<PAGE>
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, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-27514
TOMPKINS COUNTY TRUSTCO, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
NEW YORK 161482357-8
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
THE COMMONS, P.O. BOX 460, ITHACA, NY 14851
(Address of principal executive offices) (Zip Code)
</TABLE>
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 the number of shares of the Registrant's Common Stock outstanding as of
the latest practicable date:
Class Outstanding as of November 8, 1996
----------------- ----------------------------------
Common Stock, $.10 par value 3,315,191 shares
<PAGE>
TOMPKINS COUNTY TRUSTCO, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I -FINANCIAL INFORMATION
PAGE
-----
<S> <C>
ITEM 1 -FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 3-4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 5
AND 1995
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE MONTHS ENDED SEPTEMBER 30 1996 AND 1995 6
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 7
NOTES TO FINANCIAL STATEMENTS 8-10
ITEM 2 -MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11-14
AVERAGE CONSOLIDATED BALANCE SHEET AND NET INTEREST ANALYSIS 15
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share data)
AS OF AS OF
9/30/96 12/31/95
-------- ---------
ASSETS
Cash and due from banks $ 25,290 $ 20,757
Available-for-sale securities, at fair value 156,599 145,067
Held-to-maturity securities, fair value of $38,701
in 1996 and $40,219 in 1995 37,826 38,908
Federal Home Loan Bank stock, at cost 2,014 1,560
Loans, net of unearned income 344,184 321,290
Less reserve for loan/lease losses 4,754 4,704
- -------------------------------------------------------------------------------
NET LOANS 339,430 316,586
Bank premises and equipment, net 6,783 7,173
Other assets 8,186 6,941
- --------------------------------------------------------------------------------
TOTAL ASSETS $576,129 $ 536,992
================================================================================
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
CONTINUED
(In thousands, except share data)
<TABLE>
<CAPTION>
AS OF AS OF
9/30/96 12/31/95
------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Interest bearing:
Checking $ 56,775 $ 54,912
Savings and money market 120,865 135,957
Time 161,945 106,349
Non-interest bearing 78,211 73,413
- -----------------------------------------------------------------------------------------
TOTAL DEPOSITS 417,796 370,631
Securities sold under agreements to repurchase 76,015 92,903
Other borrowings 19,000 12,000
Other liabilities 6,176 6,367
- -----------------------------------------------------------------------------------------
TOTAL LIABILITIES 518,987 481,901
- -----------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
Shareholders' equity:
Common stock - par value $.10 per share
Authorized 7,500,000 shares; issued and outstanding 358 358
3,580,765 shares in 1996 and 3,580,463 in 1995
Surplus 39,195 39,191
Undivided profits 19,751 15,559
Net unrealized (loss) gain on available-for-sale
securities, net of taxes (622) 909
Treasury Stock - 22,000 shares in 1996 (615) 0
Deferred I.S.O.P. benefit expense (925) (926)
- -----------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 57,142 55,091
- -----------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $576,129 $536,992
=========================================================================================
</TABLE>
* See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
9/30/96 9/30/95 9/30/96 9/30/95
-------- -------- -------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 7,728 $ 7 523 $ 22,510 $ 21,392
Deposits with other banks 37 0 37 0
Federal Funds Sold 125 32 386 216
Available-for-sale securities 487 500 1,485 1,621
Held-to-maturity securities 2,624 2,225 7,456 6,476
---------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 11,001 10,280 31,874 29,705
- ----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Time certificates of deposit of $100,000 or more 647 169 1,384 466
Other deposits 2,384 2,584 7,318 7,398
Securities sold under agreements to repurchase 1,258 1,184 3,712 3,855
Borrowed funds 289 200 680 538
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 4,577 4,137 13,093 12,257
- ----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 6,424 6,143 18,781 17,448
Less: Provision for loan/lease losses 258 178 713 396
- ----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN/LEASE LOSSES 6,166 5,965 18,068 17,052
- ----------------------------------------------------------------------------------------------------------------------------
OTHER INCOME
Trust and investment services income 690 565 1,997 1,677
Services charges on deposit accounts 418 411 1,272 1,259
Credit card merchant income 584 515 1,451 1,275
Other service charges 293 243 868 776
Other operating income 167 364 477 640
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 2,152 2,098 6,065 5,627
- ----------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES
Salaries and wages 1,903 1,779 5,632 5,254
Pension and other employee benefits 440 437 1,423 1,345
Net occupancy expense of bank premises 326 315 1,021 925
Furniture and fixture expense 269 245 838 773
F.D.I.C assessments 1 (23) 2 367
Credit card operating expense 526 454 1,321 1,121
Other operating expenses 928 899 3,040 2,746
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 4,393 4,106 13,277 12,531
- ----------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 3,925 3,957 10,856 10,148
- ----------------------------------------------------------------------------------------------------------------------------
Income Taxes 1,393 1,384 3,810 3,438
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 2,532 $ 2,573 $ 7,045 $ 6,710
============================================================================================================================
NET INCOME PER COMMON SHARE $0.72 $0.73 $1.99 $1.90
============================================================================================================================
* See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
9/30/96 9/30/95 OPERATING
-------- --------
ACTIVITIES
<S> <C> <C>
Net Income $ 7,045 $ 6,710
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan/lease losses 713 396
Provision for depreciation and amortization 755 702
Net accretion on securities (102) (233)
Provision for deferred income taxes (75) 36
Gains on sales of bank premises and equipment (8) (9)
Increase in other assets (968) (610)
Increase in other liabilities 548 2,776
- ---------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,908 9,768
- ---------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from maturities of available-for-sale securities 43,074 9,035
Proceeds from maturities of held-to-maturity securities 6,883 23,206
Purchases of available-for-sale securities (56,824) (1,977)
Purchases of held-to-maturity securities (6,124) (31,734)
Purchases of FHLB stock (454) (58)
Proceeds from sales of loans 678 10,809
Net increase in loans (24,067) (24,229)
Proceeds from sales of bank premises and equipment 18 23
Purchases of bank premises and equipment (375) (854)
- ---------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (37,191) (15,779)
- ---------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net (decrease) increase in demand deposits,
money market accounts and savings accounts (8,432) 12,038
Net increase in time deposits 55,597 10,892
Net decrease in securities sold under
repurchase agreements (16,887) (20,242)
Net increase in other borrowings 7,000 1,000
Cash dividends (2,853) (2,539)
Decrease in deferred I.S.O.P benefit expense 1 2
Issuance of common stock 17 9
Purchase of common stock for treasury (627) 0
- ---------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 33,816 1,160
- ---------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,533 (4,851)
Cash and cash equivalents at beginning of period 20,757 28,105
- ---------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,290 $ 23,254
===================================================================================================
* See accompanying notes to condensed consolidated financial statements.
</TABLE>
6
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN/(LOSS) DEFERRED
ON AVAILABLE- I.S.O.P
COMMON TREASURY UNDIVIDED FOR-SALE BENEFIT
STOCK STOCK SURPLUS PROFITS SECURITIES EXPENSE TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1994 $ 325 $29,800 $19,788 $ (829) $(1,267) $47,817
- --------------------------------------------------------------------------------------------------------------------------
Net income 6,710 6,710
Common stock
issued 8 8
Cash dividends
($.70 per share) (2,539) (2,539)
Change in net unrealized
gain/(loss), net of taxes
of $1,094 1,451 1,451
Shares released for
allocation 1 1
- --------------------------------------------------------------------------------------------------------------------------
BALANCES AT
SEPTEMBER 30, 1995 $ 325 $29,808 $23,959 $ 622 $(1,266) $53,448
- --------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1995 $ 358 $ 0 $39,191 $15,559 $ 909 $ (926) $55,091
- --------------------------------------------------------------------------------------------------------------------------
Net income 7,045 7,045
Common stock
issued 6 6
Cash dividends
($.80 per share) (2,853) (2,853)
Change in net unrealized
gain/(loss), net of taxes
of ($1,109) (1,531) (1,531)
Common stock purchased
for treasury (627) (627)
Shares released for
allocation 12 (2) 1 11
- --------------------------------------------------------------------------------------------------------------------------
BALANCES AT
SEPTEMBER 30, 1996 $ 358 $ (615) $39,195 $19,751 $ (622) $ (925) $57,142
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Tompkins County Trustco, Inc. ("Trustco") is a registered bank holding company,
organized under the laws of New York State. On April 26, 1995, the shareholders
of Tompkins County Trust Company (the "Trust Company") approved a proposal to
revise its corporate structure by establishing Trustco as a one bank holding
company. On January 1, 1996, the Trust Company became a wholly owned subsidiary
of Trustco and all issued and outstanding shares of Trust Company common stock
were converted to shares of Trustco common stock. the accompanying financial
statements for 1995 consolidate the financial statements of Trustco and the
Trust Company on a pooling of interest basis.
The financial statements have been prepared in accordance with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that effect the
reported amounts of assets and liabilities as of the date of the statements of
condition and statements of income and expenses for the period. Actual amounts
could differ from estimates.
The accompanying interim condensed consolidated financial statements and related
notes should be read in conjunction with Trustco's Form 10-K and related notes
for the year ended December 31, 1995.
The condensed consolidated financial statements included herein reflect all
adjustments of a normal recurring nature which are, in the opinion of
management, necessary for a fair presentation of Trustco's financial position at
September 30, 1996 and December 31, 1995, and the results of operations for the
three and nine months ended September 30, 1996 and September 30, 1995. Certain
reclassifications have been made to prior period amounts for consistency in
reporting.
2. SECURITIES
Securities are accounted for under Statement of Financial Accounting Standard
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". Trustco management determines the appropriate classification of
debt securities at the time of purchase. Debt Securities are classified as
held-to-maturity when management has the positive intent and ability to hold the
securities to maturity. Held-to-maturity securities are stated at cost. Debt
securities not classified as held-to-maturity, and marketable equity securities,
are classified as available-for-sale. Available-for-sale securities are stated
at fair value, with unrealized gains and losses, net of tax, excluded from
earnings and reported as a separate component of equity capital.
As of September 30, 1996, net unrealized losses on securities classified as
available-for-sale totaled $1.1 million, resulting in an after tax equity
capital reduction of $622,000. As of December 31, 1995, available-for-sale
securities had net unrealized gains of $1.6 million, resulting in an after tax
equity capital increase of $909,000.
8
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. LOANS
The Financial Accounting Standards Board issued Statement 114, "Accounting by
Creditors for Impairment of a Loan", as amended by Statement 118, "Accounting by
Creditors for Impairment of a Loan - Income recognition and Disclosures". The
statements require certain impaired loans to be measured based upon the present
value of expected cash flows discounted at the loan's effective interest rate,
or as a practical expedient, based upon the loan's observable market price or
the fair value of collateral if the loan is collateral dependent. These
statements do not apply to large groups of smaller balance homogeneous loans
such as residential mortgages and consumer loans which are collectively
evaluated. Impairment losses are included in the allowance for loan losses
through a charge to the provision for loan losses. Interest payments on
impaired loans are accounted for on a cash basis method of income recognition.
Trustco's recorded investment in loans considered impaired in accordance with
SFAS No. 114, was $936,000 on September 30, 1996. Included in this amount was
$809,000 of impaired loans for which related reserves total $252,000. The
recorded investment in impaired loans as of December 31, 1995, was $1.1 million.
Included in the December 31, 1995, amount was $760,000 of impaired loans for
which total reserves were $233,000.
4. ACCOUNTING CHANGES
On January 1, 1996, Trustco adopted Statement of Financial Accounting Standard
No. 122, "Accounting for Mortgage Servicing Rights" on a prospective basis.
SFAS 122 requires Trustco to recognize rights to service mortgage loans for
others as separate assets, however, those servicing rights are acquired. It also
requires Trustco to assess its capitalized mortgage servicing rights for
impairment based on the fair value of those rights. The adoption of SFAS 122
did not have a material impact on Trustco's financial condition or results of
operations.
On January 1, 1996, Trustco adopted Statement of Financial Accounting Standard
No. 123, "Accounting for Stock-Based Compensation" which encourages, but does
not require, companies to use a fair value based method of determining
compensation cost for grants of stock options under stock based employee
compensation plans. As permitted by SFAS No. 123, Trustco elected to continue
to account for stock based compensation in accordance with Accounting Principles
Board Opinion No. 25 ("APB 25"). Under APB 25, no compensation cost is
recorded, as options are granted by Trustco at a purchase price not less than
the fair market value of the common stock on the date of the grant. Companies
electing to continue accounting under the provisions of APB 25 are required to
present pro forma disclosures of net income and net income per share for each
period in which a complete set of financial statements are presented.
9
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On September 28, 1996, the Financial Accounting Standards Board issued SFAS No.
125, "Accounting for Transfers of Servicing of Financial Assets and
Extinguishments of Liabilities." The statement provides accounting and reporting
standards for transfers of servicing of financial assets and extinguishments of
liabilities based upon a consistent application of a financial-components
approach that focuses on control. It distinguishes transfers of financial
assets that are sales, from transfers that are secured borrowings. Trustco will
prospectively adopt SFAS No. 125 effective January 1, 1997. The expected impact
on Trustco's consolidated financial statements is not material.
5. ACQUISITION
On July 10, 1996, the Trust Company entered into an agreement to purchase the
Odessa Community Banking Office from the First National Bank of Rochester.
Under the terms of the agreement, the Trust Company will purchase selected
assets and all deposits of the banking office. The office has approximately $10
million in deposits. The Trust Company received approval for the purchase from
the FDIC on October 22, 1996, and from the New York State Banking Department on
September 13, 1996. The transaction will be accounted for as a purchase
transaction and is expected to be completed on November 18, 1996.
6. STOCK REPURCHASE
On October 22, 1996, Trustco completed a repurchase of 244,371 shares of Trustco
stock from RHP Incorporated, an unrelated third party. The shares were
purchased at a price of $27.50 per share, for a total purchase price of $6.7
million. The repurchased shares have been returned to the status of authorized
but unissued shares.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
This discussion is intended to provide the reader with a further understanding
of the consolidated financial condition and results of operations of Tompkins
County Trustco, Inc. and its operating subsidiary the Tompkins County Trust
Company. It should be read in conjunction with Trustco's Form 10-K and related
notes for the year ended December 31, 1995, and the condensed consolidated
financial statements and notes included elsewhere in this report.
RESULTS OF OPERATIONS
Net income for the third quarter of 1996 was $2.5 million, compared to $2.6
million for the third quarter of 1995. Net income for the nine months ended
September 30, 1996, was $7.0 million, compared to $6.7 million for the same
period in 1995. Earnings per share improved to $1.99 through the first nine
months of 1996, compared to $1.90 through the first nine months of 1995. Year
to date return on average equity declined slightly from 17.8% on September 30,
1995, to 17.0% on September 30, 1996.
The attached Average Consolidated Balance Sheet and Net Interest Analysis
reflects a 4.93% tax-equivalent net interest margin on earning assets through
the first nine months of 1996, compared to a 4.98% ratio through the first nine
months of 1995. The Trust Company's September 30, 1996, one-year cumulative rate
sensitivity gap was a negative 22.8% of total assets. The modest decline in net
interest margin is attributable to several large customers shifting deposits
from money market accounts to higher yielding short term time deposits. Despite
a slight increase in the cost of interest-bearing deposits, year-to-date net
interest income increased to $18.8 million, compared to $17.4 million for the
same nine month period in 1995. The increase in net income was aided by growth
in earnings assets, which outpaced the growth in costing liabilities. Further
growth is expected in the fourth quarter with the anticipated acquisition of the
Odessa Community Banking Office. Management believes the acquisition will be
accretive to earnings.
For the nine months ended September 30, 1996, the Trust Company charged $713,000
to operations as a provision for loan and lease losses, compared to $396,000 for
the same nine month period of 1995. The increased provision expense is
attributable to an increasing trend in net charge-offs and nonperforming loans.
Although the change in provision expense is material, management believes the
1996 provision is not indicative of any significant adverse trends.
The Trust Company continues to expand its Trust and Investment Services
Department. The market value of these assets increased to $471.9 million as of
September 30, 1996, compared to $404.8 million on December 31, 1995.
Approximately $65.7 million of the increase is attributable to net new accounts.
Trust and Investment management services generated $2.0 million in fee income
during the first nine months of 1996, compared to $1.7 million over the same
period in 1995. Trust and investment services are considered important to future
revenue growth and management plans to continue to market these services
broadly.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS (CONTINUED)
-------------------------------------
As a result of the nationwide decrease in the cost of the Federal Deposit
Insurance Corporation ("FDIC") insurance premiums for commercial banks, The
Trust Company's cost for FDIC insurance for the twelve month period ended
December 31, 1996, is expected to be lower than the previous year by
approximately $400,000. The bank is considered well capitalized, and pays the
lowest premium available as a result.
FINANCIAL CONDITION
Trustco's total assets were $576 million as of September 30, 1996, representing
a 7% increase over total assets reported as of December 31, 1995. Net loans
increased from $321 million on December 31, 1995, to $344 million on September
30, 1996. Loan growth centered primarily in commercial loan and residential
loans categories. Investment securities (net of SFAS 115 market value
adjustments on available-for-sale securities) increased from $184 million to
$194 million, with growth centered in bonds issued by United States Government
agencies and United States Government sponsored corporations. Asset growth has
been funded primarily through time deposits.
Capital
- -------
Trustco continues to add approximately 60% of after tax net income to retained
earnings to be employed in the normal course of business. Dividends paid in the
first nine months of 1996 totaled $2.9 million, or $.80 per share. The most
recent dividend of $.27 per share was paid on September 15, 1996. On September
30, 1996 the Trust Company's leverage ratio was 10.01%, down slightly from
10.10% on December 30, 1995. The September 30, 1996, tier one risk-based
capital ratio of 16.75% represents an improvement over the 16.20% ratio on
December 31, 1995.
Capital ratios in the fourth quarter of 1996 will be impacted by the stock
repurchase completed on October 22, 1996, which reduced total capital by $6.7
million. Fourth quarter capital ratios will also be affected by the planned
acquisition of the Odessa Community Banking Office from the First National Bank
of Rochester. The acquisition is expected to be completed on November 18, 1996,
and is expected to add approximately $10 million to Trustco's balance sheet. The
effect of these transactions is not expected to be material to the capital
position of the institution, as capital ratios are expected to remain well above
the minimum regulatory requirements for well capitalized institutions.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS (CONTINUED)
-------------------------------------
Allowance for Loan Losses and Nonperforming Assets
- --------------------------------------------------
Bank management reviews the adequacy of the allowance for loan and lease losses
in a detailed and ongoing manner and believes the current allowance for loan and
lease losses of $4.8 million is satisfactory. Activity in The Trust Company's
loan loss allowance during the first nine months of 1996 and 1995 is presented
below.
ALLOWANCE FOR LOAN LOSSES
Nine Months Ended
September 30,1996 September 30,1995
----------------- -----------------
(thousands)
Beginning Balance $4,704 $4,654
Provision for loan losses 713 396
Loans charged off (990) (672)
Loan recoveries 327 313
------ ------
Ending Balance $4,754 $4,691
====== ======
Nonperforming assets increased by nearly $1 million between September 30, 1995,
and September 30, 1996; however, management believes nonperforming assets remain
at a manageable level. The majority of nonperforming assets are secured, with
approximately half of nonperforming loans secured by residential real estate.
The following table summarizes nonperforming assets.
NONPERFORMING ASSETS
Nine Months Ended
September 30,1996 September 30,1995
----------------- -----------------
(thousands)
Nonaccrual loans $1,429 $ 554
Loans past due 90 days
and accruing 866 882
------ ------
Total nonperforming
loans 2,295 1,436
Other real estate, net
of allowances 201 88
------ ------
Total nonperforming
assets 2,496 $1,524
====== ======
Nonperforming loans as
a percent of total loans 0.67% 0.46%
Non performing assets
as a percent of assets 0.43% 0.29%
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
LIQUIDITY
Cash and balances due from depository institutions were $25.3 million as of
September 30, 1996, compared to $20.8 million as of December 31, 1995. The
increase is largely due to cash set aside for use in the $6.7 million stock
repurchase that was completed in October 1996. The increase in cash balances
has been supported in part by short term borrowings, which totaled $9 million on
September 30 ,1996, compared to $5 million on December 31, 1995.
Through the first nine months of 1996, total assets increased from $537.0
million to $576.1 million. Total assets grew modest $2.3 million during the
third quarter. Despite a decline in short term investments from $30.5 million
as of September 30, 1995, to $26.8 million as of September 30, 1996, overall
liquidity remains sufficient to meet the demands of borrowers and depositors.
The anticipated purchase of the Odessa Community Banking Office from the First
National Bank of Rochester is expected to add approximately $9.8 million of new
core deposits in the fourth quarter of 1996.
14
<PAGE>
TOMPKINS COUNTY TRUST COMPANY
AVERAGE CONSOLIDATED BALANCE SHEET AND NET INTEREST ANALYSIS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30 1996 1995
----------------------------------------------------------------------------
Average Average Average Average
Balance (YTD) Interest Yield/Rate Balance (YTD) Interest Yield/Rate
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Certificates of deposit with other $919 $37 5.24% $0 $0
banks
Securities
U.S. Treasury $40,314 $2,105 6.86% $47,206 $2,484 6.91%
U.S. Government agencies and 107,731 5,201 6.34% 79,635 3,746 6.18%
corporations
State and municipal * 37,790 2,250 7.82% 41,482 2,456 7.78%
Other debt 2,896 151 6.85% 4,701 247 6.89%
------------------------- -------------------------
Total securities 189,650 9,743 6.75% 173,023 8,932 6.78%
Federal Funds Sold 9,657 386 5.26% 5,121 216 5.53%
Loans, net of unearned income
Commercial and industrial * 123,295 8,633 9.35% 115,836 8,191 9.45%
Residential real estate 106,976 6,263 7.82% 92,214 5,324 7.72%
Home equity 20,737 1,533 9.88% 21,192 1,609 10.15%
Consumer 64,153 5,157 10.74% 69,090 5,441 10.53%
Direct lease financing 11,997 731 8.14% 10,981 669 8.15%
Other 2,659 254 12.74% 2,151 225 14.01%
------------------------- -------------------------
Total loans, net of unearned
income 329,818 22,572 9.14% 311,465 21,459 9.21%
------------------------- -------------------------
Total interest-earning assets 529,124 32,701 8.26% 489,610 30,606 8.36%
Noninterest-earning assets
Allowance for credit losses (4,747) (4,685)
Cash and due from banks 20,441 19,706
Other assets 14,668 13,204
-------------- ---------------
TOTAL ASSETS $559,486 $517,835
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking $55,377 $776 1.87% $53,193 $731 1.84%
Savings and money market 127,112 2,917 3.07% 138,870 3,402 3.28%
Time 129,526 5,009 5.17% 97,178 3,731 5.13%
------------------------- -------------------------
Total deposits 312,015 8,702 3.73% 289,240 7,864 3.64%
Federal funds purchased 322 13 5.59% 781 36 6.13%
Repurchase agreements 95,454 3,712 5.19% 91,649 3,855 5.62%
Other borrowings 15,773 666 5.64% 12,512 502 5.36%
------------------------- -------------------------
Total interest-bearing liabilities 423,564 13,093 4.13% 394,182 12,257 4.16%
Non-interest bearing deposits 73,486 67,610
Accrued expenses and other liabilities 7,003 5,747
-------------- ---------------
TOTAL LIABILITIES 504,054 467,539
SHAREHOLDERS' EQUITY 55,432 50,296
-------------- ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $559,486 $517,835
==============-----------------------===============------------------------
Interest rate spread 4.13% 4.20%
Impact of noninterest-bearing
liabilities 0.80% 0.78%
----------------------- ------------------------
Net interest income/margin on
earning assets $19,608 4.93% $18,350 4.98%
======================= ========================
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
*Interest income includes the effects of taxable-equivalent adjustments using a
federal income tax rate of 34% to increase tax exempt interest income to a
taxable-equivalent basis.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits
Exhibit 27 - Financial Data Schedule.
(b) On September 24, 1996, Trustco filed a Form 8-K with the Securities and
Exchange Commission, reporting under Item 5 Other Events, the repurchase of
244,371 shares of its common stock for $27.50 per share from RHP
Incorporated.
16
<PAGE>
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 12, 1996
TOMPKINS COUNTY TRUSTCO, INC.
By: __________________________
JAMES J. BYRNES
Chairman of the Board,
President and Chief Executive Officer
By: __________________________
RICHARD D. FARR
Senior Vice President and
Chief Financial Officer
17
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NUMBER DESCRIPTION PAGES
- -------------- ----------- -----
EXHIBIT 27
FINANCIAL DATA SCHEDULE 19-21
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 21,929
<INT-BEARING-DEPOSITS> 3,361
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 156,599
<INVESTMENTS-CARRYING> 37,826
<INVESTMENTS-MARKET> 38,701
<LOANS> 344,184
<ALLOWANCE> 4,754
<TOTAL-ASSETS> 576,129
<DEPOSITS> 417,796
<SHORT-TERM> 85,015
<LIABILITIES-OTHER> 6,175
<LONG-TERM> 10,000
0
0
<COMMON> 358
<OTHER-SE> 56,784
<TOTAL-LIABILITIES-AND-EQUITY> 576,129
<INTEREST-LOAN> 22,510
<INTEREST-INVEST> 8,941
<INTEREST-OTHER> 423
<INTEREST-TOTAL> 31,874
<INTEREST-DEPOSIT> 8,702
<INTEREST-EXPENSE> 13,093
<INTEREST-INCOME-NET> 18,781
<LOAN-LOSSES> 713
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 13,277
<INCOME-PRETAX> 10,856
<INCOME-PRE-EXTRAORDINARY> 7,045
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,045
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 1.99
<YIELD-ACTUAL> 8.26
<LOANS-NON> 1,429
<LOANS-PAST> 866
<LOANS-TROUBLED> 430
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,704
<CHARGE-OFFS> 990
<RECOVERIES> 327
<ALLOWANCE-CLOSE> 4,754
<ALLOWANCE-DOMESTIC> 4,754
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 761
</TABLE>
