UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission File Number 0-10592
September 30, 2004
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.)
5 SARNOWSKI DRIVE, GLENVILLE, NEW YORK 12302
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 377-3311
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes.(x) No.( )
Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes (x) No.( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding
Class of Common Stock as of October 31,2004
--------------------- ----------------------------
$1 Par Value 74,346,877
TrustCo Bank Corp NY
INDEX
Part I. FINANCIAL INFORMATION PAGE NO.
Item 1. Interim Financial Statements (Unaudited): Consolidated 2
Statements of Income for the Three Months
and Nine Months Ended September 30, 2004 and 2003
Consolidated Statements of Condition as of 3
September 30, 2004 and December 31, 2003
Consolidated Statements of Cash Flows for the Nine Months 4 - 5
Ended September 30, 2004 and 2003
Notes to Consolidated Interim Financial Statements 6 - 11
Report of Independent Registered Public Accounting Firm 12
Item 2. Management's Discussion and Analysis 13 - 29
Item 3. Quantitative and Qualitative Disclosures about Market Risk 30
Item 4. Controls and Procedures 30
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 31
Item 3. Defaults Upon Senior Securities 31
Item 4. Submissions of Matters to Vote of Security Holders 31
Item 5. Other Information 31
Item 6. Exhibits 32
1
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except share data)
3 Months Ended 9 Months Ended
September 30 September 30
------------------------------- ----------------------
2004 2003 2004 2003
---- ---- ---- ----
Interest income:
Interest and fees on loans $ 18,644 20,892 55,854 68,200
Interest on U. S. Treasuries and agencies 9,926 5,984 30,653 15,078
Interest on states and political
Subdivisions 2,071 2,482 6,582 8,400
Interest on mortgage-backed securities and
collateralized mortgage obligations 2,066 848 4,916 2,853
Interest and dividends on other securities 446 392 1,262 3,076
Interest on federal funds sold and other
short-term investments 1,798 1,443 4,198 4,580
-------------------------------------------------------------
Total interest income 34,951 32,041 103,465 102,187
-------------------------------------------------------------
Interest expense:
Interest on deposits:
Interest-bearing checking 408 391 1,193 1,281
Savings 2,042 1,922 5,947 6,865
Money market deposit accounts 326 423 1,154 1,484
Time deposits 6,765 6,435 19,648 20,976
Interest on short-term borrowings 254 133 633 739
Interest on long-term debt 2 3 7 14
-------------------------------------------------------------
Total interest expense 9,797 9,307 28,582 31,359
-------------------------------------------------------------
Net interest income 25,154 22,734 74,883 70,828
Provision for loan losses 150 300 450 900
-------------------------------------------------------------
Net interest income after provision
for loan losses 25,004 22,434 74,433 69,928
-------------------------------------------------------------
Noninterest income:
Trust department income 1,406 1,785 4,405 4,757
Fees for other services to customers 2,510 2,819 7,805 8,375
Net gain on securities transactions 4,620 4,737 12,394 10,067
Other 454 860 1,482 2,360
-------------------------------------------------------------
Total noninterest income 8,990 10,201 26,086 25,559
-------------------------------------------------------------
Noninterest expenses:
Salaries and employee benefits 4,975 5,092 15,437 15,406
Net occupancy expense 1,464 1,432 4,968 4,616
Equipment expense 382 569 1,322 2,483
Professional services 900 884 2,657 2,281
Outsourced services 1,121 1,250 3,298 4,350
Other real estate expenses / (income) (111) (188) (332) (385)
Other 2,752 2,561 8,340 8,097
-------------------------------------------------------------
Total noninterest expenses 11,483 11,600 35,690 36,848
-------------------------------------------------------------
Income before taxes 22,511 21,035 64,829 58,639
Income taxes 7,298 6,750 21,112 17,751
-------------------------------------------------------------
Net income $ 15,213 14,285 43,717 40,888
=============================================================
Net income per Common Share:
- Basic $ 0.205 0.192 0.589 0.550
=============================================================
- Diluted $ 0.203 0.189 0.582 0.543
=============================================================
See accompanying notes to consolidated interim financial statements.
2
TRUSTCO BANK CORP NY
Consolidated Statements of Condition (Unaudited)
(dollars in thousands, except per share data)
9/30/04 12/31/03
----------- ---------
ASSETS:
Cash and due from banks $ 52,950 56,425
Federal funds sold and other short-term investments 511,516 355,257
----------- ---------
Total cash and cash equivalents 564,466 411,682
----------- ---------
Securities available for sale:
U. S. Treasuries and agencies 683,859 863,658
States and political subdivisions 173,220 191,727
Mortgage-backed securities and collateralized mortgage obligations 175,938 66,322
Other 23,831 55,219
----------- ---------
Total securities available for sale 1,056,848 1,176,926
----------- ---------
Loans:
Commercial 198,726 193,613
Residential mortgage loans 789,985 783,591
Home equity line of credit 187,173 171,078
Installment loans 13,201 14,365
----------- ---------
Total loans 1,189,085 1,162,647
Less:
Allowance for loan losses 48,685 48,739
Unearned income 382 381
----------- ---------
Net loans 1,140,018 1,113,527
----------- ---------
Bank premises and equipment 20,676 20,168
Other assets 55,317 55,816
----------- ---------
Total assets $ 2,837,325 2,778,119
=========== =========
LIABILITIES:
Deposits:
Demand $ 220,017 197,116
Interest-bearing checking 320,578 334,038
Savings 815,946 780,862
Money market deposit accounts 156,399 159,645
Certificates of deposit (in denominations of
$100,000 or more) 180,556 170,423
Other time deposits 799,307 777,726
----------- ---------
Total deposits 2,492,803 2,419,810
Short-term borrowings 87,033 90,608
Long-term debt 120 239
Accrued expenses and other liabilities 33,206 40,700
----------- ---------
Total liabilities 2,613,162 2,551,357
----------- ---------
SHAREHOLDERS' EQUITY:
Capital stock par value $1; 100,000,000 shares authorized,
and 81,447,650 and 80,711,016 shares issued at September 30, 2004
and December 31, 2003, respectively 81,448 80,711
Surplus 108,144 103,611
Undivided profits 88,389 78,051
Accumulated other comprehensive income:
Net unrealized gain on securities available for sale 9,930 21,042
Treasury stock at cost - 7,304,240 and 6,765,119 shares at
September 30, 2004 and December 31, 2003, respectively (63,748) (56,653)
----------- ---------
Total shareholders' equity 224,163 226,762
----------- ---------
Total liabilities and shareholders' equity $ 2,837,325 2,778,119
=========== =========
See accompanying notes to consolidated interim financial statements.
3
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED September 30, 2004 2003
---------- ----------
Cash flows from operating activities:
Net income $ 43,717 40,888
---------- ----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,296 1,958
Net loss/(gain) on sales of bank premises and equipment 55 (255)
Provision for loan losses 450 900
Net gain on securities transactions (12,394) (10,067)
Deferred tax expense (benefit) 2,485 (4,825)
(Increase)/decrease in taxes receivable (7,340) 19,220
Decrease/(increase) in interest receivable 360 (1,406)
Decrease in interest payable (8) (559)
Decrease in other assets 12,364 299
Decrease in accrued expenses and other liabilities (7,496) (3,113)
---------- ----------
Total adjustments (10,228) 2,152
---------- ----------
Net cash provided by operating activities 33,489 43,040
---------- ----------
Cash flows from investing activities:
Proceeds from sales and calls of securities available for sale 932,618 769,347
Purchase of securities available for sale (819,296) (1,040,261)
Proceeds from maturities of securities available for sale 668 2,366
Net (increase)/decrease in loans (26,941) 216,678
Proceeds from sales of bank premises and equipment 23 255
Proceeds from sales of real estate owned --- 608
Capital expenditures (1,882) (1,744)
---------- ----------
Net cash provided by (used in) investing activities 85,190 (52,751)
---------- ----------
Cash flows from financing activities:
Net increase in deposits 72,993 109,834
Net decrease in short-term borrowings (3,575) (61,030)
Repayment of long-term debt (119) (140)
Proceeds from exercise of stock options 5,270 6,906
Proceeds from sale of treasury stock 5,883 5,683
Purchase of treasury stock (12,978) (18,663)
Dividends paid (33,369) (33,820)
---------- ----------
Net cash provided by financing activities 34,105 8,770
---------- ----------
Net increase/(decrease) in cash and cash equivalents 152,784 (941)
Cash and cash equivalents at beginning of period 411,682 606,082
---------- ----------
Cash and cash equivalents at end of period $ 564,466 605,141
========== ==========
See accompanying notes to consolidated interim financial statements.
(Continued)
4
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows Continued (Unaudited)
(dollars in thousands)
SUPPLEMENTAL INFORMATION:
NINE MONTHS ENDED September 30, 2004 2003
--------- ------
Interest paid $ 28,590 31,918
Income taxes paid 3,384 3,357
Increase/(decrease) in dividends payable 10 (411)
See accompanying notes to consolidated interim financial statements.
5
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
September 30, 2004, the results of operations for the three months and nine
months ended September 30, 2004 and 2003, and cash flows for the nine months
ended September 30, 2004 and 2003. 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 2003 Annual Report to Shareholders on
Form 10-K.
2. Earnings Per Share
A reconciliation of the component parts of earnings per share for the
three month and nine month periods ended September 30, 2004
and 2003 follows:
Weighted Average
Shares
(In thousands, Net Outstanding Per Share
except per share data) Income Amounts
-------------------------------------
For the quarter ended
September 30, 2004:
Basic EPS:
Net income available to
common shareholders $15,213 74,244 $0.205
Effect of Dilutive Securities:
Stock options --- 736 (0.002)
-------------------------------------
Diluted EPS $15,213 74,980 $0.203
=====================================
For nine months ended
September 30, 2004:
Basic EPS:
Net income available to
common shareholders $43,717 74,242 $0.589
Effect of Dilutive Securities:
Stock options --- 817 (0.007)
-------------------------------------
Diluted EPS $43,717 75,059 $0.582
=====================================
There were no antidilutive stock options as of September 30, 2004.
6
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
2. Earnings Per Share (continued)
Weighted Average
Shares
(In thousands, Net Outstanding Per Share
except per share data) Income Amounts
-------------------------------------
For the quarter ended
September 30, 2003:
Basic EPS:
Net income available to
common shareholders $14,285 74,400 $0.192
Effect of Dilutive Securities:
Stock options --- 1,017 (0.003)
-------------------------------------
Diluted EPS $14,285 75,417 $0.189
=====================================
For nine months ended
September 30, 2003:
Basic EPS:
Net income available to
common shareholders $40,888 74,339 $0.550
Effect of Dilutive Securities:
Stock options --- 941 (0.007)
-------------------------------------
Diluted EPS $40,888 75,280 $0.543
=====================================
There were no antidilutive stock options as of September 30, 2003.
7
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
3. Stock Option Plans
The Company has stock option plans for officers and directors and has adopted
the disclosure only provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (Statement 123), as
amended by Statement of Financial Accounting Standards No. 148, "Accounting
for Stock-Based Compensation-Transition and Disclosure". The Company's stock
option plans are accounted for in accordance with the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and as such, no compensation expense has been recorded for these
plans. Had compensation expense for the Company's stock option plans been
determined consistent with Statement 123, the Company's net income and
earnings per share for the periods ended September 30, 2004 and 2003 would
have been as follows:
(dollars in thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------------
2004 2003 2004 2003
------------------------ -----------------------
Net income:
As reported $15,213 14,285 43,717 40,888
Deduct: total stock-based
compensation expense
determined under fair
value based method
for all awards, net of
related tax effects (165) (232) (496) (694)
------------------------ -----------------------
Pro forma net income $15,048 14,053 43,221 40,194
======================== =======================
Earnings per share:
Basic - as reported $ .205 .192 .589 .550
Basic - pro forma .203 .189 .582 .541
Diluted - as reported .203 .189 .582 .543
Diluted - pro forma .201 .186 .576 .534
The weighted average fair value of each option as of the grant date was
estimated using the Black-Scholes pricing model, and calculated in accordance
with Statement 123. Pro forma expense reflects the recognition of the
options' fair value as an expense over the applicable vesting period. No
options were granted in the first nine months of 2004.
8
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
4. Comprehensive Income (Loss)
Comprehensive income for the three months ended September 30, 2004 and 2003
was $21,219,000 and $10,526,000, respectively. Comprehensive income is
comprised of net unrealized (losses)/gains, net of taxes, on
available-for-sale securities, which were $6,006,000 and ($3,759,000) for the
three months ended September 30, 2004 and 2003, respectively, together with
net income.
Comprehensive income for the nine months ended September 30, 2004 and 2003
was $32,605,000 and $38,370,000, respectively. Comprehensive income is
comprised of net unrealized (losses)/gains, net of taxes, on
available-for-sale securities, which were ($11,112,000) and ($2,518,000) for
the nine months ended September 30, 2004 and 2003, respectively, along with
net income. At September 30, 2004 and December 31, 2003, accumulated other
comprehensive income totaled $9,930,000 and $21,042,000, respectively, and is
reflected as a component of shareholders' equity.
9
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
5. Benefit Plans
The table below outlines the components of the Company's net periodic expense
(benefit) recognized during the periods ended September 30, 2004 and 2003 for
its pension and other postretirement benefit plans:
Components of Net Periodic Expense/(Benefit) for the three months ended September 30,
Pension Benefits Other Postretirement Benefits
------------------------- -----------------------------
2004 2003 2004 2003
------------------------- -----------------------------
Service cost $ 216 174 1 1
Interest cost 410 352 8 12
Expected return on plan assets (348) (416) (58) (94)
Amortization of prior
service cost (credit) 38 6 (114) (101)
Amortization of net actuarial gain - - - (11)
------------------------- -----------------------------
Net periodic expense/(benefit) $ 316 116 (163) (193)
========================= =============================
Components of Net Periodic Expense/(Benefit) for the nine months ended September 30,
Pension Benefits Other Postretirement Benefits
------------------------- -----------------------------
2004 2003 2004 2003
------------------------- -----------------------------
Service cost $ 648 522 3 3
Interest cost 1,230 1,056 24 36
Expected return on plan assets (1,207) (1,248) (305) (282)
Amortization of prior 114 18 (342) (303)
service cost (credit)
Amortization of net actuarial gain - - - (33)
------------------------- -----------------------------
Net periodic expense/(benefit) $ 785 348 (620) (579)
========================= =============================
10
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
5. Benefit Plans (Continued)
Contributions
The Company previously disclosed in its consolidated financial statements for
the year ended December 31, 2003 , that it did not expect to make any
contributions to its pension and other postretirement benefit plans in 2004.
As of September 30, 2004, no contributions have been made. The Company
presently anticipates that, in accordance with IRS limitations and accounting
standards, it will not make any contributions in 2004.
6. Guarantees
The Company does not issue any guarantees that would require
liability-recognition or disclosure, other than its standby letters of
credit. Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Standby
letters of credit generally arise in connection with lending relationships.
The credit risk involved in issuing these instruments is essentially the same
as that involved in extending loans to customers. Contingent obligations
under standby letters of credit totaled approximately $ 3.5 million at
September 30, 2004 and represent the maximum potential future payments the
Company could be required to make. Typically, these instruments have terms of
twelve months or less and expire unused; therefore, the total amounts do not
necessarily represent future cash requirements. Each customer is evaluated
individually for creditworthiness under the same underwriting standards used
for commitments to extend credit and on-balance sheet instruments. Company
policies governing loan collateral apply to standby letters of credit at the
time of credit extension. Loan-to-value ratios are generally consistent with
loan-to-value requirements for other commercial loans secured by similar
types of collateral. The fair value of the Company's standby letters of
credit at September 30, 2004 was insignificant.
11
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
TrustCo Bank Corp NY:
We have reviewed the consolidated statement of condition of TrustCo Bank Corp
NY and subsidiaries (the Company) as of September 30, 2004, the related
consolidated statements of income for the three month and nine month periods
ended September 30, 2004 and 2003, and the related consolidated statements of
cash flows for the nine month periods ended September 30, 2004 and 2003.
These consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with the standards of the Public
Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures
and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight
Board (United States), 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 U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of by the Public
Company Accounting Oversight Board (United States), the consolidated
statement of condition of TrustCo Bank Corp NY and subsidiaries as of
December 31, 2003, 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 February 20, 2004, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying consolidated statement
of condition as of December 31, 2003 is fairly stated, in all material
respects, in relation to the consolidated statement of condition from which
it has been derived.
/s/ KPMG LLP
- -----------------
KPMG LLP
Albany, New York
October 15, 2004
12
TrustCo Bank Corp NY
Management's Discussion and Analysis
September 30, 2004
The review that follows focuses on the factors affecting the financial
condition and results of operations of TrustCo Bank Corp NY ("TrustCo" or
"Company") during the three month and nine month periods ended September 30,
2004, with comparisons to 2003 as applicable. Interest income, 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 2003 Annual Report to Shareholders should be
read in conjunction with this review. Amounts in prior period consolidated
interim financial statements are reclassified whenever necessary to conform
to the current period's presentation.
Forward-looking Statements
Statements included in this review and in future filings by TrustCo with the
Securities and Exchange Commission, in TrustCo's press releases, and in oral
statements made with the approval of an authorized executive officer, which
are not historical or current facts, are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, and are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical earnings and
those presently anticipated or projected. TrustCo wishes to caution readers
not to place undue reliance on any such forward-looking statements, which
speak only as of the date made. The following important factors, among
others, in some cases have affected and in the future could affect TrustCo's
actual results, and could cause TrustCo's actual financial performance to
differ materially from that expressed in any forward-looking statement: (1)
credit risk, (2) interest rate risk, (3) competition, (4) changes in the
regulatory environment, and (5) changes in general business and economic
trends. The foregoing list should not be construed as exhaustive, and the
Company disclaims any obligation to subsequently revise any forward-looking
statements to reflect events or circumstances after the date of such
statements, or to reflect the occurrence of anticipated or unanticipated
events.
Following this discussion is the table "Distribution of Assets, Liabilities
and Shareholders' Equity: Interest Rates and Interest Differential" which
gives a detailed breakdown of TrustCo's average interest earning assets and
interest bearing liabilities for the three months and nine months ended
September 30, 2004 and 2003.
Overview
TrustCo recorded net income of $15.2 million, or $0.203 of diluted earnings
per share for the three months ended September 30, 2004, as compared to net
income of $14.3 million or $0.189 of diluted earnings per share in the same
period in 2003. For the nine month period ended September 30, 2004, TrustCo
recorded net income of $43.7 million, or $0.582 of diluted earnings per
share, as compared to $40.9 million, or $0.543 of diluted earnings per share
for the comparable period in 2003.
13
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
The primary factors accounting for the year to date increases in net income
are:
* A $127.4 million increase in the average balance of interest
earning assets between 2003 and 2004.
* A reduction in the provision for loan losses from $900 thousand in
2003 to $450 thousand in 2004,
* An increase in noninterest income from $25.6 million in 2003 to
$26.1 million in 2004, which includes $10.1 million of net
securities gains in 2003 and $12.4 million of net securities gains
in 2004, and
* A decrease of approximately $1.1 million in noninterest expense
from $36.8 million in 2003 to $35.7 million in 2004.
Partially offsetting these year to date positive factors was a decrease of 3
basis points in net interest margin from 3.88% in 2003 to 3.85% in 2004 and
an increase of 2.30% in the Company's effective rate for income taxes from
30.3% in 2003 to 32.6% in 2004.
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 the
sensitivity of net interest income to changes in interest rates to an
acceptable level while enhancing profitability both on a short-term and
long-term basis.
The following Management's Discussion and Analysis for the third quarter and
first nine months of 2004 compared to the comparable periods in 2003 is
affected by the change in interest rates in the marketplace in which TrustCo
competes. Included in the 2003 Annual Report to Shareholders is a description
of the effect interest rates had on the results for the year 2003 compared to
2002. Most of the same market factors discussed in the 2003 Annual Report
also had a significant impact on 2004 results.
TrustCo competes with other financial service providers based upon many
factors including quality of service, convenience of operations, and rates
paid on deposits and charged on loans. The absolute level of interest rates,
changes in interest rates and customers' expectations with respect to the
direction of interest rates have a significant impact on the volume of loan
and deposit originations in any particular period.
Interest rates have remained at relatively low levels during the third
quarter of 2004 and for the nine months ended September 30,2004. The federal
funds rate increased by a
14
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
total of 50 basis points during the third quarter of 2004 to 1.75%. The
federal funds rate began 2004 at 1.00% and was increased by 25 basis points
at the end of the second quarter. During this same period the 10-year
treasury bond did not change consistently with the increased federal funds
rate. The 10-year treasury was 4.38% at the beginning of 2004 as compared to
4.12% as of September 30, 2004. During the first nine months of 2004 the low
in the 10-year treasury was during the first quarter at approximately 3.72%
and the high was approximately 4.70% during the second quarter.
These changes in interest rates have an effect on the Company relative to the
interest income on loans, securities and federal funds sold as well as on
interest expense on deposits and borrowings. Residential real estate loans
and longer term investments are most affected by the changes in longer term
market interest rates such as the ten-year treasury. The overnight deposits
in federal funds sold and other short-term investments are affected primarily
by changes in the federal funds target rate. Deposit interest rates are most
influenced by short-term market interest rates. Also, changes in interest
rates have an effect on the securities available for sale portfolio which is
recorded at market value.
For the third quarter of 2004 the net interest margin increased to 3.83% from
3.72% a year ago. For the nine months ended September 30, 2004 the net
interest margin was 3.85% compared to 3.88% for the comparable period in
2003. The quarterly results reflect the following significant factors:
- - The average balance of the securities available for sale portfolio
increased by $270.1 million and the average yield increased by 36 basis
points. The increase in balance reflects investments made of excess
liquidity as rates were changing; the increase in the yield is due to
the increased opportunity in the securities marketplace,
- - the average balance of federal funds sold decreased by $53.7 million and
the average yield increased by 39 basis points. The Company invested
part of the excess liquidity into the securities portfolio while at the
same time the increase in the yield is a result of the increased target
federal funds rate,
- - the average loan portfolio decreased by $59.7 million due to a
significant residential real estate refinancing wave that occurred
during 2003 and into 2004. These loan refinancings effectively decreased
the average yield by 41 basis points on the portfolio, and
- - the average balance of interest bearing liabilities increased by $135.8
million at the same overall rate as in the third quarter of 2003.
These changes in balances and rates resulted in an 11 basis point increase
in the
15
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
overall net interest margin for the third quarter of 2004. The Company's
strategy during the third quarter was to attract deposit customers and to
lock in longer-term certificates of deposits and other core deposit
relationships. With these new funds the Company reduced slightly the federal
funds position and invested the funds into the securities portfolio. The
shift in assets from the loan portfolio to securities is in response to
opportunities available in the securities marketplace during this time
period. Due to the relatively low interest rate environment and the magnitude
of the national refinancing trends in mortgage loans, there were large
issuances of new securities by the various government agencies. These new
issuances provided the opportunity for the Company to make additional
portfolio purchases. The Company continues to stress the importance of the
loan product and anticipates that as interest rates increase and the
refinance market stabilizes there will be increased opportunity in the loan
category.
Earning Assets
Total average interest earning assets increased from $2.60 billion for the
third quarter of 2003 to $2.76 billion in 2004 with an average yield of 5.25%
in 2004 and 5.14% in 2003. Income on earning assets increased by $2.8 million
during this same time-period from $33.4 million in 2003 to $36.2 million in
2004. The increase in interest income on earning assets was attributable to
the increase in yield on these assets and average balances outstanding.
For the nine month period ended September 30, 2004, the average balance of
interest earning assets was $2.72 billion, an increase of $127.4 million from
the average balance for the comparable period in 2003 of $2.60 billion. The
average yield on interest earning assets was 5.50% for 2003, compared to
5.25% in 2004. The increase in the average balance of earning assets offset
the decrease in the yield earned on these assets, thereby resulting in
interest income of $107.3 million for the nine months of 2004, compared to
$107.2 million for the nine months of 2003.
Loans
The average balance of loans for the third quarter was $1.17 billion in 2004
and $1.23 billion in 2003. The yield on loans decreased from 6.76% in 2003 to
6.35% in 2004. The combination of the lower average balances coupled by lower
rates resulted in a decrease of $2.3 million in interest income on loans.
For the nine month period ended September 30, 2004, the average balance in
the loan portfolio was $1.17 billion compared to $1.31 billion for the
comparable period in 2003. The average yield decreased from 6.96% in 2003 to
6.39% in 2004. The decrease in the average balance of loans outstanding and
the decrease in the yield resulted in total interest income of $55.9 million
in 2004 compared to $68.2 million in 2003.
During the third quarter and first nine months of 2004, the balance of the
loan portfolio
16
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
decreased primarily as a result of residential mortgage loans. Decreases were
also noted in other loan areas as well, with the exception of the increase
noted in the home equity credit line product. The average balance of
residential mortgage loans for the first nine months of 2004 was $780.8
million compared to $939.8 million for the comparable period in 2003, a
decrease of 16.9%. The average yield on residential mortgage loans decreased
by 50 basis points during this same period. The third quarter results were
very similar to those for the nine months. The average balance of residential
mortgage loans decreased from $855.6 million in the third quarter of 2003 to
$782.9 million in 2004. The average yield for the third quarter was 7.09% for
2003 compared to 6.64% for 2004.
TrustCo actively markets the residential mortgage loan products within its
market territory. Mortgage loan rates are affected by a number of factors
including the prime rate, the federal funds rate, rates set by competitors
and secondary market participants. As noted previously, mortgage interest
rates generally trended downward over the last several years as a result of
national economic policy in the United States. During this period of low
interest rates, TrustCo aggressively marketed the unique aspects of its loan
products thereby attempting to create a differentiation from other lenders.
These unique aspects include low closing costs, fast turnaround time on loan
approvals, no escrow or mortgage insurance requirements and the fact that the
Company holds these loans in portfolio and does not sell them into secondary
markets. However, the decrease in the residential mortgage loan portfolio
reflects the results of historical low interest rates in the residential loan
area and the desire by loan customers to obtain these historic low rates. In
light of TrustCo's decision to hold loans in portfolio, management made the
decision to offer loans at slightly higher interest rates compared to the
local competition. The end result was the decline in balances in this
portfolio from a combination of lower origination's and higher prepayments
from refinancings with other lenders. TrustCo was somewhat successful in its
marketing efforts with respect to the unique aspects of its loan products,
however, these successes were not enough to offset the amount of refinancings
as a result of customers looking for the lowest interest rates being offered
in the marketplace.
During the third quarter 2004 TrustCo lowered its interest rates on new loan
originations to match the loan market. This was done at a time when interest
rates began to increase and loan refinancings were subsiding.
Though there is debate among nationally recognized economists, the general
tenor of the national economy is for improvement and increases in long-term
interest rates. Consequently the significant amount of refinancing that has
occurred may be substantially completed with only residual effects into the
remainder of 2004. Assuming a rise in long-term interest rates, the Company
would anticipate that the unique features of its loan product will once again
attract customers in the residential mortgage loan area.
17
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
The impact of the changes in the benchmark interest rate indexes (prime rate,
federal funds rate, etc.) effects the yield earned on the commercial and home
equity loan portfolios. The average yield earned on these loan types for 2004
were 49 bp and 5 bp, respectively, less than the average yields earned during
the first nine months of 2003. For 2003 and 2004 the prime rate ranged from
4% (for virtually all of 2003) to 4.75% (which was reached at the end of the
third quarter 2004) thereby having only a slight effect on the yield earned
during these time periods on home equity credit lines. The decrease in the
commercial loan yield during the nine months of 2004 versus 2003 is the
result of certain customers with fixed rate loans refinancing to lower rates
during 2004.
The average balance of home equity lines of credit increased to $183.9
million during the third quarter of 2004 compared to $158.9 million for the
comparable period in 2003. The average yield increased from 3.89% in the
third quarter of 2003 to 4.25% in 2004. During the third quarter of 2004 the
prime rate, which the home equity product is tied to, increased by 50 basis
points in addition to a 25 basis point increase at the end of the second
quarter of 2004. This resulted in a prime rate of 4.75% at September 30, 2004
and 4.0% at September 30, 2003.
The nine months results also reflect growth, with an average balance in 2004
of $179.2 million compared to $150.8 million in 2003. The average yield for
these periods was 4.06% in 2003 and 4.01% in 2004. The increase in the
average balance of home equity lines of credit reflects the consumers desire
to obtain the lowest cost financing vehicles available. TrustCo's home equity
line of credit is a discount to prime rate during an introductory period and
then floats with prime over the life of the line. Closing costs are waived
for these loans as long as the line remains active for a set period of time.
Though rates on home equity lines of credit began to increase during the
third quarter of 2004, overall yields were down 5 basis points for the year
2004 versus 2003.
Securities Available for Sale
During the third quarter of 2004, the average balance of securities available
for sale was $1.08 billion with a yield of 5.82%, compared to $811.3 million
for the third quarter of 2003 with a yield of 5.46%. The combination of the
increase in average balance and the increase in the yields caused an increase
in interest income on securities available for sale of $4.7 million between
the third quarter of 2003 and 2004.
The increase in average balance caused a $12.8 million increase in interest
income on securities available for sale during the first nine months of 2004
versus the first nine months of 2003. The total average balance of securities
available for sale during the
18
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
nine months of 2003 was $764.9 million with an average yield of 6.00%
compared to an average balance for 2004 of $1.07 billion with a yield of
5.90%. The decrease of 10 basis points in the yield on securities available
for sale for the nine months of 2004 compared to 2003 is the result of
additional investments made in mortgage related securities and a reduction in
the balance of state and political subdivision securities.
Within the portfolio of securities available for sale, there was a $195.3
million increase in the average balance of US Treasury and agency obligations
from $524.4 million in the third quarter of 2003 to $719.7 million for the
comparable period in 2004. The yield on this category of securities increased
from 4.56% in 2003 to 5.52% in 2004.
The nine month balance for US Treasury and agency obligations increased from
$418.7 million in 2003 to $730.2 million in 2004. The yield was 5.60% in 2004
as compared to 4.80% in 2003.
The increased balances of securities available for sale were in response to
the historical low yield available in the federal funds marketplace,
increased cash flow as a result of loan refinancing and deposit inflows.
Though the investment yields on 2004 purchases are overall lower than the
yield earned on the existing securities portfolio, the new investments
provide additional interest income and help to offset the loss of interest
income from other areas. Virtually all of the new purchases of US Treasury
and agency obligations were callable agency bonds and mortgage related
securities issued by Freddie Mac and FNMA. These bonds have call features
that allow the issuer to redeem the bonds at predetermined times.
The average balance of mortgage-backed securities increased by $119.1 million
during the third quarter of 2004 compared to 2003 with a yield of 4.69% in
2004 and 5.94% in 2003. During 2004 additional investments were made in
short-term collateralized mortgage obligations to supplement the investment
portfolio. The impact on the year to date results was also due to purchases
of these collateralized mortgage obligations.
As previously noted, during 2003 and into 2004 management decided to invest
some of the additional cash flows coming from the loan portfolio refinancings
into the securities available for sale portfolio so as to provide interest
income and as a means of utilizing these funds other than in overnight
investments. The securities purchased during this time period have been
primarily collateralized mortgage obligations and US Treasury and agency
obligations consistent with the Company's past practices. While this strategy
provides the Company with additional interest income over the federal funds
rate, it does subject these assets to a greater degree of interest rate risk.
General market interest rate increases impact the market value of the
securities available for sale portfolio thereby creating a reduction in the
overall portfolio's unrealized gain position and lowering the Company's
accumulated other comprehensive income (a
19
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
component of shareholders' equity). As market interest rates increased during
2004, the accumulated other comprehensive income decreased from $21.0 to $9.9
million during the first nine months of 2004.
Federal Funds Sold and Other Short-Term Investments
During the third quarter of 2004, the average balance of federal funds sold
and other short-term investments was $500.2 million with an average yield of
1.43%, compared to the average balance for the three month period ended
September 30, 2003 of $554.0 million with an average yield of 1.04%. The
decrease in the average balance and the increase in the average yield
resulted in total interest income on federal funds sold and other short-term
investments of $1.8 million for 2004 compared to $1.4 million for 2003.
During the nine month period ended September 30, 2004, the average balance of
federal funds sold and other short-term investments was $490.9 million with a
yield of 1.14% compared to an average balance of $523.4 million in 2003 with
an average yield of 1.17%.
The federal funds sold and other short-term investments portfolio is utilized
to generate additional interest income and liquidity as funds are waiting to
be deployed into the loan and securities portfolios.
Funding Opportunities
TrustCo utilizes various funding sources to support its earning asset
portfolio. The vast majority of the Company's funding comes from traditional
deposit vehicles such as savings, interest bearing checking and time deposit
accounts.
During the quarter, total average interest bearing liabilities were $2.38
billion for 2004 and $2.25 billion for 2003. The rate paid on total interest
bearing liabilities was 1.64% for both 2004 and 2003. Total interest expense
for the third quarter increased approximately $490 thousand to $9.8 million
for 2004 compared to $9.3 million for 2003.
Similar changes in interest bearing liabilities were noted for the
nine-month period as was discussed for the quarter except the average yield
decreased from 1.86% in 2003 to 1.61% in 2004. The decrease in yield for the
nine months of 2004 versus 2003 of 37 basis points is due primarily to the
decrease in interest rates on certificates of deposits, money market and
savings accounts. These deposit yields decreased due to general trends in
market rate indexes during this time period. Total average interest bearing
liabilities were $2.36 billion for the nine-month period ended September 30,
2004 and $2.25 billion for 2003.
Demand deposit balances increased during the third quarter of 2004
compared to the third quarter of 2003. Demand deposits averaged $218.4
million in 2004 and $197.6
20
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
million in 2003. On a year to date basis, demand deposits were $207.4
million compared to $186.4 million in 2003.
Interest bearing deposit balances have increased from $2.17 billion for the
third quarter of 2003 to $2.28 billion for the same period in 2004. Each of
the deposit categories experienced increases, except money market accounts,
with notable increases in the savings account category that increased by
$50.1 million on a quarter to quarter basis between 2003 and 2004. Likewise,
the average balance of interest bearing deposit accounts for the nine-month
periods have also increased. For the nine months of 2004 the average balance
of interest bearing deposits was $2.26 billion compared to $2.14 billion in
2003. The increases in the average balance of interest bearing deposits is
attributable to movement by customers of funds back into the banking system
and away from the stock and bond markets. This reinvestment of funds back
into the banking system by customers is also supplemented by the expanded
branch network and the new deposits that are being attracted to TrustCo in
these new territories.
Short-term borrowings for the quarter were $107.5 million in 2004 compared to
$75.6 million in 2003. The average rate increased during this time period
from 0.70% to 0.94% for the third quarter of 2004, reflecting recent
increases in the federal funds rate. For the nine months ended September 30,
2004 the average balance of short term borrowings was $106.4 million as
compared to $115.8 million in 2003. The average yield was 0.79% in 2004 and
0.85% in 2003.
Net Interest Income
Taxable equivalent net interest income increased to $26.4 million for the
third quarter of 2004. The net interest spread increased 11 basis points
between 2003 and 2004 and the net interest margin increased by 11 basis
points.
Similar changes were noted in taxable equivalent net interest income, net
interest spread and net interest margin for the nine-month period ended
September 30, 2004, compared to the same period in 2003. Net interest income
for the first nine months of 2004 was $78.7 million, an increase of $2.9
million from the $75.9 million for the first nine months of 2003. Net
interest spread was 3.64% for both September 30, 2004 and 2003, while net
interest margin decreased 3 basis points to 3.85% for the nine month period
ended September 30, 2004, compared to the nine month period ended September
30, 2003.
Nonperforming Assets
Nonperforming assets include nonperforming loans which are those loans
in a nonaccrual status, loans that have been restructured, and loans past due
three payments 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.
21
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
Impaired loans are considered to be those commercial and commercial real
estate loans in a nonaccrual status and loans restructured since January 1,
1995, when the accounting standards required the identification, measurement
and reporting of impaired loans. The following will describe the
nonperforming assets of TrustCo as of September 30, 2004.
Nonperforming loans: Total nonperforming loans were $3.1 million at
September 30, 2004, a decrease from the $3.6 million of nonperforming loans
at September 30, 2003. Nonaccrual loans were $338 thousand at September 30,
2004 and zero at September 30, 2003. Loans past due 3 payments or more and
still accruing interest were $8 thousand at September 30, 2004 and zero at
September 30, 2003. Restructured loans were $2.8 million at September 30,
2004 compared to $3.6 million at September 30, 2003.
Of the $3.1 million of nonperforming loans at September 30, 2004, all are
residential real estate or retail consumer loans. The vast majority of
nonperforming loans in the past were concentrated in the commercial and
commercial real estate portfolios. Since 2000, there has been a continued
shifting in the components of TrustCo's problem loans and charge offs from
commercial and commercial real estate to the residential real estate and
retail consumer loan portfolios. Contributing factors to this shift include:
* The overall emphasis within TrustCo for residential real estate
originations,
* The relatively weak economic environment in the upstate New York
territory, and
* The relative depression in real estate values in many of the
Company's market areas that has occurred since the middle of the
1990's, thereby causing a reduction in the collateral that supports
the real estate loans.
Consumer loan defaults and bankruptcies have increased over the last several
years and this has led to an increase in defaults on loans. TrustCo strives
to identify borrowers that are experiencing financial difficulties and works
aggressively to minimize losses or exposures.
Total impaired loans at September 30, 2004 of $2.6 million, consisted of
restructured retail loans. During the first nine months of 2004, there have
been $335 thousand of commercial loan charge offs and $5.1 million of
mortgage and consumer loan charge offs as compared with $146 thousand of
commercial loan charge offs and $7.8 million of mortgage and consumer loan
charge offs in the first nine months of 2003. Recoveries during the first
nine month periods have been $4.9 million in 2004 and $3.5 million in 2003.
22
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
Real estate owned: Total real estate owned was zero at September 30, 2004 and
at September 30, 2003.
Allowance for loan losses: The balance of the allowance for loan losses is
maintained at a level that is, in management's judgment, representative of
the amount of the risk inherent in the loan portfolio.
At September 30, 2004, the allowance for loan losses was $48.7 million, a
decrease from the allowance at September 30, 2003 of $49.1 million. The
allowance represents 4.10% of the loan portfolio as of September 30, 2004
compared to 4.08% at September 30, 2003. For the nine month periods, the
provision charged to expense was $450 thousand for 2004 and $900 thousand for
2003.
In deciding on the adequacy of the allowance for loan losses, management
reviews the current nonperforming loan portfolio as well as loans that are
past due and not yet categorized as nonperforming for reporting purposes.
Also, there are a number of other factors that are taken into consideration,
including:
* The magnitude and nature of the recent loan charge offs,
* The change in the loan portfolio and the implication that has in
relation to the economic climate in the bank's business territory,
* Changes in underwriting standards in the competitive environment in
which TrustCo operates,
* Significant growth in the level of losses associated with
bankruptcies in New York State and the time period needed to
foreclose, secure and dispose of collateral, and
* The relatively weak economic environment in the upstate New York
territory combined with depressed real estate prices in many of the
Company's market areas.
In the Company's primary market area, consumer bankruptcies and defaults in
general have risen significantly since the 1990's. This trend appears to be
continuing as a result of economic strife and the relative ease of access by
consumers to additional credit. Job growth in the upstate New York area has
been modest to declining and there continues to be a shifting of higher
paying jobs in manufacturing and government to lower paying service jobs.
Management continues to monitor these and other asset quality trends as part
of the review of the allowance adequacy.
23
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
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 three months ended September 30, 2004 was
$9.0 million, as compared to $10.2 million for the comparable period in 2003.
During these periods, the Company recorded net securities gains of $4.7
million for 2003 and $4.6 million for 2004. Excluding these securities
transactions, noninterest income decreased from $5.5 million in the third
quarter of 2003 to $4.4 million in 2004.
Similar results were also recognized for the nine months of 2004 compared to
2003. Total noninterest income was $26.1 million for 2004 compared to $25.6
million for 2003. Excluding net securities transactions, noninterest income
was $13.7 million for 2004 and $15.5 million for 2003.
Gross realized gains on securities transactions have been significant for
both the nine month and quarterly results in 2004 and 2003. Gross realized
losses on securities transactions were immaterial during the nine months
ended September 30, 2004 and 2003. The level of these transactions reflect
management's decision to liquidate certain investments as interest rates were
at historically low levels and therefore the gains on security sales were
high. These sales provide the Company with additional liquidity for potential
reinvestment at higher interest rates later in 2004 or in 2005. Management
also has begun liquidating certain equity investments that had accumulated
over the last several years as part of the expansion program to acquire other
companies. Proposed changes in accounting standards relative to investment
securities may limit the Company's ability to record similar transactions in
the future (see "Proposed Accounting Standards").
Trust department income decreased by $379 thousand to $1.4 million for the
third quarter of 2004. The reduction in trust fee income is the result of
additional nonrecurring estate fee income recognized in 2003. Service fees
and other income are also down between 2004 and 2003 due primarily to loan
volume reductions and refinancing activities.
24
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
Noninterest Expenses
Total noninterest expense for the third quarter of 2004 was $11.5 million,
down slightly from $11.6 million in the third quarter of 2003. For the nine
months ended September 30, 2004, total noninterest expense was $35.7 million
compared to $36.8 million in 2003.
Salaries and employee benefits expense decreased from $5.1 million for the
third quarter of 2003 to $5.0 million for the comparable period in 2004.
Total salaries and employee benefits were $15.4 million in both 2004 and
2003.
Net occupancy expense increased slightly during the quarter from $1.4 million
in 2003 to $1.5 million in 2004 due primarily to the new branch operations
and the cost of utilities. Similar increases were also noted during the nine
month period with net occupancy expense of $5.0 million for 2004 compared to
$4.6 million in 2003.
Equipment expense decreased during the quarter by approximately $187 thousand
from $569 thousand in 2003 to $382 thousand in 2004 as a result of reduced
computer expense due to contracts not being renewed in 2004 as a result of
the data processing conversion. On a year to date basis, equipment expense
decreased by $1.2 million due to the non renewal of computer contracts and
the write-offs in 2003 of equipment and software no longer utilized.
Professional service expenses for the third quarter of 2004 were $900
thousand, an increase of $16 thousand from the comparable period in 2003. On
a year to date basis, professional service expenses were $2.7 million in 2004
compared to $2.3 million in 2003. Included in the 2004 expense were
additional fees paid for consultants to assist in the upcoming 2004 computer
software conversion. Those expenses were not incurred in 2003.
Outsourced services decreased from $1.3 million in the third quarter of 2003
to $1.1 million for the third quarter of 2004. On a year to date basis,
outsourced services were $3.3 million in 2004 compared to $4.4 million in
2003. These costs are for data processing, item processing and certain back
office operations that were transferred to a third party vendor in the fourth
quarter of 2002. The decrease in outsourced services expense between 2003 and
2004 was the elimination of a data input outsourced service in the latter
part of 2003 that was brought back in-house. There was a reduction in the
fees paid to the third party vendor as a result of this change, however the
additional work was absorbed by the existing TrustCo employees.
Income Taxes
In the third quarter of 2004 and 2003, TrustCo recognized income tax
expense of $7.3 million and $6.8 million, respectively. This resulted in an
effective tax rate of 32.4% for
25
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
2004 and 32.1% for 2003. For the nine months of 2004, total income tax
expense was $21.1 million compared to $17.8 million for 2003. This resulted
in an effective tax rate of 32.6% for 2004 and 30.3% for 2003. This increase
was primarily the result of a reduction in the amount invested in tax
advantaged states and political subdivisions during these time periods.
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 retained in the
Company (after the dividends on the common stock).
Total shareholders' equity at September 30, 2004 was $224.2 million, a
decrease of $2.6 million from the year-end 2003 balance of $226.8 million.
The change in total shareholders' equity between year-end 2003 and September
30, 2004 reflects net income of $10.3 million retained by TrustCo (net income
of $43.7 million less dividends to shareholders of $33.4 million) and a $5.3
million increase as a result of stock option exercises partially offset by an
$11.1 million reduction in the net unrealized gain on securities available
for sale, net of tax, and a $7.1 million net increase in treasury stock.
TrustCo declared dividends of $0.450 per share during the first nine months
of 2004 and 2003. These resulted in a dividend payout ratio of 81.7% in 2003
and 76.4% in 2004. The Company achieved the following capital ratios as of
September 30, 2004 and 2003:
September 30, Minimum Regulatory
2004 2003 Guidelines
----------------------------------------------
Tier 1 risk adjusted
capital 16.80% 16.60% 4.00%
Total risk adjusted
capital 18.08% 17.89% 8.00%
In addition, at September 30, 2004 and 2003, the consolidated equity to total
assets ratio (excluding the mark to market effect of securities available for
sale) was 7.58% and 7.70%, respectively.
Proposed Accounting Standards
On September 30, 2004, the Financial Accounting Standards Board ("FASB")
issued Staff Position No. EITF Issue 03-01-1, "Effective Date of Paragraphs
10-20 of EITF
26
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2004
Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments," which delays the effective date for the
measurement and recognition guidance contained in Emerging Issues Task Force
("EITF") Issue No. 03-1. EITF Issue No. 03-1 provides guidance for evaluating
whether an investment is other- than-temporarily impaired and was originally
effective for evaluations made in periods beginning after June 15, 2004 (July
1, 2004 for the Company). This delay does not suspend the requirement to
recognize other-than-temporary impairments as required by existing
authoritative literature. Also, the disclosure guidance in paragraphs 21 and
22 of EITF Issue No. 03-1 remains effective. The delay will be suspended
concurrent with the final issuance of Staff Position No. EITF 03-1-a, which
is expected to provide implementation guidance on matters such as impairment
evaluations for declines in value caused by increases in interest rates
and/or sector spreads. The impact of the final issuance of Staff Position No.
EITF 03-01-a on the Company's financial condition and results of operations
cannot be determined at the present time.
In March 2004, the FASB issued an Exposure Draft, "Share-Based Payment, an
amendment of FASB Statements No. 123 and 95." The Exposure Draft proposes
changes in accounting that would replace existing requirements under FASB
Statement No. 123 and Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees." Under the proposal, all forms of share-based
payments to employees, including employee stock options, would be treated the
same as other forms of compensation by recognizing the related cost in the
income statement. The expense of the award would generally be measured at
fair value at the grant date and recognized over the vesting period. Current
accounting literature relating to so-called fixed plan employee stock options
permits an election to disclose the associated expense in the notes to the
financial statements without recognition in the income statement. The
proposal would permit either prospective or retrospective adoption and
presently is proposed to be effective for public companies beginning July 1,
2005.
Critical Accounting Policies:
Pursuant to recent SEC guidance, management of the Company is encouraged to
evaluate and disclose those accounting policies that are judged to be
critical policies - those most important to the portrayal of the Company's
financial condition and results, and that require management's most difficult
subjective or complex judgments.
Management considers the accounting policy relating to the allowance for loan
losses to be a critical accounting policy given the inherent uncertainty in
evaluating the levels of the allowance required to cover credit losses in the
portfolio and the material effect that such judgments can have on the results
of operations. Included in Note 1 to the Consolidated Financial Statements
contained in the Company's 2003 Annual Report on Form 10-K is a description
of the significant accounting policies that are utilized by the Company in
the preparation of the Consolidated Financial Statements.
27
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average
balance sheet, related interest income and expense and the average annualized
yields on interest earning assets and annualized rates on interest bearing
liabilities of TrustCo (adjusted for tax equivalency) for each of the
reported periods. Nonaccrual loans are included in loans for this analysis.
The average balances of securities available for sale are calculated using
amortized costs for these securities. Included in the balance of
shareholders' equity is unrealized appreciation, net of tax, in the available
for sale portfolio of $7.4 million in 2004 and $16.4 million in 2003. The
subtotals contained in the following table are the arithmetic totals of the
items contained in that category.
Three Three
Months Months
2004 2003
----------- -----------
Average Interest Average Average Interest Average
(dollars in thousands) Balance Rate Balance Rate
----------- ----------- ----- ----------- -------- -----
Assets
Commercial loans $ 195,705 $ 3,330 6.80% $ 206,440 $ 3,727 7.22%
Residential mortgage loans 782,855 12,993 6.64% 855,608 15,175 7.09%
Home equity lines of credit 183,941 1,967 4.25% 158,882 1,557 3.89%
Installment loans 12,443 364 11.63% 13,746 445 12.85%
----------- -------------------- ----------- -----------------
Loans, net of unearned income 1,174,944 18,654 6.35% 1,234,676 20,904 6.76%
Securities available for sale:
U.S. Treasuries and agencies 719,707 9,927 5.52% 524,408 5,984 4.56%
Mortgage-backed securities
and collateralized mtg. obligations 176,255 2,066 4.69% 57,142 848 5.94%
States and political subdivisions 161,884 3,161 7.81% 190,708 3,735 7.83%
Other 23,561 577 9.80% 39,041 509 5.21%
----------- -------------------- ----------- -----------------
Total securities available for sale 1,081,407 15,731 5.82% 811,299 11,076 5.46%
Federal funds sold and other
short-term investments 500,249 1,798 1.43% 553,974 1,446 1.04%
----------- -------------------- ----------- -----------------
Total Interest earning assets 2,756,600 36,183 5.25% 2,599,949 33,426 5.14%
-------------------- -----------------
Allowance for loan losses (49,445) (50,490)
Cash and non-interest earning assets 141,112 154,335
----------- -----------
Total assets $ 2,848,267 $ 2,703,794
=========== ===========
Liabilities and shareholders' equity
Deposits:
Interest bearing checking $ 334,792 408 0.48% $ 321,309 391 0.48%
Money market accounts 142,061 326 0.91% 149,830 423 1.12%
Savings 825,879 2,042 0.98% 775,782 1,922 0.98%
Time deposits 972,350 6,765 2.77% 924,024 6,435 2.76%
----------- -------------------- ----------- -----------------
Total interest bearing deposits 2,275,082 9,541 1.67% 2,170,945 9,171 1.68%
Short-term borrowings 107,495 254 0.94% 75,606 133 0.70%
Long-term debt 122 2 5.19% 303 3 5.86%
----------- -------------------- ----------- -----------------
Total interest bearing liabilities 2,382,699 9,797 1.64% 2,246,854 9,307 1.64%
----------- --------
Demand deposits 218,372 197,572
Other liabilities 28,853 42,009
Shareholders' equity 218,343 217,359
----------- -----------
Total liab. & shareholders' equity $ 2,848,267 $ 2,703,794
=========== ===========
Net interest income 26,386 24,119
----------- --------
Net interest spread 3.61% 3.50%
Net interest margin (net interest
Income to total interest earning
assets) 3.83% 3.72%
Tax equivalent adjustment 1,232 1,385
----------- --------
Net interest income per book $ 25,154 $ 22,734
=========== ========
Change in Variance Variance
Interest Balance Rate
Income/ Change Change
(dollars in thousands) Expense
-------- -------- --------
Assets
Commercial loans $ (397) $ (136) $ (261)
Residential mortgage loans (2,182) (1,712) (470)
Home equity lines of credit 410 966 (556)
Installment loans (81) (43) (38)
---------------------------------------------
Loans, net of unearned income (2,250) (925) (1,325)
Securities available for sale:
U.S. Treasuries and agencies 3,943 3,812 131
Mortgage-backed securities
and collateralized mtg. obligations 1,218 3,036 (1,818)
States and political subdivisions (574) (497) (77)
Other 68 53 15
---------------------------------------------
Total securities available for sale 4,655 6,404 (1,749)
Federal funds sold and other
short-term investments 352 145 207
---------------------------------------------
Total Interest earning assets 2,757 5,624 (2,867)
---------------------------------------------
Allowance for loan losses
Cash and non-interest earning assets
Total assets
Liabilities and shareholders' equity
Deposits:
Interest bearing checking 17 142 (125)
Money market accounts (97) 384 (481)
Savings 120 1,624 (1,504)
Time deposits 330 2,916 (2,586)
---------------------------------------------
Total interest bearing deposits 370 5,066 (4,696)
Short-term borrowings 121 69 52
Long-term debt (1) (1) ---
---------------------------------------------
Total interest bearing liabilities 490 5,134 (4,644)
---------------------------------------------
Demand deposits
Other liabilities
Shareholders' equity
Total liab. & shareholders' equity
Net interest income 2,267 490 1,777
---------------------------------------------
Net interest spread
Net interest margin (net interest
Income to total interest earning
assets)
Tax equivalent adjustment
Net interest income per book
28
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average
balance sheet, related interest income and expense and the average annualized
yields on interest earning assets and annualized rates on interest bearing
liabilities of TrustCo (adjusted for tax equivalency) for each of the
reported periods. Nonaccrual loans are included in loans for this analysis.
The average balances of securities available for sale are calculated using
amortized costs for these securities. Included in the balance of
shareholders' equity is unrealized appreciation, net of tax, in the available
for sale portfolio of $12.7 million in 2004 and $23.5 million in 2003. The
subtotals contained in the following table are the arithmetic totals of the
items contained in that category.
Nine Nine
Months Months
2004 2003
----------- -----------
Average Interest Average Average Interest Average
(dollars in thousands) Balance Rate Balance Rate
----------- --------- ----- ----------- --------- -----
Assets
Commercial loans $ 193,745 $ 9,938 6.84% $ 203,577 $ 11,205 7.33%
Residential mortgage loans 780,841 39,474 6.74% 939,841 51,065 7.24%
Home equity lines of credit 179,225 5,379 4.01% 150,751 4,575 4.06%
Installment loans 12,528 1,092 11.65% 14,261 1,398 13.12%
----------- ------------------ ----------- ------------------
Loans, net of unearned income 1,166,339 55,883 6.39% 1,308,430 68,243 6.96%
Securities available for sale:
U.S. Treasuries and agencies 730,167 30,653 5.60% 418,707 15,082 4.80%
Mortgage-backed securities
and collateralized mtg. obligations 138,648 4,916 4.73% 61,334 2,853 6.20%
States and political subdivisions 170,471 10,104 7.90% 211,881 12,642 7.96%
Other 27,634 1,571 7.58% 72,950 3,842 7.02%
----------- ------------------ ----------- ------------------
Total securities available for sale 1,066,920 47,244 5.90% 764,872 34,419 6.00%
Federal funds sold and other
short-term investments 490,874 4,198 1.14% 523,385 4,586 1.17%
----------- ------------------ ----------- ------------------
Total Interest earning assets 2,724,133 107,325 5.25% 2,596,687 107,248 5.50%
------------------ ------------------
Allowance for loan losses (49,321) (51,828)
Cash and non-interest earning assets 148,867 158,721
----------- -----------
Total assets $ 2,823,679 $ 2,703,580
=========== ===========
Liabilities and shareholders' equity
Deposits:
Interest bearing checking $ 330,664 1,193 0.48% $ 318,090 1,281 0.54%
Money market accounts 157,260 1,154 0.98% 147,548 1,484 1.34%
Savings 807,514 5,947 0.98% 754,185 6,865 1.22%
Time deposits 962,082 19,648 2.73% 915,735 20,976 3.06%
----------- ------------------ ----------- ------------------
Total interest bearing deposits 2,257,520 27,942 1.65% 2,135,558 30,606 1.92%
Short-term borrowings 106,425 633 0.79% 115,844 739 0.85%
Long-term debt 162 7 5.46% 349 14 5.46%
----------- ------------------ ----------- ------------------
Total interest bearing liabilities 2,364,107 28,582 1.61% 2,251,751 31,359 1.86%
--------- ---------
Demand deposits 207,387 186,406
Other liabilities 31,442 38,141
Shareholders' equity 220,743 227,282
----------- -----------
Total liab. & shareholders' equity $ 2,823,679 $ 2,703,580
=========== ===========
Net interest income 78,743 75,889
--------- ---------
Net interest spread 3.64% 3.64%
Net interest margin (net interest
Income to total interest earning
assets) 3.85% 3.88%
Tax equivalent adjustment 3,860 5,061
--------- ---------
Net interest income per book $ 74,883 $ 70,828
========= =========
Change in Variance Variance
Interest Balance Rate
Income/ Change Change
(dollars in thousands) Expense
--------- -------- --------
Assets
Commercial loans $ (1,267) $ (434) $ (833)
Residential mortgage loans (11,591) (9,094) (2,497)
Home equity lines of credit 804 1,163 (359)
Installment loans (306) (163) (143)
----------------------------------------
Loans, net of unearned income (12,360) (8,528) (3,832)
Securities available for sale:
U.S. Treasuries and agencies 15,571 15,054 517
Mortgage-backed securities
and collateralized mtg. obligations 2,063 3,344 (1,281)
States and political subdivisions (2,538) (2,198) (340)
Other (2,271) (1,771) (500)
----------------------------------------
Total securities available for sale 12,825 14,429 (1,604)
Federal funds sold and other
short-term investments (388) (160) (228)
----------------------------------------
Total Interest earning assets 77 5,741 (5,664)
----------------------------------------
Allowance for loan losses
Cash and non-interest earning assets
Total assets
Liabilities and shareholders' equity
Deposits:
Interest bearing checking (88) 89 (177)
Money market accounts (330) 267 (597)
Savings (918) 1,105 (2,023)
Time deposits (1,328) 2,087 (3,415)
----------------------------------------
Total interest bearing deposits (2,664) 3,548 (6,212)
Short-term borrowings (106) (69) (37)
Long-term debt (7) (7) ---
----------------------------------------
Total interest bearing liabilities (2,777) 3,472 (6,249)
----------------------------------------
Demand deposits
Other liabilities
Shareholders' equity
Total liab. & shareholders' equity
Net interest income 2,854 2,269 585
----------------------------------------
Net interest spread
Net interest margin (net interest
Income to total interest earning
assets)
Tax equivalent adjustment
Net interest income per book
29
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
As detailed in the Annual Report to Shareholders as of December 31, 2003, the
Company is subject to interest rate risk as its principal market risk. As
noted in Item 2 (Management's Discussion and Analysis for the nine months
ended September 30, 2004), the Company continues to respond to changes in
interest rates in a fashion to position the Company to meet both short term
earning goals but to also allow the Company to respond to changes in interest
rates in the future. The average balance of federal funds sold and other
short-term investments has decreased from $523.4 million in 2003 to $490.9
million in 2004. As investment opportunities presented themselves, management
began investing funds from the federal funds sold and other short-term
investment portfolio into the securities available for sale and loan
portfolios. This trend is expected to continue into the fourth quarter. The
Company believes there was no significant change to its interest rate risk
during the third quarter of 2004.
Item 4.
Controls and Procedures
The Company maintains disclosure controls and procedures (as that term is
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934 ("Exchange Act") designed to ensure that information required to be
disclosed in the reports that the Company files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission.
Based upon this evaluation of those disclosure controls and procedures, the
Chief Executive Officer and Chief Financial Officer of the Company concluded,
as of the end of the period covered by this report, that the Company's
disclosure controls and procedures were effective to ensure that information
required to be disclosed in the reports the Company files and submits under
the Exchange Act is recorded, processed, summarized and reported as and when
required.
In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Further, no evaluation of a cost-effective system of controls
can provide absolute assurance that all control issues and instances of
fraud, if any, will be detected.
There have been no changes in internal control over financial reporting (as
defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the
quarter to which this report relates that have materially affected or are
reasonably likely to materially affect, the internal control over financial
reporting.
30
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Total Maximum
Number of Number
Shares of Shares
Purchased as that May
Part of Yet Be
Total Average Publicly Purchased
Number of Price Announced Under the
2004 Shares Paid per Plans or Plans or
Period Purchased Share Programs Programs
July 1 - July 31 33,600 $ 12.60 0 N/A
August 1 - August 31 163,400 $ 12.74 0 N/A
Sept. 1 - Sept. 30 3,000 $ 12.79 0 N/A
Total 200,000 $ 12.72 0 N/A
All 200,000 shares were purchased by other than through a publicly
announced plan or program. All purchases were made in open-market
transactions to provide shares for issuance upon exercise of
outstanding stock options issued by the Company and to provide
shares for issuance under the Company's dividend reinvestment plan.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submissions of Matters to Vote of Security Holders
None.
Item 5. Other Information
None.
31
Exhibits
Item 6.
Reg S-K (Item 601)
Exhibit No. Description
- ----------------------------------------------------------------------------
31(a) Rule 13a-15(e)/15d-15(e) Certification of Robert J. McCormick,
principal executive officer.
31(b) Rule 13a-15(e)/15d-15(e) Certification of Robert T. Cushing,
principal financial officer.
32 Section 1350 Certifications of Robert J. McCormick,
principal executive officer and Robert T. Cushing,
principal financial officer.
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TrustCo Bank Corp NY
By: /s/ Robert J. McCormick
---------------------------
Robert J. McCormick
President and
Chief Executive Officer
By: /s/ Robert T. Cushing
---------------------------
Robert T. Cushing
Executive Vice President
and Chief Financial Officer
Date: November 9, 2004
33
Exhibits
Exhibits Index
Reg S-K
Exhibit No. Description
- ----------------------------------------------------------------------------
31(a) Rule 13a-15(e)/15d-15(e) Certification of Robert J. McCormick,
principal executive officer.
31(b) Rule 13a-15(e)/15d-15(e) Certification of Robert T. Cushing,
principal financial officer.
32 Section 1350 Certifications of Robert J. McCormick,
principal executive officer and Robert T. Cushing,
principal financial officer.
34
Exhibits
Exhibit 31(a)
Certification
I, Robert J. McCormick, the principal executive officer of TrustCo Bank
Corp NY ("registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of TrustCo Bank
Corp NY;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this quarterly report is being
prepared; and
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
35
Exhibits
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing
the equivalent functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: November 9, 2004
/s/ Robert J. McCormick
- -----------------------
President and
Chief Executive Officer
36
Exhibits
Exhibit 31(b)
Certification
I, Robert T. Cushing, the principal financial officer of TrustCo Bank
Corp NY ("registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of TrustCo Bank
Corp NY;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this quarterly report is being
prepared; and
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
37
Exhibits
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing
the equivalent functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: November 9, 2004
/s/ Robert T. Cushing
- ----------------------------
Executive Vice President and
Chief Financial Officer
38
Exhibits
Exhibit 32
Certification
Pursuant To 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 Of The Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of TrustCo Bank Corp NY (the
"Company") on Form 10-Q for the period ending September 30, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned hereby certifies pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
1. The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ Robert J. McCormick
---------------------------
Robert J. McCormick
President and
Chief Executive Officer
/s/ Robert T. Cushing
---------------------------
Robert T. Cushing
Executive Vice President
and Chief Financial Officer
November 9, 2004
39