EX-99.(A) 2 ex99_a.htm EXHIBIT 99 (A)
Exhibit 99 (a)
 
News Release
5 Sarnowski Drive, Glenville, New York, 12302
(518) 377-3311          Fax:  (518) 381-3668

Subsidiary: Trustco Bank
NASDAQ -- TRST

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

FOR IMMEDIATE RELEASE:

TrustCo Announces Second Quarter 2019 Results;
Net Income of $14.7 Million and 6.0% Average Residential Loan Growth Year over Year

Glenville, New York – July 22, 2019
 
TrustCo Bank Corp NY (TrustCo, NASDAQ: TRST) · TrustCo Bank Corp NY today announced second quarter 2019 net income of $14.7 million or $0.151 diluted earnings per share compared to $15.4 million or $0.160 diluted earnings per share in the second quarter of 2018 despite an increase of $4.8 million in interest expense during the same time period. Similar results were noted during the six month period wherein net income was $29.2 million for the six months ended June 30, 2019 versus $30.2 million for the same period in 2018 while total interest expense increased by $8.3 million.

Summary

Robert J. McCormick, Chairman, President and Chief Executive Officer noted, “Balanced growth of loans and deposits during the second quarter helped preserve our strong liquidity position while at the same time mitigated the impact of margin compression.” Average loans grew by 4.8% and average deposits increased 4.7% for the second quarter of 2019 compared to the second quarter 2018.  Commenting on this growth Mr. McCormick noted “Flexible balance sheet management and our strong liquidity position allows us to invest in our traditional market leading real estate products while retaining our core deposit centered base.  I am pleased with these results and I believe this positions us well for the remainder of this year and beyond.”

The quarter also reflected the sale of the Company’s remaining credit card portfolio which resulted in a gain of approximately $176 thousand and reduced the required loan loss reserve allocated to this portfolio by approximately $540 thousand. The negative second quarter 2019 provision for loan losses of $341 thousand includes a reduction in the allocated reserve and the normal quarterly provision for loan losses of approximately $200 thousand.

1
Details

Average loans were up $176.6 million or 4.8% in the second quarter 2019 over the same period in 2018.  Average residential loans, our primary lending focus, were up $191.1 million or 6.0% in the second quarter 2019, over the same period in 2018.  Average deposits are up $197.7 million or 4.7% for the second quarter 2019 over the same period a year earlier.  The increase in deposits was the result of a $301.5 million or 26.5% increase in average time deposits versus the same period last year.  Excluding time deposits, total average core deposit accounts, which consist of checking, savings and money market deposits, were down $103.7 million or 3.4% for the second quarter 2019 compared to the second quarter 2018.

The Federal Open Market Committee (FOMC) increased short term rates 100 basis points from June 2018 to June 2019 while the cost of our interest bearing liabilities increased only 44 basis points over the same period.  The cost of interest bearing liabilities increased to 0.91% in the second quarter 2019 from 0.47% in the second quarter 2018.  The cost of savings and interest bearing checking remained relatively flat over the same time frame.  Money market deposits increased 46 basis points to 0.81% versus 0.35% from the second quarter 2018. A significant portion of our CD portfolio is expected to reprice during the third and fourth quarter at which point current market rates may be lower. The net interest spread for the second quarter 2019 was 2.95%, down 29 basis points from 3.24% in the second quarter of 2018.  Net interest income (TE) decreased by 2.3% or $927 thousand versus the same period last year.  Because we offered competitive shorter term rates, we would expect margin to begin to stabilize in the latter part of 2019 particularly in third and fourth quarter as our shorter term time deposits could reprice lower and provide opportunity for increased margin expansion.

The Bank continued to demonstrate its ability to grow shareholders’ equity as average equity was up $41.4 million or 8.9% in the second quarter of 2019 compared to the same period in 2018.  On this expanded equity, return on average assets and return on average equity for the second quarter 2019 were 1.14% and 11.60%, respectively, compared to 1.26% and 13.26% for the second quarter 2018.  Improving efficiencies to reduce costs continues to remain a key area of focus.  Total operating expenses increased by $807 thousand or 3.3% in the second quarter 2019 as compared to the second quarter 2018, driven by an increase in salaries and employee benefits, partially offset by a 13.6% decline in professional services costs.  The growth in salaries and benefit expense was the result of our targeted effort to hire and retain talent.

2
Asset quality and loan loss reserve measures continued to improve.  Nonperforming loans (NPLs) were $22.1 million at June 30, 2019, compared to $24.2 million at June 30, 2018.  NPLs were 0.57% of total loans at June 30, 2019, compared to 0.65% at June 30, 2018.  The coverage ratio, or allowance for loan losses to NPLs, was 200.4% at June 30, 2019, compared to 184.2% at June 30, 2018.  Nonperforming assets (NPAs) were $24.8 million at June 30, 2019 compared to $26.7 million at June 30, 2018.  The ratio of allowance for loan losses to total loans was 1.14% as of June 30, 2019, compared to 1.19% at June 30, 2018 which reflects both the improvement in asset quality and economic conditions in our lending areas.  The allowance for loan losses was $44.4 million at June 30, 2019 compared to $44.5 million at June 30, 2018.  The provision for loan losses decreased reflecting continued strong credit performance within the loan portfolio and the sale of the credit card portfolio which yielded $541 thousand or 1.2% decrease in the reserve.   Net recoveries for the second quarter 2019 were $35 thousand versus a net chargeoffs in the second quarter 2018 of $176 thousand driven by the settlement of the non performing loan sale.  The annualized net chargeoffs ratio was 0.00% for the second quarter 2019, compared to 0.02% in the second quarter 2018.

At June 30, 2019 the tangible equity to tangible asset ratio was 9.85%, compared to 9.52% at June 30, 2018.  As mentioned earlier, the Bank is proud of its ability to grow shareholder equity.  Book value per share at June 30, 2019 was $5.32, up 9.24% compared to $4.87 a year earlier.

TrustCo Bank Corp NY is a $5.2 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 148 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at June 30, 2019.

In addition, the Bank’s Financial Services Department offers a full range of investment services, retirement planning and trust and estate administration services.  The common shares of TrustCo are traded on the NASDAQ Global Select Market under the symbol TRST.
 
A conference call to discuss second quarter 2019 results will be held at 9:00 a.m. Eastern Time on July 23, 2019.  Those wishing to participate in the call may dial toll-free 1-888-339-0764.  International callers must dial 1-412-902-4195.  Please ask to be joined into the TrustCo Bank Corp NY / TRST call.  A replay of the call will be available for thirty days by dialing 1-877-344-7529 (1-412-317-0088 for international callers), Conference Number 10133313.  The call will also be audio webcast at: https://services.choruscall.com/links/trst190723.html, and will be available for one year.
 
3
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 make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of us and Trustco Bank and the continued receipt of approvals from our primary federal banking regulators under regulatory rules to distribute capital to TrustCo, which could affect our ability to pay dividends; results of supervisory monitoring or examinations of Trustco Bank and TrustCo by our respective regulators; adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; unanticipated effects from the Tax Cut and Jobs Act that may limit its benefits or adversely impact our business;  the perceived overall value of our products and services by users, including in comparison to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for our products and services; changes in consumer spending, borrowing and saving habits; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; changes in management personnel; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions; technological changes and electronic, cyber and physical security breaches; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading “Risk Factors” in our most recent annual report on Form 10-K and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.

4
TRUSTCO BANK CORP NY
GLENVILLE, NY

FINANCIAL HIGHLIGHTS

(dollars in thousands, except per share data)
(Unaudited)

   
Three months ended
  
   
6/30/2019
    
3/31/2019
    
6/30/2018
  
Summary of operations
                  
Net interest income (TE)
  
$
39,192
      
39,733
      
40,119
  
(Credit) Provision for loan losses
    
(341
)
    
300
      
300
  
Noninterest income
    
4,914
      
4,637
      
4,495
  
Noninterest expense
    
24,902
      
24,867
      
24,095
  
Net income
    
14,667
      
14,558
      
15,405
  
                         
Per common share
                        
Net income per share:
                        
- Basic
  
$
0.152
      
0.150
      
0.160
  
- Diluted
    
0.151
      
0.150
      
0.160
  
Cash dividends
    
0.068
      
0.068
      
0.066
  
Book value at period end
    
5.32
      
5.18
      
4.87
  
Market price at period end
    
7.92
      
7.76
      
8.90
  
                         
At period end
                        
Full time equivalent employees
    
858
      
899
      
829
  
Full service banking offices
    
148
      
148
      
148
  
                         
Performance ratios
                        
Return on average assets
    
1.14
%
    
1.17
      
1.26
  
Return on average equity
    
11.60
      
11.93
      
13.26
  
Efficiency (1)
    
55.98
      
56.10
      
53.35
  
Net interest spread (TE)
    
2.95
      
3.11
      
3.24
  
Net interest margin (TE)
    
3.11
      
3.24
      
3.32
  
Dividend payout ratio
    
44.94
      
45.23
      
41.08
  
                         
Capital ratios at period end
                        
Consolidated tangible equity to tangible assets (2)
    
9.85
%
    
9.72
      
9.52
  
Consolidated equity to assets
    
9.86
%
    
9.73
      
9.53
  
                         
Asset quality analysis at period end
                        
Nonperforming loans to total loans
    
0.57
      
0.64
      
0.65
  
Nonperforming assets to total assets
    
0.47
      
0.50
      
0.54
  
Allowance for loan losses to total loans
    
1.14
      
1.16
      
1.19
  
Coverage ratio (3)
    
2.0
x
    
1.8
x
    
1.8
x

(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

5
FINANCIAL HIGHLIGHTS, Continued

(dollars in thousands, except per share data)
(Unaudited)

   
Six months ended
  
   
06/30/19
    
06/30/18
  
Summary of operations
            
Net interest income (TE)
  
$
78,925
      
79,431
  
(Credit) Provision for loan losses
    
(41
)
    
600
  
Noninterest income
    
9,551
      
9,174
  
Noninterest expense
    
49,769
      
48,250
  
Net income
    
29,225
      
30,213
  
                 
Per common share
                
Net income per share:
                
- Basic
  
$
0.302
      
0.313
  
- Diluted
    
0.302
      
0.313
  
Cash dividends
    
0.136
      
0.131
  
Tangible Book value at period end
    
5.32
      
4.87
  
Market price at period end
    
7.92
      
8.90
  
                 
Performance ratios
                
Return on average assets
    
1.15
      
1.24
  
Return on average equity
    
11.76
      
13.17
  
Efficiency (1)
    
56.04
      
53.70
  
Net interest spread (TE)
    
3.03
      
3.23
  
Net interest margin (TE)
    
3.17
      
3.30
  
Dividend payout ratio
    
45.08
      
41.87
  

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

TE = Taxable equivalent.

6
CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)
(Unaudited)

   
Three months ended
  
   
6/30/2019
    
3/31/2019
    
12/31/2018
    
9/30/2018
    
6/30/2018
  
Interest and dividend income:
                              
Interest and fees on loans
  
$
41,432
      
41,253
      
41,184
      
40,073
      
38,956
  
Interest and dividends on securities available for sale:
                                        
U. S. government sponsored enterprises
    
821
      
783
      
788
      
787
      
787
  
State and political subdivisions
    
3
      
1
      
2
      
7
      
6
  
Mortgage-backed securities and collateralized mortgage obligations - residential
    
2,152
      
1,555
      
1,554
      
1,601
      
1,675
  
Corporate bonds
    
272
      
208
      
202
      
202
      
150
  
Small Business Administration - guaranteed participation securities
    
289
      
297
      
329
      
325
      
333
  
Mortgage-backed securities and collateralized mortgage obligations - commercial
    
-
      
-
      
-
      
-
      
(5
)
Other securities
    
5
      
5
      
5
      
4
      
4
  
Total interest and dividends on securities available for sale
    
3,542
      
2,849
      
2,880
      
2,926
      
2,950
  
                                         
Interest on held to maturity securities:
                                        
Mortgage-backed securities and collateralized mortgage obligations - residential
    
209
      
217
      
226
      
232
      
244
  
Total interest on held to maturity securities
    
209
      
217
      
226
      
232
      
244
  
                                         
Federal Reserve Bank and Federal Home Loan Bank stock
    
199
      
85
      
207
      
82
      
198
  
                                         
Interest on federal funds sold and other short-term investments
    
3,282
      
3,009
      
2,367
      
2,425
      
2,467
  
Total interest income
    
48,664
      
47,413
      
46,864
      
45,738
      
44,815
  
                                         
Interest expense:
                                        
Interest on deposits:
                                        
Interest-bearing checking
    
94
      
121
      
111
      
113
      
112
  
Savings
    
367
      
377
      
401
      
417
      
420
  
Money market deposit accounts
    
1,119
      
826
      
618
      
544
      
452
  
Time deposits
    
7,512
      
5,976
      
4,643
      
3,864
      
3,439
  
Interest on short-term borrowings
    
381
      
381
      
352
      
277
      
283
  
Total interest expense
    
9,473
      
7,681
      
6,125
      
5,215
      
4,706
  
                                         
Net interest income
    
39,191
      
39,732
      
40,739
      
40,523
      
40,109
  
 
                                        
Less: (Credit) Provision for loan losses
    
(341
)
    
300
      
500
      
300
      
300
  
Net interest income after provision for loan losses
    
39,532
      
39,432
      
40,239
      
40,223
      
39,809
  
                                         
Noninterest income:
                                        
Trustco Financial Services income
    
1,683
      
1,733
      
1,356
      
1,516
      
1,596
  
Fees for services to customers
    
2,611
      
2,520
      
2,897
      
2,693
      
2,677
  
Other
    
620
      
384
      
199
      
246
      
222
  
Total noninterest income
    
4,914
      
4,637
      
4,452
      
4,455
      
4,495
  
                                         
Noninterest expenses:
                                        
Salaries and employee benefits
    
11,711
      
11,451
      
10,183
      
10,761
      
10,741
  
Net occupancy expense
    
4,006
      
4,167
      
4,800
      
3,997
      
4,101
  
Equipment expense
    
1,709
      
1,902
      
1,741
      
1,783
      
1,793
  
Professional services
    
1,568
      
1,650
      
1,733
      
1,578
      
1,814
  
Outsourced services
    
1,875
      
1,925
      
1,875
      
1,875
      
1,825
  
Advertising expense
    
778
      
785
      
876
      
844
      
670
  
FDIC and other insurance
    
598
      
648
      
522
      
682
      
514
  
Other real estate (income) expense, net
    
210
      
(24
)
    
37
      
528
      
294
  
Other
    
2,447
      
2,363
      
3,152
      
2,496
      
2,343
  
Total noninterest expenses
    
24,902
      
24,867
      
24,919
      
24,544
      
24,095
  
                                         
Income before taxes
    
19,544
      
19,202
      
19,772
      
20,134
      
20,209
  
Income taxes
    
4,877
      
4,644
      
3,739
      
4,935
      
4,804
  
                                         
Net income
  
$
14,667
      
14,558
      
16,033
      
15,199
      
15,405
  
                                         
Net income per common share:
                                        
- Basic
  
$
0.152
      
0.150
      
0.166
      
0.157
      
0.160
  
 
                                        
- Diluted
    
0.151
      
0.150
      
0.166
      
0.157
      
0.160
  
                                         
Average basic shares (in thousands)
    
96,822
      
96,744
      
96,555
      
96,555
      
96,449
  
Average diluted shares (in thousands)
    
96,891
      
96,822
      
96,689
      
96,689
      
96,580
  
                                         
Note:  Taxable equivalent net interest income
  
$
39,192
      
39,733
      
40,740
      
40,526
      
40,119
  

7
CONSOLIDATED STATEMENTS OF INCOME, Continued

(dollars in thousands, except per share data)
(Unaudited)

   
Six months ended
  
   
06/30/19
    
06/30/18
  
Interest and dividend income:
            
Interest and fees on loans
  
$
82,685
      
77,047
  
Interest and dividends on securities available for sale:
                
U. S. government sponsored enterprises
    
1,604
      
1,537
  
State and political subdivisions
    
4
      
13
  
Mortgage-backed securities and collateralized mortgage obligations - residential
    
3,707
      
3,438
  
Corporate bonds
    
480
      
283
  
Small Business Administration - guaranteed participation securities
    
586
      
685
  
Mortgage-backed securities and collateralized mortgage obligations - commercial
    
-
      
37
  
Other securities
    
10
      
9
  
Total interest and dividends on securities available for sale
    
6,391
      
6,002
  
                 
Interest on held to maturity securities:
                
Mortgage-backed securities-residential
    
426
      
504
  
Total interest on held to maturity securities
    
426
      
504
  
                 
Federal Reserve Bank and Federal Home Loan Bank stock
    
284
      
275
  
                 
Interest on federal funds sold and other short-term investments
    
6,291
      
4,484
  
Total interest income
    
96,077
      
88,312
  
                 
Interest expense:
                
Interest on deposits:
                
Interest-bearing checking
    
215
      
218
  
Savings
    
744
      
839
  
Money market deposit accounts
    
1,945
      
891
  
Time deposits
    
13,488
      
6,299
  
Interest on short-term borrowings
    
762
      
641
  
Total interest expense
    
17,154
      
8,888
  
                 
Net interest income
    
78,923
      
79,424
  
 
                
Less: (Credit) Provision for loan losses
    
(41
)
    
600
  
Net interest income after provision for loan losses
    
78,964
      
78,824
  
                 
Noninterest income:
                
Trustco Financial Services income
    
3,416
      
3,411
  
Fees for services to customers
    
5,131
      
5,322
  
Other
    
1,004
      
441
  
Total noninterest income
    
9,551
      
9,174
  
                 
Noninterest expenses:
                
Salaries and employee benefits
    
23,162
      
21,163
  
Net occupancy expense
    
8,173
      
8,416
  
Equipment expense
    
3,611
      
3,544
  
Professional services
    
3,218
      
3,244
  
Outsourced services
    
3,800
      
3,750
  
Advertising expense
    
1,563
      
1,300
  
FDIC and other insurance
    
1,246
      
1,537
  
Other real estate expense, net
    
186
      
666
  
Other
    
4,810
      
4,630
  
Total noninterest expenses
    
49,769
      
48,250
  
                 
Income before taxes
    
38,746
      
39,748
  
Income taxes
    
9,521
      
9,535
  
                 
Net income
  
$
29,225
      
30,213
  
                 
Net income per common share:
                
- Basic
  
$
0.302
      
0.313
  
 
                
- Diluted
    
0.302
      
0.313
  
                 
Average basic shares (in thousands)
    
96,784
      
96,401
  
Average diluted shares (in thousands)
    
96,857
      
96,535
  
                 
Note:  Taxable equivalent net interest income
  
$
78,925
      
79,431
  

8
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands)
(Unaudited)

   
6/30/2019
    
3/31/2019
    
12/31/2018
    
9/30/2018
    
6/30/2018
  
ASSETS:
                              
                               
Cash and due from banks
  
$
42,471
      
43,064
      
49,260
      
42,195
      
40,567
  
Federal funds sold and other short term investments
    
517,684
      
576,123
      
454,449
      
423,254
      
546,049
  
Total cash and cash equivalents
    
560,155
      
619,187
      
503,709
      
465,449
      
586,616
  
                                         
Securities available for sale:
                                        
U. S. government sponsored enterprises
    
184,448
      
148,292
      
152,160
      
150,053
      
150,704
  
States and political subdivisions
    
170
      
172
      
173
      
180
      
524
  
Mortgage-backed securities and collateralized mortgage obligations - residential
    
354,679
      
312,946
      
262,032
      
269,093
      
283,252
  
Small Business Administration - guaranteed participation securities
    
53,091
      
54,113
      
56,475
      
57,894
      
61,876
  
Corporate bonds
    
40,467
      
30,258
      
29,938
      
29,977
      
29,977
  
Other securities
    
685
      
685
      
685
      
685
      
685
  
Total securities available for sale
    
633,540
      
546,466
      
501,463
      
507,882
      
527,018
  
                                         
Held to maturity securities:
                                        
Mortgage-backed securities and collateralized mortgage obligations-residential
    
20,667
      
21,609
      
22,501
      
23,462
      
24,730
  
Total held to maturity securities
    
20,667
      
21,609
      
22,501
      
23,462
      
24,730
  
                                         
Federal Reserve Bank and Federal Home Loan Bank stock
    
9,183
      
8,953
      
8,953
      
8,953
      
8,953
  
                                         
Loans:
                                        
Commercial
    
190,507
      
190,347
      
196,146
      
190,987
      
190,904
  
Residential mortgage loans
    
3,428,829
      
3,376,193
      
3,376,708
      
3,331,212
      
3,245,151
  
Home equity line of credit
    
277,559
      
282,034
      
289,540
      
293,750
      
295,791
  
Installment loans
    
9,514
      
12,579
      
11,702
      
9,967
      
9,309
  
Loans, net of deferred net costs
    
3,906,409
      
3,861,153
      
3,874,096
      
3,825,916
      
3,741,155
  
                                         
Less: Allowance for loan losses
    
44,365
      
44,671
      
44,766
      
44,736
      
44,503
  
Net loans
    
3,862,044
      
3,816,482
      
3,829,330
      
3,781,180
      
3,696,652
  
                                         
Bank premises and equipment, net
    
34,058
      
34,428
      
34,694
      
35,214
      
35,521
  
Operating lease right-of-use assets
    
51,097
      
51,559
      
-
      
-
      
-
  
Other assets
    
56,926
      
57,637
      
58,263
      
63,211
      
61,069
  
                                         
Total assets
  
$
5,227,670
      
5,156,321
      
4,958,913
      
4,885,351
      
4,940,559
  
                                         
LIABILITIES:
                                        
Deposits:
                                        
Demand
  
$
432,780
      
408,417
      
405,069
      
403,047
      
404,564
  
Interest-bearing checking
    
888,433
      
895,099
      
904,678
      
918,486
      
925,295
  
Savings accounts
    
1,132,308
      
1,150,329
      
1,182,683
      
1,221,127
      
1,257,744
  
Money market deposit accounts
    
562,318
      
538,043
      
507,311
      
501,270
      
512,453
  
Time deposits
    
1,446,428
      
1,421,181
      
1,274,506
      
1,155,994
      
1,155,214
  
Total deposits
    
4,462,267
      
4,413,069
      
4,274,247
      
4,199,924
      
4,255,270
  
                                         
Short-term borrowings
    
166,746
      
159,778
      
161,893
      
176,377
      
182,705
  
Operating lease liabilities
    
56,237
      
56,723
      
-
      
-
      
-
  
Accrued expenses and other liabilities
    
26,790
      
25,033
      
32,902
      
31,932
      
31,769
  
                                         
Total liabilities
    
4,712,040
      
4,654,603
      
4,469,042
      
4,408,233
      
4,469,744
  
                                         
SHAREHOLDERS' EQUITY:
                                        
Capital stock
    
100,180
      
100,180
      
100,175
      
100,175
      
100,093
  
Surplus
    
176,396
      
176,510
      
176,710
      
176,764
      
176,243
  
Undivided profits
    
272,433
      
264,364
      
256,397
      
246,965
      
238,342
  
Accumulated other comprehensive loss, net of tax
    
(1,774
)
    
(7,011
)
    
(10,309
)
    
(13,000
)
    
(9,796
)
Treasury stock at cost
    
(31,605
)
    
(32,325
)
    
(33,102
)
    
(33,786
)
    
(34,067
)
                                         
Total shareholders' equity
    
515,630
      
501,718
      
489,871
      
477,118
      
470,815
  
 
                                        
Total liabilities and shareholders' equity
  
$
5,227,670
      
5,156,321
      
4,958,913
      
4,885,351
      
4,940,559
  
                                         
Outstanding shares (in thousands)
    
96,822
      
96,746
      
96,659
      
96,586
      
96,475
  

9
NONPERFORMING ASSETS

(dollars in thousands)
(Unaudited)

   
6/30/2019
    
3/31/2019
    
12/31/2018
    
9/30/2018
    
6/30/2018
  
Nonperforming Assets
                              
                               
New York and other states*
                              
Loans in nonaccrual status:
                              
Commercial
  
$
905
      
701
      
645
      
928
      
767
  
Real estate mortgage - 1 to 4 family
    
19,633
      
22,343
      
22,373
      
20,750
      
21,209
  
Installment
    
1
      
26
      
4
      
13
      
6
  
Total non-accrual loans
    
20,539
      
23,070
      
23,022
      
21,691
      
21,982
  
Other nonperforming real estate mortgages - 1 to 4 family
    
31
      
33
      
34
      
35
      
36
  
Total nonperforming loans
    
20,570
      
23,103
      
23,056
      
21,726
      
22,018
  
Other real estate owned
    
2,625
      
1,262
      
1,675
      
2,306
      
2,569
  
Total nonperforming assets
  
$
23,195
      
24,365
      
24,731
      
24,032
      
24,587
  
                                         
Florida
                                        
Loans in nonaccrual status:
                                        
Commercial
  
$
-
      
-
      
-
      
-
      
-
  
Real estate mortgage - 1 to 4 family
    
1,564
      
1,644
      
1,915
      
2,054
      
2,143
  
Installment
    
-
      
-
      
15
      
13
      
-
  
Total non-accrual loans
    
1,564
      
1,644
      
1,930
      
2,067
      
2,143
  
Other nonperforming real estate mortgages - 1 to 4 family
    
-
      
-
      
-
      
-
      
-
  
Total nonperforming loans
    
1,564
      
1,644
      
1,930
      
2,067
      
2,143
  
Other real estate owned
    
-
      
-
      
-
      
-
      
-
  
Total nonperforming assets
  
$
1,564
      
1,644
      
1,930
      
2,067
      
2,143
  
                                         
Total
                                        
Loans in nonaccrual status:
                                        
Commercial
  
$
905
      
701
      
645
      
928
      
767
  
Real estate mortgage - 1 to 4 family
    
21,197
      
23,987
      
24,288
      
22,804
      
23,352
  
Installment
    
1
      
26
      
19
      
26
      
6
  
Total non-accrual loans
    
22,103
      
24,714
      
24,952
      
23,758
      
24,125
  
Other nonperforming real estate mortgages - 1 to 4 family
    
31
      
33
      
34
      
35
      
36
  
Total nonperforming loans
    
22,134
      
24,747
      
24,986
      
23,793
      
24,161
  
Other real estate owned
    
2,625
      
1,262
      
1,675
      
2,306
      
2,569
  
Total nonperforming assets
  
$
24,759
      
26,009
      
26,661
      
26,099
      
26,730
  
                                         
Quarterly Net (Recoveries) Chargeoffs
                                        
                                         
New York and other states*
                                        
Commercial
  
$
(1
)
    
4
      
99
      
(2
)
    
(1
)
Real estate mortgage - 1 to 4 family
    
(54
)
    
318
      
323
      
(3
)
    
150
  
Installment
    
45
      
23
      
35
      
64
      
27
  
Total net (recoveries) chargeoffs
  
$
(10
)
    
345
      
457
      
59
      
176
  
                                         
Florida
                                        
Commercial
  
$
-
      
-
      
-
      
-
      
-
  
Real estate mortgage - 1 to 4 family
    
(25
)
    
19
      
(3
)
    
-
      
-
  
Installment
    
-
      
31
      
16
      
8
      
-
  
Total net (recoveries) chargeoffs
  
$
(25
)
    
50
      
13
      
8
      
-
  
                                         
Total
                                        
Commercial
  
$
(1
)
    
4
      
99
      
(2
)
    
(1
)
Real estate mortgage - 1 to 4 family
    
(79
)
    
337
      
320
      
(3
)
    
150
  
Installment
    
45
      
54
      
51
      
72
      
27
  
Total net (recoveries) chargeoffs
  
$
(35
)
    
395
      
470
      
67
      
176
  
                                         
Asset Quality Ratios
                                        
                                         
Total nonperforming loans (1)
  
$
22,134
      
24,747
      
24,986
      
23,793
      
24,161
  
Total nonperforming assets (1)
    
24,759
      
26,009
      
26,661
      
26,099
      
26,730
  
Total net (recoveries) chargeoffs (2)
    
(35
)
    
395
      
470
      
67
      
176
  
                                         
Allowance for loan losses (1)
    
44,365
      
44,671
      
44,766
      
44,736
      
44,503
  
                                         
Nonperforming loans to total loans
    
0.57
%
    
0.64
%
    
0.64
%
    
0.62
%
    
0.65
%
Nonperforming assets to total assets
    
0.47
%
    
0.50
%
    
0.54
%
    
0.53
%
    
0.54
%
Allowance for loan losses to total loans
    
1.14
%
    
1.16
%
    
1.16
%
    
1.17
%
    
1.19
%
Coverage ratio (1)
    
200.4
%
    
180.5
%
    
179.2
%
    
188.0
%
    
184.2
%
Annualized net chargeoffs to average loans (2)
    
0.00
%
    
0.04
%
    
0.05
%
    
0.01
%
    
0.02
%
Allowance for loan losses to annualized net chargeoffs (2)
    
-316.9
x
    
28.3
x
    
23.8
x
    
166.9
x
    
63.2
x

* Includes New York, New Jersey, Vermont and Massachusetts.
(1)
At period-end
(2)
For the period ended

10
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY -
INTEREST RATES AND INTEREST DIFFERENTIAL

(dollars in thousands)

(Unaudited)
  
Three months ended
June 30, 2019
    
Three months ended
June 30, 2018
  
   
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
      Interest    
Average
Rate
  
Assets
                                    
                                     
Securities available for sale:
                                    
U. S. government sponsored enterprises
  
$
160,197
      
821
      
2.05
%
  
$
154,862
      
787
      
2.03
%
Mortgage backed securities and collateralized mortgage obligations - residential
    
342,678
      
2,152
      
2.51
      
300,706
      
1,675
      
2.23
  
State and political subdivisions
    
168
      
4
      
9.52
      
515
      
10
      
7.81
  
Corporate bonds
    
33,793
      
272
      
3.22
      
27,780
      
150
      
2.16
  
Small Business Administration - guaranteed participation securities
    
54,254
      
289
      
2.13
      
64,886
      
333
      
2.05
  
Mortgage backed securities and collateralized mortgage obligations - commercial
    
-
      
-
      
-
      
1,285
      
(5
)
    
(1.51
)
Other
    
686
      
5
      
2.92
      
685
      
4
      
2.34
  
                                                 
Total securities available for sale
    
591,776
      
3,543
      
2.39
      
550,719
      
2,954
      
2.15
  
                                                 
Federal funds sold and other short-term Investments
    
545,724
      
3,282
      
2.41
      
549,378
      
2,467
      
1.82
  
                                                 
Held to maturity securities:
                                                
Mortgage backed securities and collateralized mortgage obligations - residential
    
21,155
      
209
      
3.95
      
25,381
      
244
      
3.85
  
                                                 
Total held to maturity securities
    
21,155
      
209
      
3.95
      
25,381
      
244
      
3.85
  
                                                 
Federal Reserve Bank and Federal Home Loan Bank stock
    
9,173
      
199
      
8.68
      
8,943
      
198
      
8.86
  
                                                 
Commercial loans
    
189,870
      
2,546
      
5.36
      
187,157
      
2,444
      
5.22
  
Residential mortgage loans
    
3,396,149
      
35,179
      
4.14
      
3,205,035
      
32,914
      
4.11
  
Home equity lines of credit
    
279,622
      
3,503
      
5.01
      
298,489
      
3,391
      
4.61
  
Installment loans
    
10,310
      
204
      
7.91
      
8,669
      
213
      
9.98
  
                                                 
Loans, net of unearned income
    
3,875,951
      
41,432
      
4.28
      
3,699,350
      
38,962
      
4.22
  
                                                 
Total interest earning assets
    
5,043,779
      
48,665
      
3.86
      
4,833,771
      
44,825
      
3.72
  
                                                 
Allowance for loan losses
    
(44,841
)
                    
(44,551
)
                
Cash & non-interest earning assets
    
177,019
                      
124,099
                  
                                                 
                                                 
Total assets
  
$
5,175,957
                    
$
4,913,319
                  
                                                 
                                                 
Liabilities and shareholders' equity
                                                
                                                 
Deposits:
                                                
Interest bearing checking accounts
  
$
879,732
      
94
      
0.04
%
  
$
906,641
      
112
      
0.05
%
Money market accounts
    
553,708
      
1,119
      
0.81
      
529,421
      
452
      
0.35
  
Savings
    
1,138,107
      
367
      
0.13
      
1,260,656
      
420
      
0.14
  
Time deposits
    
1,437,097
      
7,512
      
2.09
      
1,135,630
      
3,439
      
1.23
  
 
                                                
Total interest bearing deposits
    
4,008,644
      
9,092
      
0.91
      
3,832,348
      
4,423
      
0.47
  
Short-term borrowings
    
162,690
      
381
      
0.94
      
189,611
      
283
      
0.61
  
                                                 
Total interest bearing liabilities
    
4,171,334
      
9,473
      
0.91
      
4,021,959
      
4,706
      
0.47
  
                                                 
Demand deposits
    
418,215
                      
396,783
                  
Other liabilities
    
79,056
                      
28,653
                  
Shareholders' equity
    
507,352
                      
465,924
                  
                                                 
Total liabilities and shareholders' equity
  
$
5,175,957
                    
$
4,913,319
                  
                                                 
Net interest income, tax equivalent
            
39,192
                      
40,119
          
                                                 
Net interest spread
                    
2.95
%
                    
3.24
%
                                                 
                                                 
Net interest margin (net interest income to total interest earning assets)
                      3.11 %
                     3.32 %
             

   
 
                        
Tax equivalent adjustment
            
(1
)
                    
(10
)
        
                                                 
Net interest income
            
39,191
                      
40,109
          

11
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY -
INTEREST RATES AND INTEREST DIFFERENTIAL, Continued

(dollars in thousands)

(Unaudited)
  
Six months ended
June 30, 2019
    
Six months ended
June 30, 2018
  
   
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
      Interest    
Average
Rate
  
Assets
                                    
                                     
Securities available for sale:
                                    
U. S. government sponsored enterprises
  
$
157,244
      
1,604
      
2.04
%
  
$
155,723
      
1,537
      
1.97
%
Mortgage backed securities and collateralized mortgage obligations - residential
    
308,034
      
3,707
      
2.41
      
307,194
      
3,438
      
2.24
  
State and political subdivisions
    
168
      
6
      
7.14
      
515
      
20
      
9.37
  
Corporate bonds
    
30,347
      
480
      
3.16
      
30,523
      
283
      
1.85
  
Small Business Administration - guaranteed participation securities
    
55,648
      
586
      
2.11
      
65,990
      
685
      
2.08
  
Mortgage backed securities and collateralized mortgage obligations - commercial
    
-
      
-
      
-
      
5,507
      
37
      
1.34
  
Other
    
685
      
10
      
2.92
      
685
      
9
      
2.63
  
                                                 
Total securities available for sale
    
552,126
      
6,393
      
2.32
      
566,137
      
6,009
      
2.12
  
                                                 
Federal funds sold and other short-term Investments
    
524,468
      
6,291
      
2.40
      
539,219
      
4,484
      
1.68
  
                                                 
Held to maturity securities:
                                                
Mortgage backed securities and collateralized mortgage obligations - residential
    
21,594
      
426
      
3.95
      
26,086
      
504
      
3.86
  
                                                 
Total held to maturity securities
    
21,594
      
426
      
3.95
      
26,086
      
504
      
3.86
  
                                                 
Federal Reserve Bank and Federal Home Loan Bank stock
    
9,064
      
284
      
6.27
      
8,861
      
275
      
6.21
  
                                                 
Commercial loans
    
191,793
      
5,129
      
5.35
      
186,405
      
4,858
      
6.25
  
Residential mortgage loans
    
3,385,628
      
70,043
      
4.14
      
3,177,041
      
65,172
      
4.11
  
Home equity lines of credit
    
282,892
      
7,040
      
4.98
      
302,368
      
6,601
      
4.40
  
Installment loans
    
11,099
      
473
      
8.52
      
8,518
      
418
      
9.88
  
                                                 
Loans, net of unearned income
    
3,871,412
      
82,685
      
4.27
      
3,674,332
      
77,049
      
4.20
  
                                                 
Total interest earning assets
    
4,978,664
      
96,079
      
3.86
      
4,814,635
      
88,321
      
3.68
  
                                                 
Allowance for loan losses
    
(44,894
)
                    
(44,472
)
                
Cash & non-interest earning assets
    
176,518
                      
124,483
                  
                                                 
                                                 
Total assets
  
$
5,110,288
                    
$
4,894,646
                  
                                                 
                                                 
Liabilities and shareholders' equity
                                                
                                                 
Deposits:
                                                
Interest bearing checking accounts
  
$
880,101
      
215
      
0.05
%
  
$
892,288
      
218
      
0.05
%
Money market accounts
    
535,950
      
1,945
      
0.73
      
538,230
      
891
      
0.33
  
Savings
    
1,149,064
      
744
      
0.13
      
1,260,509
      
839
      
0.13
  
Time deposits
    
1,395,361
      
13,488
      
1.93
      
1,108,413
      
6,299
      
1.15
  
                                                 
Total interest bearing deposits
    
3,960,476
      
16,392
      
0.83
      
3,799,440
      
8,247
      
0.44
  
Short-term borrowings
    
160,893
      
762
      
0.95
      
211,874
      
641
      
0.61
  
                                                 
Total interest bearing liabilities
    
4,121,369
      
17,154
      
0.83
      
4,011,314
      
8,888
      
0.45
  
                                                 
Demand deposits
    
407,926
                      
391,702
                  
Other liabilities
    
79,814
                      
28,891
                  
Shareholders' equity
    
501,179
                      
462,739
                  
                                                 
Total liabilities and shareholders' equity
  
$
5,110,288
                    
$
4,894,646
                  
                                                 
Net interest income, tax equivalent
            
78,925
                      
79,431
          
                                                 
Net interest spread
                    
3.03
%
                    
3.23
%
                                                 
                                                 
Net interest margin (net interest income to total interest earning assets)
                    
3.17
%
                    
3.30
%
                                                 
Tax equivalent adjustment
            
(2
)
                    
(7
)
        
                                                 
                                                 
Net interest income
            
78,923
                      
79,424
          

12
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)

   
6/30/2019
    
3/31/2019
    
6/30/2018
  
                   
Tangible Equity to Tangible Assets
                  
Total Assets
  
$
5,227,670
      
5,156,321
      
4,940,559
  
Less: Intangible assets
    
553
      
553
      
553
  
Tangible assets
    
5,227,117
      
5,155,768
      
4,940,006
  
                         
Equity
    
515,630
      
501,718
      
470,815
  
Less: Intangible assets
    
553
      
553
      
553
  
Tangible equity
    
515,077
      
501,165
      
470,262
  
Tangible Equity to Tangible Assets
    
9.85
%
    
9.72
%
    
9.52
%
Equity to Assets
    
9.86
%
    
9.73
%
    
9.53
%

   
Three months ended
    
Six months ended
  
Efficiency Ratio
  
6/30/2019
    
3/31/2019
    
6/30/2018
    
6/30/2019
    
6/30/2018
  
                               
Net interest income (fully taxable equivalent)
  
$
39,192
      
39,733
      
40,119
    
$
78,925
      
79,431
  
Non-interest income
    
4,914
      
4,637
      
4,495
      
9,551
      
9,174
  
Revenue used for efficiency ratio
    
44,106
      
44,370
      
44,614
      
88,476
      
88,605
  
                                         
Total noninterest expense
    
24,902
      
24,867
      
24,095
      
49,769
      
48,250
  
Less:  Other real estate (income) expense, net
    
210
      
(24
)
    
294
      
186
      
666
  
Expense used for efficiency ratio
    
24,692
      
24,891
      
23,801
      
49,583
      
47,584
  
                                         
Efficiency Ratio
    
55.98
%
    
56.10
%
    
53.35
%
    
56.04
%
    
53.70
%


13