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
September 30, 1994
TrustCo Bank Corp NY
(Exact name of registrant as specified in its charter)
New York 14-1630287
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
320 State Street, Schenectady, New York 12305
(Address of principal executive offices)
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 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 November 1, 1994
--------------------- -------------------------
$1 Par Value 14,615,326
TRUSTCO BANK CORP NY
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Interim Financial Statements (Unaudited):
Consolidated Statements of Income for the Three Months
and Nine Months Ended September 30, 1994 and 1993
Consolidated Statements of Financial Condition as
of September 30, 1994 and December 31, 1993
Consolidated Statements of Cash Flow for the
Nine Months Ended September 30, 1994 and 1993
Notes to Consolidated Interim Financial Statements
Independent Auditors' Report
Item 2. Management's Discussion and Analysis
Part II. OTHER INFORMATION
Item 1. Legal Proceedings - NONE
Item 2. Changes in Securities - NONE
Item 3. Defaults Upon Senior Securities - NONE
Item 4. Submission of Matters to Vote of Security Holders - NONE
Item 5. Other Information - NONE
Item 6. (a) Exhibits - NONE
(b) Reports on Form 8-K - NONE
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(Dollars in Thousands)
3 Months Ended 9 Months Ended
September 30 September 30
1994 1993 1994 1993
-------- -------- ------- -------
Interest Income:
Interest and Fees on Loans..........................$ 23,961 21,363 68,737 65,400
Interest on U. S. Government (incl.
Agencies and Corporations).......................... 6,301 7,325 19,455 22,273
Interest on States and Political
Subdivisions........................................ 255 311 723 1,186
Interest on Mortgage-backed Securities............... 2,485 2,142 6,942 6,503
Interest on Other Bonds, Notes and
Debentures.......................................... 797 704 2,476 2,230
Interest on Federal Funds Sold....................... 2,416 1,371 5,292 3,564
-------- -------- ------- -------
Total Interest Income............................. 36,215 33,216 103,625 101,156
-------- -------- ------- -------
Interest Expense:
Interest on Deposits:
Regular Savings and NOW Accounts.................... 6,417 6,704 19,099 21,144
Money Market Deposit Accounts....................... 632 711 1,900 2,265
Certificates of Deposit of $100,000 or more......... 668 511 1,820 1,514
Other Time.......................................... 7,447 7,079 21,760 21,197
Interest on Short-Term Borrowings.................... 125 94 356 276
Interest on Long-Term Debt........................... 53 108 142 343
-------- -------- ------- -------
Total Interest Expense............................. 15,342 15,207 45,077 46,739
-------- -------- ------- -------
Net Interest Income................................ 20,873 18,009 58,548 54,417
Provision for Loan Losses............................. 2,778 5,690 6,491 9,290
-------- -------- ------- -------
Net Interest Income after Provision
for Loan Losses................................... 18,095 12,319 52,057 45,127
-------- -------- ------- -------
Noninterest Income:
Trust Department Income.............................. 1,211 1,022 3,650 3,154
Fees for Other Services to Customers................. 1,626 1,748 5,338 4,398
Unrealized Gain on Trading Securities................ --- 50 --- 75
Net Gain (Loss) on Securities Available for Sale..... (2,479) 1,820 (6,351) 3,920
Other................................................ 480 720 1,113 1,689
-------- -------- ------- -------
Total Noninterest Income............................ 838 5,360 3,750 13,236
-------- -------- ------- -------
Noninterest Expenses:
Salaries and Employee Benefits....................... 4,594 4,216 13,692 12,632
Net Occupancy Expense................................ 785 840 2,448 2,631
Equipment Expense.................................... 770 892 2,396 2,711
FDIC Insurance Expense............................... 1,028 1,000 3,042 2,986
Professional Services................................ 605 650 1,849 1,942
Other Real Estate Expenses........................... 131 243 785 962
Other................................................ 1,686 2,521 5,604 6,601
-------- -------- ------- -------
Total Noninterest Expenses.......................... 9,599 10,362 29,816 30,465
-------- -------- ------- -------
Income Before Income Taxes and Cumulative Effect
of a Change in Accounting Principle............. 9,334 7,317 25,991 27,898
Applicable Income Taxes............................... 3,420 2,030 9,305 9,672
-------- -------- ------- -------
Income Before Cumulative Effect of a Change in
Accounting Principle............................. 5,914 5,287 16,686 18,226
Cumulative effect at January 1, 1993 of a Change in
Accounting Principle................................ --- --- --- (3,284)
-------- -------- ------- -------
Net Income.......................................$ 5,914 5,287 16,686 14,942
======== ======== ======= =======
See accompanying notes to consolidated interim financial statements. (Continued)
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited) Continued
(Dollars in Thousands)
3 Months Ended 9 Months Ended
September 30 September 30
1994 1993 1994 1993
------- ------- ------- -------
Earnings Per Common Share:
Income Before Cumulative Effect of a Change in
Accounting Principle...........................$ 0.40 0.36 * 1.12 * 1.23 *
Cumulative effect at January 1, 1993 of a Change
in Accounting Principle........................ --- --- * --- * (0.22) *
-------- -------- ------- -------
Net Income......................................$ 0.40 0.36 * 1.12 * 1.01 *
======== ======== ======= =======
Average Equivalent Shares Outstanding (000s omitted). 14,937 14,848 14,893 14,801
======== ======== ======== ========
*Per share data adjusted for 10% stock dividend declared July 1994.
See accompanying notes to consolidated interim financial statements.
TRUSTCO BANK CORP NY
Consolidated Statements of Financial Condition
(Dollars in Thousands)
9/30/94 12/31/93
(Unaudited)
Assets: --------- ---------
Cash and Due from Banks................................$ 48,530 50,977
Trading Securities...................................... --- 2,106
Securities Available for Sale:
U. S. Government (incl. Agencies and Corporations)..... 186,508 230,563
Other Bonds, Notes and Debentures...................... 14,697 10,153
--------- ---------
Total Securities Available for Sale................... 201,205 240,716
--------- ---------
Investment Securities:
U. S. Government (incl. Agencies and Corporations)..... 145,543 228,157
Mortgage-backed Securities............................. 147,447 138,376
States and Political Subdivisions...................... 29,422 23,017
Other Bonds, Notes and Debentures...................... 15,012 27,256
--------- ---------
Total Investment Securities........................... 337,424 416,806
--------- ---------
Federal Funds Sold...................................... 217,000 149,000
Loans:
Commercial............................................. 232,094 229,971
Mortgages, closed-end.................................. 668,640 599,805
Revolving Home Equity Credit Line...................... 206,614 202,018
Installment............................................ 32,489 31,212
--------- ---------
Total Loans...........................................1,139,837 1,063,006
Less: --------- ---------
Allowance for Loan Losses.............................. 39,233 34,087
Unearned Income........................................ 2,007 2,358
--------- ---------
Net Loans..............................................1,098,597 1,026,561
Bank Premises and Equipment............................. 24,242 24,893
Other Assets............................................ 61,913 60,239
--------- ---------
Total Assets........................................$1,988,911 1,971,298
========= =========
Liabilities:
Deposits:
Demand................................................$ 96,882 96,034
Regular Savings and NOW Accounts....................... 960,425 970,407
Money Market Deposit Accounts.......................... 99,405 110,630
Certificates of Deposit (In Denominations of
$100,000 or More)..................................... 54,304 42,358
Other Time............................................. 594,737 574,803
--------- ---------
Total Deposits........................................1,805,753 1,794,232
Short-Term Borrowings................................... 13,932 18,323
Accrued Expenses and Other Liabilities.................. 29,674 26,113
Long-Term Debt.......................................... 2,950 2,750
--------- ---------
Total Liabilities.....................................1,852,309 1,841,418
--------- ---------
Shareholders' Equity
Capital Stock Par Value $1; 25,000,000 Shares Authorized
15,016,348 and 13,588,044 Shares Issued
September 30, 1994 and December 31, 1993, respectively 15,016 13,588
Surplus................................................. 118,326 91,955
Undivided Profits....................................... 4,766 25,331
Net Unrealized Loss on Securities Available for Sale.... (512) ---
Treasury Stock at Cost - 401,022 and 364,566 Shares at
September 30, 1994 and December 31, 1993, respectively (994) (994)
--------- ---------
Total Shareholders' Equity............................ 136,602 129,880
--------- ---------
Total Liabilities and Shareholders' Equity...........$1,988,911 1,971,298
========= =========
See accompanying notes to consolidated interim financial statements.
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED September 30, 1994 1993
-------- --------
Cash Flows from Operating Activities:
Net Income before Change in Accounting Principle.........$ 16,686 18,226
Change in Accounting Principle........................... --- (3,284)
-------- --------
Net Income............................................... 16,686 14,942
-------- --------
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation and Amortization.......................... 1,711 1,748
Provision for Loan Losses.............................. 6,491 9,290
Loss on Sale of Securities Available for Sale.......... 11,996 30
Gain on Sale of Securities Available for Sale.......... (5,639) (3,950)
Gain on Calls and Sales of Investment
and Trading Securities................................ (6) (75)
Purchase of Trading Securities......................... --- (1,916)
Increase in Taxes Receivable........................... (2,693) (951)
(Increase)Decrease in Interest Receivable............... (408) 2,241
Increase(Decrease) in Interest Payable................. 61 (61)
Increase in Other Assets............................... (2,578) (12,053)
Increase in Accrued Expenses........................... 3,153 5,394
-------- --------
Total Adjustments 12,088 (303)
-------- --------
Net Cash Provided by Operating Activities................ 28,774 14,639
-------- --------
Cash Flows from Investing Activities:
Proceeds from Sales of Securities Available for Sale... 786,929 71,334
Purchase of Securities Available for Sale.............. (613,887) (100,170)
Proceeds from Maturities of Investment Securities ..... 37,434 180,354
Proceeds from Maturities of Securities Avail for Sale.. 32,557 ---
Purchase of Investment Securities...................... (129,264) (99,183)
Net Increase in Loans.................................. (80,373) (129)
Proceeds from sales of Real Estate Owned............... 6,218 3,695
Capital Expenditures................................... (1,060) (1,896)
-------- --------
Net Cash Provided by Investing Activities............ 38,554 54,005
-------- --------
Cash Flows from Financing Activities:
Net Increase(Decrease) in Deposits..................... 11,521 (4,122)
Net Decrease in Short-Term Debt........................ (4,391) (444)
Net Increase(Decrease) in Long-Term Debt............... 200 (5,000)
Proceeds from Issuance of Common Stock................. 838 401
Proceeds from Sale of Treasury Stock................... --- 218
Dividends Paid......................................... (9,943) (7,914)
-------- --------
Net Cash Used In Financing Activities................ (1,775) (16,861)
-------- --------
Net Increase in Cash and Cash Equivalents................ 65,553 51,783
Cash and Cash Equivalents at Beginning of Period......... 199,977 191,025
-------- --------
Cash and Cash Equivalents at End of Period...............$ 265,530 242,808
======== ========
See accompanying notes to consolidated interim financial statements. (Continued)
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited) Continued
(Dollars in Thousands)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid..........................................$ (45,016) (46,800)
Income Taxes Paid...................................... (11,998) (5,209)
Transfer of Loans to Real Estate Owned................. 1,846 5,942
Increase in Dividends Payable.......................... 347 341
Transfer of Trading Securities to Securities
Available for Sale.................................... (2,106) ---
Unrealized loss on Securities Available for Sale-Gross. 879 ---
Deferred tax Benefit on Unrealized Loss on Securities
Available for Sale.................................... (367) ---
Transfer of Investment Securities to Securities
Available for Sale.................................... 398,454 30,146
Transfer of Securities Available for Sale to
Investment Securities................................. 213,199 ---
Unrealized gain on Securities Transferred to
Securities Available for Sale on January 1, 1994...... 14,037 ---
COMPOSITION OF CASH AND CASH EQUIVALENTS:
September 30, 1994 1993
-------- -------
Cash and Due from Banks................................. $ 48,530 40,808
Federal Funds Sold....................................... 217,000 202,000
-------- -------
Total Cash and Cash Equivalents..................$ 265,530 242,808
======== =======
See accompanying notes to consolidated interim financial statements.
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statement
(Unaudited)
1. Financial Statement Presentation
In the opinion of the management of TrustCo Bank Corp NY, the
accompanying unaudited Consolidated Interim Financial Statements
contain all adjustments necessary to present fairly the financial
position as of September 30, 1994, the results of operations for
the three month and nine month periods ended September 30, 1994
and 1993, and the cash flows for the nine months ended September
30, 1994 and 1993. The accompanying Consolidated Interim
Financial Statements should be read in conjunction with TrustCo
Bank Corp NY's Consolidated year end Financial Statements,
including notes thereto, which are included in TrustCo Bank Corp
NY's 1993 Annual Report to shareholders on Form 10-K.
2. Securities Available for Sale and Investment Securities
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS No. 115) "Accounting for
Certain Investments in Debt and Equity Securities." Management
determines the appropriate classification of securities at the
time of purchase. If management has the positive intent and
ability to hold debt securities to maturity, they are classified
as investment securities held to maturity and are stated at
amortized cost. If securities are purchased for the purpose of
selling them in the near term, they are classified as trading
securities and are reported at fair value with unrealized holding
gains and losses reflected in current earnings. All other debt
and equity securities are classified as securities available for
sale and are reported at fair value, with net unrealized gains or
losses reported, net of income taxes, as a separate component of
shareholders' equity. Gains and losses on disposition of all
investment securities are based on the adjusted cost of the
specific security sold.
Upon the adoption of SFAS No. 115, the Company transferred the
following securities into the "available for sale" category from
the "held to maturity" category:
(Dollars in Thousands)
US Treasury & Agency $229,406
Mortgage Backed Securities 142,119
Other 26,929
--------
$398,454
========
At January 1, 1994, the net unrealized gain on securities
available for sale, net of the income tax effect, was
$12,459,000. At September 30, 1994, the net unrealized loss on
securities available for sale, net of the income tax effect was
$512,000, representing a $12,971,000 decrease from January 1,
1994.
Prior to the adoption of SFAS No. 115, securities available for
sale were carried at the lower of amortized cost or fair value.
The Company also transferred its $2,106,000 portfolio of equity
securities from trading assets to the available for sale
category.
Securities Available for Sale
(Dollars in Thousands) September 30, 1994
----------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
--------- ----------- ---------- ---------
U.S. Government (Including
Agencies and Corporations) $187,522 247 1,261 186,508
Other 14,562 135 --- 14,697
--------- ----------- ---------- ---------
Total $202,084 $382 $1,261 $201,205
========= =========== ========== =========
The maturity of securities available for sale at September 30, 1994:
Within 1 Year 1 to 5 Years 5 to 10 Years After 10 Years Total
------------------ ----------------- ------------------ ------------------ -------------------
Approx- Approx- Approx- Approx- Approx-
imate imate imate imate imate
Amortized Fair Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value Cost Value Cost Value
------------------ ----------------- ------------------ ------------------ -------------------
U.S. Government $ 275 278 166,982 165,880 20,265 20,350 --- --- 187,522 186,508
(Including Agencies
and Corporations
Other --- --- 25 25 650 650 13,887 14,022 14,562 14,697
------------------ ----------------- ------------------ ------------------ -------------------
Total $ 275 278 167,007 165,905 20,915 21,000 13,887 14,022 202,084 201,205
================== ================= ================== ================== ===================
Investment Securities
(Dollars in Thousands) September 30, 1994
-------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
--------- ---------- ---------- -----------
U.S. Government (including
Agencies and Corporations) $ 145,543 1,803 3,606 143,740
Mortgage-backed
Securities 147,447 620 6,254 141,813
State and Political
Subdivisions 29,422 210 163 29,469
Other 15,012 ---- 153 14,859
--------- ---------- ---------- -----------
Total $ 337,424 2,633 10,176 329,881
========= ========== ========== ===========
The maturity of investment securities at September 30, 1994:
Within 1 Year 1 to 5 Years 5 to 10 Years After 10 Years Total
---------------- ----------------- ----------------- ----------------- -----------------
Approx- Approx- Approx- Approx- Approx-
mate mate mate mate mate
Amortize Fair Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value Cost Value Cost Value
---------------- ----------------- ----------------- ----------------- -----------------
U.S. Government $ --- --- 19,905 19,297 84,936 82,627 40,702 41,816 145,543 143,740
(Including Agencies
and Corporations)
Mortgage-backed 9,894 10,054 81,392 78,539 55,771 52,804 390 416 147,447 141,813
Securities
State & Political 14,461 14,466 6,125 6,196 6,306 6,252 2,530 2,555 29,422 29,469
Subdivision
Other --- --- --- --- 15,012 14,859 --- --- 15,012 14,859
---------------- ----------------- ----------------- ----------------- -----------------
Total $ 24,355 24,520 107,422 104,032 162,025 156,542 43,622 44,787 337,424 329,881
================ ================= ================= ================= =================
During the nine months ended September 30, 1994, there were no sales
of investment securities.
KPMG Peat Marwick LLP
74 North Pearl Street
Albany, NY 12207
INDEPENDENT AUDITOR'S REVIEW REPORT
The Board of Directors and Shareholders
TrustCo Bank Corp NY:
We have reviewed the consolidated statement of
financial condition of TrustCo Bank Corp NY and
subsidiaries as of September 30, 1994, and the
related consolidated statements of income for the
three-month and nine-month periods ended September
30, 1994 and 1993 and the consolidated statements of
cash flows for the nine-month periods ended September
30 1994 and 1993. 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 to financial data 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 generally accepted accounting
principles.
As discussed in note 2 to the consolidated interim
financial statements, effective January 1, 1994, the
Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial
Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities"
which changed its method of accounting for certain
investments in debt and equity securities.
We have previously audited, in accordance with
generally accepted auditing standards, the
consolidated statement of financial condition of
TrustCo Bank Corp NY and subsidiaries as of December
31, 1993, 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 26, 1994, we
expressed an unqualified opinion on those
consolidated financial statements. In our opinion,
the information set forth in the accompanying
consolidated statement of financial condition as of
December 31, 1993, is fairly presented, in all
material respects, in relation to the consolidated
statement of financial condition from which it has
been derived.
/s/ KPMG Peat Marwick LLP
______________________________
KPMG Peat Marwick LLP
Albany, New York
November 9, 1994
TrustCo Bank Corp NY
Management's Discussion and Analysis
September 30, 1994
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 and nine
month periods ended September 30, 1994, with comparisons to 1993
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 1993 Annual Report to shareholders, should be read
in conjunction with this review. Certain amounts in years prior
to 1994 have been reclassified to conform to the 1994
presentation.
Overview
TrustCo recorded net income of $5.9 million, or $0.40 per share
for the three months ended September 30, 1994, as compared to
$5.3 million or $0.36 per share recorded in the same period in
1993. All per share amounts have been adjusted for a 10% stock
dividend effective as of October 1, 1994. Net income for the
nine months of 1994 amounted to $16.7 million or $1.12 per share
compared to the $14.9 million and $1.01 per share recorded in
1993.
The primary factors accounting for the year-to-date increase are:
-- the growth in average earning assets to $1.9
billion, a 4.4% increase over the average for 1993,
-- increase in the net interest margin by 10 basis points
to 4.17%,
-- reduction in the provision for loan losses from $9.3
million in 1993 to $6.5 million in 1994. This positive
trend was offset by an increase in losses on securities
transactions of $6.4 million in 1994 compared to
securities gains of $3.9 million in 1993, and
-- a 2% reduction in noninterest expense.
Asset/Liability Management
The Company strives to generate superior earnings capabilities
through a mix of core deposits funding a prudent mix of earning
assets. This is, in its most fundamental form, the essence of
asset/liability management. Additionally, TrustCo attempts to
maintain adequate liquidity and reduce, to an acceptable level,
the sensitivity of net interest income to changes in interest
rates while enhancing profitability both on a short term and long
term basis.
Earning Assets
Average earning assets of $1.9 billion during the third quarter
of 1994, were $77.0 million, or 4.2% higher than during the third
quarter of 1993. For the nine month period 1994, average earning
assets were $1.9 billion compared to $1.8 billion in 1993.
Included on the table "Distribution of Assets, Liabilities and
Shareholders' Equity: Interest Rates and Interest Differential"
is a detailed breakdown of TrustCo's average earning assets and
interest bearing liabilities for the three month and nine month
periods ended September 30, 1994 and 1993. The remainder of this
discussion will utilize average balances for 1993 and 1994 as
detailed on the enclosed table.
Loans: Total loans averaged $1.1 billion during the third quarter
of 1994, which was $114.1 million, or 11.3% higher than the third
quarter of 1993. The loan growth was centered in the real
estate loan portfolio which grew by 22% during that time period.
All TrustCo loans are self originated and none are purchased from
other financial institutions.
For the nine month period ended September 30, 1994, the average
balance of loans outstanding was $1.1 billion and this was up 8%
from the prior year. As with the third quarter analysis above,
the primary increase was in the real estate loan category.
Securities Available for Sale: This category of investments is
used primarily for liquidity purposes while simultaneously
producing current period earnings. At September 30, 1994, the
balance outstanding was $201.2 million, down from the year-end
1993 balance of $240.7 million. At September 30, 1994, the
balance of securities available for sale is stated net of fair
value adjustment of ($512 thousand), whereas the December 31,
1993, balance is presented at the lower of cost or market value
(which resulted in the balance being shown at cost).
During the third quarter of 1994, the average balance of
securities available for sale was $259.3 million compared to
1993's balance of $154.2 million. For these time periods, the
average yield on the portfolios was 6.72% in 1994 and 6.22% in
1993. For the nine month periods, the average balance in 1994
was $416.2 million with a yield of 6.24% and in 1993 was $122.2
million with a yield of 6.76%, respectively.
In the third quarter of 1994, as it became more certain that
interest rates were continuing to increase, the Company sold
approximately $232 million of securities available for sale, at
a loss of $2.5 million. This brought the year-to-date losses on
securities transactions to $6.4 million. Management's intention
with respect to these funds, as well as any obtained subsequent
to the quarter-end, is to reinvest the proceeds at substantially
higher interest rates when attractive securities are available.
In the interim, the funds are invested in short-term investments.
It is expected that the net loss incurred from the sales of
securities will be recovered within one to two years through
increased interest income. These transactions were undertaken to
improve future net interest margin, to reduce the exposure of our
capital to further declines in the fair values of securities
available for sale, as well as to shorten the duration of the
portfolio. Management expects that given the anticipated future
increases in interest rates (i.e., Federal Reserve Bank actions),
similar actions in the securities available for sales portfolio
will be taken throughout the remainder of 1994.
Investment Securities: Securities in this category have been
designated as held until maturity. These investments are held
primarily for the generation of earnings. The balance of these
securities at September 30, 1994, was $337.4 million versus the
$416.8 million at year-end 1993.
For the third quarter of 1994, the investment securities
portfolio averaged $327.1 million and earned a rate of 6.98%. In
1993 the average balance in the third quarter was $495.9 million
and the yield was 6.76%. On a year-to-date basis the average
balance and yield was $215.6 million and 6.71% in 1994 and $528.1
and 6.82% in 1993, respectively.
Federal Funds Sold: This category of investments represents the
Company's primary source of short-term investments. At
September 30, 1994, the balance of federal funds sold was $217.0
million versus the $149.0 million at year-end. During the third
quarter, the average balance and yield were $ 207.8 million and
4.61% in 1994 and $179.3 million and 3.03% in 1993 respectively.
The increase in the average balance is attributable to the
increase in deposits outstanding and the reduction in the average
balance of investments in securities. The dramatic increase in
rates is directly related to actions taken by the Federal Reserve
Board to increase the discount and federal funds rate during
1994. The same trends noted in the quarter were also evident in
the year-to-date figures.
Income from earning assets: Income from earning assets totalled
$36.6 million for the quarter reflecting an average yield of
7.62%, as compared to the $ 33.7 million and 7.31% earned in
1993. The primary reason for the increase in income on earning
assets is the result of rate changes (70%) during the quarter and
30% due to average balance increases. The average balance of
earning assets increased 4% to $1.9 billion and the average rate
increased 31 basis points on a quarter to quarter comparison.
For the nine month period ended September 30, 1994 income from
earning assets increased from $102.6 million in 1993 to $104.8
million in 1994. The reason for that change is an increase of
4% in earning assets offset by a reduction in yield by 17 basis
points.
Funding Opportunities
TrustCo utilizes various funding sources to support its earning
asset portfolio. The vast majority of the funding comes from
traditional deposit vehicles such as regular savings, NOW and
time deposits.
Total interest bearing deposits increased 3% to $1.7 billion
during the third quarter with a yield of 3.48%. Customers have
been moving modest amounts of deposits to the time deposit
category and away from the traditional savings accounts.
Likewise, the deposit growth is centered in the area of time
accounts. This reflects a growing trend in banking where
customers are trying to lock in slightly higher yields in the
time deposit category. Within the category of time deposits,
CD's over $100,000 grew to $51 million. The principal factors
affecting these time deposits were attractive rates offered in
the 30 month CD product during late 1993 and the first half of
1994.
TrustCo's strategy is to develop core deposit relationships with
customers versus purchasing deposits through secondary markets.
The Company has no brokered deposits and does not actively seek
relationships that are single transaction oriented. By focusing
on the core deposit business the Company believes the franchise
value of the retail branching network is enhanced.
Net Interest Income
Net interest income totalled $21.2 million in the third quarter
1994 up 15% over the third quarter of 1993. As a result, the net
interest margin for the period to period comparison indicates an
improvement of 41 basis points. The principal reasons for the
increased margin are:
-- increased yields in the federal funds
portfolio
-- growth in the loan category primarily
centered in the real estate area, and
-- the reduction in funding cost by 7 basis
points.
For the nine month period in 1994 the net interest income was
$59.7 million, up 7% from 1993. This increase also caused the
net interest margin to increase by 10 basis points for the year.
On a year-to-date basis the reduction in the yield on the earning
assets was less than the reduction in the yield on the interest
bearing liabilities. The decrease in the average rate on earning
assets was primarily centered in the real estate loan category,
which became very competitive during the second half of 1993 and
into 1994.
Nonperforming Assets
Nonperforming assets include nonperforming loans which are those
loans in a nonaccrual status, loans that have been restructured
as a trouble debt restructuring and loans past due 90 days or
more and still accruing interest. Also included in the total of
nonperforming assets are foreclosed and insubstance foreclosed
real estate properties.
Nonperforming loans: Total nonperforming loans decreased to $2.4
million from the $2.7 million at June 30, 1994. The most serious
category of nonperforming loans are those identified as
nonaccrual loans. Nonaccrual loans at September 30, 1994, were
$46,000, down from the $199,000 at June 30, 1994.
Foreclosed and insubstance foreclosed assets: The total balance
of other real estate was $14.9 million at September 30, 1994,
almost equal to the amount at June 30, 1994.
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 risk inherent in the
loan portfolio, given past, present and expected conditions.
At September 30,1994, the allowance for loan losses was $ 39.2
million, up slightly from the June 30,1994, balance of $36.2
million and the $34.1 million at year end 1993. This allowance
represents a reserve coverage of 16 times the nonperforming loans
at September 30, 1994, up from the 13 times coverage at June 30,
1994. The provision charge to expense during the third quarter
was $2.8 million and $5.7 million in 1994 and 1993, respectively.
The significant decrease from 1993 to 1994 is reflective of the
overall improvement in the asset quality of the Company's
portfolio. Likewise for the nine month period 1994, the
provision was $6.5 million versus the $9.3 million in 1993.
In 1993 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 114 (which has subsequently
been amended by Statement No. 118), Accounting by Creditors for
Impairment of a Loan (SFAS 114). This new accounting standard
will be effective for TrustCo's fiscal year beginning January 1,
1995. This statement prescribes recognition criteria for loan
impairment and measurement methods for certain impaired loan and
insubstance foreclosures. TrustCo has not yet determined the
impact, if any, on its consolidated financial statements that
might result from the implementation of SFAS 114. Upon adoption
of SFAS 114 a significant portion of the insubstance foreclosed
loans will be reclassified into the loan category.
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 policy. Continual monitoring of
these ratios, both historical and some prospective, 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 third quarter was $838,000
versus $5.4 million recorded in 1993. For the nine month period
ended September 30, 1994, total noninterest income amounted to
$3.8 million compared to $13.2 million for the same period in
1993. The principal reason for the variance between 1993 and
1994 for both the quarter and the year to date figures relates to
securities losses recorded in 1994. During the quarter, the
Company recorded $2.5 million of losses in 1994 and $1.8 million
of gains in 1993. For the year-to-date balances, the security
losses were $6.4 million in 1994 and gains of $3.9 million in
1993. These security losses were recognized as part of a
management approach to continually sell securities that are
underperforming with an aim to reinvest the proceeds in higher
yielding securities with like credit risk. In this way the
Company is sacrificing current period earnings with the objective
of enhancing future years net income. The increases noted in the
net interest margins are partially a result of the execution of
this strategy.
Noninterest Expenses
Total noninterest expense for the third quarter of 1994 was $9.6
million versus $10.4 million recognized in 1993. Likewise for
the year-to-date results, the Company incurred $29.8 million in
1994 and $30.5 million in 1993.
Income Taxes and Changes in Accounting Principles
In the third quarter of 1994 TrustCo recognized income tax
expense of $3.4 million versus $2.0 million in 1993. This
represents an effective tax rate of 37% in 1994. On a
year-to-date basis through the third quarter, the Company
recorded $ 9.3 million in income tax expense versus $9.7 million
in 1993.
Recognized in the 1993 results is a change in accounting
principles relating to adoption of new accounting principles
dealing with post retirement benefits. In 1993's first quarter
TrustCo recognized a one time expense of $3.3 million (net of
tax) relating to the adoption of new accounting rules for post
retirement benefits.
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 the capital retention program.
Total shareholders' equity at September 30, 1994, was $136.6
million, up 5% over the year end balance of $129.9 million.
TrustCo declared dividends of $0.70 so far in 1994 compared to
$0.57 in 1993. These results represent a dividend payout ratio
of 63% in 1994 and 56% in 1993. The Company achieved the
following ratios as of September 30, 1994 and 1993:
September 30,
1994 1993
Total equity to assets 6.87% 6.56%
Tier 1 risk adjusted capital 12.01% 11.83%
Total risk adjusted capital 13.29% 13.11%
Each of these capital ratios exceeds the minimum standards
established by the regulatory authorities.
At the July 1994 meeting of the Board of Directors, the directors
approved an increase in the quarterly cash dividend by 10% to
$0.275 per share and also approved a 10% stock dividend to
shareholders of record on October 1, 1994. The Board indicated
their intention to retain the higher cash dividend on the new
shares outstanding for the remainder of the year. Figures
included in this discussion have been adjusted for the stock
dividend.
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average balance
sheet, related interest income and expense and the average annualized yields on
interest-earning assets and annualized rates on interest-bearing libilities of
the Registrant and the Bank (adjusted for tax equivalency) for each of the
reported periods. Nonaccrual loans are included in loans for this analysis.
Third Quarter Third Quarter
1994 1993
___________________________ ___________________________ ___________________________
Average Average Average Average Change in Variance Variance
(Dollars in Thousands) Balance Interest Rate Balance Interest Rate Interest Balance Rate
Income/ Change Change
Assets Expense
Commercial Loans.....................$ 229,132 $ 5,149 8.97% $ 232,722 $ 4,972 8.53% 177 (76) 253
Real Estate Loans..................... 661,343 13,483 8.15% 542,537 11,705 8.63% 1,778 2,375 (597)
Home Equity Credit Line............... 204,063 4,579 8.90% 201,952 3,748 7.36% 831 39 792
Consumer Loans........................ 27,956 888 12.61% 31,208 1,076 13.68% (188) (107) (81)
--------- ------ --------- ------ ----- ----- -----
Loans, Net of Unearned Income.........1,122,494 24,099 8.57% 1,008,419 21,501 8.51% 2,598 2,231 367
Trading Assets........................ --- --- --- 1,941 16 3.34% (16) (16) ---
Securities Available for Sale
U.S. Treasury and Agency............. 229,827 3,850 6.70% 144,068 2,198 6.10% 1,652 1,418 234
Mortgage-backed Securities........... --- --- --- --- --- --- --- --- ---
Other Investments.................... 29,464 506 6.88% 10,158 199 7.85% 307 328 (21)
--------- ------ --------- ------ ----- ----- -----
Total Securities Available for Sale 259,291 4,356 6.72% 154,226 2,397 6.22% 1,959 1,746 213
Investment Securities:
U.S. Treasury and Agency............. 136,087 2,550 7.50% 316,605 5,311 6.71% (2,761) (3,474) 713
Mortgage-backed Securities........... 151,155 2,485 6.58% 123,492 2,142 6.94% 343 448 (105)
State and Municipal.................. 24,815 374 6.03% 28,532 443 6.22% (69) (56) (13)
Other Investments.................... 15,011 294 7.84% 27,245 489 7.18% (195) (246) 51
--------- ------ --------- ------ ----- ----- -----
Total Investment Securities........ 327,068 5,703 6.98% 495,874 8,385 6.76% (2,682) (3,328) 646
Federal Funds Sold.................... 207,848 2,416 4.61% 179,288 1,371 3.03% 1,045 245 800
--------- ------ --------- ------ ----- ----- -----
Total Interest-earning Assets.......1,916,701 36,574 7.62% 1,839,748 33,670 7.31% 2,904 878 2,026
Allowance for Loan Losses............. (37,583) ------ (30,262) ------ ----- ----- -----
Cash and Noninterest-earning Assets... 131,901 147,133
--------- ---------
Total Assets.......................$2,011,019 $ 1,956,619
========= =========
Liabilities and Shareholders' Equity
Time Deposits:
Interest-bearing Checking
NOW Accounts .....................$ 248,616 919 1.47% $ 244,617 $ 1,048 1.70% (129) 17 (146)
Money Market Accounts.............. 104,979 632 2.39% 111,879 711 2.52% (79) (43) (36)
Savings.............................. 735,733 5,498 2.97% 735,023 5,656 3.05% (158) 6 (164)
CD's Over $100M...................... 51,045 668 5.19% 36,779 511 5.51% 157 184 (27)
Other Time Deposits.................. 590,762 7,447 5.00% 551,586 7,079 5.09% 368 491 (123)
--------- ------ --------- ------ ----- ----- -----
Total Time Deposits.................1,731,135 15,164 3.48% 1,679,884 15,005 3.54% 159 655 (496)
Short-term Borrowing ................. 18,562 125 2.67% 17,746 94 2.10% 31 4 27
Long-term Debt........................ 2,759 53 7.55% 4,620 108 9.40% (55) (37) (18)
--------- ------ --------- ------ ----- ----- -----
Total Interest-bearing Liabilities..1,752,456 15,342 3.47% 1,702,250 15,207 3.54% 135 622 (487)
Demand Deposits....................... 94,067 ------ 95,419 ------ ----- ----- -----
Other Liabilities..................... 29,839 31,510
Shareholders' Equity.................. 134,657 127,440
--------- ---------
Total Liab. & Shhldrs.' Equity.....$2,011,019 $ 1,956,619
========= =========
Net Interest Income................... 21,232 18,463 2,769 256 2,513
------ ------ ----- ----- -----
Net Interest Spread................... 4.15% 3.77%
Net Interest Margin (Net Interest
Income to Total Interest-earning
Assets)............................ 4.44% 4.03%
Tax Equivalent Adjustment 359 454
------ ------
Net Interest Income per book....... $ 20,873 $ 18,009
====== ======
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 libilities of
the Registrant and the Bank (adjusted for tax equivalency) for each of the
reported periods. Nonaccrual loans are included in loans for this analysis.
Nine Months Nine Months
1994 1993
____________________________ ___________________________ ___________________________
Average Average Average Average Change in Variance Variance
(Dollars in Thousands) Balance Interest Rate Balance Interest Rate Interest Balance Rate
Income/ Change Change
Assets Expense
Commercial Loans.....................$ 228,082 $ 14,870 8.70% $ 239,650 $ 15,492 8.63% (622) (755) 133
Real Estate Loans..................... 642,858 39,228 8.14% 543,799 35,827 8.78% 3,401 5,717 (2,316)
Home Equity Credit Line............... 202,145 12,370 8.18% 199,702 10,915 7.31% 1,455 135 1,320
Consumer Loans........................ 26,837 2,689 13.40% 34,437 3,587 13.93% (898) (766) (132)
--------- ------- --------- ------- ------ ------ ------
Loans, Net of Unearned Income.........1,099,922 69,157 8.39% 1,017,588 65,821 8.63% 3,336 4,331 (995)
Trading Assets........................ --- --- --- 1,615 44 3.65% (44) (44) ---
Securities Available for Sale
U.S. Treasury and Agency............. 334,030 15,611 6.23% 112,038 5,595 6.66% 10,016 10,351 (335)
Mortgage-backed Securities........... 48,291 2,122 5.86% --- --- --- 2,122 2,122 ---
Other Investments.................... 33,871 1,757 6.92% 10,162 598 7.85% 1,159 1,221 (62)
--------- ------- --------- ------- ------ ------ ------
Total Securities Available for Sale 416,192 19,490 6.24% 122,200 6,193 6.76% 13,297 13,694 (397)
Investment Securities:
U.S. Treasury and Agency............. 77,762 4,242 7.27% 347,276 17,245 6.62% (13,003) (14,893) 1,890
Mortgage-backed Securities........... 100,287 4,820 6.41% 115,452 6,503 7.51% (1,683) (795) (888)
State and Municipal.................. 24,375 1,059 5.79% 36,179 1,690 6.23% (631) (519) (112)
Other Investments.................... 13,152 730 7.40% 29,163 1,588 7.26% (858) (889) 31
--------- ------- --------- ------- ------ ------ ------
Total Investment Securities........ 215,576 10,851 6.71% 528,070 27,026 6.82% (16,175) (17,096) 921
Federal Funds Sold.................... 177,145 5,292 3.99% 158,370 3,564 3.01% 1,728 459 1,269
--------- ------- --------- ------- ------ ------ ------
Total Interest-earning Assets.......1,908,835 104,790 7.32% 1,827,843 102,648 7.49% 2,142 1,344 798
Allowance for Loan Losses............. (36,587) ------- (28,834) ------- ------ ------ ------
Cash and Noninterest-earning Assets... 129,119 144,329
--------- ---------
Total Assets.......................$2,001,367 $ 1,943,338
========= =========
Liabilities and Shareholders' Equity
Time Deposits:
Interest-bearing Checking
NOW Accounts .....................$ 247,049 2,731 1.48% $ 241,719 $ 3,181 1.76% (450) 72 (522)
Money Market Accounts.............. 106,377 1,900 2.39% 114,877 2,265 2.64% (365) (161) (204)
Savings.............................. 739,150 16,368 2.96% 734,525 17,963 3.27% (1,595) 114 (1,709)
CD's Over $100M...................... 46,570 1,820 5.23% 36,159 1,514 5.60% 306 398 (92)
Other Time Deposits.................. 582,419 21,760 5.00% 546,696 21,197 5.18% 563 1,273 (710)
--------- ------- --------- ------- ------ ------ ------
Total Time Deposits.................1,721,565 44,579 3.46% 1,673,976 46,120 3.68% (1,541) 1,696 (3,237)
Short-term Borrowing ................. 19,235 356 2.47% 16,976 276 2.17% 80 39 41
Long-term Debt........................ 2,753 142 6.90% 4,872 343 9.40% (201) (125) (76)
--------- ------- --------- ------- ------ ------ ------
Total Interest-bearing Liabilities..1,743,553 45,077 3.46% 1,695,824 46,739 3.68% (1,662) 1,610 (3,272)
Demand Deposits....................... 93,453 ------- 90,732 ------- ------ ------ ------
Other Liabilities..................... 27,608 32,436
Shareholders' Equity.................. 136,753 124,346
--------- ---------
Total Liab. & Shhldrs.' Equity.....$2,001,367 $ 1,943,338
========= =========
Net Interest Income................... 59,713 55,909 3,804 (266) 4,070
------- ------- ------ ------ ------
Net Interest Spread................... 3.86% 3.81%
Net Interest Margin (Net Interest
Income to Total Interest-earning
Assets)............................ 4.17% 4.07%
Tax Equivalent Adjustment 1,165 1,492
------- -------
Net Interest Income per book....... $ 58,548 $ 54,417
======= =======
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned duly authorized.
TRUSTCO BANK CORP NY
(Registrant)
/s/ Robert A. McCormick
Date: November 8, 1994 _____________________________
Robert A. McCormick, President
and Chief Executive Officer
/s/ Robert T. Cushing
Date: November 8, 1994 _____________________________
Robert T. Cushing, Vice President
and Chief Financial Officer