---

 

News Release

5 Sarnowski Drive, Glenville, New York, 12302

(518) 377-3311  Fax:  (518) 381-3668

 

Subsidiary:

Trustco Bank

NASDAQ -- TRST

 

Contact:	Kevin T. Timmons
	Vice President/Treasurer
	(518) 381-3607

 

TrustCo Announces Second Quarter 2015 Earnings;

Core Net Income Up 5%

Executive Snapshot:

·

Continued strong financial results:

o

Core net income for second quarter 2015 compared to the same period in 2014:

§

Core net income up 4.9%;

§

Core diluted EPS up 3.7%;

o

GAAP earnings for the second quarter of 2015 compared to the same period in 2014:

§

Net income down 9.2%

§

Diluted EPS down 9.6%

§

Return on average assets (ROA) of 0.91%

§

Return on average equity (ROE) of 10.66%

§

Efficiency ratio of 54.71%

·

Asset quality improvement:

o

Asset quality measures continued to improve compared to both the second quarter of 2014 and for the first quarter of 2015

o

Nonperforming assets (NPAs) fell by $10.6 million when compared to June 30, 2014.

o

NPAs to total assets improved from 1.07% to 0.81% when compared to June 30, 2014.

o

Quarterly net chargeoffs at lowest level since the fourth quarter of 2008

·

Continued expansion of customer base:

o

Focus on capitalizing on opportunities presented by expanded branch network

o

Average deposits per branch grew $942 thousand from June 30, 2014 to June 30, 2015 on a same store basis

o

Average core deposits grew $93 million for the second quarter of 2015 compared to the second quarter of 2014

·

Loan portfolio reaches all-time high:

o

Average loans were up $252 million for the second quarter of 2015 compared to second quarter of 2014

o

At $3.24 billion at June 30, 2015, loans reached an all-time historic high

Note: See non-GAAP financial measures reconciliation on pages 14-15 for information on core income and earnings per share

 

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FOR IMMEDIATE RELEASE:

TrustCo Announces Second Quarter 2015 Earnings;

Core Net Income Up 5%

 

Glenville, New York – July 21, 2015

TrustCo Bank Corp NY (TrustCo, Nasdaq: TRST) today announced that second quarter of 2015 core net income rose 4.9% to $10.7 million compared to $10.2 million for the second quarter of 2014.  Second quarter 2014 results included a gain of $2.4 million on the previously disclosed sale of owned real estate that added $1.6 million to reported after-tax earnings.  On a GAAP basis, second quarter 2014 net income was $11.8 million compared to $10.7 million in 2015.

Robert J. McCormick, President and Chief Executive Officer noted, “Our core results for the second quarter of 2015 build off of the solid results of the first quarter.   In addition to core net income growth, we continued to add customer relationships which ultimately positions our business well for the future.  Our highly liquid balance sheet continues to allow us to fund our loan growth without having to overpay for deposits.  We look forward to the second half of 2015 with optimism.  We will continue taking advantage of opportunities as they are presented.”

TrustCo saw continued strong loan growth in the second quarter of 2015.  Loan portfolio expansion was funded by utilization of a portion of the Bank’s large cash position.  Growth in core deposits was used to offset declines in higher cost certificates of deposit and cash management accounts, which are significantly more costly than core deposits.  The continued shift toward loans helped offset the margin impact from continued comparatively low yields on cash and investments.  TrustCo’s strong liquidity position continues to allow the Company to take advantage of opportunities when interest rate conditions change.

Mr. McCormick also noted, “We are encouraged by the continued economic improvements in our market areas.  We are pleased with the continued improvement in our asset quality during both the second quarter and over the last year. Our long-term focus on traditional lending criteria and conservative balance sheet management has enabled us to maintain strong liquidity and capital and report continued profit improvements.  As a result, we have been able to focus on conducting business, which has put us in a position to take advantage of changes in market and competitive conditions.”

For the second quarter of 2015, return on average assets and return on average equity were 0.91% and 10.66%, respectively, compared to 1.03% and 12.50% for the second quarter of 2014, all on a reported GAAP basis.  Reported GAAP diluted earnings per share were $0.113 for the second quarter of 2015, compared to $0.125 for the second quarter of 2014.  Higher levels of assets and shareholders’ equity as well as the $2.4 million gain noted earlier contributed to the decline in return on average assets and equity.  Core diluted net income per share was $0.112 for the second quarter of 2015 compared to $0.108 for the second quarter of 2014.  The reconciliation between core and GAAP earnings is shown in the table at the back of this release.

 

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For the first six months of 2015, core diluted net income per share was $0.225, compared to $0.213 for the first six months of 2014.  On a GAAP basis, diluted earnings per share were $0.225, compared to $0.241 over the same time periods.  GAAP return on average assets and equity were 0.92% and 10.78% for the first six months of 2015, compared to 1.01% and 12.30% for the first six months of 2014.

Average loans were up $252.5 million or 8.5% in the second quarter of 2015, over the same period in 2014.  Average deposits were up $138.8 million or 3.5% for the second quarter of 2015 over the same period a year earlier.  Most of the increase in deposits came from core deposit accounts.  Average core deposits increased $92.8 million from the second quarter of 2014 to the second quarter of 2015.  Core deposits typically represent longer term customer relationships and are generally lower cost than time deposits.  Mr. McCormick noted that, “The year-over-year growth of our loans and core deposit base reflect the long term strategic focus of the Company.

While some banks have backed away from branches, a customer friendly branch franchise continues to be the key to our long term plans.  We opened one new office during the second quarter, in Orlando, Florida and now have a 50 branch network covering Central Florida.  We continue to make significant progress expanding loans and deposits throughout our entire branch network.  We expect that trend to continue as the newer branches continue to mature.

At June 30, 2015, our average branch size was $28.3 million.  On a same store basis, our average deposits per branch grew by $942 thousand from June 30, 2014 to June 30, 2015.  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 the allowance for loan losses coverage of nonperforming loans (NPLs) improved from both June 30, 2014 and March 31, 2015 to June 30, 2015.  NPLs declined to $32.5 million at June 30, 2015, compared to $40.9 million at June 30, 2014 and $33.5 million at March 31, 2015.  NPLs were equal to 1.00% of total loans at June 30, 2015, compared to 1.36% a year earlier and 1.05% at March 31, 2015.  The coverage ratio, or allowance for loan losses to NPLs, was 140.3% at June 30, 2015, compared to 137.2% at March 31, 2015 and 114.7% at June 30, 2014.  Nonperforming assets (NPAs) declined to $38.6 million from $40.4 million at March 31, 2015 and $49.2 million at June 30, 2014.  Overall, virtually every asset quality indicator improved during the second quarter of 2015 relative to the first quarter of 2015 and the second quarter of 2014.  The ratio of loan loss allowance to total loans was 1.41% as of June 30, 2015, compared to 1.44% at March 31, 2015 and to 1.56% at June 30, 2014 and reflects both the improvement in asset quality and economic conditions in our lending areas.  The allowance for loan losses was $45.6 million at June 30, 2015 compared to $45.9 million at March 31, 2015 and $46.9 million at June 30, 2014.

The net interest margin for the second quarter of 2015 was 3.07% compared to 3.08% in the first quarter of 2015 and 3.16% in the second quarter of 2014.

At June 30, 2015 the tangible equity ratio was 8.48% compared to 8.44% at March 31, 2015 and 8.38% at June 30, 2014.  Tangible book value per share at June 30, 2015 was $4.23 compared to $4.06 a year earlier.

Trustco Bank entered into an agreement with its primary regulator, the Office of the Comptroller of the Currency (OCC), on July 21, 2015.  The agreement calls for the Bank to take various actions in areas such as compliance, corporate governance, audit, capital planning including dividends, and strategic planning, among others.  The agreement followed the completion of the OCC’s regularly scheduled exam of the Bank.  Since the completion of the examination, the Bank has been working to address the issues raised. The Bank’s board of directors and management are committed to taking the necessary actions to fully address the provisions of the agreement and believe they have made significant progress towards that goal. Implementing the necessary action plans is expected to add annualized expenses of between $2.5 and $5.0 million.

 

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TrustCo Bank Corp NY is a $4.7 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 146 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at June 30, 2015.

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 second quarter 2015 results will be held at 9:00 a.m. Eastern Time on July 22, 2015.  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 10069090. The call will also be audio webcast at: http://services.choruscall.com/links/trst150722.html, and will be available for one year.

 

Note: See non-GAAP financial measures reconciliation on pages 14-15 for information on core income and earnings per share

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 2015 and for the growth of loans and deposits throughout our branch network and our ability to capitalize on economic changes in the areas in which we operate.  Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement:  our ability to continue to originate a significant volume of one-to-four family mortgage loans in our market areas; our ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income; our ability to comply with the supervisory agreement entered into with Trustco Bank’s regulator and potential regulatory actions if we fail to comply; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of Trustco Bank and the continued ability of Trustco Bank under regulatory rules and the supervisory agreement to distribute capital to TrustCo, which could affect our ability to pay dividends; results of examinations of Trustco Bank and TrustCo by our respective regulators; our ability to make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; the perceived overall value of our products and services by users, including in comparison to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for our products and services; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2014, as amended, and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.

 

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TRUSTCO BANK CORP NY

GLENVILLE, NY

FINANCIAL HIGHLIGHTS

 

		Three Months Ended
		06/30/15				03/31/15				06/30/14
Summary of operations
Net interest income (TE)		$	35,690				35,185				35,513
Provision for loan losses			800				800				1,500
Net securities transactions			-				249				-
Noninterest income, excluding net securities transactions			4,454				4,374				4,505
Noninterest expense			22,131				21,857				19,437
Net income			10,727				10,715				11,808
Per common share
Net income per share:
- Basic		$	0.113				0.113				0.125
- Diluted			0.113				0.113				0.125
Cash dividends			0.066				0.066				0.066
Tangible Book value at period end			4.23				4.21				4.06
Market price at period end			7.03				6.88				6.68
At period end
Full time equivalent employees			760				747				747
Full service banking offices			146				145				141
Performance ratios
Return on average assets			0.91	%			0.93				1.03
Return on average equity			10.66				10.91				12.50
Efficiency (1)			54.71				54.18				53.00
Net interest spread (TE)			3.01				3.02				3.11
Net interest margin (TE)			3.07				3.08				3.16
Dividend payout ratio			58.15				58.12				52.62
Capital ratio at period end
Consolidated tangible equity to tangible assets (2)			8.48				8.44				8.38
Asset quality analysis at period end
Nonperforming loans to total loans			1.00				1.05				1.36
Nonperforming assets to total assets			0.81				0.85				1.07
Allowance for loan losses to total loans			1.41				1.44				1.56
Coverage ratio (3)			1.4x				1.4				1.1

 

(1)	Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income (excluding net securities transactions, the net gain on sale of building, and the net sale of nonperforming loans).

(2)	The tangible equity ratio excludes $553 of intangibles from both equity and assets.

(3)	Calculated as allowance for loan losses divided by total nonperforming loans.

TE = Taxable equivalent.

 

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FINANCIAL HIGHLIGHTS, Continued

(dollars in thousands, except per share data)

(Unaudited)

(1)	Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income (excluding net securities transactions, the net gain on sale of building, and the net sale of nonperforming loans).

TE = Taxable equivalent.

 

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CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(Unaudited)

 

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CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(Unaudited)

 

---

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands)

(Unaudited)

 

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Nonperforming Assets
		06/30/15				03/31/15				12/31/14				09/30/14				06/30/14
New York and other states*
Loans in nonaccrual status:
Commercial		$	3,263				2,489				3,835				4,226				5,132
Real estate mortgage - 1 to 4 family			27,366				28,215				27,221				29,736				31,433
Installment			79				77				77				95				87
Total non-accrual loans			30,708				30,781				31,133				34,057				36,652
Other nonperforming real estate mortgages - 1 to 4 family			74				75				125				155				159
Total nonperforming loans			30,782				30,856				31,258				34,212				36,811
Other real estate owned			5,833				6,288				5,533				5,238				3,930
Total nonperforming assets		$	36,615				37,144				36,791				39,450				40,741
Florida
Loans in nonaccrual status:
Commercial		$	-				-				-				517				517
Real estate mortgage - 1 to 4 family			1,678				2,608				2,740				2,395				3,578
Installment			10				20				13				1				1
Total non-accrual loans			1,688				2,628				2,753				2,913				4,096
Other nonperforming real estate mortgages - 1 to 4 family			-				-				-				-				-
Total nonperforming loans			1,688				2,628				2,753				2,913				4,096
Other real estate owned			275				670				908				1,188				4,365
Total nonperforming assets		$	1,963				3,298				3,661				4,101				8,461
Total
Loans in nonaccrual status:
Commercial		$	3,263				2,489				3,835				4,743				5,649
Real estate mortgage - 1 to 4 family			29,044				30,823				29,961				32,131				35,011
Installment			89				97				90				96				88
Total non-accrual loans			32,396				33,409				33,886				36,970				40,748
Other nonperforming real estate mortgages - 1 to 4 family			74				75				125				155				159
Total nonperforming loans			32,470				33,484				34,011				37,125				40,907
Other real estate owned			6,108				6,958				6,441				6,426				8,295
Total nonperforming assets		$	38,578				40,442				40,452				43,551				49,202
Quarterly Net Chargeoffs (Recoveries)
		06/30/15				03/31/15				12/31/14				09/30/14				06/30/14
New York and other states*
Commercial		$	50				34				(16	)			124				13
Real estate mortgage - 1 to 4 family			933				1,004				1,591				1,105				1,496
Installment			24				37				48				57				24
Total net chargeoffs		$	1,007				1,075				1,623				1,286				1,533
Florida
Commercial		$	(1	)			(1	)			(476	)			(1	)			(2	)
Real estate mortgage - 1 to 4 family			167				109				37				242				59
Installment			-				-				1				(4	)			10
Total net chargeoffs		$	166				108				(438	)			237				67
Total
Commercial		$	49				33				(492	)			123				11
Real estate mortgage - 1 to 4 family			1,100				1,113				1,628				1,347				1,555
Installment			24				37				49				53				34
Total net chargeoffs		$	1,173				1,183				1,185				1,523				1,600
Asset Quality Ratios
		06/30/15				03/31/15				12/31/14				09/30/14				06/30/14
Total nonperforming loans(1)		$	32,470				33,484				34,011				37,125				40,907
Total nonperforming assets(1)			38,578				40,442				40,452				43,551				49,202
Total net chargeoffs(2)			1,173				1,183				1,185				2,179				1,600
Allowance for loan losses(1)			45,571				45,944				46,327				46,512				46,935
Nonperforming loans to total loans			1.00	%			1.05	%			1.08	%			1.20	%			1.36	%
Nonperforming assets to total assets			0.81	%			0.85	%			0.87	%			0.95	%			1.07	%
Allowance for loan losses to total loans			1.41	%			1.44	%			1.47	%			1.51	%			1.56	%
Coverage ratio(1)			140.3	%			137.2	%			136.2	%			125.3	%			114.7	%
Annualized net chargeoffs to average loans(2)			0.15	%			0.15	%			0.15	%			0.29	%			0.22	%
Allowance for loan losses to annualized net chargeoffs(2)			9.7	x			9.6	x			9.8	x			5.3	x			7.3	x

(dollars in thousands)		Three months ended												Three months ended
(Unaudited)		June 30, 2015												June 30, 2014
		Average				Interest				Average				Average				Interest				Average
		Balance								Rate				Balance								Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises		$	114,279				366				1.28	%		$	110,783				381				1.38	%
Mortgage backed securities and collateralized mortgage obligations-residential			441,754				2,276				2.06				589,334				3,299				2.24
State and political subdivisions			1,939				36				7.36				3,823				70				7.32
Corporate bonds			956				-				0.00				1,403				2				0.48
Small Business Administration-guaranteed participation securities			98,894				503				2.03				108,072				539				1.99
Mortgage backed securities and collateralized mortgage obligations-commercial			10,600				38				1.41				10,871				38				1.40
Other			685				4				2.34				665				4				2.41
Total securities available for sale			669,107				3,223				1.93				824,951				4,333				2.10
Federal funds sold and other short-term Investments			683,110				423				0.25				606,809				376				0.25
Held to maturity securities:
Corporate bonds			9,965				154				6.17				9,950				154				6.18
Mortgage backed securities and collateralized mortgage obligations-residential			55,509				480				3.46				70,377				577				3.28
Total held to maturity securities			65,474				634				3.87				80,327				731				3.64
Federal Reserve Bank and Federal Home Loan Bank stock			9,466				118				4.99				10,937				128				4.68
Commercial loans			210,424				2,710				5.15				221,819				2,842				5.12
Residential mortgage loans			2,648,320				29,371				4.44				2,401,020				27,548				4.59
Home equity lines of credit			354,053				3,092				3.50				339,884				3,064				3.62
Installment loans			8,226				176				8.60				5,827				167				11.47
Loans, net of unearned income			3,221,023				35,349				4.39				2,968,550				33,621				4.53
Total interest earning assets			4,648,180				39,747				3.42				4,491,574				39,189				3.49
Allowance for loan losses			(46,190	)											(47,389	)
Cash & non-interest earning assets			137,329												135,326
Total assets		$	4,739,319											$	4,579,511
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts		$	706,767				111				0.06	%		$	632,266				89				0.06	%
Money market accounts			635,347				547				0.35				655,009				618				0.38
Savings			1,249,865				599				0.19				1,240,158				592				0.19
Time deposits			1,190,234				2,500				0.84				1,144,165				2,035				0.71
Total interest bearing deposits			3,782,213				3,757				0.40				3,671,598				3,334				0.36
Short-term borrowings			182,829				300				0.66				189,802				342				0.72
Total interest bearing liabilities			3,965,042				4,057				0.41				3,861,400				3,676				0.38
Demand deposits			344,982												316,759
Other liabilities			25,591												22,325
Shareholders' equity			403,704												379,027
Total liabilities and shareholders' equity		$	4,739,319											$	4,579,511
Net interest income, tax equivalent							35,690												35,513
Net interest spread											3.01	%											3.11	%
Net interest margin (net interest income to total interest earning assets)											3.07	%											3.16	%
Tax equivalent adjustment							(19	)											(33	)
Net interest income							35,671												35,480

(dollars in thousands)		Six months ended												Six months ended
(Unaudited)		June 30, 2015												June 30, 2014
		Average				Interest				Average				Average				Interest				Average
		Balance								Rate				Balance								Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises		$	96,172				578				1.20	%		$	139,907				887				1.27	%
Mortgage backed securities and collateralized mortgage obligations-residential			459,980				4,669				2.03				567,700				6,377				2.25
State and political subdivisions			2,015				74				7.31				4,971				175				7.04
Corporate bonds			1,226				1				0.16				4,956				61				2.47
Small Business Administration-guaranteed participation securities			100,270				1,025				2.05				109,079				1,095				2.01
Mortgage backed securities and
collateralized mortgage obligations-commercial			10,635				75				1.41				10,904				76				1.39
Other			685				8				2.34				662				8				2.42
Total securities available for sale			670,983				6,430				1.92				838,179				8,679				2.07
Federal funds sold and other short-term Investments			668,269				823				0.25				591,167				727				0.25
Held to maturity securities:
Corporate bonds			9,964				308				6.17				9,948				308				6.18
Mortgage backed securities and collateralized mortgage obligations-residential			57,419				958				3.34				72,340				1,202				3.32
Total held to maturity securities			67,383				1,266				3.76				82,288				1,510				3.67
Federal Reserve Bank and Federal Home Loan Bank stock			9,348				234				5.01				10,720				261				4.87
Commercial loans			214,713				5,506				5.13				222,074				5,639				5.08
Residential mortgage loans			2,621,417				58,329				4.46				2,378,199				54,530				4.59
Home equity lines of credit			353,161				6,153				3.51				340,281				6,000				3.56
Installment loans			8,011				351				8.84				5,712				334				11.78
Loans, net of unearned income			3,197,302				70,339				4.41				2,946,266				66,503				4.52
Total interest earning assets			4,613,285				79,092				3.44				4,468,620				77,680				3.48
Allowance for loan losses			(46,392	)											(47,802	)
Cash & non-interest earning assets			138,319												132,906
Total assets		$	4,705,212											$	4,553,724
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts		$	692,445				216				0.06	%		$	619,076				173				0.06	%
Money market accounts			636,596				1,164				0.37				650,828				1,217				0.38
Savings			1,239,737				1,257				0.20				1,232,803				1,355				0.22
Time deposits			1,185,363				4,934				0.84				1,142,001				3,986				0.70
Total interest bearing deposits			3,754,141				7,571				0.41				3,644,708				6,731				0.37
Short-term borrowings			187,560				646				0.69				195,954				735				0.76
Total interest bearing liabilities			3,941,701				8,217				0.42				3,840,662				7,466				0.39
Demand deposits			336,741												316,386
Other liabilities			25,817												22,499
Shareholders' equity			400,953												374,177
Total liabilities and shareholders' equity		$	4,705,212											$	4,553,724
Net interest income, tax equivalent							70,875												70,214
Net interest spread											3.02	%											3.09	%
Net interest margin (net interest incometo total interest earning assets)											3.08	%											3.15	%
Tax equivalent adjustment							(39	)											(78	)
Net interest income							70,836												70,136