Market Overview

TrustCo Announces First Quarter 2018 Results; Net Income Before Taxes Up 12% Over Prior Year Quarter

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Executive Snapshot:

  • Continued solid financial results:
    • Key metrics for first quarter 2018:
      • Income before taxes of $19.5 million in the first quarter 2018, up 11.6% compared to $17.5 million in the first quarter of 2017
      • Net income of $14.8 million, up 35.3% compared to $10.9 million in the first quarter of 2017
      • Return on average assets (ROAA) of 1.23% compared to 0.91% in the first quarter of 2017
      • Return on average equity (ROAE) of 13.07% compared to 10.17% in the first quarter of 2017
      • Efficiency ratio of 54.05% compared to 55.81% in the first quarter of 2017 (Non-GAAP measure; see P. 11 for definition)
         
  • Asset quality remains solid:
    • Nonperforming assets (NPAs) fell by $2.6 million compared to March 31, 2017
    • NPAs to total assets improved to 0.55%, compared to 0.61% at March 31, 2017
    • Quarterly net chargeoffs were equal to 0.01% of average loans on an annualized basis, compared to 0.05% for the first quarter of 2017
       
  • Continued expansion of customer base:
    • Focus on capitalizing on opportunities presented by expanded branch network
    • Average core (non-maturity) deposits per branch grew $135 thousand to $21.6 million from December 31, 2017 to March 31, 2018
    • Average core deposits were $37.5 million higher in the first quarter 2018 compared to the first quarter 2017, an increase of 1.2%
       
  • Loan portfolio reaches all-time high:
    • Average loans were up $211 million for the first quarter 2018 compared to first quarter of 2017
    • At $3.67 billion as of March 31, 2018, loans reached an all-time high

GLENVILLE, N.Y., April 23, 2018 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (NASDAQ:TRST) today announced first quarter 2018 net income of $14.8 million compared to $10.9 million for the first quarter 2017, an increase of 35.3%.  First quarter 2018 results include the impact of a lower tax rate resulting from the Tax Cuts and Jobs Act.  On a pre-tax basis, earnings rose from $17.5 million in the first quarter 2017 to $19.5 million in the first quarter 2018, an increase of 11.6%. 

Summary

Robert J. McCormick, President and Chief Executive Officer noted, "We are pleased to start 2018 off with a strong performance, including an increase of 11.6% in pre-tax earnings and 35.3% in net income for the first quarter 2018 as compared to the first quarter 2017.  Solid revenue growth and expense control combined with the lower tax rate to produce these results.  Our focus on traditional lending criteria and conservative balance sheet management has enabled us to produce consistent earnings, maintain strong liquidity and capital and allowed us to continue to grow our business and take advantage of changes in market and competitive conditions.  In terms of our core business, we continue to add customer relationships, which ultimately drive future growth.  We will continue to take advantage of opportunities as they are presented during the coming year and beyond." 

TrustCo saw continued solid loan growth in the first quarter 2018 compared to the prior year, led by an increase in residential mortgages.  Loan portfolio expansion was funded by a combination of utilizing a portion of our strong cash balances and cash flow from investments, as well as growth in funding from customers and expansion of shareholders equity.  The continued shift toward loans helped sustain the margin despite a decline in mortgage loan yields and higher CD rates.  We note that current mortgage rates exceed the yield on our existing portfolio of mortgages, which, if sustained, will be a positive going forward.  In addition, the cost of our non-maturity deposits remained stable in the first quarter.  The Federal Reserve decision to raise the target Federal Funds rate has contributed to our results as our cash position immediately repriced upward.  Only a portion of the impact of the 25 basis point increase announced on March 22, 2018 is reflected in first quarter results.  While total average deposits were down slightly in the first quarter 2018 versus the prior year, core deposits were up $37.5 million over that time frame.  The shift towards increased core deposits contributed to our cost of funds increasing only 6 basis points from the first quarter 2017 to the first quarter 2018.   The gain in core deposits was the result of growth in demand deposits and low cost interest bearing checking deposits.  TrustCo's strong liquidity position continues to allow it to take advantage of opportunities as they arise.

Details

Average loans were up $210.9 million or 6.1% in the first quarter 2018 over the same period in 2017. Average residential loans, our primary lending focus, were up $236.7 million or 8.1% in the first quarter 2018, over the same period in 2017.  Overall loan growth was constrained by a $24.0 million decline in average outstandings on home equity lines of credit and a $1.9 million decline in average commercial loans. Average deposits were down $15.6 million or 0.4% for the first quarter 2018 over the same period a year earlier.  The decrease in deposits was the result of a $53.0 million decline in average time deposits and smaller declines in money market and savings deposits.  Excluding time deposits, total core deposit accounts, which consist of checking, savings and money market deposits, were up $37.5 million from the first quarter 2017 to the first quarter 2018.  Within core, money market balances were down $32.9 million, checking balances were up $84.7 million (including interest bearing and non-interest bearing balances) and savings were down $14.4 million.  Core deposits typically represent longer term customer relationships and are generally lower cost than time deposits.  The cost of interest bearing deposits increased to 0.42% in the first quarter 2018 from 0.36% in the first quarter 2017.  The cost of core deposits, including demand, remained flat at 0.13% over this same time frame.  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."

For the first quarter 2018, return on average assets and return on average equity were 1.23% and 13.07%, respectively, compared to 0.91% and 10.17% for the first quarter 2017.  Diluted earnings per share were $0.153 for the first quarter 2018, compared to $0.114 for the first quarter 2017.  Overall expense control remains a key area of focus.  Total operating expenses increased by $136 thousand in the first quarter 2018 as compared to the first quarter 2017, with relatively modest increases in several categories mostly offset by declines other categories.  The modest increase in expenses was more than offset by a $1.9 million increase in revenue (net interest income plus non-interest income).  The effective tax rate was 24.2% in the first quarter of 2018, compared to 37.5% in the year ago period, reflecting the Tax Cuts and Jobs Act.

"While some banks have backed away from branches, a customer-friendly branch franchise continues to be the key to our long term plans.  We continue to make good progress expanding loans and deposits throughout our entire branch network.  We expect that trend to continue as the newer branches continue to mature."

"At March 31, 2018, our average deposits per branch were $29.2 million, compared to $28.8 million at December 31, 2017.  While total deposit growth is important, TrustCo strives to maximize customer relationships through attracting and increasing core deposit balances.  We have always designed our branches to be smaller and more cost effective than those built by many of our competitors.  We use open floor plans that help maximize the value of our branches.  We remain mindful that fully achieving our goals for newer branches will take time and continued work.  We believe success in growing customer relationships provides basic building blocks that will help drive profit growth for the coming years."

Asset quality and loan loss reserve measures continued to improve.  Nonperforming loans (NPLs) were $24.9 million at March 31, 2018, compared to $26.4 million at March 31, 2017.  NPLs were equal to 0.68% of total loans at March 31, 2018, compared to 0.77% at March 31, 2017.  The coverage ratio, or allowance for loan losses to NPLs, was 178.6% at March 31, 2018, compared to 166.7% at March 31, 2017.  Nonperforming assets (NPAs) were $27.0 million at March 31, 2018 compared to $29.6 million at March 31, 2017.  The ratio of loan loss allowance to total loans was 1.21% as of March 31, 2018, compared to 1.28% at March 31, 2017 and reflects both the improvement in asset quality and economic conditions in our lending areas.  The allowance for loan losses was $44.4 million at March 31, 2018 compared to $44.0 million at March 31, 2017.  The provision for loan losses was $300 thousand for the first quarter 2018, compared to $600 thousand in the first quarter 2017.  Net chargeoffs for the first quarter 2018 decreased versus the first quarter 2017, falling to $90 thousand from $442 thousand in the year earlier period.  The annualized net chargeoff ratio was 0.01% for the first quarter 2018, compared to 0.05% in the first quarter 2017. 

The net interest margin for the first quarter 2018 was 3.29%, up 15 basis points versus the first quarter 2017, as increases in short term interest rates led to significantly higher earnings on cash, while slightly better returns were also achieved in the investment portfolio.  Loan yields flat, but  higher volumes increased interest income.  During the same period, the cost of interest bearing liabilities increased six basis points.

At March 31, 2018 the equity to asset ratio was 9.37%, compared to 8.98% at March 31, 2017.  Book value per share at March 31, 2018 was $4.80 compared to $4.57 a year earlier.

TrustCo Bank Corp NY is a $4.9 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 145 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at March 31, 2018.

In addition, the Bank's Financial Services Department offers a full range of investment services, retirement planning and trust and estate administration services. The common shares of TrustCo are traded on the NASDAQ Global Select Market under the symbol TRST.

A conference call to discuss fourth quarter 2017 results will be held at 9:00 a.m. Eastern Time on April 24, 2018.  Those wishing to participate in the call may dial toll-free 1-888-339-0764.  International callers must dial 1-412-902-4195.   Please ask to be joined into the TrustCo Bank Corp NY / TRST call.  A replay of the call will be available for thirty days by dialing 1-877-344-7529 (1-412-317-0088 for international callers), Conference Number 10119261. The call will also be audio webcast at: http://services.choruscall.com/links/trst180424.html, and will be available for one year. 

Safe Harbor Statement 
All statements in this news release that are not historical are forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended.  Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding our expectations for our performance during 2018, the impact of Federal Reserve actions regarding interest rates and the growth of loans and deposits throughout our branch network, our ability to capitalize on economic changes in the areas in which we operate and the extent to which higher expenses to fulfill operating and regulatory requirements recur or diminish over time.  Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo's actual results and could cause TrustCo's actual financial performance to differ materially from that expressed in any forward-looking statement:  our ability to continue to originate a significant volume of one-to-four family mortgage loans in our market areas; our ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income; our ability to comply with the supervisory agreement entered into with Trustco Bank's regulator and potential regulatory actions if we fail to comply; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of Trustco Bank and the continued ability of Trustco Bank under regulatory rules and the supervisory agreement to distribute capital to TrustCo, which could affect our ability to pay dividends; results of supervisory monitoring or examinations of Trustco Bank and TrustCo by our respective regulators; our ability to make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; adverse conditions on the securities markets that lead to impairment in the value of securities in our investment portfolio; changes in law and policy accompanying the new presidential administration and uncertainty or speculation pending the enactment of such changes; the perceived overall value of our products and services by users, including in comparison to competitors' products and services and the willingness of current and prospective customers to substitute competitors' products and services for our products and services; changes in consumer spending, borrowing and saving habits; technological changes and electronic, cyber, and physical security breaches; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading "Risk Factors" in our most recent annual report on Form 10-K and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.

 

               
TRUSTCO BANK CORP NY              
GLENVILLE, NY              
               
FINANCIAL HIGHLIGHTS              
               
(dollars in thousands, except per share data)              
(Unaudited)              
    Three Months Ended      
    03/31/18 12/31/17 03/31/17      
Summary of operations              
  Net interest income (TE) $   39,319     39,259     37,413        
  Provision for loan losses     300     300     600        
  Noninterest income     4,679     4,288     4,727        
  Noninterest expense     24,155     23,536     24,019        
  Net income     14,808     7,362     10,947        
               
Per common share              
  Net income per share:              
     - Basic $   0.154     0.077     0.114        
     - Diluted     0.153     0.076     0.114        
  Cash dividends     0.066     0.066     0.066        
  Book value at period end     4.80     4.75     4.57        
  Market price at period end     8.45     9.20     7.85        
               
At period end              
  Full time equivalent employees   827   846   802        
  Full service banking offices   145   145   144        
               
Performance ratios              
  Return on average assets   1.23 %   0.60     0.91        
  Return on average equity   13.07   6.38   10.17        
  Efficiency (1)   54.05   53.13   55.81        
  Net interest spread (TE)   3.22   3.22   3.08        
  Net interest margin (TE)   3.29   3.29   3.14        
  Dividend payout ratio   42.70   85.81   57.47        
               
Capital ratios at period end              
  Consolidated equity to assets   9.37 %   9.34     8.98        
  Consolidated tangible equity to tangible assets (2)   9.36 %   9.33     8.97        
               
Asset quality analysis at period end              
  Nonperforming loans to total loans   0.68   0.67   0.77        
  Nonperforming assets to total assets   0.55   0.56   0.61        
  Allowance for loan losses to total loans   1.21   1.21   1.28        
  Coverage ratio (3)   1.8x   1.8x   1.7x        
               
               
(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.              
               
               
               
CONSOLIDATED STATEMENTS OF INCOME              
               
(dollars in thousands, except per share data)              
(Unaudited)              
    Three Months Ended  
    3/31/2018 12/31/2017 9/30/2017 6/30/2017 3/31/2017  
Interest and dividend income:               
Interest and fees on loans $   38,091     37,914     37,513     36,662     36,044    
Interest and dividends on securities available for sale:               
  U. S. government sponsored enterprises     750     614     465     607     595    
  State and political subdivisions      7     10     6     11     12    
  Mortgage-backed securities and collateralized mortgage obligations-residential     1,763     1,730     1,815     1,944     1,958    
  Corporate bonds     133     148     153     154     151    
  Small Business Administration-guaranteed participation securities     352     358     380     394     415    
  Mortgage-backed securities and collateralized mortgage obligations-commercial     42     43     22     21     23    
  Other securities     5     4     4     4     4    
    Total interest and dividends on securities available for sale     3,052     2,907     2,845     3,135     3,158    
               
Interest on held to maturity securities:               
  Mortgage-backed securities and collateralized mortgage obligations-residential     260     261     276     296     316    
  Corporate bonds     -     -     102     154     154    
    Total interest on held to maturity securities     260     261     378     450     470    
               
  Federal Reserve Bank and Federal Home Loan Bank stock     77     151     125     134     134    
               
Interest on federal funds sold and other short-term investments     2,017     1,779     1,927     1,727     1,246    
    Total interest income     43,497     43,012     42,788     42,108     41,052    
               
Interest expense:               
  Interest on deposits:               
  Interest-bearing checking     106     107     113     134     124    
  Savings     419     429     435     435     430    
  Money market deposit accounts     439     457     469     468     466    
  Time deposits     2,860     2,412     2,247     2,181     2,283    
  Interest on short-term borrowings     358     359     345     349     349    
    Total interest expense     4,182     3,764     3,609     3,567     3,652    
               
      Net interest income     39,315     39,248     39,179     38,541     37,400    
               
Provision for loan losses     300     300     550     550     600    
Net interest income after provision for loan losses      39,015     38,948     38,629     37,991     36,800    
               
Noninterest income:              
  Trustco Financial Services income     1,815     1,457     1,844     1,425     1,858    
  Fees for services to customers     2,645     2,597     2,767     2,797     2,637    
  Net gain on securities transactions     -     -     -     -     -    
  Other     219     234     243     282     232    
    Total noninterest income     4,679     4,288     4,854     4,504     4,727    
               
Noninterest expenses:               
  Salaries and employee benefits     10,422     10,536     10,360     9,559     10,210    
  Net occupancy expense     4,315     4,140     4,027     4,267     4,109    
  Equipment expense     1,751     1,465     1,669     1,428     1,556    
  Professional services     1,430     1,325     1,679     1,963     1,928    
  Outsourced services     1,925     1,760     1,650     1,500     1,500    
  Advertising expense     630     559     699     607     713    
  FDIC and other insurance     1,023     1,102     1,018     1,012     1,047    
  Other real estate expense, net     372     401     275     (4 )   499    
  Other     2,287     2,248     2,149     2,581     2,457    
    Total noninterest expenses     24,155     23,536     23,526     22,913     24,019    
               
Income before taxes     19,539     19,700     19,957     19,582     17,508    
Income taxes     4,731     12,338     7,361     7,342     6,561    
               
Net income $   14,808     7,362     12,596     12,240     10,947    
Net income per common share:               
      - Basic $ 0.154   0.077   0.131   0.127   0.114    
               
      - Diluted   0.153   0.076   0.131   0.127   0.114    
               
Average basic shares (in thousands)     96,353     96,230     96,102     96,003     95,879    
Average diluted shares (in thousands)     96,490     96,393     96,205     96,073     95,987    
               
Note:  Taxable equivalent net interest income $   39,319     39,259     39,190     38,553     37,413    
               
               
               
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION              
               
(dollars in thousands)              
(Unaudited)              
               
               
    3/31/2018 12/31/2017 9/30/2017 6/30/2017 3/31/2017  
  ASSETS:              
               
Cash and due from banks $ 39,373   44,125   41,598   43,783   41,352    
Federal funds sold and other short term investments     577,797   568,615   582,599   663,360   641,839    
  Total cash and cash equivalents     617,170   612,740   624,197   707,143   683,191    
             
Securities available for sale:            
  U. S. government sponsored enterprises     151,327   137,994   123,658   128,386   162,341    
  States and political subdivisions     525   525   534   536   887    
  Mortgage-backed securities and collateralized mortgage obligations-residential     297,633   315,840   335,530   352,591   357,683    
  Small Business Administration-guaranteed participation securities   64,113   67,059   69,818   72,858   75,429    
  Mortgage-backed securities and collateralized mortgage obligations-commercial     9,573   9,700   9,824   9,903   9,923    
  Corporate bonds   35,227   40,162     40,381     40,498   40,612    
  Other securities     685   685   685   685   685    
    Total securities available for sale     559,083   571,965   580,430   605,457   647,560    
               
Held to maturity securities:              
  Mortgage-backed securities and collateralized mortgage obligations-residential   26,174   27,551   29,268   31,211   33,276    
  Corporate bonds   0   0   0   9,997   9,994    
    Total held to maturity securities   26,174   27,551   29,268   41,208   43,270    
               
Federal Reserve Bank and Federal Home Loan Bank stock   8,779   8,779   8,779   9,723   9,579    
             
Loans:            
  Commercial     185,129   186,207   187,281   183,035   184,451    
  Residential mortgage loans     3,171,548   3,132,521   3,070,970   2,999,306   2,929,928    
  Home equity line of credit     301,885   308,916   311,753   316,674   326,280    
  Installment loans     8,413   8,763   8,278   8,458   8,277    
Loans, net of deferred net costs     3,666,975   3,636,407   3,578,282   3,507,473   3,448,936    
Less:            
  Allowance for loan losses     44,379   44,170   44,082   44,162   44,048    
  Net loans     3,622,596   3,592,237   3,534,200   3,463,311   3,404,888    
               
Bank premises and equipment, net     35,240   35,157   35,028   35,174   35,175    
Other assets     62,522   59,579   58,373   58,466   63,080    
             
    Total assets $ 4,931,564   4,908,008   4,870,275   4,920,482   4,886,743    
             
  LIABILITIES:            
Deposits:            
  Demand $ 403,782   398,399   397,623   390,120   373,930    
  Interest-bearing checking     915,163   891,052   862,067   871,004   838,936    
  Savings accounts     1,266,852   1,260,447   1,265,229   1,285,886   1,287,802    
  Money market deposit accounts     539,839   556,462   564,557   572,580   583,909    
  Time deposits     1,109,444   1,066,966   1,075,886   1,088,824   1,113,892    
    Total deposits     4,235,080   4,173,326   4,165,362   4,208,414   4,198,469    
             
Short-term borrowings     203,910   242,991   216,508   233,621   220,946    
Accrued expenses and other liabilities     30,477   33,383   33,477   31,081   28,628    
             
    Total liabilities     4,469,467   4,449,700   4,415,347   4,473,116   4,448,043    
             
  SHAREHOLDERS' EQUITY:            
Capital stock     100,002   99,998   99,562   99,511   99,493    
Surplus     175,674   175,651   172,712   172,603   172,628    
Undivided profits     229,267   219,436   218,401   212,112   206,173    
Accumulated other comprehensive loss, net of tax     (8,490 ) (1,806 ) (3,060 ) (3,593 ) (5,568 )  
Treasury stock at cost   (34,356 ) (34,971 ) (32,687 ) (33,267 ) (34,026 )  
             
    Total shareholders' equity   462,097   458,308   454,928   447,366   438,700    
               
    Total liabilities and shareholders' equity $ 4,931,564   4,908,008   4,870,275   4,920,482   4,886,743    
               
Outstanding shares (in thousands)     96,359     96,289     96,108     96,015     95,917    
               


             
NONPERFORMING ASSETS            
             
(dollars in thousands)            
(Unaudited)            
             
Nonperforming Assets            
    03/31/18 12/31/17 09/30/17 06/30/17 03/31/17
New York and other states*            
Loans in nonaccrual status:            
  Commercial $ 1,213   1,543   1,696   1,711   1,858  
  Real estate mortgage - 1 to 4 family   21,424   20,350   20,926   20,639   22,772  
  Installment   19   57   30   25   41  
Total non-accrual loans   22,656   21,950   22,652   22,375   24,671  
Other nonperforming real estate mortgages - 1 to 4 family   38   38   40   41   41  
Total nonperforming loans   22,694   21,988   22,692   22,416   24,712  
Other real estate owned   2,190   3,246   2,879   3,585   3,191  
Total nonperforming assets $ 24,884   25,234   25,571   26,001   27,903  
             
Florida            
Loans in nonaccrual status:            
  Commercial $ -   -   -   -   -  
  Real estate mortgage - 1 to 4 family   2,154   2,389   1,895   2,112   1,712  
  Installment   4   -   -   -   -  
Total non-accrual loans   2,158   2,389   1,895   2,112   1,712  
Other nonperforming real estate mortgages - 1 to 4 family   -   -   -   -   -  
Total nonperforming loans   2,158   2,389   1,895   2,112   1,712  
Other real estate owned   -   -   -   -   -  
Total nonperforming assets $ 2,158   2,389   1,895   2,112   1,712  
             
Total            
Loans in nonaccrual status:            
  Commercial $ 1,213   1,543   1,696   1,711   1,858  
  Real estate mortgage - 1 to 4 family   23,578   22,739   22,821   22,751   24,484  
  Installment   23   57   30   25   41  
Total non-accrual loans   24,814   24,339   24,547   24,487   26,383  
Other nonperforming real estate mortgages - 1 to 4 family   38   38   40   41   41  
Total nonperforming loans   24,852   24,377   24,587   24,528   26,424  
Other real estate owned   2,190   3,246   2,879   3,585   3,191  
Total nonperforming assets $ 27,042   27,623   27,466   28,113   29,615  
             
             
Quarterly Net Chargeoffs (Recoveries)            
    03/31/18 12/31/17 09/30/17 06/30/17 03/31/17
New York and other states*            
Commercial $ (6 ) (86 ) (2 ) -   64  
Real estate mortgage - 1 to 4 family   28   249   613   334   261  
Installment   66   50   56   37   31  
  Total net chargeoffs $ 88   213   667   371   356  
             
Florida            
Commercial $ -   -   -   -   -  
Real estate mortgage - 1 to 4 family   -   (1 ) (41 ) 52   84  
Installment   2   -   4   13   2  
  Total net chargeoffs $ 2   (1 ) (37 ) 65   86  
             
Total            
Commercial $ (6 ) (86 ) (2 ) -   64  
Real estate mortgage - 1 to 4 family   28   248   572   386   345  
Installment   68   50   60   50   33  
  Total net chargeoffs $ 90   212   630   436   442  
             
             
Asset Quality Ratios            
    03/31/18 12/31/17 09/30/17 06/30/17 03/31/17
             
Total nonperforming loans(1) $ 24,852   24,377   24,587   24,528   26,424  
Total nonperforming assets(1)   27,042   27,623   27,466   28,113   29,615  
Total net chargeoffs(2)   90   212   630   436   442  
             
Allowance for loan losses(1)   44,379   44,170   44,082   44,162   44,048  
             
Nonperforming loans to total loans   0.68 % 0.67 % 0.69 % 0.70 % 0.77 %
Nonperforming assets to total assets   0.55 % 0.56 % 0.56 % 0.57 % 0.61 %
Allowance for loan losses to total loans   1.21 % 1.21 % 1.23 % 1.26 % 1.28 %
Coverage ratio(1)   178.6 % 181.2 % 179.3 % 180.0 % 166.7 %
Annualized net chargeoffs to average loans(2)   0.01 % 0.02 % 0.07 % 0.05 % 0.05 %
Allowance for loan losses to annualized net chargeoffs(2)   123.3x   52.1x   17.5x   25.3x   24.9x  
             
* 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)   March 31, 2018     March 31, 2017  
    Average   Interest Average     Average   Interest Average  
    Balance     Rate     Balance     Rate  
                         
Assets                        
                         
Securities available for sale:                        
U. S. government sponsored enterprises $ 156,593     750   1.92 % $ 142,495     595   1.67 %
Mortgage backed securities and                        
  collateralized mortgage obligations-residential   313,753     1,763   2.25     367,956     1,958   2.13  
State and political subdivisions   515     10   7.81     873     19   8.71  
Corporate bonds     33,297       133   1.60       41,580       151   1.45  
Small Business Administration-guaranteed participation securities   67,106     352   2.10     78,591     415   2.11  
Mortgage backed securities and                        
  collateralized mortgage obligations-commercial   9,775     42   1.71     10,089     23   0.91  
Other   685     5   2.52     685     4   2.34  
                         
  Total securities available for sale   581,724     3,055   2.12     642,269     3,165   1.97  
                         
Federal funds sold and other                        
 short-term Investments   528,947     2,017   1.55     641,126     1,246   0.78  
                         
Held to maturity securities:                        
Corporate bonds     -        -    -     9,992     154   6.16  
Mortgage backed securities and                        
  collateralized mortgage obligations-residential   26,799     260   3.88     34,303     316   3.68  
                         
  Total held to maturity securities   26,799     260   3.88     44,295     470   4.24  
                         
Federal Reserve Bank and Federal Home Loan Bank stock   8,779     77   6.00     9,579     134   5.60  
                         
Commercial loans   185,646     2,420   5.21     187,590     2,429   5.18  
Residential mortgage loans   3,148,735     32,257   4.11     2,911,987     30,367   4.17  
Home equity lines of credit   306,290     3,210   4.25     330,338     3,085   3.74  
Installment loans   8,365     205   9.90     8,228     169   8.22  
                         
Loans, net of unearned income   3,649,036     38,092   4.19     3,438,143     36,050   4.19  
                         
  Total interest earning assets   4,795,285     43,501   3.64     4,775,412     41,065   3.44  
                         
Allowance for loan losses   (44,393 )           (44,236 )        
Cash & non-interest earning assets   124,867             130,186          
                         
                         
Total assets $ 4,875,759           $ 4,861,362          
                         
                         
Liabilities and shareholders' equity                        
                         
Deposits:                        
Interest bearing checking accounts $ 877,776     106   0.05 % $ 809,039     124   0.06 %
Money market accounts   547,136     439   0.33     580,006     466   0.32  
Savings   1,260,360     419   0.13     1,274,757     430   0.13  
Time deposits   1,080,893     2,860   1.07     1,133,942     2,283   0.81  
                         
  Total interest bearing deposits   3,766,165     3,824   0.41     3,797,744     3,303   0.35  
Short-term borrowings   234,384     358   0.62     229,719     349   0.61  
                         
  Total interest bearing liabilities   4,000,549     4,182   0.42     4,027,463     3,652   0.36  
                         
Demand deposits   386,563             370,552          
Other liabilities   29,129             26,781          
Shareholders' equity   459,519             436,566          
                         
Total liabilities and shareholders' equity $ 4,875,760           $ 4,861,362          
                         
Net interest income, tax equivalent       39,319             37,413      
                         
Net interest spread         3.22 %         3.08 %
                         
Net interest margin (net interest income                        
to total interest earning assets)         3.29 %         3.14 %
                         
Tax equivalent adjustment       (4 )           (13 )    
                         
                         
  Net interest income        39,315             37,400      
                         


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)        
    03/31/18 12/31/17 03/31/17
         
Tangible Equity to Tangible Assets        
Total Assets   4,931,564   4,908,008   4,886,743  
Less: Intangible assets   553   553   553  
  Tangible assets   4,931,011   4,907,455   4,886,190  
         
Equity $ 462,097   458,308   438,700  
Less: Intangible assets   553   553   553  
  Tangible equity   461,544   457,755   438,147  
Tangible Equity to Tangible Assets   9.36 % 9.33 % 8.97 %
Equity to Assets   9.37 % 9.34 % 8.98 %
         
    3 Months Ended
Efficiency Ratio   03/31/18 12/31/17 03/31/17
         
Net interest income (fully taxable equivalent) $ 39,319   39,259   37,413  
Non-interest income   4,679   4,288   4,727  
Revenue used for efficiency ratio   43,998   43,547   42,140  
  Recurring expense   24,155   23,536   24,019  
Less:  Other real estate expense, net   372   401   499  
Expense used for efficiency ratio   23,783   23,135   23,520  
         
Efficiency Ratio   54.05 % 53.13 % 55.81 %
         


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

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