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, 1995
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
incorporation or organization) Identification No.)
320 STATE STREET, SCHENECTADY, NEW YORK 12305
(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 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, 1995
- --------------------- ----------------------
$1 Par Value 14,656,169
TrustCo Bank Corp NY
INDEX
Part I. FINANCIAL INFORMATION
NO.
Item 1. Interim Financial Statements (Unaudited):
Consolidated Statements of Income for the
Three Months Ended March 31, 1995 and 1994
Consolidated Statements of Financial Condition
as of March 31, 1995 and 1994
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1995 and 1994
Notes to Consolidated Interim Financial
Statements
Independent Auditors' Report
Item 2. Management's Discussion and Analysis
Part II. OTHER INFORMATION
Item 1. Legal Proceedings -- NONE
Item 2. Changes in Securities -- NONE
Item 3. Defaults Upon Senior securities -- NONE
Item 4. Submission of Matters to Vote of Security
Holders -- NONE
Item 5. Other Information -- NONE
Item 6. (a) Exhibits
Reg S-K Exhibit No. Description
------------------ -----------
10(a) Amendment No. 3 dated February
13,1995, among TrustCo, the
Bank and Robert A. McCormick
10(b) Amendment No. 1 dated February
14,1995, among TrustCo, the
Bank and Robert T. Cushing
10(c) Amendment No. 1 dated February
14,1995, among TrustCo, the
Bank and Nancy A. McNamara
10(d) Amendment No. 1 dated February
14,1995, among TrustCo, the
Bank and Ralph A. Pidgeon
10(e) Amendment No. 1 dated February
14,1995, among TrustCo, the Bank
and William F. Terry
10(f) Amendment No. 2 dated February
14,1995, among TrustCo, the Bank
and Peter A. Zakriski.
(b) Reports on Form 8-K
1. Filing on January 26, 1995, of press
release with year-end December 31,
1994 results.
2. Filing on March 8, 1995, report dated
February 21, 1995. Press release
announcing first quarter dividend
3. Filing on April 25, 1995, with press
release of first-quarter 1995 results.
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(Dollars in Thousands)
3 Months Ended
March 31
1995 1994
Interest income:
Interest and fees on loans..........................$ 26,005 21,876
Interest on U. S. Treasuries and agencies............ 4,972 6,508
Interest on states and political
subdivisions........................................ 555 224
Interest on mortgage-backed securities............... 2,326 2,122
Other................................................ 571 707
Interest on federal funds sold....................... 3,675 1,247
------- -------
Total interest income............................. 38,104 32,684
------- -------
Interest expense:
Interest on deposits:
Regular savings and NOW accounts.................... 6,364 6,274
Money market deposit accounts....................... 624 644
Certificates of deposit of $100,000 or more......... 933 541
Other time accounts................................. 9,073 7,063
Interest on short-term borrowings.................... 147 103
Interest on long-term debt........................... 69 41
------- -------
Total interest expense............................. 17,210 14,666
------- -------
Net interest income................................ 20,894 18,018
Provision for loan losses............................. 3,573 1,827
------- -------
Net interest income after provision
for loan losses................................... 17,321 16,191
------- -------
Noninterest income:
Trust department income.............................. 1,146 1,169
Fees for other services to customers................. 1,588 2,039
Net gain (loss) on securities available for sale..... 211 (577)
Other................................................ 504 683
------- -------
Total noninterest income............................ 3,449 3,314
------- -------
Noninterest expenses:
Salaries and employee benefits....................... 4,904 4,660
Net occupancy expense................................ 855 1,091
Equipment expense.................................... 712 817
FDIC insurance expense............................... 1,018 1,007
Professional services................................ 933 558
Other real estate expenses........................... 793 272
Other................................................ 2,536 3,004
------- -------
Total noninterest expenses.......................... 11,751 11,409
------- -------
Income before taxes................................ 9,019 8,096
Applicable income taxes............................... 3,114 2,800
------- -------
Net income.......................................$ 5,905 5,296
======= =======
Earnings per Common Share:
Net income......................................$ 0.40 0.36*
======= ========
Average equivalent shares outstanding (000s omitted). 14,933 14,888
======= ========
*Per share data adjusted for 10% stock dividend in October, 1994
See accompanying notes to consolidated interim financial statements.
TRUSTCO BANK CORP NY
Consolidated Statements of Financial Condition
(Dollars in Thousands)
03/31/95 12/31/94
(Unaudited)
Assets: --------- --------
Cash and due from banks................................$ 48,289 52,479
Federal funds sold...................................... 192,000 263,000
--------- ---------
Total cash and cash equivalents....................... 240,289 315,479
Securities available for sale:
U. S. Treasuries and agencies ......................... 202,664 102,919
States and political subdivisions...................... 3,727 ---
Other ................................................. 20,581 14,539
--------- ---------
Total securities available for sale................... 226,972 117,458
--------- ---------
Investment securities:
U. S. Treasuries and agencies ......................... 145,378 145,542
Mortgage-backed securities............................. 132,880 143,082
States and political subdivisions...................... 44,682 44,222
Other ................................................. 15,012 15,012
--------- ---------
Total investment securities........................... 337,952 347,858
--------- ---------
Loans:
Commercial............................................. 238,166 239,378
Residential mortgage loans............................. 687,839 681,192
Home equity line of credit............................. 205,087 207,313
Installment loans...................................... 35,186 35,875
--------- ---------
Total loans...........................................1,166,278 1,163,758
Less: --------- ---------
Allowance for loan losses.............................. 41,623 38,851
Unearned income........................................ 2,008 1,969
--------- ---------
Net loans..............................................1,122,647 1,122,938
Bank premises and equipment............................. 23,869 23,877
Real estate owned....................................... 4,067 5,080
Other assets............................................ 44,466 42,987
--------- ---------
Total assets........................................$2,000,262 1,975,677
========= =========
Liabilities:
Deposits:
Demand................................................$ 98,785 93,496
Regular savings and NOW Accounts....................... 821,954 911,629
Money market deposit accounts.......................... 84,082 92,965
Certificates of deposit (in denominations of
$100,000 or more)..................................... 79,028 62,511
Other time............................................. 732,225 629,230
--------- ---------
Total deposits........................................1,816,074 1,789,831
Short-term borrowings................................... 14,029 12,713
Accrued expenses and other liabilities.................. 27,316 30,300
Long-term debt.......................................... --- 3,550
--------- ---------
Total liabilities.....................................1,857,419 1,836,394
--------- ---------
Shareholders' equity
Capital stock par value $1; 25,000,000 shares authorized
15,068,740 and 15,018,448 shares issued
March 31, 1995 and December 31, 1994, respectively.... 15,069 15,018
Surplus................................................. 118,781 118,352
Undivided profits....................................... 8,823 6,948
Net unrealized gain/(loss) on securities
available for sale.................................... 1,417 (41)
Treasury stock at cost - 413,872 and 401,022 shares at
March 31, 1995 and December 31, 1994, respectively.... (1,247) (994)
--------- ---------
Total shareholders' equity............................ 142,843 139,283
--------- ---------
Total liabilities and shareholders' equity...........$2,000,262 1,975,677
========= =========
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
THREE MONTHS ENDED March 31, 1995 1994
-------- --------
Cash flows from operating activities:
Net income............................................... 5,905 5,296
-------- --------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 485 569
Provision for loan losses.............................. 3,573 1,827
Loss on sale of securities available for sale.......... 241 6,148
Gain on sale of securities available for sale.......... (452) (5,571)
Decrease in taxes receivable........................... 2,334 1,285
Increase in interest receivable........................ (1,204) (901)
Increase in interest payable........................... 430 53
Increase in other assets............................... (3,652) (2,807)
Increase in accrued expenses........................... 606 2,175
-------- --------
Total adjustments 2,361 2,778
-------- --------
Net cash provided by operating activities................ 8,266 8,074
-------- --------
Cash flows from investing activities:
Proceeds from sales of securities available for sale... 92,023 394,048
Purchase of securities available for sale.............. (198,687) (330,252)
Proceeds from maturities of securities avail for sale.. 50 32,558
Proceeds from maturities of investment securities ..... 13,438 1,385
Purchase of investment securities...................... (3,720) (555)
Net increase in loans.................................. (3,461) (31,586)
Proceeds from sales of real estate owned............... 1,192 3,909
Capital expenditures................................... (477) (580)
-------- --------
Net cash provided by/(used in) investing activities.. (99,642) 68,927
-------- --------
Cash flows from financing activities:
Net increase in deposits............................... 26,243 24,024
Net increase in short-term debt........................ 1,316 141
Repayment of long-term debt............................ (3,550) ---
Proceeds from issuance of common stock................. 480 728
Purchase of treasury stock............................. (253) ---
Dividends paid......................................... (8,050) (3,305)
-------- --------
Net cash provided by financing activities............ 16,186 21,588
-------- --------
Net increase(decrease) in cash and cash equivalents...... (75,190) 98,589
Cash and cash equivalents at beginning of period......... 315,479 199,977
-------- --------
Cash and cash equivalents at end of period..............$ 240,289 298,566
======== ========
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.........................................$ 16,780 14,613
Income taxes paid...................................... 780 1,515
Transfer of loans to real estate owned................. 179 1,544
Increase(decrease) in dividends payable................ (4,020) 14
Transfer of trading securities to securities
available for sale.................................... --- 2,106
Change in unrealized gain on securities
available for sale.................................... 2,501 13,465
Change in deferred tax effect on unrealized gain on
securities available for sale......................... 1,043 5,579
Reclassification at cost of investment securities to
securities available for sale upon adoption of
Statement 115......................................... --- 384,417
Unrealized gain on securities transferred to
securities available for sale on January 1, 1994...... --- 14,037
Deferred tax on unrealized gain on securities
available for sale on January 1, 1994................. --- 5,816
See accompanying notes to consolidated interim financial statements.
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, 1995, the
result of operations and cash flows for the three month periods
ended March 31, 1995 and 1994. 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 1994 Annual Report to shareholders on
Form 10-K.
2. Effective January 1, 1995 the Company adopted Statement of
Financial Accounting Standards No. 114 "Accounting by Creditors
for Impairment of a Loan" ( SFAS No. 114). SFAS No. 114 was
amended by Statement of Financial Accounting Standards No. 118
"Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosure" (SFAS No. 118). The new accounting
standards prescribe recognition criteria for loan impairment and
measurement methods for certain impaired loans and loans whose
terms are modified in a trouble debt restructuring subsequent
to the adoption of these new standards. A loan is considered
impaired when it is probable that the borrower will be unable
to repay the loan according to the original contractual terms
of the loan agreement. These new standards are applicable
principally to the commercial and commercial real estate loans,
however, certain provisions dealing with restructured loans also
apply to the retail loan products. Once a loan is identified
as impaired, the new accounting standard requires measurement
of the loan at the lower of fair value of the anticipated
proceeds to be received or the recorded investment in the loan.
The accounting standard provides certain guidelines as to how
fair value is to be determined. As of January 1, 1995, the
Company has adopted the provisions of SFAS Nos. 114 and 118 and
has provided the required disclosures. The effect of adoption
was not material to the consolidated financial statements.
In addition, SFAS No. 114 substantially modified the definition
of "insubstance foreclosure" loans. Consequently certain loans
identified at year end 1994 as being insubstance foreclosure
loans and classified as real estate owned have been reclassified
on January 1, 1995 to the loan portfolio. At January 1, 1995
$9.2 million of loans previously included in real estate owned
have been reclassified to the loan balance. For all prior
periods presented, amounts related to insubstance foreclosures
have also been reclassified. These reclassifications did not
impact the Company's consolidated financial condition or results
of operations. Prior to the adoption of SFAS Nos. 114 and 118,
insubstance foreclosed properties included those properties
where the borrower had little or no remaining equity in the
property considering its fair value; where repayment was only
expected to come from the operation or sale of the property; and
where the borrower has effectively abandoned control of the
property or it was doubtful that the borrower would be able to
rebuild equity in the property.
At March 31, 1995 there are $13.3 million of commercial,
commercial real estate and commercial mortgage loans that have
been placed on non-accrual status and are therefore classified
as impaired loans. None of the allowance for loan losses has
been allocated to these impaired loans because of the
significant charge offs that have been taken in prior years and
the fact that the collateral values support the loan balances.
All impaired loans are on a non-accrual status and therefore no
interest income is recorded on these loans. Cash payments
received are normally applied to reduce the outstanding loan
balance.
During the first quarter of 1995 the average balance of impaired
loans was $10.3 million and there was no income recorded on
these loans in the accompanying statement of income.
Transactions in the allowance for loan losses account are
summarized as follows:
Three months ended March 31,
1995 1994
------ -----
Balance at beginning of year $38,851 $34,087
Provision for loan losses 3,573 1,827
Loans charged off 1,479 --
Recoveries on loans previously
charged off 678 303
_____ _____
Balance at end of period $41,623 $36,217
======= =======
INDEPENDENT AUDITORS' 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 (the
Company) as of March 31, 1995, and the related consolidated
statements of income and cash flows for the three-month
periods ended March 31, 1995 and 1994. 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 accounting 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.
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, 1994, 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 27, 1995, 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, 1994, is fairly presented, in
all material respects, in relation to the consolidated
statement of financial condition from which it has been
derived.
As discussed in note 2 to the consolidated interim financial
statements, effective January 1, 1995, the Company adopted
the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," and
Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosures" which prescribe recognition
criteria for loan impairment and measurement methods for
certain impaired loans and loans whose terms are modified in
a troubled debt restructuring subsequent to the adoption of
these statements.
/s/KPMG Peat Marwick LLP
Albany, NY
April 14, 1995
TrustCo Bank Corp NY
Management's Discussion and Analysis
March 31, 1995
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, 1995, with comparisons to 1994 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 1994 Annual Report to Shareholders, should be read
in conjunction with this review. Certain amounts in years
prior to 1995 have been reclassified to conform to the 1995
presentation.
OVERVIEW
TrustCo recorded net income of $5.9 million, or $0.40 per share
for the three months ended March 31, 1995, as compared to $5.3
million or $0.36 per share in the same period in 1994. The per
share amounts for 1994 have been restated for the effect of the
10% stock dividend effective October 1994.
The primary factors accounting for the year to date increase
are:
--the increase in yield on the interest earning assets to
8.17% from 6.95% in 1994,
--the increase in net interest margin to 4.49%, and
--increases in operating efficiencies as demonstrated by
the efficiency ratio of 44.58%.
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 quarter were
$15.2 million less than during the first quarter of 1994.
Included in 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 periods ended
March 31, 1995 and 1994. The remainder of this discussion will
utilize average balances for 1995 and 1994 as detailed in the
enclosed table.
Loans: Total loans averaged $1.2 billion during the first
quarter of 1995 which was $74.8 million, or 6.9% higher than
the first quarter of 1994. The real estate loan portfolio
continued to increase to an average balance of $684.6 million,
an increase of $62.8 million or 10.1%. This increase was the
result of the continuing momentum throughout 1994 in the
loan origination business of TrustCo in loan refinancing and
new loan origination. The average yield on this portfolio
increased to 8.37% compared to the 8.12% in 1994. Of the
total increase in interest income from the loan portfolio
of $4.1 million, $1.7 million was in the real estate portfolio.
Also during 1995 the average balance of home equity
credit lines increased slightly to $206.6 million and
the average rate climbed 37.8% to 10.17%. The increase in
the average rate on the home equity credit lines is a
direct result of changes in the prime rate since the first
quarter of 1994. The home equity credit line portfolio changes
increased the total interest income $1.5 million almost
exclusively due to rate changes.
Securities Available for Sale: This category of investments is
used primarily for liquidity purposes while simultaneously
producing current period earnings. At March 31, 1995 the
balance outstanding was $227.0 million, an increase of $109.5
million from the year-end 1994 balance of $117.5 million.
During the first quarter 1995 the average balance of securities
available for sale was $136.1 million and produced an average
yield of 7.65%, compared to the average balance in 1994 of
$634.1 million with a yield of 5.90%.
During 1995 $91.6 million securities available for sale were
sold. These transactions were undertaken to take advantage of
alternative investment opportunities, or to provide additional
liquidity to the Company. TrustCo does not sell securities for
the purpose of producing short term gains. Rather, the
philosophy is to selectively enter into transactions with the
intention of increasing the overall yield on the portfolio.
Long term growth in interest income is more desirable than a
short term profit from securities sales.
Investment Securities: Securities in this category are
designated as being held until maturity. These investments are
primarily held for the generation of stable earnings. The
balance of these securities at March 31, 1995 was $338.0
million versus $347.9 million at year-end 1994 (the decrease
due entirely to payments received, calls and maturities).
For the first quarter of 1995, the investment securities
portfolio averaged $342.9 million and produced a yield of
7.16% compared to $32.3 million in 1994 with a yield of
5.84%. The significant increases in balances between 1995
and 1994 was due to transfers in the second quarter of 1994
from the securities available for sale to the securities
held to maturity portfolio.
Federal Funds Sold: This category of investments represents
the Company's primary source of short-term liquidity. At
March 31, 1995 the balance of federal funds sold was $192.0
million versus a year-end 1994 balance of $263.0 million.
During the first quarter, the average balance and yield were
$252.9 million and 5.89% for 1995, and $155.6 million and
3.25% in 1994. The increase in the average balance of
federal funds sold reflects the decision by TrustCo to remain
relatively liquid to take advantage of opportunities in
rate fluctuations in other interest bearing assets. The
increase in the average rates between 1994 and 1995 reflects
the actions taken by the Federal Reserve Board in increasing
the discount and target federal funds rates.
Income From Earning Assets: Income from earning assets
totalled $38.6 million for the quarter thereby producing an
average yield of 8.17%, as compared to the $33.1 million and
6.95% earned in 1994. The increase in the interest income
is comprised of a $14.2 million increase in income due to
rate changes offset by a decrease in interest income of $8.8
million due to the reduction in average balances of average
earning assets.
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 deposit accounts.
Total interest bearing deposits decreased by $11.2 million to
$1.7 billion for the first quarter of 1995 with a yield of
4.07%. The only categories of deposits that recorded an
increase were the $28.1 million in the CD's over $100
thousand category and in the other time deposit area which
increased by $105.4 million. These increases, however, were
not enough to offset the decreases in interest bearing
checking of $30.6 million and the decrease in savings of
$114.0 million. The overall decrease in deposits and the
shifting of deposits between regular savings and time
deposits is the same trend that other financial institutions,
on a national basis, are experiencing. To counter these
decreases, TrustCo has increased the yield on the regular
savings account balances to 3.50% and then again in April
1995 to 4.00%. In addition, the Company has aggressively
pursued time deposits with the CD Gift Campaign
that was launched during the 1994 holiday season, and the two
year Advantage CD that allows depositors to have one change
in rates during a two year term. By March 31, 1995 the
interest bearing deposit category had increased by $24.0
million from the first quarter 1995 average. The results
of these actions will be increases in the net cost of these
types of deposits in future periods. As an offset to these
increased costs, TrustCo has invested the net proceeds
received in interest earning assets at a positive
spread to the cost of these deposits. Likewise,
certain of the funds that were in federal funds sold
have been redeployed during March into the securities
portfolio at a positive spread to the cost of these
deposits. Therefore, even though the cost of the
interest bearing deposits is anticipated to increase in
future periods, management expects to offset a significant
amount of the increase with additional interest income
on the loan and investment portfolios and therefore overall
profitability of the Company should remain consistent with
the results previously reported. TrustCo's
strategy is to develop core deposit relationships with
customers versus purchasing deposits through secondary
sources. 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.
The other sources of funding include demand deposits, and
short and long term borrowings. The balances in these
accounts remained relatively constant during the two time
periods.
NET INTEREST INCOME
Net interest income totalled $21.3 million in the first
quarter 1995 up 15.8% from 1994. As a result of the
increased net interest income, the net interest margin
has increased by 65 basis points. The principal reasons
for the increased margin are:
-- significant increases in yields earned on interest
earning assets thereby producing a overall yield of
8.17%
-- the growth in the loan portfolio which has increased
the yield from the first quarter of 1994 by 90 basis
points, offset by
-- a 63 basis point increase in the yield on interest-
bearing liabilities.
NON-PERFORMING ASSETS
Non-performing assets include non-performing loans which are
those loans in a non-accrual status, loans that have been
restructured and loans past due 90 days or more and still
accruing interest. Also included in the total of non-
performing assets are foreclosed real estate properties.
As noted in the footnotes to the consolidated interim
financial statements, TrustCo adopted the provisions of
Statement of Financial Accounting Standards No. 114
"Accounting by Creditors for Impairment of a Loan"
(SFAS No. 114) and Statement of Financial Accounting
Standards No. 118 "Accounting by Creditors for Impairment
of a Loan -- Income Recognition and Disclosure" (SFAS No.
118) effective as of January 1, 1995. The enclosed
interim financial statements, including prior periods, have
been presented in accordance with SFAS Nos. 114 and 118
the effect of which was not material. This new accounting
requirement changes the identification, measurement and
reporting of impaired loans and loans whose terms have been
modified in a troubled debt restructuring. SFAS No. 114
defines an impaired loan as one in which the creditor
believes it is probable that the borrower will be unable to
repay the loan according to the contractual terms of the
loan. This statement is applicable principally to the
commercial and commercial real estate loans, however certain
provisions dealing with restructured loans also apply to the
retail loan products. Once a loan has been defined as
impaired, the Company is required to measure the fair value
of the anticipated cash flows from this loan using the
interest rate originally stipulated in the loan agreement.
Any difference between this calculated amount and the
recorded balance of the loan has to be earmarked as an
allocation of the allowance for loan losses.
SFAS No. 114 significantly modified the definition of loans
to be identified as "in-substance" real estate owned. As
required by SFAS No. 114, a loan is identified as "in-
substance" real estate owned when the Bank has taken
possession of the collateral regardless of whether formal
foreclosure proceedings have taken place. In the past the
definition was relatively broad and several properties were
classified as being in-substance real estate owned that
under the provisions of SFAS No. 114 will not be so
classified. Therefore, for presentation purposes, the
enclosed financial information has been reclassified in
accordance with these new accounting definitions.
For TrustCo, the definition of impaired loans are those
commercial and commercial real estate loans on a non-accrual
status and new restructured loans (loans that were classified
as restructured loans at the time SFAS No.114 was adopted are
not classified as impaired loans as long as the borrower is
in compliance with the restructured loan terms). The
following will describe the non-performing assets of TrustCo
as of March 31, 1995 and the related reclassifications that
have been made as a result of SFAS No.114.
Non-Performing Loans: Total non-performing loans increased
from $11.7 million at year-end 1994 to $19.2 million at
March 31, 1995. The increase is related to two commercial
properties that have, for 1995, been identified as
non-accrual loans. These properties are well collateralized
and no losses are anticipated from these properties, however,
during the first quarter of 1995 these borrowers ceased
making their required loan payments and for one of the loans
the borrower is seeking bankruptcy protection. Therefore,
at year-end 1994 these loans were classified as performing
loans but have subsequently been placed in the category of
non-accrual loans. Total commercial and commercial real
estate non-accrual loans were $6.7 million at year-end 1994
and $13.3 million at March 31, 1995. These are the loans
identified as impaired loans for SFAS No.114 purposes
and the increase from year-end 1994 is the result of the
same loans noted above. As previously stated, total
non-performing loans at March 31, 1995 were $19.2 million,
$13.3 million of which are identified as impaired loans
therefore leaving $5.9 million of loans that are
non-performing but have not been classified as impaired
loans. These are non-performing retail loan products and
commercial type loans past due greater than 90 days and
still accruing interest, which TrustCo does not consider
to be impaired loans.
Real Estate Owned: Total real estate owned has decreased
from $5.1 million at year-end 1994 to $4.1 million at March
31, 1995. It should be noted that $9.2 million of loans
classified as in-substance real estate owned at December 31,
1994 have been reclassified to the loan portfolio and
included, primarily, in the non-performing loans noted above.
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, given past, present and expected
future conditions.
At March 31, 1995 the allowance for loan losses was $41.6
million, up $2.8 million from the year-end 1994 balance of
$38.9 million. This allowance represents a reserve coverage
of 2.2 times the non-performing loans at March 31, 1995
compared to 3.3 times coverage at year-end 1994 and 1.9 times
coverage at March
31, 1994. The provision charged to expense during the
quarter
was $3.6 million for 1995 compared to $1.8 million for 1994.
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 $3.5
million in 1995 compared to $3.3 million in 1994. Included
in both 1995 and 1994 are securities transactions. For 1995
the Company recorded a net securities gain of $211 thousand
compared to a net loss from securities transactions of $577
thousand in 1994. Therefore, once these securities
transactions are eliminated, the 1995 noninterest income
was $3.2 million and the 1994 amount was $3.9 million. The
change between 1994 and 1995 is due primarily to reduced
fees from customers in the loan closing and refinancing area.
NONINTEREST EXPENSE
Total noninterest expense was $11.8 million in the first
quarter of 1995 and $11.4 million in the comparable period
of 1994. The Company's efficiency ratio was 44.58% for the
first quarter of 1995 compared to 49.89% for the first
quarter of 1994.
INCOME TAXES
In the first quarter of 1995 TrustCo recognized income tax
expense of $3.1 million compared to $2.8 million in 1994.
The effective tax rate for 1995 was 34.5% compared to 34.6%
in 1994.
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. Previously TrustCo has stated its
intention to open 3-5 new branch offices each year for
the next couple of years. These new branches and the
related deposit growth anticipated from these locations
will not require additional capital beyond that which is
already existing within the Company or that will be
developed and retained in the coming years.
Total shareholders' equity at March 31, 1995 was $142.8
million, up 2.6% from year-end 1994 and 7.5% greater than
March 31, 1994. TrustCo declared dividends of $0.275
o far in 1995 compared to $0.227 in 1994. These results
represent a dividend payout ratio of 68.25% in 1995 and
62.67% in 1994. The Company achieved the following
ratios as of March 31, 1995 and 1994:
March 31, Minimum Regulatory
1995 1994 Guidelines
---- ---- -----------------
Total equity to assets 7.14% 6.64% 3.00%
Tier 1 risk adjusted
Capital 12.33 11.86 4.00
Total risk adjusted
Capital 13.61 13.14 8.00
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average balance
sheet, related interest income and expense and the average annualized yields on
interest-earning assets and annualized rates on interest-bearing libilities of the
Registrant and the Bank (adjusted for tax equivalency) for each of the reported periods.
Nonaccrual loans are included in loans for this analysis.
First Quarter First Quarter
1995 1994
___________________________ ___________________________ _____________________________
Average Average Average Average Change in Variance Variance
(dollars in thousands) Balance Interest Rate Balance Interest Rate Interest Balance Rate
Income/ Change Change
Assets Expense
Commercial loans.....................$ 239,451 $ 5,579 9.36% $ 238,488 $ 4,794 8.08% 785 20 765
Real estate loans..................... 684,557 14,321 8.37% 621,716 12,620 8.12% 1,701 1,305 396
Home equity credit line............... 206,631 5,184 10.17% 201,396 3,667 7.38% 1,517 98 1,419
Installment loans..................... 33,028 1,053 12.93% 27,243 938 13.96% 115 177 (62)
--------- ------ --------- ------ ----- ----- -----
Loans, net of unearned income.........1,163,667 26,137 9.02% 1,088,843 22,019 8.12% 4,118 1,600 2,518
Securities available for sale:
U.S. Treasuries and agencies......... 119,543 2,318 7.76% 447,727 6,548 5.85% (4,230) (7,616) 3,386
Mortgage-backed securities........... --- --- --- 146,489 2,122 5.79% (2,122) (2,122) 0
States and political subdivisions.... 350 7 7.56% --- --- --- 7 7 0
Other ............................... 16,247 279 6.88% 39,860 687 6.90% (408) (406) (2)
--------- ------ --------- ------ ----- ----- -----
Total securities available for sale 136,140 2,604 7.65% 634,076 9,357 5.90% (6,753) (10,137) 3,384
Investment securities:
U.S. Treasuries and agencies......... 145,486 2,709 7.45% 7,602 114 6.00% 2,595 2,561 34
Mortgage-backed securities........... 138,087 2,326 6.74% --- --- --- 2,326 2,326 0
States and political subdivisions.... 44,346 807 7.28% 22,892 330 5.77% 477 373 104
Other ............................... 15,012 295 7.93% 1,771 27 6.00% 268 257 11
--------- ------ --------- ------ ----- ----- -----
Total investment securities........ 342,931 6,137 7.16% 32,265 471 5.84% 5,666 5,517 149
Federal funds sold.................... 252,867 3,675 5.89% 155,583 1,247 3.25% 2,428 1,055 1,373
--------- ------ --------- ------ ----- ----- -----
Total Interest earning assets.......1,895,605 38,553 8.17% 1,910,767 33,094 6.95% 5,459 (1,965) 7,424
Allowance for loan losses............. (40,844) ------ (35,664) ------ ----- ----- -----
Cash and non-interest earning assets.. 119,818 111,357
--------- ---------
Total assets.......................$1,974,579 $ 1,986,460
========= =========
Liabilities and shareholders' equity
Time deposits:
Interest-bearing checking:
NOW accounts .....................$ 235,776 1,062 1.83% $ 245,395 $ 919 1.52% 143 (34) 177
Money market accounts.............. 88,333 624 2.87% 109,309 644 2.39% (20) 501 (521)
Savings.............................. 621,074 5,302 3.46% 735,100 5,355 2.95% (53) 492 (545)
CD's over $100 thousand.............. 69,397 933 5.45% 41,334 541 5.31% 392 377 15
Other time deposits.................. 678,729 9,073 5.42% 573,322 7,063 5.00% 2,010 1,374 636
--------- ------ --------- ------ ----- ----- -----
Total time deposits.................1,693,309 16,994 4.07% 1,704,460 14,522 3.46% 2,472 2,710 (238)
Short-term borrowings................. 15,871 147 3.76% 18,609 103 2.24% 44 (12) 56
Long-term debt........................ 3,195 69 8.75% 2,750 41 6.00% 28 7 21
--------- ------ --------- ------ ----- ----- -----
Total interest-bearing liabilities..1,712,375 17,210 4.08% 1,725,819 14,666 3.45% 2,544 2,705 (161)
Demand deposits....................... 92,064 ------ 93,344 ------ ----- ----- -----
Other liabilities..................... 29,597 25,975
Shareholders' equity.................. 140,543 141,322
--------- ---------
Total liab. & shareholders' equity.$1,974,579 $ 1,986,460
========= =========
Net interest income................... 21,343 18,428 2,915 (4,670) 7,585
------ ------ ----- ----- -----
Net interest spread................... 4.09% 3.50%
Net interest margin (net interest
income to total interest earning
assets)............................ 4.49% 3.84%
Tax equivalent adjustment 449 410
------ ------
Net interest income per book....... $ 20,894 $ 18,018
====== ======
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 5, 1995 By/s/Robert A. McCormick
----------------------
Robert A. McCormick,
President and
Chief Executive Officer
Date: May 5, 1995 By/s/Robert T. Cushing
----------------------
Robert T. Cushing
Vice President and Chief
Financial Officer
EXHIBIT INDEX
The following exhibits are filed herewith:
Reg S-K Exhibit No Description
- ------------------ -----------
10(a) Amendment No. 3 dated February
13,1995, among TrustCo, the Bank
and Robert A. McCormick
10(b) Amendment No. 1 dated February
14,1995, among TrustCo, the Bank
and Robert T. Cushing
10(c) Amendment No. 1 dated February
14,1995, among TrustCo, the Bank
and Nancy A. McNamara
10(d) Amendment No. 1 dated February
14,1995, among TrustCo, the Bank
and Ralph A. Pidgeon
10(e) Amendment No. 1 dated February
14,1995, among TrustCo, the Bank
and William F. Terry
10(f) Amendment No. 2 dated February
14,1995, among TrustCo, the Bank
and Peter A. Zakriski.
AMENDMENT NO. 3 Exhibit 10(a)
TO
EMPLOYMENT AGREEMENT BETWEEN
TRUSTCO BANK NEW YORK AND
TRUSTCO BANK CORP NY AND
ROBERT A. McCORMICK
WHEREAS, Trustco Bank New York (herein referred to as
the "Company") and TrustCo Bank Corp NY (herein referred to
as "TrustCo") entered into an Employment Agreement (herein
referred to as the "Agreement") with Robert A. McCormick
(herein referred to as the "Executive"); and
WHEREAS, by statutory conversion the Company converted
from a state chartered trust company to a national bank, and
in connection with the conversion the name of the Company
changed to Trustco Bank, National Association effective
February 1, 1995; and
WHEREAS, the Company, TrustCo and the Executive desire
to amend the Agreement to reflect the name change;
NOW, THEREFORE, effective February 1, 1995, the
Agreement is hereby amended by changing "Trustco Bank New
York" to "Trustco Bank, National Association" in each place
where it appears therein.
IN WITNESS WHEREOF, the Company has caused this
Amendment No. 3 to be executed this 13th day of February,
1995.
TRUSTCO BANK, NATIONAL TRUSTCO BANK CORP NY
ASSOCIATION
By:/s/William F. Terry By:/s/William F. Terry
------------------- -------------------
Title: Secretary Title: Secretary
/s/Robert A. McCormick
----------------------
Robert A. McCormick
AMENDMENT NO. 1 Exhibit 10(b)
TO
EMPLOYMENT AGREEMENT BETWEEN
TRUSTCO BANK NEW YORK AND
TRUSTCO BANK CORP NY AND
ROBERT T. CUSHING
WHEREAS, Trustco Bank New York (herein referred to as the
"Company") and TrustCo Bank Corp NY (herein referred to as
"TrustCo") entered into an Employment Agreement (herein
referred to as the "Agreement") with Robert T. Cushing (herein
referred to as the "Executive"); and
WHEREAS, by statutory conversion the Company converted
from a state chartered trust company to a national bank, and in
connection with the conversion the name of the Company changed
to Trustco Bank, National Association effective February 1,
1995; and
WHEREAS, the Company, TrustCo and the Executive desire to
amend the Agreement to reflect the name change;
NOW, THEREFORE, effective February 1, 1995, the Agreement
is hereby amended by changing "Trustco Bank New York" to
"Trustco Bank, National Association" in each place where it
appears therein.
IN WITNESS WHEREOF, the Company has caused this Amendment
No. 1 to be executed this 14th day of February, 1995.
TRUSTCO BANK, NATIONAL TRUSTCO BANK CORP NY
ASSOCIATION
By:/s/Robert A. McCormick By:/s/Robert A. McCormick
------------------- ----------------------
Title:President and CEO Title:President and CEO
/s/Robert T. Cushing
--------------------
Robert T. Cushing
AMENDMENT NO. 1 Exhibit 10(c)
TO
EMPLOYMENT AGREEMENT BETWEEN
TRUSTCO BANK NEW YORK AND
TRUSTCO BANK CORP NY AND
NANCY A. McNAMARA
WHEREAS, Trustco Bank New York (herein referred to as
the "Company") and TrustCo Bank Corp NY (herein referred to
as "TrustCo") entered into an Employment Agreement (herein
referred to as the "Agreement") with Nancy A. McNamara
(herein referred to as the "Executive"); and
WHEREAS, by statutory conversion the Company converted from a
state chartered trust company to a national bank, and in
connection with the conversion the name of the Company
changed to Trustco Bank, National Association effective
February 1, 1995; and
WHEREAS, the Company, TrustCo and the Executive desire
to amend the Agreement to reflect the name change;
NOW, THEREFORE, effective February 1, 1995, the
Agreement is hereby amended by changing "Trustco Bank New
York" to "Trustco Bank, National Association" in each place
where it appears therein.
IN WITNESS WHEREOF, the Company has caused this
Amendment No. 1 to be executed this 14th day of February,
1995.
TRUSTCO BANK, NATIONAL TRUSTCO BANK CORP NY
ASSOCIATION
By: /s/Robert A. McCormick By:/s/Robert A.
McCormick
---------------------- ----------------------
Title: President and CEO Title: President and CEO
/s/Nancy A. McNamara
--------------------
Nancy A. McNamara
AMENDMENT NO. 1 Exhibit 10(d)
TO
EMPLOYMENT AGREEMENT BETWEEN
TRUSTCO BANK NEW YORK AND
TRUSTCO BANK CORP NY AND
RALPH A. PIDGEON
WHEREAS, Trustco Bank New York (herein referred to as
the "Company") and TrustCo Bank Corp NY (herein referred to
as "TrustCo") entered into an Employment Agreement (herein
referred to as the "Agreement") with Ralph A. Pidgeon (herein
referred to as the "Executive"); and
WHEREAS, by statutory conversion the Company converted
from a state chartered trust company to a national bank, and
in connection with the conversion the name of the Company
changed to Trustco Bank, National Association effective
February 1, 1995; and
WHEREAS, the Company, TrustCo and the Executive desire
to amend the Agreement to reflect the name change;
NOW, THEREFORE, effective February 1, 1995, the
Agreement is hereby amended by changing "Trustco Bank New
York" to "Trustco Bank, National Association" in each place
where it appears therein.
IN WITNESS WHEREOF, the Company has caused this
Amendment No. 1 to be executed this 14th day of February,
1995.
TRUSTCO BANK, NATIONAL TRUSTCO BANK CORP NY
ASSOCIATION
By:/s/Robert A. McCormick By:/s/Robert A. McCormick
- ---------------------- ----------------------
Title:President and CEO Title: President and CEO
/s/Ralph A. Pidgeon
-------------------
Ralph A. Pidgeon
AMENDMENT NO. 1 Exhibit 10(e)
TO
EMPLOYMENT AGREEMENT BETWEEN
TRUSTCO BANK NEW YORK AND
TRUSTCO BANK CORP NY AND
WILLIAM F. TERRY
WHEREAS, Trustco Bank New York (herein referred to as
the "Company") and TrustCo Bank Corp NY (herein referred to
as "TrustCo") entered into an Employment Agreement (herein
referred to as the "Agreement") with William F. Terry (herein
referred to as the "Executive"); and
WHEREAS, by statutory conversion the Company converted
from a state chartered trust company to a national bank, and
in connection with the conversion the name of the Company
changed to Trustco Bank, National Association effective
February 1, 1995; and
WHEREAS, the Company, TrustCo and the Executive desire
to amend the Agreement to reflect the name change;
NOW, THEREFORE, effective February 1, 1995, the
Agreement is hereby amended by changing "Trustco Bank New
York" to "Trustco Bank, National Association" in each place
where it appears therein.
IN WITNESS WHEREOF, the Company has caused this
Amendment No. 1 to be executed this 14th day of February,
1995.
TRUSTCO BANK, NATIONAL TRUSTCO BANK CORP NY
ASSOCIATION
By:/s/Robert A. McCormick By:/s/Robert A.
McCormick
---------------------- ----------------------
Title: President and CEO Title: President and CEO
/s/William F. Terry
-----------------------
William F. Terry
AMENDMENT NO. 2 Exhibit 10(f)
TO
EMPLOYMENT AGREEMENT BETWEEN
TRUSTCO BANK NEW YORK AND
TRUSTCO BANK CORP NY AND
PETER A. ZAKRISKI
WHEREAS, Trustco Bank New York (herein referred to as
the "Company") and TrustCo Bank Corp NY (herein referred to
as "TrustCo") entered into an Employment Agreement (herein
referred to as the "Agreement") with Peter A. Zakriski
(herein referred to as the "Executive"); and
WHEREAS, by statutory conversion the Company converted
from a state chartered trust company to a national bank, and
in connection with the conversion the name of the Company
changed to Trustco Bank, National Association effective
February 1, 1995; and
WHEREAS, the Company, TrustCo and the Executive desire
to amend the Agreement to reflect the name change;
NOW, THEREFORE, effective February 1, 1995, the
Agreement is hereby amended by changing "Trustco Bank New
York" to "Trustco Bank, National Association" in each place
where it appears therein.
IN WITNESS WHEREOF, the Company has caused this
Amendment No. 2 to be executed this 14th day of February,
1995.
TRUSTCO BANK, NATIONAL TRUSTCO BANK CORP NY
ASSOCIATION
By:/s/Robert A. McCormick By:/s/Robert A. McCormick
---------------------- ----------------------
Title:President and CEO Title: President and CEO
/s/Peter A. Zakriski
----------------------
Peter A. Zakriski