TrustCo Announces Second Quarter 2015 Earnings; Core Net

Executive Snapshot:

Continued strong financial results:
- Core net income for second quarter 2015 compared to the same period in 2014:
  - Core net income up 4.9%;
  - Core diluted EPS up 3.7%;
- GAAP earnings for the second quarter of 2015 compared to the same period in 2014:
  - Net income down 9.2%
  - Diluted EPS down 9.6%
  - Return on average assets (ROA) of 0.91%
  - Return on average equity (ROE) of 10.66%
  - Efficiency ratio of 54.71%
Asset quality improvement:
- Asset quality measures continued to improve compared to both the second quarter of 2014 and for the first quarter of 2015
- Nonperforming assets (NPAs) fell by $10.6 million when compared to June 30, 2014.
- NPAs to total assets improved from 1.07% to 0.81% when compared to June 30, 2014.
- Quarterly net chargeoffs at lowest level since the fourth quarter of 2008
Continued expansion of customer base:
- Focus on capitalizing on opportunities presented by expanded branch network
- Average deposits per branch grew $942 thousand from June 30, 2014 to June 30, 2015 on a same store basis
- Average core deposits grew $93 million for the second quarter of 2015 compared to the second quarter of 2014
Loan portfolio reaches all-time high:
- Average loans were up $252 million for the second quarter of 2015 compared to second quarter of 2014
- At $3.24 billion at June 30, 2015, loans reached an all-time historic high

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

TrustCo Announces Second Quarter 2015 Earnings;
Core Net Income Up 5%

GLENVILLE, N.Y., July 21, 2015 (GLOBE NEWSWIRE) --

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

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

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

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

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

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

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

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

"At June 30, 2015, our average branch size was $28.3 million. On a same store basis, our average deposits per branch grew by $942 thousand from June 30, 2014 to June 30, 2015. We have always designed our branches to be smaller and more cost effective than those built by many of our competitors. We use open floor plans that help maximize the value of our branches. We remain mindful that fully achieving our goals for newer branches will take time and continued work. We believe success in growing customer relationships provides basic building blocks that will help drive profit growth for the coming years.”

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

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

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

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

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

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

A conference call to discuss second quarter 2015 results will be held at 9:00 a.m. Eastern Time on July 22, 2015. Those wishing to participate in the call may dial toll-free 1-888-339-0764. International callers must dial 1-412-902-4195. Please ask to be joined into the TrustCo Bank Corp NY / TRST call. A replay of the call will be available for thirty days by dialing 1-877-344-7529 (1-412-317-0088 for international callers), Conference Number 10069090. The call will also be audio webcast at: http://services.choruscall.com/links/trst150722.html, and will be available for one year.

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

Safe Harbor Statement
All statements in this news release that are not historical are forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding our expectations for our performance during 2015 and for the growth of loans and deposits throughout our branch network and our ability to capitalize on economic changes in the areas in which we operate. Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement: our ability to continue to originate a significant volume of one-to-four family mortgage loans in our market areas; our ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income; our ability to comply with the supervisory agreement entered into with Trustco Bank’s regulator and potential regulatory actions if we fail to comply; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of Trustco Bank and the continued ability of Trustco Bank under regulatory rules and the supervisory agreement to distribute capital to TrustCo, which could affect our ability to pay dividends; results of examinations of Trustco Bank and TrustCo by our respective regulators; our ability to make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; the perceived overall value of our products and services by users, including in comparison to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for our products and services; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2014, as amended, and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.


TRUSTCO BANK CORP NY
GLENVILLE, NY

FINANCIAL HIGHLIGHTS

(dollars in thousands, except per share data)
(Unaudited)
					Three Months Ended
		06/30/15			03/31/15			06/30/14
Summary of operations
Net interest income (TE)	$		35,690			35,185			35,513
Provision for loan losses			800			800			1,500
Net securities transactions			-			249			-
Noninterest income, excluding net securities transactions			4,454			4,374			4,505
Noninterest expense			22,131			21,857			19,437
Net income			10,727			10,715			11,808

Per common share
Net income per share:
- Basic	$		0.113			0.113			0.125
- Diluted			0.113			0.113			0.125
Cash dividends			0.066			0.066			0.066
Tangible Book value at period end			4.23			4.21			4.06
Market price at period end			7.03			6.88			6.68

At period end
Full time equivalent employees			760			747			747
Full service banking offices			146			145			141

Performance ratios
Return on average assets			0.91	%		0.93			1.03
Return on average equity			10.66			10.91			12.50
Efficiency (1)			54.71			54.18			53.00
Net interest spread (TE)			3.01			3.02			3.11
Net interest margin (TE)			3.07			3.08			3.16
Dividend payout ratio			58.15			58.12			52.62

Capital ratio at period end
Consolidated tangible equity to tangible assets (2)			8.48			8.44			8.38

Asset quality analysis at period end
Nonperforming loans to total loans			1.00			1.05			1.36
Nonperforming assets to total assets			0.81			0.85			1.07
Allowance for loan losses to total loans			1.41			1.44			1.56
Coverage ratio (3)			1.4x			1.4			1.1


(1) Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income (excluding net securities transactions, the net gain on sale of building, and the net sale of nonperforming loans).
(2) The tangible equity ratio excludes $553 of intangibles from both equity and assets.
(3) Calculated as allowance for loan losses divided by total nonperforming loans.


TE = Taxable equivalent.


FINANCIAL HIGHLIGHTS, Continued

(dollars in thousands, except per share data)
(Unaudited)
		Six Months Ended
		06/30/15			06/30/14
Summary of operations
Net interest income (TE)	$		70,875			70,214
Provision for loan losses			1,600			3,000
Net securities transactions			249			6
Noninterest income			8,828			10,258
Noninterest expense			43,988			40,238
Net income			21,442			22,819

Per common share
Net income per share:
- Basic	$		0.226			0.241
- Diluted			0.225			0.241
Cash dividends			0.131			0.131
Tangible Book value at period end			4.23			4.06
Market price at period end			7.03			6.68

Performance ratios
Return on average assets			0.92	%		1.01
Return on average equity			10.78			12.30
Efficiency (1)			54.45			52.15
Net interest spread (TE)			3.02			3.09
Net interest margin (TE)			3.08			3.15
Dividend payout ratio			58.14			54.42


(1) Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income (excluding net securities transactions).

TE = Taxable equivalent.


CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)
(Unaudited)
		Three Months Ended
		6/30/2015			3/31/2015			12/31/2014			9/30/2014			6/30/2014
Interest and dividend income:
Interest and fees on loans	$		35,343			34,983			35,051			34,421			33,614
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises			366			212			233			297			381
State and political subdivisions			23			25			29			38			44
Mortgage-backed securities and collateralized mortgage obligations-residential			2,276			2,393			2,733			3,040			3,299
Corporate bonds			-			1			2			2			2
Small Business Administration-guaranteed participation securities			503			522			524			535			539
Mortgage-backed securities and collateralized mortgage obligations-commercial			38			37			37			38			38
Other securities			4			4			4			4			4
Total interest and dividends on securities available for sale			3,210			3,194			3,562			3,954			4,307

Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential			480			478			512			545			577
Corporate bonds			154			154			154			153			154
Total interest on held to maturity securities			634			632			666			698			731

Federal Reserve Bank and Federal Home Loan Bank stock			118			116			123			127			128

Interest on federal funds sold and other short-term investments			423			400			363			374			376
Total interest income			39,728			39,325			39,765			39,574			39,156

Interest expense:
Interest on deposits:
Interest-bearing checking			111			105			98			94			89
Savings			599			658			663			644			592
Money market deposit accounts			547			617			634			648			618
Time deposits			2,500			2,434			2,366			2,213			2,035
Interest on short-term borrowings			300			346			335			327			342
Total interest expense			4,057			4,160			4,096			3,926			3,676

Net interest income			35,671			35,165			35,669			35,648			35,480

Provision for loan losses			800			800			1,000			1,100			1,500
Net interest income after provision for loan losses			34,871			34,365			34,669			34,548			33,980

Noninterest income:
Trustco Financial Services income			1,478			1,653			1,451			1,471			1,405
Fees for services to customers			2,691			2,524			2,753			2,838			2,732
Net gain on securities transactions			-			249			335			376			-
Other			285			197			213			205			368
Total noninterest income			4,454			4,623			4,752			4,890			4,505

Noninterest expenses:
Salaries and employee benefits			8,164			8,481			9,003			8,272			8,012
Net occupancy expense			3,878			4,108			3,869			4,013			4,110
Equipment expense			1,803			1,942			1,919			1,725			1,823
Professional services			2,066			1,507			1,536			1,547			1,438
Outsourced services			1,425			1,425			1,225			1,375			1,425
Advertising expense			733			600			602			629			657
FDIC and other insurance			1,017			1,065			949			1,054			1,000
Other real estate expense (income), net			201			424			841			1,001			(1,688	)
Other			2,844			2,305			2,296			2,576			2,660
Total noninterest expenses			22,131			21,857			22,240			22,192			19,437

Income before taxes			17,194			17,131			17,181			17,246			19,048
Income taxes			6,467			6,416			6,521			6,532			7,240

Net income	$		10,727			10,715			10,660			10,714			11,808
Net income per common share:
- Basic	$		0.113			0.113			0.113			0.113			0.125

- Diluted			0.113			0.113			0.112			0.113			0.125

Average basic shares (in thousands)			95,056			94,947			94,681			94,628			94,559
Average diluted shares (in thousands)			95,190			95,074			94,813			94,752			94,675

Note: Taxable equivalent net interest income	$		35,690			35,185			35,693			35,676			35,513


CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)
(Unaudited)
		Six Months Ended
		6/30/2015			6/30/2014

Interest and dividend income:
Interest and fees on loans	$		70,326			66,488
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises			578			887
State and political subdivisions			48			112
Mortgage-backed securities and collateralized mortgage obligations-residential			4,669			6,377
Corporate bonds			1			61
Small Business Administration-guaranteed participation securities			1,025			1,095
Mortgage-backed securities and collateralized mortgage obligations-commercial			75			76
Other securities			8			8
Total interest and dividends on securities available for sale			6,404			8,616

Interest on held to maturity securities:
Mortgage-backed securities-residential			958			1,202
Corporate bonds			308			308
Total interest on held to maturity securities			1,266			1,510

Federal Reserve Bank and Federal Home Loan Bank stock			234			261

Interest on federal funds sold and other short-term investments			823			727
Total interest income			79,053			77,602

Interest expense:
Interest on deposits:
Interest-bearing checking			216			173
Savings			1,257			1,355
Money market deposit accounts			1,164			1,217
Time deposits			4,934			3,986
Interest on short-term borrowings			646			735
Total interest expense			8,217			7,466

Net interest income			70,836			70,136

Provision for loan losses			1,600			3,000
Net interest income after provision for loan losses			69,236			67,136

Noninterest income:
Trust department income			3,131			2,915
Fees for services to customers			5,215			5,253
Net gain on securities transactions			249			6
Other			482			2,090
Total noninterest income			9,077			10,264

Noninterest expenses:
Salaries and employee benefits			16,645			15,604
Net occupancy expense			7,986			8,369
Equipment expense			3,745			3,575
Professional services			3,573			2,724
Outsourced services			2,850			2,750
Advertising expense			1,333			1,256
FDIC and other insurance			2,082			1,904
Other real estate (income) expense, net			625			(833	)
Other			5,149			4,889
Total noninterest expenses			43,988			40,238

Income before taxes			34,325			37,162
Income taxes			12,883			14,343

Net income	$		21,442			22,819

Net income per Common Share:
- Basic	$		0.226			0.241

- Diluted			0.225			0.241

Average basic shares (thousands)			95,002			94,536
Average diluted shares (thousands)			95,132			94,658

Note: Taxable equivalent net interest income	$		70,875			70,214



CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands)
(Unaudited)


		6/30/2015			3/31/2015			12/31/2014			9/30/2014			6/30/2014
ASSETS:

Cash and due from banks	$		37,574			44,853			43,505			43,724			48,034
Federal funds sold and other short term investments			641,011			705,273			627,943			586,931			573,514
Total cash and cash equivalents			678,585			750,126			671,448			630,655			621,548

Securities available for sale:
U. S. government sponsored enterprises			152,082			108,248			77,800			83,087			103,340
States and political subdivisions			1,969			1,974			2,271			2,769			3,921
Mortgage-backed securities and collateralized mortgage obligations-residential			429,205			445,273			483,560			523,779			589,517
Corporate bonds			-			1,500			1,500			1,401			1,402
Small Business Administration-guaranteed participation securities			95,323			98,668			100,496			100,491			102,367
Mortgage-backed securities and collateralized mortgage obligations-commercial			10,399			10,503			10,447			10,417			10,544
Other securities			685			685			685			679			679
Total securities available for sale			689,663			666,851			676,759			722,623			811,770

Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential			53,576			57,296			60,986			64,223			67,974
Corporate bonds			9,967			9,964			9,960			9,956			9,952
Total held to maturity securities			63,543			67,260			70,946			74,179			77,926

Federal Reserve Bank and Federal Home Loan Bank stock			9,480			9,228			9,228			9,228			10,951

Loans:
Commercial			209,399			212,145			223,382			219,825			222,655
Residential mortgage loans			2,669,929			2,620,925			2,575,222			2,510,151			2,437,500
Home equity line of credit			354,946			352,552			352,134			346,496			339,897
Installment loans			8,674			8,003			7,594			6,557			6,098
Loans, net of deferred fees and costs			3,242,948			3,193,625			3,158,332			3,083,029			3,006,150
Less:
Allowance for loan losses			45,571			45,944			46,327			46,512			46,935
Net loans			3,197,377			3,147,681			3,112,005			3,036,517			2,959,215

Bank premises and equipment, net			38,100			38,812			38,565			37,455			36,658
Other assets			64,589			60,698			65,488			71,609			71,061

Total assets	$		4,741,337			4,740,656			4,644,439			4,582,266			4,589,129

LIABILITIES:
Deposits:
Demand	$		355,783			347,315			331,425			327,527			324,277
Interest-bearing checking			713,001			696,137			682,210			646,862			643,473
Savings accounts			1,250,154			1,237,115			1,216,831			1,215,087			1,233,347
Money market deposit accounts			633,239			640,368			638,542			655,646			651,367
Time deposits			1,185,264			1,196,233			1,163,233			1,139,919			1,142,723
Total deposits			4,137,441			4,117,168			4,032,241			3,985,041			3,995,187

Short-term borrowings			170,750			194,738			189,116			179,957			181,516
Accrued expenses and other liabilities			30,687			28,274			29,638			27,781			27,409

Total liabilities			4,338,878			4,340,180			4,250,995			4,192,779			4,204,112

SHAREHOLDERS' EQUITY:
Capital stock			98,964			98,964			98,945			98,942			98,927
Surplus			171,988			172,237			172,353			172,598			172,769
Undivided profits			175,721			171,232			166,745			162,326			157,832
Accumulated other comprehensive loss, net of tax			(5,927	)		(2,687	)		(4,509	)		(3,508	)		(2,611	)
Treasury stock at cost			(38,287	)		(39,270	)		(40,090	)		(40,871	)		(41,900	)

Total shareholders' equity			402,459			400,476			393,444			389,487			385,017

Total liabilities and shareholders' equity	$		4,741,337			4,740,656			4,644,439			4,582,266			4,589,129

Outstanding shares (in thousands)			95,056			94,956			94,857			94,785			94,665

NONPERFORMING ASSETS

(dollars in thousands)
(Unaudited)

Nonperforming Assets
		06/30/15			03/31/15			12/31/14			09/30/14			06/30/14
New York and other states*
Loans in nonaccrual status:
Commercial	$		3,263			2,489			3,835			4,226			5,132
Real estate mortgage - 1 to 4 family			27,366			28,215			27,221			29,736			31,433
Installment			79			77			77			95			87
Total non-accrual loans			30,708			30,781			31,133			34,057			36,652
Other nonperforming real estate mortgages - 1 to 4 family			74			75			125			155			159
Total nonperforming loans			30,782			30,856			31,258			34,212			36,811
Other real estate owned			5,833			6,288			5,533			5,238			3,930
Total nonperforming assets	$		36,615			37,144			36,791			39,450			40,741

Florida
Loans in nonaccrual status:
Commercial	$		-			-			-			517			517
Real estate mortgage - 1 to 4 family			1,678			2,608			2,740			2,395			3,578
Installment			10			20			13			1			1
Total non-accrual loans			1,688			2,628			2,753			2,913			4,096
Other nonperforming real estate mortgages - 1 to 4 family			-			-			-			-			-
Total nonperforming loans			1,688			2,628			2,753			2,913			4,096
Other real estate owned			275			670			908			1,188			4,365
Total nonperforming assets	$		1,963			3,298			3,661			4,101			8,461

Total
Loans in nonaccrual status:
Commercial	$		3,263			2,489			3,835			4,743			5,649
Real estate mortgage - 1 to 4 family			29,044			30,823			29,961			32,131			35,011
Installment			89			97			90			96			88
Total non-accrual loans			32,396			33,409			33,886			36,970			40,748
Other nonperforming real estate mortgages - 1 to 4 family			74			75			125			155			159
Total nonperforming loans			32,470			33,484			34,011			37,125			40,907
Other real estate owned			6,108			6,958			6,441			6,426			8,295
Total nonperforming assets	$		38,578			40,442			40,452			43,551			49,202


Quarterly Net Chargeoffs (Recoveries)
		06/30/15			03/31/15			12/31/14			09/30/14			06/30/14
New York and other states*
Commercial	$		50			34			(16	)		124			13
Real estate mortgage - 1 to 4 family			933			1,004			1,591			1,105			1,496
Installment			24			37			48			57			24
Total net chargeoffs	$		1,007			1,075			1,623			1,286			1,533

Florida
Commercial	$		(1	)		(1	)		(476	)		(1	)		(2	)
Real estate mortgage - 1 to 4 family			167			109			37			242			59
Installment			-			-			1			(4	)		10
Total net chargeoffs	$		166			108			(438	)		237			67

Total
Commercial	$		49			33			(492	)		123			11
Real estate mortgage - 1 to 4 family			1,100			1,113			1,628			1,347			1,555
Installment			24			37			49			53			34
Total net chargeoffs	$		1,173			1,183			1,185			1,523			1,600


Asset Quality Ratios
		06/30/15			03/31/15			12/31/14			09/30/14			06/30/14

Total nonperforming loans(1)	$		32,470			33,484			34,011			37,125			40,907
Total nonperforming assets(1)			38,578			40,442			40,452			43,551			49,202
Total net chargeoffs(2)			1,173			1,183			1,185			2,179			1,600

Allowance for loan losses(1)			45,571			45,944			46,327			46,512			46,935

Nonperforming loans to total loans			1.00	%		1.05	%		1.08	%		1.20	%		1.36	%
Nonperforming assets to total assets			0.81	%		0.85	%		0.87	%		0.95	%		1.07	%
Allowance for loan losses to total loans			1.41	%		1.44	%		1.47	%		1.51	%		1.56	%
Coverage ratio(1)			140.3	%		137.2	%		136.2	%		125.3	%		114.7	%
Annualized net chargeoffs to average loans(2)			0.15	%		0.15	%		0.15	%		0.29	%		0.22	%
Allowance for loan losses to annualized net chargeoffs(2)			9.7x			9.6x			9.8x			5.3x			7.3x

* 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)		June 30, 2015									June 30, 2014
		Average			Interest			Average			Average			Interest			Average
		Balance						Rate			Balance						Rate

Assets

Securities available for sale:
U. S. government sponsored enterprises	$		114,279			366		1.28	%	$		110,783			381		1.38	%
Mortgage backed securities and
collateralized mortgage obligations-residential			441,754			2,276		2.06				589,334			3,299		2.24
State and political subdivisions			1,939			36		7.36				3,823			70		7.32
Corporate bonds			956			-		0.00				1,403			2		0.48
Small Business Administration-guaranteed participation securities			98,894			503		2.03				108,072			539		1.99
Mortgage backed securities and
collateralized mortgage obligations-commercial			10,600			38		1.41				10,871			38		1.40
Other			685			4		2.34				665			4		2.41

Total securities available for sale			669,107			3,223		1.93				824,951			4,333		2.10

Federal funds sold and other
short-term Investments			683,110			423		0.25				606,809			376		0.25

Held to maturity securities:
Corporate bonds			9,965			154		6.17				9,950			154		6.18
Mortgage backed securities and
collateralized mortgage obligations-residential			55,509			480		3.46				70,377			577		3.28

Total held to maturity securities			65,474			634		3.87				80,327			731		3.64

Federal Reserve Bank and Federal Home Loan Bank stock			9,466			118		4.99				10,937			128		4.68

Commercial loans			210,424			2,710		5.15				221,819			2,842		5.12
Residential mortgage loans			2,648,320			29,371		4.44				2,401,020			27,548		4.59
Home equity lines of credit			354,053			3,092		3.50				339,884			3,064		3.62
Installment loans			8,226			176		8.60				5,827			167		11.47

Loans, net of unearned income			3,221,023			35,349		4.39				2,968,550			33,621		4.53

Total interest earning assets			4,648,180			39,747		3.42				4,491,574			39,189		3.49

Allowance for loan losses			(46,190	)								(47,389	)
Cash & non-interest earning assets			137,329									135,326


Total assets	$		4,739,319							$		4,579,511


Liabilities and shareholders' equity

Deposits:
Interest bearing checking accounts	$		706,767			111		0.06	%	$		632,266			89		0.06	%
Money market accounts			635,347			547		0.35				655,009			618		0.38
Savings			1,249,865			599		0.19				1,240,158			592		0.19
Time deposits			1,190,234			2,500		0.84				1,144,165			2,035		0.71

Total interest bearing deposits			3,782,213			3,757		0.40				3,671,598			3,334		0.36
Short-term borrowings			182,829			300		0.66				189,802			342		0.72

Total interest bearing liabilities			3,965,042			4,057		0.41				3,861,400			3,676		0.38

Demand deposits			344,982									316,759
Other liabilities			25,591									22,325
Shareholders' equity			403,704									379,027

Total liabilities and shareholders' equity	$		4,739,319							$		4,579,511

Net interest income, tax equivalent						35,690									35,513

Net interest spread								3.01	%								3.11	%

Net interest margin (net interest income
to total interest earning assets)								3.07	%								3.16	%

Tax equivalent adjustment						(19	)								(33	)


Net interest income						35,671									35,480





DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY-
INTEREST RATES AND INTEREST DIFFERENTIAL
(dollars in thousands)		Six months ended									Six months ended
(Unaudited)		June 30, 2015									June 30, 2014
		Average			Interest			Average			Average			Interest			Average
		Balance						Rate			Balance						Rate

Assets

Securities available for sale:
U. S. government sponsored enterprises	$		96,172			578		1.20	%	$		139,907			887		1.27	%
Mortgage backed securities and
collateralized mortgage obligations-residential			459,980			4,669		2.03				567,700			6,377		2.25
State and political subdivisions			2,015			74		7.31				4,971			175		7.04
Corporate bonds			1,226			1		0.16				4,956			61		2.47
Small Business Administration-guaranteed participation securities			100,270			1,025		2.05				109,079			1,095		2.01
Mortgage backed securities and
collateralized mortgage obligations-commercial			10,635			75		1.41				10,904			76		1.39
Other			685			8		2.34				662			8		2.42

Total securities available for sale			670,983			6,430		1.92				838,179			8,679		2.07

Federal funds sold and other
short-term Investments			668,269			823		0.25				591,167			727		0.25

Held to maturity securities:
Corporate bonds			9,964			308		6.17				9,948			308		6.18
Mortgage backed securities and
collateralized mortgage obligations-residential			57,419			958		3.34				72,340			1,202		3.32

Total held to maturity securities			67,383			1,266		3.76				82,288			1,510		3.67

Federal Reserve Bank and Federal Home Loan Bank stock			9,348			234		5.01				10,720			261		4.87

Commercial loans			214,713			5,506		5.13				222,074			5,639		5.08
Residential mortgage loans			2,621,417			58,329		4.46				2,378,199			54,530		4.59
Home equity lines of credit			353,161			6,153		3.51				340,281			6,000		3.56
Installment loans			8,011			351		8.84				5,712			334		11.78

Loans, net of unearned income			3,197,302			70,339		4.41				2,946,266			66,503		4.52

Total interest earning assets			4,613,285			79,092		3.44				4,468,620			77,680		3.48

Allowance for loan losses			(46,392	)								(47,802	)
Cash & non-interest earning assets			138,319									132,906


Total assets	$		4,705,212							$		4,553,724


Liabilities and shareholders' equity

Deposits:
Interest bearing checking accounts	$		692,445			216		0.06	%	$		619,076			173		0.06	%
Money market accounts			636,596			1,164		0.37				650,828			1,217		0.38
Savings			1,239,737			1,257		0.20				1,232,803			1,355		0.22
Time deposits			1,185,363			4,934		0.84				1,142,001			3,986		0.70

Total interest bearing deposits			3,754,141			7,571		0.41				3,644,708			6,731		0.37
Short-term borrowings			187,560			646		0.69				195,954			735		0.76

Total interest bearing liabilities			3,941,701			8,217		0.42				3,840,662			7,466		0.39

Demand deposits			336,741									316,386
Other liabilities			25,817									22,499
Shareholders' equity			400,953									374,177

Total liabilities and shareholders' equity	$		4,705,212							$		4,553,724

Net interest income, tax equivalent						70,875									70,214

Net interest spread								3.02	%								3.09	%

Net interest margin (net interest income
to total interest earning assets)								3.08	%								3.15	%

Tax equivalent adjustment						(39	)								(78	)


Net interest income						70,836									70,136

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 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 a building, nonperforming loans and securities from this calculation. We believe that this provides a reasonable measure of primary banking expenses relative to primary banking revenue.

Core net income (“core earnings”) and core net income (“core earnings”) per share are non-GAAP financial measures derived from GAAP-based amounts. We calculate core earnings by excluding the net after-tax gain on the sale of the proposed Florida operations building during the first quarter of 2014, the net after-tax gain on an significant sale of an ORE property in the second quarter of 2014 and net after-tax gains on the sale of non-performing loans in both the second quarter of 2014 and the second quarter of 2015 from net income and from net income per share. We believe that this provides a reasonable measure of core net income (earnings).

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, 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)
		06/30/15			03/31/15			06/30/14
Tangible Book Value Per Share

Equity	$		402,459			400,476			385,017
Less: Intangible assets			553			553			553
Tangible equity			401,906			399,923			384,464

Shares outstanding			95,056			94,956			94,665
Tangible book value per share			4.23			4.21			4.06
Book value per share			4.23			4.22			4.07

Tangible Equity to Tangible Assets
Total Assets			4,741,337			4,740,656			4,589,129
Less: Intangible assets			553			553			553
Tangible assets			4,740,784			4,740,103			4,588,576

Tangible Equity to Tangible Assets			8.48	%		8.44	%		8.38	%
Equity to Assets			8.49	%		8.45	%		8.39	%

		3 Months Ended									6 Months Ended
Efficiency Ratio		06/30/15			03/31/15			06/30/14			06/30/15			06/30/14

Net interest income	$		35,671			35,165			35,480			70,836			70,136
Taxable equivalent adjustment			19			20			33			39			78
Net interest income (fully taxable equivalent)			35,690			35,185			35,513			70,875			70,214
Non-interest income			4,454			4,623			4,505			9,077			10,264
Less: Net gain on sale of building and nonperforming loans			60			-			163			60			1,719
Less: Net gain on securities			-			249			-			249			6
Revenue used for efficiency ratio			40,084			39,559			39,855			79,643			78,753

Total noninterest expense			22,131			21,857			19,437			43,988			40,238
Less: Other real estate expense, net			201			424			(1,688	)		625			(833	)
Expense used for efficiency ratio			21,930			21,433			21,125			43,363			41,071

Efficiency Ratio			54.71	%		54.18	%		53.00	%		54.45	%		52.15	%


		3 Months Ended									6 Months Ended
Core Net Income		06/30/15			03/31/15			06/30/14			06/30/15			06/30/14

Net income	$		10,727			10,715			11,808			21,442			22,819
Less: Gain on sale of building, nonperforming loans, and significant ORE gain, net of tax			37			-			1,618			37			2,684
Core net income			10,690			10,715			10,190			21,405			20,135

Average basic shares outstanding (in thousands)			95,056			94,947			94,559			95,002			94,536
Average diluted shares outstanding (in thousands)			95,190			95,074			94,675			95,132			94,658

Net income per common share:
- Basic	$		0.113			0.113			0.125			0.226			0.241
- Diluted			0.113			0.113			0.125			0.225			0.241

Core net income per common share:

- Basic	$		0.112			0.113			0.108			0.225			0.213
- Diluted			0.112			0.113			0.108			0.225			0.213

TrustCo Announces Second Quarter 2015 Earnings; Core Net Income Up 5%

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