Conformed Copy
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission File Number 0-10592
March 31, 1998
TRUSTCO BANK CORP NY
(Exact name of registrant as specified in its charter)
NEW YORK 14-1630287
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
320 STATE STREET, SCHENECTADY, NEW YORK 12305
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 377-3311
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
(Title of class)
Common
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes.(x) No.( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding
Class of Common Stock as of April 30, 1998
--------------------------- ----------------------
$1 Par Value 23,332,314
<PAGE>
TrustCo Bank Corp NY
INDEX
Part I -- FINANCIAL INFORMATION
PAGE NO.
<PAGE>
Item 1 Interim Financial Statements (Unaudited): Consolidated 1
Statements of Income for the Three Months Ended March 31,
1998 and 1997
Consolidated Statements of Financial Condition as of March 2
31,1998 and December 31, 1997
Consolidated Statements of Cash Flows for the Three Months 3-4
Ended March 31, 1998 and 1997
Notes to Consolidated Interim Financial Statements 5-7
Independent Auditors' Report 8
Item 2 Management's Discussion and Analysis 9-15
Item 3 Quantitative and Qualitative Disclosures 16
About Market Risk
Part II -- OTHER INFORMATION
Item 1 Legal Proceedings -- NONE
Item 2 Changes in Securities -- NONE
Item 3 Defaults Upon Senior Securities -- NONE
Item 4 Submission of Matters to Vote of Security Holders -- NONE
Item 5 Other Information -- NONE
<PAGE>
Part II -- OTHER INFORMATION (Continued)
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits -- NONE
(b) Reports on Form 8-K
Filing of Form 8-K on April 21, 1998, regarding
two press releases dated April 21, 1998, detailing
first quarter financial results, incorporated herein
by reference.
<PAGE>
<TABLE>
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share data)
<CAPTION>
3 Months Ended
March 31
1998 1997
Interest income:
<S> <C> <C>
Interest and fees on loans $ 27,882 26,812
Interest on U. S. Treasuries and agencies 5,078 7,446
Interest on states and political
subdivisions 1,521 1,290
Interest on mortgage-backed securities 2,909 1,589
Other 891 436
Interest on federal funds sold 5,122 4,322
---------------- ----------------
Total interest income 43,403 41,895
---------------- ----------------
Interest expense:
Interest on deposits:
Interest-bearing checking 908 885
Savings 5,115 5,587
Money market deposit accounts 417 442
Certificates of deposit of $100,000 or more 1,692 1,322
Other time 12,056 11,335
Interest on short-term borrowings 1,567 1,317
---------------- ----------------
Total interest expense 21,755 20,888
---------------- ----------------
Net interest income 21,648 21,007
Provision for loan losses 1,372 1,210
---------------- ----------------
Net interest income after provision
for loan losses 20,276 19,797
---------------- ----------------
Noninterest income:
Trust department income 1,675 1,572
Fees for other services to customers 2,056 1,804
Net gain/(loss) on securities available for sale 32 (495)
Other 791 655
---------------- ----------------
Total noninterest income 4,554 3,536
---------------- ----------------
Noninterest expenses:
Salaries and employee benefits 5,797 5,715
Net occupancy expense 1,265 1,085
Equipment expense 1,248 757
FDIC insurance expense 62 61
Professional services 587 1,118
Other real estate expenses 326 189
Other 2,244 2,279
---------------- ----------------
Total noninterest expenses 11,529 11,204
---------------- ----------------
Income before taxes 13,301 12,129
Applicable income taxes 4,923 4,536
---------------- ----------------
Net income $ 8,378 7,593
================ ================
Net income per Common Share:
- Basic $ 0.36 0.32
================ ================
- Diluted $ 0.34 0.31
================ ================
Per share data has been adjusted for the 15% stock split declared August, 1997.
See accompanying notes to consolidated interim financial statements.
</TABLE>
<PAGE>
<TABLE>
TRUSTCO BANK CORP NY
Consolidated Statements of Financial Condition
(dollars in thousands, except share data)
<CAPTION>
03/31/98 12/31/97
ASSETS: (unaudited)
<S> <C> <C>
Cash and due from banks $ 34,579 42,740
Federal funds sold 403,000 395,000
------------------ ------------------
Total cash and cash equivalents 437,579 437,740
Securities available for sale:
U. S. Treasuries and agencies 233,247 278,823
States and political subdivisions 113,612 113,787
Mortgage-backed securities 175,025 155,080
Other 99,133 54,209
------------------ ------------------
Total securities available for sale 621,017 601,899
------------------ ------------------
Loans:
Commercial 189,951 190,651
Residential mortgage loans 920,150 906,404
Home equity line of credit 166,243 172,448
Installment loans 27,649 29,989
------------------ ------------------
Total loans 1,303,993 1,299,492
------------------ ------------------
Less:
Allowance for loan losses 53,984 53,455
Unearned income 1,136 1,216
------------------ ------------------
Net loans 1,248,873 1,244,821
Bank premises and equipment 18,033 18,609
Real estate owned 7,295 9,309
Other assets 63,042 59,887
------------------ ------------------
Total assets $ 2,395,839 2,372,265
================== ==================
LIABILITIES:
Deposits:
Demand $ 131,019 130,345
Interest-bearing checking 238,672 240,699
Savings accounts 657,674 650,601
Money market deposit accounts 57,091 57,021
Certificates of deposit (in denominations of
$100,000 or more) 122,481 112,599
Other time 836,370 830,598
------------------ ------------------
Total deposits 2,043,307 2,021,863
Short-term borrowings 131,778 127,850
Accrued expenses and other liabilities 43,776 43,727
------------------ ------------------
Total liabilities 2,218,861 2,193,440
------------------ ------------------
SHAREHOLDERS' EQUITY:
Capital stock par value $1; 50,000,000 shares
authorized, and 24,266,582 and 24,257,382 shares
issued March 31, 1998 December 31, 1997, respectively 24,266 24,257
Surplus 113,110 112,702
Undivided profits 34,078 32,119
Accumulated other comprehensive income:
Net unrealized gain on securities available for sale 14,413 15,851
Treasury stock at cost - 952,655 and 855,850 shares at
March 31, 1998 and December 31, 1997, respectively (8,889) (6,104)
------------------ ------------------
Total shareholders' equity 176,978 178,825
------------------ ------------------
Total liabilities and shareholders' equity $ 2,395,839 2,372,265
================== ==================
See accompanying notes to consolidated interim financial statements.
</TABLE>
<PAGE>
<TABLE>
- 2 -
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
THREE MONTHS ENDED March 31, 1998 1997
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net income.............................................. $ 8,378 7,593
-------- --------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 579 673
Gain on sales of fixed assets.......................... (186) ---
Provision for loan losses................................ 1,372 1,210
Loss on sale of securities available for sale.................. 1 558
Gain on sale of securities available for sale.................. (33) (63)
Provision for deferred tax benefit..................... (971) (1,613)
Decrease in taxes receivable........................... 4,748 3,875
Increase in interest receivable........................... (1,408) (891)
Increase in interest payable........................... 91 17
(Increase)/decrease in other assets..................... (3,884) 1,032
Increase/(decrease) in accrued expenses........................ (22) 920
-------- --------
Total adjustments.................................... 287 5,718
-------- --------
Net cash provided by operating activities................ 8,665 13,311
-------- --------
Cash flows from investing activities:
Proceeds from sales of securities available for sale.......... 267 57,739
Purchase of securities available for sale................... (104,450) (51,844)
Proceeds from maturities and calls
of securities available for sale............................. 82,666 19,299
Net (increase)/decrease in loans............................... (6,390) 2,347
Proceeds from dispositions of Real Estate Owned........ 2,333 1,859
Proceeds from sales of fixed assets.................... 479 ---
Capital expenditures................................... (296) (334)
-------- --------
Net cash provided by/(used in) investing activities.......... (25,391) 29,066
-------- --------
Cash flows from financing activities:
Net increase in deposits............................... 21,444 30,988
Increase in short-term borrowing........................ 3,928 807
Proceeds from exercise of stock options................ 102 320
Proceeds from sale of treasury stock................... 2,253 ---
Purchase of treasury stock............................. (4,723) (922)
Dividends paid......................................... (6,439) (5,600)
-------- --------
Net cash provided by financing activities................ 16,565 25,593
-------- --------
Net increase/(decrease) in cash and cash equivalents............. (161) 67,970
Cash and cash equivalents at beginning of period............ 437,740 355,779
-------- --------
Cash and cash equivalents at end of period.............. $ 437,579 423,749
======== ========
See accompanying notes to consolidated interim financial statements. (Continued)
-3-
</TABLE>
<PAGE>
<TABLE>
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows Continued (Unaudited)
(dollars in thousands)
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
THREE MONTHS ENDED March 31, 1998 1997
-------- --------
<S> <C> <C>
Interest paid.......................................... $ 21,664 20,871
Income taxes paid...................................... 1,146 2,274
Transfer of loans to real estate owned................. 966 5,170
Increase/(decrease) in dividends payable............... (20) 9
Change in unrealized gain on securities
available for sale-gross.............................. 2,431 4,544
Change in deferred tax effect on unrealized gain
on securities available for sale...................... (993) (1,896)
See accompanying notes to consolidated interim financial statements.
</TABLE>
-4-
<PAGE>
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements
(Unaudited)
1. Financial Statement Presentation
In the opinion of the management of TrustCo Bank Corp NY (the Company), the
accompanying unaudited Consolidated Interim Financial Statements contain all
adjustments necessary to present fairly the financial position as of March 31,
1998, the results of operations for the three months ended March 31, 1998 and
1997, and the cash flows for the three months ended March 31, 1998 and 1997. The
accompanying Consolidated Interim Financial Statements should be read in
conjunction with the TrustCo Bank Corp NY year-end Consolidated Financial
Statements, including notes thereto, which are included in TrustCo Bank Corp
NY's 1997 Annual Report to Shareholders on Form 10-K. All share and per share
data have been adjusted for the 15% stock split declared in August, 1997.
<TABLE>
2. Earnings Per Share
A reconciliation of the component parts of earnings per share for the
quarters ended March 31, 1998 and 1997 follows:
<CAPTION>
Weighted
(In thousands, Net Average Shares Per Share
except per share data) Income Outstanding Amounts
For the quarter ended March 31 1998:
Basic EPS:
Net income available to
<S> <C> <C> <C>
common shareholders. . . . . . . . $8,378 23,381 $0.36
--------------------------------------------
Effect of dilutive Securities:
Stock options. . . . . . . . . . . . . . . 945
============================================
$8,378 24,326 $0.34
For the quarter ended
March 31 1997:
Basic EPS:
Net income available to
common shareholders. . . . . . . . $7,593 23,445 $0.32
Effect of dilutive Securities:
Stock options. . . . . . . . . . . . . . . 668
--------------------------------------------
$7,593 24,113 $0.31
============================================
</TABLE>
<PAGE>
3. Comprehensive Income
On January 1, 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," (Statement 130).
This Statement establishes standards for reporting and display of comprehensive
income and its components. Comprehensive income includes the reported net income
of a company adjusted for items that are currently accounted for as direct
entries to equity, such as the mark to market adjustment on securities available
for sale, foreign currency items and minimum pension liability adjustments. At
the Company, comprehensive income represents net income plus other comprehensive
income, which consists of the net change in unrealized gains or losses on
securities available for sale for the period. Accumulated other comprehensive
income represents the net unrealized gains or losses on securities available for
sale as of the balance sheet dates.
<TABLE>
Comprehensive income for the three-month periods ended March 31, 1998 and 1997
was $6,940,000 and $4,945,000, respectively. The following summarizes the
components of other comprehensive income:
<CAPTION>
Unrealized gains on securities: (dollars in thousands)
Unrealized holding losses arising during three months
<S> <C>
ended March 31, 1998, net of tax (pre-tax amount of $2,399) ($1,419)
Reclassification adjustment for net gain realized in net
income during the three months ended March 31, 1998,
net of tax (pre-tax amount of $32) 19
--
Other comprehensive income - three months ended
March 31, 1998 ($1,438)
========
Unrealized holding losses arising during three
months ended March 31, 1997, net of tax
(pre-tax amount of $5,039) ($2,936)
Reclassification adjustment for net loss realized
in net income during the three months ended
March 31, 1997, net of tax (pre-tax amount of $495) (288)
------
Other comprehensive income - three months ended
March 31, 1997 ($2,648)
========
</TABLE>
<PAGE>
4. Recent Accounting Pronouncements
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits," (Statement 132), which amends the disclosure
requirements of Statement of Financial Accounting Standards No. 87, "Employers'
Accounting for Pensions," (Statement 87), Statement of Financial Accounting
Standards No. 88, "Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits," (Statement 88), and
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," (Statement 106). Statement 132
standardizes the disclosure requirements of Statement 87 and Statement 106 to
the extent practicable and recommends a parallel format for presenting
information about pensions and other postretirement benefits. This Statement is
applicable to all entities and addresses disclosure only. The Statement does not
change any of the measurement or recognition provisions provided for in
Statements 87, 88, or 106. The Statement is effective for fiscal years beginning
after December 15, 1997. Management anticipates providing the required
disclosures in the December 31, 1998 consolidated financial statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
TrustCo Bank Corp NY:
We have reviewed the consolidated statement of financial condition of TrustCo
Bank Corp NY and subsidiaries (the Company) as of March 31, 1998, and the
related consolidated statements of income and cash flows for the three month
periods ended March 31, 1998 and 1997. These consolidated financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial condition of TrustCo Bank
Corp NY and subsidiaries as of December 31, 1997 and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for the
year then ended (not presented herein); and in our report dated January 23,
1998, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated statement of financial condition as of December 31, 1997, is fairly
stated, in all material respects, in relation to the consolidated statement of
financial condition from which it has been derived.
/s/KPMG Peat Marwick LLP
- ------------------------------
KPMG Peat Marwick LLP
Albany, New York
April 10, 1998
<PAGE>
TrustCo Bank Corp NY
Management's Discussion and Analysis
March 31, 1998
The review that follows focuses on the factors affecting the financial
condition and results of operations of TrustCo Bank Corp NY and subsidiaries
("TrustCo" or "Company") during the three month period ended March 31, 1998,
with comparisons to 1997 as applicable. Net interest income and net interest
margin are presented on a fully taxable equivalent basis in this discussion.
The consolidated interim financial statements and related notes, as well as
the 1997 Annual Report to Shareholders, should be read in conjunction with
this review. Amounts in prior period consolidated interim financial statements
are reclassified whenever necessary to conform to the current period's
presentation. Per share results have all been adjusted for the 15% stock split
effective August 1997.
Statements included in this review and in future filings by TrustCo with the
Securities and Exchange Commission, in TrustCo's press releases, and in oral
statements made with the approval of an authorized executive officer, which
are not historical or current facts, are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, and are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical earnings and
those presently anticipated or projected. TrustCo wishes to caution readers
not to place undue reliance on any such forward-looking statements, which
speak only as of the date made. The following important factors, among others,
in some cases have affected and in the future could affect TrustCo's actual
results, and could cause TrustCo's actual financial performance to differ
materially from that expressed in any forward-looking statement: (1) credit
risk, (2) interest rate risk, (3) competition, (4) changes in the regulatory
environment, and (5) changes in general business and economic trends. The
forgoing list should not be construed as exhaustive, and the Company disclaims
any obligation subsequently to revise any forward-looking statements to
reflect events or circumstances after the date of such statements, or to
reflect the occurrence of anticipated or unanticipated events.
Following this discussion is the table "Distribution of Assets, Liabilities
and Shareholders' Equity: Interest Rates and Interest Differential" which
gives a detailed breakdown of TrustCo's average interest earning assets and
interest bearing liabilities for the three months ended March 31, 1998 and
1997.
Overview
TrustCo recorded net income of $8.4 million, or $0.34 of diluted earnings per
share for the three months ended March 31, 1998, as compared to $7.6 million
or $0.31 of diluted earnings per share in the same period in 1997.
<PAGE>
The primary factors accounting for the year to date increase are:
' increase in average total interest earning assets of $118.9 million
or 5.5% between March 31, 1997 and March 31, 1998, and
' increase in noninterest income (excluding securities transactions) by 12.2%
to $4.5 million.
These increases were partially offset by the following:
' reduction in net interest margin by 8 basis points from 4.00% for the
first quarter 1997 to 3.92% for the first quarter 1998,
' increase in noninterest expense of $325 thousand, and
' increase in income tax expense of $390 thousand between March 31, 1997 and
March 31, 1998.
Asset/Liability Management
The Company strives to generate superior earnings capabilities through a mix of
core deposits, funding a prudent mix of earning assets. This is, in its most
fundamental form, the essence of asset/liability management. Additionally,
TrustCo attempts to maintain adequate liquidity and reduce the sensitivity of
net interest income to changes in interest rates to an acceptable level while
enhancing profitability both on a short-term and long-term basis.
Earning Assets
Total interest earning assets increased from $2.16 billion in 1997 to $2.28
billion in 1998 with an average yield of 7.79% in 1998, and 7.92% in 1997.
Income on earning assets increased by $1.6 million during this same time period
from $42.7 million in 1997 to $44.3 million in 1998. The increase in interest
income on earning assets was attributable to the increase in average earning
assets offset by the reduction in yield on these assets.
Loans: The average balance of loans was $1.30 billion in 1998 and $1.24 billion
in 1997. The yield on loans decreased from 8.70% in 1997 to 8.63% in 1998. The
combination of the higher average balances offset by the lower rates resulted in
an increase in the interest income on loans by $1.1 million.
Within the category of loans, the average commercial loan balances decreased by
$27.4 million, residential mortgage loans increased by $104.8 million, home
equity lines of credit decreased by $13.6 million, and the installment loan
portfolio decreased by $3.3 million. These changes continue to reflect the
competitive environment that exists for loans and the emphasis that TrustCo has
for the residential mortgage loan products.
<PAGE>
Securities Available for Sale: Securities available for sale had an average
balance of $605.9 million during the quarter ended March 31, 1998, as compared
to $594.0 million in 1997. These balances earned an average yield of 7.37% in
1998 and 7.70% in 1997. This resulted in interest income on the securities
available for sale of $11.2 million in 1998 and $11.4 million in 1997. The
increase in average balances during the quarter caused a $1.0 million increase
in the interest income which was offset by a $1.2 million decrease in interest
income due to the change in the average rates.
Most of the decrease in the balances of securities available for sale was
centered in the category of U.S. Treasuries and agencies which decreased by
$116.6 million between the first quarter of 1997 and 1998. Mortgage-backed
securities and investments in states and political subdivisions increased on
average $87.0 million and $15.5 million, respectively.
During 1997 and continuing into 1998, the Company has shifted the emphasis in
the securities available for sale portfolio to mortgage backed securities. This
change is in response to available interest rates in the markets and the
Company's desire to take advantage of market opportunities to protect higher
interest rates in the portfolio as they become available.
Mortgage-backed securities provide cash flows over the time period to final
maturity and are subject to prepayments based upon the underlying loans' stated
interest rates. Consequently, these securities provide for longer cash flows
than do callable securities in a declining rate environment.
Federal Funds Sold: The 1998 first quarter average balance of federal funds sold
was $373.1 million, $46.5 million greater than the $326.7 million in 1997. The
portfolio yield increased to 5.57% in 1998, compared to 5.37% in 1997, an
increase of 20 basis points. Changes in the yield resulted from changes in the
target rate set by the Federal Reserve Board for federal funds sold. Interest
income on this portfolio increased by approximately $800 thousand from $4.3
million in 1997 to $5.1 million in 1998. The increase in interest income was the
result of the increase in average balances which caused approximately $600
thousand increase in interest income and approximately $200 thousand increase in
interest income due to interest rates.
Funding Opportunities
TrustCo utilizes various funding sources to support its earning assets
portfolio. The vast majority of the Company's funding comes from traditional
deposit vehicles such as savings, interest bearing checking and time deposit
accounts.
Total interest-bearing deposits (which includes interest bearing checking, money
market accounts, savings, and certificates of deposit) increased to $1.90
billion during 1998, and the average rate paid decreased to 4.30% for 1998 from
4.32% for 1997. Total interest expense on these deposits increased $617 thousand
to $20.2 million.
Short-term borrowings, primarily the Trustco Short-Term Investment Account,
increased by $17.1 million between the first quarter of 1997 and 1998. Total
interest expense on this
<PAGE>
account increased by $250 thousand in 1998, and the average rate paid
increased 16 basis points to 4.86%.
Demand deposit balances increased by 12% during the period from the first
quarter of 1997 to the first quarter of 1998. The average balance was $114.6
million in 1997, and $128.1 million in 1998.
Growth in deposit balances resulted from successful marketing and advertising
campaigns. In TrustCo's past experience, deposits gathered as the result of
these types of campaigns tend to become a very stable source of core customers
who maintain their deposit relationship with the Company through various
interest rate cycles. TrustCo competes based on a combination of interest rate,
quality service and convenience. Growth in deposits can also be attributed to
the success of the branch expansion program. Beginning in 1995, the Company
stated its intention to open between two and four branches each year. Through
the first quarter of 1998, that has resulted in the addition of eight new
banking facilities.
Net Interest Income
Taxable equivalent net interest income increased slightly to $22.5 million in
1998. The net interest spread dropped 13 basis points between 1997 and 1998 and
the net interest margin decreased by 8 basis points.
Nonperforming Assets
Nonperforming assets include nonperforming loans which are those loans in
nonaccrual status, loans that have been restructured and loans past due 90 days
or more and still accruing interest. Also included in the total of nonperforming
assets are foreclosed real estate properties, which are categorized as real
estate owned.
Impaired loans are defined as those commercial and commercial real estate loans
on a nonaccrual status, and loans restructured since January 1, 1995, when newly
effective accounting standards required changing the identification, measurement
and reporting of impaired loans, and loans whose terms have been modified in a
troubled debt restructuring. The following will describe the nonperforming
assets of TrustCo as of March 31, 1998.
Nonperforming loans: Total nonperforming loans were $11.7 million at March 31,
1998, down slightly from the $11.8 million at March 31, 1997, and $1.0 million
over the year end 1997 balance of $10.7 million. Nonaccrual loans were $7.3
million at March 31, 1998, representing a decrease of $124 thousand from the
year ago period, and $1.0 million more than the year end balance of $6.3
million. Restructured loans increased to $3.3 million at March 31, 1998, from
the balance of $2.8 million at March 31, 1997, and the balance of $3.3 million
at December 31, 1997.
At March 31, 1998, there were no commercial and commercial real estate impaired
loans. Total impaired loans at March 31, 1998 of $3.9 million, consisted of
restructured retail loans. Of the total $11.7 million of nonperforming loans at
quarter end, only the restructured retail loans of $3.9 million are considered
by management to be impaired.
<PAGE>
During the first quarter of 1998 there have been commercial loan charge offs of
$471 thousand, and consumer loan charge offs of $857 thousand. Recoveries during
the first quarter were $485 thousand.
Real estate owned: Total real estate owned decreased to $7.3 million at March
31, 1998, from the $8.3 million at March 31, 1997, and from the $9.3 million at
year end 1997. The decrease in real estate owned since year end 1997 is
primarily the result of one commercial property that was disposed of during the
quarter. The commercial property represented $1.7 million of the decrease in the
balance of real estate owned since year end 1997.
Allowance for loan losses: The balance of the allowance for loan losses is
maintained at a level that is, in management's judgment, representative of the
amount of the risk inherent in the loan portfolio, given past, present and
expected future conditions.
At March 31, 1998, the allowance for loan losses was $54.0 million, which
represents an increase of $529 thousand from the year end balance of $53.5
million. This allowance represents a reserve coverage ratio of 4.6 times the
nonperforming loans at March 31, 1998. The provision charged to expense during
the quarter was $1.4 million for 1998, and $1.2 million for 1997.
Liquidity and Interest Rate Sensitivity
TrustCo seeks to obtain favorable sources of funding and to maintain prudent
levels of liquid assets in order to satisfy varied liquidity demands. TrustCo's
earnings performance and strong capital position enable the Company to raise
funds easily in the marketplace and to secure new sources of funding. The
Company actively manages its liquidity through target ratios established under
its liquidity policies. Continual monitoring of both historical and prospective
ratios allows TrustCo to employ strategies necessary to maintain adequate
liquidity. Management has also defined various degrees of adverse liquidity
situations which could potentially occur, and has prepared appropriate
contingency plans should such a situation arise.
Noninterest Income
Total noninterest income for the first quarter was $4.6 million, compared to
$3.5 million in 1997. Included in both the 1998 and 1997 first quarter results
are net gains on securities transactions of $32 thousand in 1998, and net losses
of $495 thousand in 1997. Once these securities transactions are removed, total
noninterest income increased from $4.0 million in 1997 to $4.5 million in 1998.
Noninterest Expense
Total noninterest expense was $11.5 million for 1998 compared to $11.2 million
in 1997. The Company's efficiency ratio was 39.1% in 1998 and 40.2% in 1997.
During the first quarter 1998, the Company continued to execute the year 2000
remediation plan. TrustCo has been working on the year 2000 problem for several
years and all reprogramming efforts are expected to be completed during 1998.
<PAGE>
Income Taxes
In the first quarter of 1998 TrustCo recognized income tax expense of $4.9
million, compared to $4.5 million in 1997. The effective tax rate for 1998 was
37.0% and for 1997 it was 37.4%.
Capital Resources
Consistent with its long-term goal of operating a sound and profitable financial
organization, TrustCo strives to maintain strong capital ratios. New issues of
equity securities have not been required since traditionally most of TrustCo's
capital requirements are met through the capital retention program. Previously,
TrustCo has stated its intention to open two to four new branch offices each
year for the next couple of years. These new branches and the related deposit
growth anticipated from these locations will not require additional capital
beyond that which is already existing within the Company, or that which will be
developed and retained in the coming years.
Total shareholders' equity at March 31, 1998 was $177.0 million, down slightly
from the $178.8 million at year end 1997. The change in shareholders' equity
between year end and the first quarter 1998 reflects a $1.4 million reduction in
the net unrealized gain on securities available for sale, and a $2.8 million
increase in treasury stock during the first quarter of 1998.
<TABLE>
TrustCo declared dividends of $0.275 so far in 1998, compared with $0.239 in
1997. These results represent a dividend payout ratio of 76.62% in 1998 and
73.87% in 1997. The Company achieved the following ratios as of March 31, 1998
and 1997:
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
March 31, Minimum Regulatory
1998 1997 Guidelines
--------------------------------------------------
Tier 1 risk adjusted
<S> <C> <C> <C>
capital 13.01% 13.24 4.00
Total risk adjusted
capital 14.30 14.53 8.00
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition, at March 31, 1998 and 1997, the consolidated equity to total assets
ratio (excluding the mark to market effect of securities available for sale) was
6.83% and 6.92%, respectively.
<PAGE>
<TABLE>
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average balance
sheet, related interest income and expense and the average annualized yields on
interest-earning assets and annualized rates on interest-bearing libilities of
TrustCo (adjusted for tax equivalency) for each of the reported periods. Non-
accrual loans are included in loans for this analysis. The average balances of sec-
urities available for sale is calculated using amortized costs for these securities.
Included in the balance of shareholders' equity is unrealized appreciation, net of tax,
in the available for sale portfolio of $15.0 million in 1998 and $4.9 million in 1997.
The subtotals contained in the following table are the arithmetic totals of the items
contained in that category.
<CAPTION>
First Quarter First Quarter
1998 1997
------------------------------------------------------------------------------------------
Average Average Average Average Change in Variance Variance
(dollars in thousands) Balance Interest Rate Balance Interest Rate Interest Balance Rate
Income/ Change Change
Assets Expense
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial loans..............$ 189,731 $ 4,546 9.61% $ 217,127 $ 5,040 9.31% (494) (1,431) 937
Residential mortgage loans.... 914,262 18,626 8.15% 809,488 16,734 8.27% 1,892 3,446 (1,554)
Home equity lines of credit .. 169,807 3,944 9.42% 183,405 4,139 9.15% (195) (844) 649
Installment loans............. 27,520 879 12.95% 30,770 993 13.09% (114) (104) (10)
--------- ------ --------- ------ ----- ----- -----
Loans, net of unearned income. 1,301,320 27,995 8.63% 1,240,790 26,906 8.70% 1,089 1,067 22
Securities available for sale:
U.S. Treasuries and agencies. 266,512 5,091 7.64% 383,115 7,467 7.80% (2,376) (2,230) (146)
Mortgage-backed securities... 168,790 2,909 6.89% 81,782 1,589 7.77% 1,320 2,488 (1,168)
States and political
subdivisions........ 109,485 2,230 8.15% 93,992 1,896 8.07% 334 315 19
Other ....................... 61,119 928 6.09% 35,123 480 5.49% 448 391 57
--------- ------ --------- ------ ----- ----- -----
Total securities available
for sale... 605,906 11,158 7.37% 594,012 11,432 7.70% (274) 964 (1,238)
Federal funds sold............ 373,144 5,122 5.57% 326,678 4,322 5.37% 800 633 167
--------- ------ --------- ------ ----- ----- -----
Total Interest earning
assets.... 2,280,370 44,275 7.79% 2,161,480 42,660 7.92% 1,615 2,664 (1,049)
Allowance for loan losses..... (54,547) ------ (52,977) ------ ----- ----- -----
Cash and non-interest earning
assets... 152,837 152,554
--------- --------
Total assets................$ 2,378,660 $2,261,057
========= =========
Liabilities and shareholders'
equity
Deposits:
Interest-bearing checking..$ 239,338 908 1.54% $ 234,084 $ 885 1.53% 23 20 3
Money market accounts...... 57,835 417 2.93% 61,149 442 2.93% (25) (24) (1)
Savings...................... 651,644 5,115 3.18% 659,651 5,587 3.43% (472) (67) (405)
CD's over $100 thousand...... 120,126 1,692 5.71% 94,284 1,322 5.69% 370 365 5
Other time deposits.......... 834,195 12,056 5.86% 789,130 11,335 5.83% 721 650 71
--------- ------ -------- ------ ----- ----- -----
Total time deposits......... 1,903,138 20,188 4.30% 1,838,298 19,571 4.32% 617 944 (327)
Short-term borrowings......... 130,830 1,567 4.86% 113,764 1,317 4.70% 250 203 47
--------- ------ --------- ------ ----- ----- -----
Total interest-bearing
liabilities.... 2,033,968 21,755 4.34% 1,952,062 20,888 4.34% 867 1,147 (280)
Demand deposits............... 128,083 ------ 114,627 ------ ----- ----- -----
Other liabilities............. 40,682 32,225
Shareholders' equity.......... 175,927 162,143
--------- ---------
Total liab. & shareholders'
equity.....$ 2,378,660 $2,261,057
========= =========
Net interest income........... 22,520 21,772 748 1,517 (769)
------ ------ ----- ----- -----
Net interest spread........... 3.45% 3.58%
Net interest margin (net
interest income to total
interest earning assets)..... 3.92% 4.00%
Tax equivalent adjustment..... 872 765
------ ------
Net interest income per book $ 21,648 $ 21,007
====== ======
-15-
</TABLE>
<PAGE>
Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in the Company's interest rate risk
position since December 31, 1997. Other types of market risk, such as
foreign exchange rate risk and commodity price risk, do not arise in the
normal course of the Company's business activities.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TrustCo Bank Corp NY
Date: May 13, 1998 By: /s/Robert A. McCormick
-------------------------
Robert A. McCormick
President and
Chief Executive Officer
Date: May 13, 1998 By: /s/Robert T. Cushing
------------------------
Robert T. Cushing
Vice President and Chief
Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 34,545
<INT-BEARING-DEPOSITS> 34
<FED-FUNDS-SOLD> 403,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 621,017
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,302,857
<ALLOWANCE> 53,984
<TOTAL-ASSETS> 2,395,839
<DEPOSITS> 2,043,307
<SHORT-TERM> 131,778
<LIABILITIES-OTHER> 43,776
<LONG-TERM> 0
<COMMON> 24,266
0
0
<OTHER-SE> 152,712
<TOTAL-LIABILITIES-AND-EQUITY> 2,395,839
<INTEREST-LOAN> 27,882
<INTEREST-INVEST> 10,399
<INTEREST-OTHER> 5,122
<INTEREST-TOTAL> 43,403
<INTEREST-DEPOSIT> 20,188
<INTEREST-EXPENSE> 21,755
<INTEREST-INCOME-NET> 21,648
<LOAN-LOSSES> 1,372
<SECURITIES-GAINS> 32
<EXPENSE-OTHER> 11,529
<INCOME-PRETAX> 13,301
<INCOME-PRE-EXTRAORDINARY> 8,378
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,378
<EPS-PRIMARY> <F1> 0.36
<EPS-DILUTED> <F2> 0.34
<YIELD-ACTUAL> 3.92
<LOANS-NON> 7,329
<LOANS-PAST> 1,020
<LOANS-TROUBLED> 3,349
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 53,455
<CHARGE-OFFS> 1,328
<RECOVERIES> 485
<ALLOWANCE-CLOSE> 53,984
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 53,984
<FN>
<F1> EPS is reported as "Basic EPS" as prescribed by Statement of Financial
Accounting Standards No. 128.
<F2> EPS is reported as "Diluted EPS" as prescribed by Statement of Financial
Accounting Standards No. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996 JUN-30-1996 SEP-30-1996
<CASH> 50,885 49,771 43,264 42,355
<INT-BEARING-DEPOSITS> 4 2 3 30
<FED-FUNDS-SOLD> 239,000 247,000 435,000 388,000
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 640,206 636,337 488,352 547,787
<INVESTMENTS-CARRYING> 0 0 0 0
<INVESTMENTS-MARKET> 0 0 0 0
<LOANS> 1,226,142 1,227,587 1,227,722 1,224,831
<ALLOWANCE> 48,320 50,580 50,582 50,909
<TOTAL-ASSETS> 2,176,185 2,183,180 2,223,973 2,246,934
<DEPOSITS> 1,930,649 1,938,529 1,933,851 1,931,729
<SHORT-TERM> 56,654 61,570 106,654 124,961
<LIABILITIES-OTHER> 28,783 28,355 30,036 32,592
<LONG-TERM> 0 0 0 0
<COMMON> 18,135 18,199 18,199 18,225
0 0 0 0
0 0 0 0
<OTHER-SE> 141,964 136,527 135,233 139,427
<TOTAL-LIABILITIES-AND-EQUITY> 2,176,185 2,183,180 2,223,973 2,246,934
<INTEREST-LOAN> 107,060 26,947 53,673 80,315
<INTEREST-INVEST> 41,949 11,260 22,644 31,694
<INTEREST-OTHER> 12,543 3,301 7,013 12,911
<INTEREST-TOTAL> 161,552 41,508 83,330 124,920
<INTEREST-DEPOSIT> 78,355 19,644 38,837 58,216
<INTEREST-EXPENSE> 80,200 20,377 40,667 61,452
<INTEREST-INCOME-NET> 81,352 21,131 42,663 63,468
<LOAN-LOSSES> 12,698 3,110 3,964 4,907
<SECURITIES-GAINS> 243 (421) (3,051) (4,342)
<EXPENSE-OTHER> 44,440 10,446 21,121 31,369
<INCOME-PRETAX> 38,281 10,702 21,730 33,753
<INCOME-PRE-EXTRAORDINARY> 25,527 6,685 13,598 21,065
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 25,527 6,685 13,598 21,065
<EPS-PRIMARY> <F1> 1.10 <F1> 0.29 <F1> 0.59 <F1> 0.91
<EPS-DILUTED> <F2> 1.07 <F2> 0.28 <F2> 0.57 <F2> 0.88
<YIELD-ACTUAL> 4.18 4.13 4.14 4.08
<LOANS-NON> 12,832 12,571 10,782 8,431
<LOANS-PAST> 1,696 1,315 1,058 727
<LOANS-TROUBLED> 1,130 1,670 2,086 2,199
<LOANS-PROBLEM> 0 0 0 0
<ALLOWANCE-OPEN> 38,851 48,320 48,320 48,320
<CHARGE-OFFS> 7,338 1,838 3,051 4,274
<RECOVERIES> 4,109 988 1,349 1,956
<ALLOWANCE-CLOSE> 48,320 50,580 50,582 50,909
<ALLOWANCE-DOMESTIC> 0 0 0 0
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 48,320 50,580 50,582 50,909
<FN>
<F1> EPS is reported as "Basic EPS" as prescribed by Statement of Financial
Accounting Standards No. 128.
<F2> EPS is reported as "Diluted EPS" as prescribed by Statement of Financial
Accounting Standards No. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 45,720 50,749 41,328 40,806
<INT-BEARING-DEPOSITS> 59 0 1 1
<FED-FUNDS-SOLD> 310,000 373,000 290,000 316,000
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 610,670 588,437 670,809 665,285
<INVESTMENTS-CARRYING> 0 0 0 0
<INVESTMENTS-MARKET> 0 0 0 0
<LOANS> 1,241,882 1,233,439 1,255,944 1,278,822
<ALLOWANCE> 51,561 51,845 52,286 52,684
<TOTAL-ASSETS> 2,261,780 2,293,255 2,301,897 2,344,499
<DEPOSITS> 1,953,146 1,984,134 1,979,858 1,999,248
<SHORT-TERM> 111,662 112,469 115,245 129,198
<LIABILITIES-OTHER> 34,572 35,518 37,901 40,691
<LONG-TERM> 0 0 0 0
<COMMON> 20,959 20,986 21,006 21,028
0 0 0 0
0 0 0 0
<OTHER-SE> 141,441 140,148 147,887 154,334
<TOTAL-LIABILITIES-AND-EQUITY> 2,261,780 2,293,255 2,301,897 2,344,499
<INTEREST-LOAN> 107,111 26,812 53,900 81,441
<INTEREST-INVEST> 41,902 10,761 22,281 34,026
<INTEREST-OTHER> 17,634 4,322 8,577 12,937
<INTEREST-TOTAL> 166,647 41,895 84,758 128,404
<INTEREST-DEPOSIT> 77,749 19,571 39,575 60,180
<INTEREST-EXPENSE> 82,342 20,888 42,265 64,299
<INTEREST-INCOME-NET> 84,305 21,007 42,493 64,105
<LOAN-LOSSES> 6,577 1,210 2,395 3,740
<SECURITIES-GAINS> (4,536) (495) (790) (809)
<EXPENSE-OTHER> 42,015 11,204 22,791 33,902
<INCOME-PRETAX> 46,026 12,129 24,652 38,134
<INCOME-PRE-EXTRAORDINARY> 28,699 7,593 15,446 23,929
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 28,699 7,593 15,446 23,929
<EPS-PRIMARY> <F1> 1.23 <F1> 0.32 <F1> 0.65 <F1> 1.01
<EPS-DILUTED> <F2> 1.20 <F2> 0.31 <F2> 0.64 <F2> 0.99
<YIELD-ACTUAL> 4.07 4.00 4.04 4.04
<LOANS-NON> 10,748 7,453 7,749 6,036
<LOANS-PAST> 792 1,539 995 963
<LOANS-TROUBLED> 2,495 2,800 3,503 3,515
<LOANS-PROBLEM> 0 0 0 0
<ALLOWANCE-OPEN> 48,320 51,561 51,561 51,561
<CHARGE-OFFS> 5,648 2,329 3,684 5,118
<RECOVERIES> 2,312 1,403 2,014 2,501
<ALLOWANCE-CLOSE> 51,561 51,845 52,286 52,684
<ALLOWANCE-DOMESTIC> 0 0 0 0
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 51,561 51,845 52,286 52,684
<FN>
<F1> EPS is reported as "Basic EPS" as prescribed by Statement of Financial
Accounting Standards No. 128.
<F2> EPS is reported as "Diluted EPS" as prescribed by Statement of Financial
Accounting Standards No. 128.
</FN>
</TABLE>
