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
September 30, 1998
TRUSTCO BANK CORP NY
(Exact name of registrant as specified in its charter)
NEW YORK 14-1630287
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
320 STATE STREET, SCHENECTADY, NEW YORK 12305
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 377-3311
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
(Title of class)
Common
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 October 30, 1998
--------------------------- ----------------------
$1 Par Value 26,798,242
<PAGE>
TrustCo Bank Corp NY
INDEX
Part I. FINANCIAL INFORMATION PAGE NO.
Item 1. Interim Financial Statements (Unaudited): Consolidated 1
Statements of Income for the Three Months and Nine Months Ended
September 30, 1998 and 1997
Consolidated Statements of Financial Condition as of September 2
30, 1998 and December 31, 1997
Consolidated Statements of Cash Flows for the Nine Months Ended 3 - 4
September 30, 1998 and 1997
Notes to Consolidated Interim Financial Statements 5 - 8
Independent Auditors' Report 9
Item 2. Management's Discussion and Analysis 10 - 24
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
Part II. OTHER INFORMATION
Item 1. Legal Proceedings -- None
Item 2. Changes in Securities -- None
Item 3. Defaults Upon Senior Securities --None
Item 4. Submissions of Matters to Vote of Security Holders -- None
Item 5. Other Information 46
i
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Item 6.Exhibits and Reports on Form 8-K
(a) Exhibits
Reg S-K (Item 601)
Exhibit No.Description Page No.
- --------------------------------------------------------------------------------
The following exhibits are filed herewith:
3(ii)a Amended and Restated By-Laws of TrustCo 28
Bank Corp NY, dated August 18, 1998
10(a) Amendment No. 1 to Second Restatement of Trustco Bank 38
Supplemental Retirement Plan, dated September 15, 1998
10(b) Amendment No. 2 to Restatement of Trustco Bank Executive 41
Officer Incentive Plan, dated September 15, 1998
10(c) Amendment No. 3 to Restated Agreement for Supplemental 43
Retirement Benefits for Robert A. McCormick, dated
September 15, 1998
(b) Reports on Form 8-K
Filing of Form 8-K on August 18, 1998, regarding August 18, 1998, press release
declaring a quarterly cash dividend of $0.275 per share payable October 1, 1998,
and the issuance of a 15% stock split, to be distributed on November 13, 1998,
incorporated herein by reference.
Filing of Form 8-K on October 21, 1998, regarding two press releases dated
October 21, 1998, detailing third quarter financial results, incorporated herein
by reference.
ii
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<TABLE>
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share data)
<CAPTION>
3 Months Ended 9 Months Ended
Sept 30 Sept 30
1998 1997 1998 1997
Interest income:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 27,726 27,541 83,413 81,441
Interest on U. S. Treasuries and agencies 3,328 6,685 12,230 21,710
Interest on states and political
subdivisions 1,533 1,482 4,592 4,096
Interest on mortgage-backed securities 3,175 3,141 9,047 6,919
Other 1,973 437 4,252 1,301
Interest on federal funds sold 6,439 4,360 17,857 12,937
-------------------------------------------------------------
Total interest income 44,174 43,646 131,391 128,404
-------------------------------------------------------------
Interest expense:
Interest on deposits:
Interest-bearing checking 959 910 2,804 2,694
Savings 5,319 5,734 15,662 16,985
Money market deposit accounts 417 433 1,249 1,310
Certificates of deposit of $100,000 or more 1,920 1,531 5,392 4,268
Other time 12,332 11,997 36,582 34,923
Interest on short-term borrowings 1,858 1,429 5,329 4,119
-------------------------------------------------------------
Total interest expense 22,805 22,034 67,018 64,299
-------------------------------------------------------------
Net interest income 21,369 21,612 64,373 64,105
Provision for loan losses 450 1,345 3,380 3,740
-------------------------------------------------------------
Net interest income after provision
for loan losses 20,919 20,267 60,993 60,365
-------------------------------------------------------------
Noninterest income:
Trust department income 1,736 1,657 5,435 4,927
Fees for other services to customers 2,323 1,970 6,529 5,652
Net gain/(loss) on securities available for sale 135 (19) 271 (809)
Other 521 718 2,381 1,901
-------------------------------------------------------------
Total noninterest income 4,715 4,326 14,616 11,671
-------------------------------------------------------------
Noninterest expenses:
Salaries and employee benefits 5,760 5,669 17,219 17,166
Net occupancy expense 1,145 1,530 3,545 3,832
Equipment expense 1,186 881 3,780 2,932
FDIC insurance expense 61 62 184 185
Professional services 660 675 2,039 2,743
Other real estate expenses 352 9 714 304
Other 2,593 2,285 7,104 6,740
-------------------------------------------------------------
Total noninterest expenses 11,757 11,111 34,585 33,902
-------------------------------------------------------------
Income before taxes 13,877 13,482 41,024 38,134
Applicable income taxes 4,668 4,999 14,771 14,205
-------------------------------------------------------------
Net income $ 9,209 8,483 26,253 23,929
=============================================================
Net income per Common Share:
- Basic $ 0.34 0.31 0.98 0.89
=============================================================
- Diluted $ 0.33 0.30 0.94 0.86
=============================================================
Per share data is adjusted for the effect of the 15% stock split declared August, 1998.
See accompanying notes to consolidated interim financial statements.
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</TABLE>
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<TABLE>
TRUSTCO BANK CORP NY
Consolidated Statements of Financial Condition
(dollars in thousands, except share data)
<CAPTION>
09/30/98 12/31/97
ASSETS: (unaudited)
<S> <C> <C>
Cash and due from banks $ 42,009 42,740
Federal funds sold 437,000 395,000
----------------- ----------------
Total cash and cash equivalents 479,009 437,740
Securities available for sale:
U. S. Treasuries and agencies 179,821 278,823
States and political subdivisions 118,674 113,787
Mortgage-backed securities 190,854 155,080
Other 169,864 54,209
----------------- ----------------
Total securities available for sale 659,213 601,899
----------------- ----------------
Loans:
Commercial 188,218 190,651
Residential mortgage loans 956,552 906,404
Home equity line of credit 152,316 172,448
Installment loans 27,000 29,989
----------------- ----------------
Total loans 1,324,086 1,299,492
----------------- ----------------
Less:
Allowance for loan losses 54,325 53,455
Unearned income 1,123 1,216
----------------- ----------------
Net loans 1,268,638 1,244,821
Bank premises and equipment 17,756 18,609
Real estate owned 5,667 9,309
Other assets 58,450 59,887
----------------- ----------------
Total assets $ 2,488,733 2,372,265
================= ================
LIABILITIES:
Deposits:
Demand $ 147,633 130,345
Interest-bearing checking 247,487 240,699
Savings accounts 655,888 650,601
Money market deposit accounts 54,986 57,021
Certificates of deposit (in denominations of
$100,000 or more) 138,457 112,599
Other time 857,357 830,598
----------------- ----------------
Total deposits 2,101,808 2,021,863
Short-term borrowings 158,766 127,850
Accrued expenses and other liabilities 42,771 43,727
----------------- ----------------
Total liabilities 2,303,345 2,193,440
----------------- ----------------
SHAREHOLDERS' EQUITY:
Capital stock par value $1; 50,000,000 shares authorized,
and 27,931,404 and 24,257,382 shares issued September 30, 1998
and December 31, 1997, respectively 27,931 24,257
Surplus 109,824 112,702
Undivided profits 39,152 32,119
Accumulated other comprehensive income:
Net unrealized gain on securities available for sale 19,988 15,851
Treasury stock at cost - 1,186,534 and 855,850 shares at
September 30, 1998 and December 31, 1997, respectively (11,507) (6,104)
----------------- ----------------
Total shareholders' equity 185,388 178,825
----------------- ----------------
Total liabilities and shareholders' equity $ 2,488,733 2,372,265
================= ================
Share amounts and capital balances have been adjusted for the effect of the 15% stock
split declared August, 1998.
See accompanying notes to consolidated interim financial statements.
</TABLE>
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<TABLE>
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED September 30, 1998 1997
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net income.............................................. $ 26,253 23,929
-------- --------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 1,520 2,529
Gain on sales of fixed assets.......................... (589) ---
Provision for loan losses................................ 3,380 3,740
Loss on sale of securities available for sale............. 2 973
Gain on sale of securities available for sale............. (273) (164)
Provision for deferred tax benefit..................... (767) (3,908)
(Increase)/decrease in taxes receivable.................... (2,084) 2,194
Increase in interest receivable........................... (752) (745)
Increase/(decrease) in interest payable................... 40 (23)
Decrease in other assets............................... 4,041 3,852
Increase/(decrease) in accrued expenses................... (955) 6,140
-------- --------
Total adjustments.................................... 3,563 14,588
-------- --------
Net cash provided by operating activities................ 29,816 38,517
-------- --------
Cash flows from investing activities:
Proceeds from sales of securities available for sale...... 29,724 106,908
Purchase of securities available for sale................. (272,196) (291,691)
Proceeds from maturities and calls
of securities available for sale...................... 192,423 149,470
Net increase in loans.................................. (30,604) (48,654)
Proceeds from dispositions of real estate owned........ 5,191 3,003
Proceeds from sales of fixed assets.................... 1,476 ---
Capital expenditures................................... (1,554) (1,995)
-------- --------
Net cash used in investing activities................ (75,540) (82,959)
-------- --------
Cash flows from financing activities:
Net increase in deposits............................... 79,945 46,102
Increase in short-term borrowing........................ 30,916 17,536
Proceeds from exercise of stock options................ 264 786
Proceeds from sale of treasury stock................... 4,196 2,081
Purchase of treasury stock............................. (9,067) (4,213)
Dividends paid......................................... (19,261) (16,822)
-------- --------
Net cash provided by financing activities............... 86,993 45,470
-------- --------
Net increase in cash and cash equivalents................ 41,269 1,028
Cash and cash equivalents at beginning of period............ 437,740 355,779
-------- --------
Cash and cash equivalents at end of period..............$ 479,009 356,807
======== ========
See accompanying notes to consolidated interim financial statements. (Continued)
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</TABLE>
<PAGE>
<TABLE>
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows Continued (Unaudited)
(dollars in thousands)
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
NINE MONTHS ENDED September 30, 1998 1997
------- --------
<S> <C> <C>
Interest paid.........................................$ 66,978 64,322
Income taxes paid...................................... 17,622 15,919
Transfer of loans to real estate owned................. 3,407 9,097
Increase/(decrease) in dividends payable............... (41) 2
Change in unrealized gain on securities
available for sale-gross of deferred taxes............ (6,994) (12,111)
Change in deferred tax effect on unrealized gain
on securities available for sale...................... 2,857 4,908
See accompanying notes to consolidated interim financial statements.
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</TABLE>
<PAGE>
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements
(Unaudited)
1. Financial Statement Presentation
In the opinion of the management of TrustCo Bank Corp NY (the Company), the
accompanying unaudited Consolidated Interim Financial Statements contain all
adjustments necessary to present fairly the financial position as of September
30, 1998, the results of operations for the three months and nine months ended
September 30, 1998 and 1997, and the cash flows for the nine months ended
September 30, 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.
<TABLE>
2. Earnings Per Share
A reconciliation of the component parts of earnings per share for the three
month and nine month periods ended September 30, 1998 and 1997 follows:
<CAPTION>
Weighted Average Shares
(In thousands, Net Outstanding Per Share
except per share data) Income Amounts
----------------- -------------------------- -------------------
For the quarter ended September 30, 1998:
Basic EPS:
Net income available to
<S> <C> <C> <C>
common shareholders.............. $9,209 26,774 $0.34
Effect of Dilutive Securities:
Stock options............................. ------ 1,139 -------
----------------- -------------------------- -------------------
Diluted EPS $9,209 27,913 $0.33
================= ========================== ===================
For nine months ended September 30, 1998:
Basic EPS:
Net income available to
common shareholders.............. $26,253 26,820 $0.98
Effect of Dilutive Securities:
Stock options............................. ------- 1,113 -------
----------------- -------------------------- -------------------
Diluted EPS $26,253 27,933 $0.94
================= ========================== ===================
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Per share data has been adjusted for the 15% stock split declared in August
1998.
Weighted Average Shares
(In thousands, Net Outstanding Per Share
except per share data) Income Amounts
----------------- -------------------------- -------------------
For the quarter ended September 30, 1997:
Basic EPS:
Net income available to
<S> <C> <C> <C>
common shareholders.............. $8,483 26,983 $0.31
Effect of Dilutive Securities:
Stock options............................. ------- 925 -------
----------------- -------------------------- -------------------
Diluted EPS $8,483 27,908 $0.30
================= ========================== ===================
For the nine months ended September 30, 1997:
Basic EPS:
Net income available to
common shareholders.............. $23,929 27,019 $0.89
Effect of Dilutive Securities:
Stock options............................. ------- 785 -------
================= ========================== ===================
Diluted EPS $23,929 27,804 $0.86
================= ========================== ===================
Per share data has been adjusted for the 15% stock split declared in August
1998.
</TABLE>
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.
Comprehensive income for the three month period ended September 30, 1998 and
1997 was $8,946,000 and $12,924,000 respectively, and $30,390,000 and
$31,132,000 for the nine month period ended September 30, 1998 and 1997,
respectively. The following summarizes the components of other comprehensive
income:
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<PAGE>
<TABLE>
Other Comprehensive Income (dollars in thousands)
Three months ended September 30
Unrealized gains on securities: 1998 1997
<CAPTION>
-----------------------
Unrealized holding gain/(loss) arising during period, net of tax (pre-tax
loss of $311 for 1998 and pre-tax gain of $7,489 for
<S> <C> <C>
1997) $(183) 4,429
Reclassification adjustment for net gain/(loss) realized in net
income during period, net of tax (pre-tax gain of $135 for 1998
and pre-tax loss of $19 for 1997)
80 (12)
-----------------------
Other comprehensive income $(263) 4,441
=======================
Nine months ended September 30
Unrealized gains on securities: 1998 1997
-----------------------
Unrealized holding gains arising during period, net of tax (pre-tax amount
of $7,265 for 1998 and $11,302 for 1997)
$4,297 6,724
Reclassification adjustment for net gain/(loss) realized in net income
during period, net of tax (pre-tax gain of $271 for 1998 and pre-tax loss of
$809 for 1997)
160 (479)
------------------------
Other comprehensive income $4,137 7,203
========================
</TABLE>
4. Recent Accounting Pronouncements
In February 1998, the Financial Accounting Standards Board (FASB) 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.
In June,1998,the FASB issued Statement of Financial Accounting Standards No133,
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<PAGE>
"Accounting for Derivative Instruments and Hedging Activities," (Statement
133), which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. This Statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. Management is
currently evaluating the impact of this Statement on the Company's consolidated
financial statements.
-8-
<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 September 30, 1998, and the
related consolidated statements of income for the three month and nine month
periods ended September 30, 1998 and 1997, and the consolidated statements of
cash flows for the nine month periods ended September 30, 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
October 9, 1998
-9-
<PAGE>
TrustCo Bank Corp NY
Management's Discussion and Analysis
September 30, 1998
The review that follows focuses on the factors affecting the financial condition
and results of operations of TrustCo Bank Corp NY ("TrustCo" or " Company")
during the three month and nine month periods ended September 30, 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 been adjusted for the 15% stock split declared in August
1998.
Forward-looking Statements
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) certain vendors of critical systems or services failing to
comply with Year 2000 programming issues, (5) changes in the regulatory
environment, and (6) changes in general business and economic trends. The
foregoing list should not be construed as exhaustive, and the Company disclaims
any obligation to subsequently 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 and nine months ended September 30,
1998 and 1997.
Overview
TrustCo recorded net income of $9.2 million, or $0.33 diluted earnings per share
for the three month period ended September 30, 1998, as compared to net income
of $8.5 million and diluted earnings per share of $0.30 for the same time period
in 1997. For the nine months ended September 30, 1998, TrustCo recorded net
income of $26.3 million or $0.94 diluted earnings per share compared to $23.9
million and $0.86 diluted earnings per share in the comparable period in 1997.
The primary factors accounting for the year to date increase in net income are:
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<PAGE>
A 6% increase in the average earning assets to $2.3 billion, A
360 thousand reduction in the provision for loan losses to $3.4 million, and
An increase in noninterest income (excluding the effect of net
gains/losses on securities transactions) of $1.9 million to $14.3 million.
These increases to net income were partially offset by:
Reduction in the net interest margin to 3.82% for 1998 compared to 4.04% for
1997,
An approximately $680 thousand increase in noninterest expense to $34.6
million in 1998,and
An approximately $570 thousand increase in income tax expense.
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
The average balance of interest earning assets increased by $148.7 million to
$2.4 billion during the third quarter of 1998 compared to 1997. The average
yield on earning assets was 7.56% in 1998's third quarter compared to 7.97% in
1997.
For the nine month period ended September 30, 1998, average interest-earning
assets increased by $141.8 million to $2.3 billion. The average yield on earning
assets was 7.66% in 1998 compared to 7.96% in 1997.
Included in the tables "Distribution of Assets, Liabilities and Shareholders'
Equity: Interest Rates and Interest Differential" is a detailed breakdown of
TrustCo's average earning assets and interest bearing liabilities for the three
month and nine month periods ended September 30, 1998 and 1997.
Loans
During the third quarter of 1998, the loan portfolio grew by $50.1 million to
$1.3 billion. The average yield on the portfolio decreased 28 basis points to
8.43% for the third quarter of 1998 compared to 8.71% for 1997. This resulted in
total interest income of $27.8 million for 1998 and $27.6 million for 1997.
During the quarter, the residential mortgage loan balances increased $85.1
million to $945.2 million compared to $860.1 million for the third quarter of
1997. The other categories of loans all experienced decreases during the quarter
as a result of increased competition and loan run off. The residential real
estate loan is the principal product in the TrustCo lending area. Through
aggressive pricing and low closing costs the Company has been able to attract
new borrowers. All loans are
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<PAGE>
held in the portfolio and are not sold into the secondary markets.
Residential real estate loans are originated by TrustCo employees through the
network of branch facilities, primarily in the upstate New York territory.
For the nine month period ended September 30, 1998, the average balance in the
loan portfolio was $1.3 billion, an increase of $57.3 million over the balance
for the comparable period in 1997. The average yield decreased 18 basis points
to 8.53% for the 1998 period compared to 8.71% for the comparable period in
1997. The increase in the average balances more than offset the reduction in
rates thereby causing an increase in loan interest income to $83.7 million for
the nine months of 1998.
Securities Available for Sale
During the third quarter of 1998, the average balance of securities available
for sale were $601.6 million with a yield of 7.17%, compared to $653.0 million
for the third quarter of 1997 with a yield of 7.66%. The combination of the
decrease in average balance and the reduction in the yields combined to cause a
decrease in interest income on securities available for sale of $1.7 million
between the third quarter of 1998 and 1997.
The nine month results reflect the same principal trends as was noted for the
third quarter. The total average balance of securities available for sale during
the nine months of 1998 was $595.7 million with an average yield of 7.26%
compared to an average balance for 1997 of $626.7 million with a yield of 7.69%.
Reflected in both the third quarter and nine month results are reductions in the
average balances invested in securities issued by the U.S. Government or its
agencies that are "callable" by the agency. As interest rates in the market have
decreased, these securities were called by the agency and consequently resulted
in TrustCo having additional funds in overnight investments. Through the third
quarter there has been an increase in the amount invested in mortgage-backed
securities. These are pass through securities and are secured by the underlying
mortgage loans and government guarantees. With the types of mortgage-backed
securities that TrustCo purchases, there is little credit risk in the portfolio.
Rather, the risk with respect to these securities rests with the issue of
interest rates. As interest rates in the mortgage markets decrease, the
underlying loans will prepay or refinance in their entirety. Generally,
mortgage-backed securities provide cash flows over a longer time period to final
maturity than do callable securities.
Also during 1998, TrustCo has invested in asset-backed securities. The
underlying collateral for these bonds are home equity loans and home equity
lines of credit. Virtually all of the bonds are insured and have an average life
of less than three years. All of the bonds are "AAA" rated by Standard and Poors
or Moody's. At September 30, 1998, the Company had invested $126.8 million in
asset-backed securities.
Federal Funds
During the third quarter of 1998 the average balance of federal funds sold was
$458.6 million with a yield of 5.57%, compared to the average balance for the
three month period ended September 30, 1997 of $308.6 million with an average
yield of 5.61%. The $150.0
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<PAGE>
million increase in the average balance, offset bythe 4 basis points decrease
in the average yield, resulted in total interestincome on federal funds sold
of $6.4 million for 1998 compared to $4.4 million for 1997.
During the nine month period ended September 30, 1998 the average balance of
federal funds was $429.3 million with a yield of 5.56% compared to an average
balance of $313.9 million in 1997 with an average yield of 5.51%.
The federal funds portfolio is utilized to generate additional interest income
and liquidity as funds are waiting to be deployed into the loan and securities
portfolios. As noted in the Securities Available for Sale section there has been
a relatively large amount of unanticipated prepayments due to the low interest
rates in the market during 1998. Due to the relatively low rates in the market
place and the desire to record loans in an orderly fashion as compared to a
wholesale loan purchase program, these funds have not been redeployed in the
loan or securities portfolio as of September 30, 1998.
The rate earned on the federal funds portfolio is a function of the target rate
as established by the Federal Reserve Bank. Late in September 1998, and again in
mid- October 1998, the target rate for federal funds was decreased by 25 basis
points from 5.50% to 5.00% after the October change. This will have the effect
for the fourth quarter and thereafter of reducing the interest income on this
portfolio. Likewise, the Federal Reserve Bank rate changes also caused the prime
rate to drop by a total of 50 basis points. The impact of that rate reduction
will occur beginning in the fourth quarter of 1998. TrustCo has taken steps to
reduce the interest rates paid on deposits in response to these changes. Further
reduction in the net interest margin can be anticipated as a result of the
actions described above.
Funding Opportunities
TrustCo utilizes various funding sources to support its earning asset portfolio.
The vast majority of the Company's funding comes from traditional deposit
vehicles such as savings, interest-bearing checking and time deposit accounts.
Also, TrustCo developed a Short-Term Investment Account, which was introduced in
1995 exclusively for customers of the Trust Department.
During the quarter, total interest-bearing liabilities increased to $2.1 billion
from $2.0 billion for 1997. The rate paid on total interest-bearing liabilities
was 4.30% for the third quarter of 1998, 9 basis points less than the 4.39% rate
paid for 1997. Total interest expense for the third quarter increased $771
thousand to $22.8 million for 1998 compared to $22.0 million for 1997. Growth of
the TrustCo Short Term Investment account, interest-bearing checking and time
deposits were the principal reasons for the increase in interest-bearing
liabilities during the quarter.
Similar growth in interest-bearing liabilities was noted for the nine month
period as was discussed for the quarter. The overall growth in interest-bearing
liabilities during the nine month period ended September 30, 1998 was $102.1
million compared to the comparable period in 1997. Total interest expense
increased by $2.7 million due to the increase in
-13-
<PAGE>
average balances during the nine month period offset by a reduction of 4 basis
points in the overall rate paid.
Growth in the interest-bearing liabilities resulted from successful marketing of
the Company's products along with the impact of the new branch openings.
Net Interest Income
Taxable equivalent net interest income decreased by approximately $250 thousand
during the third quarter of 1998 compared to 1997. On a year to date basis, the
taxable equivalent net interest income was $66.9 million for 1998 compared to
$66.5 million for 1997, an increase of approximately $450 thousand.
Nonperforming Assets
Nonperforming assets include nonperforming loans which are those loans in a
nonaccrual status, loans that have been restructured, and loans past due 90 days
or more and still accruing interest. Also included in the total of nonperforming
assets are foreclosed real estate properties which are categorized as real
estate owned.
Impaired loans are defined as those commercial and commercial real estate loans
in a nonaccrual status, and loans restructured since January 1, 1995, when newly
effective accounting standards required the identification, measurement and
reporting of impaired loans. The following will describe the nonperforming
assets of TrustCo as of September 30, 1998.
Nonperforming loans: Total nonperforming loans were $10.4 million at September
30, 1998, a decrease from the $ 11.0 million of nonperforming loans at June 30,
1998 and down also from the $10.5 million at September 30, 1997. Nonaccrual
loans were $6.2 million at September 30, 1998 down slightly from the $6.4
million at June 30, 1998 and up from the $6.0 million at September 30, 1997.
Restructured loans were $3.6 million at September 30, 1998 compared to $3.8
million at June 30, 1998 and $3.5 million at September 30, 1997.
Of the $10.4 million of nonperforming loans at September 30, 1998 all but $19
thousand are residential real estate or retail consumer loans. In prior years
the vast majority of nonperforming loans were concentrated in the commercial and
commercial real estate portfolios. There has been a dramatic shifting of
nonperforming loans to the residential real estate and retail consumer loan
portfolio for several factors, including:
The overall emphasis within TrustCo for residential real estateoriginations,
The relatively weak economic environment in the upstate New York territory,
and
The reduction in real estate values in TrustCo's market area that has occurred
since the middle of the 1990's, thereby causing a reduction in the collateral
that supports the real estate loans.
-14-
<PAGE>
Consumer defaults and bankruptcies have increased dramatically over the last
several years and this has lead to an increase in defaults on loans. TrustCo
strives to identify borrowers that are experiencing financial difficulties and
to work aggressively with them so as to minimize losses or exposures.
At September 30, 1998, there was $19 thousand of commercial and commercial real
estate impaired loans. Total impaired loans at September 30, 1998 of $3.8
million, consisted principally of restructured retail loans. Of the total $10.4
million of nonperforming loans at quarter end September 30, 1998, only the
commercial and commercial real estate loans and restructured retail loans which
totaled $3.8 million are considered by management to be impaired.
During the first nine months of 1998, there have been $953 thousand of
commercial loan charge offs, $736 thousand of consumer loan charge offs and $3.1
million of mortgage loan charge offs. Recoveries during the nine month period
have been $2.3 million in 1998.
Real estate owned: Total real estate owned of $5.7 million at September 30, 1998
decreased by $1.8 million between June 30, 1998 and September 30, 1998. This
decrease of $1.8 million during the third quarter of 1998 was due to the sale of
a commercial real estate property.
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 September 30, 1998, the allowance for loan losses was $54.3 million, which
represents a slight decrease from the $54.7 million in the allowance at June 30,
1998. The allowance represents 4.11% of the loan portfolio as of September 30,
1998, down slightly from the 4.12% as of September 30, 1997. The year to date
provision charged to expense was $3.4 million compared to $3.7 million for 1997.
The deteriorating economic trends that have been prevalent in the Upstate New
York area have subsided slightly during the third quarter of 1998, thereby
causing a reduction in the provision for loan losses for both the third quarter
and year to date 1998 compared to 1997.
In deciding on the adequacy of the allowance for loan losses, management reviews
the current nonperforming loan portfolio as well as loans that are past due and
not yet categorized as nonperforming for reporting purposes. Also, there are a
number of other factors that are taken into consideration, includ
The magnitude and nature of the recent loan charge offs and the movement
of charge offs to the residential real estate loan portfolio,
The growth in the loan portfolio and the implication that has in relation to the
economic climate in the bank's business territory,
-15-
<PAGE>
Changes in underwriting standards in the competitive environment that
TrustCo operates in,
Significant growth in the level of losses associated with bankruptcies and the
time period needed to foreclose, secure and dispose of collateral, and
The relatively weak economic environment in the upstate New York territory
combined with declining real estate prices makes it more difficult for
consumers to refinance their debts.
Consumer bankruptcies and defaults in general have risen significantly during
the 1990's. This trend appears to be continuing as a result of economic strife
and the relative ease of access by consumers to additional credit. Job growth in
the upstate New York area has been modest to declining and there continues to be
a shifting of higher paying jobs to lower paying service jobs.
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 policy. 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
continuance plans should such a situation arise.
Noninterest Income
Total noninterest income for the three months ended September 30, 1998 was $4.7
million an increase of $389 thousand over the comparable period in 1997. During
the 1998 period the Company recorded net securities gains of $135 thousand
compared to $19 thousand of net losses for the comparable period in 1997.
Excluding these securities transactions, noninterest income increased from $4.3
million in the third quarter of 1997 to $4.6 million in 1998.
Similar results were also recognized for the nine months of 1998 compared to
1997. Total noninterest income was $14.6 million for 1998 compared to $11.7
million for 1997. Excluding net securities transactions the balances for 1998
and 1997 would have been $14.3 million and $12.5 million respectively. Included
in the year to date 1998 results are $565 thousand of nonrecurring gains
resulting from the sale of fixed assets.
Noninterest Expenses
Total noninterest expense for the third quarter of 1998 was $ 11.8 million an
increase of $646 thousand from $11.1 million in the third quarter of 1997. For
the nine months ended September 30, 1998 and 1997, total noninterest expense was
$34.6 million and
-16-
<PAGE>
$33.9 million respectively. Increasing operating cost associated with new
branches and Year 2000 programming cost has been offset by savings in other
areas of the bank. TrustCo has a continuing program to reduce and control cost
at all levels within the organization (see Year 2000 Update for further
discussion.)
Income Taxes
In the third quarter of 1998 and 1997, TrustCo recognized income tax expense of
$4.7 million and $5.0 million respectively. This resulted in an effective tax
rate of 33.6% for 1998 and 37.1% for 1997. For the nine months of 1998, total
income tax expense was $14.8 million compared to $14.2 million for 1997. The
reduction in the effective tax rate for the third quarter 1998 was the result of
various tax strategies that have been implemented to reduce total tax expense.
These strategies are anticipated to benefit future periods to a similar extent.
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 its
capital requirements are met through the capital retained in the Company (after
the dividends on the common stock).
Total shareholders' equity at September 30, 1998 was $185.4 million an increase
of $6.6 million from the year end 1997 balance of $178.8 million. The change in
the shareholders' equity between year-end 1997 and September 30, 1998 reflects
the net income retained by TrustCo and a $4.1 million increase in the net
unrealized gain on securities available for sale, offset by a $5.4 million
increase in the amount of Treasury stock.
<TABLE>
TrustCo declared dividends of $0.717 per share during the first nine months of
1998 compared to $0.624 in 1997. These resulted in a dividend payout ratio of
73.2% in 1998 and 70.3% in 1997. The Company achieved the following capital
ratios as of September 30, 1998 and 1997:
<CAPTION>
September 30, Minimum Regulatory
1998 1997 Guidelines
--------------------------------------------
Tier 1 risk adjusted
<S> <C> <C> <C>
capital 12.49% 13.52 4.00
Total risk adjusted
capital 13.77 14.81 8.00
</TABLE>
In addition, at September 30, 1998 and 1997, the consolidated equity to asset
ratio (excluding the mark to market adjustment on securities available for sale)
was 6.70% and 6.99%, respectively.
<PAGE>
Year 2000 Update
General:
Management believes that TrustCo's company-wide Year 2000 project is proceeding
on schedule. The Year 2000 project is addressing the issue of computer programs
and embedded computer chips being unable to distinguish between the year 1900
and 2000. TrustCo operates its principal financial accounting and record keeping
systems using software purchased from Alltel. Beginning in 1995, TrustCo began a
project to upgrade this software to the most current release available and to
work with Alltel to make the appropriate changes so as to be ready to process
Year 2000 transactions. A timetable was established for these upgrades to occur
which would culminate in the installation of a final set of upgrades that would
be Year 2000 ready programs. Since 1995, TrustCo has worked closely with Alltel
to insure that they are making the appropriate remediation efforts required to
have their programs Year 2000 ready. While these activities were ongoing,
TrustCo directed its efforts to installing the required upgrades and making the
other changes so as to be positioned to handle the Year 2000 programs from
Alltel once they were completed.
In addition to the Alltel programs, there are a limited number of mainframe
application programs that were purchased from Kirchman Corporation. TrustCo
worked directly with the technical support staff at Kirchman to evaluate the
programs for any program changes to accommodate Year 2000 processing
requirements. In light of the program structure and the fact that these programs
already utilize the full century date in their processing, it is not anticipated
that there will be any difficulties with these programs accepting Year 2000
data.
Throughout the organization, TrustCo utilizes other computer systems to process
various activities. Some of the functionality provided by these systems is of a
routine nature and is not critical to the operations of TrustCo. The critical
non-mainframe applications are the ATM application, which runs on an IBM AS400
system, Trust Accounting, which runs on an Alpha system from Digital Equipment
Corporation (DEC), and Accounting and Payroll, which are server based
applications.
The Year 2000 project also addresses the increasing speculation regarding short
and long-term unavailability of certain consumer goods, which may prompt people
to accumulate or hoard cash in quantities sufficient to meet their personal
needs for a period of time. The Year 2000 project addresses potential customer
fears by establishing procedures to provide for any extreme demand for cash.
Mainframe Operations:
Alltel software
The vast majority of all transactions processed by TrustCo are done utilizing
Alltel
-18-
<PAGE>
software. Beginning in 1995, the Company inventoried all of the
applications that are processed on the mainframe and identified the program
release that TrustCo needed to operate in order to be Year 2000 ready. A
schedule was developed and outside consulting resources were engaged to assist
the in-house programming staff to have all applications operating Year 2000
ready programs by mid-1998. That schedule has been accomplished and, as of
September 30, 1998, all Alltel Year 2000 ready programs have been installed.
Kirchman programs
TrustCo utilizes three programs purchased from Kirchman that operate on the
mainframe computer. The TrustCo in-house programming staff and outside
consultants have reviewed these programs and have concluded that the programs
are currently Year 2000 ready. Testing is being developed to insure that this
conclusion is correct.
IBM operating system
The IBM operating system also required an upgrade to a new version of the system
to insure that it would also be Year 2000 ready. This software was obtained and
has subsequently been installed. Testing of this upgrade will be done in
conjunction with the other mainframe testing.
ATM application
A second system, identical to the system in place being used for daily
production, has been installed for Year 2000 testing. The system software for
the platform has been upgraded to IBM's Year 2000 release. The application
software for both TrustCo and non-TrustCo ATM transactions is in the final
stages of compatibility testing. Future date testing will be performed prior to
year-end 1998.
Trust Accounting
A second system, identical to the system in place being used for daily
production, has been installed for Year 2000 testing. The operating system
software has been upgraded to DEC's Year 2000 release. The application software
has been upgraded to the vendor's Year 2000 release, and future date testing
will be performed during the fourth quarter of 1998.
Non-information Technology
In addition to computer systems utilized for information technology, TrustCo is
also dependent upon certain computerized operations for such things as
electrical services, heating and communications. As part of the Year 2000
project, TrustCo has taken steps to evaluate the magnitude of the computer
dependency of these systems and the potential disruption of services should
these systems fail.
-19-
<PAGE>
Third party vendors that support these systems have been contacted and are being
monitored by TrustCo in relationship to their Year 2000 implementation plan.
Personal Computers:
TrustCo reviewed all programs and departmental functions that utilize personal
computers. This inventory was then prioritized and critical programs were
identified that needed to be Year 2000 ready. Each of the critical programs has
been rewritten or new software installed so that they are Year 2000 ready.
Testing:
To insure that each of the systems that TrustCo operates will be Year 2000 ready
a testing plan has been developed. To assist in testing TrustCo has purchased
redundant equipment for all of the hardware. This will facilitate extended hours
for testing and will insure that none of the testing will in any way affect
production programs. As part of the test plan, TrustCo has identified several
dates that need to be tested. These include year-end 1998, 1999, 2000 and 2001
and other critical dates during 1999 and 2000.
Detailed test scripts have been developed to insure that once the computer
clocks have been rolled forward to the test dates, specific transactions and
processes are performed to insure operational integrity. Data aging software has
also been obtained that will assist in identifying all of the date fields and
warping them to the future date as required for the test.
The test plan requires each application to be tested on a stand-alone basis
initially to insure that it is operational in current date mode and will support
production. Once that is completed, the plan calls for each application to be
tested in future date mode on a stand-alone basis. The test plan is designed to
help identify and isolate problems if any exist in future date mode testing. The
individual application testing will then lead to entity wide testing in future
date mode to insure that all of the applications function properly in the future
date environment.
The detailed test plan covers all aspects of TrustCo=s operations on the
mainframe as well as all other mission-critical platforms.
Customer Evaluations:
TrustCo has completed a review of its significant customer relationships and
their dependency on computerized systems. In addition, significant new customer
relationships will also be subject to this evaluation. TrustCo has established
an ongoing assessment as part of the credit granting and review process.
-20-
<PAGE>
Vendor Monitoring:
In addition to the main application software vendors, TrustCo has numerous
interfaces and data exchanges with third parties and vendors. Each of the
critical interfaces and vendors have been contacted to insure that their Year
2000 plans are adequate and will meet the timetables required by TrustCo. When
such plans are not provided or do not adequately address Year 2000 concerns
alternative vendors or data exchange methods have been identified.
These interfaces and data exchanges with third parties and vendors occur
utilizing numerous types of programs and computer systems. Their Year 2000
projects require them to be compliant in accordance with timetables that are
acceptable to TrustCo and in accordance with guidelines established by bank
regulators. Due to the number of such interfaces, and data exchanges with third
parties and vendors, there is a risk that some may not meet their schedules.
TrustCo is monitoring these activities and will take appropriate action should
the need arise.
Contingency Planning:
All of the mainframe application software is currently operational on software
that the vendors have identified as being Year 2000 ready. Likewise, all of the
critical PC programs have been updated or rewritten to be Year 2000 ready. The
next phase of the project is to execute the future date testing plans to insure
that all the remediated programs function properly in the future date
environment. As problems are identified, the affected programming code will be
reworked and if needed replaced.
The contingency plan that has been developed is to insure that all the testing
and remediation efforts are completed so as to provide adequate time for final
corrections to software prior to Year 2000. Plans are also being developed to
identify and plan for unanticipated disruption of services post Year 2000 on
short, intermediate and long term horizons. These plans include timetables for
moving operations to disaster recovery sites, the availability of additional
programming staff during the critical time periods and back up for program and
data files. Initial plans will be developed prior to year-end 1998 and will be
updated continuously.
Cost:
The total cost associated with required modifications to become Year 2000
compliant is not expected to be material to the Company's financial statements.
Most of the costs associated with this project are for programming services paid
to third party consultants. Internal costs have not been captured since they are
relatively fixed costs and are
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<PAGE>
simply a reallocation of existing resources to this project. Costs paid to third
party vendors during the Year 2000 project are for the following services:
? Installation of upgrades to software so as to utilize the most recent version
released by the vendor,
? Applying the Year 2000 code,
? Applying custom code that is utilized by TrustCo in its operations, and
? Providing production support to the Company as these upgrades are being
installed.
The cost of applying the Year 2000 remediation code to the upgraded programs is
not separately determinable from the other services that the third party
consultants have been providing. The professional service cost for the services
noted above is estimated to be approximately $2 million for the Year 2000
project. Through September 30, 1998 approximately 60% of these costs have been
expensed.
Risk:
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third party data exchange partners and
vendors, the Company is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on the Company's
results of operations, liquidity or financial condition. The Year 2000 project
is expected to significantly reduce the Company's level of uncertainty about the
Year 2000 problem and, in particular, about the Year 2000 compliance and
readiness of its material third party data exchange partners and vendors. The
Company believes that, with the implementation of the modifications of all the
software and the monitoring of third party data exchange partners and vendors
that the possibility of significant interruptions of normal operations should be
reduced.
The most likely worst case scenario is that the testing phase of the software
modifications will not be completed by the scheduled timetable. Management's
plan is for testing to be substantially completed by year-end 1998. This worst
case scenario could increase the overall cost of the Year 2000 project; however,
management believes that this scenario is not probable and if the scenario
should occur, that the impact of these additional costs would not be material to
the Company's financial position and results of operations.
Readers are cautioned that forward-looking statements contained in the Year 2000
update should be read in conjunction with the Company's disclosures under the
heading "Forward-looking Statements" dealing with cautionary statements for the
purpose of the ASafe harbor@ provisions of the Private Securities Litigation
Reform Act of 1995 on page 10.
-22-
<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
heet, related interest income and expense and the average annualized yields on
nterest-earning assets and annualized rates on interest-bearing libilities of the
egistrant and the Bank (adjusted for tax equivalency) for each of the reported periods.
onaccrual loans are included in loans for this analysis. The average balances of sec-
rities available for sale is calculated using amortized costs for these securities.
ncluded in the balance of shareholders' equity is unrealized appreciation, net of tax,
n the available for sale portfolio of $18.5 million in 1998 and $9.9 million in 1997.
The subtotals contained in the following table are the arithmetic totals of the items
ontained in that category.
<CAPTION>
Third Quarter Third Quarter
1998 1997
Average Average Average Average Change in Variance Variance
(dollars in thousands) Balance Interest Rate Balance Interest Rate Interest Balance Rate
Income/ Change Change
Assets Expense
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial loans......................$ 190,718 $ 4,468 9.35% $ 200,658 $ 4,791 9.53% (323) (234) (89)
Residential mortgage loans............ 945,168 18,944 8.02% 860,082 17,708 8.24% 1,236 3,938 (2,702)
Home equity lines of credit .......... 154,610 3,561 9.14% 176,315 4,185 9.42% (624) (503) (121)
Installment loans..................... 26,022 816 12.44% 29,324 940 12.72% (124) (104) (20)
-------- ------ -------- ------ ----- ----- -----
Loans, net of unearned income......... 1,316,518 27,789 8.43% 1,266,379 27,624 8.71% 165 3,097 (2,932)
Securities available for sale:
U.S. Treasuries and agencies......... 180,008 3,341 7.42% 344,801 6,705 7.78% (3,364) (3,071) (293)
Mortgage-backed securities........... 181,620 3,175 6.99% 168,422 3,141 7.46% 34 893 (859)
States and political subdivisions.... 111,175 2,248 8.09% 107,313 2,178 8.12% 70 120 (50)
Other ............................... 128,783 2,015 6.25% 32,443 477 5.87% 1,538 1,504 34
-------- ------ --------- ------ ----- ----- -----
Total securities available for sale 601,586 10,779 7.17% 652,979 12,501 7.66% (1,722) (554) (1,168)
Federal funds sold.................... 458,598 6,439 5.57% 308,609 4,360 5.61% 2,079 2,266 (187)
-------- ------ --------- ------ ----- ----- -----
Total Interest earning assets....... 2,376,702 45,007 7.56% 2,227,967 44,485 7.97% 522 4,809 (4,287)
Allowance for loan losses............. (55,190) ------ (53,201) ------ ----- ----- -----
Cash and non-interest earning assets.. 146,257 148,777
-------- ---------
Total assets.......................$ 2,467,769 $2,323,543
======== =========
Liabilities and shareholders' equity
Deposits:
Interest-bearing checking.........$ 246,610 959 1.54% $ 234,323 $ 910 1.54% 49 49 ---
Money market accounts.............. 56,549 417 2.93% 58,574 433 2.93% (16) (16) ---
Savings.............................. 663,959 5,319 3.18% 662,540 5,734 3.43% (415) 84 (499)
CD's over $100 thousand.............. 132,814 1,920 5.74% 103,427 1,531 5.87% 389 619 (230)
Other time deposits.................. 850,101 12,332 5.76% 814,891 11,997 5.84% 335 1,291 (956)
-------- ------ --------- ------ ----- ----- -----
Total time deposits................. 1,950,033 20,947 4.26% 1,873,755 20,605 4.36% 342 2,027 (1,685)
Short-term borrowings................. 153,862 1,858 4.79% 118,125 1,429 4.80% 429 443 (14)
-------- ------ --------- ------ ----- ----- -----
Total interest-bearing liabilities.. 2,103,895 22,805 4.30% 1,991,880 22,034 4.39% 771 2,470 (1699)
Demand deposits....................... 141,884 ------ 123,585 ------ ----- ----- -----
Other liabilities..................... 39,331 38,237
Shareholders' equity.................. 182,659 169,841
-------- ---------
Total liab. & shareholder's equity.$ 2,467,769 $2,323,543
======== =========
Net interest income................... 22,202 22,451 (249) 2,339 (2588)
------ ------ ----- ----- -----
Net interest spread................... 3.26% 3.58%
Net interest margin (net interest
income to total interest earning
assets)............................ 3.75% 4.05%
Tax equivalent adjustment 833 839
------ ------
Net interest income per book....... 21,369 $21,612
====== ======
-23-
</TABLE>
<PAGE>
<TABLE>
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average balance
sheet, related interest income and expense and the average annualized yields on
interest-earning assets and annualized rates on interest-bearing libilities of the
Registrant and the Bank (adjusted for tax equivalency) for each of the reported periods.
Nonaccrual loans are included in loans for this analysis. The average balances of sec-
urities available for sale is calculated using amortized costs for these securities.
Included in the balance of shareholders' equity is unrealized appreciation, net of tax,
in the available for sale portfolio of $16.1 million in 1998 and $6.5 million in 1997.
The subtotals contained in the following table are the arithmetic totals of the items
contained in that category.
<CAPTION>
Nine Months Nine Months
1998 1997
Average Average Average Average Change in Variance Variance
(dollars in thousands) Balance Interest Rate Balance Interest Rate Interest Balance Rate
Income/ Change Change
Assets Expense
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial loans.....................$ 190,546 13,535 9.48%$ 207,863 $ 14,709 9.44% (1,174) (1,266) 92
Residential mortgage loans............. 928,909 56,273 8.08% 833,117 51,554 8.25% 4,719 6,434 (1,715)
Home equity lines of credit ........... 162,035 11,322 9.34% 179,979 12,551 9.32% (1,229) (1,270) 41
Installment loans...................... 26,681 2,535 12.70% 29,921 2,890 12.90% (355) (310) (45)
--------- ------ ------- ------- ----- ----- -----
Loans, net of unearned income......... 1,308,171 83,665 8.53% 1,250,880 81,704 8.71% 1,961 3,588 (1,627)
Securities available for sale:
U.S. Treasuries and agencies......... 216,779 12,268 7.55% 372,161 21,771 7.80% (9,503) (8,815) (688)
Mortgage-backed securities........... 175,125 9,047 6.89% 121,856 6,919 7.57% 2,128 3,144 (1,016)
States and political subdivisions.... 110,646 6,733 8.11% 99,111 6,021 8.10% 712 701 11
Other ............................... 93,150 4,368 6.25% 33,543 1,416 5.63% 2,952 2,780 172
--------- ------ ------- ------- ----- ----- -----
Total securities available for sale. 595,700 32,416 7.26% 626,671 36,127 7.69% (3,711) (2,190) (1,521)
Federal funds sold.................... 429,315 17,857 5.56% 313,850 12,937 5.51% 4,920 4,802 118
--------- ------ ------- ------- ----- ----- -----
Total Interest earning assets....... 2,333,186133,938 7.66% 2,191,401 130,768 7.96% 3,170 6,200 (3,030)
Allowance for loan losses............. (55,206)------ (52,940) ------- ----- ----- -----
Cash and non-interest earning assets... 149,442 150,638
--------- ---------
Total assets.......................$ 2,427,422 $ 2,289,099
========= =========
Liabilities and shareholders' equity
Deposits:
Interest-bearing checking.........$ 243,213 2,804 1.54%$ 234,058 2,694 1.54% 110 110 ---
Money market accounts.............. 57,057 1,249 2.93% 59,768 1,310 2.93% (61) (61) ---
Savings.............................. 658,164 15,662 3.18% 661,217 16,985 3.43% (1,323) (78) (1,245)
CD's over $100 thousand.............. 125,885 5,392 5.73% 98,524 4,268 5.79% 1,124 1,202 (78)
Other time deposits.................. 840,953 36,582 5.82% 800,792 34,923 5.83% 1,659 1,804 (145)
--------- ------ ------- ------- ----- ----- -----
Total time deposits................. 1,925,272 61,689 4.28% 1,854,359 60,180 4.34% 1,509 2,977 (1,468)
Short-term borrowings................. 147,115 5,329 4.84% 115,887 4,119 4.75% 1,210 1,129 81
--------- ------ ------- ------- ----- ----- -----
Total interest-bearing liabilities.. 2,072,387 67,018 4.32% 1,970,246 64,299 4.36% 2,719 4,106 (1,387)
Demand deposits....................... 135,885 ------ 118,413 ------- ----- ----- -----
Other liabilities..................... 41,063 35,471
Shareholders' equity.................. 178,087 164,969
--------- ---------
Total liab. & shareholders' equity.$ 2,427,422 2,289,099
========= =========
Net interest income................... 66,920 66,469 451 2,094 (1,643)
------ ------- ----- ----- -----
Net interest spread................... 3.34% 3.60%
Net interest margin (net interest
income to total interest earning
assets)............................ 3.82% 4.04%
Tax equivalent adjustment 2,547 2,364
------ -------
Net interest income per book....... 64,373 $ 64,105
====== =======
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</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.
-25-
<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: November 5, 1998 By: /s/Robert A. McCormick
------------------------------------
Robert A. McCormick
President and Chief Executive Officer
Date: November 5, 1998 By: /s/Robert T. Cushing
------------------------------------
Robert T. Cushing
Vice President and Chief
Financial Officer
-26-
<PAGE>
Exhibits Index
Reg S-K
Exhibit No. Description Page No.
- --------------------------------------------------------------------------------
The following exhibits are filed herewith:
3(ii)a Amended and Restated By-Laws of TrustCo 28
Bank Corp NY, dated August 18, 1998
10(a) Amendment No. 1 to Second Restatement of Trustco Bank 38
Supplemental Retirement Plan, dated September 15, 1998
10(b) Amendment No. 2 to Restatement of Trustco Bank Executive 41
Officer Incentive Plan, dated September 15, 1998
10(c) Amendment No. 3 to Restated Agreement for Supplemental 43
Retirement Benefits for Robert A. McCormick, dated September
15, 1998
-27-
<PAGE>
BYLAWS OF Exhibit 3(ii)a
TRUSTCO BANK CORP NY
(a New York State Corporation)
(As Amended Through August 18, 1998)
-----------------------------------------------------
ARTICLE 1
DEFINITIONS
As used in these Bylaws, unless the context otherwise requires, the term:
1.1 "Board" means the Board of Directors of the Corporation
1.2 "Business Corporation Law" means the Business Corporation Law of the State
of New York, as amended from time to time.
1.3 "Bylaws" means the initial Bylaws of the Corporation, as amended from time
to time.
1.4 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.5. "Corporation" means TrustCo Bank Corp NY.
1.6 "Directors" means directors of the Corporation.
1.7 "Entire Board" means the total number of directors which the Corporation
would have if there were no vacancies.
1.8 "Chief Executive Officer" means the Chief Executive Officer of the
corporation.
1.9 "Chairman" means chairman of the Board of the Corporation.
1.10 "President" means the President of the Corporation.
1.11 "Secretary" means the Secretary of the Corporation.
1.12 "Vice President" means the Vice President of the Corporation.
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<PAGE>
ARTICLE 2
SHAREHOLDERS
2.1 PLACE OF MEETINGS. Every meeting of shareholders shall be held at such place
within or without the State of New York as shall be designated by the Board of
Directors in the notice of such meeting or in the waiver of notice thereof.
2.2 ANNUAL MEETING. A meeting of shareholders shall be held annually for the
election of Directors and the transaction of other business at such hour and on
such business day as may be determined by the Board. Written notice of such
meeting, stating the place, date and hour thereof, shall be given, personally or
by mail, not less than ten nor more than sixty days before the date of such
meeting, to each shareholder certified to vote at such meeting.
2.3 SPECIAL MEETINGS. A special meeting of shareholders, other than those
regulated by statute, may be called at any time by the Board or by the Chief
Executive Officer. It shall also be the duty of the Chief Executive Officer to
call such a meeting whenever requested in writing so to do by shareholders
owning two thirds of the issued and outstanding share entitled to vote at such a
meeting. Written notice of such meeting, stating the place, date, hour and
purpose thereof, and indicating that it is being given by the person or persons
calling such meeting, shall be given, personally or by mail, not less than ten
nor more than sixty days before the date of such meeting, to each shareholder
certified to vote at such meeting.
2.4 QUORUM AND VOTING REQUIREMENTS; ADJOURNMENT. Except with respect to a
special meeting for the election of Directors as required by law, or as
otherwise provided in these Bylaws, (a) the holders of at least a majority of
the outstanding shares of the Corporation shall be present in person or by proxy
at any meeting of the shareholders in order to constitute a quorum for the
transaction of any business, and (b) the votes of the holders of at least a
majority of the outstanding shares of the Corporation shall be necessary at any
meeting of shareholders for the transaction of any business or specified item of
business, other than the changing, amending or repealing of any provision of the
Certificate of Incorporation or By- Laws which shall require the affirmative
vote of two-thirds of the Corporation's voting stock; provided, however, that
when a specified item of business is required to be voted on by a class or
series (if the Corporation shall then have outstanding shares or more than one
class or series), voting as a class, the holders of a majority of the shares of
such class or series shall constitute a quorum (as to such class or series) for
the transaction of such item of business. The holders of a majority of shares
present in person or represented by proxy at any meeting of shareholders,
including an adjourned meeting, whether or not a quorum is present, may adjourn
such meeting to another time and place.
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<PAGE>
2.5 INSPECTORS AT MEETINGS. Two or more inspectors shall be appointed by the
Board or the Executive Committee prior to each Annual Meeting of Shareholders,
to serve at the meeting or any adjournment thereof. In case any person appointed
fails to appear or act, the vacancy may be filled by appointment made by the
Board in advance of the meeting or at the meeting by the person presiding
thereat.
2.6 ORGANIZATION. At every meeting of shareholders, the Chief Executive Officer,
or in his absence, an officer of the Corporation designated by the Board or the
Chief Executive Officer, shall act as Chairman of the meeting. The Secretary, or
in his absence, one of the Vice Presidents not acting as Chairman of the
meeting, shall act as Secretary of the meeting. In case none of the officers
above designated to act as Chairman or Secretary of the meeting, respectively,
shall be present, a Chairman or a Secretary of the meeting, as the case may be,
shall be chosen by a majority of the votes cast at such meeting by the holders
of shares present in person, or represented by proxy and entitled to vote at the
meeting.
2.7 ORDER OF BUSINESS. The order of business at all meetings of shareholders
shall be as determined by the Chairman of the meeting, but the order of business
to be followed at any meeting at which a quorum is present may be changed by a
majority of the votes cast at such meeting by the holders of shares present in
person or represented by proxy and entitled to vote at the meeting.
ARTICLE 3
DIRECTORS
3.1 BOARD OF DIRECTORS. Except as otherwise provided in the Certificate of
Incorporation, the affairs of the Corporation shall be managed and its corporate
powers exercised by its Board. In addition to the powers expressly conferred by
the Bylaws, the Board may exercise all powers and perform all acts which are not
required, by the Blaws or the Certificate of Incorporation or by law, to be
exercised and performed by the shareholders.
3.2 NUMBER; QUALIFICATION; TERM OF OFFICE. Subject to Section 702(b) of the
Business Corporation Law, the number of Directors constituting the Entire Board
may be changed from time to time by action of the shareholders or the Board,
provided that such number shall not be less than twelve nor more than fifteen.
The Directors shall be divided into three classes as nearly equal in number as
may be, one class to be elected each year for a term of three years and until
their successors are elected and qualified. A Director attaining 75 years of age
shall cease to be a Director and that office shall be vacant. A director who was
an employee of the Corporation at the time of his election, shall vacate his
office when he ceases to be a full-time employee of the Company and shall not be
eligible for reelection. 3.3 ELECTION. Directors shall be elected by the
affirmative vote of the holders of a majority of the Company's outstanding
voting stock.
3.4 NEWLY CREATED DIRECTORSHIP AND VACANCIES. Newly created directorships
resulting from an increase in the number of Directors and vacancies occurring in
the Board for any reason, may be filled by vote of a majority of the Directors
then in office, although less than a quorum, at any meeting of the Board.
Directors elected by the Board shall hold office until the next meeting of
shareholders at which the election of directors is in the regular order of
business, and until their successors have been elected and qualified.
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<PAGE>
3.5 RULES AND REGULATIONS. The Board of Directors may adopt such Rules and
Regulations for the conduct of its meetings and the management of the affairs of
the Company as it may deem proper, not inconsistent with the laws of the State
of New York, or these Bylaws.
3.6 REGULAR MEETINGS. Regular meetings of the Board shall be held on the third
Tuesday of February, May, August and November, unless otherwise specified by the
Board, and may be held at such times and places as may be fixed from time to
time by the Board, and may be held without notice.
3.7 SPECIAL MEETINGS. Special meetings of the Board shall be held whenever
called by the Chief Executive Officer, and a special meeting shall be called by
the Chief Executive Officer or the Secretary at the written request of any seven
Directors. Notice of the time and place of each special meeting of the Board
shall, if mailed, be addressed to each Director at the address designated by him
for that purpose or, if none is designated, at his last known address at least
three days before the date on which the meeting is to be held; or such notice
shall be sent to each Director at such address by telegraph, or similar means of
communication, or be delivered to him personally, not later than the day before
the date on which such meeting is to be held.
3.8 WAIVERS OF NOTICE. Anything in these Bylaws or in any resolution adopted by
the Board to the contrary notwithstanding, notice of any meeting of the Board
need not be given to any Director who submits a signed waiver of such notice,
whether before or after such meeting, or who attends such meeting without
protesting, prior thereto or at its commencement, the lack of notice to him.
3.9 ORGANIZATION. At each meeting of the Board, the Chief Executive Officer of
the Corporation, or in the absence of the Chief Executive Officer, a Chairman
chosen by the majority of the Directors present, shall preside. The Secretary,
or in the absence of the Secretary, a Vice President, shall act as Secretary at
each meeting of the Board.
3.10 QUORUM AND VOTING. A majority of the Entire Board shall constitute a quorum
for the transaction of business or of any specified item of business at any
meeting of the Board. The affirmative vote of a majority of the Entire Board
shall be necessary for the transaction of any business or specified item of
business at any meeting of the Board, except that the affirmative vote of
two-thirds of the Entire Board shall be necessary to change, amend or repeal any
provision of the Certificate of Incorporation or Bylaws.
3.11 WRITTEN CONSENT OF DIRECTORS WITHOUT A MEETING. Any action required or
permitted to be taken by the Board may be taken without a meeting if all members
of the Board consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents thereto by the members of the
Board shall be filed with the minutes of the proceedings of the Board.
3.12 PARTICIPATION IN MEETING OF BOARD BY MEANS OF CONFERENCE TELEPHONE OR
SIMILAR COMMUNICATIONS EQUIPMENT. Any one or more members of the Board may
participate in a meeting of the Board by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
3.13 NOMINATIONS. Nominations for Directors, other than those made by or on
behalf of the existing management of the Corporation, shall be made in writing
and shall be delivered or mailed to the Board
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<PAGE>
not less than (14) days nor more than fifty (50) days prior to any meeting of
shareholders called for the election of Directors, provided, however, that if
less than twenty-one (21) days notice of the meeting is given to shareholders,
such nominations shall be mailed or delivered to the Board not later than the
close of business on the seventh (7th) day following the day on which the notice
of meeting was mailed.
ARTICLE 4
COMMITTEES
4.1 EXECUTIVE COMMITTEE. There shall be an Executive Committee consisting of not
more than nine Directors, of which four shall constitute a quorum. All but six
of the members of such Executive Committee shall be appointed by the Board of
Directors, shall be known as permanent members and shall hold office until the
organization of the Board after the annual election next succeeding their
respective appointments. Six places on the Executive Committee shall be filled
by the Directors, other than the permanent members of the Executive Committee,
in rotation according to alphabetical order, each panel of six rotating members
serving for one calendar month. In the event that any member of the Executive
Committee is unable to attend a meeting, the Chief Executive Officer may invite
any other Director to take his place for such meeting. The Executive Committee
shall possess and exercise all of the delegable powers of the Board, except when
the latter is in session. It shall keep a record of its proceedings, and the
same shall be subject to examination by the Board at any time. All acts done and
powers and authority conferred by the Executive Committee from time to time,
within the scope of its authority, shall be and be deemed to be and may be
certified as being the act and under the authority of the Board. Meetings of the
Executive Committee shall be held at such times and places and upon such, if
any, notice as the Executive Committee shall determine from time to time,
provided that a special meeting of the Executive Committee may be called by the
Chief Executive Officer, in his discretion, and shall be called by the Chief
Executive Officer or Secretary on the written request of any three members,
three days' notice of the time and place of which shall be given in the same
manner as notices of special meetings of the Board of Directors, except that if
such notice is given otherwise than by mail, it shall be sufficient if given at
any time on or before the day preceding the meeting.
4.2 OTHER COMMITTEES. The Board, by resolution adopted by a majority of the
Entire Board, may designate from among its members such other standing or
special committees as may seem necessary or desirable from time to time.
ARTICLE 5
OFFICERS
5.1 OFFICERS. The Board may elect or appoint a Chairman and shall elect or
appoint a President, either of which it shall designate the Chief Executive
Officer and shall elect or appoint one or more Vice Presidents and a Secretary,
and such other officers as it may from time to time determine. All officers
shall hold their offices, respectively, at the pleasure of the Board. The Board
may require any and all officers, clerks and employees to give a bond or other
security for the faithful performance of their duties, in such amount and with
such sureties as the Board may determine.
5.2 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Corporation
shall have general supervision over the business of the Corporation, subject,
however, to the control of the Board and of any duly authorized committee of
Directors. The Chief Executive Officer shall, if present, preside at all
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<PAGE>
meetings of the shareholders, at all meetings of the Board and shall supervise
the carrying out of policies adopted or approved by the Board. He may, with the
Secretary or any other officer of the Corporation, sign certificates for shares
of the Corporation. He may sign and execute, in the name of the Corporation,
deeds, mortgages, bonds, contracts and other instruments, subject to any
restrictions imposed by the Bylaws, Board or applicable laws, and, in general,
he shall perform all duties incident to the office of the Chief Executive
Officer and such other duties as from time to time may be assigned to him by the
Board.
5.3 CHAIRMAN AND PRESIDENT. Either the Chairman or the President shall be
designated the Chief Executive Officer of the Corporation. The one not so
designated shall perform such duties as from time to time may be assigned to him
by the Board or by the Chief Executive Officer.
5.4 OTHER OFFICERS. All the other officers of the Corporation shall perform all
duties incident to their respective offices, subject to the supervision and
direction of the Board, the Chief Executive Officer, and the Executive
Committee, and shall perform such other duties as may from time to time be
assigned them by the Board or by the Chief Executive Officer. The President and
any Vice President may also, with the Secretary, sign and execute, in the name
of the Corporation, deeds, mortgages, bonds, contracts and other instruments,
subject to any restrictions imposed by the Bylaws, Board or applicable laws.
ARTICLE 6
CONTRACTS, LOANS, ETC
6.1 EXECUTION OF CONTRACTS. The Board may authorize any officer, employee or
agent, in the name and on behalf of the Corporation, to enter into any contract
or execute and satisfy any instrument, and any such authority may be general or
confined to specific instances, or otherwise limited.
6.2 LOANS. The Chief Executive Officer or any other officer, employee or agent
authorized by the Board may effect loans and advances at any time for the
Corporation from any bank, trust company or other institution or from any firm,
corporation or individual, and for such loans and advances may make, execute and
deliver promissory notes, bonds or other certificates or evidences of
indebtedness of the Corporation, and when authorized so to do may pledge and
hypothecate or transfer any securities or other property of the Corporation as
security for any such loans or advances.
6.3 SIGNATURE AUTHORITY. The Chief Executive Officer shall from time to time
authorize the appropriate officers and employees of the Corporation who are to
sign, execute, acknowledge, verify and deliver or accept all agreements,
conveyances, transfers, obligations, authentications, certificates and other
documents and instruments and to affix the seal of the Corporation to any such
document or instrument and to cause the same to be attested by the Secretary or
Assistant Secretary.
ARTICLE 7
SHARES
7.1 STOCK CERTIFICATES. Certificates representing shares of the Corporation, in
such form as shall be determined from time to time by the Board, shall be signed
by the Chief Executive Officer, the Chairman, the President, or any Vice
President and the Secretary, and may be sealed with the seal of the
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<PAGE>
Corporation or a facsimile thereof.
7.2 TRANSFER OF SHARES. Transfers of shares shall be made only on the book of
the Corporation by the holder thereof or by his duly authorized attorney or a
transfer agent of the Corporation, and on surrender of the certificate or
certificates representing such shares properly endorsed for transfer and upon
payment of all necessary transfer taxes. Every certificate exchanged, returned
or surrendered to the Corporation shall be marked "Canceled", with the date of
cancellation, by the Secretary or the transfer agent of the Corporation. A
person in whose name shares shall stand on the books of the Corporation shall be
deemed the owner thereof to receive dividends, to vote as such owner and for all
other purposes as respects the Corporation. No transfer of shares shall be valid
as against the Corporation, its shareholders and creditors for any purpose,
except to render the transferee liable for the debts of the Corporation to the
extent provided by law, until such transfer shall have been entered on the books
of the Corporation by an entry showing from and to whom transferred.
7.3 CLOSING OF TRANSFER BOOKS. The Board may prescribe a period prior to any
shareholders' meeting or prior to the payment of any dividend, not exceeding
sixty days, during which no transfer of stock on the books of the Corporation
may be made and may fix a day as provided by the Business Corporation Law as of
which shareholders entitled to notice and to vote at such meeting shall be
determined.
7.4 TRANSFER AND REGISTRY AGENTS. The Corporation may from time to time maintain
one or more transfer offices or agents and registry officer or agents at such
place or places as may be determined from time to time by the Board.
7.5 LOST, DESTROYED, STOLEN AND MUTILATED CERTIFICATES. If the holder of any
shares shall notify the Corporation of any loss, destruction, theft or
mutilation of the certificate or certificates representing such shares, the
Corporation may issue a new certificate or certificates to replace the old, upon
such conditions as may be specified by the Board consistent with applicable
laws.
ARTICLE 8
EMERGENCIES
8.1 OPERATION DURING EMERGENCY. In the event of a state of emergency declared by
the President of the United States or the person performing his functions or by
the Governor of the State of New York or by the person performing his functions,
the officers and employees of the Corporation shall continue to conduct the
affairs of the Corporation under such guidance from the Directors as may be
available except as to matters which by statute require specific approval of the
Board of Directors and subject to conformance with any governmental directives
during the emergency.
8.2 OFFICERS PRO TEMPORE DURING EMERGENCY. The Board of Directors shall have
power, in the absence or disability of any officer, or upon the refusal of any
officer to act, to delegate and prescribe such officer's powers and duties to
any other officer for the time being.
8.3 DISASTER. In the event of a state of emergency resulting from disaster of
sufficient severity to prevent the conduct and management of the affairs and
business of the Corporation by the Directors and officers as contemplated by
these Bylaws, any two or more available members of the Executive
<PAGE>
Committee shall constitute a quorum of that committee for the full
conduct and management of the affairs and business of the Corporation,
notwithstanding any other provision of these Bylaws, and such committee
shall further be empowered to exercise all powers reserved to any and all
other committees of the Board established pursuant to Article 4 of these
Bylaws. In the event of the unavailability, at such time, of at least two
members of the Executive Committee, any three available Directors may
constitute themselves the Executive Committee pro tem for the full conduct
and management of the affairs and business of the Corporation in accordance
with the provisions of this Article, until such time as the incumbent Board
or a reconstituted Board is capable of assuming full conduct and management
of such affairs and business.
ARTICLE 9
SEAL
9.1 SEAL. The Board may adopt a corporate seal which shall be in the form of a
circle and shall bear the full name of the Corporation and the year and State of
its incorporation.
ARTICLE 10
FISCAL YEAR
10.1 FISCAL YEAR. The fiscal year of the Corporation shall be determined, and
may be changed, by resolution of the Board.
ARTICLE 11
VOTING OF SHARES HELD
11.1 VOTING OF SHARES HELD BY THE CORPORATION. Unless otherwise provided by
resolution of the Board and excepting the shares of any subsidiary company of
the Corporation which are to be voted in accordance with the resolution of the
Board, the Chief Executive Officer may from time to time appoint one or more
attorneys or agents of the Corporation, in the name and on behalf of the
Corporation, to cast the votes which the Corporation may be entitled to cast as
a shareholder or otherwise in any other corporation, any of whose shares or
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation and to consent in writing
to any action by any such other corporation, and may instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed on behalf of the Corporation
and under its corporate seal, or otherwise, such written proxies, consents,
waivers or other instruments as he may deem necessary or proper in the premises;
or the Chief Executive Officer may himself attend any meeting of the holders of
the shares or other securities of any such other corporation and thereat vote or
exercise any or all other powers of the Corporation as the holder of such shares
or other securities of such other corporation.
-35-
<PAGE>
ARTICLE 12
AMENDMENTS TO BYLAWS
12.1 AMENDMENTS. The Bylaws or any of them may be altered, amended, supplemented
or repealed, or new Bylaws may be adopted by a vote of the holders of at least
two-thirds of the shares entitled to vote at any regular or special meeting of
shareholders, or by a vote of at least two- thirds of the Entire Board of
Directors at any regular or special meeting thereof, provided notice of such
proposed changes has been set forth in the notice of meeting of shareholders or
Directors.
ARTICLE 13
INDEMNIFICATION OF DIRECTORS AND OFFICERS
13.1 In addition to authorization provided by law, the Directors are authorized,
by resolution, to provide indemnification or to advance expenses to any Officer
or Director seeking such indemnifica-tion or the advancement of such expenses.
They may also, by resolution, authorize agreements providing for
indemnification.
13.2 The indemnification and advancement authorized by this Article shall be
subject to each of the conditions or limitations set forth in the succeeding
subdivisions(s) of this Section.
13.2.1 No indemnification may be made to or on behalf of any Director or
Officer if a judgment or other final adjudication adverse to the Officer
or Director establishes that his acts were committed in bad faith or
were the result of an act of deliberate dishonesty and were material to
the cause of action so adjudicated, or that he personally gained in fact
a financial profit or other advantage to which he was not entitled.
13.3 Officers and Directors of any wholly owned subsidiary serve at the request
of the Corporation for the purpose of this Article.
13.4 The Directors may by resolution, authorize the Corporation's Officers and
Directors to serve as a Director or Officer of any other corporation of any type
or kind, domestic or foreign, of any partnership, joint venture, trust, employee
benefit plan or other enterprise for the purpose of the indemnification
provisions of this Article. The failure to enact such a resolution shall not, in
itself, create a presumption that such service was not authorized.
-36-
<PAGE>
I, William F. Terry, Secretary of TrustCo Bank Corp NY, Schenectady, New York,
hereby certify that the foregoing is a complete, true and correct copy of the
Bylaws of TrustCo Bank Corp NY, and that the same are in full force and effect
at this date.
/s/ William F. Terry
Secretary
August 18, 1998
Date
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<PAGE>
Exhibit
10(a)
AMENDMENT NO. 1
TO
SECOND RESTATEMENT OF
TRUSTCO BANK SUPPLEMENTAL RETIREMENT PLAN
WHEREAS, Trustco Bank, National Association, a national bank duly
organized and existing under the laws of the United States (hereinafter referred
to as the "Corporation") maintains the Trustco Bank Supplemental Retirement Plan
(hereinafter referred to as the "Plan"); and
WHEREAS, the Corporation desires to amend said Plan effective as of
January 1, 1998; NOW, THEREFORE, the Corporation does hereby amend the
Plan effective as of
January 1, 1998, so that it will read as follows:
I.
Section 1.1 of the Plan is hereby deleted in its entirety and the following is
substituted in lieu thereof:
"Section 1.1. "Actuarial Equivalent" means an amount or a benefit, as
the case may be, of equivalent value as calculated below.
1
A. Except as otherwise provided below, the
determination of Actuarial Equivalent shall be
based upon the following actuarial assumptions:
the UP-1984 Mortality Table, set back two years,
and interest at the rate of 7 1/2% per annum
compounded annually.
B. Prior to January 1, 1999, the present value of any benefit for
purposes of determining the amount of a lump sum distribution will be equal
to the present value determined using the "Applicable Interest Rate" if
such rate results in larger present value than calculated using a rate of 7
1/2%. The Applicable Interest Rate is the rate or rates that would be used
by the Pension Benefit Guaranty Corporation for the purposes of determining
the present value of a lump sum distribution on termination of a qualified
retirement plan (the "PBGC Rate"), determined as of the first day of the
Plan Year in which the distribution is made.
C. On or after January 1, 1999, the present value of any benefit for
purposes of determining the amount of a lump sum distribution will be equal
to the present value determined using the 1983 Group Annuitant
-38-
<PAGE>
Mortality
Table weighted 50% Males, 50% Females as set forth in Revenue Ruling 95-6
and the interest rate on 30-year treasury securities as specified by the
Commissioner of the Internal Revenue Service for the month of November of
the Plan Year preceding the Plan Year in which the distribution is made if
such rate results in larger present value than calculated using the
assumptions set forth in paragraph A above.
1
In the event the actuarial assumptions are amended, the
Actuarial Equivalent of a benefit on or after the change, with respect
to a Participant on the date of change, shall be determined as the
greater of (a) the Actuarial Equivalent of the Accrued Benefit as of
the date of change computed on the old basis, or (b) the Actuarial
Equivalent of the Accrued Benefit as of the date of determination
computed on the new basis."
II.
The last paragraph of Section 3.3(b)(2) is hereby deleted in its
entirety and the following is substituted in lieu thereof:
"A portion of the Account Balance Increment constitutes
interest which is determined by using the interest rate on 30-year
Treasury securities as specified by the Commissioner of the Internal
Revenue Service for the month of November of the Plan Year preceding
the applicable Plan Year."
III.
Paragraph (a) of Section 3.4 is hereby deleted in its entirety and the
following is substituted in lieu thereof:
"(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 interest rate on 30-year Treasury securities as specified
by the Commissioner of the Internal Revenue Service for the
month of November of the Plan Year preceding the applicable
Plan Year, plus"
IV.
Section 4.3 of the Plan is deleted in its entirety and the following is
substituted in lieu thereof:
"SECTION 4.3. The Supplemental Account Balance shall be paid
to the Participant or his Beneficiary in a single lump sum no later
than January 31 of the Plan Year following the year of the
Participant's termination of employment for any reason other than
retirement on or after Normal Retirement Date. In the event of a
Participant's retirement on or after Normal Retirement Date, the
Supplemental Account Balance shall commence to be paid to a Participant
or his
-39-
<PAGE>
Beneficiary at such time as benefits become payable to the Participant
under the Retirement Plan and such benefits will be paid in the form of a
single lump sum payment or in a series of installments over a five year
period, as elected by the Participant or his Beneficiary."
V.
Section 4.5 is hereby deleted from the Plan.
IN WITNESS WHEREOF, the Corporation has caused this Amendment No.1 to
be executed by its duly authorized officer this 15th day of September 1998.
TRUSTCO BANK, NATIONAL ASSOCIATION
/s/ William F. Terry /s/ Robert A. McCormick
- --------------------- By:------------------------
Secretary President
-40-
<PAGE>
Exhibit 10(b)
AMENDMENT NO. 2
TO
RESTATEMENT OF
TRUSTCO BANK EXECUTIVE OFFICER INCENTIVE PLAN
WHEREAS, Trustco Bank, National Association (the "Corporation"), maintains the
Trustco Bank ExecutiveOfficer Incentive Plan (the "Plan"); and
WHEREAS, the Corporation desires to amend said Plan, effective as of January 1,
1998;
NOW, THEREFORE, the Corporation does hereby amend the Plan, effective as of
January 1, 1998 so that it will read as follows:
I.
Section 3.3 of the Plan is deleted in its entirety and the following
is substituted in lieu thereof: "Section 3.3. Except as otherwise
provided in Section 3.4 or Article IV herein, 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."
II.
The following new Section 3.4 is added after Section 3.3 of the Plan:
"Section 3.4. Notwithstanding the provisions of Section 3.3
and Article IV of the Plan, payment of an Incentive Award will
automatically be deferred to the extent that such payment, together
with participant's other compensation for the calendar year as defined
in Section 162(m), is expected to exceed the limitation on deductible
compensation set forth in Section 162(m) of the Code. The date of the
initial deferral will be the date the Incentive Award would have been
paid to the Participant, but for the provisions of this Section 3.4.
Such deferred amount will be credited to a separate subaccount of the
Participant's Deferred Compensation Account and will be credited with
interest as provided in Section 4.3 of the Plan. Any amount deferred
pursuant to this Section 3.4 will become payable in the earliest
calendar year in which the payment of such deferred amount (and
interest thereon), together with participants other compensation for
the calendar year as defined in Section 162(m), is not expected to
exceed the Section 162(m) limitation; provided, however, that such
determination will be made prior to the payment of an Incentive Award
in the determination year pursuant to Section 3.3. Deferred Incentive
Awards, and earnings thereon, which become payable under this Section
3.4 will be paid in the order such Incentive Awards were deferred."
-41-
<PAGE>
III.
The following new Section 3.5 is hereby added to the Plan after Section
3.4:
"Section 3.5. (a) In the event the federal, state or local tax
rates in effect on the date a deferred Incentive Award is paid to a
Participant exceed the federal, state or local tax rates in effect on
the date the Incentive Award was initially deferred pursuant to Section
3.4, the Participant shall be entitled to receive an additional lump
sum cash payment sufficient to place the Participant in the same
after-tax position if payment of such deferred Incentive Award (and
earnings thereon) had been subject to the federal, state and local tax
rates that were in effect on the date of the initial deferral. Such
lump sum payment will be made at the same time the deferred Incentive
Award is paid to the Participant.
(b) In the event the federal, state or local tax rates in
effect on the date a deferred Incentive Award is paid to a Participant
are lower than the federal, state or local tax rates in effect on the
date the Incentive Award was initially deferred pursuant to Section
3.4, the Participant's Deferred Compensation Account will be reduced by
an amount necessary to place the Participant in the same after-tax
position if payment of such deferred Incentive Award (and earnings
thereon) had been subject to the federal, state and local tax rates
that were in effect on the date of the initial deferral. Such reduction
will be made immediately prior to the time the deferred Incentive Award
is paid to the Participant."
IV.
The following new Section 5.3 is hereby added after Section 5.2 of the
Plan:
"Section 5.3. No inservice withdrawals are permitted except
that the Committee or its designate, in its sole and absolute
discretion, may permit withdrawals by a Participant of any amount from
such Participant's Deferred Compensation Account if the Committee or
its designate determines, in its discretion, that such funds are needed
by the Participant due to serious and immediate financial hardship from
an unforeseeable emergency. Serious and immediate financial hardship to
the Participant must result from a sudden and unexpected illness or
accident of the Participant or a dependent, loss of property due to
casualty, or other similar extraordinary and unforeseeable
circumstances arising from events beyond the control of the
Participant. A distribution based upon such financial hardship cannot
exceed the amount necessary to meet such immediate financial need,
including federal, state and local taxes on the distribution. In
addition, the Committee or its designate may impose suspension of a
Participant's deferrals into the Plan or other penalties as a condition
of such withdrawals."
IN WITNESS WHEREOF, the Corporation has caused this Amendment No. 2 to
be executed by its duly authorized officer this 15th day of September, 1998.
TRUSTCO BANK, NATIONAL ASSOCIATION
/s/ William F. Terry /s/ Robert A. McCormick
- --------------------- By:----------------------------
Secretary President
-42-
<PAGE>
Exhibit 10(c)
AMENDMENT NO. 3
TO
RESTATED AGREEMENT FOR SUPPLEMENTAL RETIREMENT BENEFITS
FOR ROBERT A. McCORMICK
WHEREAS, TrustCo Bank Corp NY, a New York corporation (hereinafter
referred to as "TrustCo"), Trustco Bank, National Association, a national bank
duly organized and existing under the laws of the United States (hereinafter
referred to as the "Corporation"), and Robert A. McCormick (hereinafter referred
to as the "Executive") entered into a Restated Agreement for Supplemental
Retirement Benefits, dated as of January 1, 1994 (hereinafter referred to as the
"Agreement"); and
WHEREAS, TrustCo, the Corporation and the Executive desire to amend the
Agreement, effective as of January 1, 1998.
NOW, THEREFORE, the Agreement is hereby amended, effective as of
January 1, 1998, so that it will read as follows:
I.
Section 1.1 of the Agreement is hereby deleted in its entirety and the following
is substituted in lieu thereof:
"Section 1.1. "Actuarial Equivalent" means an amount or a benefit, as the case
may be, of equivalent value as calculated below.
A. Except as otherwise provided below, the
determination of Actuarial Equivalent shall be
based upon the following actuarial assumptions:
the UP-1984 Mortality Table, set back two years,
and interest at the rate of 7 1/2% per annum
compounded annually.
B. Prior to January 1, 1999, the present value of any benefit for
purposes of determining the amount of a lump sum distribution will be
equal to the present value determined using the "Applicable Interest
Rate" if such rate results in larger present value than calculated
using a rate of 7 1/2%. The Applicable Interest Rate is the rate or
rates that would be used by the Pension Benefit Guaranty Corporation
for the purposes of determining the present value of a lump sum
distribution on termination of a qualified retirement plan (the "PBGC
Rate"), determined as of the first day of the calendar year in which
the distribution is made.
1
C. On or after January 1, 1999, the present value of any benefit for
purposes of determining the amount of a lump sum distribution will be
equal to
-43-
<PAGE>
the present value determined using the 1983 Group Annuitant
Mortality Table weighted 50% Males, 50% Females as set forth in
Revenue Ruling 95-6 and the interest rate on 30-year treasury
securities as specified by the Commissioner of the Internal Revenue
Service for the month of November of the calendar year preceding the
calendar year in which the distribution is made if such rate results
in larger present value than calculated using the assumptions set
forth in paragraph A above.
1
In the event the actuarial assumptions are amended, the
Actuarial Equivalent of a benefit on or after the change, with respect
to the Executive on the date of change, shall be determined as the
greater of (a) the Actuarial Equivalent of the benefit as of the date
of change computed on the old basis, or (b) the Actuarial Equivalent of
the benefit as of the date of determination computed on the new basis."
II.
The last paragraph of Section 2.3(b)(2) is hereby deleted in its
entirety and the following is substituted in lieu thereof:
"A portion of the Account Balance Increment constitutes
interest which is determined by using the interest rate on 30-year
Treasury securities as specified by the Commissioner of the Internal
Revenue Service for the month of November of the Plan Year preceding
the applicable Plan Year."
III.
Paragraph (a) of Section 2.4 is hereby deleted in its entirety and the
following is substituted in lieuthereof:
"SECTION 2.4 Determination of Supplemental Account Balance after Normal
Retirement Date: If the Executive remains in the employment of the Corporation
beyond his Normal Retirement Date, his Account Balance Increment for each
Determination Year subsequent to his Normal Retirement Date is equal to:
1
(a) The Executive's Earnings for the Determination Year
multiplied by a percentage. The percentage is equal
to:
(i) The average Account Balance Increment
credited to the Executive's Supplemental
Account Balance for the Determination Year
in which occurs the Executive's Normal
Retirement Date and the immediately
preceding two Determination Years; divided
by
(ii) The Executive's average Earnings for the
Determination Year in which occurs the
Executive's Normal Retirement Date and the
immediately preceding two
-44-
<PAGE>
Determination Years.
For the Valuation Date immediately following the Executive's Normal
Retirement date, his Account Balance Increment shall be the greater of
the amount determined under Section 2.3 or the amount determined under
this Section 2.4"
IN WITNESS WHEREOF, the Corporation has caused this Amendment No. 3 to
be executed by its duly authorized officer this 15th day of September, 1998.
TRUSTCO BANK CORP NY
/s/ William F. Terry
By:--------------------------
Title: Secretary
TRUSTCO BANK, NATIONAL ASSOCIATION
/s/ William F. Terry
By:--------------------------
Title: Secretary
Executive
-45-
<PAGE>
Item 4. Submission of Matters to Vote of Security Holders -- None
Item 5. Other Information
The Securities and Exchange Commission ("SEC") recently adopted
amendments to its rules under the Securities Exchange Act of 1934 (the "Exchange
Act") regarding the submission by shareholders of proposals intended to be
presented at meetings of shareholders. These amendments, which became effective
on June 29, 1998, included provisions authorizing companies to exercise
discretionary voting authority with respect to shareholder proposals for which a
company did not receive notice within a specified time period prior to a meeting
of its shareholders or that otherwise did not satisfy certain requirements
specified in such amendments.
Pursuant to these amendments, TrustCo shareholders are hereby notified
that any shareholder proposal not included in TrustCo's proxy statement for its
1999 Annual Meeting of Shareholders will be considered untimely for purposes of
the SEC rules governing the submission of shareholder proposals for
consideration at shareholder meetings if notice of the proposal is not received
by TrustCo on or before February 22, 1999. Management proxies will be authorized
to exercise discretionary voting authority with respect to any shareholder
proposal not included in TrustCo's Proxy Statement for its 1999 Annual Meeting
unless (a) TrustCo receives notice of such proposal on or before February 22,
1999, and (b) the additional conditions set forth in SEC Rule 14a-4(c) (2) (i) -
(iii) under the Exchange Act are satisfied.
-46-
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 41,941
<INT-BEARING-DEPOSITS> 68
<FED-FUNDS-SOLD> 437,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 659,213
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,322,963
<ALLOWANCE> 54,325
<TOTAL-ASSETS> 2,488,733
<DEPOSITS> 2,101,808
<SHORT-TERM> 158,766
<LIABILITIES-OTHER> 42,771
<LONG-TERM> 0
0
0
<COMMON> 27,931
<OTHER-SE> 157,457
<TOTAL-LIABILITIES-AND-EQUITY> 2,488,733
<INTEREST-LOAN> 83,413
<INTEREST-INVEST> 30,121
<INTEREST-OTHER> 17,857
<INTEREST-TOTAL> 131,391
<INTEREST-DEPOSIT> 61,689
<INTEREST-EXPENSE> 67,018
<INTEREST-INCOME-NET> 64,373
<LOAN-LOSSES> 3,380
<SECURITIES-GAINS> 271
<EXPENSE-OTHER> 34,585
<INCOME-PRETAX> 41,024
<INCOME-PRE-EXTRAORDINARY> 41,024
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,253
<EPS-PRIMARY> <F1> 0.98
<EPS-DILUTED> <F2> 0.94
<YIELD-ACTUAL> 3.75
<LOANS-NON> 6,225
<LOANS-PAST> 567
<LOANS-TROUBLED> 3,623
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 53,455
<CHARGE-OFFS> 4,798
<RECOVERIES> 2,288
<ALLOWANCE-CLOSE> 54,325
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 54,325<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>
