TrustCo Announces Third Quarter 2016 Earnings

Executive Snapshot:

  • Continued solid financial results:
    • Key metrics for third quarter of 2016 results:
      • Net income of $10.9 million in the third quarter of 2016 compared to $10.5 million in the second quarter of 2016 and $10.6 million in the third quarter of 2015
      • Operating expenses decreased $415 thousand in the third quarter of 2016 compared to the third quarter of 2015
      • Return on average assets (ROA) of 0.90%
      • Return on average equity (ROE) of 10.05%
      • Efficiency ratio of 54.11% (Non-GAAP measure; see below for definition)
         
  • Asset quality remains solid:
    • Asset quality measures improved compared to the third quarter of 2015
    • Nonperforming assets (NPAs) fell by $7.1 million compared to September 30, 2015
    • NPAs to total assets improved from 0.80% to 0.64% compared to September 30, 2015
    • Quarterly net chargeoffs decreased to 0.10% of average loans on an annualized basis, compared to 0.15% for the third quarter of 2015, the lowest level since 2008
       
  • Continued expansion of customer base:
    • Focus on capitalizing on opportunities presented by expanded branch network
    • Average deposits per branch grew $455 thousand from September 30, 2015 to September 30, 2016 on a same store basis
    • Average deposits per branch were $28.9 million at September 30, 2016
    • Average core deposits were $51 million higher in the third quarter of 2016 compared to the third quarter of 2015
       
  • Loan portfolio reaches all-time high:
    • Average loans were up $109 million for the third quarter of 2016 compared to third quarter of 2015
    • At $3.39 billion as of September 30, 2016, loans reached an all-time high

GLENVILLE, N.Y., Oct. 21, 2016 (GLOBE NEWSWIRE) — 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: Contact:  Kevin T. Timmons
Vice President/Treasurer
(518) 381-3607