TrustCo Announces Fourth Quarter and Full Year 2017 Results; Net Income Before Taxes Up 12.9% Over Prior Year Quarter

Executive Snapshot:

  • Continued solid financial results:
    • Key metrics for fourth quarter and full year 2017:
      • Income before taxes of $19.7 million in the fourth quarter of 2017, up 12.9% compared to $17.5 million in the fourth quarter of 2016
      • Income before taxes of $76.7 million for the full year 2017, up 12.4% compared to $68.3 million for 2016
      • Net income rose for the full year 2017 over 2016 despite a $5.1 million charge related to the recently enacted federal tax legislation
      • Return on average assets (ROAA) of 0.60% compared to 0.89% in the fourth quarter of 2016
      • Return on average equity (ROAE) of 6.38% compared to 9.87% in the fourth quarter of 2016
      • Efficiency ratio of 53.13% compared to 54.65% in the fourth quarter of 2016 (Non-GAAP measure; see P. 14 for definition)
  • Asset quality remains solid:
    • Nonperforming assets (NPAs) fell by $1.7 million compared to December 31, 2016
    • NPAs to total assets improved to 0.56%, compared to 0.60% at December 31, 2016
    • Quarterly net chargeoffs were equal to 0.02% of average loans on an annualized basis, compared to 0.08% for the fourth quarter of 2016
  • Continued expansion of customer base:
    • Focus on capitalizing on opportunities presented by expanded branch network
    • Average core (non-maturity) deposits per branch grew $480 thousand to $21.4 million from December 31, 2016 to December 31, 2017
    • Average core deposits were $77.1 million higher in the fourth quarter of 2017 compared to the fourth quarter of 2016, an increase of 2.6%
  • Loan portfolio reaches all-time high:
    • Average loans were up $203 million for the fourth quarter of 2017 compared to fourth quarter of 2016
    • At $3.64 billion as of December 31, 2017, loans reached an all-time high

TrustCo Announces Fourth Quarter and Full Year 2017 Results; Net Income Before Taxes Up 12.9% Over Prior Year Quarter

GLENVILLE, N.Y., Jan. 22, 2018 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced fourth quarter of 2017 net income of $7.4 million compared to $10.8 million for the fourth quarter of 2016. Fourth quarter and full year 2017 results include the impact of the revaluation of the Company’s deferred tax assets resulting from the recently enacted tax legislation, as detailed below. On a pre-tax basis, earnings rose from $17.5 million in the fourth quarter of 2016 to $19.7 million in the fourth quarter of 2017, an increase of 12.9%. For the full year 2016, net income rose from $42.6 million to $43.1 million in 2017 while pre-tax earnings rose from $68.3 million to $76.7 million, an increase of 12.4%.

Summary

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased to be able to report a 13% increase in pre-tax earnings in the fourth quarter of 2017 as compared to the fourth quarter of 2016. Solid revenue growth and expense control combined to produce a strong quarter and 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 the coming year and beyond.”

TrustCo saw continued solid loan growth in the fourth 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 cash flow from investments, as well as growth in funding from customers and expansion of shareholders equity. The continued shift toward loans helped offset the margin impact from continued comparatively low yields on cash and investments and the continued decline in loan yields. The Federal Reserve decision 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 down slightly in the fourth quarter of 2017 versus the prior year, core deposits were up $77.1 million over that time frame. The shift towards increased core deposits contributed to our cost of funds remaining flat from the fourth quarter of 2016 to the fourth quarter of 2017. 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.

On December 22, 2017 the Tax Cuts and Jobs Act (the "Act") was signed into law, which includes a reduction of the statutory corporate tax rate from 35% to 21%. The lower tax rate will have a significant beneficial impact on results going forward, but also resulted in the revaluation of net deferred tax assets, as noted, based on the lower tax rate. Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted through income tax expense as changes in tax laws are enacted. The rate reduction is effective January 1, 2018. Included in results for the fourth quarter and full year 2017 is a reduction in the value of net deferred tax assets of $5.1 million, which is recorded as additional income tax expense for the quarter ended December 31, 2017. This charge had a negative impact on our reported net income, earnings per share, return on average equity and return on average assets.

Details

Average loans were up $202.6 million or 5.9% in the fourth quarter of 2017 over the same period in 2016. Average residential loans, our primary lending focus, were up $234.0 million or 8.2% in the fourth quarter of 2017, over the same period in 2016. Overall loan growth was constrained by a $29.0 million decline in average outstandings on home equity lines of credit and a $2.4 million decline in average commercial loans. Average deposits were down $12.8 million or 0.3% for the fourth quarter of 2017 over the same period a year earlier. The decrease in deposits was the result of a $89.9 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 $77.1 million from the fourth quarter of 2016 to the fourth quarter of 2017. Within core, money market balances were down $5.9 million, checking balances were up $90.6 million (including interest bearing and non-interest bearing balances) and savings were down $7.6 million. Core deposits typically represent longer term customer relationships and are generally lower cost than time deposits. The cost of interest bearing deposits remained flat at 0.36% in the fourth quarter of 2017 relative to the fourth quarter of 2016. The cost of core deposits, including demand, declined one basis point 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 fourth quarter of 2017, return on average assets and return on average equity were 0.60% and 6.38%, respectively, compared to 0.89% and 9.87% for the fourth quarter of 2016. Diluted earnings per share were $0.076 for the fourth quarter of 2017, compared to $0.113 for the fourth quarter of 2016. Overall expense control remains a key area of focus. Total operating expenses increased by $171 thousand in the fourth quarter of 2017 as compared to the fourth quarter of 2016, with increases in compensation and several other categories partly offset by declines in professional services expenses, ORE costs and several other categories. The modest increase in expenses was more than offset by a $2.1 million increase in revenue (net interest income plus non-interest income). As noted, the revaluation of the net deferred tax assets is included in income taxes, creating an unusually high effective tax rate for the fourth quarter of 2017. As noted, this reduced fourth quarter net income, which led to lower earnings per share, ROAA and ROAE. For 2018 the Company is expecting its combined effective tax rate to be approximately 23.5%, based on currently known information. The actual effective tax rate could be impacted by currently unknown aspects of how the tax law changes will be implemented and/or by management decisions to adapt to the new law.

“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, 2017, our average deposits per branch were $28.8 million, compared to $28.9 million a year earlier, while average core deposits per branch were $21.4 million compared to $20.9 million over the same time period. While total deposit growth is important, TrustCo strives to maximize customer relationships through attracting and increasing core deposit balances. 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 continued to improve versus December 31, 2016. Nonperforming loans (NPLs) were $24.4 million at December 31, 2017, compared to $25.1 million at December 31, 2016. NPLs were equal to 0.67% of total loans at December 31, 2017, compared to 0.73% at December 31, 2016. The coverage ratio, or allowance for loan losses to NPLs, was 181.2% at December 31, 2017, compared to 175.1% at December 31, 2016. Nonperforming assets (NPAs) were $27.6 million at December 31, 2017 compared to $29.3 million at December 31, 2016. The ratio of loan loss allowance to total loans was 1.21% as of December 31, 2017, compared to 1.28% at December 31, 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 December 31, 2017 compared to $43.9 million at December 31, 2016. The provision for loan losses was $300 thousand for the fourth quarter of 2017, compared to $600 thousand in the fourth quarter of 2016. Net chargeoffs for the fourth quarter of 2017 decreased versus the fourth quarter of 2016, falling to $212 thousand from $660 thousand in the year earlier period. The annualized net chargeoff ratio was 0.02% for the fourth quarter of 2017, compared to 0.08% in the fourth quarter of 2016.

The net interest margin for the fourth quarter of 2017 was 3.29%, up 16 basis points versus the fourth 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 increased one basis point, reflecting TrustCo’s strong funding base.

For the full year 2017, net income was $43.1 million, up 1.2% as compared to $42.6 million in the full year 2016, or $0.448 and $0.445, respectively, per diluted share. As noted, the revaluation of the net deferred tax asset reduced net income by $5.1 million in the fourth quarter and full year 2017. On a pre-tax basis, income was $76.7 million for 2017, up 12.4% as compared to the $68.3 million reported for 2016.

At December 31, 2017 the equity to asset ratio was 9.34%, compared to 8.89% at December 31, 2016. Book value per share at December 31, 2017 was $4.76 compared to $4.52 a year earlier.

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, 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 fourth quarter 2017 results will be held at 9:00 a.m. Eastern Time on January 23, 2018. 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 10116075. The call will also be audio webcast at: http://services.choruscall.com/links/trst180123.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 2018, 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
12/31/1709/30/1712/31/16
Summary of operations
Net interest income (TE)$ 39,259 39,190 36,921
Provision for loan losses 300 550 600
Net gain on securities transactions - - -
Noninterest income, excluding net gain on securities transactions 4,288 4,854 4,512
Noninterest expense 23,536 23,526 23,365
Net income 7,362 12,596 10,798
Per common share
Net income per share:
- Basic$ 0.077 0.131 0.113
- Diluted 0.076 0.131 0.113
Cash dividends 0.066 0.066 0.066
Tangible Book value at period end 4.75 4.73 4.51
Market price at period end 9.20 8.90 8.75
At period end
Full time equivalent employees 846 815 808
Full service banking offices 145 144 145
Performance ratios
Return on average assets 0.60%1.02 0.89
Return on average equity 6.38 11.06 9.87
Efficiency (1) 53.13 52.79 54.65
Net interest spread (TE) 3.22 3.21 3.07
Net interest margin (TE) 3.29 3.26 3.13
Dividend payout ratio 85.81 50.07 58.20
Capital ratio at period end
Consolidated tangible equity to tangible assets (2) 9.33 9.33 8.88
Asset quality analysis at period end
Nonperforming loans to total loans 0.67 0.69 0.73
Nonperforming assets to total assets 0.56 0.56 0.60
Allowance for loan losses to total loans 1.21 1.23 1.28
Coverage ratio (3) 1.8x 1.8x 1.8x
(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 $553 of intangibles from both equity and assets.
(3) Calculated as allowance for loan losses divided by total nonperforming loans.
TE = Taxable equivalent.
FINANCIAL HIGHLIGHTS, Continued
(dollars in thousands, except per share data)
(Unaudited)
Years Ended
12/31/1712/31/16
Summary of operations
Net interest income (TE)$ 154,413 146,109
Provision for loan losses 2,000 2,950
Net gain on securities transactions - 668
Noninterest income, excluding net gain on securities transactions 18,373 18,344
Noninterest expense 93,994 93,827
Net income 43,145 42,601
Per common share
Net income per share:
- Basic$ 0.449 0.446
- Diluted 0.448 0.445
Cash dividends 0.263 0.263
Tangible Book value at period end 4.75 4.51
Market price at period end 9.20 8.75
Performance ratios
Return on average assets 0.88%0.89
Return on average equity 9.64 9.94
Efficiency (1) 53.75 55.67
Net interest spread (TE) 3.16 3.05
Net interest margin (TE) 3.22 3.11
Dividend payout ratio 58.44 58.88
(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
12/31/20179/30/20176/30/20173/31/201712/31/2016
Interest and dividend income:
Interest and fees on loans$ 37,914 37,513 36,662 36,044 36,251
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 614 465 607 595 422
State and political subdivisions 10 6 11 12 12
Mortgage-backed securities and collateralized mortgage obligations-residential 1,730 1,815 1,944 1,958 1,849
Corporate bonds 148 153 154 151 149
Small Business Administration-guaranteed participation securities 358 380 394 415 430
Mortgage-backed securities and collateralized mortgage obligations-commercial 43 22 21 23 23
Other securities 4 4 4 4 4
Total interest and dividends on securities available for sale 2,907 2,845 3,135 3,158 2,889
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 261 276 296 316 331
Corporate bonds - 102 154 154 153
Total interest on held to maturity securities 261 378 450 470 484
Federal Reserve Bank and Federal Home Loan Bank stock 151 125 134 134 133
Interest on federal funds sold and other short-term investments 1,779 1,927 1,727 1,246 865
Total interest income 43,012 42,788 42,108 41,052 40,622
Interest expense:
Interest on deposits:
Interest-bearing checking 107 113 134 124 123
Savings 429 435 435 430 436
Money market deposit accounts 457 469 468 466 459
Time deposits 2,412 2,247 2,181 2,283 2,406
Interest on short-term borrowings 359 345 349 349 291
Total interest expense 3,764 3,609 3,567 3,652 3,715
Net interest income 39,248 39,179 38,541 37,400 36,907
Provision for loan losses 300 550 550 600 600
Net interest income after provision for loan losses 38,948 38,629 37,991 36,800 36,307
Noninterest income:
Trustco Financial Services income 1,457 1,844 1,425 1,858 1,422
Fees for services to customers 2,597 2,767 2,797 2,637 2,795
Net gain on securities transactions - - - - -
Other 234 243 282 232 295
Total noninterest income 4,288 4,854 4,504 4,727 4,512
Noninterest expenses:
Salaries and employee benefits 10,536 10,360 9,559 10,210 9,576
Net occupancy expense 4,140 4,027 4,267 4,109 4,185
Equipment expense 1,465 1,669 1,428 1,556 1,370
Professional services 1,325 1,679 1,963 1,928 1,997
Outsourced services 1,760 1,650 1,500 1,500 1,775
Advertising expense 559 699 607 713 727
FDIC and other insurance 1,102 1,018 1,012 1,047 901
Other real estate expense, net 401 275 (4) 499 721
Other 2,248 2,149 2,581 2,457 2,113
Total noninterest expenses 23,536 23,526 22,913 24,019 23,365
Income before taxes 19,700 19,957 19,582 17,508 17,454
Income taxes 12,338 7,361 7,342 6,561 6,656
Net income$ 7,362 12,596 12,240 10,947 10,798
Net income per common share:
- Basic$0.077 0.131 0.127 0.114 0.113
- Diluted 0.076 0.131 0.127 0.114 0.113
Average basic shares (in thousands) 96,230 96,102 96,003 95,879 95,732
Average diluted shares (in thousands) 96,393 96,205 96,073 95,987 95,877
Note: Taxable equivalent net interest income$ 39,259 39,190 38,553 37,413 36,921
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Years Ended
12/31/201712/31/2016
Interest and dividend income:
Interest and fees on loans$ 148,133 143,679
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 2,281 1,489
State and political subdivisions 39 52
Mortgage-backed securities and collateralized mortgage obligations-residential 7,447 7,963
Corporate bonds 606 246
Small Business Administration-guaranteed participation securities 1,547 1,801
Mortgage-backed securities and collateralized mortgage obligations-commercial 109 133
Other securities 16 16
Total interest and dividends on securities available for sale 12,045 11,700
Interest on held to maturity securities:
Mortgage-backed securities-residential 1,149 1,454
Corporate bonds 410 617
Total interest on held to maturity securities 1,559 2,071
Federal Reserve Bank and Federal Home Loan Bank stock 544 502
Interest on federal funds sold and other short-term investments 6,679 3,407
Total interest income 168,960 161,359
Interest expense:
Interest on deposits:
Interest-bearing checking 478 473
Savings 1,729 2,148
Money market deposit accounts 1,860 1,885
Time deposits 9,123 9,707
Interest on short-term borrowings 1,402 1,091
Total interest expense 14,592 15,304
Net interest income 154,368 146,055
Provision for loan losses 2,000 2,950
Net interest income after provision for loan losses 152,368 143,105
Noninterest income:
Trust department income 6,584 5,886
Fees for services to customers 10,798 10,857
Net gain on securities transactions - 668
Other 991 1,601
Total noninterest income 18,373 19,012
Noninterest expenses:
Salaries and employee benefits 40,665 36,508
Net occupancy expense 16,543 16,078
Equipment expense 6,118 6,320
Professional services 6,895 8,200
Outsourced services 6,410 6,216
Advertising expense 2,578 2,515
FDIC and other insurance 4,179 5,967
Other real estate (income) expense, net 1,171 2,558
Other 9,435 9,465
Total noninterest expenses 93,994 93,827
Income before taxes 76,747 68,290
Income taxes 33,602 25,689
Net income$ 43,145 42,601
Net income per Common Share:
- Basic$0.449 0.446
- Diluted 0.448 0.445
Average basic shares (thousands) 96,112 95,548
Average diluted shares (thousands) 96,222 95,648
Note: Taxable equivalent net interest income$ 154,413 146,109
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
12/31/20179/30/20176/30/20173/31/201712/31/2016
ASSETS:
Cash and due from banks$44,125 41,598 43,783 41,352 48,719
Federal funds sold and other short term investments 568,615 582,599 663,360 641,839 658,555
Total cash and cash equivalents 612,740 624,197 707,143 683,191 707,274
Securities available for sale:
U. S. government sponsored enterprises 137,994 123,658 128,386 162,341 117,266
States and political subdivisions 525 534 536 887 886
Mortgage-backed securities and collateralized mortgage obligations-residential 315,840 335,530 352,591 357,683 372,308
Small Business Administration-guaranteed participation securities 67,059 69,818 72,858 75,429 78,499
Mortgage-backed securities and collateralized mortgage obligations-commercial 9,700 9,824 9,903 9,923 10,011
Corporate bonds 40,162 40,381 40,498 40,612 40,705
Other securities 685 685 685 685 685
Total securities available for sale 571,965 580,430 605,457 647,560 620,360
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 27,551 29,268 31,211 33,276 35,500
Corporate bonds 0 0 9,997 9,994 9,990
Total held to maturity securities 27,551 29,268 41,208 43,270 45,490
Federal Reserve Bank and Federal Home Loan Bank stock 8,779 8,779 9,723 9,579 9,579
Loans:
Commercial 186,207 187,281 183,035 184,451 191,194
Residential mortgage loans 3,132,521 3,070,970 2,999,306 2,929,928 2,895,733
Home equity line of credit 308,916 311,753 316,674 326,280 334,841
Installment loans 8,763 8,278 8,458 8,277 8,818
Loans, net of deferred fees and costs 3,636,407 3,578,282 3,507,473 3,448,936 3,430,586
Less:
Allowance for loan losses 44,170 44,082 44,162 44,048 43,890
Net loans 3,592,237 3,534,200 3,463,311 3,404,888 3,386,696
Bank premises and equipment, net 35,157 35,028 35,174 35,175 35,466
Other assets 59,579 58,373 58,466 63,080 63,941
Total assets$4,908,008 4,870,275 4,920,482 4,886,743 4,868,806
LIABILITIES:
Deposits:
Demand$398,399 397,623 390,120 373,930 377,755
Interest-bearing checking 891,052 862,067 871,004 838,936 815,534
Savings accounts 1,260,447 1,265,229 1,285,886 1,287,802 1,271,449
Money market deposit accounts 556,462 564,557 572,580 583,909 571,962
Time deposits 1,066,966 1,075,886 1,088,824 1,113,892 1,159,463
Total deposits 4,173,326 4,165,362 4,208,414 4,198,469 4,196,163
Short-term borrowings 242,991 216,508 233,621 220,946 209,406
Accrued expenses and other liabilities 33,383 33,477 31,081 28,628 30,551
Total liabilities 4,449,700 4,415,347 4,473,116 4,448,043 4,436,120
SHAREHOLDERS' EQUITY:
Capital stock 99,998 99,562 99,511 99,493 99,214
Surplus 175,651 172,712 172,603 172,628 171,425
Undivided profits 219,436 218,401 212,112 206,173 201,517
Accumulated other comprehensive loss, net of tax (1,806)(3,060)(3,593)(5,568)(6,251)
Treasury stock at cost (34,971)(32,687)(33,267)(34,026)(33,219)
Total shareholders' equity 458,308 454,928 447,366 438,700 432,686
Total liabilities and shareholders' equity$4,908,008 4,870,275 4,920,482 4,886,743 4,868,806
Outstanding shares (in thousands) 96,289 96,108 96,015 95,917 95,780

NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
12/31/1709/30/1706/30/1703/31/1712/31/16
New York and other states*
Loans in nonaccrual status:
Commercial$ 1,543 1,696 1,711 1,858 1,843
Real estate mortgage - 1 to 4 family 20,350 20,926 20,639 22,772 21,198
Installment 57 30 25 41 48
Total non-accrual loans 21,950 22,652 22,375 24,671 23,089
Other nonperforming real estate mortgages - 1 to 4 family 38 40 41 41 42
Total nonperforming loans 21,988 22,692 22,416 24,712 23,131
Other real estate owned 3,246 2,879 3,585 3,191 4,268
Total nonperforming assets$ 25,234 25,571 26,001 27,903 27,399
Florida
Loans in nonaccrual status:
Commercial$ - - - - -
Real estate mortgage - 1 to 4 family 2,389 1,895 2,112 1,712 1,929
Installment - - - - -
Total non-accrual loans 2,389 1,895 2,112 1,712 1,929
Other nonperforming real estate mortgages - 1 to 4 family - - - - -
Total nonperforming loans 2,389 1,895 2,112 1,712 1,929
Other real estate owned - - - - -
Total nonperforming assets$ 2,389 1,895 2,112 1,712 1,929
Total
Loans in nonaccrual status:
Commercial$ 1,543 1,696 1,711 1,858 1,843
Real estate mortgage - 1 to 4 family 22,739 22,821 22,751 24,484 23,127
Installment 57 30 25 41 48
Total non-accrual loans 24,339 24,547 24,487 26,383 25,018
Other nonperforming real estate mortgages - 1 to 4 family 38 40 41 41 42
Total nonperforming loans 24,377 24,587 24,528 26,424 25,060
Other real estate owned 3,246 2,879 3,585 3,191 4,268
Total nonperforming assets$ 27,623 27,466 28,113 29,615 29,328
Quarterly Net Chargeoffs (Recoveries)
12/31/1709/30/1706/30/1703/31/1712/31/16
New York and other states*
Commercial$ (86) (2) - 64 (56)
Real estate mortgage - 1 to 4 family 249 613 334 261 619
Installment 50 56 37 31 55
Total net chargeoffs$ 213 667 371 356 618
Florida
Commercial$ - - - - -
Real estate mortgage - 1 to 4 family (1) (41) 52 84 23
Installment - 4 13 2 19
Total net chargeoffs$ (1) (37) 65 86 42
Total
Commercial$ (86) (2) - 64 (56)
Real estate mortgage - 1 to 4 family 248 572 386 345 642
Installment 50 60 50 33 74
Total net chargeoffs$ 212 630 436 442 660
Asset Quality Ratios
12/31/1709/30/1706/30/1703/31/1712/31/16
Total nonperforming loans(1)$ 24,377 24,587 24,528 26,424 25,060
Total nonperforming assets(1) 27,623 27,466 28,113 29,615 29,328
Total net chargeoffs(2) 212 630 436 442 660
Allowance for loan losses(1) 44,170 44,082 44,162 44,048 43,890
Nonperforming loans to total loans 0.67%0.69%0.70%0.77%0.73%
Nonperforming assets to total assets 0.56%0.56%0.57%0.61%0.60%
Allowance for loan losses to total loans 1.21%1.23%1.26%1.28%1.28%
Coverage ratio(1) 181.2%179.3%180.0%166.7%175.1%
Annualized net chargeoffs to average loans(2) 0.02%0.07%0.05%0.05%0.08%
Allowance for loan losses to annualized net chargeoffs(2) 52.1x 17.5x 25.3x 24.9x 16.6x
* 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, 2017 December 31, 2016
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$139,565 614 1.76%$113,158 422 1.49%
Mortgage backed securities and
collateralized mortgage obligations-residential 328,826 1,730 2.10 384,973 1,849 1.92
State and political subdivisions 519 10 7.71 943 19 8.06
Corporate bonds 41,006 148 1.44 41,039 149 1.45
Small Business Administration-guaranteed participation securities 69,643 358 2.06 81,922 430 2.10
Mortgage backed securities and
collateralized mortgage obligations-commercial 9,843 43 1.75 10,173 23 0.90
Other 685 4 2.34 685 4 2.34
Total securities available for sale 590,087 2,907 1.97 632,893 2,896 1.83
Federal funds sold and other
short-term Investments 539,700 1,779 1.32 622,578 865 0.50
Held to maturity securities:
Corporate bonds - - - 9,988 153 6.13
Mortgage backed securities and
collateralized mortgage obligations-residential 28,418 261 3.67 36,723 331 3.61
Total held to maturity securities 28,418 261 3.67 46,711 484 4.14
Federal Reserve Bank and Federal Home Loan Bank stock 8,779 151 6.88 9,579 133 5.55
Commercial loans 186,655 2,429 5.21 189,058 2,557 5.41
Residential mortgage loans 3,103,792 32,051 4.13 2,869,757 30,294 4.22
Home equity lines of credit 310,626 3,240 4.17 339,591 3,209 3.78
Installment loans 8,276 205 9.91 8,391 198 9.44
Loans, net of unearned income 3,609,349 37,925 4.20 3,406,797 36,258 4.26
Total interest earning assets 4,776,333 43,023 3.60 4,718,558 40,636 3.44
Allowance for loan losses (44,322) (44,368)
Cash & non-interest earning assets 128,340 137,372
Total assets$4,860,351 $4,811,562
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$856,031 107 0.05%$782,979 123 0.06%
Money market accounts 559,463 457 0.33 565,335 459 0.32
Savings 1,259,938 429 0.14 1,267,551 436 0.14
Time deposits 1,073,956 2,412 0.90 1,163,820 2,406 0.83
Total interest bearing deposits 3,749,388 3,405 0.36 3,779,685 3,424 0.36
Short-term borrowings 232,207 359 0.62 195,526 291 0.60
Total interest bearing liabilities 3,981,595 3,764 0.38 3,975,211 3,715 0.37
Demand deposits 390,343 372,801
Other liabilities 30,392 28,198
Shareholders' equity 458,021 435,352
Total liabilities and shareholders' equity$4,860,351 $4,811,562
Net interest income, tax equivalent 39,259 36,921
Net interest spread 3.22% 3.07%
Net interest margin (net interest income
to total interest earning assets) 3.29% 3.13%
Tax equivalent adjustment (11) (14)
Net interest income 39,248 36,907
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands) Year ended Year ended
(Unaudited) December 31, 2017 December 31, 2016
Average InterestAverage Average InterestAverage
Balance Rate Balance Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises$139,652 2,281 1.63%$101,242 1,489 1.47%
Mortgage backed securities and
collateralized mortgage obligations-residential 350,256 7,447 2.13 410,646 7,963 1.94
State and political subdivisions 682 55 8.06 991 80 8.07
Corporate bonds 41,946 606 1.44 17,088 246 1.44
Small Business Administration-guaranteed participation securities 73,996 1,547 2.09 86,407 1,801 2.08
Mortgage backed securities and
collateralized mortgage obligations-commercial 9,963 109 1.09 10,284 133 1.29
Other 685 16 2.34 683 16 2.34
Total securities available for sale 617,180 12,061 1.95 627,341 11,728 1.87
Federal funds sold and other
short-term Investments 611,586 6,679 1.09 662,436 3,407 0.50
Held to maturity securities:
Corporate bonds 6,663 410 6.15 10,145 617 6.08
Mortgage backed securities and
collateralized mortgage obligations-residential 31,266 1,149 3.67 40,830 1,454 3.56
Total held to maturity securities 37,929 1,559 4.11 50,975 2,071 4.06
Federal Reserve Bank and Federal Home Loan Bank stock 9,295 544 5.85 9,554 502 5.25
Commercial loans 185,376 9,741 5.25 196,116 10,331 5.27
Residential mortgage loans 3,002,706 124,961 4.16 2,793,780 119,817 4.29
Home equity lines of credit 318,660 12,692 3.98 350,004 12,779 3.65
Installment loans 8,158 768 9.41 8,424 778 9.24
Loans, net of unearned income 3,514,900 148,162 4.22 3,348,324 143,705 4.29
Total interest earning assets 4,790,890 169,005 3.53 4,698,630 161,413 3.44
Allowance for loan losses (44,319) (44,718)
Cash & non-interest earning assets 129,097 136,789
Total assets$4,875,668 $4,790,701
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts$844,010 478 0.06%$764,399 473 0.06%
Money market accounts 572,270 1,860 0.33 580,125 1,885 0.32
Savings 1,275,268 1,729 0.14 1,272,015 2,148 0.17
Time deposits 1,097,190 9,123 0.83 1,162,842 9,707 0.83
Total interest bearing deposits 3,788,738 13,190 0.35 3,779,381 14,213 0.38
Short-term borrowings 228,086 1,402 0.61 185,672 1,091 0.59
Total interest bearing liabilities 4,016,824 14,592 0.36 3,965,053 15,304 0.39
Demand deposits 382,658 369,820
Other liabilities 28,506 27,439
Shareholders' equity 447,680 428,389
Total liabilities and shareholders' equity$4,875,668 $4,790,701
Net interest income, tax equivalent 154,413 146,109
Net interest spread 3.16% 3.05%
Net interest margin (net interest income
to total interest earning assets) 3.22% 3.11%
Tax equivalent adjustment (45) (54)
Net interest income 154,368 146,055

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)
12/31/1709/30/1712/31/16
Tangible Book Value Per Share
Equity$ 458,308 454,928 432,686
Less: Intangible assets 553 553 553
Tangible equity 457,755 454,375 432,133
Shares outstanding 96,289 96,108 95,780
Tangible book value per share 4.75 4.73 4.51
Book value per share 4.76 4.73 4.52
Tangible Equity to Tangible Assets
Total Assets 4,908,008 4,870,275 4,868,806
Less: Intangible assets 553 553 553
Tangible assets 4,907,455 4,869,722 4,868,253
Tangible Equity to Tangible Assets 9.33%9.33%8.88%
Equity to Assets 9.34%9.34%8.89%
3 Months Ended Years Ended
Efficiency Ratio 12/31/1709/30/1712/31/16 12/31/1712/31/16
Net interest income$ 39,248 39,179 36,907 154,368 146,055
Taxable equivalent adjustment 11 11 14 45 54
Net interest income (fully taxable equivalent) 39,259 39,190 36,921 154,413 146,109
Non-interest income 4,288 4,854 4,512 18,373 19,012
Less: Net gain on sale of building - - - - 469
Less: Net gain on sale of nonperforming loans - - - 84 24
Less: Net gain on securities - - - - 668
Revenue used for efficiency ratio 43,547 44,044 41,433 172,702 163,960
Total noninterest expense 23,536 23,526 23,365 93,994 93,827
Less: Other real estate expense, net 401 275 721 1,171 2,558
Expense used for efficiency ratio 23,135 23,251 22,644 92,823 91,269
Efficiency Ratio 53.13%52.79%54.65% 53.75%55.67%

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

Source: TrustCo Bank Corp NY