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TrustCo Announces Increased Fourth Quarter and Full Year 2016 Earnings

Executive Snapshot:

  • Continued solid financial results:
    -Key metrics for fourth quarter of 2016 results:
    -Net income of $10.8 million in the fourth quarter of 2016 compared to $10.2 million in the fourth quarter of 2015
    -Return on average assets (ROA) of 0.89% compared to 0.86% in Q4/2015
    -Return on average equity (ROE) of 9.87% compared to 9.75% in Q4/2015
    -Efficiency ratio of 54.65% compared to 55.37% in Q4/2015 (Non-GAAP measure; see Non-GAAP Financial Measures Reconciliation for definition)
  • Asset quality remains solid:
    -Asset quality measures improved compared to the fourth quarter of 2015
    -Nonperforming assets (NPAs) fell by $5.4 million compared to December 31, 2015
    -NPAs to total assets improved to 0.60%, compared to 0.73% at December 31, 2015
    -Quarterly net chargeoffs decreased to 0.08% of average loans on an annualized basis, compared to 0.21% for the fourth 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 $661 thousand from December 31, 2015 to December 31, 2016 on a same store basis
    -Average deposits per branch were $28.9 million at December 31, 2016
    -Average core deposits were $41 million higher in the fourth quarter of 2016 compared to the fourth quarter of 2015
  • Loan portfolio reaches all-time high:
    -Average loans were up $123 million for the fourth quarter of 2016 compared to fourth quarter of 2015
    -At $3.43 billion as of December 31, 2016, loans reached an all-time high

GLENVILLE, N.Y., Jan. 23, 2017 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced fourth quarter of 2016 net income of $10.8 million compared to $10.2 million for the fourth quarter of 2015, an increase of 6.1%.

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased to be able to report an increase in earnings in the fourth quarter of 2016 as compared to the fourth quarter of 2015. Continued revenue growth coupled with moderating expense increases provided an encouraging end to the year. Our 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 2017 and beyond. Recent merger activity between our competitors, primarily the Key – First Niagara merger, provided us additional opportunities to add customers.”

TrustCo saw continued solid loan growth in the fourth quarter of 2016 compared to the prior year, led by an increase in residential mortgages. Loan portfolio expansion was funded primarily by growth of our deposit base. The continued shift toward loans helped offset the margin impact from continued comparatively low yields on cash and investments, although the recent move by the Federal Reserve to raise rates late in the fourth quarter will provide a benefit in the first quarter of 2017. The growth in average deposits in the fourth quarter of 2016 versus the prior year was led by lower cost checking and savings 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 2016, return on average assets and return on average equity were 0.89% and 9.87%, respectively, compared to 0.86% and 9.75% for the fourth quarter of 2015. Diluted earnings per share were $0.113 for the fourth quarter of 2016, compared to $0.107 for the fourth quarter of 2015. As discussed in recent quarters, increased operating costs in response to regulatory concerns have pushed overall expense levels higher. However costs actually declined modestly in the second half of 2016 as compared to the first half and we anticipate being able to control expense growth effectively in 2017. Some of the costs associated with regulatory issues will be recurring, but others will diminish over time.

For the full year 2016, diluted net income per share was $0.445, compared to $0.444 for the full year 2015. Return on average assets and equity were 0.89% and 9.94% for 2016, compared to 0.89% and 10.41% for 2015. The decline in return on equity was attributable to the 4.7% increase in shareholders’ equity from December 31, 2015 to December 31, 2016.

Average loans were up $122.8 million or 3.7% in the fourth quarter of 2016, over the same period in 2015. Average residential loans, our primary lending focus, were up $155.7 million or 5.7% in the fourth quarter of 2016, over the same period in 2015. Overall loan growth was constrained by a $13.8 million decline in commercial loans, which have become less attractive on a risk adjusted basis, and an $18.4 million decline in outstandings on home equity lines of credit, as well as a small decline in installment loans. Average deposits were up $71.1 million or 1.7% for the fourth 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, although checking and savings were entirely responsible for the growth within core deposits. Average core deposits increased $40.7 million from the fourth quarter of 2015 to the fourth quarter of 2016, while average time deposit balances contributed $30.4 million of growth. Within core, money market balances were actually down $50.5 million, while checking was up $73.7 million (including interest bearing and non-interest bearing balances) and savings were up $17.4 million. Core deposits typically represent longer term customer relationships and are generally lower cost than time deposits. The shift out of money market balances was also beneficial, as that category is the most expensive type of core deposit. 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 December 31, 2016, our average deposits per branch were $28.9 million, compared to $28.1 million a year earlier. 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 improved versus December 31, 2015. Nonperforming loans (NPLs) were $25.1 million at December 31, 2016, compared to $28.3 million at December 31, 2015. NPLs were equal to 0.73% of total loans at December 31, 2016, compared to 0.86% at December 31, 2015. The coverage ratio, or allowance for loan losses to NPLs, was 175.1% at December 31, 2016, compared to 158.4% at December 31, 2015. Nonperforming assets (NPAs) were $29.3 million at December 31, 2016 compared to $34.7 million at December 31, 2015. The ratio of loan loss allowance to total loans was 1.28% as of December 31, 2016, compared 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 $43.9 million at December 31, 2016 compared to $44.8 million at December 31, 2015. Net chargeoffs for the fourth quarter of 2016 decreased versus the fourth quarter of 2015, falling to $660 thousand from $1.7 million in the year earlier period. The annualized net chargeoff ratio was 0.08% for the fourth quarter of 2016, compared to 0.21% in the fourth quarter of 2015 and was at the lowest level since the first quarter of 2008. The provision for loan losses was $600 thousand, compared to $1.3 million in the fourth quarter of 2015.

The net interest margin for the fourth quarter of 2016 was 3.13%, up four basis points from the third quarter of 2016 and down a basis point versus the fourth quarter of 2015.

At December 31, 2016 the equity to asset ratio was 8.89%, compared to 8.73% at December 31, 2015. The tangible equity ratio was 8.88% compared to 8.72% at December 31, 2015. GAAP book value per share at December 31, 2016 was $4.52 compared to $4.34 a year earlier and tangible book value per share was $4.51 and $4.33, respectively. Tangible equity ratio and tangible book value per share are non-GAAP measures and are discussed in the Non-GAAP Financial Measures Reconciliation.

TrustCo Bank Corp NY is a $4.9 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 December 31, 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 Fourth Quarter 2016 results will be held at 9:00 a.m. Eastern Time on January 24, 2017. 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 10099604. The call will also be audio webcast at: http://services.choruscall.com/links/trst170124.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 2017 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
12/31/1609/30/1612/31/15
Summary of operations
Net interest income (TE)$ 36,921 36,681 36,278
Provision for loan losses 600 750 1,300
Net gain on securities transactions - - 2
Noninterest income, excluding net gain on securities transactions 4,512 4,729 4,428
Noninterest expense 23,365 23,049 23,108
Net income 10,798 10,930 10,180
Per common share
Net income per share:
- Basic$ 0.113 0.114 0.107
- Diluted 0.113 0.114 0.107
Cash dividends 0.066 0.066 0.066
Tangible Book value at period end 4.51 4.55 4.33
Market price at period end 8.75 7.09 6.14
At period end
Full time equivalent employees 808 790 787
Full service banking offices 145 145 146
Performance ratios
Return on average assets 0.89%0.90 0.86
Return on average equity 9.87 10.05 9.75
Efficiency (1) 54.65 54.11 55.37
Net interest spread (TE) 3.07 3.03 3.08
Net interest margin (TE) 3.13 3.09 3.14
Dividend payout ratio 58.20 57.40 61.54
Capital ratio at period end
Consolidated tangible equity to tangible assets (2) 8.88 9.04 8.72
Asset quality analysis at period end
Nonperforming loans to total loans 0.73 0.77 0.86
Nonperforming assets to total assets 0.60 0.64 0.73
Allowance for loan losses to total loans 1.28 1.30 1.36
Coverage ratio (3) 1.8x 1.6 1.6
(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 $553 of intangibles from both equity and assets.
(3) Calculated as allowance for loan losses divided by total nonperforming loans.
TE = Taxable equivalent.
FINANCIAL HIGHLIGHTS, Continued
(dollars in thousands, except per share data)
(Unaudited)
Years Ended
12/31/1612/31/15
Summary of operations
Net interest income (TE)$ 146,109 143,222
Provision for loan losses 2,950 3,700
Net gain on securities transactions 668 251
Noninterest income, excluding net gain on securities transactions 18,344 17,621
Noninterest expense 93,827 90,560
Net income 42,601 42,238
Per common share
Net income per share:
- Basic$ 0.446 0.444
- Diluted 0.445 0.444
Cash dividends 0.263 0.263
Tangible Book value at period end 4.51 4.33
Market price at period end 8.75 6.14
Performance ratios
Return on average assets 0.89%0.89
Return on average equity 9.94 10.41
Efficiency (1) 55.67 55.08
Net interest spread (TE) 3.05 3.03
Net interest margin (TE) 3.11 3.09
Dividend payout ratio 58.88 59.13
(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
12/31/20169/30/20166/30/20163/31/201612/31/2015
Interest and dividend income:
Interest and fees on loans$ 36,251 36,171 35,652 35,605 35,930
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 422 408 404 255 256
State and political subdivisions 12 13 13 14 16
Mortgage-backed securities and collateralized mortgage obligations-residential 1,849 1,829 2,169 2,116 2,233
Corporate bonds 149 97 - - -
Small Business Administration-guaranteed participation securities 430 445 450 476 482
Mortgage-backed securities and collateralized mortgage obligations-commercial 23 36 38 36 37
Other securities 4 4 4 4 4
Total interest and dividends on securities available for sale 2,889 2,832 3,078 2,901 3,028
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 331 347 374 402 425
Corporate bonds 153 156 154 154 154
Total interest on held to maturity securities 484 503 528 556 579
Federal Reserve Bank and Federal Home Loan Bank stock 133 131 118 120 120
Interest on federal funds sold and other short-term investments 865 866 832 844 494
Total interest income 40,622 40,503 40,208 40,026 40,151
Interest expense:
Interest on deposits:
Interest-bearing checking 123 120 116 114 115
Savings 436 504 604 604 608
Money market deposit accounts 459 463 467 496 513
Time deposits 2,406 2,468 2,460 2,373 2,375
Interest on short-term borrowings 291 281 262 257 278
Total interest expense 3,715 3,836 3,909 3,844 3,889
Net interest income 36,907 36,667 36,299 36,182 36,262
Provision for loan losses 600 750 800 800 1,300
Net interest income after provision for loan losses 36,307 35,917 35,499 35,382 34,962
Noninterest income:
Trustco Financial Services income 1,422 1,347 1,512 1,605 1,489
Fees for services to customers 2,795 2,664 2,737 2,661 2,704
Net gain on securities transactions - - 668 - 2
Other 295 718 282 306 235
Total noninterest income 4,512 4,729 5,199 4,572 4,430
Noninterest expenses:
Salaries and employee benefits 9,576 8,995 8,934 9,003 8,042
Net occupancy expense 4,185 3,887 3,918 4,088 3,884
Equipment expense 1,370 1,596 1,840 1,514 1,530
Professional services 1,997 1,959 2,098 2,146 2,067
Outsourced services 1,775 1,465 1,425 1,551 1,585
Advertising expense 727 489 570 729 592
FDIC and other insurance 901 1,127 1,949 1,990 2,055
Other real estate expense, net 721 895 423 519 570
Other 2,113 2,636 2,817 1,899 2,783
Total noninterest expenses 23,365 23,049 23,974 23,439 23,108
Income before taxes 17,454 17,597 16,724 16,515 16,284
Income taxes 6,656 6,667 6,260 6,106 6,104
Net income$ 10,798 10,930 10,464 10,409 10,180
Net income per common share:
- Basic$0.113 0.114 0.110 0.109 0.107
- Diluted 0.113 0.114 0.109 0.109 0.107
Average basic shares (in thousands) 95,732 95,603 95,487 95,365 95,256
Average diluted shares (in thousands) 95,877 95,722 95,580 95,412 95,349
Note: Taxable equivalent net interest income$ 36,921 36,681 36,311 36,196 36,278
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Years Ended
12/31/201612/31/2015
Interest and dividend income:
Interest and fees on loans$ 143,679 141,887
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 1,489 1,418
State and political subdivisions 52 87
Mortgage-backed securities and collateralized mortgage obligations-residential 7,963 9,132
Corporate bonds 246 1
Small Business Administration-guaranteed participation securities 1,801 2,004
Mortgage-backed securities and collateralized mortgage obligations-commercial 133 149
Other securities 16 16
Total interest and dividends on securities available for sale 11,700 12,807
Interest on held to maturity securities:
Mortgage-backed securities-residential 1,454 1,844
Corporate bonds 617 615
Total interest on held to maturity securities 2,071 2,459
Federal Reserve Bank and Federal Home Loan Bank stock 502 467
Interest on federal funds sold and other short-term investments 3,407 1,725
Total interest income 161,359 159,345
Interest expense:
Interest on deposits:
Interest-bearing checking 473 448
Savings 2,148 2,468
Money market deposit accounts 1,885 2,214
Time deposits 9,707 9,853
Interest on short-term borrowings 1,091 1,214
Total interest expense 15,304 16,197
Net interest income 146,055 143,148
Provision for loan losses 2,950 3,700
Net interest income after provision for loan losses 143,105 139,448
Noninterest income:
Trust department income 5,886 5,971
Fees for services to customers 10,857 10,689
Net gain on securities transactions 668 251
Other 1,601 961
Total noninterest income 19,012 17,872
Noninterest expenses:
Salaries and employee benefits 36,508 32,521
Net occupancy expense 16,078 15,799
Equipment expense 6,320 6,871
Professional services 8,200 7,878
Outsourced services 6,216 5,860
Advertising expense 2,515 2,593
FDIC and other insurance 5,967 6,339
Other real estate (income) expense, net 2,558 2,001
Other 9,465 10,698
Total noninterest expenses 93,827 90,560
Income before taxes 68,290 66,760
Income taxes 25,689 24,522
Net income$ 42,601 42,238
Net income per Common Share:
- Basic$0.446 0.444
- Diluted 0.445 0.444
Average basic shares (thousands) 95,548 95,103
Average diluted shares (thousands) 95,648 95,213
Note: Taxable equivalent net interest income$ 146,109 143,222
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
12/31/20169/30/20166/30/20163/31/201612/31/2015
ASSETS:
Cash and due from banks$48,719 42,296 39,787 37,373 41,698
Federal funds sold and other short term investments 658,555 622,132 718,609 722,805 676,458
Total cash and cash equivalents 707,274 664,428 758,396 760,178 718,156
Securities available for sale:
U. S. government sponsored enterprises 117,266 116,327 116,595 66,920 86,737
States and political subdivisions 886 970 974 974 1,290
Mortgage-backed securities and collateralized mortgage obligations-residential 372,308 400,575 404,138 422,189 411,729
Small Business Administration-guaranteed participation securities 78,499 84,687 87,740 89,053 90,416
Mortgage-backed securities and collateralized mortgage obligations-commercial 10,011 10,233 10,374 10,307 10,180
Corporate bonds 40,705 41,025 - - -
Other securities 685 685 685 685 685
Total securities available for sale 620,360 654,502 620,506 590,128 601,037
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 35,500 38,044 40,702 43,595 46,490
Corporate bonds 9,990 9,986 9,982 9,979 9,975
Total held to maturity securities 45,490 48,030 50,684 53,574 56,465
Federal Reserve Bank and Federal Home Loan Bank stock 9,579 9,579 9,579 9,480 9,480
Loans:
Commercial 191,194 189,795 195,698 198,765 203,415
Residential mortgage loans 2,895,733 2,845,876 2,786,951 2,737,784 2,721,173
Home equity line of credit 334,841 343,445 352,069 356,163 359,325
Installment loans 8,818 8,515 8,476 8,667 9,391
Loans, net of deferred fees and costs 3,430,586 3,387,631 3,343,194 3,301,379 3,293,304
Less:
Allowance for loan losses 43,890 43,950 44,064 44,398 44,762
Net loans 3,386,696 3,343,681 3,299,130 3,256,981 3,248,542
Bank premises and equipment, net 35,466 36,110 36,793 37,360 37,643
Other assets 63,941 56,519 55,825 55,561 63,669
Total assets$4,868,806 4,812,849 4,830,913 4,763,262 4,734,992
LIABILITIES:
Deposits:
Demand$377,755 380,090 376,669 359,060 365,081
Interest-bearing checking 815,534 785,118 766,322 746,562 754,347
Savings accounts 1,271,449 1,277,734 1,282,006 1,272,394 1,262,194
Money market deposit accounts 571,962 566,097 577,063 595,585 610,826
Time deposits 1,159,463 1,159,199 1,178,567 1,168,887 1,107,930
Total deposits 4,196,163 4,168,238 4,180,627 4,142,488 4,100,378
Short-term borrowings 209,406 179,204 190,542 169,528 191,226
Accrued expenses and other liabilities 30,551 29,799 29,479 28,221 30,078
Total liabilities 4,436,120 4,377,241 4,400,648 4,340,237 4,321,682
SHAREHOLDERS' EQUITY:
Capital stock 99,214 99,121 99,071 98,973 98,973
Surplus 171,425 171,093 171,174 171,113 171,443
Undivided profits 201,517 197,013 192,356 188,159 184,009
Accumulated other comprehensive income (loss), net of tax (6,251)2,328 2,395 73 (4,781)
Treasury stock at cost (33,219)(33,947)(34,731)(35,293)(36,334)
Total shareholders' equity 432,686 435,608 430,265 423,025 413,310
Total liabilities and shareholders' equity$4,868,806 4,812,849 4,830,913 4,763,262 4,734,992
Outstanding shares (in thousands) 95,780 95,614 95,493 95,369 95,262

NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
12/31/16 09/30/16 06/30/16 03/31/16 12/31/15
New York and other states*
Loans in nonaccrual status:
Commercial$ 1,843 2,366 2,690 2,762 3,024
Real estate mortgage - 1 to 4 family 21,198 21,678 23,559 25,669 23,273
Installment 48 70 49 74 90
Total non-accrual loans 23,089 24,114 26,298 28,505 26,387
Other nonperforming real estate mortgages - 1 to 4 family 42 44 45 47 48
Total nonperforming loans 23,131 24,158 26,343 28,552 26,435
Other real estate owned 4,268 4,768 4,602 5,208 6,120
Total nonperforming assets$ 27,399 28,926 30,945 33,760 32,555
Florida
Loans in nonaccrual status:
Commercial$- - - - -
Real estate mortgage - 1 to 4 family 1,929 1,844 1,900 1,802 1,817
Installment - - - - 8
Total non-accrual loans 1,929 1,844 1,900 1,802 1,825
Other nonperforming real estate mortgages - 1 to 4 family - - - - -
Total nonperforming loans 1,929 1,844 1,900 1,802 1,825
Other real estate owned - - - 476 335
Total nonperforming assets$ 1,929 1,844 1,900 2,278 2,160
Total
Loans in nonaccrual status:
Commercial$ 1,843 2,366 2,690 2,762 3,024
Real estate mortgage - 1 to 4 family 23,127 23,522 25,459 27,471 25,090
Installment 48 70 49 74 98
Total non-accrual loans 25,018 25,958 28,198 30,307 28,212
Other nonperforming real estate mortgages - 1 to 4 family 42 44 45 47 48
Total nonperforming loans 25,060 26,002 28,243 30,354 28,260
Other real estate owned 4,268 4,768 4,602 5,684 6,455
Total nonperforming assets$ 29,328 30,770 32,845 36,038 34,715
Quarterly Net Chargeoffs (Recoveries)
12/31/16 09/30/16 06/30/16 03/31/16 12/31/15
New York and other states*
Commercial$ (56) 353 67 224 672
Real estate mortgage - 1 to 4 family 619 471 973 771 963
Installment 55 37 77 70 35
Total net chargeoffs$ 618 861 1,117 1,065 1,670
Florida
Commercial$- - - - (2)
Real estate mortgage - 1 to 4 family 23 - 16 83 6
Installment 19 3 1 16 13
Total net chargeoffs$ 42 3 17 99 17
Total
Commercial$ (56) 353 67 224 670
Real estate mortgage - 1 to 4 family 642 471 989 854 969
Installment 74 40 78 86 48
Total net chargeoffs$ 660 864 1,134 1,164 1,687
Asset Quality Ratios
12/31/16 09/30/16 06/30/16 03/31/16 12/31/15
Total nonperforming loans(1)$ 25,060 26,002 28,243 30,354 28,260
Total nonperforming assets(1) 29,328 30,770 32,845 36,038 34,715
Total net chargeoffs(2) 660 864 1,134 1,164 1,687
Allowance for loan losses(1) 43,890 43,950 44,064 44,398 44,762
Nonperforming loans to total loans 0.73%0.77%0.84%0.92%0.86%
Nonperforming assets to total assets 0.60%0.64%0.68%0.76%0.73%
Allowance for loan losses to total loans 1.28%1.30%1.32%1.34%1.36%
Coverage ratio(1) 175.1%169.0%156.0%146.3%158.4%
Annualized net chargeoffs to average loans(2) 0.08%0.10%0.14%0.14%0.21%
Allowance for loan losses to annualized net chargeoffs(2) 16.6x 12.7x 9.7x 9.5x 6.6x
* Includes New York, New Jersey, Vermont and Massachusetts.
(1) At period-end
(2) For the period ended

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands) Three months ended Three months ended
(Unaudited) December 31, 2016 December 31, 2015
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$113,158 422 1.49% $80,605 256 1.27%
Mortgage backed securities and
collateralized mortgage obligations-residential 384,973 1,849 1.92 412,193 2,233 2.17
State and political subdivisions 943 19 8.06 1,280 25 7.78
Corporate bonds 41,039 149 1.45 - - -
Small Business Administration-guaranteed participation securities 81,922 430 2.10 93,329 482 2.07
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,173 23 0.90 10,464 37 1.41
Other 685 4 2.34 685 4 2.34
Total securities available for sale 632,893 2,896 1.83 598,556 3,037 2.03
Federal funds sold and other
short-term Investments 622,578 865 0.50 669,545 494 0.29
Held to maturity securities:
Corporate bonds 9,988 153 6.13 9,973 154 6.17
Mortgage backed securities and
collateralized mortgage obligations-residential 36,723 331 3.61 48,275 425 3.52
Total held to maturity securities 46,711 484 4.14 58,248 579 3.97
Federal Reserve Bank and Federal Home Loan Bank stock 9,579 133 5.55 9,480 120 5.06
Commercial loans 189,058 2,557 5.41 202,854 2,667 5.26
Residential mortgage loans 2,869,757 30,294 4.22 2,714,016 29,874 4.40
Home equity lines of credit 339,591 3,209 3.78 357,990 3,204 3.55
Installment loans 8,391 198 9.44 9,126 192 8.37
Loans, net of unearned income 3,406,797 36,258 4.26 3,283,986 35,937 4.37
Total interest earning assets 4,718,558 40,636 3.44 4,619,815 40,167 3.47
Allowance for loan losses (44,368) (45,467)
Cash & non-interest earning assets 137,372 136,209
Total assets$4,811,562 $4,710,557
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$782,979 123 0.06% $721,150 115 0.06%
Money market accounts 565,335 459 0.32 615,815 513 0.33
Savings 1,267,551 436 0.14 1,250,127 608 0.19
Time deposits 1,163,820 2,406 0.83 1,133,396 2,375 0.83
Total interest bearing deposits 3,779,685 3,424 0.36 3,720,488 3,611 0.39
Short-term borrowings 195,526 291 0.60 186,462 278 0.59
Total interest bearing liabilities 3,975,211 3,715 0.37 3,906,950 3,889 0.39
Demand deposits 372,801 360,916
Other liabilities 28,198 28,570
Shareholders' equity 435,352 414,121
Total liabilities and shareholders' equity$4,811,562 $4,710,557
Net interest income, tax equivalent 36,921 36,278
Net interest spread 3.07% 3.08%
Net interest margin (net interest income
to total interest earning assets) 3.13% 3.14%
Tax equivalent adjustment (14) (16)
Net interest income 36,907 36,262
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands) Year ended Year ended
(Unaudited) December 31, 2016 December 31, 2015
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$101,242 1,489 1.47% $107,436 1,418 1.32%
Mortgage backed securities and
collateralized mortgage obligations-residential 410,646 7,963 1.94 439,343 9,132 2.08
State and political subdivisions 991 80 8.07 1,812 133 7.40
Corporate bonds 17,088 246 1.44 613 1 0.16
Small Business Administration-guaranteed participation securities 86,407 1,801 2.08 97,496 2,004 2.06
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,284 133 1.29 10,566 149 1.41
Other 683 16 2.34 685 16 2.34
Total securities available for sale 627,341 11,728 1.87 657,951 12,853 1.95
Federal funds sold and other
short-term Investments 662,436 3,407 0.50 664,516 1,725 0.26
Held to maturity securities:
Corporate bonds 10,145 617 6.08 9,967 615 6.17
Mortgage backed securities and
collateralized mortgage obligations-residential 40,830 1,454 3.56 53,763 1,844 3.43
Total held to maturity securities 50,975 2,071 4.06 63,730 2,459 3.86
Federal Reserve Bank and Federal Home Loan Bank stock 9,554 502 5.25 9,414 467 4.96
Commercial loans 196,116 10,331 5.27 210,210 10,861 5.17
Residential mortgage loans 2,793,780 119,817 4.29 2,661,421 117,820 4.43
Home equity lines of credit 350,004 12,779 3.65 354,718 12,508 3.53
Installment loans 8,424 778 9.24 8,457 726 8.59
Loans, net of unearned income 3,348,324 143,705 4.29 3,234,806 141,915 4.39
Total interest earning assets 4,698,630 161,413 3.44 4,630,417 159,419 3.44
Allowance for loan losses (44,718) (46,023)
Cash & non-interest earning assets 136,789 136,752
Total assets$4,790,701 $4,721,146
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$764,399 473 0.06% $708,331 448 0.06%
Money market accounts 580,125 1,885 0.32 628,096 2,214 0.35
Savings 1,272,015 2,148 0.17 1,245,100 2,468 0.20
Time deposits 1,162,842 9,707 0.83 1,173,426 9,853 0.84
Total interest bearing deposits 3,779,381 14,213 0.38 3,754,953 14,983 0.40
Short-term borrowings 185,672 1,091 0.59 184,725 1,214 0.66
Total interest bearing liabilities 3,965,053 15,304 0.39 3,939,678 16,197 0.41
Demand deposits 369,820 348,552
Other liabilities 27,439 27,155
Shareholders' equity 428,389 405,761
Total liabilities and shareholders' equity$4,790,701 $4,721,146
Net interest income, tax equivalent 146,109 143,222
Net interest spread 3.05% 3.03%
Net interest margin (net interest income
to total interest earning assets) 3.11% 3.09%
Tax equivalent adjustment (54) (74)
Net interest income 146,055 143,148

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)
12/31/16 09/30/16 12/31/15
Tangible Book Value Per Share
Equity$ 432,686 435,608 413,310
Less: Intangible assets 553 553 553
Tangible equity 432,133 435,055 412,757
Shares outstanding 95,780 95,614 95,262
Tangible book value per share 4.51 4.55 4.33
Book value per share 4.52 4.56 4.34
Tangible Equity to Tangible Assets
Total Assets 4,868,806 4,812,849 4,734,992
Less: Intangible assets 553 553 553
Tangible assets 4,868,253 4,812,296 4,734,439
Tangible Equity to Tangible Assets 8.88%9.04%8.72%
Equity to Assets 8.89%9.05%8.73%
3 Months Ended Years Ended
Efficiency Ratio 12/31/16 09/30/16 12/31/15 12/31/16 12/31/15
Net interest income$ 36,907 36,667 36,262 146,055 143,148
Taxable equivalent adjustment 14 14 16 54 74
Net interest income (fully taxable equivalent) 36,921 36,681 36,278 146,109 143,222
Non-interest income 4,512 4,729 4,430 19,012 17,872
Less: Net gain on sale of building - 469 - 469 -
Less: Net gain on sale of nonperforming loans - - - 24 60
Less: Net gain on securities - - 2 668 251
Revenue used for efficiency ratio 41,433 40,941 40,706 163,960 160,783
Total noninterest expense 23,365 23,049 23,108 93,827 90,560
Less: Other real estate expense, net 721 895 570 2,558 2,001
Expense used for efficiency ratio 22,644 22,154 22,538 91,269 88,559
Efficiency Ratio 54.65%54.11%55.37% 55.67%55.08%


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

Source: TrustCo Bank Corp NY