FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
(Fee Required) For the Fiscal Year Ended December 31, 1997
Or
[ ] Transition Report Pursuant to
Section 13 or 15(d) of the
Securities Exchange Act of 1934
(No Fee Required)
For the transition period from ____________________ to ____________________
Commission file number 0-10592
TRUSTCO BANK CORP NY
(Exact name of registrant as specified in its charter)
NEW YORK 14-1630287
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer 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:
Title of each class Name of exchange on which registered
None None
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock, $1.00 Par Value
(Title of class)
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes.(x) No.( )
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K.[X]
Indicate the number of shares outstanding of each of the
registrant's classes of common stock:
Number of Shares Outstanding
Class of Common Stock as of March 17, 1998
$1 Par Value 23,332,727
The aggregate market value of registrant's common stock (based upon the closing
price on March 17, 1998) held by non-affiliates was approximately $644,566,583.
Documents Incorporated by Reference
(1) Portions of registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1997 (Part I and Part II).
(2) Portions of registrant's Proxy Statement filed for its Annual Meeting of
Shareholders to be held May 18, 1998 (Part III).
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INDEX
Description Page
PART I
Item 1 Business 1
Item 2 Properties 5
Item 3 Legal Proceedings 5
Item 4 Submission of Matters to a Vote of Security 5
Holders
PART II
Item 5 Market for the Registrant's Common Equity and 7
Related Stockholder Matters
Item 6 Selected Financial Data 7
Item 7 Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
Item 7A Quantitative and Qualitative Disclosures about 7
Market Risk
Item 8 Financial Statements and Supplementary Data 7
Item 9 Changes in and Disagreements with Accountants 7
On Accounting and Financial Disclosure
PART III
Item 10 Directors and Executive Officers of Registrant 7
Item 11 Executive Compensation 8
Item 12 Security Ownership of Certain Beneficial Owners 8
And Management
Item 13 Certain Relationships and Related Transactions 8
PART IV
Item 14 Exhibits, Financial Statement Schedules, and 8
Reports on Form 8-K
EXHIBITS INDEX 15
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PART I
Item 1. Business
General
TrustCo Bank Corp NY ("TrustCo") is a one-bank holding company having its
principal place of business at 320 State Street, Schenectady, New York 12305.
TrustCo was incorporated under the laws of New York in 1981 to acquire all of
the outstanding stock of Trustco Bank, National Association, formerly known as
Trustco Bank New York, and prior to that The Schenectady Trust Company.
Following receipt of necessary regulatory approvals, TrustCo commenced business
on July 1, 1982. In 1991, TrustCo acquired, for a combination of cash and
TrustCo common stock, Home & City Savings Bank ("Home & City") located in
Albany, New York. At the time of the acquisition, Home & City operated 16
branches, and had total assets of approximately $ 848 million, deposits of $ 750
million and shareholders' equity of $ 93 million. Through policy and practice,
TrustCo continues to emphasize that it is an equal opportunity employer. There
were 459 full-time equivalent employees at year-end 1997. TrustCo had 7,309
shareholders of record as of December 31, 1997, and the closing price of the
TrustCo common stock at that date was $27.25.
Bank Subsidiary
On November 16, 1994, TrustCo initiated the process to convert its banking
subsidiary, Trustco Bank New York, a New York state chartered trust company, to
a national banking association operating under the name Trustco Bank, National
Association (the "Bank"). The conversion was undertaken to minimize duplicative
federal/state compliance issues. The conversion became effective on February 1,
1995. The Bank is a national banking association engaged in a general commercial
banking business serving individuals, partnerships, corporations, municipalities
and governments of New York. The Bank operates 29 automatic teller machines and
51 banking offices in Albany, Columbia, Greene, Rensselaer, Saratoga,
Schenectady, Warren, and Washington counties of New York State. The largest part
of such business consists of accepting deposits and making loans and
investments. The Bank provides a wide range of both personal and business
banking services. The Bank is a member of the Federal Reserve System and its
deposits are insured by the Federal Deposit Insurance Corporation to the extent
permitted by law. An operating subsidiary of the Bank, Trustco Realty Corp.,
holds certain mortgage assets which are serviced by the Bank. The Bank accounted
for substantially all of TrustCo's 1997 consolidated net income and average
assets.
The trust department of the Bank serves as executor of estates and trustee of
personal trusts, provides estate planning and related advice, provides custodial
services and acts as trustee for various types of employee benefit plans and
corporate pension and profit sharing trusts. The aggregate market value of the
assets under trust, custody or management was approximately $1.07 billion as of
December 31, 1997.
The daily operations of the Bank remain the responsibility of its Board of
Directors and
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officers, subject to the overall supervision by TrustCo. TrustCo derives most
of its income from dividends paid to it by its subsidiary Bank. The accounts of
the Bank are included in TrustCo's consolidated financial statements.
ORE Subsidiary
During 1993, TrustCo created ORE Subsidiary Corp., a New York corporation, to
hold and manage certain foreclosed properties acquired by the Bank. The accounts
of this subsidiary are included in TrustCo's consolidated financial statements.
Competition
TrustCo faces strong competition in its market areas, both in attracting
deposits and making loans. The Bank's most direct competition for deposits,
historically, has come from other commercial banks, savings associations and
credit unions, which are located, or have branches in those areas. The Bank also
faces competition for deposits from national brokerage houses, short-term money
market funds, and other corporate and government securities funds. Factors
affecting the acquisition of deposits include pricing, office locations and
hours of operation, the variety of deposit accounts offered, and the quality of
customer service provided. Competition for loans has been especially keen during
the last five years. Commercial banks, local thrift institutions, traditional
mortgage brokers affiliated with local offices, and nationally franchised real
estate brokers, are all active and aggressive competitors. The Bank competes in
the environment by providing a full range of financial services based on a
tradition of financial strength and integrity dating from its inception. It
competes for loans, principally through the interest rates and loan fees it
charges, and the efficiency and quality of services it provides to borrowers.
TrustCo operates in a number of communities where the competition ranges from
other locally based commercial and savings banks, to branches of the largest
financial institutions in the United States. In the Capital District area of New
York State, TrustCo's principal competitors are local operations of super
regional banks, branch offices of money center banks, and locally based
commercial and savings banks. The Bank is the largest commercial bank
headquartered in the Capital District area.
Supervision and Regulation
Banking is a highly regulated industry, with numerous federal and state laws and
regulations governing the organization and operation of banks and their
affiliates. As a registered bank holding company under the Bank Holding Company
Act of 1956, as amended (the "Act"), TrustCo is regulated and examined by the
Board of Governors of the Federal Reserve System (the "Reserve Board"). The Act
requires TrustCo to obtain prior Reserve Board approval for bank and non-bank
acquisitions and restricts the business operations permitted to TrustCo. The
Bank, as a national banking association, is subject to regulation and
examination by the Office of the Comptroller of the Currency ("OCC"). Because
the Federal Deposit Insurance Corporation ("FDIC") provides deposit insurance to
the Bank, the Bank is also subject to its supervision and regulation even though
the FDIC is not its primary federal regulator. Virtually all aspects of
TrustCo's and the Bank's
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business are subject to regulation and examination by the Reserve Board, the
FDIC and the OCC.
Most of TrustCo's revenues consist of cash dividends paid to TrustCo by its
subsidiary Bank, payment of which is subject to various regulatory limitations.
(Note 1 of the consolidated financial statements contained in TrustCo's Annual
Report to Shareholders for the year ended December 31, 1997, which appears on
pages 33 and 34 thereof and contains information concerning restrictions of
TrustCo's ability to pay dividends, is hereby incorporated by reference.) In
addition, the FDIC and the Reserve Board have established guidelines with
respect to the maintenance of appropriate levels of capital by a bank holding
company under their jurisdictions. Compliance with the standards set forth in
such guidelines could also limit the amount of dividends which a bank or a bank
holding company may pay to its shareholders. The banking industry is also
affected by the monetary and fiscal policies of the federal government,
including the Reserve Board, which exerts considerable influence over the cost
and availability of funds obtained for lending and investing.
See Note 13 of the consolidated financial statements contained in TrustCo's
Annual Report to Shareholders for the year ended December 31, 1997, which
appears on page 43 thereof and contains information concerning regulatory
capital requirements.
Recent Legislation
In September 1994, the Reigle-Neal Interstate Banking and Branching Efficiency
Act of 1994 was enacted. As of September 29, 1995, adequately capitalized and
managed bank holding companies are permitted to acquire banks in any state
subject to state deposit caps and a 10% nationwide deposit cap. In addition,
this law provides for full interstate branching by bank merger commencing on
June 1, 1997. States were authorized to "opt-out" of this branching provision
prior to the effective date, and, alternatively, states were authorized to
"opt-in" earlier than June 1, 1997. New York "opted-in" prior to June 1, 1997,
by allowing out-of-state banks with reciprocal branching laws to branch in New
York through acquisition.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996 was signed
into law on September 30, 1996. This law streamlined the non-banking activities
application process for well-capitalized and well-managed bank holding
companies. Under this law, qualified bank holding companies may commence a
regulatorily approved non-banking activity without prior notice to the Reserve
Board although written notice is required within ten days after commencing the
activity. Also under this law, the prior notice period is reduced to twelve days
in the event of any non-banking acquisition or share purchase, assuming the size
of the acquisition does not exceed 10% of risk-weighted assets of the acquiring
bank holding company and the consideration does not exceed 15% of Tier 1
capital. This law also provides for the recapitalization of the Savings
Association Insurance Fund which generally insures the deposits of thrift
institutions, in order to bring it into parity with the Bank Insurance Fund.
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The references in this section to various aspects of supervision and regulation
are brief summaries which do not purport to be complete and which are qualified
in their entirety by reference to applicable laws, rules and regulations. Any
change in applicable laws or regulations may have a material effect on the
business and prospects of TrustCo. The operations of TrustCo may be affected by
legislative changes and by the policies of various regulatory authorities.
TrustCo is unable to predict the nature or the extent of the effects on its
business and earnings that fiscal or monetary policies, economic controls or new
federal or state legislation may have in the future. Regulation by the federal
and state banking authorities is designed to protect depositors rather than
shareholders.
Foreign Operations
Neither TrustCo nor the Bank engage in material operations in foreign countries
or have any outstanding loans to foreign debtors.
Statistical Information Analysis
The "Management's Discussion and Analysis" on pages 6 through 24 of TrustCo's
Annual Report to Shareholders for the year ended December 31, 1997, which
contains a presentation and discussion of statistical data relating to TrustCo,
is hereby incorporated by reference. This information should not be construed to
imply any conclusion on the part of the management of TrustCo that the results,
causes or trends indicated therein will continue in the future. The nature and
effects of governmental monetary policy, supervision and regulation, future
legislation, inflation and other economic conditions and many other factors
which affect interest rates, investments, loans, deposits and other aspects of
TrustCo's operations are extremely complex and could make historical operations,
earnings, assets and liabilities not indicative of what may occur in the future.
Forward-Looking Statements
Statements included in the Management's Discussion and Analysis of Operations of
TrustCo's Annual Report to Shareholders for the year ended December 31, 1997,
and in future filings by TrustCo with the Securities and Exchange Commission, in
TrustCo's press releases and in oral statements made with the approval of an
authorized executive officer which are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 and are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. TrustCo
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The following
important factors, among others, in some cases have affected and in the future
could affect TrustCo's actual results and could cause TrustCo's actual financial
performance to differ materially from that expressed in any forward-looking
statement: (i) credit risk; (ii) interest rate risk; (iii) competition; (iv)
changes in the regulatory environment; and (v) changes in general business and
economic trends. The foregoing list should not be construed as exhaustive and
the Company disclaims any obligation subsequently to revise any forward-looking
statements
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to reflect events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events.
Item 2. Properties
TrustCo's executive offices are located at 320 State Street, Schenectady, New
York, 12305. The Bank operates 51 offices, of which 20 are owned and 31 are
leased from others. The asset value of these properties, when considered in the
aggregate, is not material to the operation of TrustCo.
In the opinion of management, the physical properties of TrustCo and the Bank
are suitable and adequate and are being fully utilized.
Item 3. Legal Proceedings
The nature of TrustCo's business generates a certain amount of litigation
against TrustCo and its subsidiaries involving matters arising in the ordinary
course of business. In the opinion of management of TrustCo, there are no
proceedings pending to which TrustCo or either of its subsidiaries is a party,
or of which its property is the subject which, if determined adversely to
TrustCo or such subsidiaries, would be material in relation to TrustCo's
consolidated stockholders' equity and financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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Executive Officers of TrustCo
The following is a list of the names and ages of the executive officers
of TrustCo and their business history for the past five years:
Year First
Name, Age and Principal Occupations Became
Position Or Employment Since Executive
With Trustco January 1, 1992 of TrustCo
Robert A. McCormick, 61, President and Chief Executive Officer, 1984
President and TrustCo Bank Corp NY. President and
Chief Executive Officer Chief Executive Officer, Trustco Bank,
National Association
Robert T. Cushing, 42, Vice President and Chief Financial 1994
Vice President and Officer, TrustCo Bank Corp NY since
Chief Financial Officer 1994. Senior Vice President and
Chief Financial Officer, Trustco Bank,
National Association since 1994. Partner,
KPMG Peat Marwick LLP (1987-1994).
Nancy A. McNamara, 48, Vice President, TrustCo Bank Corp NY since 1992
Vice President 1992. Senior Vice President, Trustco Bank,
National Association since 1988.
William F. Terry, 56, Secretary, TrustCo Bank Corp NY since 1990
Secretary 1990. Senior Vice President, Trustco Bank,
National Association since 1987. Secretary,
Trustco Bank, National Association since 1990.
Ralph A. Pidgeon, 55, Vice President and Assistant Secretary, 1995
Vice President and TrustCo Bank Corp NY since 1995. Senior
Assistant Secretary Vice President, Trustco Bank, National
Association since 1978.
There are no family relationships among any of the named persons. Each executive
officer is elected by the Board of Directors to serve until election of his or
her successor.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The inside front cover and page 48 of TrustCo's Annual Report to Shareholders
for the year ended December 31, 1997, are incorporated herein by reference. The
closing price for the Corporation's common stock on March 17, 1998, was $27.625.
Item 6. Selected Financial Data
Page 24 of TrustCo's Annual Report to Shareholders for the year ended December
31, 1997, is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations Pages 6 through 24 of TrustCo's Annual Report to Shareholders for
the year ended December 31, 1997, are incorporated herein by reference.
Item 7A.Quantitative and Qualitative Disclosures about Market Risk
Pages 18 through 20 of TrustCo's Annual Report to Shareholders for the year
ended December 31, 1997, are incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements, together with the report thereon of KPMG Peat Marwick
LLP on pages 27 through 44 of TrustCo's Annual Report to Shareholders for the
year ended December 31, 1997, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of Registrant
The information under the captions "Information on TrustCo Directors and
Nominees" and "Information on TrustCo Executive Officers Not Listed Above" on
pages 3 through 5, and Section 16(a)"Beneficial Ownership Reporting Compliance"
on page 26, of TrustCo's Proxy Statement filed for its Annual Meeting of
Shareholders to be held May 18, 1998, is incorporated herein by reference. The
required information regarding TrustCo's executive officers is contained in PART
I in the item captioned "Executive Officers of TrustCo."
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Item 11. Executive Compensation
The information under the captions "TrustCo and Trustco Bank Executive Officer
Compensation" and "TrustCo Retirement Plans" on pages 7 through 12 of TrustCo's
Proxy Statement filed for its Annual Meeting of Shareholders to be held May 18,
1998, is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information under the captions "Information on TrustCo Directors and
Nominees," and "Information on TrustCo Executive Officers Not Listed Above," on
pages 3 through 5 and "Ownership Of TrustCo Common Stock By Certain Beneficial
Owners" on page 25 of TrustCo's Proxy Statement filed for its Annual Meeting of
Shareholders to be held May 18, 1998, is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information under the caption "Transactions with TrustCo and Trustco Bank
Directors, Executive Officers and Associates" on page 25 of TrustCo's Proxy
Statement filed for its Annual Meeting of Shareholders to be held May 18, 1998,
is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The following financial statements of TrustCo and its consolidated subsidiaries,
and the accountants' report thereon are incorporated herein by reference in item
8.
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Consolidated Statements of Condition -- December 31, 1997 and 1996.
Consolidated Statements of Income -- Years Ended December 31, 1997,
1996, and 1995.
Consolidated Statements of Changes in Shareholders' Equity -- Years
Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows -- Years Ended December 31, 1997,
1996 and 1995.
Notes to Consolidated Financial Statements.
Financial Statement Schedules
Not Applicable. All required schedules for TrustCo and its subsidiaries
have been included in the consolidated financial statements or related notes
thereto.
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The following exhibits are incorporated herein by reference:*
Reg S-K
Exhibit No. Description
3(i)a Amended and Restated Certificate of Incorporation of TrustCo Bank
Corp NY, dated July 27, 1993.
3(i)b Certificate of Amendment of the Certificate of Incorporation
of TrustCo Bank Corp NY, dated May 28, 1996.
3(i)c Certificate of Amendment of the Certificate of Incorporation
of TrustCo Bank Corp NY, dated May 19, 1997.
10(a) Employment Agreement dated January 1, 1992 and, Amendment No.
1 dated November 16, 1993, among TrustCo, the Bank and Robert
A. McCormick. Amendment No. 2 dated September 1, 1994,
Amendment No. 3 dated February 13, 1995, Amendment No. 4 dated
December 1, 1995, including Schedule A, and Amendment No. 5,
dated May 1, 1997.
10(b) Employment Agreement dated June 21, 1994, Amendment No. 1
dated February 14, 1995, including Schedule A, and Amendment
No. 2, dated May 1, 1997, among TrustCo, the Bank and Robert
T. Cushing.
10(c) Restated Employment Agreement dated June 21, 1994 and
Amendment No. 1 dated February 14, 1995, including Schedule A,
and Amendment No. 2, dated May 1, 1997, among TrustCo, the
Bank and Nancy A. McNamara.
10(d) Restated Employment Agreement dated June 21, 1994, and Amendment
No. 1 dated February 14,1995, including Schedule A, and Amendment
No. 2, dated May 1, 1997, among TrustCo, the Bank and Ralph A.
Pidgeon.
10(e) Restated Employment Agreement dated June 21, 1994, and Amendment
No. 1 dated February 14, 1995, including Schedule A, and Amendment
No. 2, dated May 1, 1997, among TrustCo, the Bank and William F.
Terry.
10(f) Restated 1985 TrustCo Bank Corp NY Stock Option Plan.
10(g) TrustCo Bank Corp NY Directors Stock Option Plan.
10(h) Restated Trustco Bank Supplemental Retirement Plan, dated June 24,
1994, Amendment No. 1, dated February 13, 1995 and Amendment
No. 2, dated December 1, 1995.
10(i) Second Restatement of Trustco Bank Supplemental Retirement Plan
among the Bank and each of Robert T. Cushing, Nancy A. McNamara,
Ralph A. Pidgeon, and William F. Terry, dated March 29, 1996.
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10(j) Restated Agreement for Supplemental Retirement Benefits for Robert
A. McCormick, dated June 24, 1994, Amendment No. 1 dated December
1, 1995, and Amendment No. 2 dated March 29, 1996.
10(k) Trustco Bank Executive Officer Incentive Plan dated December 22,
1993, Amendment No. 1, dated October 18, 1994, Amendment No. 2,
dated February 13, 1995, and Amendment No. 3, dated December 1,
1995.
10(l) Restatement of Trustco Bank Executive Officer Incentive Plan,
dated March 29, 1996.
10(m) 1995 TrustCo Bank Corp NY Stock Option Plan.
10(o) TrustCo Bank Corp NY Performance Bonus Plan, dated May 19, 1997,
and Performance Unit Agreement Under TrustCo Bank Corp NY
Performance Bonus Plan.
10(p) TrustCo Bank Corp NY Directors Performance Bonus Plan, dated
May 19, 1997, and Performance Bonus Unit Agreement Under
TrustCo Bank Corp NY Directors Performance Bonus Plan.
11 Computation of Net Income Per Common Share.
- ----------------
*The exhibits included under Exhibit 10 constitute all management contracts,
compensatory plans and arrangements required to be filed as an exhibit to this
form pursuant to Item 14(c) of this report.
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The following exhibits are filed herewith:*
Reg S-K
Exhibit No. Description
3(ii)a By-Laws of TrustCo Bank Corp NY, dated February 17, 1998.
10(n) Amendment No. 1 to Restatement of Trustco Bank Executive Officer
Incentive Plan, dated October 21, 1997.
13 Portions of Annual Report to Security Holders of TrustCo for the
year ended December 31, 1997.
21 List of Subsidiaries of TrustCo.
23 Independent Auditors' Consent of KPMG Peat Marwick LLP.
24 Power of Attorney.
27 Financial Data Schedules.
- ----------------
*The exhibits included under Exhibit 10 constitute all management contracts,
compensatory plans and arrangements required to be filed as an exhibit to this
form pursuant to Item 14(c) of this report.
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Reports on Form 8-K:
On November 19, 1997, TrustCo filed a Current Report on Form 8-K reporting the
declaration of a cash dividend.
On January 20, 1998, TrustCo filed a Current Report on Form 8-K reporting the
fourth quarter and year-end December 31, 1997, results.
On February 18, 1998, TrustCo filed a Current Report on Form 8-K reporting the
declaration of a cash dividend.
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SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TrustCo Bank Corp NY
By: /s/ Robert A. McCormick
Robert A. McCormick
President and Chief
Executive Officer
(Principal Executive Officer)
By: /s/ Robert T. Cushing
Robert T. Cushing
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
Date: March 24, 1998
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
* Director February 17, 1998
- --------------------------------------
Barton A. Andreoli
* Director February 17, 1998
- --------------------------------------
Lionel O. Barthold
* Director February 17, 1998
- --------------------------------------
M. Norman Brickman
* Director February 17, 1998
- --------------------------------------
Robert A. McCormick
* Director February 17, 1998
- --------------------------------------
Nancy A. McNamara
* Director February 17, 1998
- --------------------------------------
Dr. Anthony J. Marinello
* Director February 17, 1998
- --------------------------------------
Dr. John S. Morris
* Director February 17, 1998
- --------------------------------------
Dr. James H. Murphy
* Director February 17, 1998
- --------------------------------------
Richard J. Murray, Jr.
* Director February 17, 1998
- --------------------------------------
Kenneth C. Petersen
* Director February 17, 1998
- --------------------------------------
William D. Powers
* Director February 17, 1998
- --------------------------------------
William J. Purdy
Director February 17, 1998
William F. Terry
By: /s/ William F. Terry
*William F. Terry, as Agent
Pursuant to Power of Attorney
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Reg S-K
Item 601
Exhibit No. Exhibit Page No.
3(1)a Amended and Restated Certificate of Incorporation of TrustCo
Bank Corp NY, dated July 27, 1993, filed as Exhibit 3(i)a to
TrustCo Bank Corp NY's Quarterly Report on Form 10Q, for the
quarter ended June 30, 1997, is incorporated herein by
reference.
3(i)b Certificate of Amendment of the Certificate of Incorporation
of TrustCo Bank Corp NY, dated May 28, 1996, filed as Exhibit
3(i)b to TrustCo Bank Corp NY's Quarterly Report on Form 10Q,
for the quarter ended June 30, 1997, is incorporated herein
by reference.
3(i)c Certificate of Amendment of the Certificate of Incorporation
of TrustCo Bank Corp NY, dated May 19, 1997, filed as Exhibit
3(i)c to TrustCo Bank Corp NY's Quarterly Report on Form 10Q,
for the quarter ended June 30, 1997, is incorporated herein by
reference.
3(ii)a By-Laws of TrustCo Bank Corp NY dated February 17, 1998,
are filed herewith. 22
10(a) Employment Agreement dated January 1, 1992 and,
Amendment No. 1 dated November 16, 1993, among
TrustCo, the Bank and Robert A. McCormick, filed
as Exhibit 10(a), and Amendment No.2 dated September
1, 1994, and Amendment No. 3 dated February 13, 1995,
filed as Exhibit 10(b) to TrustCo Bank Corp NY's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994, and Amendment No. 4 dated December 1, 1995,
to the Employment Agreement dated January 1, 1992,
filed as Exhibit 10(b) and Schedule A filed as Exhibit
10(c) to TrustCo Bank Corp NY's Annual Report on
Form 10-K, for the fiscal year ended December 31,
1995, and Amendment No. 5, dated May 1, 1997,
filed as Exhibit 10(e) to TrustCo Bank Corp NY's Quarterly
Report on Form 10Q for the quarter ended June 30, 1997
are incorporated herein by reference.
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Exhibits Index
Reg S-K
Item 601
Exhibit No. Exhibit Page No.
10(b) Employment Agreement dated June 21, 1994, and Amendment
No. 1 dated February 14, 1995, among TrustCo, the Bank
and Robert T. Cushing filed as Exhibit 10(c) to TrustCo
Bank Corp NY's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, and Schedule A updating
the Employment Agreement dated June 21, 1994, filed
as Exhibit 10(e) to TrustCo Bank Corp NY's Annual
Report on Form 10-K, for the year ended
December 31, 1995, and Amendment No. 2, dated May 1,
1997, filed as Exhibit 10(f) to TrustCo Bank Corp
NY's Quarterly Report on Form 10Q for the quarter
ended June 30, 1997, are incorporated herein by reference.
10(c) Restated Employment Agreement dated June 21, 1994 and
Amendment No. 1 dated February 14, 1995, among TrustCo,
the Bank and Nancy A. McNamara, filed as Exhibit 10(d)
to TrustCo Bank Corp NY's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, and Schedule A
updating the Employment Agreement dated June 21, 1994,
filed as Exhibit 10(i) to TrustCo Bank Corp NY's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1995, and Amendment No. 2, dated May 1, 1997,
filed as Exhibit 10(f) to TrustCo Bank Corp NY's Quarterly
Report on Form 10Q for the quarter ended June 30, 1997,
are incorporated herein by reference.
10(d) Restated Employment Agreement dated June 21, 1994, and
Amendment No. 1 dated February 14, 1995, among TrustCo,
the Bank and Ralph A. Pidgeon, filed as Exhibit 10(f)
to TrustCo Bank Corp NY's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, and Schedule A
updating the Employment Agreement dated June 21, 1994,
filed as Exhibit 10(i) to TrustCo Bank Corp NY's Annual
Report on Form 10-K for the fiscal year ended December
31, 1995, and Amendment No. 2 dated May 1, 1997, filed as
Exhibit 10(f) to TrustCo Bank Corp NY's Quarterly Report
on Form 10Q for the quarter ended June 30, 1997, are
incorporated herein by reference.
18
<PAGE>
Exhibits Index
Reg S-K
Item 601
Exhibit No. Exhibit Page No.
10(e) Restated Employment Agreement dated June 21, 1994, and
Amendment No. 1 dated February 14, 1995, among TrustCo,
the Bank and William F. Terry, filed as Exhibit 10(e)
to TrustCo Bank Corp NY's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, and Schedule A
updating the Employment Agreement dated June 21, 1994,
filed as Exhibit 10(i) to TrustCo Bank Corp NY's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1995, and Amendment No. 2 dated May 1, 1997,
filed as Exhibit 10(f) to TrustCo Bank Corp NY's Quarterly
Report on Form 10Q for the quarter ended June 30, 1997,
are incorporated herein by reference.
10(f) Restated 1985 TrustCo Bank Corp NY Stock Option Plan
as amended and restated effective July 1, 1994, filed as
Exhibit 10(h) to TrustCo Bank Corp NY's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994,
is incorporated herein by reference.
10(g) TrustCo Bank Corp NY Directors Stock Option Plan filed
as Exhibit 10(g) to TrustCo Bank Corp NY's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993,
is incorporated herein by reference.
10(h) Restated Trustco Bank Supplemental Retirement Plan, dated
June 24, 1994, Amendment No. 1, dated February 13, 1995 and
Amendment No. 2, dated December 1, 1995, filed as Exhibit
10(l) to TrustCo Bank Corp NY's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, are incorporated
herein by reference.
10(i) Second Restatement of Trustco Bank Supplemental Retirement
Plan among the Bank and each of Robert T. Cushing, Nancy A.
McNamara, Ralph A. Pidgeon, and William F. Terry, dated
March 29, 1996, filed as Exhibit 10(m) to TrustCo Bank
Corp NY's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, is incorporated herein by reference.
19
<PAGE>
Exhibits Index
Reg S-K
Item 601
Exhibit No. Exhibit Page No.
10(j) Restated Agreement for Supplemental Retirement
Benefits for Robert A. McCormick, dated June 24,
1994 and Amendment No. 1 dated December 1, 1995,
filed as Exhibit 10(m) to TrustCo Bank Corp NY's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, and Amendment No. 2, dated
March 29, 1996, filed as Exhibit 10(l) to TrustCo Bank
Corp NY's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, are incorporated herein by
reference.
10(k) Trustco Bank Executive Officer Incentive Plan dated
December 22, 1993, Amendment No. 1, dated October 18, 1994,
Amendment No. 2, dated February 13, 1995, and Amendment
No. 3, dated December 1, 1995, filed as Exhibit 10(n)
to TrustCo Bank Corp NY's Annual Report on Form 10-K,
for the fiscal year ended December 31, 1995, are
incorporated herein by reference.
10(l) Restatement of Trustco Bank Executive Officer Incentive
Plan, dated March 29, 1996, filed as Exhibit 10(n) to
TrustCo Bank Corp NY's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, is
incorporated herein by reference.
10(m) 1995 TrustCo Bank Corp NY Stock Option Plan, dated
June 20, 1995, filed on Form S-8 (file No.33-60409)
dated June 20, 1995, is incorporated herein by reference.
10(n) Amendment No.1 to Restatement of Trustco Bank
Executive Officer Incentive Plan, dated October 21,
1997, is filed herewith. 36
10(o) TrustCo Bank Corp NY Performance Bonus Plan, dated
May 19, 1997, filed as Exhibit 10(a) and Performance
Bonus Unit Agreement Under TrustCo Bank Corp NY
Performance Bonus Plan, filed as Exhibit 10(b) to
TrustCo Bank Corp NY's Quarterly Report on Form 10Q,
for the quarter ended June 30, 1997, are incorporated
herein by reference.
10(p) TrustCo Bank Corp NY Directors Performance
Bonus Plan dated May 19, 1997 filed as Exhibit10(c)
and Performance Bonus Unit Agreement Under TrustCo
Bank Corp NY Directors Performance Bonus Plan, filed
as Exhibit 10(d) to TrustCo Bank Corp NY's Quarterly
Report on Form 10Q, for the quarter ended June 30, 1997,
are incorporated herein by reference.
20
<PAGE>
Exhibits Index
Reg S-K
Item 601
Exhibit No. Exhibit Page No.
11 Computation of Net Income Per Common Share. Note 10 80
on page 41 of TrustCo's Annual Report to Shareholders
for the year ended December 31, 1997, is incorporated
herein by reference.
13 Portions of Annual Report to Security Holders of 38
TrustCo for the year ended December 31, 1997, is
filed herewith.
GRAPHICS APPENDIX
Cross
Reference
To Page
Of Annual
Omitted Charts Report
1 Comparative Returns 5
2 Return on Equity 6
3 Taxable Equivalent Net Interest
Income 7
4 Dividends Per Share 15
5 Allowance for Loan Losses 16
6 Allowance to Loans
Outstanding 17
7 Efficiency Ratio 21
The charts listed above were omitted from the EDGAR version
of Exhibit 13; however, the information depicted in the
charts was adequately discussed and/or displayed in the
tabulation formation within Management's Discussion and
Analysis section of the Annual Report.
21 List of Subsidiaries of TrustCo, file herewith 90
23 Independent Auditor's Consent of KPMG Peat Marwich, LLP,
filed herewith. 91
24 Power of Attorney, filed herewith. 92
27 Financial Data Schedules, filed herewith. 93
21
<PAGE>
BY-LAWS
OF
TRUSTCO BANK CORP NY
PAGE
ARTICLE 1. Definitions 1
ARTICLE 2. Shareholders 2
2.1 Place of Meetings 2
2.2 Annual Meeting 2
2.3 Special Meetings 2
2.4 Quorum and Voting Requirements; Adjournment 2
2.5 Inspectors At Meetings 3
2.6 Organization 3
2.7 Order of Business 3
ARTICLE 3. Directors 3
3.1 Board of Directors 3
3.2 Number; Qualification; Term of Office 3
3.3 Election 4
3.4 Newly Created Directorship and Vacancies 4
3.5 Rules and Regulations 4
3.6 Regular Meetings 4
3.7 Special Meetings 4
3.8 Waivers of Notice 4
3.9 Organization 4
3.10 Quorum and Voting 5
3.11 Written Consent of Directors Without a Meeting 5
3.12 Participation in Meeting of Board by Means of Conference
Telephone or Similar Communications Equipment 5
ARTICLE 4. Committees 5
4.1 Executive Committee 5
4.2 Other Committees 6
22
<PAGE>
ARTICLE 5. Officers 6
5.1 Officers 6
5.2 Chief Executive Officer 6
5.3 Chairman and President 6
5.4 Other Officers 7
ARTICLE 6. Contracts, Loans, Etc. 7
6.1 Execution of Contracts 7
6.2 Loans 7
6.3 Signature Authority 7
ARTICLE 7. Shares 8
7.1 Stock Certificates 8
7.2 Transfer of Shares 8
7.3 Closing of Transfer Books 8
7.4 Transfer and Registry Agents 8
7.5 Lost, Destroyed, Stolen and Mutilated Certificates 8
ARTICLE 8. Emergencies 9
8.1 Operation During Emergency 9
8.2 Officers Pro Tempore During Emergency 9
8.3 Disaster 9
ARTICLE 9. Seal 9
ARTICLE 10. Fiscal Year 10
ARTICLE 11. Voting of Shares Held 10
ARTICLE 12. Amendments to By-Laws 10
ARTICLE 13. Indemnification of Directors and Officers 11
23
<PAGE>
BY-LAWS OF
TRUSTCO BANK CORP NY
(a New York State Corporation)
(As Amended Through February 17, 1998)
-----------------------------------------------------
ARTICLE 1
DEFINITIONS
As used in these By-Laws, 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 "By-Laws" means the initial By-Laws 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.
24
<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 By-Laws, (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.
25
<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 By-Laws, the Board may exercise all powers and perform all acts which are
not required, by the By-Laws 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.
26
<PAGE>
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.
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 By-Laws.
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 By-Laws 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.
27
<PAGE>
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 By-Laws.
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.
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
28
<PAGE>
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
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 By-Laws, 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.
29
<PAGE>
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.
30
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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 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.
31
<PAGE>
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 By-Laws, any two or more available members of the Executive 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 By-Laws, 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 By-Laws. 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.
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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.
ARTICLE 12
AMENDMENTS TO BY-LAWS
12.1 AMENDMENTS. The By-Laws or any of them may be altered, amended,
supplemented or repealed, or new By-Laws 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.
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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 indemnification 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.
34
<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
By-Laws of TrustCo Bank Corp NY, and that the same are in full force and effect
at this date.
/s/ William F. Terry
-------------------------------------
Secretary
03/10/98
-------------------------------------
Date
35
<PAGE>
Exhibit 10(n)
AMENDMENT NO. 1 TO
RESTATEMENT OF
TRUSTCO BANK EXECUTIVE OFFICER INCENTIVE PLAN
WHEREAS, Trustco Bank, National Association (herein referred to as the
"Corporation") maintains the Trustco Bank Executive Officer Incentive Plan
(herein referred to as the "Plan"); and
WHEREAS, the Corporation desires to amend the Plan;
NOW, THEREFORE, the Plan is hereby amended effective October 21, 1997,
as follows:
I.
Section 1.3 of the Plan is deleted in its entirety and the following is
substituted in lieu thereof:
"Section 1.3. "Board of Directors" means the Board ofDirectors of
TrustCo Bank Corp NY."
II.
In Section 1.5, Section 1.11 and Section 1.18, the phrase "the
Corporation" is changed to "TrustCo Bank Corp NY" throughout.
III.
Section 3.1 of the Plan is hereby deleted in its entirety and the
following is substituted in lieu thereof:
Section 3.1. A Participant will be entitled to an Incentive Award for
each Plan Year in which the Return on Equity of TrustCo Bank Corp NY equals or
exceeds 14%. The Incentive Award will be an amount equal to his Base Salary
multiplied by a bonus percentage based on the Return on Equity of TrustCo Bank
Corp NY as set forth inthe following table:
36
<PAGE>
Return on Equity Bonus Percentage
---------------- ----------------
14% 40%
15% 50%
16% 60%
17% 75%
18% 90%
19% 105%
| 20% 125%
The bonus percentage will be further increased by 15%
for each percentage point the Return on Equity of
TrustCo Bank Corp NY exceeds 20%."
IN WITNESS WHEREOF, the Corporation has caused this Amendment No. 1 to
be executed this 21 day of October, 1997.
TRUSTCO BANK, NATIONAL ASSOCIATION
By: /s/John S. Morris
Chairman
Title: Personnel Advisory Committee
37
<PAGE>
COVER PAGE
38
<PAGE>
TrustCo Bank Corp NY is a one bank holding company headquartered in Schenectady,
New York. The Company is the largest commercial banking enterprise headquartered
in the Capital Region of New York State. The principal subsidiary of the
Company, Trustco Bank, National Association, operates 51 community banking
offices, which include 33 drive-up windows and 29 Automatic Teller Machines,
throughout the Bank's business territory. The Bank serves 8 counties with a
broad range of community banking services.
<TABLE>
Financial Highlights
<CAPTION>
(dollars in thousands, except per share data) Years ended December 31,
Percent
1997 1996 Change
Income:
<S> <C> <C> <C>
Net interest income (TE)....................................................$ 88,685 87,007 1.93%
Net income.................................................................. 32,175 28,699 12.11
Per Share (1):
Basic earnings.............................................................. 1.37 1.23 11.38
Diluted earnings............................................................ 1.33 1.20 10.83
Book value.................................................................. 7.64 6.93 10.25
Average Balances:
Assets...................................................................... 2,302,598 2,220,535 3.70
Loans, net.................................................................. 1,260,771 1,227,407 2.72
Deposits.................................................................... 1,981,223 1,936,445 2.31
Shareholders' equity........................................................ 167,273 155,927 7.28
Financial Ratios:
Return on average assets.................................................... 1.40% 1.29 8.53
Return on average equity (2)................................................ 20.23 19.05 6.19
Tier 1 capital to:
Total average assets (leverage)........................................... 7.00 7.04 (0.57)
Risk-adjusted assets...................................................... 13.43 12.99 3.39
Total capital to risk-adjusted assets....................................... 14.72 14.28 3.08
Net loans charged off to average loans...................................... .28 0.27 3.70
Allowance for loan losses as a coverage of nonperforming loans.............. 5.0x 3.7x 35.14
Efficiency ratio............................................................ 40.61% 39.51 (2.78)
Dividend payout ratio....................................................... 72.34 70.38 2.78
------------------------------------
</TABLE>
<TABLE>
Per share information of common stock (1)
<CAPTION>
Range of Stock
Basic Diluted Cash Book Price
Earnings Earnings Dividend Value High Low
1996
<S> <C> <C> <C> <C> <C> <C>
First quarter..........................................$ .29 .28 .21 6.61 16.73 15.31
Second quarter......................................... .30 .29 .21 6.56 16.82 14.56
Third quarter.......................................... .32 .31 .21 6.73 18.53 14.18
Fourth quarter......................................... .33 .32 .24 6.93 19.66 17.39
-----------------------------------------------------------------
1997
First quarter.......................................... .32 .31 .24 6.88 19.35 17.83
Second quarter......................................... .33 .33 .24 7.20 18.70 17.39
Third quarter.......................................... .36 .35 .24 7.49 24.78 17.94
Fourth quarter......................................... .35 .34 .28 7.64 29.00 22.13
-----------------------------------------------------------------
(1) Adjusted for a 15% stock split in 1997 and 1996.
(2) Excludes the market adjustment on securities available for sale.
</TABLE>
39
<PAGE>
Table of Contents
Financial Highlights............................ Inside front cover
Executive and Senior Officers
of Trustco Bank.................................................2
President's Message...............................................3
Management's Discussion
and Analysis of Operations......................................6
Average Balances, Yields
and Net Interest Margins.......................................12
Glossary of Terms................................................25
Management's Statement of Responsibilities.......................26
Independent Auditors' Report.....................................27
Consolidated Financial Statements and Notes......................28
Officers and Board of Directors..................................45
Officers.........................................................46
Branch Locations.................................................47
General Information..............................................48
TrustCo Mission Statement:
TrustCo will be the low cost provider of high quality services to our customers
in the communities we serve and return to our owners an above average return on
their investment.
40
<PAGE>
Executive and Senior Officers of Trustco Bank
Executive Officers: From Left to Right: William F. Terry, Senior Vice President
& Secretary, Bank Operations, Marketing, Purchasing, and Trust Operations;
Nancy A. McNamara, Senior Vice President, Community Relations, Legal Counsel,
Loan Division and Trust; Robert A. McCormick, President & Chief Executive
Officer; Ralph A. Pidgeon, Senior Vice President, Branches, Installment Loans/
Credit Cards, Retirement/Government Accounts, and Compliance; Robert T.Cushing,
Senior Vice President and Chief Financial Officer, Accounting/Finance, Data
Processing, and Premises.
Senior Officers: Standing Left to Right: William M. McCartan, Vice President,
Trust Department; James Niland, Vice President, Trust Department; George W.
Wickswat, Vice President, Commercial Loans;Michael R. Bonesteel, Vice
President, Data Processing; Linda C. Christensen, Vice President, Accounting/
Finance; Jeffrey S. Farbaniec, Vice President, Accounting/Finance; Robert J.
McCormick, Administrative Vice President, Commercial/Mortgage Loans; Scot R.
Salvador, Vice President,Commercial Loans.Seated Left to Right:Robert Scribner,
Vice President, Trust Department; John C. Fay, Auditor; Donald J. Csaposs, Vice
President, Compliance; Henry C. Collins, Administrative Vice President, Legal
Counsel; James D. McLoughlin, Administrative Vice President, Bank Operations;
Ann M. Noble, Vice President, Bank Operations.
41
<PAGE>
President's Message
Dear Shareholder:
1997 was another record year at TrustCo. In the overall, our industry had a
very successful year, and TrustCo was no exception, posting results that are
competitive by any standards. We are grateful to our employees and Board of
Directors for their support and enthusiasm, ensuring our consistent strong
performance.
During 1997, shareholder values continued in the right direction with net
income at $32.2 million, up a significant 12% over 1996. TrustCo's most
important ratio, return on shareholders' equity, was 20.23%, up from 19.05% in
1996. We are committed to ensuring that return on equity compares favorably in
any peer group, and we are comfortable that it does. TrustCo's five year ROE was
18.10% and we plan an increase to 21% for the current fiscal year.
During 1997, we issued a 15% stock split maintaining the cash dividend level
on the newly issued shares, effectively increasing dividend income for TrustCo
owners by 15%. The quarterly cash dividend has increased at a 19% compound
annual rate over the last five years, a major accomplishment. It is our
intention to continue monitoring our internal generation of capital; should
excess capital exist, we would recommend steps to the Board to correct that
situation. These steps could include any measures that would return excess
capital to TrustCo's owners.
TrustCo's branch expansion program continues, and we opened three additional
branches during 1997. Our plans call for two to three branch openings a year
until we have filled the gaps in our market territory. The targeted upgrading
continues with each branch receiving a major review and renovation at
approximately seven year intervals.
During 1997, we evaluated a number of acquisition opportunities.
Unfortunately, we were not successful. Our approach to acquisitions is quite
simple -- we are extremely careful to avoid damage to shareholder value in the
existing TrustCo franchise.
TrustCo's Affordable Housing Program, which was designed to assist with
homeownership, continues to be a success in new markets. We consider this
program a model for community reinvestment and one of the most effective in the
state.
1997 was another year in which TrustCo avoided most of the industry
difficulties while moving forward to new records. We intend to continue this
"boring" path to the benefit of the owners, employees, and community for the
foreseeable future.
1998 will provide income and growth success with emphasis continuing on the
home equity loan, home equity credit line, and first mortgage products and our
improved interest-bearing checking and savings accounts on the deposit side.
Our Trust department, which currently manages assets in excess of $1 billion,
has ambitious expectations and continues moving forward under the new management
team.
Our future should benefit from the solid performance of the superb employee
team here at TrustCo. For 1997, the often quoted efficiency ratio for our
Company was 40.61% at a time when most banking companies would like to see
60.00%. This level of performance efficiency will benefit us through reduced
operating expense for years to come. In fact, the June 1997 USBanker defined
TrustCo as the third most efficiently run bank of the largest 300 in the United
States.
42
<PAGE>
1997 was a year in which average assets of $2.30 billion grew by $82.1
million, an increase of 4%, in a time of continuing deposit outflows from banks.
This solid performance will provide us with investment opportunities going
forward. Our loan portfolio continued to grow during 1997, increasing by 3%,
with continued emphasis on the retail side of the product mix.
The quality of the loan portfolio is excellent, and our allowance for loan
loss has a coverage ratio 5 times non-performing loans, an important area of
reserve.
Community needs have expanded and TrustCo has responded appropriately.
TrustCo has provided employee and management participation in charitable and
community organizations, and increased its corporate charitable contributions
throughout the Capital District, and our Affordable Housing Program continues to
grow.
TrustCo continues to receive solid external comment. During 1997 we received
favorable mention in America's Finest Companies as one of forty of the 16,000
U.S. companies which have delivered higher earnings per share for at least 20
consecutive years. In addition, the April 7 issue of Barron's mentioned TrustCo
favorably regarding our dividend payout.
From time to time it is nice to look at a longer term perspective. Following
shortly after this message is Bloomberg's comparative graph which defines
clearly the benefits of TrustCo ownership over the past ten years.
We are enthusiastic about TrustCo's future. It is our intention at every
level in the Company to continue our past success into the future. Our products
are tailored to the needs of our community, we have an unmatched employee team
to deliver them, and a management style that can adapt to any change in the
marketplace almost immediately.
We expect the combination mentioned above and enthusiastic commitment of the
Board of Directors will ensure our continuing success in the years ahead,
whatever the banking environment.
Sincerely,
Robert A. McCormick,President and Chief Executive Officer
43
<PAGE>
<TABLE>
SUSTAINED SUPERIOR PERFORMANCE (GRAPH OMITTED)
1987 - 1997
<CAPTION>
As shown by the above graph provided by Bloomberg Financial Markets,
the average annual return on investment for the ten year period ending
December 31, 1997 was:
<S> <C>
TrustCo Bank Corp NY ........................... 27.05%
Dow Jones Industrial Average.................... 18.59%
S & P 500 Index................................. 18.01%
</TABLE>
44
<PAGE>
Management's Discussion and Analysis of Operations
The financial review which follows will focus on the factors affecting the
financial condition and results of operations of TrustCo Bank Corp NY (the
"Company" or "TrustCo") and Trustco Bank, National Association (the "Bank" or
"Trustco") and its operating subsidiary Trustco Realty Corp. during 1997 and, in
summary form, the two preceding years. Net interest income and net interest
margin are presented in this discussion on a taxable equivalent basis. Balances
discussed are daily averages unless otherwise described. The consolidated
financial statements and related notes and the quarterly reports to shareholders
for 1997 should be read in conjunction with this review. Certain amounts in
years prior to 1997 have been reclassified to conform with the 1997
presentation.
All per share information has been adjusted for the 15% stock split in 1997.
Overview
TrustCo recorded net income of $32.2 million or $1.33 of diluted earnings per
share for the year ended December 31, 1997, compared to $28.7 million or $1.20
per share for the year 1996. This represents an increase of 12.1% in net income
between 1997 and 1996. The per share amounts are reported on a diluted basis in
accordance with a new accounting pronouncement that became effective during
1997.
Significant contributors to the increase in net income for 1997 were:
- an increase of $5.9 million in taxable equivalent interest income resulting
from a $67.9 million increase in the average balance of interest earning assets
and a two basis points increase in the taxable equivalent yield on assets to
7.95%,
- an increase in the average balance of demand deposits by 7.5% to $121.0
million for 1997,
- a 17.1% increase in noninterest income, excluding net securities
transactions, primarily the result of increases in fees from trust department
activities and from service charges to customers, and
- a reduction in the effective tax rate to 37%.
<TABLE>
RETURN ON EQUITY
(CHART OMITTED)
<CAPTION>
<S> <C>
1995 18.03%
1996 19.05%
1997 20.23%
</TABLE>
Also during 1997, the following had a significant effect on net income:
- an increase in interest expense by $4.2 million resulting from an increase in
interest bearing liabilities of $55.2 million and an increase of ten basis
points in the overall cost to 4.38%, and
<TABLE>
MIX OF AVERAGE EARNING ASSETS
<CAPTION>
(dollars in thousands) Components of
97-96 96-95 Total Earning Assets
1997 1996 1995 Change Change 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income............$1,260,771 1,227,407 1,187,929 33,364 39,478 57.2% 57.4 59.6
Securities available for sale:
U.S. Treasuries and agencies........... 352,301 409,590 255,244 (57,289) 154,346 16.0 19.2 12.8
States and political subdivisions...... 102,206 78,921 15,926 23,285 62,995 4.6 3.7 0.8
Mortgage-backed securities............. 134,509 53,844 8,731 80,665 45,113 6.1 2.5 0.4
Other.................................. 33,985 38,564 21,179 (4,579) 17,385 1.5 1.8 1.1
----------------------------------------------------------------------------------------
Total securities available for sale.... 623,001 580,919 301,080 42,082 279,839 28.2 27.2 15.1
----------------------------------------------------------------------------------------
Investment securities:
U.S. Treasuries and agencies........... -- -- 119,989 -- (119,989) -- -- 6.0
States and political subdivisions...... -- -- 40,068 -- (40,068) -- -- 2.0
Mortgage-backed securities............. -- -- 119,113 -- (119,113) -- -- 6.0
Other.................................. -- -- 13,738 -- (13,738) -- -- 0.7
----------------------------------------------------------------------------------------
Total investment securities............ -- -- 292,908 -- (292,908) -- -- 14.7
----------------------------------------------------------------------------------------
Federal funds sold....................... 320,953 328,500 212,323 (7,547) 116,177 14.6 15.4 10.6
----------------------------------------------------------------------------------------
Total earning assets.....................$2,204,725 2,136,826 1,994,240 67,899 142,586 100.0% 100.0 100.0
----------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
Management's Discussion and Analysis (continued)
- an increase in noninterest expenses of $4.2 million primarily associated with
additional personnel costs and new banking facilities.
TrustCo has performed well with respect to a number of key performance ratios
during 1997 and 1996 including:
- return on equity of 20.23% for 1997 and 19.05% for 1996,
- return on assets of 1.40% for 1997 and 1.29% for 1996, and
- operating efficiency ratio of 40.61% for 1997 and 39.51% for 1996.
Asset/Liability Management
In managing its balance sheet portfolios, TrustCo utilizes funding and
capital sources within sound credit, investment, interest rate and liquidity
risk guidelines. Loans and securities (including federal funds sold) are the
Company's primary earning assets. Average earning assets were 95.7% and 96.2% of
average total assets for 1997 and 1996, respectively.
TrustCo, through its management of liabilities, attempts to provide stable
and flexible sources of funding within established liquidity and interest rate
risk guidelines. This is accomplished through core deposit banking products
offered within the markets served by the Company. TrustCo does not actively seek
to attract out-of-area deposits or so called hot money; rather the Company
focuses on the value of core relationships both with depositors and borrowers.
TrustCo's objectives in managing its balance sheet are to limit the
sensitivity of net interest income to actual or potential changes in interest
rates, and to enhance profitability through strategies that promise sufficient
reward for understood and controlled risk. The Company is deliberate in its
effort to maintain adequate liquidity under prevailing and projected economic
conditions, and to maintain an efficient and appropriate mix of core deposit
relationships.
The Company relies on traditional banking investment instruments and its
large base of core deposits to help
in asset/liability management.
Earning Assets
Average earning assets during 1997 were $2.2 billion, which was an increase
of $67.9 million or 3.2% over the prior year. The increase in average earning
assets was primarily the result of a $33.4 million increase in the average
balance of loans and a $42.1 million increase in securities available for sale,
offset slightly by a $7.5 million decrease in federal funds sold.
Total average assets were $2.3 billion for 1997 and $2.2 billion for 1996.
The table "Mix of Average Earning Assets," shows how the mix of the earning
assets has changed over the last three years. While the growth in earning assets
is critical to improved profitability, changes in the mix can also have a
significant impact on income levels.
<TABLE>
TAXABLE EQUIVALENT
NET INTEREST INCOME (dollars in millions)
(CHART OMITTED)
<CAPTION>
<S> <C>
1995 $83.5
1996 $87.0
1997 $88.7
</TABLE>
Loans: Average total loans increased $33.4 million, or 2.7%, during 1997.
Interest income on the loan portfolio increased to $109.7 million in 1997 from
<TABLE>
Loan portfolio
<CAPTION>
(dollars in thousands) Average Balances
1997 1996 1995 1994 1993
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential...............$ 848,105 67.2% 783,094 63.7% 714,804 60.1% 652,837 58.0% 555,317 52.9%
Commercial................ 204,502 16.2 224,949 18.3 237,165 19.9 237,994 21.2 255,265 24.4
Home equity line of credit 178,597 14.1 187,652 15.3 202,647 17.0 203,756 18.1 201,013 19.2
Installment............... 30,931 2.5 33,299 2.7 35,269 3.0 30,242 2.7 36,185 3.5
------------------------------------------------------------------------------------------------
Total loans............... 1,262,135 100.0% 1,228,994 100.0% 1,189,885 100.0% 1,124,829 100.0% 1,047,780 100.0%
Less: Unearned income..... 1,364 1,587 1,956 2,131 2,925
Allowance for
loan losses.. 53,173 51,233 45,086 37,334 30,214
------------------------------------------------------------------------------------------------
Net loans.................$1,207,598 1,176,174 1,142,843 1,085,364 1,014,641
------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
Management's Discussion and Analysis (continued)
$107.5 million in 1996. The average yield decreased slightly to 8.70% in 1997,
from 8.76% in 1996.
The steady growth of the loan portfolio as a component of the Company's
assets, as well as the continued high quality of the portfolio, contributed
significantly to the superior earnings results for 1997.
TrustCo has distinguished itself in the Upstate New York region as one of the
principal originators of residential real estate mortgage loans. Through
aggressive marketing and pricing and a customer-friendly service delivery
network, TrustCo has increased the average balance of the residential real
estate loan portfolio to $848.1 million, an increase of $65.0 million, or 8.3%.
Income on residential real estate loans increased to $69.8 million in 1997 from
$65.0 million in 1996. The yield on this loan portfolio decreased slightly
to 8.23% for 1997 from 8.30% in 1996.
The overwhelming majority of TrustCo's real estate loans are secured by
properties within the Bank's market area. Management's specific knowledge of
local market conditions and trends enhances the quality of the loan portfolio.
During 1997, management continued its established practice of retaining all new
loan originations in the Bank's portfolio rather than selling them into the
secondary market. This practice positions TrustCo to be able to respond quickly
to customer and market needs.
Average commercial loans decreased to $204.5 million in 1997 from $224.9
million in 1996. This balance decrease was somewhat offset by an increase in the
average yield of 11 basis points to 9.47% for 1997. This has resulted in income
on commercial loans of $19.4 million in 1997 and $21.1 million in 1996. TrustCo
strives to maintain strong asset quality in all aspects of its loan portfolio,
especially with respect to commercial loans. Competition for commercial loans is
very intense in the Bank's market region. The Bank competes with large money
center and regional banks as well as with smaller locally based banks and
thrifts. Over the last several years competition for commercial loans has
intensified as smaller banks and thrifts try to develop commercial loan
portfolios. To do this, they are reducing interest rates and underwriting
standards. Rather than reduce desired loan interest rates or negatively affect
asset quality by changing the underwriting standards, the Bank has decided to
forego the potentially higher volume of new loan originations for the
maintenance of a stronger quality commercial loan portfolio.
TrustCo's commercial lending activities are focused on balancing the
Company's commitment to meeting the credit needs of businesses in its market
area with the necessity of maintaining a high quality loan portfolio. In
accordance with these goals the Company has consistently emphasized the
origination of loans within its market area. The portfolio contains no foreign
loans, nor does it contain any concentrations of credit extended to any single
borrower or industry. The Bank's commercial loan portfolio reflects the
diversity found in the Capital Region's economy.
TrustCo has a long-standing leadership position in the home equity credit
line product in its market territory. TrustCo was one of the first financial
institutions in the Upstate New York region to aggressively market and originate
this product, and has developed significant expertise with respect to its risks
and rewards. During 1997 the average balance of home equity credit lines was
$178.6 million, down from $187.7 million in 1996. The average yield increased to
9.34% for 1997 from 9.21% in 1996. The decrease in the average loans, offset in
part by the increase in the average yield, resulted in interest income on home
equity lines of credit of $16.7 million in 1997, compared to $17.3 million in
1996.
The average balance of installment loans, net of unearned income, decreased
to $29.6 million in 1997 from $31.7 million in 1996. The yield on installment
loans decreased 23 basis points to 12.86% in 1997, resulting in interest income
of $3.8 million. This portfolio continues to decrease because many consumers
have shifted their borrowing patterns from direct installment credit to home
equity loan products which may offer an income tax benefit.
<TABLE>
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
<CAPTION>
(dollars in thousands) December 31, 1997
After 1 Year
In 1 Year But Within After
or Less 5 Years 5 Years Total
<S> <C> <C> <C> <C>
Commercial..........................................$ 114,943 57,780 11,132 183,855
Real estate construction............................ 7,902 -- -- 7,902
-------------------------------------------------------------------
Total...............................................$ 122,845 57,780 11,132 191,757
-------------------------------------------------------------------
Predetermined rates.................................$ 36,783 50,397 11,132 98,312
Floating rates...................................... 86,062 7,383 -- 93,445
-------------------------------------------------------------------
Total...............................................$ 122,845 57,780 11,132 191,757
-------------------------------------------------------------------
</TABLE>
47
<PAGE>
Management's Discussion and Analysis (continued)
Securities available for sale: During 1997 and 1996, the portfolio of securities
available for sale was actively managed by the Company to take full advantage of
changes in interest rates. Securities available for sale are used primarily for
liquidity purposes while simultaneously producing earnings, and are managed
under a policy detailing the types, duration and interest rates acceptable in
the portfolio.
The designation of "available for sale" is made at the time of purchase,
based upon management's intent to hold the securities for an indefinite period
of time. However, these securities would be available for sale in response to
changes in market interest rates, related changes in prepayment risk, needs for
liquidity, or changes in the availability of and yield on alternative
investments.
At December 31, 1997, securities available for sale amounted to $601.9
million, compared to $618.7 million at year end 1996. For 1997, the average
balance of securities available for sale was $623.0 million with an average
yield of 7.67%, compared to an average balance in 1996 of $580.9 million with an
average yield of 7.61%.
TrustCo invests in high quality securities, with approximately 78% of the
average investments for 1997 comprised of securities issued or guaranteed by the
U.S. Government or its agencies. In addition, approximately 16% of the average
securities portfolio was invested in securities issued by states and political
subdivisions.
The taxable equivalent income earned on the securities portfolio in 1997 was
$47.8 million, compared to $44.2 million earned in 1996. The average balance of
the securities portfolio increased by $42.1 million between 1996 and 1997, and
the average yield on the portfolio increased by 6 basis points during the same
time period. The increase in the taxable equivalent income earned on the
securities portfolio was 90% attributable to the change in balance with the
remaining increase the result of the increase in the average portfolio yield.
During 1997, TrustCo recognized approximately $200 thousand of net losses
from securities transactions, compared to $4.5 million in 1996. Throughout 1997,
TrustCo sold securities to provide liquidity for potential reinvestment at
higher interest rates. This created additional liquidity and eliminated lower
yielding assets from the securities portfolio. At year end 1997, TrustCo
continues to have significant liquidity in the form of $395 million of federal
funds sold. Management believes that the Company will have the opportunity to
reinvest these funds in the securities or loan portfolios as enhanced
opportunities develop in 1998.
TrustCo does not invest in any exotic investment products such as interest
rate swaps, forward placement contracts, options or other instruments commonly
referred to as derivatives. By actively managing a portfolio of high quality
securities, TrustCo can meet the objectives of asset/liability management and
liquidity, while at the same time producing a constant earnings stream that
meets or exceeds alternative rates offered in the marketplace.
Securities available for sale are recorded at their fair value, with any
unrealized gains or losses, net of taxes, recognized as a component of
shareholders' equity. Average balances of securities available for sale are
stated at amortized cost. At December 31, 1997 and 1996, the market value of
TrustCo's portfolio of securities available for sale resulted in net unrealized
gains of approximately $26.8 million and $8.9 million, respectively.
<TABLE>
Securities available for sale
<CAPTION>
(dollars in thousands) As of December 31,
1997 1996 1995
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasuries and agencies............. $273,517 278,823 404,885 406,933 432,710 447,343
States and political subdivisions........ 109,210 113,787 94,954 96,918 68,151 70,371
Mortgage-backed securities............... 151,989 155,080 75,492 76,493 78,481 80,284
Other.................................... 15,430 15,451 4,276 4,276 15,690 17,290
--------------------------------------------------------------------------
Total debt securities available for sale 550,146 563,141 579,607 584,620 595,032 615,288
Equity securities........................ 24,955 38,758 30,139 34,050 24,118 24,918
--------------------------------------------------------------------------
Total securities available for sale.... $575,101 601,899 609,746 618,670 619,150 640,206
--------------------------------------------------------------------------
</TABLE>
48
<PAGE>
Management's Discussion and Analysis (continued)
The table "Securities Portfolio Maturity Distribution and Yield," distributes
the securities available for sale portfolio as of December 31, 1997 based on the
final maturity of the securities. Mortgage-backed securities are stated using
estimated average life, and equity securities are excluded. Actual maturities
may differ from contractual maturities because of securities prepayments and the
right of certain issuers to call or prepay their obligations without penalty.
<TABLE>
SECURITIES PORTFOLIO MATURITY DISTRIBUTION AND YIELD
<CAPTION>
Debt securities available for sale:
(dollars in thousands) As of December 31, 1997
Maturing:
After 1 After 5
Within But Within But Within After
1 Year 5 Years 10 Years 10 Years Total
U.S. Treasuries and agencies
<S> <C> <C> <C> <C> <C>
Amortized cost........................ $ 20,069 20,000 180,667 52,781 273,517
Market value.......................... 20,078 20,403 184,538 53,804 278,823
Yield................................. 6.73% 8.91 7.73 7.95 7.79
States and political subdivisions
Amortized cost........................ $ 5,961 13,461 3,674 86,114 109,210
Market value.......................... 6,023 13,842 3,877 90,045 113,787
Yield................................. 7.97% 8.04 8.53 8.35 8.30
Mortgage-backed securities
Amortized cost........................ $ 680 35,207 88,662 27,440 151,989
Market value.......................... 724 35,930 90,585 27,841 155,080
Yield................................. 9.38% 7.60 7.46 7.31 7.48
Other
Amortized cost........................ $ -- 14,830 600 -- 15,430
Market value.......................... -- 14,851 600 -- 15,451
Yield................................. -- 6.76 6.83 -- 6.76
------------------------------------------------------------------------------------
Total debt securities available for sale
Amortized cost........................ $ 26,710 83,498 273,603 166,335 550,146
Market value.......................... 26,825 85,026 279,600 171,690 563,141
Yield................................. 7.07% 7.83 7.65 8.05 7.77
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
Management's Discussion and Analysis (continued)
Maturity and call dates of securities: Many of the securities in the investment
portfolio have a call date in addition to the stated maturity date. Call dates
allow the issuer of the bond to redeem the bond prior to maturity at selected
dates and at predetermined prices. Normally, securities are redeemed at the call
dates when the issuer can reissue the bond at a lower yield. Therefore, for cash
flow, liquidity and interest rate management purposes, it is important to
monitor both maturity dates and call dates. The following table details the
portfolio of securities available for sale, by both maturity date and call date
as of December 31, 1997. Mortgage-backed securities are reported using an
estimate of average life, and equity securities are excluded.
<TABLE>
SECURITIES PORTFOLIO MATURITY AND CALL DATE DISTRIBUTION
<CAPTION>
Debt securities available for sale:
(dollars in thousands) As of December 31, 1997
Based on Based on
Final Maturity Call Date
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C> <C>
Within 1 year...............................................$ 26,710 26,825 152,921 153,500
1 to 5 years................................................ 83,498 85,026 187,139 191,980
5 to 10 years............................................... 273,603 279,600 171,874 178,543
After 10 years.............................................. 166,335 171,690 38,212 39,118
--------------------------------------------------------
Total debt securities available for sale..................$550,146 563,141 550,146 563,141
--------------------------------------------------------
</TABLE>
Federal Funds Sold: During 1997, the average balance of federal funds sold was
$321.0 million, a slight decrease from $328.5 million in 1996. The average rate
earned on these assets was 5.53% in 1997 and 5.37% in 1996. TrustCo utilized
this category of earning assets during 1997 as a means of maintaining strong
liquidity as interest rates changed. Rather than invest excess liquidity during
1997, the Company chose to place these funds in overnight federal funds sold.
This decision had the short-term effect of suppressing earnings for 1997, but
positioned TrustCo to take advantage of other banking opportunities as they
emerge in 1998.
The average yield increase during 1997 was primarily the result of a 25 basis
points increase in the target federal funds rate set by the Federal Reserve Bank
in early 1997.
50
<PAGE>
Management's Discussion and Analysis (continued)
<TABLE>
average balances, yields and net interest margins
<CAPTION>
(dollars in thousands) 1997 1996 1995
Interest Interest Interest
Average Income/ Average Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income...........$1,260,771 109,690 8.70% 1,227,407 107,517 8.76% 1,187,929 107,544 9.05%
-----------------------------------------------------------------------------------------
Securities available for sale:
U.S. Treasuries and agencies.......... 352,301 27,436 7.79 409,590 31,647 7.73 255,244 19,490 7.64
States and political subdivisions..... 102,206 8,249 8.07 78,921 6,235 7.90 15,926 1,277 8.02
Mortgage-backed securities............ 134,509 10,094 7.50 53,844 4,114 7.64 8,731 597 6.84
Other................................. 33,985 1,975 5.81 38,564 2,202 5.71 21,179 1,185 5.60
-----------------------------------------------------------------------------------------
Total securities available for sale... 623,001 47,754 7.67 580,919 44,198 7.61 301,080 22,549 7.49
-----------------------------------------------------------------------------------------
Investment securities:
U.S. Treasuries and agencies.......... -- -- -- -- -- -- 119,989 8,968 7.47
States and political subdivisions..... -- -- -- -- -- -- 40,068 2,963 7.39
Mortgage-backed securities............ -- -- -- -- -- -- 119,113 8,005 6.72
Other................................. -- -- -- -- -- -- 13,738 1,079 7.86
-----------------------------------------------------------------------------------------
Total investment securities........... -- -- -- -- -- -- 292,908 21,015 7.17
Federal funds sold...................... 320,953 17,761 5.53 328,500 17,634 5.37 212,323 12,543 5.91
-----------------------------------------------------------------------------------------
Total interest earning assets......... 2,204,725 175,205 7.95% 2,136,826 169,349 7.93% 1,994,240 163,651 8.21%
-----------------------------------------------------------------------------------------
Allowance for loan losses............... (53,173) (51,233) (45,086)
Cash and non-interest earning assets.... 151,046 134,942 124,237
-----------------------------------------------------------------------------------------
Total assets..........................$2,302,598 2,220,535 2,073,391
-----------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Interest-bearing deposits:
Interest-bearing checking accounts....$ 233,644 3,596 1.54% 233,340 3,591 1.54% 230,291 4,356 1.89%
Savings............................... 658,750 22,622 3.43 667,447 23,012 3.45 618,933 24,248 3.92
Time deposits and money markets....... 967,864 54,728 5.65 923,082 51,146 5.54 911,906 49,751 5.46
-----------------------------------------------------------------------------------------
Total interest-bearing deposits....... 1,860,258 80,946 4.35 1,823,869 77,749 4.26 1,761,130 78,355 4.45
-----------------------------------------------------------------------------------------
Short-term borrowings................... 117,184 5,574 4.76 98,324 4,593 4.67 38,090 1,776 4.66
Long-term debt.......................... -- -- -- -- -- -- 788 69 8.75
-----------------------------------------------------------------------------------------
Total interest-bearing liabilities.... 1,977,442 86,520 4.38 1,922,193 82,342 4.28 1,800,008 80,200 4.46
-----------------------------------------------------------------------------------------
Demand deposits......................... 120,965 112,576 97,940
Other liabilities....................... 36,918 29,839 29,974
Shareholders' equity.................... 167,273 155,927 145,469
-----------------------------------------------------------------------------------------
Total liabilities and
shareholders'equity...............$2,302,598 2,220,535 2,073,391
-----------------------------------------------------------------------------------------
Net interest income....................... 88,685 87,007 83,451
-----------------------------------------------------------------------------------------
Net interest spread....................... 3.57% 3.65% 3.75%
-----------------------------------------------------------------------------------------
Net interest margin (net interest income
to total interest earning assets)....... 4.02 4.07 4.18
-----------------------------------------------------------------------------------------
Portions of income earned on certain commercial loans, U.S. Government obligations, obligations of states and
political subdivisions, and equity securities are exempt from federal and/or state taxation. Appropriate
adjustments have been made to reflect the equivalent amount of taxable income that would have been necessary to generate an
equal amount of after tax income. Federal and New York State tax rates used to calculate income on a tax equivalent
basis were 35.0% and 9.0% for 1997, 35.0% and 9.23% for 1996, and 35.0% and 9.68% for 1995. The average balances of securities
available for sale are calculated using amortized costs for these securities. Included in the balance of shareholders'equity
is $8.2 million, $5.3 million, and $3.9 million in 1997, 1996, and 1995, respectively, of unrealized appreciation, net of tax, in
the available for sale securities portfolio. Nonaccrual loans are included in average loans.
</TABLE>
51
<PAGE>
Management's Discussion and Analysis (continued)
Interest bearing sources of funds: TrustCo utilizes various traditional sources
of funds to support its asset portfolio. The following table, "Mix of Average
Sources of Funding," presents the various categories of funds used and the
corresponding average balances for each of the last three years.
<TABLE>
mix of Average Sources of Funding
<CAPTION>
(dollars in thousands) Components of
97-96 96-95 Total Funding
1997 1996 1995 Change Change 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Demand deposits.....................$ 120,965 112,576 97,940 8,389 14,636 5.8% 5.5 5.2
Retail deposits:
Savings........................... 658,750 667,447 618,933 (8,697) 48,514 31.4 32.8 32.6
Time deposits under $100 thousand. 806,866 768,240 750,141 38,626 18,099 38.5 37.8 39.5
Interest-bearing checking accounts 233,644 233,340 230,291 304 3,049 11.1 11.5 12.1
Money market deposits............. 59,707 68,130 79,618 (8,423) (11,488) 2.8 3.3 4.2
-------------------------------------------------------------------------------------
Total retail deposits............. 1,758,967 1,737,157 1,678,983 21,810 58,174 83.8 85.4 88.4
-------------------------------------------------------------------------------------
Total core deposits............... 1,879,932 1,849,733 1,776,923 30,199 72,810 89.6 90.9 93.6
-------------------------------------------------------------------------------------
Time deposits over $100 thousand.... 101,291 86,712 82,147 14,579 4,565 4.8 4.3 4.3
Short-term borrowings............... 117,184 98,324 38,090 18,860 60,234 5.6 4.8 2.0
Long-term debt...................... -- -- 788 -- (788) -- -- 0.1
-------------------------------------------------------------------------------------
Total purchased liabilities....... 218,475 185,036 121,025 33,439 64,011 10.4 9.1 6.4
-------------------------------------------------------------------------------------
Total sources of funding..........$2,098,407 2,034,769 1,897,948 63,638 136,821 100.0% 100.0 100.0
-------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Average Deposits by Type of Depositor
<CAPTION>
(dollars in thousands) Years Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Individuals, partnerships and corporations..........$1,924,606 1,880,798 1,802,455 1,752,163 1,706,530
U.S. Government..................................... 62 45 261 542 540
States and political subdivisions................... 44,839 44,555 46,091 44,289 48,145
Other (certified and official checks, etc.)......... 11,716 11,047 10,263 11,342 12,316
-----------------------------------------------------------------
Total average deposits by type of depositor.......$1,981,223 1,936,445 1,859,070 1,808,336 1,767,531
-----------------------------------------------------------------
</TABLE>
Deposits: Average total deposits (including time deposits greater than $100
thousand) were $1.98 billion in 1997 compared to $1.94 billion in 1996, an
increase of $44.8 million. Increases were concentrated in time deposits
(including deposits greater than $100,000) and demand deposits. Total time
deposits increased by 6.2% between 1996 and 1997 and demand deposits increased
by 7.5% during the same time period. Decreases occurred in the savings and money
market deposit categories which decreased by 1.3% and 12.4%, respectively. The
increases in time deposits reflect the continuing trend among customers to seek
higher interest rates by moving funds into this deposit vehicle away, primarily,
from regular savings accounts. The increase in demand deposits is noteworthy
because these accounts represent the principal banking relationship for most
customers. The increase in deposits reflects the impact of the new branch
offices opened since 1995 and the continuing focus at TrustCo on providing core
banking services faster, cheaper and better than its competitors. The TrustCo
demand deposit account has one of the lowest minimum balance requirement
compared to other financial institutions operating in the same banking
territory.
For 1997, TrustCo had $101.3 million of certificates of deposit with balances
greater than $100,000. The vast majority of these accounts are retail in nature
and represent traditional TrustCo customers attracted to the Bank by the same
factors as other banking customers. TrustCo does not offer these depositors any
differential in interest rates, services or terms.
The overall cost of interest bearing deposits was 4.35% in 1997 compared to
4.26% in 1996. The increase in average balance of interest bearing deposits
coupled with the 9 basis points increase in the average cost resulted in an
increase of $3.2 million in interest expense to $80.9 million in 1997.
The Company strives to maintain competitive rates on deposit accounts and to
attract customers through a combination of competitive interest rates,
52
<PAGE>
Management's Discussion and Analysis (continued)
strong customer service, and convenient banking locations. In this fashion,
TrustCo is able to attract deposit customers looking for a long-term banking
relationship, and to cross sell banking services utilizing the deposit account
relationship as the starting point.
<TABLE>
Maturity of Time deposits over $100 thousand
<CAPTION>
(dollars in thousands) As of December 31, 1997
<S> <C> <C>
Under 3 months........................$ 36,594
3 to 6 months ........................ 13,629
6 to 12 months ....................... 20,928
Over 12 months........................ 41,448
---------
Total.................................$112,599
---------
</TABLE>
Other funding sources: The Company had $117.2 million of average short-term
borrowings outstanding during 1997 compared to $98.3 million in 1996. The
average cost of short-term borrowings was 4.76% in 1997 and 4.67 % in 1996. This
resulted in an increase in interest expense of approximately $1.0 million.
Virtually all of the short-term borrowing category consists of the Trustco
Short-Term Investment Account, which was developed by the Bank to facilitate
overnight deposits from the Company's Trust Department. Daily balances are
transferred by the Trust Department into this account, and are collateralized by
securities owned by the Bank.
<TABLE>
Volume and Yield Analysis
<CAPTION>
(dollars in thousands) 1997 vs. 1996 1996 vs. 1995
Increase Due to Due to Increase Due to Due to
(Decrease) Volume Rate (Decrease) Volume Rate
Interest income (TE):
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold...............$ 127 (411) 538 5,091 6,326 (1,235)
Securities available for sale:
Taxable...................... 1,542 1,329 213 16,623 16,296 327
Tax-exempt................... 2,014 1,876 138 5,026 5,045 (19)
--------------------------------------------------------------------------------------------
Total securities available
for sale.................. 3,556 3,205 351 21,649 21,341 308
Investment securities:
Taxable...................... -- -- -- (18,052) (18,052) --
Tax-exempt................... -- -- -- (2,963) (2,963) --
--------------------------------------------------------------------------------------------
Total investment securities.. -- -- -- (21,015) (21,015) --
Loans.......................... 2,173 2,303 (130) (27) 2,860 (2,887)
--------------------------------------------------------------------------------------------
Total interest income........ 5,856 5,097 759 5,698 9,512 (3,814)
--------------------------------------------------------------------------------------------
Interest expense:
Interest-bearing checking accounts 5 5 -- (765) 57 (822)
Savings........................ (390) (298) (92) (1,236) 1,811 (3,047)
Time deposits
and money markets........... 3,582 2,847 735 1,395 966 429
Short-term borrowings.......... 981 896 85 2,817 2,814 3
Long-term debt................. -- -- -- (69) (69) --
--------------------------------------------------------------------------------------------
Total interest expense....... 4,178 3,450 728 2,142 5,579 (3,437)
--------------------------------------------------------------------------------------------
Net interest income (TE).....$ 1,678 1,647 31 3,556 3,933 (377)
--------------------------------------------------------------------------------------------
Increases and decreases in interest income and interest expense due to both rate and volume have been allocated to the two
categories of variances (volume and rate) based on the percentage relationship of such variances to each other.
</TABLE>
53
<PAGE>
Management's Discussion and Analysis (continued)
Net Interest Income: Net interest income is the principal contributor to net
income. Therefore, growth in net income is directly dependent upon the ability
of the Company to increase net interest income. TrustCo's 1997 increase in net
interest income was primarily the result of increases in the average balance of
earning assets.
Taxable equivalent net interest income for 1997 was $88.7 million, up $1.7
million over 1996. The average balance of interest earning assets increased by
$67.9 million or 3.2% over 1996. The yield on average interest earning assets
increased by 2 basis points to 7.95% in 1997 compared to 7.93% in 1996, while
the average cost on interest-bearing liabilities increased 10 basis points
during 1997 to 4.38% from 4.28% in 1996. Likewise the average balance of
interest-bearing liabilities increased from $1.92 billion in 1996 to $1.98
billion in 1997. Total interest expense for 1997 was $86.5 million, an increase
of $4.2 million over the 1996 expense of $82.3 million. Approximately 80% of the
increase in interest expense for 1997 is the result of the increase in the
average balance of interest bearing liabilities.
Capital Resources
Consistent with its long-term goal of operating a sound and profitable
financial organization, TrustCo strives to maintain strong capital ratios and to
qualify as a "well capitalized" bank in accordance with federal regulatory
requirements. Historically most of the Company's capital requirements have been
provided through retained earnings generated. New issues of equity securities
have not been required to support the Company's growth.
<TABLE>
Dividends per Share
(chart omitted)
<CAPTION>
<S> <C>
1995 $0.76
1996 $0.86
1997 $0.99
</TABLE>
A basic element of TrustCo's operating philosophy is that the Company will
not retain excess capital. All capital that has been generated by the Company
that is in excess of the levels considered by management to be necessary for the
safe and sound operation of the Company has been distributed to the shareholders
in the form of cash dividends. Consequently, the capital ratios that are
maintained are adequate but not excessive. This philosophy has led to a cash
dividend payout ratio of 72.3% of net income for 1997, 70.4% for 1996, and 69.6%
for 1995. These are significant payouts to the Company's shareholders and are
considered by management to be a prudent use for the excess capital in TrustCo.
As to the likelihood of future dividends, the philosophy stated above will
continue in 1998 and, where appropriate, the Board of Directors will declare
dividends consistent with that operating philosophy.
TrustCo's Tier 1 capital was $163.0 million or 13.43% of risk-adjusted assets
at December 31, 1997, and $157.2 million or 12.99% of risk-adjusted assets at
December 31, 1996. Tier 1 capital to average assets at December 31, 1997 was
7.00%, as compared to 7.04% in 1996. At December 31, 1997 and 1996, the
subsidiary bank, Trustco, met the regulatory definition of a "well capitalized"
institution.
Risk Management
The responsibility for balance sheet risk management oversight is the
function of the Asset Allocation Committee. This committee meets monthly and
includes the executive officers of the Company as well as other department
managers as appropriate. The meetings include a review of balance sheet
structure, formulation of strategy in light of expected economic conditions, and
comparison to established guidelines to control exposures to various types of
risk.
Credit Risk
Credit risk is managed through a network of loan officer authorities, review
committees, loan policies, and oversight from the senior executives of the
Company. Management follows a policy of continually identifying, analyzing and
evaluating the credit risk inherent in the loan portfolio. As a result of
management's ongoing reviews of the loan portfolio, loans are placed in
nonaccrual status,either due to the delinquent status of the principal and/or
interest payments, or based on a judgment by management that, although payment
of principal and/or interest is current, such action is prudent. Loans are
generally placed in nonaccrual status when principal and/or interest is three
payments past due. Thereafter, no interest is taken into income unless received
in cash or until such time as the borrower demonstrates a sustained ability to
make scheduled payments of interest and principal.
Nonperforming Assets
Nonperforming assets include loans in nonaccrual status, loans which have
been treated as troubled debt restructurings, loans past due three payments or
more and still accruing interest, and foreclosed real estate properties.
Nonperforming assets at year end 1997 totalled $20.0 million, a decrease of
$600 thousand from the
54
<PAGE>
Management's Discussion and Analysis (continued)
balance of $20.6 million at year end 1996. Nonperforming loans decreased from
$14.0 million in 1996 to $10.7 million at year end 1997. Nonperforming loans
as a percentage of the total loan portfolio were 0.82% in 1997 and 1.13% in
1996.
Included in nonperforming loans at year end 1997 are $6.3 million of loans in
nonaccrual status, a reduction of $4.5 million, or 41.4%, from year end 1996
balances. Loans past due three payments or more and still accruing interest of
$ 1 . 1 million are up $270 thousand from the 1996 year end balance.
Restructured loans in 1996 were $2.5 million, compared to $3.3 million in
1997. Adherence to strong underwriting standards and vigorous loan collection
efforts have been cornerstones of the operating philosophy of TrustCo, and have
assisted the Company in avoiding many of the pitfalls that others in the banking
community have experienced.
TrustCo has a diversified loan portfolio with no concentrations to any one
borrower or in any single industry. TrustCo has a significant portfolio of
residential mortgage loans to borrowers in the Upstate New York region.
Nonperforming assets at year end 1997 include $9.3 million of foreclosed
properties, compared to $6.5 million in 1996. Once it is determined that a
borrower is unable to repay the loan balance, TrustCo takes appropriate action
with respect to the collateral securing the loan balance. The increase in the
foreclosed properties balance is the result of efforts by the Company to
complete collection efforts on nonperforming loans. Once properties are included
in the foreclosed properties category, management takes decisive action to
quickly dispose of them. Management believes that the $9.3 million balance of
foreclosed properties is realizable through the normal course of disposing of
these properties.
There are no other loans in the Bank's portfolio that management is aware of
that pose significant risk of the eventual non-collection of principal and
interest. As of December 31, 1997, there were no other loans classified for
regulatory purposes that management reasonably expects will materially impact
future operating results, liquidity, or capital resources.
TrustCo has no advances to borrowers or projects located outside the United
States.
Allowance for Loan Losses
The balance in the allowance for loan losses has been accumulated over the
years through periodic provisions, and is available to absorb losses on loans
which management determines are uncollectible. The adequacy of the allowance is
evaluated continuously, with emphasis on nonperforming and other loans that
management believes warrant special attention. The balance of the allowance is
maintained at a level that is, in management's judgment, representative of the
loan portfolio's inherent risk given present and anticipated conditions.
<TABLE>
Allowance for Loan Loss
(chart omitted)
<CAPTION>
<S> <C>
1995 $48.3
1996 $51.6
1997 $53.5
</TABLE>
<TABLE>
Nonperforming Assets
<CAPTION>
(dollars in thousands) As of December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Loans in nonaccrual status......................$ 6,298 10,748 12,832 6,370 10,227
Loans past due 3 payments or more............... 1,060 792 1,696 4,436 6,567
Restructured loans.............................. 3,294 2,495 1,130 910 --
---------------------------------------------------------------------
Total nonperforming loans....................... 10,652 14,035 15,658 11,716 16,794
Foreclosed real estate.......................... 9,309 6,518 3,732 5,080 4,309
---------------------------------------------------------------------
Total nonperforming assets......................$ 19,961 20,553 19,390 16,796 21,103
---------------------------------------------------------------------
Allowance for loan losses.......................$ 53,455 51,561 48,320 38,851 34,087
Allowance coverage of nonperforming loans....... 5.02x 3.67 3.09 3.32 2.03
Nonperforming loans as a % of total loans....... 0.82% 1.13 1.28 1.01 1.56
Nonperforming assets as a % of total assets..... 0.84 0.91 0.89 0.85 1.07
---------------------------------------------------------------------
</TABLE>
55
<PAGE>
Management's Discussion and Analysis (continued)
The table "Summary of Loan Loss Experience" includes an analysis of the
changes to the allowance for the past five years. Loans charged off in 1997 were
$6.6 million, compared to $5.6 million in 1996. Recoveries were $3.1 million in
1997 and $2.3 million in 1996. The provision recorded on the consolidated income
statement in 1997 was $5.4 million compared to $6.6 million in 1996.
Net charge offs as a percentage of average loans were 0.28% in 1997, compared
to 0.27% in 1996. The allowance for loan losses as a percentage of loans
outstanding was 4.12% in 1997 and 4.15% in 1996. The Company has a policy of
recognizing problem loan charge offs early and pursuing collection efforts
aggressively. This policy of early intervention has proven to be a cornerstone
of the strong lending performance that TrustCo has achieved.
TrustCo adopted the provisions of Statement of Financial AccountingStandards
No. 114 (Statement 114),"Accounting by Creditors for Impairment of a Loan," and
Statement of Financial Accounting Standards No. 118(Statement 118), "Accounting
by Creditors for Impairment of a Loan -- Income Recognition and Disclosure," as
of January 1, 1995.
The enclosed consolidated financial statements have been presented in
accordance with these accounting pronouncements. The footnotes to the
consolidated financial statements provide additional details with respect to
the adoption and accounting requirements of these pronouncements.
TrustCo has classified nonaccrual commercial and commercial real estate
loans, as well as all loans restructured under a troubled debt restructuring, as
impaired loans since the adoption of these accounting requirements.
At year end 1997 and 1996, there were $3.7 million and $8.6 million,
respectively, of impaired loans.
<TABLE>
Allowance to Loans Outstanding
(chart omitted)
<CAPTION>
<S> <C>
1995 3.94%
1996 4.15%
1997 4.12%
</TABLE>
The average balances of impaired loans during 1997 and 1996 were $6.0 million
and $8.5 million, respectively. The Company recognized approximately $350
thousand and $560 thousand of interest income on these loans in 1997 and 1996,
respectively.
56
<PAGE>
Management's Discussion and Analysis (continued)
<TABLE>
Summary of Loan Loss Experience
<CAPTION>
(dollars in thousands)
1997 1996 1995 1994 1993
Amount of loans outstanding at end of year
<S> <C> <C> <C> <C> <C>
(less unearned income)......................$1,298,276 1,241,882 1,226,142 1,161,789 1,075,564
Average loans outstanding during year
(less average unearned income).............. 1,260,771 1,227,407 1,187,929 1,122,698 1,044,855
-------------------------------------------------------------------------
Balance of allowance at beginning of year..... 51,561 48,320 38,851 34,087 26,919
Loans charged off:
Commercial.................................. 3,506 3,213 4,823 3,864 5,866
Real estate................................. 2,014 1,498 1,694 53 199
Installment................................. 1,059 937 821 907 676
-------------------------------------------------------------------------
Total..................................... 6,579 5,648 7,338 4,824 6,741
-------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial.................................. 2,718 1,963 3,504 1,125 1,810
Real estate................................. 169 110 258 -- --
Installment................................. 172 239 347 407 523
-------------------------------------------------------------------------
Total..................................... 3,059 2,312 4,109 1,532 2,333
-------------------------------------------------------------------------
Net loans charged off......................... 3,520 3,336 3,229 3,292 4,408
-------------------------------------------------------------------------
Additions to allowance charged to
operating expense........................... 5,414 6,577 12,698 8,056 11,576
-------------------------------------------------------------------------
Balance of allowance at end of year...........$ 53,455 51,561 48,320 38,851 34,087
-------------------------------------------------------------------------
Net charge offs as a percent of average
loans outstanding during year
(less average unearned income).............. 0.28% 0.27 0.27 0.29 0.42
Allowance as a percent of loans outstanding
at end of year.............................. 4.12 4.15 3.94 3.34 3.17
-------------------------------------------------------------------------
</TABLE>
Market Risk
The Company's principal exposure to market risk is with respect to interest
rate risk. Interest rate risk is the potential for economic loss due to future
interest rate changes. These economic losses can be reflected as a loss of
future net interest income and/or a loss of current market value.
Interest Rate Risk
Management of interest rate risk involves continual monitoring of the
relative sensitivity of asset and liability portfolios to changes in rates due
to maturities or repricing. Forecasting models are utilized to quantify the
impact of changes in rates on the Company's net income. Specific targets for
interest rate sensitivity have been established by the Company.
The objective of interest rate management is to maintain an appropriate
balance between income growth and the risk associated with maximizing income
through the mismatch of the timing of interest rate changes between assets and
liabilities. Perfectly matching this funding can eliminate interest rate risk
but net interest income is not always enhanced by this action.
One measure of interest rate risk, the so called gap, is illustrated in the
table "Interest Rate Sensitivity." The table measures the incremental and
cumulative gap, or the difference between assets and liabilities subject to
repricing/maturity during the periods indicated. For purposes of this analysis,
the maturity and repricing of loans is based on the expected cash flows or
earliest repricing date. For securities available for sale, mortgage-
backed securities are stated using anticipated cash flows over their average
life, and debt securities are stated at final maturity. Equity securities
that the Bank is required to hold are categorized in the rate insensitive
column for this presentation. Other equity securities are shown in the 0-90
days category. Interest-bearing checking, money market, demand, and savings
accounts are presented with a maturity or repricing cycle over the full interest
rate cycle and TrustCo's actual experience, even though they are subject to
immediate withdrawal. Time deposit accounts are presented based upon their
maturity dates.
At December 31, 1997, the Company's gap position indicates an excess of
assets repricing in the 0 to 90 day period of $350.0 million. This positive gap
position is the result of management's decision to retain $395.0 million of
federal funds sold at year end 1997 for potential reinvestment in 1998. The gap
position turns negative (an excess of liabilities subject to repricing over
assets that can reprice during that time period) in the 91 to 365 day period by
57
<PAGE>
Management's Discussion and Analysis (continued)
<TABLE>
Interest Rate Sensitivity
<CAPTION>
(dollars in thousands)
At December 31, 1997
Repricing, or able to be repriced, in:
0-90 91-365 1-5 Over 5 Rate
Days Days Years Years Insensitive Total
Assets:
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold.....................$395,000 -- -- -- -- 395,000
Securities available for sale.......... 52,469 24,278 122,296 390,303 12,553 601,899
Loans, net of unearned income.......... 252,368 161,537 181,951 696,122 6,298 1,298,276
Noninterest rate sensitive assets...... -- -- -- -- 77,090 77,090
------------------------------------------------------------------------------
Total assets....................... 699,837 185,815 304,247 1,086,425 95,941 2,372,265
------------------------------------------------------------------------------
Cumulative total assets..................$699,837 885,652 1,189,899 2,276,324 2,372,265 2,372,265
------------------------------------------------------------------------------
Liabilities and shareholders' equity:
Deposits:
Interest bearing deposits............$214,914 433,282 838,370 404,952 -- 1,891,518
Non-interest bearing deposits........ 7,078 13,607 50,431 59,229 -- 130,345
------------------------------------------------------------------------------
Total deposits..................... 221,992 446,889 888,801 464,181 -- 2,021,863
Borrowings............................. 127,850 -- -- -- -- 127,850
Noninterest rate sensitive liabilities. -- -- -- -- 43,727 43,727
Shareholders' equity................... -- -- -- -- 178,825 178,825
------------------------------------------------------------------------------
Total liabilities and
shareholders'equity......... 349,842 446,889 888,801 464,181 222,552 2,372,265
------------------------------------------------------------------------------
Cumulative total liabilities and
shareholders' equity..................$349,842 796,731 1,685,532 2,149,713 2,372,265 2,372,265
------------------------------------------------------------------------------
Incremental gap:
Interest sensitivity gap...............$349,995 (261,074) (584,554) 622,244
Gap as a % of earning assets........... 15.25% (11.37) (25.47) 27.11
Interest sensitive assets
to liabilities................. 204.17 42.89 36.29 268.28
Cumulative gap:
Interest sensitivity gap...............$349,995 88,921 (495,633) 126,611
Gap as a % of earning assets........... 15.25% 3.87 (21.59) 5.52
Interest sensitive assets to
liabilities.................... 204.17 114.12 73.70 112.72
------------------------------------------------------------------------------
</TABLE>
$261.1 million. This situation occurs as a result of the amount of deposits
that are subject to repricing during this time period. However, for the period
from 0 days to 1 year, the Company has a cumulative positive gap position of
$88.9 million. Interest rate sensitivity using gap analysis is most useful for
the period of less than one year.
The Company's gap position in relation to products, services, and the
marketplace is constantly under evaluation by the Asset Allocation Committee.
There are several significant shortcomings inherent in the method of analysis
presented in the Interest Rate Sensitivity table. For example, although certain
assets and liabilities have similar periods to maturity or to repricing, they
may react in different degrees to changes in market interest rates. Also, the
interest rates on certain types of assets and liabilities may fluctuate in
advance of changes in market interest rates, while other interest rates may lag
behind changes in market interest rates. Additionally, certain assets have
features which restrict changes in interest rates on a short-term basis and over
the life of the asset (certain annual caps and lifetime caps). Further, in the
event of significant changes in interest rates, prepayment and early withdrawal
levels would be likely to deviate significantly from those assumed in the table.
Some borrowers' ability to service their debt may be hampered by a significant
interest rate increase. Management takes these factors into account when
reviewing the Bank's gap position and establishing future asset/liability
strategy.
Liquidity Risk
TrustCo seeks to obtain favorable funding sources and to maintain prudent
levels of liquid assets in order to satisfy varied liquidity demands. In
addition to serving as a funding source for maturing obligations, liquidity
provides flexibility in responding to customer initiated needs. Many factors
affect the ability to meet liquidity needs, including changes in the markets
served by the Bank's network of branches, the mix of assets and liabilities, and
general economic conditions.
The Company actively manages its liquidity position through target ratios
established under its Asset/Liability Management policies. Continual mon-
58
<PAGE>
Management's Discussion and Analysis (continued)
itoring of these ratios, both historically and through forecasts under
multiple interest rate scenarios, allows TrustCo to employ strategies necessary
to maintain adequate liquidity levels. Management has also developed various
liquidity alternatives should abnormal situations arise.
The Company achieves its liability-based liquidity objectives in a variety of
ways. Net liabilities can be classified into three categories for the purposes
of managing liability-based liquidity: net core deposits, purchased money, and
capital market funds. TrustCo seeks deposits that are dependable and
predictable, ones that are based as much on the level and quality of service as
they are on interest rate. At December 31, 1997, core deposits (total deposits
less time deposits greater than $100,000) amounted to $1.91 billion. Average
balances of core deposits are detailed in the table "Average Sources of
Funding."
In addition to core deposits, another source of liability-based funding
available to TrustCo is purchased money, which consists of long-term and
short-term borrowings, federal funds purchased, securities sold under repurchase
agreements, and time deposits greater than $100,000. The average balances of
these purchased liabilities are detailed in the table "Average Sources of
Funding." During 1997, the average balance of purchased liabilities was $218.5
million, compared with $185.0 million in 1996, and $121.0 million in 1995.
In addition, TrustCo has approximately $200 million available under lines of
credit with the Federal Home Loan Bank of New York.
Off-Balance Sheet Risk
Commitments to extend credit: TrustCo makes contractual commitments to extend
credit, and extends lines of credit which are subject to the Bank's credit
approval and monitoring procedures. At December 31, 1997 and 1996, commitments
to extend credit in the form of loans, including unused lines of credit,
amounted to $223.8 million and $222.5 million, respectively. In management's
opinion, there are no material commitments to extend credit that represent
unusual risk.
Letters of credit and standby letters of credit: TrustCo guarantees the
obligations or performance of customers by issuing letters of credit and standby
letters of credit to third parties. These letters of credit are used to support
third party debt, such as corporate debt issuances, industrial revenue bonds,
and municipal securities. The risk involved in letters of credit is essentially
the same as the credit risk involved in extending loan facilities to customers,
and they are subject to the same credit standards and management procedures in
effect to monitor other credit risks. At December 31, 1997 and 1996, outstanding
standby letters of credit were approximately $7.7 million and $12.0 million,
respectively.
Other Off-Balance Sheet Risk: TrustCo does not engage in activities involving
interest rate swaps, forward placement contracts, options, or any other
instrument commonly referred to as derivatives. Management believes these
instruments pose a high degree of risk, and that investing in them is
unnecessary.
Noninterest Income and Expense
Noninterest Income: Noninterest income is a significant source of revenue for
the Company and an important factor in overall results. Total noninterest income
was $17.2 million in 1997, $10.3 million in 1996 and $14.1 million in 1995.
Included in the 1997 results are approximately $200 thousand of securities
losses compared with losses of $4.5 million in 1996 and gains of $240 thousand
in 1995. Excluding securities transactions, noninterest income would have been
$17.4 million and $14.8 million in 1997 and 1996, respectively.
The Trust Department contributes the largest recurring portion of noninterest
income through fees generated from the performance of fiduciary and investment
management services. Income from these fiduciary activities totalled $6.6
million in 1997, $5.6 million in 1996 and $4.9 million in 1995. Trust fees are
calculated as a percentage of the assets under management by the Trust
Department. During 1997 assets under management increased to $1.07 billion from
$950 million at year end 1996. The increase in the assets under management is
due to the Trust Department's success at attracting new customers and to market
appreciation.
<TABLE>
Noninterest income
<CAPTION>
(dollars in thousands)
1997 vs. 1996
1997 1996 1995 Amount Percent
<S> <C> <C> <C> <C> <C>
Trust department income..........................$ 6,554 5,556 4,890 998 18.0%
Fees for services to customers................... 7,671 6,981 7,003 690 9.9
Net gain (loss) on securities transactions....... (166) (4,536) 243 4,370 96.3
Other............................................ 3,163 2,312 1,931 851 36.8
-----------------------------------------------------------------------------
Total noninterest income.......................$17,222 10,313 14,067 6,909 67.0%
-----------------------------------------------------------------------------
</TABLE>
59
<PAGE>
Management's Discussion and Analysis (continued)
<TABLE>
Noninterest Expense
<CAPTION>
(dollars in thousands)
1997 vs. 1996
1997 1996 1995 Amount Percent
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits...................$23,162 21,532 19,895 1,630 7.6%
Net occupancy expense............................ 5,270 4,178 4,562 1,092 26.1
Equipment expense................................ 4,165 3,289 3,403 876 26.6
FDIC insurance expense........................... 246 7 2,101 239 3,414.3
Professional services............................ 3,489 3,676 3,585 (187) (5.1)
Other real estate expenses....................... 1,056 718 3,120 338 47.1
Other............................................ 8,838 8,615 7,774 223 2.6
----------------------------------------------------------------------------
Total noninterest expense......................$46,226 42,015 44,440 4,211 10.0%
----------------------------------------------------------------------------
</TABLE>
Changes in fees for services to customers reflect the fee scale used by the
Bank for pricing its services and the volume of services customers utilized.
Included in other noninterest income for 1997 is approximately $500 thousand
resulting from the gain on sales of premises and equipment. Proceeds from the
sale of these fixed assets were approximately $4.0 million.
Noninterest Expense: Noninterest expense was $46.2 million in 1997, compared
with $42.0 million in 1996 and $44.4 million in 1995. TrustCo's operating
philosophy stresses the importance of monitoring and controlling the level of
noninterest expense. The efficiency ratio is a strong indicator of how well
controlled and monitored these expenses are for a banking enterprise.
TrustCo's efficiency ratio was 40.6% in 1997, 39.5% in 1996 and 42.5% in 1995.
The general industry goal is the attainment of a 60% efficiency ratio. TrustCo
has consistently outperformed this industry goal by a wide margin since 1994.
Salaries and employee benefits are the most significant component of
noninterest expense. For 1997, these expenses amounted to $23.2 million,
compared with $21.5 million in 1996. The increase in salaries and employee
benefits reflects the addition of new branches in 1996 and 1997 and salary
adjustments given to employees.
Net occupancy costs increased to $5.3 million in 1997 from $4.2 million in
1996 and $4.6 million in 1995. The increased occupancy costs are primarily the
result of added charges associated with the new branch facilities. During 1997,
FDIC insurance premiums increased to approximately $250 thousand. This premium
represents the minimum amount that the FDIC assesses and reflects the fact that
Trustco Bank is a highly rated financial institution from a regulatory
perspective. Other real estate expenses increased slightly due to the cost
incurred to hold or dispose of foreclosed properties.
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The year 2000 problem is
pervasive and complex as virtually every computer operation will be affected in
some way by the roll over of the two digit year value to 00. TrustCo has been
working on this problem for several years and has developed a plan for all
reprogramming efforts to be completed during 1998, allowing adequate time for
testing. The total cost associated with this project has not had, and is not
anticipated to have a material effect on the Company's financial position or
results of operations.
Income Tax
In 1997, TrustCo recognized income tax expense of $18.9 million, as compared
to $17.3 million in 1996 and $12.8 million in 1995. The tax expense on the
Company's income was different than tax expense at the statutory rate of 35% due
primarily to tax exempt income, the effect of New York State income taxes, and
the reduction in 1995 of the deferred tax asset valuation reserve.
Deferred tax assets are recognized subject to management's judgment that
realization is more likely than not. During 1995, the valuation reserve was
reduced as a result of the resolution of several tax return audits and
management's reassessment of the realization of certain deferred tax assets. The
valuation allowance of $2.1 million at December 31,
60
<PAGE>
Management's Discussion and Analysis (continued)
1997 and 1996, is reserved primarily for federal and state tax law
restrictions on the deductibility of certain temporary differences, including
the lack of state carry backs and carry forwards.
Based primarily on the sufficiency of historical and future taxable income,
management believes it is more likely than not that the remaining net deferred
tax assets of $38.2 million and $34.5 million at December 31, 1997 and 1996,
respectively, will be realized.
Impact of Inflation and Changing Prices
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles which require the measurement of
financial position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increasing costs of
operations. Unlike most industrial companies, nearly all the assets and
liabilities of the Company are monetary.
As a result, changes in interest rates have a greater impact on the Company's
performance than do the effects of general levels of inflation, since interest
rates do not necessarily move in the same direction or to the same extent as the
price of goods and services.
Impact of Changes in Accounting Standards
Accounting for Stock-Based Compensation: In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (Statement 123), which
establishes a fair value based method of accounting for stock options, such as
the Company's stock option plans. Under Statement 123, entities can recognize
stock-based compensation expense in the basic financial statements using either
(1) the intrinsic value based approach set forth in the Accounting Principles
Board Opinion No. 25 (APB Opinion 25) or (2) the fair value based method
introduced in Statement 123. Companies electing to remain with the accounting in
APB Opinion 25 must make pro forma disclosures of net income and earnings per
share, as if the fair value based method of accounting defined in Statement 123
had been applied. Under the method currently utilized by TrustCo (APB Opinion
25), compensation expense is determined based upon the option's intrinsic value.
Under the fair value based method introduced by Statement 123, compensation
expense is based on the estimate of the option's fair value at the grant date
and is generally recognized over the vesting period. The Company adopted the
provisions of Statement 123 as of January 1, 1996, and has elected to continue
to measure stock-based compensation cost in accordance with APB Opinion 25.
Therefore, the pro forma disclosures required by Statement 123 have been
included in the footnotes to the consolidated financial statements.
Transfer of Financial Assets and Extinguishment of Liabilities: In June 1996,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (Statement 125), which
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishment of liabilities based on a
financial-components approach that focuses on control. Statement 125 extends the
"available for sale" and "trading" approach of Statement 115 to non-security
financial assets that can be contractually prepaid or otherwise settled in such
a way that the holder of the asset would not recover substantially all of its
recorded investment. In addition, Statement 125 amends Statement 115 with
respect to the classification as held to maturity of a security that can be
prepaid or settled at a loss to the holder of the security. Statement 125 is
effective for financial assets held on or acquired after January 1, 1997.
Certain aspects of Statement 125 were amended by Statement of Financial
Accounting Standards No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125." The adoption of Statement 125 did not
have a material impact on the Company's consolidated financial statements.
Earnings Per Share: In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 128, "Earnings per
Share" (Statement 128), which establishes standards for computing and presenting
earnings per share (EPS). This statement simplifies the standards for computing
EPSand supersedes Accounting Principals Board Opinion No. 15, "Earnings per
Share" and related interpretations. Statement 128 replaces the presentation of
primary EPSwith the presentation of basic EPS. It also requires dual
presentation of basic and diluted EPSon the face of the income statement for all
entities with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPScomputation.
Basic EPS is computed by dividing income available to common shareholders by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity (such as the Company's stock options). This Statement is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods. Earlier application is not permitted.
61
<PAGE>
Management's Discussion and Analysis (continued)
<TABLE>
Summary of unaudited quarterly financial information
<CAPTION>
(dollars in thousands, except per share data)
1997 1996
Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
Income statement:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income..............$41,895 42,863 43,646 43,601 172,005 41,508 41,822 41,590 41,727 166,647
Interest expense............. 20,888 21,377 22,034 22,221 86,520 20,377 20,290 20,785 20,890 82,342
-------------------------------------------------------------------------------------------------
Net interest income ......... 21,007 21,486 21,612 21,380 85,485 21,131 21,532 20,805 20,837 84,305
Provision for loan losses.... 1,210 1,185 1,345 1,674 5,414 3,110 854 943 1,670 6,577
-------------------------------------------------------------------------------------------------
Net interest income
after provision for
loan losses................ 19,797 20,301 20,267 19,706 80,071 18,021 20,678 19,862 19,167 77,728
Noninterest income........... 3,536 3,809 4,326 5,551 17,222 3,127 1,025 2,409 3,752 10,313
Noninterest expense.......... 11,204 11,587 11,111 12,324 46,226 10,446 10,675 10,248 10,646 42,015
-------------------------------------------------------------------------------------------------
Income before
income taxes............... 12,129 12,523 13,482 12,933 51,067 10,702 11,028 12,023 12,273 46,026
Income tax expense........... 4,536 4,670 4,999 4,687 18,892 4,017 4,115 4,556 4,639 17,327
-------------------------------------------------------------------------------------------------
Net income................... 7,593 7,853 8,483 8,246 32,175 6,685 6,913 7,467 7,634 28,699
-------------------------------------------------------------------------------------------------
Per share data:
Basic earnings............... .32 .33 .36 .35 1.37 .29 .30 .32 .33 1.23
Diluted earnings............. .31 .33 .35 .34 1.33 .28 .29 .31 .32 1.20
Cash dividends declared...... .24 .24 .24 .28 .99 .21 .21 .21 .24 .86
-------------------------------------------------------------------------------------------------
</TABLE>
This Statement requires restatement of all prior-period EPS data
presented. All of the EPS disclosures made in this annual report have been
restated for the effects of Statement 128.
Information about Capital Structure: In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 129, "Disclosure of Information about Capital Structure" (Statement 129),
which establishes standards for disclosure about a company's capital structure.
In accordance with Statement 129, companies are required to provide in the
financial statements a complete description of all aspects of their capital
structure, including call and put features, redemption requirements and
conversion options. The disclosures required by Statement 129 are effective for
financial statements for periods ending after December 15, 1997. Management has
provided the required information in this annual report.
Comprehensive Income: In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (Statement 130), which establishes standards for reporting
and display of comprehensive income. Statement 130 states that 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 unrealized gain
or loss on securities available for sale, foreign currency items and minimum
pension liability adjustments. This statement is effective for fiscal years
beginning after December 15, 1997. Management anticipates developing the
required information for inclusion in the 1998 interim consolidated financial
statements.
Segment Reporting: In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (Statement 131), which
establishes standards for reporting by public companies about operating segments
of their business. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
This statement is effective for periods beginning after December 15, 1997.
Management anticipates developing the required information for inclusion in the
1998 annual report.
62
<PAGE>
Management's Discussion and Analysis (continued)
<TABLE>
Five Year Summary of Financial Data
<CAPTION>
(dollars in thousands, except per share data)
Years Ended December 31,
1997 1996 1995 1994 1993
Statement of income data:
<S> <C> <C> <C> <C> <C>
Interest income...............................$ 172,005 166,647 161,552 140,282 133,657
Interest expense.............................. 86,520 82,342 80,200 60,698 61,619
------------------------------------------------------------------------
Net interest income........................... 85,485 84,305 81,352 79,584 72,038
Provision for loan losses..................... 5,414 6,577 12,698 8,056 11,576
------------------------------------------------------------------------
Net interest income after provision
for loan losses............................. 80,071 77,728 68,654 71,528 60,462
Noninterest income............................ 17,222 10,313 14,067 4,560 19,176
Noninterest expense........................... 46,226 42,015 44,440 40,560 43,502
------------------------------------------------------------------------
Income before income taxes.................... 51,067 46,026 38,281 35,528 36,136
Income tax expense............................ 18,892 17,327 12,754 12,640 12,516
------------------------------------------------------------------------
Income before cumulative effect of
change in accounting principle.............. 32,175 28,699 25,527 22,888 23,620
Cumulative effect of a change in
accounting principle........................ -- -- -- -- (3,295)
------------------------------------------------------------------------
Net income....................................$ 32,175 28,699 25,527 22,888 20,325
------------------------------------------------------------------------
Share data (1):
Average equivalent diluted shares outstanding
(in thousands).............................. 24,282 23,999 23,767 23,562 23,449
Book value....................................$ 7.64 6.93 6.86 6.00 5.62
Cash dividends................................ 0.99 0.86 0.76 0.62 0.50
Basic earnings................................ 1.37 1.23 1.10 0.99 0.88
Diluted earnings.............................. 1.33 1.20 1.07 0.97 0.87
------------------------------------------------------------------------
Financial:
Return on average assets...................... 1.40% 1.29 1.23 1.15 1.04
Return on average shareholders' equity (2).... 20.23 19.05 18.03 17.01 16.18
Cash dividend payout ratio.................... 72.34 70.38 69.55 62.52 56.88
Tier 1 capital as a % of total risk adjusted
assets...................................... 13.43 12.99 12.45 12.08 12.18
Total capital as a % of total risk adjusted
assets...................................... 14.72 14.28 13.73 13.35 13.45
Efficiency ratio.............................. 40.61 39.51 42.52 41.82 44.63
Net interest margin........................... 4.02 4.07 4.18 4.25 3.99
------------------------------------------------------------------------
Average balances:
Total assets..................................$ 2,302,598 2,220,535 2,073,391 1,994,497 1,946,715
Earning assets................................ 2,204,725 2,136,826 1,994,240 1,910,368 1,857,722
Loans, net.................................... 1,260,771 1,227,407 1,187,929 1,122,698 1,044,855
Allowance for loan losses..................... (53,173) (51,233) (45,086) (37,334) (30,214)
Securities available for sale................. 623,001 580,919 301,080 332,980 192,433
Investment securities......................... -- -- 292,908 250,812 455,136
Deposits...................................... 1,981,223 1,936,445 1,859,070 1,808,336 1,767,531
Short-term borrowings......................... 117,184 98,324 38,090 18,129 17,447
Long-term debt................................ -- -- 788 2,840 3,870
Shareholders' equity.......................... 167,273 155,927 145,469 136,977 125,648
(1) Share and per share data have been adjusted for a 15% stock split in 1997 and 1996, a 6 for 5 stock split in 1995, a 10% stock
dividend in 1994 and a 2 for 1 stock split in 1993.
(2) Average shareholders' equity excludes the market adjustment for securities available for sale.
</TABLE>
Forward Looking Statements
Except for historical information contained in this "Management's Discussion and
Analysis of Operations," the matters contained in this review are "forward
looking statements" that involve risk and uncertainties concerning future events
or performance and assumptions which may involve elements that are other than
historical facts. The Company wishes to caution readers that the following
important factors, among others, could in the future affect the Company's actual
results and could cause the Company's actual results for subsequent periods to
differ from those expressed in any forward looking statement made by or on
behalf of the Company herein: (i) credit risk; (ii) interest rate risk; (iii)
competition; (iv) changes in the regulatory environment; and (v) changes in
general business and economic trends.
63
<PAGE>
Glossary of Terms
Allowance for Loan Losses
A balance sheet account which has been accumulated over a period of years
as a reserve against losses from problem loans. The provision for loan losses
is added to the allowance account, charge offs of loans decrease the allowance
balance and recoveries on previously charged off loans serve to increase the
balance.
Basic Earnings Per Share
Net income divided by the weighted average number of common shares outstanding
during the period.
Book Value Per Share
Total shareholders' equity divided by shares outstanding on the same date.
This provides an indication of the book value of a share of stock.
Cash Dividends Per Share
Total cash dividends declared divided by average shares outstanding for the
period.
Core Deposits
Deposits that are traditionally stable, including all deposits other than time
deposits of $100,000 or more.
Derivative Investments
Investments in futures contracts, forwards, swaps, or option contracts, or
other investments with similar characteristics.
Diluted Earnings Per Share
Net income divided by the weighted average number of common shares outstanding
during the period, taking into consideration the effect of stock options.
Earning Assets
The sum of interest-bearing deposits with banks, securities available for sale,
investment securities, loans, net of unearned income, and federal funds sold.
Efficiency Ratio
Noninterest expense (excluding nonrecurring charges and other real estate
expense) divided by taxable equivalent net interest income plus noninterest
income (excluding securities transactions). This is an indicator of the total
cost of operating the Company in relation to recurring total income generated.
Federal Funds Sold
A one day investment of excess cash reserves as required under banking
regulations from one bank to another.
Impaired Loans Loans,
principally commercial, where it is probable that the borrower will be unable to
make the principal and interest payments according to the contractual terms of
the loan, and all loans restructured subsequent to January 1, 1995.
Interest-Bearing Liabilities
The sum of interest-bearing deposits, federal funds purchased, securities sold
under agreements to repurchase, other short-term borrowings, and long-term debt.
Interest Rate Spread
The difference between the taxable equivalent yield on earning assets and the
rate paid on interest-bearing liabilities.
Liquidity
The ability to meet both loan commitments and deposit withdrawals as they come
due.
Net Interest Income
The difference between income on earning assets and interest expense on
interest-bearing liabilities.
Net Interest Margin
Fully taxable equivalent net interest income as a percentage of average
earning assets.
Net Loans Charged Off
Reductions to the allowance for loan losses written off as losses, net of the
recovery of loans previously charged off.
Nonaccrual Loans
Loans for which no periodic accrual of interest income is recognized.
Nonperforming Assets
The sum of nonperforming loans plus foreclosed real estate properties.
Nonperforming Loans
The sum of loans in a nonaccrual status (for purposes of interest recognition)
plus loans whose repayment criteria have been renegotiated to less than market
terms due to the inability of the borrowers to repay the loan in accordance with
its original terms plus accruing loans three payments or more past due as to
principal or interest payments.
Parent Company
A company that owns or controls a subsidiary through the ownership of voting
stock.
Real Estate Owned
Real estate acquired through foreclosure proceedings.
Restructured Loans
A refinanced loan in which the bank allows the borrower certain concessions that
would normally not be considered. The concessions are made in light of the
borrower's financial difficulties and the bank's objective to maximize recovery
on the loan.
Return on Average Assets
Net income as a percentage of average total assets.
Return on Average Equity
Net income as a percentage of average equity, excluding the impact of the mark
to market adjustment for securities available for sale.
Risk-Based Capital
The amount of capital required by federal regulatory standards, based on
a risk-weighting of assets.
Taxable Equivalent (TE)
Tax exempt income that has been adjusted to an amount that would yield the same
after tax income had the income been subject to taxation at the statutory
Federal and/or state income tax rates.
64
<PAGE>
Management's Statement of Responsibilities
Responsibility for the financial information presented in the Annual Report
rests with TrustCo Bank Corp NY's management. The Company believes that the
consolidated financial statements reflect fairly the substance of transactions
and present fairly the Company's financial position and results of operations in
conformity with generally accepted accounting principles appropriate in the
circumstances, applying certain estimates and judgments as required.
In meeting its responsibilities for the reliability of the consolidated
financial statements, the Company depends on its system of internal accounting
controls. The system is designed to provide reasonable assurance that assets are
safeguarded and transactions are executed in accordance with the appropriate
corporate authorizations and recorded properly to permit the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. Although accounting control procedures are designed to
achieve these objectives, it must be recognized that errors or irregularities
may nevertheless occur. Also, estimates and judgments are required to assess and
balance the relative cost and expected benefits of the controls. The Company
believes that its accounting controls provide reasonable assurance that errors
or irregularities that could be material to the consolidated financial
statements are prevented or would be detected within a timely period by
employees in the normal course of performing their assigned functions. An
important element of the system is a continuing and extensive internal audit
program.
The Board of Directors of the Company has an Audit Committee composed entirely
of directors who are not officers or employees of the Company. The Committee
meets periodically and privately with management, the internal auditors,
and the independent public accountants to consider audit results and to discuss
internal accounting controls, auditing, and financial reporting matters.
KPMG Peat Marwick LLP, independent public accountants, have been engaged to
render an independent professional opinion on the Company's consolidated
financial statements. Their audit is conducted in accordance with generally
accepted auditing standards and forms the basis for their report as to the fair
presentation, in the consolidated financial statements, of the Company's
financial position, operating results and cash flows.
by /s/ R.A.McCormick
- ---------------------
Robert A. McCormick
President and Chief Executive Officer
by /s/ R.T. Cushing
- --------------------
Robert T. Cushing
Vice President and Chief Financial Officer
January 23, 1998
65
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders of TrustCo Bank Corp NY:
We have audited the accompanying consolidated statements of condition of TrustCo
Bank Corp NY and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
upporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TrustCo Bank Corp NY
and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
by /s/ KPMG Peat Marwick LLP
- -----------------------------
KPMG Peat Marwick LLP
Albany, New York
January 23, 1998
66
<PAGE>
<TABLE>
Consolidated Statements of Income
<CAPTION>
(dollars in thousands, except per share data)
Years Ended December 31,
1997 1996 1995
Interest income:
<S> <C> <C> <C>
Interest and fees on loans...............................................$ 109,346 107,111 107,060
Interest and dividends on:
U.S. Treasuries and agencies........................................... 27,356 31,466 28,193
States and political subdivisions...................................... 5,637 4,254 2,902
Mortgage-backed securities............................................. 10,094 4,114 8,602
Other.................................................................. 1,811 2,068 2,252
Interest on federal funds sold........................................... 17,761 17,634 12,543
------------------------------------------------
Total interest income................................................ 172,005 166,647 161,552
------------------------------------------------
Interest expense:
Interest on deposits..................................................... 80,946 77,749 78,355
Interest on short-term borrowings........................................ 5,574 4,593 1,776
Interest on long-term debt............................................... -- -- 69
------------------------------------------------
Total interest expense............................................... 86,520 82,342 80,200
------------------------------------------------
Net interest income.................................................. 85,485 84,305 81,352
Provision for loan losses.................................................. 5,414 6,577 12,698
------------------------------------------------
Net interest income after provision for loan losses.................. 80,071 77,728 68,654
------------------------------------------------
Noninterest income:
Trust department income.................................................. 6,554 5,556 4,890
Fees for services to customers........................................... 7,671 6,981 7,003
Net gain/(loss) on securities transactions............................... (166) (4,536) 243
Other.................................................................... 3,163 2,312 1,931
------------------------------------------------
Total noninterest income............................................. 17,222 10,313 14,067
------------------------------------------------
Noninterest expense:
Salaries and employee benefits........................................... 23,162 21,532 19,895
Net occupancy expense.................................................... 5,270 4,178 4,562
Equipment expense........................................................ 4,165 3,289 3,403
FDICinsurance expense.................................................... 246 7 2,101
Professional services.................................................... 3,489 3,676 3,585
Other real estate expenses............................................... 1,056 718 3,120
Other.................................................................... 8,838 8,615 7,774
------------------------------------------------
Total noninterest expense............................................ 46,226 42,015 44,440
------------------------------------------------
Income before income taxes ................................................ 51,067 46,026 38,281
Income taxes............................................................... 18,892 17,327 12,754
------------------------------------------------
Net income.................................................................$ 32,175 28,699 25,527
------------------------------------------------
Basic earnings per share...................................................$ 1.37 1.23 1.10
Diluted earnings per share................................................. 1.33 1.20 1.07
------------------------------------------------
Per share data has been adjusted for a 15% stock split in 1997 and 1996, and a 6 for 5 stock split in 1995.
See accompanying notes to consolidated financial statements.
</TABLE>
67
<PAGE>
<TABLE>
Consolidated Statements of Condition
<CAPTION>
(dollars in thousands, except share data)
As of December 31,
1997 1996
ASSETS
<S> <C> <C>
Cash and due from banks........................................................$ 42,740 45,779
Federal funds sold............................................................. 395,000 310,000
---------------------------------------
Total cash and cash equivalents.......................................... 437,740 355,779
Securities available for sale.................................................. 601,899 618,670
Loans.......................................................................... 1,299,492 1,243,335
Less: Unearned income........................................................ 1,216 1,453
Allowance for loan losses.............................................. 53,455 51,561
---------------------------------------
Net loans................................................................ 1,244,821 1,190,321
Bank premises and equipment.................................................... 18,609 23,098
Real estate owned.............................................................. 9,309 6,518
Other assets................................................................... 59,887 67,394
---------------------------------------
Total assets.............................................................$ 2,372,265 2,261,780
---------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand.......................................................................$ 130,345 123,553
Savings ..................................................................... 650,601 661,915
Interest-bearing checking accounts........................................... 240,699 236,264
Money market deposit accounts................................................ 57,021 61,131
Certificates of deposit (in denominations of $100,000 or more)............... 112,599 89,793
Other time accounts.......................................................... 830,598 780,490
---------------------------------------
Total deposits........................................................... 2,021,863 1,953,146
Short-term borrowings.......................................................... 127,850 111,662
Accrued expenses and other liabilities......................................... 43,727 34,572
---------------------------------------
Total liabilities........................................................ 2,193,440 2,099,380
---------------------------------------
Shareholders' equity:
Capital stock; $1 par value. 50,000,000 shares authorized; 24,257,382 and
20,959,376 shares issued at December 31, 1997 and 1996, respectively....... 24,257 20,959
Surplus...................................................................... 112,702 114,228
Undivided profits............................................................ 32,119 23,221
Net unrealized gain on securities available for sale......................... 15,851 5,239
Treasury stock; 855,850 and 571,142 shares, at cost, at December 31, 1997
and 1996, respectively..................................................... (6,104) (1,247)
---------------------------------------
Total shareholders' equity............................................... 178,825 162,400
---------------------------------------
Total liabilities and shareholders' equity...............................$ 2,372,265 2,261,780
---------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
68
<PAGE>
<TABLE>
Consolidated Statements of Changes in Shareholders' Equity
<CAPTION>
(dollars in thousands, except per share data)
Three Years Ended December 31, 1997
Net Unrealized
Gain/(Loss)
On Securities
Capital Undivided Available Treasury
Stock Surplus Profits For Sale Stock
<S> <C> <C> <C> <C> <C>
Beginning balance, January 1, 1995..................$15,018 118,352 6,948 (41) (994)
Net income -- 1995.................................. -- -- 25,527 -- --
Cash dividend declared, $.76 per share.............. -- -- (17,755) -- --
Stock options exercised............................. 100 793 -- -- --
6 for 5 stock split (3,016,716 shares).............. 3,017 (3,017) -- -- --
Treasury stock purchased............................ -- -- -- -- (253)
Change in net unrealized gain/(loss) on securities
available for sale................................ -- -- -- 12,404 --
--------------------------------------------------------------------
Ending balance, December 31, 1995................... 18,135 116,128 14,720 12,363 (1,247)
Net income -- 1996.................................. -- -- 28,699 -- --
Cash dividend declared, $.86 per share.............. -- -- (20,198) -- --
Stock options exercised............................. 91 844 -- -- --
15% stock split (2,733,786 shares).................. 2,733 (2,733) -- -- --
Treasury stock purchased............................ -- -- -- -- (805)
Sale of treasury stock.............................. -- (11) -- -- 805
Change in net unrealized gain/(loss) on securities
available for sale................................ -- -- -- (7,124) --
--------------------------------------------------------------------
Ending balance, December 31, 1996................... 20,959 114,228 23,221 5,239 (1,247)
Net income -- 1997.................................. -- -- 32,175 -- --
Cash dividend declared, $.99 per share.............. -- -- (23,277) -- --
Stock options exercised............................. 139 1,485 -- -- --
15% stock split (3,158,906 shares).................. 3,159 (3,159) -- -- --
Treasury stock purchased............................ -- -- -- -- (7,735)
Sale of treasury stock.............................. -- 148 -- -- 2,878
Change in net unrealized gain/(loss) on securities
available for sale................................ -- -- -- 10,612 --
--------------------------------------------------------------------
Ending balance, December 31, 1997...................$24,257 112,702 32,119 15,851 (6,104)
--------------------------------------------------------------------
Per share data has been adjusted for a 15% stock split in 1997 and 1996, and a 6 for 5 stock split in 1995.
See accompanying notes to consolidated financial statements.
</TABLE>
69
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
(dollars in thousands)
For the Years Ended December 31,
1997 1996 1995
Increase/(decrease) in cash and cash equivalents
Cash flows from operating activities:
<S> <C> <C> <C>
Net income............................................................$ 32,175 28,699 25,527
------------------------------------------------
Adjustments to reconcile net income to net cash provided by/
(used in) operating activities:
Depreciation and amortization..................................... 3,342 2,951 3,640
Gain on sales of fixed assets..................................... (460) -- --
Provision for loan losses......................................... 5,414 6,577 12,698
Provision for deferred tax benefit................................ (3,693) (4,088) (9,811)
Net (gain)/loss on sale or call of securities available for sale.. 166 4,536 (284)
Net loss on calls of investment securities........................ -- -- 41
(Increase)/decrease in taxes receivable........................... 730 (1,115) 4,044
(Increase)/decrease in interest receivable........................ 1,599 856 (3,586)
Increase in interest payable...................................... 191 144 954
(Increase)/decrease in other assets............................... 5,386 (17,098) 6,711
Increase/(decrease) in accrued expenses........................... 8,125 4,894 (3,300)
------------------------------------------------
Total adjustments............................................ 20,800 (2,343) 11,107
------------------------------------------------
Net cash provided by operating activities.................... 52,975 26,356 36,634
------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of securities available for sale................ 179,342 382,780 243,597
Proceeds from maturities and calls of securities available for sale. 205,256 125,978 48,106
Purchase of securities available for sale........................... (350,118) (503,892) (504,525)
Proceeds from maturities and calls of investment securities......... -- -- 62,514
Purchase of investment securities................................... -- -- (3,212)
Net increase in loans .............................................. (70,148) (27,469) (75,287)
Proceeds from sales of real estate owned ........................... 3,665 4,196 3,931
Proceeds from sales of fixed assets................................. 3,967 -- --
Capital expenditures................................................ (2,360) (1,041) (2,271)
------------------------------------------------
Net cash used in investing activities............................... (30,396) (19,448) (227,147)
------------------------------------------------
Cash flows from financing activities:
Net increase in deposits............................................ 68,717 22,497 140,818
Net increase in short-term borrowing................................ 16,188 55,008 43,941
Repayment of long-term debt......................................... -- -- (3,550)
Proceeds from exercise of stock options............................. 1,624 935 893
Proceeds from sale of treasury stock................................ 3,026 794 --
Payments to acquire treasury stock.................................. (7,735) (805) (253)
Dividends paid...................................................... (22,438) (19,447) (16,926)
------------------------------------------------
Net cash provided by financing activities........................... 59,382 58,982 164,923
------------------------------------------------
Net increase/(decrease) in cash and cash equivalents.................. 81,961 65,890 (25,590)
Cash and cash equivalents at beginning of year........................ 355,779 289,889 315,479
------------------------------------------------
Cash and cash equivalents at end of year..............................$ 437,740 355,779 289,889
------------------------------------------------
</TABLE>
70
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows (continued)
<CAPTION>
(dollars in thousands)
For the Years Ended December 31,
1997 1996 1995
Supplemental disclosure of cash flow information:
<S> <C> <C> <C>
Interest paid.............................................................$ 86,329 82,198 79,246
Income taxes paid......................................................... 21,615 22,363 18,521
Transfer of investment securities to securities available for sale upon
adoption of the FASB special report on Statement 115.................... -- -- 288,515
Transfer of loans to real estate owned.................................... 10,234 8,393 7,705
Transfer of building from real estate owned to premises................... -- -- 2,500
Increase in dividends payable............................................. 839 751 829
Change in unrealized (gain)/loss on securities available for sale -- gross (17,875) 12,134 (21,127)
Change in deferred tax effect on unrealized gain/(loss) on securities
available for sale...................................................... 7,263 (5,010) 8,723
--------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
71
<PAGE>
Notes to Consolidated Financial Statements
(1)Basis of Presentation
The accounting and financial reporting policies of TrustCo Bank Corp NY
(Company or TrustCo) and Trustco Bank, National Association (Bank or Trustco)
and its operating subsidiary Trustco Realty Corp., conform to general practices
within the banking industry and are in accordance with generally accepted
accounting principles. A description of the more significant policies follows.
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Consolidation
The consolidated financial statements of the Company include the accounts
of the subsidiaries after elimination of all significant intercompany accounts
and transactions.
Securities Available for Sale
Securities available for sale are carried at market value with any
unrealized appreciation or depreciation of value, net of tax, included as an
element of the capital accounts. Management maintains an available for sale
portfolio in order to provide maximum flexibility in balance sheet management.
The designation of available for sale is made at the time of purchase based upon
management's intent to hold the securities for an indefinite period of time.
These securities, however, would be available for sale in response to changes in
market interest rates, related changes in liquidity needs, or changes in the
availability of and yield on alternative investments. Unrealized losses on
securities that reflect a decline in value which is other than temporary, if
any, are charged to income. Nonmarketable equity securities (principally stock
of the Federal Reserve Bank and the Federal Home Loan Bank, both of which are
required holdings for the Company) are included in securities available for sale
at cost since there is no readily available market value.
The cost of securities available for sale is adjusted for amortization of
premium and accretion of discount on a method that equates to the level yield.
Gains and losses on the sale of securities available for sale are based on
the amortized cost of the specific security sold.
Loans
Loans are carried at the principal amount outstanding net of unearned
income and unamortized loan fees and costs, which are recognized as income over
the applicable loan term.
Nonperforming loans include nonaccrual loans,restructured loans, and loans
which are 3 payments or more past due and still accruing interest. Generally,
loans are placed in nonaccrual status, either due to the delinquent status of
principal and/or interest payments, or a judgment by management that, although
payments of principal and/or interest are current, such action is prudent.
Future payments received on nonperforming loans are recorded as interest income
or principal reductions based upon management's ultimate expectation for
collection. Loans may be removed from nonaccrual status when they become current
as to principal and interest and have demonstrated a sustained ability to make
loan payments in accordance with the contractual terms of the loan. Loans may
also be removed from nonaccrual status when, in the opinion of management, the
loan is expected to be fully collectable as to principal and interest.
Impaired loans have been defined since January 1, 1995 as commercial and
commercial real estate loans in nonaccrual status and loans restructured.
Allowance for Loan Losses
An allowance for loan losses is maintained at a level considered adequate
by management to provide for potential loan losses based on consideration of the
credit risk of the loan portfolio, including a review of past experience,
current economic conditions, and underlying collateral value. The allowance is
increased by provisions charged against income and reduced by net charge offs.
In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's allowance for
loan losses. Such agencies may require the Company to recognize additions
to the allowance based on their judgments of information available to them at
the time of their examination.
Bank Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization computed on either the straight-line or accelerated methods over
the remaining useful lives of the assets.
72
<PAGE>
Real Estate Owned
Real estate owned are assets taken through foreclosures on loans.
Foreclosed assets held for sale are recorded on an individual basis at the
lower of (1) fair value minus estimated costs to sell or (2) "cost" (which is
the fair value at initial foreclosure). When a property is acquired, the excess
of the loan balance over fair value is charged to the allowance for loan losses.
Subsequent write downs are included in noninterest expense.
Income Taxes
Deferred taxes are recorded for the future tax consequences of events that
have been recognized in the financial statements or tax returns, based upon
enacted tax laws and rates. Deferred tax assets are recognized subject to
management's judgment that realization is more likely than not.
Dividend Restrictions
Banking regulations restrict the amount of cash dividends which may be paid
during a year by the Bank to the Parent Company without the written consent of
the appropriate bank regulatory agency. Based on these restrictions, the Bank
could pay $18.5 million plus 1998 net profits. For all practical purposes,
TrustCo could not declare dividends to shareholders materially in excess of the
aggregate amount of dividends that could be paid by the Bank.
Pension Plan
The Company has a defined benefit pension plan covering substantially all
of its employees. The benefits are based on years of service and the employee's
compensation.
Stock Option Plans
The Company's stock option plans are accounted for in accordance with the
provisions of the Accounting Principles Board Opinion No. 25 (APB Opinion 25)
"Accounting for Stock Issued to Employees" and as such no compensation expense
has been recorded for these plans.
Earnings Per Share
The Company computes and presents earnings per share (EPS) in accordance
with the Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (Statement 128), which requires dual
presentation of basic and diluted EPS.
Basic EPS is computed by dividing net income by the weighted average number
of common shares outstanding during the period. Diluted EPS is computed by
dividing net income by the weighted average number of common shares outstanding
during the period, taking into consideration the effect of stock options. All
prior period EPS data has been restated to conform to the provisions of
Statement 128.
Reclassification of Prior Year Statements
It is the Company's policy to reclassify prior year consolidated financial
statements to conform to the current year presentation.
(2)Balances at Other Banks
The Bank is required to maintain certain reserves of vault cash and/or
deposits with the Federal Reserve Bank. The amount of this reserve requirement,
included in cash and due from banks, was approximately $9.8 million and $12.7
million at December 31, 1997 and 1996, respectively.
<TABLE>
(3)Securities Available for Sale
<CAPTION>
The amortized cost and approximate market value of the securities available
for sale are as follows:
(dollars in thousands)
At December 31, 1997
Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasuries ooand agencies.................................$ 273,517 5,354 48 278,823
States and political oosubdivisions............................ 109,210 4,577 -- 113,787
Mortgage-backedoosecurities.................................... 151,989 3,196 105 155,080
Other.......................................................... 15,430 26 5 15,451
--------------------------------------------------
Total debt securities.......................................... 550,146 13,153 158 563,141
Equity securities.............................................. 24,955 13,803 -- 38,758
--------------------------------------------------
Total securities available for sale............................$ 575,101 26,956 158 601,899
--------------------------------------------------
</TABLE>
<TABLE>
(dollars in thousands)
<CAPTION>
At December 31, 1996
Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasuries ooand agencies.................................$ 404,885 3,564 1,516 406,933
States and political oosubdivisions............................ 94,954 2,135 171 96,918
Mortgage-backedoosecurities.................................... 75,492 1,114 113 76,493
Other.......................................................... 4,276 -- -- 4,276
--------------------------------------------------
Total debt oosecurities........................................ 579,607 6,813 1,800 584,620
Equity securities.............................................. 30,139 3,911 -- 34,050
--------------------------------------------------
Total securities available for sale............................$ 609,746 10,724 1,800 618,670
--------------------------------------------------
</TABLE>
<PAGE> 73
<TABLE>
The following table distributes the debt securities available for sale
portfolio as of December 31, 1997, based on the securities' final maturity
(mortgage-backed securities are stated using an estimated average life):
<CAPTION>
(dollars in thousands)
Approximate
Amortized Market
Cost Value
<S> <C> <C>
Due in one year or less..........................$ 26,710 26,825
Due after one year through five years............ 83,498 85,026
Due after five years through ten years........... 273,603 279,600
Due after ten years.............................. 166,335 171,690
------------------------
$550,146 563,141
</TABLE>
<TABLE>
Actual maturities may differ from contractual maturities because of
securities prepayments and the right of certain issuers to call or prepay their
obligations without penalty.
The proceeds from sales of securities, gross realized gains and gross
realized losses from sales and calls during 1997, 1996 and 1995 are as follows:
<CAPTION>
(dollars in thousands)
At December 31,
1997 1996 1995
<S> <C> <C> <C>
Proceeds from sales...........$179,342 382,780 243,597
Gross realized gains.......... 828 3,214 1,220
Gross realized losses......... 994 7,750 977
</TABLE>
Included in the gross realized losses figure for 1995 is $41 thousand losses
from calls of investment securities.
The amount of securities available for sale that have been pledged to secure
public deposits and for other purposes required by law amounted to $288.9
million and $299.7 million at December 31, 1997 and 1996 respectively.
There are no securities of a single issuer (excluding issues of the U.S.
government and its agencies) that represent 10% or more of shareholders' equity
at December 31, 1997 and 1996.
<TABLE>
(4)Loans and Allowance for Loan Losses
A summary of loans by category is as follows:
<CAPTION>
(dollars in thousands)
At December 31,
1997 1996
<S> <C> <C>
Commercial..................................$ 183,855 217,363
Construction................................ 7,902 7,055
Residential mortgage loans.................. 905,298 801,826
Home equity line of credit.................. 172,448 183,832
Installment loans........................... 29,989 33,259
-----------------------------
Total loans................................. 1,299,492 1,243,335
Less: Unearned income....................... 1,216 1,453
Allowance for loan losses............. 53,455 51,561
-----------------------------
Net loans...................................$1,244,821 1,190,321
-----------------------------
</TABLE>
At December 31, 1997 and 1996, loans to executive officers, directors, and to
associates of such persons aggregated $6.8 million and $6.9 million,
respectively. During 1997, new loans of $4.5 million were made and repayments of
loans totalled $4.6 million. In the opinion of management, such loans were made
in the ordinary course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions. These loans do not involve more than normal risk of collectibility
or present other unfavorable features.
TrustCo lends primarily in the Capital District region of New York State and
in the geographic territory surrounding its borders. Although the loan portfolio
is diversified, a portion of its debtors' ability to repay is dependent upon the
economic conditions prevailing in New York State.
<TABLE>
The following table sets forth the information with regard to nonperforming
loans:
<CAPTION>
(dollars in thousands At December 31,
1997 1996 1995
<S> <C> <C> <C>
Loans in nonaccrual status................$ 6,298 10,748 12,832
Loans contractually past due
3 payments or more and still
accruing interest..................... 1,060 792 1,696
Restructured loans........................ 3,294 2,495 1,130
-------------------------------------------------
Total nonperforming loans.................$10,652 14,035 15,658
-------------------------------------------------
</TABLE>
74
<PAGE>
Interest on nonaccrual and restructured loans of $1.0 million in 1997 and
$1.3 million in each of 1996 and 1995 would have been earned in accordance with
the original contractual terms of the loans. Approximately $519 thousand, $834
thousand and $607 thousand of interest on nonaccrual and restructured loans was
collected and recognized as income in 1997, 1996, and 1995, respectively. There
are no commitments to extend further credit on nonaccrual or restructured loans.
<TABLE>
Transactions in the allowance for loan losses account are summarized as
follows:
<CAPTION>
(dollars in thousands)
For the years ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Balance at beginning of year.................$ 51,561 48,320 38,851
Provision for loan losses.................... 5,414 6,577 12,698
Loans charged off............................ (6,579) (5,648) (7,338)
Recoveries on loans previously charged off... 3,059 2,312 4,109
----------------------------------------
Balance at year end..........................$ 53,455 51,561 48,320
----------------------------------------
</TABLE>
The Company identifies impaired loans and measures the impairment in
accordance with Statement of Financial Accounting Standards No. 114 (Statement
114), "Accounting by Creditors for Impairment of a Loan." Statement 114 was
amended by Statement of Financial Accounting Standards No. 118 (Statement 118),
"Accounting by Creditors for Impairment of a Loan -- Income Recognition and
Disclosures." A loan is considered impaired when it is probable that the
borrower will be unable to repay the loan according to the original contractual
terms of the loan agreement or the loan is restructured in a troubled debt
restructuring subsequent to January 1, 1995. These standards are applicable
principally to commercial and commercial real estate loans; however, certain
provisions dealing with restructured loans also apply to retail loan products.
There were no nonaccrual commercial and commercial real estate loans
classified as impaired loans at December 31, 1997. At December 31, 1996, there
were $5.7 million of commercial and commercial real estate loans that were in
nonaccrual status and were classified as impaired loans. In addition, there were
newly restructured retail loans totalling $3.7 million and $2.9 million that as
of December 31, 1997 and 1996 respectively, were identified as impaired loans.
None of the allowance for loan losses has been allocated to these impaired loans
because of the significant charge offs that have been taken in prior years, and
the fact that the collateral values support the loan balances. Cash payments
received are normally applied to reduce the outstanding loan balance on the
impaired loans (exclusive of cash payments received on restructured loans).
During 1997, 1996, and 1995, the average balance of impaired loans was $6.0
million, $8.5 million, and $10.5 million, respectively, and there was
approximately $350 thousand, $562 thousand, and $400 thousand of interest income
recorded on these loans in the accompanying consolidated statements of income.
There were $1.4 million and $2.6 million of loans pledged for various
purposes at December 31, 1997 and 1996, respectively.
<TABLE>
(5)Bank Premises and Equipment
A summary of premises and equipment at December 31, 1997 and 1996 follows:
<CAPTION>
(dollars in thousands)
1997 1996
<S> <C> <C>
Land................................$ 2,511 3,585
Buildings........................... 22,461 25,214
Furniture, fixtures and equipment... 16,229 15,761
Leasehold improvements.............. 3,679 3,711
--------------------------
44,880 48,271
Accumulated depreciation and
amortization...................... (26,271) (25,173)
--------------------------
Total...............................$ 18,609 23,098
--------------------------
</TABLE>
75
<PAGE>
Depreciation and amortization expense approximated $3.3 million, $3.0
million, and $3.6 million for the years 1997, 1996, and 1995, respectively.
Occupancy expense of Bank premises included rental expense of $1.3 million in
1997, $1.2 million in 1996 and $1.1 million in 1995. (6)oShort-Term Borrowings
<TABLE>
Short-term borrowings, consisting primarily of the Trustco Short-Term
Investment Account, were as follows:
<CAPTION>
(dollars in thousands) 1997
Trustco Other
Short-Term Short-Term
Account Borrowings Total
Amount outstanding at
<S> <C> <C> <C>
December 31, 1997..............$ 94,848 33,002 127,850
Maximum amount outstanding at any
month end...................... 95,062 34,136 129,198
Average amount outstanding....... 90,633 26,551 117,184
Weighted average interest rate:
For the year................... 5.15% 3.43 4.76
As of year end................. 5.30 3.59 4.86
(dollars in thousands) 1996
Trustco Other
Short-Term Short-Term
Account Borrowings Total
Amount outstanding at
December 31, 1996..............$ 94,298 17,364 111,662
Maximum amount outstanding at any
month end...................... 106,441 20,217 124,961
Average amount outstanding....... 79,583 18,741 98,324
Weighted average interest rate:
For the year................... 5.01% 3.25 4.67
As of year end................. 4.99 3.33 4.73
</TABLE>
The Trustco Short-Term Investment Account balances are immediately
withdrawable. All short-term borrowings are collateralized by securities of the
Bank pledged for that purpose.
Trustco has approximately $200 million of available lines of credit with the
Federal Home Loan Bank.
<TABLE>
(7)Income Taxes
A summary of income tax expense/(benefit) included in the consolidated
statements of income follows:
<CAPTION>
(dollars in thousands)For the years ended December 31,
1997 1996 1995
Current tax expense:
<S> <C> <C> <C>
Federal...............................$ 17,642 16,705 16,919
State................................. 4,943 4,710 5,646
------------------------------------------
Total current tax expense............... 22,585 21,415 22,565
Deferred tax benefit.................... (3,693) (4,088) (9,811)
------------------------------------------
Total income tax expense................$ 18,892 17,327 12,754
------------------------------------------
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1997 and 1996 is as follows:
<TABLE>
Deferred Tax Assets and Liabilities
<CAPTION>
(dollars in thousands)
December 31,
1997 1996
Deductible/ Deductible/
(taxable) (taxable)
temporary temporary
differences differences
<S> <C> <C>
Bond accounting.........................................$ (54) 43
Benefits and deferred remuneration...................... 4,354 4,034
Deferred loan fees, net................................. 642 840
Difference in reporting the provision for
loan losses,net....................................... 26,605 25,247
Other income or expense not utilized for tax purposes... 6,540 4,527
Depreciable assets...................................... 1,294 1,319
Other items............................................. 897 575
-------------------------------
Total............................................. 40,278 36,585
Valuation reserve....................................... (2,051) (2,051)
-------------------------------
Net deferred tax asset at end of year................... 38,227 34,534
Net deferred tax asset at beginning of year......... 34,534 30,446
-------------------------------
Deferred tax benefit....................................$ (3,693) (4,088)
-------------------------------
</TABLE>
76
<PAGE>
Deferred tax assets are recognized subject to management's judgment that
realization is more likely than not. The valuation allowance of $2.1 million at
December 31, 1997 and 1996 is primarily reserved for federal and state tax law
restrictions on the deductibility of certain temporary differences, including
the lack of state carrybackwards and carryforwards. During 1995, the valuation
reserve was reduced as a result of the resolution of several tax return audits
and management's reassessment of the realization of certain deferred tax assets.
Based primarily on the sufficiency of historical and future taxable income,
management believes it is more likely than not that the remaining net deferred
tax asset of $38.3 million and $34.5 million at December 31, 1997 and 1996,
respectively, will be realized.
In addition to the deferred tax items described in the preceding table, the
Company also has a deferred tax liability of $10.9 million at December 31,1997,
and $3.7 million at December 31, 1996, relating to the net unrealized gains on
securities available for sale.
<TABLE>
The effective tax rates differ from the statutory federal income tax rate.
The reasons for these differences are as follows:
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Statutory federal income tax rate......... 35.0% 35.0 35.0
Increase/(decrease) in taxes
resulting from: Tax exempt income....... (3.7) (3.3) (3.1)
State income tax, net of
federal tax benefit... 5.3 5.4 9.6
Reduction in valuation reserve.......... -- -- (6.9)
Other items............................. 0.4 0.6 (1.3)
--------------------------------------------
Effective income tax rate................. 37.0% 37.7 33.3
--------------------------------------------
</TABLE>
(8)Benefit Plans
(a) Retirement Plan
The Company maintains a trusteed non-contributory pension plan covering
employees that have completed one year of employment and 1,000 hours of service.
The benefits are based on the sum of (a) a benefit equal to a prior service
benefit plus the average of the employees' highest five consecutive years'
compensation in the ten years preceding retirement multiplied by a percentage
of service after a specified date plus (b) a benefit based upon career average
compensation. The amounts contributed to the plan are determined annually on
the basis of (a) the maximum amount that can be deducted for federal income tax
purposes or (b) the amount certified by a consulting actuary as necessary to
avoid an accumulated funding deficiency as defined by the Employee Retirement
Income Security Act of 1974. Contributions are intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future. Assets of the plan are invested primarily in common stock and
fixed income common funds administered by the Bank's Trust Department. The
following table sets forth the plans' funded status and amounts recognized in
the Company's consolidated statements of condition at December 31, 1997 and 1996
<TABLE>
Actuarial Present Value of Benefit Obligations:
<CAPTION>
(dollars in thousands)
1997 1996
Accumulated benefit obligation,
including vested benefits of $16,198
and $14,186 in 1997 and 1996,
<S> <C> <C>
respectively.......................... $(16,535) (14,370)
--------------------------------------------
Projected benefit obligation for service
rendered to date...................... (19,405) (16,336)
Plan assets at fair value............... 29,776 25,170
--------------------------------------------
Plan assets in excess of projected
benefit obligation.................... 10,371 8,834
Unrecognized net gain from past
experience different from that
assumed and effects of changes in
assumptions........................... (7,979) (6,499)
Unrecognized prior service cost......... (375) (420)
Unrecognized net asset at transition being
recognized over 4 remaining years..... (442) (590)
--------------------------------------------
Prepaid pension expense................. $ 1,575 1,325
--------------------------------------------
</TABLE>
<TABLE>
Net Pension Benefit for the years endedDecember 31:
<CAPTION>
(dollars in thousands)
1997 1996 1995
<S> <C> <C> <C>
Service cost -- benefits earned during the period..$ 712 653 511
Interest cost on projected benefit obligation...... 1,054 995 920
Actual return on plan assets....................... (5,632) (3,653) (5,080)
Net amortization and deferral...................... 3,616 1,952 3,639
----------------------------------------
Net periodic pension benefit.......................$ (250) (53) (10)
----------------------------------------
</TABLE>
77
<PAGE>
<TABLE>
The weighted average discount rate, the rate of increase in future
compensation levels, and the expected long-term rate of return used in
determining the actuarial present value of projected benefit obligations, are as
follows:
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Weighted average discount rate ..................... 6.50% 6.50 6.50
Rate of increase in future oocompensation .......... 6.00 6.00 6.00
Expected long-term rate of return on assets ........ 6.50 6.50 6.25
</TABLE>
The Company also has a defined contribution supplementary pension plan
under which additional retirement benefits are accrued for eligible executive
and senior officers. The expense recorded for this plan was $3.0 million, $2.6
million, and $2.0 million in 1997, 1996, and 1995, respectively.
Rabbi trusts have been established for certain benefit plans in 1996. These
rabbi trust accounts are administered by the Company's Trust Department and
invest primarily in the Trustco Short-Term Investment Account. These assets are
reflected as other assets in the December 31, 1997 and 1996, consolidated
statement of condition.
(b) Incentive and Bonus Plans
The Company provides a profit-sharing plan for substantially all
employees. The expense of this plan, which is based on management
discretion as defined in the plan, amounted to $1.4 million in 1997 and $1.3
million in 1996 and 1995.
The Company also has an executive incentive plan. The expense of this plan
is based on the Company's performance and estimated distributions to
participants are accrued during the year and generally paid in the following
year. The expense recorded for this plan was $2.6 million, $2.1 million, and
$1.7 million in 1997, 1996, and 1995, respectively.
The Company has awarded 1.3 million performance bonus units to the
executive officers and directors. These units become vested and exercisable
only under a change of control as defined. The units were awarded based upon
the stock price at the time of grant and, if exercised under a change of
control allow the holder to receive the increase in value offered in the
exchange over the stock price at the date of grant for each unit.
(c) Stock Option Plans At December 31, 1997, the Company has stock option plans
for officers and directors as described below. TrustCo applies APB Opinion No.
25 and related Interpretations in accounting for these plans. Accordingly, no
compensation cost has been recognized for these fixed stock option plans. Had
compensation cost for the Company's stock-based compensation plans been
determined consistent with Statement of Financial Accounting Standards No.
123 (Statement 123), "Accounting for Stock-Based Compensation," the Company's
net income and earnings per share would have been reduced to the pro forma
amounts indicated below:
<TABLE>
(dollars in thousandsexcept per share data)
<CAPTION>
1997 1996 1995
Net income:
<S> <C> <C> <C>
As reported............................. $ 32,175 28,699 25,527
Pro forma............................... 31,672 28,364 25,373
Basic earnings per share:
As reported............................. $ 1.37 1.23 1.10
Pro forma............................... 1.35 1.21 1.09
Diluted earnings per share:
As reported............................. 1.33 1.20 1.07
Pro forma............................... 1.31 1.18 1.06
</TABLE>
Proforma net income and earnings per share reflect options granted since
1995. The full impact of calculating compensation cost for all stock options
under Statement 123 is not reflected in the pro forma net income and earnings
per share amounts presented above because compensation cost is reflected over
the options' expected life and compensation cost for options granted prior to
January 1, 1995 is not considered.
Under the 1995 TrustCo Bank Corp NY Stock Option Plan, the Company may
grant options to its eligible employees for up to approximately 1.6 million
shares of common stock. Under the 1993 Directors Stock Option Plan, the
Company may grant options to its directors for up to approximately 175,000
shares of its common stock. Under both plans, the exercise price of each option
equals the market price of the Company's stock on the date of grant, and an
option's maximum term is ten years. Options vest over a five year period from
the date the options are granted for the employee plan and they are immediately
exercisable for the directors plan.
78
<PAGE>
<TABLE>
A summary of the status of TrustCo's stock option plans as of December 31,
1997, 1996 and 1995 and changes during the years ended on those dates are as
follows:
<CAPTION>
Outstanding OptionsExercisable Options
Average Average
Option Option
Shares Price Shares Price
<S> <C> <C> <C> <C>
Balance, January 1, 1995.............. 1,776,953 $ 9.27 989,731 $ 8.32
New options awarded - 1995............ 405,743 14.16 92,787 14.30
Cancelled options - 1995.............. -- -- -- --
Exercised options - 1995.............. 149,314 6.06 149,314 6.06
Options became exercisable............ -- -- 320,597 9.61
------------------------------------------------
Balance, December 31, 1995............ 2,033,382 10.48 1,253,801 9.36
New options awarded - 1996............ 453,617 15.42 102,361 15.67
Cancelled options - 1996.............. 9,523 13.57 -- --
Exercised options - 1996.............. 121,819 6.56 121,819 6.56
Options became exercisable............ -- -- 306,750 11.43
------------------------------------------------
Balance, December 31, 1996............ 2,355,657 11.62 1,541,093 10.41
New options awarded - 1997............ 400,200 18.17 89,240 18.17
Cancelled options - 1997.............. 31,269 14.72 -- --
Exercised options - 1997.............. 164,132 9.92 164,132 9.92
Options became exercisable............ -- -- 308,609 13.19
------------------------------------------------
Balance, December 31, 1997............ 2,560,456 $12.71 1,774,810 $ 11.33
------------------------------------------------
</TABLE>
<TABLE>
There are approximately 1.8 million, 1.5 million and 1.3 million of options
that are exercisable at year end 1997, 1996 and 1995, respectively. The fair
value of each option as of the grant date, estimated using the Black - Scholes
pricing model, and calculated in accordance with Statement 123 was:
<CAPTION>
Employees' Directors'
Plan Plan
<S> <C> <C>
1997..........................$ 3.17 2.87
1996.......................... 2.83 3.17
1995.......................... 2.37 2.55
</TABLE>
<TABLE>
The following assumptions were utilized in the calculation of the fair value
of the options under Statement 123:
<CAPTION>
Employees' Directors'
Plan Plan
Expected dividend yield:
<S> <C> <C>
1997.............................................. 5.15% 5.15
1996 and 1995..................................... 5.06% 5.06
Risk-free interest rate:
1997.............................................. 6.39 6.35
1996.............................................. 6.65 6.62
1995.............................................. 5.97 6.27
Expected volatility rate:
1997..............................................20.20 19.31
1996..............................................20.65 21.23
1995..............................................20.29 20.47
Expected lives 1997, 1996 and 1995..................... 7.5 years 6.0 years
</TABLE>
<TABLE>
The following table summarizes information about the stock option plans for
options outstanding at December 31, 1997:
<CAPTION>
Weighted
Options Average Weighted
Range of Outstanding Remaining Average
Exercise Year End Contractual Exercise
Price 1997 Life Price
<S> <C> <C> <C>
Less than $10.00............................... 621,680 4.5 years $ 7.87
Between $10.01 and $15.00...................... 1,107,073 7.0 years 12.42
Greater than $15.01............................ 831,703 9.5 years 16.73
------------------------------------------
Total.......................................... 2,560,456 7.2 years $12.71
------------------------------------------
</TABLE>
<TABLE>
The following table summarizes information about the exercisable stock
options at December 31, 1997:
<CAPTION>
Weighted
Options Average Weighted
Range of Exercisable Remaining Average
Exercise Year End Contractual Exercise
Price 1997 Life Price
<S> <C> <C> <C>
Less than $10.00................................. 621,680 4.5 years $ 7.87
Between $10.01 and $15.00........................ 879,165 6.9 years 12.22
Greater than $15.01.............................. 273,965 9.3 years 16.35
-------------------------------------
Total............................................1,774,810 6.4 years $11.33
-------------------------------------
</TABLE>
(d) Postretirement Benefits
The Company permits retiree's under age 65 to participate in the Company's
medical plan by paying the same premium as the active employees. At age 65, the
Bank provides a Medicare Supplemental Program to retirees.
79
<PAGE>
<TABLE>
Accumulated postretirement benefit obligations at December 31, 1997 and 1996:
<CAPTION>
(dollars in thousands)
1997 1996
<S> <C> <C>
Retirees.......................................$ 5,094 4,628
Fully eligible active plan participants........ 617 657
Other active plan participants................. 3,096 2,421
--------------------------------------
Accumulated postretirement benefit obligation.. 8,807 7,706
Plan assets, at fair value..................... 10,414 8,860
--------------------------------------
Plan assets in excess of accumulated
postretirement benefit obligation............ 1,607 1,154
Unrecognized gain.............................. (3,002) (2,039)
--------------------------------------
Accrued postretirement benefits................$ (1,395) (885)
--------------------------------------
</TABLE>
<TABLE>
Net periodic postretirement benefit costs for 1997, 1996, and 1995 includes the
following components:
<CAPTION>
(dollars in thousands)
1997 1996 1995
<S> <C> <C> <C>
Service cost................................$ 378 323 325
Interest cost............................... 513 444 445
Return on plan assets....................... (1,877) (304) (248)
Deferral of Unrecognized net gain........... 1,501 (31) --
----------------------------------------
Net period postretirement benefit cost......$ 515 432 522
----------------------------------------
</TABLE>
The Company funded the prior service cost of the plan in full through the use
of a benefit trust during the first quarter of 1993. Assets of the plan are
invested primarily in common stock and fixed income common funds administered by
the Bank's Trust Department. The trust holding the plan assets is subject to
federal income taxes at a 35.0% rate. The expected long-term rate of return on
plan assets, after estimated income taxes, was 3.8%, for the years ended
December 31, 1997 and 1996 and 4.0% for the year ended December 31, 1995. For
measurement purposes, a 7.0% annual rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) was assumed for 1997 and
thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1997, by approximately $1.4
million, and increase the aggregate of the service and the interest cost
components of net periodic postretirement benefit cost for the year ended
December 31, 1997, by approximately $216 thousand.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 6.5% at December 31, 1997, 1996 and 1995.
<TABLE>
(9)Commitments and Contingent Liabilities
(a)Leases
The Bank leases certain banking premises. These leases are accounted for as
operating leases with minimum rental commitments in the amounts presented below.
The majority of these leases contain options to renew.
<CAPTION>
(dollars in thousands)
<C> <C>
1998.....................................$ 1,121
1999..................................... 1,101
2000..................................... 1,023
2001..................................... 947
2002..................................... 763
2003 and after........................... 4,032
---------
$ 8,987
---------
</TABLE>
(b)Litigation
Existing litigation arising in the normal course of business is not expected
to result in any material loss to the Company.
<TABLE>
(c)Time Deposits
At December 31, 1997, the maturity of total time deposits is as follows:
<CAPTION>
(dollars in thousands)
<S> <C>
Under 1 year.............................$535,578
1 to 2 years............................. 325,890
2 to 3 years............................. 53,917
3 to 4 years............................. 10,186
4 to 5 years............................. 14,259
over 5 years............................. 3,367
$943,197
</TABLE>
<TABLE>
(10)Earnings Per Share
A reconciliation of the component parts of earnings per share for 1997, 1996
and 1995 follows:
<CAPTION>
(dollars in thousands, Weighted
except per share data) Average Shares Per share
Income Outstanding Amounts
For the year ended December 31, 1997:
Basic EPS:
<S> <C> <C> <C>
Income available to common shareholders........ $ 32,175 23,542 $ 1.37
Effect of Diluted Securities:Stock Options....... -- 740 --
---------------------------------------------
Diluted EPS...................................... $ 32,175 24,282 $ 1.33
---------------------------------------------
For the year ended December 31, 1996:
Basic EPS:
Income available to common shareholders........ $ 28,699 23,424 $ 1.23
Effect of Diluted Securities:Stock Options....... -- 575 --
---------------------------------------------
Diluted EPS...................................... $ 28,699 23,999 $ 1.20
---------------------------------------------
For the year ended December 31, 1995:
Basic EPS:
Income available to common shareholders........ $ 25,527 23,287 $ 1.10
Effect of Diluted Securities:Stock Options....... -- 480 --
---------------------------------------------
Diluted EPS...................................... $ 25,527 23,767 $ 1.07
---------------------------------------------
</TABLE>
80
<PAGE>
(11)Off-Balance Sheet Financing
Loan commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commit-ments generally have fixed expiration dates or other termination clauses
and may require a fee. Commitments sometimes expire without being drawn upon.
Therefore, the total commitment amounts do not necessarily represent future cash
requirements. These arrangements have credit risk essentially the same as that
involved in extending loans to customers and are subject to the Bank's normal
credit policies, including obtaining collateral. The Bank's exposure to credit
loss for loan commitments, including unused lines of credit, at December 31,
1997 and 1996 was $223.8 million and $222.5 million, respectively. Approximately
five-eights of these commitments were for variable rate products at the end of
1997.
Letters of credit and standby letters of credit are conditional commitments
issued by the Bank to guarantee the performance of a customer to a third party.
These arrangements have credit risk essentially the same as that involved in
extending loans to customers and are subject to the Bank's normal credit
policies, including obtaining collateral. The Bank's exposure to credit loss for
standby letters of credit at December 31, 1997 and 1996 was $7.7 million and
$12.0 million, respectively. No losses are anticipated as a result of loan
commitments or standby letters of credit.
<TABLE>
(12)Fair Value of Financial Instruments
The fair values shown below represent management's estimates of values at
which the various types of financial instruments could be exchanged in
transactions between willing, unrelated parties. They do not necessarily
represent amounts that would be received or paid in actual trades of specific
financial instruments.
<CAPTION>
(dollars in thousands)
As of December 31, 1997
Carrying Fair
value value
Financial assets:
<S> <C> <C>
Cash and cash equivalents ................$ 437,740 437,740
Securities available for sale ............ 601,899 601,899
Loans..................................... 1,244,821 1,333,220
Accrued interest receivable............... 15,821 15,821
Financial liabilities:
Demand deposits .......................... 130,345 130,345
Interest-bearing deposits ................ 1,891,518 1,895,457
Borrowings ............................... 127,850 127,850
Accrued interest payable.................. 3,132 3,132
As of December 31, 1996
Carrying Fair
value value
Financial assets:
Cash and cash equivalents ................$ 355,779 355,779
Securities available for sale ............ 618,670 618,670
Loans..................................... 1,190,321 1,237,297
Accrued interest receivable............... 17,372 17,372
Financial liabilities:
Demand deposits .......................... 123,553 123,553
Interest-bearing deposits ................ 1,829,593 1,832,956
Borrowings ............................... 111,662 111,662
Accrued interest payable.................. 2,941 2,941
</TABLE>
The specific estimation methods and assumptions used can have a substantial
impact on the resulting fair values of financial instruments. Following is a
brief summary of the significant methods and assumptions used in the previous
table:
Cash and Cash Equivalents
The carrying value of these financial instruments approximates fair values.
Securities
Fair values for all securities portfolios are based upon quoted market
prices, where available. The carrying value of certain local, unrated municipal
obligations was used as an approximation of fair value.
Loans
The fair values of all loans are estimated using discounted cash flow
analyses with discount rates equal to the interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality.
Deposit Liabilities
The fair values disclosed for noninterest-bearing deposits, interest-bearing
checking accounts, savings accounts and money market accounts are, by
definition, equal to the amount payable on demand at the balance sheet date. The
carrying value of all variable rate certificates of deposit is assumed to
approximate fair value. The fair value of fixed rate certificates of deposit is
estimated using discounted cash flow analyses with discount rates equal to the
interest rates currently being offered on certificates of similar size and
remaining maturity.
Short-Term Borrowings and Other Financial Instruments
The fair value of all short-term borrowings and other financial instruments
is assumed to be the carrying value.
Financial Instruments with Off-Balance Sheet Risk
The Company is a party to financial instruments with off-balance sheet risk.
Such financial instruments consist of commitments to extend financing and
standby letters of credit.
81
<PAGE>
If the commitments are exercised by the prospective borrowers, these financial
instruments will become interest-earning assets of the Company. If the
commitments expire, the Company retains any fees paid by the prospective
borrower. The fair value of commitments is estimated based upon fees currently
charged to enter into similar agreements, taking into consideration the
remaining terms of the agreements and the present credit worthiness of the
borrower. For fixed rate commitments, the fair value estimation takes into
consideration an interest rate risk factor. The fair value of these off-balance
sheet items approximates the recorded amounts of the related fees, which are
considered to be immaterial.
The Company has no derivative investment products nor has the Company ever
invested in such investment vehicles. Therefore, the disclosures as required by
Statement of Financial Accounting Standards No. 119, "Disclosures about
Derivative Financial Instruments and Fair Value of Financial Instruments," are
not presented except as it relates to fair value disclosures in this footnote.
(13)Regulatory Capital Requirements
Office of the Comptroller of the Currency (OCC) capital regulations require
banks to maintain minimum levels of regulatory capital. Under the regulations in
effect at December 31, 1997 and 1996, the Bank was required to maintain a
minimum leverage ratio of Tier I (leverage) capital to total adjusted average
assets of 4.00% and minimum ratios of Tier I capital and total capital to risk
weighted assets of 4.00% and 8.00%, respectively. The Federal Reserve Board has
adopted similar requirements for the consolidated capital of bank holding
companies.
The regulations establish a framework for the classification of banks into
five categories: well capitalized, adequately capitalized, under capitalized,
significantly under capitalized and critically under capitalized. Generally, an
institution is considered well capitalized if it has a Tier I (leverage) capital
ratio of at least 5.0% (based on total adjusted average assets), a Tier I risk
based capital ratio of at least 6.0%, and a total risk based capital ratio of at
least 10.0%.
The foregoing capital ratios are based on specific quantitative measures of
assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. Capital amounts and classifications are also
subject to qualitative judgments by the OCC about capital components, risk
weighting and other factors.
Management believes that, as of December 31, 1997 and 1996, the Bank and
Company met all capital adequacy requirements to which they were subject.
Further, the most recent OCC notification categorized the Bank as a well
capitalized institution. There have been no conditions or events since that
notification that management believes have changed the Bank's capital
classification.
<TABLE>
Under its prompt corrective action regulations, the OCC is required to take
certain supervisory actions (and may take additional discretionary actions) with
respect to an undercapitalized institution. Such actions could have a direct
material effect on an institution's financial statements. As stated above, the
Company has been classified as well capitalized for regulatory purposes, and
therefore, these regulations do not apply.The following is a summary of actual
capital amounts and ratios as of December 31, 1997 and 1996 for the Bank and the
Company (on a consolidated basis):
<CAPTION>
(dollars in thousands)
As of December 31, 1997
Amount Ratio
Tier I (leverage) capital:
<S> <C> <C>
Trustco Bank, NA.......................$ 143,935 6.22%
TrustCo Bank Corp NY................... 162,974 7.00
Tier I risk based capital:
Trustco Bank, NA....................... 143,935 12.02
TrustCo Bank Corp NY................... 162,974 13.43
Total risk based capital:
Trustco Bank, NA....................... 159,383 13.31
TrustCo Bank Corp NY................... 178,610 14.72
(dollars in thousands) As of December 31, 1996
Amount Ratio
Tier I (leverage) capital:
Trustco Bank, NA.......................$ 138,982 6.27%
TrustCo Bank Corp NY................... 157,161 7.04
Tier I risk based capital:
Trustco Bank, NA....................... 138,982 11.64
TrustCo Bank Corp NY................... 157,161 12.99
Total risk based capital:
Trustco Bank, NA....................... 154,363 12.92
TrustCo Bank Corp NY................... 172,735 14.28
</TABLE>
82
<PAGE>
<TABLE>
(14)Parent Company Only
The following statements pertain to TrustCo Bank Corp NY (Parent Company):
Statements of Income
<CAPTION>
(dollars in thousands)
Years Ended December 31,
Income: 1997 1996 1995
Dividends and interest
<S> <C> <C> <C>
from subsidiaries.........................$ 27,227 20,418 28,416
Gain on sale of securities.................. -- -- 92
Income from other investments............... 379 301 66
-------------------------------------------
Total income............................ 27,606 20,719 28,574
-------------------------------------------
Expense:
Operating supplies.......................... 98 120 126
Professional services ...................... 33 222 200
Miscellaneous expense....................... 110 308 70
-------------------------------------------
Total expense.......................... 241 650 396
-------------------------------------------
Income before income
taxes and undistributed
net income of subsidiaries.................. 27,365 20,069 28,178
Income tax expense/(benefit)................. 45 (98) (32)
-------------------------------------------
Income before equity in
undistributed net
income of subsidiaries...................... 27,320 20,167 28,210
(Distributions in excess of)/equity
in undistributed net income
of subsidiaries............................. 4,855 8,532 (2,683)
-------------------------------------------
Net income...................................$ 32,175 28,699 25,527
-------------------------------------------
</TABLE>
<TABLE>
Statements of Condition
<CAPTION>
(dollars in thousands)
December 31,
Assets: 1997 1996
<S> <C> <C>
Cash in subsidiary bank........................$ 10,480 8,185
Noninterest bearing note receivable
from subsidiary............................ 1,117 2,117
Investments in subsidiaries.................... 152,692 142,108
Securities available for sale.................. 26,205 15,965
Other assets................................... 463 1,296
----------------------------------
Total assets................................$ 190,957 169,671
----------------------------------
Liabilities and shareholders' equity:
Accrued expenses and other liabilities.........$ 12,132 7,271
----------------------------------
Total liabilities.......................... 12,132 7,271
----------------------------------
Shareholders' equity............................ 178,825 162,400
----------------------------------
Total liabilities and shareholders'
equity.....................................$ 190,957 169,671
----------------------------------
</TABLE>
<TABLE>
Statements of Cash Flows
<CAPTION>
(dollars in thousands)
Years Ended December 31,
1997 1996 1995
Increase/(decrease) in cash and cash equivalents:
Cash flows from operating activities:
<S> <C> <C> <C>
Net income..........................................$ 32,175 28,699 25,527
-------------------------------------
Adjustments to reconcile net income
to net cash provided by operating activities:
Distributions in excess of/(equity
in undistributed net income)
of subsidiaries............................... (4,855) (8,532) 2,683
Gain on sales of securities...................... -- (92)
(Increase)/decrease in other assets.............. 833 (874) 78
Increase/(decrease) in accrued expenses.......... 14 (19) 31
-------------------------------------
Total adjustments.............................. (4,008) (9,425) 2,700
-------------------------------------
Net cash provided by operatingoo activities......... 28,167 19,274 28,227
-------------------------------------
Cash flows from investing activities:
Proceeds from sale of securities available for sale -- -- 1,285
Purchase of securities available for sale.......... (349) (253) (10,651)
(Increase)/decrease in noninterest
bearing note receivable from subsidiary........... -- 500 (3,617)
-------------------------------------
Net cash provided by/(used in)
investing activities.......................... (349) 247 (12,983)
-------------------------------------
Cash flows from financing activities:
Proceeds from exercise of stock options............ 1,624 935 893
Dividends paid..................................... (22,438) (19,447) (16,926)
Payments to acquire treasury stock................. (7,735) (805) (253)
Proceeds from sale of treasury stock............... 3,026 794 --
-------------------------------------
Net cash used in financing activities.......... (25,523) (18,523) (16,286)
-------------------------------------
Net increase/(decrease)
in cash and cash equivalents................... 2,295 998 (1,042)
Cash and cash equivalents at beginning of year...... 8,185 7,187 8,229
-------------------------------------
Cash and cash equivalents at end of year............$ 10,480 8,185 7,187
-------------------------------------
Supplemental disclosure of cash flow information:
Increase in dividends payable......................$ 839 751 829
Equity contribution to subsidiary.................. 1,000 1,000 --
Change in unrealized (gain)/loss on
available for sale securities -- gross........... (9,891) (3,111) (843)
Reclassification of fixed assets to other assets... -- -- 389
Change in deferred tax effect on
unrealized gain/(loss) on securities
available for sale............................... 4,008 1,285 348
-------------------------------------
</TABLE>
83
<PAGE>
TrustCo Bank Corp NY
Officers and Board of Directors
Officers
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Robert A. McCormick
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Robert T. Cushing
VICE PRESIDENT
Nancy A. McNamara
VICE PRESIDENT AND ASSISTANT SECRETARY
Ralph A. Pidgeon
SECRETARY
William F. Terry
Board of Directors
Barton A. Andreoli
President Towne Construction and Paving Corp.
Lionel O. Barthold
Chairman
Power Technologies, Inc.
M. Norman Brickman
President
D. Brickman, Inc.
Anthony J. Marinello, M.D., Ph.D.
Physician
Robert A. McCormick
President and Chief Executive Officer
Trustco Bank
Nancy A. McNamara
Senior Vice President
Trustco Bank
John S. Morris, Ph.D.
President Emeritus, Union College and Former
Chancellor, Union University
James H. Murphy, D.D.S.
Orthodontist
Richard J. Murray, Jr.
President
R.J. Murray Co., Inc.
Kenneth C. Petersen
President Schenectady International, Inc.
William D. Powers
Chairman New York Republican State Committee
William J. Purdy
President Welbourne & Purdy Realty, Inc.
William F. Terry
Senior Vice President and Secretary
Trustco Bank
Directors of TrustCo Bank Corp NY are also Directors of Trustco Bank
HONORARY DIRECTORS
Charles W. Carl, Jr.
Caryl P. Haskins, Ph.D.
Bernard J. King
H. Gladstone McKeon
William H. Milton, III
Daniel J. Rourke, M.D.
Anthony M. Salerno
Edwin O. Salisbury
Harry E. Whittingham, Jr.
84
<PAGE>
Trustco Bank Officers
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Robert A. McCormick
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Robert T. Cushing
SENIOR VICE PRESIDENT
Nancy A. McNamara
SENIOR VICE PRESIDENT
Ralph A. Pidgeon
SENIOR VICE PRESIDENT AND SECRETARY
William F. Terry
AUDITOR
John C. Fay
ACCOUNTING/FINANCE,DATA PROCESSING,PREMISES
Senior Vice President and Chief Financial Officer Robert T. Cushing
ACCOUNTING/FINANCE
Vice Presidents
Linda C. Christensen
Jeffrey S. Farbaniec
DATA PROCESSING
Vice President
Michael R. Bonesteel
Senior Programming Officer
Nancy M. Holsberger
COMMUNITY RELATIONS,LEGAL COUNSEL,LOAN DIVISION, TRUST
Senior Vice President
Nancy A. McNamara
LEGAL COUNSEL
Administrative Vice President
Henry C. Collins
LOAN DIVISIONCOMMERCIAL/MORTGAGELOANS
Administrative Vice President
Robert J. McCormick
COMMERCIAL LOANS
Vice Presidents
Scot R. Salvador
George W. Wickswat
Senior Commercial Loan Officer
Eric W. Schreck
Commercial Loan Officer
John R. O'Connor
TRUST DEPARTMENT
Vice Presidents
William M. McCartan
James Niland
Robert Scribner
Trust Officers
John P. Fulgan
Richard W. Provost
Investment Officer
Peter L. Gregory
BRANCHES, INSTALLMENTLOANS/CREDIT CARDS,RETIREMENT/GOVERNMENT ACCOUNTS,
COMPLIANCE
Senior Vice President
Ralph A. Pidgeon
BRANCH OFFICER
Thomas H. Lauster
COMPLIANCE
Vice President
Donald J. Csaposs
INSTALLMENT LOANS/CREDIT CARDS
Senior Installment Loan Officer
Thomas M. Poitras
BANK OPERATIONS,MARKETING, PURCHASING,TRUST OPERATIONS
Senior Vice President and Secretary
William F. Terry
BANK OPERATIONS
Administrative Vice President
James D. McLoughlin
Vice President
Ann M. Noble
Operations Officer
Kevin M. Curley
HUMAN RESOURCES
Senior Personnel Officer
Cheri J. Parvis
85
<PAGE>
Branch Locations
Altamont Ave. Office
1400 Altamont Ave.
Schenectady
Telephone: 356-1317
Altamont Ave. West Office
1900 Altamont Ave.
Rotterdam
Telephone: 355-1900
Bay Road Office
292 Bay Road
Queensbury
Telephone: 792-2691
Brandywine Office
State St. at Brandywine Ave.
Schenectady
Telephone: 346-4295
Central Avenue Office
163 Central Ave.
Albany
Telephone: 426-7291
Clifton Country Road Office
7 Clifton Country Road
Clifton Park
Telephone: 371-5002
Clifton Park Office
1018 Route 146
Clifton Park
Telephone: 371-8451
Colonie Office
1892 Central Ave.
Colonie Plaza,
Colonie
Telephone: 456-0041
Delmar Office
167 Delaware Ave.
Delmar
Telephone: 439-9941
East Greenbush Office
501 Columbia Turnpike
Rensselaer
Telephone: 479-7233
Exit 8/Crescent Rd. Office
CVS Plaza
Clifton Park
Telephone: 383-0039
Glens Falls Office
3 Warren Street
Glens Falls
Telephone: 798-8131
Greenwich Office
131 Main St.
Greenwich
Telephone: 692-2233
Guilderland Office
3900 Carman Road
Schenectady
Telephone: 355-4890
Halfmoon Office
Country Dollar Plaza
Halfmoon
Telephone: 371-0593
Hoosick Falls Office
47 Main St.
Hoosick Falls
Telephone: 686-5352
Hudson Office
507 Warren St.
Hudson
Telephone: 828-9434
Hudson Falls Office
3376 Burgoyne Avenue
Hudson Falls
Telephone: 747-0886
Latham Office
1 Johnson Road
Latham
Telephone: 785-0761
Loudon Plaza Office
372 Northern Blvd.
Albany
Telephone: 462-6668
Madison Avenue Office
1084 Madison Ave.
Albany
Telephone: 489-4711
Main Office
320 State St.
Schenectady
Telephone: 377-3311
Malta 4 Corners Office
2471 Route 9
Malta
Telephone: 899-1056
Malta Mall Office
43 Round Lake Road
Ballston Lake
Telephone: 899-1558
Mayfair Office
Saratoga Road at Mayfair
Glenville
Telephone: 399-9121
Mechanicville Office
9 Price Chopper Plaza
Mechanicville
Telephone: 664-1059
Mont Pleasant Office
Crane St. at Main Ave.
Schenectady
Telephone: 346-1267
New Scotland Office
301 New Scotland Ave.
Albany
Telephone: 438-7838
Newton Plaza Office
588 New Loudon Road
Latham
Telephone: 786-3687
Niskayuna-Woodlawn Office
3461 State St.
Schenectady
Telephone: 377-2264
Plaza Seven Office
1208 Troy-Schenectady Road
Latham
Telephone: 785-4744
Queensbury Office
118 Quaker RoadSuite9,
Queensbury
Telephone: 798-7226
Rotterdam Office
Curry Road Shopping Ctr.
Rotterdam
Telephone: 355-8330
Rotterdam Square Office
93 W. Campbell Road
Rotterdam
Telephone: 377-2393
Route 9 Office -- Latham
754 New Loudon Rd.
Latham
Telephone: 786-8816
Sheridan Plaza Office
1350 Gerling St.Schenectady
Telephone: 377-8517
Shoppers' World Office
Old Rte. 146 and Plank Rd.
Clifton Park
Telephone: 383-6850
South Glens Falls Office
Glengate Shopping Plaza
133 Saratoga Road, Suite 1
South Glens Falls
Telephone: 793-7668
State Farm Road Office
2050 Western Ave.
Guilderland
Telephone: 452-6913
State Street Office
112 State St.
Albany
Telephone: 436-9043
Stuyvesant Plaza Office
Western Ave. at Fuller Road
Albany
Telephone: 489-2616
Tanners Main Office
345 Main Street
Catskill
Telephone: 943-2500
Tanners West Side Office
238 West Bridge St.
Catskill
Telephone: 943-5090
Troy Office
5th Ave. and State St.
Troy
Telephone: 274-5420
Union Street East Office
1700 Union St.
Schenectady
Telephone: 382-7511
Upper New Scotland Office
583 New Scotland Ave.
Albany
Telephone: 438-6611
Upper Union Street Office
1620 Union St.
Schenectady
Telephone: 374-4056
West Sand Lake Office
3707 NY Rt. 43
West Sand Lake
Telephone: 674-3327
Wilton Mall Office
Route 50
Saratoga Springs
Telephone: 583-1716
Wolf Road Office
34 Wolf Road
Albany
Telephone: 458-7761
Wynantskill Office
134-136 Main Street, Rt. 66
Wynantskill
Telephone: 286-2674
86
<PAGE>
General Information
ANNUAL MEETING
Monday, May 18, 1998
10:00AM, Trustoco Bank Corp NY, 192 Erie Boulevard,
Schenectady, New York 12305
CORPORATE HEADQUARTERS 320 State Street, Schenectady, New York 12305
(518-377-3311)
DIVIDEND REINVESTMENT PLAN
A Dividend Reinvestment Plan is available to shareholders of TrustCo Bank Corp
NY. It provides for the reinvestment of cash dividends and optional cash
payments to purchase additional shares of TrustCo stock. The Plan is free of
administrative charges,and provides a convenient method of acquiring additional
shares. Trustco Bank acts as administrator for this service, and is the agent
for shareholders in these transactions. Shareholders who want additional
information may contact the TrustCo Shareholder Services Department
(518-381-3601).
DIRECT DEPOSIT OF DIVIDENDS
Electronic deposit of dividends, which offers safety and convenience, is
available to TrustCo shareholders who wish to have dividends deposited directly
to personal checking, savings or other accounts. Electing direct deposit will
not affect the mailing of annual and quarterly reports and proxy materials. If
you would like to arrange direct deposit, please write the Corporate Secretary
at the corporate headquarters address listed on this page.
DUPLICATE MAILING NOTIFICATION
If you are a shareholder of record and are currently receiving multiple copies
of TrustCo's annual and quarterly reports,please contact the TrustCo Shareholder
Services Department at (518) 381-3601, or at the corporate headquarters address
listed on this page.
EQUAL OPPORTUNITY AT TRUSTCO
Trustco Bank is an Affirmative Action Equal Opportunity Employer.
FORM 10-K
TrustCo Bank Corp NY will provide, without charge, a copy of its Form 10-K upon
written request. Requests and related inquiries should be directed to William F.
Terry, Secretary, TrustCo Bank Corp NY, P.O. Box 1082, Schenectady, New York
12301-1082.
NASDAQ SYMBOL: TRST
The Corporation's common stock trades on The Nasdaq Stock MarketSM under the
symbol TRST.
SUBSIDIARIES:
Trustco Bank, National Association ORE Subsidiary Corp Trustco Realty
Corp.Schenectady, New York Schenectady, New York Schenectady, New York
Member FDIC
TRANSFER AGENT
Trustco BankSecurities DepartmentP.O. Box 380Schenectady, New York
12301-0380
Trustco Bank(R) is a registered service mark with the U.S. Patent & Trademark
Office.
87
<PAGE>
INSIDE BACK COVER
BLANK PAGE
88
<PAGE>
BACK COVER
BLANK PAGE
89
<PAGE>
Exhibit 21
LIST OF SUBSIDIARIES OF TRUSTCO
Trustco Bank, National Association..............Nationally chartered
banking association
ORE Subsidiary Corp.............................New York corporation
Trustco Realty Corp.............................New York corporation
(Subsidiary of Trustco Bank,
National Association)
Each subsidiary does business under its own name. The activities of each are
described in Part I, Item 1 of Form 10-K.
90
<PAGE>
Exhibit 23
KPMG Peat Marwick LLP
515 Broadway
Albany, NY 12207
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
TrustCo Bank Corp NY:
We consent to incorporation by reference in the Registration Statements, Form
S-8 (No. 33-43153) filed on October 3, 1991, Form S-8 (No. 33-67176) filed on
August 6, 1993, Form S-8 (No. 33-43153) filed on March 21, 1995, Form S-8 (No.
33-60409) filed on June 20, 1995, Form S-3 (No. 33-46044) filed on September 20,
1995 of TrustCo Bank Corp NY and subsidiaries, and Form S-3 (No. 333-35153)
filed September 8, 1997, of our report dated January 23, 1998, relating to the
consolidated statements of condition of TrustCo Bank Corp NY and subsidiaries as
of December 31, 1997 and 1996, and the related consolidated statements of
income, changes in shareholders' equity, and cash flows for each of the years in
the three-year period ended December 31, 1997, which report appears in the
December 31, 1997 Annual Report on Form 10-K of TrustCo Bank Corp NY.
/s/ KPMG Peat Marwick LLP
March 21, 1998
91
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned persons do hereby appoint William F. Terry or Robert T. Cushing
as a true and lawful Attorney In Fact for the sole purpose of affixing their
signatures to the 1997 Annual Report (Form 10-K) of TrustCo Bank Corp NY to the
Securities and Exchange Commission.
/s/Barton A. Andreoli /s/Lionel O. Barthold
__________________________ _____________________
Barton A. Andreoli Lionel O. Barthold
/s/M. Norman Brickman /s/Anthony J. Marinello
__________________________ _____________________
M. Norman Brickman Dr. Anthony J. Marinello
/s/Robert A. McCormick /s/Nancy A. McNamara
__________________________ _____________________
Robert A. McCormick Nancy A. McNamara
/s/Dr. John S. Morris /s/James H. Murphy
__________________________ _____________________
Dr. John S. Morris Dr. James H. Murphy
/s/Richard J. Murray, Jr. /s/Kenneth C. Petersen
__________________________ _____________________
Richard J. Murray, Jr. Kenneth C. Petersen
/s/ William D. Powers /s/William J. Purdy
__________________________ _____________________
William D. Powers William J. Purdy
/s/William F. Terry
- --------------------------
William F. Terry
Sworn to before me this 17th day of February 1998.
/s/Joan Clark
- -------------------------
Notary Public
Joan Clark
Notary Public, State of New York
Qualified in Albany County
No. 01CL4822282
Commission Expires Nov. 30, 1998
92
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 42,706
<INT-BEARING-DEPOSITS> 34
<FED-FUNDS-SOLD> 395,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 601,899
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,298,276
<ALLOWANCE> 53,455
<TOTAL-ASSETS> 2,372,265
<DEPOSITS> 2,021,863
<SHORT-TERM> 127,850
<LIABILITIES-OTHER> 43,727
<LONG-TERM> 0
0
0
<COMMON> 24,257
<OTHER-SE> 154,568
<TOTAL-LIABILITIES-AND-EQUITY> 2,372,265
<INTEREST-LOAN> 109,346
<INTEREST-INVEST> 44,898
<INTEREST-OTHER> 17,761
<INTEREST-TOTAL> 172,005
<INTEREST-DEPOSIT> 80,946
<INTEREST-EXPENSE> 86,520
<INTEREST-INCOME-NET> 85,485
<LOAN-LOSSES> 5,414
<SECURITIES-GAINS> (166)
<EXPENSE-OTHER> 46,226
<INCOME-PRETAX> 51,067
<INCOME-PRE-EXTRAORDINARY> 32,175
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,175
<EPS-PRIMARY> 1.37<F1>
<EPS-DILUTED> 1.33<F2>
<YIELD-ACTUAL> 4.02
<LOANS-NON> 6,298
<LOANS-PAST> 1,060
<LOANS-TROUBLED> 3,294
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 51,561
<CHARGE-OFFS> 6,579
<RECOVERIES> 3,059
<ALLOWANCE-CLOSE> 53,455
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 53,455
<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.
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995 DEC-31-1994 DEC-31-1993
<PERIOD-END> DEC-31-1996 DEC-31-1995 DEC-31-1994 DEC-31-1993
<CASH> 45,720 50,885 52,005 50,977
<INT-BEARING-DEPOSITS> 59 4 474 0
<FED-FUNDS-SOLD> 310,000 239,000 263,000 149,000
<TRADING-ASSETS> 0 0 0 2,106
<INVESTMENTS-HELD-FOR-SALE> 610,670 640,206 117,458 240,716
<INVESTMENTS-CARRYING> 0 0 347,858 416,806
<INVESTMENTS-MARKET> 0 0 334,455 431,298
<LOANS> 1,241,882 1,226,142 1,152,632 1,060,648
<ALLOWANCE> 51,561 48,320 38,851 34,087
<TOTAL-ASSETS> 2,261,780 2,176,185 1,975,677 1,971,298
<DEPOSITS> 1,953,146 1,930,649 1,789,831 1,794,232
<SHORT-TERM> 111,662 56,654 12,713 18,323
<LIABILITIES-OTHER> 34,572 28,783 30,300 26,113
<LONG-TERM> 0 0 3,500 2,750
0 0 0 0
0 0 0 0
<COMMON> 20,959 18,135 15,018 13,588
<OTHER-SE> 141,441 141,964 124,265 116,292
<TOTAL-LIABILITIES-AND-EQUITY> 2,261,780 2,176,185 1,975,677 1,971,298
<INTEREST-LOAN> 107,111 107,060 93,873 86,965
<INTEREST-INVEST> 41,902 41,949 37,351 41,780
<INTEREST-OTHER> 17,634 12,543 9,058 4,912
<INTEREST-TOTAL> 166,647 161,552 140,282 133,657
<INTEREST-DEPOSIT> 77,749 78,355 60,034 60,882
<INTEREST-EXPENSE> 82,342 80,200 60,698 61,619
<INTEREST-INCOME-NET> 84,305 81,352 71,528 72,038
<LOAN-LOSSES> 6,577 12,698 8,056 11,576
<SECURITIES-GAINS> (4,536) 243 (8,877) 6,239
<EXPENSE-OTHER> 42,015 44,440 40,560 43,502
<INCOME-PRETAX> 46,026 38,281 35,528 36,136
<INCOME-PRE-EXTRAORDINARY> 28,699 25,527 22,888 23,620
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 (3,295)
<NET-INCOME> 28,699 25,527 22,888 20,325
<EPS-PRIMARY> <F1> 1.23 <F1>1.10 <F1>0.99 <F1>0.88
<EPS-DILUTED> <F2> 1.20 <F2>1.07 <F2>0.97 <F2>0.87
<YIELD-ACTUAL> 4.07 4.18 4.25 3.99
<LOANS-NON> 10,748 12,832 6,370 10,227
<LOANS-PAST> 792 1,696 4,436 6,567
<LOANS-TROUBLED> 2,495 1,130 910 0
<LOANS-PROBLEM> 0 0 0 0
<ALLOWANCE-OPEN> 48,320 38,851 34,087 26,919
<CHARGE-OFFS> 5,648 7,338 4,824 6,741
<RECOVERIES> 2,312 4,109 1,532 2,333
<ALLOWANCE-CLOSE> 51,561 48,320 38,851 34,087
<ALLOWANCE-DOMESTIC> 0 0 0 0
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 51,561 48,320 38,851 34,087
<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>
