-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L7iXBqltaDSasVaNyEgceI/nttJ7yQxjw7f4ZQynJOaDyUefm8HN6xgRMgaMyqtp /XoNiYPbN0gJB6AvYgGG6A== 0000357301-02-000023.txt : 20020813 0000357301-02-000023.hdr.sgml : 20020813 20020813162717 ACCESSION NUMBER: 0000357301-02-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRUSTCO BANK CORP N Y CENTRAL INDEX KEY: 0000357301 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 141630287 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10592 FILM NUMBER: 02730060 BUSINESS ADDRESS: STREET 1: 5 SARNOWSKI DRIVE CITY: GLENVILLE STATE: NY ZIP: 12302 BUSINESS PHONE: 5183773311 MAIL ADDRESS: STREET 1: 5 SARNOWSKI DRIVE CITY: GLENVILLE STATE: NY ZIP: 12302 10-Q 1 q060210q.txt 10Q FILING AS OF JUNE'02 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 June 30, 2002 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 July 31,2002 --------------------------- ---------------------- $1 Par Value 72,339,914 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 1 and Six Months Ended June 30, 2002 and 2001 Consolidated Statements of Financial Condition 2 as of June 30, 2002 and December 31, 2001 Consolidated Statements of Cash Flows for 3 - 4 the Six Months Ended June 30, 2002 and 2001 Notes to Consolidated Interim Financial Statements 5 - 8 Independent Accountants' Review Report 9 Item 2. Management's Discussion and Analysis 10 - 21 Item 3. Quantitative and Qualitative Disclosures About 22 Market Risk 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 25 Holders - Annual Meeting Item 5. Other Information - None 2 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Reg S-K (Item 601) Exhibit No. Description Page No. 22 Submission of Matters to Vote of Security 25 Holders - Annual Meeting 99.1 Certification Pursuant To 18 U.S.C. Section 1350, 26 As Adopted Pursuant to Section 906 Of The Sarbanes- Oxley Act of 2002 99.2 Certification Pursuant To 18 U.S.C. Section 1350, 27 As Adopted Pursuant to Section 906 Of The Sarbanes- Oxley Act of 2002 (b) Reports on Form 8-K Filing of Form 8-K on May 22, 2002, regarding May 21, 2002, letter to shareholders which contained discussion of May 20, 2002, annual meeting of shareholders, a press release dated May 20, 2002 discussing results of the annual meeting held on May 20, 2002, and a press release dated May 21, 2002, declaring a cash dividend of $0.15 per share payable on July 1, 2002, to shareholders of record June 7, 2002, is incorporated herein by reference. Filing of Form 8-K on July 16, 2002, regarding two press releases dated July 16, 2002, detailing second quarter financial results, is incorporated herein by reference. . 3
TRUSTCO BANK CORP NY Consolidated Statements of Income(Unaudited) (dollars in thousands, except per share data) 3 Months Ended 6 Months Ended June 30 June 30 2002 2001 2002 2001 Interest and dividend income: Interest and fees on loans $ 28,275 29,747 56,995 59,789 Interest on U. S. Treasuries and agencies 2,992 2,706 5,941 5,900 Interest on states and political subdivisions 2,973 2,664 5,901 5,032 Interest on mortgage-backed securities 1,170 2,884 2,543 6,478 Interest and dividends on other securities 1,264 1,205 2,480 2,063 Interest on federal funds sold and other short term investments 2,278 3,251 4,155 7,024 Total interest income 38,952 42,457 78,015 86,286 ------------------------------------------------------------------------- Interest expense: Interest on deposits: Interest-bearing checking 811 742 1,581 1,459 Savings 3,441 4,092 6,694 8,032 Money market deposit accounts 651 418 1,096 817 Time deposits 9,356 11,606 19,175 24,094 Interest on short-term borrowings 841 1,893 1,697 4,265 Interest on long-term debt 7 11 16 24 --------------------------------------------------------------------------- Total interest expense 15,107 18,762 30,259 38,691 --------------------------------------------------------------------------- Net interest income 23,845 23,695 47,756 47,595 Provision for loan losses 300 1,120 820 2,615 --------------------------------------------------------------------------- Net interest income after provision for loan losses 23,545 22,575 46,936 44,980 --------------------------------------------------------------------------- Noninterest income: Trust department income 2,050 1,967 3,882 4,030 Fees for other services to customers 2,793 2,655 5,235 4,963 Net gain on securities transactions 1,904 2,067 3,772 3,209 Other 988 792 1,599 1,605 ---------------------------------------------------------------------------- Total noninterest income 7,735 7,481 14,488 13,807 ---------------------------------------------------------------------------- Noninterest expenses: Salaries and employee benefits 5,467 6,600 11,281 13,223 Net occupancy expense 1,357 1,471 2,719 2,800 Equipment expense 813 972 1,531 2,320 FDIC insurance expense 90 94 180 188 Professional services 1,048 726 1,715 1,317 Outsourced services 545 ----- 1,005 ----- Charitable contributions 1,157 114 1,314 263 Other real estate expenses / (income) (95) (28) (24) (188) Other 3,335 2,991 6,389 5,278 ----------------------------------------------------------------------------- Total noninterest expenses 13,717 12,940 26,110 25,201 ----------------------------------------------------------------------------- Income before taxes 17,563 17,116 35,314 33,586 Applicable income taxes 4,992 5,444 10,375 10,616 ------------------------------------------------------------------------------ Net income $ 12,571 11,672 24,939 22,970 ============================================================================== Net income per Common Share: - Basic $ 0.174 0.164 0.347 0.323 ============================================================================== - Diluted $ 0.169 0.159 0.335 0.312 ============================================================================== Per share data is adjusted for the effect of the 15% stock split declared August, 2001. See accompanying notes to consolidated interim financial statements.
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TRUSTCO BANK CORP NY Consolidated Statements of Financial Condition (dollars in thousands, except share data) June 30, December 31, 2002 2001 ASSETS: (Unaudited) Cash and due from banks $ 48,852 60,121 Federal funds sold and other short term investments 538,491 338,452 -------------- ------------ Total cash and cash equivalents 587,343 398,573 Securities available for sale: U. S. Treasuries and agencies 193,310 160,372 States and political subdivisions 232,411 216,566 Mortgage-backed securities 65,214 96,621 Other 125,745 113,541 --------------- ------------- Total securities available for sale 616,680 587,100 --------------- ------------ Loans: Commercial 196,582 212,423 Residential mortgage loans 1,177,098 1,201,723 Home equity lines of credit 128,379 122,332 Installment loans 18,465 20,979 ------------- ------------ Total loans 1,520,524 1,557,457 ------------- ------------- Less: Allowance for loan losses 55,968 57,203 Unearned income 684 771 ------------- ------------ Net loans 1,463,872 1,499,483 Bank premises and equipment 19,211 18,312 Real estate owned 268 603 Other assets 64,583 74,550 -------------- ------------- Total assets $ 2,751,957 2,578,621 ================== ================= LIABILITIES: Deposits: Demand $ 198,165 195,390 Interest-bearing checking 305,687 295,514 Savings accounts 714,405 649,081 Money market deposit accounts 127,157 75,620 Certificates of deposit (in denominations of $100,000 or more) 120,522 128,887 Time deposits 766,642 748,414 ------------ ------------ Total deposits 2,232,578 2,092,906 Short-term borrowings 237,886 218,219 Long-term debt 516 624 Accrued expenses and other liabilities 63,767 61,045 ------------ ----------- Total liabilities 2,534,747 2,372,794 ------------ ----------- SHAREHOLDERS' EQUITY: Capital stock par value $1; 100,000,000 shares authorized, and 77,274,424 and 76,168,795 shares issued at June 30, 2002 and December 31, 2001, respectively 77,274 76,169 Surplus 78,208 75,355 Undivided profits 67,245 63,940 Accumulated other comprehensive income: Net unrealized gain on securities available for sale, net of tax 28,808 21,668 Treasury stock at cost - 5,101,603 and 4,862,718 shares at June 30, 2002 and December 31, 2001, respectively (34,325) (31,305) -------------- ----------- Total shareholders' equity 217,210 205,827 -------------- ------------ Total liabilities and shareholders' equity $ 2,751,957 2,578,621 ================== ================= See accompanying notes to consolidated interim financial statements.
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TRUSTCO BANK CORP NY Consolidated Statements of Cash Flows (Unaudited) (dollars in thousands) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS SIX MONTHS ENDED June 30, 2002 2001 -------- -------- Cash flows from operating activities: Net income..............................................$ 24,939 22,970 -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 1,030 1,070 Gain on sales of bank premises and equipment........... (300) --- Provision for loan losses.............................. 820 2,615 Loss on sale of securities available for sale.......... 1,349 355 Gain on sale of securities available for sale.......... (5,121) (3,540) Provision for deferred tax benefit..................... (181) (1,297) Decrease in taxes receivable........................... 9,761 3,844 Increase in interest receivable........................ (229) (34) Decrease in interest payable........................... (210) (605) Increase in other assets............................... (4,340) (5,446) Increase/(decrease) in accrued expenses................ 2,791 (228) -------- -------- Total adjustments.................................... 5,370 (3,266) -------- -------- Net cash provided by operating activities................ 30,309 19,704 -------- -------- Cash flows from investing activities: Proceeds from sales and calls of securities available for sale...................... 163,759 188,108 Purchase of securities available for sale.............. (188,312) (182,016) Proceeds from maturities of securities available for sale...................... 10,555 1,771 Net (increase)/decrease in loans....................... 34,594 (41,137) Proceeds from dispositions of real estate owned........ 686 1,176 Proceeds from sales of bank premises and equipment..... 300 61 Purchases of bank premises and equipment............... (1,797) (2,678) -------- -------- Net cash provided by/(used in) investing activities.. 19,785 (34,715) -------- -------- Cash flows from financing activities: Net increase/(decrease) in deposits.................... 139,672 (296) Net increase in short-term borrowings............ 19,667 11,624 Repayment of long-term debt............................ (108) (141) Proceeds from exercise of stock options................ 3,958 2,057 Proceeds from sale of treasury stock................... 3,860 3,349 Purchase of treasury stock............................. (6,880) (6,926) Dividends paid......................................... (21,493) (18,440) -------- -------- Net cash provided by/(used in) financing activities.. 138,676 (8,773) -------- -------- Net increase/(decrease) in cash and cash equivalents..... 188,770 (23,784) Cash and cash equivalents at beginning of period......... 398,573 345,446 -------- -------- Cash and cash equivalents at end of period..............$ 587,343 321,662 ======== ======== See accompanying notes to consolidated interim financial statements. (Continued)
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TRUSTCO BANK CORP NY Consolidated Statements of Cash Flows Continued (Unaudited) (dollars in thousands) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: SIX MONTHS ENDED June 30, 2002 2001 -------- -------- Interest paid.........................................$ 30,469 39,296 Income taxes paid...................................... 789 8,114 Transfer of loans to real estate owned................. 197 991 Increase in dividends payable.......................... 141 58 Change in net unrealized gain on securities available for sale-gross of deferred taxes............ (11,810) (3,851) Change in deferred tax effect on unrealized gain on securities available for sale....................... 4,670 1,612
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 June 30, 2002, the results of operations for the three months and six months ended June 30, 2002 and 2001, and the cash flows for the six months ended June 30, 2002 and 2001. 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 2001 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 six month periods ended June 30, 2002 and 2001 follows:
Weighted Average Shares (In thousands, Net Outstanding Per Share except per share data) Income Amounts ----------------- -------------------------- ------------------- For the quarter ended June 30, 2002: Basic EPS: Net income available to common shareholders.............. $12,571 72,152 $0.174 Effect of Dilutive Securities: Stock options.................... ------ 2,303 ------- ----------------- -------------------------- ------------------- Diluted EPS $12,571 74,455 $0.169 ================= ========================== =================== For six months ended June 30, 2002: Basic EPS: Net income available to common shareholders.............. $24,939 71,967 $0.347 Effect of Dilutive Securities: Stock options.................... ------- 2,404 ------- ----------------- -------------------------- ------------------- Diluted EPS $24,939 74,371 $0.335 ================= ========================== =================== There were no antidilutive stock options as of June 30, 2002.
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Weighted Average Shares (In thousands, Net Outstanding Per Share except per share data) Income Amounts ----------------- -------------------------- ------------------- For the quarter ended June 30, 2001: Basic EPS: Net income available to common shareholders.............. $11,672 71,196 $0.164 Effect of Dilutive Securities: Stock options............................. ------ 2,399 ------- ----------------- -------------------------- ------------------- Diluted EPS $11,672 73,595 $0.159 ================= ========================== =================== For six months ended June 30, 2001: Basic EPS: Net income available to common shareholders.............. $22,970 71,014 $0.323 Effect of Dilutive Securities: Stock options.................... ------- 2,516 ------- ----------------- -------------------------- ------------------- Diluted EPS $22,970 73,530 $0.312 ================= ========================== =================== Per share data have been adjusted for the 15 per cent stock split declared in August 2001. These were no antidilutive stock options as of June 30, 2001.
9 3. Comprehensive Income Comprehensive income for the three month periods ended June 30, 2002 and 2001 was $19,072,000 and $12,583,000 respectively, and $32,079,000 and $25,208,000 for the six month periods ended June 30, 2002 and 2001, respectively. The following summarizes the components of other comprehensive income:
(dollars in thousands) Three months ended June 30 2002 2001 ---------------------------------------- Unrealized holding gains arising during period, net of tax (pre-tax gain of $12,840 for 2002 and pre-tax gain of $3,658 for 2001) $7,642 2,134 Reclassification adjustment for net gain realized in net income during the period, net of tax (pre-tax gain of $1,904 for 2002 and pre-tax gain of $2,067 for 2001) 1,141 1,223 ----------------------------------------- Other comprehensive income $6,501 911 ========================================== (dollars in thousands) Six months ended June 30 2002 2001 Unrealized holding gains arising during period, net of tax (pre-tax gain of $15,582 for 2002 and pre-tax gain of $7,036 for 2001) $9,401 4,122 Reclassification adjustment for net gain realized in net income during the period, net of tax (pre-tax gain of $3,772 for 2002 and pre-tax gain of $3,209 for 2001) 2,261 1,884 ------------------------------------------ Other comprehensive income $7,140 2,238 ===========================================
10 4. Impact of Changes in Accounting Standards In July 2001, the Financial Accounting Standards Board issued Statement No. 141, "Business Combinations"(Statement 141) and Statement No. 142, "Goodwill and Other Intangible Assets" (Statement 142). Statement 141 requires that the purchase method of accounting be used for all business combinations initiated 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 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually. Statement 142 also requires 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". The Company was required to adopt the provisions of Statement 141 in July 2001 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 were amortized prior to the adoption of Statement 142. As of December 31, 2001 and June 30, 2002, the Company had $553 thousand of unamortized goodwill. Amortization expense related to goodwill was $62 thousand for the twelve months ended December 31, 2001. No impairment loss was required at adoption of Statement 142. The adoption of these Statements did not have a material effect on the Company's consolidated financial statements. 11 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 June 30, 2002, and the related consolidated statements of income for the three-month and six-month periods ended June 30, 2002 and 2001, and the consolidated statements of cash flows for the six-month periods ended June 30, 2002 and 2001. 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, 2001 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 18, 2002, 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, 2001 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 July 12, 2002 12 TrustCo Bank Corp NY Management's Discussion and Analysis June 30, 2002 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 six month periods ended June 30, 2002, with comparisons to 2001 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 2001 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 six months ended June 30, 2002 and 2001. Overview TrustCo recorded net income of $12.6 million, or $0.169 of diluted earnings per share for the three months ended June 30, 2002, as compared to net income of $11.7 million or $0.159 of diluted earnings per share in the same period in 2001. For the six month period ended June 30, 2002, TrustCo recorded net income of $24.9 million, or $0.335 of diluted earnings per share, as compared to $23.0 million, or $0.312 of diluted earnings per share for the comparable period in 2001. 13 The primary factors accounting for the year to date increases are: . A $212.6 million increase in the average balance of interest earning assets from $2.35 billion at June 30, 2001 to $2.56 billion at June 30, 2002, and . A reduction in the provision for loan losses from $2.6 million in 2001 to $820 thousand in 2002, and . An increase in total noninterest income from $13.8 million in 2001 to $14.5 million in 2002. Within this category net securities transactions were $3.8 million of gains in 2002 compared to $3.2 million in 2001. Partially offsetting these year to date positive factors were the following: . A decrease in net interest margin from 4.28% in 2001 to 4.00% in 2002, and . An increase in noninterest expense from $25.2 million for the first six months of 2001 to $26.1 million for the first six months of 2002. 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. The following Management's Discussion and Analysis for the second quarter and first six months of 2002 compared to the comparable periods in 2001 is greatly affected by the change in interest rates in the marketplace in which TrustCo competes. Included in the 2001 Annual Report to Shareholders is a description of the effect interest rates had on the results for the year 2001 compared to 2000. Most of the same market factors discussed in the 2001 Annual Report also had a significant impact on 2002 results. TrustCo competes with other financial service providers based upon many factors including quality of service, convenience of operations, and rates paid on deposits and charged on loans. The absolute level of interest rates and changes in rates and customers' expectations with respect to the direction of interest rates have a significant impact on the volume of loan and deposit originations in any particular period. Interest rates have changed dramatically in response to the slowing economic conditions. One of the most important interest rates utilized to control economic activity is the "federal funds" rate. This is the rate utilized within the banking system for overnight borrowings for the highest credit quality institutions. The federal funds rate was 6% at the beginning of 2001 and had decreased to 3.75% by the end of the second quarter of 2001. In 2002 the federal funds rate was consistent from the beginning of the year and throughout the second quarter at 1.75%. The federal funds rate affects the level of other interest rates in the economy, most specifically the prime rate. The prime rate was 9% at the beginning of 2001 and had decreased to 6.75% by the end of the second quarter of 2001. By the end of 2001, the prime rate had declined to 4.75% and has remained there for the first six months of 2002. 14 Earning Assets Total average interest earning assets increased from $2.36 billion for the second quarter of 2001 to $2.61 billion in 2002 with an average yield of 7.46% in 2001 and 6.26% in 2002. Income on earning assets decreased during this same time-period from $44.0 million in 2001 to $40.8 million in 2002. For the six month period ended June 30, 2002, the average balance of interest earning assets was $2.56 billion, a increase of $212.6 million or 9.1% from the balance for the comparable period in 2001 of $2.35 billion. The average yield on interest earning assets was 7.60% for 2001, compared to 6.39% in 2002. The increase in the average balance of earning assets was more than offset by the decrease in the yield earned on these assets, thereby resulting in a reduction in interest income of $7.5 million to $81.6 million for the six months of 2002, compared to $89.1 million for the six months of 2001. Loans The average balance of loans for the second quarter was $1.53 billion in 2002 and $1.50 billion in 2001. The yield on loans decreased from 7.94% in 2001 to 7.42% in 2002. The combination of the higher average balances offset by the lower rates resulted in a decrease in the interest income on loans by $1.5 million. For the six-month period ended June 30, 2002, the average balance in the loan portfolio was $1.53 billion compared to $1.49 billion for the comparable period in 2001. The average yield decreased from 8.03% in 2001 to 7.46% in 2002. The increase in the average balance of loans outstanding and the impact of the decrease in the yield resulted in total interest income of $57.0 million in 2002 compared to $59.9 million in 2001. During the first six months of 2002 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 $ 1.18 billion in 2002 compared to $1.14 billion in 2001, an increase of 3.7%. 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. As noted earlier, market interest rates have dropped significantly as a result of national economic policy in the United States. 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 or the prime rate. Also, during this time TrustCo aggressively marketed the unique features of its loan products thereby differentiating itself from other lenders. These differences include 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 the Bank's portfolio. The combination of competitive interest rates and the product differentiation are the principal reasons for the increase in the balances of the residential loans outstanding. 15 The impact of the decrease in the benchmark interest rates (prime rate, federal funds rate, etc.) is apparent in the decrease in the yield earned in the commercial and home equity loan portfolios. The average yield earned on these loan types in 2002 were 72 bp and 325 bp, respectively less than the average yields earned in the first six months of 2002. Securities Available for Sale During the second quarter of 2002, the average balance of securities available for sale was $566.3 million with a yield of 7.20%, compared to $559.7 million for the second quarter of 2001 with a yield of 7.85%. The combination of the increase in average balance offset by the decrease in the yields caused a decrease in interest income on securities available for sale of approximately $792 thousand between the second quarter of 2002 and 2001. The six-month results reflect the same principal trends noted for the second quarter. The total average balance of securities available for sale during the six months of 2002 was $554.8 million with an average yield of 7.37% compared to an average balance for 2001 of $570.9 million with a yield of 7.78%. The securities available for sale portfolio balance fluctuates because this portfolio is used to help fund the loan portfolio growth. Funding for loan growth either comes from new sources of deposits/borrowings or through the reallocation of existing assets. For the loan growth experienced in 2002 the primary source of funding was from new sources of deposits/borrowings. Federal Funds Sold During the second quarter of 2002, the average balance of federal funds sold was $488.9 million with a yield of 1.76%, compared to the average balance for the three month period ended June 30, 2001 of $299.1 million with an average yield of 4.36%. The $189.8 million increase in the average balance, combined with the 260 basis points decrease in the average yield, resulted in total interest income on federal funds sold of $2.2 million for 2002 compared to $3.3 million for 2001. During the six-month period ended June 30, 2002, the average balance of federal funds was $456.5 million with a yield of 1.76% compared to an average balance of $283.7 million in 2001 with an average yield of 4.99%. 16 The increase in federal funds balances between the first half of 2001 and 2002 reflects a decision to hold funds in overnight deposits versus making longer-term investments in loans or securities available for sale. The decision to retain additional liquidity in the form of federal fund balances is a result of the relatively low interest rates in the market for other alternative investments while keeping the balances available for investment once rates change. The effect of this decision by TrustCo is to have significantly more funds invested in the federal funds portfolio at significantly lower interest rates during 2002 with expectation that opportunities for reinvestment at higher levels will be available later in 2002. 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 interest bearing liabilities were $2.26 billion for 2002 and $2.04 billion for 2001. The rate paid on total interest bearing liabilities was 2.68% for the second quarter of 2002 and 3.69% for 2001. Total interest expense for the second quarter decreased approximately $3.7 million to $15.1 million for 2002 compared to $18.8 million for 2001. Similar changes in interest bearing liabilities were noted for the six-month period as was discussed for the quarter. Total interest bearing liabilities were $2.22 billion for the six-month periods ended June 30, 2002 and $2.03 billion for 2001. Demand deposit balances increased $9.3 million during the second quarter of 2002 compared to the second quarter of 2001. Demand deposits averaged $190.9 million in 2002 and $181.6 million in 2001. On a year to date basis, demand deposits were $190.3 million compared to $178.9 million in 2001. Interest bearing deposit balances have increased from $1.82 billion for the first six months of 2001 to $1.98 billion for 2002. Each of the deposit categories has also increased with the most notable being the increase in the average balance of savings accounts which averaged $599.9 million in 2001 and $685.4 million in 2002. TrustCo has experienced a deposit inflow primarily as a result of customers moving funds back into the banking system from the stock and bond market and from TrustCo's new branch openings. Short-term borrowings for the quarter were $244.6 million in 2002 compared to $214.2 million in 2001. The average yield decreased during this time period from 3.55% to 1.38% for the second quarter of 2002. The largest component of short-term borrowing 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. 17 Net Interest Income Taxable equivalent net interest income increased to $25.7 million for the second quarter of 2002. The net interest spread decreased 19 basis points between 2001 and 2002 and the net interest margin decreased by 34 basis points. Similar changes were noted in taxable equivalent net interest income, net interest spread and net interest margin for the six-month period ended June 30, 2002, compared to the same period in 2001. Net interest income for the first six months of 2001 was $51.4 million, an increase of approximately $972 thousand over the $50.4 million for the first six months of 2001. Net interest spread decreased 11 basis points to 3.64% and net interest margin decreased 28 basis points to 4.00% for the six-month period ended June 30, 2002, compared to the six-month period ended June 30, 2001. 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 June 30, 2002. Nonperforming loans: Total nonperforming loans were $6.5 million at June 30, 2002, a decrease from the $9.3 million of nonperforming loans at June 30, 2001. Nonaccrual loans were $916 thousand at June 30, 2002 down from the $3.7 million at June 30, 2001. Restructured loans were $5.5 million at June 30, 2002 compared to $5.0 million at June 30, 2001. Loans past due three payments or more and still accruing interest were $151 thousand at June 30, 2002 and $692 thousand at June 30, 2001. All of the $6.5 million of nonperforming loans of June 30, 2002 are residential real estate or retail consumer loans. In prior years the 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. 18 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 June 30, 2002 of $5.3 million, consisted of restructured residential loans. During the first six months of 2002, there have been $837 thousand of commercial loan charge offs, $288 thousand of consumer loan charge offs and $2.11 million of mortgage loan charge offs as compared with $789 thousand of commercial loan charge offs, $468 thousand of consumer loan charge offs and $1.85 million of mortgage loan charge offs in the first six months of 2001. Recoveries during the first six-month periods have been $1.17 million in 2002 and $1.14 million in 2001. Real estate owned: Total real estate owned of $268 thousand at June 30, 2002 decreased from the $1.7 million at June 30, 2001. 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 June 30, 2002, the allowance for loan losses was $56.0 million, which represents a decrease from the $57.2 million in the allowance at December 31, 2001. The allowance represents 3.68% of the loan portfolio as of June 30, 2002 compared to 3.76% at June 30, 2001. The provision charged to expense was $300 thousand compared to $1.1 million for the second quarter of 2002 compared to 2001. For the six-month periods, the provision charged to expense was $820 thousand for 2002 and $2.6 million for 2001. 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 since 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. 19 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 June 30, 2002 was $7.7 million, an increase of $254 thousand from the comparable period in 2001. During the 2002 period, the Company recorded net securities gains of $1.9 million compared to $2.1 million for the comparable period in 2001. Excluding these securities transactions, noninterest income increased from $5.4 million in the second quarter of 2001 to $5.8 million for the comparable period in 2002. Similar results were also recognized for the six months of 2002 compared to 2001. Total noninterest income was $14.5 million for 2002 compared to $13.8 million for 2001. Excluding net securities transactions, the balances for 2002 and 2001 would have been $10.7 million and $10.6 million respectively. Net securities transactions have been significant for both the six-month and quarterly results in 2002 and 2001. The level of these transactions reflects management's decision to liquidate certain investments as interest rates were at historically low levels and therefore the gains on security sales were high. These sales provide the Company with additional liquidity for potential reinvestment at higher interest rates later in 2002 and 2003.Management also has begun liquidating certain of the equity investments that had accumulated over the last several years as part of the expansion program to acquire other companies. Noninterest Expenses Total noninterest expense for the second quarter of 2002 and 2001 was $13.7 million and $12.9 million respectively. For the six-months ended June 30, 2002 and 2001, total noninterest expense was $26.1 million and $25.2 million respectively. 20 Salaries and employee benefits cost decreased from $6.6 million for the second quarter of 2001 to $5.5 million for the comparable period in 2002. The reduction in salaries and employee benefits is the result of the reduction in salary of the Chief Executive Officer and the ongoing outsourcing efforts undertaken by the Company in 2002. The Chief Executive Officer's salary was reduced by $450,000 which in turn affected the amount accrued for the incentive bonus plans. In addition, the supplemental executive retirement plan for the Chief Executive Officer was also capped at the level of the accrual as of December 31, 2001. The outsourcing efforts have the effect of reducing salary and benefit costs and to replace these costs with contract serviced expenses. Included in the outsourced contract service expenses are one-time charges associated with the conversion. The complete conversion to the outside service contractor is expected prior to year-end 2002. Initially the plan was for the conversion to be completed during the second quarter of 2002, however, this has been delayed as a result of programming difficulties encountered in converting certain of the historical programs. Equipment expense decreased approximately $789 thousand during the six months of 2002 compared to 2001 as a result of reduced computer expense due to contracts not being renewed in 2002 as a result of the conversion. Charitable contributions expense is up approximately $1.0 million as a result of an additional contribution made in the second quarter of 2002 in recognition of the 100 year anniversary of the Company. This additional contribution was made in the form of a donation of appreciated stock to assist in funding the operating cost of a not-for-profit activity located in the Capital District region. The total gain on the donation of appreciated stock was $ 736 thousand, which is included in the net gain in securities transactions. Income Taxes In the second quarter of 2002 and 2001, TrustCo recognized income tax expense of $5.0 million and $5.4 million respectively. This resulted in an effective tax rate of 28.4% for 2002 and 31.8% for 2001. For the six-months of 2002, total income tax expense was $10.4 million compared to $10.6 million for 2001. The reduction in the effective tax rate reflects the impact of the tax savings on the gain in the appreciated assets that were contributed as described above. Excluding the impact of the one time events described here and under Subsequent Events on page 22, the Company anticipates that the effective tax rate will return to historical levels for the remainder of the year. Capital Resources Consistent with its long-term goal of operating a sound and profitable financial organization, TrustCo strives to maintain strong capital ratios. New issues of equity securities have not been required since traditionally, most of its capital requirements are met through the capital retained in the Company (after the dividends on the common stock). Total shareholders' equity at June 30, 2002 was $217.2 million, an increase of $11.4 million from the year-end of 2001 balance of $205.8 million. The change in the shareholders' equity between year-end 2001 and June 30, 2002 primarily reflects the net income retained by TrustCo, the proceeds from shares issued upon the exercise of stock options, a $7.1 million increase in accumulated other comprehensive income , less approximately $3.0 million increase in the amount of Treasury stock. 21 TrustCo declared dividends of $0.300 per share during the first six-months of 2002 compared to $0.261 in 2001. These resulted in a dividend payout ratio of 86.8% in 2002 and 80.5% in 2001. The Company achieved the following capital ratios as of June 30, 2002 and 2001. June 30, Minimum Regulatory 2002 2001 Guidelines -------------------------------------- Tier 1 risk adjusted capital 13.52% 13.43 4.00 Total risk adjusted capital 14.81 14.72 8.00 In addition, at June 30, 2002 and 2001, the consolidated equity to total assets ratio (excluding the mark to market effect of securities available for sale) was 6.92% and 7.28%, 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 libilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Non- accrual loans are included in loans for this analysis. The average balances of sec- urities available for sale is calculated using amortized costs for these securities. Included in the balance of shareholders' equity is unrealized appreciation ,net of tax, in the available for sale portfolio of $24.7 million and $21.4 Million in the second quarter of 2002 and 2001, respectively. The subtotals contained in the following table are the arithmetic totals of the items in that category. Second Quarter Second Quarter 2002 2001 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......................$205,970 $4,106 7.98% $203,709 $ 4,366 8.58% (260) 299 (559) Residential mortgage loans...........1,175,879 22,172 7.54% 1,148,496 22,395 7.80% (223) 2,388 (2,611) Home equity lines of credit .......... 126,677 1,498 4.74% 126,626 2,336 7.40% (838) 7 (845) Installment loans.................... 17,797 529 11.92% 22,270 688 12.38% (159) (134) (25) -------- ----- ---------- ----- ----- ----- ----- Loans, net of unearned income....... 1,526,323 28,305 7.42% 1,501,101 29,785 7.94% (1,480) 2,560 (4,040) Securities available for sale: U.S. Treasuries and agencies........ 181,866 2,997 6.59% 141,928 2,716 7.65% 281 2,210 (1,929) Mortgage-backed securities........... 64,514 1,170 7.25% 144,895 2,884 7.96% (1,714) (1,477) (237) States and political subdivisions.. 222,476 4,404 7.92% 194,542 3,888 7.99% 516 758 (242) Other ................................ 97,485 1,619 6.65% 78,340 1,494 7.63% 125 1,092 (967) ---------- ------ ------- ------ ----- ----- ----- Total securities available for sale. 566,341 10,190 7.20% 559,705 10,982 7.85% (792) 2,583 (3,375) Federal funds sold.................... 488,941 2,150 1.76% 299,114 3,252 4.36% (1,102) 7,444 (8,546) Other short-term investments........... 23,956 131 2.19% ---- --- --- 131 131 --- ---------- ----- ------- -------- ----- ----- ----- Total Interest earning assets..... 2,605,561 40,776 6.26% 2,359,920 44,019 7.46% (3,243) 12,718 (15,961) Allowance for loan losses............. (57,389) ------ (57,095) ------ ----- ----- ----- Cash and noninterest earning assets... 172,569 166,042 ---------- Total assets.....................$ 2,720,741 $ 2,468,867 ========== ========== Liabilities and shareholders' equity Deposits: Interest bearing checking..........$304,473 811 1.07% $ 279,755 742 1.06% 69 66 3 Money market accounts...............123,761 651 2.11% 61,218 418 2.74% 233 816 (583) Savings............................ 700,768 3,441 1.97% 608,071 4,092 2.70% (651) 2,964 (3,615) Time deposits...................... 885,133 9,356 4.24% 873,199 11,606 5.33% (2,250) 1,052 (3,302) ---------- -------- ---------- -------- ----- ----- ----- Total interest bearing deposits....2,014,135 14,259 2.84% 1,822,243 16,858 3.71% (2,599) 4,898 (7,497) Short-term borrowings................ 244,557 841 1.38% 214,153 1,893 3.55% (1,052) 1,551 (2,603) Long-term debt......................... 531 7 5.67% 794 11 5.91% (4) (4) --- ---------- ------ -------- ------ ---- ---- ----- Total interest bearing liabilities 2,259,223 15,107 2.68% 2,037,190 18,762 3.69% (3,655) 6,445 (10,100) Demand deposits....................... 190,949 -------- 181,614 -------- ----- ----- ----- Other liabilities...................... 56,670 49,526 Shareholders' equity.................. 213,899 200,537 ---------- ---------- Total liab. & shareholders' equity 2,720,741 $ 2,468,867 ========== ========== Net interest income.................... 25,669 25,257 412 6,273 (5,861) -------- -------- ----- ----- ----- Net interest spread.................... 3.58% 3.77% Net interest margin (net interest income to total interest earning assets)............................. 3.94% 4.28% Tax equivalent adjustment 1,824 1,562 -------- -------- Net interest income per book........ $ 23,845 $ 23,695 ======== ========
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 libilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Non- accrual loans are included in loans for this analysis. The average balances of sec- urities available for sale is calculated using amortized costs for these securities. Included in the balance of shareholders' equity is unrealized appreciation net of tax, in the available for sale portfolio of $24.1 million and $21.4 million for the six months ended June 30, 2002 and 2001,respectively. The subtotals contained in the following table are the arithmetic totals of the items in that category. Six Months Six Months 2002 2001 Average Average Average Average Change in Variance Variance (dollars in thousands) Balance Interest Rate Balance Interest Rate Interest Balance Rate Income/ Change Change Assets Expense Commercial loans......................$ 207,465 $ 8,262 7.98% $ 203,353 $ 8,826 8.70% (564) 464 (1,028) Residential mortgage loans............. 1,180,769 44,654 7.56% 1,138,488 44,508 7.82% 146 3,171 (3,025) Home equity lines of credit ........... 125,086 2,967 4.78% 127,975 5,097 8.03% (2,130) (113) (2,017) Installment loans...................... 18,310 1,164 12.82% 23,020 1,436 12.58% (272) (348) 76 ------- ----- ------- ------- ----- ----- ---- Loans, net of unearned income.......... 1,531,630 57,047 7.46% 1,492,836 59,867 8.03% 2,820) 3,174 (5,994) Securities available for sale: U.S. Treasuries and agencies.......... 171,572 5,954 6.94% 154,083 5,921 7.69% 33 1,256 (1,223) Mortgage-backed securities............ 70,455 2,543 7.22% 169,041 6,478 7.66% (3,935) (3,578) (357) States and political subdivisions..... 220,353 8,741 7.93% 184,475 7,405 8.03% 1,336 1,589 (253) Other ................................ 92,462 3,203 6.93% 63,319 2,412 7.63% 791 1,395 (604) -------- -------- -------- ------ ----- ----- ---- Total securities available for sale. 554,842 20,441 7.37% 570,918 22,216 7.78% (1,775) 662 (2,437) Federal funds sold..................... 456,486 3,977 1.76% 283,723 7,024 4.99% (3,047) 7,418 (10,465) Other short-term investments........... 17,120 182 2.15% ---- --- --- 182 182 --- -------- ----- ------ ------ ----- ----- ----- Total Interest earning assets........ 2,560,078 81,647 6.39% 2,347,477 89,107 7.60% (7,460) 11,436 (18,896) Allowance for loan losses.............. (57,568) -------- (57,060) -------- ----- ----- ----- Cash and noninterest earning assets.... 173,680 164,855 ---------- ---------- Total assets........................$ 2,676,190 $ 2,455,272 ========== ========== Liabilities and shareholders' equity Deposits: Interest bearing checking..........$ 299,336 1,581 1.06% $ 276,739 1,459 1.06% 122 122 --- Money market accounts............... 104,903 1,096 2.11% 60,269 817 2.73% 279 789 (510) Savings............................... 685,391 6,694 1.97% 599,854 8,032 2.70% (1,338) 2,563 (3,901) Time deposits......................... 886,884 19,175 4.36% 883,256 24,094 5.50% (4,919) 296 (5,215) ---------- -------- ---------- -------- ----- ----- ----- Total interest bearing deposits.......1,976,514 28,546 2.91% 1,820,118 34,402 3.81% (5,856) 3,770 (9,626) Short-term borrowings.................. 241,826 1,697 1.42% 206,928 4,265 4.16% (2,568) 1,788 (4,356) Lond-term debt......................... 556 16 5.95% 833 24 5.91% (8) (8) --- ---------- -------- ---------- -------- ----- ----- ----- Total interest bearing liabilities. 2,218,896 30,259 2.75% 2,027,879 38,691 3.85% (8,432) 5,550 (13,982) Demand deposits........................ 190,269 -------- 178,887 -------- ----- ----- ----- Other liabilities...................... 55,326 49,096 Shareholders' equity................... 211,699 199,410 ---------- ---------- Total liab. & shareholders' equity..$ 2,676,190 $ 2,455,272 ========== ========== Net interest income.................... 51,388 50,416 972 5,886 (4,914) -------- -------- ----- ----- ----- Net interest spread.................... 3.64% 3.75% Net interest margin (net interest income to total interest earning assets)............................. 4.00% 4.28% Tax equivalent adjustment 3,632 2,821 -------- -------- Net interest income per book........ $ 47,756 $ 47,595 ======== ========
24 Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in the Company's interest rate risk position since December 31, 2001. 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. Subsequent Event On July 24, 2002 the Personnel Committee of the Board of Directors amended the Executive Officer Incentive Plan thereby eliminating the automatic deferral of payments resulting from the execution of employment contracts. As a result of this action $8.8 million of previously expensed and deferred benefits were paid to the Chief Executive Officer. As a result of the $8.8 million payment, $3.5 million of previously established deferred tax assets will be written off, thereby increasing tax expense, as the majority of the payment will not be tax deductible by the Company. The Company will also recapture approximately $1.9 million of valuation and other tax reserves that had been previously established against these assets, thereby decreasing tax expense.The Company does not expect this situation to materially affect the third quarter or year to date results. 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: August 9, 2002 By:/S/ Robert A. McCormick ------------------------- Robert A. McCormick President and Chief Executive Officer Date: August 9, 2002 By: /S/ Robert T. Cushing ---------------------------- Robert T. Cushing Vice President and Chief Financial Officer 26 Exhibits Index Reg S-K Exhibit No. Description Page No. 22 Submission of Matters to Vote of Security 25 Holders - Annual Meeting 99.1 Certification Pursuant To 18 U.S.C. Section 1350, 26 As Adopted Pursuant to Section 906 Of The Sarbanes- Oxley Act of 2002 99.2 Certification Pursuant To 18 U.S.C. Section 1350, 27 As Adopted Pursuant to Section 906 Of The Sarbanes- Oxley Act of 2002 27 Exhibit 22 Item 4. Submission of Matters to Vote of Security Holders - Annual Meeting At the annual meeting held May 20, 2002, shareholders of the Company were asked to consider the Company's nominees for directors and to elect three (3) directors to serve for a term of three (3) years. The Company's nominees for director were Robert T. Cushing, Richard J. Murray, Jr., and William D. Powers. The results of shareholder voting are as follows: 1. Election of Directors: Director For Withheld -------- --- -------- Robert T. Cushing 56,720,214 6,434,710 Richard J. Murray, Jr. 61,481,366 1,673,559 William D. Powers 61,225,111 1,929,814 Directors continuing in office are Barton A. Andreoli, Joseph A. Lucarelli, Anthony J. Marinello, M.D., Robert A. McCormick, Nancy A. McNamara, Dr. James H. Murphy, and William J. Purdy. 2. Proposal to ratify the appointment of KPMG LLP as the independent certified public accountants of TrustCo for the fiscal year ending December 31, 2002. For Withheld Abstain --- -------- ------- 61,417,931 1,354,387 382,607 28 Exhibit 99.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 Of The Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report of TrustCo Bank Corp NY (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of the undersigned's knowledge and belief: 1. The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /S/ Robert A. McCormick ------------------------- Robert A. McCormick Chief Executive Officer August 9, 2002 29 Exhibit 99.2 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 Of The Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report of TrustCo Bank Corp NY (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of the undersigned's knowledge and belief: 1. The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /S/ Robert T. Cushing ---------------------------- Robert T. Cushing Chief Financial Officer August 9, 2002 ### -----END PRIVACY-ENHANCED MESSAGE-----