term investments 718,609 722,805 676,458 655,512 641,011
Total cash and cash equivalents 758,396 760,178 718,156 698,072 678,585
Securities available for sale:
U. S. government sponsored enterprises 116,595 66,920 86,737 103,492 152,082
States and political subdivisions 974 974 1,290 1,963 1,969
Mortgage-backed securities and collateralized mortgage obligations-residential 404,138 422,189 411,729 413,878 429,205
Small Business Administration-guaranteed participation securities 87,740 89,053 90,416 94,038 95,323
Mortgage-backed securities and collateralized mortgage obligations-commercial 10,374 10,307 10,180 10,491 10,399
Other securities 685 685 685 685 685
Total securities available for sale 620,506 590,128 601,037 624,547 689,663
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 40,702 43,595 46,490 50,027 53,576
Corporate bonds 9,982 9,979 9,975 9,971 9,967
Total held to maturity securities 50,684 53,574 56,465 59,998 63,543
Federal Reserve Bank and Federal Home Loan Bank stock 9,579 9,480 9,480 9,480 9,480
Loans:
Commercial 195,698 198,765 203,415 208,794 209,399
Residential mortgage loans 2,786,951 2,737,784 2,721,173 2,707,944 2,669,929
Home equity line of credit 352,069 356,163 359,325 356,337 354,946
Installment loans 8,476 8,667 9,391 8,930 8,674
Loans, net of deferred fees and costs 3,343,194 3,301,379 3,293,304 3,282,005 3,242,948
Less:
Allowance for loan losses 44,064 44,398 44,762 45,149 45,571
Net loans 3,299,130 3,256,981 3,248,542 3,236,856 3,197,377
Bank premises and equipment, net 36,793 37,360 37,643 37,506 38,100
Other assets 55,825 55,561 63,669 59,358 64,589
Total assets$ 4,830,913 4,763,262 4,734,992 4,725,817 4,741,337
LIABILITIES:
Deposits:
Demand$ 376,669 359,060 365,081 354,162 355,783
Interest-bearing checking 766,322 746,562 754,347 719,071 713,001
Savings accounts 1,282,006 1,272,394 1,262,194 1,237,549 1,250,154
Money market deposit accounts 577,063 595,585 610,826 617,103 633,239
Time deposits 1,178,567 1,168,887 1,107,930 1,168,908 1,185,264
Total deposits 4,180,627 4,142,488 4,100,378 4,096,793 4,137,441
Short-term borrowings 190,542 169,528 191,226 184,405 170,750
Accrued expenses and other liabilities 29,479 28,221 30,078 32,327 30,687
Total liabilities 4,400,648 4,340,237 4,321,682 4,313,525 4,338,878
SHAREHOLDERS' EQUITY:
Capital stock 99,071 98,973 98,973 98,964 98,964
Surplus 171,174 171,113 171,443 171,788 171,988
Undivided profits 192,356 188,159 184,009 180,093 175,721
Accumulated other comprehensive income (loss), net of tax 2,395 73 (4,781) (1,174) (5,927)
Treasury stock at cost (34,731) (35,293) (36,334) (37,379) (38,287)
Total shareholders' equity 430,265 423,025 413,310 412,292 402,459
Total liabilities and shareholders' equity$ 4,830,913 4,763,262 4,734,992 4,725,817 4,741,337
Outstanding shares (in thousands) 95,493 95,369 95,262 95,149 95,056

NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
06/30/1603/31/1612/31/1509/30/1506/30/15
New York and other states*
Loans in nonaccrual status:
Commercial$ 2,690 2,762 3,024 3,699 3,263
Real estate mortgage - 1 to 4 family 23,559 25,669 23,273 26,059 27,366
Installment 49 74 90 69 79
Total non-accrual loans 26,298 28,505 26,387 29,827 30,708
Other nonperforming real estate mortgages - 1 to 4 family 45 47 48 50 74
Total nonperforming loans 26,343 28,552 26,435 29,877 30,782
Other real estate owned 4,602 5,208 6,120 5,893 5,833
Total nonperforming assets$ 30,945 33,760 32,555 35,770 36,615
Florida
Loans in nonaccrual status:
Commercial$ - - - - -
Real estate mortgage - 1 to 4 family 1,900 1,802 1,817 2,054 1,678
Installment - - 8 9 10
Total non-accrual loans 1,900 1,802 1,825 2,063 1,688
Other nonperforming real estate mortgages - 1 to 4 family - - - - -
Total nonperforming loans 1,900 1,802 1,825 2,063 1,688
Other real estate owned - 476 335 - 275
Total nonperforming assets$ 1,900 2,278 2,160 2,063 1,963
Total
Loans in nonaccrual status:
Commercial$ 2,690 2,762 3,024 3,699 3,263
Real estate mortgage - 1 to 4 family 25,459 27,471 25,090 28,113 29,044
Installment 49 74 98 78 89
Total non-accrual loans 28,198 30,307 28,212 31,890 32,396
Other nonperforming real estate mortgages - 1 to 4 family 45 47 48 50 74
Total nonperforming loans 28,243 30,354 28,260 31,940 32,470
Other real estate owned 4,602 5,684 6,455 5,893 6,108
Total nonperforming assets$ 32,845 36,038 34,715 37,833 38,578
Quarterly Net Chargeoffs (Recoveries)
06/30/1603/31/1612/31/1509/30/1506/30/15
New York and other states*
Commercial$ 67 224 672 3 50
Real estate mortgage - 1 to 4 family 973 771 963 1,159 933
Installment 77 70 35 26 24
Total net chargeoffs$ 1,117 1,065 1,670 1,188 1,007
Florida
Commercial$ - - (2) (3) (1)
Real estate mortgage - 1 to 4 family 16 83 6 33 167
Installment 1 16 13 4 -
Total net chargeoffs$ 17 99 17 34 166
Total
Commercial$ 67 224 670 - 49
Real estate mortgage - 1 to 4 family 989 854 969 1,192 1,100
Installment 78 86 48 30 24
Total net chargeoffs$ 1,134 1,164 1,687 1,222 1,173
Asset Quality Ratios
06/30/1603/31/1612/31/1509/30/1506/30/15
Total nonperforming loans(1)$ 28,243 30,354 28,260 31,940 32,470
Total nonperforming assets(1) 32,845 36,038 34,715 37,833 38,578
Total net chargeoffs(2) 1,134 1,164 1,687 1,222 1,173
Allowance for loan losses(1) 44,064 44,398 44,762 45,149 45,571
Nonperforming loans to total loans 0.84% 0.92% 0.86% 0.97% 1.00%
Nonperforming assets to total assets 0.68% 0.76% 0.73% 0.80% 0.81%
Allowance for loan losses to total loans 1.32% 1.34% 1.36% 1.38% 1.41%
Coverage ratio(1) 156.0% 146.3% 158.4% 141.4% 140.3%
Annualized net chargeoffs to average loans(2) 0.14% 0.14% 0.21% 0.15% 0.15%
Allowance for loan losses to annualized net chargeoffs(2) 9.7x 9.5x 6.6x 9.3x 9.7x
* 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) Three months ended Three months ended
(Unaudited) June 30, 2016 June 30, 2015
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$ 107,190 404 1.51%$ 114,279 366 1.28%
Mortgage backed securities and
collateralized mortgage obligations-residential 445,162 2,169 1.95 441,754 2,276 2.06
State and political subdivisions 955 19 7.96 1,939 36 7.36
Corporate bonds - - - 956 0 0.00
Small Business Administration-guaranteed participation securities 87,801 450 2.05 98,894 503 2.03
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,321 38 1.47 10,600 38 1.41
Other 677 4 2.36 685 4 2.34
Total securities available for sale 652,106 3,084 1.89 669,107 3,223 1.93
Federal funds sold and other
short-term Investments 668,395 832 0.50 683,110 423 0.25
Held to maturity securities:
Corporate bonds 9,981 154 6.17 9,965 154 6.17
Mortgage backed securities and
collateralized mortgage obligations-residential 42,188 374 3.55 55,509 480 3.46
Total held to maturity securities 52,169 528 4.05 65,474 634 3.87
Federal Reserve Bank and Federal Home Loan Bank stock 9,576 118 4.93 9,466 118 4.99
Commercial loans 198,938 2,563 5.15 210,424 2,710 5.15
Residential mortgage loans 2,759,024 29,725 4.31 2,648,320 29,371 4.44
Home equity lines of credit 354,897 3,179 3.58 354,053 3,092 3.50
Installment loans 8,316 191 9.19 8,226 176 8.60
Loans, net of unearned income 3,321,175 35,658 4.29 3,221,023 35,349 4.39
Total interest earning assets 4,703,421 40,220 3.42 4,648,180 39,747 3.42
Allowance for loan losses (44,754) (46,190)
Cash & non-interest earning assets 136,724 137,329
Total assets$ 4,795,391 $ 4,739,319
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$ 759,546 116 0.06%$ 706,767 111 0.06%
Money market accounts 580,100 467 0.32 635,347 547 0.35
Savings 1,273,575 604 0.19 1,249,865 599 0.19
Time deposits 1,177,084 2,460 0.84 1,190,234 2,500 0.84
Total interest bearing deposits 3,790,305 3,647 0.38 3,782,213 3,757 0.40
Short-term borrowings 181,247 262 0.58 182,829 300 0.66
Total interest bearing liabilities 3,971,552 3,909 0.39 3,965,042 4,057 0.41
Demand deposits 370,781 344,982
Other liabilities 27,121 25,591
Shareholders' equity 425,937 403,704
Total liabilities and shareholders' equity$ 4,795,391 $ 4,739,319
Net interest income, tax equivalent 36,311 35,690
Net interest spread 3.03% 3.01%
Net interest margin (net interest income
to total interest earning assets) 3.09% 3.07%
Tax equivalent adjustment (12) (19)
Net interest income 36,299 35,671
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands) Six months ended Six months ended
(Unaudited) June 30, 2016 June 30, 2015
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$ 91,111 659 1.45%$ 96,172 578 1.20%
Mortgage backed securities and
collateralized mortgage obligations-residential 428,831 4,285 2.00 459,980 4,669 2.03
State and political subdivisions 1,034 41 7.93 2,015 74 7.31
Corporate bonds - - - 1,226 1 0.16
Small Business Administration-guaranteed participation securities 89,206 926 2.08 100,270 1,025 2.05
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,357 74 1.43 10,635 75 1.41
Other 682 8 2.35 685 8 2.34
Total securities available for sale 621,221 5,993 1.93 670,983 6,430 1.92
Federal funds sold and other
short-term Investments 671,990 1,677 0.50 668,269 823 0.25
Held to maturity securities:
Corporate bonds 9,979 308 6.17 9,964 308 6.17
Mortgage backed securities and
collateralized mortgage obligations-residential 43,650 775 3.55 57,419 958 3.34
Total held to maturity securities 53,629 1,083 4.04 67,383 1,266 3.76
Federal Reserve Bank and Federal Home Loan Bank stock 9,527 238 5.00 9,348 234 5.01
Commercial loans 200,152 5,180 5.18 214,713 5,506 5.13
Residential mortgage loans 2,742,918 59,348 4.33 2,621,417 58,329 4.46
Home equity lines of credit 356,857 6,358 3.56 353,161 6,153 3.51
Installment loans 8,488 383 9.02 8,011 351 8.84
Loans, net of unearned income 3,308,415 71,269 4.31 3,197,302 70,339 4.41
Total interest earning assets 4,664,782 80,260 3.44 4,613,285 79,092 3.44
Allowance for loan losses (45,013) (46,392)
Cash & non-interest earning assets 136,138 138,319
Total assets$ 4,755,907 $ 4,705,212
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$ 747,322 230 0.06%$ 692,445 216 0.06%
Money market accounts 591,937 962 0.33 636,596 1,164 0.37
Savings 1,268,021 1,208 0.19 1,239,737 1,257 0.20
Time deposits 1,155,773 4,833 0.84 1,185,363 4,934 0.84
Total interest bearing deposits 3,763,053 7,233 0.38 3,754,141 7,571 0.41
Short-term borrowings 178,683 519 0.58 187,560 646 0.69
Total interest bearing liabilities 3,941,736 7,752 0.39 3,941,701 8,217 0.42
Demand deposits 364,503 336,741
Other liabilities 27,019 25,817
Shareholders' equity 422,649 400,953
Total liabilities and shareholders' equity$ 4,755,907 $ 4,705,212
Net interest income, tax equivalent 72,508 70,875
Net interest spread 3.05% 3.02%
Net interest margin (net interest income
to total interest earning assets) 3.11% 3.08%
Tax equivalent adjustment (26) (39)
Net interest income 72,482 70,836

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 nonperforming loans and securities from this calculation. We believe that this provides a reasonable measure of primary banking expenses relative to primary banking 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, 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)
06/30/1603/31/1606/30/15
Tangible Book Value Per Share
Equity$ 430,265 423,025 402,459
Less: Intangible assets 553 553 553
Tangible equity 429,712 422,472 401,906
Shares outstanding 95,493 95,369 95,056
Tangible book value per share 4.50 4.43 4.23
Book value per share 4.51 4.44 4.23
Tangible Equity to Tangible Assets
Total Assets 4,830,913 4,763,262 4,741,337
Less: Intangible assets 553 553 553
Tangible assets 4,830,360 4,762,709 4,740,784
Tangible Equity to Tangible Assets 8.90% 8.87% 8.48%
Equity to Assets 8.91% 8.88% 8.49%
3 Months Ended 6 Months Ended
Efficiency Ratio 06/30/1603/31/1606/30/15 06/30/1606/30/15
Net interest income$ 36,299 36,182 35,671 72,482 70,836
Taxable equivalent adjustment 12 14 19 26 39
Net interest income (fully taxable equivalent) 36,311 36,196 35,690 72,508 70,875
Non-interest income 5,199 4,572 4,454 9,771 9,077
Less: Net gain on sale of nonperforming loans 24 - 60 24 60
Less: Net gain on securities 668 - - 668 249
Revenue used for efficiency ratio 40,818 40,768 40,084 81,587 79,643
Total noninterest expense 23,974 23,439 22,131 47,412 43,988
Less: Other real estate expense, net 423 519 201 942 625
Expense used for efficiency ratio 23,551 22,920 21,930 46,470 43,363
Efficiency Ratio 57.70% 56.22% 54.71% 56.96% 54.45%


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

Source:TrustCo Bank Corp NY