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TrustCo Announces 17% Increase in Second Quarter 2017 Earnings

Executive Snapshot:

  • Continued solid financial results:
    • Key metrics for Second quarter of 2017 results:
      • Net income of $12.2 million in the second quarter of 2017, up 17.0% compared to $10.5 million in the second quarter of 2016
      • Return on average assets (ROA) of 1.00% compared to 0.88% in the second quarter of 2016
      • Return on average equity (ROE) of 11.05% compared to 9.88% in the second quarter of 2016
      • Efficiency ratio of 53.33% compared to 57.70% in the second quarter of 2016 (Non-GAAP measure; see P. 14 for definition)
  • Asset quality remains solid:
    • Asset quality measures improved compared to the second quarter of 2016
    • Nonperforming assets (NPAs) fell by $4.7 million compared to June 30, 2016
    • NPAs to total assets improved to 0.57%, compared to 0.68% at June 30, 2016
    • Quarterly net chargeoffs decreased to 0.05% of average loans on an annualized basis, compared to 0.14% for the second quarter of 2016, 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 $399 thousand to $29.2 million from June 30, 2016 to June 30, 2017
    • Average core (non-maturity) deposits were $110 million higher in the second quarter of 2017 compared to the second quarter of 2016
  • Loan portfolio reaches all-time high:
    • Average loans were up $150 million for the second quarter of 2017 compared to second quarter of 2016
    • At $3.51 billion as of June 30, 2017, loans reached an all-time high


TrustCo Announces 17% Increase in Second Quarter 2017 Earnings

GLENVILLE, N.Y., July 21, 2017 (GLOBE NEWSWIRE) --

TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced second quarter of 2017 net income of $12.2 million compared to $10.5 million for the second quarter of 2016, an increase of 17.0%.

Summary

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased to be able to report a 17% increase in net income in the second quarter of 2017 as compared to the second quarter of 2016. Improved revenue growth and expense control combined to produce a solid quarter and an encouraging first half of 2017. 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 the balance of 2017 and beyond.”

TrustCo saw continued solid loan growth in the second quarter of 2017 compared to the prior year, led by an increase in residential mortgages. Loan portfolio expansion was funded by a combination of utilizing a portion of our strong cash balances and by the growth of our deposit base. The continued shift toward loans helped offset the margin impact from continued comparatively low yields on cash and investments. Recent decisions by the Federal Reserve to raise short term interest rates have contributed to our results and will provide a further benefit in the second half of 2017 and beyond. The growth in average deposits in the second quarter of 2017 versus the prior year was led by lower cost checking and savings deposits. TrustCo’s strong liquidity position continues to allow it to take advantage of opportunities as they arise.

Asset quality measures improved versus June 30, 2016, with nonperforming assets (NPAs) declining $4.7 million.

Details

Average loans were up $150.1 million or 4.5% in the second quarter of 2017 over the same period in 2016. Average residential loans, our primary lending focus, were up $200.0 million or 7.2% in the second quarter of 2017, over the same period in 2016. Overall loan growth was constrained by a $15.6 million decline in average commercial loans, which have become less attractive on a risk adjusted basis, and a $34.0 million decline in average outstandings on home equity lines of credit, as well as a small decline in installment loans. Average deposits were up $36.0 million or 0.9% for the second quarter of 2017 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, with checking and savings entirely responsible for the growth within core deposits. Average core deposits increased $110.3 million from the second quarter of 2016 to the second quarter of 2017, while average time deposit balances were down. Within core, money market balances were down $2.6 million, while checking was up $100.2 million (including interest bearing and non-interest bearing balances) and savings were up $12.7 million. Core deposits typically represent longer term customer relationships and are generally lower cost than time deposits. The cost of interest bearing deposits declined from 0.38% in the second quarter of 2016 to 0.34% in the second quarter of 2017. 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.”

For the second quarter of 2017, return on average assets and return on average equity were 1.00% and 11.05%, respectively, compared to 0.88% and 9.88% for the second quarter of 2016. Diluted earnings per share were $0.127 for the second quarter of 2017, compared to $0.109 for the second quarter of 2016. As previously discussed, some operating costs remain at elevated levels in response to regulatory requirements, however overall expense control remains a key area of focus. Total operating expenses declined by $1.1 million in the second quarter of 2017 as compared to the second quarter of 2016, led by lower deposit insurance, ORE costs and equipment expense. The decline in expenses coupled with $1.5 million of revenue growth over the same period resulted in the bottom line improvement noted. We anticipate being able to control expense growth effectively in the second half of 2017. Some of the costs associated with regulatory issues will be recurring, but others will diminish over time.

“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, 2017, our average deposits per branch were $29.2 million, compared to $28.8 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 June 30, 2016. Nonperforming loans (NPLs) were $24.5 million at June 30, 2017, compared to $28.2 million at June 30, 2016. NPLs were equal to 0.70% of total loans at June 30, 2017, compared to 0.84% at June 30, 2016. The coverage ratio, or allowance for loan losses to NPLs, was 180.0% at June 30, 2017, compared to 156.0% at June 30, 2016. Nonperforming assets (NPAs) were $28.1 million at June 30, 2017 compared to $32.8 million at June 30, 2016. The ratio of loan loss allowance to total loans was 1.26% as of June 30, 2017, compared to 1.32% at June 30, 2016 and reflects both the improvement in asset quality and economic conditions in our lending areas. The allowance for loan losses was $44.2 million at June 30, 2017 compared to $44.1 million at June 30, 2016. The provision for loan losses was $550 thousand for the second quarter of 2017, compared to $800 thousand in the second quarter of 2016. Net chargeoffs for the second quarter of 2017 decreased versus the second quarter of 2016, falling to $436 thousand from $1.1 million in the year earlier period. The annualized net chargeoff ratio was 0.05% for the second quarter of 2017, compared to 0.14% in the second quarter of 2016, remaining at the lowest level since the first quarter of 2008.

The net interest margin for the second quarter of 2017 was 3.21%, up twelve basis points versus the second quarter of 2016, as increases in short term interest rates led to significantly higher earnings on cash, while slightly better returns were also achieved in the investment portfolio. Loan yields did decline, but that was more than offset by higher volumes in terms of income. During the same period, the cost of interest bearing liabilities declined, reflecting TrustCo’s strong funding base.

For the first half of 2017, net income was $23.2 million, up 11.1% as compared to $20.9 million in the first half of 2016, or $0.241 and $0.219, respectively, per diluted share.

At June 30, 2017 the equity to asset ratio was 9.09%, compared to 8.91% at June 30, 2016. Book value per share at June 30, 2017 was $4.66 compared to $4.51 a year earlier.

TrustCo Bank Corp NY is a $4.9 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 144 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at June 30, 2017.

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 2017 results will be held at 9:00 a.m. Eastern Time on July 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 10110582. The call will also be audio webcast at: http://services.choruscall.com/links/trst170724.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, the impact of Federal Reserve actions regarding interest rates and 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 supervisory monitoring or 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; adverse conditions on the securities markets that lead to impairment in the value of securities in our investment portfolio; changes in law and policy accompanying the new presidential administration and uncertainty or speculation pending the enactment of such changes; 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; ; changes in consumer spending, borrowing and saving habits; technological changes and electronic, cyber, and physical security breaches; 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, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.


TRUSTCO BANK CORP NY
GLENVILLE, NY
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
06/30/17 03/31/17 06/30/16
Summary of operations
Net interest income (TE) $38,553 37,413 36,311
Provision for loan losses 550 600 800
Net gain on securities transactions - - 668
Noninterest income, excluding net gain on securities transactions 4,504 4,727 4,531
Noninterest expense 22,913 24,019 23,974
Net income 12,240 10,947 10,464
Per common share
Net income per share:
- Basic $0.127 0.114 0.110
- Diluted 0.127 0.114 0.109
Cash dividends 0.066 0.066 0.066
Book value at period end 4.66 4.57 4.51
Market price at period end 7.75 7.85 6.41
At period end
Full time equivalent employees 813 802 801
Full service banking offices 144 144 145
Performance ratios
Return on average assets 1.00% 0.91 0.88
Return on average equity 11.05 10.17 9.88
Efficiency (1) 53.33 55.81 57.70
Net interest spread (TE) 3.15 3.08 3.03
Net interest margin (TE) 3.21 3.14 3.09
Dividend payout ratio 51.48 57.47 59.89
Capital ratio at period end
Consolidated equity to assets 9.09% 8.98 8.91
Consolidated tangible equity to tangible assets (2) 9.08% 8.97 8.90
Asset quality analysis at period end
Nonperforming loans to total loans 0.70 0.77 0.84
Nonperforming assets to total assets 0.57 0.61 0.68
Allowance for loan losses to total loans 1.26 1.28 1.32
Coverage ratio (3) 1.8x 1.7 1.6
(1) Non-GAAP measure; calculated as noninterest expense (excluding ORE income/expense)
divided by taxable equivalent net interest income plus noninterest income
less gain on sale of nonperforming loans).
(2) Non-GAAP measure; calculated as total equity less $553 of intangible assets divided by
total assets less $553 of intangible 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
06/30/17
06/30/16
Summary of operations
Net interest income (TE) $75,966 72,508
Provision for loan losses 1,150 1,600
Net gain on securities transactions - 668
Noninterest income, excluding net gain on securities transactions 9,231 9,103
Noninterest expense 46,932 47,412
Net income 23,187 20,875
Per common share
Net income per share:
- Basic $0.242 0.219
- Diluted 0.241 0.219
Cash dividends 0.131 0.131
Book value at period end 4.66 4.51
Market price at period end 7.75 6.41
Performance ratios
Return on average assets 0.96% 0.88
Return on average equity 10.62 9.93
Efficiency (1) 54.56 56.96
Net interest spread (TE) 3.11 3.05
Net interest margin (TE) 3.17 3.11
Dividend payout ratio 54.31 60.00
(1) Non-GAAP measure; calculated as noninterest expense (excluding ORE income/expense)
divided by taxable equivalent net interest income plus noninterest income
less gain on sale of nonperforming loans).
TE = Taxable equivalent.


CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
6/30/20173/31/201712/31/20169/30/20166/30/2016
Interest and dividend income:
Interest and fees on loans $36,662 36,04436,25136,17135,652
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 607 595422408404
State and political subdivisions 11 12121313
Mortgage-backed securities and collateralized mortgage obligations-residential 1,944 1,9581,8491,8292,169
Corporate bonds 154 15114997-
Small Business Administration-guaranteed participation securities 394 415430445450
Mortgage-backed securities and collateralized mortgage obligations-commercial 21 23233638
Other securities 4 4444
Total interest and dividends on securities available for sale 3,135 3,1582,8892,8323,078
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 296 316331347374
Corporate bonds 154 154153156154
Total interest on held to maturity securities 450 470484503528
Federal Reserve Bank and Federal Home Loan Bank stock 134 134133131118
Interest on federal funds sold and other short-term investments 1,727 1,246865866832
Total interest income 42,108 41,05240,62240,50340,208
Interest expense:
Interest on deposits:
Interest-bearing checking 134 124123120116
Savings 435 430436504604
Money market deposit accounts 468 466459463467
Time deposits 2,181 2,2832,4062,4682,460
Interest on short-term borrowings 349 349291281262
Total interest expense 3,567 3,6523,7153,8363,909
Net interest income 38,541 37,40036,90736,66736,299
Provision for loan losses 550 600600750800
Net interest income after provision for loan losses 37,991 36,80036,30735,91735,499
Noninterest income:
Trustco Financial Services income 1,425 1,8581,4221,3471,512
Fees for services to customers 2,797 2,6372,7952,6642,737
Net gain on securities transactions - ---668
Other 282 232295718282
Total noninterest income 4,504 4,7274,5124,7295,199
Noninterest expenses:
Salaries and employee benefits 9,559 10,2109,5768,9958,934
Net occupancy expense 4,267 4,1094,1853,8873,918
Equipment expense 1,428 1,5561,3701,5961,840
Professional services 1,963 1,9281,9971,9592,098
Outsourced services 1,500 1,5001,7751,4651,425
Advertising expense 607 713727489570
FDIC and other insurance 1,012 1,0479011,1271,949
Other real estate (income) expense, net (4)499721895423
Other 2,581 2,4572,1132,6362,817
Total noninterest expenses 22,913 24,01923,36523,04923,974
Income before taxes 19,582 17,50817,45417,59716,724
Income taxes 7,342 6,5616,6566,6676,260
Net income $12,240 10,94710,79810,93010,464
Net income per common share:
- Basic $0.127 0.1140.1130.1140.110
- Diluted 0.127 0.1140.1130.1140.109
Average basic shares (in thousands) 96,003 95,87995,73295,60395,487
Average diluted shares (in thousands) 96,073 95,98795,87795,72295,580
Note: Taxable equivalent net interest income $38,553 37,41336,92136,68136,311


CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Six Months Ended
6/30/20176/30/2016
Interest and dividend income:
Interest and fees on loans $72,70671,257
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 1,202659
State and political subdivisions 2327
Mortgage-backed securities and collateralized mortgage obligations-residential 3,9024,285
Corporate bonds 305-
Small Business Administration-guaranteed participation securities 809926
Mortgage-backed securities and collateralized mortgage obligations-commercial 4474
Other securities 88
Total interest and dividends on securities available for sale 6,2935,979
Interest on held to maturity securities:
Mortgage-backed securities-residential 612775
Corporate bonds 308308
Total interest on held to maturity securities 9201,083
Federal Reserve Bank and Federal Home Loan Bank stock 268238
Interest on federal funds sold and other short-term investments 2,9731,677
Total interest income 83,16080,234
Interest expense:
Interest on deposits:
Interest-bearing checking 258230
Savings 8651,208
Money market deposit accounts 934962
Time deposits 4,4644,833
Interest on short-term borrowings 698519
Total interest expense 7,2197,752
Net interest income 75,94172,482
Provision for loan losses 1,1501,600
Net interest income after provision for loan losses 74,79170,882
Noninterest income:
Trust department income 3,2833,117
Fees for services to customers 5,4345,398
Net gain on securities transactions -668
Other 514588
Total noninterest income 9,2319,771
Noninterest expenses:
Salaries and employee benefits 19,76917,937
Net occupancy expense 8,3768,006
Equipment expense 2,9843,354
Professional services 3,8914,244
Outsourced services 3,0002,976
Advertising expense 1,3201,299
FDIC and other insurance 2,0593,939
Other real estate expense, net 495942
Other 5,0384,715
Total noninterest expenses 46,93247,412
Income before taxes 37,09033,241
Income taxes 13,90312,366
Net income $23,18720,875
Net income per Common Share:
- Basic $0.2420.219
- Diluted 0.2410.219
Average basic shares (thousands) 95,94495,426
Average diluted shares (thousands) 96,03495,496
Note: Taxable equivalent net interest income $75,96672,508


CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
6/30/20173/31/201712/31/20169/30/20166/30/2016
ASSETS:
Cash and due from banks $43,783 41,352 48,719 42,296 39,787
Federal funds sold and other short term investments 663,360 641,839 658,555 622,132 718,609
Total cash and cash equivalents 707,143 683,191 707,274 664,428 758,396
Securities available for sale:
U. S. government sponsored enterprises 128,386 162,341 117,266 116,327 116,595
States and political subdivisions 536 887 886 970 974
Mortgage-backed securities and collateralized mortgage obligations-residential 352,591 357,683 372,308 400,575 404,138
Small Business Administration-guaranteed participation securities 72,858 75,429 78,499 84,687 87,740
Mortgage-backed securities and collateralized mortgage obligations-commercial 9,903 9,923 10,011 10,233 10,374
Corporate bonds 40,498 40,612 40,705 41,025 -
Other securities 685 685 685 685 685
Total securities available for sale 605,457 647,560 620,360 654,502 620,506
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 31,211 33,276 35,500 38,044 40,702
Corporate bonds 9,997 9,994 9,990 9,986 9,982
Total held to maturity securities 41,208 43,270 45,490 48,030 50,684
Federal Reserve Bank and Federal Home Loan Bank stock 9,723 9,579 9,579 9,579 9,579
Loans:
Commercial 183,035 184,451 191,194 189,795 195,698
Residential mortgage loans 2,999,306 2,929,928 2,895,733 2,845,876 2,786,951
Home equity line of credit 316,674 326,280 334,841 343,445 352,069
Installment loans 8,458 8,277 8,818 8,515 8,476
Loans, net of deferred net costs 3,507,473 3,448,936 3,430,586 3,387,631 3,343,194
Less:
Allowance for loan losses 44,162 44,048 43,890 43,950 44,064
Net loans 3,463,311 3,404,888 3,386,696 3,343,681 3,299,130
Bank premises and equipment, net 35,174 35,175 35,466 36,110 36,793
Other assets 58,466 63,080 63,941 56,519 55,825
Total assets $4,920,482 4,886,743 4,868,806 4,812,849 4,830,913
LIABILITIES:
Deposits:
Demand $390,120 373,930 377,755 380,090 376,669
Interest-bearing checking 871,004 838,936 815,534 785,118 766,322
Savings accounts 1,285,886 1,287,802 1,271,449 1,277,734 1,282,006
Money market deposit accounts 572,580 583,909 571,962 566,097 577,063
Time deposits 1,088,824 1,113,892 1,159,463 1,159,199 1,178,567
Total deposits 4,208,414 4,198,469 4,196,163 4,168,238 4,180,627
Short-term borrowings 233,621 220,946 209,406 179,204 190,542
Accrued expenses and other liabilities 31,081 28,628 30,551 29,799 29,479
Total liabilities 4,473,116 4,448,043 4,436,120 4,377,241 4,400,648
SHAREHOLDERS' EQUITY:
Capital stock 99,511 99,493 99,214 99,121 99,071
Surplus 172,603 172,628 171,425 171,093 171,174
Undivided profits 212,112 206,173 201,517 197,013 192,356
Accumulated other comprehensive (loss) income, net of tax (3,593)(5,568)(6,251)2,328 2,395
Treasury stock at cost (33,267)(34,026)(33,219)(33,947)(34,731)
Total shareholders' equity 447,366 438,700 432,686 435,608 430,265
Total liabilities and shareholders' equity $4,920,482 4,886,743 4,868,806 4,812,849 4,830,913
Outstanding shares (in thousands) 96,015 95,917 95,780 95,614 95,493


NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
06/30/1703/31/1712/31/1609/30/1606/30/16
New York and other states*
Loans in nonaccrual status:
Commercial $1,711 1,858 1,843 2,366 2,690
Real estate mortgage - 1 to 4 family 20,639 22,772 21,198 21,678 23,559
Installment 25 41 48 70 49
Total non-accrual loans 22,375 24,671 23,089 24,114 26,298
Other nonperforming real estate mortgages - 1 to 4 family 41 41 42 44 45
Total nonperforming loans 22,416 24,712 23,131 24,158 26,343
Other real estate owned 3,585 3,191 4,268 4,768 4,602
Total nonperforming assets $26,001 27,903 27,399 28,926 30,945
Florida
Loans in nonaccrual status:
Commercial $- - - - -
Real estate mortgage - 1 to 4 family 2,112 1,712 1,929 1,844 1,900
Installment - - - - -
Total non-accrual loans 2,112 1,712 1,929 1,844 1,900
Other nonperforming real estate mortgages - 1 to 4 family - - - - -
Total nonperforming loans 2,112 1,712 1,929 1,844 1,900
Other real estate owned - - - - -
Total nonperforming assets $2,112 1,712 1,929 1,844 1,900
Total
Loans in nonaccrual status:
Commercial $1,711 1,858 1,843 2,366 2,690
Real estate mortgage - 1 to 4 family 22,751 24,484 23,127 23,522 25,459
Installment 25 41 48 70 49
Total non-accrual loans 24,487 26,383 25,018 25,958 28,198
Other nonperforming real estate mortgages - 1 to 4 family 41 41 42 44 45
Total nonperforming loans 24,528 26,424 25,060 26,002 28,243
Other real estate owned 3,585 3,191 4,268 4,768 4,602
Total nonperforming assets $28,113 29,615 29,328 30,770 32,845
Quarterly Net Chargeoffs (Recoveries)
06/30/1703/31/1712/31/1609/30/1606/30/16
New York and other states*
Commercial $- 64 (56)353 67
Real estate mortgage - 1 to 4 family 334 261 619 471 973
Installment 37 31 55 37 77
Total net chargeoffs $371 356 618 861 1,117
Florida
Commercial $- - - - -
Real estate mortgage - 1 to 4 family 52 84 23 - 16
Installment 13 2 19 3 1
Total net chargeoffs $65 86 42 3 17
Total
Commercial $- 64 (56)353 67
Real estate mortgage - 1 to 4 family 386 345 642 471 989
Installment 50 33 74 40 78
Total net chargeoffs $436 442 660 864 1,134
Asset Quality Ratios
06/30/1703/31/1712/31/1609/30/1606/30/16
Total nonperforming loans(1) $24,528 26,424 25,060 26,002 28,243
Total nonperforming assets(1) 28,113 29,615 29,328 30,770 32,845
Total net chargeoffs(2) 436 442 660 864 1,134
Allowance for loan losses(1) 44,162 44,048 43,890 43,950 44,064
Nonperforming loans to total loans 0.70%0.77%0.73%0.77%0.84%
Nonperforming assets to total assets 0.57%0.61%0.60%0.64%0.68%
Allowance for loan losses to total loans 1.26%1.28%1.28%1.30%1.32%
Coverage ratio(1) 180.0%166.7%175.1%169.0%156.0%
Annualized net chargeoffs to average loans(2) 0.05%0.05%0.08%0.10%0.14%
Allowance for loan losses to annualized net chargeoffs(2) 25.3x 24.9x 16.6x 12.7x 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, 2017 June 30, 2016
Average Interest Average Average Interest Average
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises $153,552 607 1.58% $107,190 404 1.51%
Mortgage backed securities and
collateralized mortgage obligations-residential 359,085 1,944 2.17 445,162 2,169 1.95
State and political subdivisions 816 16 7.84 955 19 7.96
Corporate bonds 42,699 154 1.44 - - -
Small Business Administration-guaranteed participation securities 75,561 394 2.09 87,801 450 2.05
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,003 21 0.84 10,321 38 1.47
Other 685 4 2.34 677 4 2.36
Total securities available for sale 642,401 3,140 1.96 652,106 3,084 1.89
Federal funds sold and other
short-term Investments 643,557 1,727 1.07 668,395 832 0.50
Held to maturity securities:
Corporate bonds 9,996 154 6.16 9,981 154 6.17
Mortgage backed securities and
collateralized mortgage obligations-residential 32,188 296 3.68 42,188 374 3.55
Total held to maturity securities 42,184 450 4.27 52,169 528 4.05
Federal Reserve Bank and Federal Home Loan Bank stock 9,709 134 5.52 9,576 118 4.93
Commercial loans 183,382 2,401 5.24 198,938 2,563 5.15
Residential mortgage loans 2,958,994 30,943 4.18 2,759,024 29,725 4.31
Home equity lines of credit 320,872 3,131 3.90 354,897 3,179 3.58
Installment loans 8,029 194 9.66 8,316 191 9.19
Loans, net of unearned income 3,471,277 36,669 4.23 3,321,175 35,658 4.29
Total interest earning assets 4,809,128 42,120 3.50 4,703,421 40,220 3.42
Allowance for loan losses (44,429) (44,754)
Cash & non-interest earning assets 130,998 136,724
Total assets $4,895,697 $4,795,391
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts $849,965 134 0.06% $759,546 116 0.06%
Money market accounts 577,464 468 0.32 580,100 467 0.32
Savings 1,286,282 435 0.14 1,273,575 604 0.19
Time deposits 1,102,777 2,181 0.79 1,177,084 2,460 0.84
Total interest bearing deposits 3,816,488 3,218 0.34 3,790,305 3,647 0.38
Short-term borrowings 226,455 349 0.62 181,247 262 0.58
Total interest bearing liabilities 4,042,943 3,567 0.35 3,971,552 3,909 0.39
Demand deposits 380,611 370,781
Other liabilities 28,026 27,121
Shareholders' equity 444,117 425,937
Total liabilities and shareholders' equity $4,895,697 $4,795,391
Net interest income, tax equivalent 38,553 36,311
Net interest spread 3.15% 3.03%
Net interest margin (net interest income
to total interest earning assets) 3.21% 3.09%
Tax equivalent adjustment (12) (12)
Net interest income 38,541 36,299


DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands) Six Months ended Six Months ended
(Unaudited) June 30, 2017 June 30, 2016
Average Interest Average Average Interest Average
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises $148,054 1,202 1.62% $91,111 659 1.45%
Mortgage backed securities and
collateralized mortgage obligations-residential 363,496 3,902 2.15 428,831 4,285 2.00
State and political subdivisions 844 35 8.29 1,034 41 7.93
Corporate bonds 42,143 305 1.45 - - -
Small Business Administration-guaranteed participation securities 77,068 809 2.10 89,206 926 2.08
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,046 44 0.88 10,357 74 1.43
Other 685 8 2.34 682 8 2.35
Total securities available for sale 642,336 6,305 1.96 621,221 5,993 1.93
Federal funds sold and other
short-term Investments 642,348 2,973 0.93 671,990 1,677 0.50
Held to maturity securities:
Corporate bonds 9,994 308 6.16 9,979 308 6.17
Mortgage backed securities and
collateralized mortgage obligations-residential 33,240 612 3.68 43,650 775 3.55
Total held to maturity securities 43,234 920 4.26 53,629 1,083 4.04
Federal Reserve Bank and Federal Home Loan Bank stock 9,645 268 5.56 9,527 238 5.00
Commercial loans 185,474 4,830 5.21 200,152 5,180 5.18
Residential mortgage loans 2,935,620 61,310 4.18 2,742,918 59,348 4.33
Home equity lines of credit 325,579 6,216 3.82 356,857 6,358 3.56
Installment loans 8,128 363 8.93 8,488 383 9.02
Loans, net of unearned income 3,454,801 72,719 4.21 3,308,415 71,269 4.31
Total interest earning assets 4,792,364 83,185 3.47 4,664,782 80,260 3.44
Allowance for loan losses (44,333) (45,013)
Cash & non-interest earning assets 130,575 136,138
Total assets $4,878,606 $4,755,907
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts $829,615 258 0.06% $747,322 230 0.06%
Money market accounts 578,728 934 0.32 591,937 962 0.33
Savings 1,280,552 865 0.14 1,268,021 1,208 0.19
Time deposits 1,118,274 4,464 0.80 1,155,773 4,833 0.84
Total interest bearing deposits 3,807,169 6,521 0.34 3,763,053 7,233 0.38
Short-term borrowings 228,078 698 0.61 178,683 519 0.58
Total interest bearing liabilities 4,035,247 7,219 0.36 3,941,736 7,752 0.39
Demand deposits 375,610 364,503
Other liabilities 27,408 27,019
Shareholders' equity 440,341 422,649
Total liabilities and shareholders' equity $4,878,606 $4,755,907
Net interest income, tax equivalent 75,966 72,508
Net interest spread 3.11% 3.05%
Net interest margin (net interest income
to total interest earning assets) 3.17% 3.11%
Tax equivalent adjustment (25) (26)
Net interest income 75,941 72,482

Non-GAAP Financial Measures Reconciliation

Tangible equity as a percentage of tangible assets at period end is a non-GAAP financial measure 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 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 results. Our management internally assesses our performance based, in part, on these measures. However, these non-GAAP financial measures are supplemental and 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)
06/30/1703/31/1706/30/16
Tangible Equity to Tangible Assets
Total Assets 4,920,482 4,886,743 4,830,913
Less: Intangible assets 553 553 553
Tangible assets 4,919,929 4,886,190 4,830,360
Equity $447,366 438,700 430,265
Less: Intangible assets 553 553 553
Tangible equity 446,813 438,147 429,712
Tangible Equity to Tangible Assets 9.08%8.97%8.90%
Equity to Assets 9.09%8.98%8.91%
3 Months Ended Six Months Ended
Efficiency Ratio 06/30/1703/31/1706/30/16 06/30/1706/30/16
Net interest income $38,541 37,400 36,299 75,941 72,482
Taxable equivalent adjustment 12 13 12 25 26
Net interest income (fully taxable equivalent) 38,553 37,413 36,311 75,966 72,508
Non-interest income 4,504 4,727 5,199 9,231 9,771
Less: Net gain on sale of nonperforming loans 84 - 24 84 24
Less: Net gain on securities - - 668 - 668
Revenue used for efficiency ratio 42,973 42,140 40,818 85,113 81,587
Total noninterest expense 22,913 24,019 23,974 46,932 47,412
Less: Other real estate (income) expense, net (4)499 423 495 942
Expense used for efficiency ratio 22,917 23,520 23,551 46,437 46,470
Efficiency Ratio 53.33%55.81%57.70% 54.56%56.96%


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

Source: TrustCo Bank Corp NY