EX-99.(A) 2 ex99_a.htm EXHIBIT 99(A)
Exhibit 99(a)

 News Release

5 Sarnowski Drive, Glenville, New York, 12302
(518) 377-3311          Fax:  (518) 381-3668

Subsidiary:
TrustCo Bank
NASDAQ -- TRST

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

TrustCo Announces Third Quarter 2018 Net Income of $15.2 Million

Executive Snapshot:


 ·
Continued solid financial results:

o
Key metrics for third quarter 2018:

§
Net income of $15.2 million, up 20.7% compared to $12.6 million in the third quarter of 2017

§
Return on average assets (ROAA) of 1.24% compared to 1.02% in the third quarter of 2017

§
Return on average equity (ROAE) of 12.84% compared to 11.06% in the third quarter of 2017

§
Efficiency ratio of 53.39% compared to 52.79% in the third quarter of 2017 (Non-GAAP measure; see P. 14 for definition)


·
Asset quality continues to be strong:

o
Nonperforming assets (NPAs) fell by $1.4 million compared to September 30, 2017

o
NPAs to total assets improved to 0.53%, compared to 0.56% at September 30, 2017

o
Quarterly net chargeoffs were equal to 0.01% of average loans on an annualized basis, compared to 0.07% for the third quarter of 2017


·
Seeking depth and expansion of customer base:

o
Looking to gain depth in customer base within branch network

o
Core (non-maturity) deposits averaged $28.4 million per branch at September 30, 2018

o
Average core deposits were down $31.0 million in the third quarter 2018 compared to the third quarter 2017, however that was driven by a decrease in relatively high cost money market deposits

§
Excluding money market deposits, core deposits were up $32.4 million or 1.3%

§
With the exception of money market balances, the cost of core deposits continues to decline


·
Loan portfolio reaches all-time high:

o
Average loans were up $242 million for the third quarter 2018 compared to third quarter of 2017

o
At $3.8 billion as of September 30, 2018, loans continue to set new all-time highs

Page | 1
FOR IMMEDIATE RELEASE:

TrustCo Announces Third Quarter 2018 Net Income of $15.2 Million

Glenville, New York – October 22, 2018

TrustCo Bank Corp NY (TrustCo, Nasdaq: TRST) today announced third quarter 2018 net income of $15.2 million compared to $12.6 million for the third quarter 2017, an increase of 20.7%.  Third quarter 2018 results include the impact of a lower tax rate resulting from the Tax Cuts and Jobs Act.

Summary

Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased to report continued strong third quarter performance, with an increase of 20.7% in net income as compared to the third quarter 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 this year and beyond.”

TrustCo continues to see solid loan growth in the third quarter 2018 compared to the prior year, led by an increase in residential mortgages.  Loan portfolio expansion was funded by a combination of utilizing a portion of our strong cash balances and cash flow from security investments, as well as expansion of shareholders’ equity through increased retained net income.  The continued shift toward loans helped sustain the margin despite higher CD rates.  We note that current mortgage rates exceed the yield on our existing portfolio of mortgages, which, if sustained, will be a positive going forward.  The Federal Reserve decision to raise the target Federal Funds rate has contributed to our results as our cash position immediately repriced upward.  We are starting to see the full impact of the 25 basis point increase from last quarter, of which an additional 25 basis point increase was announced on September 26th, 2018.

Total average deposits were up $47.3 million in the third quarter 2018 versus the prior year.  Average core deposits were down over that time frame, due in part to a decline of money market balances, our highest costing core deposit type.  Other average core deposits were up $32.4 in the third quarter 2018 over the same period in 2017, driven by interest bearing checking accounts and demand deposits.  The overall cost of funds increased 16 basis points to 0.52% from the third quarter 2017 to the third quarter 2018.  The shift towards loans in the asset mix, coupled with a 100 basis point increase in the yield on Federal Funds and securities more than offset the higher cost of funds, resulting in a 9 basis point gain in net interest margin to 3.35%.  TrustCo’s strong liquidity position continues to allow us to take advantage of opportunities as they arise.

Page | 2
Details

Average loans were up $242 million or 6.8% in the third quarter 2018 over the same period in 2017.  Average residential loans, our primary lending focus, were up $254 million or 8.4% in the third quarter 2018, over the same period in 2017.  Total loan growth was offset by an $18.3 million decline in average outstandings on home equity lines of credit.

Average deposits were up $47.3 million or 1.1% for the third quarter 2018 over the same period a year earlier.  The growth in deposits was the result of a $51.8 million increase in average interest bearing checking balances, $16.0 million in average demand balances and $78.3 million in time deposits, partly offset by decreases of $63.4 million in money market balances and $35.4 million in savings balances.  Core deposits typically represent longer term customer relationships and are generally lower cost than time deposits.  The cost of total deposits increased to 0.52% in the third quarter 2018 from 0.36% in the third quarter 2017.  Mr. McCormick noted that, “The year-over-year growth of our loans and our focus to strengthen the core deposit base reflect the long term strategic focus of the Company.”

For the third quarter 2018, return on average assets and return on average equity were 1.24% and 12.84%, respectively, compared to 1.02% and 11.06% for the third quarter 2017.  Diluted earnings per share were $0.157 for the third quarter 2018, compared to $0.131 for the third quarter 2017.  Total operating expenses increased by $1.0 million in the third quarter 2018 as compared to the third quarter 2017, with the most significant increase coming in salaries and benefits.  The increase in expenses was matched with a $945 thousand increase in revenue (net interest income plus non-interest income).  The effective tax rate was 24.5% in the third quarter of 2018, compared to 36.9% in the year ago period, reflecting the Tax Cuts and Jobs Act.

For the three quarters of 2018, return on average assets and return on average equity were 1.24% and 13.00%, respectively, compared to 0.98% and 10.77% for three quarters of 2017.  Diluted earnings per share were $0.470 through September of 2018, compared to $0.372 for the same time period in 2017.

“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 September 30, 2018, our average deposits per branch were $28.4 million, compared to $29.0 million at September 30, 2017.   For branches open one year or more, the average deposits per branch is up $240 thousand year over year.  While total deposit growth is important, TrustCo strives to maximize customer relationships through attracting and increasing core deposit balances.  We have always designed our branches to be smaller and more cost effective than those built by many of our competitors.  We use open floor plans that help maximize the value of our branches.  We remain mindful that fully achieving our goals for newer branches will take time and continued work.  We believe success in growing customer relationships provides basic building blocks that will help drive profit growth for the coming years.”

Page | 3
Asset quality and loan loss reserve measures continued to improve.  Nonperforming loans (NPLs) were $23.8 million at September 30, 2018, compared to $24.6 million at September 30, 2017.  NPLs were equal to 0.62% of total loans at September 30, 2018, compared to 0.69% at September 30, 2017.  The coverage ratio, or allowance for loan losses to NPLs, was 188.0% at September 30, 2018, compared to 179.3% at September 30, 2017.  Nonperforming assets (NPAs) were $26.1 million at September 30, 2018 compared to $27.5 million at September 30, 2017.  The ratio of loan loss allowance to total loans was 1.17% as of September 30, 2018, compared to 1.23% at September 30, 2017 and reflects both the continued improvement in asset quality and the economic conditions in our lending areas.  The allowance for loan losses was $44.7 million at September 30, 2018 compared to $44.1 million at September 30, 2017.  The provision for loan losses was $300 thousand for the third quarter 2018, compared to $550 thousand in the third quarter 2017.  Net chargeoffs for the third quarter 2018 decreased versus the third quarter 2017, falling to $67 thousand from $630 thousand in the year earlier period.  The annualized net chargeoff ratio was 0.01% for the third quarter 2018, compared to 0.07% in the third quarter 2017.

The net interest margin for the third quarter 2018 was 3.35%, up 9 basis points versus the third quarter 2017, as increases in short term interest rates led to significantly higher earnings on Federal Funds, while slightly better returns were also achieved in the investment portfolio.  Loan yields declined slightly, but higher volumes increased interest income.  During the same period, the cost of interest bearing liabilities increased 16 basis points.

At September 30, 2018 the equity to asset ratio was 9.77%, compared to 9.34% at September 30, 2017.  Book value per share at September 30, 2018 was $4.93 compared to $4.73 a year earlier.

TrustCo Bank Corp NY is a $4.9 billion savings and loan holding company and through its subsidiary, TrustCo Bank, operated 148 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at September 30, 2018.

In addition, the Bank’s Financial Services Department offers a full range of investment services, retirement planning and trust and estate administration services.  The common shares of TrustCo are traded on the NASDAQ Global Select Market under the symbol TRST.
A conference call to discuss third quarter 2018 results will be held at 9:00 a.m. Eastern Time on October 23, 2018.  Those wishing to participate in the call may dial toll-free 1-888-339-0764.  International callers must dial 1-412-902-4195.  Please ask to be joined into the TrustCo Bank Corp NY / TRST call.  A replay of the call will be available for thirty days by dialing 1-877-344-7529 (1-412-317-0088 for international callers), Conference Number 10124519.  The call will also be audio webcast at: https://services.choruscall.com/links/trst181023.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 2018, the impact of Federal Reserve actions regarding interest rates and the growth of loans and deposits throughout our branch network, our ability to capitalize on economic changes in the areas in which we operate and the extent to which higher expenses to fulfill operating and regulatory requirements recur or diminish over time.  Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement:  our ability to continue to originate a significant volume of one-to-four family mortgage loans in our market areas; our ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income; our ability to comply with the supervisory agreement entered into with Trustco Bank’s regulator and potential regulatory actions if we fail to comply; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of Trustco Bank and the continued ability of Trustco Bank under regulatory rules and the supervisory agreement to distribute capital to TrustCo, which could affect our ability to pay dividends; results of supervisory monitoring or examinations of Trustco Bank and TrustCo by our respective regulators; our ability to make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; adverse conditions on the securities markets that lead to impairment in the value of securities in our investment portfolio; changes in law and policy accompanying the new presidential administration and uncertainty or speculation pending the enactment of such changes; the perceived overall value of our products and services by users, including in comparison to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for our products and services; changes in consumer spending, borrowing and saving habits; technological changes and electronic, cyber, and physical security breaches; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading “Risk Factors” in our most recent annual report on Form 10-K and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.

Page | 5
TRUSTCO BANK CORP NY
GLENVILLE, NY

FINANCIAL HIGHLIGHTS

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

   
Three months ended
  
   
9/30/2018
    
6/30/2018
    
9/30/2017
  
Summary of operations
                  
Net interest income (TE)
  
$
40,526
      
40,119
      
39,190
  
Provision for loan losses
    
300
      
300
      
550
  
Noninterest income
    
4,455
      
4,495
      
4,854
  
Noninterest expense
    
24,544
      
24,095
      
23,526
  
Net income
    
15,199
      
15,405
      
12,596
  
                         
Per common share
                        
Net income per share:
                        
- Basic
  
$
0.157
      
0.160
      
0.131
  
- Diluted
    
0.157
      
0.160
      
0.131
  
Cash dividends
    
0.068
      
0.066
      
0.066
  
Book value at period end
    
4.93
      
4.87
      
4.73
  
Market price at period end
    
8.50
      
8.90
      
8.90
  
                         
At period end
                        
Full time equivalent employees
    
807
      
829
      
815
  
Full service banking offices
    
148
      
148
      
144
  
                         
Performance ratios
                        
Return on average assets
    
1.24
%
    
1.26
      
1.02
  
Return on average equity
    
12.84
      
13.26
      
11.06
  
Efficiency (1)
    
53.39
      
53.35
      
52.79
  
Net interest spread (TE)
    
3.26
      
3.24
      
3.21
  
Net interest margin (TE)
    
3.35
      
3.32
      
3.26
  
Dividend payout ratio
    
43.29
      
41.08
      
50.07
  
                         
Capital ratios at period end
                        
Consolidated tangible equity to tangible assets (2)
    
9.76
%
    
9.52
      
9.33
  
Consolidated equity to assets
    
9.77
%
    
9.53
      
9.34
  
                         
Asset quality analysis at period end
                        
Nonperforming loans to total loans
    
0.62
      
0.65
      
0.69
  
Nonperforming assets to total assets
    
0.53
      
0.54
      
0.56
  
Allowance for loan losses to total loans
    
1.17
      
1.19
      
1.23
  
Coverage ratio (3)
    
1.9
x
    
1.8
x
    
1.8
x

(1)
Non-GAAP measure; calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income.
(2)
Non-GAAP measure; calculated as total equity less $553 of intangible assets divided by total assets less $553 of intangible assets.
(3)
Calculated as allowance for loan losses divided by total nonperforming loans.

TE = Taxable equivalent

Page | 6
FINANCIAL HIGHLIGHTS, Continued

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

   
Nine months ended
  
   
9/30/2018
    
9/30/2017
  
Summary of operations
            
Net interest income (TE)
  
$
119,957
      
115,152
  
Provision for loan losses
    
900
      
1,700
  
Noninterest income
    
13,629
      
14,085
  
Noninterest expense
    
72,794
      
70,458
  
Net income
    
45,412
      
35,783
  
                 
Per common share
                
Net income per share:
                
- Basic
  
$
0.471
      
0.373
  
- Diluted
    
0.470
      
0.372
  
Cash dividends
    
0.199
      
0.197
  
Tangible Book value at period end
    
4.93
      
4.73
  
Market price at period end
    
8.50
      
8.90
  
                 
Performance ratios
                
Return on average assets
    
1.24
%
    
0.98
  
Return on average equity
    
13.00
      
10.77
  
Efficiency (1)
    
53.60
      
53.96
  
Net interest spread (TE)
    
3.24
      
3.14
  
Net interest margin (TE)
    
3.32
      
3.20
  
Dividend payout ratio
    
42.35
      
52.82
  

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

TE = Taxable equivalent.

Page | 7
CONSOLIDATED STATEMENTS OF INCOME

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

   
Three months ended
  
   
9/30/2018
    
6/30/2018
    
3/31/2018
    
12/31/2017
    
9/30/2017
  
Interest and dividend income:
                              
Interest and fees on loans
  
$
40,073
      
38,956
      
38,091
      
37,914
      
37,513
  
Interest and dividends on securities available for sale:
                                  
U. S. government sponsored enterprises
    
787
      
787
      
750
      
614
      
465
  
State and political subdivisions
    
7
      
6
      
7
      
10
      
6
  
Mortgage-backed securities and collateralized mortgage obligations - residential
    
1,601
      
1,675
      
1,763
      
1,730
      
1,815
  
Corporate bonds
    
202
      
150
      
133
      
148
      
153
  
Small Business Administration - guaranteed participation securities
    
325
      
333
      
352
      
358
      
380
  
Mortgage-backed securities and collateralized mortgage obligations - commercial
    
-
      
(5
)
    
42
      
43
      
22
  
Other securities
    
4
      
4
      
5
      
4
      
4
  
Total interest and dividends on securities available for sale
    
2,926
      
2,950
      
3,052
      
2,907
      
2,845
  
                                         
Interest on held to maturity securities:
                                        
Mortgage-backed securities and collateralized mortgage obligations - residential
    
232
      
244
      
260
      
261
      
276
  
Corporate bonds
    
-
      
-
      
-
      
-
      
102
  
Total interest on held to maturity securities
    
232
      
244
      
260
      
261
      
378
  
                                         
Federal Reserve Bank and Federal Home Loan Bank stock
    
82
      
198
      
77
      
151
      
125
  
                                         
Interest on federal funds sold and other short-term investments
    
2,425
      
2,467
      
2,017
      
1,779
      
1,927
  
Total interest income
    
45,738
      
44,815
      
43,497
      
43,012
      
42,788
  
                                         
Interest expense:
                                        
Interest on deposits:
                                        
Interest-bearing checking
    
113
      
112
      
106
      
107
      
113
  
Savings
    
417
      
420
      
419
      
429
      
435
  
Money market deposit accounts
    
544
      
452
      
439
      
457
      
469
  
Time deposits
    
3,864
      
3,439
      
2,860
      
2,412
      
2,247
  
Interest on short-term borrowings
    
277
      
283
      
358
      
359
      
345
  
Total interest expense
    
5,215
      
4,706
      
4,182
      
3,764
      
3,609
  
                                         
Net interest income
    
40,523
      
40,109
      
39,315
      
39,248
      
39,179
  
                                         
Less: Provision for loan losses
    
300
      
300
      
300
      
300
      
550
  
Net interest income after provision for loan losses
    
40,223
      
39,809
      
39,015
      
38,948
      
38,629
  
                                         
Noninterest income:
                                        
Trustco Financial Services income
    
1,516
      
1,596
      
1,815
      
1,457
      
1,844
  
Fees for services to customers
    
2,693
      
2,677
      
2,645
      
2,597
      
2,767
  
Other
    
246
      
222
      
219
      
234
      
243
  
Total noninterest income
    
4,455
      
4,495
      
4,679
      
4,288
      
4,854
  
                                         
Noninterest expenses:
                                        
Salaries and employee benefits
    
10,761
      
10,741
      
10,422
      
10,536
      
10,360
  
Net occupancy expense
    
3,997
      
4,101
      
4,315
      
4,140
      
4,027
  
Equipment expense
    
1,783
      
1,793
      
1,751
      
1,465
      
1,669
  
Professional services
    
1,578
      
1,814
      
1,430
      
1,325
      
1,679
  
Outsourced services
    
1,875
      
1,825
      
1,925
      
1,760
      
1,650
  
Advertising expense
    
844
      
670
      
630
      
559
      
699
  
FDIC and other insurance
    
682
      
514
      
1,023
      
1,102
      
1,018
  
Other real estate expense, net
    
528
      
294
      
372
      
401
      
275
  
Other
    
2,496
      
2,343
      
2,287
      
2,248
      
2,149
  
Total noninterest expenses
    
24,544
      
24,095
      
24,155
      
23,536
      
23,526
  
                                         
Income before taxes
    
20,134
      
20,209
      
19,539
      
19,700
      
19,957
  
Income taxes
    
4,935
      
4,804
      
4,731
      
12,338
      
7,361
  
                                         
Net income
  
$
15,199
      
15,405
      
14,808
      
7,362
      
12,596
  
                                         
Net income per common share:
                                        
- Basic
  
$
0.157
      
0.160
      
0.154
      
0.077
      
0.131
  
                                         
- Diluted
    
0.157
      
0.160
      
0.153
      
0.076
      
0.131
  
                                         
Average basic shares (in thousands)
    
96,555
      
96,449
      
96,353
      
96,230
      
96,102
  
Average diluted shares (in thousands)
    
96,689
      
96,580
      
96,490
      
96,393
      
96,205
  
                                         
Note:  Taxable equivalent net interest income
  
$
40,526
      
40,119
      
39,319
      
39,259
      
39,190
  

Page | 8
CONSOLIDATED STATEMENTS OF INCOME, Continued

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

   
Nine months ended
  
   
9/30/2018
    
9/30/2017
  
Interest and dividend income:
            
Interest and fees on loans
  
$
117,120
      
110,219
  
Interest and dividends on securities available for sale:
          
U. S. government sponsored enterprises
    
2,324
      
1,667
  
State and political subdivisions
    
20
      
29
  
Mortgage-backed securities and collateralized mortgage obligations - residential
    
5,039
      
5,717
  
Corporate bonds
    
485
      
458
  
Small Business Administration - guaranteed participation securities
    
1,010
      
1,189
  
Mortgage-backed securities and collateralized mortgage obligations - commercial
    
37
      
66
  
Other securities
    
13
      
12
  
Total interest and dividends on securities available for sale
    
8,928
      
9,138
  
                 
Interest on held to maturity securities:
                
Mortgage-backed securities-residential
    
736
      
888
  
Corporate bonds
    
-
      
410
  
Total interest on held to maturity securities
    
736
      
1,298
  
                 
Federal Reserve Bank and Federal Home Loan Bank stock
    
357
      
393
  
                 
Interest on federal funds sold and other short-term investments
    
6,909
      
4,900
  
Total interest income
    
134,050
      
125,948
  
                 
Interest expense:
                
Interest on deposits:
                
Interest-bearing checking
    
331
      
371
  
Savings
    
1,256
      
1,300
  
Money market deposit accounts
    
1,435
      
1,403
  
Time deposits
    
10,163
      
6,711
  
Interest on short-term borrowings
    
918
      
1,043
  
Total interest expense
    
14,103
      
10,828
  
                 
Net interest income
    
119,947
      
115,120
  
                 
Less: Provision for loan losses
    
900
      
1,700
  
Net interest income after provision for loan losses
    
119,047
      
113,420
  
                 
Noninterest income:
                
Trustco Financial Services income
    
4,927
      
5,127
  
Fees for services to customers
    
8,015
      
8,201
  
Other
    
687
      
757
  
Total noninterest income
    
13,629
      
14,085
  
                 
Noninterest expenses:
                
Salaries and employee benefits
    
31,924
      
30,129
  
Net occupancy expense
    
12,413
      
12,403
  
Equipment expense
    
5,327
      
4,653
  
Professional services
    
4,822
      
5,570
  
Outsourced services
    
5,625
      
4,650
  
Advertising expense
    
2,144
      
2,019
  
FDIC and other insurance
    
2,219
      
3,077
  
Other real estate expense, net
    
1,194
      
770
  
Other
    
7,126
      
7,187
  
Total noninterest expenses
    
72,794
      
70,458
  
                 
Income before taxes
    
59,882
      
57,047
  
Income taxes
    
14,470
      
21,264
  
                 
Net income
  
$
45,412
      
35,783
  
                 
Net income per common share:
                
- Basic
  
$
0.471
      
0.373
  
                 
- Diluted
    
0.470
      
0.372
  
                 
Average basic shares (in thousands)
    
96,453
      
95,997
  
Average diluted shares (in thousands)
    
96,587
      
96,091
  
                 
Note:  Taxable equivalent net interest income
  
$
119,957
      
115,152
  

Page | 9
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands)
(Unaudited)

   
9/30/2018
    
6/30/2018
    
3/31/2018
    
12/31/2017
    
9/30/2017
  
ASSETS:
                              
                               
Cash and due from banks
  
$
42,195
      
40,567
      
39,373
      
44,125
      
41,598
  
Federal funds sold and other short term investments
    
423,254
      
546,049
      
577,797
      
568,615
      
582,599
  
Total cash and cash equivalents
    
465,449
      
586,616
      
617,170
      
612,740
      
624,197
  
                                         
Securities available for sale:
                                        
U. S. government sponsored enterprises
    
150,053
      
150,704
      
151,327
      
137,994
      
123,658
  
States and political subdivisions
    
180
      
524
      
525
      
525
      
534
  
Mortgage-backed securities and collateralized mortgage obligations - residential
    
269,093
      
283,252
      
297,633
      
315,840
      
335,530
  
Small Business Administration - guaranteed participation securities
    
57,894
      
61,876
      
64,113
      
67,059
      
69,818
  
Mortgage-backed securities and collateralized mortgage obligations - commercial
    
-
      
-
      
9,573
      
9,700
      
9,824
  
Corporate bonds
    
29,977
      
29,977
      
35,227
      
40,162
      
40,381
  
Other securities
    
685
      
685
      
685
      
685
      
685
  
Total securities available for sale
    
507,882
      
527,018
      
559,083
      
571,965
      
580,430
  
                                         
Held to maturity securities:
                                        
Mortgage-backed securities and collateralized mortgage obligations-residential
    
23,462
      
24,730
      
26,174
      
27,551
      
29,268
  
Total held to maturity securities
    
23,462
      
24,730
      
26,174
      
27,551
      
29,268
  
                                         
Federal Reserve Bank and Federal Home Loan Bank stock
    
8,953
      
8,953
      
8,779
      
8,779
      
8,779
  
                                         
Loans:
                                        
Commercial
    
190,987
      
190,904
      
185,129
      
186,207
      
187,281
  
Residential mortgage loans
    
3,331,212
      
3,245,151
      
3,171,548
      
3,132,521
      
3,070,970
  
Home equity line of credit
    
293,750
      
295,791
      
301,885
      
308,916
      
311,753
  
Installment loans
    
9,967
      
9,309
      
8,413
      
8,763
      
8,278
  
Loans, net of deferred net costs
    
3,825,916
      
3,741,155
      
3,666,975
      
3,636,407
      
3,578,282
  
                                         
Less: Allowance for loan losses
    
44,736
      
44,503
      
44,379
      
44,170
      
44,082
  
Net loans
    
3,781,180
      
3,696,652
      
3,622,596
      
3,592,237
      
3,534,200
  
                                         
Bank premises and equipment, net
    
35,214
      
35,521
      
35,240
      
35,157
      
35,028
  
Other assets
    
63,211
      
61,069
      
62,522
      
59,579
      
58,373
  
                                         
Total assets
  
$
4,885,351
      
4,940,559
      
4,931,564
      
4,908,008
      
4,870,275
  
                                         
LIABILITIES:
                                        
Deposits:
                                        
Demand
  
$
403,047
      
404,564
      
403,782
      
398,399
      
397,623
  
Interest-bearing checking
    
918,486
      
925,295
      
915,163
      
891,052
      
862,067
  
Savings accounts
    
1,221,127
      
1,257,744
      
1,266,852
      
1,260,447
      
1,265,229
  
Money market deposit accounts
    
501,270
      
512,453
      
539,839
      
556,462
      
564,557
  
Time deposits
    
1,155,994
      
1,155,214
      
1,109,444
      
1,066,966
      
1,075,886
  
Total deposits
    
4,199,924
      
4,255,270
      
4,235,080
      
4,173,326
      
4,165,362
  
                                         
Short-term borrowings
    
176,377
      
182,705
      
203,910
      
242,991
      
216,508
  
Accrued expenses and other liabilities
    
31,932
      
31,769
      
30,477
      
33,383
      
33,477
  
                                         
Total liabilities
    
4,408,233
      
4,469,744
      
4,469,467
      
4,449,700
      
4,415,347
  
                                         
SHAREHOLDERS' EQUITY:
                                        
Capital stock
    
100,175
      
100,093
      
100,002
      
99,998
      
99,562
  
Surplus
    
176,764
      
176,243
      
175,674
      
175,651
      
172,712
  
Undivided profits
    
246,965
      
238,342
      
229,267
      
219,436
      
218,401
  
Accumulated other comprehensive loss, net of tax
    
(13,000
)
    
(9,796
)
    
(8,490
)
    
(1,806
)
    
(3,060
)
Treasury stock at cost
    
(33,786
)
    
(34,067
)
    
(34,356
)
    
(34,971
)
    
(32,687
)
                                         
Total shareholders' equity
    
477,118
      
470,815
      
462,097
      
458,308
      
454,928
  
                                         
Total liabilities and shareholders' equity
  
$
4,885,351
      
4,940,559
      
4,931,564
      
4,908,008
      
4,870,275
  
                                         
Outstanding shares (in thousands)
    
96,586
      
96,475
      
96,359
      
96,289
      
96,108
  

Page | 10
NONPERFORMING ASSETS

(dollars in thousands)
(Unaudited)

   
9/30/2018
    
6/30/2018
    
3/31/2018
    
12/31/2017
    
9/30/2017
  
Nonperforming Assets
                              
                               
New York and other states*
                              
Loans in nonaccrual status:
                              
Commercial
  
$
928
      
767
      
1,213
      
1,543
      
1,696
  
Real estate mortgage - 1 to 4 family
    
20,750
      
21,209
      
21,424
      
20,350
      
20,926
  
Installment
    
13
      
6
      
19
      
57
      
30
  
Total non-accrual loans
    
21,691
      
21,982
      
22,656
      
21,950
      
22,652
  
Other nonperforming real estate mortgages - 1 to 4 family
    
35
      
36
      
38
      
38
      
40
  
Total nonperforming loans
    
21,726
      
22,018
      
22,694
      
21,988
      
22,692
  
Other real estate owned
    
2,306
      
2,569
      
2,190
      
3,246
      
2,879
  
Total nonperforming assets
  
$
24,032
      
24,587
      
24,884
      
25,234
      
25,571
  
                                         
Florida
                                        
Loans in nonaccrual status:
                                        
Commercial
  
$
-
      
-
      
-
      
-
      
-
  
Real estate mortgage - 1 to 4 family
    
2,054
      
2,143
      
2,154
      
2,389
      
1,895
  
Installment
    
13
      
-
      
4
      
-
      
-
  
Total non-accrual loans
    
2,067
      
2,143
      
2,158
      
2,389
      
1,895
  
Other nonperforming real estate mortgages - 1 to 4 family
    
-
      
-
      
-
      
-
      
-
  
Total nonperforming loans
    
2,067
      
2,143
      
2,158
      
2,389
      
1,895
  
Other real estate owned
    
-
      
-
      
-
      
-
      
-
  
Total nonperforming assets
  
$
2,067
      
2,143
      
2,158
      
2,389
      
1,895
  
                                         
Total
                                        
Loans in nonaccrual status:
                                        
Commercial
  
$
928
      
767
      
1,213
      
1,543
      
1,696
  
Real estate mortgage - 1 to 4 family
    
22,804
      
23,352
      
23,578
      
22,739
      
22,821
  
Installment
    
26
      
6
      
23
      
57
      
30
  
Total non-accrual loans
    
23,758
      
24,125
      
24,814
      
24,339
      
24,547
  
Other nonperforming real estate mortgages - 1 to 4 family
    
35
      
36
      
38
      
38
      
40
  
Total nonperforming loans
    
23,793
      
24,161
      
24,852
      
24,377
      
24,587
  
Other real estate owned
    
2,306
      
2,569
      
2,190
      
3,246
      
2,879
  
Total nonperforming assets
  
$
26,099
      
26,730
      
27,042
      
27,623
      
27,466
  
                                         
                                         
Quarterly Net Chargeoffs (Recoveries)
                                        
                                         
New York and other states*
                                        
Commercial
  
$
(2
)
    
(1
)
    
(6
)
    
(86
)
    
(2
)
Real estate mortgage - 1 to 4 family
    
(3
)
    
150
      
28
      
249
      
613
  
Installment
    
64
      
27
      
66
      
50
      
56
  
Total net chargeoffs
  
$
59
      
176
      
88
      
213
      
667
  
                                         
Florida
                                        
Commercial
  
$
-
      
-
      
-
      
-
      
-
  
Real estate mortgage - 1 to 4 family
    
-
      
-
      
-
      
(1
)
    
(41
)
Installment
    
8
      
-
      
2
      
-
      
4
  
Total net chargeoffs
  
$
8
      
-
      
2
      
(1
)
    
(37
)
                                         
Total
                                        
Commercial
  
$
(2
)
    
(1
)
    
(6
)
    
(86
)
    
(2
)
Real estate mortgage - 1 to 4 family
    
(3
)
    
150
      
28
      
248
      
572
  
Installment
    
72
      
27
      
68
      
50
      
60
  
Total net chargeoffs
  
$
67
      
176
      
90
      
212
      
630
  
                                         
                                         
Asset Quality Ratios
                                        
                                         
Total nonperforming loans (1)
  
$
23,793
      
24,161
      
24,852
      
24,377
      
24,587
  
Total nonperforming assets (1)
    
26,099
      
26,730
      
27,042
      
27,623
      
27,466
  
Total net chargeoffs (2)
    
67
      
176
      
90
      
212
      
630
  
                                         
Allowance for loan losses (1)
    
44,736
      
44,503
      
44,379
      
44,170
      
44,082
  
                                         
Nonperforming loans to total loans
    
0.62
%
    
0.65
%
    
0.68
%
    
0.67
%
    
0.69
%
Nonperforming assets to total assets
    
0.53
%
    
0.54
%
    
0.55
%
    
0.56
%
    
0.56
%
Allowance for loan losses to total loans
    
1.17
%
    
1.19
%
    
1.21
%
    
1.21
%
    
1.23
%
Coverage ratio (1)
    
188.0
%
    
184.2
%
    
178.6
%
    
181.2
%
    
179.3
%
Annualized net chargeoffs to average loans (2)
    
0.01
%
    
0.02
%
    
0.01
%
    
0.02
%
    
0.07
%
Allowance for loan losses to annualized net chargeoffs (2)
    
166.9
x
    
63.2
x
    
123.3
x
    
52.1
x
    
17.5
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
    
Three months ended
  
   
September 30, 2018
    
September 30, 2017
  
   
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
    
Interest
    
Average
Rate
  
Assets
                                    
                                     
Securities available for sale:
                                    
U. S. government sponsored enterprises
  
$
154,865
      
787
      
2.03
%
  
$
123,055
      
465
      
1.51
%
Mortgage backed securities and collateralized mortgage obligations - residential
    
287,760
      
1,601
      
2.23
      
345,248
      
1,815
      
2.10
  
State and political subdivisions
    
453
      
10
      
8.88
      
522
      
11
      
8.43
  
Corporate bonds
    
30,110
      
202
      
2.68
      
42,528
      
153
      
1.44
  
Small Business Administration - guaranteed participation securities
    
62,368
      
325
      
2.09
      
72,204
      
380
      
2.11
  
Mortgage backed securities and collateralized mortgage obligations - commercial
    
-
      
-
      
-
      
9,918
      
22
      
0.89
  
Other
    
685
      
4
      
2.34
      
685
      
4
      
2.34
  
                                                 
Total securities available for sale
    
536,241
      
2,929
      
2.18
      
594,160
      
2,850
      
1.92
  
                                                 
Federal funds sold and other short-term Investments
    
486,552
      
2,425
      
1.98
      
621,878
      
1,927
      
1.24
  
                                                 
Held to maturity securities:
                                                
Corporate bonds
    
-
      
-
      
-
      
6,738
      
102
      
6.06
  
Mortgage backed securities and collateralized mortgage obligations - residential
    
24,080
      
232
      
3.86
      
30,161
      
276
      
3.66
  
                                                 
Total held to maturity securities
    
24,080
      
232
      
3.86
      
36,899
      
378
      
4.10
  
                                                 
Federal Reserve Bank and Federal Home Loan Bank stock
    
8,953
      
82
      
3.66
      
9,117
      
125
      
5.48
  
                                                 
Commercial loans
    
188,757
      
2,480
      
5.25
      
183,867
      
2,482
      
5.40
  
Residential mortgage loans
    
3,289,534
      
33,949
      
4.13
      
3,035,745
      
31,600
      
4.16
  
Home equity lines of credit
    
294,518
      
3,418
      
4.60
      
312,812
      
3,237
      
4.14
  
Installment loans
    
9,447
      
226
      
9.51
      
8,096
      
200
      
9.88
  
                                                 
Loans, net of unearned income
    
3,782,256
      
40,073
      
4.23
      
3,540,520
      
37,519
      
4.24
  
                                                 
Total interest earning assets
    
4,838,082
      
45,741
      
3.78
      
4,802,574
      
42,799
      
3.56
  
                                                 
Allowance for loan losses
    
(44,770
)
                    
(44,284
)
                
Cash & non-interest earning assets
    
120,474
                      
127,004
                  
                                                 
Total assets
  
$
4,913,786
                    
$
4,885,294
                  
                                                 
                                                 
Liabilities and shareholders' equity
                                                
                                                 
Deposits:
                                                
Interest bearing checking accounts
  
$
913,150
      
113
      
0.05
%
  
$
861,387
      
113
      
0.05
%
Money market accounts
    
508,795
      
544
      
0.42
      
572,168
      
469
      
0.33
  
Savings
    
1,244,889
      
417
      
0.13
      
1,280,318
      
435
      
0.14
  
Time deposits
    
1,156,422
      
3,864
      
1.33
      
1,078,085
      
2,247
      
0.83
  
                                                 
Total interest bearing deposits
    
3,823,256
      
4,938
      
0.51
      
3,791,958
      
3,264
      
0.34
  
Short-term borrowings
    
183,796
      
277
      
0.60
      
223,238
      
345
      
0.62
  
                                                 
Total interest bearing liabilities
    
4,007,052
      
5,215
      
0.52
      
4,015,196
      
3,609
      
0.36
  
                                                 
Demand deposits
    
405,311
                      
389,286
                  
Other liabilities
    
26,429
                      
28,809
                  
Shareholders' equity
    
474,994
                      
452,003
                  
                                                 
Total liabilities and shareholders' equity
  
$
4,913,786
                    
$
4,885,294
                  
                                                 
Net interest income, tax equivalent
            
40,526
                      
39,190
          
                                                 
Net interest spread
                    
3.26
%
                    
3.21
%
                                                 
Net interest margin (net interest income to total interest earning assets)
                    
3.35
%
                    
3.26
%
                                                 
Tax equivalent adjustment
            
(3
)
                    
(11
)
        
 
                                                
Net interest income
            
40,523
                      
39,179
          

Page | 12
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY -
INTEREST RATES AND INTEREST DIFFERENTIAL, Continued

(dollars in thousands)
            
(Unaudited)  
Nine months ended
September 30, 2018
    
Nine months ended
September 30, 2017
  
   
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
     Interest    
Average
Rate
  
Assets
                                    
                                     
Securities available for sale:
                                    
U. S. government sponsored enterprises
  
$
155,434
      
2,324
      
1.99
%
  
$
139,629
      
1,667
      
1.59
%
Mortgage backed securities and collateralized mortgage obligations - residential
    
300,645
      
5,039
      
2.23
      
357,347
      
5,717
      
2.13
  
State and political subdivisions
    
494
      
30
      
8.14
      
736
      
41
      
7.43
  
Corporate bonds
    
30,384
      
485
      
2.13
      
42,272
      
458
      
1.44
  
Small Business Administration - guaranteed participation securities
    
64,769
      
1,010
      
2.08
      
75,429
      
1,189
      
2.10
  
Mortgage backed securities and collateralized mortgage obligations - commercial
    
3,651
      
37
      
1.34
      
10,003
      
66
      
0.88
  
Other
    
685
      
13
      
2.53
      
685
      
12
      
2.34
  
                                                 
Total securities available for sale
    
556,062
      
8,938
      
2.14
      
626,101
      
9,150
      
1.95
  
                                                 
Federal funds sold and other short-term Investments
    
521,470
      
6,909
      
1.77
      
635,450
      
4,900
      
1.03
  
                                                 
Held to maturity securities:
                                                
Corporate bonds
    
-
      
-
      
-
      
8,897
      
410
      
6.14
  
Mortgage backed securities and collateralized mortgage obligations - residential
    
25,410
      
736
      
3.86
      
32,202
      
888
      
3.68
  
                                                 
Total held to maturity securities
    
25,410
      
736
      
3.86
      
41,099
      
1,298
      
4.21
  
                                                 
Federal Reserve Bank and Federal Home Loan Bank stock
    
8,893
      
357
      
5.35
      
9,467
      
393
      
5.54
  
                                                 
Commercial loans
    
187,198
      
7,336
      
5.23
      
184,932
      
7,313
      
5.27
  
Residential mortgage loans
    
3,214,950
      
99,123
      
4.11
      
2,969,363
      
92,910
      
4.17
  
Home equity lines of credit
    
299,723
      
10,018
      
4.47
      
321,276
      
9,453
      
3.92
  
Installment loans
    
8,831
      
644
      
9.75
      
8,117
      
563
      
9.25
  
                                                 
Loans, net of unearned income
    
3,710,702
      
117,120
      
4.21
      
3,483,688
      
110,239
      
4.22
  
                                                 
Total interest earning assets
    
4,822,537
      
134,060
      
3.71
      
4,795,805
      
125,980
      
3.50
  
                                                 
Allowance for loan losses
    
(44,573
)
                    
(44,317
)
                
Cash & non-interest earning assets
    
123,134
                      
129,384
                  
                                                 
Total assets
  
$
4,901,098
                    
$
4,880,872
                  
                                                 
                                                 
Liabilities and shareholders' equity
                                                
                                                 
Deposits:
                                                
Interest bearing checking accounts
  
$
899,319
      
331
      
0.05
%
  
$
840,322
      
371
      
0.06
%
Money market accounts
    
528,310
      
1,435
      
0.36
      
576,518
      
1,403
      
0.32
  
Savings
    
1,255,245
      
1,256
      
0.13
      
1,280,473
      
1,300
      
0.14
  
Time deposits
    
1,124,592
      
10,163
      
1.21
      
1,104,731
      
6,711
      
0.81
  
                                                 
Total interest bearing deposits
    
3,807,466
      
13,185
      
0.46
      
3,802,044
      
9,785
      
0.34
  
Short-term borrowings
    
202,412
      
918
      
0.61
      
226,447
      
1,043
      
0.61
  
                                                 
Total interest bearing liabilities
    
4,009,878
      
14,103
      
0.47
      
4,028,491
      
10,828
      
0.36
  
                                                 
Demand deposits
    
396,288
                      
380,216
                  
Other liabilities
    
28,062
                      
27,880
                  
Shareholders' equity
    
466,870
                      
444,285
                  
                                                 
Total liabilities and shareholders' equity
  
$
4,901,098
                      
4,880,872
                  
                                                 
Net interest income, tax equivalent
            
119,957
                      
115,152
          
                                                 
Net interest spread
                    
3.24
%
                    
3.14
%
                                                 

                                               
Net interest margin (net interest income to total interest earning assets)
                    
3.32
%
                    
3.20
%
                                                 
Tax equivalent adjustment
            
(10
)
                    
(32
)
        
                                                 
Net interest income
            
119,947
                      
115,120
          

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 and other non-routine items from this calculation.  We believe that this provides a reasonable measure of primary banking expenses relative to primary banking revenue.

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

NON-GAAP FINANCIAL MEASURES RECONCILIATION

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

Tangible Equity to Tangible Assets
  
9/30/2018
    
6/30/2018
    
9/30/2017
  
                   
Total Assets
  
$
4,885,351
      
4,940,559
      
4,870,275
  
Less: Intangible assets
    
553
      
553
      
553
  
Tangible assets
    
4,884,798
      
4,940,006
      
4,869,722
  
                         
Equity
    
477,118
      
470,815
      
454,928
  
Less: Intangible assets
    
553
      
553
      
553
  
Tangible equity
    
476,565
      
470,262
      
454,375
  
Tangible Equity to Tangible Assets
    
9.76
%
    
9.52
%
    
9.33
%
Equity to Assets
    
9.77
%
    
9.53
%
    
9.34
%

   
Three months ended
    
Nine months ended
  
Efficiency Ratio
  
9/30/2018
    
6/30/2018
    
9/30/2017
    
9/30/2018
    
9/30/2017
  
                               
Net interest income (fully taxable equivalent)
  
$
40,526
      
40,119
      
39,190
      
119,957
      
115,152
  
Non-interest income
    
4,455
      
4,495
      
4,854
      
13,629
      
14,085
  
Less:  Net gain on sale of nonperforming loans
    
-
      
-
      
-
      
-
      
84
  
Revenue used for efficiency ratio
    
44,981
      
44,614
      
44,044
      
133,586
      
129,153
  
                                         
Total noninterest expense
    
24,544
      
24,095
      
23,526
      
72,794
      
70,458
  
Less:  Other real estate expense, net
    
528
      
294
      
275
      
1,194
      
770
  
Expense used for efficiency ratio
    
24,016
      
23,801
      
23,251
      
71,600
      
69,688
  
                                         
Efficiency Ratio
    
53.39
%
    
53.35
%
    
52.79
%
    
53.60
%
    
53.96
%


Page | 14