<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 March 31, 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)
New York 161482357-8
(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 the number of shares of the Registrant's Common Stock outstanding as of
the latest practicable date:
Class Outstanding as of May 6, 1996
----- -----------------------------
Common Stock, $.10 par value 3,580,765 shares
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share data)
<CAPTION>
As of As of
3/31/96 12/31/95
------- --------
ASSETS
<S> <C> <C>
Cash and due from banks $ 25,205 $ 20,757
Federal Funds sold 2,000 -0-
Available-for-sale securities, at fair value 145,165 145,067
Held-to-maturity securities,
fair value of $38,508
in 1996 and $40,219 in 1995 37,496 38,908
Federal Home Loan Bank stock, at cost 1,655 1,560
Loans, net of unearned income 323,300 321,290
Less reserve for loan/lease losses 4,729 4,704
- - --------------------------------------------------------------------------------
Net Loans 318,571 316,586
Bank premises and equipment, net 6,957 7,173
Other assets 7,137 6,941
- - ---------------------------------------------------------------------------------
Total Assets $544,186 $536,992
================================================================================
</TABLE>
2
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
continued
(In thousands, except share data)
<CAPTION>
As of As of
3/31/96 12/31/95
------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Deposits:
Interest bearing:
Checking $ 55,222 $ 54,912
Savings and money market 126,456 135,957
Time 125,219 106,349
Non-interest bearing 71,347 73,413
- - --------------------------------------------------------------------------------
Total Deposits 378,244 370,631
Securities sold under agreements to repurchase 94,163
92,902
Other borrowings 11,000 12,000
Other liabilities 6,194 6,367
- - --------------------------------------------------------------------------------
Total Liabilities 489,601 481,900
- - --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
Shareholders' equity: Common stock -
par value $.10 per share in 1996
& $1.66 in 1995:
Authorized 7,500,000 shares; issued and
outstanding 597 5,969
3,580,463 shares in 1996 and
3,580,607 in 1995
Surplus 38,952 33,580
Undivided profits 16,827 15,560
Net unrealized gain (loss) on available-for-sale
securities, net of taxes (239) 909
Treasury Stock - 22,000 shares in 1996 (627) 0
Deferred I.S.O.P. benefit expense (925) (926)
- - --------------------------------------------------------------------------------
Total Shareholders' Equity 54,585 55,091
- - --------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 544,186 $ 536,992
================================================================================
</TABLE>
3
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
<CAPTION>
Quarter ended
3/31/96 3/31/95
------- -------
<S> <C> <C>
INTEREST INCOME
Loans $ 7,359 $ 6,775
Deposits with other banks 0 0
Federal Funds Sold 162 98
Available-for-sale securities 507 563
Held-to-maturity securities 2,275 2,129
- - --------------------------------------------------------------------------------
Total Interest Income 10,303 9,565
- - --------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits:
Time certificates of deposit of $100,000 or more 289 138
Other deposits 2,549 2,358
Securities sold under agreements to repurchase 1,209 1,272
Borrowed funds 167 169
- - --------------------------------------------------------------------------------
Total Interest Expense 4,214 3,937
- - --------------------------------------------------------------------------------
Net Interest Income 6,089 5,628
Less:Provision for loan/lease losses 204 83
- - --------------------------------------------------------------------------------
Net Interest Income after provision for loan/lease losses 5,885 5,545
- - --------------------------------------------------------------------------------
OTHER INCOME
Trust and investment services income 617 506
Services charges deposit accounts 426 419
Credit card merchant income 463 415
Other service charges 294 250
Other operating income 151 134
Net securities gains 0 0
- - --------------------------------------------------------------------------------
Total Other Income 1,951 1,724
- - --------------------------------------------------------------------------------
OTHER EXPENSES
Salaries and wages 1,862 1,712
Pension and other employee benefits 510 482
Net occupancy expense of bank premises 354 292
Furniture and fixture expense 281 259
F.D.I.C assessments 0 195
Credit card operating expense 399 344
Other operating expenses 1,046 911
- - --------------------------------------------------------------------------------
Total Other Expenses 4,452 4,195
- - --------------------------------------------------------------------------------
Income before Income Taxes 3,384 3,074
Income Taxes 1,184 1,014
- - --------------------------------------------------------------------------------
Net Income $ 2,200 $ 2,060
================================================================================
Net income per common share $ 0.62 $ 0.58
================================================================================
</TABLE>
4
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
<CAPTION>
Quarter ended
3/31/96 3/31/95
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 2,200 $ 2,060
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan/lease losses 204 83
Provision for depreciation and amortization 259 229
Net accretion on securities (11) (103)
Provision for deferred income taxes 0 (15)
Gains on sales of bank premises and equipment (2) (6)
Increase in other assets (247) (919)
Increase in other liabilities 663 2,600
- - --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 3,066 3,929
- - --------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from maturities of available-for-sale
securities 25,843 2,758
Proceeds from maturities of held-to-maturity
securities 2,771 5,165
Purchases of available-for-sale securities (27,884) 0
Purchases of held-to-maturity securities (1,386) (7,825)
Purchases of FHLB stock (95) (58)
Proceeds from sales of loans 492 388
Net increase in loans (2,634) (5,954)
Proceeds from sales of bank premises and equipment 12 9
Purchases of bank premises and equipment (52) (107)
- - --------------------------------------------------------------------------------
Net Cash Used in Investing Activities (2,933) (5,624)
- - --------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net (decrease) increase in demand deposits,
money market accounts and savings accounts (11,258) 3,222
Net increase in time deposits 18,869 4,020
Net increase (decrease) in securities sold under
repurchase agreements 1,261 (6,454)
Net decrease in other borrowings (1,000) 0
Cash dividends (931) (846)
Decrease in deferred I.S.O.P benefit expense 1 2
Issuance of common stock 0 6
Purchase of common stock for treasury (627) 0
- - --------------------------------------------------------------------------------
Net Cash Provided (used) By Financing Activities 6,315 (50)
- - --------------------------------------------------------------------------------
(Decrease) Increase in Cash and Cash Equivalents 6,448 (1,745)
Cash and cash equivalents at beginning of period 20,757 28,105
- - --------------------------------------------------------------------------------
Cash And Cash Equivalents At End Of Period $ 27,205 $ 26,360
================================================================================
</TABLE>
5
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share data)
<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
January 1, 1996 $ 5,969 $ 0 $33,580 $15,559 $ 909 $ (926) $55,091
- - ------------------------------------------------------------------------------------------------------------------------------------
Net income 2,199 2,199
Common stock
issued
Cash dividends
($.26 per share) (931) (931)
Effect of change in par
value from $1.66 to $.10 (5,372) 5,372
Change in net unrealized
gain/(loss), net of taxes
of ($832) (1,148) (1,148)
Common stock purchased
for treasury (627) (627)
Shares released for
allocation 1 1
- - ------------------------------------------------------------------------------------------------------------------------------------
Balances at
March 31, 1996 $ 597 $ (627) $38,952 $16,827 $ (239) $ (925) $54,585
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
Balances at
January 1, 1995 $ 5,426 $24,699 $19,788 $ (829) $(1,267) $47,817
- - ------------------------------------------------------------------------------------------------------------------------------------
Net income 2,060 2,060
Common stock
issued 6 6
Cash dividends
($.24 per share) (845) (845)
Change in net unrealized
gain/(loss), net of taxes
of $595 824 824
Shares released for
allocation 1 1
- - ------------------------------------------------------------------------------------------------------------------------------------
Balances at
March 31, 1995 $ 5,426 $24,705 $21,003 $ (5) (1,266) $49,863
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1.
Business: On April 26, 1995, the shareholders approved a proposal to revise the
corporate structure by establishing a one bank holding company. On January 1,
1996, Tompkins County Trust Company (the Trust Company) became the wholly
owned subsidiary of Tompkins County Trustco, Inc. (Trustco) and all of the
issued and outstanding shares of common stock of the Trust Company were
automatically converted into shares of common stock of Trustco. The Trust
Company provides loan, deposit, and trust services to its customers primarily in
Tompkins County, New York. Its only business segment is domestic commercial
banking. The Trust Company traces its charter back to 1836.
Basis of Presentation: The accompanying condensed financial statements and
related notes should be read in conjunction with the consolidated financial
statements and related notes thereto included in Trustco's Form 10-K 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
March 31, 1996 and 1995, and the results of operations for the three months
ended March 31, 1996 and 1995.
Certain reclassifications have been made to prior period amounts for
consistency in reporting.
Impaired Loans: Trustco's recorded investment in loans considered impaired
in accordance with Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" ("SFAS 114"), was $994,000 at
March 31, 1996. Of that amount, $157,000 has been established as an allowance
for loan loss under SFAS 114, and management has assigned a collateral value of
$869,300 to the remaining balance of impaired loans. On December 31, 1995,
impaired loans, with similar well collateralized characteristics, totalled
$1,086,000 with an established allowance of $233,000.
7
<PAGE>
Note 1. (cont'd)
Other Accounting Issues: On January 1, 1996, Trustco adopted Statement of
Financial Accounting Standards ("SFAS 122"), "Accounting for Mortgage Servicing
Rights" on a prospective basis. SFAS 122 requires Trustco to recognize as
separate assets rights to service mortgage loans for others, however, those
servicing rights are acquired, and also requires Trustco to assess its
capitalized mortage 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
Standards 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 is presented.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of this discussion is to provide the reader with information
designed to understand the financial statements included herewith and to provide
information as to material events or changes which effected the financial
condition or results of operation since the last reporting period which was
December 31, 1995. This discussion will not repeat numerical data contained in
the financial statements nor will it recite the amount of change from period to
period since these changes are readily computable from the financial statements.
References below to "bank" or variations thereof are to Tompkins County Trustco,
Inc. ("Trustco") and its wholly owned operating subsidiary Tompkins County Trust
Company ("TCTC").
Liquidity.
There are no known demands, commitments, events or uncertainties that will
result in, or that are reasonably likely to result, in the bank's liquidity
increasing or decreasing in any material way . The second quarter of the
calendar year typically is the home mortgage season for the bank when mortgage
loan activity increases. Further, this is the period in which municipal
deposits, particularly local school district deposits, are drawn down. Neither
of theses events are expected to result in any material demands on liquidity
that can not be met through the normal course of business operations.
For the three month period ending March 31, 1996 the bank's total assets
grew modestly to $544.1 million. Loans and leases showed continued growth and on
balance sheet loans totaled $323.3 million. The bank's overall liquidity was
sufficient to meet the demands of borrowers and depositors. The period ended
with average overnight federal funds sold of $11.9 million during the quarter.
Capital resources.
The bank continues to add approximately 60% of its after tax net income to
retained earnings to be employed in the normal course of its banking business.
During the first quarter of 1996 the remaining approximately 40% of net income
was paid out in the form of dividends to shareholders of Trustco. Additionally,
TCTC has a substantial credit facility with the Federal Home Loan Bank which it
can employ should the bank need to raise funds for legitimate banking
purposes. Other than normal commitments for loans, there were no material or
unusual commitments for bank funds on March 31, 1996.
On March 31, 1996 the bank's leverage ratio was 10.1%, essentially the same
ratio for the period ending December 31, 1995. This ratio increased from 9.5% on
December 31, 1995 and 9.7% on March 31, 1995. The tier one risk based capital
ratio of 16.6% on March 31, 1996 improved over the 16.2% ratio on December 31,
1995. Other than the increase in the bank's leverage ratio, there are no
material trends, favorable or unfavorable, in the bank's capital resources.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. continued.
Results of Operations:
There were no unusual or infrequent events nor transactions nor any
significant economic changes that materially effected the amount of reported
income from continuing operations during the quarter ended March 31, 1996.
However, as a result of the nationwide decrease in the cost of the Federal
Deposit Insurance Corporation ("FDIC") insurance premiums for commercial banks,
TCTC's cost for FDIC insurance for the twelve month period ending December 31,
1996 is expected to be lower than the previous year by approximately $400,000.
The bank is considered a well capitalized bank and pays the lowest premium
available as a result.
There are no known trends or uncertainties that have had or are reasonably
expected to have a material effect on revenues or income from continuing
operations. There are no known events that are likely to cause material changes
in the relationship between costs and revenues in the upcoming period. However,
as with all financial institutions, both the bank's interest income and interest
expense are effected by changes in national and local interest rates and/or
inflation.
The bank maintains an Asset/Liability Management Committee ("the
Committee") which periodically reviews asset and liability repricing issues,
TCTC's liquidity position, and the impact of changes in interest rates on the
bank's net interest income. From time to time, the Committee employs outside
specialists to supplement its internal review and information systems.
The attached Average Consolidated Balance Sheet and Net Interest Analysis
is provided to show the components of the bank's net interest margin. The net
interest margin improved from 4.97% to 4.98 % for the twelve month period ended
March 31, 1996. Though the overall cost of interest bearing liabilities
increased to 4.14% during the twelve month period ended March 31, 1996, the
increased volume of non interest bearing deposits and capital offset the extra
cost of funds which resulted in essentially the same net interest margin on an
increased asset base and an increase in net interest income.
To date, TCTC has not specifically employed financial futures, interest
rate swaps, or off balance sheet derivative products. The Committee believes
that managing its asset and liability sensitivity through loans, leases,
investments, retail deposits and wholesale deposits has allowed it to maintain
an acceptable liability sensitive position for the near future.
It is not expected that changes in inflation will have a material effect on
other goods or services or labor costs.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. continued.
For the quarter ended March 31, 1996 the bank charged $203,566 to
operations as a provision for loan and lease losses compared to $83,149 for the
first quarter of 1995. Bank management reviews the adequacy of its allowance for
loan and lease losses in a detailed and ongoing manner and believes its current
reserve for loan and lease losses of $4.7 million is satisfactory. Though the
change in the provision is material, bank management believes that the 1995
provision was unusually low and does not believe the 1996 provision is
indicative of any adverse trends.
TCTC continues to expand its Trust and Investment Services Department. At
December 31, 1995, TCTC had assets under management or in custody with a market
value $404.8 million, an increase of almost $62 million over the preceding
twelve months. The market value of these assets again improved to $461.8 million
on March 31, 1996. Currently, Trust and Investment Services customers live
throughout the continental United States in over 40 states, with the largest
concentration in Tompkins County. Trust and investment management services
provide substantial fee income to the bank and are considered important to
future revenue growth. Consequently, management plans to continue to market
these services broadly.
Continuing operations, effected by the aforementioned factors, resulted in
net income after tax of $2.2 million, an increase of 6.8% over the same quarter
one year ago.
11
<PAGE>
<TABLE>
TOMPKINS COUNTY TRUST COMPANY
Average Consolidated Balance Sheet and Net Interest Analysis
(In thousands)
<CAPTION>
March 31 1996 1995
-------------------------------------------------------
Average Average Average Average
Balance Yield/ Balance Yield/
(YTD) Interest Rate (YTD) Interest Rate
- - --------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets
Securities
U.S. Treasury 41,621 719 6.95% 47,352 845 7.24%
U.S. Government 96,159 1,499 6.27% 77,849 1,202 6.26%
agencies and corporations
State and municipal * 38,671 768 7.99% 43,758 853 7.90%
Other debt 3,287 57 6.97% 4,919 82 6.76%
------- ------ ------- -----
Total securities 179,738 3,043 6.81% 173,879 2,982 6.95%
Federal Funds Sold 11,858 162 5.50% 6,998 98 5.69%
Loans, net of unearned
income
Commercial and 121,671 2,833 9.36% 113,379 2,596 9.29%
industrial *
Residential real 101,586 1,986 7.86% 89,246 1,696 7.70%
estate
Home equity 21,115 526 10.03% 20,910 496 9.63%
Consumer 64,218 1,708 10.70% 67,925 1,725 10.30%
Direct lease financing 12,072 242 8.06% 10,178 212 8.43%
Other 2,712 85 12.54% 2,115 74 14.16%
Total loans, net of
unearned income 323,375 7,380 9.18% 303,752 6,799 9.08%
------- ------ ------- -----
Total
interest-earning assets 514,971 10,585 8.27% 484,629 9,879 8.27%
Noninterest-earning assets
Allowance for credit losses (4,738) (4,678)
Cash and due from banks 19,977 19,934
Other assets 14,133 13,161
-------- --------
Total assets $544,344 $513,047
======== ========
-------------------------------------------------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits
Interest-bearing deposits
Interest bearing
checking $55,893 $258 1.86% $53,530 $241 1.83%
Savings and money
market 133,586 1,066 3.21% 140,636 1,143 3.30%
Time 116,217 1,514 5.24% 92,734 1,112 4.86%
------- ----- ------- -----
Total deposits 305,697 2,838 3.73% 286,900 2,496 3.53%
Federal funds purchased 242 3 5.63% 759 12 6.18%
Repurchase agreements 91,624 1,209 5.31% 94,070 1,272 5.48%
Other borrowings 11,517 163 5.70% 11,998 157 5.32%
------- ----- ------- -----
Total interest-bearing
liabilities 409,079 4,214 4.14% 393,728 3,937 4.05%
Non-interest bearing deposits 72,524 66,443
Accrued expenses and other
liabilities 7,363 4,497
------- -------
Total liabilities 488,966 464,668
Shareholders' equity 55,410 48,271
------- -------
Total liabilities and
shareholders' equity $544,376 $512,939
======== ========
Interest rate spread 4.13% 4.22%
Impact of
noninterest-bearing liabilities 0.85% 0.75%
---- ----
Net interest income/margin
on earning assets $6,371 4.98% $5,943 4.97%
====== ==== ====== ====
- - --------------------------------------------------------------------------------------
</TABLE>
*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.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. Ehibits and Reports on Form 8-K
(a) Exhibits - none.
(b) No Reports on Form 8-K were filed during the quarter ended March 31, 1996.
13
<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: May 10, 1996
TOMPKINS COUNTY TRUSTCO, INC.
By: /s/ JAMES J. BYRNES
-------------------------------------
James J. Byrnes
Chairman of the Board,
President and Chief Executive Officer
By: /s/ RICHARD D. FARR
------------------------------------
Richard D. Farr
Senior Vice President and
Chief Financial Officer
14
