TrustCo Announces Third Quarter Earnings; Year-to-Date Net Income Up 14.9% Over Prior Year

Executive Snapshot:

• Continued strong financial results:
  • Year-to-Date 2014 compared to the same period in 2013:
    • Net income up 14.9%
    • Diluted EPS up 14.2%
    • Return on average assets (ROA) rose 9 basis points to 0.98%
    • Return on average equity (ROE) rose 90 basis points to 11.84%
    • Improvement in the efficiency ratio from 52.99% in 2013 to 52.35% in 2014
       
  • Third quarter 2014 compared to third quarter 2013:
    • Net income up 4.5%
    • Diluted EPS up 3.7%
    • Return on average assets (ROA) up an additional basis point to 0.92%

• Asset quality improvement:
  • Virtually every measure of asset quality improved during the third quarter
  • Nonperforming assets (NPAs) fell $8.0 million or 16% to $43.6 million at September 30, 2014 compared to $51.6 million at September 30, 2013
  • NPAs to total assets improved from 1.16% to 0.95% over the last year
     
• Continued expansion of customer base:
  • Focus on capitalizing on opportunities presented by expanded branch network
  • Deposits per branch grew $634 thousand from September 30, 2013 to September 30, 2014 on a same store basis
  • Average core deposits grew $88.7 million for the first nine months of 2014 compared to the same period in 2013
     
• Loan portfolio reaches all-time high:
  • Average loans were up $238 million for the first nine months of 2014 compared to the same period in 2013
  • At $3.08 billion at September 30, 2014, loans reached an all-time historic high

TrustCo Announces Third Quarter Earnings;
Year-to-Date Net Income Up 14.9% Over Prior Year

GLENVILLE, N.Y., Oct. 21, 2014 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) today announced that net income rose to $10.7 million for the quarter ended September 30, 2014 from $10.3 million for the quarter ended September 30, 2013.  For the first nine months of 2014, net income rose 14.9% to $33.5 million compared to $29.2 million for the first nine months of 2013.

Robert J. McCormick, President and Chief Executive Officer noted, "Our results for the third quarter and for the first nine months of 2014 continued our solid bottom line growth while we continued to position our business for the future. In addition to the significant increase in net income, we continued to add profitable customer relationships on both the loan and deposit sides of the Bank. Our highly liquid balance sheet continues to allow us to fund our loan growth without having to overpay for deposits. We look forward to the remainder of the year and to 2015 with optimism. We will continue taking advantage of opportunities as they are presented." 

TrustCo saw continued strong loan growth in the third quarter of 2014. The gains continue to be primarily funded by expansion of retail deposits as well as proceeds from cash flow from the lower yielding investment securities portfolios. The shift toward loans helped offset part of the impact from continued low yields on cash and securities and contributed to an improvement in net interest margin to 3.16% in the third quarter of 2014 from 3.12% in the third quarter of 2013. Our strong liquidity position continues to allow us to take advantage of opportunities when interest rate conditions change. The increase in margin, along with control of operating expenses enabled the Company to achieve bottom line objectives without having to deploy liquidity into the current low rate investment environment.

Mr. McCormick also noted: "We are encouraged by the continued economic improvements where we operate, particularly Florida, and believe we are well positioned to capitalize on these changes. We are particularly pleased with the significant improvement in our asset quality during the quarter. 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 significantly enhanced our reputation and put us in a position to take advantage of changes in market and competitive conditions."

Return on average assets and return on average equity were 0.92% and 10.96%, respectively for the third quarter of 2014, compared to 0.91% and 11.64% for the third quarter of 2013. Diluted earnings per share were $0.113 for the third quarter of 2014, up 3.7% from $0.109 for the third quarter of 2013. 

For the first nine months of 2014, return on average assets and return on average equity were 0.98% and 11.84%, respectively, compared to 0.89% and 10.94% for the first nine months of 2013. Diluted earnings per share were $0.354 for the first nine months of 2014, up 14.2% from $0.310 over the same period a year earlier. 

On a year-over-year basis, average loans were up $243.0 million or 8.7% in the third quarter of 2014, over the same period in 2013. Average deposits were up $110.5 million for the third quarter of 2014 over the same period a year earlier. Most of the gain in deposits came from core deposit accounts, customers also continued to move some funds into certificates with slightly longer maturities, which may help TrustCo if rates rise, without having a material impact on the current cost of funds. Average core deposits increased $83.8 million from the third quarter of 2013 to the third quarter of 2014. 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 two new offices during the third quarter, in Lake Nona, Florida and Amsterdam, New York. During 2013 we celebrated the ten year anniversary of our expansion into Florida, while at the same time making significant progress expanding loans and deposits throughout our entire branch network. We expect that trend to continue as the new branches continue to mature. For the first nine months of 2014, our average branch size increased $82 thousand to $28.0 million compared to the same period in the prior year, despite having opened up four branches during 2014. On a same store basis, our average branch size grew by $634 thousand from September 30, 2013 to September 30, 2014. 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 the newer branches will take time and continued work. We believe success in growing customer relationships provides the basic building blocks that help drive profit growth for the coming years."

Asset quality and the allowance for loan losses coverage of nonperforming loans (NPLs) improved from September 30, 2013 to September 30, 2014. NPLs declined to $37.1 million at September 30, 2014, compared to $41.7 million at September 30, 2013 and nonperforming assets (NPAs) declined to $43.6 million from $51.6 million over the same period.  NPLs were equal to 1.20% of total loans at September 30, 2014, compared to 1.47% a year earlier. The coverage ratio, or allowance for loan losses to NPLs, was 125.3% at September 30, 2014, compared to 114.4% at September 30, 2013. Overall, virtually every asset quality indicator improved during the third quarter of 2014 relative to the third quarter of 2013. The ratio of loan loss allowance to total loans was 1.51% as of September 30, 2014, compared to 1.68% at September 30, 2013. The allowance for loan losses ended the third quarter at $46.5 million compared to $46.9 million at the end of the second quarter.

The net interest margin for the third quarter of 2014 was 3.16%, compared to 3.12% in the third quarter of 2013, as previously noted. 

At September 30, 2014 the tangible equity ratio was 8.49% compared to 8.38% at June 30, 2014 and 7.94% at September 30, 2013. Tangible book value per share ended the third quarter at $4.10 compared to $3.75 in the year-ago period.

"American Banker Magazine's" July 2014 issue recently ranked TRST shares as having the 25^th highest dividend yield for all U.S. banks and thrifts. 

TrustCo Bank Corp NY is a $4.6 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 143 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at September 30, 2014.

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

A conference call to discuss third quarter 2014 results will be held at 9:00 a.m. Eastern Time on October 22, 2014. 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 10054134. The call will also be audio webcast at: https://services.choruscall.com/links/trst141022.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 the remainder of 2014 and 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; the future earnings and capital levels of Trustco Bank and the continued ability of Trustco Bank under regulatory rules to distribute capital to TrustCo, which could affect our ability to pay dividends; 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; results of examinations of Trustco Bank and TrustCo by our respective regulators; 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, 2013, as amended, and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.

Non-GAAP Financial Measures Reconciliation

Tangible book value per share and tangible equity as a percentage of tangible assets at period end are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders' equity and total assets, respectively. We calculate tangible book value per share by dividing tangible equity by common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders' equity by common shares outstanding. We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end. We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios. 

The efficiency ratio is a non-GAAP measure of expense control relative to recurring revenue. We calculate the efficiency ratio by dividing total noninterest expenses as determined under GAAP, but excluding other real estate expense, net, which we refer to below as recurring expense, by net interest income (fully taxable equivalent) and total noninterest income as determined under GAAP, but excluding net gains on securities from this calculation, which we refer to below as recurring revenue. We believe that this provides one reasonable measure of core expenses relative to core revenue. 

We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios. Our management internally assesses our performance based, in part, on these measures.  However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titled measures reported by other companies. A reconciliation of the non-GAAP measures of tangible common equity, tangible book value per share and efficiency ratio to the underlying GAAP numbers is set forth below.