TRST TrustCo Bank Corporation of NY

Executive Snapshot:

TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced second quarter of 2016 net income of $10.5 million compared to $10.4 million for the first quarter of 2016 and $10.7 million for the second quarter of 2015. 

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased to be able to report stable earnings despite added operating costs related to regulatory issues and a difficult operating environment.  Our continued focus on traditional lending criteria and conservative balance sheet management has enabled us to produce stable 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.”

Mr. McCormick also noted, “We consider our second quarter 2016 results to be solid and are encouraged by the increase in pre-tax earnings from the first quarter of 2016.  In terms of our core business, we continue to make progress by adding the customer relationships which ultimately drive future growth.  Our highly liquid balance sheet continues to allow us to fund our loan growth without having to overpay for deposits.  We will continue taking advantage of opportunities as they are presented during the balance of 2016.  Recent merger activity between our competitors may provide us with additional opportunities to add customers.”

TrustCo saw continued solid loan growth in the second quarter of 2016 compared to the prior year.  Loan portfolio expansion was funded by deposit growth and capital expansion.  The continued shift toward loans helped offset the margin impact from continued comparatively low yields on cash and investments.  The growth in average deposits in the second quarter of 2016 versus the prior year was led by lower cost core deposits.  TrustCo’s strong liquidity position continues to allow the Company to take advantage of opportunities when interest rate conditions change.

For the second quarter of 2016, return on average assets and return on average equity were 0.88% and 9.88%, respectively, compared to 0.91% and 10.66% for the second quarter of 2015.  Diluted earnings per share were $0.109 for the second quarter of 2016, compared to $0.113 for the second quarter of 2015.  As discussed in recent quarters, increased operating costs in response to regulatory concerns have hampered earnings.  Higher expenses were anticipated in order to fulfill operating and regulatory requirements.  We took aggressive action to meet these requirements during 2015 and costs related to those actions have continued into 2016.  While some of these costs will be recurring, others will diminish over time.

For the first six months of 2016, diluted net income per share was $0.219, compared to $0.225 for the first six months of 2015.  Return on average assets and equity were 0.88% and 9.93% for the first six months of 2016, compared to 0.92% and 10.78% for the first six months of 2015. 

Average loans were up $100.2 million or 3.1% in the second quarter of 2016, over the same period in 2015.  Loan growth was constrained by an $11.5 million decline in commercial loans, which have become less attractive on a risk adjusted basis.  Average residential loans, our primary lending focus, were up $110.7 million or 4.2% in the second quarter of 2016, over the same period in 2015.  Average deposits were up $33.9 million or 0.8% for the second quarter of 2016 over the same period a year earlier.  The increase in deposits came from core deposit accounts, which consist of checking, savings and money market deposits.  Average core deposits increased $47.0 million from the second quarter of 2015 to the second quarter of 2016, while average time deposit balances declined $13.2 million.  Core deposits typically represent longer term customer relationships and are generally lower cost than time deposits.  Mr. McCormick noted that, “The year-over-year growth of our loans and core deposit base reflect the long term strategic focus of the Company.”

“While some banks have backed away from branches, a customer friendly branch franchise continues to be the key to our long term plans.  We continue to make good progress expanding loans and deposits throughout our entire branch network.  We expect that trend to continue as the newer branches continue to mature.”

“At June 30, 2016, our average branch size was $28.8 million.  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 mostly improved versus both June 30, 2015 and as compared to December 31, 2015.  Nonperforming loans (NPLs) were $28.2 million at June 30, 2016, compared to $32.5 million at June 30, 2015 and $28.3 million at December 31, 2015.  During the quarter, $1.2 million of nonperforming loans were sold.  NPLs were equal to 0.84% of total loans at June 30, 2016, compared to 1.00% a year earlier and 0.86% at December 31, 2015.  The coverage ratio, or allowance for loan losses to NPLs, was 156.0% at June 30, 2016, compared to 140.3% at June 30, 2015 and 158.4% at December 31, 2015.  Nonperforming assets (NPAs) were at $32.8 million at June 30, 2016 compared to $38.6 million at June 30, 2015 and $34.7 million at December 31, 2015.  The ratio of loan loss allowance to total loans was 1.32% as of June 30, 2016, compared to 1.41% at June 30, 2015 and to 1.36% at December 31, 2015 and reflects both the improvement in asset quality and economic conditions in our lending areas.  The allowance for loan losses was $44.1 million at June 30, 2016 compared to $45.6 million at June 30, 2015 and $44.8 million at December 31, 2015.  Net chargeoffs for the second quarter of 2016 decreased nominally versus both the second quarter of 2015 and the first quarter of 2016, to $1.1 million.  The net chargeoff ratio was 0.14% for the second quarter of 2016.  The provision for loan losses was flat versus both the second quarter of 2015 and the first quarter of 2016.

The net interest margin for the second quarter of 2016 was 3.09% compared to 3.13% in the first quarter of 2016 and 3.07% in the second quarter of 2015. 

At June 30, 2016 the equity to asset ratio was 8.91%, compared to 8.49% at June 30, 2015 and 8.73% at December 31, 2015.  The tangible equity ratio was 8.90% compared to 8.48% at June 30, 2015 and 8.72% at December 31, 2015.  GAAP book value per share at June 30, 2016 was $4.51 compared to $4.23 a year earlier and tangible book value per share was $4.50 and $4.23, respectively.  Non-GAAP measures are discussed on page 13.

TrustCo Bank Corp NY is a $4.8 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 June 30, 2016.

In addition, the Bank’s Financial Services Department offers a full range of investment services, retirement planning and trust and estate administration services. The common shares of TrustCo are traded on the NASDAQ Global Select Market under the symbol TRST.

A conference call to discuss Second Quarter 2016 results will be held at 9:00 a.m. Eastern Time on July 22, 2016.  Those wishing to participate in the call may dial toll-free 1-888-3339-0764.  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 10089498. The call will also be audio webcast at: http://services.choruscall.com/links/trst160722.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 2016 and for the growth of loans and deposits throughout our branch network, our ability to capitalize on economic changes in the areas in which we operate and the extent to which higher expenses to fulfill operating and regulatory requirements recur or diminish over time.  Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement:  our ability to continue to originate a significant volume of one-to-four family mortgage loans in our market areas; our ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income; our ability to comply with the supervisory agreement entered into with Trustco Bank’s regulator and potential regulatory actions if we fail to comply; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of Trustco Bank and the continued ability of Trustco Bank under regulatory rules and the supervisory agreement to distribute capital to TrustCo, which could affect our ability to pay dividends; results of examinations of Trustco Bank and TrustCo by our respective regulators; our ability to make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; the perceived overall value of our products and services by users, including in comparison to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for our products and services; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading “Risk Factors” in our most recent annual report on Form 10-K and in our subsequent quarterly reports on Form 10-Q or other securities filings.

TRUSTCO BANK CORP NY
GLENVILLE, NY
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share data)
(Unaudited)
					Three Months Ended
		06/30/16			03/31/16			06/30/15
Summary of operations
Net interest income (TE)	$		36,311			36,196			35,690
Provision for loan losses			800			800			800
Net gain on securities transactions			668			-			-
Noninterest income, excluding net gain on securities transactions			4,531			4,572			4,454
Noninterest expense			23,974			23,439			22,131
Net income			10,464			10,409			10,727
Per common share
Net income per share:
- Basic	$		0.110			0.109			0.113
- Diluted			0.109			0.109			0.113
Cash dividends			0.066			0.066			0.066
Tangible Book value at period end			4.50			4.43			4.23
Market price at period end			6.41			6.06			7.03
At period end
Full time equivalent employees			801			784			760
Full service banking offices			145			145			146
Performance ratios
Return on average assets			0.88	%		0.89			0.91
Return on average equity			9.88			9.98			10.66
Efficiency (1)			57.70			56.22			54.71
Net interest spread (TE)			3.03			3.07			3.01
Net interest margin (TE)			3.09			3.13			3.07
Dividend payout ratio			59.89			60.13			58.15
Capital ratio at period end
Consolidated tangible equity to tangible assets (2)			8.90			8.87			8.48
Asset quality analysis at period end
Nonperforming loans to total loans			0.84			0.92			1.00
Nonperforming assets to total assets			0.68			0.76			0.81
Allowance for loan losses to total loans			1.32			1.34			1.41
Coverage ratio (3)			1.6x			1.5			1.4
(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 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)
		Six Months Ended
			06/30/16			06/30/15
Summary of operations
Net interest income (TE)	$		72,508			70,875
Provision for loan losses			1,600			1,600
Net gain on securities transactions			668			249
Noninterest income, excluding net gain on securities transactions			9,103			8,828
Noninterest expense			47,412			43,988
Net income			20,875			21,442
Per common share
Net income per share:
- Basic	$		0.219			0.226
- Diluted			0.219			0.225
Cash dividends			0.131			0.131
Tangible Book value at period end			4.50			4.23
Market price at period end			6.41			7.03
Performance ratios
Return on average assets			0.88	%		0.92
Return on average equity			9.93			10.78
Efficiency (1)			56.96			54.45
Net interest spread (TE)			3.05			3.02
Net interest margin (TE)			3.11			3.08
Dividend payout ratio			60.00			58.14
(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 nonperforming loans).
TE = Taxable equivalent.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
		Three Months Ended
		6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
Interest and dividend income:
Interest and fees on loans	$		35,652			35,605			35,930			35,631			35,343
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises			404			255			256			584			366
State and political subdivisions			13			14			16			23			23
Mortgage-backed securities and collateralized mortgage obligations-residential			2,169			2,116			2,233			2,230			2,276
Corporate bonds			-			-			-			-			-
Small Business Administration-guaranteed participation securities			450			476			482			497			503
Mortgage-backed securities and collateralized mortgage obligations-commercial			38			36			37			37			38
Other securities			4			4			4			4			4
Total interest and dividends on securities available for sale			3,078			2,901			3,028			3,375			3,210
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential			374			402			425			461			480
Corporate bonds			154			154			154			153			154
Total interest on held to maturity securities			528			556			579			614			634
Federal Reserve Bank and Federal Home Loan Bank stock			118			120			120			113			118
Interest on federal funds sold and other short-term investments			832			844			494			408			423
Total interest income			40,208			40,026			40,151			40,141			39,728
Interest expense:
Interest on deposits:
Interest-bearing checking			116			114			115			117			111
Savings			604			604			608			603			599
Money market deposit accounts			467			496			513			537			547
Time deposits			2,460			2,373			2,375			2,544			2,500
Interest on short-term borrowings			262			257			278			290			300
Total interest expense			3,909			3,844			3,889			4,091			4,057
Net interest income			36,299			36,182			36,262			36,050			35,671
Provision for loan losses			800			800			1,300			800			800
Net interest income after provision for loan losses			35,499			35,382			34,962			35,250			34,871
Noninterest income:
Trustco Financial Services income			1,512			1,605			1,489			1,351			1,478
Fees for services to customers			2,737			2,661			2,704			2,770			2,691
Net gain on securities transactions			668			-			2			-			-
Other			282			306			235			244			285
Total noninterest income			5,199			4,572			4,430			4,365			4,454
Noninterest expenses:
Salaries and employee benefits			8,934			9,003			8,042			7,834			8,164
Net occupancy expense			3,918			4,088			3,884			3,929			3,878
Equipment expense			1,840			1,514			1,530			1,596			1,803
Professional services			2,098			2,146			2,067			2,238			2,066
Outsourced services			1,425			1,551			1,585			1,425			1,425
Advertising expense			570			729			592			668			733
FDIC and other insurance			1,949			1,990			2,055			2,202			1,017
Other real estate expense, net			423			519			570			806			201
Other			2,817			1,899			2,783			2,766			2,844
Total noninterest expenses			23,974			23,439			23,108			23,464			22,131
Income before taxes			16,724			16,515			16,284			16,151			17,194
Income taxes			6,260			6,106			6,104			5,535			6,467
Net income	$		10,464			10,409			10,180			10,616			10,727
Net income per common share:
- Basic	$		0.110			0.109			0.107			0.112			0.113
- Diluted			0.109			0.109			0.107			0.111			0.113
Average basic shares (in thousands)			95,487			95,365			95,256			95,149			95,056
Average diluted shares (in thousands)			95,580			95,412			95,349			95,234			95,190
Note:  Taxable equivalent net interest income	$		36,311			36,196			36,278			36,069			35,690
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
		Six Months Ended
			6/30/2016			6/30/2015
Interest and dividend income:
Interest and fees on loans	$		71,257			70,326
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises			659			578
State and political subdivisions			27			48
Mortgage-backed securities and collateralized mortgage obligations-residential			4,285			4,669
Corporate bonds			-			1
Small Business Administration-guaranteed participation securities			926			1,025
Mortgage-backed securities and collateralized mortgage obligations-commercial			74			75
Other securities			8			8
Total interest and dividends on securities available for sale			5,979			6,404
Interest on held to maturity securities:
Mortgage-backed securities-residential			775			958
Corporate bonds			308			308
Total interest on held to maturity securities			1,083			1,266
Federal Reserve Bank and Federal Home Loan Bank stock			238			234
Interest on federal funds sold and other short-term investments			1,677			823
Total interest income			80,234			79,053
Interest expense:
Interest on deposits:
Interest-bearing checking			230			216
Savings			1,208			1,257
Money market deposit accounts			962			1,164
Time deposits			4,833			4,934
Interest on short-term borrowings			519			646
Total interest expense			7,752			8,217
Net interest income			72,482			70,836
Provision for loan losses			1,600			1,600
Net interest income after provision for loan losses			70,882			69,236
Noninterest income:
Trust department income			3,117			3,131
Fees for services to customers			5,398			5,215
Net gain on securities transactions			668			249
Other			588			482
Total noninterest income			9,771			9,077
Noninterest expenses:
Salaries and employee benefits			17,937			16,645
Net occupancy expense			8,006			7,986
Equipment expense			3,354			3,745
Professional services			4,244			3,573
Outsourced services			2,976			2,850
Advertising expense			1,299			1,333
FDIC and other insurance			3,939			2,082
Other real estate (income) expense, net			942			625
Other			4,715			5,149
Total noninterest expenses			47,412			43,988
Income before taxes			33,241			34,325
Income taxes			12,366			12,883
Net income	$		20,875			21,442
Net income per Common Share:
- Basic	$		0.219			0.226
- Diluted			0.219			0.225
Average basic shares (thousands)			95,426			95,002
Average diluted shares (thousands)			95,496			95,132
Note:  Taxable equivalent net interest income	$		72,508			70,875
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
		6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
ASSETS:
Cash and due from banks	$		39,787			37,373			41,698			42,560			37,574
Federal funds sold and other short term investments			718,609			722,805			676,458			655,512			641,011
Total cash and cash equivalents			758,396			760,178			718,156			698,072			678,585
Securities available for sale:
U. S. government sponsored enterprises			116,595			66,920			86,737			103,492			152,082
States and political subdivisions			974			974			1,290			1,963			1,969
Mortgage-backed securities and collateralized mortgage obligations-residential			404,138			422,189			411,729			413,878			429,205
Small Business Administration-guaranteed participation securities			87,740			89,053			90,416			94,038			95,323
Mortgage-backed securities and collateralized mortgage obligations-commercial			10,374			10,307			10,180			10,491			10,399
Other securities			685			685			685			685			685
Total securities available for sale			620,506			590,128			601,037			624,547			689,663
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential			40,702			43,595			46,490			50,027			53,576
Corporate bonds			9,982			9,979			9,975			9,971			9,967
Total held to maturity securities			50,684			53,574			56,465			59,998			63,543
Federal Reserve Bank and Federal Home Loan Bank stock			9,579			9,480			9,480			9,480			9,480
Loans:
Commercial			195,698			198,765			203,415			208,794			209,399
Residential mortgage loans			2,786,951			2,737,784			2,721,173			2,707,944			2,669,929
Home equity line of credit			352,069			356,163			359,325			356,337			354,946
Installment loans			8,476			8,667			9,391			8,930			8,674
Loans, net of deferred fees and costs			3,343,194			3,301,379			3,293,304			3,282,005			3,242,948
Less:
Allowance for loan losses			44,064			44,398			44,762			45,149			45,571
Net loans			3,299,130			3,256,981			3,248,542			3,236,856			3,197,377
Bank premises and equipment, net			36,793			37,360			37,643			37,506			38,100
Other assets			55,825			55,561			63,669			59,358			64,589
Total assets	$		4,830,913			4,763,262			4,734,992			4,725,817			4,741,337
LIABILITIES:
Deposits:
Demand	$		376,669			359,060			365,081			354,162			355,783
Interest-bearing checking			766,322			746,562			754,347			719,071			713,001
Savings accounts			1,282,006			1,272,394			1,262,194			1,237,549			1,250,154
Money market deposit accounts			577,063			595,585			610,826			617,103			633,239
Time deposits			1,178,567			1,168,887			1,107,930			1,168,908			1,185,264
Total deposits			4,180,627			4,142,488			4,100,378			4,096,793			4,137,441
Short-term borrowings			190,542			169,528			191,226			184,405			170,750
Accrued expenses and other liabilities			29,479			28,221			30,078			32,327			30,687
Total liabilities			4,400,648			4,340,237			4,321,682			4,313,525			4,338,878
SHAREHOLDERS' EQUITY:
Capital stock			99,071			98,973			98,973			98,964			98,964
Surplus			171,174			171,113			171,443			171,788			171,988
Undivided profits			192,356			188,159			184,009			180,093			175,721
Accumulated other comprehensive income (loss), net of tax			2,395			73			(4,781	)		(1,174	)		(5,927	)
Treasury stock at cost			(34,731	)		(35,293	)		(36,334	)		(37,379	)		(38,287	)
Total shareholders' equity			430,265			423,025			413,310			412,292			402,459
Total liabilities and shareholders' equity	$		4,830,913			4,763,262			4,734,992			4,725,817			4,741,337
Outstanding shares (in thousands)			95,493			95,369			95,262			95,149			95,056

 

NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
		06/30/16			03/31/16			12/31/15			09/30/15			06/30/15
New York and other states*
Loans in nonaccrual status:
Commercial	$		2,690			2,762			3,024			3,699			3,263
Real estate mortgage - 1 to 4 family			23,559			25,669			23,273			26,059			27,366
Installment			49			74			90			69			79
Total non-accrual loans			26,298			28,505			26,387			29,827			30,708
Other nonperforming real estate mortgages - 1 to 4 family			45			47			48			50			74
Total nonperforming loans			26,343			28,552			26,435			29,877			30,782
Other real estate owned			4,602			5,208			6,120			5,893			5,833
Total nonperforming assets	$		30,945			33,760			32,555			35,770			36,615
Florida
Loans in nonaccrual status:
Commercial	$		-			-			-			-			-
Real estate mortgage - 1 to 4 family			1,900			1,802			1,817			2,054			1,678
Installment			-			-			8			9			10
Total non-accrual loans			1,900			1,802			1,825			2,063			1,688
Other nonperforming real estate mortgages - 1 to 4 family			-			-			-			-			-
Total nonperforming loans			1,900			1,802			1,825			2,063			1,688
Other real estate owned			-			476			335			-			275
Total nonperforming assets	$		1,900			2,278			2,160			2,063			1,963
Total
Loans in nonaccrual status:
Commercial	$		2,690			2,762			3,024			3,699			3,263
Real estate mortgage - 1 to 4 family			25,459			27,471			25,090			28,113			29,044
Installment			49			74			98			78			89
Total non-accrual loans			28,198			30,307			28,212			31,890			32,396
Other nonperforming real estate mortgages - 1 to 4 family			45			47			48			50			74
Total nonperforming loans			28,243			30,354			28,260			31,940			32,470
Other real estate owned			4,602			5,684			6,455			5,893			6,108
Total nonperforming assets	$		32,845			36,038			34,715			37,833			38,578
Quarterly Net Chargeoffs (Recoveries)
		06/30/16			03/31/16			12/31/15			09/30/15			06/30/15
New York and other states*
Commercial	$		67			224			672			3			50
Real estate mortgage - 1 to 4 family			973			771			963			1,159			933
Installment			77			70			35			26			24
Total net chargeoffs	$		1,117			1,065			1,670			1,188			1,007
Florida
Commercial	$		-			-			(2	)		(3	)		(1	)
Real estate mortgage - 1 to 4 family			16			83			6			33			167
Installment			1			16			13			4			-
Total net chargeoffs	$		17			99			17			34			166
Total
Commercial	$		67			224			670			-			49
Real estate mortgage - 1 to 4 family			989			854			969			1,192			1,100
Installment			78			86			48			30			24
Total net chargeoffs	$		1,134			1,164			1,687			1,222			1,173
Asset Quality Ratios
		06/30/16			03/31/16			12/31/15			09/30/15			06/30/15
Total nonperforming loans(1)	$		28,243			30,354			28,260			31,940			32,470
Total nonperforming assets(1)			32,845			36,038			34,715			37,833			38,578
Total net chargeoffs(2)			1,134			1,164			1,687			1,222			1,173
Allowance for loan losses(1)			44,064			44,398			44,762			45,149			45,571
Nonperforming loans to total loans			0.84	%		0.92	%		0.86	%		0.97	%		1.00	%
Nonperforming assets to total assets			0.68	%		0.76	%		0.73	%		0.80	%		0.81	%
Allowance for loan losses to total loans			1.32	%		1.34	%		1.36	%		1.38	%		1.41	%
Coverage ratio(1)			156.0	%		146.3	%		158.4	%		141.4	%		140.3	%
Annualized net chargeoffs to average loans(2)			0.14	%		0.14	%		0.21	%		0.15	%		0.15	%
Allowance for loan losses to annualized net chargeoffs(2)			9.7x			9.5x			6.6x			9.3x			9.7x
* Includes New York, New Jersey, Vermont and Massachusetts.
(1)  At period-end
(2)  For the period ended

 

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands)		Three months ended										Three months ended
(Unaudited)		June 30, 2016										June 30, 2015
		Average				Interest			Average			Average				Interest			Average
		Balance							Rate			Balance							Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises	$		107,190				404		1.51	%	$		114,279				366		1.28	%
Mortgage backed securities and
collateralized mortgage obligations-residential			445,162				2,169		1.95				441,754				2,276		2.06
State and political subdivisions			955				19		7.96				1,939				36		7.36
Corporate bonds			-				-		-				956				0		0.00
Small Business Administration-guaranteed participation securities			87,801				450		2.05				98,894				503		2.03
Mortgage backed securities and
collateralized mortgage obligations-commercial			10,321				38		1.47				10,600				38		1.41
Other			677				4		2.36				685				4		2.34
Total securities available for sale			652,106				3,084		1.89				669,107				3,223		1.93
Federal funds sold and other
short-term Investments			668,395				832		0.50				683,110				423		0.25
Held to maturity securities:
Corporate bonds			9,981				154		6.17				9,965				154		6.17
Mortgage backed securities and
collateralized mortgage obligations-residential			42,188				374		3.55				55,509				480		3.46
Total held to maturity securities			52,169				528		4.05				65,474				634		3.87
Federal Reserve Bank and Federal Home Loan Bank stock			9,576				118		4.93				9,466				118		4.99
Commercial loans			198,938				2,563		5.15				210,424				2,710		5.15
Residential mortgage loans			2,759,024				29,725		4.31				2,648,320				29,371		4.44
Home equity lines of credit			354,897				3,179		3.58				354,053				3,092		3.50
Installment loans			8,316				191		9.19				8,226				176		8.60
Loans, net of unearned income			3,321,175				35,658		4.29				3,221,023				35,349		4.39
Total interest earning assets			4,703,421				40,220		3.42				4,648,180				39,747		3.42
Allowance for loan losses			(44,754	)									(46,190	)
Cash & non-interest earning assets			136,724										137,329
Total assets	$		4,795,391								$		4,739,319
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts	$		759,546				116		0.06	%	$		706,767				111		0.06	%
Money market accounts			580,100				467		0.32				635,347				547		0.35
Savings			1,273,575				604		0.19				1,249,865				599		0.19
Time deposits			1,177,084				2,460		0.84				1,190,234				2,500		0.84
Total interest bearing deposits			3,790,305				3,647		0.38				3,782,213				3,757		0.40
Short-term borrowings			181,247				262		0.58				182,829				300		0.66
Total interest bearing liabilities			3,971,552				3,909		0.39				3,965,042				4,057		0.41
Demand deposits			370,781										344,982
Other liabilities			27,121										25,591
Shareholders' equity			425,937										403,704
Total liabilities and shareholders' equity	$		4,795,391								$		4,739,319
Net interest income, tax equivalent							36,311										35,690
Net interest spread									3.03	%									3.01	%
Net interest margin (net interest income
to total interest earning assets)									3.09	%									3.07	%
Tax equivalent adjustment							(12	)									(19	)
Net interest income							36,299										35,671
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands)		Six months ended										Six months ended
(Unaudited)		June 30, 2016										June 30, 2015
		Average				Interest			Average			Average				Interest			Average
		Balance							Rate			Balance							Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises	$		91,111				659		1.45	%	$		96,172				578		1.20	%
Mortgage backed securities and
collateralized mortgage obligations-residential			428,831				4,285		2.00				459,980				4,669		2.03
State and political subdivisions			1,034				41		7.93				2,015				74		7.31
Corporate bonds			-				-		-				1,226				1		0.16
Small Business Administration-guaranteed participation securities			89,206				926		2.08				100,270				1,025		2.05
Mortgage backed securities and
collateralized mortgage obligations-commercial			10,357				74		1.43				10,635				75		1.41
Other			682				8		2.35				685				8		2.34
Total securities available for sale			621,221				5,993		1.93				670,983				6,430		1.92
Federal funds sold and other
short-term Investments			671,990				1,677		0.50				668,269				823		0.25
Held to maturity securities:
Corporate bonds			9,979				308		6.17				9,964				308		6.17
Mortgage backed securities and
collateralized mortgage obligations-residential			43,650				775		3.55				57,419				958		3.34
Total held to maturity securities			53,629				1,083		4.04				67,383				1,266		3.76
Federal Reserve Bank and Federal Home Loan Bank stock			9,527				238		5.00				9,348				234		5.01
Commercial loans			200,152				5,180		5.18				214,713				5,506		5.13
Residential mortgage loans			2,742,918				59,348		4.33				2,621,417				58,329		4.46
Home equity lines of credit			356,857				6,358		3.56				353,161				6,153		3.51
Installment loans			8,488				383		9.02				8,011				351		8.84
Loans, net of unearned income			3,308,415				71,269		4.31				3,197,302				70,339		4.41
Total interest earning assets			4,664,782				80,260		3.44				4,613,285				79,092		3.44
Allowance for loan losses			(45,013	)									(46,392	)
Cash & non-interest earning assets			136,138										138,319
Total assets	$		4,755,907								$		4,705,212
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts	$		747,322				230		0.06	%	$		692,445				216		0.06	%
Money market accounts			591,937				962		0.33				636,596				1,164		0.37
Savings			1,268,021				1,208		0.19				1,239,737				1,257		0.20
Time deposits			1,155,773				4,833		0.84				1,185,363				4,934		0.84
Total interest bearing deposits			3,763,053				7,233		0.38				3,754,141				7,571		0.41
Short-term borrowings			178,683				519		0.58				187,560				646		0.69
Total interest bearing liabilities			3,941,736				7,752		0.39				3,941,701				8,217		0.42
Demand deposits			364,503										336,741
Other liabilities			27,019										25,817
Shareholders' equity			422,649										400,953
Total liabilities and shareholders' equity	$		4,755,907								$		4,705,212
Net interest income, tax equivalent							72,508										70,875
Net interest spread									3.05	%									3.02	%
Net interest margin (net interest income
to total interest earning assets)									3.11	%									3.08	%
Tax equivalent adjustment							(26	)									(39	)
Net interest income							72,482										70,836

 

Non-GAAP Financial Measures Reconciliation

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

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

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

NON-GAAP FINANCIAL MEASURES RECONCILIATION
(dollars in thousands, except per share amounts)
(Unaudited)
		06/30/16			03/31/16			06/30/15
Tangible Book Value Per Share
Equity	$		430,265			423,025			402,459
Less: Intangible assets			553			553			553
Tangible equity			429,712			422,472			401,906
Shares outstanding			95,493			95,369			95,056
Tangible book value per share			4.50			4.43			4.23
Book value per share			4.51			4.44			4.23
Tangible Equity to Tangible Assets
Total Assets			4,830,913			4,763,262			4,741,337
Less: Intangible assets			553			553			553
Tangible assets			4,830,360			4,762,709			4,740,784
Tangible Equity to Tangible Assets			8.90	%		8.87	%		8.48	%
Equity to Assets			8.91	%		8.88	%		8.49	%
		3 Months Ended										6 Months Ended
Efficiency Ratio		06/30/16			03/31/16			06/30/15				06/30/16			06/30/15
Net interest income	$		36,299			36,182			35,671				72,482			70,836
Taxable equivalent adjustment			12			14			19				26			39
Net interest income (fully taxable equivalent)			36,311			36,196			35,690				72,508			70,875
Non-interest income			5,199			4,572			4,454				9,771			9,077
Less:  Net gain on sale of nonperforming loans			24			-			60				24			60
Less:  Net gain on securities			668			-			-				668			249
Revenue used for efficiency ratio			40,818			40,768			40,084				81,587			79,643
Total noninterest expense			23,974			23,439			22,131				47,412			43,988
Less:  Other real estate expense, net			423			519			201				942			625
Expense used for efficiency ratio			23,551			22,920			21,930				46,470			43,363
Efficiency Ratio			57.70	%		56.22	%		54.71	%			56.96	%		54.45	%

 

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