10-Q 1 q10q93001.txt QUARTER EMDED 9/30/01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended Commission File Number 0-10592 September 30, 2001 TRUSTCO BANK CORP NY (Exact name of registrant as specified in its charter) NEW YORK 14-1630287 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5 SARNOWSKI DRIVE, GLENVILLE, NEW YORK 12302 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (518) 377-3311 Securities registered pursuant to Section 12(b) of the Act: Name of exchange on Title of each class which registered None None Securities registered pursuant to Section 12(g) of the Act: (Title of class) Common Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes.(x) No.( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of Shares Outstanding Class of Common Stock as of October 31, 2001 -------------------------- ---------------------- $1 Par Value 61,930,035 1
TrustCo Bank Corp NY INDEX Part I. FINANCIAL INFORMATION PAGE NO. Item 1. Interim Financial Statements (Unaudited): Consolidated Statements of Income for the Three Months and Nine Months Ended 1 September 30, 2001 and 2000 Consolidated Statements of Financial Condition as of September 2 30, 2001 and December 31, 2000 Consolidated Statements of Cash Flows for the Nine Months Ended 3 - 4 September 30, 2001 and 2000 Notes to Consolidated Interim Financial Statements 5 - 9 Independent Auditors' Review Report 10 Item 2. Management's Discussion and Analysis 11 - 21 Item 3. Quantitative and Qualitative Disclosures About Market Risk 22 Part II. OTHER INFORMATION Item 1. Legal Proceedings - None Item 2. Changes in Securities and Use of Proceeds - None Item 3. Defaults Upon Senior Securities --None Item 4. Submissions of Matters to Vote of Security Holders - None Item 5. Other Information - None
2 Item 6.Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K TrustCo filled a current report on Form 8-K on August 21,2001 regarding a press release issued on August 21, 2001 declaring a quarterly cash dividend of $0.15 per share, payable October 1, 2001, to the shareholders of record at the close of business on September 7, 2001. The Company also announced that its Board of Directors approved a 15% stock split. The additional shares are to be distributed on November 13, 2001 to shareholders of record on October 19, 2001. TrustCo filed a current report on Form 8-K on September 4, 2001, regarding a press release declaring that TrustCo Bank Corp NY ranked in the top 10% of dividend achievers in the nation. TrustCo filed a current report on Form 8-K on October 16, 2001, regarding two press releases with year to date and third quarter results for the period ending September 30, 2001. 3
TRUSTCO BANK CORP NY Consolidated Statements of Income (dollars in thousands, except per share data) (Unaudited) 3 Months Ended 9 Months Ended September 30 September 30 2001 2000 2001 2000 Interest and dividend income: Interest and fees on loans $ 29,963 28,953 89,752 84,164 Interest on U. S. Treasuries and agencies 2,704 4,063 8,604 11,934 Interest on states and political subdivisions 3,028 2,114 8,060 5,950 Interest on mortgage-backed securities 2,098 3,674 8,576 11,277 Interest and dividends on other securities 1,351 1,448 3,414 4,736 Interest on federal funds sold and other short-term investments 2,510 3,846 9,534 11,313 ----------------------------------------------------------- Total interest income 41,654 44,098 127,940 129,374 ----------------------------------------------------------- Interest expense: Interest on deposits: Interest-bearing checking 778 729 2,237 2,172 Savings 4,175 4,241 12,207 12,803 Money market deposit accounts 440 401 1,257 1,182 Time deposits 11,179 11,651 35,273 33,110 Interest on short-term borrowings 1,465 2,330 5,730 6,111 Interest on long-term debt 11 21 35 21 ----------------------------------------------------------- Total interest expense 18,048 19,373 56,739 55,399 ----------------------------------------------------------- Net interest income 23,606 24,725 71,201 73,975 Provision for loan losses 750 910 3,365 2,560 ----------------------------------------------------------- Net interest income after provision for loan losses 22,856 23,815 67,836 71,415 ----------------------------------------------------------- Noninterest income: Trust department income 1,912 2,296 5,942 6,566 Fees for other services to customers 2,714 2,406 7,677 6,768 Net gain / (loss) on securities transactions 696 (1,644) 3,905 (5,013) Other 686 909 2,291 2,503 ----------------------------------------------------------- Total noninterest income 6,008 3,967 19,815 10,824 ----------------------------------------------------------- Noninterest expenses: Salaries and employee benefits 6,252 5,736 19,475 17,844 Net occupancy expense 1,348 1,099 4,148 3,471 Equipment expense 914 912 3,234 3,205 FDIC insurance expense 93 100 281 306 Professional services 634 534 1,951 2,096 Other real estate expenses / (income) (209) (52) (397) (354) Other 3,331 3,418 8,872 8,533 ----------------------------------------------------------- Total noninterest expenses 12,363 11,747 37,564 35,101 ----------------------------------------------------------- Income before taxes 16,501 16,035 50,087 47,138 Applicable income taxes 4,910 5,274 15,526 15,610 ----------------------------------------------------------- Net income $ 11,591 10,761 34,561 31,528 =========================================================== Net income per Common Share: - Basic $ 0.163 0.152 0.486 0.446 =========================================================== - Diluted $ 0.157 0.147 0.470 0.432 =========================================================== Per share data is adjusted for the effect of the 15% stock split declared August, 2001. See accompanying notes to consolidated interim financial statements. -1-
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TRUSTCO BANK CORP NY Consolidated Statements of Financial Condition (dollars in thousands, except share data) 9/30/01 12/31/00 ASSETS: (Unaudited) Cash and due from banks $ 52,818 45,956 Federal funds sold and other short term investments 300,792 299,490 ------------------ ----------------- Total cash and cash equivalents 353,610 345,446 Securities available for sale: U. S. Treasuries and agencies 146,893 189,562 States and political subdivisions 226,198 173,195 Mortgage-backed securities 101,106 188,602 Other 107,096 53,925 ------------------ ----------------- Total securities available for sale 581,293 605,284 ------------------ ----------------- Loans: Commercial 208,371 199,728 Residential mortgage loans 1,198,259 1,119,437 Home equity line of credit 123,415 130,739 Installment loans 21,468 26,134 ------------------ ----------------- Total loans 1,551,513 1,476,038 ------------------ ----------------- Less: Allowance for loan losses 56,608 56,298 Unearned income 848 990 ------------------ ----------------- Net loans 1,494,057 1,418,750 Bank premises and equipment 18,762 17,416 Real estate owned 1,024 1,911 Other assets 59,989 67,391 ------------------ ----------------- Total assets $ 2,508,735 2,456,198 ================== ================= LIABILITIES: Deposits: Demand $ 194,067 191,260 Interest-bearing checking 292,820 277,543 Savings accounts 634,995 588,595 Money market deposit accounts 67,512 56,917 Certificates of deposit (in denominations of $100,000 or more) 131,720 123,211 Time deposits 749,948 773,465 ------------------ ----------------- Total deposits 2,071,062 2,010,991 Short-term borrowings 174,798 192,898 Long-term debt 697 911 Accrued expenses and other liabilities 57,235 55,555 ------------------ ----------------- Total liabilities 2,303,792 2,260,355 ------------------ ----------------- SHAREHOLDERS' EQUITY: Capital stock par value $1; 100,000,000 shares authorized, and 66,077,681 and 65,172,317 shares issued September 30, 2001 and December 31, 2000, respectively 66,078 65,172 Surplus 80,860 78,407 Undivided profits 63,695 56,923 Accumulated other comprehensive income: Net unrealized gain on securities available for sale 24,135 20,539 Treasury stock at cost - 4,168,767 and 3,801,267 shares at September 30, 2001 and December 31, 2000, respectively (29,825) (25,198) ------------------ ----------------- Total shareholders' equity 204,943 195,843 ------------------ ----------------- Total liabilities and shareholders' equity $ 2,508,735 2,456,198 ================== ================= See accompanying notes to consolidated interim financial statements. - 2 -
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TRUSTCO BANK CORP NY Consolidated Statements of Cash Flows (Unaudited) (dollars in thousands) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS NINE MONTHS ENDED September 30, 2001 2000 -------- -------- Cash flows from operating activities: Net income............................................... $ 34,561 31,528 -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 1,735 1,589 Gain on sales of fixed assets.......................... (17) (85) Provision for loan losses.............................. 3,365 2,560 Loss on sale of securities available for sale.......... 676 5,631 Gain on sale of securities available for sale.......... (4,581) (618) Provision for deferred tax expense/(benefit)........... (1,297) (544) Decrease in taxes receivable........................... 7,415 2,964 (Increase)/decrease in interest receivable.............. 642 (952) Increase/(decrease) in interest payable................ (801) 303 Increase in other assets............................... (2,273) (1,546) Increase in accrued expenses........................... 2,397 980 -------- -------- Total adjustments.................................... 7,261 10,282 -------- -------- Net cash provided by operating activities................ 41,822 41,810 -------- -------- Cash flows from investing activities: Proceeds from sales and calls of securities available for sale.................................... 286,900 136,768 Purchase of securities available for sale.............. (256,569) (185,162) Proceeds from maturities of securities available for sale.................................... 3,712 68,458 Net increase in loans.................................. (79,943) (68,415) Proceeds from dispositions of real estate owned........ 2,265 1,397 Proceeds from sales of fixed assets.................... 110 153 Payment for purchase of Landmark Financial Corp, net of cash acquired --- (1,639) Capital expenditures................................... (2,917) (1,659) -------- -------- Net cash used in investing activities................ (46,442) (50,099) -------- -------- Cash flows from financing activities: Net increase/(decrease) in deposits.................... 60,071 (23,010) Increase/(decrease) in short-term borrowings........... (18,100) 11,541 Repayment of long-term debt............................ (214) --- Proceeds from issuance of FHLB debt.................... --- 3 Proceeds from exercise of stock options................ 3,359 1,079 Proceeds from sale of treasury stock................... 5,020 4,526 Purchase of treasury stock............................. (9,647) (7,265) Dividends paid......................................... (27,705) (24,056) -------- -------- Net cash provided by/(used in) financing activities.. 12,784 (37,182) -------- -------- Net increase/(decrease) in cash and cash equivalents..... 8,164 (45,471) Cash and cash equivalents at beginning of period......... 345,446 330,512 -------- -------- Cash and cash equivalents at end of period............... $ 353,610 285,041 ======== ======== See accompanying notes to consolidated interim financial statements. (Continued) -3-
6 TRUSTCO BANK CORP NY Consolidated Statements of Cash Flows Continued (Unaudited) (dollars in thousands) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: NINE MONTHS ENDED September 30, 2001 2000 -------- -------- Interest paid.......................................... $ 57,540 55,096 Income taxes paid...................................... 9,314 13,210 Transfer of loans to real estate owned................. 1,271 1,089 Increase/(decrease) in dividends payable............... 84 (6) Change in unrealized (gain)/loss on securities available for sale-gross of deferred taxes............ (6,147) (20,550) Change in deferred tax effect on unrealized gain/(loss) on securities available for sale...................... 2,551 8,404 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Fair value of noncash assets acquired in Landmark Financial Corp. acquisition --- 25,541 Fair value of liabilities assumed in Landmark Financial Corp. acquisition --- 24,298 ====== See accompanying notes to consolidated interim financial statements. -4-
7 TrustCo Bank Corp NY Notes to Consolidated Interim Financial Statements (Unaudited) 1. Financial Statement Presentation In the opinion of the management of TrustCo Bank Corp NY (the Company), the accompanying unaudited Consolidated Interim Financial Statements contain all adjustments necessary to present fairly the financial position as of September 30, 2001, the results of operations for the three months and nine months ended September 30, 2001 and 2000, and the cash flows for the nine months ended September 30, 2001 and 2000. The accompanying Consolidated Interim Financial Statements should be read in conjunction with the TrustCo Bank Corp NY year-end Consolidated Financial Statements, including notes thereto, which are included in TrustCo Bank Corp NY's 2000 Annual Report to Shareholders on Form 10-K. 2. Earnings Per Share A reconciliation of the component parts of earnings per share for the three month and nine month periods ended September 30, 2001 and 2000 follows:
Weighted Average Shares (In thousands, Net Outstanding Per Share except per share data) Income Amounts ----------------- -------------------------- ------------------- For the quarter ended September 30, 2001: Basic EPS: Net income available to $11,591 71,164 $0.163 common shareholders.............. Effect of Dilutive Securities: Stock options............................. ------ 2,495 ------- ----------------- -------------------------- ------------------- Diluted EPS $11,591 73,659 $0.157 ================= ========================== =================== For nine months ended September 30, 2001: Basic EPS: Net income available to common shareholders.............. $34,561 71,060 $0.486 Effect of Dilutive Securities: Stock options............................. ------- 2,496 ------- ----------------- -------------------------- ------------------- Diluted EPS $34,561 73,556 $0.470 ================= ========================== =================== There were no antidilutive stock options during the quarter or nine months ended September 30, 2001.
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Weighted Average Shares (In thousands, Net Outstanding Per Share except per share data) Income Amounts ----------------- -------------------------- ------------------- For the quarter ended September 30, 2000: Basic EPS: Net income available to common shareholders.............. $10,761 70,755 $0.152 Effect of Dilutive Securities: Stock options............................. ------ 2,361 ------- ----------------- -------------------------- ------------------- Diluted EPS $10,761 73,116 $0.147 ================= ========================== =================== For nine months ended September 30, 2000: Basic EPS: Net income available to common shareholders.............. $31,528 70,715 $0.446 Effect of Dilutive Securities: Stock options............................. ------- 2,297 ------- ----------------- -------------------------- ------------------- Diluted EPS $31,528 73,012 $0.432 ================= ========================== =================== There were 1,729,830 stock options which were antidilutive and were therefore excluded from the September 30, 2000 calculations. Share and per share data have been adjusted for the 15% stock split declared in August 2001.
3. Comprehensive Income Comprehensive income includes the reported net income of a company adjusted for items that are currently accounted for as direct entries to equity, such as the mark to market adjustment on securities available for sale, foreign currency items and minimum pension liability adjustments. At the Company, comprehensive income represents net income plus other comprehensive income, which consists of the net change, after tax, in unrealized gains or losses on securities available for sale for the period. Accumulated other comprehensive income represents the net after tax unrealized gains or losses on securities available for sale as of the balance sheet dates. 9 Comprehensive income for the three month periods ended September 30, 2001 and 2000 was $12,949,000 and $17,149,000 respectively, and $38,157,000 and $43,674,000 for the nine month periods ended September 30, 2001 and 2000, respectively. The following summarizes the components of other comprehensive income:
(dollars in thousands) Unrealized gains on securities: Three months ended September 30 2001 2000 ---------------------------------------- Unrealized holding gains arising during period, net of tax (pre-tax gain of $2,992 for 2001 and pre-tax gain of $9,172 for 2000) $1,770 5,416 Reclassification adjustment for net gain/(loss) realized in net income during the period, net of tax (pre-tax gain of $696 for 2001 and pre-tax loss of $1,644 for 2000) 412 (972) ---------------- ----------- Other comprehensive income $1,358 6,388 ================= =========== (dollars in thousands) Unrealized gains on securities: Nine months September 30 2001 2000 ---------------------------------------- Unrealized holding gains arising during period, net of tax (pre-tax gain of $10,052 for 2001 and pre-tax gain of $15,537 for 2000) $5,906 9,181 Reclassification adjustment for net gain/(loss) realized in net income during period, net of tax (pre-tax gain of $3,905 for 2001 and pre-tax loss of $5,013 for 2000) 2,310 (2,965) ----------------- ------------ Other comprehensive income $3,596 12,146 ================= ============
4. Impact of Changes in Accounting Standards The Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (Statement 133), effective January 1, 2001. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of condition and measure those instruments at fair value. Changes in the fair value of the derivative financial instruments are reported in either earnings or comprehensive income, depending on the use of the derivative and whether or not it qualifies for hedge accounting. 10 Special hedge accounting treatment is permitted only if specific criteria are met, including a requirement that the hedging relationship be highly effective both at inception and on an ongoing basis. Accounting for hedges varies based on the type of hedge - fair value or cash flow. Results of effective hedges are recognized in current earnings for fair value hedges and in other comprehensive income for cash flow hedges. Ineffective portions of hedges are recognized immediately in earnings and are not deferred. The adoption of Statement 133 as of January 1, 2001 did not have a material effect on the Company's consolidated financial statements, as the Company had no derivitive instruments or embedded derivitives at adoption or at any time during the first nine months of 2001. If the Company were to invest in derivative instruments, there may be increased volatility in net income and shareholders' equity on an ongoing basis as a result of accounting for derivative instruments in accordance with Statement 133. In September 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" (Statement 140). Statement 140 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. Under Statement 140, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished. Statement 140 also provides standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. Statement 140 is effective for certain disclosures in the fiscal year ended December 31, 2000, and for certain transactions occurring after March 31, 2001. The adoption of Statement 140 did not have a material effect on the Company's consolidated financial statements. In July 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. 11 The Company is required to adopt the provisions of Statement 141 immediately and Statement 142 effective January 1, 2002. Furthermore, any goodwill and any intangible asset determined to have an indefinite useful life that are acquired in a purchase business combination completed after June 30, 2001 will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of Statement 142. As of September 30, 2001 the Company had $1.1 million of unamortized goodwill which will be subject to the transition provisions of Statements 141 and 142. Amortization expense related to goodwill was $257 thousand for the nine months ended September 30, 2001. Because of the extensive effort needed to comply with adopting Statements 141 and 142, it is not practicable to reasonably estimate the full impact of adopting these Statements on the Company's financial statements at the date of this report, including whether any transitional impairment losses will be required to be recognized as the cumulative effect of a change in accounting principle. Since the Company only had $1.1 million of unamortized goodwill as of September 30, 2001, the adoption of these Statements will not have a material effect on the Company's consolidated financial statements. 12 INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Board of Directors and Shareholders TrustCo Bank Corp NY: We have reviewed the consolidated statement of financial condition of TrustCo Bank Corp NY and subsidiaries (the Company) as of September 30, 2001, and the related consolidated statements of income for the three month and nine month periods ended September 30, 2001 and 2000, and the consolidated statements of cash flows for the nine month periods ended September 30, 2001 and 2000. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards, generally accepted in the United States of America, the consolidated statement of financial condition of TrustCo Bank Corp NY and subsidiaries as of December 31, 2000, and the related consolidated statements of income,changes in shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 19, 2001, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of financial condition as of December 31, 2000, is fairly stated, in all material respects, in relation to the consolidated statement of financial condition from which it has been derived. /s/KPMG LLP ------------------------------ KPMG LLP Albany, New York October 12, 2001 13 TrustCo Bank Corp NY Management's Discussion and Analysis September 30, 2001 The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo Bank Corp NY ("TrustCo" or "Company") during the three month and nine month periods ended September 30, 2001, with comparisons to 2000 as applicable. Net interest income and net interest margin are presented on a fully taxable equivalent basis in this discussion. The consolidated interim financial statements and related notes, as well as the 2000 Annual Report to Shareholders should be read in conjunction with this review. Amounts in prior period consolidated interim financial statements are reclassified whenever necessary to conform to the current period's presentation. Per share results have been adjusted for the 15% stock split declared in August 2001. Forward-looking Statements Statements included in this review and in future filings by TrustCo with the Securities and Exchange Commission, in TrustCo's press releases, and in oral statements made with the approval of an authorized executive officer, which are not historical or current facts, are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo's actual results, and could cause TrustCo's actual financial performance to differ materially from that expressed in any forward-looking statement: (1) credit risk, (2) interest rate risk, (3) competition, (4) changes in the regulatory environment, and (5) changes in general business and economic trends. The foregoing list should not be construed as exhaustive, and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events. Following this discussion is the table "Distribution of Assets, Liabilities and Shareholders' Equity: Interest Rates and Interest Differential" which gives a detailed breakdown of TrustCo's average interest earning assets and interest bearing liabilities for the three months and nine months ended September 30, 2001 and 2000. Overview TrustCo recorded net income of $11.6 million, or $0.157 of diluted earnings per share for the three months ended September 30, 2001, as compared to net income of $10.8 million or $0.147 of diluted earnings per share in the same period in 2000. For the nine month period ended September 30, 2001, TrustCo recorded net income of $34.6 million,or $0.470 of diluted earnings per share, as compared to $31.5 million,or $0.432 of diluted earnings per share for the comparable period in 2000. 14 The primary factors accounting for the year to date increases are: ` A $74.0 million increase in the average balance of interest earning assets between 2000 and 2001, and, ` Net securities gains of $3.9 million in 2001 compared to net securities losses of $5.0 million in 2000. These increases were partially offset by the following: ` A decrease of 23 basis points in the net interest margin from 4.50% in 2000 to 4.27% in 2001, and, ` A $2.5 million increase in non-interest expense in 2001 compared to 2000. Asset/Liability Management The Company strives to generate superior earnings capabilities through a mix of core deposits, funding a prudent mix of earning assets. This is, in its most fundamental form, the essence of asset/liability management. Additionally, TrustCo attempts to maintain adequate liquidity and reduce the sensitivity of net interest income to changes in interest rates to an acceptable level while enhancing profitability both on a short-term and long- term basis. Acquisition During the third quarter 2000 TrustCo acquired Landmark Financial Corporation and its wholly owned subsidiary, Landmark Community Bank, in a purchase business combination. The fair value of Landmark's assets was $26.2 million and the fair value of Landmark's liabilities was $24.3 million at the time of the acquisition. As a result of the relative immateriality of the balances acquired in the Landmark acquisition, the following discussion does not separately identify the change in balances due to the acquisition. Earning Assets Total average interest earning assets increased from $2.30 billion for the third quarter of 2000 to $2.39 billion in 2001 with an average yield of 7.27% in 2001 and 7.87% in 2000. Income on earning assets decreased by $1.8 million during this same time-period from $45.3 million in 2000 to $43.5 million in 2001. The decrease in interest income on earning assets was attributable to the decrease in yield on these assets, partially offset by the increase in balances outstanding. For the nine month period ended September 30, 2001, the average balance of interest earning assets was $2.36 billion, an increase of $74.0 million from the average balance for the comparable period in 2000 of $2.29 billion. The average yield on interest earning assets was 7.74% for 2000, compared to 7.48% in 2001. 15 The increase in the average balance of earning assets offset the decrease in the yield earned on these assets, thereby resulting in interest income of $132.6 million for the nine months of 2001, compared to $132.7 million for the nine months of 2000. Loans The average balance of loans for the third quarter was $1.53 billion in 2001 and $1.41 billion in 2000. The yield on loans decreased from 8.22% in 2000 to 7.82% in 2001. The combination of the higher average balances offset by lower rates resulted in an increase in the interest income on loans of $1.0 million. For the nine month period ended September 30, 2001, the average balance in the loan portfolio was $1.51 billion compared to $1.38 billion for the comparable period in 2000. The average yield decreased from 8.18% in 2000 to 7.96% in 2001. The increase in the average balance of loans outstanding, partially offset by the decrease in the yield resulted in total interest income of $89.9 million in 2001 compared to $84.3 million in 2000. During the first nine months of 2001 the balance of the loan portfolio increased primarily as a result of the increase in the residential mortgages. The average balance of residential mortgage loans was $1.15 billion in 2001 compared to $1.02 billion in 2000, an increase of 12.6%. The average yield on residential mortgage loans decreased by 3 basis points in 2001, compared to 2000. TrustCo actively markets the residential loan products within its market territory. Mortgage loan rates are affected by a number of factors including the prime rate, the federal funds rate, rates set by competitors and secondary market participants. For 2001 the prime rate and the federal funds rate decreased significantly as a result of the 350 basis point reduction in the target federal funds rate set by the Federal Reserve Board. Though interest rates on the residential mortgage loan products decreased during this time period they did not decrease as much as the reduction in the target federal funds rate. Also during this time TrustCo aggressively marketed the unique features of its loan products thereby differentiating itself from other lenders. These differences include extremely low closing costs, quick turnaround on credit decisions, no required escrow payments or private mortgage insurance and the fact that the loans are held in portfolio. The combination of competitive interest rates and the product differentiation noted above are the principal reasons for the increase in the balance of residential loans outstanding. The impact of the decrease in the benchmark interest rate indexes (prime rate, federal funds rate, etc.)is apparent in the decrease in the yield earned in the commercial, home equity and installment loan portfolios. The rates earned in 2001 were 27 bp, 152 bp and 31 bp, respectively, less than in the nine month period for 2000. Securities Available for Sale During the third quarter of 2001, the average balance of securities available for sale was $569.3 million with a yield of 7.70%, compared to $656.4 million for the third quarter of 2000 with a yield of 7.51%. The combination of the decrease in average balance offset by the increase in the yields caused a decrease in interest income on securities available for sale of $1.4 million between the third quarter of 2001 and 2000. 16 The nine month results reflect the same principal trends noted for the third quarter. The total average balance of securities available for sale during the nine months of 2001 was $570.4 million with an average yield of 7.76% compared to an average balance for 2000 of $663.9 million with a yield of 7.39%. Federal Funds Sold During the third quarter of 2001, the average balance of federal funds sold was $287.2 million with a yield of 3.46%, compared to the average balance for the three month period ended September 30, 2000 of $231.2 million with an average yield of 6.62%. The $56.0 million increase in the average balance, offset with the 316 basis points decrease in the average yield, resulted in total interest income on federal funds sold of $2.5 million for 2001 compared to $3.8 million for 2000. During the nine month period ended September 30, 2001, the average balance of federal funds was $284.9 million with a yield of 4.47% compared to an average balance of $242.7 million in 2000 with an average yield of 6.23%. The federal funds portfolio is utilized to generate additional interest income and liquidity as funds are waiting to be deployed into the loan and securities portfolios. The decrease in the yield on federal funds sold between 2000 and 2001 is the result of changes made by the Federal Reserve Bank for the target rate on overnight federal funds investments. As of September 30, 2001 the Federal Reserve Bank decreased its target rate to 3.0%. Funding Opportunities TrustCo utilizes various funding sources to support its earning asset portfolio. The vast majority of the Company's funding comes from traditional deposit vehicles such as savings, interest bearing checking and time deposit accounts. During the quarter, total average interest bearing liabilities were $2.07 billion for 2001 and $1.99 billion for 2000. The rate paid on total interest bearing liabilities was 3.88% for the third quarter of 2000, and 3.46% for 2001. Total interest expense for the third quarter decreased approximately $1.3 million to $18.0 million for 2001 compared to $19.4 million for 2000. Similar changes in interest bearing liabilities were noted for the nine-month period as was discussed for the quarter except the average yield decreased from 3.74% in 2000 to 3.71% in 2001. Total average interest bearing liabilities were $2.04 billion for the nine-month period ended September 30, 2001 and $1.98 billion for 2000. Demand deposit balances increased $7.2 million during the third quarter of 2001 compared to the third quarter of 2000. Demand deposits averaged $179.4 million in 2001 and $172.3 million in 2000. On a year to date basis, demand deposits were $179.1 million compared to $165.6 million in 2000. 17 The balance of deposits has remained relatively flat between the three month and nine month periods of 2001 compared to the same periods of 2000. The market territory within which the Company operates is not a growing, dynamic area and therefore opportunities to grow deposits are somewhat limited. Rates paid on the deposits are based upon local market competition and funds availability. The largest component of the deposit portfolio are time deposits which had an average balance of $883.1 million for the nine months of 2001 compared to $859.6 million for the comparable period in 2000. The average yield on these deposits was 5.34% for 2001 and 5.15% for 2000. The increase in the yield is a result of the rate increases in the second half of 2000 and the reduction in rates in 2001. Customers tended to take relatively longer maturity time deposits when rates were higher at the end of 2000 and have altered that pattern in 2001 as they move money into shorter-term deposits. Short-term borrowings for the quarter were $208.7 million in 2001 compared to $168.4 million in 2000. The average yield decreased during this time period from 5.51% to 2.79% for the third quarter of 2001. The largest component of short-term borrowings is the Trustco Short Term Investments which is only available to Trustco Trust Department customers. The increased balances in this account are a result of trust customers temporarily investing their funds in money market type instruments while waiting for some stability in the equity and bond markets. Net Interest Income Taxable equivalent net interest income decreased to $25.4 million for the third quarter of 2001. The net interest spread also decreased 18 basis points between 2000 and 2001 and the net interest margin decreased by 23 basis points. Similar decreases were noted in taxable equivalent net interest income, net interest spread and net interest margin for the nine-month period ended September 30, 2001, compared to the same period in 2000. Net interest income for the first nine months of 2001 was $75.8 million, a decrease of $1.4 million from the $77.3 million for the first nine months of 2000. Net interest spread decreased 23 basis points to 3.77% and net interest margin decreased 23 basis points to 4.27% for the nine month period ended September 30, 2001, compared to the nine month period ended September 30, 2000. Nonperforming Assets Nonperforming assets include nonperforming loans which are those loans in a nonaccrual status, loans that have been restructured, and loans past due three payments or more and still accruing interest. Also included in the total of nonperforming assets are foreclosed real estate properties, which are categorized as real estate owned. Impaired loans are considered to be those commercial and commercial real estate loans in a nonaccrual status and loans restructured since January 1, 1995, when the accounting standards required the identification, measurement and reporting of impaired loans. The following will describe the nonperforming assets of TrustCo as of September 30, 2001. 18 Nonperforming loans: Total nonperforming loans were $7.6 million at September 30, 2001, a decrease from the $12.7 million of nonperforming loans at September 30, 2000. Nonaccrual loans were $1.8 million at September 30, 2001 down from the $5.0 million at September 30, 2000. Restructured loans were $5.4 million at September 30, 2001 compared to $6.5 million at September 30, 2000. Of the $7.6 million of nonperforming loans at September 30, 2001, all but approximately $332 thousand are residential real estate or retail consumer loans. Historically the vast majority of nonperforming loans were concentrated in the commercial and commercial real estate portfolios. There has been a dramatic shifting of nonperforming loans to the residential real estate and retail consumer loan portfolio for several factors, including: ` The overall emphasis within TrustCo for residential real estate originations, ` The relatively weak economic environment in the upstate New York territory, and ` The reduction in real estate values in TrustCo's market area that has occurred since the middle of the 1990's, thereby causing a reduction in the collateral that supports the real estate loans. Consumer defaults and bankruptcies have increased dramatically over the last several years and this has lead to an increase in defaults on loans. TrustCo strives to identify borrowers that are experiencing financial difficulties and to work aggressively with them to minimize losses or exposures. Total impaired loans at September 30, 2001 of $5.5 million, consisted of restructured retail loans. During the first nine months of 2001, there have been $1.0 million of commercial loan charge offs and $4.4 million of mortgage and consumer loan charge offs as compared with $1.5 million of commercial loan charge offs and $2.5 million of mortgage and consumer loan charge offs in the first nine months of 2000. Recoveries during the first nine month periods have been $2.3 million in 2001 and $1.2 million in 2000. Real estate owned: Total real estate owned of $1.0 million at September 30, 2001 decreased by $698 thousand since September 30, 2000. Allowance for loan losses: The balance of the allowance for loan losses is maintained at a level that is, in management's judgment, representative of the amount of the risk inherent in the loan portfolio. At September 30, 2001, the allowance for loan losses was $56.6 million, a slight increase from the allowance at September 30, 2000 of $55.8 million. The allowance represents 3.65% of the loan portfolio as of September 30, 2001 compared to 3.88% at September 30, 2000. For the nine month periods, the provision charged to expense was $3.4 million for 2001 and $2.6 million for 2000. 19 In deciding on the adequacy of the allowance for loan losses, management reviews the current nonperforming loan portfolio as well as loans that are past due and not yet categorized as nonperforming for reporting purposes. Also, there are a number of other factors that are taken into consideration, including: ` The magnitude and nature of the recent loan charge offs and the movement of charge offs to the residential real estate loan portfolio, ` The growth in the loan portfolio and the implication that has in relation to the economic climate in the bank's business territory, ` Changes in underwriting standards in the competitive environment in which TrustCo operates, ` Significant growth in the level of losses associated with bankruptcies and the time period needed to foreclose, secure and dispose of collateral, and ` The relatively weak economic environment in the upstate New York territory combined with declining real estate prices. Consumer bankruptcies and defaults in general have risen significantly during the 1990's. This trend appears to be continuing as a result of economic strife and the relative ease of access by consumers to additional credit. Job growth in the upstate New York area has been modest to declining and there continues to be a shifting of higher paying jobs in manufacturing and government to lower paying service jobs. In light of these trends, management believes the allowance for loan losses is reasonable in relation to the risk that is present in its current loan portfolio. Liquidity and Interest Rate Sensitivity TrustCo seeks to obtain favorable sources of funding and to maintain prudent levels of liquid assets in order to satisfy varied liquidity demands. TrustCo's earnings performance and strong capital position enable the Company to raise funds easily in the marketplace and to secure new sources of funding. The Company actively manages its liquidity through target ratios established under its liquidity policies. Continual monitoring of both historical and prospective ratios allows TrustCo to employ strategies necessary to maintain adequate liquidity. Management has also defined various degrees of adverse liquidity situations, which could potentially occur, and has prepared appropriate contingency plans should such a situation arise. Noninterest Income Total noninterest income for the three months ended September 30, 2001 was $6.0 million, a $2.0 million increase from the comparable period in 2000. During these periods, the Company recorded net securities losses of $1.6 million for 2000 and net securities gains of $696 thousand for the comparable period in 2001. Excluding these securities transactions, noninterest income decreased from $5.6 million in the third quarter of 2000 to $5.3 million in 2001. The decrease is the result of a reduction in Trust fee income and other miscellaneous items. 20 The reduction in trust fee income is the result of market conditions that have negatively affected the underlying trust assets. Similar results were also recognized for the nine months of 2001 compared to 2000. Total noninterest income was $19.8 million for 2001 compared to $10.8 million for 2000. Excluding net securities transactions, the balances for 2001 and 2000 would have been $15.9 million for 2001 and $15.8 million for 2000. Noninterest Expenses Total noninterest expense for the third quarter of 2001 was $12.4 million up from $11.7 million in the third quarter of 2000. For the nine months ended September 30, 2001 and 2000, total noninterest expense was $37.6 million compared to $35.1 million. For the third quarter of 2001, the increase in total noninterest expense is principally the result of increases in salaries and employee benefits, net occupancy expenses, and professional services. The same trends were noted for the year to date period in 2001, compared to 2000. Salary and employee benefit increases were the result of normal inflationary changes and additional costs associated with benefit plans. Income Taxes In the third quarter of 2001 and 2000, TrustCo recognized income tax expense of $4.9 million and $5.3 million respectively. For the nine months of 2001, total income tax expense was $15.5 million compared to $15.6 million for 2000. Capital Resources Consistent with its long-term goal of operating a sound and profitable financial organization, TrustCo strives to maintain strong capital ratios. New issues of equity securities have not been required since traditionally, most of its capital requirements are met through the capital retained in the Company (after the dividends on the common stock). 21 Total shareholders' equity at September 30, 2001 was $204.9 million, a increase of $9.1 million from the year-end of 2000 balance of $195.8 million. The change in the shareholders' equity between year-end 2000 and September 30, 2001 reflects the net income retained by TrustCo and a $3.6 million increase in the net unrealized gain, net of tax, on securities available for sale, offset by a $4.6 million increase in the amount of Treasury stock. TrustCo declared dividends of $0.391 per share during the first nine months of 2001 compared to $0.340 in 2000. These resulted in a dividend payout ratio of 80.4% in 2001 and 76.3% in 2000. The Company achieved the following capital ratios as of September 30, 2001 and 2000: September 30, Minimum Regulatory Guidelines 2001 2000 -------------------------------------------- Tier 1 risk adjusted capital 13.45% 13.76 4.00 Total risk adjusted capital 14.74 15.05 8.00 In addition, at September 30, 2001 and 2000, the consolidated equity to total assets ratio (excluding the mark to market effect of securities available for sale) was 7.28% and 7.32%, respectively. 22
TrustCo Bank Corp NY Management's Discussion and Analysis STATISTICAL DISCLOSURE I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL The following table summarizes the component distribution of average balance sheet, related interest income and expense and the average annualized yields on interest earning assets and annualized rates on interest bearing liabilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Non- accrual loans are included in loans for this analysis. The average balances of sec- urities available for sale is calculated using amortized costs for these securities. Included in the balance of shareholders' equity is unrealized appreciation ,net of tax, in the available for sale portfolio of $24.7 million and $5.4 Million in the third quarter of 2001 and 2000, respectively. The subtotals contained in the following table are the arithmetic totals of the items in that category. Third Quarter Third Quarter 2001 2000 Average Average Average Average Change in Variance Variance (dollars in thousands) Balance Interest Rate Balance Interest Rate interest Balance Rate Income/ Change Change Assets Expense Commercial loans......................$ 207,347 $ 4,381 8.45% $ 196,308 $ 4,364 8.88% 17 922 (905) Residential mortgage loans............. 1,179,865 22,836 7.74% 1,057,399 20,716 7.84% 2,120 3,736 (1,616) Home equity lines of credit ........... 124,086 2,078 6.64% 132,762 3,159 9.47% (1,081) (194) (887) Installment loans...................... 21,079 702 13.21% 23,681 758 12.73% (56) (211) 155 --------- ------- --------- ------- ----- ----- ----- Loans, net of unearned income.......... 1,532,377 29,997 7.82% 1,410,150 28,997 8.22% 1,000 4,253 (3,253) Securities available for sale: U.S. Treasuries and agencies.......... 148,322 2,714 7.32% 214,439 4,073 7.60% (1,359) (1,215) (144) Mortgage-backed securities............ 103,906 2,098 8.07% 200,502 3,674 7.33% (1,576) (3,766) 2,190 States and political subdivisions..... 224,784 4,455 7.93% 155,058 3,131 8.08% 1,324 1,721 (397) Other ................................ 92,336 1,698 7.35% 86,448 1,446 6.68% 252 102 150 --------- ------- --------- ------- ----- ----- ----- Total securities available for sale. 569,348 10,965 7.70% 656,447 12,324 7.51% (1,359) (3,158) 1,799 Federal funds sold..................... 287,207 2,507 3.46% 231,188 3,846 6.62% (1,339) 4,464 (5,803) Other short-term investments........... 541 2 1.33% 6,483 98 6.00% (96) (52) (44) --------- ------- --------- ------- ----- ---- ----- Total Interest earning assets........ 2,389,473 43,471 7.27% 2,304,268 45,265 7.87% (1,794) 5,507 (7,301) Allowance for loan losses.............. (58,067) ------- (56,121) ------- ----- ---- ----- Cash and noninterest earning assets.... 177,341 140,616 --------- --------- Total assets........................$ 2,508,747 $ 2,388,763 ========= ========= Liabilities and shareholders' equity Deposits: Interest bearing checking..........$ 291,840 778 1.06% $ 271,940 729 1.07% 49 90 (41) Money market accounts............... 64,156 441 2.73% 58,368 401 2.73% 40 40 --- Savings............................. 624,272 4,176 2.65% 624,035 4,241 2.70% (65) 11 (76) Time deposits....................... 882,704 11,179 5.02% 863,790 11,651 5.37% (472) 1,390 (1,862) --------- ------- --------- ------ ----- ---- ----- Total time deposits.................. 1,862,972 16,574 3.53% 1,818,133 17,022 3.72% (448) 1,531 (1,979) Short-term borrowings.................. 208,655 1,465 2.79% 168,354 2,330 5.51% (865) 2,708 (3,573) Long-term debt......................... 722 10 6.07% 1,223 21 6.07% (11) (11) --- --------- ------- --------- ------- ----- ---- ----- Total interest bearing liabilities... 2,072,349 18,049 3.46% 1,987,710 19,373 3.88% (1,324) 4,228 (5,552) Demand deposits........................ 179,435 ------- 172,271 ------ ----- ----- ----- Other liabilities...................... 51,508 47,354 Shareholders' equity................... 205,455 181,428 --------- --------- Total liab. & shareholders' equity..$ 2,508,747 $ 2,388,763 ========= ========= Net interest income.................... 25,422 25,892 (470) 1,279 (1,749) ------- ------- ----- ----- ----- Net interest spread.................... 3.81% 3.99% Net interest margin (net interest income to total interest earning assets)............................. 4.27% 4.50% Tax equivalent adjustment 1,816 1,167 ------- ------- Net interest income per book........ $ 23,606 $ 24,725 ======= ====== -20-
23
TrustCo Bank Corp NY Management's Discussion and Analysis STATISTICAL DISCLOSURE I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL The following table summarizes the component distribution of average balance sheet, related interest income and expense and the average annualized yields on interest earning assets and annualized rates on interest bearing liabilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Non- accrual loans are included in loans for this analysis. The average balances of sec- urities available for sale is calculated using amortized costs for these securities. Included in the balance of shareholders' equity is unrealized appreciation net of tax, in the available for sale portfolio of $22.5 million and unrealized depreciation of $242 thousand for the nine months ended September 30, 2001 and 2000, respectively. The subtotals contained in the following table are the arithmetic totals of the items in that category. Nine Months Nine Months 2001 2000 Average Average Average Average Change in Variance Variance (dollars in thousands) Balance Interest Rate Balance Interest Rate Interest Balance Rate Income/ Income/ Change Change Assets Expense Expense Commercial loans......................$ 204,699 $ 13,206 8.60% $ 194,192 $ 12,919 8.87% 287 866 (579) Residential mortgage loans............. 1,152,431 67,345 7.79% 1,023,825 60,035 7.82% 7,310 7,650 (340) Home equity lines of credit ........... 126,665 7,175 7.57% 135,443 9,216 9.09% (2,041) (569) (1,472) Installment loans...................... 22,366 2,138 2.78% 21,716 2,128 13.09% 10 81 (71) --------- ------- -------- ------- ----- ----- ----- Loans, net of unearned income.......... 1,506,161 89,864 7.96% 1,375,176 84,298 8.18% 5,566 8,028 (2,462) Securities available for sale: U.S. Treasuries and agencies.......... 152,141 8,635 7.57% 213,017 11,964 7.49% (3,329) (3,535) 206 Mortgage-backed securities............ 147,091 8,576 7.77% 209,039 11,277 7.19% (2,701) (4,031) 1,330 States and political subdivisions..... 198,059 11,861 7.98% 146,063 8,812 8.04% 3,049 3,157 (108) Other ................................ 73,098 4,109 7.50% 95,792 4,745 6.61% (636) (1,493) 857 --------- ------- -------- ------- ----- ----- ----- Total securities available for sale. 570,389 33,181 7.76% 663,911 36,798 7.39% (3,617) (5,902) 2,285 Federal funds sold..................... 284,897 9,532 4.47% 242,720 11,313 6.23% (1,781) 2,571 (4,352) Other short-term investments........... 182 2 1.35% 5,787 261 6.03% (259) (144) (115) --------- ------- -------- ------- ----- ----- ----- Total Interest earning assets........ 2,361,629 132,579 7.48% 2,287,594 132,670 7.74% (91) 4,553 (4,644) Allowance for loan losses.............. (57,399) ------- (56,298) ------- ----- ----- ----- Cash and noninterest earning assets.... 169,063 133,137 --------- --------- Total assets........................$ 2,473,293 $2,364,433 ========= ========= Liabilities and shareholders' equity Deposits: Interest bearing checking..........$ 281,828 2,237 1.06% $ 272,205 2,172 1.07% 65 84 (19) Money market accounts............... 61,579 1,257 2.73% 57,817 1,182 2.73% 75 75 --- Savings............................... 608,083 12,207 2.68% 632,842 12,803 2.70% (596) (498) (98) Time deposits......................... 883,070 35,274 5.34% 859,594 33,110 5.15% 2,164 919 1,245 --------- ------- -------- ------- ----- ----- ----- Total time deposits.................. 1,834,560 50,975 3.71% 1,822,458 49,267 3.61% 1,708 580 1,128 Short-term borrowings.................. 207,509 5,730 3.69% 158,067 6,111 5.16% (381) 2,239 (2,620) Long-term debt......................... 796 35 5.83% 411 21 6.07% 14 0 14 --------- ------- -------- ------- ----- ----- ----- Total interest bearing liabilities... 2,042,865 56,740 3.71% 1,980,936 55,399 3.74% 1,341 2,819 (1,478) Demand deposits........................ 179,072 ------- 165,578 ------- ----- ----- ----- Other liabilities...................... 49,909 44,895 Shareholders' equity................... 201,447 173,024 --------- --------- Total liab. & shareholders' equity..$ 2,473,293 $2,364,433 ========= ========= Net interest income.................... 75,839 77,271 (1,432) 1,734 (3,166) ------- ------- ----- ----- ----- Net interest spread.................... 3.77% 4.00% Net interest margin (net interest income to total interest earning assets)............................. 4.27% 4.50% Tax equivalent adjustment 4,638 3,296 ------- ------- Net interest income per book........ $71,201 $ 73,975 ======= ======= -21-
24 Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in the Company's interest rate risk position since December 31, 2000. Other types of market risk, such as foreign exchange rate risk and commodity price risk do not arise in the normal course of the Company's business activities. 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TrustCo Bank Corp NY Date: November 14, 2001 By: /s/ Robert A. McCormick ------------------------- Robert A. McCormick President and Chief Executive Officer Date: November 14, 2001 By: /s/ Robert T. Cushing -------------------------- Robert T. Cushing Vice President and Chief Financial Officer 26