8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported):  January 22, 2019

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 January 22, 2019, TrustCo Bank Corp NY (“TrustCo”) issued a press release with results for the quarter and year ending December 31, 2018. 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 January 22, 2019 for the period ending December 31, 2018, regarding quarterly and year end results.

-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: January 22, 2019

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

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

TrustCo Announces Fourth Quarter and Full Year 2018 Results;

 Net Income Up 42.4% Over Prior Year to $61.4 Million

Executive Snapshot:

· Continued solid financial results:

o Key metrics for fourth quarter 2018:

§ Net income of $16.0 million in the fourth quarter 2018 up 118% compared to $7.4 million in the fourth quarter 2017

§ Return on average assets (ROAA) of 1.30% compared to 0.60% in the fourth quarter of 2017

§ Return on average equity (ROAE) of 13.18% compared to 6.38% in the fourth quarter of 2017

§ Efficiency ratio of 55.06% compared to 53.13% in the fourth quarter of 2017 (Non-GAAP measure; see P. 14 for definition)

· Asset quality remains strong:

o Nonperforming assets (NPAs) fell by $962 thousand compared to December 31, 2017

o NPAs to total assets improved to 0.54% at December 31, 2018

o Quarterly net chargeoffs were $470 thousand in the fourth quarter 2018, compared to $212 thousand in the fourth quarter 2017

· Loan portfolio reaches all-time high:

o Average loans were up $244 million for the fourth quarter 2018 compared to fourth quarter of 2017

o At $3.9 billion as of December 31, 2018, loans continue to set new all-time highs

· Year over year deposit growth:

o Average Deposits balances reached $4.2 billion in fourth quarter 2018 up $77.1 million or 1.9% from fourth quarter 2017

o Time deposits increased $153.1 million or 14.3% compared to the fourth quarter 2017

o Average interest bearing checking and demand deposits are up $42.8 million or 3.4% in the fourth quarter 2018 compared to fourth quarter 2017

Page | 1

FOR IMMEDIATE RELEASE:

TrustCo Announces Fourth Quarter and Full Year 2018 Results;

 Net Income Up 42.4% Over Prior Year to $61.4 Million

Glenville, New York – January 22, 2019

TrustCo Bank Corp NY (TrustCo, Nasdaq: TRST)today announced fourth quarter 2018 net income of $16.0 million compared to $7.4 million for the fourth quarter 2017, an increase of 118%.  For the full year 2018, net income rose from $43.1 million to $61.4 million or 42.4% driven by strong performance and the lower tax rate from the Tax Cuts and Jobs Act during 2018.  Income before taxes increased $2.9 million over prior year or 3.8%.

Summary

Robert J. McCormick, Chairman, President and Chief Executive Officer noted, “We are pleased to be reporting strong 2018 performance, with an increase of over 40% in net income as compared to 2017.  Our focus on traditional lending criteria and conservative balance sheet management has enabled us to produce consistent earnings, maintain solid liquidity and grow capital.  Our strong financial condition is evidenced by our continued recognition as a BauerFinancial, Inc. 5-Star Superior Bank rating.  These strategies have allowed us to continue to grow our business and take advantage of changes in market and competitive conditions.  We continue to achieve new records in residential loan balances through our customer relationships, driving our growth.  Our Board’s decision to increase our quarterly cash dividend by 3.8% to $0.2725 per share reinforces our financial strength.  A meaningful and growing dividend is part of our commitment to provide consistent and favorable long-term shareholder return.  We will continue to take advantage of opportunities as they are presented during the coming year and beyond.”

TrustCo continued to see solid loan growth throughout 2018 compared to the prior year, led by an increase in residential mortgages.  Loan portfolio expansion was funded by a combination of utilizing portions of our strong cash balances and cash flow from our loan and investment portfolios.  The continued shift toward loans helped expand the margin despite higher deposit rates.  We note that current mortgage rates exceed the yield on our existing portfolio of mortgages, which, if sustained, will be a positive factor for net interest margin going forward.  The Federal Reserve decision to raise the target Federal Funds rate throughout the course of the year has contributed to our results as our cash position immediately repriced upward.

Total average deposits were up $77.1 million in the fourth quarter 2018 versus the fourth quarter 2017.  Interest bearing checking accounts and demand deposits increased $42.8 million in the fourth quarter 2018 versus 2017.The overall cost of funds increased 23 basis points to 0.61% from the fourth quarter 2017 to the fourth quarter 2018.  The shift towards loans in the asset mix, coupled with a 93 basis-point increase in the yield on Federal Funds more than offset the higher cost of funds, resulting in a 9 basis-point gain in net interest margin to 3.38%.

Page | 2

Details

Average loans were up $244 million or 6.8% in the fourth quarter 2018 over the same period in 2017.  Average residential loans, our primary lending focus, were up $256 million or 8.2% in the fourth quarter 2018, over the same period in 2017.  Total loan growth was offset by a $19.2 million decline in average outstanding home equity lines of credit over the same period.  Mr. McCormick noted, “The growth of our loans and our focus to strengthen the core deposit base reflect the long term strategic focus of our Company.”

Average deposits were up $77.1 million or 1.9% for the fourth quarter 2018 over the same period a year earlier.  Average Core deposits excluding money market deposit accounts declined by $16 million or 0.6%, in fourth quarter 2018 verses 2017.  Money market deposits, our highest costing core deposit declined $59.7 million.  The cost of total deposits increased to 0.60% in the fourth quarter 2018 from 0.36% in the fourth quarter 2017.

For the fourth quarter 2018, return on average assets and return on average equity were 1.30% and 13.18%, respectively, compared to 0.60% and 6.38% for the fourth quarter 2017.  Diluted earnings per share were $0.166 for the fourth quarter 2018, compared to $0.076 for the fourth quarter 2017.  Total operating expenses increased by $1.4 million in the fourth quarter 2018 as compared to the fourth quarter 2017, with the most significant increases coming in infrastructure investment and professional services.  The increase in expenses was offset with a $1.7 million increase in revenue (net interest income plus non-interest income).  The effective tax rate was 18.9% in the fourth quarter of 2018, compared to 62.6% in the same period a year ago.  This was partially driven by implementation of a tax planning strategy that reduced taxes on a one time basis of $880 thousand.

For 2018, return on average assets and return on average equity were 1.25% and 13.05%, respectively, compared to 0.88% and 9.64% for the year ended 2017.  Diluted earnings per share were $0.636 through December of 2018, compared to $0.448 for the same time period in 2017.

“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.”

Nonperforming loans (NPLs) were $25.0 million at December 31, 2018, compared to $24.4 million at December 31, 2017.  NPLs were equal to 0.64% of total loans at December 31, 2018, compared to 0.67% at December 31, 2017.  The coverage ratio, or allowance for loan losses to NPLs, was 179.2% at December 31, 2018, compared to 181.2% at December 31, 2017.  Nonperforming assets (NPAs) were $26.7 million at December 31, 2018 compared to $27.6 million at December 31, 2017.  The ratio of allowance for loan losses to total loans was 1.16% as of December 31, 2018, compared to 1.21% at December 31, 2017 and reflects both the continued improvement in asset quality and the economic conditions in our primary markets.  The allowance for loan losses was $44.8 million at December 31, 2018 compared to $44.2 million at December 31, 2017.  The provision for loan losses was $1.4 million for 2018, compared to $2.0 million in 2017.  Net chargeoffs decreased to $803 thousand for 2018 from $1.7 million for 2017.  The annualized net chargeoff ratio was 0.05% for 2018, compared to 0.02% in 2017.

Page | 3

The net interest margin for the fourth quarter 2018 was 3.38%, up 9 basis points versus the fourth 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 loan and investment portfolios.  Higher loan volumes also increased interest income.  During the same period, the cost of interest bearing liabilities increased 23 basis points.

At December 31, 2018 the equity to asset ratio was 9.88%, compared to 9.34% at December 31, 2017.  Book value per share at December 31, 2018 was $5.06 compared to $4.75 a year earlier.

TrustCo Bank Corp NY is a $5.0 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 December 31, 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 fourth quarter 2018results will be held at 9:00 a.m. Eastern Time on January 23, 2019.  Those wishing to participate in the call may dial toll‑free 1‑888‑339‑0764.  International callers must dial 1‑412‑902‑4195.  Please ask to be joined into the TrustCo Bank Corp NY / TRST call.  A replay of the call will be available for thirty days by dialing 1‑877‑344‑7529 (1‑412‑317‑0088 for international callers), Conference Number 10127907.  The call will also be audio webcast at https://services.choruscall.com/links/trst190123.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

FINANCIAL HIGHLIGHTS

(dollars in thousands, except per share data)

(Unaudited)

	Three months ended
	12/31/2018			9/30/2018			12/31/2017
Summary of operations
Net interest income (TE)	$	40,740			40,526			39,259
Provision for loan losses		500			300			300
Noninterest income		4,452			4,455			4,288
Noninterest expense		24,919			24,544			23,536
Net income		16,033			15,199			7,362
Per common share
Net income per share:
- Basic	$	0.166			0.157			0.077
- Diluted		0.166			0.157			0.076
Cash dividends		0.068			0.068			0.066
Book value at period end		5.06			4.93			4.75
Market price at period end		6.86			8.50			9.20
At period end
Full time equivalent employees		854			807			846
Full service banking offices		148			148			145
Performance ratios
Return on average assets		1.30	%		1.24			0.60
Return on average equity		13.18			12.84			6.38
Efficiency (1)		55.06			53.39			53.13
Net interest spread (TE)		3.27			3.26			3.22
Net interest margin (TE)		3.38			3.35			3.29
Dividend payout ratio		41.07			43.29			85.81
Capital ratios at period end
Consolidated tangible equity to tangible assets (2)		9.87	%		9.76			9.33
Consolidated equity to assets		9.88	%		9.77			9.34
Asset quality analysis at period end
Nonperforming loans to total loans		0.64			0.62			0.67
Nonperforming assets to total assets		0.54			0.53			0.56
Allowance for loan losses to total loans		1.16			1.17			1.21
Coverage ratio (3)		1.8	x		1.9	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)

	Years ended
	12/31/2018			12/31/2017
Summary of operations
Net interest income (TE)	$	160,698			154,413
Provision for loan losses		1,400			2,000
Noninterest income		18,081			18,373
Noninterest expense		97,713			93,994
Net income		61,445			43,145
Per common share
Net income per share:
- Basic	$	0.637			0.449
- Diluted		0.636			0.448
Cash dividends		0.268			0.263
Tangible Book value at period end		5.06			4.75
Market price at period end		6.86			9.20
Performance ratios
Return on average assets		1.25	%		0.88
Return on average equity		13.05			9.64
Efficiency (1)		53.97			53.75
Net interest spread (TE)		3.25			3.16
Net interest margin (TE)		3.33			3.22
Dividend payout ratio		42.02			58.44

(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
	12/31/2018		9/30/2018		6/30/2018			3/31/2018		12/31/2017
Interest and dividend income:
Interest and fees on loans	$	41,184		40,073		38,956			38,091		37,914
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		788		787		787			750		614
State and political subdivisions		2		7		6			7		10
Mortgage-backed securities and collateralized mortgage obligations - residential		1,554		1,601		1,675			1,763		1,730
Corporate bonds		202		202		150			133		148
Small Business Administration - guaranteed participation securities		329		325		333			352		358
Mortgage-backed securities and collateralized mortgage obligations - commercial		-		-		(5	)		42		43
Other securities		5		4		4			5		4
Total interest and dividends on securities available for sale		2,880		2,926		2,950			3,052		2,907
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations - residential		226		232		244			260		261
Total interest on held to maturity securities		226		232		244			260		261
Federal Reserve Bank and Federal Home Loan Bank stock		207		82		198			77		151
Interest on federal funds sold and other short-term investments		2,367		2,425		2,467			2,017		1,779
Total interest income		46,864		45,738		44,815			43,497		43,012
Interest expense:
Interest on deposits:
Interest-bearing checking		111		113		112			106		107
Savings		401		417		420			419		429
Money market deposit accounts		618		544		452			439		457
Time deposits		4,643		3,864		3,439			2,860		2,412
Interest on short-term borrowings		352		277		283			358		359
Total interest expense		6,125		5,215		4,706			4,182		3,764
Net interest income		40,739		40,523		40,109			39,315		39,248
Less: Provision for loan losses		500		300		300			300		300
Net interest income after provision for loan losses		40,239		40,223		39,809			39,015		38,948
Noninterest income:
Trustco Financial Services income		1,356		1,516		1,596			1,815		1,457
Fees for services to customers		2,897		2,693		2,677			2,645		2,597
Other		199		246		222			219		234
Total noninterest income		4,452		4,455		4,495			4,679		4,288
Noninterest expenses:
Salaries and employee benefits		10,183		10,761		10,741			10,422		10,536
Net occupancy expense		4,800		3,997		4,101			4,315		4,140
Equipment expense		1,741		1,783		1,793			1,751		1,465
Professional services		1,733		1,578		1,814			1,430		1,325
Outsourced services		1,875		1,875		1,825			1,925		1,760
Advertising expense		876		844		670			630		559
FDIC and other insurance		522		682		514			1,023		1,102
Other real estate expense, net		37		528		294			372		401
Other		3,152		2,496		2,343			2,287		2,248
Total noninterest expenses		24,919		24,544		24,095			24,155		23,536
Income before taxes		19,772		20,134		20,209			19,539		19,700
Income taxes		3,739		4,935		4,804			4,731		12,338
Net income	$	16,033		15,199		15,405			14,808		7,362
Net income per common share:
- Basic	$	0.166		0.157		0.160			0.154		0.077
- Diluted		0.166		0.157		0.160			0.153		0.076
Average basic shares (in thousands)		96,555		96,555		96,449			96,353		96,230
Average diluted shares (in thousands)		96,689		96,689		96,580			96,490		96,393
Note:  Taxable equivalent net interest income	$	40,740		40,526		40,119			39,319		39,259

Page | 8

CONSOLIDATED STATEMENTS OF INCOME, Continued

(dollars in thousands, except per share data)

(Unaudited)

	Years ended
	12/31/2018		12/31/2017
Interest and dividend income:
Interest and fees on loans	$	158,304		148,133
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		3,112		2,281
State and political subdivisions		22		39
Mortgage-backed securities and collateralized mortgage obligations - residential		6,593		7,447
Corporate bonds		687		606
Small Business Administration - guaranteed participation securities		1,339		1,547
Mortgage-backed securities and collateralized mortgage obligations - commercial		37		109
Other securities		18		16
Total interest and dividends on securities available for sale		11,808		12,045
Interest on held to maturity securities:
Mortgage-backed securities-residential		962		1,149
Corporate bonds		-		410
Total interest on held to maturity securities		962		1,559
Federal Reserve Bank and Federal Home Loan Bank stock		564		544
Interest on federal funds sold and other short-term investments		9,276		6,679
Total interest income		180,914		168,960
Interest expense:
Interest on deposits:
Interest-bearing checking		442		478
Savings		1,657		1,729
Money market deposit accounts		2,053		1,860
Time deposits		14,806		9,123
Interest on short-term borrowings		1,270		1,402
Total interest expense		20,228		14,592
Net interest income		160,686		154,368
Less: Provision for loan losses		1,400		2,000
Net interest income after provision for loan losses		159,286		152,368
Noninterest income:
Trustco Financial Services income		6,283		6,584
Fees for services to customers		10,912		10,798
Other		886		991
Total noninterest income		18,081		18,373
Noninterest expenses:
Salaries and employee benefits		42,107		40,665
Net occupancy expense		17,213		16,543
Equipment expense		7,068		6,118
Professional services		6,555		6,895
Outsourced services		7,500		6,410
Advertising expense		3,020		2,578
FDIC and other insurance		2,741		4,179
Other real estate expense, net		1,231		1,171
Other		10,278		9,435
Total noninterest expenses		97,713		93,994
Income before taxes		79,654		76,747
Income taxes		18,209		33,602
Net income	$	61,445		43,145
Net income per common share:
- Basic	$	0.637		0.449
- Diluted		0.636		0.448
Average basic shares (in thousands)		96,505		96,112
Average diluted shares (in thousands)		96,646		96,222
Note:  Taxable equivalent net interest income	$	160,698		154,413

Page | 9

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands)

(Unaudited)

	12/31/2018			9/30/2018			6/30/2018			3/31/2018			12/31/2017
ASSETS:
Cash and due from banks	$	49,260			42,195			40,567			39,373			44,125
Federal funds sold and other short term investments		454,449			423,254			546,049			577,797			568,615
Total cash and cash equivalents		503,709			465,449			586,616			617,170			612,740
Securities available for sale:
U. S. government sponsored enterprises		152,160			150,053			150,704			151,327			137,994
States and political subdivisions		173			180			524			525			525
Mortgage-backed securities and collateralized mortgage obligations - residential		262,032			269,093			283,252			297,633			315,840
Small Business Administration - guaranteed participation securities		56,475			57,894			61,876			64,113			67,059
Mortgage-backed securities and collateralized mortgage obligations - commercial		-			-			-			9,573			9,700
Corporate bonds		29,938			29,977			29,977			35,227			40,162
Other securities		685			685			685			685			685
Total securities available for sale		501,463			507,882			527,018			559,083			571,965
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential		22,501			23,462			24,730			26,174			27,551
Total held to maturity securities		22,501			23,462			24,730			26,174			27,551
Federal Reserve Bank and Federal Home Loan Bank stock		8,953			8,953			8,953			8,779			8,779
Loans:
Commercial		196,146			190,987			190,904			185,129			186,207
Residential mortgage loans		3,376,708			3,331,212			3,245,151			3,171,548			3,132,521
Home equity line of credit		289,540			293,750			295,791			301,885			308,916
Installment loans		11,702			9,967			9,309			8,413			8,763
Loans, net of deferred net costs		3,874,096			3,825,916			3,741,155			3,666,975			3,636,407
Less: Allowance for loan losses		44,766			44,736			44,503			44,379			44,170
Net loans		3,829,330			3,781,180			3,696,652			3,622,596			3,592,237
Bank premises and equipment, net		34,694			35,214			35,521			35,240			35,157
Other assets		58,263			63,211			61,069			62,522			59,579
Total assets	$	4,958,913			4,885,351			4,940,559			4,931,564			4,908,008
LIABILITIES:
Deposits:
Demand	$	405,069			403,047			404,564			403,782			398,399
Interest-bearing checking		904,678			918,486			925,295			915,163			891,052
Savings accounts		1,182,683			1,221,127			1,257,744			1,266,852			1,260,447
Money market deposit accounts		507,311			501,270			512,453			539,839			556,462
Time deposits		1,274,506			1,155,994			1,155,214			1,109,444			1,066,966
Total deposits		4,274,247			4,199,924			4,255,270			4,235,080			4,173,326
Short-term borrowings		161,893			176,377			182,705			203,910			242,991
Accrued expenses and other liabilities		32,902			31,932			31,769			30,477			33,383
Total liabilities		4,469,042			4,408,233			4,469,744			4,469,467			4,449,700
SHAREHOLDERS' EQUITY:
Capital stock		100,175			100,175			100,093			100,002			99,998
Surplus		176,710			176,764			176,243			175,674			175,651
Undivided profits		256,397			246,965			238,342			229,267			219,436
Accumulated other comprehensive loss, net of tax		(10,309	)		(13,000	)		(9,796	)		(8,490	)		(1,806	)
Treasury stock at cost		(33,102	)		(33,786	)		(34,067	)		(34,356	)		(34,971	)
Total shareholders' equity		489,871			477,118			470,815			462,097			458,308
Total liabilities and shareholders' equity	$	4,958,913			4,885,351			4,940,559			4,931,564			4,908,008
Outstanding shares (in thousands)		96,659			96,586			96,475			96,359			96,289

Page | 10

NONPERFORMING ASSETS

(dollars in thousands)

(Unaudited)

	12/31/2018			9/30/2018			6/30/2018			3/31/2018			12/31/2017
Nonperforming Assets
New York and other states*
Loans in nonaccrual status:
Commercial	$	645			928			767			1,213			1,543
Real estate mortgage - 1 to 4 family		22,373			20,750			21,209			21,424			20,350
Installment		4			13			6			19			57
Total non-accrual loans		23,022			21,691			21,982			22,656			21,950
Other nonperforming real estate mortgages - 1 to 4 family		34			35			36			38			38
Total nonperforming loans		23,056			21,726			22,018			22,694			21,988
Other real estate owned		1,675			2,306			2,569			2,190			3,246
Total nonperforming assets	$	24,731			24,032			24,587			24,884			25,234
Florida
Loans in nonaccrual status:
Commercial	$	-			-			-			-			-
Real estate mortgage - 1 to 4 family		1,915			2,054			2,143			2,154			2,389
Installment		15			13			-			4			-
Total non-accrual loans		1,930			2,067			2,143			2,158			2,389
Other nonperforming real estate mortgages - 1 to 4 family		-			-			-			-			-
Total nonperforming loans		1,930			2,067			2,143			2,158			2,389
Other real estate owned		-			-			-			-			-
Total nonperforming assets	$	1,930			2,067			2,143			2,158			2,389
Total
Loans in nonaccrual status:
Commercial	$	645			928			767			1,213			1,543
Real estate mortgage - 1 to 4 family		24,288			22,804			23,352			23,578			22,739
Installment		19			26			6			23			57
Total non-accrual loans		24,952			23,758			24,125			24,814			24,339
Other nonperforming real estate mortgages - 1 to 4 family		34			35			36			38			38
Total nonperforming loans		24,986			23,793			24,161			24,852			24,377
Other real estate owned		1,675			2,306			2,569			2,190			3,246
Total nonperforming assets	$	26,661			26,099			26,730			27,042			27,623
Quarterly Net Chargeoffs (Recoveries)
New York and other states*
Commercial	$	99			(2	)		(1	)		(6	)		(86	)
Real estate mortgage - 1 to 4 family		323			(3	)		150			28			249
Installment		35			64			27			66			50
Total net chargeoffs	$	457			59			176			88			213
Florida
Commercial	$	-			-			-			-			-
Real estate mortgage - 1 to 4 family		(3	)		-			-			-			(1	)
Installment		16			8			-			2			-
Total net chargeoffs	$	13			8			-			2			(1	)
Total
Commercial	$	99			(2	)		(1	)		(6	)		(86	)
Real estate mortgage - 1 to 4 family		320			(3	)		150			28			248
Installment		51			72			27			68			50
Total net chargeoffs	$	470			67			176			90			212
Asset Quality Ratios
Total nonperforming loans (1)	$	24,986			23,793			24,161			24,852			24,377
Total nonperforming assets (1)		26,661			26,099			26,730			27,042			27,623
Total net chargeoffs (2)		470			67			176			90			212
Allowance for loan losses (1)		44,766			44,736			44,503			44,379			44,170
Nonperforming loans to total loans		0.64	%		0.62	%		0.65	%		0.68	%		0.67	%
Nonperforming assets to total assets		0.54	%		0.53	%		0.54	%		0.55	%		0.56	%
Allowance for loan losses to total loans		1.16	%		1.17	%		1.19	%		1.21	%		1.21	%
Coverage ratio (1)		179.2	%		188.0	%		184.2	%		178.6	%		181.2	%
Annualized net chargeoffs to average loans (2)		0.05	%		0.01	%		0.02	%		0.01	%		0.02	%
Allowance for loan losses to annualized net chargeoffs (2)		23.8	x		166.9	x		63.2	x		123.3	x		52.1	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
	December 31, 2018									December 31, 2017
	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises	$	154,867			788			2.03	%	$	139,565			614			1.76	%
Mortgage backed securities and collateralized mortgage obligations - residential		276,747			1,554			2.25			328,826			1,730			2.10
State and political subdivisions		172			3			7.82			519			10			7.71
Corporate bonds		30,068			202			2.68			41,006			148			1.44
Small Business Administration - guaranteed
participation securities		59,363			329			2.21			69,643			358			2.06
Mortgage backed securities and collateralized mortgage obligations - commercial		-			-			-			9,843			43			1.75
Other		684			5			2.92			685			4			2.34
Total securities available for sale		521,901			2,881			2.21			590,087			2,907			1.97
Federal funds sold and other short-term Investments		416,765			2,367			2.25			539,700			1,779			1.32
Held to maturity securities:
Corporate bonds		-			-			-			-			-			-
Mortgage backed securities and collateralized mortgage obligations - residential		22,947			226			3.93			28,418			261			3.67
Total held to maturity securities		22,947			226			3.93			28,418			261			3.67
Federal Reserve Bank and Federal Home Loan Bank stock		8,953			207			9.25			8,779			151			6.88
Commercial loans		191,899			2,577			5.37			186,655			2,429			5.21
Residential mortgage loans		3,359,540			34,808			4.14			3,103,792			32,051			4.13
Home equity lines of credit		291,411			3,544			4.82			310,626			3,240			4.17
Installment loans		10,486			255			9.65			8,276			205			9.91
Loans, net of unearned income		3,853,336			41,184			4.27			3,609,349			37,925			4.20
Total interest earning assets		4,823,902			46,865			3.88			4,776,333			43,023			3.60
Allowance for loan losses		(44,887	)								(44,322	)
Cash & non-interest earning assets		120,646									128,340
Total assets	$	4,899,661								$	4,860,351
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts	$	892,241			111			0.05	%	$	856,031			107			0.05	%
Money market accounts		499,771			618			0.49			559,463			457			0.33
Savings		1,200,864			401			0.13			1,259,938			429			0.14
Time deposits		1,227,034			4,643			1.50			1,073,956			2,412			0.90
Total interest bearing deposits		3,819,910			5,773			0.60			3,749,388			3,405			0.36
Short-term borrowings		171,247			352			0.82			232,207			359			0.62
Total interest bearing liabilities		3,991,157			6,125			0.61			3,981,595			3,764			0.38
Demand deposits		396,959									390,343
Other liabilities		28,748									30,392
Shareholders' equity		482,797									458,021
Total liabilities and shareholders' equity	$	4,899,661								$	4,860,351
Net interest income, tax equivalent					40,740									39,259
Net interest spread								3.27	%								3.22	%
Net interest margin (net interest income to total interest earning assets)								3.38	%								3.29	%
Tax equivalent adjustment					(1	)								(11	)
Net interest income					40,739									39,248

Page | 12

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY -

INTEREST RATES AND INTEREST DIFFERENTIAL, Continued

(dollars in thousands)
(Unaudited)	Year ended December 31, 2018									Year ended December 31, 2017
	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Assets
Securities available for sale:
U. S. government sponsored enterprises	$	155,381			3,112			2.00	%	$	139,652			2,281			1.63	%
Mortgage backed securities and collateralized mortgage obligations - residential		294,732			6,593			2.24			350,256			7,447			2.13
State and political subdivisions		414			34			8.11			682			55			8.06
Corporate bonds		30,310			687			2.27			41,946			606			1.44
Small Business Administration - guaranteed participation securities		63,430			1,339			2.11			73,996			1,547			2.09
Mortgage backed securities and collateralized mortgage obligations - commercial		2,769			37			1.33			9,963			109			1.09
Other		685			18			3.50			685			16			2.34
Total securities available for sale		547,721			11,820			2.88			617,180			12,061			1.95
Federal funds sold and other short-term Investments		495,066			9,276			1.87			611,586			6,679			1.09
Held to maturity securities:
Corporate bonds		-			-			-			6,663			410			6.15
Mortgage backed securities and collateralized mortgage obligations - residential		24,801			962			3.88			31,266			1,149			3.67
Total held to maturity securities		24,801			962			3.88			37,929			1,559			4.11
Federal Reserve Bank and Federal Home Loan Bank stock		8,907			564			8.44			9,295			544			5.85
Commercial loans		188,362			9,913			5.26			185,376			9,741			5.25
Residential mortgage loans		3,250,800			133,930			4.12			3,002,706			124,961			4.16
Home equity lines of credit		297,678			13,562			4.56			318,660			12,692			3.98
Installment loans		9,242			899			9.73			8,158			768			9.41
Loans, net of unearned income		3,746,082			158,304			4.23			3,514,900			148,162			4.22
Total interest earning assets		4,822,577			180,926			3.75			4,790,890			169,005			3.53
Allowance for loan losses		(44,651	)								(44,319	)
Cash & non-interest earning assets		122,524									129,097
Total assets	$	4,900,450								$	4,875,668
Liabilities and shareholders' equity
Deposits:
Interest bearing checking accounts	$	897,378			442			0.05	%	$	844,010			478			0.06	%
Money market accounts		521,233			2,053			0.39			572,270			1,860			0.33
Savings		1,241,619			1,657			0.13			1,275,268			1,729			0.14
Time deposits		1,149,980			14,806			1.29			1,097,190			9,123			0.83
Total interest bearing deposits		3,810,210			18,958			0.50			3,788,738			13,190			0.35
Short-term borrowings		194,810			1,270			0.65			228,086			1,402			0.61
Total interest bearing liabilities		4,005,020			20,228			0.51			4,016,824			14,592			0.36
Demand deposits		396,367									382,658
Other liabilities		28,249									28,506
Shareholders' equity		470,814									447,680
Total liabilities and shareholders' equity	$	4,900,450									4,875,668
Net interest income, tax equivalent					160,698									154,413
Net interest spread								3.25	%								3.16	%
Net interest margin (net interest income to total interest earning assets)								3.33	%								3.22	%
Tax equivalent adjustment					(12	)								(45	)
Net interest income					160,686									154,368

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 Book Value Per Share	12/31/2018			9/30/2018			12/31/2017
Equity		489,871			477,118			458,308
Less: Intangible assets		553			553			553
Tangible equity		489,318			476,565			457,755
Shares outstanding		96,659			96,586			96,289
Tangible book value per share		5.06			4.93			4.75
Book value per share		5.07			4.94			4.76
Tangible Equity to Tangible Assets
Total Assets	$	4,958,913			4,885,351			4,908,008
Less: Intangible assets		553			553			553
Tangible assets		4,958,360			4,884,798			4,907,455
Tangible Equity to Tangible Assets		9.87	%		9.76	%		9.33	%
Equity to Assets		9.88	%		9.77	%		9.34	%

	Three months ended									Years ended
Efficiency Ratio	12/31/2018			9/30/2018			12/31/2017			12/31/2018			12/31/2017
Net interest income	$	40,739			40,523			39,248			160,686			154,368
Taxable equivalent adjustment		1			3			11			12			45
Net interest income (fully taxable equivalent)		40,740			40,526			39,259			160,698			154,413
Non-interest income		4,452			4,455			4,288			18,081			18,373
Less:  Net gain on sale of nonperforming loans		-			-			-			-			84
Revenue used for efficiency ratio		45,192			44,981			43,547			178,779			172,702
Total noninterest expense		24,919			24,544			23,536			97,713			93,994
Less:  Other real estate expense, net		37			528			401			1,231			1,171
Expense used for efficiency ratio		24,882			24,016			23,135			96,482			92,823
Efficiency Ratio		55.06	%		53.39	%		53.13	%		53.97	%		53.75	%

Page | 14