Good morning, and welcome to the TrustCo Bank Corp Second Quarter Earnings Call and Webcast. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions). Before proceeding, we would like to mention that this presentation may contain forward-looking information about TrustCo Bank Corp NY that is intended to be covered by the Safe Harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various risks, uncertainties and other factors. Please review risk factors in our most recent annual report on Form 10-K and our other securities filings for detailed information. The statements are valid only as of the date hereof and the company disclaims any obligation to update this information except as maybe required by applicable law. Please also note this event is being recorded. I would now like to turn the conference over to Mr. Robert J. McCormick, President and CEO. Please go ahead.

Good morning, everyone. Welcome to the TrustCo Bank's second quarter earnings call. As Kate said, I'm Rob McCormick, President and CEO of TrustCo Bank. Joining me on the call today are Bob Cushing, our CFO; and Scot Salvador, our Chief Banking Officer. Kevin Timmons, who most of you deal with regularly is in the room to keep us in line. We had a very good second quarter at TrustCo Bank. The plan for this call is I will hit the highlights, Bob and Scot will give detail on the numbers, and then we will have time for questions and answers. Our net income was over $11.8 million, this is over 20% greater than the same period in 2013. We also saw a strong rise in year-to-date net income to over $22.8 million. Our strong net income provided us with a return on average assets over 1% and a return on average equity of 12.5%, all significantly greater than the same period in 2013. Our net interest margin saw an expansion for 3.6. That's up 6 basis points from the same period in 2013. Total deposits grew to $3.995 billion; this is up over $100 million from June 30 of 2013. We were also very happy to continue the pattern of being less dependent on CDs or higher cost deposits. Our capital ratio is over 8.38% at quarter end. The balance sheet is still very liquid with significant investment portfolio for short maturities. And Bob is going to touch on that. We opened two new offices this quarter Warrensburg, New York and Stuart, Florida. They are just expansions of our existing market place service area. We also relocated our Longwood, Florida branch. Our non-performing loan and asset ratios have improved to 1.36 and 1.07 respectively. Most of you know we are very proud of our efficiency ratio which improved under 53% down from last year. Just as a recap, loans were up, deposits were up, net income is up, non-performing loans are down, margin is up, efficiency ratio is down and return on equity is up. I think we had a pretty good quarter. Bob, would you provide more detail?

These results generated a return on average equity of 12.5% for the second quarter of 2014 and 12.3% for the year. Both the quarter and year-to-date results benefited by a couple of one-time items. We noted in our press releases this year we had a one-time income item in both first quarter and second quarter 2014. In the first quarter, we had the gain in the sale of Florida proposed corporate headquarters which generated a pre-tax gain of $1.8 million. And in the second quarter we sold a piece of other real estate we had in our portfolio for quite a while at a pre-tax gain of $2.4 million. Also during the second quarter, we had a sale of long term non-performing assets of $1.8 million at a gain of $164,000 which was offset by $151,000 of property taxes we had to pay on these assets sold. So the loan sale did not result on any meaningful impact on the P&L, but it did help to reduce non-performing assets. These gains allowed us to remain highly liquid while at the same time post meaningful increases in both net income and other performance criteria. Complementing these one-time items as the quarter reflects our progress in expanding our balance sheet to quantify the growth and increases in residential retail loan customers. On average total deposits increased by $55 million for the first quarter of this year and by $116 million over the second quarter of last year's average balances. The average cost of interest bearing liabilities continue to decrease by 2 basis points in the quarter to come in at 38 basis point as compared to 40 basis points for the first quarter of this year and 41 basis points for the second quarter 2013. Average loans have increased by $45 million…

Okay, thanks Bob. As far as the loan portfolio is concerned total net loans grew a strong $65 million or 2.2% in the quarter. This follows upon approximate growth of $32 million in the first quarter and equates to year-over-year growth of $243 million or 8.8%. Over $62 million of the quarter's growth was in the residential portfolio with commercial loans increasing just over $2 million. Home equity loans grew by $1.7 million with remainder of the residential increase occurring in our first mortgage product. Our Florida market continues to show strong activity with a growth in Florida accounting for approximately 40% to 70% of the second quarter's net loan growth. Overall, loan activity grew steadily in the second quarter as is typical for the time of the year. We are pleased with our results and we ended the quarter with a backlog of approved loans larger than both the first quarter and the corresponding second quarter of last year. With regard to non-performing loans, virtually all asset quality indicators showed improvement on both the quarter and the year. Nonperforming assets dropped from $53.9 million to $49.2 million this quarter. On a year-over-year basis, nonperforming loans to total loans dropped to 1.36% from 1.57%, a year earlier. Included in the second quarter results as it was noted earlier was the sale of approximately $1.8 million of nonperforming assets to a third-party at a small net gain. Early stage delinquencies remained strong in all markets and further improved quarter-over-quarter to levels we have not seen in quite some time. We consider as a positive future indicator with regards to non-performers. Rob?

We're pleased with the quarter and that's our story and I guess I'll turn it back over to Kate to get the questions lined up.

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Our first question is from Alex Twerdahl from Sandler O'Neill. Please go ahead.

Just looking at the balance sheet it looks like you've put about $100 million of cash to work during the quarter. A good chunk of it went into the securities portfolio. Can you just give us a little more color, Bob, on what you are buying in the securities portfolio in terms of duration, rate, et cetera?

Okay, Alex. Really it's actually -- really the second -- the first quarter really was the kind of the odd quarter if you really look at it. At the end of the first quarter, we had about a $120 million of securities that either matured or were called back into cash. So if you look at the end of the first quarter, you'll see that the security portfolio was lower than the average balance it was for the first quarter and the cash position went up by about $120 million. Early in the second quarter, we reinvested that back into similar securities, which for us represents call latencies in the five year or under final maturity and mortgage-backed securities, again with average life, mortgage-backed securities under five years. The yield on those portfolios are in the 2% to 2.5% range. And if you look at the average balance for the second quarter, you'll see the average balance of the second quarter is pretty much in line with the end of quarter balances. So the rest of the second quarter, we really didn't do any purchases.

Great. And then for the ORE property that you sold during the quarter that you kind of had hedged in your portfolio, are there any more of those that could be sold in the next couple of quarters?

Nothing exactly like that, Alex. We certainly have other ORE property, but that was a long-term holding was unapproved and unimproved vacant land it took a very, very, very long time to sell. We took a wait and see approach for quite some time and then it was on our books for nothing and the right buyer came along and finally was able to put something together. So nothing like that.

Right. And then, Scot, just in terms of the pipeline you said is larger than it was at the end of the first quarter and the year ago. Could you just give us some color on what the rates are on that portfolio today versus what's on your books already? Not on the portfolio, on the pipeline today?

Sure. Alex, today we're originating today at 408, that's on a 30 year loan obviously. And the backlog is probably in that range, may be a little bit higher on an average, if you average it all together, little bit higher than 408 in the background, more in the 4 in a quarter. It's a backlog; it might be more in the 4 in a quarter, the 4.5 range.

Okay. That's great. And then just finally a couple of quarter ago, Rob, you mentioned that you're going to get back into the card business. And is that something that's still going on or we haven't have really heard much about it, and I guess in a couple of quarters.

Yeah Alex, we're about to issue our first test card this month. And they will be branded MasterCard. There will be four separate cards including a corporate card. And again, we're not trying to conquer that business or compete with the big guys, but we have a lot of customers who like to deal with our branches one on one, I think you know that like to be able to make their payments in the branches and we have had some outcry for a card. So we are going to dip our toll back into that water very shortly.

The next question comes from Travis Lan from KBW. Please go ahead.

This is actually Collyn Gilbert calling for Travis. Good morning guys.

Hi, Collyn, how are you?

Hi, Collyn, how are you?

Good thanks. So just to circle back on the CDs that you did this quarter. What were the kind of the terms that you were looking for and I'm just trying to get an understanding of where customer behavior is that they are willing to extend. So just on yield and duration I would be curious to know about that.

What we were doing is we are reaching out to customers before their maturities to see that we can get them to either roll into the existing terms they had or to some slightly longer terms that we were offering. So we had actually at one point made a five-year CD out there that we were trying to get people interested in and we did get some people to move out to that far. The rate even out that far was not -- was not a very large rate from if you look at historical numbers but in 1% to 1.5% range. What we have now is 18 month in a 24 month type of term that we are trying to entice people into and again it is the 1% range.

Okay. Okay. That's helpful.

That's the way Collyn that works to Bob's point. The 18 month to 2-year seems to work best for our customers.

Okay. And it seems like the trigger has to be somewhere above that 1% level to get them to come in?

Certainly 1.

1 is the magic number.

Okay, okay, that's helpful. And then just given your comments on credit and your outlook seems pretty positive there, how should we think about provisions going forward? I mean do you anticipate them to match the net charge-offs or do you want to see reserves may be start to fall, or how should we think about the provision from here?

From what, we tend to be pretty conservative individuals and we look at a long-term horizon relative losses and 2008, 2009, and 2010 are still in our memory from that perspective. So we like the idea of having reserves in the levels we're at right now in the total dollar amounts. So we see ourselves pretty much providing at the level of net charge-offs and in that range we're -- we're in that $1.5 million range and that's about what we think is appropriate.

Okay, okay, that's helpful. And then just one final question, do you guys have a sense for what you average annual operating expenses are for your branches? How are you thinking about kind of breakeven now in terms of level of deposits?

Our deposits -- we look at a new branch operation to be on a breakeven mode in that $8 million to $10 million range of deposits and again sooner than normal distribution of loan growth in the same time from that same operation. So we like that 60:40 split between loans and deposits, I'm sorry between loans and investments. So we can get about 60% of the deposit flow back in the form of loans. The other 40% we will invest with Fed funds and securities portfolio. So as operating costs are concerned we continue to drive down operating costs as you know we kind of look at the smaller branch footprints they are 1,800 square foot to 2,200 square foot locations with the drive through end cap those types of things and from a staffing model we've been driving -- there has been a little bit of overstaff at the beginning of a branch when a branch first comes on board, so that we have a lot of splash, and lot of opportunity to market in the community, but as they stabilize those operating costs come down. Those costs probably are in the $250,000 to $300,000 range.

Okay. That's helpful. That's all we have thanks.

You know we've opened -- you know Collyn for years we have opened for people are opening now. We open, as Bob said smaller branches open floor plans and very customer friendly set up. So --

Got it.

That certainly helps us with our cost basis.

The next question is a follow-up from Alex Twerdahl from Sandler O'Neill. Please go ahead.

Hi, guys. I was just looking through my notes and I'm not sure I got what you guided for expenses going forward. Can you just repeat that?

We continue to look on to it. That's $20.2 million to $20.7 million operating expense range with another $500,000 to $1 million in ORE expense reaffirming where we were.

(Operator Instructions) As there are no questions at this time, this concludes our question-and-answer session. I would like to turn the conference back over to Mr. McCormick for any closing remarks.

Thank you for your interest in the bank and thanks for taking the time this morning. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.