TrustCo Announces Third Quarter 2019 Results; Net Income of $14.7 Million and 5.3% Average Residential Loan Growth Year over Year

Monday, 21. October 2019 22:00

GLENVILLE, N.Y., Oct. 21, 2019 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo, NASDAQ: TRST) · TrustCo Bank Corp NY today announced third quarter 2019 net income of $14.7 million or $0.152 diluted earnings per share compared to $15.2 million or $0.157 diluted earnings per share in the third quarter of 2018 despite an increase of $4.7 million in interest expense during the same time period. Similar results were noted during the nine month period wherein net income was $43.9 million for the nine months ended September 30, 2019 versus $45.4 million for the same period in 2018 while total interest expense increased by $12.9 million.          

Summary

Robert J. McCormick, Chairman, President and Chief Executive Officer noted, “We are pleased to be able to report an increase in average residential loan growth of 5.3% or $175.6 million in the third quarter 2019 compared to the third quarter 2018.  Our focus on traditional lending criteria, conservative balance sheet management and expense control 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.  Our strong financial condition is evidenced by our continued recognition as a BauerFinancial, Inc. 5-Star Superior Bank Rating.”  Average deposits increased 5.6% for the third quarter of 2019 compared to the third quarter 2018.  Mr. McCormick further added “We continue to add core customer relationships, which ultimately drive future growth.  Loan growth and stabilizing cost of funds as a result of federal rate cuts have put us in a good position as we move forward.”

TrustCo saw solid loan growth in the third quarter of 2019 compared to the prior year led by an increase in residential mortgages.  Loan portfolio expansion was funded by a combination of utilizing our strong cash balances and growth in our deposit base.  TrustCo’s strong liquidity position continues to allow it to take advantage of opportunities when interest rate conditions change.

Details

Average loans were up $158.4 million or 4.2% in the third quarter 2019 over the same period in 2018.  Average residential loans, our primary lending focus, were up $175.6 million or 5.3% in the third quarter 2019, over the same period in 2018.  Average deposits are up $236.4 million or 5.6% for the third quarter 2019 over the same period a year earlier.  The increase in deposits was the result of a $301.1 million or 26.0% increase in average time deposits over the same period last year.  Excluding time deposits, total average core deposit accounts, which consist of checking, savings and money market deposits accounts, were down $64.7 million or 2.1% for the third quarter 2019 compared to the third quarter 2018. 

The cost of interest bearing liabilities increased to 0.94% in the third quarter 2019 from 0.52% in the third quarter 2018.  The cost of savings and interest bearing checking decreased slightly by 2 basis points and 3 basis points, respectively, from the third quarter 2018.  Money market deposits increased 41 basis points to 0.83% versus 0.42% from the third quarter 2018. A significant portion of our CD portfolio is expected to reprice during the fourth quarter which at current lower market rates will have a positive impact on net interest margin.  The net interest spread for the third quarter 2019 was 2.88%, down 38 basis points from 3.26% in the third quarter of 2018.  Net interest income (TE) decreased by 4.6% or $1.9 million over the same period last year.  Because we offered competitive shorter term rates, we expect margin to stabilize in the fourth quarter of 2019 as our shorter term time deposits could reprice lower and provide opportunity for increased margin expansion.

The Bank continued to demonstrate its ability to grow shareholders’ equity as average equity was up $46.5 million or 9.8% in the third quarter of 2019 compared to the same period in 2018.  On this expanded equity, return on average assets and return on average equity for the third quarter 2019 were 1.12% and 11.19%, respectively, compared to 1.24% and 12.84% for the third quarter 2018.  Improving efficiencies to reduce costs continues to remain a key area of focus.  Total operating expenses decreased by $474 thousand or 1.9% in the third quarter 2019 as compared to the third quarter 2018, driven by decreases in advertising expense, FDIC and other insurance expense, and other real estate expense, partially offset by an increase in salaries and employee benefits. The growth in salaries and benefit expense was the result of our targeted effort to hire and retain talent.

Asset quality and the resulting loan loss reserve measures continued to improve.  Nonperforming loans (NPLs) were $21.0 million at September 30, 2019, compared to $23.8 million at September 30, 2018.  NPLs were 0.53% of total loans at September 30, 2019, compared to 0.62% at September 30, 2018.  The coverage ratio, or allowance for loan losses to NPLs, was 210.9% at September 30, 2019, compared to 188.0% at September 30, 2018.  Nonperforming assets (NPAs) were $23.4 million at September 30, 2019 compared to $26.1 million at September 30, 2018.  The ratio of allowance for loan losses to total loans was 1.11% as of September 30, 2019, compared to 1.17% at September 30, 2018 which reflects both an improvement in asset quality and economic conditions in our lending areas.  The allowance for loan losses was $44.3 million at September 30, 2019 compared to $44.7 million at September 30, 2018.  Net chargeoffs for the third quarter 2019 were $36 thousand versus $67 thousand in the third quarter 2018.  As a result of the aforementioned loan growth and improvement in asset quality trends, the Company did not record a provision for loan losses during the third quarter 2019.

At September 30, 2019 the tangible equity to tangible asset ratio was 10.07%, compared to 9.76% at September 30, 2018.  As mentioned earlier, the Company is proud of its ability to grow shareholders’ equity.  Tangible book value per share at September 30, 2019 was $5.42, up 9.94% compared to $4.93 a year earlier.

TrustCo Bank Corp NY is a $5.2 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, 2019.

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 2019 results will be held at 9:00 a.m. Eastern Time on October 22, 2019.  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 10135926.  The call will also be audio webcast at: https://services.choruscall.com/links/trst191022.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 2019, 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 make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of us and Trustco Bank and the continued receipt of approvals from our primary federal banking regulators under regulatory rules to distribute capital to TrustCo, which could affect our ability to pay dividends; results of supervisory monitoring or examinations of Trustco Bank and TrustCo by our respective regulators; adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; unanticipated effects from the Tax Cut and Jobs Act that may limit its benefits or adversely impact our business;  the perceived overall value of our products and services by users, including in comparison to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for our products and services; changes in consumer spending, borrowing and saving habits; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; changes in management personnel; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions; technological changes and electronic, cyber and physical security breaches; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading “Risk Factors” in our most recent annual report on Form 10-K and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.

 

 
TRUSTCO BANK CORP NY
GLENVILLE, NY
 
FINANCIAL HIGHLIGHTS
 
(dollars in thousands, except per share data)
(Unaudited)
  Three months ended
  9/30/2019 6/30/2019 9/30/2018 
Summary of operations      
  Net interest income (TE)$  38,644   39,192   40,526 
  (Credit) Provision for loan losses   -   (341)  300 
  Noninterest income   4,925   4,914   4,455 
  Noninterest expense   24,070   24,902   24,544 
  Net income   14,708   14,667   15,199 
       
Per common share      
  Net income per share:      
  - Basic$  0.152   0.152   0.157 
  - Diluted   0.152   0.151   0.157 
  Cash dividends   0.068   0.068   0.068 
  Tangible Book value at period end   5.42   5.32   4.93 
  Market price at period end   8.15   7.92   8.50 
       
At period end      
  Full time equivalent employees   823   858   807 
  Full service banking offices   148   148   148 
       
Performance ratios      
  Return on average assets   1.12%  1.14   1.24 
  Return on average equity   11.19   11.60   12.84 
  Efficiency (1)   55.17   55.98   53.39 
  Net interest spread (TE)   2.88   2.95   3.26 
  Net interest margin (TE)   3.04   3.11   3.35 
  Dividend payout ratio   44.85   44.94   43.29 
       
Capital ratios at period end      
  Consolidated tangible equity to tangible assets (2)   10.07%  9.85   9.76 
  Consolidated equity to assets   10.07%  9.86   9.77 
       
Asset quality analysis at period end      
  Nonperforming loans to total loans   0.53   0.57   0.62 
  Nonperforming assets to total assets   0.45   0.47   0.53 
  Allowance for loan losses to total loans   1.11   1.14   1.17 
  Coverage ratio (3) 2.1x2.0x1.9x
       
(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
  09/30/19 09/30/18 
Summary of operations    
  Net interest income (TE)$  117,569   119,957 
  (Credit) Provision for loan losses   (41)  900 
  Noninterest income   14,476   13,629 
  Noninterest expense   73,839   72,794 
  Net income   43,933   45,412 
     
Per common share    
  Net income per share:    
  - Basic$  0.454   0.471 
  - Diluted   0.453   0.470 
  Cash dividends   0.204   0.199 
  Tangible Book value at period end   5.42   4.93 
  Market price at period end   8.15   8.50 
     
Performance ratios    
  Return on average assets 1.14 1.24 
  Return on average equity 11.56 13.00 
  Efficiency (1) 55.75 53.60 
  Net interest spread (TE) 2.98 3.24 
  Net interest margin (TE) 3.13 3.32 
  Dividend payout ratio 45.00 42.35 
     
(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
  9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 
Interest and dividend income:          
  Interest and fees on loans$  41,923   41,432   41,253   41,184   40,073 
  Interest and dividends on securities available for sale:          
  U. S. government sponsored enterprises   996   821   783   788   787 
  State and political subdivisions    2   3   1   2   7 
  Mortgage-backed securities and collateralized mortgage         
   obligations - residential   2,178   2,152   1,555   1,554   1,601 
  Corporate bonds   321   272   208   202   202 
  Small Business Administration - guaranteed         
  participation securities   282   289   297   329   325 
  Mortgage-backed securities and collateralized mortgage         
   obligations - commercial   -   -   -   -   - 
  Other securities   6   5   5   5   4 
  Total interest and dividends on securities available for sale   3,785   3,542   2,849   2,880   2,926 
          
Interest on held to maturity securities:          
  Mortgage-backed securities and collateralized mortgage         
   obligations - residential   187   209   217   226   232 
  Total interest on held to maturity securities   187   209   217   226   232 
          
Federal Reserve Bank and Federal Home Loan Bank stock   81   199   85   207   82 
          
Interest on federal funds sold and other short-term investments   2,552   3,282   3,009   2,367   2,425 
  Total interest income   48,528   48,664   47,413   46,864   45,738 
          
Interest expense:          
  Interest on deposits:          
  Interest-bearing checking   52   94   121   111   113 
  Savings   323   367   377   401   417 
  Money market deposit accounts   1,177   1,119   826   618   544 
  Time deposits   7,974   7,512   5,976   4,643   3,864 
  Interest on short-term borrowings   359   381   381   352   277 
  Total interest expense   9,885   9,473   7,681   6,125   5,215 
          
  Net interest income   38,643   39,191   39,732   40,739   40,523 
          
  Less: (Credit) Provision for loan losses   -   (341)  300   500   300 
  Net interest income after provision for loan losses    38,643   39,532   39,432   40,239   40,223 
          
Noninterest income:         
  Trustco Financial Services income   1,517   1,683   1,733   1,356   1,516 
  Fees for services to customers   2,602   2,611   2,520   2,897   2,693 
  Other   806   620   384   199   246 
  Total noninterest income   4,925   4,914   4,637   4,452   4,455 
          
Noninterest expenses:          
  Salaries and employee benefits   11,725   11,711   11,451   10,183   10,761 
  Net occupancy expense   4,094   4,006   4,167   4,800   3,997 
  Equipment expense   1,689   1,709   1,902   1,741   1,783 
  Professional services   1,507   1,568   1,650   1,733   1,578 
  Outsourced services   1,875   1,875   1,925   1,875   1,875 
  Advertising expense   494   778   785   876   844 
  FDIC and other insurance   282   598   648   522   682 
  Other real estate (income) expense, net   33   210   (24)  37   528 
  Other   2,371   2,447   2,363   3,152   2,496 
  Total noninterest expenses   24,070   24,902   24,867   24,919   24,544 
          
Income before taxes   19,498   19,544   19,202   19,772   20,134 
Income taxes   4,790   4,877   4,644   3,739   4,935 
          
Net income$  14,708   14,667   14,558   16,033   15,199 
          
Net income per common share:          
  - Basic$  0.152   0.152   0.150   0.166   0.157 
          
  - Diluted   0.152   0.151   0.150   0.166   0.157 
          
Average basic shares (in thousands)   96,907   96,822   96,744   96,555   96,555 
Average diluted shares (in thousands)   96,977   96,891   96,822   96,689   96,689 
          
Note:  Taxable equivalent net interest income$  38,644   39,192   39,733   40,740   40,526 
          


CONSOLIDATED STATEMENTS OF INCOME, Continued
 
(dollars in thousands, except per share data)
(Unaudited)
  Nine months ended 
  09/30/19  09/30/18 
Interest and dividend income:      
  Interest and fees on loans$  124,608    117,120 
  Interest and dividends on securities available for sale:      
  U. S. government sponsored enterprises   2,600    2,324 
  State and political subdivisions    6    20 
  Mortgage-backed securities and collateralized mortgage     
   obligations - residential   5,885    5,039 
  Corporate bonds   801    485 
  Small Business Administration - guaranteed     
   participation securities   868    1,010 
  Mortgage-backed securities and collateralized mortgage     
   obligations - commercial   -    37 
  Other securities   16    13 
  Total interest and dividends on securities available for sale   10,176    8,928 
      
Interest on held to maturity securities:      
  Mortgage-backed securities-residential   613    736 
  Total interest on held to maturity securities   613    736 
      
Federal Reserve Bank and Federal Home Loan Bank stock   365    357 
      
Interest on federal funds sold and other short-term investments   8,843    6,909 
  Total interest income   144,605    134,050 
      
Interest expense:      
  Interest on deposits:      
  Interest-bearing checking   267    331 
  Savings   1,067    1,256 
  Money market deposit accounts   3,122    1,435 
  Time deposits   21,462    10,163 
  Interest on short-term borrowings   1,121    918 
  Total interest expense   27,039    14,103 
      
  Net interest income   117,566    119,947 
      
  Less: (Credit) Provision for loan losses   (41)   900 
  Net interest income after provision for loan losses    117,607    119,047 
      
Noninterest income:     
  Trustco Financial Services income   4,933    4,927 
  Fees for services to customers   7,733    8,015 
  Other   1,810    687 
  Total noninterest income   14,476    13,629 
      
Noninterest expenses:      
  Salaries and employee benefits   34,887    31,924 
  Net occupancy expense   12,267    12,413 
  Equipment expense   5,300    5,327 
  Professional services   4,725    4,822 
  Outsourced services   5,675    5,625 
  Advertising expense   2,057    2,144 
  FDIC and other insurance   1,528    2,219 
  Other real estate expense, net   219    1,194 
  Other   7,181    7,126 
  Total noninterest expenses   73,839    72,794 
      
Income before taxes   58,244    59,882 
Income taxes   14,311    14,470 
      
Net income$  43,933    45,412 
      
Net income per common share:      
  - Basic$  0.454    0.471 
      
  - Diluted   0.453    0.470 
      
Average basic shares (in thousands)   96,825    96,453 
Average diluted shares (in thousands)   96,897    96,587 
      
Note:  Taxable equivalent net interest income$  117,569    119,957 
      


CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 
(dollars in thousands)
(Unaudited)
  9/30/20196/30/2019 3/31/2019 12/31/2018 9/30/2018 
ASSETS:           
            
Cash and due from banks$  49,526   42,471   43,064   49,260   42,195 
Federal funds sold and other short term investments   401,151   517,684   576,123   454,449   423,254 
  Total cash and cash equivalents   450,677   560,155   619,187   503,709   465,449 
       
Securities available for sale:      
  U. S. government sponsored enterprises   164,490   184,448   148,292   152,160   150,053 
  States and political subdivisions   169   170   172   173   180 
  Mortgage-backed securities and collateralized mortgage      
   obligations - residential   406,166   354,679   312,946   262,032   269,093 
  Small Business Administration - guaranteed      
   participation securities   50,970   53,091   54,113   56,475   57,894 
  Corporate bonds   40,281   40,467   30,258   29,938   29,977 
  Other securities   683   685   685   685   685 
  Total securities available for sale   662,759   633,540   546,466   501,463   507,882 
       
Held to maturity securities:      
  Mortgage-backed securities and collateralized mortgage      
   obligations-residential   19,705   20,667   21,609   22,501   23,462 
  Total held to maturity securities   19,705   20,667   21,609   22,501   23,462 
       
Federal Reserve Bank and Federal Home Loan Bank stock   9,183   9,183   8,953   8,953   8,953 
       
Loans:      
  Commercial   192,443   190,507   190,347   196,146   190,987 
  Residential mortgage loans   3,508,647   3,428,829   3,376,193   3,376,708   3,331,212 
  Home equity line of credit   273,526   277,559   282,034   289,540   293,750 
  Installment loans   10,703   9,514   12,579   11,702   9,967 
Loans, net of deferred net costs   3,985,319   3,906,409   3,861,153   3,874,096   3,825,916 
       
Less: Allowance for loan losses   44,329   44,365   44,671   44,766   44,736 
  Net loans   3,940,990   3,862,044   3,816,482   3,829,330   3,781,180 
       
Bank premises and equipment, net   34,168   34,058   34,428   34,694   35,214 
Operating lease right-of-use assets   49,618   51,097   51,559   -   - 
Other assets   55,369   56,926   57,637   58,263   63,211 
       
  Total assets$  5,222,469   5,227,670   5,156,321   4,958,913   4,885,351 
       
LIABILITIES:      
Deposits:      
  Demand$  453,439   432,780   408,417   405,069   403,047 
  Interest-bearing checking   869,101   888,433   895,099   904,678   918,486 
  Savings accounts   1,110,947   1,132,308   1,150,329   1,182,683   1,221,127 
  Money market deposit accounts   570,457   562,318   538,043   507,311   501,270 
  Time deposits   1,457,223   1,446,428   1,421,181   1,274,506   1,155,994 
  Total deposits   4,461,167   4,462,267   4,413,069   4,274,247   4,199,924 
       
Short-term borrowings   151,095   166,746   159,778   161,893   176,377 
Operating lease liabilities   54,731   56,237   56,723   -   - 
Accrued expenses and other liabilities   29,313   26,790   25,033   32,902   31,932 
       
  Total liabilities   4,696,306   4,712,040   4,654,603   4,469,042   4,408,233 
       
SHAREHOLDERS' EQUITY:      
Capital stock   100,200   100,180   100,180   100,175   100,175 
Surplus   176,395   176,396   176,510   176,710   176,764 
Undivided profits   280,542   272,433   264,364   256,397   246,965 
Accumulated other comprehensive loss, net of tax   (71)  (1,774)  (7,011)  (10,309)  (13,000)
Treasury stock at cost   (30,903)  (31,605)  (32,325)  (33,102)  (33,786)
       
  Total shareholders' equity   526,163   515,630   501,718   489,871   477,118 
       
  Total liabilities and shareholders' equity$  5,222,469   5,227,670   5,156,321   4,958,913   4,885,351 
       
Outstanding shares (in thousands)   96,917   96,822   96,746   96,659   96,586 
       


NONPERFORMING ASSETS
            
(dollars in thousands)
(Unaudited)
  9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 
Nonperforming Assets           
            
  New York and other states*           
  Loans in nonaccrual status:           
  Commercial$  888   905   701   645   928 
  Real estate mortgage - 1 to 4 family   18,275   19,633   22,343   22,373   20,750 
  Installment   13   1   26   4   13 
  Total non-accrual loans   19,176   20,539   23,070   23,022   21,691 
  Other nonperforming real estate mortgages - 1 to 4 family   30   31   33   34   35 
  Total nonperforming loans   19,206   20,570   23,103   23,056   21,726 
  Other real estate owned   2,409   2,625   1,262   1,675   2,306 
  Total nonperforming assets$  21,615   23,195   24,365   24,731   24,032 
       
  Florida      
  Loans in nonaccrual status:      
  Commercial$  -   -   -   -   - 
  Real estate mortgage - 1 to 4 family   1,809   1,564   1,644   1,915   2,054 
  Installment   -   -   -   15   13 
  Total non-accrual loans   1,809   1,564   1,644   1,930   2,067 
  Other nonperforming real estate mortgages - 1 to 4 family   -   -   -   -   - 
  Total nonperforming loans   1,809   1,564   1,644   1,930   2,067 
  Other real estate owned   -   -   -   -   - 
  Total nonperforming assets$  1,809   1,564   1,644   1,930   2,067 
       
  Total      
  Loans in nonaccrual status:      
  Commercial$  888   905   701   645   928 
  Real estate mortgage - 1 to 4 family   20,084   21,197   23,987   24,288   22,804 
  Installment   13   1   26   19   26 
  Total non-accrual loans   20,985   22,103   24,714   24,952   23,758 
  Other nonperforming real estate mortgages - 1 to 4 family   30   31   33   34   35 
  Total nonperforming loans   21,015   22,134   24,747   24,986   23,793 
  Other real estate owned   2,409   2,625   1,262   1,675   2,306 
  Total nonperforming assets$  23,424   24,759   26,009   26,661   26,099 
       
       
Quarterly Net (Recoveries) Chargeoffs      
       
  New York and other states*      
  Commercial$  (28)  (1)  4   99   (2)
  Real estate mortgage - 1 to 4 family   39   (54)  318   323   (3)
  Installment   9   45   23   35   64 
  Total net chargeoffs (recoveries)$  20   (10)  345   457   59 
       
  Florida      
  Commercial$  -   -   -   -   - 
  Real estate mortgage - 1 to 4 family   -   (25)  19   (3)  - 
  Installment   16   -   31   16   8 
  Total net chargeoffs (recoveries)$  16   (25)  50   13   8 
       
  Total      
  Commercial$  (28)  (1)  4   99   (2)
  Real estate mortgage - 1 to 4 family   39   (79)  337   320   (3)
  Installment   25   45   54   51   72 
  Total net chargeoffs (recoveries)$  36   (35)  395   470   67 
       
       
Asset Quality Ratios      
       
Total nonperforming loans (1)$  21,015   22,134   24,747   24,986   23,793 
Total nonperforming assets (1)   23,424   24,759   26,009   26,661   26,099 
Total net chargeoffs (recoveries) (2)   36   (35)  395   470   67 
       
Allowance for loan losses (1)   44,329   44,365   44,671   44,766   44,736 
       
Nonperforming loans to total loans 0.53%0.57%0.64%0.64%0.62%
Nonperforming assets to total assets 0.45%0.47%0.50%0.54%0.53%
Allowance for loan losses to total loans 1.11%1.14%1.16%1.16%1.17%
Coverage ratio (1) 210.9%200.4%180.5%179.2%188.0%
Annualized net chargeoffs to average loans (2) 0.00%0.00%0.04%0.05%0.01%
Allowance for loan losses to annualized net chargeoffs (2) 307.8x-316.9x28.3x23.8x166.9x
 
* 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, 2019   September 30, 2018 
   Average InterestAverage    Average InterestAverage 
   Balance  Rate    Balance  Rate 
Assets             
              
Securities available for sale:             
  U. S. government sponsored enterprises$  183,580    996   2.17% $  154,865  787   2.03%
  Mortgage backed securities and collateralized mortgage             
   obligations - residential   370,808    2,178   2.35     287,760  1,601   2.23 
  State and political subdivisions   166    3   7.23     453  10   8.88 
  Corporate bonds   40,231    321   3.19     30,110  202   2.68 
  Small Business Administration - guaranteed             
   participation securities   51,988    282   2.17     62,368  325   2.09 
  Mortgage backed securities and collateralized mortgage             
   obligations - commercial   -    -   -      -    -   -  
  Other   685    6   3.50     685  4   2.34 
              
  Total securities available for sale   647,458    3,786   2.34     536,241  2,929   2.18 
              
Federal funds sold and other short-term Investments   465,251    2,552   2.19     486,552  2,425   1.98 
              
Held to maturity securities:             
  Mortgage backed securities and collateralized mortgage             
   obligations - residential   20,197    187   3.70     24,080    232   3.86 
              
  Total held to maturity securities   20,197    187   3.70     24,080    232   3.86 
              
Federal Reserve Bank and Federal Home Loan Bank stock   9,183    81   3.53     8,953    82   3.66 
              
Commercial loans   190,538    2,596   5.45     188,757    2,480   5.25 
Residential mortgage loans   3,465,102    35,743   4.13     3,289,534    33,949   4.13 
Home equity lines of credit   275,047    3,401   4.95     294,518    3,418   4.60 
Installment loans   9,967    183   7.34     9,447    226   9.51 
              
Loans, net of unearned income   3,940,654    41,923   4.26     3,782,256    40,073   4.23 
              
  Total interest earning assets   5,082,743    48,529   3.82     4,838,082    45,741   3.78 
              
Allowance for loan losses   (44,448)        (44,770)    
Cash & non-interest earning assets   188,528         120,474     
              
              
Total assets$  5,226,823      $  4,913,786     
              
              
Liabilities and shareholders' equity             
              
Deposits:             
  Interest bearing checking accounts$  874,179    52   0.02% $  913,150    113   0.05%
  Money market accounts   567,554    1,177   0.83     508,795    544   0.42 
  Savings   1,126,935    323   0.11     1,244,889    417   0.13 
  Time deposits   1,457,510    7,974   2.19     1,156,422    3,864   1.33 
              
  Total interest bearing deposits   4,026,178    9,526   0.95     3,823,256    4,938   0.51 
Short-term borrowings   160,162    359   0.90     183,796    277   0.60 
              
  Total interest bearing liabilities   4,186,340    9,885   0.94     4,007,052  5,215   0.52 
              
Demand deposits   438,789         405,311     
Other liabilities   80,188         26,429     
Shareholders' equity   521,506         474,994     
              
Total liabilities and shareholders' equity$  5,226,823      $  4,913,786     
              
Net interest income, tax equivalent     38,644       40,526   
              
Net interest spread      2.88%       3.26%
              
              
Net interest margin (net interest income to             
 total interest earning assets)      3.04%       3.35%
              
Tax equivalent adjustment     (1)      (3)  
              
              
Net interest income     38,643       40,523   
              
              
              
              
              
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, 2019   September 30, 2018 
   Average InterestAverage    Average InterestAverage 
   Balance  Rate    Balance  Rate 
Assets             
              
Securities available for sale:             
  U. S. government sponsored enterprises$  166,119    2,600   2.09% $  155,434  2,324   1.99%
  Mortgage backed securities and collateralized mortgage             
   obligations - residential   329,188    5,885   2.38     300,645  5,039   2.23 
  State and political subdivisions   167    9   7.19     494  30   8.14 
  Corporate bonds   33,678    801   3.17     30,384  485   2.13 
  Small Business Administration - guaranteed             
   participation securities   54,414    868   2.13     64,769  1,010   2.08 
  Mortgage backed securities and collateralized mortgage             
   obligations - commercial   -    -   -      3,651    37   1.34 
  Other   685    16   3.11     685  13   2.53 
              
  Total securities available for sale   584,251    10,179   2.32     556,062  8,938   2.14 
              
Federal funds sold and other short-term Investments   504,512    8,843   2.34     521,470  6,909   1.77 
              
Held to maturity securities:             
  Mortgage backed securities and collateralized mortgage             
   obligations - residential   21,123    613   3.87     25,410    736   3.86 
              
  Total held to maturity securities   21,123    613   3.87     25,410    736   3.86 
              
Federal Reserve Bank and Federal Home Loan Bank stock   9,104    365   5.35     8,893    357   5.35 
              
Commercial loans   191,370    7,725   5.38     187,198    7,336   5.23 
Residential mortgage loans   3,412,411    105,786   4.13     3,214,950    99,123   4.11 
Home equity lines of credit   280,248    10,441   4.97     299,723    10,018   4.47 
Installment loans   10,718    656   8.16     8,831    644   9.75 
              
Loans, net of unearned income   3,894,747    124,608   4.27     3,710,702    117,120   4.21 
              
  Total interest earning assets   5,013,737    144,608   3.85     4,822,537    134,060   3.71 
              
Allowance for loan losses   (44,744)        (44,573)    
Cash & non-interest earning assets   180,568         123,134     
              
              
Total assets$  5,149,561      $  4,901,098     
              
              
Liabilities and shareholders' equity             
              
Deposits:             
  Interest bearing checking accounts$  878,106    267   0.04% $  899,319    331   0.05%
  Money market accounts   546,601    3,122   0.76     528,310    1,435   0.36 
  Savings   1,141,607    1,067   0.12     1,255,245    1,256   0.13 
  Time deposits   1,416,306    21,462   2.02     1,124,592    10,163   1.21 
              
  Total interest bearing deposits   3,982,620    25,918   0.87     3,807,466    13,185   0.46 
Short-term borrowings   160,647    1,121   0.93     202,412    918   0.61 
              
  Total interest bearing liabilities   4,143,267    27,039   0.87     4,009,878  14,103   0.47 
              
Demand deposits   418,327         396,288     
Other liabilities   79,937         28,062     
Shareholders' equity   508,030         466,870     
              
Total liabilities and shareholders' equity$  5,149,561      $  4,901,098     
              
Net interest income, tax equivalent     117,569       119,957   
              
Net interest spread      2.98%       3.24%
              
              
Net interest margin (net interest income to             
 total interest earning assets)      3.13%       3.32%
              
Tax equivalent adjustment     (3)      (10)  
              
              
Net interest income     117,566       119,947   
              

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)
  9/30/2019 6/30/2019 9/30/2018     
         
Tangible Equity to Tangible Assets        
Total Assets$  5,222,469   5,227,670   4,885,351     
Less: Intangible assets   553   553   553     
  Tangible assets   5,221,916   5,227,117   4,884,798     
         
Equity   526,163   515,630   477,118     
Less: Intangible assets   553   553   553     
  Tangible equity   525,610   515,077   476,565     
Tangible Equity to Tangible Assets 10.07%9.85%9.76%    
Equity to Assets 10.07%9.86%9.77%    
         
  Three months ended  Nine months ended
Efficiency Ratio 9/30/2019 6/30/2019 9/30/2018   9/30/2019 9/30/2018 
          
Net interest income (fully taxable equivalent)$  38,644   39,192   40,526  $  117,569   119,957 
Non-interest income   4,925   4,914   4,455     14,476   13,629 
Revenue used for efficiency ratio   43,569   44,106   44,981     132,045   133,586 
         
Total noninterest expense   24,070   24,902   24,544     73,839   72,794 
Less:  Other real estate (income) expense, net   33   210   528     219   1,194 
Expense used for efficiency ratio   24,037   24,692   24,016     73,620   71,600 
         
Efficiency Ratio 55.17%55.98%53.39%  55.75%53.60%
              

Subsidiary: Trustco Bank

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

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Related Links: Trustco Bank Corp. NY
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