UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission File Number 0-10592
March 31, 2003
TRUSTCO BANK CORP NY
(Exact name of registrant as specified in its charter)
NEW YORK 14-1630287
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5 SARNOWSKI DRIVE, GLENVILLE, NEW YORK 12302
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 377-3311
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
(Title of class)
Common
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes.(x) No.( )
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes (x) No.( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding
Class of Common Stock as of May 5, 2003
--------------------------- ----------------------
$1 Par Value 74,485,321
1
TrustCo Bank Corp NY
INDEX
Part I. FINANCIAL INFORMATION PAGE NO.
Item 1. Interim Financial Statements (Unaudited): Consolidated 1
Statements of Income for the Three Months Ended March 31,
2003 and 2002
Consolidated Statements of Condition as of March 31, 2003 2
and December 31, 2002
Consolidated Statements of Cash Flows for the Three Months 3-4
Ended March 31, 2003 and 2002
Notes to Consolidated Interim Financial Statements 5-8
Independent Accountants' Review Report 9
Item 2. Management's Discussion and Analysis 10-19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
Part II. OTHER INFORMATION
Item 1. Legal Proceedings -- None
Item 2. Changes in Securities and Use of Proceeds -- None
Item 3. Defaults Upon Senior Securities --None
Item 4. Submissions of Matters to Vote of Security Holders -- None
Item 5. Other Information -- None
2
Item 6.Exhibits and Reports on Form 8-K
3(ii)a Amended and Restated Bylaws of TrustCo Bank Corp NY 25
99.1 Certification Pursuant To 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 Of The Sarbanes-
Oxley Act of 2002 36
(b) Reports on Form 8-K
On April 15, 2003, TrustCo filed a Current Report on Form 8-K, regarding
two press releases dated April 15, 2003, detailing first quarter
financial results.
On April 29, 2003, TrustCo filed a Current Report on Form 8-K, regarding
a press release dated April 29, 2003, announcing that Henry Collins,
Secretary and General Counsel will be leaving the Company effective May
23, 2003 to return to private law practice.
3
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share data)
3 Months Ended
March 31
2003 2002
---- ----
Interest income:
Interest and fees on loans $24,586 28,720
Interest on U. S. Treasuries and agencies 3,387 2,949
Interest on states and political
subdivisions 2,968 2,928
Interest on mortgage-backed securities 991 1,373
Interest and dividends on other securities 1,814 1,216
Interest on federal funds sold and other short- 1,655 1,877
term investments
------------------------------
Total interest income 35,401 39,063
------------------------------
Interest expense:
Interest on deposits:
Interest-bearing checking 511 770
Savings 2,570 3,253
Money market deposit accounts 553 445
Time deposits 7,719 9,819
Interest on short-term borrowings 347 856
Interest on long-term debt 6 9
------------------------------
Total interest expense 11,706 15,152
------------------------------
Net interest income 23,695 23,911
Provision for loan losses 300 520
------------------------------
Net interest income after provision
for loan losses 23,395 23,391
------------------------------
Noninterest income:
Trust department income 1,399 1,832
Fees for other services to customers 2,620 2,442
Net gain on securities transactions 3,096 1,868
Other 735 611
------------------------------
Total noninterest income 7,850 6,753
------------------------------
Noninterest expenses:
Salaries and employee benefits 5,248 5,814
Net occupancy expense 1,702 1,362
Equipment expense 1,226 718
FDIC insurance expense 93 90
Professional services 620 667
Outsourced services 1,250 160
Other real estate expenses/ (income) (34) 71
Other 2,564 3,511
-------------------------------
Total noninterest expenses 12,669 12,393
-------------------------------
Income before taxes 18,576 17,751
Income taxes 5,384 5,383
-------------------------------
Net income $ 13,192 12,368
===============================
Net income per Common Share:
- Basic $ 0.178 0.172
===============================
- Diluted $ 0.175 0.166
===============================
See accompanying notes to consolidated interim financial statements
4
TRUSTCO BANK CORP NY
Consolidated Statements of Condition
(dollars in thousands, except per share data
3/31/03 12/31/02
------- --------
ASSETS: (Unaudited)
Cash and due from banks $ 51,200 63,957
Federal funds sold and other short term
investments 538,120 542,125
---------------- ----------------
Total cash and cash equivalents 589,320 606,082
Securities available for sale:
U. S. Treasuries and agencies 329,957 230,428
States and political subdivisions 235,861 235,495
Mortgage-backed securities 75,082 52,591
Other 123,032 134,649
---------------- ----------------
Total securities available for sale 763,932 653,163
---------------- ----------------
Loans:
Commercial 202,460 202,707
Residential mortgage loans 982,539 1,063,375
Home equity line of credit 145,714 139,294
Installment loans 15,834 17,465
---------------- ----------------
Total loans 1,346,547 1,422,841
---------------- ----------------
Less:
Allowance for loan losses 51,017 52,558
Unearned income 472 540
---------------- ----------------
Net loans 1,295,058 1,369,743
Bank premises and equipment 19,199 19,544
Real estate owned 86 86
Other assets 44,539 47,470
---------------- ----------------
Total assets $ 2,712,134 2,696,088
================ ================
LIABILITIES:
Deposits:
Demand $ 184,376 178,058
Interest-bearing checking 313,021 338,740
Savings accounts 747,249 715,349
Money market deposit accounts 149,422 130,914
Certificates of deposit (in denominations
of $100,000 or more) 140,007 137,513
Other time deposits 766,341 773,694
---------------- ----------------
Total deposits 2,300,416 2,274,268
Short-term borrowings 144,479 141,231
Long-term debt 381 427
Accrued expenses and other liabilities 34,668 45,318
---------------- ----------------
Total liabilities 2,479,944 2,461,244
---------------- ----------------
SHAREHOLDERS' EQUITY:
Capital stock par value $1; 100,000,000
shares authorized, and 79,533,986 and
79,107,851 shares issued March 31, 2003
and December 31, 2002, respectively 79,534 79,108
Surplus 93,536 92,009
Undivided profits 71,645 69,553
Accumulated other comprehensive income:
Net unrealized gain on securities
Available for sale 23,872 27,277
Treasury stock at cost-5,256,161 and
4,930,300 shares at March 31, 2003
and December 31, 2002, respectively (36,397) (33,103)
---------------- ----------------
Total shareholders' equity
232,190 234,844
---------------- ----------------
Total liabilities and shareholders'
equity 2,712,134 2,696,088
================ ================
See accompanying notes to consolidated interim financial statements.
5
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
THREE MONTHS ENDED March 31, 2003 2002
---------------- ----------------
Cash flows from operating activities:
Net income 13,192 12,368
---------------- ----------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 800 505
Provision for loan losses 300 520
Net gain on sale of securities available for sale (3,096) (1,868)
Deferred tax expense/(benefit) (295) 2,102
Decrease in taxes receivable 5,680 2,493
(Increase)/decrease in interest receivable (4) 623
Decrease in interest payable (210) (65)
(Increase)/decrease in other assets 242 (12,657)
Decrease in accrued expenses and other liabilities (9,953) (532)
---------------- ----------------
Total adjustments (6,536) (8,879)
---------------- ----------------
Net cash provided by operating activities 6,656 3,489
--------------- ----------------
Cash flows from investing activities:
Proceeds from sales and calls of securities available
for sale 167,544 59,025
Purchase of securities available for sale (281,906) (71,877)
Proceeds from maturities and calls
of securities available for sale 530 10,099
Net decrease in loans 74,385 28,771
Proceeds from dispositions of real estate owned --- 334
Capital expenditures (392) (691)
---------------- ----------------
Net cash provided by/(used in) investing activities (39,839) 25,661
---------------- ----------------
Cash flows from financing activities:
Net increase in deposits 26,148 76,477
Net increase in short-term borrowings 3,248 25,422
Repayment of long-term debt (46) (64)
Proceeds from exercise of stock options 1,953 2,885
Proceeds from sale of treasury stock 1,904 1,923
Purchase of treasury stock (5,199) (3,991)
Dividends paid (11,587) (10,688)
---------------- ----------------
Net cash provided by financing activities 16,421 91,964
---------------- ----------------
Net increase/(decrease) in cash and cash equivalents (16,762) 121,114
Cash and cash equivalents at beginning of period 606,082 398,573
---------------- ----------------
Cash and cash equivalents at end of period 589,320 519,687
================ ================
See accompanying notes to consolidated interim financial statements.
(Continued)
6
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows Continued (Unaudited)
(dollars in thousands)
SUPPLEMENTAL INFORMATION:
THREE MONTHS ENDED March 31, 2003 2002
---------------- ----------------
Interest paid 11,916 15,217
Income taxes paid
--- 788
Increase/(decrease) in dividends payable
(487) 115
Change in unrealized (gain)/loss on securities
available for sale-gross of deferred taxes 6,159 (874)
Change in deferred tax effect on unrealized
gain/(loss)on securities available for sale (2,755) 235
See accompanying notes to consolidated interim financial statements.
7
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements
(Unaudited)
1. Financial Statement Presentation
In the opinion of the management of TrustCo Bank Corp NY (the Company), the
accompanying unaudited Consolidated Interim Financial Statements contain all
adjustments necessary to present fairly the financial position as of March 31,
2003 and the results of operations and cash flows for the three months ended
March 31, 2003 and 2002. The accompanying Consolidated Interim Financial
Statements should be read in conjunction with the TrustCo Bank Corp NY year-end
Consolidated Financial Statements, including notes thereto, which are included
in TrustCo Bank Corp NY's 2002 Annual Report to Shareholders on Form 10-K.
2. Earnings Per Share
A reconciliation of the component parts of earnings per share for the three
month period ended March 31, 2002 and 2001 follows:
Weighted Average Shares
(In thousands, Net Outstanding Per Share
except per share data) Income Amounts
----------------- -------------------------- -------------------
For the quarter ended
March 31, 2003:
Basic EPS:
Net income available to
Common shareholders $13,192 74,248 $0.178
Effect of Dilutive Securities:
Stock options ------ 937 -------
----------------- -------------------------- -------------------
Diluted EPS $13,192 75,185 $0.175
================= ========================== ===================
For quarter ended March 31, 2002:
Basic EPS:
Net income available to
Common shareholders $12,368 71,779 $0.172
Effect of Dilutive Securities:
Stock options ------- 2,509 -------
----------------- -------------------------- -------------------
Diluted EPS $12,368 74,288 $0.166
================= ========================== ===================
8
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
3. Stock Option Plans
The Company has stock option plans for officers and directors and has adopted
the disclosure only provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (Statement 123) and Statement
of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure" (Statement 148). The Company's stock
option plans are accounted for in accordance with the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
Opinion 25) and as such, no compensation expense has been recorded for these
plans. Had compensation expense for the Company's stock option plans been
determined consistent with Statement 123, the Company's net income and earnings
per share for the periods ended March 31, 2003 and 2002 would have been as
follows:
(dollars in thousands except per share data)
2003 2002
------------------------
Net income:
As reported $13,192 12,368
Deduct: total stock-based
compensation expense
determined under fair
value based method
for all awards, net of
related tax effects (231) (302)
--------------------------
Pro forma net income $12,961 12,066
====== ======
Earnings per share:
Basic - as reported $ .178 .172
Basic - pro forma .175 .168
Diluted - as reported .175 .166
Diluted - pro forma .172 .162
The weighted average fair value of each option as of the grant date was
estimated using the Black-Scholes pricing model, and calculated in accordance
with Statement 123. No options were granted in the first quarter of 2003. The
estimated fair value of options granted in 2002 was as follows:
Employees' Directors'
Plan Plan
$1.730 1.680
9
The following assumptions were utilized in the calculation of the fair value of
the 2002 options under Statement 123:
Employees' Directors'
Plan Plan
Expected dividend yield: 4.45% 4.45
Risk-free interest rate: 4.10 3.79
Expected volatility rate: 21.75 22.41
Expected lives 7.5 years 6.0 years
4. Comprehensive Income
Comprehensive income includes the reported net income of a company adjusted for
items that are accounted for as direct entries to equity, such as the mark to
market adjustment on securities available for sale, foreign currency items,
minimum pension liability adjustments, and certain derivative gains and losses.
At the Company, comprehensive income represents net income plus other
comprehensive income, which consists of the net change in unrealized gains or
losses on securities available for sale for the period. Accumulated other
comprehensive income represents the after-tax net unrealized gains or losses on
securities available for sale as of the balance sheet dates.
Comprehensive income for the three month periods ended March 31, 2003 and 2002
was $9,787,000 and $13,007,000, respectively.
The following summarizes the components of other comprehensive income/(loss):
Unrealized gains/(losses) on securities: (dollars in thousands)
holding losses arising during the three months ended March 31, 2003, net of
tax (pre-tax loss of $3,063). (1,548)
Less reclassification adjustment for net gain realized in net income during
the three months ended March 31, 2003, net of tax (pre-tax gain of $3,096). 1,857
--------------
Other comprehensive loss - three months ended March 31, 2003$ (3,405)
==============
10
Unrealized net holding gains arising during the three months ended March 31,
2002, net of tax (pre-tax gain of $2,742).
$ 1,759
Less reclassification adjustment for net gain realized in net income during
the three months ended March 31, 2002 net of tax
(pre-tax gain of $1,868). 1,120
--------------
Other comprehensive income - three months ended March 31, 2002
$ 639
==============
5. Impact of Changes in Accounting Standards
In December 2002, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure - an Amendment of FASB Statement No. 123", to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of Statement 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. This statement is effective for fiscal years
ending after December 15, 2002 and was adopted by the Company on January 1,
2003. The adoption of this statement did not have a material impact on the
Company's consolidated financial statements.
6. Guarantees
The Company does not issue any guarantees that would require
liability-recognition or disclosure, other than its standby letters of credit.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Standby letters of
credit generally arise in connection with lending relationships. The credit risk
involved in issuing these instruments is essentially the same as that involved
in extending loans to customers. Contingent obligations under standby letters of
credit totaled approximately $2.2 million at March 31, 2003 and represent the
maximum potential future payments the Company could be required to make.
Typically, these instruments have terms of twelve months or less and expire
unused; therefore, the total amounts do not necessarily represent future cash
requirements. Each customer is evaluated individually for creditworthiness under
the same underwriting standards used for commitments to extend credit and
on-balance sheet instruments. Company policies governing loan collateral apply
to standby letters of credit at the time of credit extension. Loan-to-value
ratios are generally consistent with loan-to-value requirements for other
commercial loans secured by similar types of collateral. The fair value of the
Company's standby letters of credit at March 31, 2003 was insignificant.
11
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Shareholders
TrustCo Bank Corp NY:
We have reviewed the consolidated statement of condition of TrustCo Bank Corp NY
and subsidiaries (the Company) as of March 31, 2003, and the related
consolidated statements of income and cash flows for the three month periods
ended March 31, 2003 and 2002. These consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated statement of
condition of TrustCo Bank Corp NY and subsidiaries as of December 31, 2002, and
the related consolidated statements of income, changes in shareholders' equity,
and cash flows for the year then ended (not presented herein); and in our report
dated January 17, 2003, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated statement of condition as of December 31, 2002 is
fairly stated, in all material respects, in relation to the consolidated
statement of condition from which it has been derived.
/s/KPMG LLP
- ------------------------------
KPMG LLP
Albany, New York
April 10, 2003
12
TrustCo Bank Corp NY
Management's Discussion and Analysis
March 31, 2003
The review that follows focuses on the factors affecting the financial condition
and results of operations of TrustCo Bank Corp NY ("TrustCo" or "Company")
during the three month period ended March 31, 2003, with comparisons to 2002 as
applicable. Net interest income and net interest margin are presented on a fully
taxable equivalent basis in this discussion. The consolidated interim financial
statements and related notes, as well as the 2002 Annual Report to Shareholders
should be read in conjunction with this review. Amounts in prior period
consolidated interim financial statements are reclassified whenever necessary to
conform to the current period's presentation.
Forward-looking Statements
Statements included in this review and in future filings by TrustCo with the
Securities and Exchange Commission, in TrustCo's press releases, and in oral
statements made with the approval of an authorized executive officer, which are
not historical or current facts, are "forward-looking statements" made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, and are subject to certain risks and uncertainties that could cause actual
results to differ materially from historical earnings and those presently
anticipated or projected. 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: (1) credit risk, (2) interest rate risk, (3)
competition, (4) changes in the regulatory environment, and (5) changes in
general business and economic trends. The foregoing list should not be construed
as exhaustive, and the Company disclaims any obligation to subsequently revise
any forward-looking statements to reflect events or circumstances after the date
of such statements, or to reflect the occurrence of anticipated or unanticipated
events.
Following this discussion is the table "Distribution of Assets, Liabilities and
Shareholders' Equity: Interest Rates and Interest Differential" which gives a
detailed breakdown of TrustCo's average interest earning assets and interest
bearing liabilities for the three months ended March 31, 2003 and 2002.
Overview
TrustCo recorded net income of $13.2 million, or $0.175 of diluted earnings per
share for the three months ended March 31, 2003, as compared to net income of
$12.4 million or $0.166 of diluted earnings per share in the same period in
2002.
The primary factors accounting for the year to date increases were:
- -Increase in average interest earning assets of $60.4 million to $2.57 billion
in 2003 as compared to $2.51 billion in 2002,
- -Reduction in the provision for loan losses from $520 thousand in 2002 to $300
thousand in 2003, and
13
- -Increases in noninterest income from $6.8 million to $7.9 million in 2003,
primarily due to an increase in the net gains on securities transactions.
These positive factors affecting net income were partially offset by:
- -Decrease in net interest margin from 4.07% in 2002 to 3.96% in 2003, and
- -Increase in noninterest expense from $12.4 million in 2002 to $12.7 million
in 2003.
Asset/Liability Management
The Company strives to generate superior earnings capabilities through a mix of
core deposits, funding a prudent mix of earning assets. Additionally, TrustCo
attempts to maintain adequate liquidity and reduce the sensitivity of net
interest income to changes in interest rates to an acceptable level while
enhancing profitability both on a short-term and long- term basis.
The following Management's Discussion and Analysis for the first quarter of 2003
compared to the comparable period in 2002 is greatly affected by the change in
interest rates in the marketplace in which TrustCo competes. Included in the
2002 Annual Report to Shareholders is a description of the effect interest rates
had on the results for the year 2002 compared to 2001. Most of the same market
factors discussed in the 2002 Annual Report also had a significant impact on the
first quarter 2003 results.
TrustCo competes with other financial service providers based upon many factors
including quality of service, convenience of operations, and rates paid on
deposits and charged on loans. The absolute level of interest rates, changes in
rates and customers' expectations with respect to the direction of interest
rates have a significant impact on the volume of loan and deposit originations
in any particular period.
Interest rates have changed dramatically in response to the slowing economic
conditions. One of the most important interest rates utilized to control
economic activity is the "federal funds" rate. This is the rate utilized within
the banking system for overnight borrowings for the highest credit quality
institutions. The federal funds rate was 1.75% at the beginning of 2002 and had
decreased by 50 bp to 1.25% by the end of 2002. In 2003 the federal funds rate
was consistent from the beginning of the year and throughout the quarter at
1.25%. The federal funds rate affects the level of other interest rates in the
economy, most specifically the prime rate. The prime rate was 4.75% at the
beginning of 2002 and had also decreased by 50 bp to 4.25% by the end of 2002.
The prime rate has remained at 4.25% for the first quarter of 2003.
14
Earning Assets
Total average interest earning assets increased to $2.57 billion in 2003 from
$2.51 billion in 2002 with an average yield of 6.51% in 2002 and 5.81% in 2003.
Income on average earning assets decreased by $3.5 million during this same
time-period from $40.9 million in 2002 to $37.3 million in 2003. The decrease in
interest income on earning assets was attributable to the decrease in yield on
these assets offset by the increase in average balances.
Loans
The average balance of loans was $1.38 billion in 2003 and $1.54 billion in
2002. The yield on loans decreased from 7.49% in 2002 to 7.12% in 2003. The
combination of the lower average balances and the lower rates resulted in a
decrease in the interest income on loans by $4.1 million.
During the first quarter of 2003 the balance of the loan portfolio decreased
primarily as a result of residential mortgages, though decreases were also noted
in the commercial and installment loan areas. The average balance of residential
mortgage loans was $1.19 billion in 2002 compared to $1.03 billion in 2003, a
decrease of 13.4%. The average yield on residential mortgage loans decreased by
23 basis points in 2003 compared to 2002. TrustCo actively markets the
residential loan products within its market territory. Mortgage loan rates are
affected by a number of factors including, the prime rate, the federal funds
rate, rates set by competitors and secondary market participants. As noted
earlier, market interest rates have dropped significantly as a result of
national economic policy in the United States. Though interest rates on the
residential mortgage loan products decreased during this time period they did
not decrease as much as the reduction in the target federal funds rate or the
prime rate. Also during this time TrustCo aggressively marketed the unique
features of its loan products thereby differentiating itself from other lenders.
These differences include extremely low closing costs, quick turnaround on
credit decisions, no required escrow payments or private mortgage insurance and
the fact that the loans are held in portfolio.
The decrease in the residential mortgage loan portfolio is the result of loan
refinancing to other institutions by customers. This occurs in all the
categories of the loan portfolio but primarily in the residential real estate
loan area. The prepayment in the residential loan portfolio reflects the effect
of the historical lows in the 30-year mortgage loans market. As noted earlier,
certain mortgage loan customers are attracted to TrustCo's loan products as a
result of the low closing cost and lack of escrow. However, in light of the
strategic decision by TrustCo to retain loans in the portfolio, its rates are
somewhat higher than rates offered in the secondary market, contributing to the
recent decline in the portfolio.
The impact of the decrease in the benchmark interest rate indexes (prime rate,
federal funds, etc.) is apparent in the decrease in the yield earned in the
commercial and home equity loan portfolios. The rates earned in 2003 were 45 bp,
and 61 bp, respectively, less than in the first three months of 2002.
15
Securities Available for Sale
Securities available for sale had an average balance of $649.0 million during
the quarter ended March 31, 2003, as compared to $543.2 million in 2002. These
balances earned an average yield of 6.83% in 2003 and 7.55% in 2002. This
resulted in interest income on the securities available for sale of $11.1
million in 2003 and $10.3 million in 2002.
Within the portfolio of securities available for sale, there was an $88.3
million increase in the average balance of US Treasury and agency obligations
from $161.2 million in the first quarter of 2002 to $249.5 million for the
comparable period in 2003. The yield on this category of securities decreased
from 7.34% in 2002 to 5.44% in 2003. Mortgage backed securities decreased by
$16.8 million to $59.7 million for the first quarter of 2003, while the
portfolio of state, county and municipal securities slightly increased. The
portfolio of securities classified as other securities increased by $29.5
million as a result of increased investment in corporate bonds.
The increased balances of securities available for sale was in response to the
historically low yield available in the federal funds marketplace, increased
cash flow as a result of loan refinancing and deposit inflows. Though the new
investment yields are lower than the yield earned on the existing securities
portfolio, the new investments provide additional interest income and help to
offset the loss of interest income from other areas.
Federal Funds Sold and Other Short-term Investments
The 2003 first quarter average balance of federal funds sold and other
short-term investments was $540.6 million, $106.7 million more than the $433.9
million in 2002. The portfolio yield decreased to 1.26% in 2003, compared to
1.75% in 2002. Changes in the yield resulted from changes in the target rate set
by the Federal Reserve Board for federal funds sold. Interest income on this
portfolio decreased by approximately $222 thousand from $1.9 million in 2002 to
$1.7 million in 2003.
The increase in federal funds sold and other short-term investments balances
between the first quarter of 2002 and 2003 reflects a decision to hold
additional funds in overnight deposits versus making additional longer-term
investments in loans or securities available for sale. The decision to retain
additional liquidity is a result of the relatively low interest rates in the
market for such alternative investments while keeping the balances available for
investment once rates change. The effect of this decision by TrustCo is to have
significantly more funds invested in the federal funds sold and other short-term
investments portfolio at significantly lower interest rates during the first
quarter of 2003 with the expectation that opportunities for reinvestment at
higher yields will be available later in 2003.
Funding Opportunities
TrustCo utilizes various funding sources to support its earning asset portfolio.
The vast majority of the Company's funding comes from traditional deposit
vehicles such as savings, interest-bearing checking and time deposit accounts.
16
Total average interest-bearing deposits (which includes interest bearing
checking, money market accounts, savings, and certificates of deposit) increased
to $2.10 billion during 2003, and the average rate paid decreased to 2.19% for
2003 from 2.99% for 2002. Total interest expense on these deposits decreased
$2.9 million to $11.4 million.
Average short-term borrowings, primarily the Trustco Short-Term Investment
Account, decreased by $90.8 million between the first quarter of 2002 and 2003.
Total interest expense on this account decreased by $509 thousand in 2003, and
the average rate paid decreased 50 basis points to 0.95%.
Demand deposit balances decreased by 8.5% during the period from the first
quarter of 2002 to the first quarter of 2003. The average balance was $189.6
million in 2002, and $173.4 million in 2003.
Net Interest Income
Taxable equivalent net interest income decreased slightly to $25.6 million in
2003. The net interest spread remained almost the same at 3.70% in 2003 versus
3.69% in 2002. The net interest margin decreased by 11 basis points between 2002
and 2003.
Nonperforming Assets
Nonperforming assets include nonperforming loans which are those loans in a
nonaccrual status, loans that have been restructured, and loans past due 90 days
or more and still accruing interest. Also included in the total of nonperforming
assets are foreclosed real estate properties, which are categorized as real
estate owned.
Impaired loans are considered to be those commercial and commercial real estate
loans in a nonaccrual status and loans restructured since January 1, 1995, when
the accounting standards required the identification, measurement and reporting
of impaired loans. The following describes the nonperforming assets of TrustCo
as of March 31, 2003.
Nonperforming loans: Total nonperforming loans were $5.5 million at March 31,
2003, a decrease from the $8.1 million of nonperforming loans at March 31, 2002.
Nonaccrual loans were $1.3 million at March 31, 2003, a decrease from the $2.4
million at March 31, 2002. Restructured loans were $4.2 million at March 31,
2003 compared to $5.5 million at March 31, 2002.
Virtually all of the nonperforming loans at March 31, 2003 and 2002 are
residential real estate or retail consumer loans. Historically the vast majority
of nonperforming loans were concentrated in the commercial and commercial real
estate portfolios. There has been a dramatic shifting of nonperforming loans to
the residential real estate and retail consumer loan portfolio for several
factors, including:
` The overall emphasis within TrustCo for residential real estate
originations,
` The relatively weak economic environment in the upstate
New York territory, and
17
` The reduction in real estate values in TrustCo's market area
that has occurred since the middle of the 1990's, thereby
causing a reduction in the collateral value that supports the
real estate loans.
Consumer defaults and bankruptcies have increased dramatically over the last
several years and this has led to an increase in defaults on loans. TrustCo
strives to identify borrowers that are experiencing financial difficulties and
to work aggressively with them so as to minimize losses or exposures.
Total impaired loans at March 31 2003 of $4.0 million, consisted of restructured
retail loans. During the first quarter of 2003, there were $5 thousand of
commercial loan charge offs, $114 thousand of consumer loan charge offs and $2.1
million of residential mortgage loan charge offs as compared with $837 thousand
of commercial loan charge offs, $148 thousand of consumer loan charge offs and
$440 thousand of residential mortgage loan charge offs in the first quarter of
2002. Recoveries during the quarter were $372 thousand in 2003 and $341 thousand
in 2002.
Real estate owned: Total real estate owned of $86 thousand at March 31, 2003
decreased by $217 thousand since March 31, 2002.
Allowance for loan losses: The balance of the allowance for loan losses is
maintained at a level that is, in management's judgment, representative of the
amount of the risk inherent in the loan portfolio.
At March 31, 2003, the allowance for loan losses was $51.0 million, which
represents a decrease from the $56.6 million in the allowance at March 31, 2002.
The allowance represents 3.71% of the loan portfolio as of March 31, 2002
compared to 3.79% at March 31, 2003. The provision charged to expense was $520
thousand in 2002 compared to $300 thousand for 2003.
In determining the allowance for loan losses, management reviews the current
nonperforming loan portfolio as well as loans that are past due and not yet
categorized as nonperforming for reporting purposes. Also, there are a number of
other factors that are taken into consideration, including:
`The magnitude and nature of the recent loan charge offs and the
movement of charge offs to the residential real estate loan
portfolio,
`The growth in the loan portfolio and the implication that has in relation
to the economic climate in the bank's business territory,
`Changes in underwriting standards in the competitive environment that TrustCo
operates in,
`Significant growth in the level of losses associated with bankruptcies and
the time period needed to foreclose, secure and dispose of collateral, and
18
`The relatively weak economic environment in the upstate New York
territory combined with declining real estate prices.
In the Company's primary market areas, consumer bankruptcies and defaults in
general have risen significantly during the recent years. This trend appears to
be continuing as a result of economic strife and the relative ease of access by
consumers to additional credit. Job growth in the upstate New York area has been
modest to declining and there continues to be a shifting of higher paying jobs
in manufacturing and government to lower paying service jobs.
Management continues to monitor these and other asset quality trends in the
review of allowance adequacy.
Liquidity and Interest Rate Sensitivity
TrustCo seeks to obtain favorable sources of funding and to maintain prudent
levels of liquid assets in order to satisfy varied liquidity demands. TrustCo's
earnings performance and strong capital position enable the Company to raise
funds easily in the marketplace and to secure new sources of funding. The
Company actively manages its liquidity through target ratios established under
its liquidity policies. Continual monitoring of both historical and prospective
ratios allows TrustCo to employ strategies necessary to maintain adequate
liquidity. Management has also defined various degrees of adverse liquidity
situations, which could potentially occur, and has prepared appropriate
contingency plans should such a situation arise.
Noninterest Income
Total noninterest income for the first quarter was $7.9 million, compared to
$6.8 million in 2002. Included in the first quarter results are net securities
gains of $3.1 million in 2003, and $1.9 million in 2002. Securities transactions
were recognized during the quarter due to the significant amount of appreciation
in the securities available for sale portfolio as interest rates in the overall
market place have declined.
Trust department income decreased by $433 thousand to $1.40 million for the
first quarter of 2003. The reduction in trust fee income is the result of market
conditions that have negatively affected the underlying trust assets. Trust
department assets under management were $860.6 million at March 31, 2003
compared to $1.19 billion at March 31, 2002.
Noninterest Expenses
Total noninterest expense increased from $12.4 million for the three months
ended March 31, 2002 to $12.7 million for the three months ended March 31, 2003.
Within the category of noninterest expense, salaries and employee benefits
decreased by approximately $566 thousand due primarily to the retirement of the
former chief executive officer. Benefit costs also decreased as a result of
changes made to post retirement benefits, wherein retirees will assume increased
levels of premium payment.
19
Net occupancy expense increased by $340 thousand as a result of additional cost
for new branch operations and the increased cost of utilities in 2003 compared
to 2002. Equipment expense increased by $508 thousand due to the additional
branches and the write off of equipment and software no longer in use.
Outsourced services increased from $160 thousand in the first quarter of 2002 to
$1.3 million for the comparable period in 2003. These costs are for data
processing, item processing, and back room bank and trust operations that were
outsourced to a third party late in 2002.
Income Taxes
In both the first quarter of 2003 and 2002, TrustCo recognized income tax
expense of $5.4 million. The effective tax rate for the first quarter of 2003
was 29.0% compared to 30.3% for the same period of 2002.
Capital Resources
Consistent with its long-term goal of operating a sound and profitable financial
organization, TrustCo strives to maintain strong capital ratios. New issues of
equity securities have not been required since traditionally, most of its
capital requirements are met through capital retention.
Total shareholders' equity at March 31, 2003 was $232.2 million, a decrease from
the $234.8 million at year-end 2002. TrustCo declared dividends of $0.150 in
2003 and 2002. These results represent a dividend payout ratio of 84.14% in 2003
and 87.36% in 2002.
The Company achieved the following ratios as of March 31, 2003 and 2002:
March 31, Minimum Regulatory
2003 2002 Guidelines
--------------------------------------------
Tier 1 risk adjusted
capital 15.63% 13.36 4.00
Total risk adjusted
capital 16.91 14.65 8.00
In addition, at March 31, 2003 and 2002, the consolidated equity to total assets
ratio (excluding the mark to market effect of securities available for sale) was
7.75% and 7.01%, respectively, compared to a minimum regulatory requirement of
4.00%.
Critical Accounting Policies:
Pursuant to recent SEC guidance, management of the Company is encouraged to
evaluate and disclose those accounting policies that are judged to be critical
policies - those most important to the portrayal of the Company's financial
condition and results, and that require management's most difficult subjective
or complex judgments.
20
Management considers the accounting policy relating to the allowance for loan
losses to be a critical accounting policy given the inherent uncertainty in
evaluating the levels of the allowance required to cover credit losses in the
portfolio and the material effect that such judgments can have on the results of
operations. Included in Note 1 to the Consolidated Financial Statements
contained in the Company's 2002 Annual Report on Form 10-K is a description of
the significant accounting policies that are utilized by the Company in the
preparation of the Consolidated Financial Statements.
21
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average balance
sheet, related interest income and expense and the average annualized yields on
interest earning assets and annualized rates on interest bearing liabilities of
TrustCo (adjusted for tax equivalency) for each of the reported periods. Non-
accrual loans are included in loans for this analysis. The average balances of
securities for sale is calculated using amortized costs for these securities.
Included in the balance of shareholders' equity is unrealized appreciation, net
of tax, in the available for sale portfolio of $27.5 million in 2003 and $23.6
million in 2002. The subtotals contained in the following table are the
arithmetic totals of the items contained in that category.
First 2003 First 2002
Quarter Quarter
-------------- ------------ -------------- ------------------------------------
Average Interest Average Average Interest Average Change in Variance Variance
Balance Rate Balance Rate Interest Balance Rate
(dollars in thousands) Income/ Change Change
Expense
Assets
Commercial loans 201,548 $ 3,785 7.53% $ 208,976 $4,156 7.98% (371) (144) (227)
Residential mortgage loans 1,026,271 18,848 7.35% 1,185,714 22,482 7.58% (3,634) (2,946) (688)
Home equity lines of credit 142,262 1,479 4.22% 123,477 1,470 4.83% 9 829 (820)
Installment loans 14,829 492 13.46% 18,828 635 13.67% (143) (133) (10)
----------- ------------- -------- -------------------------------------
Loans, net of unearned income 1,384,910 24,604 7.12% 1,536,995 28,743 7.49% (4,139) (2,394) (1,745)
Securities available for sale:
U.S. Treasuries and agencies 249,485 3,391 5.44% 161,164 2,957 7.34% 434 4,458 (4,024)
Mortgage-backed securities 59,666 991 6.64% 76,461 1,373 7.18% (382) (285) (97)
States and political 222,949 4,467 8.01% 218,206 4,337 7.95% 130 95 35
subdivisions
Other 116,921 2,228 7.63% 87,383 1,584 7.26% 644 559 85
----------- ------------- -------- -------------------------------------
Total securities available 649,021 11,077 6.83% 543,214 10,251 7.55% 826 4,827 (4,001)
for sale
Federal funds sold and other
short-term investments 540,556 1,655 1.24% 433,879 1,877 1.75% (222) 1,930 (2,152)
----------- ------------- -------- -------------------------------------
Total Interest earning 2,574,487 37,336 5.81% 2,514,088 40,8716.51% (3,535) 4,363 (7,898)
assets ------------- -------------------------------------
Allowance for loan losses (52,682) (57,748)
Cash and non-interest earning 168,211 174,804
assets ----------- --------
Total assets 2,690,016 $ 2,631,144
=========== ========
Liabilities and shareholders' equity
Deposits:
Interest bearing checking 319,117 511 0.65% $ 294,142 770 1.06% (259) 388 (647)
Money market accounts 144,143 553 1.55% 85,835 445 2.10% 108 759 (651)
Savings 725,211 2,570 1.44% 669,842 3,253 1.97% (683) 1,508 (2,191)
Time deposits 911,445 7,719 3.43% 888,655 9,819 4.48% (2,100) 1,632 (3,732)
----------- ------------------------ -------------------------------------
Total interest bearing 2,099,916 11,353 2.19% 1,938,474 14,287 2.99% (2,934) 4,287 (7,221)
deposits
Short-term borrowings 148,306 347 0.95% 239,065 856 1.45% (509) (266) (243)
Long-term debt 397 6 5.93% 582 9 5.95% (3) (3) ---
----------- ------------------------ -------------------------------------
Total interest bearing 2,248,619 11,706 2.11% 2,178,121 15,152 2.82% (3,446) 4,018 (7,464)
liabilities ------ ------ -------------------------
Demand deposits 173,400 189,582
Other liabilities 36,161 53,966
Shareholders' equity 231,836 209,475
----------- --------
Total liab. & shareholders' 2,690,016 $ 2,631,144
equity =========== ========
Net interest income 25,630 25,719 (89) 345 (434)
------ ------ ------------------------
Net interest spread 3.70% 3.69%
Net interest margin (net interest
Income to total interest earning assets) 3.96% 4.07%
Tax equivalent adjustment 1,935 1,808
------ ------
Net interest income per book $ 23,695 $ 23,911
====== ======
22
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
As detailed in the Annual Report to Shareholders as of December 31, 2002 the
Company is subject to interest rate risk as it is principal market risk. As
noted in detail throughout this Management's Discussion and Analysis for the
three months ended March 31, 2003 the Company continues to respond to changes in
interest rates in a fashion to position the Company to meet both short term
earning goals but to also allow the Company to respond to changes in interest
rates in the future. Consequently the average balance of federal funds sold and
other short-term investments has increased from $433.9 million in 2002 to $540.6
million in 2003. These increases in federal funds sold and short term
investments position the Company with added funds available for investment in
the securities and loan portfolios if rates rise.
Item 4.
Controls and Procedures
Evaluation of disclosure controls and procedures. The Company maintains controls
and procedures designed to ensure that information required to be disclosed in
the reports that the Company files or submits under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission.
Based upon their evaluation of those controls and procedures performed within 90
days of the filing date of this report, the Chief Executive and Chief Financial
Officer of the Company concluded that the Company's disclosure controls and
procedures were adequate.
Changes in internal controls. The Company made no significant changes in its
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the Chief
Executive and Chief Financial Officer.
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TrustCo Bank Corp NY
Date: May 13, 2003 By: /s/Robert T. Cushing
-----------------------------------------
Robert T. Cushing
President, Chief Executive Officer,
and Chief Financial Officer
24
Certification Pursuant To Section 302
of The Sarbanes-Oxley Act of 2002
I, Robert T. Cushing, the principal executive officer and principal financial
officer of TrustCo Bank Corp NY, certify that:
1. I have reviewed this quarterly report on Form 10-Q of TrustCo Bank Corp NY;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fac
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the egistrant's internal
controls; and
25
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 13, 2003
/s/ Robert T. Cushing
------------------
Chief Executive Officer and
Chief Financial Officer
26
Exhibits Index
Reg S-K
Exhibit No. Description Page No.
- --------------------------------------------------------------------------------
3(ii)a Amended and Restated Bylaws of TrustCo Bank Corp NY 26
99.1 Certification Pursuant To 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 Of The Sarbanes- 37
Oxley Act of 2002
27
Exhibit 3(ii)a
AMENDED AND RESTATED BYLAWS OF
TRUSTCO BANK CORP NY
(a New York State Corporation)
(September 17, 2002)
-----------------------------------------------------
ARTICLE 1
DEFINITIONS
As used in these Bylaws, unless the context otherwise requires, the term:
1.1 "Board" means the Board of Directors of the Corporation.
1.2 "Business Corporation Law" means the Business Corporation Law of the State
of New York, as amended from time to time.
1.3 "Bylaws" means the initial Bylaws of the Corporation, as amended from time
to time.
1.4 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.5. "Corporation" means TrustCo Bank Corp NY.
1.6 "Directors" means directors of the Corporation.
1.7 "Entire Board" means the total number of directors which the Corporation
would have if there were no vacancies.
1.8 "Chief Executive Officer" means the Chief Executive Officer of the
corporation.
1.9 "Chairman" means chairman of the Board of the Corporation.
1.10 "President" means the President of the Corporation.
1.11 "Secretary" means the Secretary of the Corporation.
1.12 "Vice President" means the Vice President of the Corporation.
28
ARTICLE 2
SHAREHOLDERS
2.1 PLACE OF MEETINGS. Every meeting of shareholders shall be held at such place
within or without the State of New York as shall be designated by the Board of
Directors in the notice of such meeting or in the waiver of notice thereof.
2.2 ANNUAL MEETING. A meeting of shareholders shall be held annually for the
election of Directors and the transaction of other business at such hour and on
such business day as may be determined by the Board. Written notice of such
meeting, stating the place, date and hour thereof, shall be given, personally or
by mail, not less than ten nor more than sixty days before the date of such
meeting, to each shareholder certified to vote at such meeting.
2.3 SPECIAL MEETINGS. At every meeting of shareholders, the Chairman, or in his
absence, an officer of the Corporation designated by the Board or the Chairman,
shall act as chairman of the meeting. The Secretary, or in his absence, one of
the Vice Presidents not acting as chairman of the meeting, shall act as
secretary of the meeting. In case none of the officers above designated to act
as chairman or secretary of the meeting, respectively, shall be present, a
chairman or a secretary of the meeting, as the case may be, shall be chosen by a
majority of the votes cast at such meeting by the holders of shares present in
person, or represented by proxy and entitled to vote at the meeting.
2.4 QUORUM AND VOTING REQUIREMENTS; ADJOURNMENT. Except with respect to a
special meeting for the election of Directors as required by law, or as
otherwise provided in these Bylaws, (a) the holders of at least a majority of
the outstanding shares of the Corporation shall be present in person or by proxy
at any meeting of the shareholders in order to constitute a quorum for the
transaction of any business, and (b) the votes of the holders of at least a
majority of the outstanding shares of the Corporation shall be necessary at any
meeting of shareholders for the transaction of any business or specified item of
business, other than the changing, amending or repealing of any provision of the
Certificate of Incorporation or Bylaws which shall require the affirmative vote
of two-thirds of the Corporation's voting stock; provided, however, that when a
specified item of business is required to be voted on by a class or series (if
the Corporation shall then have outstanding shares or more than one class or
series), voting as a class, the holders of a majority of the shares of such
class or series shall constitute a quorum (as to such class or series) for the
transaction of such item of business. The holders of a majority of shares
present in person or represented by proxy at any meeting of shareholders,
including an adjourned meeting, whether or not a quorum is present, may adjourn
such meeting to another time and place.
2.5 INSPECTORS AT MEETINGS. Two or more inspectors shall be appointed by the
Board prior to each Annual Meeting of Shareholders, to serve at the meeting or
any adjournment thereof. In case any person appointed fails to appear or act,
the
29
vacancy may be filled by appointment made by the Board in advance of the
meeting or at the meeting by the person presiding thereat.
2.6 ORGANIZATION. At every meeting of shareholders, the Chairman of the Board of
Directors, or in his absence, an officer of the Corporation designated by the
Board or the Chairman of the Board, shall act as Chairman of the meeting. The
Secretary, or in his absence, one of the Vice Presidents not acting as Chairman
of the meeting, shall act as Secretary of the meeting. In case none of the
officers above designated to act as Chairman or Secretary of the meeting,
respectively, shall be present, a Chairman or a Secretary of the meeting, as the
case may be, shall be chosen by a majority of the votes cast at such meeting by
the holders of shares present in person, or represented by proxy and entitled to
vote at the meeting.
2.7 ORDER OF BUSINESS. The order of business at all meetings of shareholders
shall be as determined by the Chairman of the meeting, but the order of business
to be followed at any meeting at which a quorum is present may be changed by a
majority of the votes cast at such meeting by the holders of shares present in
person or represented by proxy and entitled to vote at the meeting.
ARTICLE 3
DIRECTORS
3.1 BOARD OF DIRECTORS. Except as otherwise provided in the Certificate of
Incorporation, the affairs of the Corporation shall be managed and its corporate
powers exercised by its Board. In addition to the powers expressly conferred by
the Bylaws, the Board may exercise all powers and perform all acts which are not
required, by the Bylaws or the Certificate of Incorporation or by law, to be
exercised and performed by the shareholders.
3.2 NUMBER; QUALIFICATION; TERM OF OFFICE. Subject to Section 702(b) of the
Business Corporation Law, the number of Directors constituting the Entire Board
may be changed from time to time by action of the shareholders or the Board,
provided that such number shall not be less than seven or more than twenty. The
Directors shall be divided into three classes as nearly equal in number as may
be, one class to be elected each year for a term of three years and until their
successors are elected and qualified. A Director attaining 75 years of age shall
cease to be a Director and that office shall be vacant.
3.3 ELECTION. Directors shall be elected by the affirmative vote of the holders
of a majority of the Company's outstanding voting stock.
3.4 CHAIRMAN OF THE BOARD OF DIRECTORS. The Board shall designate one of their
number as the Chairman. The Chairman shall, if present, preside at all meetings
of shareholders and of the Board and may perform such other duties as from time
to time may be assigned him by the Board. The Chairman shall be a member of such
committees as the Board may from time to time determine.
30
3.5 NEWLY CREATED DIRECTORSHIP AND VACANCIES. Newly created directorships
resulting from an increase in the number of Directors and vacancies occurring in
the Board for any reason, may be filled by vote of a majority of the Directors
then in office, although less than a quorum, at any meeting. Directors elected
by the Board shall hold office until the next meeting of shareholders at which
the election of directors is in the regular order of business, and until their
successors have been elected and qualified.
3.6 RULES AND REGULATIONS. The Board of Directors may adopt such Rules and
Regulations for the conduct of its meetings and the management of the affairs of
the Company as it may deem proper, not inconsistent with the laws of the State
of New York, or these Bylaws.
3.7 REGULAR MEETINGS. Regular meetings of the Board shall be held on the third
Tuesday of February, May, August and November, unless otherwise specified by the
Board, and may be held at such times and places as may be fixed from time to
time by the Board, and may be held without notice.
3.8 SPECIAL MEETINGS. Special meetings of the Board shall be held whenever
called by the Chairman, and a special meeting shall be called by the Chief
Executive Officer or the Secretary at the written request of any seven
Directors. Notice of the time and place of each special meeting of the Board
shall, if mailed, be addressed to each Director at the address designated by him
for that purpose or, if none is designated, at his last known address at least
three days before the date on which the meeting is to be held; or such notice
shall be sent to each Director at such address by telegraph, or similar means of
communication, or be delivered to him personally, not later than the day before
the date on which such meeting is to be held.
3.9 WAIVERS OF NOTICE. Anything in these Bylaws or in any resolution adopted by
the Board to the contrary notwithstanding, notice of any meeting of the Board
need not be given to any Director who submits a signed waiver of such notice,
whether before or after such meeting, or who attends such meeting without
protesting, prior thereto or at its commencement, the lack of notice to him.
3.10 ORGANIZATION. At each meeting of the Board, the Chairman of the Board or in
the absence of the Chairman of the Board, a Chairman chosen by the majority of
the Directors present, shall preside. The Secretary, or in the absence of the
Secretary, a Vice President, shall act as Secretary at each meeting of the
Board.
3.11 QUORUM AND VOTING. A majority of the Entire Board shall constitute a quorum
for the transaction of business or of any specified item of business at any
meeting of the Board. The affirmative vote of a majority of the Entire Board
shall be necessary for the transaction of any business or specified item of
business at any meeting of the Board, except that the affirmative vote of
two-thirds of the Entire Board shall be necessary to change, amend or repeal any
provision of the Certificate of Incorporation or Bylaws.
31
3.12 WRITTEN CONSENT OF DIRECTORS WITHOUT A MEETING. Any action required or
permitted to be taken by the Board may be taken without a meeting if all members
of the Board consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents thereto by the members of the
Board shall be filed with the minutes of the proceedings of the Board.
3.13 PARTICIPATION IN MEETING OF BOARD BY MEANS OF CONFERENCE TELEPHONE OR
SIMILAR COMMUNICATIONS EQUIPMENT. Any one or more members of the Board may
participate in a meeting of the Board by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
3.14 NOMINATIONS. Nominations for Directors, other than those made by or on
behalf of the existing management of the Corporation, shall be made in writing
and shall be delivered or mailed to the Board not less than (14) days nor more
than fifty (50) days prior to any meeting of shareholders called for the
election of Directors, provided, however, that if less than twenty-one (21) days
notice of the meeting is given to shareholders, such nominations shall be mailed
or delivered to the Board not later than the close of business on the seventh
(7th) day following the day on which the notice of meeting was mailed.
ARTICLE 4
COMMITTEES
4.1 [Reserved]
4.2 OTHER COMMITTEES. The Board, by resolution adopted by a majority of the
Entire Board, may designate from among its members such other standing or
special committees as may seem necessary or desirable from time to time.
ARTICLE 5
OFFICERS
5.1 OFFICERS. The Board shall elect or appoint a Chairman and shall elect or
appoint a President, either of which it shall designate the Chief Executive
Officer. If so elected or appointed by the Board, the Chairman may be the Chief
Executive Officer or President of the Corporation; in the absence of such an
election or appointment, however, the Chairman shall not be authorized to act in
the capacity of an officer of the Corporation except as expressly authorized by
the Board. The Board shall also elect or appoint one or more Vice Presidents and
a Secretary, and such other officers as it may from time to time determine. All
officers shall hold their offices, respectively, at the pleasure of the Board.
The Board may require any and all officers, clerks and employees to give a bond
or other security for the faithful performance of their duties, in such amount
and with such sureties as the Board may determine.
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5.2 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Corporation
shall have general supervision over the business of the Corporation, subject,
however, to the control of the Board and of any duly authorized committee of
Directors. In the absence of the Chairman of the Board, the Chief Executive
Officer may preside at meetings of the shareholders and at meetings of the
Board. The Chief Executive Officer shall supervise the carrying out of policies
adopted or approved by the Board. He may, with the Secretary or any other
officer of the Corporation, sign certificates for shares of the Corporation. He
may sign and execute, in the name of the Corporation, deeds, mortgages, bonds,
contracts and other instruments, subject to any restrictions imposed by the
Bylaws, Board or applicable laws, and, in general, he shall perform all duties
incident to the office of the Chief Executive Officer and such other duties as
from time to time may be assigned to him by the Board.
5.3 CHAIRMAN AND PRESIDENT. Either the Chairman or the President shall be
designated the Chief Executive Officer of the Corporation. The President, if not
so designated, shall perform such duties as from time to time may be assigned to
him by the Board or by the Chief Executive Officer. The Chairman, if not
designated the Chief Executive Officer, shall perform such duties as from time
to time may be assigned to him by the Board, but not by the Chief Executive
Officer.
5.4 OTHER OFFICERS. All the other officers of the Corporation shall perform all
duties incident to their respective offices, subject to the supervision and
direction of the Board and the Chief Executive Officer, and shall perform such
other duties as may from time to time be assigned them by the Board or by the
Chief Executive Officer. The President and any Vice President may also, with the
Secretary, sign and execute, in the name of the Corporation, deeds, mortgages,
bonds, contracts and other instruments, subject to any restrictions imposed by
the Bylaws, Board or applicable laws.
ARTICLE 6
CONTRACTS, LOANS, ETC
6.1 EXECUTION OF CONTRACTS. The Board may authorize any officer, employee or
agent, in the name and on behalf of the Corporation, to enter into any contract
or execute and satisfy any instrument, and any such authority may be general or
confined to specific instances, or otherwise limited.
6.2 LOANS. The Chief Executive Officer or any other officer, employee or agent
authorized by the Board may effect loans and advances at any time for the
Corporation from any bank, trust company or other institution or from any firm,
corporation or individual, and for such loans and advances may make, execute and
deliver promissory notes, bonds or other certificates or evidences of
indebtedness of the Corporation, and when authorized so to do may pledge and
hypothecate or transfer any securities or other property of the Corporation as
security for any such loans or advances.
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6.3 SIGNATURE AUTHORITY. The Chief Executive Officer shall from time to time
authorize the appropriate officers and employees of the Corporation who are to
sign, execute, acknowledge, verify and deliver or accept all agreements,
conveyances, transfers, obligations, authentications, certificates and other
documents and instruments and to affix the seal of the Corporation to any such
document or instrument and to cause the same to be attested by the Secretary or
Assistant Secretary.
ARTICLE 7
SHARES
7.1 STOCK CERTIFICATES. Certificates representing shares of the Corporation, in
such form as shall be determined from time to time by the Board, shall be signed
by the Chief Executive Officer, the President, or any Vice President and the
Secretary, and may be sealed with the seal of the Corporation or a facsimile
thereof.
7.2 TRANSFER OF SHARES. Transfers of shares shall be made only on the book of
the Corporation by the holder thereof or by his duly authorized attorney or a
transfer agent of the Corporation, and on surrender of the certificate or
certificates representing such shares properly endorsed for transfer and upon
payment of all necessary transfer taxes. Every certificate exchanged, returned
or surrendered to the Corporation shall be marked "Canceled", with the date of
cancellation, by the Secretary or the transfer agent of the Corporation. A
person in whose name shares shall stand on the books of the Corporation shall be
deemed the owner thereof to receive dividends, to vote as such owner and for all
other purposes as respects the Corporation. No transfer of shares shall be valid
as against the Corporation, its shareholders and creditors for any purpose,
except to render the transferee liable for the debts of the Corporation to the
extent provided by law, until such transfer shall have been entered on the books
of the Corporation by an entry showing from and to whom transferred.
7.3 CLOSING OF TRANSFER BOOKS. The Board may prescribe a period prior to any
shareholders' meeting or prior to the payment of any dividend, not exceeding
sixty days, during which no transfer of stock on the books of the Corporation
may be made and may fix a day as provided by the Business Corporation Law as of
which shareholders entitled to notice and to vote at such meeting shall be
determined.
7.4 TRANSFER AND REGISTRY AGENTS. The Corporation may from time to time maintain
one or more transfer offices or agents and registry officer or agents at such
place or places as may be determined from time to time by the Board.
7.5 LOST, DESTROYED, STOLEN AND MUTILATED CERTIFICATES. If the holder of any
shares shall notify the Corporation of any loss, destruction, theft or
mutilation of the certificate or certificates representing such shares, the
Corporation may issue a new certificate or certificates to replace the old, upon
such conditions as may be specified by the Board consistent with applicable
laws.
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ARTICLE 8
EMERGENCIES
8.1 OPERATION DURING EMERGENCY. In the event of a state of emergency declared by
the President of the United States or the person performing his functions or by
the Governor of the State of New York or by the person performing his functions,
the officers and employees of the Corporation shall continue to conduct the
affairs of the Corporation under such guidance from the Directors as may be
available except as to matters which by statute require specific approval of the
Board of Directors and subject to conformance with any governmental directives
during the emergency.
8.2 OFFICERS PRO TEMPORE DURING EMERGENCY. The Board of Directors shall have
power, in the absence or disability of any officer, or upon the refusal of any
officer to act, to delegate and prescribe such officer's powers and duties to
any other officer for the time being.
8.3 DISASTER. In the event of a state of emergency resulting from disaster of
sufficient severity to prevent the conduct and management of the affairs and
business of the Corporation by the Directors and officers as contemplated by
these Bylaws, any three or more available members of the Board of Directors
shall be responsible for the full conduct and management of the affairs and
business of the Corporation, notwithstanding any other provision of these
Bylaws, and such directors shall further be empowered to exercise all powers
reserved to any and all committees of the Board established pursuant to Article
4 of these Bylaws, until such time as the incumbent Board or a reconstituted
Board is capable of assuming full conduct and management of such affairs and
business.
ARTICLE 9
SEAL
9.1 SEAL. The Board may adopt a corporate seal which shall be in the form of a
circle and shall bear the full name of the Corporation and the year and State of
its incorporation.
ARTICLE 10
FISCAL YEAR
10.1 FISCAL YEAR. The fiscal year of the Corporation shall be determined, and
may be changed, by resolution of the Board.
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ARTICLE 11
VOTING OF SHARES HELD
11.1 VOTING OF SHARES HELD BY THE CORPORATION. Unless otherwise provided by
resolution of the Board and excepting the shares of any subsidiary company of
the Corporation which are to be voted in accordance with the resolution of the
Board, the Chief Executive Officer may from time to time appoint one or more
attorneys or agents of the Corporation, in the name and on behalf of the
Corporation, to cast the votes which the Corporation may be entitled to cast as
a shareholder or otherwise in any other corporation, any of whose shares or
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation and to consent in writing
to any action by any such other corporation, and may instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed on behalf of the Corporation
and under its corporate seal, or otherwise, such written proxies, consents,
waivers or other instruments as he may deem necessary or proper in the premises;
or the Chief Executive Officer may himself attend any meeting of the holders of
the shares or other securities of any such other corporation and thereat vote or
exercise any or all other powers of the Corporation as the holder of such shares
or other securities of such other corporation.
ARTICLE 12
AMENDMENTS TO BYLAWS
12.1 AMENDMENTS. The Bylaws or any of them may be altered, amended, supplemented
or repealed, or new Bylaws may be adopted by a vote of the holders of at least
two-thirds of the shares entitled to vote at any regular or special meeting of
shareholders, or by a vote of at least two- thirds of the Entire Board of
Directors at any regular or special meeting thereof, provided notice of such
proposed changes has been set forth in the notice of meeting of shareholders or
Directors.
ARTICLE 13
INDEMNIFICATION OF DIRECTORS AND OFFICERS
13.1 In addition to authorization provided by law, the Directors are authorized,
by resolution, to provide indemnification or to advance expenses to any Officer
or Director seeking such indemnification or the advancement of such expenses.
They may also, by resolution, authorize agreements providing for
indemnification.
13.2 The indemnification and advancement authorized by this Article shall be
subject to each of the conditions or limitations set forth in the succeeding
subdivisions(s) of this Section.
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13.2.1 No indemnification may be made to or on behalf of any Director or
Officer if a judgment or other final adjudication adverse to the Officer
or Director establishes that his acts were committed in bad faith or
were the result of an act of deliberate dishonesty and were material to
the cause of action so adjudicated, or that he personally gained in fact
a financial profit or other advantage to which he was not entitled.
13.3 Officers and Directors of any wholly owned subsidiary serve at the request
of the Corporation for the purpose of this Article.
13.4 The Directors may by resolution, authorize the Corporation's Officers and
Directors to serve as a Director or Officer of any other corporation of any type
or kind, domestic or foreign, of any partnership, joint venture, trust, employee
benefit plan or other enterprise for the purpose of the indemnification
provisions of this Article. The failure to enact such a resolution shall not, in
itself, create a presumption that such service was not authorized.
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I, Henry C. Collins, Secretary of TrustCo Bank Corp NY, Schenectady, New York,
hereby certify that the foregoing is a complete, true and correct copy of the
Amended and Restated Bylaws of TrustCo Bank Corp NY, and that the same are in
full force and effect at this date.
By:/s/Henry C. Collins
-------------------------------------
Secretary
May 13, 2003
-------------------------------------
Date
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Exhibit 99.1
Certification
Pursuant To 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 Of The Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of TrustCo Bank Corp NY (the
"Company") on Form 10-Q for the period ending March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned hereby certifies pursuant to 18 U.S. C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of
the undersigned's knowledge and belief:
1. The Report fully complies with the requirements of section
13(a) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents,
in all material respects, the financial condition and
result of operations of the Company.
/s/ Robert T. Cushing
-----------------------------------
Robert T. Cushing
Chief Executive Officer and
Chief Financial Officer
May 13, 2003
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