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TrustCo Announces Third Quarter Pretax Earnings Up 10%

GLENVILLE, N.Y., Oct. 22, 2012 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced that pre-tax earnings were up 10.1% from $14.4 million in the third quarter of 2011 to $15.8 million in the third quarter of 2012. Net income for the third quarter of 2012 was $9.8 million, up 5.7% over the prior-year period and equal to diluted earnings per share of $0.104, compared to net income of $9.2 million and diluted earnings per share of $0.100 for the third quarter of 2011.

The third quarter of 2012 saw continued balance sheet growth compared to the third quarter of 2011, but a modest decline compared to the second quarter of 2012. Robert J. McCormick, President and Chief Executive Officer noted, "We are pleased that the third quarter resulted in continued solid earnings growth. As noted in our second quarter release, the current interest rate environment has created a unique opportunity for our Company to realign the deposit mix which should support future objectives. As we had discussed we allowed an average of $124.0 million of higher cost time deposits to run off during the third quarter while at the same time growing our core deposits by an average of $96.9 million. Previous strong quarterly growth in deposits allowed us the flexibility to take advantage of this opportunity to shift our deposit mix, which helped improve our margin. Balance sheet expansion remains an important part of our future plans, but we will also continue to take advantage of future opportunities like those in the third quarter that strengthen our deposit mix and have a positive impact on our margin. We continue to add solid and profitable customers on both the deposit and loan side, and will remain conservative as to how we price our products. Our highly liquid balance sheet allows us to fund loan growth without having to overpay for deposits. We look forward to the balance of 2012 and 2013 with optimism, though we note that our industry continues to face challenges as the economy remains fragile and interest rates remain at unprecedented levels. We will continue to take advantage of opportunities that are presented." Return on average equity and return on average assets were 10.97% and 0.89%, respectively, for the third quarter of 2012, compared to 10.91% and 0.88% for the third quarter of 2011. The efficiency ratio was 49.18% for the third quarter of 2012, compared to 46.51% for the third quarter of 2011. Both years ratios rank among industry leaders.

Mr. McCormick also noted "We continue to see some signs of economic improvement in the markets in which we operate, although high levels of unemployment and other persistent issues continue to constrain any significant growth. We believe our long-term focus on traditional lending criteria and conservative balance sheet management has enabled us to maintain a strong balance sheet with continued profitability. As a result, we have been able to focus on conducting business, which has put us in a position to take advantage of the significant upheaval that customers of other banks have experienced."

TrustCo continued to report solid growth in loans and deposits on a year-over-year basis. For the quarter ended September 30, 2012, average loans were up $134.7 million or 5.5% compared to the same period in 2011, while average deposits increased $166.1 million or 4.5% over the same period. Compared to the second quarter of 2012, average deposits were down $27.0 million or 2.8% (annualized) and average loans were up $42.3 million or 6.7% (annualized). Mr. McCormick noted that, "The year-over-year growth of our loans and deposits reflects the long term strategic focus of the Bank, while the decline in average deposits relative to the second quarter reflects our near term tactical decision to intensify our focus on enhancing our mix of deposits and growing our core customer base. Our efforts in this regard resulted in certificate of deposit balances falling from 33.9% of deposits at June 30, 2012 to 29.4% at September 30, 2012. Because certificates are our most costly deposits, this decline contributed to our overall cost of deposits falling to 0.44% in the third quarter compared to 0.52% in the second quarter.

Our branch franchise continues to be the key to our long term plans. We have made significant progress in expanding our loans and deposits through our branches, and expect that to continue as the new branches grow towards their capacity. We remain mindful that fully achieving our goals for our newer branches will take time and continued hard work. We believe our success in growing customer relationships provides the basic building blocks that will help drive profit growth over the coming years. As we have noted, however, we will not pursue balance sheet expansion that does not contribute to the long term health of the Company."

For the first nine months of 2012 net income was $27.7 million and resulted in diluted earnings per share of $0.296, as compared to the first nine months of 2011 net income of $24.4 million and diluted earnings per share of $0.296. Net income was up 13.8% from the first nine months of 2011 to the first nine months of 2012. Return on average equity and return on average assets were 10.64% and 0.85%, respectively, for the first nine months of 2012 and 11.38% and 0.80% for the comparable period in 2011.

Reported credit results for the quarter were affected by the implementation in the third quarter of new OCC guidance which affected consumer loans where the borrower's obligation to TrustCo has been discharged in bankruptcy and the borrower has not reaffirmed the debt. Implementation of this new OCC guidance affected nonperforming loans and net charge offs as follows:

  • Net $4.0 million of performing consumer loans were reclassified to nonaccrual status, and
  • $804 thousand increase in net charge offs, which was covered by the reserve.

Nonperforming loans were $49.9 million as of September 30, 2012, compared to $51.5 million at June 30, 2012 and $47.0 million at September 30, 2011. Nonperforming assets were $58.6 million at September 30, 2012, compared to $55.3 million at June 30, 2012 and $53.1 million at September 30, 2011. At September 30, 2012, nonperforming loans were equal to 1.92% of total loans, compared to 2.01% at June 30, 2012 and 1.89% at September 30, 2011. Nonperforming assets to total assets were 1.36% at September 30, 2012, compared to 1.25% at June 30, 2012 and 1.27% at September 30, 2011. The allowance for loan losses as a percentage of gross loans and as a multiple of net charge-offs remains strong. Excluding the affect of implementing the new OCC guidance TrustCo would have had nonperforming loans of $45.9 million or 1.76% of total loans, and nonperforming assets of $54.6 million or 1.26% of total assets as of September 30, 2012. The allowance to total loans was 1.82% at September 30, 2012 and 1.88% at June 30, 2012, and covered annualized third quarter net charge-offs by 3.3 times, compared to an annualized 4.1 times for the third quarter of 2011. The coverage ratio, or allowance for loan losses to nonperforming loans was 94.9% at September 30, 2012, compared to 93.3% at June 30, 2012 and 101.7% at September 30, 2011. Excluding the affect of implementing the new OCC guidance TrustCo's allowance for loan losses at September 30, 2012 as a percentage of gross loans would have been 1.85%, which would have covered annualized third quarter net charge offs by 4.4 times. Likewise the coverage ratio of the allowance for loan losses to nonperforming loans would have been 104.9% at September 30 , 2012.

Net interest margin for the third quarter of 2012 was 3.21%, up from 3.16% in the second quarter of 2012 and down from 3.38% in the third quarter of 2011. The improvement in the margin is partly due to the decision to restrain overall deposit growth through pricing discipline while improving the deposit mix during the third quarter.

At September 30, 2012 the tangible equity ratio was 8.27% compared to 8.04% at September 30, 2011. Tangible book value per share ended the third quarter at $3.81 compared to $3.62 in the year-ago period.

TrustCo Bank Corp NY is a $4.3 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 138 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at September 30, 2012.

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 2012 results will be held at 9:00 a.m. Eastern Time on October 23, 2012. Those wishing to participate in the call may dial toll-free 1-877-317-6789. International callers must dial + 1-412-317-6789. A replay of the call will be available until January 24, 2013 by dialing 1-877-344-7529 (1-412-317-0088 for international callers), Conference Number 10019368. The call will also be audio webcast at: http://services.choruscall.com/links/trst121023.html, and will be available until October 23, 2013.

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. The "forward-looking statements" may include statements regarding future events or performance and statements regarding TrustCo's ability to offer and sell securities under its shelf registration statement. 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 our actual results and could cause our actual financial performance to differ materially from that expressed in any forward-looking statement: credit risk, the effects of and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rates, market and monetary fluctuations, competition, the effect of changes in financial services laws and regulations (including laws concerning taxation, banking and securities), real estate and collateral values, changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board ("FASB") or the Public Company Accounting Oversight Board; changes in local market areas and general business and economic trends and the matters described under the heading "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2011, as amended, and in our subsequent securities filings.

TRUSTCO BANK CORP NY
GLENVILLE, NY
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
09/30/12 06/30/12 09/30/11
Summary of operations
Net interest income (TE) $ 34,321 33,993 34,390
Provision for loan losses 2,900 3,000 5,100
Net securities transactions 666 55 158
Noninterest income 3,927 3,971 3,645
Noninterest expense 20,019 20,498 18,443
Net income 9,753 9,066 9,225
Per common share
Net income per share:
- Basic $ 0.104 0.097 0.100
- Diluted $ 0.104 0.097 0.100
Cash dividends 0.066 0.066 0.066
Tangible Book value at period end 3.81 3.73 3.62
Market price at period end 5.71 5.46 4.46
At period end
Full time equivalent employees 760 742 720
Full service banking offices 138 137 135
Performance ratios
Return on average assets 0.89% 0.83 0.88
Return on average equity 10.97 10.49 10.91
Efficiency (1) 49.18 52.24 46.51
Net interest spread (TE) 3.15 3.09 3.29
Net interest margin (TE) 3.21 3.16 3.38
Dividend payout ratio 63.13 67.80 66.27
Capital ratio at period end
Consolidated tangible equity to tangible assets (2) 8.27 7.90 8.04
Asset quality analysis at period end
Nonperforming loans to total loans (4) 1.92 2.01 1.89
Nonperforming assets to total assets (4) 1.36 1.25 1.27
Allowance for loan losses to total loans 1.82 1.88 1.93
Coverage ratio (3) 0.9x 0.9 1.0
(1) Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income (excluding net securities transactions).
(2) The tangible equity ratio excludes $553,000 of intangibles from both equity and assets.
(3) Calculated as allowance for loan losses divided by total nonperforming loans.
(4) Included in the September 30, 2012 balance of nonperforming loans is net $4.0 of performing loans that have been reclassified to nonaccrual status as a result of recent OCC guidance.
TE = Taxable equivalent.
FINANCIAL HIGHLIGHTS, Continued
(dollars in thousands, except per share data)
(Unaudited)
Nine Months Ended
09/30/12 09/30/11
Summary of operations
Net interest income (TE) $ 101,951 101,497
Provision for loan losses 9,000 14,550
Net securities transactions 1,398 1,296
Noninterest income 11,739 11,349
Noninterest expense 61,161 60,841
Net income 27,728 24,373
Per common share
Net income per share:
- Basic $ 0.296 0.296
- Diluted 0.296 0.296
Cash dividends 0.197 0.197
Tangible Book value at period end 3.81 3.62
Market price at period end 5.71 4.46
Performance ratios
Return on average assets 0.85% 0.80
Return on average equity 10.64 11.38
Efficiency (1) 51.30 49.98
Net interest spread (TE) 3.12 3.33
Net interest margin (TE) 3.20 3.42
Dividend payout ratio 66.51 66.71
(1) Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income (excluding net securities transactions).
TE = Taxable equivalent.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
9/30/2012 6/30/2012 3/31/2012 12/31/2011 9/30/2011
Interest and dividend income:
Interest and fees on loans $ 32,103 32,277 32,425 32,711 32,640
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 1,996 2,606 2,304 2,661 3,347
State and political subdivisions 340 368 410 490 557
Mortgage-backed securities and collateralized mortgage obligations-residential 2,003 1,364 1,093 1,083 778
Corporate bonds 529 648 822 886 953
Small Business Administration-guaranteed participation securities 43 -- -- -- --
Other securities 4 5 5 5 5
Total interest and dividends on securities available for sale 4,915 4,991 4,634 5,125 5,640
Interest on held to maturity securities:
U. S. government sponsored enterprises -- -- 25 97 164
Mortgage-backed securities and collateralized mortgage obligations-residential 976 1,198 1,290 1,151 1,186
Corporate bonds 385 387 509 590 565
Total interest on held to maturity securities 1,361 1,585 1,824 1,838 1,915
Federal Reserve Bank and Federal Home Loan Bank stock 120 149 90 80 84
Interest on federal funds sold and other short-term investments 258 299 320 284 318
Total interest income 38,757 39,301 39,293 40,038 40,597
Interest expense:
Interest on deposits:
Interest-bearing checking 79 78 78 76 74
Savings 870 979 1,102 1,018 952
Money market deposit accounts 673 770 923 1,030 1,158
Time deposits 2,629 3,230 3,418 3,552 3,904
Interest on short-term borrowings 348 378 388 401 384
Total interest expense 4,599 5,435 5,909 6,077 6,472
Net interest income 34,158 33,866 33,384 33,961 34,125
Provision for loan losses 2,900 3,000 3,100 4,200 5,100
Net interest income after provision for loan losses 31,258 30,866 30,284 29,761 29,025
Noninterest income:
Trust department income 1,145 1,407 1,394 1,086 1,242
Fees for services to customers 2,610 2,388 2,240 2,305 2,189
Net gain on securities transactions 666 55 677 132 158
Other 172 176 207 213 214
Total noninterest income 4,593 4,026 4,518 3,736 3,803
Noninterest expenses:
Salaries and employee benefits 7,587 7,519 7,743 7,638 7,087
Net occupancy expense 3,756 3,817 3,795 3,664 3,614
Equipment expense 1,316 1,600 1,520 1,200 1,639
Professional services 1,657 1,489 1,436 1,411 1,152
Outsourced services 1,350 1,347 1,250 1,050 1,350
Advertising expense 935 1,060 809 607 763
FDIC and other insurance 983 953 880 577 835
Other real estate expense, net 1,210 665 966 1,254 754
Other 1,225 2,048 2,245 1,508 1,249
Total noninterest expenses 20,019 20,498 20,644 18,909 18,443
Income before taxes 15,832 14,394 14,158 14,588 14,385
Income taxes 6,079 5,328 5,249 5,874 5,160
Net income $ 9,753 9,066 8,909 8,714 9,225
Net income per Common Share:
- Basic $ 0.104 0.097 0.095 0.093 0.100
- Diluted 0.104 0.097 0.095 0.093 0.100
Average basic shares (thousands) 93,692 93,561 93,546 93,308 92,124
Average diluted shares (thousands) 93,700 93,562 93,546 93,308 92,124
Note: Taxable equivalent net interest income $ 34,321 33,993 33,637 34,220 34,390
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
Nine Months Ended
9/30/2012 9/30/2011
Interest and dividend income:
Interest and fees on loans $ 96,805 96,501
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 6,906 10,337
State and political subdivisions 1,118 1,981
Mortgage-backed securities and collateralized mortgage obligations-residential 4,460 2,008
Corporate bonds 1,999 3,173
Small Business Administration-guaranteed participation securities 43 --
Other securities 14 14
Total interest and dividends on securities available for sale 14,540 17,513
Interest on held to maturity securities:
U. S. government sponsored enterprises 25 164
Mortgage-backed securities-residential 3,464 3,614
Corporate bonds 1,281 1,875
Total interest on held to maturity securities 4,770 5,653
Federal Reserve Bank and Federal Home Loan Bank stock 359 225
Interest on federal funds sold and other short-term investments 877 818
Total interest income 117,351 120,710
Interest expense:
Interest on deposits:
Interest-bearing checking 235 209
Savings 2,951 2,770
Money market deposit accounts 2,366 3,569
Time deposits 9,277 12,446
Interest on short-term borrowings 1,114 1,173
Total interest expense 15,943 20,167
Net interest income 101,408 100,543
Provision for loan losses 9,000 14,550
Net interest income after provision for loan losses 92,408 85,993
Noninterest income:
Trust department income 3,946 4,002
Fees for services to customers 7,238 6,608
Net gain on securities transactions 1,398 1,296
Other 555 739
Total noninterest income 13,137 12,645
Noninterest expenses:
Salaries and employee benefits 22,849 21,113
Net occupancy expense 11,368 11,023
Equipment expense 4,436 4,452
Professional services 4,582 4,318
Outsourced services 3,947 4,050
Advertising expense 2,804 2,177
FDIC and other insurance 2,816 4,078
Other real estate expense, net 2,841 4,439
Other 5,518 5,191
Total noninterest expenses 61,161 60,841
Income before taxes 44,384 37,797
Income taxes 16,656 13,424
Net income $ 27,728 24,373
Net income per Common Share:
- Basic $ 0.296 0.296
- Diluted 0.296 0.296
Average basic shares (thousands) 93,568 82,297
Average diluted shares (thousands) 93,572 82,297
Note: Taxable equivalent net interest income $ 101,951 101,497
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
9/30/2012 6/30/2012 3/31/2012 12/31/2011 9/30/2011
ASSETS:
Cash and due from banks $ 40,354 36,589 39,426 44,395 40,875
Federal funds sold and other short term investments 402,290 486,049 486,055 488,548 434,950
Total cash and cash equivalents 442,644 522,638 525,481 532,943 475,825
Securities available for sale:
U. S. government sponsored enterprises 427,798 643,189 744,725 563,460 633,812
States and political subdivisions 33,857 36,978 38,367 43,968 51,289
Mortgage-backed securities and collateralized mortgage obligations-residential 515,879 354,285 219,301 204,022 200,516
Corporate bonds 49,296 73,311 81,654 96,608 97,464
Small Business Administration-guaranteed participation securities 25,338 -- -- -- --
Other securities 660 660 660 660 660
Total securities available for sale 1,052,828 1,108,423 1,084,707 908,718 983,741
Held to maturity securities:
U. S. government sponsored enterprises -- -- -- 15,000 25,000
Mortgage-backed securities and collateralized mortgage obligations-residential 120,877 133,562 143,629 141,857 109,603
Corporate bonds 35,074 35,193 35,312 59,431 59,555
Total held to maturity securities 155,951 168,755 178,941 216,288 194,158
Federal Reserve Bank and Federal Home Loan Bank stock 9,632 9,632 9,004 9,004 6,861
Loans:
Commercial 217,431 235,347 235,513 248,163 244,389
Residential mortgage loans 2,056,972 2,003,046 1,970,278 1,955,951 1,925,144
Home equity line of credit 327,083 317,157 314,668 313,038 305,587
Installment loans 4,455 4,071 3,855 4,151 3,829
Loans, net of deferred fees and costs 2,605,941 2,559,621 2,524,314 2,521,303 2,478,949
Less:
Allowance for loan losses 47,364 48,018 48,535 48,717 47,782
Net loans 2,558,577 2,511,603 2,475,779 2,472,586 2,431,167
Bank premises and equipment, net 37,251 37,868 37,099 37,006 35,946
Other assets 61,290 62,480 63,432 67,099 65,261
Total assets $ 4,318,173 4,421,399 4,374,443 4,243,644 4,192,959
LIABILITIES:
Deposits:
Demand $ 292,350 283,873 281,628 267,776 269,958
Interest-bearing checking 536,892 528,101 507,510 489,227 472,908
Savings accounts 1,167,927 1,122,208 1,068,058 978,819 923,893
Money market deposit accounts 668,064 644,627 631,761 635,434 642,054
Certificates of deposit (in denominations of $100,000 or more) 359,246 452,043 467,447 460,971 461,081
Other time accounts 751,974 867,798 894,946 903,746 910,633
Total deposits 3,776,453 3,898,650 3,851,350 3,735,973 3,680,527
Short-term borrowings 161,751 150,718 159,002 147,563 143,081
Due to broker -- -- -- -- 10,000
Accrued expenses and other liabilities 22,352 22,124 19,445 21,592 21,541
Total liabilities 3,960,556 4,071,492 4,029,797 3,905,128 3,855,149
SHAREHOLDERS' EQUITY:
Capital stock 98,912 98,912 98,912 98,912 98,806
Surplus 175,284 175,773 176,199 176,638 177,448
Undivided profits 128,750 125,153 122,235 119,465 116,894
Accumulated other comprehensive income (loss), net of tax 4,879 1,585 53 (2,493) 258
Treasury stock at cost (50,208) (51,516) (52,753) (54,006) (55,596)
Total shareholders' equity 357,617 349,907 344,646 338,516 337,810
Total liabilities and shareholders' equity $ 4,318,173 4,421,399 4,374,443 4,243,644 4,192,959
Outstanding shares (thousands) 93,807 93,674 93,549 93,315 93,154
NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
09/30/12 06/30/12 03/31/12 12/31/11 09/30/11
New York and other states*
Loans in nonaccrual status:
Commercial $ 5,880 5,656 5,667 4,981 5,086
Real estate mortgage - 1 to 4 family 32,593 29,167 29,894 27,820 25,932
Installment 71 1 9 3 4
Total non-accrual loans 38,544 34,824 35,570 32,804 31,022
Other nonperforming real estate mortgages - 1 to 4 family 238 243 306 312 317
Total nonperforming loans 38,782 35,067 35,876 33,116 31,339
Other real estate owned 2,716 2,787 2,411 2,382 2,372
Total nonperforming assets $ 41,498 37,854 38,287 35,498 33,711
Florida
Loans in nonaccrual status:
Commercial $ 2,698 8,435 5,874 5,000 5,400
Real estate mortgage - 1 to 4 family 8,438 7,954 9,404 10,662 10,231
Installment 7 1 -- -- --
Total non-accrual loans 11,143 16,390 15,278 15,662 15,631
Other nonperforming real estate mortgages - 1 to 4 family -- -- -- -- --
Total nonperforming loans 11,143 16,390 15,278 15,662 15,631
Other real estate owned 5,975 1,083 1,293 2,883 3,739
Total nonperforming assets $ 17,118 17,473 16,571 18,545 19,370
Total
Loans in nonaccrual status:
Commercial $ 8,578 14,091 11,541 9,981 10,486
Real estate mortgage - 1 to 4 family 41,031 37,121 39,298 38,482 36,163
Installment 78 2 9 3 4
Total non-accrual loans 49,687 51,214 50,848 48,466 46,653
Other nonperforming real estate mortgages - 1 to 4 family 238 243 306 312 317
Total nonperforming loans 49,925 51,457 51,154 48,778 46,970
Other real estate owned 8,691 3,870 3,704 5,265 6,111
Total nonperforming assets $ 58,616 55,327 54,858 54,043 53,081
Quarterly Net Chargeoffs
09/30/12 06/30/12 03/31/12 12/31/11 09/30/11
New York and other states*
Commercial $ 9 713 321 99 (3)
Real estate mortgage - 1 to 4 family 2,157 1,844 1,136 1,404 858
Installment 7 7 (8) 5 17
Total net chargeoffs $ 2,173 2,564 1,449 1,508 872
Florida
Commercial $ 736 288 160 400 --
Real estate mortgage - 1 to 4 family 644 665 1,673 1,359 2,006
Installment 1 -- -- (2) 1
Total net chargeoffs $ 1,381 953 1,833 1,757 2,007
Total
Commercial $ 745 1,001 481 499 (3)
Real estate mortgage - 1 to 4 family 2,801 2,509 2,809 2,763 2,864
Installment 8 7 (8) 3 18
Total net chargeoffs $ 3,554 3,517 3,282 3,265 2,879
Asset Quality Ratios
09/30/12 06/30/12 03/31/12 12/31/11 09/30/11
Total nonperforming loans(1) $ 49,925 51,457 51,154 48,778 46,970
Total nonperforming assets(1) 58,616 55,327 54,858 54,043 53,081
Total net chargeoffs(2) 3,554 3,517 3,282 3,265 2,879
Allowance for loan losses(1) 47,364 48,018 48,535 48,717 47,782
Nonperforming loans to total loans(1) 1.92% 2.01% 2.03% 1.93% 1.89%
Nonperforming assets to total assets(1) 1.36% 1.25% 1.25% 1.27% 1.27%
Allowance for loan losses to total loans(1) 1.82% 1.88% 1.92% 1.93% 1.93%
Coverage ratio(1) 94.9% 93.3% 94.9% 99.9% 101.7%
Annualized net chargeoffs to average loans(2) 0.55% 0.55% 0.52% 0.52% 0.47%
Allowance for loan losses to annualized net chargeoffs(2) 3.3x 3.4x 3.7x 3.7x 4.1x
* 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)
(Unaudited)
Three months ended
September 30, 2012
Three months ended
September 30, 2011
Average
Balance
Interest
Average
Rate
Average
Balance
Interest
Average
Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises $ 594,814 1,996 1.34% $ 666,503 3,347 2.01%
Mortgage backed securities and
collateralized mortgage obligations-residential 397,935 2,003 2.01 114,442 778 2.72
State and political subdivisions 34,383 495 5.76 53,540 815 6.09
Corporate bonds 66,940 529 3.16 102,522 953 3.72
Small Business Administration-guaranteed participation securities 8,024 43 2.14 -- -- 0.00
Other 660 4 2.42 660 5 3.03
Total securities available for sale 1,102,756 5,070 1.84 937,667 5,898 2.52
Federal funds sold and other
short-term Investments 416,971 258 0.25 486,749 318 0.26
Held to maturity securities:
U. S. government sponsored enterprises -- -- 0.00 27,772 164 2.36
Corporate bonds 35,132 385 4.39 50,962 565 4.44
Mortgage backed securities and
collateralized mortgage obligations-residential 128,188 976 3.04 111,037 1,186 4.27
Total held to maturity securities 163,320 1,361 3.33 189,771 1,915 4.04
Federal Reserve Bank and Federal Home Loan Bank stock 9,632 120 4.98 6,861 84 4.90
Commercial loans 228,537 3,068 5.36 247,294 3,532 5.71
Residential mortgage loans 2,031,080 25,988 5.12 1,899,421 26,115 5.50
Home equity lines of credit 322,405 2,906 3.59 301,055 2,853 3.76
Installment loans 4,007 149 14.82 3,559 147 16.34
Loans, net of unearned income 2,586,029 32,111 4.96 2,451,329 32,647 5.32
Total interest earning assets 4,278,708 38,920 3.64 4,072,377 40,862 4.01
Allowance for loan losses (49,039) (46,731)
Cash & non-interest earning assets 144,099 143,928
Total assets $ 4,373,768 $ 4,169,574
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts $ 531,216 79 0.06% $ 467,152 74 0.06%
Money market accounts 660,464 673 0.40 644,452 1,158 0.71%
Savings 1,151,910 870 0.30 913,384 952 0.41%
Time deposits 1,217,080 2,629 0.86 1,396,941 3,904 1.11%
Total interest bearing deposits 3,560,670 4,251 0.48 3,421,929 6,088 0.71
Short-term borrowings 151,535 348 0.91 132,404 384 1.15
Total interest bearing liabilities 3,712,205 4,599 0.49 3,554,333 6,472 0.72
Demand deposits 287,915 260,602
Other liabilities 20,084 19,310
Shareholders' equity 353,564 335,329
Total liabilities and shareholders' equity $ 4,373,768 $ 4,169,574
Net interest income , tax equivalent 34,321 34,390
Net interest spread 3.15% 3.29%
Net interest margin (net interest income
to total interest earning assets) 3.21% 3.38%
Tax equivalent adjustment (163) (265)
Net interest income 34,158 34,125
(dollars in thousands)
(Unaudited)
Nine months ended
September 30, 2012
Nine months ended
September 30, 2011
Average
Balance
Interest
Average
Rate
Average
Balance
Interest
Average
Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises $ 634,903 6,906 1.45% $ 691,975 10,337 1.99%
Mortgage backed securities and
collateralized mortgage obligations-residential 286,287 4,460 2.08 83,603 2,008 3.20
State and political subdivisions 37,032 1,587 5.71 62,440 2,913 6.22
Corporate bonds 78,999 1,999 3.38 110,438 3,173 3.83
Small Business Administration-guaranteed participation securities 2,694 43 2.13 -- -- 0.00
Other 660 14 2.83 717 14 2.60
Total securities available for sale 1,040,575 15,009 1.92 949,173 18,445 2.59
Federal funds sold and other
short-term Investments 473,196 877 0.25 429,115 818 0.25
Held to maturity securities:
U. S. government sponsored enterprises 1,423 25 2.38 9,359 164 2.33
Corporate bonds 41,071 1,281 4.16 55,125 1,875 4.54
Mortgage backed securities and
collateralized mortgage obligations-residential 136,554 3,464 3.38 112,472 3,614 4.28
Total held to maturity securities 179,048 4,770 3.55 176,956 5,653 4.26
Federal Reserve Bank and Federal Home Loan Bank stock 9,357 359 5.12 6,879 225 4.36
Commercial loans 235,128 9,569 5.43 250,346 10,884 5.80
Residential mortgage loans 1,994,051 78,224 5.23 1,849,192 76,950 5.55
Home equity lines of credit 317,914 8,646 3.63 295,338 8,247 3.73
Installment loans 3,795 440 15.50 3,650 442 16.19
Loans, net of unearned income 2,550,888 96,879 5.06 2,398,526 96,523 5.37
Total interest earning assets 4,253,064 117,894 3.70 3,960,649 121,664 4.10
Allowance for loan losses (49,420) (45,197)
Cash & non-interest earning assets 141,725 144,386
Total assets $ 4,345,369 $ 4,059,838
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts $ 509,346 235 0.06% $ 452,938 209 0.06%
Money market accounts 642,907 2,366 0.49 630,649 3,569 0.76
Savings 1,092,195 2,951 0.36 869,511 2,770 0.43
Time deposits 1,307,411 9,277 0.95 1,417,272 12,446 1.17
Total interest bearing deposits 3,551,859 14,829 0.56 3,370,370 18,994 0.75
Short-term borrowings 150,039 1,114 0.99 130,890 1,173 1.20
Total interest bearing liabilities 3,701,898 15,943 0.58 3,501,260 20,167 0.77
Demand deposits 276,484 254,187
Other liabilities 18,922 18,070
Shareholders' equity 348,065 286,321
Total liabilities and shareholders' equity $ 4,345,369 $ 4,059,838
Net interest income , tax equivalent 101,951 101,497
Net interest spread 3.12% 3.33%
Net interest margin (net interest income
to total interest earning assets) 3.20% 3.42%
Tax equivalent adjustment (543) (954)
Net interest income 101,408 100,543

Non-GAAP Financial Measures Reconciliation

Tangible book value per share and tangible equity as a percentage of tangible assets at period end are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders' equity and total assets, respectively. We calculate tangible book value per share by dividing tangible equity by common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders' equity by common shares outstanding. We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end. We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.

The efficiency ratio is a non-GAAP measure of expense control relative to recurring revenue. We calculate the efficiency ratio by dividing total noninterest expenses as determined under GAAP, but excluding other real estate expense, net, which we refer to below as recurring expense, by net interest income (fully taxable equivalent) and total noninterest income as determined under GAAP, but excluding net gains on securities from this calculation, which we refer to below as recurring revenue. We believe that this provides one reasonable measure of core expenses relative to core revenue.

We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titled measures reported by other companies. A reconciliation of the non-GAAP measures of tangible common equity, tangible book value per share and efficiency ratio to the underlying GAAP numbers is set forth below.

[Table on following page]

Non-GAAP Financial Measures Reconciliation
(dollars in thousands, except per share amounts)
(Unaudited)
09/30/12 06/30/12 03/31/12 12/31/11 09/30/11
Tangible Book Value Per Share
Equity $ 357,617 349,907 344,646 338,516 337,810
Less: Intangible assets 553 553 553 553 553
Tangible equity 357,064 349,354 344,093 337,963 337,257
Shares outstanding 93,807 93,674 93,549 93,315 93,154
Tangible book value per share 3.81 3.73 3.68 3.62 3.62
Book value per share 3.81 3.74 3.68 3.63 3.63
Tangible Equity to Tangible Assets
Total Assets 4,318,173 4,421,399 4,374,443 4,243,644 4,192,959
Less: Intangible assets 553 553 553 553 553
Tangible assets 4,317,620 4,420,846 4,373,890 4,243,091 4,192,406
Tangible Equity to Tangible Assets 8.27% 7.90% 7.87% 7.97% 8.04%
Equity to Assets 8.28% 7.91% 7.88% 7.98% 8.06%
3 Months Ended 9 Months Ended
Efficiency Ratio 09/30/12 06/30/12 03/31/12 12/31/11 09/30/11 09/30/12 09/30/11
Net interest income (fully taxable equivalent) $ 34,321 33,993 33,637 34,220 34,390 101,951 101,497
Non-interest income 4,593 4,026 4,518 3,736 3,803 13,137 12,645
Less: Net gain on securities 666 55 677 132 158 1,398 1,296
Recurring revenue 38,248 37,964 37,478 37,824 38,035 113,690 112,846
Total Noninterest expense 20,019 20,498 20,644 18,909 18,443 61,161 60,841
Less: Other real estate expense, net 1,210 665 966 1,254 754 2,841 4,439
Recurring expense 18,809 19,833 19,678 17,655 17,689 58,320 56,402
Efficiency Ratio 49.18% 52.24% 52.51% 46.68% 46.51% 51.30% 49.98%
09/30/12
Asset Quality Ratios
Total nonperforming loans before OCC guidance $ 45,910
Add: Chapter 7 bankruptcies net of chargeoffs 4,015
Total nonperforming loans after OCC guidance 49,925
Total nonperforming assets before OCC guidance $ 54,601
Add: Chapter 7 bankruptcies net of chargeoffs 4,015
Total nonperforming assets after OCC guidance 58,616
Total loans before OCC guidance $ 2,606,745
Less: Chapter 7 bankruptcies chargeoffs 804
Total loans after OCC guidance 2,605,941
Total allowance for loan losses before OCC guidance $ 48,168
Less: Chapter 7 bankruptcies chargeoffs 804
Total allowance for loan losses after OCC guidance 47,364
Net chargeoffs before OCC guidance $ 2,750
Add: Chapter 7 bankruptcies chargeoffs 804
Net chargeoffs after OCC guidance 3,554
Nonperforming loans to total loans before OCC guidance 1.76%
Nonperforming loans to total loans after OCC guidance 1.92%
Nonperforming assets to total assets before OCC guidance 1.26%
Nonperforming assets to total assets after OCC guidance 1.36%
Allowance for loan losses to total loans before OCC guidance 1.85%
Allowance for loan losses to total loans after OCC guidance 1.82%
Coverage ratio before OCC guidance 104.9%
Coverage ratio after OCC guidance 94.9%
Annualized net chargeoffs to average loans before OCC guidance 0.43%
Annualized net chargeoffs to average loans after OCC guidance 0.55%
Allowance for loan losses to annualized net chargeoffs before OCC guidance 4.4x
Allowance for loan losses to annualized net chargeoffs after OCC guidance 3.3x
CONTACT: Kevin T. Timmons Vice President/Treasurer (518) 381-3607Source:TrustCo Bank Corp NY