News Column

TrustCo Announces Fourth Quarter Earnings Up 8.4% Over Prior Year

January 21, 2014

Executive Snapshot: -- Continued strong financial results: - Fourth quarter 2013: Net income up 8.4% from the fourth quarter of 2012 Diluted EPS up 7.7% Return on average assets (ROA) rose 3 basis points to 0.94% Return on average equity (ROE) rose 90 basis points to 11.78% Efficiency ratio improved 96 basis points to 52.15% Net interest margin improved 3 basis points to 3.15% versus the third quarter - Full year 2013: Net income up 6.1% from 2012 Diluted EPS up 5.5% ROA rose 3 basis points to 0.90% ROE rose 45 basis points to 11.15% Paid $24.8 million in cash dividends -- Continued expansion of customer base: - Focus on capitalizing on the opportunities presented by expanded branch franchise - Deposits per branch grew from $27.6 million at year-end 2012 to $28.3 million at year-end 2013 - Average core deposits grew $192 million from 2012 to 2013 -- Asset quality improvement: - Non-performing assets (NPAs) fell $9.3 million to $52.1 million at year-end 2013 - NPAs to total assets improved from 1.41% to 1.15% - Net charge-offs (NCOs) declined to $7.2 million for 2013 from $12.8 million in 2012 - NCOs to average loans improved from 0.50% in 2012 to 0.26% in 2013 - The loan loss allowance coverage of annual NCOs improved from 3.7x in 2012 to 6.6x in 2013 TrustCo Announces Fourth Quarter Earnings Up 8.4% Over Prior Year GLENVILLE, N.Y. , Jan. 21, 2014 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY ("TrustCo") (Nasdaq:TRST) today announced that net income rose to $10.6 million in the quarter ended December 31, 2013 , up 8.4% from $9.8 million for the quarter ended December 31 , 2012. Full year net income rose 6.1% to $39.8 million for 2013 versus the prior year. TrustCo saw continued strong loan growth in the fourth quarter of 2013. The gains were funded by continued expansion of retail deposits, along with a shift from lower yielding investment securities, and helped boost the average yield on earning assets and the net interest margin. Robert J. McCormick, President and Chief Executive Officer noted, "Our results for the fourth quarter of 2013 continued the progress we made in the first nine months of the year in terms of bottom line growth and in positioning our business for the future. In addition to the gain in net income, we continue to add profitable customer relationships on both the loan and deposit sides of the Bank. Our highly liquid balance sheet continues to allow us to fund our loan growth without having to overpay for deposits. Our cost of interest-bearing deposits remained at just 0.38% in the fourth quarter, flat with the third quarter and down four basis points relative to the year-earlier quarter. We look forward to 2014 with optimism, though we note that our industry continues to face challenges including an increasingly complex and burdensome regulatory environment, an economy that remains fragile and an interest rate environment that remains mixed. We will continue to take advantage of opportunities as they are presented." Mr. McCormick also noted "There are continued economic improvements in the markets in which we operate, particularly Florida , although unemployment and other persistent issues continue to constrain any significant economic growth. Our long-term focus on traditional lending criteria and conservative balance sheet management has enabled us to maintain a strong balance sheet and continued profitability. As a result, we have been able to focus on conducting business, which has significantly enhanced our reputation and put us in a position to take advantage of changes in market and competitive conditions." Return on average assets and return on average equity were 0.94% and 11.78%, respectively for the fourth quarter of 2013, compared to 0.91% and 10.88% for the fourth quarter of 2012. Diluted earnings per share were $0.112 for the fourth quarter of 2013, up 7.7% from $0.104 for the fourth quarter of 2012. For the full year, TrustCo earned $39.8 million or $0.422 per diluted share, compared to $37.5 million or $0.400 per share for 2012. On a year-over-year basis, average loans were up $227.1 million or 8.6% in the fourth quarter of 2013, over the same period in 2012. Average deposits were up $138.5 million for the fourth quarter of 2013 over the same period a year earlier. Customers continued to move some funds into certificates with slightly longer maturities, which may be helpful if rates rise, without having a material impact on the current cost of funds. For the full year, core deposits rose $192 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 the shift in our deposit base reflects 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. During 2013 we celebrated the ten year anniversary of our expansion into Florida , and have made significant progress expanding loans and deposits through our branches. We expect that trend to continue as the new branches continue to grow. We also note we have always designed our branches to be smaller and more cost effective than those built by many of our competitors. We have utilized open floor plans that help maximize the value of our branches. We remain mindful that fully achieving our goals for our newer branches will take time and continued hard work. We believe our success in growing customer relationships provides the basic building blocks that will help drive profit growth over the coming years." Asset quality, reserve coverage of nonperforming loans (NPLs) and reserve coverage of net charge-offs all improved from December 31, 2012 to December 31 , 2013. NPLs declined to $43.4 million at December 31, 2013 , compared to $52.7 million at December 31, 2012 and nonperforming assets (NPAs) declined to $52.1 million from $61.4 million over the same period. NPLs were equal to 1.49% of total loans at year-end, compared to 1.96% a year earlier. For the fourth quarter of 2013 the allowance for loan losses covered annualized fourth quarter net charge-offs by 7.9 times, compared to an annualized 4.9 times for the fourth quarter of 2012. The coverage ratio, or allowance for loan losses to NPLs, was 110.0% at December 31, 2013 , compared to 91.0% at December 31 , 2012. Overall, every asset quality indicator improved during the fourth quarter of 2013 relative to the fourth quarter of 2012. The ratio of reserves to total loans was 1.64% as of December 31, 2013 , compared to 1.68% at September 30 , 2013. This decline was the result of loan growth as the loan loss reserve remained at $47.7 million . During the fourth quarter of 2013 approximately $1.6 million of NPAs were sold to a third party at a slight gain. The net interest margin for the fourth quarter of 2013 was 3.15%, compared to 3.12% in the third quarter of 2013. At December 31, 2013 the tangible equity ratio was 7.99% compared to 7.94% at September 30, 2013 and 8.24% at December 31 , 2012. Tangible book value per share ended the fourth quarter at $3.82 compared to $3.81 in the year-ago period. TrustCo Bank Corp NY is a $4.5 billion savings and loan holding company and through its subsidiary, Trustco Bank , operated 139 offices in New York , New Jersey , Vermont , Massachusetts , and Florida at December 31, 2013 . 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 fourth quarter 2013 results will be held at 9:00 a.m. Eastern Time on January 22 , 2014. Those wishing to participate in the call may dial toll-free 1-888-317-6 016. International callers must dial + 1-412-317-6 016. A replay of the call will be available thirty days by dialing 1-877-344-7529 ( 1-412-317-0088 for international callers), Conference Number 10039245. The call will also be audio webcast at: https://services.choruscall.com/links/trst140122.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. The "forward-looking statements" may include statements regarding future events or performance. 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: credit risk, the effects of and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System , inflation, interest rates, market and monetary fluctuations, competition, the effect of changes in financial services laws and regulations (including laws concerning taxation, banking and securities), real estate and collateral values, changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board ("FASB") or the Public Company Accounting Oversight Board ; changes in local market areas and general business and economic trends and the matters described under the heading "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2012 , as amended, and in our subsequent securities filings. TRUSTCO BANK CORP NY GLENVILLE, NY FINANCIAL HIGHLIGHTS (dollars in thousands, except per share data) (Unaudited) Three Months Ended 12/31/13 09/30/13 12/31/12 Summary of operations Net interest income (TE) $ 34,577 34,180 33,718 Provision for loan losses 1,500 1,500 3,000 Net securities transactions 188 -- 763 Noninterest income 4,660 4,414 5,398 Noninterest expense 20,891 20,688 21,150 Net income 10,629 10,252 9,806 Per common share Net income per share: - Basic $ 0.113 0.109 0.104 - Diluted 0.112 0.109 0.104 Cash dividends 0.066 0.066 0.066 Tangible Book value at period end 3.82 3.75 3.81 Market price at period end 7.18 5.95 5.28 At period end Full time equivalent employees 708 708 759 Full service banking offices 139 139 138 Performance ratios Return on average assets 0.94% 0.91 0.91 Return on average equity 11.78 11.64 10.88 Efficiency (1) 52.15 51.15 53.11 Net interest spread (TE) 3.10 3.06 3.15 Net interest margin (TE) 3.15 3.12 3.21 Dividend payout ratio 58.44 60.38 63.00 Capital ratio at period end Consolidated tangible equity to tangible assets (2) 7.99 7.94 8.24 Asset quality analysis at period end Nonperforming loans to total loans 1.49 1.47 1.96 Nonperforming assets to total assets 1.15 1.16 1.41 Allowance for loan losses to total loans 1.64 1.68 1.79 Coverage ratio (3) 1.1x 1.1x 0.9x (1) Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income (excluding net securities transactions). (2) The tangible equity ratio excludes $553,000 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) Years Ended 12/31/13 12/31/12 Summary of operations Net interest income (TE) $ 136,094 135,669 Provision for loan losses 7,000 12,000 Net securities transactions 1,622 2,161 Noninterest income 18,148 18,803 Noninterest expense 85,005 83,977 Net income 39,812 37,534 Per common share Net income per share: - Basic $ 0.422 0.400 - Diluted 0.422 0.400 Cash dividends 0.263 0.263 Tangible Book value at period end 3.82 3.81 Market price at period end 7.18 5.28 Performance ratios Return on average assets 0.90% 0.87 Return on average equity 11.15 10.70 Efficiency (1) 52.78 52.28 Net interest spread (TE) 3.08 3.13 Net interest margin (TE) 3.14 3.20 Dividend payout ratio 62.19 65.60 (1) Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income (excluding net securities transactions). TE = Taxable equivalent. (dollars in thousands, except per share data) (Unaudited) Three Months Ended 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 Interest and dividend income: Interest and fees on loans $ 32,658 $ 32,166 $ 31,639 $ 31,481 $ 31,776 Interest and dividends on securities available for sale: U. S. government sponsored enterprises 586 571 627 816 1,191 State and political subdivisions 96 127 148 191 295 Mortgage-backed securities and collateralized mortgage obligations-residential 3,027 2,888 2,701 2,769 2,237 Corporate bonds 138 223 233 218 232 Small Business Administration -guaranteed participation securities 562 558 564 496 276 Mortgage-backed securities and collateralized mortgage obligations-commercial 38 39 38 29 -- Other securities 4 5 3 5 5 Total interest and dividends on securities available for sale 4,451 4,411 4,314 4,524 4,236 Interest on held to maturity securities: Mortgage-backed securities and collateralized mortgage obligations-residential 649 686 716 789 823 Corporate bonds 153 154 214 312 385 Total interest on held to maturity securities 802 840 930 1,101 1,208 Federal Reserve Bank and Federal Home Loan Bank stock 129 121 121 119 127 Interest on federal funds sold and other short-term investments 324 344 327 245 265 Total interest income 38,364 37,882 37,331 37,470 37,612 Interest expense: Interest on deposits: Interest-bearing checking 83 84 82 80 80 Savings 790 798 829 916 921 Money market deposit accounts 611 590 630 685 703 Time deposits 1,982 1,937 1,883 1,820 1,967 Interest on short-term borrowings 382 370 367 364 361 Total interest expense 3,848 3,779 3,791 3,865 4,032 Net interest income 34,516 34,103 33,540 33,605 33,580 Provision for loan losses 1,500 1,500 2,000 2,000 3,000 Net interest income after provision for loan losses 33,016 32,603 31,540 31,605 30,580 Noninterest income: Trustco Financial Services income 1,276 1,317 1,287 1,421 1,815 Fees for services to customers 2,917 2,903 2,968 2,887 3,386 Net gain on securities transactions 188 -- 1,432 2 763 Other 467 194 229 282 197 Total noninterest income 4,848 4,414 5,916 4,592 6,161 Noninterest expenses: Salaries and employee benefits 8,664 7,935 7,647 8,178 8,427 Net occupancy expense 4,226 3,911 3,910 4,053 3,889 Equipment expense 1,514 1,567 1,582 1,718 1,637 Professional services 1,409 1,255 1,565 1,420 1,458 Outsourced services 1,075 1,350 1,350 1,350 1,175 Advertising expense 835 548 714 730 1,037 FDIC and other insurance 952 1,009 1,004 1,010 1,007 Other real estate expense, net 430 946 1,473 749 375 Other 1,786 2,167 2,624 2,349 2,145 Total noninterest expenses 20,891 20,688 21,869 21,557 21,150 Income before taxes 16,973 16,329 15,587 14,640 15,591 Income taxes 6,344 6,077 5,824 5,472 5,785 Net income $ 10,629 $ 10,252 $ 9,763 $ 9,168 $ 9,806 Net income per Common Share: - Basic $ 0.113 $ 0.109 $ 0.104 $ 0.097 $ 0.104 - Diluted 0.112 0.109 0.104 0.097 0.104 Average basic shares (thousands) 94,347 94,228 94,204 94,068 93,824 Average diluted shares (thousands) 94,472 94,275 94,211 94,073 93,828 Note: Taxable equivalent net interest income $ 34,577 $ 34,180 $ 33,630 $ 33,707 $ 33,718 CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data) (Unaudited) Years Ended 12/31/2013 12/31/2012 Interest and dividend income: Interest and fees on loans $ 127,944 $ 128,581 Interest and dividends on securities available for sale: U. S. government sponsored enterprises 2,600 8,097 State and political subdivisions 562 1,413 Mortgage-backed securities and collateralized mortgage obligations-residential 11,385 6,697 Corporate bonds 812 2,231 Small Business Administration -guaranteed participation securities 2,180 319 Mortgage-backed securities and collateralized mortgage obligations-commercial 144 -- Other securities 17 19 Total interest and dividends on securities available for sale 17,700 18,776 Interest on held to maturity securities: U. S. government sponsored enterprises -- 25 Mortgage-backed securities and collateralized mortgage obligations-residential 2,840 4,287 Corporate bonds 833 1,666 Total interest on held to maturity securities 3,673 5,978 Federal Reserve Bank and Federal Home Loan Bank stock 490 486 Interest on federal funds sold and other short-term investments 1,240 1,142 Total interest income 151,047 154,963 Interest expense: Interest on deposits: Interest-bearing checking 329 315 Savings 3,333 3,872 Money market deposit accounts 2,516 3,069 Time deposits 7,622 11,244 Interest on short-term borrowings 1,483 1,475 Total interest expense 15,283 19,975 Net interest income 135,764 134,988 Provision for loan losses 7,000 12,000 Net interest income after provision for loan losses 128,764 122,988 Noninterest income: Trust department income 5,301 5,761 Fees for services to customers 11,675 12,290 Net gain on securities transactions 1,622 2,161 Other 1,172 752 Total noninterest income 19,770 20,964 Noninterest expenses: Salaries and employee benefits 32,424 31,276 Net occupancy expense 16,100 15,257 Equipment expense 6,381 6,073 Professional services 5,649 6,040 Outsourced services 5,125 5,122 Advertising expense 2,827 3,841 FDIC and other insurance 3,975 3,823 Other real estate expense, net 3,598 3,216 Other 8,926 9,329 Total noninterest expenses 85,005 83,977 Income before taxes 63,529 59,975 Income taxes 23,717 22,441 Net income $ 39,812 $ 37,534 Net income per Common Share: - Basic $ 0.422 $ 0.400 - Diluted 0.422 0.400 Average basic shares (thousands) 94,160 93,633 Average diluted shares (thousands) 94,206 93,637 Note: Taxable equivalent net interest income $ 136,094 $ 135,669 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands) (Unaudited) 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 ASSETS: Cash and due from banks $ 46,453 $ 45,088 $ 40,580 $ 39,512 $ 55,789 Federal funds sold and other short term investments 536,591 510,561 588,252 405,262 488,227 Total cash and cash equivalents 583,044 555,649 628,832 444,774 544,016 Securities available for sale: U. S. government sponsored enterprises 198,829 193,614 188,133 263,165 263,108 States and political subdivisions 7,758 11,199 12,159 15,265 26,457 Mortgage-backed securities and collateralized mortgage obligations-residential 532,449 534,301 504,793 612,555 518,776 Corporate bonds 10,471 53,094 53,053 59,239 26,529 Small Business Administration -guaranteed participation securities 103,029 104,863 108,665 115,464 76,562 Mortgage-backed securities and collateralized mortgage obligations-commercial 10,558 10,715 10,725 11,136 -- Other securities 660 660 660 660 660 Total securities available for sale 863,754 908,446 878,188 1,077,484 912,092 Held to maturity securities: Mortgage-backed securities and collateralized mortgage obligations-residential 76,270 81,337 88,852 98,038 108,471 Corporate bonds 9,945 9,941 9,937 19,935 34,955 Total held to maturity securities 86,215 91,278 98,789 117,973 143,426 Federal Reserve Bank and Federal Home Loan Bank stock 10,500 10,500 10,500 9,632 9,632 Loans: Commercial 223,481 212,833 216,977 212,637 219,577 Residential mortgage loans 2,338,944 2,279,064 2,205,334 2,154,188 2,126,668 Home equity line of credit 340,489 337,178 334,571 332,111 333,909 Installment loans 5,895 5,894 5,544 4,831 4,579 Loans, net of deferred fees and costs 2,908,809 2,834,969 2,762,426 2,703,767 2,684,733 Less: Allowance for loan losses 47,714 47,722 47,589 47,658 47,927 Net loans 2,861,095 2,787,247 2,714,837 2,656,109 2,636,806 Bank premises and equipment, net 34,414 34,559 38,301 35,787 36,239 Other assets 82,430 71,728 73,757 69,998 64,402 Total assets $ 4,521,452 $ 4,459,407 $ 4,443,204 $ 4,411,757 $ 4,346,613 LIABILITIES: Deposits: Demand $ 318,456 $ 314,660 $ 314,985 $ 298,243 $ 300,544 Interest-bearing checking 611,127 591,590 591,844 579,077 560,064 Savings accounts 1,218,038 1,221,791 1,228,281 1,213,226 1,198,517 Money market deposit accounts 648,402 650,688 634,804 656,577 667,589 Certificates of deposit (in denominations of $100,000 or more) 431,008 405,575 397,707 384,559 352,734 Other time accounts 700,040 710,064 725,255 725,998 724,745 Total deposits 3,927,071 3,894,368 3,892,876 3,857,680 3,804,193 Short-term borrowings 204,162 185,226 176,325 171,019 159,846 Accrued expenses and other liabilities 28,406 25,425 25,380 22,169 23,776 Total liabilities 4,159,639 4,105,019 4,094,581 4,050,868 3,987,815 SHAREHOLDERS' EQUITY: Capital stock 98,927 98,912 98,912 98,912 98,912 Surplus 173,144 173,408 173,897 174,386 174,899 Undivided profits 147,432 143,015 138,953 135,373 132,378 Accumulated other comprehensive income (loss), net of tax (13,803) (15,923) (16,831) (169) 1,558 Treasury stock at cost (43,887) (45,024) (46,308) (47,613) (48,949) Total shareholders' equity 361,813 354,388 348,623 360,889 358,798 Total liabilities and shareholders' equity $ 4,521,452 $ 4,459,407 $ 4,443,204 $ 4,411,757 $ 4,346,613 Outstanding shares (thousands) 94,463 94,334 94,204 94,071 93,935 NONPERFORMING ASSETS (dollars in thousands) (Unaudited) Nonperforming Assets 12/31/13 09/30/13 06/30/13 03/31/13 12/31/12 New York and other states* Loans in nonaccrual status: Commercial $ 6,952 5,436 5,891 5,978 6,635 Real estate mortgage - 1 to 4 family 31,045 30,643 30,736 34,027 35,286 Installment 93 71 36 35 6 Total non-accrual loans 38,090 36,150 36,663 40,040 41,927 Other nonperforming real estate mortgages - 1 to 4 family 166 170 174 225 231 Total nonperforming loans 38,256 36,320 36,837 40,265 42,158 Other real estate owned 3,348 3,011 3,918 4,461 2,979 Total nonperforming assets $ 41,604 39,331 40,755 44,726 45,137 Florida Loans in nonaccrual status: Commercial $ -- -- 583 2,595 2,698 Real estate mortgage - 1 to 4 family 5,137 5,406 6,022 7,013 7,820 Installment -- -- -- 1 1 Total non-accrual loans 5,137 5,406 6,605 9,609 10,519 Other nonperforming real estate mortgages - 1 to 4 family -- -- -- -- -- Total nonperforming loans 5,137 5,406 6,605 9,609 10,519 Other real estate owned 5,381 6,816 6,427 5,406 5,726 Total nonperforming assets $ 10,518 12,222 13,032 15,015 16,245 Total Loans in nonaccrual status: Commercial $ 6,952 5,436 6,474 8,573 9,333 Real estate mortgage - 1 to 4 family 36,182 36,049 36,758 41,040 43,106 Installment 93 71 36 36 7 Total non-accrual loans 43,227 41,556 43,268 49,649 52,446 Other nonperforming real estate mortgages - 1 to 4 family 166 170 174 225 231 Total nonperforming loans 43,393 41,726 43,442 49,874 52,677 Other real estate owned 8,729 9,827 10,345 9,867 8,705 Total nonperforming assets $ 52,122 51,553 53,787 59,741 61,382 Quarterly Net Chargeoffs 12/31/13 09/30/13 06/30/13 03/31/13 12/31/12 New York and other states* Commercial $ 176 585 49 248 152 Real estate mortgage - 1 to 4 family 1,194 1,215 1,885 1,563 1,410 Installment (2) 25 13 15 72 Total net chargeoffs $ 1,368 1,825 1,947 1,826 1,634 Florida Commercial $ (1) (502) (1) 99 (18) Real estate mortgage - 1 to 4 family 138 41 123 344 810 Installment 3 3 -- -- 12 Total net chargeoffs $ 140 (458) 122 443 804 Total Commercial $ 175 83 48 347 134 Real estate mortgage - 1 to 4 family 1,332 1,256 2,008 1,907 2,220 Installment 1 28 13 15 84 Total net chargeoffs $ 1,508 1,367 2,069 2,269 2,438 Asset Quality Ratios 12/31/13 09/30/13 06/30/13 03/31/13 12/31/12 Total nonperforming loans(1) $ 43,393 $ 41,726 43,442 49,874 52,677 Total nonperforming assets(1) 52,122 51,553 53,787 59,741 61,382 Total net chargeoffs(2) 1,508 1,367 2,069 2,269 2,438 Allowance for loan losses(1) 47,714 47,722 47,589 47,658 47,927 Nonperforming loans to total loans 1.49% 1.47% 1.57% 1.84% 1.96% Nonperforming assets to total assets 1.15% 1.16% 1.21% 1.35% 1.41% Allowance for loan losses to total loans 1.64% 1.68% 1.72% 1.76% 1.79% Coverage ratio(1) 110.0% 114.4% 109.5% 95.6% 91.0% Annualized net chargeoffs to average loans(2) 0.21% 0.20% 0.29% 0.34% 0.37% Allowance for loan losses to annualized net chargeoffs(2) 7.9x 8.7x 6.0x 5.3x 4.9x * 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) Three months ended Three months ended (Unaudited) December 31, 2013 December 31, 2012 Average Interest Average Average Interest Average Balance Rate Balance Rate Assets Securities available for sale: U. S. government sponsored enterprises $ 197,755 586 1.18% $ 370,086 1,191 1.29% Mortgage backed securities and collateralized mortgage obligations-residential 543,856 3,027 2.23 480,382 2,237 1.86 State and political subdivisions 8,577 149 6.96 30,619 425 5.55 Corporate bonds 28,689 138 1.92 35,640 232 2.59 Small Business Administration -guaranteed participation securities 111,859 562 2.01 54,678 276 2.02 Mortgage backed securities and collateralized mortgage obligations-commercial 11,004 38 1.39 -- -- 0.00 Other 523 4 3.06 660 5 3.03 Total securities available for sale 902,263 4,504 2.00 972,065 4,366 1.80 Federal funds sold and other short-term Investments 522,461 324 0.25 427,298 265 0.25 Held to maturity securities: Corporate bonds 9,943 153 6.19 35,013 385 4.40 Mortgage backed securities and collateralized mortgage obligations-residential 78,821 649 3.29 114,647 823 2.87 Total held to maturity securities 88,764 802 3.62 149,660 1,208 3.23 Federal Reserve Bank and Federal Home Loan Bank stock 10,500 129 4.91 9,632 127 5.27 Commercial loans 215,124 2,766 5.14 216,787 2,917 5.38 Residential mortgage loans 2,306,591 26,771 4.64 2,087,003 25,804 4.95 Home equity lines of credit 339,281 2,954 3.45 331,441 2,905 3.49 Installment loans 5,653 175 12.26 4,274 158 14.68 Loans, net of unearned income 2,866,649 32,666 4.55 2,639,505 31,784 4.81 Total interest earning assets 4,390,637 38,425 3.50 4,198,160 37,750 3.59 Allowance for loan losses (48,393) (48,312) Cash & non-interest earning assets 122,386 146,482 Total assets $ 4,464,630 $ 4,296,330 Liabilities and shareholders' equity Deposits: Interest bearing checking accounts $ 587,854 83 0.06% $ 532,579 80 0.06% Money market accounts 649,574 611 0.37 669,201 703 0.42 Savings 1,219,178 790 0.26 1,184,601 921 0.31 Time deposits 1,123,671 1,982 0.70 1,085,054 1,967 0.72 Total interest bearing deposits 3,580,277 3,466 0.38 3,471,435 3,671 0.42 Short-term borrowings 189,754 382 0.80 161,816 361 0.89 Total interest bearing liabilities 3,770,031 3,848 0.40 3,633,251 4,032 0.44 Demand deposits 313,174 283,528 Other liabilities 23,469 21,006 Shareholders' equity 357,956 358,545 Total liabilities and shareholders' equity $ 4,464,630 $ 4,296,330 Net interest income , tax equivalent 34,577 33,718 Net interest spread 3.10% 3.15% Net interest margin (net interest income to total interest earning assets) 3.15% 3.21% Tax equivalent adjustment (61) (138) Net interest income 34,516 33,580 (dollars in thousands) Year ended Year ended (Unaudited) December 31, 2013 December 31, 2012 Average Interest Average Average Interest Average Balance Rate Balance Rate Assets Securities available for sale: U. S. government sponsored enterprises $ 221,028 2,600 1.18% $ 568,425 8,097 1.42% Mortgage backed securities and collateralized mortgage obligations-residential 545,487 11,385 2.09 334,616 6,697 2.00 State and political subdivisions 12,845 862 6.71 35,435 2,012 5.68 Corporate bonds 46,049 812 1.76 68,182 2,231 3.27 Small Business Administration -guaranteed participation securities 109,913 2,180 1.98 15,707 319 2.03 Mortgage backed securities and collateralized mortgage obligations-commercial 10,420 144 1.38 -- -- 0.00 Other 625 17 2.72 660 19 2.88 Total securities available for sale 946,367 18,000 1.90 1,023,025 19,375 1.89 Federal funds sold and other short-term Investments 502,136 1,240 0.25 461,495 1,142 0.25 Held to maturity securities: U. S. government sponsored enterprises -- -- 0.00 1,048 25 2.43 Corporate bonds 14,011 833 5.95 39,570 1,666 4.21 Mortgage backed securities and collateralized mortgage obligations-residential 90,360 2,840 3.14 131,092 4,287 3.27 Total held to maturity securities 104,371 3,673 3.52 171,710 5,978 3.48 Federal Reserve Bank and Federal Home Loan Bank stock 10,266 490 4.77 9,425 486 5.16 Commercial loans 214,756 11,210 5.22 230,539 12,486 5.42 Residential mortgage loans 2,216,346 104,646 4.72 2,017,230 104,028 5.16 Home equity lines of credit 335,409 11,452 3.41 321,299 11,551 3.60 Installment loans 5,152 666 12.93 3,915 598 15.28 Loans, net of unearned income 2,771,663 127,974 4.62 2,572,983 128,663 5.00 Total interest earning assets 4,334,803 151,377 3.49 4,238,638 155,644 3.67 Allowance for loan losses (48,452) (49,148) Cash & non-interest earning assets 136,042 143,303 Total assets $ 4,422,393 $ 4,332,793 Liabilities and shareholders' equity Deposits: Interest bearing checking accounts $ 578,531 329 0.06% $ 515,062 315 0.06% Money market accounts 650,324 2,516 0.39 649,452 3,069 0.47 Savings 1,218,655 3,333 0.27 1,115,151 3,872 0.35 Time deposits 1,113,473 7,622 0.68 1,251,846 11,244 0.90 Total interest bearing deposits 3,560,983 13,800 0.39 3,531,511 18,500 0.52 Short-term borrowings 180,275 1,483 0.82 152,982 1,475 0.96 Total interest bearing liabilities 3,741,258 15,283 0.41 3,684,493 19,975 0.54 Demand deposits 302,437 278,179 Other liabilities 21,719 19,441 Shareholders' equity 356,979 350,680 Total liabilities and shareholders' equity $ 4,422,393 $ 4,332,793 Net interest income , tax equivalent 136,094 135,669 Net interest spread 3.08% 3.13% Net interest margin (net interest income to total interest earning assets) 3.14% 3.20% Tax equivalent adjustment (330) (681) Net interest income 135,764 134,988 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 recurring revenue. We calculate the efficiency ratio by dividing total noninterest expenses as determined under GAAP, but excluding other real estate expense, net, which we refer to below as recurring expense, by net interest income (fully taxable equivalent) and total noninterest income as determined under GAAP, but excluding net gains on securities from this calculation, which we refer to below as recurring revenue. We believe that this provides one reasonable measure of core expenses relative to core 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 and efficiency ratio to the underlying GAAP numbers is set forth below. Non-GAAP Financial Measures Reconciliation (dollars in thousands, except per share amounts) (Unaudited) 12/31/13 09/30/13 06/30/13 03/31/13 12/31/12 Tangible Book Value Per Share Equity $ 361,813 354,388 348,623 360,889 358,798 Less: Intangible assets 553 553 553 553 553 Tangible equity 361,260 353,835 348,070 360,336 358,245 Shares outstanding 94,463 94,334 94,204 94,071 93,935 Tangible book value per share 3.82 3.75 3.69 3.83 3.81 Book value per share 3.83 3.76 3.70 3.84 3.82 Tangible Equity to Tangible Assets Total Assets 4,521,452 4,459,407 4,443,204 4,411,757 4,346,613 Less: Intangible assets 553 553 553 553 553 Tangible assets 4,520,899 4,458,854 4,442,651 4,411,204 4,346,060 Tangible Equity to Tangible Assets 7.99% 7.94% 7.83% 8.17% 8.24% Equity to Assets 8.00% 7.95% 7.85% 8.18% 8.25% 3 Months Ended Years Ended Efficiency Ratio 12/31/13 09/30/13 06/30/13 03/31/13 12/31/12 12/31/13 12/31/12 Net interest income (fully taxable equivalent) $ 34,577 34,180 33,630 33,707 33,718 136,094 135,669 Non-interest income 4,848 4,413 5,916 4,592 6,161 19,770 20,964 Less: Net gain on securities 188 -- 1,432 2 763 1,622 2,161 Recurring revenue 39,237 38,593 38,114 38,297 39,116 154,242 154,472 Total Noninterest expense 20,891 20,688 21,869 21,557 21,150 85,005 83,977 Less: Other real estate expense, net 430 946 1,473 749 375 3,598 3,216 Recurring expense 20,461 19,742 20,396 20,808 20,775 81,407 80,761 Efficiency Ratio 52.15% 51.15% 53.51% 54.33% 53.11% 52.78% 52.28% CONTACT: Kevin T. Timmons Vice President/Treasurer (518) 381-3607 Source: TrustCo Bank Corp NY


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