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TrustCo Announces Third Quarter 2018 Net Income of $15.2 Million

Executive Snapshot:

  • Continued solid financial results:
    • Key metrics for third quarter 2018:
      • Net income of $15.2 million, up 20.7% compared to $12.6 million in the third quarter of 2017
      • Return on average assets (ROAA) of 1.24% compared to 1.02% in the third quarter of 2017
      • Return on average equity (ROAE) of 12.84% compared to 11.06% in the third quarter of 2017
      • Efficiency ratio of 53.39% compared to 52.79% in the third quarter of 2017 (Non-GAAP measure; see P. 14 for definition)
         
  • Asset quality continues to be strong:
    • Nonperforming assets (NPAs) fell by $1.4 million compared to September 30, 2017
    • NPAs to total assets improved to 0.53%, compared to 0.56% at September 30, 2017
    • Quarterly net chargeoffs were equal to 0.01% of average loans on an annualized basis, compared to 0.07% for the third quarter of 2017
       
  • Seeking depth and expansion of customer base:
    • Looking to gain depth in customer base within branch network
    • Core (non-maturity) deposits averaged $28.4 million per branch at September 30, 2018
    • Average core deposits were down $31.0 million in the third quarter 2018 compared to the third quarter 2017, however that was driven by a decrease in relatively high cost money market deposits
      • Excluding money market deposits, core deposits were up $32.4 million or 1.3%
      • With the exception of money market balances, the cost of core deposits continues to decline
         
  • Loan portfolio reaches all-time high:
    • Average loans were up $242 million for the third quarter 2018 compared to third quarter of 2017
    • At $3.8 billion as of September 30, 2018, loans continue to set new all-time highs

GLENVILLE, N.Y., Oct. 22, 2018 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo, Nasdaq: TRST) today announced third quarter 2018 net income of $15.2 million compared to $12.6 million for the third quarter 2017, an increase of 20.7%.  Third quarter 2018 results include the impact of a lower tax rate resulting from the Tax Cuts and Jobs Act.

Summary

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased to report continued strong third quarter performance, with an increase of 20.7% in net income as compared to the third quarter of 2017.  Our 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 this year and beyond.” 

TrustCo continues to see solid loan growth in the third quarter 2018 compared to the prior year, led by an increase in residential mortgages.  Loan portfolio expansion was funded by a combination of utilizing a portion of our strong cash balances and cash flow from security investments, as well as expansion of shareholders’ equity through increased retained net income.  The continued shift toward loans helped sustain the margin despite higher CD rates.  We note that current mortgage rates exceed the yield on our existing portfolio of mortgages, which, if sustained, will be a positive going forward.  The Federal Reserve decision to raise the target Federal Funds rate has contributed to our results as our cash position immediately repriced upward.  We are starting to see the full impact of the 25 basis point increase from last quarter, of which an additional 25 basis point increase was announced on September 26th, 2018.

Total average deposits were up $47.3 million in the third quarter 2018 versus the prior year.  Average core deposits were down over that time frame, due in part to a decline of money market balances, our highest costing core deposit type.  Other average core deposits were up $32.4 in the third quarter 2018 over the same period in 2017, driven by interest bearing checking accounts and demand deposits.  The overall cost of funds increased 16 basis points to 0.52% from the third quarter 2017 to the third quarter 2018.  The shift towards loans in the asset mix, coupled with a 100 basis point increase in the yield on Federal Funds and securities more than offset the higher cost of funds, resulting in a 9 basis point gain in net interest margin to 3.35%.  TrustCo’s strong liquidity position continues to allow us to take advantage of opportunities as they arise.

Details

Average loans were up $242 million or 6.8% in the third quarter 2018 over the same period in 2017.  Average residential loans, our primary lending focus, were up $254 million or 8.4% in the third quarter 2018, over the same period in 2017.  Total loan growth was offset by an $18.3 million decline in average outstandings on home equity lines of credit.

Average deposits were up $47.3 million or 1.1% for the third quarter 2018 over the same period a year earlier.  The growth in deposits was the result of a $51.8 million increase in average interest bearing checking balances, $16.0 million in average demand balances and $78.3 million in time deposits, partly offset by decreases of $63.4 million in money market balances and $35.4 million in savings balances.  Core deposits typically represent longer term customer relationships and are generally lower cost than time deposits.  The cost of total deposits increased to 0.52% in the third quarter 2018 from 0.36% in the third quarter 2017.  Mr. McCormick noted that, “The year-over-year growth of our loans and our focus to strengthen the core deposit base reflect the long term strategic focus of the Company.”

For the third quarter 2018, return on average assets and return on average equity were 1.24% and 12.84%, respectively, compared to 1.02% and 11.06% for the third quarter 2017.  Diluted earnings per share were $0.157 for the third quarter 2018, compared to $0.131 for the third quarter 2017.  Total operating expenses increased by $1.0 million in the third quarter 2018 as compared to the third quarter 2017, with the most significant increase coming in salaries and benefits.  The increase in expenses was matched with a $945 thousand increase in revenue (net interest income plus non-interest income).  The effective tax rate was 24.5% in the third quarter of 2018, compared to 36.9% in the year ago period, reflecting the Tax Cuts and Jobs Act.

For the three quarters of 2018, return on average assets and return on average equity were 1.24% and 13.00%, respectively, compared to 0.98% and 10.77% for three quarters of 2017.  Diluted earnings per share were $0.470 through September of 2018, compared to $0.372 for the same time period in 2017.

“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, 2018, our average deposits per branch were $28.4 million, compared to $29.0 million at September 30, 2017.   For branches open one year or more, the average deposits per branch is up $240 thousand year over year.  While total deposit growth is important, TrustCo strives to maximize customer relationships through attracting and increasing core deposit balances.  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 continued to improve.  Nonperforming loans (NPLs) were $23.8 million at September 30, 2018, compared to $24.6 million at September 30, 2017.  NPLs were equal to 0.62% of total loans at September 30, 2018, compared to 0.69% at September 30, 2017.  The coverage ratio, or allowance for loan losses to NPLs, was 188.0% at September 30, 2018, compared to 179.3% at September 30, 2017.  Nonperforming assets (NPAs) were $26.1 million at September 30, 2018 compared to $27.5 million at September 30, 2017.  The ratio of loan loss allowance to total loans was 1.17% as of September 30, 2018, compared to 1.23% at September 30, 2017 and reflects both the continued improvement in asset quality and the economic conditions in our lending areas.  The allowance for loan losses was $44.7 million at September 30, 2018 compared to $44.1 million at September 30, 2017.  The provision for loan losses was $300 thousand for the third quarter 2018, compared to $550 thousand in the third quarter 2017.  Net chargeoffs for the third quarter 2018 decreased versus the third quarter 2017, falling to $67 thousand from $630 thousand in the year earlier period.  The annualized net chargeoff ratio was 0.01% for the third quarter 2018, compared to 0.07% in the third quarter 2017. 

The net interest margin for the third quarter 2018 was 3.35%, up 9 basis points versus the third quarter 2017, as increases in short term interest rates led to significantly higher earnings on Federal Funds, while slightly better returns were also achieved in the investment portfolio.  Loan yields declined slightly, but higher volumes increased interest income.  During the same period, the cost of interest bearing liabilities increased 16 basis points.

At September 30, 2018 the equity to asset ratio was 9.77%, compared to 9.34% at September 30, 2017.  Book value per share at September 30, 2018 was $4.93 compared to $4.73 a year earlier.

TrustCo Bank Corp NY is a $4.9 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 September 30, 2018.

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 2018 results will be held at 9:00 a.m. Eastern Time on October 23, 2018.  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 10124519.  The call will also be audio webcast at: https://services.choruscall.com/links/trst181023.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 2018, 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:  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 supervisory monitoring or 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; adverse conditions on the securities markets that lead to impairment in the value of securities in our investment portfolio; changes in law and policy accompanying the new presidential administration and uncertainty or speculation pending the enactment of such changes; 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; technological changes and electronic, cyber, and physical security breaches; 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, 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
    9/30/2018   6/30/2018   9/30/2017
Summary of operations            
Net interest income (TE) $ 40,526   40,119   39,190
Provision for loan losses   300   300   550
Noninterest income   4,455   4,495   4,854
Noninterest expense   24,544   24,095   23,526
Net income   15,199   15,405   12,596
             
Per common share            
Net income per share:            
- Basic $ 0.157   0.160   0.131
- Diluted   0.157   0.160   0.131
Cash dividends   0.068   0.066   0.066
Book value at period end   4.93   4.87   4.73
Market price at period end   8.50   8.90   8.90
             
At period end            
Full time equivalent employees   807   829   815
Full service banking offices   148   148   144
             
Performance ratios            
Return on average assets   1.24 % 1.26   1.02
Return on average equity   12.84   13.26   11.06
Efficiency (1)   53.39   53.35   52.79
Net interest spread (TE)   3.26   3.24   3.21
Net interest margin (TE)   3.35   3.32   3.26
Dividend payout ratio   43.29   41.08   50.07
             
Capital ratios at period end            
Consolidated tangible equity to tangible assets (2)   9.76 % 9.52   9.33
Consolidated equity to assets   9.77 % 9.53   9.34
             
Asset quality analysis at period end            
Nonperforming loans to total loans   0.62   0.65   0.69
Nonperforming assets to total assets   0.53   0.54   0.56
Allowance for loan losses to total loans   1.17   1.19   1.23
Coverage ratio (3)   1.9x   1.8x   1.8x
             

(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

FINANCIAL HIGHLIGHTS, Continued
 
(dollars in thousands, except per share data)
(Unaudited)
    Nine months ended
    9/30/2018   9/30/2017
Summary of operations        
  Net interest income (TE) $   119,957   115,152
  Provision for loan losses     900   1,700
  Noninterest income     13,629   14,085
  Noninterest expense     72,794   70,458
  Net income     45,412   35,783
         
Per common share        
Net income per share:        
- Basic $   0.471   0.373
- Diluted     0.470   0.372
Cash dividends     0.199   0.197
Tangible Book value at period end     4.93   4.73
Market price at period end     8.50   8.90
         
Performance ratios        
Return on average assets   1.24 % 0.98
Return on average equity   13.00   10.77
Efficiency (1)   53.60   53.96
Net interest spread (TE)   3.24   3.14
Net interest margin (TE)   3.32   3.20
Dividend payout ratio   42.35   52.82
         

(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
    9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017
Interest and dividend income:                     
Interest and fees on loans $ 40,073   38,956     38,091   37,914   37,513
Interest and dividends on securities available for sale:                
U. S. government sponsored enterprises   787   787     750   614   465
State and political subdivisions   7   6     7   10   6
Mortgage-backed securities and collateralized mortgage                    
obligations - residential   1,601   1,675     1,763   1,730   1,815
Corporate bonds   202   150     133   148   153
Small Business Administration - guaranteed                    
participation securities   325   333     352   358   380
Mortgage-backed securities and collateralized mortgage                    
obligations - commercial   -   (5 )   42   43   22
Other securities   4   4     5   4   4
Total interest and dividends on securities available for sale   2,926   2,950     3,052   2,907   2,845
                     
Interest on held to maturity securities:                     
Mortgage-backed securities and collateralized mortgage                    
  obligations - residential     232     244       260     261     276
Corporate bonds     -     -       -     -     102
Total interest on held to maturity securities     232     244       260     261     378
                     
Federal Reserve Bank and Federal Home Loan Bank stock     82     198       77     151     125
                     
Interest on federal funds sold and other short-term investments     2,425     2,467       2,017     1,779     1,927
Total interest income     45,738     44,815       43,497     43,012     42,788
                     
Interest expense:                     
Interest on deposits:                    
Interest-bearing checking     113     112       106     107     113
Savings     417     420       419     429     435
Money market deposit accounts     544     452       439     457     469
Time deposits     3,864     3,439       2,860     2,412     2,247
Interest on short-term borrowings     277     283       358     359     345
Total interest expense     5,215     4,706       4,182     3,764     3,609
                     
Net interest income     40,523     40,109       39,315     39,248     39,179
                     
Less: Provision for loan losses     300     300       300     300     550
Net interest income after provision for loan losses     40,223     39,809       39,015     38,948     38,629
                     
Noninterest income:                    
Trustco Financial Services income     1,516     1,596       1,815     1,457     1,844
Fees for services to customers     2,693     2,677       2,645     2,597     2,767
Other     246     222       219     234     243
  Total noninterest income     4,455     4,495       4,679     4,288     4,854
                     
Noninterest expenses:                     
Salaries and employee benefits     10,761     10,741       10,422     10,536     10,360
Net occupancy expense     3,997     4,101       4,315     4,140     4,027
Equipment expense     1,783     1,793       1,751     1,465     1,669
Professional services     1,578     1,814       1,430     1,325     1,679
Outsourced services     1,875     1,825       1,925     1,760     1,650
Advertising expense     844     670       630     559     699
FDIC and other insurance     682     514     1,023   1,102   1,018
Other real estate expense, net     528     294     372   401   275
Other     2,496     2,343     2,287   2,248   2,149
Total noninterest expenses     24,544     24,095     24,155   23,536   23,526
                     
Income before taxes     20,134     20,209     19,539   19,700   19,957
Income taxes     4,935     4,804     4,731   12,338   7,361
                     
Net income $   15,199     15,405     14,808   7,362   12,596
                     
Net income per common share:                     
- Basic $   0.157     0.160     0.154   0.077   0.131
                     
- Diluted     0.157     0.160     0.153   0.076   0.131
                     
Average basic shares (in thousands)     96,555     96,449     96,353   96,230   96,102
Average diluted shares (in thousands)     96,689     96,580     96,490   96,393   96,205
                     
Note:  Taxable equivalent net interest income $   40,526     40,119     39,319   39,259   39,190
                       


CONSOLIDATED STATEMENTS OF INCOME, Continued
 
(dollars in thousands, except per share data)
(Unaudited)
    Nine months ended  
    9/30/2018   9/30/2017  
Interest and dividend income:           
Interest and fees on loans $   117,120     110,219  
Interest and dividends on securities available for sale:      
U. S. government sponsored enterprises     2,324     1,667  
State and political subdivisions     20     29  
Mortgage-backed securities and collateralized mortgage          
obligations - residential     5,039     5,717  
Corporate bonds     485     458  
Small Business Administration - guaranteed          
participation securities     1,010     1,189  
Mortgage-backed securities and collateralized mortgage          
obligations - commercial     37     66  
Other securities     13     12  
Total interest and dividends on securities available for sale     8,928     9,138  
           
Interest on held to maturity securities:           
Mortgage-backed securities-residential     736     888  
Corporate bonds     -     410  
Total interest on held to maturity securities     736     1,298  
           
Federal Reserve Bank and Federal Home Loan Bank stock     357     393  
           
Interest on federal funds sold and other short-term investments     6,909     4,900  
Total interest income     134,050     125,948  
           
Interest expense:           
Interest on deposits:          
Interest-bearing checking     331     371  
Savings     1,256     1,300  
Money market deposit accounts     1,435     1,403  
Time deposits     10,163     6,711  
Interest on short-term borrowings     918     1,043  
Total interest expense     14,103     10,828  
           
Net interest income     119,947     115,120  
           
Less: Provision for loan losses     900     1,700  
Net interest income after provision for loan losses     119,047     113,420  
           
Noninterest income:          
Trustco Financial Services income     4,927     5,127  
Fees for services to customers     8,015     8,201  
Other     687     757  
Total noninterest income     13,629     14,085  
           
Noninterest expenses:           
Salaries and employee benefits     31,924     30,129  
Net occupancy expense     12,413     12,403  
Equipment expense     5,327     4,653  
Professional services     4,822     5,570  
Outsourced services     5,625     4,650  
Advertising expense     2,144     2,019  
FDIC and other insurance     2,219     3,077  
Other real estate expense, net     1,194     770  
Other     7,126     7,187  
Total noninterest expenses     72,794     70,458  
           
Income before taxes     59,882     57,047  
Income taxes     14,470     21,264  
           
Net income $   45,412     35,783  
           
Net income per common share:           
- Basic $   0.471     0.373  
           
- Diluted     0.470     0.372  
           
Average basic shares (in thousands)     96,453     95,997  
Average diluted shares (in thousands)     96,587     96,091  
           
Note:  Taxable equivalent net interest income $   119,957     115,152  
           


CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 
(dollars in thousands)
(Unaudited)
    9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017
ASSETS:                    
                     
Cash and due from banks $   42,195       40,567       39,373       44,125       41,598  
Federal funds sold and other short term investments     423,254       546,049       577,797       568,615       582,599  
Total cash and cash equivalents     465,449       586,616       617,170       612,740       624,197  
                     
Securities available for sale:                    
U. S. government sponsored enterprises     150,053       150,704       151,327       137,994       123,658  
States and political subdivisions     180       524       525       525       534  
Mortgage-backed securities and collateralized mortgage                    
obligations - residential     269,093       283,252       297,633       315,840       335,530  
Small Business Administration - guaranteed                    
participation securities     57,894       61,876       64,113       67,059       69,818  
Mortgage-backed securities and collateralized mortgage                    
obligations - commercial     -       -       9,573       9,700       9,824  
Corporate bonds     29,977       29,977       35,227       40,162       40,381  
Other securities     685       685       685       685       685  
Total securities available for sale     507,882       527,018       559,083       571,965       580,430  
                     
Held to maturity securities:                    
Mortgage-backed securities and collateralized mortgage                    
obligations-residential     23,462       24,730       26,174       27,551       29,268  
Total held to maturity securities     23,462       24,730       26,174       27,551       29,268  
                     
Federal Reserve Bank and Federal Home Loan Bank stock     8,953       8,953       8,779       8,779       8,779  
                     
Loans:                    
Commercial     190,987       190,904       185,129       186,207       187,281  
Residential mortgage loans     3,331,212       3,245,151       3,171,548       3,132,521       3,070,970  
Home equity line of credit     293,750       295,791       301,885       308,916       311,753  
Installment loans     9,967       9,309       8,413       8,763       8,278  
Loans, net of deferred net costs     3,825,916       3,741,155       3,666,975       3,636,407       3,578,282  
                     
Less: Allowance for loan losses     44,736       44,503       44,379       44,170       44,082  
Net loans     3,781,180       3,696,652       3,622,596       3,592,237       3,534,200  
                     
Bank premises and equipment, net     35,214       35,521       35,240       35,157       35,028  
Other assets     63,211       61,069       62,522       59,579       58,373  
                     
Total assets $   4,885,351       4,940,559       4,931,564       4,908,008       4,870,275  
                     
LIABILITIES:                    
Deposits:                    
Demand $   403,047       404,564       403,782       398,399       397,623  
Interest-bearing checking     918,486       925,295       915,163       891,052       862,067  
Savings accounts     1,221,127       1,257,744       1,266,852       1,260,447       1,265,229  
Money market deposit accounts     501,270       512,453       539,839       556,462       564,557  
Time deposits     1,155,994       1,155,214       1,109,444       1,066,966       1,075,886  
Total deposits     4,199,924       4,255,270       4,235,080       4,173,326       4,165,362  
                     
Short-term borrowings     176,377       182,705       203,910       242,991       216,508  
Accrued expenses and other liabilities     31,932       31,769       30,477       33,383       33,477  
                     
Total liabilities     4,408,233       4,469,744       4,469,467       4,449,700       4,415,347  
                     
SHAREHOLDERS' EQUITY:                    
Capital stock     100,175       100,093       100,002       99,998       99,562  
Surplus     176,764       176,243       175,674       175,651       172,712  
Undivided profits     246,965       238,342       229,267       219,436       218,401  
Accumulated other comprehensive loss, net of tax     (13,000 )     (9,796 )     (8,490 )     (1,806 )     (3,060 )
Treasury stock at cost     (33,786 )     (34,067 )     (34,356 )     (34,971 )     (32,687 )
                     
Total shareholders' equity     477,118       470,815       462,097       458,308       454,928  
                     
Total liabilities and shareholders' equity $   4,885,351       4,940,559       4,931,564       4,908,008       4,870,275  
                     
Outstanding shares (in thousands)     96,586       96,475       96,359       96,289       96,108  
                               


NONPERFORMING ASSETS
             
(dollars in thousands)
(Unaudited)
    9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017
Nonperforming Assets            
             
New York and other states*            
Loans in nonaccrual status:            
Commercial $   928     767     1,213     1,543     1,696  
Real estate mortgage - 1 to 4 family     20,750     21,209     21,424     20,350     20,926  
Installment     13     6     19     57     30  
Total non-accrual loans     21,691     21,982     22,656     21,950     22,652  
Other nonperforming real estate mortgages - 1 to 4 family     35     36     38     38     40  
Total nonperforming loans     21,726     22,018     22,694     21,988     22,692  
Other real estate owned     2,306     2,569     2,190     3,246     2,879  
Total nonperforming assets $   24,032     24,587     24,884     25,234     25,571  
             
Florida            
Loans in nonaccrual status:            
Commercial $   -     -     -     -     -  
Real estate mortgage - 1 to 4 family     2,054     2,143     2,154     2,389     1,895  
Installment     13     -     4     -     -  
Total non-accrual loans     2,067     2,143     2,158     2,389     1,895  
Other nonperforming real estate mortgages - 1 to 4 family     -     -     -     -     -  
Total nonperforming loans     2,067     2,143     2,158     2,389     1,895  
Other real estate owned     -     -     -     -     -  
Total nonperforming assets $   2,067     2,143     2,158     2,389     1,895  
             
Total            
Loans in nonaccrual status:            
Commercial $   928     767     1,213     1,543     1,696  
Real estate mortgage - 1 to 4 family     22,804     23,352     23,578     22,739     22,821  
Installment     26     6     23     57     30  
Total non-accrual loans     23,758     24,125     24,814     24,339     24,547  
Other nonperforming real estate mortgages - 1 to 4 family     35     36     38     38     40  
Total nonperforming loans     23,793     24,161     24,852     24,377     24,587  
Other real estate owned     2,306     2,569     2,190     3,246     2,879  
Total nonperforming assets $   26,099     26,730     27,042     27,623     27,466  
             
             
Quarterly Net Chargeoffs (Recoveries)            
             
New York and other states*            
Commercial $   (2 )   (1 )   (6 )   (86 )   (2 )
Real estate mortgage - 1 to 4 family     (3 )   150     28     249     613  
Installment     64     27     66     50     56  
  Total net chargeoffs $   59     176     88     213     667  
             
Florida            
Commercial $   -     -     -     -     -  
Real estate mortgage - 1 to 4 family     -     -     -     (1 )   (41 )
Installment     8     -     2     -     4  
Total net chargeoffs $   8     -     2     (1 )   (37 )
             
Total            
Commercial $   (2 )   (1 )   (6 )   (86 )   (2 )
Real estate mortgage - 1 to 4 family     (3 )   150     28     248     572  
Installment     72     27     68     50     60  
Total net chargeoffs $   67     176     90     212     630  
             
             
Asset Quality Ratios            
             
Total nonperforming loans (1) $   23,793     24,161     24,852     24,377     24,587  
Total nonperforming assets (1)     26,099     26,730     27,042     27,623     27,466  
Total net chargeoffs (2)     67     176     90     212     630  
             
Allowance for loan losses (1)     44,736     44,503     44,379     44,170     44,082  
             
Nonperforming loans to total loans   0.62 % 0.65 % 0.68 % 0.67 % 0.69 %
Nonperforming assets to total assets   0.53 % 0.54 % 0.55 % 0.56 % 0.56 %
Allowance for loan losses to total loans   1.17 % 1.19 % 1.21 % 1.21 % 1.23 %
Coverage ratio (1)   188.0 % 184.2 % 178.6 % 181.2 % 179.3 %
Annualized net chargeoffs to average loans (2)   0.01 % 0.02 % 0.01 % 0.02 % 0.07 %
Allowance for loan losses to annualized net chargeoffs (2)   166.9x 63.2x 123.3x 52.1x 17.5x
             

* 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  
    September 30, 2018     September 30, 2017  
     Average   Interest Average      Average   Interest Average  
     Balance     Rate      Balance     Rate  
Assets                        
                         
Securities available for sale:                        
U. S. government sponsored enterprises $   154,865     787     2.03 % $   123,055       465   1.51 %
Mortgage backed securities and collateralized mortgage                        
obligations - residential     287,760     1,601     2.23       345,248       1,815     2.10  
State and political subdivisions     453     10     8.88       522       11     8.43  
Corporate bonds     30,110     202     2.68       42,528       153     1.44  
Small Business Administration - guaranteed                        
participation securities     62,368     325     2.09       72,204       380     2.11  
Mortgage backed securities and collateralized mortgage                        
obligations - commercial     -       -     -        9,918       22   0.89  
Other     685     4     2.34       685       4     2.34  
                         
Total securities available for sale     536,241     2,929     2.18       594,160       2,850     1.92  
                         
Federal funds sold and other short-term Investments     486,552     2,425     1.98       621,878       1,927   1.24  
                         
Held to maturity securities:                        
Corporate bonds     -       -     -       6,738       102   6.06  
Mortgage backed securities and collateralized mortgage                        
obligations - residential     24,080     232     3.86       30,161       276   3.66  
                         
Total held to maturity securities     24,080     232     3.86       36,899       378     4.10  
                         
Federal Reserve Bank and Federal Home Loan Bank stock     8,953     82     3.66       9,117       125     5.48  
                         
Commercial loans     188,757     2,480     5.25       183,867       2,482     5.40  
Residential mortgage loans     3,289,534     33,949     4.13       3,035,745       31,600   4.16  
Home equity lines of credit     294,518     3,418     4.60       312,812       3,237   4.14  
Installment loans     9,447     226     9.51       8,096       200   9.88  
                         
Loans, net of unearned income     3,782,256     40,073     4.23       3,540,520       37,519     4.24  
                         
Total interest earning assets     4,838,082     45,741     3.78       4,802,574       42,799     3.56  
                         
Allowance for loan losses     (44,770 )             (44,284 )        
Cash & non-interest earning assets     120,474               127,004          
                         
                         
Total assets $   4,913,786           $   4,885,294          
                         
                         
Liabilities and shareholders' equity                        
                         
Deposits:                        
Interest bearing checking accounts $   913,150     113     0.05 % $   861,387       113   0.05 %
Money market accounts     508,795     544     0.42       572,168       469   0.33  
Savings     1,244,889     417     0.13       1,280,318       435   0.14  
Time deposits     1,156,422     3,864     1.33       1,078,085       2,247   0.83  
                         
Total interest bearing deposits     3,823,256     4,938     0.51       3,791,958       3,264   0.34  
Short-term borrowings     183,796     277     0.60       223,238       345   0.62  
                         
Total interest bearing liabilities     4,007,052     5,215     0.52       4,015,196       3,609   0.36  
                         
Demand deposits     405,311               389,286          
Other liabilities     26,429               28,809          
Shareholders' equity     474,994               452,003          
                         
Total liabilities and shareholders' equity $   4,913,786           $   4,885,294          
                         
Net interest income, tax equivalent       40,526               39,190      
                         
Net interest spread         3.26 %         3.21 %
                         
Net interest margin (net interest income to                        
total interest earning assets)         3.35 %         3.26 %
                         
Tax equivalent adjustment       (3 )           (11 )    
                         
Net interest income       40,523             39,179      
                             


DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY -
INTEREST RATES AND INTEREST DIFFERENTIAL, Continued
                         
(dollars in thousands)                        
(Unaudited)   Nine months ended     Nine months ended  
    September 30, 2018     September 30, 2017  
     Average   Interest Average      Average   Interest Average  
     Balance     Rate      Balance     Rate  
Assets                        
                         
Securities available for sale:                        
U. S. government sponsored enterprises $   155,434     2,324     1.99 % $   139,629       1,667   1.59 %
Mortgage backed securities and collateralized mortgage                        
obligations - residential     300,645     5,039     2.23       357,347       5,717     2.13  
State and political subdivisions     494     30     8.14       736       41     7.43  
Corporate bonds     30,384     485     2.13       42,272       458   1.44  
Small Business Administration - guaranteed                        
participation securities     64,769     1,010     2.08       75,429       1,189     2.10  
Mortgage backed securities and collateralized mortgage                        
obligations - commercial     3,651     37     1.34       10,003       66     0.88  
Other     685     13     2.53       685       12     2.34  
                         
Total securities available for sale     556,062     8,938     2.14       626,101       9,150     1.95  
                         
Federal funds sold and other short-term Investments     521,470     6,909     1.77       635,450       4,900   1.03  
                         
Held to maturity securities:                        
Corporate bonds     -       -     -       8,897       410   6.14  
Mortgage backed securities and collateralized mortgage                        
obligations - residential     25,410     736     3.86       32,202       888     3.68  
                         
Total held to maturity securities     25,410     736     3.86       41,099       1,298     4.21  
                         
Federal Reserve Bank and Federal Home Loan Bank stock     8,893     357     5.35       9,467       393     5.54  
                         
Commercial loans     187,198       7,336   5.23       184,932       7,313   5.27  
Residential mortgage loans     3,214,950       99,123   4.11       2,969,363       92,910   4.17  
Home equity lines of credit     299,723       10,018   4.47       321,276       9,453   3.92  
Installment loans     8,831       644   9.75       8,117       563   9.25  
                         
Loans, net of unearned income     3,710,702     117,120     4.21       3,483,688       110,239   4.22  
                         
Total interest earning assets     4,822,537     134,060   3.71       4,795,805       125,980   3.50  
                         
Allowance for loan losses     (44,573 )             (44,317 )        
Cash & non-interest earning assets     123,134               129,384          
                         
                         
Total assets $   4,901,098           $   4,880,872          
                         
                         
Liabilities and shareholders' equity                        
                         
Deposits:                        
Interest bearing checking accounts $   899,319     331     0.05 % $   840,322       371   0.06 %
Money market accounts     528,310     1,435     0.36       576,518       1,403   0.32  
Savings     1,255,245     1,256     0.13       1,280,473       1,300   0.14  
Time deposits     1,124,592     10,163     1.21       1,104,731       6,711   0.81  
                         
Total interest bearing deposits     3,807,466     13,185     0.46       3,802,044       9,785   0.34  
Short-term borrowings     202,412     918     0.61       226,447       1,043   0.61  
                         
Total interest bearing liabilities     4,009,878     14,103   0.47       4,028,491       10,828   0.36  
                         
Demand deposits     396,288               380,216          
Other liabilities     28,062               27,880          
Shareholders' equity     466,870               444,285          
                         
Total liabilities and shareholders' equity $   4,901,098               4,880,872          
                         
Net interest income, tax equivalent       119,957               115,152      
                         
Net interest spread         3.24 %         3.14 %
                         
Net interest margin (net interest income to                        
total interest earning assets)         3.32 %         3.20 %
                         
Tax equivalent adjustment       (10 )             (32 )    
                         
Net interest income       119,947               115,120      
                             

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)
             
Tangible Equity to Tangible Assets   9/30/2018 6/30/2018 9/30/2017        
                 
Total Assets $   4,885,351     4,940,559     4,870,275          
Less: Intangible assets     553     553     553          
Tangible assets     4,884,798     4,940,006     4,869,722          
                 
Equity     477,118     470,815     454,928          
Less: Intangible assets     553     553     553          
Tangible equity     476,565     470,262     454,375          
Tangible Equity to Tangible Assets   9.76 % 9.52 % 9.33 %        
Equity to Assets   9.77 % 9.53 % 9.34 %        
                 
    Three months ended     Nine months ended
Efficiency Ratio   9/30/2018 6/30/2018 9/30/2017     9/30/2018 9/30/2017
                 
Net interest income (fully taxable equivalent) $   40,526     40,119     39,190         119,957     115,152  
Non-interest income     4,455     4,495     4,854         13,629     14,085  
Less:  Net gain on sale of nonperforming loans     -     -     -         -     84  
Revenue used for efficiency ratio     44,981     44,614     44,044         133,586     129,153  
                 
Total noninterest expense     24,544     24,095     23,526         72,794     70,458  
Less:  Other real estate expense, net     528     294     275         1,194     770  
Expense used for efficiency ratio     24,016     23,801     23,251         71,600     69,688  
                 
Efficiency Ratio   53.39 % 53.35 % 52.79 %     53.60 % 53.96 %
                           


Contact:      Robert Leonard
Executive Vice President and
Chief Risk Officer
(518) 381-3693
 
     

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