TrustCo is Pleased to Report First Quarter 2020 Results; Net Income of $13.3 Million and 6.7% Average Residential Loan Growth...

TrustCo Bank Corp NY (TrustCo, NASDAQ: TRST) today announced first quarter 2020 net income of $13.3 million or $0.138 diluted earnings per share. Average residential loan growth increased 6.7% or $226.7 million for the first quarter 2020 compared to the first quarter 2019.

Summary

Robert J. McCormick, Chairman, President and Chief Executive Officer noted, “First and foremost, I hope you and your families are healthy and safe during this difficult time. Please know we are committed to being a pillar in our community for all. Providing Home Town Service will always remain constant in this time of uncertainty. It’s been hard, but we are all in this together. We are thankful to those on the front lines from medical centers to food banks that are providing the necessary services for those affected physically, emotionally, and financially by COVID-19.”

TrustCo has created a “COVID-19 Fund” and will donate time and financial support to front line organizations across the communities we serve. In addition, to support our borrowers experiencing economic hardships, we have launched a “COVID-19 Financial Relief Program.” This program includes loan modifications, such as deferments on residential and commercial loans by request, and short-term reduced-rate personal loans of up to $5,000. TrustCo is also working with the Small Business Administration to offer federal relief to our small business clients through the Paycheck Protection Program.

The beginning of 2020 saw continued loan and deposit growth. Our focus on traditional lending criteria and conservative balance sheet management has produced consistent earnings while maintaining strong liquidity and growing capital. This approach allowed us to continue to expand our business and take advantage of changes in market and competitive conditions. Though the pandemic has created an uncertain future, we are well-positioned to help our customers through this economic disruption and turmoil. We continue to hire across our locations for all levels of branch staff. As we enter a traditionally busy season for residential lending, the Bank is well-positioned to deploy its existing liquidity into our residential loan portfolio and we will be paying close attention to how the market changes under current circumstances.

TrustCo saw average loans grow 5.4% in the first quarter of 2020 compared to the first quarter of 2019. Year over year, loan portfolio expansion was funded by a combination of utilizing a portion of our strong cash balances, cash flow from investments, and the growth in funding from customer deposits. The continued shift in earning assets toward higher yielding loans has helped to manage margin compression driven by the higher cost of funds. Total average deposits are up $121.0 million or 2.8% in the first quarter 2020 compared to the prior year.

Details

Average loans were up $209.1 million or 5.4% in the first quarter 2020 over the same period in 2019. Average residential loans, our primary lending focus, were up $226.7 million or 6.7% in the first quarter 2020, over the same period in 2019. Average deposits were up $121.0 million or 2.8% for the first quarter 2020 over the same period a year earlier. The increase in deposits was primarily the result of a $96.2 million or 18.6% increase in average money market accounts versus prior year. Excluding time deposits, total average core deposit accounts, which consist of checking, savings and money market deposits, were up $104.3 million or 3.5% for the first quarter 2020 compared to the first quarter 2019. Within core, checking balances were up $51.6 million (including interest bearing and non‑interest bearing balances).

The cost of interest bearing liabilities remained relatively flat in the first quarter 2020 from the first quarter 2019. A significant portion of our CD portfolio repriced during 2019 and in the first quarter 2020 with additional still to reprice in the second quarter. The net interest margin for the first quarter 2020 was 3.05%, down 19 basis points from 3.24% in the first quarter of 2019 primarily due to federal interest rate cuts over the same period resulting in less interest earned on our short-term funds and variable rate loans. Our growth in deposits was primarily a result of core deposit growth while remaining at relatively the same cost. Additionally, because we offered competitive shorter term rates on our time deposits in the past, we expect cost of interest bearing liabilities to continue to decrease as these reprice at lower rates.

The Bank continued to demonstrate its ability to grow and manage shareholders’ equity. Average equity was up $47.2 million or 9.5% in the first quarter of 2020 compared to the same period in 2019. On this expanded equity, return on average assets and return on average equity for the first quarter 2020 were 1.03% and 9.87%. The Company also purchased 489 thousand shares of stock under the announced Stock Repurchase Plan. Overall expense control continues to be a key area of focus. Total operating expenses decreased by $599 thousand or 2.4% in the first quarter 2020 as compared to the first quarter 2019, driven by declines in professional services, advertising expense, and FDIC Insurance, partially offset by increases in outsourced services and ORE expenses, net.

Asset quality measures have stayed consistent. Nonperforming loans (NPLs) were $20.7 million at March 31, 2020, compared to $24.7 million at March 31, 2019. NPLs were equal to 0.51% of total loans at March 31, 2020, compared to 0.64% at March 31, 2019. The coverage ratio, or allowance for loan losses to NPLs, was 222.5% at March 31, 2020, compared to 180.5% at March 31, 2019. Nonperforming assets (NPAs) were $22.0 million at March 31, 2020 compared to $26.0 million at March 31, 2019. The ratio of allowance for loan losses to total loans was 1.13% as of March 31, 2020, compared to 1.09% at December 31, 2019. The allowance for loan losses was $46.2 million at March 31, 2020 compared to $44.3 million at December 31, 2019. The provision for loan losses increased $1.7 million to $2.0 million in the first quarter 2020 compared to the same period in the prior year, primarily driven by the uncertainty in the current economic environment resulting from COVID-19. The Bank did not adopt “FASB Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“CECL”) as of January 1, 2020 as allowed by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Bank will adopt CECL as required by the CARES Act at the earlier of the termination of the National Emergency concerning COVID-19 or December 31, 2020. Net chargeoffs for the first quarter 2020 decreased versus the first quarter 2019, at $162 thousand from $395 thousand in the year earlier period, driven by a non performing loan sale in the prior year. The annualized net chargeoff ratio was 0.02% for the first quarter 2020, compared to 0.04% in the first quarter 2019.

At March 31, 2020 the equity to asset ratio was 10.43%, compared to 9.73% at March 31, 2019. As mentioned earlier the Bank is proud of its ability to grow shareholder value. Book value per share at March 31, 2020 was $5.68 up 9.7% compared to $5.18 a year earlier.

TrustCo Bank Corp NY is a $5.3 billion savings and loan holding company and through its subsidiary, TrustCo Bank, operated 148 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at March 31, 2020.

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 first quarter 2020 results will be held at 9:00 a.m. Eastern Time on April 22, 2020. 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 10142447. The call will also be audio webcast at: https://services.choruscall.com/links/trst200422.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 2020, including our expectations for the repricing of our CD portfolio and the stabilizing of our net interest margin, the impact of Federal Reserve actions regarding interest rates and the growth of loans and deposits throughout our branch network, our ability to capitalize on economic changes in the areas in which we operate and the extent to which higher expenses to fulfill operating and regulatory requirements recur or diminish over time. Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement: the effect of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations; 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 make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; 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; 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 us and Trustco Bank and the continued receipt of approvals from our primary federal banking regulators under regulatory rules to distribute capital to TrustCo, which could affect our ability to pay dividends; results of supervisory monitoring or examinations of Trustco Bank and TrustCo by our respective regulators; adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; unanticipated effects from the Tax Cut and Jobs Act that may limit its benefits or adversely impact our business; the perceived overall value of our products and services by users, including in comparison to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for our products and services; changes in consumer spending, borrowing and saving habits; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; changes in management personnel; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions; technological changes and electronic, cyber and physical security breaches; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading “Risk Factors” in our most recent annual report on Form 10-K and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.


TRUSTCO BANK CORP NY
GLENVILLE, NY

FINANCIAL HIGHLIGHTS

(dollars in thousands, except per share data)
(Unaudited)
		Three months ended
		3/31/2020			12/31/2019		3/31/2019
Summary of operations
Net interest income (TE)	$	38,554			38,243		39,733
Provision for loan losses		2,000			200		300
Noninterest income		5,334			4,115		4,637
Noninterest expense		24,268			23,891		24,867
Net income		13,313			13,907		14,558

Per common share
Net income per share:
- Basic	$	0.138			0.143		0.150
- Diluted		0.138			0.143		0.150
Cash dividends		0.068			0.068		0.068
Book value at period end		5.68			5.55		5.18
Market price at period end		5.41			8.67		7.76

At period end
Full time equivalent employees		813			814		899
Full service banking offices		148			148		148

Performance ratios
Return on average assets		1.03		%	1.06		1.17
Return on average equity		9.87			10.41		11.93
Efficiency (1)		56.34			57.31		56.10
Net interest spread (TE)		2.91			2.86		3.11
Net interest margin (TE)		3.05			3.02		3.24
Dividend payout ratio		49.41			47.48		45.23

Capital ratios at period end
Consolidated tangible equity to tangible assets (2)		10.42		%	10.30		9.72
Consolidated equity to assets		10.43		%	10.31		9.73

Asset quality analysis at period end
Nonperforming loans to total loans		0.51			0.51		0.64
Nonperforming assets to total assets		0.42			0.43		0.50
Allowance for loan losses to total loans		1.13			1.09		1.16
Coverage ratio (3)		2.2	x		2.1	x	1.8	x


(1) Non-GAAP measure; calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income.
(2) Non-GAAP measure; calculated as total equity less $553 of intangible assets divided by total assets less $553 of intangible assets.
(3) Calculated as allowance for loan losses divided by total nonperforming loans.

TE = Taxable equivalent


CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)
(Unaudited)
		Three months ended
		3/31/2020			12/31/2019		9/30/2019		6/30/2019		3/31/2019
Interest and dividend income:
Interest and fees on loans	$	42,063			42,002		41,923		41,432		41,253
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		421			609		996		821		783
State and political subdivisions		1			2		2		3		1
Mortgage-backed securities and collateralized mortgage
obligations - residential		2,113			2,334		2,178		2,152		1,555
Corporate bonds		238			295		321		272		208
Small Business Administration - guaranteed
participation securities		245			253		282		289		297
Other securities		6			6		6		5		5
Total interest and dividends on securities available for sale		3,024			3,499		3,785		3,542		2,849

Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage
obligations - residential		175			184		187		209		217
Total interest on held to maturity securities		175			184		187		209		217

Federal Reserve Bank and Federal Home Loan Bank stock		82			203		81		199		85

Interest on federal funds sold and other short-term investments		1,267			1,635		2,552		3,282		3,009
Total interest income		46,611			47,523		48,528		48,664		47,413

Interest expense:
Interest on deposits:
Interest-bearing checking		16			21		52		94		121
Savings		233			271		323		367		377
Money market deposit accounts		1,096			1,175		1,177		1,119		826
Time deposits		6,391			7,468		7,974		7,512		5,976
Interest on short-term borrowings		322			347		359		381		381
Total interest expense		8,058			9,282		9,885		9,473		7,681

Net interest income		38,553			38,241		38,643		39,191		39,732

Less: Provision for loan losses		2,000			200		-		(341	)	300
Net interest income after provision for loan losses		36,553			38,041		38,643		39,532		39,432

Noninterest income:
Trustco Financial Services income		1,600			1,454		1,517		1,683		1,733
Fees for services to customers		2,315			2,377		2,602		2,611		2,520
Net gain on securities transactions		1,155			-		-		-		-
Other		264			284		806		620		384
Total noninterest income		5,334			4,115		4,925		4,914		4,637

Noninterest expenses:
Salaries and employee benefits		11,373			11,743		11,725		11,711		11,451
Net occupancy expense		4,306			4,399		4,094		4,006		4,167
Equipment expense		1,802			1,768		1,689		1,709		1,902
Professional services		1,481			1,449		1,507		1,568		1,650
Outsourced services		2,075			1,925		1,875		1,875		1,925
Advertising expense		488			464		494		778		785
FDIC and other insurance		294			259		282		598		648
Other real estate expense (income), net		194			(385	)	33		210		(24	)
Other		2,255			2,269		2,371		2,447		2,363
Total noninterest expenses		24,268			23,891		24,070		24,902		24,867

Income before taxes		17,619			18,265		19,498		19,544		19,202
Income taxes		4,306			4,358		4,790		4,877		4,644

Net income	$	13,313			13,907		14,708		14,667		14,558

Net income per common share:
- Basic	$	0.138			0.143		0.152		0.152		0.150

- Diluted		0.138			0.143		0.152		0.151		0.150

Average basic shares (in thousands)		96,727			96,919		96,907		96,822		96,744
Average diluted shares (in thousands)		96,750			97,015		96,977		96,891		96,822

Note: Taxable equivalent net interest income	$	38,554			38,243		38,644		39,192		39,733


CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands)
(Unaudited)
		3/31/2020			12/31/2019		9/30/2019		6/30/2019		3/31/2019
ASSETS:

Cash and due from banks	$	43,362			48,198		49,526		42,471		43,064
Federal funds sold and other short term investments		492,691			408,648		401,151		517,684		576,123
Total cash and cash equivalents		536,053			456,846		450,677		560,155		619,187

Securities available for sale:
U. S. government sponsored enterprises		54,970			104,512		164,490		184,448		148,292
States and political subdivisions		112			162		169		170		172
Mortgage-backed securities and collateralized mortgage
obligations - residential		352,067			389,517		406,166		354,679		312,946
Small Business Administration - guaranteed
participation securities		46,768			48,511		50,970		53,091		54,113
Corporate bonds		48,564			30,436		40,281		40,467		30,258
Other securities		685			685		683		685		685
Total securities available for sale		503,166			573,823		662,759		633,540		546,466

Held to maturity securities:
Mortgage-backed securities and collateralized mortgage
obligations-residential		17,720			18,618		19,705		20,667		21,609
Total held to maturity securities		17,720			18,618		19,705		20,667		21,609

Federal Reserve Bank and Federal Home Loan Bank stock		9,183			9,183		9,183		9,183		8,953

Loans:
Commercial		195,805			199,499		192,443		190,507		190,347
Residential mortgage loans		3,627,121			3,583,774		3,508,647		3,428,829		3,376,193
Home equity line of credit		265,753			267,922		273,526		277,559		282,034
Installment loans		10,713			11,001		10,703		9,514		12,579
Loans, net of deferred net costs		4,099,392			4,062,196		3,985,319		3,906,409		3,861,153

Less: Allowance for loan losses		46,155			44,317		44,329		44,365		44,671
Net loans		4,053,237			4,017,879		3,940,990		3,862,044		3,816,482

Bank premises and equipment, net		34,428			34,622		34,168		34,058		34,428
Operating lease right-of-use assets		49,955			51,475		49,618		51,097		51,559
Other assets		52,905			58,876		55,369		56,926		57,637

Total assets	$	5,256,647			5,221,322		5,222,469		5,227,670		5,156,321

LIABILITIES:
Deposits:
Demand	$	480,255			463,858		453,439		432,780		408,417
Interest-bearing checking		895,254			875,672		869,101		888,433		895,099
Savings accounts		1,122,116			1,113,146		1,110,947		1,132,308		1,150,329
Money market deposit accounts		617,198			599,163		570,457		562,318		538,043
Time deposits		1,367,005			1,398,177		1,457,223		1,446,428		1,421,181
Total deposits		4,481,828			4,450,016		4,461,167		4,462,267		4,413,069

Short-term borrowings		148,090			148,666		151,095		166,746		159,778
Operating lease liabilities		54,998			56,553		54,731		56,237		56,723
Accrued expenses and other liabilities		23,546			27,830		29,313		26,790		25,033

Total liabilities		4,708,462			4,683,065		4,696,306		4,712,040		4,654,603

SHAREHOLDERS' EQUITY:
Capital stock		100,205			100,205		100,200		100,180		100,180
Surplus		176,431			176,427		176,395		176,396		176,510
Undivided profits		294,553			288,067		280,542		272,433		264,364
Accumulated other comprehensive income (loss), net of tax		11,392			4,461		(71	)	(1,774	)	(7,011	)
Treasury stock at cost		(34,396	)		(30,903	)	(30,903	)	(31,605	)	(32,325	)

Total shareholders' equity		548,185			538,257		526,163		515,630		501,718

Total liabilities and shareholders' equity	$	5,256,647			5,221,322		5,222,469		5,227,670		5,156,321

Outstanding shares (in thousands)		96,433			96,922		96,917		96,822		96,746


NONPERFORMING ASSETS

(dollars in thousands)
(Unaudited)
		3/31/2020		12/31/2019		9/30/2019		6/30/2019		3/31/2019
Nonperforming Assets

New York and other states*
Loans in nonaccrual status:
Commercial	$	630		816		888		905		701
Real estate mortgage - 1 to 4 family		18,570		18,407		18,275		19,633		22,343
Installment		24		3		13		1		26
Total non-accrual loans		19,224		19,226		19,176		20,539		23,070
Other nonperforming real estate mortgages - 1 to 4 family		27		29		30		31		33
Total nonperforming loans		19,251		19,255		19,206		20,570		23,103
Other real estate owned		1,284		1,579		2,409		2,625		1,262
Total nonperforming assets	$	20,535		20,834		21,615		23,195		24,365

Florida
Loans in nonaccrual status:
Commercial	$	-		-		-		-		-
Real estate mortgage - 1 to 4 family		1,492		1,614		1,809		1,564		1,644
Installment		-		-		-		-		-
Total non-accrual loans		1,492		1,614		1,809		1,564		1,644
Other nonperforming real estate mortgages - 1 to 4 family		-		-		-		-		-
Total nonperforming loans		1,492		1,614		1,809		1,564		1,644
Other real estate owned		-		-		-		-		-
Total nonperforming assets	$	1,492		1,614		1,809		1,564		1,644

Total
Loans in nonaccrual status:
Commercial	$	630		816		888		905		701
Real estate mortgage - 1 to 4 family		20,062		20,021		20,084		21,197		23,987
Installment		24		3		13		1		26
Total non-accrual loans		20,716		20,840		20,985		22,103		24,714
Other nonperforming real estate mortgages - 1 to 4 family		27		29		30		31		33
Total nonperforming loans		20,743		20,869		21,015		22,134		24,747
Other real estate owned		1,284		1,579		2,409		2,625		1,262
Total nonperforming assets	$	22,027		22,448		23,424		24,759		26,009


Quarterly Net Chargeoffs (Recoveries)

New York and other states*
Commercial	$	1		(1	)	(28	)	(1	)	4
Real estate mortgage - 1 to 4 family		140		146		39		(54	)	318
Installment		4		67		9		45		23
Total net chargeoffs	$	145		212		20		(10	)	345

Florida
Commercial	$	-		-		-		-		-
Real estate mortgage - 1 to 4 family		(2	)	(1	)	-		(25	)	19
Installment		19		1		16		-		31
Total net chargeoffs	$	17		-		16		(25	)	50

Total
Commercial	$	1		(1	)	(28	)	(1	)	4
Real estate mortgage - 1 to 4 family		138		145		39		(79	)	337
Installment		23		68		25		45		54
Total net chargeoffs	$	162		212		36		(35	)	395


Asset Quality Ratios

Total nonperforming loans (1)	$	20,743		20,869		21,015		22,134		24,747
Total nonperforming assets (1)		22,027		22,448		23,424		24,759		26,009
Total net chargeoffs (2)		162		212		36		(35	)	395

Allowance for loan losses (1)		46,155		44,317		44,329		44,365		44,671

Nonperforming loans to total loans		0.51	%	0.51	%	0.53	%	0.57	%	0.64	%
Nonperforming assets to total assets		0.42	%	0.43	%	0.45	%	0.47	%	0.50	%
Allowance for loan losses to total loans		1.13	%	1.09	%	1.11	%	1.14	%	1.16	%
Coverage ratio (1)		222.5	%	212.4	%	210.9	%	200.4	%	180.5	%
Annualized net chargeoffs to average loans (2)		0.02	%	0.02	%	0.00	%	0.00	%	0.04	%
Allowance for loan losses to annualized net chargeoffs (2)		71.2	x	52.3	x	307.8	x	N/A		28.3	x

* Includes New York, New Jersey, Vermont and Massachusetts.
(1) At period-end
(2) For the period ended


DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY -
INTEREST RATES AND INTEREST DIFFERENTIAL

(dollars in thousands)
(Unaudited)		Three months ended							Three months ended
		March 31, 2020							March 31, 2019
		Average		Interest		Average			Average		Interest		Average
		Balance				Rate			Balance				Rate
Assets

Securities available for sale:
U. S. government sponsored enterprises	$	92,369		421		1.82	%	$	154,258		783		2.03	%
Mortgage backed securities and collateralized mortgage
obligations - residential		371,768		2,113		2.27			273,004		1,555		2.28
State and political subdivisions		114		2		7.59			168		2		7.85
Corporate bonds		28,332		238		3.36			26,862		208		3.09
Small Business Administration - guaranteed
participation securities		47,418		245		2.06			57,057		297		2.08
Other		685		6		3.50			685		5		2.92

Total securities available for sale		540,686		3,025		2.26			512,034		2,850		2.23

Federal funds sold and other short-term Investments		412,076		1,267		1.24			502,976		3,009		2.43

Held to maturity securities:
Mortgage backed securities and collateralized mortgage
obligations - residential		18,144		175		3.86			22,037		217		3.94

Total held to maturity securities		18,144		175		3.86			22,037		217		3.94

Federal Reserve Bank and Federal Home Loan Bank stock		9,183		82		3.57			8,953		85		3.80

Commercial loans		198,047		2,542		5.13			193,738		2,583		5.33
Residential mortgage loans		3,601,728		36,461		4.05			3,374,990		34,864		4.14
Home equity lines of credit		265,461		2,868		4.35			286,199		3,537		5.01
Installment loans		10,717		192		7.20			11,897		269		9.17

Loans, net of unearned income		4,075,953		42,063		4.13			3,866,824		41,253		4.28

Total interest earning assets		5,056,042		46,612		3.69			4,912,824		47,414		3.87

Allowance for loan losses		(44,520	)						(44,947	)
Cash & non-interest earning assets		193,619							176,009


Total assets	$	5,205,141						$	5,043,886


Liabilities and shareholders' equity

Deposits:
Interest bearing checking accounts	$	871,153		16		0.01	%	$	880,474		121		0.06	%
Money market accounts		614,201		1,096		0.72			517,995		826		0.65
Savings		1,116,558		233		0.08			1,160,142		377		0.13
Time deposits		1,369,914		6,391		1.88			1,353,160		5,976		1.79

Total interest bearing deposits		3,971,826		7,736		0.78			3,911,771		7,300		0.76
Short-term borrowings		153,668		322		0.84			159,076		381		0.97

Total interest bearing liabilities		4,125,494		8,058		0.79			4,070,847		7,681		0.77

Demand deposits		458,476							397,522
Other liabilities		79,003							80,579
Shareholders' equity		542,168							494,938

Total liabilities and shareholders' equity	$	5,205,141						$	5,043,886

Net interest income, tax equivalent				38,554							39,733

Net interest spread						2.91	%						3.11	%


Net interest margin (net interest income to
total interest earning assets)						3.05	%						3.24	%

Tax equivalent adjustment				(1	)						(1	)


Net interest income				38,553							39,732

Non-GAAP Financial Measures Reconciliation

Tangible equity as a percentage of tangible assets at period end is a non-GAAP financial measure derived from GAAP-based amounts. We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively. We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end. We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.

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

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


NON-GAAP FINANCIAL MEASURES RECONCILIATION

(dollars in thousands, except per share amounts)
(Unaudited)
		3/31/2020		12/31/2019		3/31/2019

Tangible Equity to Tangible Assets
Total Assets (GAAP)	$	5,256,647		5,221,322		5,156,321
Less: Intangible assets		553		553		553
Tangible assets (Non-GAAP)		5,256,094		5,220,769		5,155,768

Equity (GAAP)		548,185		538,257		501,718
Less: Intangible assets		553		553		553
Tangible equity (Non-GAAP)		547,632		537,704		501,165
Tangible Equity to Tangible Assets (Non-GAAP)		10.42	%	10.30	%	9.72	%
Equity to Assets (GAAP)		10.43	%	10.31	%	9.73	%

		Three months ended
Efficiency Ratio		3/31/2020		12/31/2019		3/31/2019

Net interest income (fully taxable equivalent) (Non-GAAP)		38,554		38,243		39,733
Non-interest income (GAAP)		5,334		4,115		4,637
Less: Net gain on securities		1,155		-		-
Revenue used for efficiency ratio (Non-GAAP)		42,733		42,358		44,370

Total noninterest expense (GAAP)		24,268		23,891		24,867
Less: Other real estate expense (income), net		194		(385	)	(24	)
Expense used for efficiency ratio (Non-GAAP)		24,074		24,276		24,891

Efficiency Ratio		56.34	%	57.31	%	56.10	%