<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, 1997
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 [ ] No [ X ].
Indicate the number of shares of the Registrant's Common Stock outstanding as of
the latest practicable date:
Class Outstanding as of May 5, 1997
---------------------------- -----------------------------
Common Stock, $.10 par value 3,316,230 shares
<PAGE>
TOMPKINS COUNTY TRUSTCO, INC.
FORM 10-Q
INDEX
PART I -FINANCIAL INFORMATION
PAGE
----
ITEM 1 -FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
MARCH 31, 1997 AND DECEMBER 31, 1996 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7-8
ITEM 2 -MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-12
AVERAGE CONSOLIDATED BALANCE SHEET AND NET INTEREST
ANALYSIS 13
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
EXHIBIT INDEX 16
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share data)
ASSETS AS OF AS OF
03/31/97 12/31/96
-------- --------
Cash & noninterest bearing balances
due from banks 30,607 25,319
Federal funds sold 2,000 0
Available-for-sale securities, at fair
value 177,273 167,904
Held-to-maturity securities, fair value
of $38,932 in 1997 and $38,784 in 1996 38,234 37,753
Loans and leases net of unearned income 350,432 350,409
Less: Reserve for loan and lease losses 4,829 4,779
- -------------------------------------------------------------
NET LOANS 345,603 345,630
Bank Premises and Equipment 6,922 6,924
Other Assets 8,341 7,814
- -------------------------------------------------------------
TOTAL ASSETS 608,980 591,344
=============================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Interest bearing:
Checking 56,611 59,738
Savings and money market 146,617 133,799
Time 163,507 155,832
Noninterest bearing 79,352 77,997
- -------------------------------------------------------------
TOTAL DEPOSITS 446,087 427,366
Securities Sold under agreements to
repurchase and Federal funds purchased 88,735 89,993
Other Borrowings 14,005 15,005
Other Liabilities 7,024 6,367
- -------------------------------------------------------------
TOTAL LIABILITIES 555,851 538,731
- -------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
Shareholders' equity:
Common Stock - par value $.10 per
share
Authorized 7,500,000 shares; issued
and outstanding 3,33634 in 1997
and 3,336,394 shares in 1996 334 334
Surplus 32,531 32,529
Undivided Profits 22,369 20,925
Net Unrealized gain (loss) on
available-for-sale securities, net
of taxes (876) 66
Treasury Stock - 20,904 shares in
1997, 21,203 shares in 1996. (596) (604)
Deferred I.S.O.P. benefit expense (633) (637)
- -------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 53,129 52,613
- -------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 608,980 591,344
=============================================================
* See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
QUARTER ENDING
03/31/97 3/31/96
-------- --------
INTEREST INCOME
Loans 7,790 7,359
Deposits with other banks 0 0
Federal funds sold 118 162
Available-for-sale securities 2,855 2,275
Held-to maturity securities 502 507
- -------------------------------------------------------------------
TOTAL INTEREST INCOME 11,265 10,303
- -------------------------------------------------------------------
INTEREST EXPENSE
Deposits:
Time certificates of deposits of
$100,000 or more 1,057 289
Other Deposits 2,432 2,549
Securities sold under agreements
to repurchase 1,059 1,209
Borrowed funds 216 167
- -------------------------------------------------------------------
TOTAL INTEREST EXPENSE 4,764 4,214
- -------------------------------------------------------------------
NET INTEREST INCOME 6,501 6,089
- -------------------------------------------------------------------
Less: Provision for loan/lease losses 414 204
- -------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN/LEASE LOSSES 6,087 5,885
- -------------------------------------------------------------------
OTHER INCOME
Trust and investment services income 819 617
Service charges on deposit accounts 459 426
Credit card merchant income 556 463
Other service charges 326 294
Other operating income 137 151
- -------------------------------------------------------------------
TOTAL OTHER INCOME 2,297 1,951
- -------------------------------------------------------------------
OTHER EXPENSES
Salary and wages 1,964 1,862
Pension and other employee benefits 522 510
Net Occupancy Expense of bank premises 328 354
Furniture and fixture expense 280 281
Credit Card Operating Expense 494 399
Other operating expense 1,067 1,046
- -------------------------------------------------------------------
TOTAL OTHER EXPENSES 4,655 4,452
- -------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 3,729 3,384
- -------------------------------------------------------------------
INCOME TAXES 1,297 1,184
- -------------------------------------------------------------------
NET INCOME 2,432 2,200
===================================================================
Weighted Average Shares 3,294,308 3,546,957
NET INCOME PER COMMON SHARE 0.74 0.62
===================================================================
* See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
THREE MONTHS ENDED
3/31/97 3/31/96
-------- --------
OPERATING ACTIVITIES
Net Income $ 2,432 $ 2,220
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan/lease losses 414 204
Provision for depreciation and amortization 259 259
Net amortization/(accretion) on securities 41 (11)
Gains on sales of bank premises and equipment (4) (2)
Increase in other assets (527) (247)
Increase in other liabilities 1,338 663
- -----------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,953 3,066
- -----------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from maturities of available-for-sale
securities 6,182 25,843
Proceeds from maturities of held-to-maturity
securities 4,736 2,771
Purchases of available-for-sale securities (17,191) (27,979)
Purchases of held-to-maturity securities (5,242) (1,386)
Proceeds from sales of loans 539 492
Net increase in loans (925) (2,634)
Proceeds from sales of bank premises and
equipment 4 12
Purchases of bank premises and equipment (256) (52)
- -----------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (12,153) (2,933)
- -----------------------------------------------------------------------
FINANCING ACTIVITIES
Net (decrease) increase in demand deposits,
money market accounts and savings accounts 11,045 (11,258)
Net increase in time deposits 7,675 18,869
Net increase (decrease) in securities sold under
repurchase agreements and Federal funds
purchased (1,258) (1,261)
Net increase in other borrowings (1,000) (1,000)
Cash dividends (988) (931)
Decrease in deferred I.S.O.P benefit expense 5 1
Treasury stock sold 9 0
Treasury stock purchased 0 (627)
- -----------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 15,488 6,315
- -----------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,288 6,448
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 25,319 20,757
- -----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 32,607 $ 27,205
=======================================================================
* See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
NET UNREALIZED
GAIN/(LOSS) ON DEFERRED
COMMON TREASURY UNDIVIDED AVAILABLE-FOR-SALE ISOP
STOCK STOCK SURPLUS PROFITS SECURITIES BENEFIT EXP TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
BALANCES AT
JANUARY 1, 1996 597 0 38,952 15,559 909 (926) 55,091
- ---------------------------------------------------------------------------------------------------------------------------
Net Income 2,199 2,199
Common Stock Issued 0
Cash Dividends (931) (931)
($.26/Share)
Treasury Stock Purchased (627) (627)
(22,000 shares)
Change in net unrealized 0
Gain/(Loss) net of taxes (1,148) (1,148)
I.S.O.P. Shares Released 1 1
for Allocation
0
- ---------------------------------------------------------------------------------------------------------------------------
BALANCES AT
MARCH 31, 1996 597 (627) 38,952 16,827 (239) (925) 54,585
===========================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
BALANCES AT
JANUARY 1, 1997 334 (604) 32,529 20,925 66 (637) 52,613
- ---------------------------------------------------------------------------------------------------------------------------
0 0 0 0 0 0 0
Net Income 2,432 2,432
Cash Dividends (988) (988)
($.30/Share)
Treasury Stock Sold 8 1 9
(299 shares)
Change in net unrealized 0
Gain/(Loss) net of taxes (942) (942)
I.S.O.P. Shares Released 1 4 5
for Allocation
0
- ---------------------------------------------------------------------------------------------------------------------------
BALANCES AT
MARCH 31, 1997 334 (596) 32,531 22,369 (876) (633) 53,129
===========================================================================================================================
</TABLE>
* See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Tompkins County Trustco, Inc. (the "Company") 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 the Company as a one
bank holding company. On January 1, 1996, the Trust Company became a wholly
owned subsidiary of the Company and all issued and outstanding shares of Trust
Company common stock were converted to shares of the Company's common stock. The
accompanying financial statements consolidate the financial statements of the
Company 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 the Company's Form 10-K and related
notes for the year ended December 31, 1996.
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 the Company's financial
position at March 31, 1997, and December 31, 1996, and the results of operations
for the three months ended March 31, 1997 and March 31, 1996. Certain
reclassifications have been made to prior period amounts for consistency in
reporting.
2. STOCK REPURCHASE PROGRAM
In November 1996, the board of directors approved a stock repurchase program,
which authorizes the repurchase of up to $3 million in common stock of the
Company in open market transactions. No open market transactions have been
completed under this program.
3. SECURITIES
Management determines the appropriate classification of debt and equity
securities at the time of purchase. Debt securities are classified as held-to-
maturity when the Company has the positive intent and ability to hold the
securities to maturity. Held-to-maturity securities are stated at amortized
cost. Debt securities not classified as held-to-maturity and marketable equity
securities are classified as available-for-sale. Available-for-sale securities
are stated at fair value, with the unrealized gains and losses, net of tax,
excluded from earnings and reported as a separate component of shareholders'
equity.
Amortized cost of held-to-maturity debt securities is adjusted for amortization
of premiums and accretion of discounts to maturity, or in the case of mortgage-
backed securities, over the estimated life of the security. Realized gains and
losses, and declines in value judged to be other-than-temporary, are included in
net securities gains (losses). The cost of securities sold is based on the
specific identification method.
Transfers of securities between categories are recorded at fair value at the
date of transfer. Unrealized holding gains or losses included in the separate
component of equity for securities transferred from available-for-sale to held-
to-maturity are maintained and amortized into earnings over the remaining life
of the security as an adjustment to yield in a manner consistent with the
amortization or accretion of premium or discount on the associated security.
As of March 31, 1997, net unrealized losses on securities classified as
available-for-sale totaled $1.5 million, resulting in an after tax equity
capital reduction of $876,000. As of December 31, 1996, available-for-sale
securities had net unrealized gains of $113,000, resulting in an after tax
equity capital increase of $66,000.
7
<PAGE>
4. LOANS
Loans are reported at their principal outstanding balance net of charge-offs,
deferred loan fees and costs, and unearned income. The Company provides motor
vehicle and equipment financing to its customers through direct financing
leases. These leases are carried at the aggregate lease payments receivable,
plus estimated residual values, less unearned income. Unearned income on direct
financing leases is amortized over the lease terms resulting in a level rate of
return.
Loans, including impaired loans, are generally classified as nonaccrual if they
are past due as to maturity or payment of principal or interest for a period of
more than 90 days, unless such loans are well secured and in the process of
collection. Loans that are past due less than 90 days may also be classified as
nonaccrual if repayment in full of principal and/or interest is in doubt.
Loans may be returned to accrual status when all principal and interest amounts
contractually due (including arrearages) are reasonably assured of repayment
within an acceptable time period, and there is a sustained period of repayment
performance by the borrower, in accordance with the contractual terms of the
loan agreement. Payments received on loans carried as nonaccrual are generally
applied as a reduction to principal. When the future collectibility of the
recorded loan balance is expected, interest income may be recognized on a cash
basis.
The Company's recorded investment in loans considered impaired was $684,000 on
March 31, 1997, and the average recorded investment in impaired loans was
$657,000 through the first three months of 1997. Included in this amount was
$88,000 of impaired loans for which related reserves total $76,000. The recorded
investment in impaired loans as of December 31, 1996, was $1.2 million. The
December 31, 1996, amount includes $582,000 of impaired loans which had related
reserves of $94,000. Interest income on impaired loans of $8,000 was
recognized for cash payments received during the first three months of 1997.
5. ACCOUNTING CHANGES
In June 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. In December 1996, the
Financial Accounting Standards Board issued SFAS No. 127, "Deferral of the
effective date of certain provisions of FASB No. 125". SFAS No. 127 defers for
one year the effective implementation date of SFAS No. 125 for certain
transactions. The Company prospectively adopted applicable sections of SFAS
No. 125 effective January 1, 1997. Sections of SFAS No. 125, which have been
deferred by SFAS No. 127 will be prospectively adopted by the Company on January
1, 1998. The expected impact on the Company's consolidated financial statements
is not material.
In December 1996, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share". The Statement supersedes Accounting Principles Board
Opinion No. 15. "Earnings Per Share", and specifies the computation,
presentation, and disclosure requirements for earnings per share (EPS) for
entities with publicly held common stock. It requires dual presentation of
"Basic EPS" and "Diluted EPS" on the face of the income statement for all
entities with complex capital structures. The Company will prospectively adopt
SFAS No. 128 effective for financial statement periods ending after December 15,
1997. Upon adoption, all prior period EPS will be restated. The expected
impact on the Company's consolidated financial statements is not material.
8
<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 the Company's Form 10-K and
related notes for the year ended December 31, 1996, and the condensed
consolidated financial statements and notes included elsewhere in this report.
RESULTS OF OPERATIONS
Net income for the first quarter of 1997 was $2.4 million, compared to $2.2
million for the first quarter of 1996. Earnings per share in the first quarter
of 1997 increased 19.4% to $0.74, compared to $0.62 in the first quarter of
1996. Significant improvement in earnings per share was achieved through a
combination of 10% growth in earnings and a 8% decline in the average number of
shares outstanding. The reduction in average shares outstanding is primarily
the result of a privately negotiated repurchase of 244,371 shares of the
Company's common stock in October of 1996.
The Company's return on average assets improved to 1.64% during the first three
months of 1997, compared to 1.63% during the same period in 1996. Return on
average shareholders' equity for the first quarter of 1997 was 18.58%, compared
to 15.97% for the first quarter of 1996. The 16% increase in return on average
shareholders' equity benefited from the repurchase of the Company's common
stock in October of 1996.
NET INTEREST INCOME
The attached Average Consolidated Balance Sheet and Net Interest Analysis
reflects a 4.85% tax-equivalent net interest margin on earning assets through
the three months of 1997, compared to a 4.98% ratio through the first three
months of 1996. The decline in net interest margin is attributable to several
large customers shifting deposits from money market accounts to higher yielding
time deposits during 1996. That trend has reversed during the first quarter as
savings and money market accounts grew by nearly 10%, while growth in time
deposits slowed to 5%. Despite the increase in the cost of interest-bearing
deposits, year-to-date net interest income of $6.5 million represents a 7%
increase over the same three month period in 1996.
PROVISION FOR LOAN AND LEASE LOSSES
The provision represents management's estimate of the expense necessary to
maintain the reserve for loan and lease losses at an adequate level. The
provision for loan and lease losses for the first three months of 1997 was
$414,000, representing an increase of 103% over the $204,000 provision made
during the first quarter of 1996. The increased provision in the first quarter
of 1997 was largely due to an increased volume of charge-offs, primarily in the
consumer loan portfolio. Based upon improving trends in consumer loan
delinquency, management expects a modest decline in consumer loan charge-offs in
the second quarter of 1997.
OTHER INCOME
Total other income was $2.3 million, representing an 18% increase from the first
quarter of 1996 to the first quarter of 1997. Income from trust and investment
services, the largest segment of other income, increased 33% to $819,000,
compared to $617,000 in the first three months of 1996. The increase is
primarily attributable to continued asset growth in the Trust and Investment
Services Department. Total assets under management by the Trust and Investment
Services Department increased from $404.8 million on March 31, 1996, to $704.2
million on March 31, 1997. Total department assets on March 31, 1997 includes
$177.6 million of the Company's investment portfolio, for which the department
began providing custodial services in December 1996. Total Trust and Investment
Services Department assets, excluding assets of the Company, grew at a rate of
30% from March 1996 to March 1997. Trust and investment services are
considered important to future revenue growth of the Company and management
plans to continue to market these services broadly.
Credit card merchant fee income was $556,000 through the first three months of
1997, representing an increase of 20% over the first three months of 1996.
Growth in merchant fee income is primarily attributable to an increase in the
number of Trust Company merchant customers.
9
<PAGE>
INTEREST RATE RISK
Interest rate sensitivity refers to the volatility of earnings caused by changes
in interest rates. Each month the Asset/Liability Management Committee
estimates the likely impact on earnings resulting from various changing interest
rates scenarios. The findings of the committee are incorporated into the
investment and funding decision of the Company.
The Trust Company's March 31, 1997, one-year cumulative rate sensitivity gap was
a negative 25.3% of total assets. This suggests earnings would benefit from a
declining interest rate environment, and would be vulnerable to a rising
interest rate environment. Management believes the current interest rate risk
exposure is not significant given the Company's current level of earnings and
capital.
FINANCIAL CONDITION
The Company's total assets were $609 million as of March 31, 1997, representing
a 3% increase over total assets reported as of December 31, 1996. Net loans
remained level at $345.6 million, while securities (net of SFAS 115 market value
adjustments on available-for-sale securities) increased from $205.6 million at
year end to $215.5 million on March 31, 1997. Growth in the securities portfolio
centered in U.S. Government agency issued mortgage-backed securities. Asset
growth has been funded primarily through core deposit growth.
CAPITAL
The Company continues to add approximately 60% of after tax net income to
undivided profits to be employed in the normal course of business. Dividends
paid in the first three months of 1997 totaled approximately $988,000, or $.30
per share. The Company and the Trust Company are subject to various regulatory
capital requirements administered by Federal banking agencies. Management
believes the Company and the Trust Company meet all capital adequacy
requirements to which they are subject. The table below reflects the Company's
capital position at March 31, 1997, compared to the regulatory capital
requirements for a "well capitalized" institution.
REGULATORY CAPITAL ANALYSIS - March 31, 1997
- -------------------------------------------------------------------------------
ACTUAL WELL CAPITALIZED
REQUIREMENT
AMOUNT RATIO AMOUNT RATIO
- -------------------------------------------------------------------------------
Total Capital (to risk weighted assets) 57,889 16.6% 34,826 10.0%
Tier I Capital (to risk weighted assets) 53,530 15.4% 20,896 6.0%
Tier I Capital (to average assets) 53,530 8.9% 29,978 5.0%
===============================================================================
As illustrated above, the Company's capital ratios on March 31, 1997 remain well
above the minimum requirement for a well capitalized institution. The ratios
also reflect improvement from the December 31, 1996 capital ratios. As of
December 31, 1996, the Company's Total Capital as a percentage of Risk Weighted
assets was 16.1%; Tier I Capital to risk weighted assets was 14.9%; and Tier I
Capital to average assets was 8.9%.
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS
Management reviews the adequacy of the allowance for loan and lease losses in a
detailed and ongoing basis, giving consideration to various risk elements that
may affect the losses in the loan portfolio. Based upon management's review,
the current reserve of $4.8 million is believed to be adequate to absorb
potential losses in the loan and lease portfolios. Activity in the Company's
reserve for loan and lease losses during the first three months of 1997 and 1996
is illustrated in the table below.
10
<PAGE>
ANALYSIS OF THE RESERVE FOR LOAN/LEASE LOSSES (In Thousands)
- ---------------------------------------------------------------------------
MARCH 31, 1997 MARCH 31, 1996
- ---------------------------------------------------------------------------
Average Loans Outstanding Year to Date 350,126 323,375
- ---------------------------------------------------------------------------
Beginning Balance 4,779 4,703
Provision for loan losses 414 204
Loans charged off 498 296
Loan recoveries 134 117
- ---------------------------------------------------------------------------
Net Charge-offs 364 179
- ---------------------------------------------------------------------------
Ending Balance 4,829 4,728
===========================================================================
Annualized net charge-offs through the first three months of 1997 amounted to
0.42% of average loans outstanding during the period. This ratio compares to
0.22% for the three months ended March 31, 1996, and 0.34% for the twelve months
ended December 31, 1996. The increasing trend in net charge-offs has been
primarily in the personal loan and credit card portfolios, which had net charge-
offs of $255,000 and $75,000, respectively in the first quarter of 1997.
Although trends in net charge-offs continues to increase, some positive trends
are noted in loan and lease delinquencies, which may be an indicator that
increasing trends in net charge-offs may be slowing. An analysis of
nonperforming assets as of the three months ended March 31, 1997 and March 31,
1996 is presented in the table below.
NONPERFORMING ASSETS (In thousands) Three Months Ended
===========================================================================
MARCH 31, 1997 MARCH 31, 1996
- ---------------------------------------------------------------------------
Nonaccrual loans 1,184 1,352
Loans past due 90 days and accruing 64 379
Troubled debt restructuring not
included above 0 130
- ---------------------------------------------------------------------------
Total nonperforming loans 1,248 1,861
- ---------------------------------------------------------------------------
Other real estate, net of allowances 136 262
- ---------------------------------------------------------------------------
Total nonperforming assets 1,384 2,123
- ---------------------------------------------------------------------------
Total nonperforming loans as a percent
of total loans 0.36% 0.58%
===========================================================================
Total nonperforming assets as a
percentage of total assets 0.22% 0.39%
===========================================================================
DEPOSITS AND OTHER LIABILITIES
Core deposits, which include demand deposits, savings and money market accounts,
and time deposits of $100,000 and less, represent the primary funding source
for the Company. As of March 31, 1997, core deposits represented 66.4% of total
liabilities, compared to 66.3% on December 31, 1996. Total Deposits were
$446.1 million on March 31, 1997, representing 4% growth over total deposits on
December 31, 1996. Deposit growth centered primarily in savings and money
market accounts which grew from $132.8 million on December 31, 1996, to $146.6
million as of March 31, 1997. Total time deposits grew from $156.8 million at
December 31, 1996, to $163.5 million on March 31, 1997, with growth centered in
time deposits greater than $100,000. A modest decline in interest bearing
checking accounts was partially offset by growth in noninterest bearing demand
deposits.
The Company uses securities sold under repurchase agreements, Federal funds
purchased, and other borrowings as additional funding sources. As of March 31,
1997, total securities sold under repurchase agreements amounted to $88.7
million, compared to $86.2 million at December 31, 1996. The Company had no
borrowings in the form of Federal funds purchased on March 31, 1997, compared to
$3.8 million on December 31, 1996. Other borrowings declined from $15 million
at year end to $14 million on March 31, 1997.
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.
11
<PAGE>
Cash and cash equivalents increased from $25.3 million on December 31, 1996 to
$32.6 million on March 31, 1997. Short term investments consisting of
securities due in one year or less declined slightly from $27.6 million to $27.5
million over the same three month period. Total securities pledged to secure
certain large deposits and securities sold under repurchase agreements increased
as a percentage of total securities declined from 88.6% on December 31, 1996, to
85.3% on March 31, 1997.
Additional liquidity is provided through the Trust Company's Federal Home Loan
Bank (FHLB) membership. The Trust Company has in excess of $50 million in
available borrowing capacity through established lines of credit with the FHLB.
The Trust Company has approximately $123 million in residential mortgage loans
that can also be used to secure additional borrowings from the FHLB.
12
<PAGE>
TOMPKINS COUNTY TRUSTCO, INC.
AVERAGE CONSOLIDATED BALANCE SHEET AND NET INTEREST ANALYSIS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31 1997 1996
----------------------------------- -----------------------------------
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 $ 0 $ 0 $ 0 $ 0
banks
Securities (1) (2)
U.S. Treasury 39,969 687 6.88% 41,621 719 6.91%
U.S. Government agencies and
corporations 125,700 2,122 6.72% 96,174 1,499 6.24%
State and municipal 39,052 761 7.80% 38,671 768 7.94%
Other securities 3,050 64 8.41% 3,304 57 6.86%
------------------- -------------------
Total securities 207,772 3,625 6.98% 179,770 3,3043 6.77%
Federal Funds Sold 9,208 118 5.13% 11,858 162 5.47%
Loans, net of unearned income (3)
Commercial and industrial (2) 128,986 2,966 9.33% 121,671 2,833 9.36%
Residential real estate 122,506 2,386 7.90% 101,586 1,986 7.86%
Home equity 20,563 485 9.57% 21,115 526 10.03%
Consumer 63,693 1,649 10.50% 64,218 1,708 10.70%
Direct lease financing 11,645 238 8.29% 12,072 242 8.06%
Other 2,734 86 12.72% 2,712 85 12.54%
------------------- ------------------
Total loans, net of unearned
income 350,126 7,810 9.05% 323,375 7,380 9.18%
------------------- ------------------
Total interest-earning assets 567,106 11,553 8.26% 515,004 10,585 8.27%
Noninterest-earning assets
Allowance for credit losses (4,799) (4,738)
Cash and due from banks 22,365 19,977
Other assets 15,234 14,133
-------- --------
TOTAL ASSETS $599,906 $544,376
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Interest-bearing deposits
Interest bearing checking $ 59,066 $ 273 1.87% $ 55,893 $ 731 1.84%
Savings and money market 143,851 1,136 3.20% 133,586 1,066 3.21%
Time 158,769 2,080 5.32% 116,217 1,514 5.24%
------------------- -------------------
Total deposits 361,687 3,489 3.91% 305,697 2,838 3.73%
Federal funds purchased 119 3 8.98% 242 3 5.63%
Repurchase agreements 84,169 1,056 5.09% 91,264 1,209 5.31%
Other borrowings 14,539 216 6.02% 11,517 163 5.70%
------------------ -------------------
Total interest-bearing liabilities 460,513 4,764 4.20% 409,078 4,214 4.14%
Non-interest bearing deposits 78,666 72,524
Accrued expenses and other liabilities 8,668 7,363
-------- --------
TOTAL LIABILITIES 547,846 488,965
SHAREHOLDERS' EQUITY 52,060 55,410
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $599,906 $544,376
======== ========
Interest rate spread 4.07% 4.12%
Impact of noninterest-bearing
liabilities 0.79% 0.85%
-------------------- --------------------
Net interest income/margin on
earning assets $ 6,787 4.85% $ 6,371 4.98%
====================================================================================================================
</TABLE>
(1) Average balances and yields on available-for-sale securities are based on
historical amortized cost.
(2) 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.
(3) Nonaccrual loans are included in the average asset totals presented above.
Payments received on nonaccrual loans have been recognized as disclosed in Note
4 to the condensed consolidated financial statements.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits
Exhibit 27 - Financial Data Schedule.
14
<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 13, 1997
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
15
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NUMBER DESCRIPTION PAGES
- -------------- ----------- -----
EXHIBIT 27 FINANCIAL DATA SCHEDULE
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
MARCH 31, 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 30,607
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 177,273
<INVESTMENTS-CARRYING> 214,507
<INVESTMENTS-MARKET> 215,205
<LOANS> 350,432
<ALLOWANCE> 4,829
<TOTAL-ASSETS> 608,980
<DEPOSITS> 446,087
<SHORT-TERM> 11,005
<LIABILITIES-OTHER> 7,024
<LONG-TERM> 3,000
0
0
<COMMON> 334
<OTHER-SE> 52,795
<TOTAL-LIABILITIES-AND-EQUITY> 608,908
<INTEREST-LOAN> 7,790
<INTEREST-INVEST> 3,357
<INTEREST-OTHER> 118
<INTEREST-TOTAL> 11,265
<INTEREST-DEPOSIT> 3,490
<INTEREST-EXPENSE> 4,764
<INTEREST-INCOME-NET> 6,501
<LOAN-LOSSES> 414
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,655
<INCOME-PRETAX> 3,729
<INCOME-PRE-EXTRAORDINARY> 3,729
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,432
<EPS-PRIMARY> .74
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4
<LOANS-NON> 1,184
<LOANS-PAST> 64
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,779
<CHARGE-OFFS> 498
<RECOVERIES> 134
<ALLOWANCE-CLOSE> 4,829
<ALLOWANCE-DOMESTIC> 4,829
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,206
</TABLE>
