Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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Forward-looking Statements
Statements included in this report and in future filings by TrustCo Bank Corp NY (“TrustCo” or the “Company”) with the Securities and Exchange Commission, in TrustCo’s press releases, and in oral statements made with the approval of an authorized executive officer, which are not historical or current facts, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Forward-looking statements can be identified by the use of such words as may, will, should, could, would, estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. Examples of forward-looking statements include, among others, statements TrustCo makes regarding its expectations for complying with the new regulatory capital rules, costs associated with the Formal Agreement that the Company’s subsidiary, Trustco Bank (or the “Bank”) has entered into with the Office of the Comptroller of the Currency (“OCC”), the Company’s ability to grow its balance sheet and the profitability of such growth, the ability of its loan products to continue to attract customers if long-term rates rise and the ability to secure new sources of liquidity should the need arise. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.
In addition to factors described under Part II, Item 1A, Risk Factors, if any, and under the Risk Factor discussion in TrustCo’s Annual Report on Form 10-K for the year ended December 31, 2015, 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:
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TrustCo’s ability to continue to originate a significant volume of one- to- four family mortgage loans in its market areas and to otherwise maintain or increase its market share in the areas in which it operates;
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TrustCo’s ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income;
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TrustCo’s ability to comply with the Formal Agreement entered into with Trustco Bank’s regulator, the OCC, and potential regulatory actions if TrustCo or Trustco Bank fails to comply;
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Restrictions or conditions imposed by TrustCo’s and Trustco Bank’s regulators on their operations that may make it more difficult to achieve TrustCo’s and Trustco Bank’s goals;
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the future earnings and capital levels of TrustCo and Trustco Bank and the continued receipt of approvals from TrustCo’s and Trustco Bank’s primary federal banking regulators under regulatory rules and the Formal Agreement to distribute capital from Trustco Bank to TrustCo, which could affect the ability of TrustCo to pay;
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TrustCo’s ability to make accurate assumptions and judgments regarding the credit risks associated with its lending and investing activities, including changes in the level and direction of loan delinquencies and chargeoffs, changes in property values, and changes in estimates of the adequacy of the allowance for loan and lease losses;
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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;
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adverse conditions in the securities markets that lead to impairment in the value of securities in TrustCo’s investment portfolio;
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the perceived overall value of TrustCo’s products and services by users, including the features, pricing and quality compared to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for TrustCo’s products and services;
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changes in consumer spending, borrowing and savings habits;
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the effect of changes in financial services laws and regulations (including laws concerning taxation, banking and securities) and the impact of other governmental initiatives affecting the financial services industry, including new regulatory capital requirements that took effect for 2015;
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the results of examinations of Trustco Bank and the Company by their respective primary federal banking regulators, including the possibility that the regulators may, among other things, require us to increase our loss allowances or to take other actions that reduce capital or income;
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changes in management personnel;
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real estate and collateral values;
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changes in accounting policies and practices, as may be adopted by the bank regulatory agencies Financial Accounting Standards Board (“FASB”) or the Public Company Accounting Oversight Board;
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technological changes and electronic, cyber and physical security breaches;
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changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits;
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TrustCo’s success at managing the risks involved in the foregoing and managing its business; and
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other risks and uncertainties included under “Risk Factors” in our Form 10-K for the year ended December 31, 2015.
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The foregoing list should not be construed as exhaustive, and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Following this discussion are the tables "Distribution of Assets, Liabilities and Shareholders' Equity: Interest Rates and Interest Differential" which gives a detailed breakdown of TrustCo's average interest earning assets and interest bearing liabilities for the three and six month periods ended June 30, 2016 and 2015.
Introduction
The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the three and six month periods ended June 30, 2016, with comparisons to the corresponding periods in 2015, as applicable. Net interest margin is presented on a fully taxable equivalent basis in this discussion. The consolidated interim financial statements and related notes, as well as the 2015 Annual Report to Shareholders on Form 10-K, which was filed with the SEC on March 4, 2016, should also be read in conjunction with this review. Amounts in prior period consolidated interim financial statements are reclassified whenever necessary to conform to the current period's presentation.
Equity markets ended the second quarter up modestly, after suffering a meaningful correction earlier in the quarter. Overall volatility was relatively high. For the full second quarter, the S&P 500 Index was up 0.8% and the Dow Jones Industrial Average was up 1.5%. Credit markets continue to be driven by worldwide economic news and decreasing liquidity in some segments of the bond market. The shape of the curve continued to flatten during the quarter, with yields declining across the curve. The 10 year Treasury bond averaged 1.75% during Q2 compared to 1.92% in Q1, a decrease of 17 basis points. However, the 2 year Treasury bond average rate declined just 7 basis points to 0.77%, resulting in the flattening of the curve. The spread between the 10 year and the 2 year Treasury bonds decreased from 1.08% on average in Q1 to 0.98% in Q2. This spread has declined in eight of the last nine quarters, and is less than half the 2.42% level averaged at its most recent peak in Q4 of 2013. Steeper yield curves are favorable for portfolio mortgage lenders like TrustCo. The table below illustrates the range of rate movements for both short term and longer term rates. The target Fed Funds range remained unchanged at 0.25% to 0.50% during the second quarter of 2016, unchanged since the 25 basis point increase in the fourth quarter of 2015. Spreads of most asset classes, including agency securities and mortgage-backed securities, declined slightly compared to recent quarters. Changes in rates and spreads during the current quarter were due to a number of factors; however, uncertainty about the timing of any actions that the Federal Reserve Board (“FRB”) would take in regard to the extraordinary accommodations that have influenced markets in recent years and further uncertainty regarding the economy and related issues were key factors. Low risk free rates in major nations have also caused investors to shift into alternative fixed income instruments, contributing to the compression of spreads over the risk free rate.
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3 Month
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2 Year
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5 Year
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10 Year
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10 - 2 Year
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Yield (%)
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Yield (%)
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Yield (%)
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Yield (%)
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Spread (%)
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Q1/15
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Beg of Q1
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0.02
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0.66
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1.61
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2.12
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1.46
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Peak
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0.05
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0.73
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1.70
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2.24
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1.51
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Trough
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0.01
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0.44
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1.18
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1.68
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1.19
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End of Q1
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0.03
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0.56
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1.37
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1.94
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1.38
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Average in Q1
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0.02
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0.60
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1.46
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1.97
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1.36
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Q2/15
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Beg of Q2
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0.03
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0.55
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1.32
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1.87
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1.32
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Peak
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0.03
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0.75
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1.80
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2.50
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1.77
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Trough
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0.01
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0.49
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1.26
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1.85
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1.32
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End of Q2
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0.01
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0.64
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1.63
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2.35
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1.71
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Average in Q2
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0.02
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0.61
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1.53
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2.16
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1.55
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Q3/15
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Beg of Q3
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0.01
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0.69
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1.70
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2.43
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1.74
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Peak
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0.12
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0.82
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1.72
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2.44
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1.77
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Trough
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0.00
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0.55
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1.37
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2.01
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1.40
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End of Q3
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0.00
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0.64
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1.37
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2.06
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1.42
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Average in Q3
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0.04
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0.69
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1.56
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2.22
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1.53
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Q4/15
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Beg of Q4
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0.00
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0.64
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1.37
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2.05
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1.41
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Peak
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0.29
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1.09
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1.81
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2.36
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1.47
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Trough
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0.00
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0.57
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1.29
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1.99
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1.19
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End of Q4
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0.16
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1.06
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1.76
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2.27
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1.21
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Average in Q4
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0.13
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0.84
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1.59
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2.19
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1.35
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Q1/16
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Beg of Q1
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0.16
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1.06
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1.76
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2.27
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1.21
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Peak
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0.36
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1.06
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1.76
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2.27
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1.23
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Trough
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0.16
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0.64
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1.11
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1.63
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0.95
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End of Q1
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0.21
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0.73
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1.21
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1.78
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1.05
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Average in Q1
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0.29
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0.84
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1.37
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1.92
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1.08
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Q2/16
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Beg of Q2
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0.21
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0.73
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1.21
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1.78
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1.05
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Peak
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0.35
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0.92
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1.41
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1.94
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1.08
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Trough
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0.19
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0.58
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1.00
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1.46
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0.85
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End of Q2
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0.26
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0.58
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1.01
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1.49
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0.91
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Average in Q2
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0.26
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0.77
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1.24
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1.75
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0.98
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Despite some modest improvements in parts of the economy, the underlying economy of the United States continued to face significant challenges. Employment metrics were somewhat more positive than negative, but were not particularly robust. Economic conditions vary significantly over geographic areas, with strength concentrated in and around major population centers on the coasts and in certain areas where economic activity has been driven by specific regional factors. The unprecedented intervention by governments in markets and attempts to stimulate the economy, including the sharp easing of monetary policy during 2007-2008 will eventually be reversed. Economic activity in Europe, China and elsewhere has also been mixed at best, contributing to global economic issues and leading to additional government stimulation efforts in those areas. Finally, regulatory changes that have been enacted are expected to continue to impact the banking industry going forward. These regulatory changes have added significant operating expense and operational burden and fundamentally changed the way banks conduct business.
TrustCo believes that its long-term focus on traditional banking services and practices has enabled the Company to avoid significant impact from asset quality problems and that the Company’s strong liquidity and solid capital positions have allowed the Company to continue to conduct business in a manner consistent with its past practice. TrustCo has not engaged in the types of high risk loans and investments that have led to the widely reported problems in the industry. Nevertheless, the Company may experience increases in nonperforming loans (“NPLs”) relative to historical levels from time to time. While the Company does not expect to see a significant change in the inherent risk of loss in its loan portfolio at June 30, 2016, should general housing prices and other economic measures, such as unemployment in the Company’s market areas, deteriorate, the Company may experience an increase in the level of credit risk and in the amount of its classified and nonperforming loans.
Overview
TrustCo recorded net income of $10.5 million, or $0.109 of diluted earnings per share for the three months ended June 30, 2016, compared to net income of $10.7 million or $0.113 of diluted earnings per share in the same period in 2015. Return on average assets was 0.88% and 0.91%, respectively, for the three months ended June 30, 2016 and 2015. Return on average equity was 9.88% and 10.66%, respectively, for the three months ended June 30, 2016 and 2015.
For the six months ended June 30, 2016, net income was $20.9 million or $0.219 of diluted earnings per share, compared to $21.4 million and $0.226 per share, respectively, in the same period in 2015. Return on average assets was 0.88% and 0.92%, respectively, for the six months ended June 30, 2016 and 2015. Return on average equity was 9.93% and 10.78%, respectively, for the six months ended June 30, 2016 and 2015.
The primary factors accounting for the change in net income for the three months ended June 30, 2016 compared to the same periods of the prior year were:
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An increase in the average balance of interest earning assets of $55.2 million to $4.70 billion for the second quarter of 2016 compared to the same period in 2015
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An increase in taxable equivalent net interest margin for the second quarter of 2016 to 3.09% from 3.07% in the prior year period. The increase in the margin coupled with the increase in average earning assets, resulted in an increase of $621 thousand in taxable equivalent net interest income in the second quarter of 2016 compared to the second quarter of 2015.
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An increase of $668 thousand in securities gains for the second quarter of 2016 as compared to the prior year period.
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An increase of $1.8 million in noninterest expense, including net other real estate (“ORE”) expense, for the second quarter of 2016 compared to the second quarter of 2015.
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A decrease of $207 thousand in income taxes, in the second quarter of 2016 compared to the prior year due to lower pre-tax earnings.
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The primary factors accounting for the change in net income for the six months ended June 30, 2016 compared to the same periods of the prior year were:
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An increase in the average balance of interest earning assets of $51.5 million to $4.66 billion for the first six months of 2016 compared to the same period in 2015
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An increase in taxable equivalent net interest margin for the first six months of 2016 to 3.11% from 3.08% in the prior year period. The increase in the margin coupled with the increase in average earning assets, resulted in an increase of $1.6 million in taxable equivalent net interest income in the first six months of 2016 compared to the same period in 2015.
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An increase of $419 thousand in securities gains for the first six months of 2016 as compared to the prior year period.
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An increase of $3.4 million in noninterest expense, including net other real estate (“ORE”) expense, for the first six months of 2016 compared to the same period in 2015.
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A decrease of $517 thousand in income taxes, in the first six months of 2016 compared to the same period in 2015.
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Regulatory Agreement
On July 21, 2015 Trustco Bank, the wholly owned subsidiary of the Company, entered into a formal agreement with the OCC.
The Formal Agreement relates to the findings of the OCC following its regularly scheduled examination of the Bank in January 2015. Since the completion of the examination, the Bank believes it has been working diligently to address the findings of the examination and to develop and implement appropriate formal action plans.
The Formal Agreement requires the Bank to take various actions, within prescribed time frames, with respect to certain areas of the Bank. These include, among others, (i) establishment of a committee of at least three Directors to monitor and coordinate the Bank’s response to the Formal Agreement; (ii) adoption of compliance plans to respond to the Formal Agreement with the assistance of an independent qualified consultant; (iii) evaluation and implementation of improvements in corporate governance with the assistance of an independent qualified consultant; (iv) evaluation and implementation of improvements in internal audit; (v) development of a strategic plan; (vi) development of a revised capital plan, including dividends, consistent with the strategic plan; (vii) development and implementation of improvements to the Bank’s loan review system; and (viii) such other necessary steps to address the issues and questions noted by the OCC in the Formal Agreement. The Company expects the cost to comply with the agreement to be approximately $5.0 million annually.
Asset/Liability Management
The Company strives to generate its earnings capabilities through a mix of core deposits funding a prudent mix of earning assets. Additionally, TrustCo attempts to maintain adequate liquidity and reduce the sensitivity of net interest income to changes in interest rates to an acceptable level while enhancing profitability both on a short-term and long-term basis.
TrustCo’s results are affected by a variety of factors including competitive and economic conditions in the specific markets in which the Company operates, and more generally in the national economy, financial market conditions and the regulatory environment. Each of these factors is dynamic, and changes in any area can have an impact on TrustCo’s results.
Included in the Annual Report to Shareholders on Form 10-K for the year ended December 31, 2015 is a description of the effect interest rates had on the results for the year 2015 compared to 2014. Many of the same market factors discussed in the 2015 Annual Report continued to have a significant impact on results through the second quarter of 2016.
TrustCo competes with other financial service providers based upon many factors including quality of service, convenience of operations and rates paid on deposits and charged on loans. In the experience of management, the absolute level of interest rates, changes in interest rates and customers’ expectations with respect to the direction of interest rates have a significant impact on the volume of loan and deposit originations in any particular period.
Interest rates have a significant impact on the operations and financial results of all financial services companies. One of the most important interest rates used to implement national economic policy is the Federal Funds rate. This is the interest rate utilized within the banking system for overnight borrowings for institutions with the highest credit rating. The Federal Funds target rate decreased from 4.25% at the beginning of 2008 to a target range of 0.00% to 0.25% by the end of 2008. In December 2015, the target range increased to 0.50%. FRB officials have not been completely consistent or clear in regard to expectations for the future and have generally stressed the need to be accommodative given economic conditions, but have noted in their June statement that “The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”
Traditionally, interest rates on bank deposit accounts are heavily influenced by the Federal Funds rate. The average rate on interest bearing deposits was 2 basis points lower in the second quarter of 2016 relative to the prior year period. Relative to the year ago period, lower rates on money market deposits accounted for the overall reduction in the cost of interest bearing deposits. Please refer to the statistical disclosures in the table below entitled “Distribution of Assets, Liabilities and Shareholders’ Equity: Interest Rates and Interest Differential.”
The interest rate on the 10 year Treasury bond and other long-term interest rates have significant influence on the rates for new residential real estate loans. The FRB has attempted to influence rates on mortgage loans by means other than targeting a lower Federal Funds rate, including direct intervention in the mortgage-backed securities market through purchasing these securities in an attempt to raise prices and reduce yields. In recent periods this includes the reinvestment of principal payments received on its holdings of agency securities, agency mortgage-backed securities and Treasury securities. While no longer increasing its holdings of these securities, the reinvestment of principal means that the existing holdings are not being unwound. Eventually, management believes, the FRB will have to unwind these positions, which would likely put upward pressure on rates, although other factors may mitigate this pressure. These changes in interest rates can have an effect on the Company relative to the interest income on loans, securities and Federal Funds sold and other short term instruments, as well as on interest expense on deposits and borrowings.
TrustCo’s principal loan products are residential real estate loans. As noted above, residential real estate loans and longer-term investments are most affected by the changes in longer term market interest rates such as the 10 year Treasury. As noted previously, the 10 year Treasury yield was down significantly, on average, during the second quarter of 2016 compared to the second quarter of 2015.
Interest rates on new residential real estate loan originations are also influenced by the rates established by secondary market participants such as Freddie Mac and Fannie Mae. As a portfolio lender, TrustCo does not sell loans into the secondary market in the normal course of business, and is able to establish rates that management determines are appropriate in light of the long-term nature of residential real estate loans while remaining competitive with the secondary market rates. Financial market volatility and the problems faced by the financial services industry have lessened the influence of the secondary market; however, various programs initiated by arms of the federal government have had an impact on rate levels for certain products. Most importantly, a government goal of keeping mortgage rates low has been supported by targeted buying of certain securities, thus supporting prices and constraining yields, as noted above. Very low interest rates in many markets around the world have also increased demand for US fixed income assets, which has also contributed to the decline of rates on these assets.
The Federal Funds sold and other short term investments portfolios are affected primarily by changes in the Federal Funds target rate. Also, changes in interest rates have an effect on the recorded balance of the securities available for sale portfolio, which is recorded at fair value. Generally, as interest rates increase the fair value of these securities will decrease.
Interest rates generally remained below historic norms on both short term and longer term investments during the second quarter of 2016.
While TrustCo has been affected by aspects of the overall changes in financial markets, it was not affected to the degree the mortgage crisis affected some banks and financial institutions in the United States beginning in 2007. Generally, the crisis revolved around actual and future levels of delinquencies and defaults on mortgage loans, in many cases arising, in management’s view, from lenders with overly liberal underwriting standards, changes in the types of mortgage loans offered, significant upward resets on adjustable rate loans and fraud, among other factors. The Company utilizes a traditional underwriting process in evaluating loan applications, and since originated loans are retained in the portfolio, there is a strong incentive to be conservative in making credit decisions. For additional information concerning TrustCo’s loan portfolio and nonperforming loans, please refer to the discussions under “Loans” and “Nonperforming Assets,” respectively. Further, the Company does not rely on borrowed funds to support its assets and maintains a significant level of liquidity on the asset side of the balance sheet. These characteristics provide the Company with increased flexibility and stability during periods of market disruption and interest rate volatility.
A fundamental component of TrustCo’s strategy has been to grow customer relationships and the deposits and loans that are part of those relationships. The Company has significant capacity to grow its balance sheet given its existing infrastructure. The Company expects that growth to be profitable. The current interest rate environment, however, has narrowed the margin on incremental balance sheet expansion. While the Company has not changed its fundamental long term strategy in regard to utilizing its excess capacity, management continually evaluates changing conditions and may seek to limit growth or reduce the size of the balance sheet if its analysis indicates that doing so would be beneficial in the short term.
For the second quarter of 2016, the net interest margin was 3.09%, up 2 basis points versus the prior year’s quarter. The quarterly results reflect the following significant factors:
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The average balance of Federal Funds sold and other short-term investments decreased by $14.7 million while the average yield was 50 basis points in the second quarter of 2016 compared to 25 basis points in the same period in 2015. The decrease in the average balance reflects the continued growth of the loan portfolio.
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The average balance of securities available for sale decreased by $17.0 million while the average yield decreased to 1.89% for the second quarter of 2016 compared to 1.93% for the same period in 2015. The average balance of held to maturity securities decreased by $13.3 million and the average yield increased to 4.05% for the second quarter of 2016 compared to 3.87% for the same period in 2015.
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The average loan portfolio grew by $100.2 million to $3.32 billion and the average yield decreased 10 basis points to 4.29% in the second quarter of 2016 compared to the same period in 2015. The decline in the average yield primarily reflects the decline in market interest rates on new loan originations as older, higher rate loans pay down or are paid off.
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The average balance of interest bearing liabilities (primarily deposit accounts) increased $6.5 million and the average rate paid decreased 2 basis points to 0.39% in the second quarter of 2016 compared to the same period in 2015.
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During the second quarter of 2016, the Company continued to focus on its strategy to expand the loan portfolio by offering competitive interest rates. Management believes the TrustCo residential real estate loan product is very competitive compared to local and national competitors. Competition remains strong in the Company’s market areas.
The strategy on the funding side of the balance sheet continues to be to attract and retain deposit customers to the Company based upon a combination of service, convenience and interest rate.
Earning Assets
Total average interest earning assets increased from $4.65 billion in the second quarter of 2015 to $4.70 billion in the same period of 2016 with an average yield of 3.42% in both periods. The mix shift towards a higher proportion of loans, along with the increase in yield on cash offset the declining yields on securities and loans. Interest income on average earning assets increased from $39.7 million in the second quarter of 2015 to $40.2 million in the second quarter of 2016, on a tax equivalent basis. The increase was the result of higher volume and flat yield.
Loans
The average balance of loans was $3.32 billion in the second quarter of 2016 and $3.22 billion in the comparable period in 2015. The yield on loans decreased 10 basis points to 4.29%. The higher average balances more than offset the lower yield, leading to an increase in the interest income on loans from $35.3 million in the second quarter of 2015 to $35.7 million in the second quarter of 2016.
Compared to the second quarter of 2015, the average balance of the loan portfolio during the second quarter of 2016 increased in all categories except commercial loans, with increases in residential mortgage, home equity and installment loan categories. The average balance of residential mortgage loans was $2.76 billion in 2016 compared to $2.65 billion in 2015, an increase of 4.2%. The average yield on residential mortgage loans decreased by 13 basis points to 4.31% in the second quarter of 2016 compared to 2015.
TrustCo actively markets the residential loan products within its market territories. Mortgage loan rates are affected by a number of factors including rates on Treasury securities, the Federal Funds rate and rates set by competitors and secondary market participants. TrustCo aggressively markets the unique aspects of its loan products thereby attempting to create a differentiation from other lenders. These unique aspects include low closing costs, fast turn-around time on loan approvals, no escrow or mortgage insurance requirements for qualified borrowers and the fact that the Company
typically holds these loans in portfolio and does not sell them into the secondary markets. Assuming a rise in long-term interest rates, the Company would anticipate that the unique features of its loan products will continue to attract customers in the residential mortgage loan area.
Commercial loans, which consist primarily of loans secured by commercial real estate, decreased $11.5 million to an average balance of $198.9 million in the second quarter of 2016 compared to the same period in the prior year. The average yield on this portfolio was flat at 5.15% over the same period.
The average yield on home equity credit lines increased 8 basis points to 3.58% during the second quarter of 2016 compared to 3.50% in the year earlier period. The average balances of home equity lines increased 0.2% to $354.9 million in the second quarter of 2016 as compared to the prior year.
Securities Available for Sale
The average balance of the securities available for sale portfolio for the second quarter of 2016 was $652.1 million compared to $669.1 million for the comparable period in 2015. The decreased balances reflect routine paydowns, calls, maturities and sales, partly offset by new investment purchases. During the quarter, continued low market yields on securities eligible to be added to the portfolio resulted in loans being a more attractive option for the deployment of cash. The average yield was 1.89% for the second quarter of 2016 and 1.93% for the second quarter of 2015 for the available for sale portfolio. This portfolio is primarily comprised of agency issued residential mortgage backed securities, bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank, and Freddie Mac), agency-issued commercial mortgage backed securities, Small Business Administration participation certificates and municipal bonds. These securities are recorded at fair value with any adjustment in fair value included in other comprehensive income (loss), net of tax.
The net unrealized gain in the available for sale securities portfolio was $4.4 million as of June 30, 2016 compared to a net unrealized loss of $7.5 million as of December 31, 2015. The unrealized gain or loss in the portfolio is primarily the result of changes in market interest rate levels.
Held to Maturity Securities
The average balance of held to maturity securities was $52.2 million for the second quarter of 2016 compared to $65.5 million in the second quarter of 2015. The decrease in balances reflects routine paydowns, calls and maturities and follows the overall decline in securities with a shift towards cash for more flexibility and loans for greater yield. The average yield was 4.05% for the second quarter of 2016 compared to 3.87% for the year earlier period. The higher yield reflects a modest change in mix and slower prepayments on MBS, which reduced premium amortization. TrustCo expects to hold the securities in this portfolio until they mature or are called.
As of June 30, 2016, the securities in this portfolio include residential mortgage-backed securities and corporate bonds. The balances for these securities are recorded at amortized cost.
Federal Funds Sold and Other Short-term Investments
The 2016 second quarter average balance of Federal Funds sold and other short-term investments was $668.4 million, a $14.7 million decrease from the $683.1 million average for the same period in 2015. The yield was 0.50% for the second quarter of 2016 and 0.25% for the comparable period in 2015. Interest income from this portfolio increased $409 thousand from $423 thousand in 2015 to $832 thousand in 2016, reflecting the target rate increase that took effect in December.
The Federal Funds sold and other short-term investments portfolio is utilized to generate additional interest income and liquidity as funds are waiting to be deployed into the loan and securities portfolios.
Funding Opportunities
TrustCo utilizes various funding sources to support its earning asset portfolio. The vast majority of the Company’s funding comes from traditional deposit vehicles such as savings, demand deposits, interest-bearing checking, money market and time deposit accounts.
Total average interest bearing deposits (which includes interest bearing checking, money market accounts, savings and certificates of deposit) increased $8.1 million to $3.79 billion for the second quarter of 2016 versus the second quarter in the prior year, and the average rate paid decreased from 0.40% for 2015 to 0.38% for 2016. Total interest expense on these deposits decreased $110 thousand to $3.6 million in the second quarter of 2016 compared to the year earlier period. From the second quarter of 2015 to the second quarter of 2016, interest bearing demand account average balances were up 7.5%, certificates of deposit average balances were down 1.1%, non-interest demand average balances were up 7.5% and average savings balances increased 1.9%. Money market balances were down 8.7%. The Company has not utilized brokered deposits as a funding source, but does incorporate them as a contingent funding source within its Asset/Liability Policy. Like other contingent funding sources, brokered CDs may be tested from time to time to ensure operational and market readiness.
At June 30, 2016, the maturity of total time deposits is as follows:
(dollars in thousands)
|
|
|
|
|
|
|
|
Under 1 year
|
|
$
|
1,024,430
|
|
1 to 2 years
|
|
|
104,028
|
|
2 to 3 years
|
|
|
37,346
|
|
3 to 4 years
|
|
|
10,126
|
|
4 to 5 years
|
|
|
2,437
|
|
Over 5 years
|
|
|
200
|
|
|
|
$
|
1,178,567
|
|
Average short-term borrowings for the quarter were $181.2 million in 2016 compared to $182.8 million in 2015. The average rate decreased during this time period from 0.66% in 2015 to 0.58% in 2016. The short-term borrowings of the Company are cash management accounts, which represent retail accounts with customers for which the Bank has pledged certain assets as collateral.
Net Interest Income
Taxable equivalent net interest income increased by $621 thousand to $36.3 million in the second quarter of 2016 compared to the same period in 2015. The net interest spread was up 2 basis points to 3.03% in the second quarter of 2016 compared to the year ago period. As previously noted, the net interest margin was up 2 basis points to 3.09% for the second quarter of 2016 compared to the same period in 2015.
Nonperforming Assets
Nonperforming assets include nonperforming loans
(“NPLs”)
, which are those loans in a non-accrual status and loans past due three payments or more and still accruing interest. Also included in the total of nonperforming assets are foreclosed real estate properties, which are included in other assets and categorized as other real estate owned.
The following describes the nonperforming assets of TrustCo as of June 30, 2016:
Nonperforming loans and foreclosed real estate
:
Total NPLs were $28.2 million at June 30, 2016, compared to $28.3 million at December 31, 2015 and $32.5 million at June 30, 2015. There were $28.2 million of non-accrual loans at June 30, 2016 compared to $28.2 million at December 31, 2015 and $32.4 million at June 30, 2015. There were no loans at June 30, 2016 and 2015 and December 31, 2015 that were past due 90 days or more and still accruing interest.
At June 30, 2016, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of $28.2 million at June 30, 2016, $25.5 million were residential real estate loans, $2.7 million were commercial mortgages and $49 thousand were installment loans, compared to $25.1 million, $3.0 million and $98 thousand, respectively at December 31, 2015.
A significant percentage of nonperforming loans are residential real estate loans, which are historically lower-risk than most other types of loans. Annualized net chargeoffs were 0.13% of average residential real estate loans (including home equity lines of credit) for the second quarter of 2016 compared to 0.15% for the second quarter of 2015. Management believes that these loans have been appropriately written down where required.
Ongoing portfolio management is intended to result in early identification and disengagement from deteriorating credits. TrustCo has a diversified loan portfolio that includes a significant balance of residential mortgage loans to borrowers in the Capital Region of New York and avoids concentrations to any one borrower or any single industry. TrustCo has no advances to borrowers or projects located outside the United States. TrustCo continues to identify delinquent loans as quickly as possible and to move promptly to resolve problem loans. Efforts to resolve delinquencies begin immediately after the payment grace period expires, with repeated, automatically generated notices, as well as personalized phone calls and letters. Loans are placed in nonaccrual status once they are 90 days past due, or earlier if management has determined that such classification is appropriate. Once in nonaccrual status, loans are either brought current and maintained current, at which point they may be returned to accrual status, or they proceed through the foreclosure process. The collateral on nonaccrual loans is evaluated periodically, and the loan value is written down if the collateral value is insufficient.
The Company originates loans throughout its deposit franchise area. At June 30, 2016, 79.6% of its gross loan portfolio balances were in New York State and the immediately surrounding areas (including New Jersey, Vermont and Massachusetts), and 20.4% were in Florida. Those figures compare to 80.5% and 19.5%, respectively at December 31, 2015. Within these two geographic regions, commercial loans constitute a larger component of the local outstandings in New York than in Florida, at 6.8% and 2.1%, respectively, as of June 30, 2016.
Economic conditions vary widely by geographic location. Florida experienced a more significant downturn than New York during the recession. Reflecting that, nonperforming loans (NPLs as a percentage of the portfolio) had generally been more heavily weighted towards Florida in recent years. However, as of June 30, 2016, NPLs were roughly in line with regional outstandings, as 6.7% of nonperforming loans were to Florida borrowers, compared to 93.3% in New York and surrounding areas. The level of Florida based NPLs was 6.5% of total NPLs as of December 31, 2015. For the three months ended June 30, 2016, New York and surrounding areas experienced net charge-offs of approximately $1.1 million, compared to $17 thousand in Florida.
Other than loans currently identified as nonperforming, management is aware of no other loans in the Bank’s portfolio that pose material risk of the eventual non-collection of principal and interest. Also as of June 30, 2016, there were no other loans classified for regulatory purposes that management reasonably expects will materially impact future operating results, liquidity, or capital resources.
TrustCo has identified nonaccrual commercial and commercial real estate loans, as well as all loans restructured under a troubled debt restructuring (TDR), as impaired loans. There were $3.0 million of commercial mortgages and commercial loans classified as impaired as of June 30, 2016, compared to $3.3 million at December 31, 2015. There were $22.2 million of impaired residential loans at June 30, 2016 and $22.6 million at December 31, 2015
. The average balances of all impaired loans were $24.8 million during the second three months of 2016 and $26.6 million for the full year 2015.
As of June 30, 2016 and December 31, 2015, the Company’s loan portfolio did not include any subprime mortgages or loans acquired with deteriorated credit quality.
At June 30, 2016 there was $4.6 million of foreclosed real estate compared to $6.5 million at December 31, 2015.
Allowance for loan losses:
The balance of the allowance for loan losses is maintained at a level that is, in management’s judgment, representative of the amount of probable incurred losses in the loan portfolio.
(dollars in thousands)
|
|
As of
June 30, 2016
|
|
|
As of
December 31, 2015
|
|
|
|
Amount
|
|
|
Percent of
Loans to
Total Loans
|
|
|
Amount
|
|
|
Percent of
Loans to
Total Loans
|
|
Commercial
|
|
$
|
4,922
|
|
|
|
5.57
|
%
|
|
$
|
4,347
|
|
|
|
5.85
|
%
|
Real estate - construction
|
|
|
304
|
|
|
|
0.68
|
%
|
|
|
365
|
|
|
|
0.81
|
%
|
Real estate mortgage - 1 to 4 family
|
|
|
32,290
|
|
|
|
82.96
|
%
|
|
|
33,167
|
|
|
|
82.14
|
%
|
Home equity lines of credit
|
|
|
6,119
|
|
|
|
10.53
|
%
|
|
|
6,365
|
|
|
|
10.91
|
%
|
Installment Loans
|
|
|
429
|
|
|
|
0.25
|
%
|
|
|
518
|
|
|
|
0.29
|
%
|
|
|
$
|
44,064
|
|
|
|
100.00
|
%
|
|
$
|
44,762
|
|
|
|
100.00
|
%
|
At June 30, 2016, the allowance for loan losses was $44.1 million, compared to $45.6 million at June 30, 2015 and $44.8 million at December 31, 2015. The allowance represents 1.32% of the loan portfolio as of June 30, 2016 compared to 1.41% at June 30, 2015 and 1.36% at December 31, 2015.
The provision for loan losses was $800 thousand for the quarter ended June 30, 2016 and 2015. Net chargeoffs for the three-month period ended June 30, 2016 and 2015 were $1.1 million.
During the second quarter of 2016, there were $68 thousand of gross commercial loan chargeoffs and $1.2 million of gross residential mortgage and consumer loan chargeoffs as compared with $50 thousand of gross commercial loan charge-offs and $1.3 million of residential mortgage and consumer loan chargeoffs in the second quarter of 2015. Gross recoveries during the second quarter of 2016 were $1 thousand for commercial loans and $133 thousand for residential mortgage and consumer loans, compared to $1 thousand for commercial loans and $144 thousand for residential and consumer in the second quarter of 2015.
In determining the adequacy of the allowance for loan losses, management reviews the current nonperforming loan portfolio as well as loans that are past due and not yet categorized as nonperforming for reporting purposes. Also, there are a number of other factors that are taken into consideration, including:
|
·
|
The magnitude and nature of recent loan chargeoffs and recoveries,
|
|
·
|
The growth in the loan portfolio and the implication that it has in relation to the economic climate in the Bank’s market territories, and
|
|
·
|
The economic environment in the Upstate New York territory primarily (the Company’s largest geographical market) over the last several years, as well as in the Company’s other market areas.
|
Management continues to monitor these factors in determining future loan loss provisions or recaptures in relation to the economic environment, loan chargeoffs, recoveries and the level and trends of nonperforming loans.
Liquidity and Interest Rate Sensitivity
TrustCo seeks to obtain favorable sources of funding and to maintain prudent levels of liquid assets in order to satisfy varied liquidity demands. Management believes that TrustCo’s earnings performance and strong capital position enable the Company to easily secure new sources of liquidity. The Company actively manages its liquidity through target ratios established under its liquidity policies. Continual monitoring of both historical and prospective ratios allows TrustCo to employ strategies necessary to maintain adequate liquidity. Management has also defined various degrees of adverse liquidity situations which could potentially occur and has prepared appropriate contingency plans should such a situation arise. While TrustCo has not used brokered deposits as a funding source, the Company does have a program in place to do so as a source of contingent liquidity.
The Company uses an industry standard external model as the primary tool to identify, quantify and project changes in interest rates and prepayment speeds taken both from industry sources and internally generated data based upon historical trends in the Bank’s balance sheet. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in market interest rates are also incorporated into the model. This model calculates an economic or fair value amount with respect to non-time deposit categories since these deposits are part of the core deposit products of the Company. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure the fair value of capital or precisely predict the impact of fluctuations in interest rates on the fair value of capital.
Using this model, the fair value of capital projections as of June 30, 2016 are referenced below. The base case (current rates) scenario shows the present estimate of the fair value of capital assuming no change in the operating environment or operating strategies and no change in interest rates from those existing in the marketplace as of June 30, 2016. The table indicates the impact on the fair value of capital assuming interest rates were to instantaneously increase by 100 bp, 200 bp, 300 bp and 400 bp or to decrease by 100 bp.
As of June 30, 2016
|
|
Estimated Percentage of
Fair value of Capital to
Fair value of Assets
|
|
+400 BP
|
|
|
19.52%
|
|
+300 BP
|
|
|
20.87
|
|
+200 BP
|
|
|
22.19
|
|
+100 BP
|
|
|
23.23
|
|
Current rates
|
|
|
21.14
|
|
-100 BP
|
|
|
21.92
|
|
Noninterest Income
Total noninterest income for the second quarter of 2016 was $5.2 million, compared to $4.5 million in the prior year period. The increase of $745 thousand was primarily due to securities gains of $668 thousand in the second quarter of 2016, compared to none in the year-ago period. For the six months ended June 30, 2016 and 2015 total noninterest income was $9.8 million and $9.1 million, respectively. The increase was primarily due to a $419 thousand increase in securities gains.
Trustco Financial Services income increased $34 thousand to $1.5 million for the second quarter of 2016 compared to the second quarter of 2015. The fair value of assets under management were $851 million at June 30, 2016 compared to $842 million at December 31, 2015 and $938 million at June 30, 2015. The fluctuation in assets was due to market value changes and net account acquisitions/closures. For both the six months ended June 30 2016 and 2015, Financial Services income was $3.1 million.
The total of fees for other services to customers plus other income was $3.0 million in the second quarter of 2016, up $289 thousand.
Noninterest Expenses
Total noninterest expenses were $24.0 million for the three months ended June 30, 2016, compared to $22.1 million for the three months ended
June 30, 2015
. The largest causes of the increase in expenses were a $932 thousand increase in FDIC and other insurance expenses, a $770 thousand increase in salaries and benefits and a $222 thousand increase in ORE expense, net. The increase in salaries and benefits was primarily due to the increase in full time equivalent headcount from 760 as of June 30, 2015, to 801 as of June 30, 2016. Professional services expenses were up a modest $32 thousand for the period, however that remains elevated due in large part to legal and consulting fees related to the Formal Agreement with the OCC. The only significant decreases was a decline of $163 thousand in advertising expense.
Total noninterest expenses were $47.4 million for the six months ended June 30, 2016, compared to $44.0 million for the six months ended
June 30, 2015
. The largest causes of the increase in expenses was a $1.9 million increase in FDIC and other insurance expenses, a $1.3 million increase in salaries and benefits and a $671 thousand increase in professional services costs. The increase in salaries and benefits was primarily due to the noted increase in full time equivalent headcount. The only significant decreases was a decline of $391 thousand in equipment expense.
Income Taxes
In the second quarter of 2016, TrustCo recognized income tax expense of $6.3 million, compared to $6.5 million for the second quarter of 2015. The effective tax rates were 37.4% and 37.6% for the second quarters of 2016 and 2015, respectively. For the first six months of 2016, the effective tax rate was 37.2%, compared to 37.5% in the year earlier period, reflecting lower pretax income.
Capital Resources
Consistent with its long-term goal of operating a sound and profitable financial organization, TrustCo strives to maintain strong capital ratios.
Banking regulators have moved towards higher required capital requirements due to the standards included in the Basel III reform measures and the Dodd-Frank Act, as well as a general trend towards reducing risk in the banking system by providing a greater capital margin.
Trustco Bank’s Formal Agreement with the OCC requires the Bank to develop and comply with a capital plan, and the Bank may declare or pay a dividend or make a capital distribution only (a) when the Bank is in compliance with its approved written capital plan, and would remain in compliance with such Capital Plan immediately following the declaration or payment of any dividend or capital distribution and (b) following OCC approval under OCC capital distribution rules.
Total shareholders’ equity at June 30, 2016 was $430.3 million, compared to $402.5 million at June 30, 2015. TrustCo declared a dividend of $0.065625 per share in the second quarter of 2016. This results in a dividend payout ratio of 59.89% based on second quarter 2016 earnings of $10.5 million.
The Bank reported the following capital ratios as of June 30, 2016 and December 31, 2015:
(dollars in thousands)
|
|
As of June 30, 2016
|
|
|
Well
|
|
|
Adequately
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Capitalized(1)
|
|
|
Capitalized(1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital
|
|
$
|
414,803
|
|
|
|
8.65
|
%
|
|
|
5.00
|
%
|
|
|
4.000
|
%
|
Common equity tier 1 capital
|
|
|
414,803
|
|
|
|
17.32
|
|
|
|
6.50
|
|
|
|
5.125
|
|
Tier 1 risk-based capital
|
|
|
414,803
|
|
|
|
17.32
|
|
|
|
8.00
|
|
|
|
6.625
|
|
Total risk-based capital
|
|
|
444,920
|
|
|
|
18.58
|
|
|
|
10.00
|
|
|
|
8.625
|
|
(dollars in thousands)
|
|
As of December 31, 2015
|
|
|
Well
|
|
|
Adequately
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Capitalized*
|
|
|
Capitalized*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 (core) capital
|
|
$
|
405,506
|
|
|
|
8.60
|
%
|
|
|
5.000
|
%
|
|
|
4.000
|
%
|
Common equity tier 1 capital
|
|
|
405,506
|
|
|
|
17.21
|
|
|
|
6.500
|
|
|
|
4.500
|
|
Tier 1 risk-based capital
|
|
|
405,506
|
|
|
|
17.21
|
|
|
|
8.000
|
|
|
|
6.000
|
|
Total risk-based capital
|
|
|
435,149
|
|
|
|
18.47
|
|
|
|
10.000
|
|
|
|
8.000
|
|
(1) Federal regulatory minimum requirements to be considered to be Well Capitalized and Adequately Capitalized
(2) The June 30, 2016 common equity tier 1, tier 1 risk-based, and total risk-based capital ratios include a transition capital conservation buffer of 0.625 percent
The following is a summary of actual capital amounts and ratios as of June 30, 2016 and December 31, 2015 for TrustCo on a consolidated basis:
(dollars in thousands)
|
|
As of June 30, 2016
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital
|
|
$
|
427,318
|
|
|
|
8.91
|
%
|
Common equity tier 1 capital
|
|
|
427,318
|
|
|
|
17.83
|
|
Tier 1 risk-based capital
|
|
|
427,318
|
|
|
|
17.83
|
|
Total risk-based capital
|
|
|
457,447
|
|
|
|
19.09
|
|
(dollars in thousands)
|
|
As of December 31, 2015
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
|
|
|
|
|
Leverage capital
|
|
$
|
417,538
|
|
|
|
8.85
|
%
|
Common equity tier 1 capital
|
|
|
417,538
|
|
|
|
17.71
|
|
Tier 1 risk-based capital
|
|
|
417,538
|
|
|
|
17.71
|
|
Total risk-based capital
|
|
|
447,193
|
|
|
|
18.97
|
|
In addition, at June 30, 2016, the consolidated equity to total assets ratio was 8.91%, compared to 8.73% at
December 31, 2015 and 8.49% at June 30, 2015.
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet minimum capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements and results of operations. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company and the Bank on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule and fully phased in by January 1, 2019. The Basel III capital rules will require the Company and the Bank to meet a capital conservation buffer requirement in order to avoid constraints on dividends, equity repurchases and certain compensation. To meet the requirement when it is fully phased in, the organization must maintain an amount of CET1 capital that exceeds the buffer level of 2.5% above each of the minimum risk-weighted asset ratios. The requirement will be phased in over a four year period, starting January 1, 2016, when the amount of such capital must exceed the buffer level of 0.625%. Accordingly, the required minimum conservation buffer will increase to 1.25% on January 1, 2017, 1.875% on January 1, 2018 and 2.5% on January 1, 2019. When the capital conservation buffer requirement is fully phased in, to avoid constraints, a banking organization must maintain the following capital ratios: (1) CET1 to risk-weighted assets more than 7.0%, (ii) Tier 1 capital to risk-weighted assets more than 8.5%, and (iii) total capital (Tier 1 plus Tier 2) to risk-weighted assets more than 10.5%. The final capital rules impose restrictions on capital distributions and certain discretionary cash bonus payments if the minimum capital conservation buffer is not met. Prior to January 1, 2015, the Company had not been subject to express regulatory capital requirements. The Company has chosen to exclude net unrealized gain or loss on available for sale securities in computing regulatory capital. Management believes as of June 30, 2016, the Company and Bank meet all capital adequacy requirements to which they are subject, including the currently applicable capital conservation buffer of 0.625%.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. Adequately capitalized institutions must obtain prior regulatory approval to accept brokered deposits. The federal banking agencies are required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution or its holding company. If an institution is classified as undercapitalized, it is required to submit a capital restoration plan to its federal banking regulators and is prohibited from increasing its assets, engaging in a new line of business, acquiring any interest in any company or insured depository institution, or opening or acquiring a new branch office, except under certain circumstances, including the acceptance by the federal banking regulators of a capital restoration plan for the institution. Furthermore, if an institution is classified as undercapitalized, the federal banking regulators may take certain actions to correct the capital position of the institution; if it is classified as significantly undercapitalized or critically undercapitalized, the federal banking regulators would be required to take one or more prompt corrective actions. These actions would include, among other things, requiring sales of new securities to bolster capital, improvements in management, limits on interest rates paid, prohibitions on transactions with affiliates, termination of certain risky activities and restrictions on compensation paid to executive officers. If a bank is classified as critically undercapitalized, the bank must be placed into conservatorship or receivership within 90 days, unless the federal banking regulators determines that other action would better achieve the purposes of the prompt corrective action regime. Any of the foregoing regulatory actions could have a direct material effect on an institution’s or its holding company’s financial statements. The Bank’s capital ratios exceed the levels necessary to meet the definition of “well capitalized” for regulatory purposes as of June 30, 2016.
Critical Accounting Policies:
Pursuant to SEC guidance, management of the Company is encouraged to evaluate and disclose those accounting policies judged to be critical policies - those most important to the portrayal of the Company’s financial condition and results, and that require management’s most difficult subjective or complex judgments.
Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the inherent uncertainty in evaluating the levels of the allowance required to cover the inherent risk of losses in the loan portfolio and the material effect that such judgments can have on the results of operations. Included in Note 1 to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 is a description of the significant accounting policies that are utilized by the Company in the preparation of the Consolidated Financial Statements.
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of the average balance sheet, related interest income and expense and the average annualized yields on interest earning assets and annualized rates on interest bearing liabilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Nonaccrual loans are included in loans for this analysis. The average balances of securities available for sale and held to maturity are calculated using amortized costs for these securities. Included in the average balance of shareholders' equity is the unrealized gain (loss), net of tax, in the available for sale portfolio of $0.7 million in 2016 and ($3.5) million in 2015. The subtotals contained in the following table are the arithmetic totals of the items contained in that category. Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and rate) based on the percentage relationship of such variances to each other.
|
|
Three months ended
June 30, 2016
|
|
|
Three months ended
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Change in
Interest
Income/
Expense
|
|
|
Variance
Balance
Change
|
|
|
Variance
Rate
Change
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. government sponsored enterprises
|
|
$
|
107,190
|
|
|
|
404
|
|
|
|
1.51
|
%
|
|
$
|
114,279
|
|
|
|
366
|
|
|
|
1.28
|
%
|
|
$
|
38
|
|
|
|
(125
|
)
|
|
|
163
|
|
Mortgage backed securities and collateralized mortgage obligations-residential
|
|
|
445,162
|
|
|
|
2,169
|
|
|
|
1.95
|
%
|
|
|
441,754
|
|
|
|
2,276
|
|
|
|
2.06
|
%
|
|
|
(107
|
)
|
|
|
109
|
|
|
|
(216
|
)
|
State and political subdivisions
|
|
|
955
|
|
|
|
19
|
|
|
|
7.96
|
%
|
|
|
1,939
|
|
|
|
36
|
|
|
|
7.36
|
%
|
|
|
(17
|
)
|
|
|
(35
|
)
|
|
|
18
|
|
Corporate bonds
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
%
|
|
|
956
|
|
|
|
-
|
|
|
|
-
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Small Business Administration-guaranteed participation securities
|
|
|
87,801
|
|
|
|
450
|
|
|
|
2.05
|
%
|
|
|
98,894
|
|
|
|
503
|
|
|
|
2.03
|
%
|
|
|
(53
|
)
|
|
|
(85
|
)
|
|
|
32
|
|
Mortgage backed securities and collateralized mortgage obligations-commercial
|
|
|
10,321
|
|
|
|
38
|
|
|
|
1.47
|
|
|
|
10,600
|
|
|
|
38
|
|
|
|
1.41
|
|
|
|
-
|
|
|
|
(5
|
)
|
|
|
5
|
|
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
|
%
|
|
|
(139
|
)
|
|
|
(141
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and other short-term Investments
|
|
|
668,395
|
|
|
|
832
|
|
|
|
0.50
|
%
|
|
|
683,110
|
|
|
|
423
|
|
|
|
0.25
|
%
|
|
|
409
|
|
|
|
(9
|
)
|
|
|
418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
%
|
|
|
(106
|
)
|
|
|
(186
|
)
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity securities
|
|
|
52,169
|
|
|
|
528
|
|
|
|
4.05
|
%
|
|
|
65,474
|
|
|
|
634
|
|
|
|
3.87
|
%
|
|
|
(106
|
)
|
|
|
(186
|
)
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
%
|
|
|
(147
|
)
|
|
|
(147
|
)
|
|
|
-
|
|
Residential mortgage loans
|
|
|
2,759,024
|
|
|
|
29,725
|
|
|
|
4.31
|
%
|
|
|
2,648,320
|
|
|
|
29,371
|
|
|
|
4.44
|
%
|
|
|
354
|
|
|
|
4,257
|
|
|
|
(3,903
|
)
|
Home equity lines of credit
|
|
|
354,897
|
|
|
|
3,179
|
|
|
|
3.58
|
%
|
|
|
354,053
|
|
|
|
3,092
|
|
|
|
3.50
|
%
|
|
|
87
|
|
|
|
8
|
|
|
|
79
|
|
Installment loans
|
|
|
8,316
|
|
|
|
191
|
|
|
|
9.19
|
%
|
|
|
8,226
|
|
|
|
176
|
|
|
|
8.60
|
%
|
|
|
15
|
|
|
|
16
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned income
|
|
|
3,321,175
|
|
|
|
35,658
|
|
|
|
4.29
|
%
|
|
|
3,221,023
|
|
|
|
35,349
|
|
|
|
4.39
|
%
|
|
|
309
|
|
|
|
4,134
|
|
|
|
(3,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets
|
|
|
4,703,421
|
|
|
|
40,220
|
|
|
|
3.42
|
%
|
|
|
4,648,180
|
|
|
|
39,747
|
|
|
|
3.42
|
%
|
|
|
473
|
|
|
|
3,799
|
|
|
|
(3,326
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
%
|
|
|
5
|
|
|
|
5
|
|
|
|
-
|
|
Money market accounts
|
|
|
580,100
|
|
|
|
467
|
|
|
|
0.32
|
%
|
|
|
635,347
|
|
|
|
547
|
|
|
|
0.35
|
%
|
|
|
(80
|
)
|
|
|
(40
|
)
|
|
|
(40
|
)
|
Savings
|
|
|
1,273,575
|
|
|
|
604
|
|
|
|
0.19
|
%
|
|
|
1,249,865
|
|
|
|
599
|
|
|
|
0.19
|
%
|
|
|
5
|
|
|
|
5
|
|
|
|
-
|
|
Time deposits
|
|
|
1,177,084
|
|
|
|
2,460
|
|
|
|
0.84
|
%
|
|
|
1,190,234
|
|
|
|
2,500
|
|
|
|
0.84
|
%
|
|
|
(40
|
)
|
|
|
(40
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing deposits
|
|
|
3,790,305
|
|
|
|
3,647
|
|
|
|
0.38
|
%
|
|
|
3,782,213
|
|
|
|
3,757
|
|
|
|
0.40
|
%
|
|
|
(110
|
)
|
|
|
(70
|
)
|
|
|
(40
|
)
|
Short-term borrowings
|
|
|
181,247
|
|
|
|
262
|
|
|
|
0.58
|
%
|
|
|
182,829
|
|
|
|
300
|
|
|
|
0.66
|
%
|
|
|
(38
|
)
|
|
|
(3
|
)
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities
|
|
|
3,971,552
|
|
|
|
3,909
|
|
|
|
0.39
|
%
|
|
|
3,965,042
|
|
|
|
4,057
|
|
|
|
0.41
|
%
|
|
|
(148
|
)
|
|
|
(73
|
)
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
$
|
621
|
|
|
|
3,871
|
|
|
|
(3,250
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of the average balance sheet, related interest income and expense and the average annualized yields on interest earning assets and annualized rates on interest bearing liabilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Nonaccrual loans are included in loans for this analysis. The average balances of securities available for sale and held to maturity are calculated using amortized costs for these securities. Included in the average balance of shareholders' equity is the unrealized loss, net of tax, in the available for sale portfolio of ($0.5) million in 2016 and ($3.1) million in 2015. The subtotals contained in the following table are the arithmetic totals of the items contained in that category. Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and rate) based on the percentage relationship of such variances to each other.
|
|
Six months ended
June 30, 2016
|
|
|
Six months ended
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Change in
Interest
Income/
Expense
|
|
|
Variance
Balance
Change
|
|
|
Variance
Rate
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. government sponsored enterprises
|
|
$
|
91,111
|
|
|
|
659
|
|
|
|
1.45
|
%
|
|
$
|
96,172
|
|
|
|
578
|
|
|
|
1.20
|
%
|
|
$
|
81
|
|
|
|
(81
|
)
|
|
|
162
|
|
Mortgage backed securities and collateralized mortgage obligations-residential
|
|
|
428,831
|
|
|
|
4,285
|
|
|
|
2.00
|
%
|
|
|
459,980
|
|
|
|
4,669
|
|
|
|
2.03
|
%
|
|
|
(384
|
)
|
|
|
(315
|
)
|
|
|
(69
|
)
|
State and political subdivisions
|
|
|
1,034
|
|
|
|
41
|
|
|
|
7.93
|
%
|
|
|
2,015
|
|
|
|
74
|
|
|
|
7.31
|
%
|
|
|
(33
|
)
|
|
|
(49
|
)
|
|
|
16
|
|
Corporate bonds
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
%
|
|
|
1,226
|
|
|
|
1
|
|
|
|
0.16
|
%
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Small Business Administration-guaranteed participation securities
|
|
|
89,206
|
|
|
|
926
|
|
|
|
2.08
|
%
|
|
|
100,270
|
|
|
|
1,025
|
|
|
|
2.05
|
%
|
|
|
(99
|
)
|
|
|
(141
|
)
|
|
|
42
|
|
Mortgage backed securities and collateralized mortgage obligations-commercial
|
|
|
10,357
|
|
|
|
74
|
|
|
|
1.43
|
%
|
|
|
10,635
|
|
|
|
75
|
|
|
|
1.41
|
%
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
2
|
|
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
|
%
|
|
|
(437
|
)
|
|
|
(590
|
)
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and other short-term Investments
|
|
|
671,990
|
|
|
|
1,677
|
|
|
|
0.50
|
%
|
|
|
668,269
|
|
|
|
823
|
|
|
|
0.25
|
%
|
|
|
854
|
|
|
|
5
|
|
|
|
849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
%
|
|
|
(183
|
)
|
|
|
(336
|
)
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity securities
|
|
|
53,629
|
|
|
|
1,083
|
|
|
|
4.04
|
%
|
|
|
67,383
|
|
|
|
1,266
|
|
|
|
3.76
|
%
|
|
|
(183
|
)
|
|
|
(336
|
)
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Reserve Bank and Federal Home Loan Bank stock
|
|
|
9,527
|
|
|
|
238
|
|
|
|
5.00
|
%
|
|
|
9,348
|
|
|
|
234
|
|
|
|
5.01
|
%
|
|
|
4
|
|
|
|
4
|
|
|
|
(0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans
|
|
|
200,152
|
|
|
|
5,180
|
|
|
|
5.18
|
%
|
|
|
214,713
|
|
|
|
5,506
|
|
|
|
5.13
|
%
|
|
|
(326
|
)
|
|
|
(473
|
)
|
|
|
147
|
|
Residential mortgage loans
|
|
|
2,742,918
|
|
|
|
59,348
|
|
|
|
4.33
|
%
|
|
|
2,621,417
|
|
|
|
58,329
|
|
|
|
4.46
|
%
|
|
|
1,019
|
|
|
|
4,810
|
|
|
|
(3,791
|
)
|
Home equity lines of credit
|
|
|
356,857
|
|
|
|
6,358
|
|
|
|
3.56
|
%
|
|
|
353,161
|
|
|
|
6,153
|
|
|
|
3.51
|
%
|
|
|
205
|
|
|
|
410
|
|
|
|
(205
|
)
|
Installment loans
|
|
|
8,488
|
|
|
|
383
|
|
|
|
9.02
|
%
|
|
|
8,011
|
|
|
|
351
|
|
|
|
8.84
|
%
|
|
|
32
|
|
|
|
5
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned income
|
|
|
3,308,415
|
|
|
|
71,269
|
|
|
|
4.31
|
%
|
|
|
3,197,302
|
|
|
|
70,339
|
|
|
|
4.41
|
%
|
|
|
930
|
|
|
|
4,752
|
|
|
|
(3,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets
|
|
|
4,664,782
|
|
|
|
80,260
|
|
|
|
3.44
|
%
|
|
|
4,613,285
|
|
|
|
79,092
|
|
|
|
3.44
|
%
|
|
|
1,168
|
|
|
|
3,836
|
|
|
|
(2,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
%
|
|
|
14
|
|
|
|
14
|
|
|
|
-
|
|
Money market accounts
|
|
|
591,937
|
|
|
|
962
|
|
|
|
0.33
|
%
|
|
|
636,596
|
|
|
|
1,164
|
|
|
|
0.37
|
%
|
|
|
(202
|
)
|
|
|
(79
|
)
|
|
|
(123
|
)
|
Savings
|
|
|
1,268,021
|
|
|
|
1,208
|
|
|
|
0.19
|
%
|
|
|
1,239,737
|
|
|
|
1,257
|
|
|
|
0.20
|
%
|
|
|
(49
|
)
|
|
|
62
|
|
|
|
(111
|
)
|
Time deposits
|
|
|
1,155,773
|
|
|
|
4,833
|
|
|
|
0.84
|
%
|
|
|
1,185,363
|
|
|
|
4,934
|
|
|
|
0.84
|
%
|
|
|
(101
|
)
|
|
|
(101
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing deposits
|
|
|
3,763,053
|
|
|
|
7,233
|
|
|
|
0.38
|
%
|
|
|
3,754,141
|
|
|
|
7,571
|
|
|
|
0.41
|
%
|
|
|
(338
|
)
|
|
|
(104
|
)
|
|
|
(234
|
)
|
Short-term borrowings
|
|
|
178,683
|
|
|
|
519
|
|
|
|
0.58
|
%
|
|
|
187,560
|
|
|
|
646
|
|
|
|
0.69
|
%
|
|
|
(127
|
)
|
|
|
(29
|
)
|
|
|
(98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities
|
|
|
3,941,736
|
|
|
|
7,752
|
|
|
|
0.39
|
%
|
|
|
3,941,701
|
|
|
|
8,217
|
|
|
|
0.42
|
%
|
|
|
(465
|
)
|
|
|
(133
|
)
|
|
|
(332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
$
|
1,633
|
|
|
|
3,969
|
|
|
|
(2,336
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|