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
June 30, 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 August 2, 1995
- --------------------- ----------------------
$1 Par Value 14,669,712
TrustCo Bank Corp NY
INDEX
Part I. FINANCIAL INFORMATION
PAGE
NO.
Item 1. Interim Financial Statements (Unaudited):
Consolidated Statements of Income for the
Three Months and Six Months Ended
June 30, 1995 and 1994 1
Consolidated Statements of Financial Condition
as of June 30, 1995 and December 31, 1994 2
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1995 and 1994 3 - 4
Notes to Consolidated Interim Financial
Statements 5 - 6
Independent Auditors' Report 7
Item 2. Management's Discussion and Analysis 8 - 17
Part II. OTHER INFORMATION
Item 1. Legal Proceedings -- NONE
Item 2. Changes in Securities -- NONE
Item 3. Defaults Upon Senior securities -- NONE
Item 4. Submission of Matters to Vote of Security
Holders -- ANNUAL MEETING
Item 5. Other Information -- NONE
Item 6. (a) Exhibits
REG S-K EXHIBIT No. DESCRIPTION
___________________ ___________
22 Submission of Matters to
Vote of Security Holders --
Annual Meeting
(b) Reports on Form 8-K
1. Filing on May 18, 1995, of press
release with details of May 15, 1995,
Annual Meeting of Shareholders and press
release announcing 1995 first quarter
cash dividend.
2. Filing on July 19, 1995, of two press
releases with the second quarter and
year-to-date June 30, 1995 results.
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(Dollars in Thousands)
3 Months Ended 6 Months Ended
June 30 June 30
1995 1994 1995 1994
------- ------- ------- -------
Interest income:
Interest and fees on loans..........................$ 26,558 22,900 52,563 44,776
Interest on U. S. Treasuries and agencies............ 6,963 6,798 11,935 13,306
Interest on states and political
subdivisions........................................ 699 244 1,254 468
Interest on mortgage-backed securities............... 2,198 2,335 4,524 4,457
Other................................................ 599 820 1,170 1,527
Interest on federal funds sold....................... 2,942 1,629 6,617 2,876
------- ------- ------- -------
Total interest income............................. 39,959 34,726 78,063 67,410
------- ------- ------- -------
Interest expense:
Interest on deposits:
Regular savings and NOW accounts.................... 7,096 6,408 13,460 12,682
Money market deposit accounts....................... 573 624 1,197 1,268
Certificates of deposit of $100,000 or more......... 1,234 610 2,167 1,152
Other time.......................................... 10,740 7,251 19,813 14,313
Interest on short-term borrowings.................... 230 128 377 231
Interest on long-term debt........................... 0 48 69 89
------- ------- ------- -------
Total interest expense............................. 19,873 15,069 37,083 29,735
------- ------- ------- -------
Net interest income................................ 20,086 19,657 40,980 37,675
Provision for loan losses............................. 3,045 1,886 6,618 3,713
------- ------- ------- -------
Net interest income after provision
for loan losses................................... 17,041 17,771 34,362 33,962
------- ------- ------- -------
Noninterest income:
Trust department income.............................. 1,297 1,270 2,443 2,439
Fees for other services to customers................. 1,768 1,673 3,356 3,712
Net gain (loss) on securities available for sale..... 417 (3,295) 628 (3,872)
Other................................................ 504 (50) 1,008 633
------- ------- ------- -------
Total noninterest income............................ 3,986 (402) 7,435 2,912
------- ------- ------- -------
Noninterest expenses:
Salaries and employee benefits....................... 4,889 4,438 9,793 9,098
Net occupancy expense................................ 822 572 1,677 1,663
Equipment expense.................................... 870 809 1,582 1,626
FDIC insurance expense............................... 1,016 1,007 2,034 2,014
Professional services................................ 782 686 1,715 1,244
Other real estate expenses........................... 1,513 382 2,306 654
Other................................................ 1,970 914 4,506 3,918
------- ------- ------- -------
Total noninterest expenses.......................... 11,862 8,808 23,613 20,217
------- ------- ------- -------
Income before taxes................................ 9,165 8,561 18,184 16,657
Applicable income taxes............................... 3,059 3,085 6,173 5,885
------- ------- ------- -------
Net income.......................................$ 6,106 5,476 12,011 10,772
======= ======= ======= =======
Earnings per Common Share:
Net income.......................................$ 0.41 0.37* 0.80 0.72*
======= ======= ======= =======
Average equivalent shares outstanding (000s omitted). 14,964 14,841 14,944 14,876
======= ======= ======= =======
Earnings per Common Share giving retroactive effect
to a 6 for 5 stock split declared July 1995:
Net income......................................$ 0.34 0.31* 0.67 0.60*
======= ======= ======= =======
Average equivalent shares outstanding (000s omitted). 17,957 17,809 17,933 17,851
======= ======= ======= =======
*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)
06/30/95 12/31/94
(Unaudited)
Assets: --------- ---------
Cash and due from banks................................$ 48,259 52,479
Federal funds sold...................................... 165,000 263,000
--------- ---------
Total cash and cash equivalents....................... 213,259 315,479
Securities available for sale:
U. S. Treasuries and agencies.......................... 291,579 102,919
States and political subdivisions...................... 14,823 ---
Other.................................................. 15,969 14,539
--------- ---------
Total securities available for sale................... 322,371 117,458
--------- ---------
Investment securities:
U. S. Treasuries and agencies.......................... 145,330 145,542
Mortgage-backed securities............................. 128,636 143,082
States and political subdivisions...................... 43,877 44,222
Other.................................................. 15,014 15,012
--------- ---------
Total investment securities........................... 332,857 347,858
--------- ---------
Loans:
Commercial............................................. 235,875 239,378
Residential mortgage loans............................. 708,814 681,192
Home equity line of credit............................. 203,012 207,313
Installment loans...................................... 35,522 35,875
--------- ---------
Total loans........................................... 1,183,223 1,163,758
Less: --------- ---------
Allowance for loan losses.............................. 43,715 38,851
Unearned income........................................ 2,009 1,969
--------- ---------
Net loans.............................................. 1,137,499 1,122,938
Bank premises and equipment............................. 25,895 23,877
Real estate owned....................................... 4,321 5,080
Other assets............................................ 50,478 42,987
--------- ---------
Total assets........................................$ 2,086,680 1,975,677
========= =========
Liabilities:
Deposits:
Demand................................................$ 102,096 93,496
Regular savings and NOW accounts....................... 831,691 911,629
Money market deposit accounts.......................... 79,485 92,965
Certificates of deposit (in denominations of
$100,000 or more)..................................... 84,571 62,511
Other time............................................. 771,208 629,230
--------- ---------
Total deposits........................................ 1,869,051 1,789,831
Short-term borrowings................................... 37,503 12,713
Accrued expenses and other liabilities.................. 32,587 30,300
Long-term debt.......................................... 0 3,550
--------- ---------
Total liabilities..................................... 1,939,141 1,836,394
--------- ---------
Shareholders' equity
Capital stock par value $1; 25,000,000 shares authorized
15,083,284 and 15,018,448 shares issued
June 30, 1995 and December 31, 1994, respectively..... 15,083 15,018
Surplus................................................. 118,850 118,352
Undivided profits....................................... 10,895 6,948
Net unrealized gain/(loss) on securities
available for sale.................................... 3,958 (41)
Treasury stock at cost - 413,872 and 401,022 shares at
June 30, 1995 and December 31, 1994, respectively..... (1,247) (994)
--------- ---------
Total shareholders' equity............................ 147,539 139,283
--------- ---------
Total liabilities and shareholders' equity...........$ 2,086,680 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 IN CASH AND CASH EQUIVALENTS
SIX MONTHS ENDED June 30, 1995 1994
-------- --------
Cash flows from operating activities:
Net income..............................................$ 12,011 10,772
-------- --------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 1,041 1,140
Provision for loan losses.............................. 6,618 3,713
Loss on sale of securities available for sale.......... 241 9,443
Gain on sale of securities available for sale.......... (869) (5,571)
Increase in taxes receivable........................... (4,032) (4,189)
Increase in interest receivable........................ (3,006) (465)
Increase in interest payable........................... 600 38
Increase in other assets............................... (1,375) (5,500)
Increase in accrued expenses........................... 1,673 2,484
-------- --------
Total adjustments 891 1,093
-------- --------
Net cash provided by operating activities................ 12,902 11,865
-------- --------
Cash flows from investing activities:
Proceeds from sales of securities available for sale... 138,823 554,412
Purchase of securities available for sale.............. (336,332) (550,325)
Proceeds from maturities of securities avail for sale.. 275 32,558
Proceeds from maturities of investment securities ..... 18,345 25,078
Purchase of investment securities...................... (3,532) (111,008)
Net increase in loans.................................. (26,819) (48,402)
Proceeds from sales of real estate owned............... 1,957 5,805
Capital expenditures................................... (559) (640)
-------- --------
Net cash used in investing activities................ (207,842) (92,522)
-------- --------
Cash flows from financing activities:
Net increase in deposits............................... 79,220 28,078
Net increase in short-term debt........................ 24,790 1,047
Repayment of long-term debt............................ (3,550) ---
Proceeds from issuance of common stock................. 563 728
Purchase of treasury stock............................. (253) ---
Dividends paid......................................... (8,050) (6,624)
-------- --------
Net cash provided by financing activities............ 92,720 23,229
-------- --------
Net decrease in cash and cash equivalents................ (102,220) (57,428)
Cash and cash equivalents at beginning of period......... 315,479 199,977
-------- --------
Cash and cash equivalents at end of period..............$ 213,259 142,549
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid.........................................$ 36,483 29,697
Income taxes paid...................................... 10,205 10,074
Transfer of loans to real estate owned................. 5,640 1,406
Increase in dividends payable.......................... 14 14
Reclassification of trading securities to securities
available for sale upon adoption of Statement 115..... --- 2,106
Change in unrealized (gain)loss on securities
available for sale-gross.............................. (6,863) 16,217
Change in deferred tax effect on unrealized gain(loss)
on securities available for sale...................... 2,864 (4,907)
Reclassification of investment securities to securities
available for sale upon adoption of Statement 115..... --- 384,417
Transfer of securities available for sale to
investment securities, amortized cost equalled
market value.......................................... --- 213,199
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
Transfer of building from other real estate to premises 2,500 ---
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 June 30, 1995, the
results of operations for the three month and six month periods
ended June 30, 1995 and 1994, and cash flows for the six month
periods ended June 30, 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 troubled 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 "in-substance foreclosure" loans. Consequently certain loans
identified at year-end 1994 as being in-substance 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 in-substance 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,
in-substance 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 June 30, 1995, there are $7.4 million of commercial,
commercial real estate and commercial mortgage loans that have
been placed on nonaccrual status and are therefore classified as
impaired loans. In addition, there were newly restructured
retail loans totalling $404,000, that as of June 30, 1995, are
identified 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 nonaccrual 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 half of 1995, the average balance of impaired
loans was $10.2 million and there was no income recorded on these
loans in the accompanying consolidated statement of income.
Transactions in the allowance for loan losses account are
summarized as follows:
Six month ended June 30,
1995 1994
Balance at beginning of year $38,851 $34,087
Provision for loan losses 6,618 3,713
Loans charged off (3,413) (2,481)
Recoveries of loans previously
charged off 1,659 847
______ ______
Balance at end of period $43,715 $36,166
======= =======
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 June 30, 1995, and the related consolidated statements of
income for the three-month and six-month periods ended June 30,
1995 and 1994, and the consolidated statements of cash flows for
the six-month periods ended June 30 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 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.
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
______________________________
KPMG Peat Marwick LLP
Albany, New York
July 14, 1995
TrustCo Bank Corp NY
Management's Discussion and Analysis
June 30, 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
and six month periods ended June 30, 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 $6.1 million, or $0.41 per
share for the three month period ended June 30, 1995, as
compared to $5.5 million and $0.37 per share in the same
period in 1994.
For the six months of 1995, TrustCo recorded net income of
$12.0 million or $0.80 per share compared to $10.8 million
and $0.72 per share in 1994. The per share amounts have not
been restated for the 6 for 5 stock split declared in July
1995. The effect on the three month and six month per share
results of the stock split are presented in the Consolidated
Statement of Income. 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
in net income are:
-- the increase in net interest margin to 4.34% from
4.00% in 1994,
-- security gains of $628,000 in 1995 compared to
security losses of $3.9 million in 1994, and
-- an increase in the average balance of earning
assets to $1.93 billion.
These positive factors affecting net income were offset by:
-- an increase in the provision for loan losses to
$6.6 million from $3.7 million in 1994, and
-- increased noninterest expenses of $3.4 million.
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
The average balance of earning assets increased $31.9
million, to $1.96 billion during the second quarter of 1995
compared to 1994. The average yield earned on these assets
was 8.28% in 1995 and 7.30% in 1994. For the six month
periods, the average balance of earning assets in 1995 was
$1.93 billion, an increase of $8.5 million over the 1994
average balances. Included in the tables "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 six month periods ended
June 30, 1995 and 1994. The remainder of this discussion
will utilize average balances for 1995 and 1994 as detailed
in the enclosed tables.
Loans: During the second quarter, total loans increased to
$1.17 billion in 1995 compared to $1.11 billion in 1994, a
5.1% increase. The yield earned on these assets increased
to 9.12% compared to the 8.27% earned in 1994. Interest
income on loans increased $3.6 million. The increase in
interest rates accounted for approximately 60% of the
increased interest income on loans with the remaining 40%
increase coming from the increased loan balances. The three
month average balance of residential mortgage loan balances
increased $45.2 million to $695.9 million in 1995 versus
$650.7 million in 1994, while at the same time the average
yield on the residential mortgage loans increased 37 basis
points to 8.44% in 1995. The combination of the increased
balance and yields resulted in interest income on the
residential loan portfolio increasing by $1.6 million. This
increase was primarily a result of the increased asset
balances. The home equity lines of credit portfolio
increased slightly to $204.9 million in 1995. The average
yield on these loans increased to 10.34% from 8.22% in
1994. This increase in the yields is a direct result of the
increased prime rates during 1994 and 1995. Should the
prime rate change, the yield on this portfolio will also
change.
The changes noted during the second quarter are also the
principal factors affecting the six month average balances.
The average balance of the loan portfolio increased $65.8
million to $1.17 billion in 1995. The yield on the loan
portfolio increased to 9.07% in 1995 from 8.20% in 1994.
The combination of the increased balances and the increased
yield resulted in an increase in the interest income of $7.8
million with approximately 60% of the increase the result of
the increased yields and 40% the result of the increased
balances.
The Company is a retail oriented institution, and as such,
stresses the importance of consumer oriented products such
as the residential mortgage loan, home equity loan and
credit card portfolios. Each of these areas is an important
contributor to profitability at TrustCo and is a focus of
continued marketing and product development so as to develop
increases in the balances outstanding. The second quarter
and the year to date results reflect this focus. TrustCo
aggressively pursues the fixed rate residential mortgage
loan market. The Company has a long history of experience
in underwriting loans in this market territory and is
confident that the average life of these loans is
significantly shorter than contractual maturity. This asset
portfolio is an excellent investment in relation to the core
deposit base that TrustCo has attracted.
Securities Available for Sale: During the second quarter of
1995, securities available for sale had an average balance
of $256.2 million, down from the 1994 average balance of
$359.3 million. The average yield on the portfolio
increased from 6.42% in 1994 to 7.61% in 1995. The
combination of the decreased balance offset by the increased
yield produced a decrease in interest income of $897,000.
Principally, the decreased balance was due to the transfer
of certain securities from the available for sale portfolio
to the held to maturity portfolio subsequent to the second
quarter of 1994.
The variances in the six month balances are similar to those
noted for the second quarter.
Investment Securities: The average balance of investment
securities increased to $335.9 million from $284.2 million
in the second quarter of 1994. The average yield has
increased to 7.13% from 6.59% in 1994. The combination of
the increased balances and yield produced an increase in
interest income of $1.3 million with almost 70% of the
increase the result of the change in interest rates.
The six month average balance of investment securities was
$339.4 million in 1995 compared to $158.9 million in 1994.
The yield on this portfolio increased to 7.15% in 1995 from
6.48% in 1994.
Federal Funds Sold: During the second quarter of 1995 the
average balance of federal funds sold was $193.8 million and
produced a yield of 6.09% as compared to $167.4 million and
3.90% in 1994. The significant changes in the federal funds
portfolio are the result of changes in the target rate set
by the Federal Reserve Board for federal funds sold and the
desire by the Company to maintain extra liquidity. Interest
income on federal funds sold increased $1.3 million with
more than three quarters of the increase the result of
changes in the interest rate.
For the six month periods 1995 and 1994 the average balance
and yield were $223.2 million and 5.98% in 1995, and $161.5
million and 3.59% in 1994.
Income from Earning Assets: Income from earning assets
increased by $ 5.4 million during the second quarter. For
the six month period, the increase was $10.8 million for
1995 compared to the same period in 1994.
Funding Opportunities
TrustCo utilizes various funding sources to support its
earning assets portfolio. The vast majority of the funding
comes from traditional deposit vehicles such as regular
savings, NOW and time deposits.
Total interest bearing liabilities were $1.76 billion during
the second quarter of 1995, an increase of $8.9 million over
the second quarter of 1994. The yield on this portfolio was
4.53% in 1995 and 3.45% in 1994. The significant increase
in the yield is the result of increasing to 4% the yield on
the regular savings accounts. The increased yield on the
regular savings accounts caused a $6.1 million increase in
interest expense. As with most other financial
institutions, TrustCo experienced a shift in the deposit
balances away from the regular savings accounts and towards
the time deposit categories. In an effort to stem that
trend, and to attract increased regular savings accounts the
Company decided to significantly increase the yield to 4%
during the second quarter. The increase in interest expense
associated with the change in rates on the regular savings
accounts was somewhat offset by the lower deposit balances
from 1994 to 1995. The average balance of regular saving
accounts during the second quarter of 1994 was $746.6
million compared to $594.5 million in 1995. By the end of
the second quarter 1995, the balance of regular savings and
NOW accounts had increased to $831.7 million. In addition
to the changes in the regular savings category during the
second quarter, the average of other time deposit balances
increased from $583.0 million in 1994 to $752.3 million in
1995. The yield on these deposits also increased to 5.73%
from the 4.99% in the second quarter of 1994.
The average balance of interest bearing liabilities was
$1.74 billion in 1995 which was virtually unchanged from the
1994 balances. The yields, however, increased from 3.45% to
4.30% as a result of the changes in yields on the regular
savings accounts and the time deposit category.
Net Interest Income
Taxable equivalent net interest income totalled $20.6
million for the second quarter of 1995 versus $20.1 million
in 1994. For the six months of 1995, taxable equivalent net
interest income totalled $42.0 million compared to $38.5
million in 1994.
The net interest margin for the second quarter was 4.21% in
1995 and 4.16% in 1994. For the six month periods, the net
interest margin was 4.34% and 4.00% for 1995 and 1994
respectively.
Nonperforming Assets
Nonperforming assets include nonperforming loans which are
those loans in a nonaccrual status, loans that have been
restructured and loans past due 90 days or more and still
accruing interest. Also included in the total of
nonperforming assets are foreclosed real estate properties
which are categorized as Real Estate Owned.
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 No. 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 original contractual terms of the loan. This accounting
standard is applicable principally to 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 nonaccrual
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 nonperforming
assets of TrustCo as of June 30, 1995 and the related
reclassification that have been made as a result of SFAS
No. 114.
Nonperforming Loans: Total nonperforming loans decreased
from the March 31, 1995 balance of $19.2 million to $13.3
million at June 30, 1995 . The decrease is the result of
the transfer of $5.6 million of loans to real estate owned,
loan charge offs and loan repayments. Nonaccrual loans were
$13.7 million as of March 31, 1995 and have decreased to
$10.4 million at June 30, 1995. Restructured loans
increased by $264,000 between March and June 1995. Total
commercial and commercial real estate impaired loans were
$7.4 million at June 30, 1995 and together with the newly
restructured retail loans of $404,000 represent the
Company's impaired loans at June 30, 1995. Of the total
nonperforming loans of $13.3 million, $7.8 million have been
identified as impaired therefore leaving $5.6 million of
loans that are nonperforming but do not meet the definition
of being an impaired loan. These are the nonperforming
retail loan products and the commercial loan types that are
past due greater than 90 days and still accruing interest,
all of which TrustCo does not consider to be impaired loans.
As to additional risk elements in the loan portfolio at June
30, 1995, TrustCo had $2.9 million of nonaccrual residential
mortgage loans compared to $446,000 at March 31, 1995. In
addition, there have been $2.0 million of commercial loan
charge offs, $391,000 of installment loan charge offs, and
$979,000 of residential mortgage loan charge offs during the
first six months of 1995.
Real Estate Owned: Total real estate owned at June 30, 1995
was $4.3 million, up slightly from the balance of $4.1
million as of March 31, 1995. During the quarter, as noted
above, $5.6 million of loans were transferred to the real
estate owned portfolio, write downs taken on the portfolio
of real estate owned amounted to $1.9 million, and $2.5
million was transferred to bank premises and equipment. The
$2.5 million transfer to bank premises and equipment was a
single property that the Company has identified as a site
for future bank expansion.
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 June 30, 1995, the allowance for loan losses was $43.7
million. This allowance represents a reserve coverage of
3.3 times the nonperforming loans at June 30, 1995 compared
to 2.2 times coverage as of March 31,1995. As a percentage
of loans outstanding the allowance was 3.70% at June
30,1995, 3.58% at March 31, 1995, and 3.34% at year end
1994.
The provision charged to expense for the three months of
1995 was $3.0 million compared to $1.9 million for the same
period in 1994. For the six months, the provision was $6.6
million in 1995 and $3.7 million in 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 policy.
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 was $4.0 million for the three
months ended June 30, 1995, compared to an expense of
$402,000 for the comparable period in 1994. In 1995,
security gains of $417,000 were recognized compared to net
security losses of $3.3 million in 1994. Absent these
security transactions the total noninterest income would
have been $3.6 million in 1995 and $2.9 million in 1994.
For the six month periods, total noninterest income was $7.4
million in 1995 and $2.9 million in 1994. Consistent with
the three month results, net security transactions were a
gain of $628,000 in 1995 and a net loss of $3.9 million in
1994. Without these security transactions total noninterest
income would have been $6.8 million in 1995 and in 1994.
Noninterest Expense
Total noninterest expense was $11.9 million for the second
quarter of 1995 compared to $8.8 million in 1994. The
increased expense is the result of additional cost for
salaries and benefits of $451,000, other real estate
expenses of $1.1 million and other expenses of $1.5
million. The Company recorded an operating efficiency ratio
of 42.79% for the period. For the six month period, total
noninterest expense was $23.6 million in 1995 and $20.2
million in 1994. The operating efficiency ratio for the
six months of 1995 was 43.69%.
Income Taxes
In the second quarter of 1995 and 1994 TrustCo recognized
income tax expense of $3.1 million. This resulted in an
effective tax rate of 33.4% in 1995 and 36.0% in 1994. The
decrease in the effective tax rate between 1994 and 1995
was the result of the increased amount of state and
political subdivision interest income that is tax exempt for
1995 compared to 1994.
Similarly, for the six month period of 1995, total tax
expense was $6.2 million compared to $5.9 million in 1994.
Effective tax rates for the six month periods are 33.9% in
1995 and 35.3% 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 to 5 new branch offices each year for
the next several 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 June 30, 1995 was $147.5
million, up $8.3 million from year end 1994. TrustCo
declared dividends of $0.275 in the first and second
quarters of 1995. Also, in July 1995 the Board of Directors
declared a stock split of 6 for 5 effective in the third
quarter and declared its intention to retain the cash
dividend of $0.275 per share. The combination of these two
events will mean that TrustCo shareholders will enjoy a 20%
increase in the amount of their cash dividends.
The Company achieved the following ratios as of June 30,
1995 and 1994:
Minimum
June 30, June 30, Regulatory
1995 1994 Guidelines
_______ _______ ____________
Total equity to assets 7.07% 6.65% 3.00%
Tier 1 risk adjusted
capital 12.29% 12.09% 4.00%
Total risk adjusted
capital 13.57% 13.36% 8.00%
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average balance
sheet, related interest income and expense and the average annualized yields on
interest earning assets and annualized rates on interest-bearing libilities of
the Registrant and the Bank (adjusted for tax equivalency) for each of the
reported periods. Nonaccrual loans are included in loans for this analysis.
Second Quarter Second Quarter
1995 1994
__________________________ _____________________________________________________
Average Average Average AverageChange in VarianceVariance
(dollars in thousands) Balance Interest Rate Balance Interest Rate Interest Balance Rate
Income/ Change Change
Assets Expense
Commercial loans.....................$ 237,708 $ 5,668 9.54% $ 237,417 $ 4,926 8.31% 742 6 736
Residential mortgage loans............ 695,887 14,684 8.44% 650,702 13,127 8.07% 1,557 937 620
Home equity lines of credit .......... 204,872 5,283 10.34% 201,237 4,124 8.22% 1,159 76 1,083
Installment loans..................... 33,235 1,048 12.65% 25,521 863 13.56% 185 531 (346)
--------- ------ --------- ------ ----- ----- -----
Loans, net of unearned income.........1,171,702 26,683 9.12% 1,114,877 23,040 8.27% 3,643 1,550 2,093
Securities available for sale:
U.S. Treasuries and agencies......... 228,412 4,363 7.64% 329,375 5,245 6.37% (882) (5,605) 4,723
Mortgage-backed securities........... --- --- --- --- --- -- --- --- ---
States and political subdivisions.... 9,718 201 8.29% --- --- --- 201 201 ---
Other ............................... 18,103 310 6.86% 29,958 526 7.03% (216) (203) (13)
--------- ------ --------- ------ ----- ----- -----
Total securities available for sale 256,233 4,874 7.61% 359,333 5,771 6.42% (897) (5,607) 4,710
Investment securities:
U.S. Treasuries and agencies......... 145,353 2,672 7.35% 95,704 1,693 7.08% 979 910 69
Mortgage-backed securities........... 131,376 2,198 6.69% 148,040 2,335 6.31% (137) (823) 686
States and political subdivisions.... 44,141 825 7.48% 25,397 357 5.62% 468 323 145
Other ............................... 15,013 294 7.85% 15,010 294 7.85% --- --- ---
--------- ------ --------- ------ ----- ----- -----
Total investment securities........ 335,883 5,989 7.13% 284,151 4,679 6.59% 1,310 410 900
Federal funds sold.................... 193,846 2,942 6.09% 167,428 1,629 3.90% 1,313 289 1,024
--------- ------ --------- ------ ----- ----- -----
Total Interest earning assets.......1,957,664 40,488 8.28% 1,925,789 35,119 7.30% 5,369 (3,358) 8,727
Allowance for loan losses............. (44,200) ------ (36,493) ------ ----- ----- -----
Cash and non-interest earning assets.. 118,147 117,056
--------- ---------
Total assets.......................$2,031,611 $ 2,006,352
========= =========
Liabilities and shareholders' equity
Time deposits:
Interest-bearing checking:
NOW accounts .....................$ 228,119 1,091 1.92% $ 247,101 $ 893 1.45% 198 (406) 604
Money market accounts.............. 79,900 573 2.87% 104,890 624 2.39% (51) (578) 527
Savings.............................. 594,475 6,005 4.05% 746,612 5,515 2.96% 490 (5,625) 6,115
CD's over $100 thousand.............. 85,083 1,234 5.82% 47,225 610 5.18% 624 542 82
Other time deposits.................. 752,268 10,740 5.73% 582,979 7,251 4.99% 3,489 2,312 1,177
--------- ------ --------- ------ ----- ----- -----
Total time deposits.................1,739,845 19,643 4.53% 1,728,807 14,893 3.46% 4,750 (3,755) 8,505
Short-term borrowings................. 21,171 230 4.34% 20,535 128 2.51% 102 4 98
Long-term debt........................ --- --- --- 2,750 48 6.99% (48) (48) ---
--------- ------ --------- ------ ----- ----- -----
Total interest-bearing liabilities..1,761,016 19,873 4.53% 1,752,092 15,069 3.45% 4,804 (3,799) 8,603
Demand deposits....................... 95,346 ------ 92,941 ------ ----- ----- -----
Other liabilities..................... 31,536 26,966
Shareholders' equity.................. 143,713 134,353
--------- ---------
Total liab. & shareholders' equity.$2,031,611 $ 2,006,352
========= =========
Net interest income................... 20,615 20,050 565 441 124
------ ------ ----- ----- -----
Net interest spread................... 3.75% 3.85%
Net interest margin (net interest
income to total interest earning
assets)............................ 4.21% 4.16%
Tax equivalent adjustment 529 393
------ ------
Net interest income per book....... $ 20,086 $ 19,657
====== ======
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
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.
Six Months Six Months
1995 1994
_________________________ __________________________________________________
Average Average Average AverageChange inVarianceVariance
(dollars in thousands) Balance Interest Rate Balance Interest Rate Interest Balance Rate
Income/ Change Change
Assets Expense
Commercial loans.....................$ 238,575 $11,245 9.45% $ 237,950 $ 9,720 8.19% 1,525 26 1,499
Residential mortgage loans............ 690,253 29,006 8.40% 636,289 25,747 8.09% 3,259 2,241 1,018
Home equity lines of credit .......... 205,747 10,467 10.26% 201,316 7,791 7.80% 2,676 175 2,501
Installment loans..................... 33,132 2,101 12.79% 26,377 1,800 13.76% 301 640 (339)
--------- ------ --------- ------ ----- ----- -----
Loans, net of unearned income.........1,167,707 52,819 9.07% 1,101,932 45,058 8.20% 7,761 3,082 4,679
Securities available for sale:
U.S. Treasuries and agencies......... 174,278 6,682 7.67% 390,817 11,912 6.10% (5,230)(11,953) 6,723
Mortgage-backed securities........... --- --- --- 72,837 2,122 5.83% (2,122) (2,122) ---
States and political subdivisions.... 5,060 208 8.21% --- --- --- 208 208 ---
Other ............................... 17,180 589 6.90% 32,289 1,100 6.82% (511) (549) 38
--------- ------ --------- ------ ----- ----- -----
Total securities available for sale 196,518 7,479 7.61% 495,943 15,134 6.10% (7,655)(14,416) 6,761
Investment securities:
U.S. Treasuries and agencies......... 145,419 5,381 7.40% 48,116 1,693 7.04% 3,688 3,596 92
Mortgage-backed securities........... 134,713 4,524 6.72% 74,432 2,335 6.27% 2,189 2,014 175
States and political subdivisions.... 44,243 1,632 7.38% 24,151 685 5.67% 947 695 252
Other ............................... 15,013 589 7.85% 12,207 435 7.14% 154 108 46
--------- ------ --------- ------ ----- ----- -----
Total investment securities........ 339,388 12,126 7.15% 158,906 5,148 6.48% 6,978 6,413 565
Federal funds sold.................... 223,193 6,617 5.98% 161,539 2,876 3.59% 3,741 1,364 2,377
--------- ------ --------- ------ ----- ----- -----
Total Interest earning assets.......1,926,806 79,041 8.22% 1,918,320 68,216 7.13% 10,825 (3,557) 14,382
Allowance for loan losses............. (42,532) ------ (36,081) ------ ----- ----- -----
Cash and non-interest earning assets.. 118,979 114,222
--------- ---------
Total assets.......................$2,003,253 $ 1,996,461
========= =========
Liabilities and shareholders' equity
Time deposits:
Interest-bearing checking:
NOW accounts .....................$ 231,927 2,153 1.87% $ 246,253 $ 1,812 1.48% 341 (286) 627
Money market accounts.............. 84,093 1,197 2.87% 107,087 1,268 2.39% (71) (569) 498
Savings.............................. 607,748 11,307 3.75% 740,887 10,870 2.96% 437 (4,541) 4,978
CD's over $100 thousand.............. 77,283 2,167 5.66% 44,296 1,152 5.24% 1,015 918 97
Other time deposits.................. 715,655 19,813 5.58% 578,177 14,313 4.99% 5,500 3,673 1,827
--------- ------ --------- ------ ----- ----- -----
Total time deposits.................1,716,706 36,637 4.30% 1,716,700 29,415 3.46% 7,222 (805) 8,027
Short-term borrowings................. 18,535 377 4.10% 19,578 231 2.38% 146 (36) 182
Long-term debt........................ 1,589 69 8.68% 2,750 89 6.46% (20) (78) 58
--------- ------ --------- ------ ----- ----- -----
Total interest-bearing liabilities..1,736,830 37,083 4.30% 1,739,028 29,735 3.45% 7,348 (919) 8,267
Demand deposits....................... 93,714 ------ 93,142 ------ ----- ----- -----
Other liabilities..................... 30,572 26,473
Shareholders' equity.................. 142,137 137,818
--------- ---------
Total liab. & shareholders' equity.$2,003,253 $ 1,996,461
========= =========
Net interest income................... 41,958 38,481 3,477 (2,638) 6,115
------ ------ ----- ----- -----
Net interest spread................... 3.92% 3.68%
Net interest margin (net interest
income to total interest earning
assets)............................ 4.34% 4.00%
Tax equivalent adjustment 978 806
------ ------
Net interest income per book....... $40,980 $37,675
====== ======
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: August 4, 1995 By/s/Robert A. McCormick
----------------------
Robert A. McCormick
President and
Chief Executive Officer
Date: August 4, 1995 By/s/Robert T. Cushing
----------------------
Robert T. Cushing
Vice President and Chief
Financial Officer
Exhibit Index
Reg S-K Exhibit No. Description Page
___________________ ___________ ----
22 Submission of Matters to 20
Vote of Security Holders
-- Annual Meeting
Exhibit 22
Item 4. Submission of Matters to Vote of Security
Holders -- Annual Meeting
At the annual meeting held May 15, 1995, shareholders of the
Company were asked to consider the Company's nominees for
directors and to elect five (5) directors, each to serve for a
term of three (3) years. The Company's nominees for director
were M. Norman Brickman, Charles W. Carl, Jr., Robert A.
McCormick, Kenneth C. Petersen, and Philip J. Thompson. The
results of shareholder voting are as follows:
DIRECTOR FOR AGAINST ABSTAIN WITHHELD NON-VOTE
________
Brickman 13,175,999 463,938 N/A N/A N/A
Carl 13,170,203 469,735 N/A N/A N/A
McCormick 13,161,485 478,452 N/A N/A N/A
Petersen 13,123,917 516,020 N/A N/A N/A
Thompson 13,168,703 471,234 N/A N/A N/A
Directors continuing in office are: Barton A. Andreoli,
Lionel O. Barthold, Nancy A. McNamara, John S. Morris, PhD,
James H. Murphy, DDS, Richard J. Murray, William J. Purdy,
and William F. Terry.
Shareholders were asked to consider a proposal to adopt the
TrustCo Bank Corp NY 1995 Stock Option Plan providing for
authorized shares of TrustCo common stock issuable under the
Plan. The results of shareholder voting are as follows:
FOR AGAINST ABSTAIN WITHHELD NON-VOTE
PROPOSAL 11,494,110 720,700 1,425,126 N/A N/A
Shareholders of the Company were also asked to consider a
proposal to ratify the appointment by TrustCo's Board of
Directors of KPMG Peat Marwick LLP as the independent
certified public accountants of TrustCo for the fiscal
year ending December 31, 1995. The results of shareholder
voting are as follows:
FOR AGAINST ABSTAIN WITHHELD NON-VOTE
PROPOSAL 13,430,114 40,643 169,180 N/A N/A