SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 Commission File Number 1-12709
[GRAPHIC OMITTED]
TOMPKINS TRUSTCO INC.
(Exact name of registrant as specified in its charter)
New York 16-1482357
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
The Commons, P.O. Box 460, Ithaca, NY 14851
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (607) 273-3210
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes [X] No [ ].
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]
Indicate the number of shares of the Registrant's Common Stock outstanding as of
the latest practicable date:
Class Outstanding as of October 29, 2004
---------------------------- -----------------------------------
Common Stock, $.10 par value 8,118,181 shares
TOMPKINS TRUSTCO, INC.
FORM 10-Q
INDEX
PART I -FINANCIAL INFORMATION
PAGE
----
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Statements of Condition as of 3
September 30, 2004 and December 31, 2003
Condensed Consolidated Statements of Income for
the three months and nine months ended September 30, 2004 and 2003 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2004 and 2003 5
Condensed Consolidated Statements of Changes in Shareholders'
Equity for the nine months ended September 30, 2004 and 2003 6
Notes to Unaudited Condensed Consolidated Financial Statements 7-11
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-19
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 19-20
Item 4 - Controls and Procedures 20
Average Consolidated Balance Sheet and Net Interest Analysis 21
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 22
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 22
Item 3 - Defaults Upon Senior Securities 22
Item 4 - Submission of Matters to a Vote of Security Holders 22
Item 5 - Other Information 22
Item 6 - Exhibits 23
SIGNATURES 24
EXHIBIT INDEX 25
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share data) (Unaudited)
As of As of
ASSETS 09/30/2004 12/31/2003
------------ ------------
Cash and noninterest bearing balances due from banks $ 57,012 $ 56,540
Interest bearing balances due from banks 937 9,216
Available-for-sale securities, at fair value 614,667 592,137
Held-to-maturity securities, fair value of $67,771 at September 30, 2004,
and $51,441 at December 31, 2003 66,136 49,528
Loans and leases net of unearned income and deferred costs and fees 1,145,522 1,069,140
Less: Reserve for loan/lease losses 12,175 11,685
- ------------------------------------------------------------------------------------------------------------------
Net Loans/Leases 1,133,347 1,057,455
Bank premises and equipment, net 31,296 28,466
Corporate owned life insurance 23,676 22,843
Goodwill 11,541 11,541
Other intangible assets 2,727 3,322
Accrued interest and other assets 30,942 33,398
==================================================================================================================
Total Assets $ 1,972,281 $ 1,864,446
==================================================================================================================
LIABILITIES, MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARIES AND SHAREHOLDERS' EQUITY
Deposits:
Interest bearing:
Checking, savings and money market $ 788,475 $ 747,691
Time 431,980 381,175
Noninterest bearing 318,378 282,259
- ------------------------------------------------------------------------------------------------------------------
Total Deposits 1,538,833 1,411,125
Securities sold under agreements to repurchase 163,731 187,908
Other borrowings 77,487 87,111
Other liabilities 22,515 17,843
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities $ 1,802,566 $ 1,703,987
- ------------------------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiaries 1,501 1,489
Shareholders' equity:
Common Stock - par value $.10 per share: Authorized 15,000,000 shares;
Issued: 8,145,162 at September 30, 2004; and 8,185,816 at December 31, 2003 814 819
Surplus 75,139 76,926
Undivided profits 90,378 78,676
Accumulated other comprehensive income 2,875 3,015
Treasury stock, at cost - 43,206 shares at September 30, 2004,
and 26,981 shares at December 31, 2003 (992) (466)
- ------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity $ 168,214 $ 158,970
==================================================================================================================
Total Liabilities, Minority Interest in Consolidated Subsidiaries
and Shareholders' Equity $ 1,972,281 $ 1,864,446
==================================================================================================================
See accompanying notes to unaudited condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) (Unaudited)
Three months ended Nine months ended
---------------------------- ---------------------------
09/30/2004 09/30/2003 09/30/2004 09/30/2003
------------ ------------ ------------ ------------
INTEREST AND DIVIDEND INCOME
Loans $ 17,360 $ 17,342 $ 50,790 $ 51,338
Balances due from banks 12 7 88 25
Federal funds sold 1 1 18 15
Available-for-sale securities 6,015 4,870 17,935 15,503
Held-to-maturity securities 488 374 1,378 1,154
- ----------------------------------------------------------------------------------------------------------------------------
Total Interest and Dividend Income 23,876 22,594 70,209 68,035
- ----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits:
Time certificates of deposits of $100,000 or more 785 680 2,061 2,166
Other deposits 3,012 3,007 9,025 10,322
Federal funds purchased and securities sold under agreements
to repurchase 1,080 915 3,262 2,320
Other borrowings 946 956 2,843 3,093
- ----------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 5,823 5,558 17,191 17,901
- ----------------------------------------------------------------------------------------------------------------------------
Net Interest Income 18,053 17,036 53,018 50,134
- ----------------------------------------------------------------------------------------------------------------------------
Less: Provision for loan/lease losses 749 585 2,274 1,723
- ----------------------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan/Lease Losses 17,304 16,451 50,744 48,411
- ----------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Trust and investment services income 1,274 1,092 3,938 3,138
Service charges on deposit accounts 2,074 1,863 5,869 5,215
Insurance commissions and fees 1,693 1,371 4,883 3,974
Card services income 646 577 1,835 1,735
Other service charges 813 732 2,457 2,342
Increase in cash surrender value of corporate owned life insurance 225 262 807 777
Gains on sale of loans 66 24 185 849
Other income 513 429 939 655
Net realized (loss) gain on available-for-sale securities (8) (241) 70 101
- ----------------------------------------------------------------------------------------------------------------------------
Total Noninterest Income 7,296 6,109 20,983 18,786
- ----------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSES
Salary and wages 6,702 5,921 19,966 17,944
Pension and other employee benefits 1,693 1,639 5,345 5,188
Net occupancy expense of bank premises 881 837 2,756 2,521
Furniture and fixture expense 859 805 2,557 2,431
Marketing expense 503 473 1,473 1,390
Professional fees 539 270 1,115 686
Software licensing and maintenance 308 255 1,010 804
Amortization of intangible assets 154 170 502 544
Other operating expense 2,748 2,888 8,512 8,151
- ----------------------------------------------------------------------------------------------------------------------------
Total Noninterest Expenses 14,387 13,258 43,236 39,659
- ----------------------------------------------------------------------------------------------------------------------------
Income Before Income Tax Expense and Minority
Interest in Consolidated Subsidiaries 10,213 9,302 28,491 27,538
- ----------------------------------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiaries 34 34 101 101
Income Tax Expense 3,395 3,092 9,355 9,187
============================================================================================================================
Net Income $ 6,784 $ 6,176 $ 19,035 $ 18,250
============================================================================================================================
Basic Earnings Per Share $ 0.84 $ 0.76 $ 2.34 $ 2.25
============================================================================================================================
Diluted Earnings Per Share $ 0.82 $ 0.75 $ 2.30 $ 2.21
============================================================================================================================
See accompanying notes to unaudited condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
Nine months ended
----------------------------
09/30/2004 09/30/2003
------------ ------------
OPERATING ACTIVITIES
Net income $ 19,035 $ 18,250
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan/lease losses 2,274 1,723
Depreciation and amortization premises, equipment, and software 2,664 2,351
Amortization of intangible assets 502 544
Earnings from corporate owned life insurance (807) (777)
Net amortization on securities 1,702 3,263
Net realized gain on available-for-sale securities (70) (101)
Net gain on sale of loans (185) (849)
Proceeds from sale of loans 10,741 42,155
Loans originated for sale (10,563) (37,027)
Net (gain) loss on sales of bank premises and equipment (19) 30
Decrease (increase) in accrued interest receivable 166 (184)
Increase (decrease) in accrued interest payable 2 (59)
Other, net 6,819 3,440
- -------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 32,261 32,759
- -------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from maturities of available-for-sale securities 186,430 250,898
Proceeds from sales of available-for-sale securities 46,132 93,512
Proceeds from maturities of held-to-maturity securities 12,801 9,340
Purchases of available-for-sale securities (256,868) (392,328)
Purchases of held-to-maturity securities (29,499) (12,612)
Net increase in loans (78,159) (88,595)
Proceeds from sale of bank premises and equipment 55 32
Purchases of bank premises and equipment (5,191) (2,768)
Purchase of corporate owned life insurance (25) 0
Net cash used in acquisitions 0 (53)
- -------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (124,324) (142,574)
- -------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in demand, money market,
and savings deposits 76,903 65,069
Net increase (decrease) in time deposits 50,805 (1,121)
Net (decrease) increase in securities sold under agreements
to repurchase and Federal funds purchased (24,177) 74,232
Increase in other borrowings 16,623 60,000
Repayment of other borrowings (26,247) (69,668)
Cash dividends (7,333) (6,647)
Cash paid in lieu of fractional shares - 10% stock dividend 0 (13)
Common stock repurchased and returned to unissued status (2,976) (3,712)
Net proceeds from exercise of stock options and related tax benefit 658 438
- -------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 84,256 118,578
- -------------------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and Cash Equivalents (7,807) 8,763
Cash and cash equivalents at beginning of period 65,756 64,298
=============================================================================================================
Total Cash & Cash Equivalents at End of Period $ 57,949 $ 73,061
=============================================================================================================
Supplemental Information:
Cash paid during the year for:
Interest $ 17,190 $ 17,960
Taxes 4,708 3,681
Non-cash Investing Activities
Securitization of Loans 0 39,663
See accompanying notes to unaudited condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share data) (Unaudited)
Accumulated
Other
Common Undivided Comprehensive Treasury
Stock Surplus Profits Income (Loss) Stock Total
===================================================================================================================================
January 1, 2003 $ 747 $ 45,997 $ 96,722 $ 7,597 ($ 466) $ 150,597
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive Income:
Net Income 18,250 18,250
Other comprehensive loss (5,197) (5,197)
------------
Total Comprehensive Income 13,053
============
Cash dividends ($0.81/Share) (6,647) (6,647)
Exercise of stock options, and related
tax benefit (32,915 shares, net) 3 435 438
Common stock repurchased and returned
to unissued status (95,799 shares) (9) (3,703) (3,712)
Effect of 10% stock dividend 74 33,071 (33,145) 0
Cash paid in lieu of fractional shares
(298 shares) (13) (13)
===================================================================================================================================
Balances at September 30, 2003 $ 815 $ 75,800 $ 75,167 $ 2,400 ($ 466) $ 153,716
===================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
January 1, 2004 $ 819 $ 76,926 $ 78,676 $ 3,015 ($ 466) $ 158,970
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive Income:
Net Income 19,035 19,035
Other comprehensive loss (140) (140)
------------
Total Comprehensive Income 18,895
============
Cash dividends ($0.90/Share) (7,333) (7,333)
Exercise of stock options and related
tax benefit ( 25,292 shares, net) 2 656 658
Common stock repurchased and returned
to unissued status ( 65,946 shares) (7) (2,969) (2,976)
Directors deferred compensation plan
(16,225 shares) 526 (526) 0
===================================================================================================================================
Balances at September 30, 2004 $ 814 $ 75,139 $ 90,378 $ 2,875 ($ 992) $ 168,214
===================================================================================================================================
See accompanying notes to unaudited condensed consolidated financial statements.
6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Tompkins Trustco, Inc. ("Tompkins" or the "Company"), is the corporate parent to
three community banks, Tompkins Trust Company ("Trust Company"), The Bank of
Castile, and The Mahopac National Bank, which together operate 35 banking
offices in New York State, and to one insurance agency subsidiary, Tompkins
Insurance Agencies, Inc. ("Tompkins Insurance"). Unless the context otherwise
requires, the term "Company" refers to Tompkins Trustco, Inc. and its
subsidiaries.
Headquartered in Ithaca, New York, 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 Trust Company, a commercial bank that
has operated in Ithaca and surrounding communities since 1836. Through its
community banking subsidiaries, the Company provides traditional banking
services. Tompkins offers trust and investment services through Tompkins
Investment Services, a division of Trust Company. The Company also offers
insurance services through Tompkins Insurance, an independent agency with a
history of over 100 years of service to individual and business clients
throughout western New York. Each Tompkins subsidiary operates with a community
focus, meeting the needs of the unique communities served.
2. Basis of Presentation
The unaudited condensed consolidated financial statements included in this
quarterly report have been prepared in accordance with accounting principles
generally accepted in the United States of America. In the application of
certain accounting policies management is required to make assumptions regarding
the effect of matters that are inherently uncertain. These estimates and
assumptions affect the reported amounts of certain assets, liabilities,
revenues, and expenses in the consolidated financial statements. Different
amounts could be reported under different conditions, or if different
assumptions were used in the application of these accounting policies. The
accounting policy management considers critical in this respect is the
determination of the reserve for loan/lease losses.
In management's opinion, the unaudited condensed consolidated financial
statements reflect all adjustments of a normal recurring nature. The results of
operations for the interim periods are not necessarily indicative of the results
of operations to be expected for the full year ended December 31, 2004. The
unaudited condensed consolidated financial statements should be read in
conjunction with the Company's 2003 Annual Report on Form 10-K. The consolidated
financial information included herein combines the results of operations, the
assets, liabilities, and shareholders' equity of the Company and its
subsidiaries. Amounts in the prior period's consolidated financial statements
are reclassified when necessary to conform to the current period's presentation.
All significant intercompany balances and transactions are eliminated in
consolidation. Share and per share data have been retroactively adjusted to
reflect a 10% stock dividend paid on August 15, 2003.
The Company applies Accounting Principles Board Opinion (APB Opinion) No. 25,
"Accounting for Stock Issued to Employees," 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. Since the Company grants options with
the exercise price equal to the fair value of the underlying stock at the grant
date, there is no compensation expense recorded in net income. Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," 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.
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.
7
Three months ended Nine months ended
(in thousands except per share data) 09/30/2004 09/30/2003 09/30/2004 09/30/2003
- ------------------------------------------------------------------------------------------------------------------------
Net Income:
As reported $ 6,784 $ 6,176 $ 19,035 $ 18,250
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of all related tax effects 217 147 528 408
- ------------------------------------------------------------------------------------------------------------------------
Pro forma $ 6,567 $ 6,029 $ 18,507 $ 17,842
- ------------------------------------------------------------------------------------------------------------------------
Basic earnings per share:
As reported $ 0.84 $ 0.76 $ 2.34 $ 2.25
- ------------------------------------------------------------------------------------------------------------------------
Pro forma 0.81 0.74 2.27 2.20
- ------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share:
As reported $ 0.82 $ 0.75 $ 2.30 $ 2.21
========================================================================================================================
Pro forma 0.80 0.73 2.24 2.16
========================================================================================================================
The per share-weighted average fair value of the 199,000 stock options granted
during the first nine months of 2004 was $15.00. The per share weighted average
fair value of the 6,600 stock options granted during the first nine months of
2003 was $17.48. Fair values were arrived at using the Black Scholes
option-pricing model with the following assumptions:
2004 2003
- --------------------------------------------------------------------------------
Risk-free interest rate 3.82% 3.68%
Expected dividend yield 2.70% 2.80%
Volatility 39.76% 44.58%
Expected life (years) 5.00 7.00
================================================================================
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 different from those of
traded options, for which the Black-Scholes option-pricing model was developed,
and because changes in the subjective assumptions can materially affect fair
value estimate.
3. Earnings Per Share
The Company follows the provisions of SFAS No. 128, "Earnings per Share"
("EPS"). A computation of Basic EPS and Diluted EPS for the three and nine month
periods ending September 30, 2004 and 2003 is presented in the table below.
- -------------------------------------------------------------------------------------------------------------
Three months ended September 30, 2004 Net Income Weighted Per
(In thousands except share and per share data) (Numerator) Average Shares Share
(Denominator) Amount
- -------------------------------------------------------------------------------------------------------------
Basic EPS
Income available to common shareholders $ 6,784 8,120,935 $ 0.84
Effect of dilutive securities (Stock options) 120,718
Diluted EPS
=============================================================================================================
Income available to common shareholders plus assumed conversions $ 6,784 8,241,653 $ 0.82
=============================================================================================================
8
3. Earnings Per Share (continued)
- -------------------------------------------------------------------------------------------------------------
Three months ended September 30, 2003 Net Income Weighted Per
(In thousands except share and per share data) (Numerator) Average Shares Share
(Denominator) Amount
- -------------------------------------------------------------------------------------------------------------
Basic EPS
Income available to common shareholders $ 6,176 8,112,827 $ 0.76
Effect of dilutive securities (Stock options) 157,771
Diluted EPS
- -------------------------------------------------------------------------------------------------------------
Income available to common shareholders plus assumed conversions $ 6,176 8,270,598 $ 0.75
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 2004 Net Income Weighted Per
(In thousands except share and per share data) (Numerator) Average Shares Share
(Denominator) Amount
- -------------------------------------------------------------------------------------------------------------
Basic EPS
Income available to common shareholders $ 19,035 8,148,141 $ 2.34
Effect of dilutive securities (Stock options) 130,472
Diluted EPS
- -------------------------------------------------------------------------------------------------------------
Income available to common shareholders plus assumed conversions $ 19,035 8,278,613 $ 2.30
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 2003 Net Income Weighted Per
(In thousands except share and per share data) (Numerator) Average Shares Share
(Denominator) Amount
- -------------------------------------------------------------------------------------------------------------
Basic EPS
Income available to common shareholders $ 18,250 8,125,410 $ 2.25
Effect of dilutive securities (Stock options) 140,757
Diluted EPS
- -------------------------------------------------------------------------------------------------------------
Income available to common shareholders plus assumed conversions $ 18,250 8,266,167 $ 2.21
- -------------------------------------------------------------------------------------------------------------
4. Comprehensive Income (Loss)
Three months ended Nine months ended
(in thousands) 09/30/2004 09/30/2003 09/30/2004 09/30/2003
- -----------------------------------------------------------------------------------------------------------------
Net Income $ 6,784 $ 6,176 $ 19,035 $ 18,250
Net unrealized holding gains (losses) during the period 7,819 (4,573) (98) (5,136)
Memo: Pre-tax net unrealized holding gain (loss) 13,032 (7,621) (163) (8,561)
Reclassification adjustment for net realized loss (gain) on
available-for-sale securities 5 145 (42) (61)
Memo: Pretax net realized loss (gain) 8 241 (70) (101)
- -----------------------------------------------------------------------------------------------------------------
Other Comprehensive Income (Loss) 7,824 (4,428) (140) (5,197)
=================================================================================================================
Total Comprehensive Income $ 14,608 $ 1,748 $ 18,895 $ 13,053
=================================================================================================================
9
5. Employee Benefit Plans
The following table sets forth the amount of the net periodic benefit cost
recognized, including the following components: the service cost and interest
cost; the expected return on plan assets for the period; the amortization of the
unrecognized transitional obligation or transition asset; and the amounts of
recognized gains and losses, prior service cost recognized, and gain or loss
recognized due to settlement or curtailment, for the Company's pension plan and
post-retirement plan.
Components of Net Period Benefit Cost
Pension Benefit Other Benefits
Three months ended Three months ended
(In thousands) 09/30/2004 09/30/2003 09/30/2004 09/30/2003
- ---------------------------------------------------------------------------------------------------
Service cost $ 334 $ 292 $ 44 $ 37
Interest cost 407 384 77 71
Expected return on plan assets for the period (579) (451) 0 0
Amortization of transition (asset) liability 0 (14) 29 29
Amortization of prior service cost (33) (33) 2 2
Amortization of net loss 164 175 1 0
===================================================================================================
Net periodic benefit cost $ 293 $ 353 $ 153 $ 139
===================================================================================================
Pension Benefit Other Benefits
Nine months ended Nine months ended
(In thousands) 09/30/2004 09/30/2003 09/30/2004 09/30/2003
- ---------------------------------------------------------------------------------------------------
Service cost $ 1,002 $ 876 $ 132 $ 111
Interest cost 1,221 1,152 231 213
Expected return on plan assets for the period (1,737) (1,353) 0 0
Amortization of transition (asset) liability 0 (42) 87 87
Amortization of prior service cost (99) (99) 6 6
Amortization of net loss 492 525 3 0
===================================================================================================
Net periodic benefit cost $ 879 $ 1,059 $ 459 $ 417
===================================================================================================
The Company previously disclosed in its financial statements for the year ended
December 31, 2003, included in its 2003 Annual Report on Form 10-K, that
although it was not required to contribute to the pension plan in 2004, it may
voluntarily contribute to the pension plan in 2004. There was no contribution to
the pension plan through the first nine months of 2004; however, the Company
expects to contribute approximately $2.5 million in the fourth quarter of 2004.
In addition to the Company's noncontributory defined-benefit retirement and
pension plan, the Company provides supplemental employee retirement plans
(SERPS) to certain executives. For the three month period ended September 30,
2004, the net periodic benefit cost of the Company's SERPS was $134,000,
consisting of the following: service cost of $18,000; interest cost of $83,000;
amortization of prior service cost of $26,000; and amortization of net loss of
$7,000. For the three month period ended September 30, 2003, the net periodic
benefit cost was $126,000, consisting of the following: service cost of $16,000;
interest cost of $78,000; amortization of prior service cost of $26,000; and
amortization of net loss of $6,000.
For the nine month period ended September 30, 2004, the net periodic benefit
cost of the Company SERPS was $402,000, consisting of the following: service
cost of $54,000; interest cost of $249,000; amortization of prior service cost
of $78,000; and amortization of net loss of $21,000. For the nine month period
ended September 30, 2003, the net periodic benefit cost was $378,000, consisting
of the following: service cost of $48,000; interest cost of $234,000;
amortization of prior service cost of $78,000; and amortization of net loss of
$18,000.
In December 2003, The Medicare Prescription Drug, Improvement and Modernization
Act of 2003 ("Medicare Act") was signed into law. The Medicare Act introduced
both a Medicare prescription-drug benefit and a federal subsidy to sponsors of
retiree healthcare plans that provide a benefit at least "actuarially
equivalent" to the Medicare benefit. These provisions of the Medicare Act will
affect accounting measurements under SFAS No. 106.
10
In May 2004, the Financial Accounting Standards Board (FASB) issued Staff
Position (FSP) No. FAS 106-2, "Accounting and Disclosure Requirements Related to
the Medicare Prescription Drug, Improvement and Modernization Act of 2003",
which supersedes FSP FAS 106-1 of the same title. The FSP clarifies the
accounting for the benefits attributable to new government subsidies for
companies that provide prescription drug benefits to retirees. The new
accounting requirements are effective beginning in the third calendar quarter of
2004. In accordance with FSP FAS 106-1, the Company elected to defer accounting
for the economic effects of the new Medicare Act. Accordingly, any measures of
the accumulated postretirement benefit obligation or net periodic postretirement
benefit cost in the financial statements or accompanying notes do not reflect
the effect of the subsidy because the Company, as of September 30, 2004, has not
concluded whether the benefits provided by the plan are actuarially equivalent
to Part D under the Medicare Act.
6. Financial Guarantees
FASB Interpretation No. 45 (FIN No. 45), Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others; an Interpretation of FASB Statements No. 5, 57, and 107 and rescission
of FASB Interpretation No. 34 requires certain disclosures and potential
liability recognition for the fair value at issuance of guarantees that fall
within its scope. Based upon the Company's interpretation of FIN No. 45, the
Company currently does not issue any guarantees that would require liability
recognition under FIN No. 45, other than standby letters of credit. The Company
extends standby letters of credit to its customers in the normal course of
business. The standby letters of credit are generally short-term. As of
September 30, 2004, the Company's maximum potential obligation under standby
letters of credit was $21.4 million. Management uses the same credit policies to
extend standby letters of credit that it uses for on-balance sheet lending
decisions and may require collateral to support standby letters of credit based
upon its evaluation of the counterparty. Management does not anticipate losses
as a result of these transactions.
Item 2. Management's 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, 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 ("Mahopac
National Bank"), became subsidiaries of Tompkins.
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.
("Tompkins Insurance"), a wholly-owned subsidiary of Tompkins. Subsequently, the
Company has acquired three additional insurance agencies, which have been merged
into Tompkins Insurance. The agencies primarily offer property and casualty
insurance to individuals and businesses in Western New York State. Tompkins
Insurance has eight offices located in a geographic area that closely matches
the footprint of the Company's Bank of Castile subsidiary. Further details
pertaining to the mergers and acquisitions are presented in Note 6 to the
Company's Annual Report on Form 10-K for the year ended December 31, 2003.
Through its community bank subsidiaries, the Company provides traditional
banking related services, which constitute the Company's only reportable
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/lease 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 trust
and investment services, including investment management accounts, custody
accounts, trusts, retirement plans and rollovers, estate settlement, and
financial planning. Tompkins Insurance primarily provides services consisting of
property and casualty insurance for individuals and businesses, which complement
the services offered through the Company's banking subsidiaries.
11
The banking industry is highly competitive, as deregulation has opened the
industry for nontraditional commercial banking companies. Competition for
commercial banking and other financial services is strong in the Company's
market area. Competition includes other commercial banks, savings and loan
associations, credit unions, finance companies, mutual funds, insurance
companies, brokerage and investment companies, and other financial
intermediaries. The Company differentiates itself from its competitors through
its full complement of banking and related financial services, and through its
community commitment and involvement in its primary market areas, as well as its
commitment to quality and personalized banking services. The industry is also
highly regulated. As a multi-bank holding company, the Company is subject to
examination and regulation from the Federal Reserve Board, the Federal Deposit
Insurance Corporation, the Office of the Comptroller of Currency, and the New
York State Banking Department.
Other external factors affecting the Company's operating results are market
rates of interest, the condition of financial markets, and both national and
regional economic conditions. The Company's subsidiary banks operate 35 offices,
including one limited-service office, serving communities located in upstate New
York. The general economic climate of the markets served by the Company vary by
region, with the Western New York market representing the most challenging due
to recent cutbacks and layoffs by some major employers in Rochester, New York.
The economic climates in Tompkins County and in the counties the Company serves
near the New York City area are more favorable.
The following discussion is intended to provide the reader with a further
understanding of the consolidated financial condition and results of operations
of Tompkins Trustco, Inc. and its operating subsidiaries. It should be read in
conjunction with the Company's Form 10-K and related notes for the year ended
December 31, 2003, and the unaudited condensed consolidated financial statements
and notes included elsewhere in this report.
Forward-Looking Statements
The Company is making this statement in order to satisfy the "Safe Harbor"
provision contained in the Private Securities Litigation Reform Act of 1995. The
statements contained in this Quarterly Report on Form 10-Q that are not
statements of historical fact may include forward-looking statements that
involve a number of risks and uncertainties. Such forward-looking statements are
made based on management's expectations and beliefs concerning future events
impacting the Company and are subject to certain uncertainties and factors
relating to the Company's operations and economic environment, all of which are
difficult to predict and many of which are beyond the control of the Company,
that could cause actual results of the Company to differ materially from those
matters expressed and/or implied by such forward-looking statements. The
following factors are among those that could cause actual results to differ
materially from the forward-looking statements: changes in general economic,
market and regulatory conditions; the development of an interest rate
environment that may adversely affect the Company's interest rate spread, other
income or cash flow anticipated from the Company's operations, investment and/or
lending activities; changes in laws and regulations affecting banks, insurance
companies, bank holding companies and/or financial holding companies;
technological developments and changes; the ability to continue to introduce
competitive new products and services on a timely, cost-effective basis;
governmental and public policy changes, including environmental regulation;
protection and validity of intellectual property rights; reliance on large
customers; and financial resources in the amounts, at the times and on the terms
required to support the Company's future businesses. In addition, such
forward-looking statements could be affected by general industry and market
conditions and growth rates, general economic and political conditions,
including interest rate and currency exchange rate fluctuations, and other
factors.
Critical Accounting Policies
In the course of the Company's normal business activity, management must select
and apply many accounting policies and methodologies that lead to the financial
results presented in the consolidated financial statements of the Company. Some
of these policies are more critical than others. Management considers the
accounting policy relating to the reserve for loan/lease losses (reserve) to be
a critical accounting policy because of the uncertainty and subjectivity
inherent in estimating the levels of reserve needed to cover probable credit
losses within the loan portfolio and the material effect that these estimates
can have on the Company's results of operations.
The Company has developed a methodology to measure the amount of estimated loan
loss exposure inherent in the loan portfolio to ensure that an adequate reserve
is maintained. The methodology includes an estimate of exposure for the
following: specifically reviewed and graded loans, historical loss experience by
product type, past due and nonperforming loans, and other internal and external
factors such as local and regional economic conditions, growth trends, and
credit policy and underwriting standards. The methodology includes a review of
loans considered impaired in accordance with the Statement of Financial
12
Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of
a Loan", as well as other commercial loans and commercial mortgage loans that
are evaluated using an internal rating system. An estimated exposure amount is
assigned to these internally reviewed credits based upon a review of the
borrower's financial condition, payment history, collateral adequacy, and
business conditions. For commercial loans and commercial mortgage loans not
specifically reviewed, and for more homogenous loan portfolios such as
residential mortgage loans and consumer loans, estimated exposure amounts are
assigned based upon historical loss experience as well as past due status.
Lastly, an additional unallocated reserve is maintained based upon management
judgment and assessment of other quantitative and qualitative factors such as
regional and local economic conditions and portfolio growth trends.
Since the methodology is based upon historical experience and trends as well as
management's judgment, factors may arise that result in different estimations.
Significant factors that could give rise to changes in these estimates may
include, but are not limited to, changes in economic conditions in the local
area, concentration of risk, and declines in local property values. While
management's evaluation of the reserve for loan/lease losses as of September 30,
2004, considers the reserve to be adequate, under adversely different conditions
or assumptions, the Company would need to increase the reserve.
All accounting policies are important and the reader of the financial statements
should review these policies, described in Note 1 of the Company's Form 10-K for
the year ended December 31, 2003, to gain a greater understanding of how the
Company's financial performance is reported.
RESULTS OF OPERATIONS
For the quarter ended September 30, 2004, net income was $6.8 million, an
increase of 9.8% compared to net income of $6.2 million for the same period in
2003. Diluted earnings per share were $0.82 for the third quarter of 2004,
compared to $0.75 for the same period in 2003. For the nine months ended
September 30, 2004, net income was $19.0 million compared to $18.3 million for
the nine months ended September 30, 2003. Diluted earnings per share were $2.30
for the first nine months of 2004 compared to $2.21 for the same period in 2003.
The increase in net income in 2004 over 2003 is due to an increase in net
interest income as well as increases in key fee income categories. Net interest
income benefited from growth in average earnings assets and core deposits, while
the increase in noninterest income reflects the successful execution of the
Company's primary business strategies. These strategies include a commitment to
community banking through diversified revenue sources, including net interest
income generated from the loan and securities portfolios, trust and investment
services income, commissions from insurance sales, and other service charges and
fees for providing banking and related financial services.
The historically low interest rate environment continues to be a challenge to
operating performance, as yields on the Company's earning assets reprice
downward more rapidly than the interest cost on the Company's interest-bearing
liabilities. The Company's net interest margin decreased from 4.26% for the
third quarter of 2003 to 4.06% for the third quarter of 2004. The year-to-date
net interest margin decreased from 4.32% in 2003 to 4.09% in 2004. Despite the
decline in the net interest margin, net interest income increased by 6.0% to
$18.1 million for the three months ended September 30, 2004, from $17.0 million
for the same period in 2003. The increase in net interest income during this
period of declining margins was achieved through solid growth in earning assets.
Average earning assets increased by $185.2 million, or 11.3%, from $1.6 billion
at September 30, 2003, to $1.8 billion at September 30, 2004. Growth in average
earning assets included a 7.9% increase in average loans and a 17.6% increase in
average securities, excluding market value adjustments. A $146.0 million
increase in average deposits from the third quarter of 2003 to the third quarter
of 2004 supported the growth in average earnings assets.
Asset quality showed some improvement when compared to the same period last
year, with nonperforming assets decreasing to $8.1 million at September 30,
2004, from $9.6 million at September 30, 2003. The ratio of nonperforming assets
to total assets improved from 0.53% at September 30, 2003, to 0.41% at September
30, 2004. Net charge-offs in the third quarter of 2004 were $674,000, compared
to $1.2 million in the third quarter of 2003. The provision expense increased to
$749,000 in the third quarter of 2004 from $585,000 in the same period in 2003.
Noninterest income was up $1.2 million, or 19.4%, to $7.3 million for the three
months ended September 30, 2004, from $6.1 million for the same period in 2003.
The majority of the increase was due to solid growth in trust and investment
services income, insurance commissions and fees, and service charges on deposit
accounts. Trust and investment services income benefited from new business
initiatives as well as higher stock market levels, while insurance commissions
and fees benefited from an acquisition of a small insurance agency in the fourth
quarter of 2003. Recent additions to the Company's branch network and an
increase in fees and related services contributed to the growth in deposit fees.
Key performance measurements for the Company include return on average assets
(ROA) and return on average shareholders' equity (ROE). Return on average assets
for the quarter ended September 30, 2004, was 1.38%, unchanged from the same
period in 2003. Return on average shareholders' equity for the third quarter of
2004 was 16.76%, compared to 16.14% for the same period in 2003. Return on
13
average assets for the nine months ended September 30, 2004, was 1.32%, compared
to 1.40% for the same period in 2003. Return on average shareholders' equity for
the nine months ended 2004 was 15.77%, compared to 16.14% for the same period in
2003. The decrease in year-to-date 2004 ROA and ROE compared to year-to-date
2003 reflects growth in average earnings assets at lower yields in 2004 than in
2003.
Net Interest Income
The Average Consolidated Balance Sheet and Net Interest Analysis included in
this Quarterly Report on Form 10-Q illustrates the trend in average
interest-earning assets and interest-bearing liabilities, and the corresponding
yield or cost associated with each. The Company earned tax-equivalent net
interest income of $18.7 million for the three months ended September 30, 2004,
an increase of 6.0% over the same period in 2003. An increased volume of earning
assets and noninterest bearing deposits offset a lower net interest margin and
contributed to the growth in net interest income. The net interest margin
declined from 4.26% in the third quarter of 2003 to 4.06% in the third quarter
of 2004.
For the nine months ended September 30, 2004, the Company earned tax-equivalent
net interest income of $54.9 million, an increase of 5.7% over $51.9 million for
the first nine months of 2003. The net interest margin for the nine months ended
September 30, 2004 was 4.09%, down from 4.32% for the same period in 2003.
The low interest rate environment has resulted in declines in both the yield on
earning assets and the cost of interest-bearing liabilities. The yield on
earning assets declined from 5.81% for the first nine months of 2003, to 5.37%
for the same period in 2004. The cost of interest-bearing liabilities declined
from 1.82% to 1.58% over the same period. The yield on earning assets for the
third quarter of 2003 was 5.60% compared to 5.33% for the third quarter of 2004.
The cost of interest-bearing liabilities was 1.66% for the third quarter of 2003
compared to 1.58% for the same period in 2004. The larger decline in asset
yields has contributed to the compression in the Company's net interest margin.
The recent increase in the Prime lending rate has had a positive effect on
interest income; however, the narrowing of the spread between longer-term
interest rates and short-term interest rates has offset some of this positive
impact. Although the net interest margin continued to decline during the
quarter, the rate of decline on a sequential quarter comparison was less in the
third quarter of 2004, than in the preceding three quarters.
Average earning assets for the year-to-date period ended September 30, 2004,
were up $185.5 million, or 11.5%, to $1.8 billion from $1.6 billion for the
period ended September 30, 2003. Growth in earning assets was concentrated in
securities and commercial and residential lending products. Average securities
(excluding changes in unrealized gains and losses on available-for-sale
securities) increased by $95.7 million for the first nine months of 2004
compared to the same period of 2003. Growth in the securities portfolio included
a $44.7 million increase in average U.S. Government agency securities, and a
$44.9 million increase in U.S. Government mortgage-backed securities. The
increase in mortgage-backed securities includes the effects of $39.7 million in
securities that were created from the Company's own mortgage production in
August 2003. Prepayments on mortgage-backed securities slowed in the first nine
months of 2004 compared with the same period in 2003; consequently premium
amortizations decreased to $1.7 million for the first nine months of 2004
compared to $3.3 million for the same period in 2003.
Between September 30, 2003, and September 30, 2004, year-to-date average
balances for commercial real estate loans and commercial loans increased by
$52.3 million and $13.2 million, respectively. The combined average balances of
commercial loan products, including commercial leases, increased by 13.0% for
the first nine months of 2004 compared to the same period in 2003. These
commercial lending products represented 49.2% of average loans at September 30,
2004, compared with 47.0% of average loans at September 30, 2003. Management
continues to emphasize commercial services, as these commercial loan products
are typically attractive to the Company from a yield and interest rate risk
management perspective. Average residential real estate loans at September 30,
2004, increased by $10.4 million over average real estate loans at September 30,
2003, despite $21.8 million in residential mortgage loan sales between September
30, 2003 and September 30, 2004, and the securitization of another $39.7 million
of residential mortgage loans during the same period.
Core deposits (total deposits, less brokered deposits, municipal money market
deposits, and time deposits of $100,000 or more) supported the growth in average
assets in the first nine months of 2004. Average core deposits for the nine
months ended September 30, 2004, increased by $93.5 million, or 8.7%, from an
average balance of $1.1 billion for the first nine months of 2003, to
approximately $1.2 billion. Core deposits represent the Company's largest and
lowest cost funding source, with average core deposits representing 65.9% of
average liabilities for the first nine months of 2004. This compares to 67.2%
for the same period in 2003.
Non-core funding sources, which include time deposits of $100,000 or more,
brokered deposits, municipal money market deposits, Federal funds purchased,
securities sold under agreements to repurchase (repurchase agreements), and
14
other borrowings provided additional sources of funding to support asset growth.
Average balances on these non-core funding sources increased by $82.1 million
between September 30, 2003, and September 30, 2004. The growth in average
non-core funding was concentrated in wholesale repurchase agreements and
reflected favorable rates and terms on these funding sources. The primary
component of non-core funding sources at September 30, 2004, was municipal money
market deposits with an average balance of $154.1 million.
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. Management has developed a model to measure the amount of estimated loan
loss exposure inherent in the loan portfolio to ensure that an adequate reserve
is maintained. For the third quarter of 2004, the provision for loan/lease
losses was $749,000, compared to $585,000 for the same period in 2003. The
provision for loan/lease losses of $2.3 million for the first nine months of
2004 is up from $1.7 million for the same period in 2003. The increase in the
provision for loan/lease losses in 2004 is attributable to continued growth in
the loan portfolio, including an increased level of commercial real estate and
commercial loans. Net charge-offs were $674,000 for the quarter ended September
30, 2004, compared to $1.2 million for the quarter ended September 30, 2003. Net
charge-offs were approximately $1.8 million for the first nine months of 2004
and 2003. The reserve for loan/lease losses as a percentage of period end loans
was 1.06% at September 30, 2004, 1.09% at December 31, 2003, and 1.12% at
September 30, 2003.
Noninterest Income
Although net interest income is the Company's primary revenue source,
competitive, regulatory and economic conditions have led management to target
noninterest income sources as important drivers of long-term revenue growth.
Noninterest income for the nine months ended September 30, 2004, was $21.0
million, an increase of 11.7% over the same period in 2003. For the year-to-date
period ended September 30, 2004, noninterest income represented 28.4% of total
revenue, compared to 27.3% for the same period in 2003. Noninterest income for
the three months ended September 30, 2004 was $7.3 million, an increase of 19.4%
over the same period in 2003. The growth in noninterest income for the
year-to-date period is significant in that 2004 results were negatively affected
by reduced income from sales of residential mortgages. For the first nine months
of 2004, gains on sales of residential loans were down $664,000. The higher
amount of gains in 2003 was largely due to increased application volumes that
were driven by historically low interest rates in the first half of 2003.
Trust and investment services income was $3.9 million in the first nine months
of 2004, which is up 25.5% over the same period in 2003. For the third quarter
of 2004, trust and investment services income of $1.3 million increased $182,000
or 16.7% over the same period last year. Growth in new business and an increase
in the major stock market indices contributed to the growth in trust and
investment services income for the quarter. With fees largely based on the
market value and mix of assets managed, the general direction of the stock
market can have a considerable impact on fee income. The market value of assets
managed by, or in custody of, Tompkins Investment Services was $1.4 billion at
September 30, 2004, up 8.0% from September 30, 2003. Tompkins Investment
Services generates fee income through managing trust and investment
relationships, managing estates, providing custody services, and managing
investments in employee benefits plans. Services are primarily provided to
customers in the Company's market areas, but currently the division has
customers in approximately 40 states. Trends for new business in trust and
investments services remain positive.
Service charges on deposit accounts were $5.9 million for the nine-month period
ended September 30, 2004, compared to $5.2 million for the same period in 2003.
For the third quarter of 2004, service charges on deposit accounts were $2.1
million, an increase of $211,000 over the same quarter last year. The growth in
2004 over 2003 reflects an increase in deposit accounts, fee increases, and
additional deposit related services. The average dollar volume of
noninterest-bearing accounts increased by about $35.7 million between September
30, 2003, and September 30, 2004, from $256.3 million to $292.0 million.
Interest-bearing checking, savings and money market accounts increased by $55.5
million over the same period, from $717.0 million to $772.5 million.
Insurance commissions and fees were $4.9 million for the first nine months of
2004, up 22.9% from the $4.0 million for the same period last year. For the
third quarter of 2004, income from insurance commissions and fees was $1.7
million, up $322,000 or 23.5% from the third quarter of 2003. Higher premium
costs instituted by underwriting insurance companies and Tompkins Insurance's
acquisition of a small insurance agency in November 2003 contributed to the
growth in commission income. Tompkins Insurance has also expanded its efforts to
offer services to bank customers by sharing certain offices with The Bank of
Castile.
15
Card services income of $1.8 million for the nine months ended September 30,
2004, was up 5.8% from the $1.7 million earned in the first nine months of 2003.
Card services income was $646,000 in the third quarter 2004, an increase of
12.0% over income of $577,000 in the same quarter of 2003. The increase in
income over prior year was concentrated in debit card income and ATM fees and
reflects an increased number of cardholders, higher transaction volume and fee
increases. The Company continues to expand its product offerings to better serve
the needs of customers. Card services products include traditional credit cards,
purchasing cards, and debit cards.
Noninterest income for the first nine months of 2004 includes $807,000 of income
relating to increases in the cash surrender value of corporate owned life
insurance (COLI). This compares to $777,000 for the same period in 2003. The
COLI relates to life insurance policies covering certain senior officers of the
Company. The Company's average investment in COLI was $23.2 million for the
nine-month period ended September 30, 2004, compared to $21.8 million for the
same period in 2003. Although income associated with the insurance policies is
not included in interest income, increases in the cash surrender value produced
a tax-equivalent return of 7.42% for the first nine months of 2004, compared to
7.96% for the same period in 2003.
Net gains on loan sales were $185,000 in the first nine months of 2004, compared
with $849,000 during the same period last year. Residential loan origination
volume was lower in the first nine months of 2004 when compared to the same
period last year, as an increase in interest rates for residential loan products
slowed the volume of applications to refinance loans. Historically low interest
rates in the first half of 2003 led to strong application volume, including
applications to refinance mortgage loans currently serviced by the Company and
others. As a result of lower application volume in 2004, loan sales decreased to
$10.6 million in the first nine months of 2004, down from $41.3 million in the
first nine months of 2003.
Noninterest Expenses
Total noninterest expenses were $43.2 million for the first nine months of 2004,
an increase of 9.0% over noninterest expenses of $39.7 million for the same
period in 2003. For the third quarter of 2004, noninterest expenses were $14.4
million, up 8.5% over the prior year third quarter. The increase in noninterest
expense in the first nine months of 2004 is concentrated in personnel-related
costs. Personnel-related expenses comprise the largest segment of noninterest
expense, representing 58.5% of noninterest expense for the first nine months of
2004 compared to 58.3% of noninterest expense for the first nine months of 2003.
The 9.4% increase in personnel-related expenses year-over-year was primarily a
result of higher salaries and wages related to an increase in average full time
equivalents employees (FTEs), from 542 at September 30, 2003, to 577 at
September 30, 2004, as well as annual salary adjustments. The increase in
average FTEs is primarily a result of staffing requirements at the Company's
newer offices, including the Mt. Kisco office of Mahopac National Bank, which
opened in July 2004, the Auburn office of Tompkins Trust Company, which opened
in July 2003, and the two small insurance agency acquisitions by Tompkins
Insurance in 2003.
Expenses related to bank premises and furniture and fixtures totaled $5.3
million for the first nine months of 2004, an increase of 7.3% over the same
period last year. For the third quarter of 2004, expenses related to bank
premises and furniture and fixtures were $1.7 million compared to $1.6 million
for the third quarter of 2003. The additions to the Company's branch network
mentioned above as well as higher real estate taxes, insurance and utility costs
contributed to the increased expenses for bank premises and furniture and
fixtures year-over-year.
Other noninterest expenses amounted to $12.6 million in the first nine months of
2004, compared to $11.6 million for the same period in 2003. For the third
quarter of 2004, other noninterest expenses were $4.3 million, an increase of
4.8% over the same period in 2003. Contributing to the increase in other
operating expenses were: higher professional fees related to complying with
Sarbanes-Oxley Act of 2002, and higher software license and maintenance fees
mainly related to upgrades to our mainframe computer system. Professional
services expenses associated with the implementation of Section 404 of
Sarbanes-Oxley Act were $164,500 in the third quarter of 2004, and $204,000 for
the year-to-date period; no such fees were incurred during the same period in
2003.
Income Tax Expense
The provision for income taxes provides for Federal and New York State income
taxes. The provision for the nine months ended September 30, 2004, was $9.4
million, compared to $9.2 million for the same period in 2003. The increased
provision is primarily due to increased earnings for the period. The Company's
effective tax rate for the first nine months of 2004 was 32.8%, compared to
33.4% for the same period in 2003. The lower effective tax rate reflects higher
levels of nontaxable income, such as income from investments in municipal bonds.
16
FINANCIAL CONDITION
The Company's total assets were nearly $2.0 billion at September 30, 2004,
representing an increase of $107.8 million over total assets reported at
December 31, 2003. Asset growth included a $76.4 million increase in total loans
and a $39.1 million increase in the carrying value of securities. Loan growth
during the period is net of $10.6 million in sales of fixed rate residential
mortgage loans during the first nine months of 2004. Loan growth was
concentrated in the commercial real estate and residential real estate loan
portfolios. Growth in the securities portfolio reflects enhanced utilization of
the Company's liquidity position. Deposits were up $127.7 million in the first
nine months of 2004, from $1.4 billion at December 31, 2003, to $1.5 billion at
September 30, 2004. Additions to the Company's branch network contributed to the
growth in deposits in the first nine months of 2004.
Capital
Total shareholders' equity totaled $168.2 million at September 30, 2004, an
increase of $9.2 million from December 31, 2003. The increase was concentrated
in undivided profits, which were up $11.7 million from year-end 2003. Surplus
decreased $1.8 million from $76.9 million at December 31, 2003, to $75.1 million
at September 30, 2004, as share repurchases more than offset the effects of
stock option exercises. Accumulated other comprehensive income was down $140,000
over the same period, reflecting a decrease in unrealized gains on
available-for-sale securities. Cash dividends paid in the first nine months of
2004 totaled approximately $7.3 million, representing 38.5% of year-to-date
earnings. Cash dividends of $0.90 per share for the first nine months of 2004
were up 11.1% from $0.81 per share for the same period in 2003.
On July 24, 2002, the Company's board of directors approved a stock repurchase
plan (the "2002 Plan"), which authorized the repurchase of up to 440,000 shares
of Tompkins common stock over a two-year period. The 2002 Plan ended July 24,
2004, with 163,065 shares purchased under the 2002 Plan at an average cost of
$41.31. This includes 65,946 shares purchased in 2004, at an average cost of
$45.13 per share.
On July 27, 2004, the Company's board of directors approved a new stock
repurchase plan (the "2004 Plan") to replace the expiring 2002 Plan. The 2004
Plan authorizes the repurchase of up to 400,000 shares of the Company's
outstanding common stock over a two-year period. As of September 30, 2004, no
shares have been repurchased under the 2004 Plan.
The Company and its banking subsidiaries are subject to various regulatory
capital requirements administered by Federal banking agencies. Management
believes the Company and its subsidiaries meet all capital adequacy requirements
to which they are subject. The table below reflects the Company's capital
position at September 30, 2004, compared to the regulatory capital requirements
for "well capitalized" institutions.
REGULATORY CAPITAL ANALYSIS - September 30, 2004
- ----------------------------------------------------------------------------------------------------
Actual Well Capitalized
Requirement
(Dollar amounts in thousands) Amount Ratio Amount Ratio
- ----------------------------------------------------------------------------------------------------
Total Capital (to risk weighted assets) $166,247 13.4% $124,388 10.0%
Tier I Capital (to risk weighted assets) $154,072 12.4% $ 74,633 6.0%
Tier I Capital (to average assets) $154,072 7.9% $ 97,342 5.0%
====================================================================================================
As illustrated above, the Company's capital ratios on September 30, 2004, remain
well above the minimum requirement for well capitalized institutions. As of
September 30, 2004, the capital ratios for each of the Company's subsidiary
banks also exceeded the minimum levels required to be considered well
capitalized.
Reserve for Loan/Lease Losses and Nonperforming Assets
Management reviews the adequacy of the reserve for loan/lease losses (reserve)
on a regular basis. Management considers the accounting policy relating to the
reserve to be a critical accounting policy, given the inherent uncertainty in
evaluating the levels of the reserve required to cover credit losses in the
Company's portfolio and the material effect that assumption could have on the
Company's results of operations. 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
and external loan review functions; the growth and composition of the loan and
lease portfolio; comments received during the course of regulatory examinations;
current local economic conditions; past due and nonperforming loan statistics;
estimated collateral values; and a historical review of loan and lease loss
experience. Based upon consideration of the above factors, management believes
that the reserve is adequate to provide for the risk of loss inherent in the
current loan and lease portfolio. Activity in the Company's reserve for
loan/lease losses during the first nine months of 2004 and 2003 is illustrated
in the table below.
17
ANALYSIS OF THE RESERVE FOR LOAN/LEASE LOSSES (In thousands)
- -----------------------------------------------------------------------------------------------------
September 30, 2004 September 30, 2003
- -----------------------------------------------------------------------------------------------------
Average Loans and Leases Outstanding Year to Date $ 1,104,483 $ 1,023,888
- -----------------------------------------------------------------------------------------------------
Beginning Balance 11,685 11,704
- -----------------------------------------------------------------------------------------------------
Provision for loan/lease losses 2,274 1,723
Loans charged off (2,404) (2,149)
Loan recoveries 620 343
- -----------------------------------------------------------------------------------------------------
Net charge-offs 1,784 1,806
- -----------------------------------------------------------------------------------------------------
Ending Balance $ 12,175 $ 11,621
=====================================================================================================
The reserve represented 1.06% of total loans and leases outstanding at September
30, 2004, down from 1.12% at September 30, 2003. The reserve coverage of
nonperforming loans (loans past due 90 days and accruing, nonaccrual loans, and
restructured troubled debt) increased from 1.25 times at September 30, 2003, to
1.52 times at September 30, 2004. Management is committed to early recognition
of loan problems and to maintaining an adequate reserve.
The level of nonperforming assets at September 30, 2004, and 2003 is illustrated
in the table below. Nonperforming assets of $8.1 million as of September 30,
2004, reflect a decrease of $1.5 million from $9.6 million as of September 30,
2003. The current level of nonperforming assets was 0.41% of total assets at
September 30, 2004 compared to 0.53% at September 30, 2003. Approximately
$308,000 of nonperforming loans at September 30, 2004, were secured by U.S.
Government guarantees, while $2.2 million were secured by one-to-four family
residential properties.
Potential problem loans/leases are loans/leases that are currently performing,
but where known information about possible credit problems of the related
borrowers causes management to have doubt as to the ability of such borrowers to
comply with the present loan payment terms and may result in disclosure of such
loans/leases as nonperforming at some time in the future. Management considers
loans/leases classified as Substandard, and continue to accrue interest, to be
potential problem loans/leases. At September 30, 2004, the Company's internal
loan review function had identified 28 commercial relationships totaling $8.5
million, which it has classified as Substandard, which continue to accrue
interest. As of December 31, 2003, the Company's internal loan review function
had classified 32 commercial relationships totaling $11.5 million, which
continue to accrue interest, as Substandard. These loans remain in a performing
status due to a variety of factors, including payment history, the value of
collateral supporting the credits, and personal or government guarantees. These
factors, when considered in aggregate, give management reason to believe that
the current risk exposure on these loans is not significant. At September 30,
2004, approximately $411,000 of these loans were backed by guarantees of U.S.
government agencies. While in a performing status as of September 30, 2004,
these loans exhibit certain risk factors, which have the potential to cause them
to become nonperforming in the future. Accordingly, management's attention is
focused on these credits, which are reviewed on at least a quarterly basis.
NONPERFORMING ASSETS (In thousands)
- --------------------------------------------------------------------------------------------------------------
September 30, 2004 September 30, 2003
- --------------------------------------------------------------------------------------------------------------
Nonaccrual loans and leases $ 7,797 $ 9,000
Loans past due 90 days and accruing 25 19
Troubled debt restructuring not included above 190 250
- --------------------------------------------------------------------------------------------------------------
Total nonperforming loans 8,012 9,269
- --------------------------------------------------------------------------------------------------------------
Other real estate, net of allowances 104 343
==============================================================================================================
Total nonperforming assets $ 8,116 $ 9,612
==============================================================================================================
Total nonperforming loans/leases as a percent of total loans/leases 0.70% 0.89%
==============================================================================================================
Total nonperforming assets as a percentage of total assets 0.41% 0.53%
==============================================================================================================
Deposits and Other Liabilities
Total deposits of $1.5 billion on September 30, 2004, were up $127.7 million, or
9.1%, from December 31, 2003. Core deposits represent the primary funding source
for the Company. As of September 30, 2004, core deposits of $1.2 billion
represented 69.3% of total liabilities. This compares to core deposits of $1.1
billion, representing 66.1% of total liabilities at December 31, 2003. The
growth in core deposits was concentrated in money market accounts and
noninterest bearing accounts. The opening of the Auburn office (July 2003) of
the Trust Company and the Mt. Kisco office (July 2004) of Mahopac National Bank
contributed to the growth in deposits.
18
Non-core funding sources for the Company totaled $531.6 million at September 30,
2004, down from $560.0 million at December 31, 2003. Non-core funding at
September 30, 2004 included term advances and repurchase agreements with the
Federal Home Loan Bank (FHLB) and retail repurchase agreements. Refer to
Liquidity comment for further details.
Liquidity
Liquidity represents the Company's ability to efficiently and economically
accommodate decreases in deposits and other liabilities, and fund increases in
assets. The Company uses a variety of resources to meet its liquidity needs,
which include cash and cash equivalents, short-term investments, cash flow from
lending and investing activities, deposit growth, securities sold under
repurchase agreements, and borrowings. The Company may also use borrowings as
part of a growth strategy.
Cash and cash equivalents totaled $57.9 million as of September 30, 2004, down
from $65.8 million at December 31, 2003. Short-term investments, consisting of
securities due in one year or less, increased from $24.8 million at December 31,
2003, to $39.1 million on September 30, 2004. Securities carried at $454.7
million at December 31, 2003, and $535.7 million at September 30, 2004, were
designated as pledged securities for public deposits, borrowed funds and for
other purposes as provided by law. Pledged securities represented 78.7% of total
securities as of September 30, 2004, compared to 70.9% as of December 31, 2003.
In the first nine months of 2004, total borrowings decreased $33.8 million from
$275.0 million to $241.2 million at September 30, 2004. The decrease was
primarily in retail repurchase agreements and reflected the seasonality of some
of the Company's retail repurchase agreement counterparties. Included in
securities sold under agreements to repurchase at September 30, 2004, were $90.0
million in FHLB repurchase agreements, $22.2 million in wholesale repurchase
agreements, and $51.5 million in retail repurchase agreements. Other borrowings
totaled $77.5 million consisting almost entirely of advances with the FHLB.
Included in the borrowings with the FHLB are $116.0 million of callable advances
with call dates ranging from 2004 to 2007.
Liquidity is enhanced by ready access to national and regional wholesale funding
sources including Federal funds purchased, repurchase agreements, brokered
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 September 30, 2004, the
unused borrowing capacity on established lines with the FHLB was $135.1 million.
As members of the FHLB, the Company's subsidiary banks can use certain
unencumbered mortgage-related assets to secure additional borrowings from the
FHLB. At September 30, 2004, total unencumbered residential mortgage loans of
the Company were $251.1 million. Additional assets may also qualify as
collateral for FHLB advances upon approval of the FHLB.
The Company has not identified any trends or circumstances that are reasonably
likely to result in material increases or decreases in liquidity in the near
term.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Interest rate risk is the primary market risk category associated with the
Company's operations. Interest rate risk refers to the volatility of earnings
caused by changes in interest rates. The Company manages interest rate risk
using income simulation to measure interest rate risk inherent in its on-balance
sheet and off-balance sheet financial instruments at a given point in time by
showing the potential effect of interest rate shifts on net interest income for
future periods. Each quarter the Asset/Liability Management Committee reviews
the simulation results to determine whether the exposure of net interest income
to changes in interest rates remains within board-approved levels. The Committee
also discusses strategies to manage this exposure and incorporates these
strategies into the investment and funding decisions of the Company. The Company
has not made use of derivatives, such as interest rate swaps, to manage its
interest rate risk exposure.
The Company's board of directors has set a policy that interest rate risk
exposure will remain within a range whereby net interest income will not decline
by more than 10% in one year as a result of a 200 basis point change in rates.
Based upon the simulation analysis performed as of September 30, 2004, a 200
basis point upward shift in interest rates over a one-year time frame would
result in a one-year decline in net interest income of approximately 0.82%,
assuming no balance sheet growth and no management action to address balance
sheet mismatches. The same simulation indicates that a 100 basis point decline
in interest rates over a one-year period would result in a decrease in net
interest income of 1.74%. The negative exposure in a rising rate environment is
mainly driven by the repricing assumptions of the Company's core deposit base
and the lag in the repricing of the Company's adjustable rate assets.
Longer-term, the impact of a rising rate environment is positive as the asset
base continues to reset at higher levels, while the repricing of the rate
sensitive liabilities moderates. The negative exposure in the 100 basis point
decline scenario results from the Company's assets repricing downward more
19
rapidly than the rates on the Company's interest-bearing liabilities, mainly
deposits, as deposit rates are at low levels given the historically low interest
rate environment over the past two years. The aforementioned percentage changes
in net interest income are from our base case scenario. In our most recent
simulation, the base case scenario (which assumes interest rates remain
unchanged from the date of the simulation) showed a relatively flat net interest
margin over the remainder of 2004 in the present interest rate environment.
Although the simulation model is useful in identifying potential exposure to
interest rate movements, actual results may differ from those modeled as the
repricing, maturity, and prepayment characteristics of financial instruments may
change to a different degree than modeled. In addition, the model does not
reflect actions that management may employ to manage its interest rate risk
exposure. The Company's current liquidity profile, capital position, and growth
prospects, offer a level of flexibility for management to take actions that
could offset some of the negative effects of unfavorable movements in interest
rates. Management believes the current exposure to changes in interest rates is
not significant in relation to the earnings and capital strength of the Company.
The table below is a Condensed Static Gap Report, which illustrates the
anticipated repricing intervals of assets and liabilities as of September 30,
2004.
Condensed Static Gap - September 30, 2004 Repricing Interval
Cumulative
(Dollar amounts in thousands) Total 0-3 months 3-6 months 6-12 months 12 months
- ----------------------------------------------------------------------------------------------------------------------
Interest-earning assets $1,822,470 $ 514,595 $ 120,050 $ 177,561 $ 812,206
Interest-bearing liabilities 1,461,672 576,381 91,403 156,428 824,212
- ----------------------------------------------------------------------------------------------------------------------
Net gap position (61,786) (28,647) 21,133 (12,006)
- ----------------------------------------------------------------------------------------------------------------------
Net gap position as a percentage of total assets (3.13%) 1.45% 1.07% (0.61%)
======================================================================================================================
Item 4. Controls and Procedures
The Company's management, including its Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the design and operations of
the Company's disclosure controls and procedures (as defined in Rule 13a-15
under the Securities Exchange Act of 1934, (the "Exchange Act") as amended) as
of September 30, 2004. Based upon that evaluation, the Company's management,
including the Chief Executive Officer and Chief Financial Officer, concluded
that the Company's disclosure controls and procedures were effective in
providing reasonable assurance that any material information relating to the
Company and its subsidiaries required to be included in reports filed or
submitted by the Company under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
There were no significant changes made in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation performed by the Company's Chief Executive Officer and
Chief Financial Officer.
20
TOMPKINS TRUSTCO, INC.
Average Consolidated Balance Sheet and Net Interest Analysis
Quarter Ended Year to Date Period Ended Year to Date Period Ended
Sept-04 Sept-04 Sept-03
- -----------------------------------------------------------------------------------------------------------------------------------
Average Average Average
Balance Average Balance Average Balance Average
(Dollar amounts in thousands) (QTD) Interest Yield/Rate (YTD) Interest Yield/Rate (YTD) Interest Yield/Rate
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Interest-earning assets
Interest-bearing balances due
from banks $ 3,300 $ 12 1.45% $ 11,704 $ 88 1.00% $ 3,086 $ 25 1.08%
Securities (1)
U.S. Government Securities 572,551 5,443 3.78% 548,546 16,151 3.93% 459,014 13,293 3.87%
State and municipal (2) 102,686 1,505 5.83% 99,978 4,506 6.02% 87,352 4,254 6.51%
Other Securities (2) 19,657 135 2.73% 25,060 396 2.11% 31,562 749 3.17%
--------------------------------------------------------------------------------------------
Total securities 694,894 7,083 4.06% 673,584 21,053 4.17% 577,928 18,296 4.23%
Federal Funds Sold 391 1 1.02% 2,518 18 0.95% 1,885 15 1.06%
Loans, net of unearned income
Real Estate 730,844 10,867 5.92% 704,267 31,628 6.00% 639,250 31,207 6.53%
Commercial Loans (2) 270,245 3,969 5.84% 272,511 11,567 5.67% 259,356 12,002 6.19%
Consumer Loans 105,246 2,237 8.46% 105,639 6,698 8.47% 102,388 7,090 9.26%
Direct Lease Financing 22,082 320 5.77% 22,066 996 6.03% 22,894 1,152 6.73%
--------------------------------------------------------------------------------------------
Total loans, net of
unearned income 1,128,417 17,393 6.13% 1,104,483 50,889 6.15% 1,023,888 51,451 6.72%
--------------------------------------------------------------------------------------------
Total interest-earning
assets 1,827,002 24,489 5.33% 1,792,289 72,048 5.37% 1,606,787 69,787 5.81%
--------------------------------------------------------------------------------------------
Other assets 132,424 137,670 137,428
---------- ---------- ----------
Total assets $1,959,426 $1,929,959 $1,744,215
========== ========== ==========
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
Deposits
Interest-bearing deposits
Interest bearing checking,
savings, & money market 763,270 1,307 0.68% 772,532 3,993 0.69% 716,993 4,570 0.85%
Time Dep > $100,000 163,462 785 1.91% 134,975 2,061 2.04% 114,986 2,166 2.52%
Time Dep < $100,000 258,705 1,494 2.30% 253,314 4,406 2.32% 250,163 5,157 2.76%
Brokered Time Dep < $100,000 30,065 211 2.79% 29,291 626 2.85% 22,750 595 3.50%
--------------------------------------------------------------------------------------------
Total interest-bearing
deposits 1,215,502 3,797 1.24% 1,190,112 11,086 1.24% 1,104,892 12,488 1.51%
Federal funds purchased & securities
sold under agreements to
repurchase 167,001 1,080 2.57% 180,886 3,262 2.41% 120,586 2,320 2.57%
Other borrowings 83,722 946 4.50% 84,295 2,843 4.51% 89,861 3,093 4.60%
--------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 1,466,225 5,823 1.58% 1,455,293 17,191 1.58% 1,315,339 17,901 1.82%
Noninterest bearing deposits 308,350 292,020 256,263
Accrued expenses and other
liabilities 22,286 19,950 19,915
---------- ---------- ----------
Total liabilities 1,796,861 1,767,263 1,591,517
Minority Interest 1,500 1,512 1,515
Shareholders' equity 161,065 161,184 151,183
---------- ---------- ----------
Total liabilities and
shareholders' equity $1,959,426 $1,929,959 $1,744,215
========== ========== ==========
Interest rate spread 3.75% 3.79% 3.99%
---------------- ---------------- ----------------
Net interest income/margin on
earning assets $ 18,666 4.06% $ 54,857 4.09% $ 51,886 4.32%
Tax Equivalent Adjustment (613) (1,839) (1,752)
-------- -------- --------
Net interest income per
consolidated
financial statements $ 18,053 $ 53,018 $ 50,134
=================================================================================================================================
(1) Average balances and yields exclude unrealized gains and losses on
available-for-sale securities.
(2) Interest income includes the effects of taxable-equivalent adjustments using
a blended Federal and State income tax rate of 40% to increase tax exempt
interest income to a taxable-equivalent basis.
(3) Nonaccrual loans are included in the average loans totals presented above.
Payments received on nonaccrual loans have been recognized as disclosed in Note
1 to the Company's Annual Report on Form 10-K dated December 31, 2003.
21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
- ----------------------------------------------------------------------------------------------------------------------------------
Maximum Number
(or Approximate
Total Number of Dollar Value) of
Shares Purchased Shares that May
as Part of Publicly Yet Be Purchased
Total Number of Average Price Paid Announced Plans Under the Plans or
Shares Purchased Per Share or Programs Programs
Period (a) (b) (c) (d)
- ----------------------------------------------------------------------------------------------------------------------------------
July 1, 2004 through
July 31, 2004 30,547 $45.45 29,700 400,000
August 1, 2004 through
August 31, 2004 107 $45.20 N/A 400,000
September 1, 2004 through
September 30, 2004 0 0 N/A 400,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total 30,654 $45.45 29,700 400,000
- ----------------------------------------------------------------------------------------------------------------------------------
On July 24, 2002, the Company's board of directors approved a stock repurchase
plan (the "2002 Plan"), which authorizes the repurchase of up to 440,000 shares
of Tompkins common stock over a two-year period. The 2002 Plan expired July 24,
2004, with a total of 163,065 shares purchased under the Plan at an average cost
of $41.31. This includes 29,700 shares purchased in the third quarter of 2004,
at an average cost of $45.44 per share.
On July 27, 2004, the Company's board of directors approved a new stock
repurchase plan (the "2004 Plan") to replace the 2002 Plan, which expired in
July 2004. The 2004 Plan authorizes the repurchase of up to 400,000 shares of
the Company's outstanding common stock over a two-year period. There were no
shares repurchased under the 2004 Plan in the third quarter.
In addition to the shares purchased under the 2002 Plan, the Company purchased
954 shares, at an average cost of $45.82 per share, during the third quarter of
2004 as part of a directors deferred stock compensation plan.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
22
Item 6. Exhibits
31.1 Certification of the Chief Executive Officer as required
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
31.2 Certification of the Chief Financial Officer as required
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
32.1 Certification of the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith).
32.2 Certification of the Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act 2002 (filed herewith).
23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: November 8, 2004
TOMPKINS TRUSTCO, INC.
By: /s/ JAMES J. BYRNES
-------------------------------
James J. Byrnes
Chairman of the Board,
Chief Executive Officer
By: /s/ FRANCIS M. FETSKO
-------------------------------
Francis M. Fetsko
Executive Vice President and
Chief Financial Officer
24
EXHIBIT INDEX
- -------------
EXHIBIT NUMBER DESCRIPTION PAGES
- --------------------------------------------------------------------------------
31.1 Certification of Chief Executive Officer as required
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 26
31.2 Certification of Chief Financial Officer as required
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 27
32.1 Certification of the Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 28
32.2 Certification of the Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act 2002 29
25