8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 11(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported):  July 21, 2017

TrustCo Bank Corp NY

(Exact name of registrant as specified in its charter)

NEW YORK	0-10592	14-1630287
State or Other Jurisdiction of Incorporation or Organization	Commission File No.	I.R.S. Employer Identification Number

5 SARNOWSKI DRIVE, GLENVILLE, NEW YORK 12302

(Address of principal executive offices)

(518) 377-3311

(Registrant’s Telephone Number,

Including Area Code)

NOT APPLICABLE

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act  (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act  (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

TrustCo Bank Corp NY

Item 2.02. Results of Operations and Financial Condition

On July 21, 2017, TrustCo Bank Corp NY (“TrustCo”) issued a press release with results for the quarter ending June 30, 2017. Attached is a copy of the press release labeled as Exhibit 99(a).

Item 9.01. Financial Statements and Exhibits

(c) Exhibits

Reg S-K Exhibit No. Description

99(a) Press release dated July 21, 2017, for the period ending June 30, 2017, regarding quarterly results.

Page | 2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: July 21, 2017

TrustCo Bank Corp NY
(Registrant)
By:	/s/ Michael M. Ozimek
	Michael M. Ozimek
	Senior Vice President and
	Chief Financial Officer

Page | 3

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

TrustCo Announces 17% Increase in Second Quarter 2017 Earnings

Executive Snapshot:

· Continued solid financial results:

o Key metrics for Second quarter of 2017 results:

§ Net income of $12.2 million in the second quarter of 2017, up 17.0% compared to $10.5 million in the second quarter of 2016

§ Return on average assets (ROA) of 1.00% compared to 0.88% in the second quarter of 2016

§ Return on average equity (ROE) of 11.05% compared to 9.88% in the second quarter of 2016

§ Efficiency ratio of 53.33% compared to 57.70% in the second quarter of 2016 (Non-GAAP measure; see P. 14 for definition)

· Asset quality remains solid:

o Asset quality measures improved compared to the second quarter of 2016

o Nonperforming assets (NPAs) fell by $4.7 million compared to June 30, 2016

o NPAs to total assets improved to 0.57%, compared to 0.68% at June 30, 2016

o Quarterly net chargeoffs decreased to 0.05% of average loans on an annualized basis, compared to 0.14% for the second quarter of 2016, the lowest level since 2008

· Continued expansion of customer base:

o Focus on capitalizing on opportunities presented by expanded branch network

o Average deposits per branch grew $399 thousand to $29.2 million from June 30, 2016 to June 30, 2017

o Average core (non-maturity) deposits were $110 million higher in the second quarter of 2017 compared to the second quarter of 2016

· Loan portfolio reaches all-time high:

o Average loans were up $150 million for the second quarter of 2017 compared to second quarter of 2016

o At $3.51 billion as of June 30, 2017, loans reached an all-time high

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FOR IMMEDIATE RELEASE:

TrustCo Announces 17% Increase in Second Quarter 2017 Earnings

Glenville, New York – July 21, 2017

TrustCo Bank Corp NY (TrustCo, Nasdaq: TRST)today announced second quarter of 2017 net income of $12.2 million compared to $10.5 million for the second quarter of 2016, an increase of 17.0%.

Summary

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased to be able to report a 17% increase in net income in the second quarter of 2017 as compared to the second quarter of 2016.  Improved revenue growth and expense control combined to produce a solid quarter and an encouraging first half of 2017.  Our focus on traditional lending criteria and conservative balance sheet management has enabled us to produce consistent earnings, maintain strong liquidity and capital and allowed us to continue to grow our business and take advantage of changes in market and competitive conditions.  In terms of our core business, we continue to add customer relationships, which ultimately drive future growth.  We will continue to take advantage of opportunities as they are presented during the balance of 2017 and beyond.”

TrustCo saw continued solid loan growth in the second quarter of 2017 compared to the prior year, led by an increase in residential mortgages.  Loan portfolio expansion was funded by a combination of utilizing a portion of our strong cash balances and by the growth of our deposit base.  The continued shift toward loans helped offset the margin impact from continued comparatively low yields on cash and investments.  Recent decisions by the Federal Reserve to raise short term interest rates have contributed to our results and will provide a further benefit in the second half of 2017 and beyond.  The growth in average deposits in the second quarter of 2017 versus the prior year was led by lower cost checking and savings deposits.  TrustCo’s strong liquidity position continues to allow it to take advantage of opportunities as they arise.

Asset quality measures improved versus June 30, 2016, with nonperforming assets (NPAs) declining $4.7 million.

Details

Average loans were up $150.1 million or 4.5% in the second quarter of 2017 over the same period in 2016. Average residential loans, our primary lending focus, were up $200.0 million or 7.2% in the second quarter of 2017, over the same period in 2016.  Overall loan growth was constrained by a $15.6 million decline in average commercial loans, which have become less attractive on a risk adjusted basis, and a $34.0 million decline in average outstandings on home equity lines of credit, as well as a small decline in installment loans. Average deposits were up $36.0 million or 0.9% for the second quarter of 2017 over the same period a year earlier.  The increase in deposits came from core deposit accounts, which consist of checking, savings and money market deposits, with checking and savings entirely responsible for the growth within core deposits.  Average core deposits increased $110.3 million from the second quarter of 2016 to the second quarter of 2017, while average time deposit balances were down.  Within core, money market balances were down $2.6 million, while checking was up $100.2 million (including interest bearing and non-interest bearing balances) and savings were up $12.7 million.  Core deposits typically represent longer term customer relationships and are generally lower cost than time deposits.  The cost of interest bearing deposits declined from 0.38% in the second quarter of 2016 to 0.34% in the second quarter of 2017.  The shift out of money market balances was also beneficial, as that category is the most expensive type of core deposit.  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.”

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For the second quarter of 2017, return on average assets and return on average equity were 1.00% and 11.05%, respectively, compared to 0.88% and 9.88% for the second quarter of 2016.  Diluted earnings per share were $0.127 for the second quarter of 2017, compared to $0.109 for the second quarter of 2016.  As previously discussed, some operating costs remain at elevated levels in response to regulatory requirements, however overall expense control remains a key area of focus.  Total operating expenses declined by $1.1 million in the second quarter of 2017 as compared to the second quarter of 2016, led by lower deposit insurance, ORE costs and equipment expense.  The decline in expenses coupled with $1.5 million of revenue growth over the same period resulted in the bottom line improvement noted.  We anticipate being able to control expense growth effectively in the second half of 2017.  Some of the costs associated with regulatory issues will be recurring, but others will diminish over time.

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

“At June 30, 2017, our average deposits per branch were $29.2 million, compared to $28.8 million a year earlier.  We have always designed our branches to be smaller and more cost effective than those built by many of our competitors.  We use open floor plans that help maximize the value of our branches.  We remain mindful that fully achieving our goals for newer branches will take time and continued work.  We believe success in growing customer relationships provides basic building blocks that will help drive profit growth for the coming years.”

Asset quality and loan loss reserve measures improved versus June 30, 2016.  Nonperforming loans (NPLs) were $24.5 million at June 30, 2017, compared to $28.2 million at June 30, 2016.  NPLs were equal to 0.70% of total loans at June 30, 2017, compared to 0.84% at June 30, 2016.  The coverage ratio, or allowance for loan losses to NPLs, was 180.0% at June 30, 2017, compared to 156.0% at June 30, 2016.  Nonperforming assets (NPAs) were $28.1 million at June 30, 2017 compared to $32.8 million at June 30, 2016.  The ratio of loan loss allowance to total loans was 1.26% as of June 30, 2017, compared to 1.32% at June 30, 2016 and reflects both the improvement in asset quality and economic conditions in our lending areas.  The allowance for loan losses was $44.2 million at June 30, 2017 compared to $44.1 million at June 30, 2016.  The provision for loan losses was $550 thousand for the second quarter of 2017, compared to $800 thousand in the second quarter of 2016.  Net chargeoffs for the second quarter of 2017 decreased versus the second quarter of 2016, falling to $436 thousand from $1.1 million in the year earlier period.  The annualized net chargeoff ratio was 0.05% for the second quarter of 2017, compared to 0.14% in the second quarter of 2016, remaining at the lowest level since the first quarter of 2008.

Page | 3

The net interest margin for the second quarter of 2017 was 3.21%, up twelve basis points versus the second quarter of 2016, as increases in short term interest rates led to significantly higher earnings on cash, while slightly better returns were also achieved in the investment portfolio.  Loan yields did decline, but that was more than offset by higher volumes in terms of income.  During the same period, the cost of interest bearing liabilities declined, reflecting TrustCo’s strong funding base.

For the first half of 2017, net income was $23.2 million, up 11.1% as compared to $20.9 million in the first half of 2016, or $0.241 and $0.219, respectively, per diluted share.

At June 30, 2017 the equity to asset ratio was 9.09%, compared to 8.91% at June 30, 2016.  Book value per share at June 30, 2017 was $4.66 compared to $4.51 a year earlier.

TrustCo Bank Corp NY is a $4.9 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 144 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at June 30, 2017.

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 2017results will be held at 9:00 a.m. Eastern Time on July 24, 2017.  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 10110582. The call will also be audio webcast at: http://services.choruscall.com/links/trst170724.html, and will be available for one year.

Page | 4

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 2017, the impact of Federal Reserve actions regarding interest rates and the growth of loans and deposits throughout our branch network, our ability to capitalize on economic changes in the areas in which we operate and the extent to which higher expenses to fulfill operating and regulatory requirements recur or diminish over time.  Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement:  our ability to continue to originate a significant volume of one-to-four family mortgage loans in our market areas; our ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income; our ability to comply with the supervisory agreement entered into with Trustco Bank’s regulator and potential regulatory actions if we fail to comply; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of Trustco Bank and the continued ability of Trustco Bank under regulatory rules and the supervisory agreement to distribute capital to TrustCo, which could affect our ability to pay dividends; results of supervisory monitoring or examinations of Trustco Bank and TrustCo by our respective regulators; our ability to make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; adverse conditions on the securities markets that lead to impairment in the value of securities in our investment portfolio; changes in law and policy accompanying the new presidential administration and uncertainty or speculation pending the enactment of such changes; the perceived overall value of our products and services by users, including in comparison to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for our products and services; ; changes in consumer spending, borrowing and saving habits; technological changes and electronic, cyber, and physical security breaches; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading “Risk Factors” in our most recent annual report on Form 10-K and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.

Page | 5

TRUSTCO BANK CORP NY

GLENVILLE, NY

FINANCIAL HIGHLIGHTS

(dollars in thousands, except per share data)

(Unaudited)

				Three Months Ended
	06/30/17			03/31/17		06/30/16
Summary of operations
Net interest income (TE)	$	38,553			37,413		36,311
Provision for loan losses		550			600		800
Net gain on securities transactions		-			-		668
Noninterest income, excluding net gain on securities transactions		4,504			4,727		4,531
Noninterest expense		22,913			24,019		23,974
Net income		12,240			10,947		10,464
Per common share
Net income per share:
- Basic	$	0.127			0.114		0.110
- Diluted		0.127			0.114		0.109
Cash dividends		0.066			0.066		0.066
Book value at period end		4.66			4.57		4.51
Market price at period end		7.75			7.85		6.41
At period end
Full time equivalent employees		813			802		801
Full service banking offices		144			144		145
Performance ratios
Return on average assets		1.00	%		0.91		0.88
Return on average equity		11.05			10.17		9.88
Efficiency (1)		53.33			55.81		57.70
Net interest spread (TE)		3.15			3.08		3.03
Net interest margin (TE)		3.21			3.14		3.09
Dividend payout ratio		51.48			57.47		59.89
Capital ratio at period end
Consolidated equity to assets		9.09	%		8.98		8.91
Consolidated tangible equity to tangible assets (2)		9.08	%		8.97		8.90
Asset quality analysis at period end
Nonperforming loans to total loans		0.70			0.77		0.84
Nonperforming assets to total assets		0.57			0.61		0.68
Allowance for loan losses to total loans		1.26			1.28		1.32
Coverage ratio (3)		1.8	x		1.7		1.6

(1) Non-GAAP measure; calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income less gain on sale of nonperforming loans).

(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.

Page | 6

FINANCIAL HIGHLIGHTS, Continued

(dollars in thousands, except per share data)

(Unaudited)

	Six Months Ended
	06/30/17			06/30/16
Summary of operations
Net interest income (TE)	$	75,966			72,508
Provision for loan losses		1,150			1,600
Net gain on securities transactions		-			668
Noninterest income, excluding net gain on securities transactions		9,231			9,103
Noninterest expense		46,932			47,412
Net income		23,187			20,875
Per common share
Net income per share:
- Basic	$	0.242			0.219
- Diluted		0.241			0.219
Cash dividends		0.131			0.131
Book value at period end		4.66			4.51
Market price at period end		7.75			6.41
Performance ratios
Return on average assets		0.96	%		0.88
Return on average equity		10.62			9.93
Efficiency (1)		54.56			56.96
Net interest spread (TE)		3.11			3.05
Net interest margin (TE)		3.17			3.11
Dividend payout ratio		54.31			60.00

(1) Non-GAAP measure; calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income less gain on sale of nonperforming loans).

TE = Taxable equivalent.

Page | 7

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(Unaudited)

	Three Months Ended
	6/30/2017			3/31/2017		12/31/2016		9/30/2016		6/30/2016
Interest and dividend income:
Interest and fees on loans	$	36,662			36,044		36,251		36,171		35,652
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		607			595		422		408		404
State and political subdivisions		11			12		12		13		13
Mortgage-backed securities and collateralized mortgage obligations-residential		1,944			1,958		1,849		1,829		2,169
Corporate bonds		154			151		149		97		-
Small Business Administration-guaranteed participation securities		394			415		430		445		450
Mortgage-backed securities and collateralized mortgage obligations-commercial		21			23		23		36		38
Other securities		4			4		4		4		4
Total interest and dividends on securities available for sale		3,135			3,158		2,889		2,832		3,078
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential		296			316		331		347		374
Corporate bonds		154			154		153		156		154
Total interest on held to maturity securities		450			470		484		503		528
Federal Reserve Bank and Federal Home Loan Bank stock		134			134		133		131		118
Interest on federal funds sold and other short-term investments		1,727			1,246		865		866		832
Total interest income		42,108			41,052		40,622		40,503		40,208
Interest expense:
Interest on deposits:
Interest-bearing checking		134			124		123		120		116
Savings		435			430		436		504		604
Money market deposit accounts		468			466		459		463		467
Time deposits		2,181			2,283		2,406		2,468		2,460
Interest on short-term borrowings		349			349		291		281		262
Total interest expense		3,567			3,652		3,715		3,836		3,909
Net interest income		38,541			37,400		36,907		36,667		36,299
Provision for loan losses		550			600		600		750		800
Net interest income after provision for loan losses		37,991			36,800		36,307		35,917		35,499
Noninterest income:
Trustco Financial Services income		1,425			1,858		1,422		1,347		1,512
Fees for services to customers		2,797			2,637		2,795		2,664		2,737
Net gain on securities transactions		-			-		-		-		668
Other		282			232		295		718		282
Total noninterest income		4,504			4,727		4,512		4,729		5,199
Noninterest expenses:
Salaries and employee benefits		9,559			10,210		9,576		8,995		8,934
Net occupancy expense		4,267			4,109		4,185		3,887		3,918
Equipment expense		1,428			1,556		1,370		1,596		1,840
Professional services		1,963			1,928		1,997		1,959		2,098
Outsourced services		1,500			1,500		1,775		1,465		1,425
Advertising expense		607			713		727		489		570
FDIC and other insurance		1,012			1,047		901		1,127		1,949
Other real estate (income) expense, net		(4	)		499		721		895		423
Other		2,581			2,457		2,113		2,636		2,817
Total noninterest expenses		22,913			24,019		23,365		23,049		23,974
Income before taxes		19,582			17,508		17,454		17,597		16,724
Income taxes		7,342			6,561		6,656		6,667		6,260
Net income	$	12,240			10,947		10,798		10,930		10,464
Net income per common share:
- Basic	$	0.127			0.114		0.113		0.114		0.110
- Diluted		0.127			0.114		0.113		0.114		0.109
Average basic shares (in thousands)		96,003			95,879		95,732		95,603		95,487
Average diluted shares (in thousands)		96,073			95,987		95,877		95,722		95,580
Note:  Taxable equivalent net interest income	$	38,553			37,413		36,921		36,681		36,311

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CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(Unaudited)

	Six Months Ended
	6/30/2017		6/30/2016
Interest and dividend income:
Interest and fees on loans	$	72,706		71,257
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		1,202		659
State and political subdivisions		23		27
Mortgage-backed securities and collateralized mortgage obligations-residential		3,902		4,285
Corporate bonds		305		-
Small Business Administration-guaranteed participation securities		809		926
Mortgage-backed securities and collateralized mortgage obligations-commercial		44		74
Other securities		8		8
Total interest and dividends on securities available for sale		6,293		5,979
Interest on held to maturity securities:
Mortgage-backed securities-residential		612		775
Corporate bonds		308		308
Total interest on held to maturity securities		920		1,083
Federal Reserve Bank and Federal Home Loan Bank stock		268		238
Interest on federal funds sold and other short-term investments		2,973		1,677
Total interest income		83,160		80,234
Interest expense:
Interest on deposits:
Interest-bearing checking		258		230
Savings		865		1,208
Money market deposit accounts		934		962
Time deposits		4,464		4,833
Interest on short-term borrowings		698		519
Total interest expense		7,219		7,752
Net interest income		75,941		72,482
Provision for loan losses		1,150		1,600
Net interest income after provision for loan losses		74,791		70,882
Noninterest income:
Trust department income		3,283		3,117
Fees for services to customers		5,434		5,398
Net gain on securities transactions		-		668
Other		514		588
Total noninterest income		9,231		9,771
Noninterest expenses:
Salaries and employee benefits		19,769		17,937
Net occupancy expense		8,376		8,006
Equipment expense		2,984		3,354
Professional services		3,891		4,244
Outsourced services		3,000		2,976
Advertising expense		1,320		1,299
FDIC and other insurance		2,059		3,939
Other real estate expense, net		495		942
Other		5,038		4,715
Total noninterest expenses		46,932		47,412
Income before taxes		37,090		33,241
Income taxes		13,903		12,366
Net income	$	23,187		20,875
Net income per Common Share:
- Basic	$	0.242		0.219
- Diluted		0.241		0.219
Average basic shares (thousands)		95,944		95,426
Average diluted shares (thousands)		96,034		95,496
Note:  Taxable equivalent net interest income	$	75,966		72,508

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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands)

(Unaudited)

	6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016
ASSETS:
Cash and due from banks	$	43,783			41,352			48,719			42,296			39,787
Federal funds sold and other short term investments		663,360			641,839			658,555			622,132			718,609
Total cash and cash equivalents		707,143			683,191			707,274			664,428			758,396
Securities available for sale:
U. S. government sponsored enterprises		128,386			162,341			117,266			116,327			116,595
States and political subdivisions		536			887			886			970			974
Mortgage-backed securities and collateralized mortgage obligations-residential		352,591			357,683			372,308			400,575			404,138
Small Business Administration-guaranteed participation securities		72,858			75,429			78,499			84,687			87,740
Mortgage-backed securities and collateralized mortgage obligations-commercial		9,903			9,923			10,011			10,233			10,374
Corporate bonds		40,498			40,612			40,705			41,025			-
Other securities		685			685			685			685			685
Total securities available for sale		605,457			647,560			620,360			654,502			620,506
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential		31,211			33,276			35,500			38,044			40,702
Corporate bonds		9,997			9,994			9,990			9,986			9,982
Total held to maturity securities		41,208			43,270			45,490			48,030			50,684
Federal Reserve Bank and Federal Home Loan Bank stock		9,723			9,579			9,579			9,579			9,579
Loans:
Commercial		183,035			184,451			191,194			189,795			195,698
Residential mortgage loans		2,999,306			2,929,928			2,895,733			2,845,876			2,786,951
Home equity line of credit		316,674			326,280			334,841			343,445			352,069
Installment loans		8,458			8,277			8,818			8,515			8,476
Loans, net of deferred net costs		3,507,473			3,448,936			3,430,586			3,387,631			3,343,194
Less:
Allowance for loan losses		44,162			44,048			43,890			43,950			44,064
Net loans		3,463,311			3,404,888			3,386,696			3,343,681			3,299,130
Bank premises and equipment, net		35,174			35,175			35,466			36,110			36,793
Other assets		58,466			63,080			63,941			56,519			55,825
Total assets	$	4,920,482			4,886,743			4,868,806			4,812,849			4,830,913
LIABILITIES:
Deposits:
Demand	$	390,120			373,930			377,755			380,090			376,669
Interest-bearing checking		871,004			838,936			815,534			785,118			766,322
Savings accounts		1,285,886			1,287,802			1,271,449			1,277,734			1,282,006
Money market deposit accounts		572,580			583,909			571,962			566,097			577,063
Time deposits		1,088,824			1,113,892			1,159,463			1,159,199			1,178,567
Total deposits		4,208,414			4,198,469			4,196,163			4,168,238			4,180,627
Short-term borrowings		233,621			220,946			209,406			179,204			190,542
Accrued expenses and other liabilities		31,081			28,628			30,551			29,799			29,479
Total liabilities		4,473,116			4,448,043			4,436,120			4,377,241			4,400,648
SHAREHOLDERS’ EQUITY:
Capital stock		99,511			99,493			99,214			99,121			99,071
Surplus		172,603			172,628			171,425			171,093			171,174
Undivided profits		212,112			206,173			201,517			197,013			192,356
Accumulated other comprehensive (loss) income, net of tax		(3,593	)		(5,568	)		(6,251	)		2,328			2,395
Treasury stock at cost		(33,267	)		(34,026	)		(33,219	)		(33,947	)		(34,731	)
Total shareholders’ equity		447,366			438,700			432,686			435,608			430,265
Total liabilities and shareholders’ equity	$	4,920,482			4,886,743			4,868,806			4,812,849			4,830,913
Outstanding shares (in thousands)		96,015			95,917			95,780			95,614			95,493

Page | 10

NONPERFORMING ASSETS

(dollars in thousands)

(Unaudited)

Nonperforming Assets
	06/30/17		03/31/17		12/31/16		09/30/16		06/30/16
New York and other states*
Loans in nonaccrual status:
Commercial	$	1,711		1,858		1,843		2,366		2,690
Real estate mortgage - 1 to 4 family		20,639		22,772		21,198		21,678		23,559
Installment		25		41		48		70		49
Total non-accrual loans		22,375		24,671		23,089		24,114		26,298
Other nonperforming real estate mortgages - 1 to 4 family		41		41		42		44		45
Total nonperforming loans		22,416		24,712		23,131		24,158		26,343
Other real estate owned		3,585		3,191		4,268		4,768		4,602
Total nonperforming assets	$	26,001		27,903		27,399		28,926		30,945
Florida
Loans in nonaccrual status:
Commercial	$	-		-		-		-		-
Real estate mortgage - 1 to 4 family		2,112		1,712		1,929		1,844		1,900
Installment		-		-		-		-		-
Total non-accrual loans		2,112		1,712		1,929		1,844		1,900
Other nonperforming real estate mortgages - 1 to 4 family		-		-		-		-		-
Total nonperforming loans		2,112		1,712		1,929		1,844		1,900
Other real estate owned		-		-		-		-		-
Total nonperforming assets	$	2,112		1,712		1,929		1,844		1,900
Total
Loans in nonaccrual status:
Commercial	$	1,711		1,858		1,843		2,366		2,690
Real estate mortgage - 1 to 4 family		22,751		24,484		23,127		23,522		25,459
Installment		25		41		48		70		49
Total non-accrual loans		24,487		26,383		25,018		25,958		28,198
Other nonperforming real estate mortgages - 1 to 4 family		41		41		42		44		45
Total nonperforming loans		24,528		26,424		25,060		26,002		28,243
Other real estate owned		3,585		3,191		4,268		4,768		4,602
Total nonperforming assets	$	28,113		29,615		29,328		30,770		32,845

Quarterly Net Chargeoffs (Recoveries)

	06/30/17		03/31/17		12/31/16			09/30/16		06/30/16
New York and other states*
Commercial	$	-		64		(56	)		353		67
Real estate mortgage - 1 to 4 family		334		261		619			471		973
Installment		37		31		55			37		77
Total net chargeoffs	$	371		356		618			861		1,117
Florida
Commercial	$	-		-		-			-		-
Real estate mortgage - 1 to 4 family		52		84		23			-		16
Installment		13		2		19			3		1
Total net chargeoffs	$	65		86		42			3		17
Total
Commercial	$	-		64		(56	)		353		67
Real estate mortgage - 1 to 4 family		386		345		642			471		989
Installment		50		33		74			40		78
Total net chargeoffs	$	436		442		660			864		1,134

Asset Quality Ratios

	06/30/17			03/31/17			12/31/16			09/30/16			06/30/16
Total nonperforming loans(1)	$	24,528			26,424			25,060			26,002			28,243
Total nonperforming assets(1)		28,113			29,615			29,328			30,770			32,845
Total net chargeoffs(2)		436			442			660			864			1,134
Allowance for loan losses(1)		44,162			44,048			43,890			43,950			44,064
Nonperforming loans to total loans		0.70	%		0.77	%		0.73	%		0.77	%		0.84	%
Nonperforming assets to total assets		0.57	%		0.61	%		0.60	%		0.64	%		0.68	%
Allowance for loan losses to total loans		1.26	%		1.28	%		1.28	%		1.30	%		1.32	%
Coverage ratio(1)		180.0	%		166.7	%		175.1	%		169.0	%		156.0	%
Annualized net chargeoffs to average loans(2)		0.05	%		0.05	%		0.08	%		0.10	%		0.14	%
Allowance for loan losses to annualized net chargeoffs(2)		25.3	x		24.9	x		16.6	x		12.7	x		9.7	x

* Includes New York, New Jersey, Vermont and Massachusetts.

(1) At period-end

(2) For the period ended

Page | 11

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY-

INTEREST RATES AND INTEREST DIFFERENTIAL

(dollars in thousands) (Unaudited)	Three months ended June 30, 2017									Three months ended June 30, 2016
	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises	$	153,552			607			1.58	%	$	107,190			404			1.51	%
Mortgage backed securities and collateralized mortgage obligations-residential		359,085			1,944			2.17			445,162			2,169			1.95
State and political subdivisions		816			16			7.84			955			19			7.96
Corporate bonds		42,699			154			1.44			-			-			-
Small Business Administration-guaranteed participation securities		75,561			394			2.09			87,801			450			2.05
Mortgage backed securities and collateralized mortgage obligations-commercial		10,003			21			0.84			10,321			38			1.47
Other		685			4			2.34			677			4			2.36
Total securities available for sale		642,401			3,140			1.96			652,106			3,084			1.89
Federal funds sold and other short-term Investments		643,557			1,727			1.07			668,395			832			0.50
Held to maturity securities:
Corporate bonds		9,996			154			6.16			9,981			154			6.17
Mortgage backed securities and collateralized mortgage obligations-residential		32,188			296			3.68			42,188			374			3.55
Total held to maturity securities		42,184			450			4.27			52,169			528			4.05
Federal Reserve Bank and Federal Home Loan Bank stock		9,709			134			5.52			9,576			118			4.93
Commercial loans		183,382			2,401			5.24			198,938			2,563			5.15
Residential mortgage loans		2,958,994			30,943			4.18			2,759,024			29,725			4.31
Home equity lines of credit		320,872			3,131			3.90			354,897			3,179			3.58
Installment loans		8,029			194			9.66			8,316			191			9.19
Loans, net of unearned income		3,471,277			36,669			4.23			3,321,175			35,658			4.29
Total interest earning assets		4,809,128			42,120			3.50			4,703,421			40,220			3.42
Allowance for loan losses		(44,429	)								(44,754	)
Cash & non-interest earning assets		130,998									136,724
Total assets	$	4,895,697								$	4,795,391
Liabilities and shareholders’ equity
Deposits:
Interest bearing checking accounts	$	849,965			134			0.06	%	$	759,546			116			0.06	%
Money market accounts		577,464			468			0.32			580,100			467			0.32
Savings		1,286,282			435			0.14			1,273,575			604			0.19
Time deposits		1,102,777			2,181			0.79			1,177,084			2,460			0.84
Total interest bearing deposits		3,816,488			3,218			0.34			3,790,305			3,647			0.38
Short-term borrowings		226,455			349			0.62			181,247			262			0.58
Total interest bearing liabilities		4,042,943			3,567			0.35			3,971,552			3,909			0.39
Demand deposits		380,611									370,781
Other liabilities		28,026									27,121
Shareholders’ equity		444,117									425,937
Total liabilities and shareholders’ equity	$	4,895,697								$	4,795,391
Net interest income, tax equivalent					38,553									36,311
Net interest spread								3.15	%								3.03	%
Net interest margin (net interest income to total interest earning assets)								3.21	%								3.09	%
Tax equivalent adjustment					(12	)								(12	)
Net interest income					38,541									36,299

Page | 12

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY-

INTEREST RATES AND INTEREST DIFFERENTIAL

(dollars in thousands) (Unaudited)	Six Months ended June 30, 2017									Six Months ended June 30, 2016
	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises	$	148,054			1,202			1.62	%	$	91,111			659			1.45	%
Mortgage backed securities and collateralized mortgage obligations-residential		363,496			3,902			2.15			428,831			4,285			2.00
State and political subdivisions		844			35			8.29			1,034			41			7.93
Corporate bonds		42,143			305			1.45			-			-			-
Small Business Administration-guaranteed participation securities		77,068			809			2.10			89,206			926			2.08
Mortgage backed securities and collateralized mortgage obligations-commercial		10,046			44			0.88			10,357			74			1.43
Other		685			8			2.34			682			8			2.35
Total securities available for sale		642,336			6,305			1.96			621,221			5,993			1.93
Federal funds sold and other short-term Investments		642,348			2,973			0.93			671,990			1,677			0.50
Held to maturity securities:
Corporate bonds		9,994			308			6.16			9,979			308			6.17
Mortgage backed securities and collateralized mortgage obligations-residential		33,240			612			3.68			43,650			775			3.55
Total held to maturity securities		43,234			920			4.26			53,629			1,083			4.04
Federal Reserve Bank and Federal Home Loan Bank stock		9,645			268			5.56			9,527			238			5.00
Commercial loans		185,474			4,830			5.21			200,152			5,180			5.18
Residential mortgage loans		2,935,620			61,310			4.18			2,742,918			59,348			4.33
Home equity lines of credit		325,579			6,216			3.82			356,857			6,358			3.56
Installment loans		8,128			363			8.93			8,488			383			9.02
Loans, net of unearned income		3,454,801			72,719			4.21			3,308,415			71,269			4.31
Total interest earning assets		4,792,364			83,185			3.47			4,664,782			80,260			3.44
Allowance for loan losses		(44,333	)								(45,013	)
Cash & non-interest earning assets		130,575									136,138
Total assets	$	4,878,606								$	4,755,907
Liabilities and shareholders’ equity
Deposits:
Interest bearing checking accounts	$	829,615			258			0.06	%	$	747,322			230			0.06	%
Money market accounts		578,728			934			0.32			591,937			962			0.33
Savings		1,280,552			865			0.14			1,268,021			1,208			0.19
Time deposits		1,118,274			4,464			0.80			1,155,773			4,833			0.84
Total interest bearing deposits		3,807,169			6,521			0.34			3,763,053			7,233			0.38
Short-term borrowings		228,078			698			0.61			178,683			519			0.58
Total interest bearing liabilities		4,035,247			7,219			0.36			3,941,736			7,752			0.39
Demand deposits		375,610									364,503
Other liabilities		27,408									27,019
Shareholders’ equity		440,341									422,649
Total liabilities and shareholders’ equity	$	4,878,606								$	4,755,907
Net interest income, tax equivalent					75,966									72,508
Net interest spread								3.11	%								3.05	%
Net interest margin (net interest income to total interest earning assets)								3.17	%								3.11	%
Tax equivalent adjustment					(25	)								(26	)
Net interest income					75,941									72,482

Page | 13

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 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)
	06/30/17			03/31/17			06/30/16
Tangible Equity to Tangible Assets
Total Assets		4,920,482			4,886,743			4,830,913
Less: Intangible assets		553			553			553
Tangible assets		4,919,929			4,886,190			4,830,360
Equity	$	447,366			438,700			430,265
Less: Intangible assets		553			553			553
Tangible equity		446,813			438,147			429,712
Tangible Equity to Tangible Assets		9.08	%		8.97	%		8.90	%
Equity to Assets		9.09	%		8.98	%		8.91	%

	3 Months Ended									Six Months Ended
Efficiency Ratio	06/30/17			03/31/17			06/30/16			06/30/17			06/30/16
Net interest income	$	38,541			37,400			36,299			75,941			72,482
Taxable equivalent adjustment		12			13			12			25			26
Net interest income (fully taxable equivalent)		38,553			37,413			36,311			75,966			72,508
Non-interest income		4,504			4,727			5,199			9,231			9,771
Less:  Net gain on sale of nonperforming loans		84			-			24			84			24
Less:  Net gain on securities		-			-			668			-			668
Revenue used for efficiency ratio		42,973			42,140			40,818			85,113			81,587
Total noninterest expense		22,913			24,019			23,974			46,932			47,412
Less:  Other real estate (income) expense, net		(4	)		499			423			495			942
Expense used for efficiency ratio		22,917			23,520			23,551			46,437			46,470
Efficiency Ratio		53.33	%		55.81	%		57.70	%		54.56	%		56.96	%

Page | 14