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TrustCo Announces Third Quarter 2016 Earnings

Executive Snapshot:

  • Continued solid financial results:
    • Key metrics for third quarter of 2016 results:
      • Net income of $10.9 million in the third quarter of 2016 compared to $10.5 million in the second quarter of 2016 and $10.6 million in the third quarter of 2015
      • Operating expenses decreased $415 thousand in the third quarter of 2016 compared to the third quarter of 2015
      • Return on average assets (ROA) of 0.90%
      • Return on average equity (ROE) of 10.05%
      • Efficiency ratio of 54.11% (Non-GAAP measure; see below for definition)
  • Asset quality remains solid:
    • Asset quality measures improved compared to the third quarter of 2015
    • Nonperforming assets (NPAs) fell by $7.1 million compared to September 30, 2015
    • NPAs to total assets improved from 0.80% to 0.64% compared to September 30, 2015
    • Quarterly net chargeoffs decreased to 0.10% of average loans on an annualized basis, compared to 0.15% for the third quarter of 2015, the lowest level since 2008
  • Continued expansion of customer base:
    • Focus on capitalizing on opportunities presented by expanded branch network
    • Average deposits per branch grew $455 thousand from September 30, 2015 to September 30, 2016 on a same store basis
    • Average deposits per branch were $28.9 million at September 30, 2016
    • Average core deposits were $51 million higher in the third quarter of 2016 compared to the third quarter of 2015
  • Loan portfolio reaches all-time high:
    • Average loans were up $109 million for the third quarter of 2016 compared to third quarter of 2015
    • At $3.39 billion as of September 30, 2016, loans reached an all-time high

GLENVILLE, N.Y., Oct. 21, 2016 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced third quarter of 2016 net income of $10.9 million compared to $10.5 million for the second quarter of 2016 and $10.6 million for the third quarter of 2015.

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased to be able to report an increase in earnings in the third quarter of 2016 as compared to the third quarter of 2015. We are encouraged by the combination of revenue growth and expense decline in the quarter, despite a difficult operating environment and continued higher costs related to regulatory issues. Our continued focus on traditional lending criteria and conservative balance sheet management has enabled us to produce consistent 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. In terms of our core business, we continue to add customer relationships which ultimately drive future growth. We will continue to take advantage of opportunities as they are presented during the balance of 2016. Recent merger activity between our competitors, including the Key – First Niagara merger, may provide us with additional opportunities to add customers.”

TrustCo saw continued solid loan growth in the third quarter of 2016 compared to the prior year. Loan portfolio expansion was funded primarily by our strong liquidity reserves. 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 third 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 third quarter of 2016, return on average assets and return on average equity were 0.90% and 10.05%, respectively, compared to 0.88% and 10.35% for the third quarter of 2015. The decline in return on average equity was due to continued growth of TrustCo’s capital position. Diluted earnings per share were $0.114 for the third quarter of 2016, compared to $0.111 for the third 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. During the third quarter of 2016 we experienced a reduction in FDIC deposit insurance premiums and were also able to reduce expenses in a number of other categories.

For the first nine months of 2016, diluted net income per share was $0.333, compared to $0.337 for the first nine months of 2015. Return on average assets and equity were 0.89% and 9.97% for the first nine months of 2016, compared to 0.91% and 10.64% for the first nine months of 2015.

Average loans were up $108.7 million or 3.3% in the third quarter of 2016, over the same period in 2015. Loan growth was constrained by a $13.4 million decline in commercial loans, which have become less attractive on a risk adjusted basis. Average residential loans, our primary lending focus, were up $130.3 million or 4.8% in the third quarter of 2016, over the same period in 2015. Average deposits were up $37.5 million or 0.9% for the third 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 $51.2 million from the third quarter of 2015 to the third quarter of 2016, while average time deposit balances declined $13.6 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 September 30, 2016, our average branch size was $28.9 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 September 30, 2015 and as compared to December 31, 2015. Nonperforming loans (NPLs) were $26.0 million at September 30, 2016, compared to $31.9 million at September 30, 2015 and $28.3 million at December 31, 2015. NPLs were equal to 0.77% of total loans at September 30, 2016, compared to 0.97% a year earlier and 0.86% at December 31, 2015. The coverage ratio, or allowance for loan losses to NPLs, was 169.0% at September 30, 2016, compared to 141.4% at September 30, 2015 and 158.4% at December 31, 2015. Nonperforming assets (NPAs) were at $30.8 million at September 30, 2016 compared to $37.8 million at September 30, 2015 and $34.7 million at December 31, 2015. The ratio of loan loss allowance to total loans was 1.30% as of September 30, 2016, compared to 1.38% at September 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 $44.0 million at September 30, 2016 compared to $45.2 million at September 30, 2015 and $44.8 million at December 31, 2015. Net chargeoffs for the third quarter of 2016 decreased versus both the third quarter of 2015 and the second quarter of 2016, to $0.9 million. The net chargeoff ratio was 0.10% for the third quarter of 2016, compared to 0.15% in the third quarter of 2015 and was at the lowest level since the first quarter of 2008. The provision for loan losses was $750 thousand, compared to $800 thousand in the third quarter of 2015.

The net interest margin for the third quarter of 2016 was 3.09%, the same as in the second quarter and a basis point higher than in the third quarter of 2015.

At September 30, 2016 the equity to asset ratio was 9.05%, compared to 8.91% at June 30, 2016 and 8.72% at September 30, 2015. The tangible equity ratio was 9.04% compared to 8.90% at June 30, 2016 and 8.71% at September 30, 2015. GAAP book value per share at September 30, 2016 was $4.56 compared to $4.33 a year earlier and tangible book value per share was $4.55 and $4.33, respectively. Tangible equity and book value are non-GAAP measures and 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 September 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 Third Quarter 2016 results will be held at 9:00 a.m. Eastern Time on October 24, 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 10094705. The call will also be audio webcast at: http://services.choruscall.com/links/trst161024.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
09/30/1606/30/1609/30/15
Summary of operations
Net interest income (TE)$ 36,681 36,311 36,069
Provision for loan losses 750 800 800
Net gain on securities transactions - 668 -
Noninterest income, excluding net gain on securities transactions 4,729 4,531 4,365
Noninterest expense 23,049 23,974 23,464
Net income 10,930 10,464 10,616
Per common share
Net income per share:
- Basic$ 0.114 0.110 0.112
- Diluted 0.114 0.109 0.111
Cash dividends 0.066 0.066 0.066
Tangible Book value at period end 4.55 4.50 4.33
Market price at period end 7.09 6.41 5.84
At period end
Full time equivalent employees 790 801 778
Full service banking offices 145 145 146
Performance ratios
Return on average assets 0.90% 0.88 0.88
Return on average equity 10.05 9.88 10.35
Efficiency (1) 54.11 57.70 56.04
Net interest spread (TE) 3.03 3.03 3.02
Net interest margin (TE) 3.09 3.09 3.08
Dividend payout ratio 57.40 59.89 58.82
Capital ratio at period end
Consolidated tangible equity to tangible assets (2) 9.04 8.90 8.71
Asset quality analysis at period end
Nonperforming loans to total loans 0.77 0.84 0.97
Nonperforming assets to total assets 0.64 0.68 0.80
Allowance for loan losses to total loans 1.30 1.32 1.38
Coverage ratio (3) 1.6x 1.6 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 building and nonperforming loans).
(2) The tangible equity ratio excludes $553 of intangibles from both equity and assets.
(3) Calculated as allowance for loan losses divided by total nonperforming loans.
TE = Taxable equivalent.
FINANCIAL HIGHLIGHTS, Continued
(dollars in thousands, except per share data)
(Unaudited)
Nine Months Ended
09/30/1609/30/15
Summary of operations
Net interest income (TE)$ 109,188 106,944
Provision for loan losses 2,350 2,400
Net gain on securities transactions 668 249
Noninterest income, excluding net gain on securities transactions 13,832 13,193
Noninterest expense 70,462 67,452
Net income 31,803 32,058
Per common share
Net income per share:
- Basic$ 0.333 0.337
- Diluted 0.333 0.337
Cash dividends 0.197 0.197
Tangible Book value at period end 4.55 4.33
Market price at period end 7.09 5.84
Performance ratios
Return on average assets 0.89% 0.91
Return on average equity 9.97 10.64
Efficiency (1) 56.01 54.98
Net interest spread (TE) 3.04 3.01
Net interest margin (TE) 3.10 3.08
Dividend payout ratio 59.11 58.36
(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 building and nonperforming loans).
TE = Taxable equivalent.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
9/30/20166/30/20163/31/201612/31/20159/30/2015
Interest and dividend income:
Interest and fees on loans$ 36,171 35,652 35,605 35,930 35,631
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 408 404 255 256 584
State and political subdivisions 13 13 14 16 23
Mortgage-backed securities and collateralized mortgage obligations-residential 1,829 2,169 2,116 2,233 2,230
Corporate bonds 97 - - - -
Small Business Administration-guaranteed participation securities 445 450 476 482 497
Mortgage-backed securities and collateralized mortgage obligations-commercial 36 38 36 37 37
Other securities 4 4 4 4 4
Total interest and dividends on securities available for sale 2,832 3,078 2,901 3,028 3,375
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 347 374 402 425 461
Corporate bonds 156 154 154 154 153
Total interest on held to maturity securities 503 528 556 579 614
Federal Reserve Bank and Federal Home Loan Bank stock 131 118 120 120 113
Interest on federal funds sold and other short-term investments 866 832 844 494 408
Total interest income 40,503 40,208 40,026 40,151 40,141
Interest expense:
Interest on deposits:
Interest-bearing checking 120 116 114 115 117
Savings 504 604 604 608 603
Money market deposit accounts 463 467 496 513 537
Time deposits 2,468 2,460 2,373 2,375 2,544
Interest on short-term borrowings 281 262 257 278 290
Total interest expense 3,836 3,909 3,844 3,889 4,091
Net interest income 36,667 36,299 36,182 36,262 36,050
Provision for loan losses 750 800 800 1,300 800
Net interest income after provision for loan losses 35,917 35,499 35,382 34,962 35,250
Noninterest income:
Trustco Financial Services income 1,347 1,512 1,605 1,489 1,351
Fees for services to customers 2,664 2,737 2,661 2,704 2,770
Net gain on securities transactions - 668 - 2 -
Other 718 282 306 235 244
Total noninterest income 4,729 5,199 4,572 4,430 4,365
Noninterest expenses:
Salaries and employee benefits 8,995 8,934 9,003 8,042 7,834
Net occupancy expense 3,887 3,918 4,088 3,884 3,929
Equipment expense 1,596 1,840 1,514 1,530 1,596
Professional services 1,959 2,098 2,146 2,067 2,238
Outsourced services 1,465 1,425 1,551 1,585 1,425
Advertising expense 489 570 729 592 668
FDIC and other insurance 1,127 1,949 1,990 2,055 2,202
Other real estate expense, net 895 423 519 570 806
Other 2,636 2,817 1,899 2,783 2,766
Total noninterest expenses 23,049 23,974 23,439 23,108 23,464
Income before taxes 17,597 16,724 16,515 16,284 16,151
Income taxes 6,667 6,260 6,106 6,104 5,535
Net income$ 10,930 10,464 10,409 10,180 10,616
Net income per common share:
- Basic$ 0.114 0.110 0.109 0.107 0.112
- Diluted 0.114 0.109 0.109 0.107 0.111
Average basic shares (in thousands) 95,603 95,487 95,365 95,256 95,149
Average diluted shares (in thousands) 95,722 95,580 95,412 95,349 95,234
Note: Taxable equivalent net interest income$ 36,681 36,311 36,196 36,278 36,069
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Nine Months Ended
9/30/20169/30/2015
Interest and dividend income:
Interest and fees on loans$ 107,428 105,957
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 1,067 1,162
State and political subdivisions 40 71
Mortgage-backed securities and collateralized mortgage obligations-residential 6,114 6,899
Corporate bonds 97 1
Small Business Administration-guaranteed participation securities 1,371 1,522
Mortgage-backed securities and collateralized mortgage obligations-commercial 110 112
Other securities 12 12
Total interest and dividends on securities available for sale 8,811 9,779
Interest on held to maturity securities:
Mortgage-backed securities-residential 1,123 1,419
Corporate bonds 464 461
Total interest on held to maturity securities 1,587 1,880
Federal Reserve Bank and Federal Home Loan Bank stock 369 347
Interest on federal funds sold and other short-term investments 2,542 1,231
Total interest income 120,737 119,194
Interest expense:
Interest on deposits:
Interest-bearing checking 350 333
Savings 1,712 1,860
Money market deposit accounts 1,426 1,701
Time deposits 7,301 7,478
Interest on short-term borrowings 800 936
Total interest expense 11,589 12,308
Net interest income 109,148 106,886
Provision for loan losses 2,350 2,400
Net interest income after provision for loan losses 106,798 104,486
Noninterest income:
Trust department income 4,464 4,482
Fees for services to customers 8,062 7,985
Net gain on securities transactions 668 249
Other 1,306 726
Total noninterest income 14,500 13,442
Noninterest expenses:
Salaries and employee benefits 26,932 24,479
Net occupancy expense 11,893 11,915
Equipment expense 4,950 5,341
Professional services 6,203 5,811
Outsourced services 4,441 4,275
Advertising expense 1,788 2,001
FDIC and other insurance 5,066 4,284
Other real estate (income) expense, net 1,837 1,431
Other 7,352 7,915
Total noninterest expenses 70,462 67,452
Income before taxes 50,836 50,476
Income taxes 19,033 18,418
Net income$ 31,803 32,058
Net income per Common Share:
- Basic$ 0.333 0.337
- Diluted 0.333 0.337
Average basic shares (thousands) 95,486 95,051
Average diluted shares (thousands) 95,572 95,167
Note: Taxable equivalent net interest income$ 109,188 106,944
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
9/30/20166/30/20163/31/201612/31/20159/30/2015
ASSETS:
Cash and due from banks$ 42,296 39,787 37,373 41,698 42,560
Federal funds sold and other short term investments 622,132 718,609 722,805 676,458 655,512
Total cash and cash equivalents 664,428 758,396 760,178 718,156 698,072
Securities available for sale:
U. S. government sponsored enterprises 116,327 116,595 66,920 86,737 103,492
States and political subdivisions 970 974 974 1,290 1,963
Mortgage-backed securities and collateralized mortgage obligations-residential 400,575 404,138 422,189 411,729 413,878
Small Business Administration-guaranteed participation securities 84,687 87,740 89,053 90,416 94,038
Mortgage-backed securities and collateralized mortgage obligations-commercial 10,233 10,374 10,307 10,180 10,491
Corporate bonds 41,025 - - - -
Other securities 685 685 685 685 685
Total securities available for sale 654,502 620,506 590,128 601,037 624,547
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 38,044 40,702 43,595 46,490 50,027
Corporate bonds 9,986 9,982 9,979 9,975 9,971
Total held to maturity securities 48,030 50,684 53,574 56,465 59,998
Federal Reserve Bank and Federal Home Loan Bank stock 9,579 9,579 9,480 9,480 9,480
Loans:
Commercial 189,795 195,698 198,765 203,415 208,794
Residential mortgage loans 2,845,876 2,786,951 2,737,784 2,721,173 2,707,944
Home equity line of credit 343,445 352,069 356,163 359,325 356,337
Installment loans 8,515 8,476 8,667 9,391 8,930
Loans, net of deferred fees and costs 3,387,631 3,343,194 3,301,379 3,293,304 3,282,005
Less:
Allowance for loan losses 43,950 44,064 44,398 44,762 45,149
Net loans 3,343,681 3,299,130 3,256,981 3,248,542 3,236,856
Bank premises and equipment, net 36,110 36,793 37,360 37,643 37,506
Other assets 56,519 55,825 55,561 63,669 59,358
Total assets$ 4,812,849 4,830,913 4,763,262 4,734,992 4,725,817
LIABILITIES:
Deposits:
Demand$ 380,090 376,669 359,060 365,081 354,162
Interest-bearing checking 785,118 766,322 746,562 754,347 719,071
Savings accounts 1,277,734 1,282,006 1,272,394 1,262,194 1,237,549
Money market deposit accounts 566,097 577,063 595,585 610,826 617,103
Time deposits 1,159,199 1,178,567 1,168,887 1,107,930 1,168,908
Total deposits 4,168,238 4,180,627 4,142,488 4,100,378 4,096,793
Short-term borrowings 179,204 190,542 169,528 191,226 184,405
Accrued expenses and other liabilities 29,799 29,479 28,221 30,078 32,327
Total liabilities 4,377,241 4,400,648 4,340,237 4,321,682 4,313,525
SHAREHOLDERS' EQUITY:
Capital stock 99,121 99,071 98,973 98,973 98,964
Surplus 171,093 171,174 171,113 171,443 171,788
Undivided profits 197,013 192,356 188,159 184,009 180,093
Accumulated other comprehensive income (loss), net of tax 2,328 2,395 73 (4,781) (1,174)
Treasury stock at cost (33,947) (34,731) (35,293) (36,334) (37,379)
Total shareholders' equity 435,608 430,265 423,025 413,310 412,292
Total liabilities and shareholders' equity$ 4,812,849 4,830,913 4,763,262 4,734,992 4,725,817
Outstanding shares (in thousands) 95,614 95,493 95,369 95,262 95,149

NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
09/30/1606/30/1603/31/1612/31/1509/30/15
New York and other states*
Loans in nonaccrual status:
Commercial$ 2,366 2,690 2,762 3,024 3,699
Real estate mortgage - 1 to 4 family 21,678 23,559 25,669 23,273 26,059
Installment 70 49 74 90 69
Total non-accrual loans 24,114 26,298 28,505 26,387 29,827
Other nonperforming real estate mortgages - 1 to 4 family 44 45 47 48 50
Total nonperforming loans 24,158 26,343 28,552 26,435 29,877
Other real estate owned 4,768 4,602 5,208 6,120 5,893
Total nonperforming assets$ 28,926 30,945 33,760 32,555 35,770
Florida
Loans in nonaccrual status:
Commercial$ - - - - -
Real estate mortgage - 1 to 4 family 1,844 1,900 1,802 1,817 2,054
Installment - - - 8 9
Total non-accrual loans 1,844 1,900 1,802 1,825 2,063
Other nonperforming real estate mortgages - 1 to 4 family - - - - -
Total nonperforming loans 1,844 1,900 1,802 1,825 2,063
Other real estate owned - - 476 335 -
Total nonperforming assets$ 1,844 1,900 2,278 2,160 2,063
Total
Loans in nonaccrual status:
Commercial$ 2,366 2,690 2,762 3,024 3,699
Real estate mortgage - 1 to 4 family 23,522 25,459 27,471 25,090 28,113
Installment 70 49 74 98 78
Total non-accrual loans 25,958 28,198 30,307 28,212 31,890
Other nonperforming real estate mortgages - 1 to 4 family 44 45 47 48 50
Total nonperforming loans 26,002 28,243 30,354 28,260 31,940
Other real estate owned 4,768 4,602 5,684 6,455 5,893
Total nonperforming assets$ 30,770 32,845 36,038 34,715 37,833
Quarterly Net Chargeoffs (Recoveries)
09/30/1606/30/1603/31/1612/31/1509/30/15
New York and other states*
Commercial$ 353 67 224 672 3
Real estate mortgage - 1 to 4 family 471 973 771 963 1,159
Installment 37 77 70 35 26
Total net chargeoffs$ 861 1,117 1,065 1,670 1,188
Florida
Commercial$ - - - (2) (3)
Real estate mortgage - 1 to 4 family - 16 83 6 33
Installment 3 1 16 13 4
Total net chargeoffs$ 3 17 99 17 34
Total
Commercial$ 353 67 224 670 -
Real estate mortgage - 1 to 4 family 471 989 854 969 1,192
Installment 40 78 86 48 30
Total net chargeoffs$ 864 1,134 1,164 1,687 1,222
Asset Quality Ratios
09/30/1606/30/1603/31/1612/31/1509/30/15
Total nonperforming loans(1)$ 26,002 28,243 30,354 28,260 31,940
Total nonperforming assets(1) 30,770 32,845 36,038 34,715 37,833
Total net chargeoffs(2) 864 1,134 1,164 1,687 1,222
Allowance for loan losses(1) 43,950 44,064 44,398 44,762 45,149
Nonperforming loans to total loans 0.77% 0.84% 0.92% 0.86% 0.97%
Nonperforming assets to total assets 0.64% 0.68% 0.76% 0.73% 0.80%
Allowance for loan losses to total loans 1.30% 1.32% 1.34% 1.36% 1.38%
Coverage ratio(1) 169.0% 156.0% 146.3% 158.4% 141.4%
Annualized net chargeoffs to average loans(2) 0.10% 0.14% 0.14% 0.21% 0.15%
Allowance for loan losses to annualized net chargeoffs(2) 12.7x 9.7x 9.5x 6.6x 9.3x
* 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, 2016 September 30, 2015
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$ 109,488 408 1.49%$ 157,454 584 1.48%
Mortgage backed securities and
collateralized mortgage obligations-residential 400,103 1,829 1.83 425,092 2,230 2.10
State and political subdivisions 953 20 8.39 1,937 34 7.02
Corporate bonds 27,161 97 1.43 - - -
Small Business Administration-guaranteed participation securities 85,305 445 2.09 96,109 497 2.07
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,247 36 1.41 10,532 37 1.41
Other 685 4 2.34 685 4 2.34
Total securities available for sale 633,942 2,839 1.79 691,809 3,386 1.96
Federal funds sold and other
short-term Investments 683,777 866 0.50 652,274 408 0.25
Held to maturity securities:
Corporate bonds 10,644 156 5.86 9,969 153 6.17
Mortgage backed securities and
collateralized mortgage obligations-residential 39,307 347 3.53 51,928 461 3.55
Total held to maturity securities 49,951 503 4.03 61,897 614 3.97
Federal Reserve Bank and Federal Home Loan Bank stock 9,579 131 5.47 9,480 113 4.77
Commercial loans 195,115 2,597 5.32 208,492 2,688 5.15
Residential mortgage loans 2,819,343 30,175 4.28 2,689,072 29,617 4.41
Home equity lines of credit 346,744 3,211 3.70 354,552 3,151 3.53
Installment loans 8,331 195 9.36 8,678 183 8.33
Loans, net of unearned income 3,369,533 36,178 4.29 3,260,794 35,639 4.37
Total interest earning assets 4,746,782 40,517 3.41 4,676,254 40,160 3.43
Allowance for loan losses (44,473) (45,829)
Cash & non-interest earning assets 137,462 133,241
Total assets$ 4,839,771 $ 4,763,666
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$ 780,058 120 0.06%$ 727,693 117 0.06%
Money market accounts 571,333 463 0.32 623,381 537 0.34
Savings 1,284,533 504 0.16 1,251,031 603 0.19
Time deposits 1,176,115 2,468 0.84 1,189,763 2,544 0.85
Total interest bearing deposits 3,812,039 3,555 0.37 3,791,868 3,801 0.40
Short-term borrowings 189,910 281 0.59 177,230 290 0.65
Total interest bearing liabilities 4,001,949 3,836 0.38 3,969,098 4,091 0.41
Demand deposits 377,455 360,080
Other liabilities 27,496 27,524
Shareholders' equity 432,871 406,964
Total liabilities and shareholders' equity$ 4,839,771 $ 4,763,666
Net interest income, tax equivalent 36,681 36,069
Net interest spread 3.03% 3.02%
Net interest margin (net interest income
to total interest earning assets) 3.09% 3.08%
Tax equivalent adjustment (14) (19)
Net interest income 36,667 36,050
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands) Nine months ended Nine months ended
(Unaudited) September 30, 2016 September 30, 2015
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$ 97,281 1,067 1.46%$ 116,824 1,162 1.33%
Mortgage backed securities and
collateralized mortgage obligations-residential 419,185 6,114 1.94 448,223 6,899 2.05
State and political subdivisions 1,007 60 7.94 1,989 108 7.32
Corporate bonds 9,120 97 1.42 813 1 0.16
Small Business Administration-guaranteed participation securities 87,896 1,371 2.08 98,868 1,522 2.05
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,320 110 1.42 10,600 112 1.41
Other 683 12 2.34 685 12 2.34
Total securities available for sale 625,492 8,831 1.88 678,002 9,816 1.93
Federal funds sold and other
short-term Investments 675,948 2,542 0.50 662,879 1,231 0.25
Held to maturity securities:
Corporate bonds 10,202 464 6.06 9,965 461 6.17
Mortgage backed securities and
collateralized mortgage obligations-residential 42,192 1,123 3.55 55,569 1,419 3.41
Total held to maturity securities 52,394 1,587 4.04 65,534 1,880 3.83
Federal Reserve Bank and Federal Home Loan Bank stock 9,545 369 5.15 9,392 347 4.93
Commercial loans 198,461 7,777 5.22 212,617 8,194 5.14
Residential mortgage loans 2,768,579 89,523 4.31 2,644,216 87,946 4.44
Home equity lines of credit 353,461 9,569 3.61 353,630 9,304 3.52
Installment loans 8,435 579 9.15 8,236 534 8.66
Loans, net of unearned income 3,328,936 107,448 4.30 3,218,699 105,978 4.39
Total interest earning assets 4,692,315 120,777 3.43 4,634,506 119,252 3.43
Allowance for loan losses (44,832) (46,203)
Cash & non-interest earning assets 136,584 136,906
Total assets$ 4,784,067 $ 4,725,209
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$ 758,314 350 0.06%$ 704,323 333 0.06%
Money market accounts 585,019 1,426 0.33 632,143 1,701 0.36
Savings 1,273,565 1,712 0.18 1,243,544 1,860 0.20
Time deposits 1,162,603 7,301 0.84 1,186,846 7,478 0.84
Total interest bearing deposits 3,779,501 10,789 0.38 3,766,856 11,372 0.40
Short-term borrowings 182,453 800 0.58 184,079 936 0.68
Total interest bearing liabilities 3,961,954 11,589 0.39 3,950,935 12,308 0.42
Demand deposits 368,852 344,606
Other liabilities 27,179 26,689
Shareholders' equity 426,082 402,979
Total liabilities and shareholders' equity$ 4,784,067 $ 4,725,209
Net interest income, tax equivalent 109,188 106,944
Net interest spread 3.04% 3.01%
Net interest margin (net interest income
to total interest earning assets) 3.10% 3.08%
Tax equivalent adjustment (40) (58)
Net interest income 109,148 106,886

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)
09/30/1606/30/1609/30/15
Tangible Book Value Per Share
Equity$ 435,608 430,265 412,292
Less: Intangible assets 553 553 553
Tangible equity 435,055 429,712 411,739
Shares outstanding 95,614 95,493 95,149
Tangible book value per share 4.55 4.50 4.33
Book value per share 4.56 4.51 4.33
Tangible Equity to Tangible Assets
Total Assets 4,812,849 4,830,913 4,725,817
Less: Intangible assets 553 553 553
Tangible assets 4,812,296 4,830,360 4,725,264
Tangible Equity to Tangible Assets 9.04% 8.90% 8.71%
Equity to Assets 9.05% 8.91% 8.72%
3 Months Ended 9 Months Ended
Efficiency Ratio 09/30/1606/30/1609/30/15 09/30/1609/30/15
Net interest income$ 36,667 36,299 36,050 109,148 106,886
Taxable equivalent adjustment 14 12 19 40 58
Net interest income (fully taxable equivalent) 36,681 36,311 36,069 109,188 106,944
Non-interest income 4,729 5,199 4,365 14,500 13,442
Less: Net gain on sale of building 469 - - 469 -
Less: Net gain on sale of nonperforming loans - 24 - 24 60
Less: Net gain on securities - 668 - 668 249
Revenue used for efficiency ratio 40,941 40,818 40,434 122,527 120,077
Total noninterest expense 23,049 23,974 23,464 70,462 67,452
Less: Other real estate expense, net 895 423 806 1,837 1,431
Expense used for efficiency ratio 22,154 23,551 22,658 68,625 66,021
Efficiency Ratio 54.11% 57.70% 56.04% 56.01% 54.98%

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

Source:TrustCo Bank Corp NY