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TrustCo Announces 15% Increase in Third Quarter 2017 Net Income

Executive Snapshot:

  • Continued solid financial results:
    • Key metrics for third quarter of 2017 results:
      • Net income of $12.6 million in the third quarter of 2017, up 15.2% compared to $10.9 million in the third quarter of 2016
      • Return on average assets (ROA) of 1.02% compared to 0.90% in the third quarter of 2016
      • Return on average equity (ROE) of 11.06% compared to 10.05% in the third quarter of 2016
      • Efficiency ratio of 52.79% compared to 54.11% in the third quarter of 2016 (Non-GAAP measure; see P. 15 for definition)
  • Asset quality remains solid:
    • Nonperforming assets (NPAs) fell by $3.3 million compared to September 30, 2016
    • NPAs to total assets improved to 0.56%, compared to 0.64% at September 30, 2016
    • Quarterly net chargeoffs were equal to 0.07% of average loans on an annualized basis, compared to 0.10% for the third quarter of 2016
  • Continued expansion of customer base:
    • Focus on capitalizing on opportunities presented by expanded branch network
    • Average deposits per branch grew $180 thousand to $28.9 million from September 30, 2016 to September 30, 2017
    • Average core (non-maturity) deposits were $89.8million higher in the third quarter of 2017 compared to the third quarter of 2016, an increase of 3.0%.
  • Loan portfolio reaches all-time high:
    • Average loans were up $171 million for the third quarter of 2017 compared to third quarter of 2016
    • At $3.58 billion as of September 30, 2017, loans reached an all-time high


TrustCo Announces 15% Increase in Third Quarter 2017 Net Income

GLENVILLE, N.Y., Oct. 23, 2017 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced third quarter of 2017 net income of $12.6 million compared to $10.9 million for the third quarter of 2016, an increase of 15.2%.

Summary

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased to be able to report a 15% increase in net income in the third quarter of 2017 as compared to the third quarter of 2016. Solid revenue growth and expense control combined to produce a solid quarter, building on 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 third 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 cash flow from investments. The continued shift toward loans helped offset the margin impact from continued comparatively low yields on cash and investments. The Federal Reserve decision to begin to raise the target Federal Funds rate has contributed to our results during 2017 as our cash position immediately repriced upward, and is likely to continue to do so in 2018 to the extent there are additional rate increases. While total average deposits were roughly flat in the third quarter of 2017 versus the prior year, core deposits were up $89.8 million over that time frame, contributing to a decline in our cost of funds. The gain in core deposits was led by demand deposits and low cost interest bearing checking deposits. TrustCo’s strong liquidity position continues to allow it to take advantage of opportunities as they arise.

Asset quality measures improved versus September 30, 2016, with nonperforming assets (NPAs) declining $3.3 million.

Details

Average loans were up $171.0 million or 5.1% in the third quarter of 2017 over the same period in 2016. Average residential loans, our primary lending focus, were up $216.4 million or 7.7% in the third quarter of 2017, over the same period in 2016. Overall loan growth was constrained by an $11.2 million decline in average commercial loans, which have become less attractive on a risk adjusted basis, and a $33.9 million decline in average outstandings on home equity lines of credit, as well as a small decline in installment loans. Average deposits were down $8.3 million or 0.2% for the third quarter of 2017 over the same period a year earlier. The decrease in deposits was the result of a $98.0 million decline in average time deposits as the company focused on less costly non-maturity deposits. Excluding time deposits, core deposit accounts, which consist of checking, savings and money market deposits, were up $89.8 million from the third quarter of 2016 to the third quarter of 2017. Within core, money market balances were up $835 thousand, checking balances were up $93.2 million (including interest bearing and non-interest bearing balances) and savings were down $4.2 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 0.37% in the third quarter of 2016 to 0.34% in the third quarter of 2017. The cost of core deposits, including demand, declined from 0.14% to 0.13% over this same time frame. 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 third quarter of 2017, return on average assets and return on average equity were 1.02% and 11.06%, respectively, compared to 0.90% and 10.05% for the third quarter of 2016. Diluted earnings per share were $0.131 for the third quarter of 2017, compared to $0.114 for the third 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 increased by $477 thousand in the third quarter of 2017 as compared to the third quarter of 2016, with increases in compensation and several other categories partly offset by declines in ORE costs and several other categories. The modest increase in expenses was more than offset by a $2.6 million increase in revenue (net interest income plus non-interest income), which coupled with a slightly lower effective tax rate resulted in the bottom line improvement noted.

“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, 2017, our average deposits per branch were $28.9 million, compared to $28.7 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 were generally consistent with June 30, 2017 metrics and generally improved versus September 30, 2016. Nonperforming loans (NPLs) were $24.6 million at September 30, 2017, compared to $26.0 million at September 30, 2016. NPLs were equal to 0.69% of total loans at September 30, 2017, compared to 0.77% at September 30, 2016. The coverage ratio, or allowance for loan losses to NPLs, was 179.3% at September 30, 2017, compared to 169.0% at September 30, 2016. Nonperforming assets (NPAs) were $27.5 million at September 30, 2017 compared to $30.8 million at September 30, 2016. The ratio of loan loss allowance to total loans was 1.23% as of September 30, 2017, compared to 1.30% at September 30, 2016 and reflects both the improvement in asset quality and economic conditions in our lending areas. The allowance for loan losses was $44.1 million at September 30, 2017 compared to $44.0 million at September 30, 2016. The provision for loan losses was $550 thousand for the third quarter of 2017, compared to $750 thousand in the third quarter of 2016. Net chargeoffs for the third quarter of 2017 decreased versus the third quarter of 2016, falling to $630 thousand from $864 thousand in the year earlier period. The annualized net chargeoff ratio was 0.07% for the third quarter of 2017, compared to 0.10% in the third quarter of 2016.

The net interest margin for the third quarter of 2017 was 3.26%, up 17 basis points versus the third 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 nine months of 2017, net income was $35.8 million, up 12.5% as compared to $31.8 million in the first nine months of 2016, or $0.372 and $0.333, respectively, per diluted share.

At September 30, 2017 the equity to asset ratio was 9.34%, compared to 9.05% at September 30, 2016. Book value per share at September 30, 2017 was $4.73 compared to $4.55 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 September 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 third quarter 2017 results will be held at 9:00 a.m. Eastern Time on October 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 10113238. The call will also be audio webcast at: http://services.choruscall.com/links/trst171024.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.

Contact:

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

TRUSTCO BANK CORP NY
GLENVILLE, NY
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
09/30/1706/30/1709/30/16
Summary of operations
Net interest income (TE)$ 39,190 38,553 36,681
Provision for loan losses 550 550 750
Net gain on securities transactions - - -
Noninterest income, excluding net gain on securities transactions 4,854 4,504 4,729
Noninterest expense 23,526 22,913 23,049
Net income 12,596 12,240 10,930
Per common share
Net income per share:
- Basic$ 0.131 0.127 0.114
- Diluted 0.131 0.127 0.114
Cash dividends 0.066 0.066 0.066
Book value at period end 4.73 4.66 4.55
Market price at period end 8.90 7.75 7.09
At period end
Full time equivalent employees 815 813 790
Full service banking offices 144 144 145
Performance ratios
Return on average assets 1.02%1.00 0.90
Return on average equity 11.06 11.05 10.05
Efficiency (1) 52.79 53.33 54.11
Net interest spread (TE) 3.21 3.15 3.03
Net interest margin (TE) 3.26 3.21 3.09
Dividend payout ratio 50.07 51.48 57.40
Capital ratio at period end
Consolidated equity to assets 9.34%9.09 9.05
Consolidated tangible equity to tangible assets (1) 9.33%9.08 9.04
Asset quality analysis at period end
Nonperforming loans to total loans 0.69 0.70 0.77
Nonperforming assets to total assets 0.56 0.57 0.64
Allowance for loan losses to total loans 1.23 1.26 1.30
Coverage ratio (3) 1.8x 1.8 1.6
(1) Non-GAAP measure; please refer to Non-GAAP disclosures on Page 14 .
(2) 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
09/30/1709/30/16
Summary of operations
Net interest income (TE)$ 115,152 109,188
Provision for loan losses 1,700 2,350
Net gain on securities transactions - 668
Noninterest income, excluding net gain on securities transactions 14,085 13,832
Noninterest expense 70,458 70,462
Net income 35,783 31,803
Per common share
Net income per share:
- Basic$ 0.373 0.333
- Diluted 0.372 0.333
Cash dividends 0.197 0.197
Book value at period end 4.73 4.55
Market price at period end 8.90 7.09
Performance ratios
Return on average assets 0.98%0.89
Return on average equity 10.77 9.97
Efficiency (1) 53.96 56.01
Net interest spread (TE) 3.14 3.04
Net interest margin (TE) 3.20 3.10
Dividend payout ratio 52.82 59.11
(1) Non-GAAP measure; please refer to Non-GAAP disclosures on Page 14 .
TE = Taxable equivalent.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
9/30/20176/30/20173/31/201712/31/20169/30/2016
Interest and dividend income:
Interest and fees on loans$ 37,513 36,662 36,044 36,251 36,171
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 465 607 595 422 408
State and political subdivisions 6 11 12 12 13
Mortgage-backed securities and collateralized mortgage obligations-residential 1,815 1,944 1,958 1,849 1,829
Corporate bonds 153 154 151 149 97
Small Business Administration-guaranteed participation securities 380 394 415 430 445
Mortgage-backed securities and collateralized mortgage obligations-commercial 22 21 23 23 36
Other securities 4 4 4 4 4
Total interest and dividends on securities available for sale 2,845 3,135 3,158 2,889 2,832
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 276 296 316 331 347
Corporate bonds 102 154 154 153 156
Total interest on held to maturity securities 378 450 470 484 503
Federal Reserve Bank and Federal Home Loan Bank stock 125 134 134 133 131
Interest on federal funds sold and other short-term investments 1,927 1,727 1,246 865 866
Total interest income 42,788 42,108 41,052 40,622 40,503
Interest expense:
Interest on deposits:
Interest-bearing checking 113 134 124 123 120
Savings 435 435 430 436 504
Money market deposit accounts 469 468 466 459 463
Time deposits 2,247 2,181 2,283 2,406 2,468
Interest on short-term borrowings 345 349 349 291 281
Total interest expense 3,609 3,567 3,652 3,715 3,836
Net interest income 39,179 38,541 37,400 36,907 36,667
Provision for loan losses 550 550 600 600 750
Net interest income after provision for loan losses 38,629 37,991 36,800 36,307 35,917
Noninterest income:
Trustco Financial Services income 1,844 1,425 1,858 1,422 1,347
Fees for services to customers 2,767 2,797 2,637 2,795 2,664
Net gain on securities transactions - - - - -
Other 243 282 232 295 718
Total noninterest income 4,854 4,504 4,727 4,512 4,729
Noninterest expenses:
Salaries and employee benefits 10,360 9,559 10,210 9,576 8,995
Net occupancy expense 4,027 4,267 4,109 4,185 3,887
Equipment expense 1,669 1,428 1,556 1,370 1,596
Professional services 1,679 1,963 1,928 1,997 1,959
Outsourced services 1,650 1,500 1,500 1,775 1,465
Advertising expense 699 607 713 727 489
FDIC and other insurance 1,018 1,012 1,047 901 1,127
Other real estate (income) expense, net 275 (4) 499 721 895
Other 2,149 2,581 2,457 2,113 2,636
Total noninterest expenses 23,526 22,913 24,019 23,365 23,049
Income before taxes 19,957 19,582 17,508 17,454 17,597
Income taxes 7,361 7,342 6,561 6,656 6,667
Net income$ 12,596 12,240 10,947 10,798 10,930
Net income per common share:
- Basic$0.131 0.127 0.114 0.113 0.114
- Diluted 0.131 0.127 0.114 0.113 0.114
Average basic shares (in thousands) 96,102 96,003 95,879 95,732 95,603
Average diluted shares (in thousands) 96,205 96,073 95,987 95,877 95,722
Note: Taxable equivalent net interest income$ 39,190 38,553 37,413 36,921 36,681
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Nine Months Ended
9/30/20179/30/2016
Interest and dividend income:
Interest and fees on loans$ 110,219 107,428
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 1,667 1,067
State and political subdivisions 29 40
Mortgage-backed securities and collateralized mortgage obligations-residential 5,717 6,114
Corporate bonds 458 97
Small Business Administration-guaranteed participation securities 1,189 1,371
Mortgage-backed securities and collateralized mortgage obligations-commercial 66 110
Other securities 12 12
Total interest and dividends on securities available for sale 9,138 8,811
Interest on held to maturity securities:
Mortgage-backed securities-residential 888 1,123
Corporate bonds 410 464
Total interest on held to maturity securities 1,298 1,587
Federal Reserve Bank and Federal Home Loan Bank stock 393 369
Interest on federal funds sold and other short-term investments 4,900 2,542
Total interest income 125,948 120,737
Interest expense:
Interest on deposits:
Interest-bearing checking 371 350
Savings 1,300 1,712
Money market deposit accounts 1,403 1,426
Time deposits 6,711 7,301
Interest on short-term borrowings 1,043 800
Total interest expense 10,828 11,589
Net interest income 115,120 109,148
Provision for loan losses 1,700 2,350
Net interest income after provision for loan losses 113,420 106,798
Noninterest income:
Trust department income 5,127 4,464
Fees for services to customers 8,201 8,062
Net gain on securities transactions - 668
Other 757 1,306
Total noninterest income 14,085 14,500
Noninterest expenses:
Salaries and employee benefits 30,129 26,932
Net occupancy expense 12,403 11,893
Equipment expense 4,653 4,950
Professional services 5,570 6,203
Outsourced services 4,650 4,441
Advertising expense 2,019 1,788
FDIC and other insurance 3,077 5,066
Other real estate expense, net 770 1,837
Other 7,187 7,352
Total noninterest expenses 70,458 70,462
Income before taxes 57,047 50,836
Income taxes 21,264 19,033
Net income$ 35,783 31,803
Net income per Common Share:
- Basic$0.373 0.333
- Diluted 0.372 0.333
Average basic shares (thousands) 95,997 95,486
Average diluted shares (thousands) 96,091 95,572
Note: Taxable equivalent net interest income$ 115,152 109,188
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
9/30/20176/30/20173/31/201712/31/20169/30/2016
ASSETS:
Cash and due from banks$41,598 43,783 41,352 48,719 42,296
Federal funds sold and other short term investments 582,599 663,360 641,839 658,555 622,132
Total cash and cash equivalents 624,197 707,143 683,191 707,274 664,428
Securities available for sale:
U. S. government sponsored enterprises 123,658 128,386 162,341 117,266 116,327
States and political subdivisions 534 536 887 886 970
Mortgage-backed securities and collateralized mortgage obligations-residential 335,530 352,591 357,683 372,308 400,575
Small Business Administration-guaranteed participation securities 69,818 72,858 75,429 78,499 84,687
Mortgage-backed securities and collateralized mortgage obligations-commercial 9,824 9,903 9,923 10,011 10,233
Corporate bonds 40,381 40,498 40,612 40,705 41,025
Other securities 685 685 685 685 685
Total securities available for sale 580,430 605,457 647,560 620,360 654,502
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 29,268 31,211 33,276 35,500 38,044
Corporate bonds 0 9,997 9,994 9,990 9,986
Total held to maturity securities 29,268 41,208 43,270 45,490 48,030
Federal Reserve Bank and Federal Home Loan Bank stock 8,779 9,723 9,579 9,579 9,579
Loans:
Commercial 187,281 183,035 184,451 191,194 189,795
Residential mortgage loans 3,070,970 2,999,306 2,929,928 2,895,733 2,845,876
Home equity line of credit 311,753 316,674 326,280 334,841 343,445
Installment loans 8,278 8,458 8,277 8,818 8,515
Loans, net of deferred net costs 3,578,282 3,507,473 3,448,936 3,430,586 3,387,631
Less:
Allowance for loan losses 44,082 44,162 44,048 43,890 43,950
Net loans 3,534,200 3,463,311 3,404,888 3,386,696 3,343,681
Bank premises and equipment, net 35,028 35,174 35,175 35,466 36,110
Other assets 58,373 58,466 63,080 63,941 56,519
Total assets$4,870,275 4,920,482 4,886,743 4,868,806 4,812,849
LIABILITIES:
Deposits:
Demand$397,623 390,120 373,930 377,755 380,090
Interest-bearing checking 862,067 871,004 838,936 815,534 785,118
Savings accounts 1,265,229 1,285,886 1,287,802 1,271,449 1,277,734
Money market deposit accounts 564,557 572,580 583,909 571,962 566,097
Time deposits 1,075,886 1,088,824 1,113,892 1,159,463 1,159,199
Total deposits 4,165,362 4,208,414 4,198,469 4,196,163 4,168,238
Short-term borrowings 216,508 233,621 220,946 209,406 179,204
Accrued expenses and other liabilities 33,477 31,081 28,628 30,551 29,799
Total liabilities 4,415,347 4,473,116 4,448,043 4,436,120 4,377,241
SHAREHOLDERS' EQUITY:
Capital stock 99,562 99,511 99,493 99,214 99,121
Surplus 172,712 172,603 172,628 171,425 171,093
Undivided profits 218,401 212,112 206,173 201,517 197,013
Accumulated other comprehensive (loss) income, net of tax (3,060)(3,593)(5,568)(6,251)2,328
Treasury stock at cost (32,687)(33,267)(34,026)(33,219)(33,947)
Total shareholders' equity 454,928 447,366 438,700 432,686 435,608
Total liabilities and shareholders' equity$4,870,275 4,920,482 4,886,743 4,868,806 4,812,849
Outstanding shares (in thousands) 96,108 96,015 95,917 95,780 95,614

NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
09/30/1706/30/1703/31/1712/31/1609/30/16
New York and other states*
Loans in nonaccrual status:
Commercial$ 1,696 1,711 1,858 1,843 2,366
Real estate mortgage - 1 to 4 family 20,926 20,639 22,772 21,198 21,678
Installment 30 25 41 48 70
Total non-accrual loans 22,652 22,375 24,671 23,089 24,114
Other nonperforming real estate mortgages - 1 to 4 family 40 41 41 42 44
Total nonperforming loans 22,692 22,416 24,712 23,131 24,158
Other real estate owned 2,879 3,585 3,191 4,268 4,768
Total nonperforming assets$ 25,571 26,001 27,903 27,399 28,926
Florida
Loans in nonaccrual status:
Commercial$ - - - - -
Real estate mortgage - 1 to 4 family 1,895 2,112 1,712 1,929 1,844
Installment - - - - -
Total non-accrual loans 1,895 2,112 1,712 1,929 1,844
Other nonperforming real estate mortgages - 1 to 4 family - - - - -
Total nonperforming loans 1,895 2,112 1,712 1,929 1,844
Other real estate owned - - - - -
Total nonperforming assets$ 1,895 2,112 1,712 1,929 1,844
Total
Loans in nonaccrual status:
Commercial$ 1,696 1,711 1,858 1,843 2,366
Real estate mortgage - 1 to 4 family 22,821 22,751 24,484 23,127 23,522
Installment 30 25 41 48 70
Total non-accrual loans 24,547 24,487 26,383 25,018 25,958
Other nonperforming real estate mortgages - 1 to 4 family 40 41 41 42 44
Total nonperforming loans 24,587 24,528 26,424 25,060 26,002
Other real estate owned 2,879 3,585 3,191 4,268 4,768
Total nonperforming assets$ 27,466 28,113 29,615 29,328 30,770
Quarterly Net Chargeoffs (Recoveries)
09/30/1706/30/1703/31/1712/31/1609/30/16
New York and other states*
Commercial$ (2) - 64 (56) 353
Real estate mortgage - 1 to 4 family 613 334 261 619 471
Installment 56 37 31 55 37
Total net chargeoffs$ 667 371 356 618 861
Florida
Commercial$ - - - - -
Real estate mortgage - 1 to 4 family (41) 52 84 23 -
Installment 4 13 2 19 3
Total net chargeoffs$ (37) 65 86 42 3
Total
Commercial$ (2) - 64 (56) 353
Real estate mortgage - 1 to 4 family 572 386 345 642 471
Installment 60 50 33 74 40
Total net chargeoffs$ 630 436 442 660 864
Asset Quality Ratios
09/30/1706/30/1703/31/1712/31/1609/30/16
Total nonperforming loans(1)$ 24,587 24,528 26,424 25,060 26,002
Total nonperforming assets(1) 27,466 28,113 29,615 29,328 30,770
Total net chargeoffs(2) 630 436 442 660 864
Allowance for loan losses(1) 44,082 44,162 44,048 43,890 43,950
Nonperforming loans to total loans 0.69%0.70%0.77%0.73%0.77%
Nonperforming assets to total assets 0.56%0.57%0.61%0.60%0.64%
Allowance for loan losses to total loans 1.23%1.26%1.28%1.28%1.30%
Coverage ratio(1) 179.3%180.0%166.7%175.1%169.0%
Annualized net chargeoffs to average loans(2) 0.07%0.05%0.05%0.08%0.10%
Allowance for loan losses to annualized net chargeoffs(2) 17.5x25.3x24.9x16.6x12.7x
* 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) September 30, 2017 September 30, 2016
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$123,055 465 1.51%$109,488 408 1.49%
Mortgage backed securities and
collateralized mortgage obligations-residential 345,248 1,815 2.10 400,103 1,829 1.83
State and political subdivisions 522 11 8.43 953 20 8.39
Corporate bonds 42,528 153 1.44 27,161 97 1.43
Small Business Administration-guaranteed participation securities 72,204 380 2.11 85,305 445 2.09
Mortgage backed securities and
collateralized mortgage obligations-commercial 9,918 22 0.89 10,247 36 1.41
Other 685 4 2.34 685 4 2.34
Total securities available for sale 594,160 2,850 1.92 633,942 2,839 1.79
Federal funds sold and other
short-term Investments 621,878 1,927 1.24 683,777 866 0.50
Held to maturity securities:
Corporate bonds 6,738 102 6.06 10,644 156 5.86
Mortgage backed securities and
collateralized mortgage obligations-residential 30,161 276 3.66 39,307 347 3.53
Total held to maturity securities 36,899 378 4.10 49,951 503 4.03
Federal Reserve Bank and Federal Home Loan Bank stock 9,117 125 5.48 9,579 131 5.47
Commercial loans 183,867 2,482 5.40 195,115 2,597 5.32
Residential mortgage loans 3,035,745 31,600 4.16 2,819,343 30,175 4.28
Home equity lines of credit 312,812 3,237 4.14 346,744 3,211 3.70
Installment loans 8,096 200 9.88 8,331 195 9.36
Loans, net of unearned income 3,540,520 37,519 4.24 3,369,533 36,178 4.29
Total interest earning assets 4,802,574 42,799 3.56 4,746,782 40,517 3.41
Allowance for loan losses (44,284) (44,473)
Cash & non-interest earning assets 127,004 137,462
Total assets$4,885,294 $4,839,771
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$861,387 113 0.05%$780,058 120 0.06%
Money market accounts 572,168 469 0.33 571,333 463 0.32
Savings 1,280,318 435 0.14 1,284,533 504 0.16
Time deposits 1,078,085 2,247 0.83 1,176,115 2,468 0.84
Total interest bearing deposits 3,791,958 3,264 0.34 3,812,039 3,555 0.37
Short-term borrowings 223,238 345 0.62 189,910 281 0.59
Total interest bearing liabilities 4,015,196 3,609 0.36 4,001,949 3,836 0.38
Demand deposits 389,286 377,455
Other liabilities 28,809 27,496
Shareholders' equity 452,003 432,871
Total liabilities and shareholders' equity$4,885,294 $4,839,771
Net interest income, tax equivalent 39,190 36,681
Net interest spread 3.21% 3.03%
Net interest margin (net interest income
to total interest earning assets) 3.26% 3.09%
Tax equivalent adjustment (11) (14)
Net interest income 39,179 36,667
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands) Nine Months ended Nine Months ended
(Unaudited) September 30, 2017 September 30, 2016
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$139,629 1,667 1.59%$97,281 1,067 1.46%
Mortgage backed securities and
collateralized mortgage obligations-residential 357,347 5,717 2.13 419,185 6,114 1.94
State and political subdivisions 736 41 7.43 1,007 60 7.94
Corporate bonds 42,272 458 1.44 9,120 97 1.42
Small Business Administration-guaranteed participation securities 75,429 1,189 2.10 87,896 1,371 2.08
Mortgage backed securities and
collateralized mortgage obligations-commercial 10,003 66 0.88 10,320 110 1.42
Other 685 12 2.34 683 12 2.34
Total securities available for sale 626,101 9,150 1.95 625,492 8,831 1.88
Federal funds sold and other
short-term Investments 635,450 4,900 1.03 675,948 2,542 0.50
Held to maturity securities:
Corporate bonds 8,897 410 6.14 10,202 464 6.06
Mortgage backed securities and
collateralized mortgage obligations-residential 32,202 888 3.68 42,192 1,123 3.55
Total held to maturity securities 41,099 1,298 4.21 52,394 1,587 4.04
Federal Reserve Bank and Federal Home Loan Bank stock 9,467 393 5.54 9,545 369 5.15
Commercial loans 184,932 7,313 5.27 198,461 7,777 5.22
Residential mortgage loans 2,969,363 92,910 4.17 2,768,579 89,523 4.31
Home equity lines of credit 321,276 9,453 3.92 353,461 9,569 3.61
Installment loans 8,117 563 9.25 8,435 579 9.15
Loans, net of unearned income 3,483,688 110,239 4.22 3,328,936 107,448 4.30
Total interest earning assets 4,795,805 125,980 3.50 4,692,315 120,777 3.43
Allowance for loan losses (44,317) (44,832)
Cash & non-interest earning assets 129,384 136,584
Total assets$4,880,872 $4,784,067
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$840,322 371 0.06%$758,314 350 0.06%
Money market accounts 576,518 1,403 0.32 585,019 1,426 0.33
Savings 1,280,473 1,300 0.14 1,273,565 1,712 0.18
Time deposits 1,104,731 6,711 0.81 1,162,603 7,301 0.84
Total interest bearing deposits 3,802,044 9,785 0.34 3,779,501 10,789 0.38
Short-term borrowings 226,447 1,043 0.61 182,453 800 0.58
Total interest bearing liabilities 4,028,491 10,828 0.36 3,961,954 11,589 0.39
Demand deposits 380,216 368,852
Other liabilities 27,880 27,179
Shareholders' equity 444,285 426,082
Total liabilities and shareholders' equity$4,880,872 $4,784,067
Net interest income, tax equivalent 115,152 109,188
Net interest spread 3.14% 3.04%
Net interest margin (net interest income
to total interest earning assets) 3.20% 3.10%
Tax equivalent adjustment (32) (40)
Net interest income 115,120 109,148

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 and other non-routine items 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)
09/30/1706/30/1709/30/16
Tangible Equity to Tangible Assets
Total Assets 4,870,275 4,920,482 4,812,849
Less: Intangible assets 553 553 553
Tangible assets 4,869,722 4,919,929 4,812,296
Equity$ 454,928 447,366 435,608
Less: Intangible assets 553 553 553
Tangible equity 454,375 446,813 435,055
Tangible Equity to Tangible Assets 9.33%9.08%9.04%
Equity to Assets 9.34%9.09%9.05%
3 Months Ended Nine Months Ended
Efficiency Ratio 09/30/1706/30/1709/30/16 09/30/1709/30/16
Net interest income$ 39,179 38,541 36,667 115,120 109,148
Taxable equivalent adjustment 11 12 14 32 40
Net interest income (fully taxable equivalent) 39,190 38,553 36,681 115,152 109,188
Non-interest income 4,854 4,504 4,729 14,085 14,500
Less: Net gain on sale of building - - 469 - 469
Less: Net gain on sale of nonperforming loans - 84 - 84 24
Less: Net gain on securities - - - - 668
Revenue used for efficiency ratio 44,044 42,973 40,941 129,153 122,527
Total noninterest expense 23,526 22,913 23,049 70,458 70,462
Less: Other real estate (income) expense, net 275 (4) 895 770 1,837
Expense used for efficiency ratio 23,251 22,917 22,154 69,688 68,625
Efficiency Ratio 52.79%53.33%54.11% 53.96%56.01%

Source: TrustCo Bank Corp NY