FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
(Fee Required) For the Fiscal Year Ended December 31, 1996
Or
[ ] Transition Report Pursuant
to Section 13 or 15(d) of
the Securities Exchange Act
of 1934 (No Fee Required)
For the transition period from ____________________ to ____________________
Commission file number 0-10592
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 Identification No.)
incorporation or organization)
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:
Title of each class Name of exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act: None
None
Common Stock, $1.00 Par Value None
(Title of class)
______________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) None of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes.(x) No.( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K.[X]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock:
Number of Shares Outstanding
Class of Common Stock as of March 17, 1997
$1 Par Value 20,395,288
The aggregate market value of registrant's common stock (based upon the closing
price on March 17, 1997) held by non-affiliates was approximately $430,850,459.
Documents Incorporated by Reference
(1) Portions of registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1996 (Part I and Part II).
(2) Portions of registrant's Proxy Statement filed for its Annual Meeting of
Shareholders to be held May 19, 1997 (Part III).
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INDEX
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Description Page
PART I
Item 1 Business 1
Item 2 Properties 5
Item 3 Legal Proceedings 5
Item 4 Submission of Matters to a Vote of Security 5
Holders
PART II
Item 5 Market for the Registrant's Common Equity and 7
Related Stockholder Matters
Item 6 Selected Financial Data 7
Item 7 Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
Item 8 Financial Statements and Supplementary Data 7
Item 9 Changes in and Disagreements with Accountants 7
On Accounting and Financial Disclosure
PART III
Item 10 Directors and Executive Officers of Registrant 7
Item 11 Executive Compensation 7
Item 12 Security Ownership of Certain Beneficial Owners 8
And Management
Item 13 Certain Relationships and Related Transactions 8
PART IV
Item 14 Exhibits, Financial Statement Schedules, and 8
Reports on Form 8-K
EXHIBITS INDEX 15
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PART I
Item 1. Business
General
TrustCo Bank Corp NY ("TrustCo") is a one-bank holding company having its
principal place of business at 320 State Street, Schenectady, New York 12305.
TrustCo was incorporated under the laws of New York in 1981 to acquire all of
the outstanding stock of Trustco Bank, National Association, formerly known as
Trustco Bank New York, and prior to that The Schenectady Trust Company.
Following receipt of necessary regulatory approvals, TrustCo commenced business
on July 1, 1982. In 1991, TrustCo acquired, for a combination of cash and
TrustCo common stock, Home & City Savings Bank ("Home & City") located in
Albany, New York. At the time of the acquisition, Home & City operated 16
branches, and had total assets of approximately $ 848 million, deposits of $ 750
million and shareholders' equity of $ 93 million. Through policy and practice,
TrustCo continues to emphasize that it is an equal opportunity employer. There
were 448 full-time equivalent employees at year-end 1996. TrustCo had 5,897
shareholders of record as of December 31, 1996, and the closing price of the
TrustCo common stock at that date was $21.375.
Bank Subsidiary
On November 16, 1994, TrustCo initiated the process to convert its banking
subsidiary, Trustco Bank New York, a New York state chartered trust company, to
a national banking association operating under the name Trustco Bank, National
Association (the "Bank"). The conversion was undertaken to minimize duplicative
federal/state compliance issues. The conversion became effective on February 1,
1995. The Bank is a national banking association engaged in a general commercial
banking business serving individuals, partnerships, corporations, municipalities
and governments of New York. The Bank operates 25 automatic teller machines and
48 banking offices in Albany, Columbia, Greene, Rensselaer, Saratoga,
Schenectady, Warren, and Washington counties of New York State. The largest part
of such business consists of accepting deposits and making loans and
investments. The Bank provides a wide range of both personal and business
banking services. The Bank is a member of the Federal Reserve System and its
deposits are insured by the Federal Deposit Insurance Corporation to the extent
permitted by law. An operating subsidiary of the Bank, Trustco Realty Corp.,
holds certain mortgage assets which are serviced by the Bank. The Bank accounted
for substantially all of TrustCo's 1996 consolidated net income and average
assets.
The trust department of the Bank serves as executor of estates and trustee of
personal trusts, provides estate planning and related advice, provides custodial
services and acts as trustee for various types of employee benefit plans and
corporate pension and profit sharing trusts. The aggregate market value of the
assets under trust, custody or management was approximately $950 million as of
December 31, 1996.
The daily operations of the Bank remain the responsibility of its Board of
Directors and
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officers, subject to the overall supervision by TrustCo. TrustCo derives most of
its income from dividends paid to it by its subsidiary Bank. The accounts of the
Bank are included in TrustCo's consolidated financial statements.
ORE Subsidiary
During 1993, TrustCo created ORE Subsidiary Corp., a New York corporation, to
hold and manage certain foreclosed properties acquired by the Bank. The accounts
of this subsidiary are included in TrustCo's consolidated financial statements.
Competition
TrustCo faces strong competition in its market areas, both in attracting
deposits and making loans. The Bank's most direct competition for deposits,
historically, has come from other commercial banks, savings associations and
credit unions, which are located, or have branches in those areas. The Bank also
faces competition for deposits from national brokerage houses, short-term money
market funds, and other corporate and government securities funds. Factors
affecting the acquisition of deposits include pricing, office locations and
hours of operation, the variety of deposit accounts offered, and the quality of
customer service provided. Competition for loans has been especially keen during
the last five years. Commercial banks, local thrift institutions, traditional
mortgage brokers affiliated with local offices, and nationally franchised real
estate brokers, are all active and aggressive competitors. The Bank competes in
the environment by providing a full range of financial services based on a
tradition of financial strength and integrity dating from its inception. It
competes for loans, principally through the interest rates and loan fees it
charges, and the efficiency and quality of services it provides to borrowers.
TrustCo operates in a number of communities where the competition ranges from
other locally based commercial and savings banks, to branches of the largest
financial institutions in the United States. In the Capital District area of New
York State, TrustCo's principal competitors are local operations of super
regional banks, branch offices of money center banks, and locally based
commercial and savings banks. The Bank is the largest commercial bank
headquartered in the Capital District area.
Supervision and Regulation
Banking is a highly regulated industry, with numerous federal and state laws and
regulations governing the organization and operation of banks and their
affiliates. As a registered bank holding company under the Bank Holding Company
Act of 1956, as amended (the "Act"), TrustCo is regulated and examined by the
Board of Governors of the Federal Reserve System (the "Reserve Board"). The Act
requires TrustCo to obtain prior Reserve Board approval for bank and non-bank
acquisitions and restricts the business operations permitted to TrustCo. The
Bank, as a national banking association, is subject to regulation and
examination by the Office of the Comptroller of the Currency ("OCC"). Because
the Federal Deposit Insurance Corporation ("FDIC") provides deposit insurance to
the Bank, the Bank is also subject to its supervision and regulation even though
the FDIC is not its primary federal regulator. Virtually all aspects of
TrustCo's and the Bank's
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business are subject to regulation and examination by the Reserve Board, the
FDIC and the OCC.
Most of TrustCo's revenues consist of cash dividends paid to TrustCo by its
subsidiary Bank, payment of which is subject to various regulatory limitations.
(Note 1 of the consolidated financial statements contained in TrustCo's Annual
Report to Shareholders for the year ended December 31, 1996, which appears on
pages 33 and 34 thereof and contains information concerning restrictions of
TrustCo's ability to pay dividends, is hereby incorporated by reference.) In
addition, the FDIC and the Reserve Board have established guidelines with
respect to the maintenance of appropriate levels of capital by a bank holding
company under their jurisdictions. Compliance with the standards set forth in
such guidelines could also limit the amount of dividends which a bank or a bank
holding company may pay to its shareholders. The banking industry is also
affected by the monetary and fiscal policies of the federal government,
including the Reserve Board, which exerts considerable influence over the cost
and availability of funds obtained for lending and investing.
See Note 12 of the consolidated financial statements contained in TrustCo's
Annual Report to Shareholders for the year ended December 31, 1996, which
appears on page 43 thereof and contains information concerning regulatory
capital requirements.
Recent Legislation
In September 1994, the Reigle-Neal Interstate Banking and Branching Efficiency
Act of 1994 was enacted. As of September 29, 1995, adequately capitalized and
managed bank holding companies are permitted to acquire banks in any state
subject to state deposit caps and a 10% nationwide deposit cap. In addition,
this law provides for full interstate branching by bank merger commencing on
June 1, 1997. States may "opt-out" of this branching provision prior to the
effective date, and alternatively, states may "opt-in" earlier than June 1,
1997. New York "opted-in" prior to June 1, 1997, by allowing out-of-state banks
with reciprocal branching laws to branch in New York through acquisition.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996 was signed
into law on September 30, 1996. This law streamlined the non-banking activities
application process for well-capitalized and well-managed bank holding
companies. Under this law, qualified bank holding companies may commence a
regulatorily approved non-banking activity without prior notice to the Reserve
Board although written notice is required within ten days after commencing the
activity. Also under this law, the prior notice period is reduced to twelve days
in the event of any non-banking acquisition or share purchase, assuming the size
of the acquisition does not exceed 10% of risk-weighted assets of the acquiring
bank holding company and the consideration does not exceed 15% of Tier 1
capital. This law also provides for the recapitalization of the Savings
Association Insurance Fund which generally insures the deposits of thrift
institutions, in order to bring it into parity with the Bank Insurance Fund.
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The references in this section to various aspects of supervision and regulation
are brief summaries which do not purport to be complete and which are qualified
in their entirety by reference to applicable laws, rules and regulations. Any
change in applicable laws or regulations may have a material effect on the
business and prospects of TrustCo. The operations of TrustCo may be affected by
legislative changes and by the policies of various regulatory authorities.
TrustCo is unable to predict the nature or the extent of the effects on its
business and earnings that fiscal or monetary policies, economic controls or new
federal or state legislation may have in the future. Regulation by the federal
and state banking authorities is designed to protect depositors rather than
shareholders.
Foreign Operations
Neither TrustCo nor the Bank engage in material operations in foreign countries
or have any outstanding loans to foreign debtors.
Statistical Information Analysis
The "Management's Discussion and Analysis" on pages 6 through 24 of TrustCo's
Annual Report to Shareholders for the year ended December 31, 1996, which
contains a presentation and discussion of statistical data relating to TrustCo,
is hereby incorporated by reference. This information should not be construed to
imply any conclusion on the part of the management of TrustCo that the results,
causes or trends indicated therein will continue in the future. The nature and
effects of governmental monetary policy, supervision and regulation, future
legislation, inflation and other economic conditions and many other factors
which affect interest rates, investments, loans, deposits and other aspects of
TrustCo's operations are extremely complex and could make historical operations,
earnings, assets and liabilities not indicative of what may occur in the future.
Forward-Looking Statements
Statements included in the Management's Discussion and Analysis of Operations of
TrustCo's Annual Report to Shareholders for the year ended December 31, 1996,
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: (i) credit risk; (ii) interest rate risk; (iii) competition; (iv)
changes in the regulatory environment; and (v) changes in general business and
economic trends. The foregoing list should not be construed as exhaustive and
the Company disclaims any obligation subsequently to revise any forward-looking
statements
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to reflect events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events.
Item 2. Properties
TrustCo's executive offices are located at 320 State Street, Schenectady, New
York, 12305. The Bank operates 48 offices, of which 20 are owned and 28 are
leased from others. The asset value of these properties, when considered in the
aggregate, are not material to the operation of TrustCo.
In the opinion of management, the physical properties of TrustCo and the Bank
are suitable and adequate and are being fully utilized.
Item 3. Legal Proceedings
The nature of TrustCo's business generates a certain amount of litigation
against TrustCo and its subsidiaries involving matters arising in the ordinary
course of business. In the opinion of management of TrustCo, there are no
proceedings pending to which TrustCo or either of its subsidiaries is a party,
or of which its property is the subject which, if determined adversely to
TrustCo or such subsidiaries, would be material in relation to TrustCo's
consolidated stockholders' equity and financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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Executive Officers of TrustCo
The following is a list of the names and ages of the executive officers
of TrustCo and their business history for the past five years:
Year First
Name, Age and Principal Occupations Became
Position Or Employment Since Executive
With Trustco January 1, 1992 of TrustCo
Robert A. McCormick, President and Chief Executive Officer,
60, President and TrustCo Bank Corp NY. President and 1984
Chief Executive Officer Chief Executive Officer, Trustco Bank,
National Association
Robert T. Cushing, Vice President and Chief Financial Officer,
41,Vice President and TrustCo Bank Corp NY since 1994. Senior 1994
Chief Financial Officer Vice President and Chief Financial Officer,
Trustco Bank, National Association since
1994. Partner, KPMG Peat Marwick LLP
(1987-1994).
Nancy A. McNamara, Vice President, TrustCo Bank Corp NY
47, Vice President since 1992. Senior Vice President, Trustco 1992
Bank, National Association since 1988.
William F. Terry, Secretary, TrustCo Bank Corp NY since
55, Secretary 1990. Senior Vice President, Trustco Bank, 1990
National Association since 1987. Secretary,
Trustco Bank, National Association since
1990.
Ralph A. Pidgeon, Vice President and Assistant Secretary,
54,Vice President TrustCo Bank Corp NY since 1995. Senior 1995
and Assistant Vice President, Trustco Bank, National
Secretary Association since 1978.
There are no family relationships among any of the named persons. Each executive
officer is elected by the Board of Directors to serve until election of his or
her successor.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Page one of TrustCo's Annual Report to Shareholders for the year ended December
31, 1996, is incorporated herein by reference. The closing price for the
Corporation's common stock on December 31, 1996, was $21.375.
Item 6. Selected Financial Data
Page 24 of TrustCo's Annual Report to Shareholders for the year ended December
31, 1996, is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Pages 6 through 24 of TrustCo's Annual Report to Shareholders for the year ended
December 31, 1996, are incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements, together with the report thereon of KPMG Peat Marwick
LLP on pages 26 through 44 of TrustCo's Annual Report to Shareholders for the
year ended December 31, 1996, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of Registrant
The information under the captions "Information on TrustCo Directors and
Nominees" and "Information on TrustCo Executive Officers Not Listed Above" on
pages 3 through 6, and Section 16(a) Beneficial Ownership Reporting Compliance"
on page 21, of TrustCo's Proxy Statement filed for its Annual Meeting of
Shareholders to be held May 19, 1997, is incorporated herein by reference. The
required information regarding TrustCo's executive officers is contained in PART
I in the item captioned "Executive Officers of TrustCo."
Item 11. Executive Compensation
The information under the captions "TrustCo and Trustco Bank Executive Officer
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Compensation" and "TrustCo Retirement Plans" on pages 7 through 11 of TrustCo's
Proxy Statement filed for its Annual Meeting of Shareholders to be held May 19,
1997, is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management The
information under the captions "Information on TrustCo Directors and Nominees,"
and "Information on TrustCo Executive Officers Not Listed Above," on pages 3
through 5 and "Ownership Of TrustCo Common Stock By Certain Beneficial Owners"
on page 20 of TrustCo's Proxy Statement filed for its Annual Meeting of
Shareholders to be held May 19, 1997, is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information under the caption "Transactions with TrustCo and Trustco Bank
Directors, Executive Officers and Associates" on page 21 of TrustCo's
Proxy Statement filed for its Annual Meeting of Shareholders to be held May 19,
1997, is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K The
following financial statements of TrustCo and its consolidated subsidiaries, and
the accountants' report thereon are incorporated herein by reference in item 8.
Consolidated Statements of Condition -- December 31, 1996 and 1995.
Consolidated Statements of Income -- Years Ended December 31, 1996,
1995, and 1994.
Consolidated Statements of Changes in Shareholders' Equity -- Years
Ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows -- Years Ended December 31, 1996,
1995 and 1994.
Notes to Consolidated Financial Statements.
Financial Statement Schedules
Not Applicable. All required schedules for TrustCo and its subsidiaries
have been included in the consolidated financial statements or related
notes thereto.
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The following exhibits are incorporated herein by reference:*
Reg S-K
Exhibit No. Description
10(a) Employment Agreement dated January 1, 1992 and, Amendment No. 1
dated November 16, 1993, among TrustCo, the Bank and Robert A.
McCormick. Amendment No. 2 dated September 1, 1994, Amendment No.
3 dated February 13, 1995, Amendment No. 4 dated December 1, 1995,
among Trustco, the Bank and Robert A. McCormick, including Schedule A.
10(b) Employment Agreement dated June 21, 1994, and Amendment No. 1 dated
February 14, 1995, including Schedule A, among TrustCo, the Bank and
Robert T. Cushing.
10(c) Restated Employment Agreement dated June 21, 1994 and Amendment
No.1 dated February 14, 1995, including Schedule A, among TrustCo, the
Bank and Nancy A. McNamara.
10(d) Restated Employment Agreement dated June 21, 1994, and Amendment
No. 1 dated February 14, 1995,including Schedule A, among TrustCo, the
Bank and Ralph A. Pidgeon.
10(e) Restated Employment Agreement dated June 21, 1994, and Amendment
No.1 dated February 14, 1995, including Schedule A, among TrustCo, the
Bank and William F. Terry.
10(f) Restated 1985 TrustCo Bank Corp NY Stock Option Plan.
10(g) TrustCo Bank Corp NY Directors Stock Option Plan.
10(h) Restated Trustco Bank Supplemental Retirement Plan, dated June 24,
1994, Amendment No. 1, dated February 13, 1995 and Amendment No. 2,
dated December 1, 1995.
10(i) Restated Agreement for Supplemental Retirement Benefits for Robert A.
McCormick, dated June 24, 1994 and Amendment No. 1 dated December
1, 1995.
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The following exhibits are incorporated herein by reference:*
Reg S-K
Exhibit No. Description
10(j) Trustco Bank Executive Officer Incentive Plan dated December 22, 1993,
Amendment No. 1, dated October 18, 1994, Amendment No. 2, dated
February 13, 1995, and Amendment No. 3, dated December 1, 1995.
10(k) 1995 TrustCo Bank Corp NY Stock Option Plan.
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*The exhibits included under Exhibit 10 constitute all management contracts,
compensatory plans and arrangements required to be filed as an exhibit to this
form pursuant to Item 14(c) of this report.
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The following exhibits are filed herewith:*
Reg S-K
Exhibit No. Description
10(l) Amendment No. 2 to Restated Agreement for Supplemental Retirement
Benefits for Robert A. McCormick, dated March 29, 1996.
10(m) Second Restatement of Trustco Bank Supplemental Retirement Plan among
the Bank and each of Robert T. Cushing, Nancy A. McNamara, Ralph A.
Pidgeon, and William F. Terry, dated March 29, 1996.
10(n) Restatement of Trustco Bank Executive Officer Incentive Plan, dated
March 29, 1996.
11 Computation of Net Income Per Common Share.
13 Portions of Annual Report to Security Holders of TrustCo for the year
ended December 31, 1996.
21 List of Subsidiaries of TrustCo.
23 Independent Auditors' Consent of KPMG Peat Marwick LLP.
24 Power of Attorney.
27 Financial Data Schedules.
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*The exhibits included under Exhibit 10 constitute all management contracts,
compensatory plans and arrangements required to be filed as an exhibit to this
form pursuant to Item 14(c) of this report.
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Reports on Form 8-K:
On October 16, 1996, TrustCo filed a Current Report on Form 8-K reporting the
third quarter 1996 results.
On January 22, 1997, TrustCo filed a Current Report on Form 8-K reporting the
fourth quarter and year-end December 31, 1996, results.
On February 20, 1997, TrustCo filed a Current Report on Form 8-K reporting the
declaration of a cash dividend.
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SIGNATURES
Pursuant to the requirement 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
By/s/Robert A. McCormick
Robert A. McCormick
President and Chief
Executive Officer
(Principal Executive Officer)
By/s/Robert T. Cushing
Robert T. Cushing
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
Date: March 19, 1997
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
* Director March 18, 1997
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Barton A. Andreoli
* Director March 18, 1997
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Lionel O. Barthold
* Director March 18, 1997
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M. Norman Brickman
* Director March 18, 1997
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Robert A. McCormick
* Director March 18, 1997
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Nancy A. McNamara
* Director March 18, 1997
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Dr. Anthony J. Marinello
* Director March 18, 1997
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Dr. John S. Morris
* Director March 18, 1997
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Dr. James H. Murphy
* Director March 18, 1997
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Richard J. Murray, Jr.
* Director March 18, 1997
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Kenneth C. Petersen
* Director March 18, 1997
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William D. Powers
* Director March 18, 1997
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William J. Purdy
/s/William F. Terry Director March 18, 1997
William F. Terry
By:/s/William F. Terry
*William F. Terry, as Agent
Pursuant to Power of Attorney
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Exhibits Index
Reg S-K
Item 601
Exhibit No. Exhibit Page No.
10(a) Employment Agreement dated January 1, 1992 and,
Amendment No. 1 dated November 16, 1993, among TrustCo,
the Bank and Robert A. McCormick, filed as Exhibit 10(a);
and Amendment No. 2 dated September 1, 1994, and Amendment
No. 3 dated February 13, 1995, among TrustCo, the Bank
and Robert A. McCormick, filed as Exhibit 10(b) to TrustCo
Bank Corp NY's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, and Amendment No. 4 dated
December 1, 1995, to the Employment Agreement dated January
1, 1992, among Trustco, the Bank and Robert A. McCormick,
filed as exhibit 10(b) and Schedule A filed as Exhibit 10(c)
to TrustCo Bank Corp NY's Annual Report on Form 10-K, for
the fiscal year ended December 31, 1995, are incorporated
herein by reference.
10(b) Employment Agreement dated June 21, 1994, and Amendment
No. 1 dated February 14, 1995, among TrustCo, the Bank and
Robert T. Cushing filed as Exhibit 10(c) to TrustCo Bank
Corp NY's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, and Schedule A updating the
Employment Agreement dated June 21, 1994, among TrustCo,
the Bank and Robert T. Cushing, filed as Exhibit 10(e) to
TrustCo Bank Corp NY's Annual Report on Form 10-K, for the
year ended December 31, 1995, are incorporated herein by
reference.
10(c) Restated Employment Agreement dated June 21, 1994 and
Amendment No. 1 dated February 14, 1995, among TrustCo, the
Bank and Nancy A. McNamara, filed as Exhibit 10(d) to TrustCo
Bank Corp NY's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, and Schedule A updating the
Employment Agreement dated June 21, 1994, filed as Exhibit 10(i)
to TrustCo Bank corp NY's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, are incorporated herein by
reference.
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Exhibits Index
Reg S-K
Item 601
Exhibit No. Exhibit Page No.
10(d) Restated Employment Agreement dated June 21, 1994,
and Amendment No. 1 dated February 14, 1995, among
TrustCo, the Bank and Ralph A. Pidgeon, filed as.
Exhibit 10(f) to TrustCo Bank Corp NY's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994,
and Schedule A updating the Employment Agreement dated
June 21, 1994, filed as exhibit 10(i) to TrustCo Bank Corp
NY's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, are incorporated herein by reference.
10(e) Restated Employment Agreement dated June 21, 1994, and
Amendment No. 1 dated February 14, 1995, among TrustCo, the
Bank and William F. Terry, filed as. Exhibit 10(e) to TrustCo
Bank Corp NY's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, and Schedule A updating the
Employment Agreement dated June 21, 1994, filed as Exhibit
10(i) to TrustCo Bank Corp NY's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, are incorporated
herein by reference.
10(f) Restated 1985 TrustCo Bank Corp NY Stock Option Plan as
amended and restated effective July 1, 1994, filed as
Exhibit 10(h) to TrustCo Bank Corp NY's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, is
incorporated herein by reference.
10(g) TrustCo Bank Corp NY Directors Stock Option Plan filed as
Exhibit 10(g) to TrustCo Bank Corp NY's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, is
incorporated herein by reference.
10(h) Restated Trustco Bank Supplemental Retirement Plan, dated
June 24, 1994, Amendment No. 1, dated February 13, 1995 and
Amendment No. 2, dated December 1, 1995, filed as exhibit 10(l)
to TrustCo Bank Corp NY's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, are incorporated herein by
reference.
10(i) Restated Agreement for Supplemental Retirement Benefits for
Robert A. McCormick, dated June 24, 1994 and Amendment No.
1 dated December 1, 1995, filed as Exhibit 10(m) to TrustCo Bank
Corp NY's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, are incorporated herein by reference.
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Exhibits Index
Reg S-K
Item 601
Exhibit No. Exhibit Page No.
10(j) Trustco Bank Executive Officer Incentive Plan dated
December 22, 1993, Amendment No. 1, dated October 18,
1994, Amendment No. 2, dated February 13, 1995, and
Amendment No. 3, dated December 1, 1995, filed as
Exhibit 10(n) to TrustCo Bank Corp NY's Annual Report
on Form 10-K, for the fiscal year ended December 31,
1995, are incorporated herein by reference.
10(k) 1995 TrustCo Bank Corp NY Stock Option Plan, dated
June 20, 1995, filed on Form S-8 (file No. 33-60409)
dated June 20, 1995, is incorporated herein by reference.
10(l) Amendment No. 2 to Restated Agreement for Supplemental 19
Retirement Benefits for Robert A. McCormick, dated
March 29, 1996, is filed herewith.
10(m) Second Restatement of Trustco Bank Supplemental
Retirement Plan among the Bank and each of Robert T. 21
Cushing, Nancy A. McNamara, Ralph A. Pidgeon, and
William F. Terry, dated March 29, 1996, is filed herewith.
10(n) Restatement of Trustco Bank Executive Officer Incentive Plan, 42
dated March 29, 1996, is filed herewith.
11 Computation of Net Income Per Common Share is filed herewith. 56
-17-
<PAGE>
Exhibits Index
Reg S-K
Item 601
Exhibit No. Exhibit Page No.
13 Portions of Annual Report to Security Holders of TrustCo
for the year ended December 31, 1996, is filed herewith. 57
GRAPHICS APPENDIX
Cross
Reference
To Page
Of Annual
Omitted Charts Report
1 Taxable Equivalent Net Interest
Income 7
2 Dividends Per Share 15
3 Allowance for Loan Losses 17
4 Allowance to Loans
Outstanding 17
5 Efficiency Ratio 21
6 Noninterest Expense 21
The charts listed above were omitted from the EDGAR version of
Exhibit 13; however, the information depicted in the charts
was adequately discussed and/or displayed in the tabulation
formation within Management's Discussion and Analysis section
of the Annual Report.
21 List of Subsidiaries of TrustCo, filed herewith. 109
23 Independent Auditors' Consent of KPMG Peat Marwick LLP, 110
filed herewith.
24 Power of Attorney, filed herewith. 111
27 Financial Data Schedules, filed herewith. 112
-18-
<PAGE>
AMENDMENT NO. 2 TO
RESTATED AGREEMENT FOR SUPPLEMENTAL RETIREMENT BENEFITS
FOR ROBERT A. McCORMICK
WHEREAS, TrustCo Bank Corp NY, a New York corporation, Trustco Bank,
National Association (herein referred to as the "Corporation"), and Robert A.
McCormick (herein referred to as the "Executive") entered into an Agreement For
Supplemental Retirement Benefits dated as of January 1, 1992 (herein referred to
as the "Agreement"); and
WHEREAS, the Corporation and the Executive desire to amend the
Agreement;
NOW, THEREFORE, the Agreement is hereby amended effective January 1,
1996, as follows:
I.
The following is hereby added at the end of Article III of the
Agreement:
"3.5. Notwithstanding Section 3.3, if the Executive's
employment with the Corporation or one of its subsidiaries is
terminated for any reason, the Corporation, upon the petition of the
Executive, may pay to the Executive an amount equal to the Executive's
Supplemental Account Balance. The Corporation will not unreasonably
withhold its consent to the Executive's petition under this Section
3.5.
3.6. Notwithstanding Section 3.3, if the Executive becomes
disabled and petitions the Corporation after demonstrating a financial
hardship as a result of such disability, the Corporation will pay to
the Executive an amount equal to the Executive's Supplemental Account
Balance. In the event the Executive is so disabled as to be unable to
care for his own affairs, the Executive's duly qualified guardian or
other legal representative may petition the Corporation on the
Executive's behalf. The Committee will have the sole discretion to
determine financial hardship for purposes of this Section 3.6.
3.7. In the event that the Internal Revenue Service determines
that all or a portion of the benefits payable under the Plan will be
subject to federal income tax prior to distribution of such benefits,
the Corporation will distribute to the Executive that portion of his
benefit on which federal income tax is being imposed."
<PAGE> -19-
II.
The following is hereby added at the end of Article V of the Agreement:
"5.8. All expenses (including, without limitation, legal fees
and expenses) incurred by the Executive in connection with, or in
prosecuting or defending, any claim or controversy arising out of or
relating to this Agreement shall be paid by the Corporation."
III.
Section 6.1 of the Agreement is hereby deleted in its entirety and the
following is substituted in lieu thereof:
"6.1. Notwithstanding Section 3.3, in the event the
Executive's employment with the Corporation or one of its subsidiaries
is terminated for any reason within one year prior to, or at any time
after, a Change in Control, the Corporation will pay to the Executive
or his Beneficiary, a single lump sum equal to his Supplemental Account
Balance. In the event of a hostile Change in Control, the Corporation
will pay to the Executive or his Beneficiary, within ten (10) days
after such hostile Change in Control, a single lump sum equal to his
Supplemental Account Balance. For purposes of this Section 6.1, a
hostile Change in Control is defined as a transaction which the
executive officers of the Corporation unanimously determine is a
hostile Change of Control. IN WITNESS WHEREOF, the Corporation has
caused this Amendment
No. 2 to be executed this 29 day of March, 1996.
TRUSTCO BANK CORP NY
By: /s/William F. Terry
-----------------------
WIlliam F. Terry
Title: Sr. V.P. & Secretary
TRUSTCO BANK, NATIONAL ASSOCIATION
By: /s/William F. Terry
-----------------------
WIlliam F. Terry
Title: Sr. V.P. & Secretary
/s/Robert A. Mccormick
----------------------------------
Robert A. McCormick
-20-
<PAGE>
TRUSTCO BANK SUPPLEMENTAL RETIREMENT PLAN
21
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................... 1
SECTION 1.1. Actuarial Equivalent................................... 1
SECTION 1.2. Board of Directors..................................... 1
SECTION 1.3. Cause.................................................. 1
SECTION 1.4. Change in Control...................................... 1
SECTION 1.5. Code................................................... 2
SECTION 1.6. Committee.............................................. 2
SECTION 1.7. Corporation............................................ 2
SECTION 1.8. Credited Years of Service.............................. 2
SECTION 1.9. Determination Date..................................... 2
SECTION 1.10. Earnings............................................... 3
SECTION 1.11. Employee............................................... 3
SECTION 1.12. Final Average Earnings................................. 3
SECTION 1.13. Normal Retirement Date................................. 4
SECTION 1.14. Participant............................................ 4
SECTION 1.15. Plan................................................... 4
SECTION 1.16. Plan Year.............................................. 4
SECTION 1.17. Primary Social Security Benefit........................ 4
SECTION 1.18. Projected Accrued Benefit.............................. 4
SECTION 1.19. Projected Earnings..................................... 4
SECTION 1.20. Projected Final Average Earnings....................... 5
SECTION 1.21. Projected Primary Social Security
Benefit............................................. 5
SECTION 1.22. Projected Total Retirement Benefit..................... 5
SECTION 1.23. Projected Years of Service............................. 5
SECTION 1.24. Retirement Plan........................................ 5
SECTION 1.25. Supplemental Account Balance........................... 5
SECTION 1.26. Supplemental Retirement Benefit........................ 5
SECTION 1.27. Total Retirement Benefit............................... 6
SECTION 1.28. Valuation Date......................................... 7
ARTICLE II PARTICIPATION................................................. 7
ARTICLE III BENEFITS...................................................... 7
SECTION 3.1. Benefit Amount......................................... 7
SECTION 3.2. Supplemental Account Balance at
December 31, 1993................................... 7
SECTION 3.3. Redetermination of Supplemental Account
Balance on or Before Normal
Retirement Date..................................... 8
SECTION 3.4. Determination of Supplemental Account
Balance After Normal Retirement Date................... 9
SECTION 3.5. Monthly Allocation Date................................ 10
SECTION 3.6. Reduction of Supplemental Account
Balance................................................ 10
ARTICLE IV PAYMENT OF BENEFITS........................................... 10
i
22
<PAGE>
ARTICLE V CLAIMS........................................................ 11
ARTICLE VI AMENDMENT AND TERMINATION..................................... 12
ARTICLE VII ADMINISTRATION................................................ 12
ARTICLE VIII MISCELLANEOUS................................................. 12
ARTICLE IX CHANGE OF CONTROL............................................. 13
ii
23
<PAGE>
SECOND RESTATEMENT OF
TRUSTCO BANK SUPPLEMENTAL RETIREMENT PLAN
WHEREAS, Trustco Bank, National Association, a New York corporation
(the "Corporation") established effective as of November 21, 1989, the Trustco
Bank Supplemental Retirement Plan (the "Plan"); and
WHEREAS, the Corporation desires to amend and restate the Plan
effective as of January 1, 1996;
NOW, THEREFORE, effective as of January 1, 1996, the Plan is hereby
amended and restated in its entirety so that it shall read as follows:
ARTICLE I
DEFINITIONS
Except as otherwise specified herein, all capitalized terms shall have
the same meanings as such terms have under the Retirement Plan of Trustco Bank,
National Association.
SECTION 1.1. "Actuarial Equivalent" means equality in value of the
aggregate amounts expected to be received under different forms of payment,
based on the UP-1984 Mortality Table, with 7 1/2% interest. When determining the
amount of a Participant's lump sum distribution or the present value of a
Participant's Accrued Benefit under the Retirement Plan, the interest rates used
to make an Actuarial Equivalent determination are the immediate and deferred
annuity rates the Pension Benefit Guaranty Corporation ("PBGC") would use for a
trusteed single employer plan to value a benefit upon termination of an
insufficient trusteed single- employer plan. In the event of a distribution made
during a calendar year, the applicable PBGC interest rates for the month of
January preceding the distribution shall be used to make an Actuarial Equivalent
determination.
SECTION 1.2. "Board of Directors" means the Board of
Directors of Trustco Bank, National Association.
SECTION 1.3. "Cause" means conduct of a Participant which is finally
adjudged to be knowingly fraudulent, deliberately dishonest or willful
misconduct. The Committee shall have sole and uncontrolled discretion with
respect to the application of the provisions of this Section 1.3 and any
determination shall be conclusive and binding upon the Participant and all other
persons.
SECTION 1.4. "Change in Control" means any of the following events: (a)
any individual, corporation (other than the Corporation), partnership, trust,
association, pool, syndicate, or any other entity or any group of persons acting
in concert becomes the beneficial owner, as that concept is defined in Rule
13d-3 promulgated by the Securities and Exchange Commission under the
24
<PAGE>
Securities Exchange Act of 1934, of securities of the Corporation possessing
twenty percent (20%) or more of the voting power for the election of Directors
of the Corporation; (b) there shall be consummated any consolidation, merger or
other business combination involving the Corporation or the securities of the
Corporation in which holders of voting securities of the Corporation immediately
prior to such consummation own, as a group, immediately after such consummation,
voting securities of the Corporation (or, if the Corporation does not survive
such transaction, voting securities of the corporation surviving such
transaction) having less than fifty percent (50%) of the total voting power in
an election of Directors of the Corporation (or such other surviving
corporation); (c) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Directors of the Corporation cease
for any reason to constitute at least a majority thereof unless the election, or
the nomination for election by the Corporation's shareholders, of each new
Director of the Corporation was approved by a vote of at least two-thirds of the
Directors of the Corporation then still in office who were Directors of the
Corporation at the beginning of any such period; (d) removal by the stockholders
of all or any of the incumbent Directors of the Corporation other than a removal
for Cause; or (e) there shall be consummated any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Corporation (on a consolidated basis) to
a party which is not controlled by or under common control with the Corporation.
SECTION 1.5. "Code" means the Internal Revenue Code of 1986,
as amended.
SECTION 1.6. "Committee" means the committee appointed by the
Board of Directors to administer the Plan.
SECTION 1.7. "Corporation" means Trustco Bank, National
Association.
SECTION 1.8. "Credited Years of Service" means (i) as of a
Determination Date, a Participant's Years of Benefit Service, as calculated
under the Retirement Plan without taking into account the maximum limit on Years
of Benefit Service set forth in the Retirement Plan, and (ii) as of a
Participant's Normal Retirement Date, a Participant's Years of Benefit Service,
as calculated under the Retirement Plan without taking into account the maximum
limit on Years of Benefit Service set forth in the Retirement Plan, plus the
number of Plan Years (and fractions thereof) from the Determination Date to his
Normal Retirement Date.
SECTION 1.9. "Determination Date" means the date of termination of
employment or the date the Corporation elects to distribute the present value of
the Supplemental Retirement Benefit of the Participant or Beneficiary in a
single lump sum.
25
<PAGE>
SECTION 1.10. "Earnings" means the calendar year earned income, wages,
salaries, and fees for professional services, and other amounts received for
personal services actually rendered in the course of employment with the
Corporation (including, but not limited to, commissions paid to salesmen,
compensation for services on the basis of a percentage of profits, commissions
on insurance premiums, tips and bonuses, and amounts paid under the Trustco Bank
Executive Officer Incentive Plan and the Trustco Bank Executive Incentive Plan)
paid or accrued to a Participant by the Company and excluding the following:
(a) contributions by the Corporation to a plan of deferred
compensation which are not included in a Participant's gross income for
the taxable years in which contributed or contributions by the
Corporation under a simplified employee pension plan to the extent the
contributions are deductible by the Participant, or any distributions
from a plan of deferred compensation;
(b) amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by a Participant
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
(c) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option;
(d) other amounts which received special tax benefits, or
contributions made by the Corporation (whether or not under a salary
reduction agreement) toward the purchase of an annuity described in
Code Section 403(b) (whether or not the amounts are actually excludable
from the gross income of a Participant); and
(e) amounts paid from any supplemental retirement plan
maintained by the Corporation.
Earnings includes any amounts contributed by the Corporation or any
related employer on behalf of a Participant pursuant to a salary reduction
agreement which are not includable in the gross income of a Participant pursuant
to Code Section 125, 401(a)(8), 401(k), 402(h) or 403(b).
SECTION 1.11. "Employee" means any person, except Robert A.
McCormick, who is employed as an executive officer by the
Corporation or any of its subsidiaries.
SECTION 1.12. "Final Average Earnings" as of any Determination Date
shall be equal to the average of a Participant's highest five (5) consecutive
Plan Years of Earnings out of the ten (10) consecutive Plan Years immediately
preceding the Determination Date.
26
<PAGE>
Provided, however, if a Participant's Earnings for the Plan Year in
which his employment with the Corporation terminates for any reason is greater
than his Earnings during the first Plan Year of the averaging period to be used,
the first Plan Year Earnings shall be disregarded and the Earnings of the
Participant during the Plan Year in which his employment terminates shall be
taken into account.
SECTION 1.13. "Normal Retirement Date" means the first day of the month
coinciding with or next following the month in which a Participant attains age
65.
SECTION 1.14. "Participant" means any Employee who is
selected by the Board of Directors for participation in the Plan as
provided in Article II.
SECTION 1.15. "Plan" means the Trustco Bank Supplemental Retirement
Plan as set forth herein and as the same may be amended from time to time.
SECTION 1.16. "Plan Year" means the twelve (12) month period beginning
on any January 1 and ending on the following December 31.
SECTION 1.17. "Primary Social Security Benefit" means the annual amount
that would be available to a Participant at social security retirement age under
the provisions of Title II of the Social Security Act without regard to any
changes in the wage base or benefit levels that take effect after that date,
based on the assumption that he will continue to receive until social security
retirement age compensation which would be treated as wages for purposes of the
Social Security Act at the same rate as he received such compensation at the
time of retirement, death, disability or termination of employment if such event
precedes his attainment of social security retirement age.
SECTION 1.18. "Projected Accrued Benefit" under the Retirement Plan
means the Participant's Accrued Benefit under the Retirement Plan as of his
Normal Retirement Date, based on Projected Earnings, Projected Final Average
Earnings, Projected Primary Social Security Benefit, and Projected Years of
Service.
SECTION 1.19. "Projected Earnings" means the estimated annual earnings
of a Participant for a future Plan Year and is equal to Earnings, excluding
bonus, for the year ending on the Valuation Date increased by
(a) the assumed future bonus payments, and
(b) the assumed future cost of living increases for such
year.
27
<PAGE>
The rate of assumed future bonus payments and the rate of assumed future cost of
living increases shall be determined as of each Valuation Date by the Committee.
SECTION 1.20. "Projected Final Average Earnings" means the average of
the highest five (5) consecutive Plan Year's Projected Earnings out of the ten
(10) consecutive Plan Years immediately preceding the Normal Retirement Date. If
the Participant is within ten (10) years of his Normal Retirement Date, his
actual Earnings, including bonuses, will be used for any Plan Year prior to the
Valuation Date.
Provided, however, if the Participant's Earnings for the Plan Year in
which his employment with the Corporation terminates for any reason is greater
than his Earnings during the first Plan Year of the averaging period to be used,
the first Plan Year Earnings shall be disregarded and the Earnings of the
Participant during the Plan Year in which his employment terminates shall be
taken into account.
SECTION 1.21. "Projected Primary Social Security Benefit" means the
Participant's estimated Primary Social Security Benefit as of the January 1st of
the year during which he attains the Social Security retirement age assuming
that the Social Security wage base and the Social Security cost of living
increases are equal to the assumed future cost of living increases used for
projecting earnings.
SECTION 1.22. "Projected Total Retirement Benefit" means the Total
Retirement Benefit of a Participant as of his Normal Retirement Date, based on
Projected Earnings, Projected Final Average Earnings, Projected Primary Social
Security Benefits, and Projected Years of Service.
SECTION 1.23. "Projected Years of Service" means the completed Credited
Years of Service at the Participant's Normal Retirement Date assuming the
Participant continues to work forty (40) hours per week from the Valuation Date
to his Normal Retirement Date.
SECTION 1.24. "Retirement Plan" means the Retirement Plan of
Trustco Bank, National Association.
SECTION 1.25. "Supplemental Account Balance" means a bookkeeping
account maintained by the Corporation which reflects a Participant's benefit
under the Plan as calculated under Article III herein.
SECTION 1.26. "Supplemental Retirement Benefit" means the
benefit calculated in accordance with Article III of the Plan.
28
<PAGE>
SECTION 1.27. "Total Retirement Benefit" for an individual who is a
Participant in the Plan on December 31, 1993 means, as of any Determination
Date, the greatest of the following formulas:
(a) A career average pension equal to, for each year of
employment:
(i) 1.1% of the first $5,000 of Earnings, plus,
(ii) 2.0% of Earnings in excess of $5,000, or
(b) A pension equal to:
(i) 1% times Final Average Earnings times Credited
Years of Service at Normal Retirement Date up to a
maximum of 40 years, times
(ii) Credited Years of Service as of the Determination
Date divided by Credited Years of Service at Normal
Retirement Date, or
(c) A pension equal to:
(i) 2% times Final Average Earnings times Credited
Years of Service at Normal Retirement Date up to a
maximum of 40 years, less
(ii) 2% times the Primary Social Security Benefit times
Credited Years of Service at Normal Retirement Date
up to a maximum of 25 years, times
(iii) Credited Years of Service at the Determination Date
divided by Credited Years of Service at Normal
Retirement Date, or
(d) A pension equal to:
(i) the Accrued Benefit under the Retirement Plan as of
December 31, 1988 which is not limited by the maximum
benefit limit under Code Section 415 and the maximum
compensation limit under Code Section 401(a)(17),
plus
(ii) 1.25% times Final Average Earnings times credited
Years of Service after January 1, 1989 up to a
maximum of X years at the Determination Date, plus
(iii) .65% times Final Average Earnings in excess of the
Covered Compensation level times Credited Years of
Service after January 1, 1989 up to a maximum of X
years at the Determination Date.
29
<PAGE>
For purposes of subparagraphs (ii) and (iii), X is equal to 40
years minus the Credited Years of service at January 1, 1989.
For an individual who becomes a Participant in the Plan on or after
January 1, 1994, "Total Retirement Benefit" means the formula described in
subparagraph (d) of this Section 1.27.
SECTION 1.28. "Valuation Date" means December 31 of each
year.
ARTICLE II
PARTICIPATION
SECTION 2.1. Participation in the Plan shall be limited to a select
group of Employees of the Corporation and its subsidiaries who are management or
highly compensated Employees within the meaning of Section 201(2) of the
Employee Retirement Income Security Act of 1974, as amended, and who have been
selected by the Board of Directors to participate in the Plan; provided,
however, that Robert A. McCormick shall not be a Participant in the Plan.
SECTION 2.2. Each Employee selected by the Board of Directors to
participate in the Plan shall indicate his agreement to the terms of the Plan by
executing a Participation Agreement, a form of which is attached hereto as
Exhibit A. Subject to Article VI, an Employee and the Corporation may agree to
vary the terms of the Plan as to such Employee.
ARTICLE III
BENEFITS
SECTION 3.1. Benefit Amount. Except in the case of termination for
Cause, in which event no benefit shall be payable under the Plan, if a
Participant's employment with the Corporation and all of its subsidiaries is
terminated (a) by death or Disability, (b) after the Participant has completed
five (5) years of Vesting Service, or (c) after the Participant has satisfied
the requirements for early retirement under the Retirement Plan, the Participant
will be entitled to a benefit in an amount equal to his Supplemental Account
Balance payable at such time and in such manner as provided herein.
SECTION 3.2. Supplemental Account Balance at December 31, 1993. The
Participant's Supplemental Account Balance at December 31, 1993, is equal to the
lump sum Actuarial Equivalent of the Participant's Supplemental Retirement
Benefit payable under the provisions of the Plan in effect on December 31, 1993.
The Actuarial Equivalent shall be determined based on the annual Supplemental
Retirement Benefit beginning on the Participant's Normal Retirement Date but
based on his Final Average Earnings and Credited Years of Service as of December
31, 1993.
30
<PAGE>
SECTION 3.3. Redetermination of Supplemental Account Balance
on or Before Normal Retirement Date. The Participant's
Supplemental Account Balance shall be redetermined on each
Valuation Date and on his Normal Retirement Date.
(a) The Supplemental Account Balance on any Valuation Date
after December 31, 1993 is equal to:
(i) the Supplemental Account Balance as of the
immediately preceding Valuation Date, plus
(ii) the Account Balance Increment for the Plan Year
ending on the Valuation Date; less
(iii) the amount of his Supplemental Retirement Benefit
distributed under the Plan pursuant to Section 4.4,
or its successor, since the immediately preceding
Valuation Date.
(b) (1) The Account Balance Increment for the Plan Year
ending December 31, 1994 shall be determined as of
January 1, 1994 and is equal to:
(i) the projected Supplemental Account Balance at
Normal Retirement Date, measured as of December 31,
1993, minus
(ii) the accrued pension expense as determined by the
Retirement Plan actuary under the Statement of
Financial Accounting Standards No. 87 as of December
31, 1993, divided by
(iii) the number of years and months from December 31,
1993 to the Participant's Normal Retirement Date,
minus
(iv) the Supplemental Account Balance as of December 31,
1993, plus
(v) the accrued pension expense as determined by the
Retirement Plan actuary under the Statement of
Financial Accounting Standards No. 87 as of December
31, 1993.
Notwithstanding the above, no Account Balance Increment for
the Plan Year ending December 31, 1994 shall be less than
zero.
(2) The Account Balance Increment for any Plan Year
beginning on and after January 1, 1995 and through the Plan
Year in which a Participant's Normal Retirement Date
31
<PAGE>
occurs shall be determined on the immediately preceding
Valuation Date and is equal to:
(i) the projected Supplemental Account Balance at
Normal Retirement Date, measured as of the
immediately preceding Valuation Date, minus
(ii) the Supplemental Account Balance as of the
immediately preceding Valuation Date, divided by
(iii) the number of years and months from the immediately
preceding Valuation Date to the Participant's
Normal Retirement Date.
Notwithstanding the above, no Account Balance Increment for
any Plan Year beginning on and after January 1, 1995 shall be
less than zero.
A portion of the Account Balance Increment
constitutes interest which is determined by using the Pension
Benefit Guaranty Corporation interest rate in effect as of the
first day of the applicable Plan Year.
(c) The Participant's projected Supplemental Account Balance
at Normal Retirement Date is equal to the lump sum
Actuarial Equivalent of:
(i) his Projected Total Retirement Benefit, less
(ii) the amount of his Projected Accrued Benefit under
the Retirement Plan; less
(iii) the amount of his Supplemental Retirement Benefit
previously distributed under the Plan pursuant to
Section 4.4, or its successor.
SECTION 3.4. Determination of Supplemental Account Balance After Normal
Retirement Date. If a Participant remains in the employment of the Corporation
beyond his Normal Retirement Date, his Supplemental Account Balance shall be
increased as of each Valuation Date subsequent to his Normal Retirement Date by
an amount equal to:
(a) the interest on the Supplemental Account Balance as of the
immediately preceding Valuation Date (adjusted for any
distributions made to the Participant in accordance with
Section 4.4 since the immediately preceding Valuation Date) at
the Pension Benefit Guaranty Corporation interest rate in
effect on the Valuation Date, plus
32
<PAGE>
(b) the same percentage of Earnings as is allocated as of such
Valuation Date to participants under the Profit Sharing Plan
of Trustco Bank, National Association.
For the Valuation Date immediately following the Participant's Normal Retirement
Date, his Account Balance Increment shall be the greater of the amount
determined under Section 3.3 or the amount determined under this Section 3.4.
SECTION 3.5. Monthly Allocation Date. The Supplemental
Account Balance on the last day of any month during the Plan Year
(the "Monthly Allocation Date") shall be equal to:
(a) the Supplemental Account Balance as of the immediately
preceding Valuation Date, plus
(b) the Account Balance Increment, times the quotient of the
number of months from the immediately preceding Valuation Date
to the Monthly Allocation Date, divided by 12.
SECTION 3.6. Reduction of Supplemental Account Balance. A Participant's
Supplemental Account Balance will be reduced by the amount of any distribution
made to the Participant pursuant to Sections 4.3 or 4.4.
ARTICLE IV
PAYMENT OF BENEFITS
SECTION 4.1. Except in the case of termination for Cause, in which
event no benefit shall be payable under the Plan, and except as otherwise
provided in Sections 4.2 and 9.1, if a Participant's employment with the
Corporation and all of its subsidiaries is terminated (a) after the Participant
has completed five (5) years of Vesting Service, or (b) after the Participant
has satisfied the requirements for early retirement under the Retirement Plan,
the Participant will be entitled to his Supplemental Account Balance determined
at the next Monthly Allocation Date.
SECTION 4.2. If a Participant's employment with the Corporation or one
of its subsidiaries is terminated (a) by retirement, (b) by disability, or (c)
by death, the Participant or his Beneficiary will be entitled to his
Supplemental Account Balance determined at the next Valuation Date.
SECTION 4.3. The Supplemental Account Balance shall commence to be paid
to a Participant or his Beneficiary at such time as benefits become payable to
the Participant under the Retirement Plan. The Supplemental Account Balance may
be paid in any one of the benefit forms provided under the Retirement Plan or in
one lump sum or a series of installments, as elected by the Participant or his
Beneficiary.
33
<PAGE>
SECTION 4.4. Notwithstanding Section 4.3, the Corporation, in its
discretion, may at any time elect to distribute to a Participant or his
Beneficiary a single lump sum equal to the Supplemental Account Balance as of a
date specified by the Corporation. The Actuarial Equivalent of any single lump
sum distribution will be included in the amount offset under Section
3.3(c)(iii).
SECTION 4.5. Notwithstanding Section 4.3, if a Participant's employment
with the Corporation or one of its subsidiaries is terminated for any reason,
the Corporation, upon the petition of the Participant, may pay to the
Participant an amount equal to the Participant's Supplemental Account Balance.
The Corporation will not unreasonably withhold its consent to a Participant's
petition under this Section 4.5.
SECTION 4.6. Notwithstanding Section 4.3, if a Participant becomes
disabled and petitions the Corporation after demonstrating a financial hardship
as a result of such disability, the Corporation will pay to the Participant an
amount equal to the Participant's Supplemental Account Balance. In the event the
Participant is so disabled as to be unable to care for his own affairs, the
Participant's duly qualified guardian or other legal representative may petition
the Corporation on the Participant's behalf. The Committee will have the sole
discretion to determine financial hardship for purposes of this Section 4.6.
SECTION 4.7. In the event that the Internal Revenue Service determines
that all or a portion of the benefits payable under the Plan will be subject to
federal income tax prior to distribution of such benefits, the Corporation will
distribute to the Participant that portion of his benefit on which federal
income tax is being imposed.
ARTICLE V
CLAIMS
SECTION 5.1. If a claim for benefits under the Plan is denied, the
Committee will provide a written notice of the denial setting forth the specific
reasons for the denial, a description of any additional material or information
necessary for a claimant to perfect a claim, and an explanation of why such
material or information is necessary and appropriate information as to the steps
to be taken for the claim to be submitted for review. A claimant may request a
review of a denial. Such requests should be submitted to the Committee, in
writing within 60 days after receipt of the denial notice, stating the reasons
for requesting the review. A claimant may review pertinent documents and submit
issues and comments in writing. A decision will be made on the review of the
denial of a claim not later than 60 days after the Committee's receipt of a
request for review unless special circumstances require an extension of time for
processing, in which
34
<PAGE>
case a decision shall be rendered as soon as possible but not later than 120
days after receipt of a request for review. The decision on review will be in
writing to the claimant and shall include specific reasons for the decision.
ARTICLE VI
AMENDMENT AND TERMINATION
SECTION 6.1. The Board of Directors may amend or terminate the Plan at
any time; provided, however, that no such amendment or termination shall have
the effect of reducing a Participant's benefit accrued under the Plan as of the
date of such amendment or termination and the Participant shall be entitled to
receive such benefit as provided in Article III.
ARTICLE VII
ADMINISTRATION
SECTION 7.1. The Plan shall be administered by the Committee in
accordance with its terms, for the exclusive benefit of Participants. The powers
and duties of the Committee shall be similar to those powers and duties granted
to the Plan Administrator of the Retirement Plan. Any interpretation or
construction of Plan terms or any determination by the Committee with respect to
Plan benefits, etc., shall be conclusive and binding with respect to
Participants and all other persons.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. The Company intends that the Plan constitute an unfunded
plan maintained for the purposes of providing deferred compensation for a select
group of management or highly compensated employees.
SECTION 8.2. Nothing contained in this Plan and no action taken
pursuant to the provisions of this Plan shall give the Participant the right to
be retained in the employ of the Corporation or its subsidiaries or interfere
with the right of the Corporation or its subsidiaries to discharge the
Participant at any time, nor shall it give the Corporation or its subsidiaries
the right to require the Participant to remain in their employ or interfere with
the Participant's right to terminate his employment at any time.
SECTION 8.3. No benefit payable at any time under this Plan shall be
subject in any manner to alienation, sale, transfer, assignment, pledge,
attachment or encumbrance of any kind.
SECTION 8.4. All rights hereunder shall be governed by and construed
according to the laws of the State of New York, except to the extent such laws
are preempted by the laws of the United States
35
<PAGE>
of America. In the event any provision of this Plan is held invalid, void or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of this Plan.
SECTION 8.5. Nothing contained in this Plan and no action taken
pursuant to the provisions of this Plan shall create or be construed to create a
trust of any kind or a fiduciary relationship between the Corporation or its
subsidiaries and the Participant or any other person. To the extent that any
person acquires the right to receive payment from the Corporation under this
Plan, such right shall be no greater than the right of any unsecured general
creditor of the Corporation.
SECTION 8.6. The terms of this Plan shall be binding upon and inure to
the benefit of the Corporation, its successors and assigns, and the Participant
and his heirs and legal representatives.
SECTION 8.7. If a Participant becomes entitled to a distribution of
benefits under the Plan, and if at such time the Participant has outstanding any
debt, obligation, or other liability representing an amount owing to the
Corporation or its subsidiaries, then the Corporation may offset such amount so
owing against the amount of benefits otherwise distributable. Such determination
shall be made by the Committee.
SECTION 8.8. The Corporation shall, to the extent permitted by law,
have the right to deduct from any payments of any kind with respect to the
benefit otherwise due to the Participant any Federal, state or local taxes of
any kind required by law to be withheld from such payments.
SECTION 8.9. All expenses (including, without limitation, legal fees
and expenses) incurred by a Participant in connection with, or in prosecuting or
defending, any claim or controversy arising out of or relating to the Plan shall
be paid by the Corporation.
ARTICLE IX
CHANGE OF CONTROL
SECTION 9.1. Notwithstanding Section 4.3, in the event a Participant's
employment with the Corporation or one of its subsidiaries is terminated for any
reason within one year prior to, or at any time after, a Change in Control, the
Corporation will pay to the Participant or his Beneficiary a single lump sum
equal to his Supplemental Account Balance. In the event of a hostile Change in
Control, the Corporation will pay to the Participant or his Beneficiary within
10 days after such hostile Change in Control, a single lump sum equal to his
Supplemental Account Balance. For purposes of this Section 9.1, a hostile Change
in Control is
36
<PAGE>
defined as a transaction which the executive officers of the Corporation
unanimously determine is a hostile Change of Control.
IN WITNESS WHEREOF, the Corporation has caused this Second Restatement
of the Plan to be executed this 29 day of March , 1996.
TRUSTCO BANK, NATIONAL ASSOCIATION
By: /s/William F. Terry
-----------------------
William F. Terry
Sr. V.P. & Secretary
37
<PAGE>
EXHIBIT A
TRUSTCO BANK SUPPLEMENTAL RETIREMENT PLAN
PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of March 29, 1996 between Trustco Bank,
National Association ("Corporation") and William F. Terry ("Participant").
The Corporation and the Participant mutually agree as follows:
1. The Participant has received a copy of the Trustco Bank
Supplemental Retirement Plan ("Plan") and has read and understands
the Plan.
2. By completion of this Agreement, the Participant agrees
to comply with the terms of the Plan in all respects.
3. All provisions of the Plan are hereby made a part of this
Agreement.
4. The following special provisions are applicable to the
Participant's participation in the Plan: __________________________________
____________________________________________________________________________
____________________________________________________________________________
TRUSTCO BANK, NATIONAL ASSOCIATION
3/29/96 By: /s/Robert A. McCormick
Date ------------------------
Robert A. McCormick
Title: President
4/2/96 /s/William F. Terry
Date -------------------
William F. Terry
Participant
38
<PAGE>
EXHIBIT A
TRUSTCO BANK SUPPLEMENTAL RETIREMENT PLAN
PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of March 29, 1996 between Trustco Bank,
National Association ("Corporation") and Nancy A. McNamaara ("Participant").
The Corporation and the Participant mutually agree as follows:
1. The Participant has received a copy of the Trustco Bank
Supplemental Retirement Plan ("Plan") and has read and understands
the Plan.
2. By completion of this Agreement, the Participant agrees
to comply with the terms of the Plan in all respects.
3. All provisions of the Plan are hereby made a part of this
Agreement.
4. The following special provisions are applicable to the
Participant's participation in the Plan: __________________________________
____________________________________________________________________________
____________________________________________________________________________
TRUSTCO BANK, NATIONAL ASSOCIATION
3/29/96 By: /s/William F. Terry
Date ---------------------
William F. Terry
Title: Sr. V.P. & Secretary
4/8/96 /s/Nancy A. McNamara
Date -------------------
Nancy A. McNamara
Participant
39
<PAGE>
EXHIBIT A
TRUSTCO BANK SUPPLEMENTAL RETIREMENT PLAN
PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of March 29, 1996 between Trustco Bank,
National Association ("Corporation") and Ralph A. Pidgeon ("Participant").
The Corporation and the Participant mutually agree as follows:
1. The Participant has received a copy of the Trustco Bank
Supplemental Retirement Plan ("Plan") and has read and understands
the Plan.
2. By completion of this Agreement, the Participant agrees
to comply with the terms of the Plan in all respects.
3. All provisions of the Plan are hereby made a part of this
Agreement.
4. The following special provisions are applicable to the
Participant's participation in the Plan: __________________________________
____________________________________________________________________________
____________________________________________________________________________
TRUSTCO BANK, NATIONAL ASSOCIATION
3/29/96 By: /s/William F. Terry
Date ---------------------
William F. Terry
Title: Sr. V.P. & Secretary
4/2/96 /s/Ralph A. Pidgeon
Date -------------------
Ralph A. Pidgeon
Participant
40
<PAGE>
EXHIBIT A
TRUSTCO BANK SUPPLEMENTAL RETIREMENT PLAN
PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of March 29, 1996 between Trustco Bank,
National Association ("Corporation") and Robert T. Cushing ("Participant").
The Corporation and the Participant mutually agree as follows:
1. The Participant has received a copy of the Trustco Bank
Supplemental Retirement Plan ("Plan") and has read and understands
the Plan.
2. By completion of this Agreement, the Participant agrees
to comply with the terms of the Plan in all respects.
3. All provisions of the Plan are hereby made a part of this
Agreement.
4. The following special provisions are applicable to the
Participant's participation in the Plan: Five year vesting requirement
eliminated in the event of a change of control.
TRUSTCO BANK, NATIONAL ASSOCIATION
3/29/96 By: /s/William F. Terry
Date ---------------------
William F. Terry
Title: Sr. V.P. & Secretary
4/2/96 /s/Robert T. Cushing
Date -------------------
Robert T. Cushing
Participant
41
<PAGE>
RESTATEMENT OF
TRUSTCO BANK
EXECUTIVE OFFICER INCENTIVE PLAN
42
<PAGE>
TABLE OF CONTENTS
Page No.
ARTICLE I, DEFINITIONS 1
ARTICLE II, PARTICIPATION 5
ARTICLE III, INCENTIVE AWARDS 6
ARTICLE IV, DEFERRAL OF INCENTIVE AWARDS 7
ARTICLE V, PAYMENT OF DEFERRED INCENTIVE AWARDS 8
ARTICLE VI, CLAIMS 9
ARTICLE VII, AMENDMENT AND TERMINATION 10
ARTICLE VIII, ADMINISTRATION 10
ARTICLE IX, MISCELLANEOUS 10
43
<PAGE>
RESTATEMENT OF
TRUSTCO BANK
EXECUTIVE OFFICER INCENTIVE PLAN
WHEREAS, Trustco Bank, National Association (herein referred to as the
"Corporation") maintains the Trustco Bank Executive Officer Incentive Plan
(herein referred to as the "Plan"); and
WHEREAS, the Corporation desires to amend the Plan and to
restate the Plan in its entirety effective as of January 1, 1996;
NOW, THEREFORE, the Company does hereby amend and restate the Plan in
its entirety effective as of January 1, 1996, so that it shall read as follows:
ARTICLE I
DEFINITIONS
Section 1.1. "Base Salary" means the annual salary payable to a
Participant, including deferrals under Code Section 125 and exclusive of any
bonuses, incentive awards, plan contributions or any other fringe benefit
payable during the Plan Year.
Section 1.2. "Beneficiary" means the person or persons designated by a
Participant in writing to receive any benefits under this Plan upon the
Participant's death. If a Participant fails to designate a Beneficiary, if no
such Beneficiary is living upon the death of such Participant, or if such
designation is legally ineffective, then "Beneficiary" shall mean the trustee of
the Participant's revocable living trust, and if none the trustee of the
Participant's testamentary trust, and if none the personal representative of the
Participant's estate.
44
<PAGE>
Section 1.3. "Board of Directors" means the Board of
Directors of Trustco Bank, National Association.
Section 1.4. "Cause" means conduct of a Participant which is finally
adjudged to be knowingly fraudulent, deliberately dishonest or willful
misconduct. The Committee shall have sole and uncontrolled discretion with
respect to the application of the provisions of this Section 1.4 and any
determination shall be conclusive and binding upon the Participant and all other
persons.
Section 1.5. "Change in Control" means any of the following events: (a)
any individual, corporation (other than the Corporation), partnership, trust,
association, pool, syndicate, or any other entity or any group of persons acting
in concert becomes the beneficial owner, as that concept is defined in Rule
13d-3 promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, of securities of the Corporation possessing twenty percent
(20%) or more of the voting power for the election of Directors of the
Corporation; (b) there shall be consummated any consolidation, merger or other
business combination involving the Corporation or the securities of the
Corporation in which holders of voting securities of the Corporation immediately
prior to such consummation own, as a group, immediately after such consummation,
voting securities of the Corporation (or, if the Corporation does not survive
such transaction, voting securities of the corporation surviving such
transaction) having less than fifty percent (50%) of the total voting power in
an election of Directors of the Corporation (or such other surviving
corporation);
45
<PAGE>
(c) during any period of two consecutive years, individuals who at the beginning
of such period constitute the Directors of the Corporation cease for any reason
to constitute at least a majority thereof unless the election, or the nomination
for election by the Corporation's shareholders, of each new Director of the
Corporation was approved by a vote of at least two-thirds of the Directors of
the Corporation then still in office who were Directors of the Corporation at
the beginning of any such period; (d) removal by the stockholders of all or any
of the incumbent Directors of the Corporation other than a removal for Cause; or
(e) there shall be consummated any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all, or substantially
all, of the assets of the Corporation (on a consolidated basis) to a party which
is not controlled by or under common control with the Corporation.
Section 1.6. "Code" means the Internal Revenue Code of 1986,
as amended.
Section 1.7. "Committee" means the committee appointed by the
Board of Directors to administer the Plan.
Section 1.8. "Corporation" means Trustco Bank, National
Association.
Section 1.9. "Deferred Compensation Account" means the bookkeeping
account established for each Participant pursuant to Section 4.2 herein.
Section 1.10. "Incentive Award" means the awards made
pursuant to Section 3.1 herein.
46
<PAGE>
Section 1.11. "Net Income" means net income of the Corporation
exclusive of any related restructure charges directly in conjunction with a
merger or acquisition.
Section 1.12. "Participant" means any executive officer of the
Corporation who is approved by the Board of Directors for participation in the
Plan as provided in Article II.
Section 1.13. "Plan" means the Trustco Bank Executive Officer Incentive
Plan as set forth herein and as the same may be amended from time to time.
Section 1.14. "Plan Year" means the twelve (12) month period beginning
on any January 1 and ending on the following December 31.
Section 1.15. "Retirement" means termination on or after the earliest
retirement date specified in the Retirement Plan of Trustco Bank, National
Association.
Section 1.16. "Return on Equity" means Net Income divided by the sum of
Total Shareholder Equity plus or minus mark-to-market adjustments for securities
minus any equity transaction directly in conjunction with a merger or
acquisition.
Section 1.17. "Total and Permanent Disability" has the same meaning as
defined in the Retirement Plan of Trustco Bank, National Association.
Section 1.18. "Total Shareholder Equity" means total equity of the
Corporation exclusive of any equity transactions directly in conjunction with a
merger or acquisition.
47
<PAGE>
ARTICLE II
PARTICIPATION
Section 2.1. Prior to each Plan Year, the Chief Executive Officer of
the Corporation will present to the Board of Directors a list of the executive
officer positions recommended for participation in the Plan for the Plan Year.
The Board of Directors shall act upon these recommendations and inform executive
officers of their selection prior to the beginning of the Plan Year.
Section 2.2. Subject to the provisions of Sections 2.3, 2.4, 2.5 and
2.6 herein, individuals assigned to a position designated for participation in
the Plan during the course of a Plan Year will be eligible for receipt of
Incentive Awards even if they are in such positions only part of the Plan Year.
The Incentive Award to such Participants will be prorated based upon the number
of full calendar months of service in the participating position. A Participant
shall be one hundred percent (100%) vested at all times in each Incentive Award
made to such Participant.
Section 2.3. A Participant who terminates employment due to Total and
Permanent Disability or Retirement will be entitled to an Incentive Award for
the Plan Year based upon the portion of the Base Salary actually paid to such
Participant during the Plan Year in which he terminates.
Section 2.4. A Participant who dies prior to the end of the Plan Year
will be entitled to an Incentive Award for the Plan Year as calculated under
Section 3.1 herein.
48
<PAGE>
Section 2.5. A Participant who terminates employment prior to the end
of a Plan Year for reasons other than death, Total and Permanent Disability or
Retirement, will cease to be a Participant in the Plan as of the date of
termination of employment and will forfeit all rights to Incentive Awards
accrued during the Plan Year in which the termination of employment occurs.
Section 2.6. A Participant who terminates employment within two (2)
years after a Change in Control will be entitled to an Incentive Award for the
Plan Year based upon the portion of the Base Salary actually paid to such
Participant during the Plan Year in which he terminates.
ARTICLE III
INCENTIVE AWARDS
Section 3.1. A Participant will be entitled to an Incentive Award for
each Plan Year in which the Return on Equity of the Corporation equals or
exceeds 14%. The Incentive Award will be an amount equal to his Base Salary
multiplied by a bonus percentage based on the Corporation's Return on Equity as
set forth in the following table:
Return on Equity Bonus Percentage
14% 40%
15% 50%
16% 60%
17% 75%
18% 90%
19% 105%
20% 125%
Section 3.2. The Incentive Award for a Plan Year will be
determined by the Board of Directors following a report to the
49
<PAGE>
Board of Directors made no earlier than the December meeting of the Board of
Directors for the Plan Year.
Section 3.3. Unless the Participant elects to defer receipt of his
Incentive Award as provided in Article IV, Incentive Awards will be paid in cash
to Participants as soon as practicable following the determination of the
Incentive Awards by the Board of Directors.
ARTICLE IV
DEFERRAL OF INCENTIVE AWARDS
Section 4.1. On or before December 31, a Participant may elect in
writing to defer receipt of all or a specific part of the Incentive Award that
the Participant may earn the following Plan Year. Such deferral election
continues in effect from Plan Year to Plan Year unless the Participant amends or
terminates his deferral election by written request. Any amendment or
termination of a deferral election will first become effective for the Incentive
Award earned during the Plan Year commencing after the receipt of such written
request.
Section 4.2. The Corporation will establish a Deferred Compensation
Account for each Participant who elects to defer all or part of an Incentive
Award for any Plan Year. Incentive Awards deferred by a Participant pursuant to
this Article IV will be credited to his Deferred Compensation Account as of the
date the Incentive Award would have been payable to the Participant but for his
deferral election. Such Deferred Compensation Account will be for bookkeeping
purposes only. The Corporation will not be
50
<PAGE>
required to segregate assets or otherwise establish a trust with respect to
Incentive Awards deferred pursuant to this Article IV.
Section 4.3. A Participant's Deferred Compensation Account will be
credited at the end of each calendar quarter with an amount calculated by
multiplying the Participant's Deferred Compensation Account as of the first day
of the calendar quarter by a rate equal to one-fourth of the greater of (i) six
percent (6%), or (ii) the ten-year U.S. Treasury Bond rate on the last business
day of the quarter.
Section 4.4. In the event that the Internal Revenue Service determines
that all or a portion of the benefits payable under the Plan will be subject to
federal income tax prior to distribution of such benefits, the Corporation will
distribute to the Participant that portion of his benefit on which federal
income tax is being imposed.
ARTICLE V
PAYMENT OF DEFERRED INCENTIVE AWARDS
Section 5.1. Upon termination of employment of a Participant due to
Retirement, Total and Permanent Disability or any reason other than death, his
Deferred Compensation Account will be payable to him or his Beneficiary in a
single lump sum as soon as practicable following his termination of employment.
Section 5.2. Upon the death of a Participant, his Deferred Compensation
Account will be payable to his Beneficiary in a single lump sum on the first day
of the Plan Year following his death.
51
<PAGE>
ARTICLE VI
CLAIMS
Section 6.1. If a claim for benefits under the Plan is denied, the
Committee will provide a written notice of the denial setting forth the specific
reasons for the denial, a description of any additional material or information
necessary for a claimant to perfect a claim, an explanation of why such material
or information is necessary and appropriate information as to the steps to be
taken for the claim to be submitted for review. A claimant may request a review
of a denial. Such requests should be submitted to the Committee, in writing,
within 60 days after receipt of the denial notice stating the reasons for
requesting the review. A claimant may review pertinent documents and submit
issues and comments in writing. A decision will be made on the review of the
denial of a claim not later than 60 days after the Committee's receipt of a
request for review unless special circumstances require an extension of time for
processing, in which case a decision shall be rendered as soon as possible but
not later than 120 days after receipt of a request for review, provided that the
claimant is given written notice of the extension of time within the original 60
day period. The decision on review will be in writing to the claimant and shall
include specific reasons for the decision.
52
<PAGE>
ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.1. The Board of Directors may amend or terminate the Plan at
any time; provided, however, that no such amendment or termination may alter or
impair any Participant's rights previously granted under the Plan as of the date
of such amendment or termination without his consent.
Section 7.2. In the event of Plan termination, a Participant's Deferred
Compensation Account will not be paid to him until he dies or otherwise
terminates his employment with the Corporation.
ARTICLE VIII
ADMINISTRATION
Section 8.1. The Plan shall be administered by the Committee, in
accordance with its terms, for the exclusive benefit of Participants.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Nothing contained in this Plan and no action taken
pursuant to the provisions of this Plan shall give the Participant the right to
be retained in the employ of the Corporation or interfere with the right of the
Corporation to discharge the Participant at any time.
Section 9.2. No benefit payable at any time under this Plan shall be
subject in any manner to alienation, sale, transfer, assignment, pledge,
attachment or encumbrance of any kind except by
53
<PAGE>
will, by the laws of descent and distribution or by Beneficiary
designation herein.
Section 9.3. All rights hereunder shall be governed by and construed
according to the laws of the State of New York, except to the extent such laws
are preempted by the laws of the United States of America. In the event any
provision of this Plan is held invalid, void or unenforceable, the same shall
not affect, in any respect whatsoever, the validity of any other provision of
this Plan.
Section 9.4. Nothing contained in this Plan and no action taken
pursuant to the provisions of this Plan shall create or be construed to create a
trust of any kind or a fiduciary relationship between the Corporation and the
Participant or any other person. To the extent that any person acquires the
right to receive payment from the Corporation under this Plan, such right shall
be no greater than the right of any unsecured general creditor of the
Corporation.
Section 9.5. The terms of this Plan shall be binding upon and inure to
the benefit of the Corporation, its successors and assigns, and the Participant
and his heirs and legal representatives.
Section 9.6. All expenses (including, without limitation, legal fees
and expenses) incurred by a Participant in connection with, or in prosecuting or
defending, any claim or controversy arising out of or relating to the Plan shall
be paid by the Corporation.
54
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Restatement of the
Plan to be executed on this 29th day of March, 1996.
TRUSTCO BANK, NATIONAL ASSOCIATION
By: /s/Robert A. McCormick
----------------------
Robert A. McCormick
Title: President
55
<PAGE>
<TABLE>
Exhibit 11
TRUSTCO BANK CORP NY
1996 FORM 10-K
Computation of Net Income Per Common Share
Year Ended December 31,
<CAPTION>
1996 1995 1994
------------ ----------- --------
Primary (1)
<S> <C> <C> <C>
Net Income............................................. $28,699,000 25,527,000 22,888,000
========== ========== ==========
Weighted daily average number of common
shares outstanding........................... 20,369,000 20,249,000 20,162,000
Weighted average common stock equivalents due
to the dilutive effect of stock options when
utilizing the Treasury stock method. Per share
market price is based on the average per share
market price for the period. 653,000 491,000 380,000
------- ------- -------
Total weighted average common shares
and common stock equivalents outstanding 21,022,000 20,740,000 20,542,000
========== ========== ==========
Net Income per common share........................... $ 1.37 1.23 1.11
==== ==== ====
Assuming Full Dilution (1)(2)
Net Income............................................. $28,699,000 25,527,000 22,888,000
========== ========== ==========
Weighted daily average number of
common shares outstanding.................... 20,369,000 20,249,000 20,162,000
Weighted average common stock equivalents due
to the dilutive effect of stock options when
utilizing the Treasury stock method. Per share
market price used is the greater of the average
price for the period or the end of period
market price per share....................... 768,000 661,000 423,000
------- ------- -------
Total weighted average common shares and
common stock equivalents outstanding......... 21,137,000 20,910,000 20,585,000
========== ========== ==========
Net Income per common share assuming
full dilution $ 1.36 1.22 1.11
==== ==== ====
<FN>
Notes:
(1)Daily average shares outstanding for all years have been adjusted to reflect a 15% stock split in 1996, 6 for 5
stock split in 1995, an a 10% stock dividend in 1994.
(2)This calculation is submitted in accordance with Regulation S-K item 601(b) (11) although not required by
footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%.
</FN>
</TABLE>
-56-
<PAGE>
(FRONT COVER)
TrustCo Bank Corp NY
1996 Annual Report
57
<PAGE>
(INSIDE FRONT COVER)
(BLANK)
<PAGE> 58
TrustCo Bank Corp NY is a one bank holding company headquartered in Schenectady,
New York. The Company is the largest commercial banking enterprise headquartered
in the Capital Region of New York State. The principal subsidiary of the
Company, Trustco Bank, National Association, operates 48 community banking
offices, which include 30 drive-up windows and 25 ATMs, throughout the Banks
business territory. The Bank serves 8 counties with a broad range of community
banking services.
<TABLE>
Financial Highlights
<CAPTION>
(dollars in thousands, except per share data) Years ended December 31,
Percent
1996 1995 Change
Income:
<S> <C> <C> <C>
Net interest income (TE) $ 87,007 83,451 4.26%
Net income 28,699 25,527 12.43
Per Share (1):
Net income 1.37 1.23 11.38
Book value 7.97 7.89 1.01
Average Balances:
Assets 2,220,535 2,073,391 7.10
Loans, net 1,227,407 1,187,929 3.32
Deposits 1,936,445 1,859,070 4.16
Shareholders' equity 155,927 145,469 7.19
Financial Ratios:
Return on average assets 1.29% 1.23 4.88
Return on average equity (2) 19.05 18.03 5.66
Tier 1 capital to:
Total average assets (leverage) 7.04 6.88 2.33
Risk-adjusted assets 12.99 12.45 4.34
Total capital to risk-adjusted assets 14.28 13.73 4.01
As a percentage of average loans:
Loans charged off, net of recoveries 0.27 0.27 --
Provision for loan losses 0.54 1.07 (49.53)
Allowance for loan losses as a coverage of
nonperforming loans 3.7x 3.1x 19.35
Efficiency ratio 39.51% 42.52 7.08
Dividend payout ratio 70.38 69.55 1.19
</TABLE>
<TABLE>
Per share information of common stock (1)
<CAPTION>
Range of Stock
Net Cash Book Price
Income Dividend Value High Low
1995
<S> <C> <C> <C> <C> <C>
First quarter $.29 .20 7.06 15.04 13.22
Second quarter .30 .20 7.29 15.76 14.31
Third quarter .32 .24 7.39 20.00 15.40
Fourth quarter .33 .24 7.89 19.57 18.48
1996
First quarter .32 .24 7.60 19.24 17.61
Second quarter .33 .24 7.54 19.35 16.74
Third quarter .36 .24 7.74 21.30 16.30
Fourth quarter .36 .28 7.97 22.61 20.00
<FN>
(1) Adjusted for a 15% stock split in 1996 and a 6 for 5 stock split
in 1995.
(2) Excludes the market adjustment on securities available for sale.
</FN>
</TABLE>
59
<PAGE>
Table of Contents
Contents
Financial Highlights................................................. 1
Executive and Senior Officers of Trustco Bank........................ 3
President's Message.................................................. 4
Management's Discussion and Analysis of Operations................... 6
Average Balances, Yields and Net Interest Margins.................... 12
Glossary of Terms.................................................... 25
Management's Statement of Responsibilities........................... 26
Independent Auditors' Report......................................... 27
Consolidated Financial Statements and Notes.......................... 28
Officers and Board of Directors...................................... 45
Officers............................................................. 46
Branch Locations..................................................... 47
General Information.................................................. 48
TrustCo Mission Statement:
TrustCo will be the low cost provider of high quality services to our customers
in the communities we serve and return to our owners an above average return on
their investment.
60
<PAGE>
Executive and Senior Officers of Trustco Bank
61
<PAGE>
President's Message
Dear Shareholder:
1996 was another record year at TrustCo. In the overall, our industry had a
very successful year, and TrustCo was no exception, posting results that
are competitive by any standards. We are grateful to our employees and Board
of Directors for their strong support and enthusiasm, ensuring our consistent
strong performance.
During 1996, shareholder values continued in the right direction with net
income at $28.7 million, up a significant 12.4% over 1995. TrustCo's most
important ratio, return on shareholders' equity, was 19.05%, up from 18.03% in
1995. We are committed to insuring that return on equity compares favorably in
any peer group, and we are comfortable that it does. TrustCo's five year ROE was
17.07% and we plan an increase to 20% for the current fiscal year.
During 1996, we issued a 15% stock split maintaining the cash dividend level
on the newly issued shares, effectively increasing dividend income for TrustCo
owners by 15%. The quarterly cash dividend has increased at a 21% compound
annual rate over the last five years, a major accomplishment. It is our
intention to continue monitoring our internal generation of capital; should
excess capital exist, we would recommend steps to the Board to correct that
situation. These steps could include any measures that would return excess
capital to TrustCo's owners.
We note with sorrow the passing of Philip J. Thompson and the retirement
of Charles W. Carl, Jr. Chuck served with distinction on our Board for 46
years. His counsel will be missed. During 1996 Anthony J. Marinello, M.D.,
joined the Boards of the Bank and Holding Company.
TrustCo's branch expansion program continues, and we opened one additional
branch during 1996. Our plans call for two to three branch openings a year until
we have filled the gaps in our market territory. The targeted upgrading
continues with each branch receiving a major review and renovation at
approximately seven year intervals.
During 1996, we evaluated and discussed a number of acquisition opportunities.
Unfortunately, our discussions were not successful. Our approach to acquisitions
is quite simple -- we are extremely careful to avoid damage to shareholder
value in the existing TrustCo franchise.
TrustCo's Affordable Housing Program, which was designed to assist with
homeownership, continues to be a success in new markets. We consider this
program a model for community reinvestment and one of the most effective in the
state.
1996 was another year in which TrustCo avoided most of the industry
difficulties while moving forward to new records. We intend to continue this
"boring" path to the benefit of the owners, employees, and community for the
foreseeable future.
1997 will provide income and growth success with emphasis continuing on the
home equity loan, home equity credit line, and first mortgage products and our
improved NOW and savings accounts on the deposit side.
Our Trust department, which currently manages assets in excess of $950
million, has ambitious expectations, and is moving forward under the new
management team.
1997 and beyond should benefit from the solid performance of the superb
employee team here at TrustCo. For 1996 the often quoted efficiency ratio for
our Company was below 40.00% at a time when most banking companies would like
to see 60.00%. This level of performance efficiency will benefit us through
reduced operating expense for years to come.
62
<PAGE>
1996 was a year of significant asset growth from average assets of $2.07
billion to $2.22 billion, an increase of 7.1%, in a time of continuing deposit
outflows from banks. This solid performance will provide us with investment
opportunities going forward. Our loan portfolio continued to grow during 1996,
increasing by 3.3%, with continued emphasis on the retail side of the product
mix.
The quality of the loan portfolio is excellent, and our allowance for loan
loss has a coverage ratio 3.7 times nonperforming loans, an important area of
reserve.
Community needs have expanded and TrustCo has responded appropriately.
TrustCo has provided employee and management participation in charitable and
community organizations, and increased its corporate charitable contributions
throughout the Capital District, and our Affordable Housing Program continues
to grow.
TrustCo continues to receive solid external comment. During 1996 we received
favorable mention in the 1997 edition of America's Finest Companies as one of
sixty-five of 16,000 public companies with an unbroken record of annual earnings
and dividend increases since at least 1985.
We are enthusiastic about TrustCo's future. It is the intention at every
level in the Company to continue our past success into the future. Our products
are tailored to the needs of our community, we have an unmatched employee team
to deliver them, and a management style that can adapt to any change the
marketplace may bring almost immediately.
We expect the combination mentioned above and enthusiastic commitment of the
Board of Directors will ensure our continuing success in the years ahead,
whatever the banking environment.
Sincerely,
Robert A. McCormick,
President and Chief Executive Officer
63
<PAGE>
Management's Discussion and Analysis of Operations
The financial review which follows will focus on the factors affecting the
financial condition and results of operations of TrustCo Bank Corp NY (the
"Company" or "TrustCo") and Trustco Bank, National Association (the "Bank" or
"Trustco") during 1996 and, in summary form, the preceding two years. Net
interest income and net interest margin are presented in this discussion on a
taxable equivalent basis. Balances discussed are daily averages unless otherwise
described. The consolidated financial statements and related notes and the
quarterly reports to shareholders for 1996 should be read in conjunction with
this review. Certain amounts in years prior to 1996 have been reclassified to
conform with the 1996 presentation.
All per share information has been adjusted for the 15% stock split in 1996.
Overview
TrustCo recorded net income of $28,699,000 or $1.37 per share for the year
ended December 31, 1996, compared to $25,527,000 or $1.23 per share for the year
ended December 31, 1995. This represents an increase of 12.4% in full year
earnings and an 11.4% increase in per share results.
During 1996 TrustCo achieved:
- taxable equivalent net interest income of $87.0 million, an increase
of 4.3% over 1995,
- a reserve for loan losses that provides a coverage ratio of 3.7 times
nonperforming loans. The allowance set aside for problem loans reached
4.15% of total loans at year end 1996, compared to 3.94% for 1995,
- an efficiency ratio of only 39.51% for the year when the industry target
is the attainment of a 60% efficiency ratio. TrustCo significantly
outperformed this target level for 1994, 1995 and 1996, and
- growth in average deposits, earning assets and total assets of $77.4
million, $142.6 million and $147.1 million, respectively.
Asset/Liability Management
TrustCo's objectives in managing its balance sheet are to monitor the
sensitivity of net interest income in relation to actual or potential changes in
interest rates, and to enhance profitability through strategies that promise
sufficient reward for understood and controlled risk. The Company has
established guidelines for liquidity to maintain adequate levels in light of
loan and deposit demands. TrustCo does not engage in any high risk investing
activities, nor does it invest in financial derivatives. The Company relies on
traditional banking investment instruments and its large base of "core" deposits
to help in asset/liability management.
<TABLE>
MIX OF AVERAGE EARNING ASSETS
(dollars in thousands)
<CAPTION>
Components of
96-95 95-94 Total Earning Assets
1996 1995 1994 Change Change 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income $1,227,407 1,187,929 1,122,698 39,478 65,231 57.4% 59.6 58.9
Securities available for sale:
U.S. Treasuries and agencies 409,590 255,244 269,378 154,346 (14,134) 19.2 12.8 14.1
States and political subdivisions 78,921 15,926 -- 62,995 15,926 3.7 0.8 --
Mortgage-backed securities 53,844 8,731 35,172 45,113 (26,441) 2.5 0.4 1.8
Other 38,564 21,179 28,430 17,385 (7,251) 1.8 1.1 1.5
Total securities available for sale 580,919 301,080 332,980 279,839 (31,900) 27.2 15.1 17.4
Investment securities:
U.S. Treasuries and agencies -- 119,989 98,380 (119,989) 21,609 -- 6.0 5.1
States and political subdivisions -- 40,068 27,120 (40,068) 12,948 -- 2.0 1.4
Mortgage-backed securities -- 119,113 111,691 (119,113) 7,422 -- 6.0 5.8
Other -- 13,738 13,621 (13,738) 117 -- 0.7 0.7
Total investment securities -- 292,908 250,812 (292,908) 42,096 -- 14.7 13.0
Federal funds sold 328,500 212,323 203,878 116,177 8,445 15.4 10.6 10.7
Total earning assets $2,136,826 1,994,240 1,910,368 142,586 83,872 100.0% 100.0 100.0
</TABLE>
64
<PAGE>
Earning Assets
Average earning assets during 1996 were $2.14 billion,which is $142.6 million,
or 7.1%, greater than the prior year. The increase in average earning assets
reflected the following:
- growth in funding sources (deposits and short-term borrowings) of $136.8
million, or 7.2%, over the 1995 average balance, and
- the internal generation of capital retained by the Company of $10.5
million.
Total average assets for 1996 were $2.22 billion, compared to $2.07 billion
in 1995. The table, "Mix of Average Earning Assets" shows how the mix of the
earning assets has changed over the last three years. While growth in earning
assets is critical to improved profitability, changes in the mix can also have a
significant impact on income levels.
The most significant shift in the mix of earning assets between 1995 and 1996
was the increase in federal funds sold as a percentage of average earning
assets. This shift in investment mix was taken by management to develop
significant levels of liquidity during 1996 to take advantage in 1997 of
reinvestment opportunities in the loan and securities portfolios.
Loans: Average total loans increased $39.1 million, or 3.3%, during 1996.
Interest income on the loan portfolio remained essentially unchanged in
1996 at $107.5 million. The increase in the average balances outstanding during
1996 was offset by a reduction in the average yield on the loan portfolio from
9.05% in 1995 to 8.76% in 1996. The steady growth of the loan portfolio as a
component of the Company's assets, as well as the continued high quality of the
portfolio, contributed significantly to the Company's superior operating results
for 1996.
Loan products related to residential real estate continued to exhibit
significant growth during 1996. Average residential mortgage loans rose $68.3
million, or 9.6%, during 1996. TrustCo continued to outpace the competition by
offering mortgage loan products with a quick credit decision, low closing costs,
and no escrow requirement.
<TABLE>
Taxable Equivalent Net Interest Income (in millions)
<CAPTION>
<S> <C>
1994 $81.1
1995 83.5
1996 87.0
</TABLE>
The overwhelming majority of TrustCo's real estate loans are secured by
properties within the Bank's market area. Management's specific knowledge of
local market conditions and trends enhances the quality of the loan portfolio.
During 1996, management continued its established practice of retaining all new
loans originated in the Bank's portfolio rather than packaging them for sale in
the secondary mortgage market.
The yield on the residential mortgage loan portfolio decreased from 8.41%
in 1995 to 8.30% in 1996 due principally to the effect of new loan production.
As a result of the increase in average balances, total interest income on
residential mortgage loans increased by 8.2% to $65.0 million in 1996.
<TABLE>
Loan portfolio
(dollars in thousands) Average Balances
<CAPTION>
1996 1995 1994 1993 1992
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential $ 783,094 63.7% 714,804 60.1% 652,837 58.0% 555,317 52.9% 506,362 49.2%
Commercial 224,949 18.3 237,165 19.9 237,994 21.2 255,265 24.4 287,524 27.9
Home equity line of credit 187,652 15.3 202,647 17.0 203,756 18.1 201,013 19.2 183,539 17.8
Installment 33,299 2.7 35,269 3.0 30,242 2.7 36,185 3.5 52,790 5.1
Total loans 1,228,994 100.0% 1,189,885 100.0% 1,124,829 100.0% 1,047,780 100.0% 1,030,215 100.0%
Less: Unearned income 1,587 1,956 2,131 2,925 4,735
Allowance for
loan losses 51,233 45,086 37,334 30,214 23,735
Net loans $1,176,174 1,142,843 1,085,364 1,014,641 1,001,745
</TABLE>
65
<PAGE>
The average balance of commercial loans decreased by $12.2 million, from
$237.2 million in 1995 to $224.9 million in 1996. In addition,the yield on this
portfolio decreased by 15 basis points, thereby creating an overall reduction in
interest income on commercial loans of $1.5 million. TrustCo strives to maintain
strong asset quality in all aspects of its loan portfolio, especially with
respect to commercial loans. During 1996, the Company experienced an excess of
repayments and troubled loan resolutions over new commercial loans.
Rather than reduce desired interest rates on the portfolio or compromise
overall asset quality, TrustCo's operating philosophy is to maintain its
strong loan underwriting standards, even if that results in fewer new loans.
This philosophy has been very successful over the years for the Company in
avoiding loan underwriting problems while maintaining a portfolio of high
quality commercial loans.
TrustCo's commercial lending activities are focused on balancing the Company's
commitment to meeting the credit needs of businesses in its market area with the
necessity of maintaining a high quality loan portfolio. In accordance with these
ideals, the Bank has consistently emphasized the origination of loans
within its market area. The portfolio contains no foreign loans, nor does it
contain any concentrations of credit extended to any single borrower or
industry. The Bank's commercial portfolio reflects the diversity found in
the Capital Region's economy.
TrustCo has a long standing leadership position in the home equity credit line
product in its market. TrustCo was one of the first financial institutions
in the Upstate New York region to aggressively market and originate this
product and has developed significant expertise with respect to its risks and
rewards. During 1996 the average balance of home equity credit lines was $187.7
million, down from the 1995 average balance of $202.6 million. The average yield
on this portfolio decreased from 10.19% in 1995 to 9.21% in 1996. The decrease
in yield during 1996 was directly attributable to changes in the prime rate of
interest (home equity credit lines reprice with changes in prime) and to
changes made by the Company in the margin above prime that was charged on
these loans.
The average balance of the installment loan portfolio, net of unearned income,
decreased to $31.7 million for 1996, compared to $33.3 million in 1995. This
portfolio continues to decrease because many consumers have shifted their
borrowing patterns from direct placement installment credits to home equity
loan products, which may offer an income tax deduction.
<TABLE>
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
(in thousands)
<CAPTION>
December 31, 1996
After 1 Year
In 1 Year But Within After
or Less 5 Years 5 Years Total
<S> <C> <C> <C> <C>
Commercial $150,555 58,183 8,625 217,363
Real estate construction 7,055 -- -- 7,055
Total $157,610 58,183 8,625 224,418
Predetermined rates $ 35,724 47,684 8,625 92,033
Floating rates 121,886 10,499 -- 132,385
Total $157,610 58,183 8,625 224,418
</TABLE>
Securities available for sale: During 1996 and 1995, the portfolio of securities
available for sale was actively managed by the Company to take full advantage of
changes in interest rates occurring during those time periods. At December 31,
1996, securities available for sale amounted to $618.7 million, compared to
$640.2 million at year end 1995.
As more fully described in the footnotes to the consolidated financial
statements, due to changes in the accounting for investment securities,
in December 1995 TrustCo transferred the held to maturity securities portfolio
to the securities available for sale portfolio, and determined that all of
its securities portfolio would be designated as available for sale. In the
fourth quarter of 1995, the accounting regulatory authorities allowed a one
time transfer of securities from the held to maturity category to the available
for sale category. Approximately $288.5 million of securities were transferred
to the available for sale portfolio as a result of this opportunity.
66
<PAGE>
Securities classified as available for sale are utilized as an integral
element in the asset/liability management process of the Company. These
securities are actively managed to take advantage of changes in interest rates
or other banking opportunities that become available. The decision to transfer
the held to maturity securities into the category of securities available for
sale allows TrustCo to manage these newly transferred assets similarly. Sales of
securities from the held to maturity portfolio are allowed only under very
limited circumstances and, therefore,active portfolio management is not allowed.
For 1996, the average balance of securities available for sale was $580.9
million with an average yield of 7.61%, compared to $301.1 million with an
average yield of 7.49% in 1995. As noted above, the accounting for investment
securities changed during 1995, and there were certain securities classified
as held to maturity during some periods in 1995. For the remainder of this
analysis, the 1995 figures will be for both the balance of securities
available for sale and securities held to maturity. The 1995 average balance
for total securities (securities available for sale and securities held to
maturity) was $594.0 million, and the average yield on this portfolio was 7.33%.
TrustCo invests in high quality securities with approximately 80% of the
average investments for 1996 comprised of securities issued or guaranteed by
the U.S. Treasury or its agencies. In addition, approximately 14% of the
average securities portfolio is invested in securities issued by states and
political subdivisions.
The taxable equivalent income earned on the securities portfolio in 1996 was
$44.2 million, versus $43.6 million in 1995. The average balance in the
securities portfolio decreased by $13.1 million between 1995 and 1996. This
decrease in balance was offset by an increase in the average yield to 7.61% in
1996 from an average of 7.33% in 1995.
During 1996, TrustCo also recognized $4.5 million of net losses from
securities transactions, compared to a net gain of $240 thousand in 1995.
Throughout 1996 TrustCo sold securities to provide liquidity for potential
reinvestment at higher interest rates. This created a situation where losses
were being recognized in 1996 with the expectation that, upon reinvestment of
the proceeds, interest income in future periods would be enhanced sufficiently
to more than offset the loss that was recognized. At year end 1996, TrustCo
continued to have significant liquidity in the form of $310 million of federal
funds sold. Management believes that the Company will have the opportunity to
reinvest these funds in the securities or loan portfolios as enhanced
opportunities develop in 1997.
TrustCo does not invest in any exotic investment products such as interest
rate swaps, forward placement contracts, options, or any other instruments
commonly referred to as derivatives. By actively managing a portfolio of high
quality securities, the objectives of asset/liability management and liquidity
can be met, while at the same time producing a constant earnings stream that
meets or exceeds alternative rates offered in the marketplace.
<TABLE>
Securities available for sale and investment securities
(in thousands)
<CAPTION>
As of December 31,
1996 1995 1994
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
Securities available for sale:
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasuries and agencies $404,885 406,933 432,710 447,343 102,947 102,919
States and political subdivisions 94,954 96,918 68,151 70,371 -- --
Mortgage-backed securities 75,492 76,493 78,481 80,284 -- --
Other 4,276 4,276 15,690 17,290 675 675
Total debt securities available for sale 579,607 584,620 595,032 615,288 103,622 103,594
Equity securities 30,139 34,050 24,118 24,918 13,906 13,864
Total securities available for sale $609,746 618,670 619,150 640,206 117,528 117,458
Investment securities:
U.S. Treasuries and agencies $ -- -- -- -- 145,542 141,117
States and political subdivisions -- -- -- -- 44,222 43,827
Mortgage-backed securities -- -- -- -- 143,082 134,902
Other -- -- -- -- 15,012 14,609
Total investment securities $ -- -- -- -- 347,858 334,455
</TABLE>
67
<PAGE>
Securities available for sale are recorded at their fair value with any
unrealized gains or losses, net of taxes, recognized as a component of
shareholders' equity. At December 31, 1996 and 1995, the market value of
TrustCo's portfolio of securities available for sale resulted in unrealized
gains of approximately $8.9 million and $21.1 million, respectively.
The table "Securities Portfolio Maturity Distribution and Yield," distributes
the securities available for sale portfolio as of December 31, 1996, based on
the final maturity of the securities. Mortgage-backed securities are stated
using average life, and equity securities are excluded.
<TABLE>
SECURITIES PORTFOLIO MATURITY DISTRIBUTION AND YIELD
Debt securities available for sale:
(dollars in thousands)
<CAPTION>
As of December 31, 1996
Maturing:
After 1 After 5
Within But Within But Within After
1 Year 5 Years 10 Years 10 Years Total
U.S. Treasuries and agencies
<S> <C> <C> <C> <C> <C>
Amortized cost $25,114 20,117 237,854 121,800 404,885
Market value 25,397 20,787 239,708 121,041 406,933
Yield 7.92% 8.06 7.67 7.87 7.77
States and political subdivisions
Amortized cost $ 9,636 18,149 2,198 64,971 94,954
Market value 9,697 18,705 2,271 66,245 96,918
Yield 6.88% 8.03 7.90 8.37 8.14
Mortgage-backed securities
Amortized cost $ 652 8,828 39,168 26,844 75,492
Market value 676 9,097 39,834 26,886 76,493
Yield 9.45% 8.19 7.60 7.74 7.73
Other
Amortized cost $ 3,626 -- 650 -- 4,276
Market value 3,626 -- 650 -- 4,276
Yield 6.74% -- 6.90 -- 6.76
Total debt securities available
for sale
Amortized cost $39,028 47,094 279,870 213,615 579,607
Market value 39,396 48,589 282,463 214,172 584,620
Yield 7.58% 8.07 7.66 8.01 7.82
</TABLE>
68
<PAGE>
Maturity and call dates of securities: Many of the securities in the investment
portfolio have a call date in addition to the stated maturity date. Call dates
allow the issuer of the bond to redeem the bond prior to maturity at selected
dates and at predetermined prices. Normally, securities are redeemed at the call
date because the issuer can reissue the bond at a lower yield. Therefore, for
cash flow, liquidity, and interest rate management purposes, it is important to
monitor both maturity dates and call dates. The following table details the
portfolio of securities available for sale, for both the maturity date and call
date as of December 31, 1996. Mortgage-backed securities are reported according
to average life, and equity securities are excluded.
<TABLE>
SECURITIES PORTFOLIO MATURITY AND CALL DATE DISTRIBUTION
Debt securities available for sale:
(in thousands)
<CAPTION>
As of December 31, 1996
Based on Based on
Final Maturity Call Date
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
Within 1 year $ 39,028 39,396 244,915 244,389
1 to 5 years 47,094 48,589 194,683 197,129
5 to 10 years 279,870 282,463 102,335 105,130
After 10 years 213,615 214,172 37,674 37,972
Total debt securities available for sale $579,607 584,620 579,607 584,620
</TABLE>
Federal funds sold: During 1996, the average balance of federal funds sold was
$328.5 million, up from $212.3 million in 1995. The average rate earned on these
assets was 5.37% for 1996 and 5.91% for 1995. TrustCo utilized this category of
earning assets during 1996 as a means of keeping strong liquidity as interest
rates in the securities markets changed. Rather than invest excess liquidity
during 1996, the Company chose to place these funds in overnight federal funds
sold. This decision had the short-term effect of suppressing earnings for 1996,
but positioned TrustCo to take advantage of other banking opportunities as they
emerge in 1997.
The average yield on federal funds sold decreased during 1996 as a result of
changes made by the Federal Reserve Board in setting the target federal funds
rate.
69
<PAGE>
<TABLE>
Average Balances, Yields and Net Interest Margins
(dollars in thousands)
<CAPTION>
1996 1995 1994`
Interest Interest Interest
Average Income/ Average Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income $1,227,407 107,517 8.76% 1,187,929 107,544 9.05% 1,122,698 94,432 8.41%
Securities available for sale:
U.S. Treasuries and agencies 409,590 31,647 7.73 255,244 19,490 7.64 269,378 17,142 6.36
States and political subdivisions 78,921 6,235 7.90 15,926 1,277 8.02 -- -- --
Mortgage-backed securities 53,844 4,114 7.64 8,731 597 6.84 35,172 2,122 6.03
Other 38,564 2,202 5.71 21,179 1,185 5.60 28,430 1,994 7.02
Total securities available for sale 580,919 44,198 7.61 301,080 22,549 7.49 332,980 21,258 6.38
Investment securities:
U.S. Treasuries and agencies -- -- -- 119,989 8,968 7.47 98,380 7,128 7.24
States and political subdivisions -- -- -- 40,068 2,963 7.39 27,120 1,661 6.13
Mortgage-backed securities -- -- -- 119,113 8,005 6.72 111,691 7,254 6.50
Other -- -- -- 13,738 1,079 7.86 13,621 1,024 7.52
Total investment securities -- -- -- 292,908 21,015 7.17 250,812 17,067 6.81
Federal funds sold 328,500 17,634 5.37 212,323 12,543 5.91 203,878 9,058 4.44
Total interest earning assets 2,136,826 169,349 7.93% 1,994,240 163,651 8.21% 1,910,368 141,815 7.42%
Allowance for loan losses (51,233) (45,086) (37,334)
Cash and non-interest earning assets 134,942 124,237 121,463
Total assets $2,220,535 2,073,391 1,994,497
Liabilities and shareholders' equity
Interest-bearing deposits:
NOW accounts $ 233,340 3,591 1.54% 230,291 4,356 1.89% 246,357 3,636 1.48%
Savings 667,447 23,012 3.45 618,933 24,248 3.92 726,295 21,725 2.99
Time deposits and money markets 923,082 51,146 5.54 911,906 49,751 5.46 741,862 34,673 4.67
Total interest-bearing deposits 1,823,869 77,749 4.26 1,761,130 78,355 4.45 1,714,514 60,034 3.50
Short-term borrowings 98,324 4,593 4.67 38,090 1,776 4.66 18,129 461 2.54
Long-term debt -- -- -- 788 69 8.75 2,840 203 7.15
Total interest-bearing liabilities 1,922,193 82,342 4.28 1,800,008 80,200 4.46 1,735,483 60,698 3.50
Demand deposits 112,576 97,940 93,822
Other liabilities 29,839 29,974 28,215
Shareholders' equity 155,927 145,469 136,977
Total liabilities and shareholders'
equity $2,220,535 2,073,391 1,994,497
Net interest income 87,007 83,451 81,117
Net interest spread 3.65% 3.75% 3.92%
Net interest margin(net interest income
to total interest earning assets) 4.07 4.18 4.25
Portions of income earned on certain commercial loans, U.S. Government obligations,obligations of states and political subdivisions,
and equity securities are exempt from federal and/or state taxation. Appropriate adjustments have been made to reflect the
equivalent amount of taxable income that would have been necessary to generate an equal amount of after tax income. Federal
and New York State tax rates used to calculate income on a tax equivalent basis were 35.0 percent and 9.23 percent for 1996,
35.0 percent and 9.68 percent for 1995, and 35.0 percent and 10.13 percent for 1994. The average balances of securities
available for sale is calculated using amortized costs for these securities. Included in the balance of shareholders' equity is
$5.3 million, $3.9 million, and $2.4 million in 1996, 1995, and 1994, respectively, of unrealized appreciation, net of tax, in
the available for sale securities portfolio.
</TABLE>
70
<PAGE>
Interest bearing sources of funds: TrustCo utilizes various traditional sources
of funds to support its asset portfolio. The following table "Average Sources of
Funding" presents the various categories of funds used and the corresponding
average balances for each of the last three years.
<TABLE>
Average Sources of Funding
(dollars in thousands)
<CAPTION>
Components of
96-95 95-94 Total Funding
1996 1995 1994 Change Change 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Demand deposits $ 112,576 97,940 93,822 14,636 4,118 5.5% 5.2 5.1
Retail deposits:
Savings 667,447 618,933 726,295 48,514 (107,362) 32.8 32.6 39.7
Time deposits under $100 thousand 768,240 750,141 589,573 18,099 160,568 37.8 39.5 32.2
NOW accounts 233,340 230,291 246,357 3,049 (16,066) 11.5 12.1 13.5
Money market deposits 68,130 79,618 103,622 (11,488) (24,004) 3.3 4.2 5.7
Total retail deposits 1,737,157 1,678,983 1,665,847 58,174 13,136 85.4 88.4 91.1
Total core deposits 1,849,733 1,776,923 1,759,669 72,810 17,254 90.9 93.6 96.2
Time deposits over $100 thousand 86,712 82,147 48,667 4,565 33,480 4.3 4.3 2.7
Short-term borrowings 98,324 38,090 18,129 60,234 19,961 4.8 2.0 1.0
Long-term debt -- 788 2,840 (788) (2,052) -- 0.1 0.1
Total purchased liabilities 185,036 121,025 69,636 64,011 51,389 9.1 6.4 3.8
Total sources of funding $2,034,769 1,897,948 1,829,305 136,821 68,643 100.0% 100.0 100.0
</TABLE>
<TABLE>
Average Deposits by Type of Depositor
(in thousands)
<CAPTION>
Years Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Individuals, partnerships and corporations $1,880,798 1,802,455 1,752,163 1,706,530 1,605,191
U.S. Government 45 261 542 540 525
States and political subdivisions 44,555 46,091 44,289 48,145 58,439
Other (certified and official checks, etc.) 11,047 10,263 11,342 12,316 11,324
Total average deposits by type of depositor $1,936,445 1,859,070 1,808,336 1,767,531 1,675,479
</TABLE>
Deposits: Average total deposits (including time deposits greater than $100
thousand) were $1.94 billion in 1996 compared to $1.86 billion in 1995, an
increase of $77.4 million or 4.2%. Increases were concentrated in the savings
deposit category, which increased by $48.5 million or 7.8% between 1995 and
1996, the core time deposit category, which increased by $18.1 million or 2.4%,
and the demand deposit category, which increased by $14.6 million or 14.9%. The
overall increase in deposits is very noteworthy in light of the significant
outflow of deposits in the banking industry nationally and locally. For 1996,
the average balance of interest-bearing deposits was $1.82 billion, with an
average yield of 4.26%, compared to an average balance of $1.76 billion and an
average yield of 4.45% for 1995. During 1996 the Company experienced strong
contributions from each of the new branches opened during 1995 and 1996 as well
as overall deposit inflows from the existing branch network. The 14.9% increase
in the demand deposit category during 1996 is extremely important because
customers tend to identify their primary banking relationship with the bank that
has their demand deposit account.
The Company strives to maintain competitive rates on deposit accounts and to
attract customers through a combination of competitive interest rates,
strong customer service, and convenient banking locations. In this fashion,
TrustCo is able to attract deposit customers looking for a long-term banking
relationship, and to cross sell banking services utilizing the deposit
account relationship as the starting point.
Interest expense on deposits decreased from $78.4 million in 1995 to $77.7
million in 1996. The decrease in interest expense of $610 thousand was due to a
decrease of 19 basis points in the rates paid on deposits in 1996 to 4.26%,
which more than offset the increase in the average balance of interest-bearing
deposits of $62.7 million. Total interest expense decreased on NOW, money
market, and savings accounts, while interest expense increased on certificates
of deposit over $100,000 and on core
71
<PAGE>
time deposit accounts. The decrease in interest expense
associated with savings deposits was the result of a decrease to the rates paid
early in 1996. The increase in interest expense associated with the certificates
of deposit over $100,000 was a result of the increase in the average balances of
$4.6 million, which was to some extent offset by a reduction in the average
yield of 22 basis points to 5.75%. The increase in interest expense on core time
deposits was due to both an increase in the average balances of $18.1 million
and an increase of 8 basis points in the average yield to 5.75% in 1996.
<TABLE>
Maturity of Time deposits
over $100 thousand
(in thousands) As of December 31, 1996
<CAPTION>
<S> <C>
Under 3 months $28,007
3 to 6 months 9,297
6 to 12 months 21,348
Over 12 months 31,141
Total $89,793
</TABLE>
Other funding sources: The Company had $98.3 million of average short-term
borrowings outstanding during 1996, an increase of $60.2 million from the 1995
average of $38.1 million. Total purchased liabilities (which includes time
deposits over $100 thousand) were $185.0 million in 1996, compared to $121.0
million in 1995.
The increase in purchased liabilities during 1996 was due to the effect for
the full year of the Trustco Short-Term Investment Account, which had been
introduced during 1995. This account was developed by the Bank's Trust
Department as an investment vehicle for trust customers. Balances are
transferred daily by the Trust Department into this account, and are
collateralized by securities owned by the Bank. Purchased liabilities as a
percentage of total funding sources (which includes all deposits,
borrowings and equity) averaged 8.4% in 1996, and 5.9% in 1995. The average
rate on short-term borrowings was 4.67% in 1996 and 4.66% in 1995.
<TABLE>
Volume and Yield Analysis
(in thousands)
<CAPTION>
1996 vs. 1995 1995 vs. 1994
Increase Due to Due to Increase Due to Due to
(Decrease) Volume Rate (Decrease) Volume Rate
Interest income (TE):
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold $ 5,091 6,326 (1,235) 3,485 389 3,096
Securities available for sale:
Taxable 16,623 16,296 327 13 (3,164) 3,177
Tax-exempt 5,026 5,045 (19) 1,278 1,278 --
Total securities available for sale 21,649 21,341 308 1,291 (1,886) 3,177
Investment securities:
Taxable (18,052) (18,052) -- 2,647 2,112 535
Tax-exempt (2,963) (2,963) -- 1,301 907 394
Total investment securities (21,015) (21,015) -- 3,948 3,019 929
Loans (27) 2,860 (2,887) 13,112 5,662 7,450
Total interest income 5,698 9,512 (3,814) 21,836 7,184 14,652
Interest expense:
NOW accounts (765) 57 (822) 720 (250) 970
Money market deposits (308) (335) 27 (181) (637) 456
Savings (1,236) 1,811 (3,047) 2,523 (3,532) 6,055
Time deposits under $100 thousand 1,627 1,035 592 12,936 8,773 4,163
Time deposits over $100 thousand 76 266 (190) 2,323 1,966 357
Short-term borrowings 2,817 2,814 3 1,315 747 568
Long-term debt (69) (69) -- (134) (171) 37
Total interest expense 2,142 5,579 (3,437) 19,502 6,896 12,606
Net interest income (TE) $ 3,556 3,933 (377) 2,334 288 2,046
Increases and decreases in interest income and interest expense due to both
rate and volume have been allocated to the two categories of variances (volume
and rate) based on the percentage relationship of such variances to each other.
</TABLE>
72
<PAGE>
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 most of the Company's capital
requirements have been provided through retained earnings.
Part of TrustCo's operating philosophy is that the Company will not retain
excess capital. All capital that is generated by the Company that is in
excess of the levels considered by management to be necessary for the safe
and sound operations of the Company has been distributed to the shareholders
in the form of cash dividends. Consequently, the capital ratios that are
maintained are adequate but not excessive. This philosophy has led to a cash
dividend payout ratio for 1996 of 70.38%, for 1995 of 69.55%, and for 1994 of
62.52%. These are significant payouts to the Company's shareholders and are
considered by management to be a prudent use of the retained capital in TrustCo.
As to the likelihood of future dividends, the philosophy stated above will
continue into 1997 and, where appropriate, the Board of Directors will declare
dividends consistent with that operating philosophy.
<TABLE>
Dividends Per Share
<CAPTION>
<S> <C>
1994 $0.71
1995 0.88
1996 0.99
</TABLE>
At December 31, 1996, TrustCo's Tier 1 capital was $157.2 million or 12.99% of
risk-adjusted assets. Tier 1 capital to total average assets (the leverage
ratio) at December 31, 1996 was 7.04% as compared to 6.88% in 1995. At December
31, 1996 the subsidiary bank, Trustco Bank, met the regulatory definition of a
"well capitalized" institution.
The Bank converted to a nationally chartered bank in early 1995 and changed
its legal name to Trustco Bank, National Association. All of the operations of
the Bank were consistent with those of a nationally chartered bank. The national
charter allowed the Bank to streamline its regulatory process by having the
Office of the Comptroller of the Currency as the primary bank regulator.
As stated earlier, TrustCo plans to expand its branch network in 1997. It is
not anticipated that additional capital will be required to support this
expansion program. Likewise, operating costs during 1997 can be expected to
rise modestly as a result of these new branches, but will be offset by the
additional revenue generated by the new branches.
Net Interest Income
Net interest income is the principal contributor to net income. Therefore,
growth in net income is directly dependent upon the ability of the Company to
increase net interest income. TrustCo's 1996 increase in net interest income was
primarily the result of increased average balances of earning assets invested
at somewhat lower interest rates in 1996 than in 1995.
Taxable equivalent net interest income for 1996 was $87.0 million, up $3.6
million or 4.3% over 1995. The average balance of interest earning assets
increased by $142.6 million or 7.1% to $2.14 billion in 1996 compared to $1.99
billion for 1995. The yield on average earning assets decreased 28 basis points
to 7.93% in 1996 compared to 8.21% in 1995, while the average yield on
interest-bearing liabilities decreased 18 basis points in 1996 to 4.28% from
4.46% in 1995. However, the increase in the average balance of interest earning
assets more than offset the reduction in net interest spread. Total interest
income increased by $5.7 million between 1995 and 1996. This increase was caused
by the net effect of the decrease in interest rates, offset by the increase in
the average balance of interest earning assets.
Total interest-bearing liabilities increased from $1.80 billion with an
average yield of 4.46% in 1995 to $1.92 billion with an average yield of 4.28%
in 1996. Total interest expense increased from $80.2 million in 1995 to $82.3
million in 1996. The increase in interest expense was the net result of the
increase in balances offset by a reduction in rates.
Net interest income increased by $3.6 million due to the effects of the
reduction in interest rates, offset by the increase in average balances
outstanding.
The changes between 1996 and 1995, as illustrated in the table "Volume and
Yield Analysis," resulted in an increase in interest on earning assets of $5.7
million and an increase in interest expense of $2.1 million.
Risk Management
The responsibility for balance sheet risk management oversight is the
function of the Asset Allocation Committee. This committee meets monthly and
includes the executive officers of the Company as well as other department
managers as appropriate. The meetings include a review of the balance sheet
structure, formulation of strategy in light of expected economic conditions, and
a review of performance against established guidelines to control exposure to
various types of risk.
73
<PAGE>
Credit Risk
Credit risk is managed through a network of loan officer authorities, review
committees, loan policies, and oversight from the senior executives of the
Company. Management follows a policy of continually identifying, analyzing, and
evaluating the credit risk inherent in the loan portfolio. As a result of
management's ongoing review of the loan portfolio, loans are placed in
nonaccrual status, either due to the delinquent status of principal and/or
interest payments, or based on a judgment by management that, although payment
of principal and/or interest is current, such action is prudent. Loans
are generally placed in nonaccrual status when principal and/or interest is 90
days past due. Thereafter, no interest is taken into income unless received
in cash or until such time as the borrower demonstrates the sustained ability
to make scheduled payments of interest and principal.
Nonperforming Assets
Nonperforming assets include loans in nonaccrual status, loans which have
been treated as troubled debt restructurings, loans past due 90 days or more and
still accruing interest, and foreclosed real estate properties.
Nonperforming assets at year end 1996 totalled $20.6 million, an increase of
$1.2 million from the balance at year end 1995. Nonperforming loans decreased
from $15.7 million in 1995 to $14.0 million in 1996. Nonperforming loans as a
percentage of total loans were 1.28% in 1995 and decreased to 1.13% in 1996.
Included in nonperforming loans at year end 1996 are $10.7 million of loans in
nonaccrual status, a reduction of $2.1 million, or 16.2%, from the year end 1995
balance. Loans past due 90 days or more and still accruing interest of $790
thousand are down from the year end 1995 balance of $1.7 million, and
restructured loans of $2.5 million increased by $1.4 million from 1995.
Adherence to strong underwriting standards and vigorous loan collection efforts
have been cornerstones of the operating philosophy of TrustCo, and have assisted
the Company in avoiding many of the pitfalls that others in the banking
community have experienced.
TrustCo has a very diversified loan portfolio with no concentrations to any
one borrower or in any one industry.
Nonperforming assets at year end 1996 included $6.5 million of foreclosed
properties compared to $3.7 million in 1995. Once it is determined that a
borrower is unable to repay the loan balance, TrustCo takes appropriate
action with respect to the collateral supporting the loan balance. The increase
in the foreclosed properties balance is the result of efforts by the
Company to complete collection efforts on nonperforming loans. Once included
in the foreclosed property category, management takes decisive action to quickly
dispose of the property. Management believes that the $6.5 million balance
of foreclosed properties is realizable through the normal course of disposing
of these properties.
As of December 31, 1996, there were no other loans classified for regulatory
purposes that management reasonably expects will materially impact future
operating results, liquidity, or capital resources.
TrustCo has no advances to borrowers or projects that are located outside of
the United States.
<TABLE>
Nonperforming Assets
(dollars in thousands)
<CAPTION>
As of December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Loans in nonaccrual status $10,748 12,832 6,370 10,227 17,448
Loans past due 90 days or more 792 1,696 4,436 6,567 10,634
Restructured loans 2,495 1,130 910 -- --
Total nonperforming loans 14,035 15,658 11,716 16,794 28,082
Foreclosed real estate 6,518 3,732 5,080 4,309 5,946
Total nonperforming assets $20,553 19,390 16,796 21,103 34,028
Allowance for loan losses $51,561 48,320 38,851 34,087 26,919
Allowance coverage of nonperforming loans 3.67X 3.09 3.32 2.03 0.96
Nonperforming loans as a % of total loans 1.13% 1.28 1.01 1.56 2.68
Nonperforming assets as a % of total assets 0.91 0.89 0.85 1.07 1.75
</TABLE>
Allowance for Loan Losses
The balance in the allowance for loan losses has been accumulated over the years
through periodic provisions, and is available to absorb losses on loans
74
<PAGE>
which have been determined to be uncollectible. The adequacy of the allowance
is evaluated continuously, with emphasis on nonperforming and other loans that
management believes warrant special attention. The balance of the allowance is
maintained at a level that is, in management's judgment, representative of the
loan portfolio's inherent risk given present and anticipated future conditions.
<TABLE>
Allowance for Loan Losses
(in millions)
<CAPTION>
<S> <C>
1994 $38.9
1995 48.3
1996 51.6
</TABLE>
The table"Summary of Loan Loss Experience" includes an analysis of the changes
to the allowance for the past five years. Loans charged off in 1996 were $5.6
million, compared to $7.3 million in 1995. Recoveries were $2.3 million in 1996
and $4.1 million in 1995. Provisions recorded in 1996 and 1995 were $6.6 million
and $12.7 million, respectively.
Net charge offs as a percentage of average loans were 0.27% in both 1996 and
1995. The allowance as a percentage of loans outstanding grew to 4.15% in 1996
from 3.94% in 1995. The Company has a policy of recognizing problem loan charge
offs early and aggressively pursuing collection efforts. This policy of
early intervention has proven to be a cornerstone of the strong lending
performance that TrustCo has achieved.
TrustCo adopted the provisions of Statement of Financial Accounting Standards
No. 114 (Statement 114), "Accounting by Creditors for Impairment of a Loan,"
and Statement of Financial Accounting Standards No. 118 (Statement 118),
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosure," as of January 1, 1995.
The enclosed consolidated financial statements have been presented in
accordance with these new accounting pronouncements. The footnotes to the
consolidated financial statements provide additional details with respect to
the adoption and accounting requirements of these pronouncements.
TrustCo has classified nonaccrual commercial and commercial real estate loans
as impaired loans, as well as all loans restructured under a troubled debt
restructuring since the adoption of new accounting requirements as of January 1,
1995. At year end 1996 and 1995, there were $8.6 million and $10.0 million,
respectively, of impaired loans. The average balance of impaired loans during
1996 and 1995 was $8.5 million and $10.5 million, respectively. The
Company recognized approximately $560 thousand and $400 thousand of interest
income on these loans in 1996 and 1995, respectively.
<TABLE>
Allowance to Loans Outstanding
<CAPTION>
<S> <C>
1994 3.34%
1995 3.94
1996 4.15
</TABLE>
Statement 114 substantially modified the definition of "in-substance
foreclosure" loans. Consequently, certain loans identified at year end 1994 as
being in-substance foreclosure loans and classified as real estate owned have
been reclassified as of January 1, 1995 to the loan portfolio. At January 1,
1995, $9.2 million of loans previously included in real estate owned were
reclassified to the loan balance. Prior to adoption of Statements 114 and 118,
in-substance foreclosed properties included those properties where the borrower
had little or no remaining equity in the property, considering its fair value;
where repayment was expected to come only from the operation or sale of the
property; and where the borrower had effectively abandoned control of the
property or it was doubtful the borrower would be able to rebuild equity in the
property.
75
<PAGE>
<TABLE>
Summary of Loan Loss Experience
(dollars in thousands)
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Amount of loans outstanding at end of year
(less unearned income) $1,241,882 1,226,142 1,161,789 1,075,564 1,049,215
Average loans outstanding during year
(less average unearned income) 1,227,407 1,187,929 1,122,698 1,044,855 1,025,480
Balance of allowance at beginning of year 48,320 38,851 34,087 26,919 19,049
Loans charged off:
Commercial 3,213 4,823 3,864 5,866 4,857
Real estate 1,498 1,694 53 199 125
Installment 937 821 907 676 1,015
Total 5,648 7,338 4,824 6,741 5,997
Recoveries of loans previously charged off:
Commercial 1,963 3,504 1,125 1,810 327
Real estate 110 258 -- -- --
Installment 239 347 407 523 847
Total 2,312 4,109 1,532 2,333 1,174
Net loans charged off 3,336 3,229 3,292 4,408 4,823
Additions to allowance charged to
operating expense 6,577 12,698 8,056 11,576 12,693
Balance of allowance at end of year $ 51,561 48,320 38,851 34,087 26,919
Net charge offs as a percent of average
loans outstanding during year
(less average unearned income) 0.27% 0.27 0.29 0.42 0.47
Allowance as a percent of loans outstanding
at end of year 4.15 3.94 3.34 3.17 2.57
Interest Rate Risk
Management of interest rate risk involves continual monitoring of the relative
sensitivity of asset and liability portfolios to changes in rates due to
maturities or repricing. Forecasting models are utilized to quantify the impact
of changes in rates on the Company's net income. Specific targets for interest
rate sensitivity have been established by the Company.
The objective of interest rate management is to maintain an appropriate
balance between income growth and the risk associated with maximizing income
through the mismatch of the timing of interest rate changes between assets and
liabilities. Perfectly matching this funding can eliminate interest rate risk
but net interest income is not always enhanced by this action.
One measure of interest rate risk, the so called "gap," is illustrated in the
table "Interest Rate Sensitivity." The table measures the incremental and
cumulative gap, or the difference between assets and liabilities subject to
repricing/maturity during the periods indicated. For purposes of this analysis
the maturity and repricing of loans is based on the expected cash flows
or earliest repricing date. For securities available for sale, mortgage-backed
securities are stated using anticipated cash flows over their average life and
debt securities are stated at final maturity. Equity securities that the Bank is
required to hold are categorized in the rate insensitive column for this
presentation. NOW, money market, demand, and savings accounts are presented with
a maturity or repricing cycle over the full interest rate cycle and TrustCo's
actual experience, even though they are subject to immediate withdrawal. Time
deposit accounts are presented based upon their maturity dates.
At December 31, 1996, the Company's gap position indicates an excess of assets
repricing in the 0 to 90 day period of $314.7 million. This positive gap
position is the result of management's decision to retain $310 million of
federal funds sold at year end 1996 for potential reinvestment in 1997. The gap
position turns negative (an excess of liabilities subject to repricing over
assets that can reprice during that time period) in the 91 to 365 day period by
$217.8 million. This situation occurs as a result of the amount of deposits
that are subject to repricing during this time period. However, for the period
from 0 days to 1 year, the Company has a cumulative positive gap position of
76
<PAGE>
$96.8 million. Interest rate sensitivity using gap analysis is most useful for
the period less than one year.
</TABLE>
<TABLE>
Interest Rate Sensitivity
(dollars in thousands)
<CAPTION>
At December 31, 1996
Repricing, or able to be repriced, in:
0-90 91-365 1-5 Over 5 Rate
Days Days Years Years Insensitive Total
Assets:
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold $310,000 -- -- -- -- 310,000
Securities available for sale 28,642 34,608 70,479 472,606 12,335 618,670
Loans, net of unearned income 314,641 170,124 146,866 599,503 10,748 1,241,882
Noninterest rate sensitive assets -- -- -- -- 91,228 91,228
Total assets 653,283 204,732 217,345 1,072,109 114,311 2,261,780
Cumulative total assets 653,283 858,015 1,075,360 2,147,469 2,261,780 2,261,780
Liabilities and shareholdersO equity:
Deposits:
Interest bearing deposits 221,513 404,145 799,699 404,236 -- 1,829,593
Noninterest bearing deposits 5,424 18,435 34,743 64,951 -- 123,553
Total deposits 226,937 422,580 834,442 469,187 -- 1,953,146
Borrowings 111,662 -- -- -- -- 111,662
Noninterest rate sensitive liabilities -- -- -- -- 34,572 34,572
Shareholders' equity -- -- -- -- 162,400 162,400
Total liabilities and
shareholders' equity 338,599 422,580 834,442 469,187 196,972 2,261,780
Cumulative total liabilities and
shareholders' equity $338,599 761,179 1,595,621 2,064,808 2,261,780 2,261,780
Incremental gap:
Interest sensitivity gap $314,684 (217,848) (617,097) 602,922
Gap as a % of earning assets 14.50% (10.04) (28.43) 27.78
Interest sensitive assets to
liabilities 196.08 50.66 27.18 265.22
Cumulative gap:
Interest sensitivity gap $314,684 96,836 (520,261) 82,661
Gap as a % of earning assets 14.50% 4.46 (23.97) 3.81
Interest sensitive assets to
liabilities 196.08 116.37 69.96 110.62
</TABLE>
The Company's gap position in relation to products, services, and the
marketplace, is constantly under evaluation by the Asset Allocation Committee.
There are several significant shortcomings inherent in the method of analysis
presented in the Interest Rate Sensitivity table. For example, although certain
assets and liabilities have similar periods to maturity or to repricing, they
may react in different degrees to changes in market rates. Also, the interest
rates on certain types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while other interest rates may lag behind
changes in market rates. Additionally, certain assets have features which
restrict changes in interest rates on a short-term basis and over the life of
the asset (certain annual caps and lifetime caps). Further, in the event of
significant changes in interest rates, prepayment and early withdrawal levels
would be likely to deviate significantly from those assumed in the table. Some
borrowers' ability to service their debt may be hampered by a significant
interest rate increase. Management takes these factors into account when
reviewing the Bank's gap position and establishing future asset/liability
strategy.
Liquidity Risk
TrustCo seeks to obtain favorable funding sources and to maintain prudent
levels of liquid assets in order to satisfy varied liquidity demands. In
addition to serving as a funding source for maturing obligations, liquidity
provides flexibility in responding to customer initiated needs. Many factors
affect the ability to meet liquidity needs, including changes in the
markets served by the Bank's network of branches, the mix of assets and
liabilities, and general economic conditions.
The Company actively manages its liquidity position through target ratios
established under its Asset/Liability Management policies.Continual monitoring
of these ratios, both historically and through forecasts under
76
<PAGE>
multiple interest rate scenarios, allows TrustCo to employ strategies necessary
to maintain adequate liquidity levels. Management has also developed various
liquidity alternatives should abnormal situations arise.
The Company achieves its liability-based liquidity objectives in a
variety of ways. Net liabilities can be classified into three categories for the
purposes of managing liability-based liquidity: net core deposits, purchased
money, and capital market funds. TrustCo seeks deposits that are dependable and
predictable, ones that are based as much on the level and quality of service as
they are on interest rate. At December 31, 1996, core deposits (total deposits
less those time deposits greater than $100,000) amounted to $1.86 billion.
Average balances of core deposits are detailed in the table "Average Sources of
Funding."
In addition to core deposits, another source of liability-based funding
available to TrustCo is purchased money, which consists of long-term and short-
term borrowings, federal funds purchased, securities sold under repurchase
agreements, and time deposits greater than $100,000. The average balances of
these purchased liabilities are detailed in the table "Average Sources of
Funding." During 1996, the average balance in purchased liabilities was $185.0
million, compared with $121.0 million in 1995, and $69.6 million in 1994.
In addition, TrustCo has approximately $200 million of available lines of
credit with the Federal Home Loan Bank.
Off-Balance Sheet Risk
Commitments to extend credit: TrustCo makes contractual commitments to extend
credit, and extends lines of credit which are subject to the Bank's credit
approval and monitoring procedures. At December 31, 1996 and 1995, commitments
to extend credit in the form of loans, including unused lines of credit,
amounted to $222.5 million and $220.8 million respectively. In management's
opinion, there are no material commitments to extend credit that represent
unusual risk.
Letters of credit and standby letters of credit: TrustCo guarantees the
obligations or performance of customers by issuing letters of credit and standby
letters of credit to third parties. These letters of credit are used to support
third party debt, such as corporate debt issuances, industrial revenue bonds,
and municipal securities. The risk involved in letters of credit is essentially
the same as the credit risk involved in extending loan facilities to customers,
and they are subject to the same credit standards, and management procedures in
effect to monitor other credit risks. At December 31, 1996 and 1995,
outstanding letters of credit were approximately $12.0 million and $19.0
million, respectively.
Other Off-Balance Sheet Risk: TrustCo does not engage in activities involving
interest rate swaps, forward placement contracts, options, or any other
instrument commonly referred to as "derivatives." Management believes these
instruments pose a high degree of risk, and that investing in them is
unnecessary.
Noninterest Income and Expense
Noninterest income: Noninterest income is a significant source of revenue for
the Company and an important factor in overall results. Total noninterest income
was $10.3 million for 1996, compared to $14.1 million in 1995, and $4.6 million
in 1994. Included in the 1996 results are $4.5 million of securities losses
compared to securities gains of $240 thousand in 1995. Excluding securities
transactions, noninterest income would have been $14.8 million and $13.8 million
in 1996 and 1995, respectively. As noted earlier, securities losses for 1996
were realized to create available liquidity with the intent of reinvesting the
net sales proceeds at higher interest rates. Future performance should benefit
from these enhanced rates.
<TABLE>
Noninterest income
(dollars in thousands)
<CAPTION>
1996 vs. 1995
1996 1995 1994 Amount Percent
<S> <C> <C> <C> <C> <C>
Trust department income $ 5,556 4,890 4,850 666 13.6%
Fees for other services to customers 6,981 7,003 7,007 (22) (.3)
Net gain (loss) on securities transactions (4,536) 243 (8,877) (4,779) (1,966.7)
Other 2,312 1,931 1,580 381 19.7
Total noninterest income $ 10,313 14,067 4,560 (3,754) (26.7)%
</TABLE>
78
<PAGE>
<TABLE>
Noninterest Expense
(dollars in thousands)
<CAPTION>
1996 vs. 1995
1996 1995 1994 Amount Percent
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits $21,532 19,895 18,323 1,637 8.2%
Net occupancy expense of bank premises 4,178 4,562 3,479 (384) (8.4)
Equipment expense 3,289 3,403 3,363 (114) (3.3)
FDIC insurance expense 7 2,101 4,071 (2,094) (99.7)
Professional services 3,676 3,585 2,548 91 2.5
Other real estate expenses 718 3,120 1,016 (2,402) (77.0)
Other 8,615 7,774 7,760 841 10.8
Total noninterest expense $42,015 44,440 40,560 (2,425) (5.5)%
</TABLE>
The Trust Department contributes the largest recurring portion of noninterest
income through fees generated for the performance of fiduciary services. Income
from these fiduciary activities totalled $5.6 million in 1996 and $4.9 million
in 1995. Trust fees are calculated as a percentage of the assets under
management by the Trust Department. During 1996, assets under management
increased to $950 million from $777 million at year end 1995. The increase in
asset balances is due both to the Trust Department's success at attracting new
customer accounts and to market appreciation.
Changes in the other categories of noninterest income reflect the fee scale
used by the Bank for pricing its services and the volume of services utilized.
Noninterest expense: Noninterest expense was $42.0 million in 1996, $44.4
million in 1995, and $40.6 million in 1994. TrustCo's operating philosophy
stresses the importance of monitoring and controlling the level of noninterest
expense. The efficiency ratio is a strong indicator of how well controlled and
monitored these expenses are for a banking enterprise.TrustCo's efficiency ratio
was 39.51% for 1996, 42.52% for 1995, and 41.82% for 1994. The industry goal is
the attainment of a 60% efficiency ratio. TrustCo outperformed the industry
on this ratio for 1994, 1995, and 1996 by a wide margin.
<TABLE>
Efficiency Ratio
<CAPTION>
<S> <C>
1994 41.82%
1995 42.52
1996 39.51
</TABLE>
Salaries and employee benefits are the most significant component of
noninterest expense. At year end 1996, these expenses amounted to $21.5 million,
compared to $19.9 million and $18.3 million for 1995 and 1994, respectively. The
increase in salaries and employee benefits reflects the addition of new branches
during 1995 and 1996, and salary adjustments given to the Bank staff. Increased
costs for benefits, such as health insurance and retirement benefits, account
for the remainder of the increase.
<TABLE>
Noninterest Expense
(in millions)
<CAPTION>
<S> <C>
1994 $40.6
1995 44.4
1996 42.0
</TABLE>
During 1996, FDIC insurance premiums decreased by $2.1 million compared to 1995
as a result of the reduction and eventual elimination of the insurance premium
on TrustCo deposits. Other real estate expense is down by $2.4 million between
1995 and 1996 due to certain costs incurred in 1995 relative to property
dispositions.
79
<PAGE>
Income Tax
In 1996, TrustCo recognized income tax expense of $17.3 million as compared to
$12.8 million in 1995, and $12.6 million in 1994. The tax expense on the
Company's income was different than tax expense at the statutory rate of 35% due
primarily to tax exempt income, the effect of New York State income taxes, and
the reduction in 1995 of the deferred tax asset valuation reserve.
Deferred tax assets are recognized subject to management's judgment that
realization is more likely than not. During 1995, the valuation reserve was
reduced as a result of the resolution of several tax return audits and
management's reassessment of the realization of certain deferred tax assets.
The valuation allowance of $2.1 million at December 31, 1996 and 1995, is
primarily reserved for federal and state tax law restrictions on the
deductibility of certain temporary differences.
Based primarily on the sufficiency of historical and future taxable income,
management believes it is more likely than not that the remaining net deferred
tax asset of $34.5 million and $30.4 million at December 31, 1996 and
1995, respectively, will be realized.
Financial Results
The discussion included in Management's Discussion and Analysis is by its
nature a review of 1996 actual performance. Projection of the historical 1996
results to future periods may not be appropriate due to changes in the business
environment outside the Company's control.
Impact of Inflation and Changing Prices
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles which require the measurement of
financial position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increasing costs of
operations. Unlike most industrial companies, nearly all the assets and
liabilities of the Company are monetary.
As a result, changes in interest rates have a greater impact on the Company's
performance than do the effects of general levels of inflation, since interest
rates do not necessarily move in the same direction or to the same extent as
the price of goods and services.
Impact of Changes in Accounting Standards
Accounting by Creditors for Impairment of a Loan: The Company adopted
Statements 114 and 118 effective as of January 1, 1995. These statements require
that an impaired loan be measured at the present value of expected cash flows.
The Statements also narrow the application of the concept of in-substance
foreclosure to situations where the creditor has received physical possession of
the debtor's collateral. The adoption of Statements 114 and 118 did not have a
material impact on the financial condition or results of operations of the
Company.
Accounting for Certain Investments in Debt and Equity Securities: The
Company adopted Statement of Financial Accounting Standards No. 115 (Statement
115), "Accounting for Certain Investments in Debt and Equity Securities,"
effective January 1, 1994. Upon adoption of Statement 115, the Company
identified securities that are "available for sale" and those that are "held to
maturity" (the Company has no trading account assets as prescribed by Statement
115). Securities classified as available for sale are those that can be sold in
response to changes in market interest rates, liquidity requirements, or other
investment alternatives. Securities classified as held to maturity are not
available for sale and are held until contractual maturity or call. Securities
available for sale are recorded at market value with the unrealized appreciation
and depreciation, net of tax, recorded as an element of shareholders' equity.
Securities identified as held to maturity are recorded at amortized cost.
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of: The Company adopted Statement of Financial Accounting
Standards No. 121 (Statement 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," as of January 1, 1996.
Various assets are excluded from the scope of Statement 121, including financial
instruments which constitute the majority of the Company's assets. For long-
lived assets included in the scope of Statement 121, such as premises and
equipment, an impairment loss must be recognized when the estimate of total
undiscounted future cash flows attributable to the asset is less than the
asset's carrying amount. The adoption of Statement 121 did not have a material
effect on the Company's consolidated financial statements.
80
<PAGE>
<TABLE>
Summary of unaudited quarterly financial information
(dollars in thousands, except per share data)
<CAPTION>
1996 1995
Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
Income statement:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $41,508 41,822 41,590 41,727 166,647 38,104 39,959 41,506 41,983 161,552
Interest expense 20,377 20,290 20,785 20,890 82,342 17,210 19,873 21,407 21,710 80,200
Net interest income 21,131 21,532 20,805 20,837 84,305 20,894 20,086 20,099 20,273 81,352
Provision for loan losses 3,110 854 943 1,670 6,577 3,573 3,045 3,120 2,960 12,698
Net interest income
after provision for
loan losses 18,021 20,678 19,862 19,167 77,728 17,321 17,041 16,979 17,313 68,654
Noninterest income 3,127 1,025 2,409 3,752 10,313 3,449 3,986 3,647 2,985 14,067
Noninterest expense 10,446 10,675 10,248 10,646 42,015 11,751 11,862 10,695 10,132 44,440
Income before
income taxes 10,702 11,028 12,023 12,273 46,026 9,019 9,165 9,931 10,166 38,281
Income tax expense 4,017 4,115 4,556 4,639 17,327 3,114 3,059 3,335 3,246 12,754
Net income 6,685 6,913 7,467 7,634 28,699 5,905 6,106 6,596 6,920 25,527
Per share data:
Net income .32 .33 .36 .36 1.37 .29 .30 .32 .33 1.23
Cash dividends declared .24 .24 .24 .28 .99 .20 .20 .24 .24 .88
</TABLE>
Accounting for Stock-Based Compensation: In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 123 (Statement 123), "Accounting for Stock-Based Compensation," which
establishes a fair value based method of accounting for stock options, such as
the Company's stock option plans. Under Statement 123, entities can recognize
stock-based compensation expense in the basic financial statements using either
(1) the intrinsic value based approach set forth in the Accounting Principles
Board Opinion No. 25 (APB Opinion 25), or (2) the fair value based method
introduced in Statement 123. Companies electing to remain with the accounting in
APB Opinion 25 must make pro forma disclosures of net income and earnings per
share, as if the fair value based method of accounting defined in Statement 123
had been applied. Under the method currently utilized by TrustCo (APB Opinion
25), compensation expense is determined based upon the option's intrinsic value.
Under the fair value based method introduced by Statement 123, compensation
expense is based on the estimate of the option's fair value at the grant date
and is generally recognized over the vesting period. The Company adopted the
provisions of Statement 123 as of January 1, 1996, and has elected to continue
to measure stock-based compensation cost in accordance with APB Opinion 25.
Therefore, the pro forma disclosures required by Statement 123 have been
included in the footnotes to the consolidated financial statements.
Transfer of Financial Assets and Extinguishment of Liabilities: In June 1996,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 125 (Statement 125), "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishment of liabilities based on a financial-
components approach that focuses on control. Statement 125 extends the
"available for sale" and "trading" approach of Statement 115 to non-security
financial assets that can be contractually prepaid or otherwise settled in
such a way that the holder of the asset would not recover substantially all
of its recorded investment. In addition, Statement 125 amends Statement 115
with respect to the classification as held to maturity of a security that can
be prepaid or settled at a loss to the holder of the security. Statement 125 is
effective for financial assets held on or acquired after January 1, 1997.
Certain aspects of Statement 125 were amended by Statement of Financial
Accounting Standards No. 127 "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125." Management believes the adoption of
Statement 125 will not have a material impact on the Company's consolidated
financial statements.
80
<PAGE>
<TABLE>
Five Year Summary of Financial Data
(dollars in thousands, except per share data)
<CAPTION>
Years Ended December 31,
1996 1995 1994 1993 1992
Statement of income data:
<S> <C> <C> <C> <C> <C>
Interest income $ 166,647 161,552 140,282 133,657 143,260
Interest expense 82,342 80,200 60,698 61,619 76,401
Net interest income 84,305 81,352 79,584 72,038 66,859
Provision for loan losses 6,577 12,698 8,056 11,576 12,693
Net interest income after provision
for loan losses 77,728 68,654 71,528 60,462 54,166
Noninterest income 10,313 14,067 4,560 19,176 15,433
Noninterest expense 42,015 44,440 40,560 43,502 42,771
Income before income taxes 46,026 38,281 35,528 36,136 26,828
Income tax expense 17,327 12,754 12,640 12,516 9,325
Income before cumulative effect of
change in accounting
principle 28,699 25,527 22,888 23,620 17,503
Cumulative effect of a change in
accounting principle -- -- -- (3,295) --
Net income $ 28,699 25,527 22,888 20,325 17,503
Share data:
Average equivalent shares
outstanding
(in thousands) 21,022 20,740 20,542 20,429 20,156
Book value $ 7.97 7.89 6.90 6.47 6.03
Cash dividends 0.99 0.88 0.71 0.58 0.45
Net income 1.37 1.23 1.11 0.99 0.87
Financial:
Return on average assets 1.29% 1.23 1.15 1.04 0.95
Return on average shareholders'
equity (1) 19.05 18.03 17.01 16.18 15.06
Cash dividend payout ratio 70.38 69.55 62.52 56.88 51.05
Tier 1 capital as a % of total
risk adjusted assets 12.99 12.45 12.08 12.18 11.39
Total capital as a % of total risk
adjusted assets 14.28 13.73 13.35 13.45 12.64
Efficiency ratio 39.51 42.52 41.82 44.63 51.96
Net interest margin 4.07 4.18 4.25 3.99 3.94
Average balances:
Total assets $2,220,535 2,073,391 1,994,497 1,946,715 1,852,180
Earning assets 2,136,826 1,994,240 1,910,368 1,857,722 1,763,450
Loans, net 1,227,407 1,187,929 1,122,698 1,044,855 1,025,480
Allowance for loan losses (51,233) (45,086) (37,334) (30,214) (23,735)
Securities available for sale 580,919 301,080 332,980 192,433 55,716
Investment securities -- 292,908 250,812 455,136 568,825
Deposits 1,936,445 1,859,070 1,808,336 1,767,531 1,675,479
Short-term borrowings 98,324 38,090 18,129 17,447 25,520
Long-term debt -- 788 2,840 3,870 5,000
Shareholders' equity 155,927 145,469 136,977 125,648 116,238
<FN>
(1) Average shareholders' equity excludes the market adjustment for securities
available for sale.
</FN>
</TABLE>
82
<PAGE>
Glossary of Terms
Allowance for Loan Losses
A balance sheet account which has been accumulated over a period of years as
a reserve against losses from problem loans. The provision for loan losses is
added to the allowance account, charge offs of loans decrease the allowance
balance and recoveries on previously charged off loans serve to increase the
balance.
Book Value Per Share
Total shareholders' equity divided by shares outstanding on the same date.
This provides an indication of the book value of a share of stock.
Cash Dividends Per Share
Total cash dividends declared divided by average shares outstanding for the
period.
Core Deposits
Deposits that are traditionally stable, including all deposits other than time
deposits of $100,000 or more.
Derivative Investments
Investments in futures contracts, forwards, swaps, or option contracts, or other
investments with similar characteristics.
Earning Assets
The sum of interest-bearing deposits with banks, securities available for
sale, investment securities, loans, net of unearned income, and federal funds
sold.
Earnings Per Share
Net income divided by the average number of shares of common stock
outstanding during the period including the effect of stock options.
Efficiency Ratio
Noninterest expense (excluding nonrecurring charges and other real estate
expense) divided by taxable equivalent net interest income plus noninterest
income (excluding securities transactions). This is an indicator of the total
cost of operating the Company in relation to recurring total income generated.
Federal Funds Sold
A one day investment of excess cash reserves as required under banking
regulations from one bank to another.
Impaired Loans
Loans, principally commercial, where it is probable that the borrower will be
unable to make the principal and interest payments according to the contractual
terms of the loan, and all loans restructured subsequent to January 1, 1995.
Interest-Bearing Liabilities
The sum of interest-bearing deposits, federal funds purchased, securities sold
under agreements to repurchase, other short-term borrowings, and long-term debt.
Interest Rate Spread
The difference between the taxable equivalent yield on earning assets and the
rate paid on interest-bearing liabilities.
Liquidity
The ability to meet both loan commitments and deposit withdrawals as they come
due.
Net Interest Income
The difference between income on earning assets and interest expense on
interest-bearing liabilities.
Net Interest Margin
Fully taxable equivalent net interest income as a percentage of average earning
assets.
Net Loans Charged Off
Reductions to the allowance for loan losses written off as losses, net of the
recovery of loans previously charged off.
Nonaccrual Loans
Loans for which no periodic accrual of interest income is recognized.
Nonperforming Assets
The sum of nonperforming loans plus foreclosed real estate properties.
Nonperforming Loans
The sum of loans in a nonaccrual status (for purposes of interest recognition)
plus loans whose repayment criteria have been renegotiated to less than market
terms due to the inability of the borrowers to repay the loan in accordance
with its original terms plus accruing loans 90 days or more past due as to
principal or interest payments.
Parent Company
A company that owns or controls a subsidiary through the ownership of
voting stock.
Real Estate Owned
Real estate acquired through foreclosure proceedings.
Restructured Loans
A refinanced loan in which the bank allows the borrower certain concessions that
would normally not be considered. The concessions are made in light of the
borrower's financial difficulties and the bank's objective to maximize recovery
on the loan.
Return on Average Assets
Net income as a percentage of average total assets.
Return on Average Equity
Net income as a percentage of average equity, excluding the impact of the mark
to market adjustment for securities available for sale.
Risk-Based Capital
The amount of capital required by federal regulatory standards, based on a
risk-weighting of assets.
Taxable Equivalent (TE)
Tax exempt income that has been adjusted to an amount that would yield the same
after tax income had the income been subject to taxation at the statutory
Federal and/or state income tax rates.
83
<PAGE>
Management's Statement of Responsibilities
Responsibility for the financial information presented in the Annual Report
rests with TrustCo Bank Corp NY's management. The Company believes that the
consolidated financial statements reflect fairly the substance of transactions
and present fairly the Company's financial position and results of operations in
conformity with generally accepted accounting principles appropriate in the
circumstances, applying certain estimates and judgments as required.
In meeting its responsibilities for the reliability of the consolidated
financial statements, the Company depends on its system of internal accounting
controls. The system is designed to provide reasonable assurance that
assets are safeguarded and transactions are executed in accordance with the
appropriate corporate authorization and recorded properly to permit the
preparation of the consolidated financial statements in accordance with
generally accepted accounting principles. Although accounting control procedures
are designed to achieve these objectives, it must be recognized that errors or
irregularities may nevertheless occur. Also, estimates and judgments are
required to assess and balance the relative cost and expected benefits of the
controls. The Company believes that its accounting controls provide reasonable
assurance that errors or irregularities that could be material to the
consolidated financial statements are prevented or would be detected within
a timely period by employees in the normal course of performing their
assigned functions. An important element of the system is a continuing and
extensive internal audit program.
The Board of Directors of the Company has an Audit Committee composed entirely
of directors who are not officers or employees of the Company. The Committee
meets periodically and privately with management, the internal auditors,
and the independent public accountants to consider audit results and to discuss
internal accounting controls, auditing and financial reporting matters.
KPMG Peat Marwick LLP, independent public accountants, have been engaged to
render an independent professional opinion on the Company's consolidated
financial statements. Their audit is conducted in accordance with generally
accepted auditing standards and forms the basis for their report as to the fair
presentation, in the consolidated financial statements, of the Company's
financial position, operating results and cash flows.
/s/Robert A. McCormick
- - ----------------------
Robert A. McCormick
President and Chief Executive Officer
/s/Robert T. Cushing
- - --------------------
Robert T. Cushing
Vice President and Chief Financial Officer
January 24, 1997
84
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders of TrustCo Bank Corp NY:
We have audited the accompanying consolidated statements of condition of TrustCo
Bank Corp NY and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TrustCo Bank Corp
NY and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in note 4 to the consolidated financial statements, effective
January 1,1995, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," and Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan
- - -- Income Recognition and Disclosures" which prescribe recognition criteria
for loan impairment and measurement methods for impaired loans. As discussed
in note 3 to the consolidated financial statements, in 1994 the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" which changed its method of accounting for
certain investments in debt and equity securities.
/s/KPMG Peat Marwick LLP
- - ------------------------
KPMG Peat Marwick LLP
Albany, New York
January 24, 1997
85
<PAGE>
<TABLE>
Consolidated Statements of Income
(dollars in thousands, except per share data)
<CAPTION>
Years Ended December 31,
1996 1995 1994
Interest income:
<S> <C> <C> <C>
Interest and fees on loans $ 107,111 107,060 93,873
Interest and dividends on:
U.S. Treasuries and agencies 31,466 28,193 23,841
States and political subdivisions 4,254 2,902 1,129
Mortgage-backed securities 4,114 8,602 9,376
Other 2,068 2,252 3,005
Interest on federal funds sold 17,634 12,543 9,058
Total interest income 166,647 161,552 140,282
Interest expense:
Interest on deposits 77,749 78,355 60,034
Interest on short-term borrowings 4,593 1,776 461
Interest on long-term debt -- 69 203
Total interest expense 82,342 80,200 60,698
Net interest income 84,305 81,352 79,584
Provision for loan losses 6,577 12,698 8,056
Net interest income after
provision for loan losses 77,728 68,654 71,528
Noninterest income:
Trust department income 5,556 4,890 4,850
Fees for other services to customers 6,981 7,003 7,007
Net gain/(loss) on securities transactions (4,536) 243 (8,877)
Other 2,312 1,931 1,580
Total noninterest income 10,313 14,067 4,560
Noninterest expense:
Salaries and employee benefits 21,532 19,895 18,323
Net occupancy expense 4,178 4,562 3,479
Equipment expense 3,289 3,403 3,363
FDIC insurance expense 7 2,101 4,071
Professional services 3,676 3,585 2,548
Other real estate expenses 718 3,120 1,016
Other 8,615 7,774 7,760
Total noninterest expense 42,015 44,440 40,560
Income before income taxes 46,026 38,281 35,528
Income taxes 17,327 12,754 12,640
Net income $ 28,699 25,527 22,888
Net income per common share $ 1.37 1.23 1.11
Average equivalent shares outstanding were 21,022,000 for 1996, 20,740,000 for
1995, and 20,542,000 for 1994. Per share data has been adjusted for a 15% stock
split in 1996, a 6 for 5 stock split in 1995, and a 10% stock dividend in 1994.
See accompanying notes to consolidated financial statements.
</TABLE>
86
<PAGE>
<TABLE>
Consolidated Statements of Condition
(dollars in thousands, except share data)
<CAPTION>
As of December 31,
1996 1995
ASSETS
<S> <C> <C>
Cash and due from banks $ 45,779 50,889
Federal funds sold 310,000 239,000
Total cash and cash equivalents 355,779 289,889
Securities available for sale 618,670 640,206
Loans 1,243,335 1,227,926
Less: Unearned income 1,453 1,784
Allowance for loan losses 51,561 48,320
Net loans 1,190,321 1,177,822
Bank premises and equipment 23,098 25,008
Real estate owned 6,518 3,732
Other assets 67,394 39,528
Total assets $2,261,780 2,176,185
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand $ 123,553 111,743
Savings 661,915 649,033
NOW accounts 236,264 231,107
Money market deposit accounts 61,131 69,434
Certificates of deposit (in denominations
of $100,000 or more) 89,793 84,210
Other time accounts 780,490 785,122
Total deposits 1,953,146 1,930,649
Short-term borrowings 111,662 56,654
Accrued expenses and other liabilities 34,572 28,783
Total liabilities 2,099,380 2,016,086
Shareholders' equity:
Capital stock; $1 par value. 50,000,000
and 25,000,000 shares authorized at
December 31,1996 and 1995, respectively,
and 20,959,376 and 18,134,708 shares
issued at December 31, 1996 and 1995,
respectively 20,959 18,135
Surplus 114,228 116,128
Undivided profits 23,221 14,720
Net unrealized gain on securities
available for sale 5,239 12,363
Treasury stock; 571,142 and 496,646
shares, at cost, at December 31, 1996
and 1995, respectively (1,247) (1,247)
Total shareholders' equity 162,400 160,099
Total liabilities and shareholders'
equity $2,261,780 2,176,185
See accompanying notes to consolidated financial statements.
</TABLE>
87
<PAGE>
<TABLE>
Consolidated Statements of Changes in Shareholders' Equity
(dollars in thousands, except per share data)
<CAPTION>
Three Years Ended December 31, 1996
Net Unrealized
Gain/(Loss)
On Securities
Capital Undivided Available Treasury
Stock Surplus Profits For Sale Stock
<S> <C> <C> <C> <C> <C>
Beginning balance, January 1, 1994 $ 13,588 91,955 25,331 -- (994)
Net income -- 1994 -- -- 22,888 -- --
Cash dividend declared, $.71 per share -- -- (14,310) -- --
Stock options exercised, 65,282 shares 65 801 -- -- --
Net unrealized loss on securities
available for sale -- -- -- (41) --
10% stock dividend (1,365,122 shares) 1,365 25,596 (26,961) -- --
Ending balance, December 31, 1994 15,018 118,352 6,948 (41) (994)
Net income -- 1995 -- -- 25,527 -- --
Cash dividend declared, $.88 per share -- -- (17,755) -- --
Stock options exercised, 99,544 shares 100 793 -- -- --
6 for 5 stock split (3,016,716 shares) 3,017 (3,017) -- -- --
Treasury stock purchased -- -- -- -- (253)
Change in net unrealized gain/(loss) on
securities available for sale -- -- -- 12,404 --
Ending balance, December 31, 1995 18,135 116,128 14,720 12,363 (1,247)
Net income -- 1996 -- -- 28,699 -- --
Cash dividend declared, $.99 per share -- -- (20,198) -- --
Stock options exercised, 90,882 shares 91 844 -- -- --
15% stock split (2,733,786 shares) 2,733 (2,733) -- -- --
Treasury stock purchased -- -- -- -- (805)
Sale of treasury stock -- (11) -- -- 805
Change in net unrealized gain/(loss) on
securities available for sale -- -- -- (7,124) --
Ending balance, December 31, 1996 $ 20,959 114,228 23,221 5,239 (1,247)
Per share data has been adjusted for a 15% stock split in 1996, a 6 for 5 stock split in 1995, and a 10% stock dividend in
1994.
See accompanying notes to consolidated financial statements.
</TABLE>
88
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
(in thousands)
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
Increase/(decrease) in cash and cash equivalents
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 28,699 25,527 22,888
Adjustments to reconcile net income to net cash provided by/
(used in) operating activities:
Depreciation and amortization 2,951 3,640 2,749
Provision for loan losses 6,577 12,698 8,056
Provision for deferred tax benefit (3,644) (9,811) (2,981)
Net (gain)/loss on sale or call of securities available for
sale 4,536 (284) 8,883
Net (gain)/loss on maturities and calls of
investment securities and trading assets -- 41 (6)
(Increase)/decrease in taxes receivable (1,559) 4,044 (1,003)
(Increase)/decrease in interest receivable 856 (3,586) 488
Increase in interest payable 144 954 318
(Increase)/decrease in other assets (17,098) 6,711 1,551
Increase/(decrease) in accrued expenses 4,894 (3,300) 3,154
Total adjustments (2,343) 11,107 21,209
Net cash provided by operating activities 26,356 36,634 44,097
Cash flows from investing activities:
Proceeds from sales of securities available for sale 382,780 243,597 1,015,688
Proceeds from maturities and calls of securities available for
sale 125,978 48,106 42,558
Purchase of securities available for sale (503,892) (504,525) (770,617)
Proceeds from maturities and calls of investment securities -- 62,514 80,717
Purchase of investment securities -- (3,212) (182,981)
Net increase in loans (27,469) (75,287) (99,396)
Proceeds from sales of real estate owned 4,196 3,931 9,109
Capital expenditures (1,041) (2,271) (1,733)
Net cash provided by/(used in) investing activities (19,448) (227,147) 93,345
Cash flows from financing activities:
Net increase/(decrease) in deposits 22,497 140,818 (4,401)
Net increase/(decrease) in short-term borrowings 55,008 43,941 (5,610)
Repayment of long-term debt -- (3,550) --
Proceeds from issuance of long-term debt -- -- 800
Proceeds from issuance of common stock 935 893 866
Proceeds from sale of treasury stock 794 -- --
Payments to acquire treasury stock (805) (253) --
Dividends paid (19,447) (16,926) (13,595)
Net cash provided by/(used in) financing activities 58,982 164,923 (21,940)
Net increase/(decrease) in cash and cash equivalents 65,890 (25,590) 115,502
Cash and cash equivalents at beginning of year 289,889 315,479 199,977
Cash and cash equivalents at end of year $ 355,779 289,889 315,479
(continued)
</TABLE>
89
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows(continued)
(in thousands)
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
Supplemental disclosure of cash flow information:
<S> <C> <C> <C>
Interest paid $ 82,198 79,246 60,380
Income taxes paid 22,363 18,521 16,624
Reclassification of investment securities to
securities available for sale upon adoption
of Statement 115 -- -- 384,416
Transfer of investment securities to securities
available for sale upon adoption of the
FASB special report on Statement 115 -- 288,515 --
Transfer to investment securities from securities
available for sale -- -- 213,199
Transfer of loans to real estate owned 8,393 7,705 9,880
Transfer of building from real estate owned to premises -- 2,500 --
Increase in dividends payable 751 829 715
Reclassification of trading securities to securities
available for sale upon adoption of Statement 115 -- -- 2,106
Unrealized gain on securities available for sale on
January 1, 1994 -- -- 14,037
Deferred tax on unrealized gain on securities available
for sale on January 1, 1994 -- -- 5,816
Change in unrealized (gain)/loss on securities available
for sale -- gross 12,134 (21,127) (14,107)
Change in deferred tax effect on unrealized gain/(loss)
on securities available for sale (5,010) 8,723 (5,787)
See accompanying notes to consolidated financial statements.
</TABLE>
90
<PAGE>
Notes to Consolidated Financial Statements
Basis of Presentation
The accounting and financial reporting policies of TrustCo Bank Corp NY (Company
or TrustCo) and Trustco Bank, National Association (Bank or Trustco) and its
operating subsidiary Trustco Realty Corp., conform to general practices within
the banking industry and are in accordance with generally accepted accounting
principles. A description of the more significant policies follows.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Consolidation
The consolidated financial statements of the Company include the accounts of
the subsidiaries after elimination of all significant intercompany accounts
and transactions.
Securities Available for Sale
Securities available for sale are carried at market value with any
unrealized appreciation or depreciation of value, net of tax, included as an
element of the capital accounts. Management maintains an available for sale
portfolio in order to provide maximum flexibility in future balance sheet
management. The designation of available for sale is made at the time of
purchase based upon managementOs intent to hold the securities for an indefinite
period of time. These securities, however, would be available for sale in
response to changes in market interest rates, related changes in liquidity
needs, or changes in the availability of and yield on alternative investments.
Unrealized losses on securities that reflect a decline in value which is other
than temporary, if any, are charged to income. Nonmarketable equity securities
(principally stock of the Federal Reserve Bank and the Federal Home Loan Bank)
are included in securities available for sale at cost since there is no readily
available market value.
The cost of securities available for sale is adjusted for amortization of
premium and accretion of discount on a method that equates to the level yield.
Gains and losses on the sale of securities available for
sale are based on the amortized cost of the specific security sold.
Investment Securities
Securities classified as investment securities are carried at cost and are
held to maturity to meet longer term investment objectives, including yield and
liquidity purposes. At the time of purchase, securities are identified as held
for investment based upon the Company's intention and ability to hold the
securities to maturity. Unrealized losses on securities that reflect a decline
in value which is other than temporary, if any, are charged to income. There
were no securities classified as investment securities as of December 31, 1996
and 1995.
Loans
Loans are carried at the principal amount outstanding net of unearned income
and unamortized loan fees and costs, which are recognized as income over the
applicable loan term.
Nonperforming loans include nonaccrual loans, restructured loans, and loans
which are 90 days or more past due and still accruing interest. Generally, loans
are placed in nonaccrual status, either due to the delinquent status of
principal and/or interest payments, or a judgment by management that, although
payments of principal and/or interest are current, such action is prudent.
Future payments received on nonperforming loans are recorded as interest income
or principal reductions based upon management's ultimate expectation for
collection.
Impaired loans are commercial and commercial real estate loans in nonaccrual
status and loans restructured in a troubled debt restructuring since January 1,
1995.
Allowance for Loan Losses
An allowance for loan losses is maintained at a level considered adequate
by management to provide for potential loan losses based on consideration of the
credit risk of the loan portfolio, including a review of past experience,
current economic conditions, and underlying collateral value. The allowance is
increased by provisions charged against income and reduced by net charge offs.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for loan
losses. Such agencies may require the Company to recognize additions to the
allowance based on their judgments of information available to them at the time
of their examination.
91
<PAGE>
Bank Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization computed on either the straight-line or accelerated methods over
the remaining useful lives of the assets.
Real Estate Owned
Real estate owned are assets taken through foreclosures on loans. Foreclosed
assets held for sale are recorded on an individual basis at the lower of
(1) fair value minus estimated costs to sell or (2) "cost" (which is the
fair value at initial foreclosure). When a property is acquired, the excess
of the loan balance over fair value is charged to the allowance for loan losses.
Subsequent write downs are included in noninterest expense.
Income Taxes
Deferred taxes are recorded for the future tax consequences of events that
have been recognized in the financial statements or tax returns, based upon
enacted tax laws and rates. Deferred tax assets are recognized subject to
management's judgment that realization is more likely than not.
Dividend Restrictions
Banking regulations restrict the amount of cash dividends which may be paid
during a year by the Bank to the Parent Company without the written consent of
the appropriate bank regulatory agency. Based on these restrictions, the Bank
could pay $19.2 million plus 1997 net profits. For all practical purposes,
TrustCo could not declare dividends to shareholders materially in excess of
the aggregate amount of dividends that could be paid by the Bank.
Pension Plan
The Company has a defined benefit pension plan covering substantially all of
its employees. The benefits are based on years of service and the employee's
compensation.
Stock Option Plans
The Company's stock option plans are accounted for in accordance with the
provisions of the Accounting Principles Board Opinion No. 25 (APB Opinion 25)
"Accounting for Stock Issued to Employees" and as such no compensation expense
has been recorded for these plans.
Reclassification of Prior Year Statements
It is the Company's policy to reclassify prior year consolidated financial
statements to conform to the current year presentation.
(2) Balances at Other Banks
The Bank is required to maintain certain reserves of vault cash and/or
deposits with the Federal Reserve Bank. The amount of this reserve requirement,
included in cash and due from banks, was approximately $12.7 million and $15.6
million at December 31, 1996 and 1995, respectively.
(3) Securities Available for Sale
The amortized cost and approximate market value of the securities available
for sale are as follows:
<TABLE>
(in thousands)
<CAPTION>
At December 31, 1996
Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasuries and agencies $404,885 3,564 1,516 406,933
States and political subdivisions 94,954 2,135 171 96,918
Mortgage-backed securities 75,492 1,114 113 76,493
Other 4,276 -- -- 4,276
Total debt securities 579,607 6,813 1,800 584,620
Equity securities 30,139 3,911 -- 34,050
Total securities available for sale $609,746 10,724 1,800 618,670
</TABLE>
<TABLE>
(in thousands)
<CAPTION>
At December 31, 1995
Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasuries and agencies $432,710 14,806 173 447,343
States and political subdivisions 68,151 2,256 36 70,371
Mortgage-backed securities 78,481 1,934 131 80,284
Other 15,690 1,600 -- 17,290
Total debt securities 595,032 20,596 340 615,288
Equity securities 24,118 800 -- 24,918
Total securities available for sale $619,150 21,396 340 640,206
</TABLE>
92
<PAGE>
The following table distributes the debt securities available for sale
portfolio as of December 31, 1996, based on the securities' final maturity
(mortgage-backed securities are stated using average life):
<TABLE>
(in thousands)
<CAPTION>
Approximate
Amortized Market
Cost Value
<S> <C> <C>
Due in one year or less $ 39,028 39,396
Due after one year through five years 47,094 48,589
Due after five years through ten years 279,870 282,463
Due after ten years 213,615 214,172
$579,607 584,620
The proceeds from sales of securities, gross realized gains and gross realized
losses from sales and calls during 1996, 1995 and 1994 are as follows:
</TABLE>
<TABLE>
(in thousands)
<CAPTION>
At December 31,
1996 1995 1994
<S> <C> <C> <C>
Proceeds from sales $382,780 243,597 1,015,688
Gross realized gains 3,214 1,220 5,805
Gross realized losses 7,750 977 14,682
</TABLE>
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," as of
January 1, 1994. The Company classified certain of the investment securities as
being available for sale and reclassified these balances to a separate line
on the consolidated statement of condition.
In December 1995, the Company reclassified the entire portfolio of investment
securities to the category of securities available for sale. This
reclassification was made in response to a one-time transfer allowed by the
Financial Accounting Standards Board and the various federal banking regulators.
The amortized cost of securities available for sale that have been pledged to
secure public deposits and for other purposes required by law amounted to $299.7
million and $250.1 million at December 31, 1996 and 1995 respectively.
There are no securities of a single issuer (excluding issues of the U.S.
government and its agencies) that represent 10% or more of shareholders' equity
at December 31, 1996 and 1995.
<TABLE>
(4) Loans and Allowance for Loan Losses
A summary of loans by category is as follows:
(in thousands)
<CAPTION>
At December 31,
1996 1995
<S> <C> <C>
Commercial $ 217,363 225,174
Real estate
Construction 7,055 11,239
Residential mortgage loans 801,826 760,276
Home equity line of credit 183,832 194,744
Installment loans 33,259 36,493
Total loans 1,243,335 1,227,926
Less: Unearned income 1,453 1,784
Allowance for loan losses 51,561 48,320
Net loans $1,190,321 1,177,822
</TABLE>
At December 31, 1996 and 1995, loans to executive officers, directors, and to
associates of such persons aggregated $6.9 million and $7.7 million,
respectively. During 1996, new loans of $3.8 million were made and repayments of
loans totalled $4.6 million. In the opinion of management, such loans were made
in the ordinary course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions. These loans do not involve more than normal risk of collectibility
or present other unfavorable features.
TrustCo lends primarily in the Capital District region of New York State and
in the geographic territory surrounding its borders. Although the loan portfolio
is diversified, a portion of its debtors' ability to repay is dependent upon
the economic conditions prevailing in New York State.
The following table sets forth the information with regard to nonperforming
loans:
<TABLE>
(in thousands)
<CAPTION>
At December 31,
1996 1995 1994
<S> <C> <C> <C>
Loans in nonaccrual status $10,748 12,832 6,370
Loans contractually past due 90 days or more
and still accruing interest 792 1,696 4,436
Restructured loans 2,495 1,130 910
Total nonperforming loans $14,035 15,658 11,716
</TABLE>
93
<PAGE>
Interest on nonaccrual and restructured loans of $1.3 million in each of 1996
and 1995, and $639 thousand in 1994, would have been earned in accordance with
the original contractual terms of the loans. Approximately $834 thousand, $607
thousand and $292 thousand of interest on nonaccrual and restructured loans was
collected and recognized as income in 1996, 1995, and 1994, respectively.
There are no commitments to extend further credit on nonaccrual or restructured
loans.
Transactions in the allowance for loan losses account are summarized as
follows:
<TABLE>
(in thousands)
<CAPTION>
For the years ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $ 48,320 38,851 34,087
Provision for loan losses 6,577 12,698 8,056
Loans charged off (5,648) (7,338) (4,824)
Recoveries on loans previously charged off 2,312 4,109 1,532
Balance at year end $ 51,561 48,320 38,851
</TABLE>
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114 (Statement 114), "Accounting by Creditors for
Impairment of a Loan." Statement 114 was amended by Statement of Financial
Accounting Standards No. 118 (Statement 118), "Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclosures." These new
accounting standards prescribe recognition criteria for loan impairment and
measurement methods for impaired loans, and loans whose terms are modified in
a troubled debt restructuring subsequent to the adoption of these new standards.
A loan is considered impaired when it is probable that the borrower will be
unable to repay the loan according to the original contractual terms of
the loan agreement. These new standards are applicable principally to
commercial and commercial real estate loans, however, certain provisions
dealing with restructured loans also apply to the retail loan products.
Once a loan is identified as impaired, the new accounting standards require
measurement of the loan at the lower of fair value of the anticipated proceeds
to be received or the recorded investment in the loan. The accounting standards
provide certain guidelines as to how fair value is to be determined.
In addition, Statement 114 substantially modified the definition of
"in-substance foreclosure" loans. Consequently, certain loans identified at year
end 1994 as being in-substance foreclosure loans, and classified as real estate
owned, have been reclassified into the loan portfolio. At January 1, 1995, $9.2
million of loans previously included in real estate owned have been reclassified
to the loan balance.
At December 31, 1996 and 1995, there were $5.7 million and $9.4 million,
respectively, of commercial and commercial real estate loans that were in non-
accrual status and were classified as impaired loans. In addition, there were
newly restructured retail loans totalling $2.9 million and $600 thousand
that as of December 31, 1996 and 1995 respectively, were identified as impaired
loans. None of the allowance for loan losses has been allocated to these
impaired loans because of the significant charge offs that have been taken in
prior years, and the fact that the collateral values support the loan
balances. Cash payments received are normally applied to reduce the outstanding
loan balance on the impaired loans (exclusive of cash payments received on
restructured loans).
During 1996 and 1995 the average balance of impaired loans was $8.5 million
and $10.5 million, respectively, and there was approximately $562 thousand
and $400 thousand of interest income recorded on these loans in the accompanying
consolidated statements of income for 1996 and 1995, respectively.
There were $2.6 million and $7.1 million of loans pledged for various
purposes at December 31, 1996 and 1995, respectively.
<TABLE>
(5) Bank Premises and Equipment
A summary of premises and equipment at December 31, 1996 and 1995 follows:
(in thousands)
<CAPTION>
1996 1995
<S> <C> <C>
Land $ 3,585 3,593
Buildings 25,214 25,075
Furniture, fixtures and equipment 15,761 15,611
Leasehold improvements 3,711 3,458
48,271 47,737
Accumulated depreciation and amortization (25,173) (22,729)
Total $ 23,098 25,008
</TABLE>
94
<PAGE>
Depreciation and amortization expense approximated $3.0 million, $3.6
million, and $2.7 million for the years 1996, 1995, and 1994, respectively.
Occupancy expense included rental expense of $1.2 million in 1996, and $1.1
million in each of 1995 and 1994.
6) Short-Term Borrowings
Short-term borrowings, consisting primarily of the Trustco Short-Term
Investment Account, were as follows:
<TABLE>
(in thousands)
<CAPTION>
1996
Trustco Other
Short-Term Short-Term
Account Borrowings Total
<S> <C> <C> <C>
Amount outstanding at
December 31, 1996 $ 94,298 17,364 111,662
Maximum amount outstanding
at any month end 106,441 20,217 124,961
Average amount outstanding 79,583 18,741 98,324
Weighted average interest rate:
For the year 5.01% 3.25 4.67
As of year end 4.99 3.33 4.73
</TABLE>
<TABLE>
(in thousands)
<CAPTION>
1995
Trustco Other
Short-Term Short-Term
Account Borrowings Total
<S> <C> <C> <C>
Amount outstanding at
December 31, 1995 $ 42,250 14,404 56,654
Maximum amount outstanding
at any month end 45,066 19,375 62,164
Average amount outstanding 20,812 17,278 38,090
Weighted average interest rate:
For the year 5.40% 3.78 4.66
As of year end 5.33 3.38 4.83
</TABLE>
The Trustco Short-Term Investment Account balances are immediately
withdrawable. All short-term borrowings are collateralized by securities of
the Bank pledged for that purpose.
Trustco has approximately $200 million of available lines of credit with the
Federal Home Loan Bank.
(7) Income Taxes
A summary of income tax expense/(benefit) included in the
consolidated statements of income follows:
<TABLE>
(in thousands)
<CAPTION>
For the years ended December 31,
1996 1995 1994
Current tax expense:
<S> <C> <C> <C>
Federal $ 16,705 16,919 12,412
State 4,710 5,646 3,209
Total current tax expense 21,415 22,565 15,621
Deferred tax benefit (4,088) (9,811) (2,981)
Total income tax expense $ 17,327 12,754 12,640
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1996, 1995 and 1994 is as follows:
<TABLE>
Deferred Tax Benefits and Liabilities
(in thousands)
<CAPTION>
December 31,
1996 1995 1994
Deductible/ Deductible/ Deductible/
(Taxable) (Taxable) (Taxable)
Temporary Temporary Temporary
Differences Differences Differences
<S> <C> <C> <C>
Bond accounting $ 43 18 107
Benefits and deferred remuneration 4,034 2,433 2,326
Deferred loan fees, net 840 1,085 1,391
Difference in reporting the provision for loan
losses,net 25,247 23,477 18,301
Other income or expense not utilized
for tax purposes 4,527 4,386 2,174
Depreciable assets 1,319 651 561
Other items 575 447 481
Total 36,585 32,497 25,341
Valuation reserve (2,051) (2,051) (4,706)
Net deferred tax asset at end of year 34,534 30,446 20,635
Net deferred tax asset at beginning of year 30,446 20,635 17,654
Deferred tax benefit $ (4,088) (9,811) (2,981)
</TABLE>
95
<PAGE>
Deferred tax assets are recognized subject to management's judgment that
realization is more likely than not. The valuation allowance of $2.1 million at
December 31, 1996 and December 31, 1995 is primarily reserved for federal and
state tax law restrictions on the deductibility of certain temporary
differences. During 1995, the valuation reserve was reduced as a result of the
resolution of several tax return audits and management's reassessment of the
realization of certain deferred tax assets. Based primarily on the sufficiency
of historical and future taxable income, management believes it is more likely
than not that the remaining net deferred tax asset of $34.5 million and $30.4
million at December 31, 1996 and 1995, respectively, will be realized.
In addition to the deferred tax items described in the preceding table, the
Company also has a deferred tax liability of $3.7 million at December 31,1996,
and $8.7 million at December 31, 1995, relating to the net unrealized gains on
securities available for sale.
<TABLE>
The effective tax rates differ from the statutory federal income tax rate.
The reasons for these differences are as follows:
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0 35.0
Increase/(decrease) in taxes resulting from:
Tax exempt income (3.3) (3.1) (1.9)
State income tax, net of federal
tax benefit 5.4 9.6 4.9
Effect of decrease in tax rate
on deferred tax benefit -- -- 1.1
Reduction in valuation reserve -- (6.9) (3.5)
Other items 0.6 (1.3) --
Effective income tax rate 37.7% 33.3 35.6
</TABLE>
(8) Benefit Plans
(a) Retirement Plan
The Company maintains a trusteed non-contributory pension plan covering
employees that have completed one year of employment and 1,000 hours of service.
The benefits are based on the sum of (a) a benefit equal to a prior service
benefit plus the average of the employees' highest five consecutive years'
compensation in the ten years preceding retirement multiplied by a percentage
of service after a specified date plus (b) a benefit based upon career average
compensation. The amounts contributed to the plan are determined annually on
the basis of (a) the maximum amount that can be deducted for federal income tax
purposes or (b) the amount certified by a consulting actuary as necessary
to avoid an accumulated funding deficiency as defined by the Employee Retirement
Income Security Act of 1974. Contributions are intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future. Assets of the plan are invested primarily in common stock and
fixed income common funds administered by the Bank's Trust Department. The
following table sets forth the plans' funded status and amounts recognized
in the Company's consolidated statements of condition at December 31, 1996 and
1995:
<TABLE>
Actuarial Present Value of Benefit Obligations:
(in thousands)
<CAPTION>
1996 1995
<S> <C> <C>
Accumulated benefit obligation,
including vested benefits of $14,186 and
$13,513 in 1996 and 1995, respectively $ (14,370) (13,715)
Projected benefit obligation for service
rendered to date (16,336) (15,037)
Plan assets at fair value 25,170 22,621
Plan assets in excess of projected
benefit obligation 8,834 7,584
Unrecognized net gain from past experience
different from that assumed and effects
of changes in assumptions (6,499) (5,110)
Unrecognized prior service cost (420) (465)
Unrecognized net asset at transition being
recognized over 4 remaining years (590) (737)
Prepaid pension expense $ 1,325 1,272
</TABLE>
<TABLE>
Net Pension Benefit for the years ended December 31:
(in thousands)
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost -- benefits earned
during the period $ 653 511 518
Interest cost on projected
benefit obligation 995 920 874
Actual return on plan assets (3,653) (5,080) (39)
Net amortization and deferral 1,952 3,639 (1,478)
Net periodic pension benefit $ (53) (10) (125)
</TABLE>
96
<PAGE>
<TABLE>
The weighted average discount rate, the rate of increase in future
compensation levels, and the expected long-term rate of return used in
determining the actuarial present value of projected benefit obligations, were
as follows:
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.50 7.00
Rate of increase in future compensation 6.00 6.00 6.00
Expected long-term rate of return on assets 6.50 6.25 6.75
</TABLE>
The Company also has actuarily determined supplemental pension plans under
which additional retirement benefits are accrued for eligible executive and
senior officers. The expense recorded for these plans were $2.6 million,
$2.0 million, and $1.8 million in 1996, 1995, and 1994, respectively.
Rabbi trusts have been established for certain benefit plans in 1996. These
rabbi trust accounts are administered by the Bank's Trust department and invest
primarily in the Trustco Short-Term Investment Account. These assets are
reflected as other assets in the December 31, 1996, consolidated statement of
condition.
(b) Incentive and Bonus Plans
The Company provides a profit-sharing plan for substantially all employees.
The expense of this plan, which is based on management discretion as defined
in the plan, amounted to $1.3 million in 1996 and 1995, and $1.2 million in
1994.
The Company also has an executive incentive plan. The expense of this plan
is based on the Company's performance and estimated distributions to
participants are accrued during the year and generally paid in the following
year. The expense recorded fo this plan was $2.1 million, $1.7 million,
and $1.3 million in 1996, 1995, and 1994, respectively.
<TABLE>
(c) Stock Option Plans
At December 31, 1996, the Company had stock option plans for officers and
directors as described below. TrustCo applies APB Opinion No. 25 and related
Interpretations in accounting for these plans. Accordingly, no compensation cost
has been recognized for these fixed stock option plans. Had compensation cost
for the Company's stock-based compensation plans been determined consistent with
Statement of Financial Accounting Standards No. 123 (Statement 123), "Accounting
for Stock-Based Compensation," the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
<CAPTION>
1996 1995
Net income
<S> <C> <C>
As reported $28,699 25,527
Pro forma 28,364 25,373
Earnings per share
As reported 1.37 1.23
Pro forma 1.35 1.22
</TABLE>
Pro forma net income and earnings per share reflect options granted in 1996
and 1995. The full impact of calculating compensation cost for all stock
options under Statement 123 is not reflected in the pro forma net income and
earnings per share amounts presented above because compensation cost is
reflected over the options' expected life and compensation cost for options
granted prior to January 1, 1995 is not considered.
Under the 1995 TrustCo Bank Corp NY Stock Option Plan, the Company may grant
options to its eligible employees for up to approximately 1.4 million shares of
common stock. Under the 1993 Directors Stock Option Plan, the Company may
grant options to its directors for up to approximately 152,000 shares of
its common stock. Under both plans, the exercise price of each option equals the
market price of the Company's stock on the date of grant, and an option's
maximum term is ten years. Options vest over a five year period from the date
the options are granted for the employee plan and they are immediately
exercisable for the directors plan.
97
<PAGE>
<TABLE>
A summary of the status of TrustCo's stock option plans as of December 31,1996,
1995 and 1994 and changes during the years ended on those dates are as follows:
<CAPTION>
Outstanding Options Exercisable Options
Average Average
Option Option
Shares Price Shares Price
<S> <C> <C> <C> <C>
Balance, January 1, 1994 1,377,802 $ 9.06 647,493 $ 8.68
New options awarded 389,367 13.32 91,232 13.55
Cancelled options 123,185 12.64 1,518 13.30
Exercised options 98,809 8.78 98,809 8.78
Options became exercisable -- -- 222,236 8.41
Balance, December 31, 1994 1,545,175 10.66 860,634 9.57
New options awarded 352,820 16.29 80,684 16.44
Exercised options 129,837 6.97 129,837 6.97
Options became exercisable -- -- 278,780 11.05
Balance, December 31, 1995 1,768,158 12.05 1,090,261 10.76
New options awarded 394,450 17.73 89,010 18.03
Cancelled options 8,280 15.61 -- --
Exercised options 105,929 7.55 105,929 7.55
Options became exercisable -- -- 266,739 13.14
Balance, December 31, 1996 2,048,399 $13.36 1,340,081 $11.97
</TABLE>
<TABLE>
Options are exercisable for approximately 1.3 million shares at year end 1996
and 1.1 million shares at year end 1995. The fair value of each option as of the
grant date, estimated using the Black-Scholes pricing model, and calculated in
accordance with Statement 123 was:
<CAPTION>
Employees' Directors'
Plan Plan
<C> <C> <C>
1996 $3.25 3.64
1995 2.72 2.93
</TABLE>
<TABLE>
The following assumptions were utilized in the calculation of the fair value
of the options under Statement 123:
<CAPTION>
Employees' Directors'
Plan Plan
<S> <C> <C>
Expected dividend yield 1996 and 1995 5.06% 5.06
Risk-free interest rate:
1996 6.65 6.62
1995 5.97 6.27
Expected volatility rate:
1996 20.65 21.23
1995 20.29 20.47
Expected lives 1996 and 1995 7.5 years 6.0 years
</TABLE>
<TABLE>
The following table summarizes information about the stock option plans for
options outstanding at December 31, 1996:
<CAPTION>
Weighted
Options Average Weighted
Range of Outstanding Remaining Average
Exercise Year End Contractual Exercise
Price 1996 Life Price
<S> <C> <C> <C>
Less than $10.00 612,889 5.4 years $ 8.93
Between $10.01 and $15.00 696,060 7.5 years 13.34
Greater than $15.01 739,450 9.5 years 17.05
Total 2,048,399 7.6 years $13.36
</TABLE>
<TABLE>
The following table summarizes information about the exercisable
stock options at December 31, 1996:
<CAPTION>
Weighted
Options Average Weighted
Range of Exercisable Remaining Average
Exercise Year End Contractual Exercise
Price 1996 Life Price
<S> <C> <C> <C>
Less than $10.00 612,889 5.4 years $ 8.93
Between $10.01 and $15.00 492,040 7.5 years 13.36
Greater than $15.01 235,152 9.4 years 16.98
Total 1,340,081 6.9 years $11.97
</TABLE>
(d) Postretirement Benefits
The Company permits retiree's under age 65 to participate in the Company's
medical plan by paying the same premium as the active employees. At age 65, the
Bank provides a Medicare Supplemental Program to retirees.
98
<PAGE>
<TABLE>
Accumulated postretirement benefit obligations at December 31, 1996 and 1995:
(in thousands)
<CAPTION>
1996 1995
<S> <C> <C>
Retirees $ 4,628 4,000
Fully eligible active plan participants 657 651
Other active plan participants 2,421 1,929
Accumulated postretirement benefit
obligation 7,706 6,580
Plan assets, at fair value 8,860 8,058
Plan assets in excess of accumulated
postretirement benefit obligation 1,154 1,478
Unrecognized gain (2,039) (1,937)
Accrued postretirement benefit cost $ (885) (459)
</TABLE>
<TABLE>
Net periodic postretirement benefit costs for 1996, 1995, and 1994 includes the
following components:
(in thousands)
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost $ 323 325 362
Interest cost 444 445 462
Return on plan assets (304) (248) (429)
Deferral of unrecognized net gain (31) -- --
Net period postretirement benefit cost $ 432 522 395
</TABLE>
The Company funded the prior service cost of the plan in full through the
use of a benefit trust during the first quarter of 1993. Assets of the plan are
invested primarily in common stock and fixed income common funds administered by
the Bank's Trust Department. The trust holding the plan assets is subject to
federal income taxes at a 35.0% rate. The expected long-term rate of return on
plan assets, after estimated income taxes, was 3.8%, 4.0%, and 4.2% for the
years ended December 31, 1996, 1995, and 1994, respectively. For measurement
purposes, a 7% annual rate of increase in the per capita cost of covered
benefits (i.e., health care cost trend rate) was assumed for 1996 and
thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1996, by approximately $1.1
million, and increase the aggregate of the service and the interest cost
components of net periodic postretirement benefit cost for the year ended
December 31, 1996, by approximately $185 thousand.
The weighted average discount rate used in determining the accumulated post-
retirement benefit obligation was 6.50 percent at December 31, 1996 and
December 31, 1995, and 6.75 percent at December 31, 1994.
<TABLE>
(9) Commitments and Contingent Liabilities
(a) Leases
The Bank leases certain banking premises. These leases are accounted
for as operating leases with minimum rental commitments in the amounts presented
below. The majority of these leases contain options to renew.
(in thousands)
<CAPTION>
<S> <C>
1997 $1,121
1998 1,064
1999 1,040
2000 964
2001 887
2002 and after 4,672
</TABLE>
$9,748
(b) Litigation
Existing litigation arising in the normal course of business is not
expected to result in any material loss to the Company.
<TABLE>
(c) Time Deposits
At December 31, 1996, the maturity of all time deposits is as follows:
(in thousands)
<CAPTION>
<S> <C> <C>
Under 1 year $507,187
1 to 2 years 194,815
2 to 3 years 126,390
3 to 4 years 30,365
4 to 5 years 8,243
over 5 years 3,283
$870,283
</TABLE>
99
<PAGE>
(10) Off-Balance Sheet Financing
Loan commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require a fee. Commitments sometimes expire without being drawn upon.
Therefore, the total commitment amounts do not necessarily represent future cash
requirements. These arrangements have credit risk essentially the same as that
involved in extending loans to customers and are subject to the BankOs normal
credit policies, including obtaining collateral. The Bank's exposure to credit
loss for loan commitments, including unused lines of credit, at December 31,
1996 and 1995 was $222.5 million and $220.8 million, respectively. Approximately
three-fifths of these commitments were for variable rate products at the end of
1996.
Letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. These arrangements
have credit risk essentially the same as that involved in extending loans to
customers and are subject to the BankOs normal credit policies, including
obtaining collateral. The BankOs exposure to credit loss for standby letters of
credit at December 31, 1996 and 1995 was $12.0 million and $19.0 million,
respectively. No losses are anticipated as a result of loan commitments or
standby letters of credit.
(11) Fair Value of Financial Instruments
The fair values shown below represent management's estimates of values
at which the various types of financial instruments could be exchanged in
transactions between willing, unrelated parties. They do not necessarily
represent amounts that would be received or paid in actual trades of
specific financial instruments.
<TABLE>
(in thousands)
<CAPTION>
As of December 31, 1996
Carrying Fair
value value
Financial assets:
<S> <C> <C>
Cash and cash equivalents $ 355,779 355,779
Securities available for sale 618,670 618,670
Loans 1,190,321 1,237,297
Accrued interest receivable 17,372 17,372
Financial liabilities:
Demand deposits 123,553 123,553
Interest-bearing deposits 1,829,593 1,832,956
Borrowings 111,662 111,662
Accrued interest payable 2,941 2,941
</TABLE>
<TABLE>
(in thousands)
<CAPTION>
As of December 31, 1995
Carrying Fair
value value
Financial assets:
<S> <C> <C>
Cash and cash equivalents $ 289,889 289,889
Securities available for sale 640,206 640,206
Loans 1,177,822 1,242,507
Accrued interest receivable 18,276 18,276
Financial liabilities:
Demand deposits 111,743 111,743
Interest-bearing deposits 1,818,906 1,829,052
Borrowings 56,654 56,654
Accrued interest payable 2,797 2,797
</TABLE>
The specific estimation methods and assumptions used can have a substantial
impact on the resulting fair values of financial instruments. Following is a
brief summary of the significant methods and assumptions used in the previous
table:
Cash and Cash Equivalents
The carrying value of these financial instruments approximates fair values.
Securities
Fair values for all securities portfolios are based upon quoted market prices,
where available. The carrying value of certain local, unrated municipal
obligations was used as an approximation of fair value.
Loans
The fair values of all loans are estimated using discounted cash flow analyses
with discount rates equal to the interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality.
Deposit Liabilities
The fair values disclosed for noninterest-bearing deposits, NOW accounts,
savings accounts and money market accounts are, by definition, equal to the
amount payable on demand at the balance sheet date. The carrying value of
all variable rate certificates of deposit is assumed to approximate fair
value. The fair value of fixed rate certificates of deposit is estimated
using discounted cash flow analyses with discount rates equal to the interest
rates currently being offered on certificates of similar size and remaining
maturity.
Short-Term Borrowings and Other Financial Instruments
The fair value of all short-term borrowings and other financial instruments
is assumed to be the carrying value.
Financial Instruments with Off-Balance Sheet Risk
The Company is a party to financial instruments with off-balance sheet risk.
Such financial instruments consist of commitments to extend financing and
letters of credit.
100
<PAGE>
If the commitments are exercised by the prospective borrowers, these financial
instruments will become interest-earning assets of the Company. If the
commitments expire, the Company retains any fees paid by the prospective
borrower. The fair value of commitments is estimated based upon fees currently
charged to enter into similar agreements, taking into consideration the
remaining terms of the agreements and the present credit worthiness of the
borrower. For fixed rate commitments, the fair value estimation takes into
consideration an interest rate risk factor. The fair value of these off-balance
sheet items approximates the recorded amounts of the related fees, which
are considered to be immaterial.
The Company has no derivative investment products nor has the Company ever
invested in such investment vehicles. Therefore, the disclosures as required
by Statement of Financial Accounting Standards No. 119, "Disclosures about
Derivative Financial Instruments and Fair Value of Financial Instruments," are
not presented except as it relates to fair value disclosures in this footnote.
(12) Regulatory Capital Requirements
Office of the Comptroller of the Currency (OCC) capital regulations require
banks to maintain minimum levels of regulatory capital. Under the regulations
in effect at December 31, 1996, the Bank was required to maintain a minimum
leverage ratio of Tier I (leverage) capital to total adjusted average assets of
4.00% and minimum ratios of Tier I capital and total capital to risk weighted
assets of 4.00% and 8.00%, respectively. The Federal Reserve Board has adopted
similar requirements for the consolidated capital of bank holding companies.
The regulations establish a framework for the classification of banks into
five categories: well capitalized, adequately capitalized, under capitalized,
significantly under capitalized and critically under capitalized. Generally,
an institution is considered well capitalized if it has a Tier I (leverage)
capital ratio of at least 5.0% (based on total adjusted average assets),
a Tier I risk based capital ratio of at least 6.0%, and a total risk based
capital ratio of at least 10.0%.
The foregoing capital ratios are based on specific quantitative measures of
assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. Capital amounts and classifications are also
subject to qualitative judgments by the OCC about capital components, risk
weighting and other factors.
Management believes that, as of December 31, 1996, the Bank and Company meet
all capital adequacy requirements to which they are subject. Further, the
most recent OCC notification categorized the Bank as a well capitalized
institution. There have been no conditions or events since that notification
that management believes have changed the Bank's capital classification.
Under its prompt corrective action regulations, the OCC is required to take
certain supervisory actions (and may take additional discretionary actions)
with respect to an undercapitalized institution. Such actions could have a
direct material effect on an institution's financial statements. As stated
above, the Company has been classified as well capitalized for regulatory
purposes, and therefore, these regulations do not apply. The following is a
summary of actual capital amounts and ratios for the Bank and the Company (on a
consolidated basis):
<TABLE>
(dollars in thousands)
<CAPTION>
As of December 31, 1996
Amount Ratio
Tier I (leverage) capital:
<S> <C> <C>
Trustco Bank, NA $138,982 6.27%
TrustCo Bank Corp NY 157,161 7.04
Tier I risk based capital:
Trustco Bank, NA 138,982 11.64
TrustCo Bank Corp NY 157,161 12.99
Total risk based capital:
Trustco Bank, NA 154,363 12.92
TrustCo Bank Corp NY 172,735 14.28
</TABLE>
(13) Parent Company Only
The following statements pertain to TrustCo Bank Corp NY (Parent Company):
<TABLE>
Statements of Income
(in thousands)
<CAPTION>
Years Ended December 31,
Income: 1996 1995 1994
<S> <C> <C> <C>
Dividends and interest
from subsidiaries $ 20,418 28,416 14,820
Gain on sale of securities -- 92 133
Income from other investments 301 66 66
Total income 20,719 28,574 15,019
Expense:
Operating supplies 120 126 129
Professional services 222 200 145
Miscellaneous expense . 308 70 48
Total expense 650 396 322
Income before income
taxes and undistributed
net income of subsidiaries 20,069 28,178 14,697
Income tax expense/(benefit) (98) (32) 1
Income before equity in undistributed net
income of subsidiaries 20,167 28,210 14,696
(Distributions in excess of)/equity in
undistributed net income of subsidiaries 8,532 (2,683) 8,192
Net income $ 28,699 25,527 22,888
</TABLE>
101
<PAGE>
<TABLE>
Statements of Condition
(in thousands)
<CAPTION>
December 31,
Assets: 1996 1995
<S> <C> <C>
Cash in subsidiary bank $ 8,185 7,187
Noninterest bearing note receivable from
subsidiary 2,117 3,617
Investments in subsidiaries 142,108 141,526
Securities available for sale 15,965 12,601
Other assets . 1,296 422
Total assets $ 169,671 165,353
Liabilities and shareholders' equity:
Accrued expenses and other liabilities $ 7,271 5,254
Total liabilities 7,271 5,254
Shareholders' equity . 162,400 160,099
Total liabilities and shareholders' equity $ 169,671 165,353
</TABLE>
<TABLE>
Statements of Cash Flows
(in thousands)
<CAPTION>
Years Ended December 31,
1996 1995 1994
Increase/(decrease) in cash and cash equivalents:
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 28,699 25,527 22,888
Adjustments to reconcile net income to net
cash provided by operating activities:
Distributions in excess of/(equity in
undistributed net income) of subsidiaries (8,532) 2,683 (8,192)
Gain on sales of securities -- (92) (133)
(Increase)/decrease in other assets (874) 78 1
Increase/(decrease) in accrued expenses (19) 31 34
Total adjustments (9,425) 2,700 (8,290)
Net cash provided by operating activities 19,274 28,227 14,598
Cash flows from investing activities:
Proceeds from sale of securities available
for sale -- 1,285 1,603
Purchase of securities available for sale (253) (10,651) (1,668)
(Increase)/decrease in noninterest bearing
note receivable from subsidiary 500 (3,617) --
Net cash provided by/(used in)investing
activities 247 (12,983) (65)
Cash flows from financing activities:
Proceeds from issuance of common stock 935 893 866
Dividends paid (19,447) (16,926) (13,595)
Payments to acquire treasury stock (805) (253) --
Proceeds from sale of treasury stock 794 -- --
Net cash used in financing activities (18,523) (16,286) (12,729)
Net increase/(decrease) in cash and cash equivalents 998 (1,042) (1,804)
Cash and cash equivalents at beginning of year 7,187 8,229 6,425
Cash and cash equivalents at end of year $ 8,185 7,187 8,229
Supplemental disclosure of cash flow information:
Increase in dividends payable $ 751 829 715
Equity contribution to subsidiary 1,000 -- --
Reclassification of trading securities to
securities available for sale
upon adoption of Statement 115 -- -- 2,106
Change in unrealized (gain)/loss on
available for sale securities -- gross (3,111) (843) 42
Reclassification of fixed assets to other assets -- 389 --
Change in deferred tax effect on unrealized
gain/(loss) on securities available for
sale 1,285 348 (18)
</TABLE>
102
<PAGE>
TrustCo Bank Corp NY
Officers and Board of Directors
Officers
Robert A. McCormick
President and Chief Executive Officer
Robert T. Cushing
Vice President and Chief Financial Officer
Nancy A. McNamara
Vice President
Ralph A. Pidgeon
Vice President and Assistant Secretary
William F. Terry
Secretary
Board of Directors
Barton A. Andreoli
President Towne Construction and Paving Corp.
Lionel O. Barthold
Chairman
Power Technologies, Inc.
M. Norman Brickman
President
D. Brickman, Inc.
Anthony J. Marinello, M.D., Ph.D.
Physician
Robert A. McCormick
President and Chief Executive Officer Trustco Bank
Nancy A. McNamara
Senior Vice President
Trustco Bank
John S. Morris, Ph.D.
President Emeritus, Union College and Former Chancellor, Union
University
James H. Murphy, D.D.S.
Orthodontist
Richard J. Murray, Jr.
President
R.J. Murray Co., Inc.
Kenneth C. Petersen
President Schenectady International, Inc.
William D. Powers
Chairman New York Republican State Committee
William J. Purdy
President Welbourne & Purdy Realty, Inc.
William F. Terry
Senior Vice President and Secretary Trustco Bank
Directors of TrustCo Bank Corp NY are also Directors of Trustco Bank
HONORARY DIRECTORS
Charles W. Carl, Jr.
Caryl P. Haskins, Ph.D.
Bernard J. King
H. Gladstone McKeon
William H. Milton, III
Daniel J. Rourke, M.D.
Anthony M. Salerno
Edwin O. Salisbury
Harry E. Whittingham, Jr.
103
<PAGE>
Trustco Bank Officers
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Robert A. McCormick
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Robert T. Cushing
SENIOR VICE PRESIDENT
Nancy A. McNamara
SENIOR VICE PRESIDENT
Ralph A. Pidgeon
SENIOR VICE PRESIDENT AND SECRETARY
William F. Terry
AUDITOR
John C. Fay
ACCOUNTING/FINANCE, DATA PROCESSING, GENERAL SERVICES, MANAGEMENT
INFORMATION SYSTEMS
Senior Vice President and
Chief Financial Officer
Robert T. Cushing
ACCOUNTING/FINANCE
Vice Presidents
Linda C. Christensen
Jeffrey S. Farbaniec
Management Information Officer
Lynn D. Hackler
DATA PROCESSING
Administrative Vice President
William H. Milton
Senior Information Services Officer
Daneille M. Eddy
COMMUNITY RELATIONS, LEGAL COUNSEL, LOAN DIVISION, TRUST
Senior Vice President
Nancy A. McNamara
LEGAL COUNSEL
Administrative Vice President
Henry C. Collins
LOAN DIVISION COMMERCIAL/MORTGAGE LOANS
Administrative Vice President
Robert J. McCormick
COMMERCIAL LOANS
Vice Presidents
Donald J. Csaposs
Scot R. Salvador
George W. Wickswat
Commercial Loan Officers
Peter L. Gregory
Eric W. Schreck
Joseph F. Scriver
MORTGAGE LOANS
Senior Loan Officer
Elinore J. Vine
TRUST DEPARTMENT
Vice Presidents
Ann Marie Franke
James Niland
Ann M. Noble
Robert Scribner
Trust Officers
John P. Fulgan
Richard W. Provost
J. Jeffrey Underhill
Investment Officer
William M. McCartan
BRANCHES, INSTALLMENT LOANS/CREDIT CARDS, RETIREMENT/GOVERNMENT ACCOUNTS
Senior Vice President
Ralph A. Pidgeon
BRANCH OFFICERS
Richard E. Bailey
Thomas H. Lauster
Eleanor G. Moran
INSTALLMENT LOANS/ CREDIT CARDS
Senior Installment Loan Officer
Thomas M. Poitras
BANK OPERATIONS, MARKETING
Senior Vice President and Secretary
William F. Terry
BANK OPERATIONS
Administrative Vice President
James D. McLoughlin
Deposit Operations
Officer Kevin M. Curley
MARKETING
Vice President
Madeline S. Busch
HUMAN RESOURCES
Senior Personnel Officer
Cheri J. Parvis
104
<PAGE>
Branch Locations
Altamont Ave. Office 1400 Altamont Ave. Schenectady Telephone:
356-1317
Altamont Ave. West Office 1900 Altamont Ave. Rotterdam Telephone:
355-1900
Bay Road Office 345 Bay Road, Suite 1 Queensbury Telephone: 792-2691
Brandywine Office State St. at Brandywine Ave. Schenectady
Telephone: 346-4295
Central Avenue Office 163 Central Ave. Albany Telephone: 426-7291
Clifton Country Road Office 7 Clifton Country Road Clifton Park
Telephone: 371-5002
Clifton Park Office 1018 Route 146 Clifton Park Telephone: 371-8451
Colonie Office 1892 Central Ave. Colonie Plaza, Colonie Telephone:
456-0041
Delmar Office 167 Delaware Ave. Delmar Telephone: 439-9941
East Greenbush Office 501 Columbia Turnpike Rensselaer Telephone:
479-7233
Exit 8/Crescent Rd. Office CVS Plaza Clifton Park Telephone: 383-0113
Glens Falls Office 3 Warren Street Glens Falls Telephone: 798-8131
Greenwich Office 131 Main St. Greenwich Telephone: 692-2233
Guilderland Office 3900 Carman Road Schenectady Telephone: 355-4890
Halfmoon Office Country Dollar Plaza Halfmoon Telephone: 371-0593
Hoosick Falls Office 47 Main St. Hoosick Falls Telephone: 686-5352
Hudson Office 507 Warren St. Hudson Telephone: 828-9434
Hudson Falls Office 3376 Burgoyne Avenue Hudson Falls Telephone:
747-0886
Latham Office 1 Johnson Road Latham Telephone: 785-0761
Loudon Plaza Office 372 Northern Blvd. Albany Telephone: 462-6668
Madison Avenue Office 1084 Madison Ave. Albany Telephone: 489-4711
Main Office 320 State St. Schenectady Telephone: 377-3311
Malta 4 Corners Office 2471 Route 9 Malta Telephone: 899-1056
Malta Mall Office 43 Round Lake Road Ballston Lake Telephone:
899-1558
Mayfair Office Saratoga Road at Mayfair Glenville Telephone: 399-9121
Mechanicville Office 9 Price Chopper Plaza Mechanicville Telephone:
664-1059
Mont Pleasant Office Crane St. at Main Ave. Schenectady Telephone:
346-1267
New Scotland Office 301 New Scotland Ave. Albany Telephone: 438-7838
Newton Plaza Office 588 New Loudon Road Latham Telephone: 786-3687
Niskayuna-Woodlawn Office 3461 State St. Schenectady Telephone:
377-2264
Plaza Seven Office 1208 Troy-Schenectady Road Latham Telephone:
785-4744
Queensbury Office 118 Quaker Road Suite 9, Queensbury Telephone:
798-7226
Rotterdam Office Curry Road Shopping Ctr. Rotterdam Telephone:
355-8330
Rotterdam Square Office 93 W. Campbell Road Rotterdam Telephone:
377-2393
Route 9 Office N Latham 754 New Loudon Rd. Latham Telephone: 786-8816
Sheridan Plaza Office 1350 Gerling St. Schenectady Telephone:
377-8517
Shoppers' World Office Old Rte. 146 and Plank Rd. Clifton Park
Telephone: 383-6850
State Farm Road Office 2050 Western Ave. Guilderland Telephone:
452-6913
State Street Office 112 State St. Albany Telephone: 436-9043
Stuyvesant Plaza Office Western Ave. at Fuller Road Albany
Telephone: 489-2616
Tanners Main Office 345 Main Street Catskill Telephone: 943-2500
Tanners West Side Office 238 West Bridge St. Catskill Telephone:
943-5090
Troy Office 5th Ave. and State St. Troy Telephone: 274-5420
Union Street East Office 1700 Union St. Schenectady Telephone:
382-7511
Upper New Scotland Office 583 New Scotland Ave. Albany Telephone:
438-6611
Upper Union Street Office 1620 Union St. Schenectady Telephone:
374-4056
Wilton Mall Office Route 50 Saratoga Springs Telephone: 583-1716
Wolf Road Office 34 Wolf Road Albany Telephone: 458-7761
105
<PAGE>
General Information
ANNUAL MEETING
Monday, May 19, 1997
10:00 AM
TrustCo Bank Corp NY
192 Erie Boulevard
Schenectady, NY 12305
CORPORATE HEADQUARTERS
320 State Street
Schenectady, New York 12305
(518) 377-3311
DIVIDEND REINVESTMENT PLAN
A Dividend Reinvestment Plan is available to shareholders of TrustCo Bank
Corp NY. It provides for the reinvestment of cash dividends and optional cash
payments to purchase additional shares of TrustCo stock. The Plan is free
of administrative charges, and provides a convenient method of acquiring
additional shares. Trustco Bank, our wholly owned bank subsidiary, acts as
administrator for this service, and is the agent for shareholders in these
transactions. Shareholders who want additional information may contact the
TrustCo Shareholder Services Department (518) 381-3601.
DIRECT DEPOSIT OF DIVIDENDS
Electronic deposit of dividends, which offers safety and convenience, is
available to TrustCo shareholders who wish to have dividends deposited directly
to personal checking, savings or other accounts. Electing direct deposit
will not affect the mailing of annual and quarterly reports and proxy
materials. If you would like to arrange direct deposit, please write or call
the Corporate Secretary at the address or the telephone number listed on this
page.
DUPLICATE MAILING NOTIFICATION
If you are a shareholder of record and are currently receiving multiple copies
of TrustCo's annual and quarterly reports, please contact the TrustCo
Shareholder Services Department at (518) 381-3601, or at the address listed
on this page.
EQUAL OPPORTUNITY AT TRUSTCO
Trustco Bank is an Affirmative Action Equal Opportunity Employer.
FORM 10-K
TrustCo Bank Corp NY will provide without charge a copy of its Form 10-K upon
written request. Requests and related inquiries should be directed to William
F. Terry, Secretary, TrustCo Bank Corp NY, P.O. Box 1082, Schenectady, New
York 12301-1082.
NASDAQ SYMBOL: TRST
The Corporation's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol TRST.
SUBSIDIARIES:
Trustco Bank, National Association
Schenectady, New York
Member FDIC
ORE Subsidiary Corp.
Schenectady, New York
Trustco Realty Corp.
Schenectady, New York
TRANSFER AGENT
Trustco Bank
Securities Department
P.O. Box 380 Schenectady, New York 12301-0380
Trustco Bank is a registered service mark with the U.S. Patent &
Trademark Office.
106
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(INSIDE BACK COVER)
(BLANK)
107
<PAGE>
(BACK COVER)
(BLANK)
108
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LIST OF SUBSIDIARIES OF TRUSTCO
Trustco Bank, National Association Nationally chartered
banking association
ORE Subsidiary Corp New York corporation
Trustco Realty Corp. New York corporation
(Subsidiary of Trustco Bank,
National Association)
Each subsidiary does business under its own name. The activities of each is
described in Part I, Item 1 of Form 10-K.
-109-
<PAGE>
Exhibit 23
KPMG Peat Marwick LLP
74 North Pearl Street
Albany, NY 12207
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
TrustCo Bank Corp NY:
We consent to incorporation by reference in the Registration Statements, Form
S-8 (No. 33-43153) filed on October 3, 1991, Form S-8 (No. 33-67176) filed on
August 6, 1993, Form S-8 (No. 33-43153) filed on March 21, 1995, Form S-8 (No.
33-60409) filed on June 20, 1995, Form S-3 (No. 33-46044) filed on September
20, 1995 of TrustCo Bank Corp NY and subsidiaries of our report dated January
24, 1997, relating to the consolidated statements of condition of TrustCo Bank
Corp NY and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996,
which report appears in the December 31, 1996 Annual Report on Form 10-K of
TrustCo Bank Corp NY. Our report refers to the adoption of the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan," and
Statement of Financial Accounting Standards No. 118, "Accounting by Creditors
for Impairment of a Loan -- Income Recognition and Disclosures."
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
March 21, 1997
-110-
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned persons do hereby appoint William F. Terry or Robert T.
Cushing as a true and lawful Attorney In Fact for the sole purpose of affixing
their signatures to the 1996 Annual Report (Form 10-K) of TrustCo Bank Corp NY
to the Securities and Exchange Commission.
/s/Barton A. Andreoli /s/Lionel O. Barthold
-------------------------- ---------------------
Barton A. Andreoli Lionel O. Barthold
/s/M. Norman Brickman /s/Anthony J. Marinello
-------------------------- ---------------------
M. Norman Brickman Dr. Anthony J. Marinello
/s/Robert A. McCormick /s/Nancy A. McNamara
-------------------------- ---------------------
Robert A. McCormick Nancy A. McNamara
/s/Dr. John S. Morris /s/James H. Murphy
-------------------------- ---------------------
Dr. John S. Morris Dr. James H. Murphy
/s/Richard J. Murray, Jr. /s/Kenneth C. Petersen
-------------------------- ---------------------
Richard J. Murray, Jr. Kenneth C. Petersen
/s/ William D. Powers /s/William J. Purdy
-------------------------- ---------------------
William D. Powers William J. Purdy
/s/William F. Terry
--------------------------
William F. Terry
Sworn to before me this 18th day of March 1997.
/s/Joan Clark
-------------------------
Notary Public
Joan Clark
Notary Public, State of New York
Qualified in Albany County
No. 01CL4822282
Commission Expires Nov. 30, 1998
-111-
<PAGE>
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