UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- -----------------------------------------------------------------------------
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission File Number 0-10592
March 31, 1997
TRUSTCO BANK CORP NY
(Exact name of registrant as specified in its charter)
NEW YORK 14-1630287
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 STATE STREET, SCHENECTADY, NEW YORK 12305
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 377-3311
Securities registered pursuant to Section 12(b) of
the Act:
Name of exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of
the Act:
(Title of class)
Common
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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 outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding
Class of Common Stock as of April 17, 1997
- --------------------------- ----------------------
$1 Par Value 20,417,588
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<PAGE>
TrustCo Bank Corp NY
INDEX
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Part I -- FINANCIAL INFORMATION
PAGE NO.
Item 1 Interim Financial Statements (Unaudited): 1
Consolidated Statements of Income for the
Three Months Ended March 31, 1997 and
1996
Consolidated Statements of Financial 2
Condition as of March 31,1997
Consolidated Statements of Cash Flows for 3-4
the Three Months Ended March 31, 1997
and 1996
Notes to Consolidated Interim Financial 5
Statements
Independent Auditors' Report 6
Item 2 Management's Discussion and Analysis 7-13
Part II -- OTHER INFORMATION
Item 1 Legal Proceedings -- NONE
Item 2 Changes in Securities -- NONE
Item 3 Defaults Upon Senior Securities -- NONE
Item 4 Submission of Matters to Vote of Security Holders -- NONE
Item 5 Other Information -- NONE
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<PAGE>
Part II -- OTHER INFORMATION (Continued)
Item 6 Exhibits and Reports on Form 8-K
------ --------------------------------
(a) Exhibits -- NONE
(b) Reports on Form 8-K
Filing of Form 8-K on January 22, 1997, regarding two
press releases dated January 21, 1997, detailing
fourth quarter and year-end 1996 financial results,
incorporated herein by reference.
Filing of Form 8-K on February 20, 1997, regarding
press release of February 18, 1997, declaring
quarterly dividend of $0.275 payable April 1, 1997,
to shareholders of record March 7, 1997, incorporated
herein by reference.
Filing of Form 8-K on April 15, 1997, regarding two
press releases dated April 15, 1997, detailing first
quarter financial results, incorporated herein by
reference.
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<PAGE>
<TABLE>
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(Dollars in Thousands)
<CAPTION>
3 Months Ended
March 31
1997 1996
------- -------
Interest income:
<S> <C> <C>
Interest and fees on loans....................... 26,812 26,947
Interest on U. S. Treasuries and agencies........ 7,446 8,437
Interest on states and political
subdivisions.................................... 1,290 900
Interest on mortgage-backed securities........... 1,589 1,322
Other............................................ 436 601
Interest on federal funds sold................... 4,322 3,301
------- -------
Total interest income......................... 41,895 41,508
------- -------
Interest expense:
Interest on deposits:
NOW accounts.................................... 885 891
Savings......................................... 5,587 5,696
Money market deposit accounts................... 442 512
Certificates of deposit of $100,000 or more..... 1,322 1,281
Other time...................................... 11,335 11,264
Interest on short-term borrowings................ 1,317 733
------- -------
Total interest expense......................... 20,888 20,377
------- -------
Net interest income............................ 21,007 21,131
Provision for loan losses......................... 1,210 3,110
------- -------
Net interest income after provision
for loan losses............................... 19,797 18,021
------- -------
Noninterest income:
Trust department income.......................... 1,572 1,372
Fees for other services to customers............. 1,804 1,693
Net gain/(loss) on securities available for sale. (495) (421)
Other............................................ 655 483
------- -------
Total noninterest income........................ 3,536 3,127
------- -------
Noninterest expenses:
Salaries and employee benefits................... 5,715 5,342
Net occupancy expense............................ 1,085 1,239
Equipment expense................................ 757 840
FDIC insurance expense........................... 61 1
Professional services............................ 1,118 787
Other real estate expenses....................... 189 216
Other............................................ 2,279 2,021
------- -------
Total noninterest expenses...................... 11,204 10,446
------- -------
Income before taxes............................ 12,129 10,702
Applicable income taxes........................... 4,536 4,017
------- -------
Net income.................................... 7,593 6,685
======== ========
Earnings per Common Share:
Net income.................................... $0.36 0.32*
======= =======
Average equivalent shares outstanding
(000s omitted 21,157 20,941
======= =======
*Per share data adjusted for 15% stock split declared August, 1996.
See accompanying notes to consolidated interim financial statements.
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</TABLE>
<PAGE>
<TABLE>
TRUSTCO BANK CORP NY
Consolidated Statements of Financial Condition
(Dollars in Thousands)
<CAPTION>
03/31/97 12/31/96
(Unaudited)
Assets: --------- ---------
<S> <C> <C>
Cash and due from banks......................... 50,749 45,779
Federal funds sold.............................. 373,000 310,000
--------- ---------
Total cash and cash equivalents............... 423,749 355,779
Securities available for sale:
U. S. Treasuries and agencies.................. 357,225 406,933
States and political subdivisions.............. 93,335 96,918
Mortgage-backed securities..................... 98,210 76,493
Other.......................................... 39,667 38,326
--------- ---------
Total securities available for sale........... 588,437 618,670
--------- ---------
Loans:
Commercial..................................... 204,664 223,116
Residential mortgage loans..................... 817,140 803,128
Home equity line of credit..................... 181,726 183,832
Installment loans.............................. 31,302 33,259
--------- ---------
Total loans................................... 1,234,832 1,243,335
Less: --------- ---------
Allowance for loan losses...................... 51,845 51,561
Unearned income................................ 1,393 1,453
--------- ---------
Net loans...................................... 1,181,594 1,190,321
Bank premises and equipment..................... 22,759 23,098
Real estate owned............................... 8,347 6,518
Other assets.................................... 68,369 67,394
--------- ---------
Total assets................................. 2,293,255 2,261,780
========= =========
Liabilities:
Deposits:
Demand......................................... 112,617 123,553
Now accounts................................... 259,454 236,264
Savings accounts............................... 662,471 661,915
Money market deposit accounts.................. 59,564 61,131
Certificates of deposit (in denominations of
$100,000 or more)............................. 97,605 89,793
Other time..................................... 792,423 780,490
--------- ---------
Total deposits................................ 1,984,134 1,953,146
Short-term borrowings........................... 112,469 111,662
Accrued expenses and other liabilities.......... 35,518 34,572
--------- ---------
Total liabilities............................. 2,132,121 2,099,380
--------- ---------
Shareholders' equity
Capital stock par value $1; 50,000,000 shares
authorized March 31, 1997 and December 31,
1996, and 20,986,430 and 20,959,376 shares
issued March 31, 1997 and December 31, 1996,
respectively.................................. 20,986 20,959
Surplus......................................... 114,521 114,228
Undivided profits............................... 25,205 23,221
Net unrealized gain on securities available for
sale 2,591 5,239
Treasury stock at cost - 614,142 and 571,142
shares at March 31, 1997 and December 31, 1996,
respectively.................................. (2,169) (1,247)
--------- ---------
Total shareholders' equity.................... 161,134 162,400
--------- ---------
Total liabilities and shareholders' equity.... 2,293,255 2,261,780
========= =========
See accompanying notes to consolidated interim financial statements.
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</TABLE>
<PAGE>
<TABLE>
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
THREE MONTHS ENDED March 31, 1997 1996
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net income........................................... 7,593 6,685
-------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization...................... 673 890
Provision for loan losses.......................... 1,210 3,110
Loss on sale of securities available for sale...... 558 1,089
Gain on sale of securities available for sale...... (63) (668)
(Increase)/decrease in taxes receivable............. 2,262 (960)
Increase in interest receivable.................... (891) (190)
Increase/(decrease) in interest payable............ 17 (161)
Decrease in other assets........................... 1,032 523
Increase/(decrease) in accrued expenses............ 920 (276)
-------- --------
Total adjustments 5,718 3,357
-------- --------
Net cash provided by operating activities............ 13,311 10,042
-------- --------
Cash flows from investing activities:
Proceeds from sales of securities available for sale. 57,739 87,749
Purchase of securities available for sale...........(51,844) (160,388)
Proceeds from maturities and calls
of securities avail for sale....................... 19,299 62,912
Net (increase)/decrease in loans.................... 2,347 (2,633)
Proceeds from sales of real estate owned............ 1,859 975
Capital expenditures................................ (334) (255)
-------- --------
Net cash provided by/(used in) investing
activities......................................... 29,066 (11,640)
-------- --------
Cash flows from financing activities:
Net increase in deposits............................ 30,988 7,880
Increase in short-term borrowing.................... 807 4,916
Proceeds from issuance of common stock.............. 320 535
Purchase of treasury stock.......................... (922) ---
Dividends paid...................................... (5,600) (4,849)
-------- --------
Net cash provided by financing activities......... 25,593 8,482
-------- --------
Net increase in cash and cash equivalents............. 67,970 6,884
Cash and cash equivalents at beginning of period......355,779 289,889
-------- --------
Cash and cash equivalents at end of period............423,749 296,773
======== ========
See accompanying notes to consolidated interim financial statements. Continued)
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</TABLE>
<PAGE>
<TABLE>
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows Continued (Unaudited)
(Dollars in Thousands)
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
THREE MONTHS ENDED March 31, 1997 1996
-------- --------
<S> <C> <C>
Interest paid..................................... 20,871 20,538
Income taxes paid................................. 2,274 4,977
Transfer of loans to real estate owned............ 5,170 338
Increase in dividends payable..................... 9 9
Change in unrealized gain on securities
available for sale-gross......................... 4,544 13,175
Change in deferred tax effect on unrealized gain
on securities available for sale................. (1,896) (5,440)
See accompanying notes to consolidated interim financial statements.
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</TABLE>
<PAGE>
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements
(Unaudited)
1. Financial Statement Presentation
In the opinion of the management of TrustCo Bank Corp NY (the Company), the
accompanying unaudited Consolidated Interim Financial Statements contain all
adjustments necessary to present fairly the financial position as of March 31,
1997, the results of operations for the three months ended March 31, 1997 and
1996, and the cash flows for the three months ended March 31, 1997 and 1996.
The accompanying Consolidated Interim Financial Statements should be read in
conjunction with the TrustCo Bank Corp NY year-end Consolidated Financial
Statements, including notes thereto, which are included in TrustCo Bank Corp
NY's 1996 Annual Report to Shareholders on Form 10-K.
2. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (Statement
128), which establishes standards for computing and presenting earnings per
share (EPS). This statement simplifies the standards for computing EPS and
supersedes Accounting Principals Board Opinion No. 15, "Earnings per Share"
and related interpretations. Statement 128 replaces the presentation of
primary EPS with the presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation.
Basic EPS is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the
earnings of the entity (such as the Company's stock options). This Statement
is effective for financial statements issued for periods ending after December
15, 1997, including interim periods. Earlier application is not permitted.
This Statement requires restatement of all prior-period EPS data presented.
Management does not anticipate that the adoption of Statement 128 will
materially impact EPS.
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<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
TrustCo Bank Corp NY:
We have reviewed the consolidated statement of financial condition of TrustCo
Bank Corp NY and subsidiaries (the Company) as of March 31, 1997, and the
related consolidated statements of income and cash flows for the three month
periods ended March 31, 1997 and 1996. These consolidated financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial condition of TrustCo Bank
Corp NY and subsidiaries as of December 31, 1996 and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for the
year then ended (not presented herein); and in our report dated January 24,
1997, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated statement of financial condition as of December 31, 1996, is
fairly presented, in all material respects, in relation to the consolidated
statement of financial condition from which it has been derived.
/s/KPMG Peat Marwick LLP
------------------------------
KPMG Peat Marwick LLP
Albany, New York
April 11, 1997
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<PAGE>
TrustCo Bank Corp NY
Management's Discussion and Analysis
March 31, 1997
The review that follows focuses on the factors affecting the financial
condition and results of operations of TrustCo Bank Corp NY ("TrustCo" or "
Company") during the three month period ended March 31, 1997, with comparisons
to 1996 as applicable. Net interest income and net interest margin are
presented on a fully taxable equivalent basis in this discussion. The
consolidated interim financial statements and related notes, as well as the
1996 Annual Report to Shareholders, should be read in conjunction with this
review. Amounts in prior period consolidated interim financial statements are
reclassified whenever necessary to conform to the current period's
presentation. Per share results have all been adjusted for the 15% stock split
effective August 1996.
Statements included in this review and in future filings by TrustCo with the
Securities and Exchange Commission, in TrustCo's press releases, and in oral
statements made with the approval of an authorized executive officer, which
are not historical or current facts, are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, and are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical earnings and
those presently anticipated or projected. TrustCo wishes to caution readers
not to place undue reliance on any such forward-looking statements, which
speak only as of the date made. The following important factors, among others,
in some cases have affected and in the future could affect TrustCo's actual
results, and could cause TrustCo's actual financial performance to differ
materially from that expressed in any forward-looking statement: (1) credit
risk, (2) interest rate risk, (3) competition, (4) changes in the regulatory
environment, and (5) changes in general business and economic trends. The
forgoing list should not be construed as exhaustive, and the Company disclaims
any obligation subsequently to revise any forward- looking statements to
reflect events or circumstances after the date of such statements, or to
reflect the occurrence of anticipated or unanticipated events.
Following this discussion is the table "Distribution of Assets, Liabilities
and Shareholders' Equity: Interest Rates and Interest Differential" which
gives a detailed breakdown of TrustCo's average interest earning assets and
interest bearing liabilities for the three months ended March 31, 1997 and
1996.
Overview
TrustCo recorded net income of $7.6 million, or $0.36 per share for the three
months ended March 31, 1997, as compared to $6.7 million or $0.32 per share in
the same period in 1996.
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<PAGE>
The primary factors accounting for the year to date increase are:
-> reduction in the provision for loan losses from $3.1 million in 1996 to
$1.2 million in 1997,
-> increase in total noninterest income by $409 thousand between 1996 and
1997, and
-> continued emphasis on expense control, resulting in a continued improvement
of the efficiency ratio to 40.2% for the first quarter of 1997.
Asset/Liability Management
The Company strives to generate superior earnings capabilities through a mix
of core deposits, funding a prudent mix of earning assets. This is, in its
most fundamental form, the essence of asset/liability management.
Additionally, TrustCo attempts to maintain adequate liquidity and reduce the
sensitivity of net interest income to changes in interest rates to an
acceptable level while enhancing profitability both on a short-term and
long-term basis.
Earning Assets
Total interest earning assets increased from $2.10 billion in 1996 to $2.16
billion in 1997 with an average yield of 7.92% in 1997, and 8.03% in 1996.
Income on earning assets increased by $522 thousand during this same time
period from $42.1 million in 1996 to $42.7 million in 1997. The increase in
interest income on earning assets was attributable to the increase in average
earning assets offset by the reduction in yield on these assets.
Loans: The average balance of loans was $1.24 billion in 1997 and $1.23
billion in 1996. The yield on loans decreased from 8.83% in 1996 to 8.70% in
1997. This resulted in a reduction in the interest income on loans by $148
thousand.
Within the category of loans, the commercial loans balances decreased by $15.3
million, residential mortgage loans increased by $39.6 million, home equity
lines of credit decreased by $8.7 million, and the installment loan portfolio
decreased by $1.9 million. These changes continue to reflect the competitive
environment that exists for loans and the emphasis that TrustCo has for the
residential mortgage loan products.
Securities Available for Sale: Securities available for sale had an average
balance of $594 million during the quarter as compared to $629 million in
1996. These balances earned an average yield of 7.70% in 1997 and 7.50% in
1996. This resulted in interest income on the securities available for sale of
$11.4 million in 1997 and $11.8 million in 1996. The reduction in average
balances during the quarter caused a $2.0 million decrease in the interest
income which was offset by a $1.7 million increase in interest income due to
the change in the average rates.
Most of the decrease in the balances of securities available for sale was
centered in the category of U.S. Treasuries and agencies which decreased by
$65.3 million between the first quarter of 1996 and 1997. Mortgage-backed
securities and investments in states and political subdivisions increased on
average $9.6 million and $25.2 million, respectively.
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<PAGE>
Federal Funds Sold: The 1997 first quarter average balance of federal funds
sold was $326.7 million, $82.2 million greater than the $244.5 million in
1996. The portfolio yield declined to 5.37% in 1997, compared to 5.43% in
1996, down 6 basis points. Changes in the yield resulted from changes in the
target rate set by the Federal Reserve Board for federal funds sold. Interest
income on this portfolio increased by approximately $1 million from $3.3
million in 1996 to $4.3 million in 1997. The increase in interest income
resulting from the increase in average balances was $1.3 million, and was
offset by a reduction in interest income of $250 thousand as a result of the
decrease in interest rates.
Income From Earning Assets: Income from earning assets rose to $42.7 million
during the first quarter of 1997 from $42.1 million last year.
Funding Opportunities
TrustCo utilizes various funding sources to support its earning assets
portfolio. The vast majority of the Company's funding comes from traditional
deposit vehicles such as savings, NOW and time deposit accounts.
Total time deposits (which includes interest bearing checking, savings, and
certificates of deposit) increased to $1.84 billion during 1997, and the
average yield was unchanged at 4.32% from 1996. Total interest expense on
these deposits decreased $73 thousand to $19.6 million. Within this category
of deposits, NOW accounts, savings, certificates of deposits over $100
thousand, and other time deposits increased by $2.7 million, $3.2 million,
$5.4 million and $8.8 million, respectively. Money market deposit accounts
decreased by $9.6 million during the same time period.
Short-term borrowings, primarily the Trustco Short-Term Investment Account,
increased by $49.1 million between the first quarter of 1996 and 1997. Total
interest expense on this account increased by 80% to $1.3 million in 1997, and
the average yield increased 14 basis points to 4.70%.
Demand deposit balances increased by 10% during the period from the first
quarter of 1996 to the first quarter of 1997. The average balance was $104.1
million in 1996, and $114.6 million in 1997.
Growth in deposits balances resulted from successful marketing and advertising
campaigns for certificates of deposits and savings products. In TrustCo's past
experience, deposits gathered as the result of these types of campaigns tend
to become a very stable source of core customers who maintain their deposit
relationship with the Company through various interest rate cycles. TrustCo
competes on a combination of interest rate, quality service and convenience.
Net Interest Income
Taxable equivalent net interest income increased slightly to $21.8 million in
1997. The net interest spread dropped 12 basis points between 1996 add 1997
and the net interest margin also decreased by 13 basis points.
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<PAGE>
Nonperforming Assets
Nonperforming assets include nonperforming loans which are those loans in a
nonaccrual status, loans that have been restructured and loans past due 90
days or more and still accruing interest. Also included in the total of
nonperforming assets are foreclosed real estate properties, which are
categorized as real estate owned.
Impaired loans are defined as those commercial and commercial real estate
loans on a nonaccrual status, and loans restructured since January 1, 1995,
when newly effective accounting standards required changing the
identification, measurement and reporting of impaired loans, and loans whose
terms have been modified in a troubled debt restructuring. The following will
describe the nonperforming assets of TrustCo as of March 31, 1997.
Nonperforming loans: Total nonperforming loans were $11.8 million at March 31,
1997, down $3.8 million from the $15.6 million at March 31, 1996, and down
$2.2 million from the year end 1996 balance of $14.0 million. Nonaccrual loans
were $7.5 million at March 31, 1997, representing a decrease of $5.1 million
from the year ago period, and also down $3.3 million from the year end balance
of $10.7 million. Restructured loans increased to $2.8 million at March 31,
1997, from the balance of $1.7 million at March 31, 1996, and the balance of
$2.5 million at December 31, 1996.
Total commercial and commercial real estate impaired loans were $2.8 million
at March 31, 1997, and together with the newly restructured retail loans of
$3.1 million, represent the Company's impaired loans at March 31, 1997. Of the
total $11.8 million of nonperforming loans at quarter end, $5.9 million were
identified as being impaired, leaving $5.9 million of loans that are primarily
nonperforming retail loans and commercial loans that are past due 90 days or
more and still accruing interest. TrustCo does not consider these to be
impaired loans.
During the first quarter of 1997 there have been commercial loan charge offs
of $1.8 million, and consumer loan charge offs of $566 thousand. Recoveries
during the first quarter were $1.4 million.
Real estate owned: Total real estate owned increased to $8.3 million at March
31, 1997, from the $2.9 million at March 31, 1996, and from the $6.5 million
at year end 1996. The increase in real estate owned since year end 1996 is
primarily the result of one commercial property that was foreclosed on during
the quarter, and several residential foreclosures. The commercial property
represented $2.0 million of the increase in the balance of real estate owned
since year end 1996.
Allowance for loan losses: The balance of the allowance for loan losses is
maintained at a level that is, in management's judgment, representative of the
amount of the risk inherent in the loan portfolio, given past, present and
expected future conditions.
At March 31, 1997, the allowance for loan losses was $51.8 million, which
represents a slight increase of $284 thousand from the year end balance of
$51.6 million. This allowance represents a reserve coverage of 4.4 times the
nonperforming loans at March 31, 1997. The
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<PAGE>
provision charged to expense during the quarter was $1.2 million for 1997, and
$3.1 million for 1996.
Liquidity and Interest Rate Sensitivity
TrustCo seeks to obtain favorable sources of funding and to maintain prudent
levels of liquid assets in order to satisfy varied liquidity demands.
TrustCo's earnings performance and strong capital position enable the Company
to raise funds easily in the marketplace and to secure new sources of funding.
The Company actively manages its liquidity through target ratios established
under its liquidity policies. Continual monitoring of both historical and
prospective ratios allows TrustCo to employ strategies necessary to maintain
adequate liquidity. Management has also defined various degrees of adverse
liquidity situations which could potentially occur, and has prepared
appropriate contingency plans should such a situation arise.
Noninterest Income
Total noninterest income for the first quarter was $3.5 million, compared to
$3.1 million in 1996. Included in both the 1997 and 1996 first quarter results
are losses on securities of $495 thousand in 1997, and $421 thousand in 1996.
Once these securities transactions are removed, total noninterest income
increased from $3.5 million in 1996 to $4.0 million in 1997.
Noninterest Expense
Total noninterest expense was $11.2 million for 1997 compared to $10.4 million
in 1996. Most of the increase in noninterest expense during these two time
periods relates to salaries and employee benefits which increased by
approximately 7%, and professional charges which increased by $331 thousand
between 1996 and 1997. The Company's efficiency ratio was 40.2% in 1997 and
40.4% in 1996.
Income Taxes
In the first quarter of 1997 TrustCo recognized income tax expense of $4.5
million, compared to $4.0 million in 1996. The effective tax rate for 1997 was
37.4% and for 1996 it was 37.5%.
Capital Resources
Consistent with its long-term goal of operating a sound and profitable
financial organization, TrustCo strives to maintain strong capital ratios. New
issues of equity securities have not been required since traditionally most of
TrustCo's capital requirements are met through the capital retention program.
Previously, TrustCo has stated its intention to open three to five new branch
offices each year for the next couple of years. For 1997, the Company has
plans to open three new facilities in the first half of the year. These new
branches and the related deposit growth anticipated from these locations will
not require additional capital beyond that which is already existing within
the Company, or that which will be developed and retained in the coming years.
Total shareholders' equity at March 31, 1997 was $161.1 million, down slightly
from the $162.4 million at year end 1996. The change in shareholders' equity
between year end and the first quarter 1997 reflects a $2.6 million reduction
in the net unrealized gain on securities
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<PAGE>
available for sale, and $922 thousand of additional treasury stock purchased
during the first quarter of 1997.
<TABLE>
TrustCo declared dividends of $0.28 so far in 1997, compared with $0.24 in
1996. These results represent a dividend payout ratio of 73.87% in 1997 and
72.67% in 1996. The Company achieved the following ratios as of March 31, 1997
and 1996:
<CAPTION>
March 31, Minimum Regulatory
1997 1996 Guidelines
<S> <C> <C> <C>
Tier 1 risk adjusted
capital 13.24 12.74 4.00
Total risk adjusted
capital 14.53 14.03 8.00
</TABLE>
In addition, at March 31, 1997 and 1996, the consolidated equity to total
assets ratio (excluding the mark to market effect of securities available for
sale) was 6.92% and 6.89%, respectively.
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<PAGE>
<TABLE>
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average balance
sheet, related interest income and expense and the average annualized yields on
interest-earning assets and annualized rates on interest-bearing libilities of the
Registrant and the Bank (adjusted for tax equivalency) for each of the reported periods.
Nonaccrual loans are included in loans for this analysis. The average balances of sec-
urities available for sale is calculated using amortized costs for these securities.
Included in the balance of shareholders' equity is unrealized appreciation, net of tax,
in the available for sale portfolio of $4.9 million in 1997 and $11.3 million in 1996.
<CAPTION>
First Quarter First Quarter
1997 1996
Average Average Average Average Change in Variance Variance
(dollars in thousands) Balance Interest Rate Balance Interest Rate Interest Balance Rate
Income/ Change Change
Assets Expense
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial loans................... 217,127 $5,040 9.3$% 232,418 $ 5,420 9.34% (380) (365) (15)
Residential mortgage loans......... 809,488 16,734 8.27% 769,930 16,087 8.36% 647 1,670 (1,023)
Home equity lines of credit ....... 183,405 4,139 9.15% 192,151 4,449 9.29% (310) (235) (75)
Installment loans.................. 30,770 993 13.09% 32,665 1,098 13.48% (105) (70) (35)
--------- ------ --------- ------ ----- ----- -----
Loans, net of unearned income......1,240,790 26,906 8.70%1,227,164 27,054 8.83% (148) 1,000 (1,148)
Securities available for sale:
U.S. Treasuries and agencies...... 383,115 7,467 7.80% 448,424 8,504 7.59% (1,037) (2,457) 1,420
Mortgage-backed securities........ 81,782 1,589 7.77% 72,175 1,322 7.33% 267 122 145
States and political subdivisions. 93,992 1,896 8.07% 68,765 1,315 7.65% 581 388 193
Other ............................ 35,123 480 5.49% 39,529 642 6.51% (162) (67) (95)
--------- ------ --------- ------ ----- ----- -----
Total securities available for sale 594,012 11,432 7.70% 628,893 11,783 7.50% (351) (2,014) 1,663
Federal funds sold................. 326,678 4,322 5.37% 244,505 3,301 5.43% 1,021 1,271 (250)
--------- ------ --------- ------ ----- ----- -----
Total Interest earning assets....2,161,480 42,660 7.92%2,100,562 42,138 8.03% 522 257 265
Allowance for loan losses.......... (52,977) ------ (50,494) ------ ----- ----- -----
Cash and non-interest earning assets 152,554 131,666
--------- ---------
Total assets.....................2,261,057 2,181,734
========= =========
Liabilities and shareholders' equity
Time deposits:
Interest-bearing checking:
NOW accounts ................... 234,084 885 1.55% 231,431 $ 891 1.55% (6) 34 (40)
Money market accounts........... 61,149 442 2.93% 70,736 512 2.91% (70) (96) 26
Savings........................... 659,651 5,587 3.43% 656,479 5,696 3.49% (109) 144 (253)
CD's over $100 thousand........... 94,284 1,322 5.69% 88,879 1,281 5.80% 41 177 (136)
Other time deposits............... 789,130 11,335 5.83% 780,346 11,264 5.81% 71 55 16
--------- ------ --------- ------ ----- ----- -----
Total time deposits..............1,838,298 19,571 4.32%1,827,871 19,644 4.32% (73) 314 (387)
Short-term borrowings.............. 113,764 1,317 4.70% 64,630 733 4.56% 584 563 21
--------- ------ --------- ------ ----- ----- -----
Total interest-bearing liabilities1,952,062 20,888 4.34%1,892,501 20,377 4.33% 511 877 (366)
Demand deposits.................... 114,627 ------ 104,115 ------ ----- ----- -----
Other liabilities.................. 32,225 27,081
Shareholders' equity............... 162,143 158,037
--------- ---------
Total liab.& shareholders' equity 2,261,057 2,181,734
========= =========
Net interest income................ 21,772 21,761 11 (620) 631
------ ------ ----- ----- -----
Net interest spread................ 3.58% 3.70%
Net interest margin (net interest
income to total interest earning
assets)......................... 4.00% 4.13%
Tax equivalent adjustment 765 630
------ ------
Net interest income per book.... 21,007 $ 21,131
====== ======
</TABLE>
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TrustCo Bank Corp NY
Date: April 28, 1997 By: /s/Robert A. McCormick
------------------------
Robert A. McCormick
President and
Chief Executive Officer
Date: April 28, 1997 By: /s/Robert T. Cushing
----------------------
Robert T. Cushing
Vice President and Chief
Financial Officer
- 14 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 50,749
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 373,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 588,437
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,233,439
<ALLOWANCE> 51,845
<TOTAL-ASSETS> 2,293,255
<DEPOSITS> 1,984,134
<SHORT-TERM> 112,469
<LIABILITIES-OTHER> 35,518
<LONG-TERM> 0
0
0
<COMMON> 20,986
<OTHER-SE> 140,148
<TOTAL-LIABILITIES-AND-EQUITY> 2,293,255
<INTEREST-LOAN> 26,812
<INTEREST-INVEST> 10,761
<INTEREST-OTHER> 4,322
<INTEREST-TOTAL> 41,895
<INTEREST-DEPOSIT> 19,571
<INTEREST-EXPENSE> 20,888
<INTEREST-INCOME-NET> 21,007
<LOAN-LOSSES> 1,210
<SECURITIES-GAINS> (495)
<EXPENSE-OTHER> 11,204
<INCOME-PRETAX> 12,129
<INCOME-PRE-EXTRAORDINARY> 12,129
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,593
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
<YIELD-ACTUAL> 4.00
<LOANS-NON> 1,539
<LOANS-PAST> 7,453
<LOANS-TROUBLED> 2,800
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 51,561
<CHARGE-OFFS> 2,329
<RECOVERIES> 1,403
<ALLOWANCE-CLOSE> 51,845
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 51,845
</TABLE>
