UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 2000
Commission File Number 1-12709
TOMPKINS TRUSTCO INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 16-1482357
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
THE COMMONS, P.O. BOX 460, ITHACA, NEW YORK 14851
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (607) 273-3210
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Title of Class:
COMMON STOCK ($.10 PAR VALUE)
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the registrant's voting stock held by
non-affiliates was approximately $172,897,000 on March 12, 2001, based on the
closing sales price of the registrant's common stock, $.10 par value (the
"Common Stock"), as reported on the American Stock Exchange, Inc. as of such
date.
The number of shares of the registrant's Common Stock outstanding as of March
12, 2001, was 7,433,841 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement (the "Proxy Statement") filed with the Securities and Exchange
Commission in connection with the 2001 Annual Meeting of Stockholders, is
incorporated herein by reference in Part III.
TOMPKINS TRUSTCO, INC.
2001 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I PAGE
Item 1. Business of the Company 1
Item 2. Properties 4
Item 3. Legal Proceedings 6
Item 4. Submission of Matters for a Vote by Securities Holders 6
PART II
Item 5. Market for Registrant's Common Equity and Related
Securities 7
Item 6. Selected Financial Data 7
Item 7. Management Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 22
Item 8. Financial Statements and Supplementary Data 24
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 55
PART III
Item 10. Directors and Executive Officers of the Registrant 55
Item 11. Executive Compensation 56
Item 12. Security Ownership of Certain Beneficial Owners and
Management 56
Item 13. Certain Relationships and Related Transactions 56
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 57
[This Page Intentionally Left Blank]
PART I
ITEM 1. BUSINESS OF THE COMPANY
GENERAL
Headquartered in Ithaca, New York, Tompkins Trustco, Inc. ("Tompkins" or "the
Company") is the publicly traded parent company of Tompkins Trust Company (the
"Trust Company"), The Bank of Castile, and The Mahopac National Bank. Through
its banking subsidiaries the Company provides community banking services to
their local market areas in New York State. Tompkins is registered as a
Financial Holding Company with the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended. Tompkins was organized in 1995, under the laws
of the State of New York, as a bank holding company for the Tompkins Trust
Company (formerly known as Tompkins County Trust Company), a commercial bank
that has operated in the community of Ithaca, New York, and environs since 1836.
MERGERS AND ACQUISITIONS
On December 31, 1999, Tompkins completed a merger with Letchworth Independent
Bancshares ("Letchworth"), which was the parent company for The Bank of Castile
(a wholly-owned subsidiary) and The Mahopac National Bank (approximately 70
percent owned by Letchworth). The merger was accounted for as a
pooling-of-interests, and upon completing the merger, Letchworth was merged with
and into Tompkins. All prior period financial information has been restated to
present the combined financial condition and results of operations of both
companies as if the merger had been in effect for all periods presented.
On June 4, 1999, Letchworth acquired 70.17 percent of the outstanding common
stock of The Mahopac National Bank in a cash transaction accounted for as a
purchase. Accordingly, operating results for The Mahopac National Bank are not
included for periods prior to June 4, 1999. Subsequent to June 4, 1999, net
income of The Mahopac National Bank is included in Tompkins' net income based
upon the percentage of Tompkins' ownership of The Mahopac National Bank.
Effective September 1, 2000, and early in 2001, Tompkins completed the purchase
of the minority interest in The Mahopac National Bank, primarily in a
stock-for-stock transaction accounted for as a purchase. Prior to September 1,
2000, the approximately 30% interest in The Mahopac National Bank, which was not
owned by Tompkins, was shown as a minority interest in consolidated subsidiaries
on the consolidated statements of condition.
Effective January 1, 2001, the Company completed the acquisition of 100% of the
common stock of Austin, Hardie, Wise Agency, Inc. and Ernest Townsend & Son,
Inc., in a cash and stock transaction accounted for as a purchase. The two
agencies have been merged with and into Tompkins Insurance Agencies, Inc., a
wholly-owned subsidiary of Tompkins. The agencies primarily offer property and
casualty insurance to individuals and businesses in Western New York State. They
are expected to continue operating in their current locations, which include
Attica, Warsaw, Alden, LeRoy, Batavia and Caledonia. Further details pertaining
to the mergers and acquisitions are presented in Note 2 to the consolidated
financial statements, included herein.
NARRATIVE DESCRIPTION OF BUSINESS
Through its community bank subsidiaries, the Company provides traditional
banking related services, which constitute the Company's only business segment.
Banking services consist primarily of attracting deposits from the areas served
by its banking offices and using those deposits to originate a variety of
commercial loans, consumer loans, real estate loans (including commercial loans
collateralized by real estate), and leases, and providing trust and investment
related services. The Company's principal expenses are interest on deposits,
interest on borrowings, and operating and general administrative expenses, as
well as provisions for loan losses. Funding sources, other than deposits,
include borrowings, securities sold under agreements to repurchase, and cash
flow from lending and investing activities.
The Company conducts trust and investment services through Tompkins Investment
Services, a division of Tompkins Trust Company. Tompkins Investment Services
provides a full range of money management services, including investment
management accounts, custody accounts, trusts, retirement plans and rollovers,
estate settlement, and financial planning.
The Company maintains a portfolio of securities such as U.S. government and
agency securities, obligations of states and political subdivisions thereof,
equity securities, and interest-bearing deposits. It is the intention of
management to maintain short to intermediate average lives in the Company's
securities portfolio in order to better match the interest rate sensitivities of
its assets and liabilities.
Investment decisions are made within policy guidelines established by the
Company's board of directors. The investment policy established by the board of
directors is based on the asset/liability management goals of the Company. The
intent of the policy is to establish a portfolio of high quality diversified
securities, which optimize net interest income within acceptable limits of
safety and liquidity. Purchases of securities, other than certain obligations of
states and political subdivisions thereof, are classified as available-for-sale,
1
though it is generally management's intent to hold all securities to maturity.
Securities available-for-sale may be used to enhance total return, provide
additional liquidity, or reduce interest rate risk.
Information regarding the amortized cost and fair value of the securities
portfolio for the years ended 2000 and 1999 is presented in Note 3 to the
Company's consolidated financial statements. The amortized cost and fair value
of the securities portfolio for the year ended 1998 is presented in the table
below.
AVAILABLE-FOR-SALE SECURITIES
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GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1998 (in thousands) COST GAINS LOSSES VALUE
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U.S. Treasury securities and obligations of
U.S. Government agencies $135,719 $1,858 $ 21 $137,556
Obligations of states and political subdivisions 32,487 1,415 25 33,877
Mortgage-backed securities 71,570 444 134 71,880
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Total debt securities 239,776 3,717 180 243,313
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Equity securities 5,769 173 0 5,942
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Total available-for-sale securities $245,545 $3,890 $180 $249,255
==========================================================================================================
Available-for-sale securities include $4,833,000 in equity securities, which are
carried at amortized cost since fair values are not readily determinable. This
figure includes $3,629,000 of Federal Home Loan Bank Stock.
HELD-TO-MATURITY SECURITIES
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GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1998 (in thousands) COST GAINS LOSSES VALUE
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Obligations of states and political subdivisions $ 34,088 $ 923 $ 0 $ 35,011
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Total held -to-maturity debt securities $ 34,088 $ 923 $ 0 $ 35,011
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COMPETITION
The Company's subsidiary banks operate 30 offices, including two limited-service
offices, serving communities in upstate New York. The Trust Company operates 12
full-service and one limited service banking offices in the counties of Tompkins
and Schuyler. The Bank of Castile conducts its operations through its 12
full-service and one limited service offices, in towns situated in and around
the areas commonly known as the Letchworth State Park area and the Genesee
Valley region of New York State. The Mahopac National Bank is located in Putnam
County, and operates four full-service branches in that county. Deposits of all
three banks are insured by the Federal Deposit Insurance Corporation.
Competition for commercial banking and trust and investment services is strong
in the Company's market areas. Deregulation of the banking industry has created
a highly competitive environment for commercial banking services. Increased
competition has resulted in a decreasing number of community banks, and
increased competition from regional and national financial service providers. In
one or more aspects of its business, the Company competes with other commercial
banks, savings institutions, credit unions, mortgage bankers and brokers,
finance companies, mutual funds, insurance companies, brokerage and investment
banking companies, and other financial intermediaries. Many of these
competitors, some of which are affiliated with large financial holding
companies, have substantially greater resources and lending limits, and may
offer certain services the Company does not currently provide. In addition, many
non-bank competitors, such as credit unions, are not subject to the same taxes
or extensive federal regulations that apply to bank holding companies and
federally insured banks. The recent Letchworth acquisition provides increased
capacity for growth, and greater capital resources necessary to make investments
in technology and services that will improve the Company's ability to compete.
2
Since the office locations of The Mahopac National Bank and The Bank of Castile
are not immediately adjacent to markets served by the Trust Company, the merger
provides Tompkins with new areas to market products and services, with
relatively little disruption to the core strategy or operation of the Trust
Company. The Company's decision to operate as three locally managed community
banks reflects management's commitment to community banking as a business
strategy that will continue to be emphasized. The recent acquisitions of Austin,
Hardie, Wise Agency, Inc. and Ernest Townsend & Son, Inc., to form Tompkins
Insurance Agencies, Inc. will add a line of insurance and risk management
products to the Company's array of financial products.
The area served by the Trust Company consists primarily of Tompkins County, with
an estimated population of 97,000 people. Education plays a significant role in
the local economy with Cornell University and Ithaca College being two of the
county's major employers. Current economic trends include low unemployment and
moderate growth. The Bank of Castile serves a five-county market that is
primarily rural in nature. The opening of a branch office in Chili, New York, in
1999 provides increased access to the suburban Rochester, New York, market.
Excluding Monroe County, which includes Rochester, the population of counties
served by The Bank of Castile is approximately 171,000. Economic growth has been
relatively flat in The Bank of Castile's market area, although the significant
population base of the suburban Rochester market (in excess of 700,000 people),
provides significant opportunities for growth. The primary market area for The
Mahopac National Bank is Putnam County, New York, with a population of
approximately 93,000. Putnam County is about 60 miles north of Manhattan, and is
one of the fastest growing counties in New York State.
REGULATION
As a registered financial holding company, the Company is subject to examination
and comprehensive regulation by the Federal Reserve Board (FRB). The Company's
subsidiary banks are subject to examination and comprehensive regulation by
various regulatory authorities, including the Federal Deposit Insurance
Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the
New York State Banking Department (NYSBD). Each of these agencies issues
regulations and requires the filing of reports describing the activities and
financial condition of the entities under its jurisdiction. Likewise, such
agencies conduct examinations on a recurring basis to evaluate the safety and
soundness of the institutions, and to test compliance with various regulatory
requirements, including: consumer protection, fair lending, the Community
Reinvestment Act, sales of non-deposit investments, electronic data processing,
and trust department activities.
Under FRB regulations, the Company may not, without providing prior notice to
the FRB, purchase or redeem its own Common Stock if the gross consideration for
the purchase or redemption, combined with the net consideration paid for all
such purchases or redemptions during the preceding twelve months, is equal to
ten percent or more of the Company's consolidated net worth. Additionally, FRB
policy provides that dividends shall not be paid except out of current earnings
and unless prospective rate of earnings retention by the Company appears
consistent with its capital needs, asset quality, and overall financial
condition.
The FRB, the FDIC, and the OCC have promulgated capital adequacy guidelines that
are considered by the agencies in examining and supervising a bank or bank
holding company; and in analyzing any applications a bank or bank holding
company may submit to the appropriate agency. In addition, for supervisory
purposes, the agencies have promulgated regulations establishing five categories
of capitalization, ranging from well capitalized to critically undercapitalized,
depending upon the level of capitalization and other factors. Currently, the
Company and its subsidiary banks maintain leverage and risk-based capital ratios
above the required levels and are considered well capitalized under the
applicable regulations. A comparison of the Company's capital ratios and the
various regulatory requirements is included in Note 17 of the Company's
consolidated financial statements.
All deposit accounts of the Company's subsidiary banks are insured by the Bank
Insurance Fund (BIF), generally in amounts up to $100,000 per depositor. The
FDIC has the power to terminate a bank's insured status or to temporarily
suspend it under special conditions. Deposit insurance coverage is maintained by
payment of premiums assessed to banks insured by the BIF. Based on capital
strength and a favorable FDIC risk classification, the subsidiary banks are not
currently subject to BIF insurance assessments. Beginning in January 1997, all
BIF insured banks are subject to special assessments to repay Financing
Corporation (FICO) bonds, which were used to repay depositors of failed Savings
and Loan Associations after the former Federal Savings and Loan Insurance Fund
became insolvent.
EMPLOYEES
At December 31, 2000, the Company employed 491 employees, approximately 93 of
whom were part-time. No employees are covered by a collective bargaining
agreement and the Company believes its employee relations are excellent.
3
ITEM 2. PROPERTIES
The following table provides information relating to the Company's facilities:
LOCATION FACILITY TYPE SQUARE FEET OWNED/LEASED*
The Commons Trust Company 23,900 Owned
Ithaca, NY Main Office
119 E. Seneca Street Trust Company 18,550 Owned
Ithaca, NY Trust and Investment Services
121 E. Seneca Street Administration 18,900 Owned
Ithaca, NY
Rothschilds Building Operations and Data Processing 20,500 Leased
The Commons, Ithaca, NY
Central Avenue Trust Company 400 Leased
Cornell University, Ithaca, NY Cornell Campus Office
905 Hanshaw Road Trust Company 790 Leased
Ithaca, NY Community Corners Office
139 N. Street Extension Trust Company 2,250 Owned
Dryden, NY Dryden Office
1020 Ellis Hollow Road Trust Company 650 Leased
Ithaca, NY East Hill Plaza Office
775 S. Meadow Street Trust Company 2,280 Owned
Ithaca, NY Plaza Office
Pyramid Mall Trust Company 610 Leased
Ithaca, NY Pyramid Mall Office
116 E. Seneca Street Trust Company 775 Owned
Ithaca, NY Seneca Street Drive-in
2251 N. Triphammer Road Trust Company 3,000 Leased
Ithaca, NY Triphammer Road Office
2 W. Main Street Trust Company 2,720 Owned
Trumansburg, NY Trumansburg Office
701 W. Seneca Street Trust Company 2,150 Owned
Ithaca, NY West End Office
2230 N. Triphammer Road Trust Company 204 Leased
Ithaca, NY Kendal Office (Part-time office)
100 Main Street Trust Company 3,115 Owned
Odessa, NY Odessa Office
50 N. Main Street The Bank of Castile 6,662 Owned
Castile, NY Main Office
4
LOCATION FACILITY TYPE SQUARE FEET OWNED/LEASED*
604 W. Main Street The Bank of Castile 4,662 Owned
Arcade, NY Arcade Office
263 E. Main Street The Bank of Castile 3,303 Owned
Avon, NY Avon Office
408 E. Main Street The Bank of Castile 3,496 Owned
Batavia, NY Batavia Office
3155 State Street The Bank of Castile 4,680 Owned
Caledonia, NY Caledonia Office
3252 Chili Avenue The Bank of Castile 4,000 Owned
Chili, NY Chili Office
1 Main Street The Bank of Castile 1,448 Owned
Gainesville, NY Gainesville Office
11 South Street The Bank of Castile 9,700 Owned
Geneseo, NY Geneseo Office
29 Main Street The Bank of Castile 3,084 Owned
LeRoy, NY LeRoy Office
102 N. Center Street The Bank of Castile 4,702 Owned
Perry, NY Perry Office
2727 Genesee Street The Bank of Castile 2,220 Leased
Retsof, NY Retsof Office
445 N. Main Street The Bank of Castile 2,798 Owned
Warsaw, NY Warsaw Office
129 N. Center Street The Bank of Castile 11,138 Owned
Perry, NY Processing Center **
1410 S. Main Street The Bank of Castile 1,250 Leased
Medina, NY 14103 Medina Office (Loan Production Office)
630 Route 6 The Mahopac National Bank 2,800 Owned
Mahopac, NY Mahopac Office
591 Route 6N The Mahopac National Bank 3,000 Owned
Mahopac Falls, NY Red Mills Office
21 Peekskill Hollow Road The Mahopac National Bank 17,950 Owned
Putnam Valley, NY Putnam Valley Office
925 S. Lake Boulevard The Mahopac National Bank 3,460 Owned
Mahopac, NY Loan Center
1441 Route 22 The Mahopac National Bank 34,000 Owned
Brewster, NY Brewster Office
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* Lease terminations for the Company's leased properties range from 2000 through
2042. ** Office includes two parcels of land that are being leased through 2004,
and 2090, respectively.
Management believes the current facilities are suitable for their present and
intended purposes.
5
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in legal proceedings in the normal course of business,
none of which are expected to have a material adverse impact on the financial
condition or operations of the Company.
ITEM 4. SUBMISSION OF MATTERS FOR A VOTE BY SECURITIES HOLDERS
There were no matters submitted for shareholder vote in the fourth quarter of
2000.
6
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITIES
MARKET PRICE** CASH
MARKET PRICE & DIVIDEND INFORMATION HIGH LOW DIVIDENDS PAID**
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See Notes 1 and 2 below:
2000 1st Quarter $29.13 $22.63 $.27
2nd Quarter 26.06 23.13 .27
3rd Quarter 29.06 23.75 .27
4th Quarter 29.00 26.75 .27
1999 1st Quarter $35.88 $33.75 $.25
2nd Quarter 34.25 31.75 .25
3rd Quarter 35.50 30.69 .26
4th Quarter 31.50 28.25 .27
Note 1 - The range of reported high and low price for Tompkins Trustco, Inc.
common stock for actual transactions as quoted on the American Stock Exchange.
As of March 16, 2001, there were approximately 1,650 shareholders of record.
Note 2 - Dividends on Tompkins Trustco, Inc. common stock were paid on the 15th
day of March, June, September, and December of each year.
ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31
(dollar amounts in thousands except
per share data) 2000 1999 1998 1997 1996
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FINANCIAL STATEMENT HIGHLIGHTS
Assets $ 1,304,894 $ 1,188,679 $ 954,705 $ 886,846 $ 836,397
Deposits 1,034,901 974,239 733,644 693,905 635,649
Other borrowings 67,257 42,012 48,973 34,817 23,150
Shareholders' equity 114,995 96,624 97,652 89,003 78,419
Interest and dividend income 92,018 77,617 69,729 66,265 61,427
Interest expense 40,076 30,551 29,371 28,235 25,359
Net interest income 51,942 47,066 40,358 38,030 36,068
Provision for loan/lease losses 1,216 944 1,539 1,436 1,493
Net securities gains (losses) 450 (59) (12) (48) 13
Net income 17,512 15,200 14,502 12,992 12,049
PER SHARE INFORMATION
Basic earnings per share 2.47 2.15 2.05 1.91 1.70
Diluted earnings per share 2.45 2.12 2.01 1.84 1.66
Basic earnings per share-operating* 2.57 2.39 2.07 1.93 1.72
Diluted earnings per share-operating* 2.55 2.36 2.03 1.86 1.67
Cash dividends per share** 1.08 1.03 0.91 0.82 0.73
SELECTED RATIOS
Return on average assets 1.42% 1.41% 1.57% 1.51% 1.50%
Return on average equity 17.09% 15.46% 16.09% 15.95% 15.29%
Return on average assets-operating* 1.48% 1.57% 1.59% 1.52% 1.52%
Return on average equity-operating* 17.70% 16.91% 16.22% 16.10% 15.41%
Shareholders' equity to average assets 9.31% 8.97% 10.60% 10.32% 9.79%
Dividend payout ratio 43.95% 40.52% 37.92% 36.68% 36.65%
OTHER SELECTED DATA (actual numerical count)
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Employees (average full-time equivalent) 462 442 365 361 356
Full-service banking offices 28 26 22 22 21
Bank access centers (ATMs) 41 36 33 32 30
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* Uses net income before amortization of intangible assets and one-time
merger-related expenses, net of applicable tax benefit.
** Cash dividends per share and stock price reflect historical information for
Tompkins Trustco, Inc.
7
UNAUDITED QUARTERLY FINANCIAL DATA: 2000
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(in thousands except per share data) FIRST SECOND THIRD FOURTH
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Interest and dividend income $21,792 $22,598 $23,599 $24,029
Interest expense 8,964 9,567 10,690 10,855
Net interest income 12,828 13,031 12,909 13,174
Provision for loan/lease losses 240 274 301 401
Income before income taxes 6,464 6,282 6,644 6,374
Net income 4,326 4,188 4,572 4,426
Net income per common share (basic) .62 .60 .64 .61
Net income per common share (diluted) .61 .60 .64 .60
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1999
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(in thousands except per share data) FIRST SECOND THIRD FOURTH
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Interest income $17,233 $18,301 $20,756 $21,327
Interest expense 6,942 7,258 7,975 8,376
Net interest income 10,291 11,043 12,781 12,951
Provision for loan/lease losses 238 268 174 264
Income before income taxes 5,782 5,849 6,732 4,686
Net income 3,931 3,930 4,548 2,791
Net income per common share (basic) .56 .55 .64 .40
Net income per common share (diluted) .54 .55 .64 .39
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8
ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Tompkins Trustco, Inc. ("Tompkins" or "the Company") was organized in 1995, as
the parent company of Tompkins Trust Company (the "Trust Company"), which traces
its charter back to 1836. On December 31, 1999, the Company completed a merger
with Letchworth Independent Bancshares Corporation ("Letchworth"), at which time
Letchworth was merged with and into Tompkins. Upon completion of the merger,
Letchworth's two subsidiary banks, The Bank of Castile and The Mahopac National
Bank, became subsidiaries of Tompkins. The merger with Letchworth was accounted
for as a pooling-of-interests, and accordingly all prior period financial
information has been restated to present the combined financial condition and
results of operations of both companies as if the merger had been in effect for
all periods presented.
On June 4, 1999, Letchworth acquired 70.17 percent of the outstanding common
stock of The Mahopac National Bank in a cash transaction accounted for as a
purchase. Accordingly, operating results for The Mahopac National Bank are not
included for periods prior to June 4, 1999. Subsequent to June 4, 1999, net
income of The Mahopac National Bank is included in Tompkins' net income based
upon the percentage of Tompkins' ownership of The Mahopac National Bank. This
transaction with The Mahopac National Bank resulted in a core deposit intangible
of $3.5 million, which is being amortized over a ten year period, and goodwill
of $2.5 million, which is being amortized over a 20 year period.
Effective September 1, 2000, and early in 2001, Tompkins Trustco, Inc. completed
the purchase of the minority interest in The Mahopac National Bank, primarily in
a stock-for-stock transaction accounted for as a purchase. Prior to September 1,
2000, the approximately 30 percent interest in The Mahopac National Bank, which
was not owned by Tompkins, was shown as a minority interest in consolidated
subsidiaries on the consolidated statements of condition. Subsequent to
September 1, 2000, effectively all of the net income of The Mahopac National
Bank is included in Tompkins' consolidated net income. The approximately 30%
acquisition of The Mahopac National Bank resulted in a core deposit intangible
of $1.9 million, which is being amortized over a 10 year period, and goodwill of
$2.5 million, which is being amortized over a 20 year period.
Effective January 1, 2001, the Company completed the acquisition of 100% of the
common stock of Austin, Hardie, Wise Agency, Inc. and Ernest Townsend & Son,
Inc., in a cash and stock transaction accounted for as a purchase. The two
agencies have been merged with and into Tompkins Insurance Agencies, Inc., a
wholly-owned subsidiary of Tompkins. The agencies are expected to continue
operating in their current western New York locations, which include Attica,
Warsaw, Alden, LeRoy, Batavia and Caledonia. The purchase agreements for the
insurance agencies include provisions for additional consideration to be paid in
the form of Company stock if certain income targets are met by Tompkins
Insurance Agencies, Inc. in 2001 and 2002. The contingent consideration includes
25,093 shares, which are payable if the income targets are met, and an
additional 8,333 shares which are payable if income targets are exceeded by 5%.
Additional information on the Company's merger and acquisition activities is
discussed in Note 2 to the consolidated financial statements.
The following analysis is intended to provide the reader with a further
understanding of the consolidated financial condition and results of operations
of the Company and its operating subsidiaries for the periods shown. For a full
understanding of this analysis, it should be read in conjunction with the
consolidated financial statements and notes thereto.
FORWARD-LOOKING STATEMENTS
This report may include forward-looking statements with respect to revenue
sources, growth, market risk, and corporate objectives. The Company assumes no
duty, and specifically disclaims any obligation, to update forward-looking
statements, and cautions that these statements are subject to numerous
assumptions, risk, and uncertainties, all of which could change over time.
Actual results could differ materially from forward-looking statements.
RESULTS OF OPERATIONS
Operating earnings, which exclude amortization of intangible assets and one-time
merger-related expenses, were $18.3 million for the year ended December 31,
2000, up 8 percent from 1999 operating earnings of $16.9 million. Earnings
reported in accordance with Generally Accepted Accounting Principles (GAAP) were
$17.5 million in 2000, up 15.2 percent over 1999. Similar growth was seen in per
share earnings, as 2000 diluted operating earnings per share of $2.55 reflect an
8.3 percent increase over 1999. Diluted earning per share reported in accordance
with GAAP increased by 15.6 percent to $2.45 in 2000, from $2.12 in 1999. Basic
earnings per share were 2.47 in 2000, compared to 2.15 in 1999.
The Company's strong earnings performance in 2000 is attributable to the success
of the core business strategies of the Company and its community banking
subsidiaries, which include diversified revenue sources consisting of net
interest income generated from the loan and securities portfolios, trust and
investment services income, and other service charges and fees for providing
banking and related financial services. Although net interest income remains the
Company's primary revenue source, management continues to focus on growing
revenue from noninterest related sources.
9
TABLE 1 - AVERAGE STATEMENTS OF CONDITION AND NET INTEREST ANALYSIS
DECEMBER 31
- - ------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
- - ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
(dollar amounts in thousands) BALANCE INTEREST YIELD/RATE BALANCE INTEREST YIELD/RATE BALANCE INTEREST YIELD/RATE
- - ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Interest-earning assets:
Securities (1)
U.S. Government securities $242,611 $15,929 6.57% $210,598 $13,751 6.53% $204,357 $13,545 6.63%
State and municipal (2) 78,474 5,654 7.20% 75,531 5,463 7.23% 67,613 5,222 7.72%
Other securities (2) 13,715 1,142 8.33% 24,858 1,580 6.36% 26,455 1,657 6.26%
- - -----------------------------------------------------------------------------------------------------------------------------------
Total securities 334,800 22,725 6.79% 310,987 20,794 6.69% 298,425 20,424 6.84%
Federal funds sold 11,992 726 6.05% 17,717 980 5.53% 12,018 632 5.26%
Loans, net of unearned income (3)
Residential real estate 326,139 25,488 7.82% 274,321 21,049 7.67% 216,479 17,422 8.05%
Commercial real estate 161,104 16,402 10.18% 138,882 12,464 8.97% 107,204 10,164 9.48%
Commercial loans (2) 183,736 16,602 9.04% 122,288 11,855 9.69% 113,595 11,263 9.92%
Consumer and other 108,912 10,785 9.90% 123,655 11,233 9.08% 109,442 10,784 9.85%
Lease financing 17,315 1,368 7.90% 15,602 1,249 8.01% 12,438 1,002 8.06%
- - -----------------------------------------------------------------------------------------------------------------------------------
Total loans, net of
unearned income 797,205 70,645 8.86% 674,748 57,850 8.57% 559,158 50,635 9.06%
- - -----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning 1,143,997 94,096 8.23% 1,003,452 79,624 7.94% 869,601 71,691 8.24%
assets
- - -----------------------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets 91,040 74,122 51,587
Total assets $1,235,037 $1,077,574 $921,188
===================================================================================================================================
LIABILITIES & SHAREHOLDERS'
EQUITY
Deposits:
Interest-bearing deposits
Interest checking,
savings, and money market $ 412,864 $10,311 2.50% $361,115 $8,436 2.34% $294,188 $7,459 2.54%
Time Deposits > $100,000 167,149 10,205 6.11% 149,124 7,565 5.07% 125,329 6,905 5.51%
Time Deposits < $100,000 220,402 11,977 5.43% 186,603 9,206 4.93% 174,853 9,395 5.37%
- - -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing 800,415 32,493 4.06% 696,842 25,207 3.62% 594,370 23,759 4.00%
deposits
Federal funds purchased and
securities sold under
agreements to repurchase 68,305 3,996 5.85% 60,662 2,852 4.70% 60,391 3,110 5.15%
Other borrowings 59,125 3,587 6.07% 49,966 2,492 4.99% 44,444 2,502 5.63%
- - -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 927,845 40,076 4.32% 807,470 30,551 3.78% 699,205 29,371 4.20%
- - -----------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing deposits 186,505 154,803 120,036
Accrued expenses and other 13,444 15,555 11,487
liabilities
- - -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,127,794 977,828 830,728
Minority Interest 4,791 1,404 324
Shareholders' equity 102,452 98,342 90,136
- - -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $1,235,037 $1077,574 $921,188
===================================================================================================================================
Interest rate spread 3.92% 4.16% 4.04%
- - -----------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin
on earning assets $54,020 4.72% $49,073 4.89% $42,320 4.87%
- - -----------------------------------------------------------------------------------------------------------------------------------
(1) Average balances and yields on available-for-sale securities are based on
amortized cost.
(2) Interest income includes the tax effects of taxable-equivalent adjustments
using a combined New York State and federal effective income tax rate of 40
percent in 2000 and 1999, and 41 percent in 1998, to increase tax-exempt
interest income to a taxable equivalent basis.
(3) Nonaccrual loans are included in the average loan totals presented above.
Payments received on nonaccrual loans have been recognized as disclosed in Note
1 of the consolidated financial statements.
10
Return on average shareholders' equity (ROE) was 17.09 percent in 2000, compared
to 15.46 percent in 1999, and 16.09 percent in 1998. The decline in ROE in 1999
was due to one-time merger-related expenses related to the Letchworth merger.
Operating ROE (using operating earnings) was 17.70 percent in 2000, 16.91
percent in 1999, and 16.22 percent in 1998. Return on average assets (ROA) was
1.42 percent in 2000, 1.41 percent in 1999, and 1.57 percent in 1998. Operating
ROA was 1.48 percent in 2000, 1.57 percent in 1999, and 1.59 percent in 1999.
NET INTEREST INCOME
Table 1 illustrates the trend in average interest-earning assets and
interest-bearing liabilities, and the corresponding yield or cost associated
with each. Tax-equivalent net interest income improved to $54.0 million in 2000,
up from $49.1 million in 1999, and $42.3 million in 1998. The growth was
supported by an increased volume of earning assets, which grew by 14.0 percent
in 2000, following growth of 15.4 percent in 1999. Growth in average earning
assets between year-end 1999 and year-end 2000 was primarily centered in the
loan portfolio, which included a $61.4 million increase in average commercial
loans, and a $51.8 million increase in average residential real estate loans.
Net interest income also benefited from an improved mix of earning assets and
interest-bearing liabilities. Average loans for 2000 increased to 69.7 percent
of average earning assets, compared to 67.2 percent in 1999, while average core
deposits (total deposits, less time deposits of $100,000 or more) improved to
56.2 percent of average liabilities in 2000, compared to 56.0 percent in 1999.
The $85.5 million increase in average core deposits from 1999 to 2000 was
primarily centered in the Company's two newest branches - the Brewster Office of
The Mahopac National Bank, which opened in the first quarter of 2000; and the
Chili Office of The Bank of Castile, which opened in the second quarter of 1999.
The Company's net interest margin declined slightly in 2000 to 4.72 percent,
down from 4.89 percent in 1999. The net interest margin in 2000 was negatively
impacted by rising short term interest rates, which resulted in an inverted
yield curve for much of 2000, whereby short term interest rates exceeded longer
term interest rates. Additionally, the net interest margin has experienced
downward pressure due to the competitive environment for loans and deposits in
the markets in which the Company competes. The long term impact of these
economic and competitive factors is likely to result in continued narrowing of
net interest margins for the Company, and the industry as a whole. Nevertheless,
management feels that recent acquisitions have improved the Company's
competitive position as it relates to net interest margin by providing
additional sources of lower cost core deposits and creating an improved balance
sheet mix with less interest rate risk exposure.
Changes in net interest income occur from a combination of changes in the volume
of interest-earning assets and interest-bearing liabilities, and the rate of
interest earned or paid on them. Table 2 illustrates changes in interest income
and interest expense attributable to changes in volume (change in average
balance multiplied by prior year rate), changes in rate (change in rate
multiplied by prior year volume), and the net change in net interest income. The
net change attributable to the combined impact of volume and rate has been
allocated to each in proportion to the absolute dollar amounts of the change.
The $4.9 million increase in tax-equivalent net interest income from 1999 to
2000 included a $14.5 million increase in interest income, which was partially
offset by a $9.5 million increase in interest expense. An increased volume of
earning assets resulted in a $7.1 million increase in net interest income
between 1999 and 2000, while the impact from changes in interest rates resulted
in a $2.2 million reduction in net interest income. Between 1998 and 1999, net
interest income increased by $6.8 million, with a $7.9 million increase in
interest income offset by a $1.2 million increase in interest expense. An
increased volume of earning assets contributed $7.2 million to the increase in
net interest income, which was offset by a $492,000 decline in net interest
income due to an unfavorable rate variance.
11
TABLE 2 - ANALYSIS OF CHANGES IN NET INTEREST INCOME
(dollar amounts in thousands)(taxable equivalent) 2000 VS. 1999 1999 VS. 1998
- - -----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) DUE INCREASE (DECREASE) DUE
TO CHANGE IN AVERAGE TO CHANGE IN AVERAGE
VOLUME RATE TOTAL VOLUME RATE TOTAL
- - -----------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME:
Federal funds sold ($340) $86 ($254) $ 314 $ 34 $ 348
Investments:
Taxable 1,393 325 1,718 299 (183) 116
Tax-exempt 200 13 213 595 (341) 254
Loans, net:
Taxable 10,794 2,001 12,795 9,770 (2,573) 7,197
Tax-exempt 4 (4) 0 22 (4) 18
- - -----------------------------------------------------------------------------------------------------------------------------------
Total interest income $12,051 $2,421 $14,472 $11,000 ($3,067) $7,933
- - -----------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest bearing deposits:
Interest checking,
savings, and money market 1,265 610 1,875 1,600 (623) 977
Time 2,783 2,628 5,411 1,849 (1,378) 471
Federal funds purchased
and securities sold under
agreements to repurchase 389 755 1,144 14 (272) (258)
Other borrowings 502 593 1,095 292 (302) (10)
- - -----------------------------------------------------------------------------------------------------------------------------------
Total interest expense $4,939 $4,586 $9,525 $3,755 ($2,575) $1,180
- - -----------------------------------------------------------------------------------------------------------------------------------
Net interest income $7,112 ($2,165) $4,947 $7,245 ($492) $6,753
- - -----------------------------------------------------------------------------------------------------------------------------------
Notes: See notes to Table 1.
PROVISION FOR LOAN/LEASE LOSSES
The provision for loan/lease losses represents management's estimate of the
expense necessary to maintain the reserve for loan/lease losses at an adequate
level. The provision for loan/lease losses was $1.2 million in 2000, $944,000 in
1999, and $1.5 million in 1998. The increase in 2000 is primarily due to growth
in the loan portfolio. Although, recent industry trends (as reported by the
FDIC) indicate deterioration in asset quality for the commercial banking
industry as a whole, the Company's loan portfolio remains of generally high
quality, as evidenced by the low level of nonperforming loans and declining
trends in net charge-offs. Nonperforming loans and leases were $4.7 million at
December 31, 2000, representing a modest 0.56 percent of total loans and leases
outstanding at year-end. Nonperforming loans and leases at year-end 1999 were
$4.3 million, also representing 0.56 percent of total loans and leases. Net
charge-offs of $620,000 in 2000 represented 0.08 percent of average loans during
the period, compared to net charge-offs of $632,000 in 1999, representing 0.09
percent of average loans and leases.
OTHER INCOME
Other income, excluding sales of securities, has increased steadily as a
percentage of revenue (net interest income, plus other income) from 19 percent
in 1998, to 20 percent in 1999, to 21 percent in 2000. Although net interest
income remains the primary revenue source for the Company, competitive,
regulatory, and economic conditions have led management to target other income
opportunities as an important driver of long-term revenue growth. Management
believes a continued focus on noninterest income will improve the Company's
ability to compete with non-bank competitors, and reduce earnings volatility
that may result from changes in the general interest rate environment. The
success of this strategy is evident, as other income increased by 22 percent in
2000, 21 percent in 1999, and 19 percent in 1998. Other income of $14.4 million
for the year ended December 31, 2000, reflects an increase of $2.6 million over
1999. A portion of the growth is attributable to the fact that other income of
The Mahopac National Bank is included for the full year in 2000, and only seven
months in 1999. If income from The Mahopac National Bank were included for the
full year in 1999, the growth in 2000 would have been approximately $2.1
million, or approximately 17.4 percent.
Through the Trust Company, the Company has invested significant resources in
developing fee income producing products and services. Many of these products
and services can be offered to customers of The Bank of Castile and The Mahopac
National Bank, thereby expanding the customer base for these products. The
process of marketing these products throughout the Tompkins organization was
started in 2000 and is expected to continue in 2001 and beyond, creating
continued opportunities for growth in noninterest income.
12
Income from trust and investment services remains the largest source of other
income. The Tompkins Investment Services Division of Tompkins Trust Company
generates fee income through managing trust and investment relationships,
managing estates, providing custody services, and managing employee benefits
plans. Trust and investments services income of $4.6 million in 2000 represents
an 11 percent increase over 1999. Trust and investment services income grew by 8
percent from 1998 to 1999. Increased fee income is attributable to the continued
growth in average assets managed by, or in the custody of, Tompkins Investment
Services. Income generated by Tompkins Investment Services is largely based on
the value of the assets managed by the division, which can be affected by
general trends in the stock market, as well as the amount of new business
generated. Total assets managed by, or in custody of, Tompkins Investment
Services had a market value of $1.1 billion at December 31, 2000 and 1999,
compared to $952.9 million at December 31, 1998.
Tompkins Investment Services remains important to future revenue growth of the
Company. Services are primarily provided to customers in the Trust Company's
market area of Tompkins County and surrounding areas, although the division
currently manages assets for clients in more than 40 states. In 2001, Tompkins
Investment Services expects to expand its presence in the markets served by The
Bank of Castile and The Mahopac National Bank. In 1997, the Company expanded the
reach of Tompkins Investment Services by offering trust and investment services
through a "Trust Alliance" program, through which the Company provides servicing
and administrative support to trust departments of other banks. The Company
currently has Trust Alliances with two non-affiliated community banks, which
have assets under management totaling $54.0 million at December 31, 2000.
Card services, included in other service charges on the consolidated statements
of income, have been another growth area for the Company, as technology has
created opportunities to provide customers with new products to better serve
their needs. Card services products include traditional credit cards, purchasing
cards, debit cards, automated teller machines (ATM), and merchant card
processing. Fee income associated with card services increased 31 percent in
2000 to $2.1 million, following growth of 56.7 percent in 1999.
Other income includes a $956,000 increase in cash surrender value of corporate
owned life insurance, up from $723,000, in 1999, and $66,000 in 1998. This
income is exempt from taxes. The corporate owned life insurance was purchased
primarily in the third and fourth quarters of 1998, and relates to life
insurance provided to certain senior officers. Increases in the cash surrender
value of the insurance are reflected as other operating income, and the related
mortality expense is recognized as an other operating expense. Although income
associated with the insurance policies is not included in interest income,
increases in the cash surrender value produced a tax-adjusted return of
approximately 7.9 percent in 2000, and 8.1 percent in 1999.
The recent acquisitions of Austin, Hardie, Wise, Inc. and Ernest Townsend &
Sons, Inc., (effective January 1, 2001) will provide an additional source of
noninterest income and enhance the Company's ability to serve its customers with
a full range of financial products and services.
OTHER EXPENSE
The Company's 2000 other expenses increased 13.1 percent, over 1999, to $38.8
million. Operating expenses, which excludes amortization of intangible assets
and one-time merger expense, increased 17.1 percent. The $5.5 million increase
in operating expenses is partially attributable to the fact that expenses of The
Mahopac National Bank are included for the full year in 2000, and only seven
months in 1999. If expenses of The Mahopac National Bank were included for the
full year in 1999, the growth in 2000 would have been approximately $3.3
million, or approximately 9.9 percent. The increase in 2000 also includes
approximately $1.1 million of increased expenses associated with two branch
office openings -- the Chili Office of The Bank of Castile (opened in the third
quarter of 1999), and the Brewster Office of The Mahopac National Bank (opened
in the first quarter of 2000).
The Company's efficiency ratio (operating expense divided by tax-equivalent net
interest income plus other income before securities gains and losses) was 55.1
percent in 2000, 52.6 percent in 1999, and 50.9 percent in 1998. The increase in
2000 is primarily due to increased expenses associated with the opening of the
Chili Office of The Bank of Castile and the Brewster Office of The Mahopac
National Bank.
Personnel-related expenses comprise the largest segment of other expense,
representing approximately 57 percent of operating expenses in 2000, compared to
approximately 58 percent in 1999, and 57 percent in 1998. Total
personnel-related expenses increased by $2.9 million in 2000, to $21.5 million.
If expenses of The Mahopac National Bank were included for the full year in
1999, the increase in 2000 would have been approximately $1.6 million, or
approximately 8.2 percent.
Expense for premises, furniture, and fixtures increased to $5.0 million in 2000,
from $4.1 million in 1999. The increase in 2000 is primarily due to increased
expenses associated with the opening of the Chili Office of The Bank of Castile
and the Brewster Office of The Mahopac National Bank. Approximately $277,000 of
the increase relates to the fact that expenses of The Mahopac National Bank are
included for the full year in 2000, and only seven months in 1999.
13
Amortization of intangible assets for 2000 includes $885,000 of amortization
expense related to core deposit intangible assets and approximately $250,000 of
amortization expense related to goodwill. Merger-related expenses in 1999 of
$1.5 million are primarily related to investment banking services and other
professional services associated with the Letchworth merger.
Other expenses included, among other things, fees paid for marketing services,
postage and courier services, telephone expense, donations, software maintenance
and amortization, and card services related expense. The increase from $9.5
million in 1999 to $11.2 million in 2000, is attributable to several factors,
including: normal increases associated with growth in noninterest revenue,
increased marketing costs associated with new branch openings, increased
technology investments including improved internet banking services, and
approximately $611,000 related to the fact that expenses of The Mahopac National
Bank are included for the full year in 2000, and only seven months in 1999.
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
Minority interest expense represents the portion of net income in consolidated
majority-owned subsidiaries that is attributable to the minority owners of the
subsidiary. Minority interest expense for 2000 includes $433,000 related to the
approximate 30 percent interest held by minority owners of The Mahopac National
Bank for the period from January 1, 2000, through September 1, 2000. Effective
September 1, 2000, the Company acquired the interest held by the minority
owners. Minority interest expense for 1999 includes $403,000 related to the
minority owners of The Mahopac National Bank for the period from June 3, 1999,
through December 31, 1999. The Company also had minority interest expense of
$135,000 in 2000, and $155,000 in 1999 related to minority interests in three
real estate investment trusts, which are substantially owned by the Company's
banking subsidiaries.
INCOME TAX EXPENSE
The provision for income taxes provides for Federal and New York State income
taxes. The 2000 provision was $8.3 million, compared to $7.8 million in 1999,
and $7.2 million in 1998. The increasing trend is primarily due to increased
levels of taxable income. The effective tax rate for 2000 was 32.0 percent,
compared to 34.1 percent in 1999, and 33.3 percent in 1998.
14
FINANCIAL CONDITION
During 2000, total assets grew by 9.8 percent to $1.3 billion, compared to $1.2
billion at December 31, 1999. Table 3 provides a comparison of average and
year-end balances of selected balance sheet categories over the past three
years, and the change in those balances between 1999 and 2000. Earning asset
growth in 2000 consisted of a $90.4 million increase in loans, offset by a $3.0
million decline in the amortized cost of securities. Asset growth was funded
primarily with core deposits, which increased by $57.1 million, including $33.3
million related to new branch openings. Asset growth was also supported by a
$25.2 million increase in borrowings, and a $14.4 million increase in securities
sold under agreements to repurchase.
TABLE 3 - BALANCE SHEET COMPARISONS
AVERAGE BALANCE SHEET CHANGE (1999-2000)
(dollar amounts in thousands) 2000 1999 1998 AMOUNT PERCENTAGE
- - -----------------------------------------------------------------------------------------------------------------------------------
Total assets $1,235,037 $1,077,574 $921,188 $157,463 14.61%
Earning assets* 1,143,997 1,003,452 869,601 140,545 14.01%
Total loans and leases, less unearned income and
net deferred costs and fees 797,205 674,748 559,158 122,458 18.15%
Securities* 334,800 310,987 298,425 23,813 7.66%
Core deposits 819,771 702,521 589,077 117,250 16.69%
Time deposits of $100,000 and more 167,149 149,124 125,329 18,025 12.09%
Federal funds purchased and securities
sold under agreements to repurchase 68,305 60,662 60,391 7,643 12.60%
Other borrowings 59,125 49,966 44,444 9,159 18.33%
Shareholders' equity 102,452 98,342 90,136 4,110 4.18%
- - -----------------------------------------------------------------------------------------------------------------------------------
ENDING BALANCE SHEET CHANGE (1999-2000)
(dollar amounts in thousands) 2000 1999 1998 AMOUNT PERCENTAGE
- - -----------------------------------------------------------------------------------------------------------------------------------
Total assets $1,304,894 $1,188,679 $954,705 $116,215 9.78%
Earning assets* 1,195,419 1,107,510 890,676 87,909 7.94%
Total loans and leases, less unearned income and
net deferred costs and fees 845,758 755,382 592,193 90,376 11.96%
Securities* 330,236 333,278 279,633 (3,042) -0.91%
Core deposits 851,449 794,303 594,914 57,146 7.19%
Time deposits of $100,000 and more 183,452 179,936 138,730 3,516 1.95%
Federal funds purchased and securities
sold under agreements to repurchase 72,231 57,846 61,205 14,385 24.87%
Other borrowings 67,257 42,012 48,973 25,245 60.09%
Shareholders' equity 114,995 96,624 97,652 18,371 19.01%
- - -----------------------------------------------------------------------------------------------------------------------------------
* Balances of available-for-sale securities are shown at amortized cost.
SHAREHOLDERS' EQUITY
The consolidated statements of changes in shareholders' equity, included under
Item 8 herein, detail the changes in equity capital, including payments to
shareholders in the form of cash dividends. Per share cash dividends for 1999
and 1998 represent the historical per share dividends paid on Tompkins common
stock, while the dollar amount of the dividends paid represents the cash
dividends paid by the combined organization. The Company continued the long
history of increasing cash dividends with a per share increase of 4.9 percent in
2000, which followed a 13.2 percent increase in 1999. Dividends per share
amounted to $1.08 in 2000, compared to $1.03 in 1999, and $0.91 in 1998. Cash
dividends paid represented 44 percent, 41 percent, and 38 percent of net income
after tax in each of 2000, 1999, and 1998, respectively.
Total shareholders' equity was $115.0 million at December 31, 2000, compared to
$96.6 million at December 31, 1999, and $97.7 million at December 31, 1998. The
$18.4 million increase from year-end 1999 to year-end 2000 included a $9.8
million increase in retained earnings and an $8.2 million increase from the
issuance of shares to purchase the minority interest in The Mahopac National
Bank. The $4.7 million of other comprehensive income was offset by $4.9 million
in common stock repurchased and returned to unissued status. On August 15, 2000,
the board of directors of the Company approved a repurchase plan (the "Plan")
authorizing the repurchase of up to 400,000 shares of the Company's common stock
over a 24 month period. As of December 31, 2000, 130,244 shares had been
repurchased under the Plan at an average purchase price of $26.41 per share.
15
The decline in shareholders' equity from year-end 1998 to year-end 1999 was due
primarily to a decline in the fair value of available-for-sale securities, as a
result of rising interest rates in the second half of 1999. The decline in fair
value of securities resulted in other comprehensive loss of $7.1 million for the
year ended December 31, 1999. Shareholders' equity also declined by
approximately $4.1 million in 1999 due to the repurchase of 128,731 shares of
common stock. Shares repurchased in 1999 were partially offset by 71,786 net
shares issued through the exercise of stock options.
Tangible equity of $105.1 million represented 8.1 percent of tangible assets at
December 31, 2000, compared to tangible equity of $90.4 million representing 7.6
percent of tangible assets as of December 31, 1999. Tangible book value per
share increased from $12.78 at December 31, 1999, to $14.36 at December 31,
2000.
The Company and its subsidiary banks are subject to quantitative capital
measures established by regulation to ensure capital adequacy. Consistent with
the objective of operating a sound financial organization, the Company and its
subsidiary banks maintain capital ratios well above regulatory minimums, as
detailed in Note 17 of the consolidated financial statements.
SECURITIES
The securities portfolio (excluding fair value adjustments on available-for-sale
securities) at December 31, 2000 was $330.2 million, reflecting a decrease of 1
percent, from the previous year-end. Note 3 to the consolidated financial
statements details the types of securities held, the carrying and fair values,
and the contractual maturities. Qualified tax-exempt debt securities, primarily
obligations of state and political subdivisions, were $72.3 million at December
31, 2000, or 21.9 percent of total securities, compared to $78.9 million, or
23.7 percent of securities at year-end 1999. Mortgage-backed securities,
consisting solely of securities issued by U.S. government agencies, totaled $
84.3 million at December 31, 2000, compared to $85.3 million at December 31,
1999.
Management's policy is to purchase investment grade securities that, on average,
have relatively short expected maturities. This policy helps mitigate interest
rate risk and provides sources of liquidity without significant risk to capital.
A large percentage of securities are direct obligations of the Federal
government and its agencies. Expected maturities may differ from contractual
maturities because issuers may have the right to call or prepay obligations with
or without penalty. At December 31, 2000, approximately 10 percent of total debt
securities were scheduled to mature in one year or less. The maturity
distribution of debt securities and mortgage-backed securities as of December
31, 2000, along with the weighted average yield of each category, is presented
in Table 4. Balances are shown at amortized cost.
TABLE 4 - MATURITY DISTRIBUTION
DUE AFTER ONE DUE AFTER FIVE
DUE IN ONE YEAR THROUGH YEARS THROUGH DUE AFTER
(dollar amounts in thousands) YEAR OR LESS YIELD FIVE YEARS YIELD TEN YEARS YIELD TEN YEARS YIELD
- - --------------------------------------------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE:*
U.S. Treasury securities
and obligations of U.S.
Government agencies $12,960 6.35% $47,421 6.41% $112,030 6.62% $73,891 6.99%
Obligations of state and
political subdivisions** $11,915 4.37% $19,817 4.81% $ 12,084 4.64% $ 2,616 4.89%
- - --------------------------------------------------------------------------------------------------------------------------------
$24,875 5.40% $67,238 5.94% $124,114 6.43% $79,507 6.65%
HELD-TO-MATURITY:
Obligations of state and
political subdivisions** $ 8,448 5.17% $10,669 5.16% $ 3,848 5.23% $ 2,897 5.49%
- - --------------------------------------------------------------------------------------------------------------------------------
$ 8,448 5.17% $10,669 5.16% $ 3,848 5.23% $ 2,897 5.49%
- - --------------------------------------------------------------------------------------------------------------------------------
TOTAL $33,323 5.33% $77,907 5.83% $127,962 6.39% $82,404 6.61%
- - --------------------------------------------------------------------------------------------------------------------------------
* Balances of available-for-sale securities are shown at amortized cost.
* * Yields on obligations of state and political subdivisions are shown before
tax-equivalent adjustments.
16
LOANS
Total loans and leases, net of unearned income and net deferred loan fees and
costs, grew 12.0 percent, to $845.8 million at December 31, 2000. Table 5
details the composition and volume changes in the loan portfolio over the past
five years.
TABLE 5 - LOAN CLASSIFICATION SUMMARY
DECEMBER 31
(Dollar amounts in thousands) 2000 1999 1998 1997 1996
- - ------------------------------------------------------------------------------------------------------------------------------
Residential real estate $344,715 $312,506 $232,167 $208,455 $188,332
Commercial real estate 152,218 141,903 105,222 96,389 81,526
Real estate construction 18,746 19,046 9,064 5,267 1,203
Commercial 202,956 166,263 154,085 143,791 142,189
Consumer and other 110,126 99,206 78,018 70,678 72,132
Leases 19,565 18,850 15,691 14,313 12,740
- - ------------------------------------------------------------------------------------------------------------------------------
Total loans and leases 848,326 757,774 594,247 538,893 498,122
Less unearned income and net
deferred cost and fees (2,568) (2,392) (2,054) (1,737) (1,416)
- - ------------------------------------------------------------------------------------------------------------------------------
Total loans and leases, net of unearned
income and deferred costs and fees $845,758 $755,382 $592,193 $537,156 $496,706
- - ------------------------------------------------------------------------------------------------------------------------------
Residential real estate loans grew by $32.2 million or 10.3 percent in 2000, and
comprised 41 percent of total loans and leases. Residential real estate loan
growth has exceeded 10 percent in each of the last five years. The Company
occasionally sells some of its residential mortgage loans to Federal agencies
and retains all servicing rights. The Company sold $7.2 million of residential
mortgage loans in 2000, compared to $6.0 million in 1999. Mortgage servicing on
sold loans continues to provide fee income. Residential mortgage loans serviced
for others totaled $63.3 million at December 31, 2000, compared to $59.1 million
at December 31, 1999.
Commercial real estate loans increased by $10.3 million in 2000, or 7.3 percent.
Commercial real estate loans of $152.2 million represented 18 percent of total
loans and leases at December 31, 2000. Commercial loans totaled $203.0 million
at December 31, 2000, an increase of 22 percent over 1999. Growth in commercial
lending reflects an increased emphasis in commercial lending, which was
supported by the opening of the Chili and Brewster offices, along with the 2000
opening of The Bank of Castile's Medina loan production office.
The consumer loan portfolio includes personal installment loans, indirect
automobile financing, credit card loans, and overdraft lines of credit. Consumer
and other loans were $110.1 million at December 31, 2000, up from $99.2 million
at December 31, 1999. Consumer loan growth was primarily concentrated in The
Bank of Castile market area, and included $5.5 million of growth in indirect
auto financing.
The lease portfolio increased by 3.8 percent in 2000, to $19.6 million. The
lease portfolio has traditionally consisted of leases on vehicles for consumers
and small businesses. Competition for automobile financing has increased in
recent years, resulting in a decline in the consumer lease portfolio. In
response to the decline in consumer leasing opportunities, management has
increased its marketing efforts relating to commercial leasing, which has been
the primary source of growth in the lease portfolio. As of December 31, 2000,
commercial leases represented 69 percent of total leases, compared to 58 percent
at year-end 1999.
THE RESERVE FOR LOAN/LEASE LOSSES
Management reviews the adequacy of the reserve for loan/lease losses on a
regular basis. Factors considered in determining the adequacy of the reserve and
the related provision include: management's approach to granting new credit; the
ongoing monitoring of existing credits by the internal loan review department;
the growth and composition of the loan and lease portfolio; comments received
during the course of independent examinations; current local economic
conditions; past due and nonaccrual loan statistics; and a historical review of
loan and lease loss experience. Based upon consideration of the above factors,
management believes that the allowance for loan/lease losses is adequate to
provide for the risk of loss inherent in the current loan and lease portfolio.
Management uses a model to measure some of these factors and the resulting
quantitative analysis, combined with qualitative assessments, comprise the basis
on which the adequacy of the reserve for loan/lease losses is determined. The
reserve for loan/lease losses increased by $596,000 from 1999 to 2000. The
increase is a result of the provision for loan/lease losses exceeding the net
loan losses for the year. The allocation of the Company's reserve for loan/lease
losses for year-end 2000, and each of the previous four year-ends is illustrated
in Table 6.
17
TABLE 6 - ALLOCATION OF THE RESERVE FOR LOAN/LEASE LOSSES
DECEMBER 31
(dollar amounts in thousands) 2000 1999 1998 1997 1996
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LOANS OUTSTANDING AT END OF YEAR $845,758 $755,382 $592,193 $537,156 $496,706
- - ----------------------------------------------------------------------------------------------------------------------------------
ALLOCATION OF THE RESERVE BY LOAN TYPE:
Commercial $ 2,526 3,281 1,906 981 699
Real estate 2,210 1,964 1,384 1,458 944
Consumer and all other 2,771 3,202 2,935 2,256 2,463
Unallocated 2,317 781 1,180 2,312 2,514
- - ----------------------------------------------------------------------------------------------------------------------------------
Total $ 9,824 $ 9,228 $ 7,405 $ 7,007 $ 6,620
- - ----------------------------------------------------------------------------------------------------------------------------------
ALLOCATION OF THE RESERVE AS A PERCENT
OF TOTAL RESERVE:
Commercial 26% 36% 26% 14% 11%
Real estate 22% 21% 19% 21% 14%
Consumer and all other 28% 35% 40% 32% 37%
Unallocated 24% 8% 15% 33% 38%
- - ----------------------------------------------------------------------------------------------------------------------------------
Total 100% 100% 100% 100% 100%
- - ----------------------------------------------------------------------------------------------------------------------------------
LOAN/LEASE TYPES AS A PERCENT
OF TOTAL LOANS/LEASES:
Commercial 24% 22% 26% 27% 29%
Real estate 61% 62% 59% 58% 55%
Consumer and all other 15% 16% 15% 15% 16%
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 100% 100% 100% 100% 100%
- - ----------------------------------------------------------------------------------------------------------------------------------
Loans 90 days past due and accruing $ 226 $ 168 $ 507 $ 183 $ 400
Nonaccruing loans 4,134 3,698 1,611 3,425 2,486
Troubled debt restructurings not included above 389 400 471 483 428
Other real estate owned 175 214 235 244 128
- - ----------------------------------------------------------------------------------------------------------------------------------
RESERVE AS PERCENT OF LOANS OUTSTANDING AT
END OF YEAR 1.16% 1.22% 1.25% 1.30% 1.33%
- - ----------------------------------------------------------------------------------------------------------------------------------
The reserve represented 1.16 percent of total loans and leases outstanding at
year-end 2000, down slightly from 1.22 percent at December 31, 1999. The reserve
coverage of nonperforming loans (loans past due 90 days and accruing, nonaccrual
loans, and restructured troubled debt) declined slightly to 2.07 times at
December 31, 2000, compared to 2.16 times at December 31, 1999. Management is
committed to early recognition of loan problems and to maintaining an adequate
reserve. Based upon management's review, the reserve is believed adequate to
absorb probable losses in the portfolio. The above allocation is neither
indicative of the specific amounts or the loan categories in which future
charge-offs may occur nor is it an indicator of future loss trends. The
allocation of the allowance to each category does not restrict the use of the
allowances to absorb losses in any category. The Company's historical loss
experience is detailed in Table 7.
18
TABLE 7 - ANALYSIS OF THE RESERVE FOR LOAN/LEASE LOSSES
(dollar amounts in thousands) 2000 1999 1998 1997 1996
- - ----------------------------------------------------------------------------------------------------------------------------------
Average loans outstanding during year $797,205 674,748 559,158 511,989 469,942
Balance of reserve at beginning of year 9,228 7,405 7,007 6,620 6,420
Allowance related to purchase acquisition N/A 1,511 N/A N/A N/A
Loans charged-off, domestic:
Commercial, financial, and agricultural 130 241 326 230 124
Real estate - mortgage 108 105 509 64 174
Installment loans to individuals 677 647 674 1,200 1,369
Lease financing 8 1 10 8 10
Other loans 106 114 70 69 59
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LOANS CHARGED-OFF 1,029 1,108 1,589 1,571 1,736
- - ----------------------------------------------------------------------------------------------------------------------------------
RECOVERIES OF LOANS PREVIOUSLY CHARGED-OFF,
DOMESTIC:
Commercial, financial, and agricultural 28 62 69 74 61
Real estate - mortgage 31 49 4 3 7
Installment loans to individuals 317 343 349 412 348
Lease financing 2 0 5 4 7
Other loans 31 22 21 29 21
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LOANS RECOVERED 409 476 448 522 444
- - ----------------------------------------------------------------------------------------------------------------------------------
Net loans charged-off 620 632 1,141 1,049 1,292
Additions to reserve charged to operations 1,216 944 1,539 1,436 1,492
- - ----------------------------------------------------------------------------------------------------------------------------------
Balance of reserve at end of year $ 9,824 9,228 7,405 7,007 6,620
- - ----------------------------------------------------------------------------------------------------------------------------------
Net charge-offs as percent of average loans
outstanding during year 0.08% 0.09% 0.20% 0.20% 0.28%
- - ----------------------------------------------------------------------------------------------------------------------------------
DEPOSITS AND OTHER LIABILITIES
Total deposits of $1.0 billion at December 31, 2000, reflect an increase of
$60.7 million over total deposits at year-end 1999. Deposit growth consisted
primarily of core deposits, which increased by $57.1 million, while time
deposits of $100,000 or more grew by $3.5 million. The Company's Chili and
Brewster offices contributed $10.7 million and $34.8 million, respectively to
deposit growth in 2000.
The Company's liability for securities sold under agreements to repurchase
("repurchase agreements") amounted to $72.2 million at December 31, 2000,
representing a $14.4 million increase over year-end 1999. Repurchase agreements
are arrangements with local customers of the Company, in which the Company
agrees to sell securities to the customer with an agreement to repurchase those
securities at a specified later date. Management generally views local
repurchase agreements as an alternative to large time deposits.
During 2000, the Company increased its borrowings from the Federal Home Loan
Bank (FHLB) by $25.2 million, to $67.3 million. Borrowings outstanding at
December 31, 2000, included $22 million in borrowings due in one year or less,
and $45.1 million due in more than one year. The weighted average interest rate
on borrowings due in more than one year was 6.22 percent at December 31, 2000.
19
LIQUIDITY MANAGEMENT
The objective of liquidity management is to ensure the availability of adequate
funding sources to satisfy the demand for credit, deposit withdrawals, and
business investment opportunities. The Company's large, stable core deposit base
and strong capital position are the foundation for the Company's liquidity
position. Asset and liability positions are monitored primarily through
Asset/Liability Management Committees of the subsidiary banks, which review
periodic reports on the liquidity and interest rate sensitivity positions.
Comparisons with industry and peer groups are also monitored.
Core deposits remain the key funding source, representing 82 percent of total
deposits, and 72 percent of total liabilities at December 31, 2000. Non-core
funding sources (time deposits of $100,000 or more, repurchase agreements, and
other borrowings) increased as a percentage of total liabilities from 26 percent
at December 31, 1999, to 27 percent at December 31, 2000. Short-term investments
consisting of securities with maturities of one year or less and Federal funds
sold increased from $42.6 million at December 31, 1999, to $52.5 million at
December 31, 2000. The ratio of short-term investments to short-term non-core
liabilities increased from 17.0 percent at year-end 1999, to 19.5 percent at
year-end 2000, indicating a slight decline in the volume of long-term assets
supported by short-term non-core liabilities.
Non-core funding sources may require securities to be pledged against the
underlying liability. At December 31, 2000, securities pledged to secure certain
large deposits, repurchase agreements, and other borrowings amounted to $261.5
million, compared to $249.3 million at December 31, 1999. Total securities
pledged for deposits and repurchase agreements represented 79.2 percent of total
securities at December 31, 2000, compared to 76.7 percent of total securities at
December 31, 1999.
Liquidity is enhanced by ready access to national and regional wholesale funding
sources including Federal funds purchased, repurchase agreements, negotiable
certificates of deposit, and FHLB advances. Through its subsidiary banks, the
Company has borrowing relationships with the FHLB and correspondent banks, which
provide secured and unsecured borrowing capacity. At December 31, 2000, the
unused borrowing capacity on established lines with the FHLB was $116.9 million.
As members of the FHLB, the Company's subsidiary banks can use unencumbered
mortgage-related assets to secure additional borrowings from the FHLB. At
December 31, 2000, total qualifying real estate assets of the Company were
$496.9 million.
Cash flow from the loan and investment portfolios provides a significant source
of liquidity. These assets may have stated maturities in excess of one year, but
have monthly principal reductions. Total mortgage-backed securities increased
from $83.2 million at year-end 1999, to $84.3 million at year-end 2000.
Investments in residential mortgage loans, consumer loans, and leases totaled
approximately $474.4 million at December 31, 2000. Aggregate amortization from
monthly payments on these assets provides significant cash flow to the Company.
Table 8 details total scheduled maturities of selected loan categories.
TABLE 8 - LOAN MATURITY
REMAINING MATURITY OF SELECTED LOANS AT DECEMBER 31, 2000
(dollar amounts in thousands) TOTAL WITHIN 1 YEAR 1-5 YEARS AFTER 5 YEARS
- - -------------------------------------------------------------------------------------------------------------
Commercial real estate $152,218 7,630 9,014 135,574
Real estate construction 18,746 3,455 913 14,378
Commercial 202,954 60,502 42,722 99,730
- - -------------------------------------------------------------------------------------------------------------
TOTAL $373,883 71,587 52,649 249,647
- - -------------------------------------------------------------------------------------------------------------
RECENT ACCOUNTING STANDARDS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: The Company
adopted the provisions of Financial Accounting Standards Board (FASB) Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective January 1, 2001. This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivatives embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities on the balance sheet and measure those assets at fair
value. Changes in fair value of the derivative financial instruments are
reported as either net income or as a component of comprehensive income,
depending on whether or not it qualifies from hedge accounting. Consequently,
there may be increased volatility in net income and shareholders' equity as a
result of accounting for derivatives in accordance with SFAS No. 133.
Special hedge accounting treatment is permitted only if specific criteria are
met, including a requirement that the hedging relationship be highly effective
both at inception and on an ongoing basis. Results of effective hedges are
recognized in current earnings for fair value hedges, in other comprehensive
income for cash flow hedges. Ineffective portions of hedges are recognized
immediately in earnings and are not deferred. The adoption of SFAS No. 133 by
the Company on January 1, 2001, did not have a material effect on the Company's
consolidated financial statements.
20
ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION: In March 2000,
the FASB issued FASB Interpretation No. 44, "Accounting for Certain Transactions
involving Stock Compensation." FASB Interpretation No. 44 clarifies certain
issues relating to the application of Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees." FASB Interpretation No. 44 became
effective on July 31, 2000, and the adoption of this interpretation did not have
a material effect on the Company's consolidated financial position or results of
operations.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES: In September 2000, The FASB issued SFAS No. 140 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
SFAS No. 140 replaces identically titled SFAS No. 125, and it carries forward
most of SFAS No. 125's provisions without change. It does revise accounting
standards for securitizations and certain other transfers of financial assets
and collateral. The statement is generally applied prospectively to transactions
and servicing activities occurring after March 31, 2001, although provisions
with respect to collateral and certain disclosure requirements are effective for
fiscal years ending after December 15, 2000. The adoption of this statement did
not have a material impact on the consolidated financial statements of the
Company.
21
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
MARKET RISK
The Company's primary market risk exposure relates to sensitivity to interest
rate changes. Interest rate sensitivity refers to the volatility in earnings,
resulting from changes in interest rates. Each quarter the Asset/Liability
Management Committees estimate the earnings impact of changes in interest rates.
The findings of the committees are incorporated into investment and funding
decisions, and in the business planning process.
Table 9 is a Condensed Static Gap Report, which illustrates the anticipated
repricing intervals of assets and liabilities as of December 31, 2000. The
analysis reflects a liability sensitive position, suggesting that earnings would
benefit from a declining interest rate environment and would be hindered by a
rising rate environment.
TABLE 9 - INTEREST RATE RISK ANALYSIS
CONDENSED STATIC GAP - DECEMBER 31, 2000 REPRICING INTERVAL
CUMULATIVE
(dollar amounts in thousands) TOTAL 0-3 MONTHS 3-6 MONTHS 6-12 MONTHS 12 MONTHS
- - ---------------------------------------------------------------------------------------------------------------------------
Interest-earning assets* $1,195,419 $274,365 $54,871 $116,188 $445,424
Interest-bearing liabilities 965,824 429,142 75,959 105,119 610,220
- - ---------------------------------------------------------------------------------------------------------------------------
Net gap position (154,777) (21,088) 11,069 (164,796)
- - ---------------------------------------------------------------------------------------------------------------------------
Net gap position as a percentage of total assets (11.86%) (1.62%) 0.85% (12.63%)
- - ---------------------------------------------------------------------------------------------------------------------------
* Balances of available-for-sale securities are shown at amortized cost.
Management uses a simulation model to assess the potential impact from various
interest rate movements. Based upon the simulation analysis performed as of
December 31, 2000, a 200 basis point upward shift in interest rates over a
one-year time frame would result in a one-year decline of approximately 3
percent in net interest income, assuming management takes no action to address
balance sheet mismatches. The same simulation indicates that a 200 basis point
decline in interest rates over a one-year period would increase net interest
income by less than 1 percent. The simulation model is useful in identifying
potential exposure to interest rate movements; however, management feels that
certain actions could be taken to offset some of the negative effects of
unfavorable movements in interest rates. Although the analysis reflects some
exposure to rising interest rates, management feels the exposure is not
significant in relation to the earnings and capital strength of the Company.
Additional information regarding market risk of the Company's financial
instruments at December 31, 2000 is provided in Table 10.
TABLE 10 - REPRICING INTERVALS OF SELECTED FINANCIAL INSTRUMENTS
GREATER
(dollar amounts in thousands) 0-1 YEAR 1-2 YEARS 2-3 YEARS 3-5 YEARS THAN 5 YEARS TOTAL FAIR VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL ASSETS:
Available-for-sale securities $ 58,170 $ 22,131 $ 34,349 $ 70,281 $119,427 $304,358 $304,358
Average interest rate* 6.27% 6.27% 7.73% 7.17% 7.08% 6.96%
Held-to-maturity securities 8,448 4,928 2,407 3,334 6,746 25,863 26,147
Average interest rate* 5.17% 5.16% 5.18% 5.05% 5.35% 5.2%
Loans and Leases 375,645 123,818 102,882 110,658 132,755 845,758 846,555**
Average interest rate* 9.45% 8.24% 8.27% 8.13% 8.02% 8.73%
FINANCIAL LIABILITIES:
Time deposits $373,647 $ 35,591 $ 5,592 $ 5,425 $ 0 $420,255 $420,458
Average interest rate 5.99% 6.15% 5.55% 5.74% 0% 5.99%
Federal funds sold and securities sold
under agreements to repurchase 72,231 0 0 0 0 72,231 72,231
Average interest rate 5.85% 0% 0% 0% 0% 5.85%
Other borrowings 40,757 10,810 1,867 11,751 2,072 67,257 67,576
Average interest rate 6.08% 7.10% 6.64% 6.70% 5.87% 6.36%
- - ----------------------------------------------------------------------------------------------------------------------------------
* Interest rate on tax-exempt obligations is shown before tax-equivalent
adjustments.
** Reflects fair value before allowance for loan/lease losses.
22
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23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF CONDITION
AS OF DECEMBER 31
(in thousands except share and per share data) 2000 1999
- - ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and noninterest bearing balances due from banks $ 45,939 $ 35,938
Federal funds sold 19,425 18,850
Available-for-sale securities, at fair value 304,358 294,199
Held-to-maturity securities, fair value of $26,147
at December 31, 2000 and $31,265 at December 31, 1999 25,863 30,975
Loans and leases, net of unearned income and deferred costs and fees 845,758 755,382
- - ----------------------------------------------------------------------------------------------------------------------------------
Less reserve for loan/lease losses 9,824 9,228
NET LOANS/LEASES 835,934 746,154
Bank premises and equipment, net 23,861 21,147
Corporate owned life insurance 18,581 13,267
Intangible assets 9,858 6,271
Accrued interest and other assets 21,075 21,878
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,304,894 $1,188,679
LIABILITIES, MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES,
AND SHAREHOLDERS' EQUITY
Deposits:
Interest bearing:
Checking, savings, and money market $ 406,081 $ 416,836
Time 420,255 376,371
Non-interest bearing 208,565 181,032
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 1,034,901 974,239
Securities sold under agreements to repurchase 72,231 57,846
Other borrowings 67,257 42,012
Other liabilities 14,020 11,766
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,188,409 1,085,863
- - ----------------------------------------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiaries 1,490 6,192
Shareholders' equity:
Common stock - par value $0.10 per share: Authorized 15,000,000 shares;
Issued 7,344,813 shares at December 31, 2000, and 7,099,606 shares at December 31, 1999 734 710
Surplus 44,182 40,548
Undivided profits 70,894 61,078
Accumulated other comprehensive loss (9) (4,745)
Treasury stock at cost: 24,886 shares at December 31, 2000,
and 27,663 shares at December 31, 1999 (473) (525)
Unallocated ESOP: 32,261 shares at December 31, 2000,
- - ----------------------------------------------------------------------------------------------------------------------------------
and 37,637 shares at December 31, 1999 (333) (442)
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 114,995 96,624
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES,
AND SHAREHOLDERS' EQUITY $1,304,894 $1,188,679
- - ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
24
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31
(in thousands except per share data) 2000 1999 1998
- - ----------------------------------------------------------------------------------------------------------------------------------
INTEREST AND DIVIDEND INCOME
Loans $70,587 $57,790 $50,578
Federal funds sold 726 980 632
Available-for-sale securities 19,216 17,229 15,020
Held-to-maturity securities 1,489 1,618 3,499
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST AND DIVIDEND INCOME 92,018 77,617 69,729
- - ----------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits:
Time certificates of deposit of $100,000 or more 10,205 7,498 6,905
Other deposits 22,288 17,642 16,854
Federal funds purchased and securities sold under agreements to repurchase 3,996 2,919 3,110
Other borrowings 3,587 2,492 2,502
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 40,076 30,551 29,371
- - ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 51,942 47,066 40,358
LESS PROVISION FOR LOAN/LEASE LOSSES 1,216 944 1,539
- - ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN/LEASE LOSSES 50,726 46,122 38,819
OTHER INCOME
Trust and investment services income 4,586 4,119 3,811
Service charges on deposit accounts 3,739 3,223 2,722
Other service charges 3,812 2,716 2,008
Increase in cash surrender value of corporate owned life insurance 956 723 66
Other operating income 882 1,083 1,160
Gain (loss) on sale of available-for-sale securities 450 (59) (12)
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 14,425 11,805 9,755
- - ----------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES
Salaries and wages 17,354 15,131 12,358
Pension and other employee benefits 4,112 3,469 2,697
Net occupancy expense of bank premises 2,439 1,801 1,839
Net furniture and fixture expense 2,582 2,255 1,958
Amortization of intangible assets 1,135 687 239
Merger and acquisition-related expenses 0 1,463 0
Other operating expenses 11,197 9,514 7,765
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 38,819 34,320 26,856
- - ----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE AND MINORITY
INTEREST IN CONSOLIDATED SUBSIDIARIES 26,332 23,607 21,718
Minority interest in consolidated subsidiaries 568 558 0
INCOME TAX EXPENSE 8,252 7,849 7,216
- - ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $17,512 $15,200 $14,502
- - ----------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 2.47 $ 2.15 $ 2.05
Diluted earnings per share $ 2.45 $ 2.12 $ 2.01
- - ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
25
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
(in thousands) 2000 1999 1998
- - ----------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 17,512 $ 15,200 $ 14,502
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan/lease losses 1,216 944 1,539
Depreciation and amortization premises, equipment, and software 2,461 2,166 1,890
Amortization of intangible assets 1,135 687 239
Earnings from corporate owned life insurance (956) (723) (66)
Net amortization on securities 17 266 287
Deferred income tax benefit (599) (576) (537)
(Loss) gain on sale of securities (450) 59 12
Net gain on sales of loans (74) (27) (107)
Proceeds from sale of loans 8,287 7,436 8,564
Net gain on sales of bank premises and equipment 3 (32) (11)
Treasury stock issued 75 41 40
ISOP/ESOP shares released or committed to be released for allocation 159 384 507
Increase in interest receivable (1,419) (802) (420)
(Decrease) increase in interest payable 1,271 (18) 35
Other, net (268) (2,127) 2,928
- - ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 28,370 22,878 29,402
- - ----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from maturities of available-for-sale securities 39,768 82,381 86,514
Proceeds from sales of available-for-sale securities 9,393 12,983 26,237
Proceeds from maturities of held-to-maturity securities 10,750 12,296 19,018
Purchases of available-for-sale securities (50,955) (115,701) (115,231)
Purchases of held-to-maturity securities (5,674) (6,766) (7,071)
Net increase in loans/leases (99,209) (79,905) (64,636)
Proceeds from sales of bank premises and equipment 33 74 25
Purchases of bank premises and equipment (5,547) (2,434) (2,184)
Purchase of corporate owned life insurance (4,358) (815) (10,980)
Net cash provided by acquisition of The Mahopac National Bank 0 4,258 0
- - ----------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (105,799) (93,629) (68,308)
- - ----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in demand deposits, money market accounts, and savings accounts 16,778 58,059 21,416
Net increase in time deposits 43,884 40,701 18,323
Net (decrease) increase in securities sold under agreements to repurchase
and federal funds purchased 14,385 (3,359) 1,533
Net (decrease) increase in other borrowings 25,245 (6,961) 14,156
Cash dividends (7,696) (6,159) (5,499)
Repurchase of common shares (4,870) (4,101) (2,138)
Net proceeds from exercise of stock options, warrants, and related tax benefit 288 691 281
Cash paid in lieu of fractional Letchworth common shares (9) 0 0
- - ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 88,005 78,871 48,072
- - ----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 10,576 8,120 9,166
- - ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 54,788 46,668 37,502
- - ----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 65,364 $ 54,788 $ 46,668
- - ----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Interest $ 38,805 $ 30,569 $ 29,410
Income taxes $ 9,307 $ 10,307 $ 5,221
Non-cash investing and financing activities:
Change in net unrealized holding (loss) gain on available-for-sale securities $ 8,089 $ (11,814) $ 1,399
Fair value of non-cash assets acquired in purchase acquisition 60,034 143,298 0
Fair value of liabilities assumed in purchase acquisition 55,469 147,556 0
Shares issued for the acquisition of The Mahopac National Bank 8,176 0 0
See notes to consolidated financial statements.
26
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
ACCUMULATED
OTHER
COMMON UNDIVIDED COMPREHENSIVE TREASURY UNALLOCATED
(in thousands except share and per share data) STOCK SURPLUS PROFITS INCOME (LOSS) STOCK ISOP/ESOP TOTAL
- - -----------------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1997 $403 $45,522 $43,197 $1,383 $(571) $(931) $89,003
- - -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income 14,502 14,502
Other comprehensive income 956 956
--------
TOTAL COMPREHENSIVE INCOME 15,458
--------
Cash dividends ($.91 per share) (5,499) (5,499)
Exercise of stock options, and related
tax benefit (33,215 shares, net) 3 278 281
Treasury stock issued (1,180 shares) 17 23 40
Treasury stock purchased and returned to unissued
status by pooled company (59,490 shares) (5) (1,549) (1,554)
Common stock repurchased and returned
to unissued status (17,245 shares) (1) (583) (584)
ISOP/ESOP shares released or committed to
be released for allocation (16,182 shares) 243 264 507
Effect of stock splits in the form of stock
dividends 317 (154) (163) 0
- - -----------------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1998 $717 $43,774 $52,037 $2,339 $(548) $(667) $97,652
- - -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income 15,200 15,200
Other comprehensive loss (7,084) (7,084)
--------
TOTAL COMPREHENSIVE INCOME 8,116
--------
Cash dividends ($1.03 per share) (6,159) (6,159)
Exercise of stock options, and related tax benefit
(71,786 shares, net) 7 684 691
Treasury stock issued (1,226 shares) 18 23 41
Treasury stock purchased and returned to unissued
status by pooled company (9,465 shares) (1) (215) (216)
Common stock repurchased and returned to
unissued status (119,266 shares) (13) (3,872) (3,885)
ISOP/ESOP shares released or committed to
be released for allocation (14,164 shares) 159 225 384
- - -----------------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1999 $710 $40,548 $61,078 $(4,745) $(525) $(442) $96,624
- - -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income 17,512 17,512
Other comprehensive income 4,736 4,736
---------
TOTAL COMPREHENSIVE INCOME 22,248
---------
Cash paid in lieu of fractional Letchworth
common shares (9) (9)
Cash dividends ($1.08 per share) (7,696) (7,696)
Exercise of stock options and related
tax benefit (16,208 shares, net) 2 286 288
Treasury stock issued (2,777 shares) 23 52 75
Common stock repurchased and returned
to unissued status (185,696 shares) (19) (4,851) (4,870)
ESOP shares released or committed to
be released for allocation (5,376 shares) 50 109 159
Shares issued for purchase acquisition (415,000 shares) 41 8,135 8,176
- - -----------------------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 2000 $734 $44,182 $70,894 $(9) $(473) $(333) $114,995
- - -----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: Tompkins Trustco, Inc. ("Tompkins" or "the Company") is a
Financial Holding Company, organized under the laws of New York State, and is
the parent company of three wholly-owned community banking subsidiaries
- - -Tompkins Trust Company (the "Trust Company"), The Bank of Castile, and The
Mahopac National Bank. The consolidated financial information included herein
combines the results of operations, the assets, liabilities, and shareholders'
equity (including comprehensive income) of the Company and its subsidiaries. All
significant intercompany balances and transactions are eliminated in
consolidation.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclose contingent assets and
liabilities, at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates. Amounts in the prior years' consolidated financial
statements are reclassified when necessary to conform with the current year's
presentation.
CASH EQUIVALENTS: Cash equivalents in the consolidated statements of cash flows
include cash and noninterest bearing balances due from banks and Federal funds
sold.
SECURITIES: Management determines the appropriate classification of debt and
equity securities at the time of purchase. Securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at amortized
cost. Debt securities not classified as held-to-maturity and marketable equity
securities are classified as available-for-sale. Available-for-sale securities
are stated at fair value with the unrealized gains and losses, net of tax,
excluded from earnings and reported as a separate component of accumulated
comprehensive income or loss, in shareholders' equity.
Premiums and discounts are amortized or accreted over the expected life of the
related security as an adjustment to yield using the interest method. Dividend
and interest income are recognized when earned. Realized gains and losses on the
sale of securities are included in securities gains (losses). The cost of
securities sold is based on the specific identification method.
A decline in the fair value of any available-for-sale or held-to-maturity
security below cost that is deemed to be other than temporary is charged to
earnings, resulting in the establishment of a new cost basis for the security.
LOANS AND LEASES: Loans are reported at their principal outstanding balance, net
of deferred loan origination fees and costs, and unearned income. The Company
has the ability and intent to hold its loans for the foreseeable future, except
for education loans which are sold to a third party from time to time upon
reaching repayment status. The Company provides motor vehicle and equipment
financing to its customers through direct financing leases. These leases are
carried at the aggregate of lease payments receivable, plus estimated residual
values, less unearned income. Unearned income on direct financing leases is
amortized over the lease terms, resulting in a level rate of return.
RESERVE FOR LOAN/LEASE LOSSES: The reserve for loan/lease losses is regularly
evaluated by management in order to maintain the reserve at a level consistent
with the inherent risk of loss in the loan and lease portfolios. Management's
evaluation of the adequacy of the reserve is based upon a review of the
Company's historical loss experience, known and inherent risks in the loan and
lease portfolios, the estimated value of collateral, the level of nonperforming
loans, and trends in delinquencies. External factors, such as the level and
trend of interest rates and the national and local economies, are also
considered. Management believes that the reserve for loan/lease losses is
adequate.
Management considers a loan to be impaired if, based on current information, it
is probable that the Company will be unable to collect all scheduled payments of
principal or interest when due, according to the contractual terms of the loan
agreement. When a loan is considered to be impaired, the amount of the
impairment is measured based on the present value of expected future cash flows
discounted at the effective interest rate of the loan or, as a practical
expedient, at the observable market price or the fair value of collateral if the
loan is collateral dependent. Management excludes large groups of smaller
balance homogeneous loans such as residential mortgages, consumer loans, and
leases, which are collectively evaluated. All loans and leases restructured in a
troubled debt restructuring are also considered impaired loans. Impairment
losses are included in the reserve for loan/lease losses through a charge to the
provision for loan/lease losses.
INCOME RECOGNITION ON IMPAIRED AND NONACCRUAL LOANS AND LEASES: Loans and
leases, including impaired loans, are generally classified as nonaccrual if they
are past due as to maturity or payment of principal or interest for a period of
more than 90 days, unless such loans are well secured and in the process of
collection. Loans that are past due less than 90 days may also be classified as
nonaccrual if repayment in full of principal or interest is in doubt.
Loans may be returned to accrual status when all principal and interest amounts
contractually due (including arrearages) are reasonably assured of repayment
within an acceptable time period, and there is a sustained period of repayment
performance by the borrower in accordance with the contractual terms of the loan
agreement. Payments received on loans carried as nonaccrual are generally
applied as a reduction to principal. When the future collectibility of the
recorded loan balance is expected, interest income may be recognized on a cash
basis.
28
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
OTHER REAL ESTATE OWNED: Other real estate owned consists of properties formerly
pledged as collateral to loans, which have been acquired by the Company through
foreclosure proceedings or acceptance of a deed in lieu of foreclosure. Other
real estate owned is carried at the lower of the recorded investment in the loan
or the fair value of the real estate, less estimated costs to sell. Upon
transfer of a loan to foreclosure status, an appraisal is obtained and any
excess of the loan balance over the fair value, less estimated costs to sell, is
charged against the reserve for loan/lease losses. Expenses and subsequent
adjustments to the fair value are treated as other operating expense.
BANK PREMISES AND EQUIPMENT: Land is carried at cost. Bank premises and
equipment are stated at cost, less allowances for depreciation. The provision
for depreciation for financial reporting purposes is computed generally by the
straight-line method at rates sufficient to write-off the cost of such assets
over their estimated useful lives. Bank premises are amortized over a period of
10-39 years, and furniture, fixtures, and equipment are amortized over a period
of 2-20 years. Maintenance and repairs are charged to expense as incurred.
INCOME TAXES: Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
GOODWILL AND CORE DEPOSIT INTANGIBLE: Goodwill represents the excess of purchase
price over the fair value of assets acquired in a transaction using purchase
accounting. Core deposit intangible represents a premium paid to acquire a base
of stable low cost deposits in the acquisition of a bank, or a bank branch,
using purchase accounting. The amortization period of goodwill ranges from 10
years to 20 years, and the amortization period for core deposit intangible
ranges from 5 years to 10 years. The amortization periods are monitored to
determine if circumstances require such period to be reduced. The Company
periodically reviews its intangible assets for changes in circumstances that may
indicate the carrying amount of the asset is impaired.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE: Securities sold under agreements
to repurchase (repurchase agreements) are agreements in which the Company
transfers the underlying securities to a third-party custodian's account that
explicitly recognizes the Company's interest in the securities. The agreements
are accounted for as secured financing transactions provided the Company
maintains effective control over the transferred securities and meets other
criteria as specified in Statement of Financial Accounting Standards (SFAS) No.
125. The Company's agreements are accounted for as secured financings;
accordingly, the transaction proceeds are reflected as liabilities and the
securities underlying the agreements continue to be carried in the Company's
securities portfolio.
TREASURY STOCK: The cost of treasury stock is shown on the consolidated
statements of condition as a separate component of shareholders' equity, and is
a reduction to total shareholders' equity. Shares are released from treasury at
fair value, with any gain or loss on the sale reflected as an adjustment to
shareholders' equity. All shares currently carried in treasury are the result of
a single purchase; therefore, the cost basis for shares released is equal to the
actual cost.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: In the normal course of
business the Company is party to certain financial instruments with
off-balance-sheet risk such as commitments under stand-by letters of credit,
unused portions of lines of credit, and commitments to fund new loans. The
Company's policy is to record such instruments when funded.
TRUST AND INVESTMENT SERVICES DIVISION: Assets held in fiduciary or agency
capacities for customers are not included in the accompanying consolidated
statements of condition, since such items are not assets of the Company. Fees
associated with providing trust and investment services are included in other
income.
EARNINGS PER SHARE: Basic earnings per share is calculated by dividing net
income available to common shareholders by the weighted average number of shares
outstanding during the year. Diluted earnings per share is calculated by
dividing net income available to common shareholders by the weighted average
number of shares outstanding during the year plus the maximum dilutive effect of
stock issuable upon conversion of stock options and warrants.
CASH DIVIDENDS PER SHARE: Cash dividends per share reflect actual historical
information for Tompkins Trustco, Inc.
SEGMENT REPORTING: The Company's operations are solely in the financial services
industry and include the provisions of traditional commercial banking services.
The Company operates primarily in the geographical areas in the proximity of its
branch locations in New York State. Operating decisions are made based upon a
review of the Company's traditional banking services, which constitute the
Company's only reportable segment.
COMPREHENSIVE INCOME: For the Company, comprehensive income represents net
income plus the net change in unrealized gains or losses on securities available
for sale for the period (net of taxes), and is presented in the consolidated
statements of changes in shareholders' equity. Accumulated other comprehensive
income represents the net unrealized gains or losses on securities available for
sale (net of tax) as of the dates of the consolidated statements of condition.
STOCK BASE COMPENSATION: The Company applies APB Opinion No. 25 and related
interpretations in accounting for its stock option plan. Accordingly,
compensation expense is recognized only if the exercise price of the option is
less than the fair value of the underlying stock at the grant date. Statement of
Financial Accounting Standards (SFAS) No. 133 requires companies not using a
fair value based method of accounting for stock options to provide pro forma
disclosure of net income and earnings per share as if the fair value method of
accounting had been applied.
29
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: The Company
adopted the provisions of Financial Accounting Standards Board (FASB) SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," effective
January 1, 2001. This statement establishes accounting and reporting standards
for derivative instruments, including certain derivatives embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities on the balance sheet and measure
those assets at fair value. Changes in fair value of the derivative financial
instruments are reported as either net income or as a component of comprehensive
income, depending on whether or not it qualifies from hedge accounting.
Consequently, there may be increased volatility in net income and shareholders'
equity as a result of accounting for derivatives in accordance with SFAS No.
133.
Special hedge accounting treatment is permitted only if specific criteria are
met, including a requirement that the hedging relationship be highly effective
both at inception and on an ongoing basis. Results of effective hedges are
recognized in current earnings for fair value hedges, in other comprehensive
income for cash flow hedges. Ineffective portions of hedges are recognized
immediately in earnings and are not deferred. The adoption of SFAS No. 133 by
the Company on January 1, 2001, did not have a material effect on the Company's
consolidated financial statements.
ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION: In March 2000,
the FASB issued FASB Interpretation No. 44, "Accounting for Certain Transactions
involving Stock Compensation." FASB Interpretation No. 44 clarifies certain
issues relating to the application of Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees." FASB Interpretation No. 44 became
effective on July 31, 2000, and the adoption of this interpretation did not have
a material effect on the Company's consolidated financial position or results of
operations.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES: In September 2000, The FASB issued SFAS No. 140 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
SFAS No. 140 replaces identically titled SFAS No. 125, and it carries forward
most of SFAS No. 125's provisions without change. It does revise accounting
standards for securitizations and certain other transfers of financial assets
and collateral. The statement is generally applied prospectively to transactions
and servicing activities occurring after March 31, 2001, although provisions
with respect to collateral and certain disclosure requirements are effective for
fiscal years ending after December 15, 2000. The adoption of this statement did
not have a material impact on the consolidated financial statements of the
Company.
30
NOTE 2 MERGERS AND ACQUISITIONS
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION ACQUISITION
On December 20, 1999, the shareholders of Tompkins Trustco, Inc. and Letchworth
Independent Bancshares Corporation ("Letchworth") approved a merger between the
two companies. Effective December 31, 1999, Letchworth was merged with and into
Tompkins, and each issued and outstanding share of Letchworth common stock was
converted into 0.685 shares of Tompkins common stock, plus cash in lieu of any
fractional shares. This merger resulted in the issuance of approximately 2.3
million additional shares of Tompkins common stock, bringing Tompkins' total
outstanding shares to approximately 7.1 million shares immediately following the
merger.
Letchworth was the holding company for The Bank of Castile, Castile, New York,
and The Mahopac National Bank, Mahopac, New York. The Bank of Castile will
continue to operate its community banking business as a wholly-owned subsidiary
of Tompkins. The Bank of Castile conducts its operations through its main office
located in Castile, New York, and at its eleven branch offices in towns situated
in and around the areas commonly known as the Letchworth State Park area and the
Genesee Valley region of New York State. In 1999, The Bank of Castile opened its
first branch office in Monroe County. The Mahopac National Bank will continue to
operate its community banking business as a majority-owned subsidiary of
Tompkins. Immediately following the Letchworth merger, Tompkins owned 70 percent
of The Mahopac National Bank outstanding common stock. As noted below, Tompkins
subsequently purchased the additional remaining shares of The Mahopac National
Bank, such that at December 31, 2000, Tompkins effectively owned all of The
Mahopac National Bank outstanding common stock. The Mahopac National Bank is
located in Putnam County, New York, and operates four bank branches in that
county.
As a result of the merger, the Company incurred one-time merger-related expenses
of approximately $1.5 million ($1.3 million after tax impact), which were
recognized in the fourth quarter of 1999. The expenses related primarily to fees
for professional services and also include fees for data processing conversion
and certain employment-related costs.
The merger qualified as a tax-free reorganization and was accounted for as a
pooling-of-interests. All historical financial information in this annual report
has been restated for the combination of the two companies.
The following table presents the results of operations for the years ended
December 31, 1999 and 1998, as reported by each of the companies, and on a
combined basis:
YEAR ENDED DECEMBER 31 (dollar amounts in thousands, except per share) 1999 1998
- - ------------------------------------------------------------------------------------------------------
Net interest income:
Tompkins $29,111 $28,231
Letchworth 17,955 12,127
- - ------------------------------------------------------------------------------------------------------
COMBINED $47,066 $40,358
Net income:
Tompkins $11,865 $11,189
Letchworth 3,335 3,313
- - ------------------------------------------------------------------------------------------------------
COMBINED $15,200 $14,502
Basic earnings per share:
Tompkins $ 2.46 $ 2.31
Letchworth $ 1.01 $ 1.01
- - ------------------------------------------------------------------------------------------------------
COMBINED $ 2.15 $ 2.05
Diluted earnings per share:
Tompkins $ 2.43 $ 2.27
Letchworth $ 1.00 $ .99
- - ------------------------------------------------------------------------------------------------------
COMBINED $ 2.12 $ 2.01
- - ------------------------------------------------------------------------------------------------------
31
THE MAHOPAC NATIONAL BANK ACQUISITION
On June 4, 1999, Letchworth acquired 70.17 percent of the outstanding common
stock of The Mahopac National Bank in a cash transaction accounted for as a
purchase. Accordingly, operating results for The Mahopac National Bank are not
included for periods prior to June 4, 1999. Subsequent to June 4, 1999, net
income of The Mahopac National Bank is included in Tompkins' net income based
upon the percentage of Tompkins' ownership of The Mahopac National Bank . This
transaction resulted in a core deposit intangible of $3.5 million, which is
being amortized over a ten year period, and goodwill of $2.5 million, which is
being amortized over a 20 year period.
Effective September 1, 2000, and early in 2001, Tompkins completed the purchase
of the minority interest in The Mahopac National Bank, primarily in a
stock-for-stock transaction accounted for as a purchase. Prior to September 1,
2000, the approximately 30% interest in The Mahopac National Bank, which was not
owned by Tompkins, was shown as a minority interest in consolidated subsidiaries
on the consolidated statements of condition. Subsequent to September 1, 2000,
effectively all of the net income of The Mahopac National Bank is included in
Tompkins' consolidated net income. The approximately 30% acquisition of The
Mahopac National Bank resulted in a core deposit intangible of $1.9 million,
which is being amortized over a 10 year period, and goodwill of $2.5 million,
which is being amortized over a 20 year period.
The table below presents the pro forma combined results of operations of
Tompkins and The Mahopac National Bank, as if Mahopac had been 100% owned for
all periods presented.
YEAR ENDED DECEMBER 31 (dollar amounts in thousands, except per share) 2000 1999 1998
- - ------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME:
- - ------------------------------------------------------------------------------------------------------------------------
As reported $51,942 $47,066 $40,358
Pro forma combined $51,942 49,928 46,615
NET INCOME:
- - ------------------------------------------------------------------------------------------------------------------------
As reported $17,512 $15,200 $14,502
Pro forma combined 17,818 15,866 14,896
BASIC EARNINGS PER SHARE:
- - ------------------------------------------------------------------------------------------------------------------------
As reported $ 2.47 $ 2.15 $ 2.05
Pro forma combined 2.41 2.12 1.99
DILUTED EARNINGS PER SHARE:
- - ------------------------------------------------------------------------------------------------------------------------
As reported $ 2.45 $ 2.12 $ 2.01
Pro forma combined 2.40 $ 2.09 $ 1.95
- - ------------------------------------------------------------------------------------------------------------------------
The pro forma combined financial information does not reflect any potential cost
savings or revenue enhancements that are expected to result from the merger and
acquisitions. Accordingly, the pro forma combined financial information may not
be indicative of operations that would have been achieved had the merger and
acquisitions occurred on the dates indicated, nor do they purport to be
indicative of the results of operations that may be achieved in the future.
AUSTIN, HARDIE, WISE AGENCY, INC. AND ERNEST TOWNSEND & SON, INC. ACQUISITIONS
Effective January 1, 2001, the Company completed the acquisition of 100% of the
common stock of Austin, Hardie, Wise Agency, Inc. and Ernest Townsend & Son,
Inc., in a cash and stock transaction accounted for as a purchase. The two
agencies have been merged with and into Tompkins Insurance Agencies, Inc., a
wholly-owned subsidiary of Tompkins. The agencies are expected to continue
operating in their current western New York locations, which include Attica,
Warsaw, Alden, LeRoy, Batavia and Caledonia. The acquisition has been accounted
for as a purchase transaction, with the $3.92 million excess of the purchase
price over the fair value of identifiable assets acquired less liabilities
assumed recorded as goodwill and amortized on a straight-line basis over fifteen
years.
The purchase agreements for the insurance agencies include provisions for
additional consideration to be paid in the form of Company stock if certain
income targets are met by Tompkins Insurance Agencies, Inc. in 2001 and 2002.
The contingent consideration includes 25,093 shares, which are payable if the
income targets are met, and an additional 8,333 shares which are payable if
income targets are exceeded by 5%.
32
NOTE 3 SECURITIES
The following summarizes securities:
AVAILABLE-FOR-SALE SECURITIES
- - ----------------------------------------------------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 2000 (in thousands) COST GAINS LOSSES VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury securities and obligations of
U.S. Government agencies $160,470 $ 103 $ 503 $160,070
Obligations of states and political subdivisions 46,432 696 190 46,938
Mortgage-backed securities 84,342 340 376 84,306
U.S. corporate securities 4,489 4 25 4,468
- - ----------------------------------------------------------------------------------------------------------------------------------
Total debt securities 295,733 1,143 1,094 295,782
- - ----------------------------------------------------------------------------------------------------------------------------------
Equity securities 8,640 0 64 8,576
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE-FOR-SALE SECURITIES $304,373 $1,143 $1,158 $304,358
==================================================================================================================================
Available-for-sale securities includes $7,089,000 in equity securities, which
are carried at amortized cost since fair values are not readily determinable.
This figure includes $6,270,000 of Federal Home Loan Bank Stock. Substantially
all of the above mortgage-backed securities are direct pass through securities
issued or backed by Federal agencies.
HELD-TO-MATURITY SECURITIES
- - ----------------------------------------------------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 2000 (in thousands) COST GAINS LOSSES VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions $25,863 $284 $0 $26,147
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL HELD-TO-MATURITY DEBT SECURITIES $25,863 $284 $0 $26,147
==================================================================================================================================
AVAILABLE-FOR-SALE SECURITIES
- - ----------------------------------------------------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1999 (in thousands) COST GAINS LOSSES VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury securities and obligations of
U.S. Government agencies $156,763 $ 63 $6,025 $150,801
Obligations of states and political subdivisions 47,943 325 628 47,640
Mortgage-backed securities 85,340 50 2,204 83,186
U.S. corporate securities 4,486 7 25 4,468
- - ----------------------------------------------------------------------------------------------------------------------------------
Total debt securities 294,532 445 8,882 286,095
- - ----------------------------------------------------------------------------------------------------------------------------------
Equity securities 7,771 333 0 8,104
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE-FOR-SALE SECURITIES $302,303 $778 $8,882 $294,199
- - ----------------------------------------------------------------------------------------------------------------------------------
Available-for-sale securities includes $6,665,000 in equity securities, which
are carried at amortized cost since fair values are not readily determinable.
This figure includes $5,039,000 of Federal Home Loan Bank Stock. Substantially
all of the above mortgage-backed securities are direct pass through securities
issued or backed by Federal agencies.
HELD-TO-MATURITY SECURITIES
- - ----------------------------------------------------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1999 (in thousands) COST GAINS LOSSES VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions $30,975 $349 $59 $31,265
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL HELD-TO-MATURITY DEBT SECURITIES $30,975 $349 $59 $31,265
- - ----------------------------------------------------------------------------------------------------------------------------------
33
NOTE 3 SECURITIES (continued)
The amortized cost and fair value of debt securities by contractual maturity are
shown in the following table. Expected maturities will differ from contractual
maturities because issuers may have the right to call or prepay obligations with
or without call or prepayment penalties.
AMORTIZED FAIR
DECEMBER 31, 2000 (in thousands) COST VALUE
- - ------------------------------------------------------------------------------------------------------
Available-for-sale securities:
Due in one year or less $ 24,612 $ 24,630
Due after one year through five years 62,656 62,870
Due after five years through ten years 113,506 113,362
Due after ten years 10,617 10,615
- - ------------------------------------------------------------------------------------------------------
TOTAL 211,391 211,477
- - ------------------------------------------------------------------------------------------------------
Mortgage-backed securities 84,342 84,306
Equity securities 8,640 8,576
- - ------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE-FOR-SALE SECURITIES $304,373 $304,358
======================================================================================================
AMORTIZED FAIR
DECEMBER 31, 2000 (in thousands) COST VALUE
- - ------------------------------------------------------------------------------------------------------
Held-to-maturity securities:
Due in one year or less $ 8,448 $ 8,484
Due after one year through five years 10,669 10,813
Due after five years through ten years 3,848 3,945
Due after ten years 2,897 2,905
- - ------------------------------------------------------------------------------------------------------
TOTAL HELD-TO-MATURITY DEBT SECURITIES $ 25,863 $ 26,147
======================================================================================================
Realized gains on available-for-sale securities were $453,000 in 2000, $37,000
in 1999, and $89,000 in 1998; realized losses on available-for-sale securities
were $3,000 in 2000, $96,000 in 1999, and $101,000 in 1998. At December 31,
2000, securities with a carrying value of $261,503,000 were pledged to secure
public deposits (as required by law), and securities were sold under agreements
to repurchase (see also Note 9).
Except for U.S. government securities, there were no holdings, when taken in
aggregate, of any single issuer that exceeded 10 percent of shareholders' equity
at December 31, 2000.
NOTE 4 COMPREHENSIVE INCOME
Comprehensive income for the three years ended December 31, 2000, is summarized
below:
DECEMBER 31 (in thousands) 2000 1999 1998
- - --------------------------------------------------------------------------------------------------------------------------------
Net income $17,512 $ 15,200 $14,502
- - --------------------------------------------------------------------------------------------------------------------------------
Net unrealized holding gain (loss) on available-for-sale securities
during the year. Pre-tax net unrealized holding gain (loss) was
$8,539 in 2000, $(11,873) in 1999, and $1,387 in 1998. 5,006 (7,119) 948
Reclassification adjustment for net realized (gain) loss on sale of
available-for-sale securities (pre-tax net gain of $450 in 2000, and
pre-tax net loss of $59 in 1999, and $12 in 1998). (270) 35 8
- - --------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) 4,736 (7,084) 956
- - --------------------------------------------------------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME $22,248 $ 8,116 $15,458
================================================================================================================================
34
NOTE 5 LOAN/LEASE CLASSIFICATION SUMMARY AND RELATED PARTY TRANSACTIONS
Loans/Leases at December 31 were as follows:
(in thousands) 2000 1999
- - -----------------------------------------------------------------------------------------------------------------
Residential real estate $344,715 $312,506
Commercial real estate 152,218 141,903
Real estate construction 18,746 19,046
Commercial 202,956 166,263
Consumer and other 110,126 99,206
Leases 19,565 18,850
- - -----------------------------------------------------------------------------------------------------------------
Total loans and leases 848,326 757,774
- - -----------------------------------------------------------------------------------------------------------------
Less unearned income and net deferred costs and fees (2,568) (2,392)
- - -----------------------------------------------------------------------------------------------------------------
TOTAL LOANS AND LEASES, NET OF UNEARNED INCOME AND DEFERRED COSTS AND FEES $845,758 $755,382
=================================================================================================================
Directors and officers of the Company and its affiliated companies were
customers of, and had other transactions with, the Company in the ordinary
course of business. Such loans and commitments were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons, and did not involve more
than normal risk of collectibility or present other unfavorable features.
Loan transactions with related parties are summarized as follows:
(in thousands) 2000 1999
- - ----------------------------------------------------------------------------------------------------------------
Balance January 1 $5,438 $5,855
Related party loans associated with purchase acquisition 0 576
Former Directors/Executive Officers (1,133) 0
New Executive Officers 96 0
New loans and advances 2,138 4,324
Loan payments (2,436) (5,317)
- - ----------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31 $4,104 $5,438
During 2000, the Company sold $1,068,000 of education loans and $7,194,000 of
mortgage loans, realizing net gains of $73,000. During 1999, the Company sold
$1,401,000 of student loans and $6,035,000 of mortgage loans, realizing a net
gain of $27,000. During 1998, the Company sold $6,877,000 in student loans and
$1,687,000 in mortgage loans, realizing a net gain of $107,000. Net gains and
losses on the sale of loans are included in other operating income on the
Company's consolidated statements of income. There were no loans held for sale
at December 31, 2000, or 1999. At December 31, 2000, the Company serviced
mortgage loans for third parties aggregating $63,250,000, compared to
$59,145,000 at December 31, 1999.
The Company's loan/lease customers are located primarily in the upstate New York
communities served by its three subsidiary banks. The Trust Company operates
eleven full-service banking offices in the counties of Tompkins and Schuyler.
The Bank of Castile operates twelve branch offices in towns situated in and
around the areas commonly known as the Letchworth State Park area and the
Genesee Valley region of New York State. The Mahopac National Bank is located in
Putnam County, and operated four full-service branches in that county on
December 31, 2000. Other than general economic risks, management is not aware of
any material concentrations of credit risk to any industry or individual
borrower.
35
NOTE 6 RESERVE FOR LOAN/LEASE LOSSES
Changes in the reserve for loan/lease losses are summarized as follows:
(in thousands) 2000 1999 1998
- - -------------------------------------------------------------------------------------------------------------------------------
Reserve at beginning of year $9,228 $7,405 $7,007
Allowance related to purchase acquisition 0 1,511 0
Provisions charged to operations 1,216 944 1,539
Recoveries on loans/leases 409 476 448
Loans/leases charged-off (1,029) (1,108) (1,589)
- - -------------------------------------------------------------------------------------------------------------------------------
RESERVE AT END OF YEAR $9,824 $9,228 $7,405
===============================================================================================================================
The Company's recorded investment in loans/leases that are considered impaired
totaled $2,710,000 at December 31, 2000, and $2,371,000 at December 31, 1999.
The average recorded investment in impaired loans/leases was $1,636,000 in 2000,
$828,000 in 1999, and $1,592,000 in 1998. The December 31, 2000, recorded
investment in impaired loans/leases includes $1,882,000 of loans/leases that had
related reserves of $706,000. The recorded investment in impaired loans/leases
at December 31, 1999, included $2,059,000 of loans/leases which had related
reserves of $786,000. Interest income recognized for cash payments received on
impaired loans/leases was $94,000 for 2000, $103,000 for 1999, and was not
material to the accompanying financial statements for 1998.
The principal balance nonperforming loans/leases, including impaired
loans/leases, are detailed in the table below.
DECEMBER 31
(in thousands) 2000 1999
- - ----------------------------------------------------------------------------------------------------
Loans 90 days past due and accruing $ 226 $ 168
Nonaccruing loans 4,134 3,698
Troubled debt restructurings not included above 389 400
- - ----------------------------------------------------------------------------------------------------
NONPERFORMING LOANS/LEASES $4,749 $4,266
====================================================================================================
The difference between the interest income that would have been recorded if
these loans/leases had been paid in accordance with their original terms and the
interest income recorded for the three-year period ended December 31, 2000, was
not significant.
NOTE 7 BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31 were as follows:
(in thousands) 2000 1999
- - ------------------------------------------------------------------------------------------------------
Land $ 3,229 $ 3,148
Bank premises 22,271 19,409
Furniture, fixtures, and equipment 18,758 17,574
Accumulated depreciation and amortization (20,397) (18,984)
- - ------------------------------------------------------------------------------------------------------
$ 23,861 $ 21,147
======================================================================================================
Depreciation and amortization expense in 2000, 1999, and 1998 are included in
operating expenses as follows:
(in thousands) 2000 1999 1998
- - -----------------------------------------------------------------------------------------------------------------------
Bank premises $ 808 $ 702 $ 474
Furniture, fixtures, and equipment 1,501 1,420 1,193
- - -----------------------------------------------------------------------------------------------------------------------
$ 2,309 $2,122 $1,667
=======================================================================================================================
36
NOTE 8 DEPOSITS
The aggregate time deposits of $100,000 or more were $183,452,000 at December
31, 2000, and $179,936,000 at December 31, 1999. Scheduled maturities of time
deposits at December 31, 2000, were as follows:
LESS THAN $100,000
(in thousands) $100,000 AND OVER TOTAL
- - -------------------------------------------------------------------------------------------------------------------------------
Maturity:
Three months or less $ 73,216 $124,774 $197,990
Over three through six months 58,684 34,120 92,804
Over six through twelve months 66,146 16,707 82,853
- - -------------------------------------------------------------------------------------------------------------------------------
Total due in 2001 198,046 175,601 373,647
2002 28,923 6,668 35,591
2003 5,058 534 5,592
2004 3,655 505 4,160
2005 and thereafter 1,121 144 1,265
- - -------------------------------------------------------------------------------------------------------------------------------
$236,803 $183,452 $420,255
===============================================================================================================================
NOTE 9 FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE
Information regarding securities sold under agreements to repurchase as of
December 31, 2000, is summarized below:
(dollar amounts in thousands) COLLATERAL SECURITIES REPURCHASE LIABILITY
- - ----------------------------------------------------------------------------------------------------------------------------------
ESTIMATED WEIGHTED AVERAGE
CARRYING FAIR INTEREST
AMOUNT VALUE AMOUNT RATE
- - ----------------------------------------------------------------------------------------------------------------------------------
Maturity/Type of Asset
2 to 30 days:
U.S. Government agency securities $ 14 $ 14 $ 14 6.35%
Mortgage-backed securities N/A N/A N/A N/A
Obligations of states and political subdivisions 165 170 93 6.35%
31 to 89 days:
U.S. Treasury securities 564 551 526 5.85%
Mortgage-backed securities 161 162 159 6.15%
Obligations of states and political subdivisions 220 216 831 6.44%
U.S. Government agency securities 44 43 43 6.44%
Over 90 days:
Mortgage-backed securities 343 337 333 5.00%
Obligations of states and political subdivisions 145 152 276 6.28%
Demand:
U.S. Treasury securities 1,499 1,505 1,500 6.45%
U.S. Government agency securities 28,110 28,202 28,178 6.43%
Corporate bonds 3,000 2,975 3,000 5.65%
Mortgage-backed securities 37,792 37,524 37,278 5.40%
- - ----------------------------------------------------------------------------------------------------------------------------------
$72,057 $71,851 $72,231 5.85%
==================================================================================================================================
37
NOTE 9 FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE (Continued)
At December 31, 2000, substantially all of the above securities were held by the
Bank of New York or the Federal Reserve Bank of New York. Additional information
regarding securities sold under agreements to repurchase and federal funds
purchased for the years ended December 31, is detailed in the table below:
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (dollar amounts in thousands) 2000 1999 1998
- - --------------------------------------------------------------------------------------------------------------------------------
Total outstanding at December 31 $72,231 $57,846 $61,205
Maximum month-end balance 75,525 60,662 66,079
Average balance during the year 61,207 56,453 57,379
Weighted average rate at December 31 5.85% 5.07% 5.38%
- - --------------------------------------------------------------------------------------------------------------------------------
Average interest rate paid during year 5.73% 4.76% 5.12%
================================================================================================================================
FEDERAL FUNDS PURCHASED (dollar amounts in thousands) 2000 1999 1998
- - --------------------------------------------------------------------------------------------------------------------------------
Total outstanding at December 31 $ 0 $ 0 $ 0
Maximum month-end balance 18,000 13,500 13,500
Average balance during the year 7,098 4,201 3,012
Weighted average rate at December 31 N/A N/A N/A
Average interest rate paid during year 6.85% 5.27% 5.74%
================================================================================================================================
NOTE 10 OTHER BORROWINGS
The Company, through its subsidiary banks, had available lines-of-credit
agreements with banks permitting borrowings to a maximum of approximately
$29,500,000 at December 31, 2000, and December 31, 1999. No advances were
outstanding against those lines at December 31, 2000, or 1999.
All bank subsidiaries are members of the Federal Home Loan Bank (FHLB) and as
such, may apply for advances secured by certain residential mortgage loans and
other assets, provided that certain standards for credit worthiness have been
met. At December 31, 2000, the Company, through its subsidiaries, had
established unused lines of credit with the FHLB of $116,915,000. At December
31, 2000, there were $67,117,000 in term advances from the FHLB, compared to
$41,912,000 at December 31, 1999.
FHLB term advances due in one year or less as of December 31, 2000, and 1999,
are detailed in the table below:
FEDERAL HOME LOAN BANK ADVANCES: (dollar amounts in thousands) 2000 1999
- - ------------------------------------------------------------------------------------------------------------
Due in one year or less:
Total outstanding at December 31 $22,000 $10,000
Maximum month-end balance 32,000 10,000
Average balance during the year 18,030 2,285
Average interest rate paid during year 6.74% 5.46%
============================================================================================================
At December 31, 2000, there were advances due in more than one year of
$45,117,000, with a weighted average rate of 6.22 percent. Maturities of
advances included $11,000,000 maturing in 2002, $12,717,000 in 2004, $10,000,000
in 2005, $833,000 in 2006, and $10,567,000 in 2010. The Company's FHLB
borrowings at December 31, 2000, include $30,000,000 in fixed-rate callable
borrowings, which can be called by the FHLB on the first anniversary of the
borrowing, and quarterly thereafter.
Other borrowings included a $140,000 Treasury Tax and Loan Note account with the
Federal Reserve Bank of New York at December 31, 2000, and $100,000 at December
31, 1999.
38
NOTE 11 EMPLOYEE BENEFIT PLANS
The Company maintains a noncontributory defined-benefit pension plan covering
substantially all employees of the Trust Company and The Bank of Castile. The
benefits are based on years of service and a percentage of the employees'
average compensation. Prior to October 1, 2000, the Company maintained two
noncontributory defined benefit plans, Tompkins County Trust Company Retirement
Plan and Bank of Castile Employees Retirement Plan. Effective October 1, 2000,
the Company amended and merged these two plans. Assets of the Company's defined
benefit plan are invested in common and preferred stock, U. S. Government
securities, corporate bonds and notes, and mutual funds. The plan assets at
December 31, 2000, included 56,518 shares of Tompkins common stock.
The Trust Company also offers post-retirement medical coverage and life
insurance coverage to full-time employees who have worked ten years and attained
age 55. Medical coverage is contributory with contributions reviewed annually.
The Trust Company assumes the majority of the cost for these other benefits,
while retirees share some of the cost through co-insurance and deductibles.
The following table sets forth the changes in the plans' benefit obligation and
plan assets, and the plans' funded status and amounts recognized in the
Company's consolidated statements of condition at December 31, 2000 and 1999.
For purposes of this disclosure the defined-benefit pension plans which existed
at December 31, 1999 have been combined. At December 31, 1999, the Trust Company
had a prepaid benefit cost of $2,396,000 and The Bank of Castile had an accrued
benefit cost of $207,000.
PENSION BENEFITS OTHER BENEFITS
- - -----------------------------------------------------------------------------------------------------------------------------------
(dollar amounts in thousands) 2000 1999 2000 1999
- - -----------------------------------------------------------------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year $ 16,983 $ 17,375 $ 3,391 $ 3,114
Service cost 704 646 98 88
Interest cost 1,258 1,134 259 227
Amendments (2,500) 0 0 0
Actuarial (gain) loss 1,892 (1,396) 160 141
Benefits paid (1,379) (776) (183) (179)
- - -----------------------------------------------------------------------------------------------------------------------------------
BENEFIT OBLIGATION AT END OF YEAR $ 16,958 $ 16,983 $ 3,725 $ 3,391
- - -----------------------------------------------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year $ 17,533 $ 16,207 $ 0 $ 0
Actual return on plan assets 1,231 1,523 0 0
Employer contribution 729 579 183 178
Benefits paid (1,379) (776) (183) (178)
- - -----------------------------------------------------------------------------------------------------------------------------------
FAIR VALUE OF PLAN ASSETS AT END OF YEAR $ 18,114 $ 17,533 $ 0 $ 0
- - -----------------------------------------------------------------------------------------------------------------------------------
Funded status $ 1,156 $ 550 $ (3,725) $ (3,391)
Unrecognized net actuarial loss (gain) 3,801 1,781 151 (9)
Net transition (asset) obligation (195) (301) 1,386 1,502
Unrecognized prior service cost (2,429) 159 0 0
- - -----------------------------------------------------------------------------------------------------------------------------------
PREPAID (ACCRUED) BENEFIT COST $ 2,333 $ 2,189 $ (2,188) $ (1,898)
- - -----------------------------------------------------------------------------------------------------------------------------------
Weighted-average assumptions as of December 31:
Discount rate 7.50% 7.25% 7.50% 7.25%
Expected return on plan assets 8.50% 8.50% NA NA
Rate of compensation increase 4.00-5.00% 4.00% (1) 4.00% 4.00%
- - -----------------------------------------------------------------------------------------------------------------------------------
(1) The rate of compensation increase for The Bank of Castile was 5%.
The Trust Company currently offers medical coverage and life insurance coverage
to substantially all of its employees upon retirement. The weighted average
annual assumed rate of increase in the per capita cost of covered benefits (the
health care cost trend rate) is 10 percent beginning in 2001, and is assumed to
decrease gradually to 5.0 percent in 2010 and beyond. Increasing the assumed
health care cost trend rates by 1 percent in each year would increase the
accumulated post-retirement benefit obligation as of December 31, 2000, by
$70,000 and the net periodic post-retirement benefit cost for 2000 by $5,000.
Decreasing the assumed health care cost trend rates by 1 percent each year would
decrease the accumulated post-retirement benefit obligation as of December 31,
2000, by $85,000 and decrease the net periodic post-retirement benefit cost by
$6,000.
39
NOTE 11 EMPLOYEE BENEFIT PLANS (continued)
Net periodic benefit cost includes the following components:
COMPONENTS OF NET PERIODIC BENEFIT COST PENSION BENEFITS OTHER BENEFITS
(in thousands) 2000 1999 1998 2000 1999 1998
- - --------------------------------------------------------------------------------------------------------------------------------
Service cost $ 704 $ 646 $ 548 $ 98 $ 88 $ 78
Interest cost 1,258 1,134 1,040 259 227 203
Expected return on plan assets (1,487) (1,371) (1,381) 0 0 0
Amortization of prior service cost 15 14 14 0 0 0
Recognized net actuarial gain (loss) 96 70 0 0 0 (4)
Amortization of transition (asset) liability (106) (77) (77) 116 116 116
Other 107 NA NA NA NA NA
- - --------------------------------------------------------------------------------------------------------------------------------
NET PERIODIC BENEFIT COST $ 587 $ 416 $ 144 $ 473 $ 431 $ 393
================================================================================================================================
At December 31, 2000, the Trust Company and The Bank of Castile had an
Investment and Stock Ownership Plan (ISOP) and an Employee Stock Ownership Plan
(ESOP), which covered substantially all employees of those organizations. The
plans allowed for Company contributions in the form of cash and/or stock of the
Company. Contributions are determined by the board of directors as determined by
a performance-based formula, and were limited to a maximum amount as stipulated
in the respective plans.
In 1994, the Trust Company ISOP borrowed $1,650,000 from the Trust Company to
purchase 82,500 common shares of the Company. The debt had a term of ten years
and an interest rate of 9.5 percent. At December 31, 2000, the debt had been
repaid and no shares remained unallocated. The Trust Company recognized
compensation expense, including cash contributions, if any, for the ISOP of $0
in 2000, $392,000 in 1999, and $364,000 in 1998.
In 1997, The Bank of Castile ESOP borrowed $487,000 from The Bank of Castile to
purchase Company stock for the ESOP. The debt has a term of ten years and on
December 31, 2000, had an outstanding balance of $334,000 and an adjustable
interest rate of 10.5 percent. On December 31, 2000, 32,261 shares remained
unallocated with a fair market value of $903,000. The Bank of Castile recognized
compensation expense of $140,000 in 2000, $130,000 in 1999,and $132,000 in 1998.
The Bank of Castile and The Mahopac National Bank each had separate 401K plans
for which the Company provided certain matching contributions based upon the
amount of contributions made by plan participants. The expense associated with
these matching provisions was $160,000, $175,000, and $160,000 in 2000, 1999,
and 1998, respectively. As of January 1, 2001, the Company adopted new 401-K and
ESOP plans covering substantially all employees of the Company, and replacing
the ESOP, ISOP, and 401-K plans which were previously in place at the Company's
subsidiary banks.
Life insurance benefits are provided to certain officers of the Company. In
connection with these benefits, the Company purchased $4.4 million and $815,000
in corporate owned life insurance in 2000 and 1999, respectively, which is
carried at its cash surrender value as an other asset on the consolidated
statements of condition. Increases in the cash surrender value of the insurance
are reflected as other operating income, and the related mortality expense is
recognized as other employee benefits expense in the consolidated statements of
income.
In addition to the Company's non-contributory defined benefit retirement and
pension plan, the Company provides supplemental employee retirement plans to
certain executives. The amount of liability recognized in the Company's
consolidated statements of condition for supplemental retirement plans was $1.3
million at December 31, 2000 and $915,000 at December 31, 1999. Benefits expense
associated with the supplemental retirement plans amounted to $415,000, $195,000
and $61,000 for the years ended December 31, 2000, 1999, and 1998, respectively.
40
NOTE 12 STOCK BASED COMPENSATION
In 1992, the Company adopted a stock option plan (the "1992 Plan") which
authorized grants of options up to 254,100 shares of authorized but unissued
common stock. In 1998, the Company adopted the 1998 Stock Option Plan (the "1998
Plan") which authorized grants of options up to 240,000 shares of authorized but
unissued common stock, plus to the extent authorized by the board of directors,
shares which are reacquired by the Company. Under the 1992 Plan and the 1998
Plan, the board of directors may grant stock options to officers, employees, and
certain other individuals. Stock options are granted with an exercise price
equal to the stock's fair market value at the date of grant. Stock options may
not have a term in excess of ten years, and have vesting periods that range
between one and five years from the grant date. Outstanding options of
Letchworth were converted to options of Tompkins at the time of the merger,
effective December 31, 1999. At December 31, 2000, there were 20,279 shares
available for grant under the 1992 and 1998 Plans.
The Company applies APB Opinion No. 25 in accounting for stock based
compensation, and accordingly, no compensation cost has been recognized for
stock options in the accompanying consolidated financial statements. Had the
Company determined compensation cost based on the fair value of its stock
options at the grant date under SFAS No. 123, the Company's net income and
earnings per share would have been reduced to pro forma amounts indicated in the
following table:
(in thousands except per share data) 2000 1999 1998
- - ----------------------------------------------------------------------------------------------------------------------
Net income:
As reported $17,512 $ 15,200 14,502
Pro forma 17,356 14,958 14,387
- - ----------------------------------------------------------------------------------------------------------------------
Basic earnings per share:
As reported $ 2.47 $ 2.15 2.05
Pro forma 2.44 2.12 2.03
- - ----------------------------------------------------------------------------------------------------------------------
Diluted earnings per share:
As reported $ 2.45 $ 2.12 2.01
Pro forma 2.42 2.08 1.99
======================================================================================================================
Pro forma compensation cost is amortized over the options' vesting period. Pro
forma net income reflects only options granted after January 1, 1995. Therefore,
the full impact of calculating compensation cost for stock options under SFAS
123 is not reflected in the pro forma net income amounts presented above because
compensation cost for options granted prior to January 1, 1995 is not
considered.
The per share weighted average fair value of stock options granted during 2000,
1999, and 1998 was $10.96, $8.07, and $8.52, respectively. Fair values were
arrived at using the Black Scholes option-pricing model with the following
assumptions:
2000 1999 1998
- - ---------------------------------------------------------------------------------------------------------
Risk-free interest rate 5.91% 5.85% 5.31%
Expected dividend yield 3.90% 3.43% 3.10%
Volatility 52.00% 47.00% 27.60%
Expected life (years) 7.00 7.00 8.00
- - ---------------------------------------------------------------------------------------------------------
In management's opinion the existing models do not necessarily provide a
reliable measure of the fair value of its employee stock options because the
Company's employee stock options have characteristics significantly different
from those of traded options for which the Black-Scholes model was developed,
and because changes in the subjective assumptions can materially affect fair
value estimate.
41
NOTE 12 STOCK BASED COMPENSATION (continued)
The following table presents the combined stock option activity for the 1992
Plan and the 1998 Plan during the periods indicated:
WEIGHTED AVERAGE
NUMBER OF SHARES EXERCISE PRICE
- - ---------------------------------------------------------------------------------------------------------------------------
2000:
Beginning balance 251,977 $19.46
Granted 163,500 26.63
Exercised (19,546) 18.32
Forfeited (11,187) 26.79
- - ---------------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT YEAR-END 384,744 22.35
- - ---------------------------------------------------------------------------------------------------------------------------
EXERCISABLE AT YEAR-END 196,200 $18.89
- - ---------------------------------------------------------------------------------------------------------------------------
1999:
Beginning balance 300,738 $16.78
Granted 33,568 20.17
Exercised (79,589) 10.25
Forfeited (2,740) 7.29
- - ---------------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT YEAR-END 251,977 19.46
- - ---------------------------------------------------------------------------------------------------------------------------
EXERCISABLE AT YEAR-END 158,377 $18.24
- - ---------------------------------------------------------------------------------------------------------------------------
1998:
Beginning balance 349,149 $15.88
Granted 12,600 25.64
Exercised (54,445) 12.45
Forfeited (6,566) 16.84
- - ---------------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT YEAR-END 300,738 16.78
- - ---------------------------------------------------------------------------------------------------------------------------
EXERCISABLE AT YEAR-END 154,640 $14.35
- - ---------------------------------------------------------------------------------------------------------------------------
The following summarizes outstanding and exercisable options at December
31,2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- - -----------------------------------------------------------------------------------------------------------------------------
RANGE OF WEIGHTED AVERAGE WEIGHTED WEIGHTED
EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- - -----------------------------------------------------------------------------------------------------------------------------
$11.21-15.56 50,929 3.47 $13.61 50,929 $13.61
$19.27-20.17 110,590 6.12 $19.54 97.790 $19.49
$20.91-23.66 64,225 6.28 $23.31 46,606 $23.18
$26.63-32.75 159,000 9.66 $26.72 875 $31.00
- - -----------------------------------------------------------------------------------------------------------------------------
384,744 7.26 $22.35 196,200 $18.89
=============================================================================================================================
42
NOTE 13 INCOME TAXES
The income tax expense (benefit) attributable to income from operations is
summarized as follows:
(in thousands) CURRENT DEFERRED TOTAL
- - --------------------------------------------------------------------------------------------------------------------
2000:
Federal $7,772 $(530) $7,242
State 1,079 (69) 1,010
- - --------------------------------------------------------------------------------------------------------------------
$8,851 $(599) $8,252
- - --------------------------------------------------------------------------------------------------------------------
1999:
Federal $7,338 $(523) $6,815
State 1,087 (53) 1,034
- - --------------------------------------------------------------------------------------------------------------------
$8,425 $(576) $7,849
- - --------------------------------------------------------------------------------------------------------------------
1998:
Federal $6,261 $(421) $5,840
State 1,492 (116) 1,376
- - --------------------------------------------------------------------------------------------------------------------
$7,753 $(537) $7,216
- - --------------------------------------------------------------------------------------------------------------------
The primary reasons for the differences between income tax expense and the
amount computed by applying the statutory federal income tax rate to earnings
are as follows:
2000 1999 1998
- - --------------------------------------------------------------------------------------------------------------------
Statutory federal income tax rate 35.0% 35.0% 34.0%
State income taxes, net of federal tax benefit 2.5 2.9 4.2
Tax exempt income (4.3) (4.8) (4.8)
Non-deductible merger costs 0 1.5 0
All other (1.7) (0.5) (0.1)
- - --------------------------------------------------------------------------------------------------------------------
31.5% 34.1% 33.3%
- - --------------------------------------------------------------------------------------------------------------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of December 31 were as
follows:
(in thousands) 2000 1999
- - ---------------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Reserve for loan/lease losses $3,636 $3,378
Compensation and benefits 2,319 2,015
Other 627 779
- - ---------------------------------------------------------------------------------------------------------------------
TOTAL DEFERRED TAX ASSETS $6,582 $6,172
- - ---------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Leasing transactions $1,595 $1,432
Prepaid pension 930 948
Depreciation 543 653
Purchase accounting adjustments 887 810
Other 275 270
- - ---------------------------------------------------------------------------------------------------------------------
TOTAL DEFERRED TAX LIABILITIES $4,230 $4,113
- - ---------------------------------------------------------------------------------------------------------------------
NET DEFERRED TAX ASSET AT YEAR-END $2,352 $2,059
- - ---------------------------------------------------------------------------------------------------------------------
NET DEFERRED TAX ASSET AT BEGINNING OF YEAR $2,059 $1,691
- - ---------------------------------------------------------------------------------------------------------------------
Increase in net deferred tax asset (293) (368)
Net deferred tax asset acquired 0 723
Initial purchase accounting adjustments, net (306) (931)
- - ---------------------------------------------------------------------------------------------------------------------
DEFERRED TAX BENEFIT $(599) $(576)
- - ---------------------------------------------------------------------------------------------------------------------
43
NOTE 13 INCOME TAXES (continued)
This analysis does not include the recorded deferred tax assets of $6,000, and
$3,359,000 related to the net unrealized depreciation in the available-for-sale
securities portfolio as of December 31, 2000, and 1999, respectively.
Realization of deferred tax assets is dependent upon the generation of future
taxable income or the existence of sufficient taxable income within the
carry-back period. A valuation allowance is provided when it is more likely than
not that some portion of the deferred tax assets will not be realized. In
assessing the need for a valuation allowance, management considers the scheduled
reversal of the deferred tax liabilities, the level of historical taxable
income, and the projected future taxable income over the periods in which the
temporary differences comprising the deferred tax assets will be deductible.
Based on its assessment, management determined that no valuation allowance is
necessary at December 31, 2000 and 1999.
NOTE 14 COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases land, buildings, and equipment under operating lease
arrangements extending to the year 2090. Rental expense included in operating
expenses amounted to $347,000 in 2000, $359,000 in 1999, and $343,000 in 1998.
The future minimum rental commitments as of December 31, 2000, for all operating
leases that cannot be canceled are as follows:
(in thousands)
2001 $ 238
2002 236
2003 215
2004 218
2005 184
Thereafter $3,552
Most leases include options to renew for periods ranging from five to 20 years.
Options to renew are not included in the above future minimum rental
commitments.
In August 2000, The Company renewed its software contract for the core banking
application used by the Bank of Castile and Tompkins Trust Company. The contract
expires in August 2005, with annual increases based upon asset growth of the
banks serviced under the contract. Data processing services for The Mahopac
National Bank our covered by a contract that expires in July 2005, with annual
increases based upon increases in the Consumer Price Index and increased account
volume. Required minimum annual payments under the above contracts are $371,782
in 2001.
The Company, in the normal course of business, is a party to financial
instruments with off-balance-sheet risk to meet the financial needs of its
customers. These financial instruments include loan commitments, stand-by
letters of credit, and unused portions of lines of credit. The contract, or
notional amount, of these instruments represents the Company's involvement in
particular classes of financial instruments. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized on the consolidated statements of condition.
As of December 31, 2000, the Company was committed to invest $3,850,000 in a
limited partnership formed to operate a Small Business Investment Company
(SBIC). As of December 31, 2000, the Company had made equity investments in the
SBIC of $3,292,000, which is accounted for under the equity method of
accounting, and is included in other assets on the Company's consolidated
statements of condition. On December 31, 2000, and 1999, the cost of the
Company's investment in the SBIC approximates fair value.
The Company's maximum potential obligations to extend credit for loan
commitments (unfunded loans, unused lines of credit, and stand-by letters of
credit) outstanding, and its remaining commitment to invest in a Small Business
Investment Company, on December 31 were as follows:
(in thousands) 2000 1999
- - ----------------------------------------------------------------------------------------------------------------------------------
Loan commitments $ 76,379 $ 69,977
Stand-by letters of credit 6,220 3,793
Undisbursed portion of lines of credit 125,073 106,869
Commitment to invest in limited partnership registered as a Small Business Investment Company 558 862
- - ----------------------------------------------------------------------------------------------------------------------------------
$208,230 $181,501
- - ----------------------------------------------------------------------------------------------------------------------------------
44
NOTE 14 COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Commitments to extend credit (including lines of credit) are agreements to lend
to a customer as long as there is no violation of any condition established in
the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Stand-by letters of credit
are conditional commitments to guarantee the performance of a customer to a
third party. Management uses the same credit policies in making commitments to
extend credit and stand-by letters of credit as are used for on-balance-sheet
lending decisions. Based upon management's evaluation of the counterparty, the
Company may require collateral to support commitments to extend credit and
stand-by letters of credit. The credit risk amounts are equal to the contractual
amounts, assuming the amounts are fully advanced and collateral or other
security is of no value. The Company does not anticipate losses as a result of
these transactions. These commitments also have off-balance-sheet interest-rate
risk, in that the interest rate at which these commitments were made may not be
at market rates on the date the commitments are fulfilled. Since some
commitments and stand-by letters of credit are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash flow requirements.
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, based upon the review with counsel,
the proceedings are not expected to have a material effect on the consolidated
financial statements.
45
NOTE 15 EARNINGS PER SHARE
Calculation of basic earnings per share (Basic EPS) and diluted earnings per
share (Diluted EPS) is as follows:
NET WEIGHTED
FOR YEAR ENDED DECEMBER 31, 2000 INCOME AVERAGE SHARES PER SHARE
(in thousands except share and per share data) (NUMERATOR) (DENOMINATOR) AMOUNT
- - ----------------------------------------------------------------------------------------------------------------------------------
Basic EPS:
Income available to common shareholders $17,512 7,103,784 $2.47
Effect of dilutive securities:
Stock options 55,184
Diluted EPS:
Income available to common shareholders plus assumed conversions $17,512 7,158,968 $2.45
- - ----------------------------------------------------------------------------------------------------------------------------------
The effect of dilutive securities calculation for 2000 excludes 52,347 options
because the exercise price was greater than the average market price for the
period.
NET WEIGHTED
FOR YEAR ENDED DECEMBER 31, 1999 INCOME AVERAGE SHARES PER SHARE
(in thousands except share and per share data) (NUMERATOR) (DENOMINATOR) AMOUNT
- - ----------------------------------------------------------------------------------------------------------------------------------
Basic EPS:
Income available to common shareholders $15,200 7,068,409 $2.15
Effect of dilutive securities:
Stock options 109,412
Diluted EPS:
Income available to common shareholders plus assumed conversions $15,200 7,177,821 $2.12
- - ----------------------------------------------------------------------------------------------------------------------------------
The effect of dilutive securities calculation for 1999 excludes 2,000 options
because the exercise price was greater than the average market price for the
period.
- - ----------------------------------------------------------------------------------------------------------------------------------
FOR YEAR ENDED DECEMBER 31, 1998 INCOME AVERAGE SHARES PER SHARE
(in thousands except share and per share data) (NUMERATOR) (DENOMINATOR) AMOUNT
Basic EPS:
Income available to common shareholders $14,502 7,081,213 $2.05
Effect of dilutive securities:
Stock options 147,241
Stock warrants 47
Diluted EPS:
Income available to common shareholders plus assumed conversions $14,502 7,228,501 $2.01
- - ----------------------------------------------------------------------------------------------------------------------------------
==================================================================================================================================
46
NOTE 16 FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values of
the Company's financial instruments at December 31, 2000 and 1999. The carrying
amounts shown in the table are included in the consolidated statements of
condition under the indicated captions.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS: 2000 1999
- - -----------------------------------------------------------------------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
(in thousands) AMOUNT VALUE AMOUNT VALUE
- - -----------------------------------------------------------------------------------------------------------------------------------
Financial assets:
Cash and cash equivalents $ 65,364 $ 65,364 $ 54,788 $ 54,788
Securities - available-for-sale 304,358 304,358 294,199 294,199
Securities - held-to-maturity 25,863 26,147 30,975 31,265
Loans/leases, net 835,934 836,731 746,154 741,043
Accrued interest receivable 9,705 9,705 7,842 7,842
Financial liabilities:
Time deposits $420,255 $420,458 $376,371 $376,307
Other deposits 614,646 614,646 597,868 597,868
Securities sold under agreements to repurchase 72,231 72,231 57,846 57,834
Other borrowings 67,257 67,576 42,012 41,845
Accrued interest payable 5,249 5,249 3,880 3,880
- - -----------------------------------------------------------------------------------------------------------------------------------
The following methods and assumptions were used in estimating fair value
disclosures for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amounts reported in the consolidated
statements of condition for cash, noninterest bearing deposits, and Federal
funds sold approximate the fair value of those assets.
SECURITIES: Fair values for securities are based on quoted market prices. When
no secondary market exists to quote a market price the fair value is estimated
based upon comparable securities, or, the carrying amount of the security is
used as the estimated fair value. Note 3 discloses the fair values of
securities.
LOANS/LEASES: For variable rate loans/leases that reprice frequently and with no
significant change in credit risk, fair values are based on carrying values. The
fair value of fixed rate loans/leases was estimated using discounted cash flow
analyses, and interest rates currently offered for loans/leases with similar
terms and credit quality.
DEPOSITS: The fair values disclosed for demand deposits (e.g. interest and
noninterest checking) are, by definition, equal to the amount payable on demand
at the reporting date (i.e., the carrying amounts). The carrying amounts of
variable-rate money market accounts and time deposits approximate their fair
values at the reporting date. Fair values for fixed-rate time deposits are
estimated using a discounted cash flows calculation that applies current
interest rates to a schedule of aggregate expected monthly maturities.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE: The carrying amounts of
securities sold under agreements to repurchase with maturities of 90 days or
less approximate their fair values. Fair values of repurchase agreements with
maturities of more than 90 days are estimated using discounted cash flow
analyses based on the Company's current incremental borrowing rate for similar
types of borrowing arrangements.
OTHER BORROWINGS: The fair value of other borrowings was estimated using
discounted cash flow analysis, discounted at the Company's current incremental
borrowing rate for similar borrowing arrangements.
OFF-BALANCE-SHEET INSTRUMENTS: The fair value of outstanding loan commitments,
including unused lines of credit, and stand-by letters of credit are based on
fees currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements, the counterparties' credit standing, and
discounted cash flow analyses. The fair value of these instruments approximates
the value of the related fees and is not significant.
47
NOTE 17 REGULATION AND SUPERVISION
The Company and its subsidiary banks are subject to various regulatory capital
requirements administered by Federal bank regulatory agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on the Company's consolidated financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action (PCA), banks must meet specific guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. Capital amounts and
classifications of the Company and its subsidiary banks are also subject to
qualitative judgments by regulators concerning components, risk weightings, and
other factors. Quantitative measures established by regulation to ensure capital
adequacy require the maintenance of minimum amounts and ratios (set forth in the
table below) of total capital and Tier I capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier I capital to average assets
(as defined). Management believes that the Company and its subsidiary banks meet
all capital adequacy requirements to which they are subject.
As of December 31, 2000, the most recent notifications from federal bank
regulatory agencies categorized the Trust Company, The Bank of Castile, and The
Mahopac National Bank as well capitalized under the regulatory framework for
PCA. To be categorized as well capitalized, the Company and its subsidiary banks
must maintain total risk-based, Tier I risk-based, and Tier I leverage ratios as
set forth in the table below. There are no conditions or events since that
notification that management believes have changed the capital category of the
Company or its subsidiary banks. Actual capital amounts and ratios of the
Company and its subsidiary banks are as follows:
REQUIRED REQUIRED
TO BE TO BE
ACTUAL ADEQUATELY CAPITALIZED WELL CAPITALIZED
- - -----------------------------------------------------------------------------------------------------------------------------------
(dollar amounts in thousands) AMOUNT/RATIO AMOUNT/RATIO AMOUNT/RATIO
- - -----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 2000:
Total Capital (to risk-weighted assets)
The Company (consolidated) $116,746/13.0% >$72,048/>8.0% >$90,060/>10.0%
Trust Company $66,387/14.5% >$36,715/>8.0% >$45,893/>10.0%
Castile $26,661/10.7% >$19,972/>8.0% >$24,965/>10.0%
Mahopac $18,864/13.3% >$11,312/>8.0% >$14,141/>10.0%
Tier I Capital (to risk-weighted assets)
The Company (consolidated) $106,922/11.9% >$36,024/>4.0% >$54,036/>6.0%
Trust Company $61,208/13.3% >$18,357/>4.0% >$27,536/>6.0%
Castile $23,642/9.5% >$9,986/>4.0% >$14,979/>6.0%
Mahopac $17,238/12.2% >$5,656/>4.0% >$8,484/>6.0%
Tier I Capital (to average assets)
The Company (consolidated) $106,922/8.5% >$50,489/>4.0% >$63,111/>5.0%
Trust Company $61,208/8.4% >$29,178/>4.0% >$36,472/>5.0%
Castile $23,642/7.2% >$13,129/>4.0% >$16,411/>5.0%
Mahopac $17,238/8.5% >$8,093/>4.0% >$10,116/>5.0%
===================================================================================================================================
DECEMBER 31, 1999:
Total Capital (to risk-weighted assets)
The Company (consolidated) $109,105/14.5% >$60,026/>8.0% >$75,032/>10.0%
Trust Company $70,264/16.0% >$35,080/>8.0% >$43,850/>10.0%
Castile $21,628/10.1% >$17,079/>8.0% >$21,349/>10.0%
Mahopac $17,907/16.7% >$8,572/>8.0% >$10,716/>10.0%
Tier I Capital (to risk-weighted assets)
The Company (consolidated) $99,877/13.3% >$30,013/>4.0% >$45,019/>6.0%
Trust Company $65,135/14.9% >$17,540/>4.0% >$26,310/>6.0%
Castile $19,077/ 8.9% >$8,540/>4.0% >$12,809/>6.0%
Mahopac $16,580/15.5% >$4,286/>4.0% >$6,429/>6.0%
Tier I Capital (to average assets)
The Company (consolidated) $99,877/9.3% >$42,913/>4.0% >$53,641/>5.0%
Trust Company $65,135/9.2% >$28,431/>4.0% >$35,539/>5.0%
Castile $19,077/6.6% >$11,504/>4.0% >$14,381/>5.0%
Mahopac $16,580/9.9% >$6,696/>4.0% >$8,370/>5.0%
- - -----------------------------------------------------------------------------------------------------------------------------------
Generally, dividends from the banking subsidiaries to the Company are limited to
retained net profits for the current year and two preceding years, unless
specific approval is received from the appropriate bank regulatory authority. At
December 31, 2000, the retained net profits of the Company's bank subsidiaries
available to pay dividends were $11,492,000.
Each bank subsidiary is required to maintain reserve balances by the Federal
Reserve Bank of New York. At December 31, 2000, and 1999, the reserve
requirements for the Company's banking subsidiaries totaled $10,406,000 and
$12,252,000, respectively.
48
NOTE 18 CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS
Condensed financial statements for Tompkins Trustco, Inc. (the Parent Company)
as of December 31 are presented below.
CONDENSED STATEMENTS OF CONDITION
- - -----------------------------------------------------------------------------------------------------------------------------------
(in thousands) 2000 1999
- - -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash $ 3,846 $ 769
Available-for-sale securities, at fair value 1,488 2,559
Investment in subsidiaries, at equity 108,545 90,251
Other 2,054 5,786
- - -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $115,933 $99,365
- - -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities $ 938 $ 2,741
Shareholders' equity 114,995 96,624
- - -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $115,933 $99,365
- - -----------------------------------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF INCOME
- - ---------------------------------------------------------------------------------------------------------------------------------
(in thousands) 2000 1999 1998
- - ---------------------------------------------------------------------------------------------------------------------------------
Dividends from available-for-sale investments $ 169 $ 110 $ 97
Dividends received from banking subsidiaries 16,098 24,365 6,369
Securities gains 299 0 0
Other income 87 72 24
- - ---------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING INCOME 16,653 24,547 6,490
- - ---------------------------------------------------------------------------------------------------------------------------------
Amortization of intangible assets 451 370 0
Other expenses 683 2,198 728
- - ---------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 1,133 2,568 728
- - ---------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED NET INCOME OF SUBSIDIARIES 15,520 21,979 5,762
- - ---------------------------------------------------------------------------------------------------------------------------------
Income tax benefit (375) (414) (121)
Equity in undistributed net income of subsidiaries 1,618 (7,193) 8,619
- - ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $17,512 $15,200 $14,502
- - ---------------------------------------------------------------------------------------------------------------------------------
49
NOTE 18 CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS (continued)
CONDENSED STATEMENTS OF CASH FLOWS
- - -----------------------------------------------------------------------------------------------------------------------------------
(in thousands) 2000 1999 1998
- - -----------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net Income $ 17,512 $ 15,200 $ 14,502
Adjustments to reconcile net income to cash provided by operating activities:
Equity in undistributed income of subsidiaries (1,618) 7,193 (8,619)
Amortization of intangible assets 451 370 0
Realized gains on available-for-sale securities (299) 0 0
Issuance of treasury shares 75 41 40
ESOP compensation expenses 159 130 132
Other, net (649) (334) (846)
- - -----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 15,631 22,600 5,209
- - -----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of available-for-sale securities 0 (191) (123)
Proceeds from sale of available-for-sale securities 1,047 0 0
Purchase of The Mahopac National Bank 0 (14,624) 0
- - -----------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES 1,047 (14,815) (123)
- - -----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Cash dividends (7,696) (6,159) (5,499)
Repurchase of common shares (4,870) (4,101) (2,138)
Cash paid in lieu of fractional common shares (9) 0 0
Net proceeds from exercise of stock options, warrants, and related tax benefit 288 691
281
Advances from subsidiaries 0 1,265 0
Repayment of advances from subsidiaries (1,314) (275) (49)
- - -----------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (13,601) (8,579) (7,405)
- - -----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH 3,077 (794) (2,319)
- - -----------------------------------------------------------------------------------------------------------------------------------
CASH AT BEGINNING OF YEAR 769 1,563 3,882
- - -----------------------------------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR $ 3,846 $ 769 $ 1,563
- - -----------------------------------------------------------------------------------------------------------------------------------
50
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51
REPORT OF KPMG LLP,
INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHAREHOLDERS, TOMPKINS TRUSTCO, INC.
We have audited the accompanying consolidated statements of condition of
Tompkins Trustco, Inc. and subsidiaries as of December 31, 2000 and 1999, and
the related consolidated statements of income, changes in shareholders' equity,
and cash flows for each of the years in the three year period ended December 31,
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The consolidated
financial statements give retroactive effect to the merger of Letchworth
Independent Bancshares Corporation and Tompkins Trustco, Inc., which has been
accounted for as a pooling-of-interests, as described in Note 2 to the
consolidated financial statements. We did not audit the consolidated statements
of income, changes in shareholders' equity, and cash flows of Letchworth
Independent Bancshares Corporation for the year ended December 31, 1998, which
statements reflect net interest income of $12.1 million. Those statements were
audited by other auditors whose unqualified report dated January 22, 1999 has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Letchworth Independent Bancshares Corporation for 1998, is based
solely on the report of such other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Tompkins Trustco, Inc. and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
- - ---------------------
JANUARY 22, 2001
SYRACUSE, NEW YORK
52
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53
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
Management is responsible for preparation of the consolidated financial
statements and related financial information contained in all sections of this
annual report, including the determination of amounts that must necessarily be
based on judgments and estimates. It is the belief of management that the
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles appropriate in the circumstances, and
that the financial information appearing throughout this annual report is
consistent with the consolidated financial statements.
Management establishes and monitors the Company's system of internal accounting
controls to meet its responsibility for reliable financial statements. The
system is designed to provide reasonable assurance that assets are safeguarded,
and that transactions are executed in accordance with management's authorization
and are properly recorded.
The Audit/Examining Committee of the board of directors, composed solely of
outside directors, meets periodically and privately with management, internal
auditors, and independent auditors, KPMG LLP, to review matters relating to the
quality of financial reporting, internal accounting control, and the nature,
extent, and results of audit efforts. The independent and internal auditors have
unlimited access to the Audit/Examining Committee to discuss all such matters.
The consolidated financial statements have been audited by the Company's
independent auditors for the purpose of expressing an opinion on the
consolidated financial statements.
/s/ JAMES J. BYRNES /s/ FRANCIS M. FETSKO
------------------------------- -------------------------------
James J. Byrnes Francis M. Fetsko
Chief Executive Officer Chief Financial Officer
54
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Information relating to the Directors of the Company is incorporated herein by
reference from the "Election of Directors" section of the Proxy Statement
beginning on page 4 thereof.
EXECUTIVE OFFICERS
AGE TITLE JOINED COMPANY
James J. Byrnes 59 Chairman of the Board, and Chief Executive Officer January 1989
James W. Fulmer 49 President, Director January 2000
Brenda L. Copeland 49 Executive Vice President January 2000
Stephen E. Garner 54 Executive Vice President January 2000
Donald S. Stewart 56 Executive Vice President December 1972
Francis M. Fetsko 36 Senior Vice President and Chief Financial Officer October 1996
Joyce P. Maglione 58 Senior Vice President March 1981
Thomas J. Smith 60 Senior Vice President December 1964
Lawrence A. Updike 55 Senior Vice President December 1965
BUSINESS EXPERIENCE OF THE EXECUTIVE OFFICERS:
James J. Byrnes has been chairman of the board of the Company since April 1992,
and chief executive officer of the Company since January 1989. From 1978 to
1988, Mr. Byrnes was employed at the Bank of Montreal, most recently as senior
vice president.
James W. Fulmer was appointed president of the Company in January 2000. Mr.
Fulmer is the former president and chief executive officer of Letchworth
Independent Bancshares Corporation, where he served as president and chief
executive officer since January 1991. Effective December 31, 1999, Letchworth
was merged with and into Tompkins Trustco, Inc.
Brenda L. Copeland was appointed executive vice president of the Company in May
2000. Ms. Copeland is the president and chief executive officer of The Bank of
Castile, where she served as president since January 1991 and chief executive
officer since April 1999.
Stephen E. Garner was appointed executive vice president of the Company in May
2000. Mr. Garner is the president and chief executive officer of The Mahopac
National Bank, where he served as in that capacity since January 1994.
Francis M. Fetsko has been employed by the Company since 1996, and has served as
senior vice president and chief financial officer since December 2000.
Joyce P. Maglione has been employed by the Company since March 1981, and has
served as senior vice president since December 1999.
Thomas J. Smith has been employed by the Company since 1964, and has served as
senior vice president in charge of credit services since December 1984.
Donald S. Stewart has been employed by the Company since 1972, served as senior
vice president in charge of trust and investment services since December 1984,
and was promoted to executive vice president in 1997.
Lawrence A. Updike has been employed by the Company since 1965, and has served
as senior vice president in charge of operations and systems since December
1988.
55
ITEM 11. EXECUTIVE COMPENSATION
"Executive Compensation" beginning on page 7 of the Proxy Statement is
incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"Security Ownership of Certain Beneficial Owners and Management" beginning on
page 2 of the Proxy Statement is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
"Certain Relationships and Related Transactions" contained on page 13 of the
Proxy Statement is incorporated by reference herein.
56
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) THE FOLLOWING FINANCIAL STATEMENTS AND ACCOUNTANT'S REPORT ARE
INCLUDED IN THIS ANNUAL REPORT ON FORM 10-K:
Report of Independent Accountants
Consolidated Statement of Condition for the years ended December 31,
2000, and 1999
Consolidated Statement of Income for the years ended December 31, 2000,
1999, and 1998
Consolidated Statement of Changes in Shareholders' Equity for the years
ended December 31, 2000, 1999, and 1998
Consolidated Statement of Cash Flows for the years ended December 31,
2000, 1999, and 1998
Notes to Consolidated Financial Statements
(a)(2) LIST OF FINANCIAL SCHEDULES
Not Applicable.
(a)(3) EXHIBITS
Item No. Description
2. Agreement and Plan of Reorganization, dated as of March 14,
1995, among the Bank, the Company and the Interim Bank
incorporated herein by reference to the identically numbered
exhibit contained in the Registrant's Registration Statement
on Form 8-A (No. 0-27514), as filed with the Commission on
December 29, 1995, and amended.
3.1 Certificate of Incorporation of the Company incorporated
herein by reference to the identically numbered exhibit
contained in the Registrant's Registration Statement on Form
8-A (No. 0-27514), as filed with the Commission on December
29, 1995, and amended.
3.2 Bylaws of the Company incorporated herein by reference to the
identically numbered exhibit contained in the Registrant's
Registration Statement on Form 8-A (No. 0-27514), as filed
with the Commission on December 29, 1995, and amended.
4. Form of Specimen Common Stock Certificate of the Company
incorporated herein by reference to the identically numbered
exhibit contained in the Registrant's Registration Statement
on Form 8-A (No. 0-27514), as filed with the Commission on
December 29, 1995, and amended.
10.2 1992 Stock Option Plan incorporated herein by reference to the
identically numbered exhibit contained in the Registrant's
Registration Statement on Form 8-A (No. 0-27514), as filed
with the Commission on December 29, 1995, and amended.
10.3 1996 Stock Retainer Plan for Non-Employee Directors
incorporated herein by reference to the identically numbered
exhibit contained in the Registrant's Registration Statement
on Form 8-A (No. 0-27514), as filed with the Commission on
December 29, 1995, and amended.
10.4 Form of Director Deferred Compensation Agreement incorporated
herein by reference to the identically numbered exhibit
contained in the Registrant's Registration Statement on Form
8-A (No. 0-27514), as filed with the Commission on December
29, 1995, and amended.
10.5 Deferred Compensation Plan for Senior Officers incorporated
herein by reference to the identically numbered exhibit
contained in the Registrant's Registration Statement on Form
8-A (No. 0-27514), as filed with the Commission on December
29, 1995, and amended.
57
10.6 Supplemental Executive Retirement Agreement with James J.
Byrnes incorporated herein by reference to the identically
numbered exhibit contained in the Registrant's Registration
Statement on Form 8-A (No. 0-27514), as filed with the
Commission on December 29, 1995, and amended.
10.7 Severance Agreement with James J. Byrnes incorporated herein
by reference to the identically numbered exhibit contained in
the Registrant's Registration Statement on Form 8-A (No.
0-27514), as filed with the Commission on December 29, 1995,
and amended.
10.8 Lease Agreement dated August 20, 1993, between Tompkins County
Trust Company and Comex Plaza Associates, relating to leased
property at the Rothschilds Building, Ithaca, NY, incorporated
herein by reference to the identically numbered exhibit
contained in the Registrant's Form 10-K, as filed with the
Commission on March 26, 1996, and amended.
10.9 Employment Agreement, dated September 12, 1989, by and between
Letchworth and James W. Fulmer, incorporated by reference to
Letchworth's Amendment No. 1 to Form S-18 Registration
Statement (Reg. No. 33-31149-NY), filed with the Commission on
October 31, 1989, and wherein such Exhibit is designated
Exhibit 10(a).
10.10 Employment Agreement, dated as of January 1,1991, by and
between Letchworth and Brenda L. Copeland, incorporated by
reference to Letchworth's Annual Report on Form 10-K for the
year ended December 31, 1991, filed with the Commission on
March 30, 1992, and wherein such Exhibit is designated Exhibit
10(b).
10.11 Employee Stock Ownership Plan of Letchworth, incorporated by
reference to Letchworth's Registration Statement on Form S-18
(Reg. No. 33-31149-NY), filed with the Commission on September
2, 1989, and wherein such Exhibit is designated Exhibit 10(c).
10.12 Defined Benefit Pension Plan of Letchworth, incorporated by
reference to Letchworth's Registration Statement on Form S-18
(Reg. No. 33-31149-NY), filed with the Commission on September
2, 1989, and wherein such Exhibit is designated Exhibit 10(d).
10.13 Form of Executive Supplemental Income Agreement, as amended,
incorporated by reference to Letchworth's Annual Report on
Form 10-K for the year ended December 31, 1991 and filed with
the Commission on March 30, 1992, and where in such Exhibit is
designated Exhibit 19.
10.14 Form of Director Deferred Compensation Agreement, incorporated
by reference to Letchworth's Registration Statement on Form
S-18 (Reg. No. 33-31149-NY), filed with the Commission on
September 2, 1989, and wherein such Exhibit is designated
Exhibit 10(f).
10.15 Loan and Pledge Agreement, dated June 16, 1986, by and between
Employee Stock Ownership Trust of Letchworth and Salamanca
Trust Company, incorporated by reference to Letchworth's
Registration Statement on Form S-18 (Reg. No. 33-31149-NY),
filed with the Commission on September 2, 1989, and wherein
such Exhibit is designated Exhibit 10(g).
10.16 Loan and Pledge Agreement, dated June 16, 1986, by and between
Employee Stock Ownership Trust of Letchworth and Community
National Bank, incorporated by reference to Letchworth's
Registration Statement on Form S-18 (Reg. No. 33-31149-NY),
filed with the Commission on September 2, 1989, and wherein
such Exhibit is designated Exhibit 10(h).
10.17 Lease Agreement, dated March 1, 1982, by and between
Letchworth and Herald Ford, Inc., incorporated by reference to
Letchworth's Registration Statement on Form S-18 (Reg. No.
33-31149-NY), filed with the Commission on September 2, 1989,
and wherein such Exhibit is designated Exhibit 10(i).
10.18 Lease Agreement, dated April 12, 1982, and an Addendum
thereto, dated January 25, 1973, by and between Letchworth and
15 South Center Street, Inc., incorporated by reference to
Letchworth's Registration Statement on Form S-18 (Reg. No.
33-31149-NY), filed with the Commission on September 2, 1989,
and wherein such Exhibit is designated Exhibit 10(j).
10.19 Lease Agreement, dated August 1, 1974, by and between The
Citizen Bank, Attica and Fred Glickstein, which Lease
Agreement was assumed by Letchworth on December 7, 1984,
incorporated by reference to Letchworth's Registration
Statement on Form S-18 (Reg. No. 33-31149-NY), filed with the
Commission on September 2, 1989, and wherein such Exhibit is
designated Exhibit 10(k).
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10.20 Salary Savings Plan (401(k) Plan) of Letchworth, incorporated
by reference to Letchworth's Amendment No. 1 to Form S-18
Registration Statement (Reg. No. 33-31149-NY), filed with the
Commission on October 31, 1989, and wherein such Exhibit is
designated Exhibit 10(l).
10.21 Loan Agreement, dated November 6, 1990, by and between
Letchworth and Alden State Bank, incorporated by reference to
Letchworth's Annual Report on Form 10-K for the year-ended
December 31, 1990, and filed with the Commission on April 1,
1991, and wherein such Exhibit is designated Exhibit 10(m).
10.22 Sales Contract, dated September 10, 1991, by and between John
Piraino, Jr. ("Piraino") and the Bank, incorporated by
reference to Letchworth's Annual Report on Form 10-K for the
year ended December 31, 1992, and filed with the Commission on
March 30, 1993, and wherein such Exhibit is designated Exhibit
10(n).
10.23 Indenture of Lease, dated September 10, 1991, by and between
Piraino and the Bank, incorporated by reference to
Letchworth's Annual Report on Form 10-K for the year ended
December 31, 1992, and filed with the Commission on March 30,
1993, and wherein such Exhibit is designated Exhibit 10(o).
10.24 Purchase and Assumption Agreement, dated as of January 10,
1991, by and between Letchworth, The Bank of Castile, and
Anchor Savings Bank FSB, incorporated by reference to the
Letchworth's Report on Form 8-K/A amending the Letchworth's
Current Report on Form 8-K dated January 31, 1992, and which
Form 8-K/A was filed with the Commission on April 3, 1992, and
wherein such Exhibit is designated Exhibit 10(a).
10.25 Sales Contract, dated as of January 10, 1991, by and between
The Bank of Castile and Anchor Savings Bank FSB, incorporated
by reference to Letchworth's Report on Form 8-K/A amending the
Letchworth's Current Report on Form 8-K dated January 31,
1992, and which Form 8-K/A was filed with the Commission on
April 3, 1992, and wherein such Exhibit is designated Exhibit
10(b).
10.26 Purchase and Assumption Agreement, dated as of May 11, 1994,
by and between The Bank of Castile and The Chase Manhattan
Bank (National Association), incorporated by reference to
Letchworth's Report on Form 8-K, dated December 12, 1994, and
which Form 8-K was filed with the Commission on December 19,
1994, and wherein such Exhibit is designated Exhibit 2.1.
10.27 Sales Contract, dated as of May 11, 1994, by and between The
Bank of Castile and The Chase Manhattan Bank (National
Association), incorporated by reference to Letchworth's Report
on Form 8-K, dated December 12, 1994, and which Form 8-K was
filed with the Commission on December 19, 1994, and wherein
such Exhibit is designated Exhibit 2.2.
10.28 Agreement and Plan of Reorganization, dated as of July 30,
1999 between Tompkins Trustco, Inc. and Letchworth Independent
Bancshares Corporation, incorporated by reference to the
Company's Registration Statement on Form S-4 (Registration No.
333-90411), in which such exhibit is included as Annex A.
10.29 Stock Purchase Agreement, dated October 31, 1998, between
Letchworth and certain shareholders of The Mahopac National
Bank, together with a letter agreement extending the closing
date for said transaction until the close of business on June
4, 1999. The exhibit is incorporated by reference to
Letchworth's report on Form 8-K dated June 17, 1999, as
amended, wherein said exhibit is referenced as Exhibit 2(a).
10.30 Shareholder agreement dated October 16, 1998, by and among
Letchworth and W. D. Spain & Sons Limited Partnership, William
D. Spain, Jr., C. Compton Spain, Michael H. Spain, and William
D. Spain.
11 Statement of Computation of Earnings Per Share Required
information is incorporated by reference to Note 15 of the
Company's consolidated financial statements included under
Item 8.
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21 Subsidiaries of Registrant:
Tompkins Trust Company, which is wholly-owned by the Company,
and its subsidiary Tompkins Real Estate Holdings, Inc., which
is approximately 99 percent owned by Tompkins County Trust
Company.
The Bank of Castile, which is wholly-owned by the Company, and
its subsidiary Castile Funding Corporation, Inc., which is
approximately 99 percent owned by The Bank of Castile.
The Mahopac National Bank, which is wholly-owned by the
Company, and its subsidiary Mahopac Funding Corporation, Inc.,
which is approximately 99 percent owned by The Mahopac
National Bank.
23 Consent of KPMG LLP
23.1 Consent of PricewaterhouseCoopers LLP
99.1 Independent Auditors' Report from PricewaterhouseCoopers LLP
(as auditors for Letchworth Independent Bancshares
Corporation).
(b) REPORTS ON FORM 8-K
The Company filed no Current Reports on Form 8-K during the quarter
ended December 31, 2000.
60
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.
TOMPKINS TRUSTCO, INC.
By: /s/ JAMES J. BYRNES
------------------------------
James J. Byrnes
Chairman of the Board and Chief Executive Officer
Date: March 27, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities indicated:
SIGNATURE CAPACITY
/s/ JAMES J. BYRNES Chairman of the Board and
- - --------------------------- Chief Executive Officer
James J. Byrnes
/s/ JAMES W. FULMER President, Director
- - ---------------------------
James W. Fulmer
/s/ FRANCIS M. FETSKO Senior Vice President and
- - --------------------------- Chief Financial Officer
Francis M. Fetsko
/s/ JOHN ALEXANDER Director
- - ---------------------------
John E. Alexander
/s/ REEDER D. GATES Director
- - ---------------------------
Reeder D. Gates
/s/ WILLIAM W. GRISWOLD Director
- - ---------------------------
William W. Griswold
/s/ JAMES R. HARDIE Director
- - ---------------------------
/ JAMES R. HARDIE
/s/ EDWARD C. HOOKS Director
- - ---------------------------
Edward C. Hooks
/s/ BONNIE H. HOWELL Vice Chairman
- - --------------------------- Director
Bonnie H. Howell
/s/ HUNTER R. RAWLINGS, III Director
- - ---------------------------
Hunter R. Rawlings, III
/s/ THOMAS R. SALM Director
- - ---------------------------
Thomas R. Salm
/s/ MICHAEL SPAIN Director
- - ---------------------------
Michael Spain
/s/ WILLIAM D. SPAIN Director
- - ---------------------------
William D. Spain
/s/ CRAIG YUNKER Director
- - ---------------------------
Craig Yunker
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TOMPKINS TRUSTCO INC.
P.O. Box 460, Ithaca, New York 14851
(607) 273-3210
www.tompkinstrustco.com
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