TRST TrustCo Bank Corporation of NY

Executive Snapshot:

TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced third quarter of 2016 net income of $10.9 million compared to $10.5 million for the second quarter of 2016 and $10.6 million for the third quarter of 2015. 

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased to be able to report an increase in earnings in the third quarter of 2016 as compared to the third quarter of 2015.  We are encouraged by the combination of revenue growth and expense decline in the quarter, despite a difficult operating environment and continued higher costs related to regulatory issues.  Our continued focus on traditional lending criteria and conservative balance sheet management has enabled us to produce consistent earnings, maintain strong liquidity and capital and allowed us to continue to grow our business and take advantage of changes in market and competitive conditions.  In terms of our core business, we continue to add customer relationships which ultimately drive future growth.  We will continue to take advantage of opportunities as they are presented during the balance of 2016.  Recent merger activity between our competitors, including the Key – First Niagara merger, may provide us with additional opportunities to add customers.”

TrustCo saw continued solid loan growth in the third quarter of 2016 compared to the prior year.  Loan portfolio expansion was funded primarily by our strong liquidity reserves.  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 third 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 third quarter of 2016, return on average assets and return on average equity were 0.90% and 10.05%, respectively, compared to 0.88% and 10.35% for the third quarter of 2015.  The decline in return on average equity was due to continued growth of TrustCo’s capital position.  Diluted earnings per share were $0.114 for the third quarter of 2016, compared to $0.111 for the third 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. During the third quarter of 2016 we experienced a reduction in FDIC deposit insurance premiums and were also able to reduce expenses in a number of other categories.

For the first nine months of 2016, diluted net income per share was $0.333, compared to $0.337 for the first nine months of 2015.  Return on average assets and equity were 0.89% and 9.97% for the first nine months of 2016, compared to 0.91% and 10.64% for the first nine months of 2015. 

Average loans were up $108.7 million or 3.3% in the third quarter of 2016, over the same period in 2015.  Loan growth was constrained by a $13.4 million decline in commercial loans, which have become less attractive on a risk adjusted basis.  Average residential loans, our primary lending focus, were up $130.3 million or 4.8% in the third quarter of 2016, over the same period in 2015.  Average deposits were up $37.5 million or 0.9% for the third 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 $51.2 million from the third quarter of 2015 to the third quarter of 2016, while average time deposit balances declined $13.6 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 September 30, 2016, our average branch size was $28.9 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 September 30, 2015 and as compared to December 31, 2015.  Nonperforming loans (NPLs) were $26.0 million at September 30, 2016, compared to $31.9 million at September 30, 2015 and $28.3 million at December 31, 2015.  NPLs were equal to 0.77% of total loans at September 30, 2016, compared to 0.97% a year earlier and 0.86% at December 31, 2015.  The coverage ratio, or allowance for loan losses to NPLs, was 169.0% at September 30, 2016, compared to 141.4% at September 30, 2015 and 158.4% at December 31, 2015.  Nonperforming assets (NPAs) were at $30.8 million at September 30, 2016 compared to $37.8 million at September 30, 2015 and $34.7 million at December 31, 2015.  The ratio of loan loss allowance to total loans was 1.30% as of September 30, 2016, compared to 1.38% at September 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 $44.0 million at September 30, 2016 compared to $45.2 million at September 30, 2015 and $44.8 million at December 31, 2015.  Net chargeoffs for the third quarter of 2016 decreased versus both the third quarter of 2015 and the second quarter of 2016, to $0.9 million.  The net chargeoff ratio was 0.10% for the third quarter of 2016, compared to 0.15% in the third quarter of 2015 and was at the lowest level since the first quarter of 2008.  The provision for loan losses was $750 thousand, compared to $800 thousand in the third quarter of 2015.

The net interest margin for the third quarter of 2016 was 3.09%, the same as in the second quarter and a basis point higher than in the third quarter of 2015. 

At September 30, 2016 the equity to asset ratio was 9.05%, compared to 8.91% at June 30, 2016 and 8.72% at September 30, 2015.  The tangible equity ratio was 9.04% compared to 8.90% at June 30, 2016 and 8.71% at September 30, 2015.  GAAP book value per share at September 30, 2016 was $4.56 compared to $4.33 a year earlier and tangible book value per share was $4.55 and $4.33, respectively.  Tangible equity and book value are non-GAAP measures and 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 September 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 Third Quarter 2016 results will be held at 9:00 a.m. Eastern Time on October 24, 2016.  Those wishing to participate in the call may dial toll-free 1-888-339-0764.  International callers must dial 1-412-902-4195.   Please ask to be joined into the TrustCo Bank Corp NY / TRST call.  A replay of the call will be available for thirty days by dialing 1-877-344-7529 (1-412-317-0088 for international callers), Conference Number 10094705. The call will also be audio webcast at: http://services.choruscall.com/links/trst161024.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
		09/30/16			06/30/16			09/30/15
Summary of operations
Net interest income (TE)	$		36,681			36,311			36,069
Provision for loan losses			750			800			800
Net gain on securities transactions			-			668			-
Noninterest income, excluding net gain on securities transactions			4,729			4,531			4,365
Noninterest expense			23,049			23,974			23,464
Net income			10,930			10,464			10,616
Per common share
Net income per share:
- Basic	$		0.114			0.110			0.112
- Diluted			0.114			0.109			0.111
Cash dividends			0.066			0.066			0.066
Tangible Book value at period end			4.55			4.50			4.33
Market price at period end			7.09			6.41			5.84
At period end
Full time equivalent employees			790			801			778
Full service banking offices			145			145			146
Performance ratios
Return on average assets			0.90	%		0.88			0.88
Return on average equity			10.05			9.88			10.35
Efficiency (1)			54.11			57.70			56.04
Net interest spread (TE)			3.03			3.03			3.02
Net interest margin (TE)			3.09			3.09			3.08
Dividend payout ratio			57.40			59.89			58.82
Capital ratio at period end
Consolidated tangible equity to tangible assets (2)			9.04			8.90			8.71
Asset quality analysis at period end
Nonperforming loans to total loans			0.77			0.84			0.97
Nonperforming assets to total assets			0.64			0.68			0.80
Allowance for loan losses to total loans			1.30			1.32			1.38
Coverage ratio (3)			1.6x			1.6			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 building and nonperforming loans).
(2)  The tangible equity ratio excludes $553 of intangibles from both equity and assets.
(3)  Calculated as allowance for loan losses divided by total nonperforming loans.
TE = Taxable equivalent.
FINANCIAL HIGHLIGHTS, Continued
(dollars in thousands, except per share data)
(Unaudited)
		Nine Months Ended
		09/30/16			09/30/15
Summary of operations
Net interest income (TE)	$		109,188			106,944
Provision for loan losses			2,350			2,400
Net gain on securities transactions			668			249
Noninterest income, excluding net gain on securities transactions			13,832			13,193
Noninterest expense			70,462			67,452
Net income			31,803			32,058
Per common share
Net income per share:
- Basic	$		0.333			0.337
- Diluted			0.333			0.337
Cash dividends			0.197			0.197
Tangible Book value at period end			4.55			4.33
Market price at period end			7.09			5.84
Performance ratios
Return on average assets			0.89	%		0.91
Return on average equity			9.97			10.64
Efficiency (1)			56.01			54.98
Net interest spread (TE)			3.04			3.01
Net interest margin (TE)			3.10			3.08
Dividend payout ratio			59.11			58.36
(1)  Calculated as noninterest expense (excluding ORE income/expense) divided by
taxable equivalent net interest income plus noninterest income (excluding
net securities transactions and gain on sale of building and nonperforming loans).
TE = Taxable equivalent.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
		Three Months Ended
		9/30/2016			6/30/2016			3/31/2016			12/31/2015			9/30/2015
Interest and dividend income:
Interest and fees on loans	$		36,171			35,652			35,605			35,930			35,631
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises			408			404			255			256			584
State and political subdivisions			13			13			14			16			23
Mortgage-backed securities and collateralized mortgage obligations-residential			1,829			2,169			2,116			2,233			2,230
Corporate bonds			97			-			-			-			-
Small Business Administration-guaranteed participation securities			445			450			476			482			497
Mortgage-backed securities and collateralized mortgage obligations-commercial			36			38			36			37			37
Other securities			4			4			4			4			4
Total interest and dividends on securities available for sale			2,832			3,078			2,901			3,028			3,375
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential			347			374			402			425			461
Corporate bonds			156			154			154			154			153
Total interest on held to maturity securities			503			528			556			579			614
Federal Reserve Bank and Federal Home Loan Bank stock			131			118			120			120			113
Interest on federal funds sold and other short-term investments			866			832			844			494			408
Total interest income			40,503			40,208			40,026			40,151			40,141
Interest expense:
Interest on deposits:
Interest-bearing checking			120			116			114			115			117
Savings			504			604			604			608			603
Money market deposit accounts			463			467			496			513			537
Time deposits			2,468			2,460			2,373			2,375			2,544
Interest on short-term borrowings			281			262			257			278			290
Total interest expense			3,836			3,909			3,844			3,889			4,091
Net interest income			36,667			36,299			36,182			36,262			36,050
Provision for loan losses			750			800			800			1,300			800
Net interest income after provision for loan losses			35,917			35,499			35,382			34,962			35,250
Noninterest income:
Trustco Financial Services income			1,347			1,512			1,605			1,489			1,351
Fees for services to customers			2,664			2,737			2,661			2,704			2,770
Net gain on securities transactions			-			668			-			2			-
Other			718			282			306			235			244
Total noninterest income			4,729			5,199			4,572			4,430			4,365
Noninterest expenses:
Salaries and employee benefits			8,995			8,934			9,003			8,042			7,834
Net occupancy expense			3,887			3,918			4,088			3,884			3,929
Equipment expense			1,596			1,840			1,514			1,530			1,596
Professional services			1,959			2,098			2,146			2,067			2,238
Outsourced services			1,465			1,425			1,551			1,585			1,425
Advertising expense			489			570			729			592			668
FDIC and other insurance			1,127			1,949			1,990			2,055			2,202
Other real estate expense, net			895			423			519			570			806
Other			2,636			2,817			1,899			2,783			2,766
Total noninterest expenses			23,049			23,974			23,439			23,108			23,464
Income before taxes			17,597			16,724			16,515			16,284			16,151
Income taxes			6,667			6,260			6,106			6,104			5,535
Net income	$		10,930			10,464			10,409			10,180			10,616
Net income per common share:
- Basic	$		0.114			0.110			0.109			0.107			0.112
- Diluted			0.114			0.109			0.109			0.107			0.111
Average basic shares (in thousands)			95,603			95,487			95,365			95,256			95,149
Average diluted shares (in thousands)			95,722			95,580			95,412			95,349			95,234
Note:  Taxable equivalent net interest income	$		36,681			36,311			36,196			36,278			36,069
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
		Nine Months Ended
		9/30/2016			9/30/2015
Interest and dividend income:
Interest and fees on loans	$		107,428			105,957
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises			1,067			1,162
State and political subdivisions			40			71
Mortgage-backed securities and collateralized mortgage obligations-residential			6,114			6,899
Corporate bonds			97			1
Small Business Administration-guaranteed participation securities			1,371			1,522
Mortgage-backed securities and collateralized mortgage obligations-commercial			110			112
Other securities			12			12
Total interest and dividends on securities available for sale			8,811			9,779
Interest on held to maturity securities:
Mortgage-backed securities-residential			1,123			1,419
Corporate bonds			464			461
Total interest on held to maturity securities			1,587			1,880
Federal Reserve Bank and Federal Home Loan Bank stock			369			347
Interest on federal funds sold and other short-term investments			2,542			1,231
Total interest income			120,737			119,194
Interest expense:
Interest on deposits:
Interest-bearing checking			350			333
Savings			1,712			1,860
Money market deposit accounts			1,426			1,701
Time deposits			7,301			7,478
Interest on short-term borrowings			800			936
Total interest expense			11,589			12,308
Net interest income			109,148			106,886
Provision for loan losses			2,350			2,400
Net interest income after provision for loan losses			106,798			104,486
Noninterest income:
Trust department income			4,464			4,482
Fees for services to customers			8,062			7,985
Net gain on securities transactions			668			249
Other			1,306			726
Total noninterest income			14,500			13,442
Noninterest expenses:
Salaries and employee benefits			26,932			24,479
Net occupancy expense			11,893			11,915
Equipment expense			4,950			5,341
Professional services			6,203			5,811
Outsourced services			4,441			4,275
Advertising expense			1,788			2,001
FDIC and other insurance			5,066			4,284
Other real estate (income) expense, net			1,837			1,431
Other			7,352			7,915
Total noninterest expenses			70,462			67,452
Income before taxes			50,836			50,476
Income taxes			19,033			18,418
Net income	$		31,803			32,058
Net income per Common Share:
- Basic	$		0.333			0.337
- Diluted			0.333			0.337
Average basic shares (thousands)			95,486			95,051
Average diluted shares (thousands)			95,572			95,167
Note:  Taxable equivalent net interest income	$		109,188			106,944
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
		9/30/2016			6/30/2016			3/31/2016			12/31/2015			9/30/2015
ASSETS:
Cash and due from banks	$		42,296			39,787			37,373			41,698			42,560
Federal funds sold and other short term investments			622,132			718,609			722,805			676,458			655,512
Total cash and cash equivalents			664,428			758,396			760,178			718,156			698,072
Securities available for sale:
U. S. government sponsored enterprises			116,327			116,595			66,920			86,737			103,492
States and political subdivisions			970			974			974			1,290			1,963
Mortgage-backed securities and collateralized mortgage obligations-residential			400,575			404,138			422,189			411,729			413,878
Small Business Administration-guaranteed participation securities			84,687			87,740			89,053			90,416			94,038
Mortgage-backed securities and collateralized mortgage obligations-commercial			10,233			10,374			10,307			10,180			10,491
Corporate bonds			41,025			-			-			-			-
Other securities			685			685			685			685			685
Total securities available for sale			654,502			620,506			590,128			601,037			624,547
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential			38,044			40,702			43,595			46,490			50,027
Corporate bonds			9,986			9,982			9,979			9,975			9,971
Total held to maturity securities			48,030			50,684			53,574			56,465			59,998
Federal Reserve Bank and Federal Home Loan Bank stock			9,579			9,579			9,480			9,480			9,480
Loans:
Commercial			189,795			195,698			198,765			203,415			208,794
Residential mortgage loans			2,845,876			2,786,951			2,737,784			2,721,173			2,707,944
Home equity line of credit			343,445			352,069			356,163			359,325			356,337
Installment loans			8,515			8,476			8,667			9,391			8,930
Loans, net of deferred fees and costs			3,387,631			3,343,194			3,301,379			3,293,304			3,282,005
Less:
Allowance for loan losses			43,950			44,064			44,398			44,762			45,149
Net loans			3,343,681			3,299,130			3,256,981			3,248,542			3,236,856
Bank premises and equipment, net			36,110			36,793			37,360			37,643			37,506
Other assets			56,519			55,825			55,561			63,669			59,358
Total assets	$		4,812,849			4,830,913			4,763,262			4,734,992			4,725,817
LIABILITIES:
Deposits:
Demand	$		380,090			376,669			359,060			365,081			354,162
Interest-bearing checking			785,118			766,322			746,562			754,347			719,071
Savings accounts			1,277,734			1,282,006			1,272,394			1,262,194			1,237,549
Money market deposit accounts			566,097			577,063			595,585			610,826			617,103
Time deposits			1,159,199			1,178,567			1,168,887			1,107,930			1,168,908
Total deposits			4,168,238			4,180,627			4,142,488			4,100,378			4,096,793
Short-term borrowings			179,204			190,542			169,528			191,226			184,405
Accrued expenses and other liabilities			29,799			29,479			28,221			30,078			32,327
Total liabilities			4,377,241			4,400,648			4,340,237			4,321,682			4,313,525
SHAREHOLDERS' EQUITY:
Capital stock			99,121			99,071			98,973			98,973			98,964
Surplus			171,093			171,174			171,113			171,443			171,788
Undivided profits			197,013			192,356			188,159			184,009			180,093
Accumulated other comprehensive income (loss), net of tax			2,328			2,395			73			(4,781	)		(1,174	)
Treasury stock at cost			(33,947	)		(34,731	)		(35,293	)		(36,334	)		(37,379	)
Total shareholders' equity			435,608			430,265			423,025			413,310			412,292
Total liabilities and shareholders' equity	$		4,812,849			4,830,913			4,763,262			4,734,992			4,725,817
Outstanding shares (in thousands)			95,614			95,493			95,369			95,262			95,149

 

NONPERFORMING ASSETS
(dollars in thousands)
(Unaudited)
Nonperforming Assets
		09/30/16			06/30/16			03/31/16			12/31/15			09/30/15
New York and other states*
Loans in nonaccrual status:
Commercial	$		2,366			2,690			2,762			3,024			3,699
Real estate mortgage - 1 to 4 family			21,678			23,559			25,669			23,273			26,059
Installment			70			49			74			90			69
Total non-accrual loans			24,114			26,298			28,505			26,387			29,827
Other nonperforming real estate mortgages - 1 to 4 family			44			45			47			48			50
Total nonperforming loans			24,158			26,343			28,552			26,435			29,877
Other real estate owned			4,768			4,602			5,208			6,120			5,893
Total nonperforming assets	$		28,926			30,945			33,760			32,555			35,770
Florida
Loans in nonaccrual status:
Commercial	$		-			-			-			-			-
Real estate mortgage - 1 to 4 family			1,844			1,900			1,802			1,817			2,054
Installment			-			-			-			8			9
Total non-accrual loans			1,844			1,900			1,802			1,825			2,063
Other nonperforming real estate mortgages - 1 to 4 family			-			-			-			-			-
Total nonperforming loans			1,844			1,900			1,802			1,825			2,063
Other real estate owned			-			-			476			335			-
Total nonperforming assets	$		1,844			1,900			2,278			2,160			2,063
Total
Loans in nonaccrual status:
Commercial	$		2,366			2,690			2,762			3,024			3,699
Real estate mortgage - 1 to 4 family			23,522			25,459			27,471			25,090			28,113
Installment			70			49			74			98			78
Total non-accrual loans			25,958			28,198			30,307			28,212			31,890
Other nonperforming real estate mortgages - 1 to 4 family			44			45			47			48			50
Total nonperforming loans			26,002			28,243			30,354			28,260			31,940
Other real estate owned			4,768			4,602			5,684			6,455			5,893
Total nonperforming assets	$		30,770			32,845			36,038			34,715			37,833
Quarterly Net Chargeoffs (Recoveries)
		09/30/16			06/30/16			03/31/16			12/31/15			09/30/15
New York and other states*
Commercial	$		353			67			224			672			3
Real estate mortgage - 1 to 4 family			471			973			771			963			1,159
Installment			37			77			70			35			26
Total net chargeoffs	$		861			1,117			1,065			1,670			1,188
Florida
Commercial	$		-			-			-			(2	)		(3	)
Real estate mortgage - 1 to 4 family			-			16			83			6			33
Installment			3			1			16			13			4
Total net chargeoffs	$		3			17			99			17			34
Total
Commercial	$		353			67			224			670			-
Real estate mortgage - 1 to 4 family			471			989			854			969			1,192
Installment			40			78			86			48			30
Total net chargeoffs	$		864			1,134			1,164			1,687			1,222
Asset Quality Ratios
		09/30/16			06/30/16			03/31/16			12/31/15			09/30/15
Total nonperforming loans(1)	$		26,002			28,243			30,354			28,260			31,940
Total nonperforming assets(1)			30,770			32,845			36,038			34,715			37,833
Total net chargeoffs(2)			864			1,134			1,164			1,687			1,222
Allowance for loan losses(1)			43,950			44,064			44,398			44,762			45,149
Nonperforming loans to total loans			0.77	%		0.84	%		0.92	%		0.86	%		0.97	%
Nonperforming assets to total assets			0.64	%		0.68	%		0.76	%		0.73	%		0.80	%
Allowance for loan losses to total loans			1.30	%		1.32	%		1.34	%		1.36	%		1.38	%
Coverage ratio(1)			169.0	%		156.0	%		146.3	%		158.4	%		141.4	%
Annualized net chargeoffs to average loans(2)			0.10	%		0.14	%		0.14	%		0.21	%		0.15	%
Allowance for loan losses to annualized net chargeoffs(2)			12.7x			9.7x			9.5x			6.6x			9.3x
* Includes New York, New Jersey, Vermont and Massachusetts.
(1)  At period-end
(2)  For the period ended

 

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands)		Three months ended										Three months ended
(Unaudited)		September 30, 2016										September 30, 2015
		Average				Interest			Average			Average				Interest			Average
		Balance							Rate			Balance							Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises	$		109,488				408		1.49	%	$		157,454				584		1.48	%
Mortgage backed securities and
collateralized mortgage obligations-residential			400,103				1,829		1.83				425,092				2,230		2.10
State and political subdivisions			953				20		8.39				1,937				34		7.02
Corporate bonds			27,161				97		1.43				-				-		-
Small Business Administration-guaranteed participation securities			85,305				445		2.09				96,109				497		2.07
Mortgage backed securities and
collateralized mortgage obligations-commercial			10,247				36		1.41				10,532				37		1.41
Other			685				4		2.34				685				4		2.34
Total securities available for sale			633,942				2,839		1.79				691,809				3,386		1.96
Federal funds sold and other
short-term Investments			683,777				866		0.50				652,274				408		0.25
Held to maturity securities:
Corporate bonds			10,644				156		5.86				9,969				153		6.17
Mortgage backed securities and
collateralized mortgage obligations-residential			39,307				347		3.53				51,928				461		3.55
Total held to maturity securities			49,951				503		4.03				61,897				614		3.97
Federal Reserve Bank and Federal Home Loan Bank stock			9,579				131		5.47				9,480				113		4.77
Commercial loans			195,115				2,597		5.32				208,492				2,688		5.15
Residential mortgage loans			2,819,343				30,175		4.28				2,689,072				29,617		4.41
Home equity lines of credit			346,744				3,211		3.70				354,552				3,151		3.53
Installment loans			8,331				195		9.36				8,678				183		8.33
Loans, net of unearned income			3,369,533				36,178		4.29				3,260,794				35,639		4.37
Total interest earning assets			4,746,782				40,517		3.41				4,676,254				40,160		3.43
Allowance for loan losses			(44,473	)									(45,829	)
Cash & non-interest earning assets			137,462										133,241
Total assets	$		4,839,771								$		4,763,666
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts	$		780,058				120		0.06	%	$		727,693				117		0.06	%
Money market accounts			571,333				463		0.32				623,381				537		0.34
Savings			1,284,533				504		0.16				1,251,031				603		0.19
Time deposits			1,176,115				2,468		0.84				1,189,763				2,544		0.85
Total interest bearing deposits			3,812,039				3,555		0.37				3,791,868				3,801		0.40
Short-term borrowings			189,910				281		0.59				177,230				290		0.65
Total interest bearing liabilities			4,001,949				3,836		0.38				3,969,098				4,091		0.41
Demand deposits			377,455										360,080
Other liabilities			27,496										27,524
Shareholders' equity			432,871										406,964
Total liabilities and shareholders' equity	$		4,839,771								$		4,763,666
Net interest income, tax equivalent							36,681										36,069
Net interest spread									3.03	%									3.02	%
Net interest margin (net interest income
to total interest earning assets)									3.09	%									3.08	%
Tax equivalent adjustment							(14	)									(19	)
Net interest income							36,667										36,050
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands)		Nine months ended										Nine months ended
(Unaudited)		September 30, 2016										September 30, 2015
		Average				Interest			Average			Average				Interest			Average
		Balance							Rate			Balance							Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises	$		97,281				1,067		1.46	%	$		116,824				1,162		1.33	%
Mortgage backed securities and
collateralized mortgage obligations-residential			419,185				6,114		1.94				448,223				6,899		2.05
State and political subdivisions			1,007				60		7.94				1,989				108		7.32
Corporate bonds			9,120				97		1.42				813				1		0.16
Small Business Administration-guaranteed participation securities			87,896				1,371		2.08				98,868				1,522		2.05
Mortgage backed securities and
collateralized mortgage obligations-commercial			10,320				110		1.42				10,600				112		1.41
Other			683				12		2.34				685				12		2.34
Total securities available for sale			625,492				8,831		1.88				678,002				9,816		1.93
Federal funds sold and other
short-term Investments			675,948				2,542		0.50				662,879				1,231		0.25
Held to maturity securities:
Corporate bonds			10,202				464		6.06				9,965				461		6.17
Mortgage backed securities and
collateralized mortgage obligations-residential			42,192				1,123		3.55				55,569				1,419		3.41
Total held to maturity securities			52,394				1,587		4.04				65,534				1,880		3.83
Federal Reserve Bank and Federal Home Loan Bank stock			9,545				369		5.15				9,392				347		4.93
Commercial loans			198,461				7,777		5.22				212,617				8,194		5.14
Residential mortgage loans			2,768,579				89,523		4.31				2,644,216				87,946		4.44
Home equity lines of credit			353,461				9,569		3.61				353,630				9,304		3.52
Installment loans			8,435				579		9.15				8,236				534		8.66
Loans, net of unearned income			3,328,936				107,448		4.30				3,218,699				105,978		4.39
Total interest earning assets			4,692,315				120,777		3.43				4,634,506				119,252		3.43
Allowance for loan losses			(44,832	)									(46,203	)
Cash & non-interest earning assets			136,584										136,906
Total assets	$		4,784,067								$		4,725,209
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts	$		758,314				350		0.06	%	$		704,323				333		0.06	%
Money market accounts			585,019				1,426		0.33				632,143				1,701		0.36
Savings			1,273,565				1,712		0.18				1,243,544				1,860		0.20
Time deposits			1,162,603				7,301		0.84				1,186,846				7,478		0.84
Total interest bearing deposits			3,779,501				10,789		0.38				3,766,856				11,372		0.40
Short-term borrowings			182,453				800		0.58				184,079				936		0.68
Total interest bearing liabilities			3,961,954				11,589		0.39				3,950,935				12,308		0.42
Demand deposits			368,852										344,606
Other liabilities			27,179										26,689
Shareholders' equity			426,082										402,979
Total liabilities and shareholders' equity	$		4,784,067								$		4,725,209
Net interest income, tax equivalent							109,188										106,944
Net interest spread									3.04	%									3.01	%
Net interest margin (net interest income
to total interest earning assets)									3.10	%									3.08	%
Tax equivalent adjustment							(40	)									(58	)
Net interest income							109,148										106,886

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)
		09/30/16			06/30/16			09/30/15
Tangible Book Value Per Share
Equity	$		435,608			430,265			412,292
Less: Intangible assets			553			553			553
Tangible equity			435,055			429,712			411,739
Shares outstanding			95,614			95,493			95,149
Tangible book value per share			4.55			4.50			4.33
Book value per share			4.56			4.51			4.33
Tangible Equity to Tangible Assets
Total Assets			4,812,849			4,830,913			4,725,817
Less: Intangible assets			553			553			553
Tangible assets			4,812,296			4,830,360			4,725,264
Tangible Equity to Tangible Assets			9.04	%		8.90	%		8.71	%
Equity to Assets			9.05	%		8.91	%		8.72	%
		3 Months Ended										9 Months Ended
Efficiency Ratio		09/30/16			06/30/16			09/30/15				09/30/16			09/30/15
Net interest income	$		36,667			36,299			36,050				109,148			106,886
Taxable equivalent adjustment			14			12			19				40			58
Net interest income (fully taxable equivalent)			36,681			36,311			36,069				109,188			106,944
Non-interest income			4,729			5,199			4,365				14,500			13,442
Less:  Net gain on sale of building			469			-			-				469			-
Less:  Net gain on sale of nonperforming loans			-			24			-				24			60
Less:  Net gain on securities			-			668			-				668			249
Revenue used for efficiency ratio			40,941			40,818			40,434				122,527			120,077
Total noninterest expense			23,049			23,974			23,464				70,462			67,452
Less:  Other real estate expense, net			895			423			806				1,837			1,431
Expense used for efficiency ratio			22,154			23,551			22,658				68,625			66,021
Efficiency Ratio			54.11	%		57.70	%		56.04	%			56.01	%		54.98	%

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