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Management's Discussion and Analysis of Financial Condition and Results of Operations
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Forward-looking Statements
Statements included in this report 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, including statements regarding the effect of the novel coronavirus disease (“COVID-19”) pandemic on our business and our continuing response to the COVID-19 pandemic, that 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. Forward-looking statements can be identified by the use of such words as may, will, should, could, would, estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions.
TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.
In addition to factors described under Part II, Item 1A, Risk Factors, and under the Risk Factor discussion in TrustCo’s Annual Report on Form 10-K for the year ended December 31, 2020, the factors listed below,
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. Additionally, many
of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic.
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The current COVID-19 pandemic, the effects of which could, and in some instances has, caused us to experience a decline in the demand for products and services; an increase in loan delinquencies; problem
assets and foreclosures; a decline in collateral value; a work stoppage, forced quarantine, or other interruption or the unavailability of key employees; an increase in the allowance for loan losses; a reduction in wealth management
revenues; an increase in Federal Deposit Insurance Corporation premiums; a reduction in the value of the securities portfolio; or a decline in the net worth and liquidity of loan guarantors;
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TrustCo’s ability to continue to originate a significant volume of one- to- four family mortgage loans in its market areas and to otherwise maintain or increase its market share in the areas in which it
operates;
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TrustCo’s ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income;
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TrustCo’s ability to make accurate assumptions and judgments regarding the credit risks associated with its lending and investing activities, including changes in the level and direction of loan delinquencies
and charge-offs, changes in property values, and changes in estimates of the adequacy of the allowance for loan and lease losses;
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the effects of and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rates, market and
monetary fluctuations;
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restrictions or conditions imposed by TrustCo’s and Trustco Bank’s regulators on their operations that may make it more difficult to achieve TrustCo’s and Trustco Bank’s goals;
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the future earnings and capital levels of TrustCo and Trustco Bank and the continued non objection from TrustCo’s and Trustco Bank’s primary federal banking regulators under regulatory rules to distribute
capital from Trustco Bank to TrustCo, which could affect the ability of TrustCo to pay dividends;
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the results of supervisory monitoring or examinations of Trustco Bank and the Company by their respective primary federal banking regulators, including the possibility that the regulators may, among other
things, require us to increase our loss allowances or to take other actions that reduce capital or income;
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adverse conditions in the securities markets that lead to impairment in the value of securities in TrustCo’s investment portfolio;
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the perceived overall value of TrustCo’s products and services by users, including the features, pricing and quality, compared to competitors’ products and services and the willingness of current and
prospective customers to substitute competitors’ products and services for TrustCo’s products and services;
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changes in consumer spending, borrowing and savings habits;
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the effect of changes in financial services laws and regulations (including laws concerning taxation, banking and securities) and the impact of other governmental initiatives affecting the financial services
industry, including regulatory capital requirements;
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changes in management personnel;
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real estate and collateral values;
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changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, Financial Accounting Standards Board or the Public Company Accounting Oversight Board;
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disruptions, security breaches or other adverse events affecting the third-party vendors who perform several of our critical processing functions;
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technological changes and electronic, cyber and physical security breaches;
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changes in local market areas and general business and economic trends;
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TrustCo’s success at managing the risks involved in the foregoing and managing its business; and
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other risks and uncertainties included under “Risk Factors” in our Form 10-K for the year ended December 31, 2020.
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You should not rely upon forward-looking statements as predictions of future events. Although TrustCo believes that the expectations reflected in the forward‑looking statements are reasonable,
it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. 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 are the tables "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 month and nine month periods ended September 30, 2021 and 2020.
Introduction
The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the three month and nine month periods ended September 30, 2021, with comparisons to the
corresponding period in 2020, as applicable. Net interest margin is presented on a fully taxable equivalent basis in this discussion. The consolidated interim financial statements and related notes, as well as the 2020 Annual Report on Form 10-K,
which was filed with the SEC on February 26, 2021, should also 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.
COVID-19 Impact
In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The Company has evaluated the impact of
the effects of COVID-19 and determined that there were no material or systematic adverse impacts on the Company’s balance sheets and results of operations as of and for the three month and nine month periods ended September 30, 2021, except for the
adjustments in the allowance for loan losses since the inception of the pandemic. At this time, it is difficult to quantify the impact COVID-19 will have on future periods.
The following is a description of the impact the COVID-19 global pandemic is having on certain elements of our business:
Loan modifications
We began receiving requests from our borrowers for loan deferrals in March 2020 and agreed with many borrowers to modify their loans. Modifications included the deferral of principal and/or interest payments for
terms generally up to 90 days. Requests were evaluated individually and approved modifications were based on the unique circumstances of each borrower. We are committed to working with our clients to allow time to work through the challenges of
this pandemic. Loan modifications and payment deferrals as a result of COVID-19 that meet the criteria established under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was enacted in March 2020, or under
applicable interagency guidance of the federal banking regulators, are excluded from evaluation of TDR classification and will continue to be reported as current during the payment deferral period. The Company’s policy is to continue to accrue
interest during the deferral period. Loans not meeting the CARES Act or regulatory guidance are evaluated for TDR and non-accrual treatment under the Company’s existing policies and procedures. As of September 30, 2021, loans in deferral as a
result of the COVID-19 pandemic were not material.
Paycheck Protection Program (“PPP”) and Liquidity
As part of the CARES Act, the Small Business Administration (SBA) has been authorized to guarantee loans under the PPP for small businesses who meet the necessary eligibility requirements in order to keep their
workers on the payroll. The Company began accepting PPP loan applications on April 3, 2020. The Bank had originally funded 663 PPP loans totaling $46 million in 2020, and an additional 344 loans totaling $23 million in 2021. As of September 30,
2021, 349 PPP loans totaling $21 million remain outstanding. The Company receives loan origination fees which are recognized over the life of the loan and apply the effective yield method.
On April 9, 2020, the FDIC, Federal Reserve and the Office of the Comptroller of the Currency (“OCC”) created the Paycheck Protection Program Liquidity Facility (“PPPLF”) to bolster the effectiveness of the PPP by
providing liquidity to and neutralizing the regulatory capital effects on participating financial institutions. We do not intend to utilize the liquidity relief offered by the PPPLF as we do not expect our participation in the PPP to have a
negative impact on our liquidity position, capital resources, financial condition or results of operations.
Asset impairment
At this time, we do not believe there exists any impairment to our goodwill, long-lived assets, right of use assets, held to maturity investment securities, or available-for-sale investment securities due to the
COVID-19 pandemic. It is uncertain whether prolonged effects of the COVID-19 pandemic will result in future impairment charges related to any of the aforementioned assets.
Provision for loan losses
See “Allowance for Loan Losses” for more information.
Preventative measures
The Company has instituted preventative measures at branch and back office locations to protect the health of both the customers and our employees, including regular deep cleaning of facilities, adhering to CDC guidelines and practicing “social
distancing.” These additional expenses did not have a material impact on the Company for the three month and nine month periods ended September 30, 2021.
Federal Reserve Actions
The Federal Reserve Board has taken several actions to support the flow of credit to households and businesses. Some of these pertinent actions include:
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The establishment of the Commercial Paper Funding Facility, the Money Market Mutual Fund Liquidity Facility, and the Primary Dealer Credit Facility;
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The expansion of central bank liquidity swap lines;
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Steps to enhance the availability and ease terms for borrowing at the discount window;
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The elimination of reserve requirements;
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Guidance, issued with the other federal banking regulators, encouraging banks to be flexible with customers experiencing financial challenges related to the coronavirus pandemic and to utilize their liquidity and capital buffers in doing
so;
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Expand access to its PPPLF for additional SBA-qualified lenders; and
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Statements encouraging the use of daylight credit at the Federal Reserve.
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Economic Overview
During the third quarter of 2021, financial markets were a bit volatile resulting in the Dow Jones Industrial Average, Russell 2000, and Nasdaq posting quarterly losses of 1.9%, 4.6%, and 0.4%,
respectively, while the S&P 500 squeezed out a quarterly gain of 0.2%. Credit markets continue to be driven by worldwide economic news, effects of COVID-19, supply chain issues and demand shifts. The shape of the yield curve ended the quarter
relatively consistent as compared to the second quarter. The 10‑year Treasury bond averaged 1.32% during Q3 2021 compared to 1.59% in Q2 2021, a decrease of 27 basis points. The 2‑year Treasury bond average rate increased 6 basis points to
0.23%. The spread between the 10‑year and the 2-year Treasury bonds shortened from 1.42% on average in Q2 to 1.10% in Q3. This spread had been depressed in recent years, and compares to 2.42% during its most recent peak in Q4 of 2013. Steeper
yield curves are favorable for portfolio mortgage lenders like TrustCo. The table below illustrates the range of rate movements for both short term and longer term rates. The target Federal Funds rate remained flat at 0.00% to 0.25% for the
quarter. Spreads of most asset classes to the comparative treasury yield, including agency securities, corporates, municipals and mortgage-backed securities, continue to be down as compared to the levels seen before the pandemic. Accordingly,
changes in rates and spreads continue to be effected by the pandemic.
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3 Month
Yield (%)
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2 Year
Yield (%)
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5 Year
Yield (%)
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10 Year
Yield (%)
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10 - 2 Year
Spread (%)
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Q3/20
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Beg of Q3
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0.16
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0.16
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0.29
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0.66
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0.50
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Peak
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0.16
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0.17
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0.32
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0.74
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0.60
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Trough
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0.09
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0.11
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0.19
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0.52
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0.41
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End of Q3
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0.10
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0.13
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0.28
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0.69
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0.56
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Average in Q3
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0.14
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0.14
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0.27
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0.65
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0.51
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Q4/20
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Beg of Q4
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0.10
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0.13
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0.28
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0.69
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0.56
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Peak
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0.12
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0.19
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0.46
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0.98
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0.83
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Trough
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0.07
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0.11
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0.27
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0.68
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0.54
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End of Q4
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0.09
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0.13
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0.36
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0.93
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0.80
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Average in Q4
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0.09
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0.15
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0.37
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0.86
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0.71
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Q1/21
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Beg of Q1
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0.09
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0.13
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0.36
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0.93
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0.80
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Peak
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0.09
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0.17
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0.92
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1.74
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1.59
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Trough
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0.01
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0.09
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0.36
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0.93
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0.82
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End of Q1
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0.03
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0.16
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0.92
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1.74
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1.58
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Average in Q1
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0.05
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0.13
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0.62
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1.34
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1.20
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Q2/21
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Beg of Q2
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0.03
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0.16
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0.92
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1.74
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1.58
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Peak
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0.06
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0.28
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0.97
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1.73
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1.56
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Trough
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0.01
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0.13
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0.73
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1.45
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1.19
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End of Q2
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0.05
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0.25
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0.87
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1.45
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1.20
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Average in Q2
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0.03
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0.17
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0.84
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1.59
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1.42
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Q3/21
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Beg of Q3
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0.05
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0.25
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0.87
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1.45
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1.20
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Peak
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0.07
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0.31
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1.02
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1.55
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1.25
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Trough
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0.03
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0.17
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0.65
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1.19
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0.98
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End of Q3
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0.04
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0.28
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0.98
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1.52
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1.24
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Average in Q3
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0.05
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0.23
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0.80
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1.32
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1.10
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The United States economy overall has continued to show improvements during 2021. Economic conditions vary significantly over geographic areas, with strength concentrated in and around major population centers on
the coasts and in certain areas where economic activity has been driven by specific regional factors.
TrustCo believes that its long-term focus on traditional banking services and practices historically has enabled the Company to avoid significant impact from asset quality problems, and that the Company’s strong
liquidity and solid capital positions have allowed the Company to continue to conduct business in a manner consistent with its past practice. TrustCo has not engaged in the types of high risk loans and investments that have led to the widely
reported problems in the industry, particularly those arising during the 2008-2010 financial crisis. Nevertheless, the Company may experience increases in nonperforming loans (“NPLs”) relative to historical levels from time to time. Should
general housing prices and other economic measures, such as unemployment in the Company’s market areas, deteriorate as a result of the COVID-19 pandemic or other reasons, the Company may experience an increase in the level of credit risk and in the
amount of its classified and nonperforming loans.
In a direct response to the COVID-19 pandemic, on March 27, 2020 Congress passed the CARES Act. As previously noted, included in the CARES Act is support for small businesses, direct payments to lower and middle income families, expanded
unemployment insurance and additional funding for health care providers, as well as support for other industries. The Federal Reserve Board, in an attempt to increase liquidity and promote the normal functioning of financial markets, also provided
support by increasing purchases of Treasury securities and agency mortgage-backed securities.
Financial Overview
TrustCo recorded net income of $16.8 million, or $0.871 of diluted earnings per share, for the three months ended September 30, 2021, compared to net income of $14.1 million, or $0.730 of diluted earnings per share,
in the same period in 2020. For all periods presented, share and per share information has been adjusted for the 1-for-5 reverse stock split (the “Reverse Stock Split”) of TrustCo’s common stock that was effective May 28, 2021. Return on average
assets was 1.08% and 0.98%, respectively, for the three-months ended September 30, 2021 and 2020. Return on average equity was 11.40% and 10.04%, respectively, for the three-months ended September 30, 2021 and 2020.
The primary factors accounting for the change in net income for the three months ended September 30, 2021 compared to the same period of the prior year were:
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A decrease in the cost of interest bearing liabilities of $4.0 million, partially offset by a decrease in income from interest earning assets of $2.3 million, resulted in an increase in taxable equivalent net interest income in the third
quarter of 2021 compared to the third quarter of 2020 of $1.7 million.
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A decrease of $3.8 million in provision for loan losses for the third quarter of 2021 compared to the third quarter 2020 as a result of the ongoing uncertainty surrounding the pandemic in the prior year as well as related adjustments in
the current quarter due to improving economic conditions and credit risk metrics.
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An increase of $2.0 million in noninterest expense for the third quarter of 2021 compared to the third quarter 2020 primarily as a result of an increase in salaries and employee benefits.
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TrustCo recorded net income of $45.3 million, or $2.349 of diluted earnings per share, for the nine‑months ended September 30, 2021, compared to net income of $38.6 million, or $2.001 of diluted earnings per share,
in the same period in 2020. Return on average assets was 1.00% and 0.94%, respectively, for the nine-months ended September 30, 2021 and 2020. Return on average equity was 10.50% and 9.38%, respectively, for the nine-months ended September 30,
2021 and 2020.
Asset/Liability Management
The Company strives to generate its earnings capabilities through a mix of core deposits funding a prudent mix of earning assets. 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.
TrustCo’s results are affected by a variety of factors including competitive and economic conditions in the specific markets in which the Company
operates and, more generally, by the national economy, financial market conditions and the regulatory environment. Each of these factors is dynamic, and changes in any area can have an impact on TrustCo’s results. Included in the Annual Report to Shareholders on Form 10-K for the year ended December 31, 2020 is a description of the effect interest rates had on the results for the year 2020 compared to 2019. Many of the same market factors
discussed in the 2020 Annual Report continued to have a significant impact on results through the third quarter of 2021, as well as the economic effect of COVID-19.
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. In the experience of
management, the absolute level of interest rates, changes in interest 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 a significant impact on the operations and financial results of all financial services companies. One of the most important interest rates used to control national economic policy is the “Federal
Funds” rate. This is the interest rate utilized within the banking system for overnight borrowings for institutions with the highest credit rating. From December 2015 through December 2018, the U.S. Federal Reserve Board increased its federal
funds target rate from a range of 0.00% - 0.25% to a range of 2.25% - 2.50%. Beginning in the second half of 2019, the Federal Reserve Board began lowering the rate in response to a slowing economy. During the first quarter of 2020 the rate was
significantly decreased again as a result of the global pandemic related to COVID-19, and has returned the range of 0.00% to 0.25%.
The interest rate on the ten-year Treasury bond and other long-term interest rates have significant influence on the rates for new residential real estate loans. These changes in interest rates have an effect on the
Company relative to the interest income on loans, securities, and Federal Funds sold and other short-term instruments as well as the interest expense on deposits and borrowings. Residential real estate loans and longer‑term investments are most
affected by the changes in longer term market interest rates such as the 10‑year Treasury. The Federal Funds sold portfolio and other short‑term investments are affected primarily by changes in the Federal Funds target rate. Deposit interest
rates are most affected by short term market interest rates. Also, changes in interest rates have an effect on the recorded balance of the securities available for sale portfolio, which are recorded at fair value. Generally, as market interest
rates increase, the fair value of the securities will decrease and the reverse is also generally applicable. Interest rates on new residential real estate loan originations are also influenced by the rates established by secondary market
participants such as Freddie Mac and Fannie Mae. Because TrustCo is a portfolio lender and does not sell loans into the secondary market, the Company establishes rates that management determines are appropriate in light of the long-term nature of
residential real estate loans while remaining competitive with the secondary market rates. Higher market interest rates also generally increase the value of retail deposits.
TrustCo’s principal loan products are residential real estate loans. As noted above, residential real estate loans and longer‑term investments are most affected by the changes in longer term market interest rates
such as the 10-year Treasury. The 10‑year Treasury yield increased 46 basis points, on average, during the third quarter of 2021 compared to the fourth quarter of 2020 and increased 67 basis points as compared to the third quarter of 2020.
While TrustCo has been affected by changes in financial markets over time, the impacts have been mitigated by the Company’s generally conservative approach to banking. The Company utilizes a
traditional underwriting process in evaluating loan applications, and since originated loans are retained in the portfolio, there is a strong incentive to be conservative in making credit decisions. For additional information concerning TrustCo’s
loan portfolio and nonperforming loans, please refer to the discussions under “Loans” and “Nonperforming Assets,” respectively. Further, the Company does not rely on borrowed funds to support its assets and maintains a significant level of
liquidity on the asset side of the balance sheet. These characteristics provide the Company with increased flexibility and stability during periods of market disruption and interest rate volatility.
A fundamental component of TrustCo’s strategy has been to grow customer relationships and the deposits and loans that are part of those relationships. The Company has significant capacity to
grow its balance sheet given its extensive branch network. The Company expects that growth to be profitable. The current interest rate environment, however, has narrowed the margin on incremental balance sheet expansion. While the Company has
not changed its fundamental long term strategy in regard to utilizing its excess capacity, management continually evaluates changing conditions and may seek to limit growth or reduce the size of the balance sheet if its analysis indicates that
doing so would be beneficial.
For the third quarter of 2021, the net interest margin was 2.65%, down 8 basis points versus the prior year’s quarter. The quarterly results reflect the following significant factors:
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The average balance of Federal Funds sold and other short-term investments increased by $228.6 million while the average yield increased 6 basis points in the third quarter of 2021 compared to the same period in 2020.
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The average balance of securities available for sale increased by $23.8 million while the average yield decreased 69 basis points to 1.36%. The average balance of held to maturity securities decreased by $4.6 million and the average
yield increased 20 basis points to 3.72% for the third quarter of 2021 compared to the same period in 2020.
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The average loan portfolio grew by $176.4 million to $4.37 billion and the average yield decreased 33 basis points to 3.61% in the third quarter of 2021 compared to the same period in 2020.
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The average balance of interest bearing liabilities increased $236.8 million and the average rate paid decreased 37 basis points to 0.15% in the third quarter of 2021 compared to the same period in 2020.
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During the third quarter of 2021, the Company continued to focus on its strategy to expand the loan portfolio by offering competitive interest rates. Management believes the TrustCo residential real estate loan
product is very competitive compared to local and national competitors. Competition remains strong in the Company’s market areas.
The strategy on the funding side of the balance sheet is to offer competitive shorter term rates which allowed the Bank to gain market share as well as retain our existing time deposits. This strategy drove growth
at a relatively low cost that will sustain TrustCo’s strong liquidity position and continue to allow us to cross sell new relationships and take advantage of opportunities as they arise.
Earning Assets
Total average interest earning assets increased from $5.58 billion in the third quarter of 2020 to $6.01 billion in the same period of 2021 with an average yield of 2.77% in the third quarter of 2021 and 3.15% in the
third quarter of 2020. There was a shift in the mix of assets towards a higher proportion of federal funds sold and other short-term investments as a result of an increase in deposits. There was a sharp decrease in the federal funds rate during
March of 2020 significantly reducing the average yield on the federal funds sold and other short-term investments. Since then the rate has remained consistently low, however, during the third quarter 2021 it increased by 6 basis points to 0.16%
from 0.10% due to a slight increase in the interest rate on excess reserves. Interest income on average earning assets decreased from $44.0 million in the third quarter of 2020 to $41.7 million in the third quarter of 2021, on a tax equivalent
basis, and was primarily driven by the lower rates on securities available for sale and loans.
Loans
The average balance of loans was $4.37 billion in the third quarter of 2021 and $4.20 billion in the comparable period in 2020. The yield on loans was down 33 basis points to 3.61%. Interest income on loans was
$39.5 million in the third quarter of 2021 down $1.8 million from the same period in 2020.
Compared to the third quarter of 2020, the average balance of residential mortgage loans increased while commercial loans, home equity lines of credit, and installment loans decreased. while . The average balance
of residential mortgage loans was $3.92 billion in the third quarter of 2021 compared to $3.70 billion in 2020, an increase of 5.9%. The average yield on residential mortgage loans decreased by 37 basis points to 3.52% in the third quarter of 2021
compared to 2020.
TrustCo actively markets the residential loan products within its market territories. Mortgage loan rates are affected by a number of factors including rates on Treasury securities, the Federal Funds rate and rates
set by competitors and secondary market participants. TrustCo aggressively markets the unique aspects of its loan products thereby attempting to create a differentiation from other lenders. These unique aspects include low closing costs, fast
turn-around time on loan approvals, no escrow or mortgage insurance requirements for qualified borrowers and the fact that the Company typically holds these loans in portfolio and does not sell them into the
secondary markets. Assuming an eventual rise in long-term interest rates, the Company anticipates that the unique features of its loan products will continue to attract customers in the residential mortgage loan area.
Commercial loans, which consist primarily of loans secured by commercial real estate, decreased $20.7 million to an average balance of $210.8 million in the third quarter of 2021 compared to the same period in the
prior year, primarily as a result of the forgiven PPP loans. The average yield on this portfolio was up 49 basis points to 5.03% compared to the prior year period, primarily as a result of the origination fees recognized on forgiven PPP loans. The Company remains selective in underwriting commercial loans in recent periods as the apparent risk/reward balance has been less favorable in many cases.
The average yield on home equity credit lines decreased 29 basis points to 3.69% during the third quarter of 2021 compared to the year earlier period. The average balances of home equity credit lines decreased 8.0%
to $231.3 million in the third quarter of 2021 as compared to the prior year. Customers with home equity lines continue to refinance their balances into fixed rate mortgage loans given the current rate environment and have been less likely to draw
on home equity lines due to receipt of COVID-19 stimulus payments and reduced tax benefits.
Securities Available for Sale
The average balance of the securities available for sale portfolio for the third quarter of 2021 was $453.1 million compared to $429.3 million for the comparable period in 2020. The increasing balance reflects new
investment purchases offset by paydowns, calls and maturities. The current interest rate environment has significantly contributed to more bonds being called. The average yield was 1.36% for the third quarter of 2021 compared to 2.05% for the
third quarter of 2020. This portfolio is primarily comprised of agency, mortgage backed securities and collateral mortgage obligation bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank and Freddie
Mac), Small Business Administration participation certificates, corporate bonds and municipal bonds. These securities are recorded at fair value with any adjustment in fair value included in accumulated other comprehensive loss, net of tax.
The net unrealized gain in the available for sale securities portfolio was $3.8 million as of September 30, 2021 compared to a net unrealized gain of $9.7 million as of December 31, 2020. The decrease in the net
unrealized gains in the portfolio is the result of changes in market interest rate levels.
Held to Maturity Securities
The average balance of held to maturity securities was $11.2 million for the third quarter of 2021 compared to $15.8 million in the third quarter of 2020. The decrease in balances reflects routine paydowns and
calls. No new securities were added to this portfolio during the period. The average yield was 3.72% for the third quarter of 2021 compared to 3.52% for the year earlier period. TrustCo expects to hold the securities in this portfolio until they
mature or are called.
As of September 30, 2021, this portfolio consisted solely of agency issued mortgage-backed securities. The balances for these securities are recorded at amortized cost.
Federal Funds Sold and Other Short-term Investments
The 2021 third quarter average balance of Federal Funds sold and other short‑term investments was $1.2 billion, a $228.6 million increase from the $938.1 million average for the same period in 2020. The yield was
0.16% for the third quarter of 2021 and 0.10% for the comparable period in 2020. As previously noted, the increase in the yield was a result of an increase in the excess reserves interest rate. Interest income from this portfolio increased $228
thousand from $242 thousand in 2020 to $470 thousand in 2021.
The Federal Funds sold and other short-term investments portfolio is utilized to generate additional interest income and liquidity as funds are waiting to be deployed into the loan and securities portfolios.
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, demand deposits, interest-bearing
checking, money market and time deposit accounts.
Total average interest bearing deposit accounts (which includes interest bearing checking, money market accounts, savings and time deposits) increased $190.4 million to $4.5 billion for the third quarter of 2021
versus the third quarter in the prior year, and the average rate paid decreased from 0.52% for 2020 to 0.14% for 2021. Total interest expense on these deposits decreased from $5.6 million to $1.5 million in the third quarter of 2021 compared to
the year earlier period primarily as a result of reduced market rates and shifts in the mix of deposit balances. From the third quarter of 2020 to the third quarter of 2021, interest bearing demand account average balances were up 12.6%,
certificates of deposit average balances were down 15.0%, non-interest demand average balances were up 25.4%, average savings balances increased 17.0% and money market balances were up 8.3%. Our growth in deposits came at relatively low cost and
continues to be offset by higher earnings on loan yields and returns in the investment portfolios.
At September 30, 2021, the maturity of total time deposits is as follows:
(dollars in thousands)
|
Under 1 year
|
|
$
|
1,047,698
|
|
|
1 to 2 years
|
|
|
65,500
|
|
|
2 to 3 years
|
|
|
9,127
|
|
|
3 to 4 years
|
|
|
1,419
|
|
|
4 to 5 years
|
|
|
687
|
|
|
Over 5 years
|
|
|
150
|
|
| |
|
$
|
1,124,581
|
|
Average short-term borrowings for the third quarter were $240.2 million in 2021 compared to $193.8 million in 2020. The average rate decreased during this time period from 0.45% in 2020 to 0.38% in 2021. The
short-term borrowings of the Company are cash management accounts, which represent retail accounts with customers for which the Bank has pledged certain assets as collateral.
The Company has a number of contingent funding alternatives available in addition to the large cash and cash equivalents position and the investment securities positions it maintains on its balance sheet. The Bank
is a member of the Federal Home Loan Bank of New York (“FHLBNY”) and is an eligible borrower at the Federal Reserve Bank of New York (“FRBNY”) and has the ability to borrow utilizing securities and/or loans as collateral at either. The Bank does
not utilize brokered deposits as a part of its funding strategy, but does incorporate them as a potential contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered CDs may be tested
from time to time to ensure operational and market readiness.
Net Interest Income
Taxable equivalent net interest income increased by $1.7 million to $39.9 million in the third quarter of 2021 compared to the same period in 2020. The net interest spread was down 1 basis point to 2.62% in the
third quarter of 2021 compared to the same period in 2020. As previously noted, the net interest margin was down 8 basis points to 2.65% for the third quarter of 2021 compared to the same period in 2020.
Taxable equivalent net interest income increased by $5.7 million to $120.1 million in the first nine-months of 2021 compared to the same period in 2020. The net interest spread was down 7 basis points to 2.67% in
the first nine-months of 2021 compared to the same period in 2020. Net interest margin was down 15 basis points to 2.71% for the first nine‑months of 2021 compared to the same period in 2020.
Nonperforming Assets
Nonperforming assets include nonperforming loans (“NPLs”), which are those loans in a non‑accrual status 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 included in other assets and categorized as other real estate owned. As of September 30, 2021, there were $1.8 million pandemic
related deferrals that have been recorded as NPLs. Additionally, $1.4 million of pandemic related deferrals are classified as troubled debt restructurings (“TDRs”).
The following describes the nonperforming assets of TrustCo as of September 30, 2021:
Nonperforming loans and foreclosed real estate: Total
NPLs and non-accrual loans were $20.2 million at September 30, 2021, compared to $21.1 million at December 31, 2020 and $21.8 million at September 30, 2020. There were no loans at September 30, 2021 and 2020 and December 31, 2020 that were past
due 90 days or more and still accruing interest.
At September 30, 2021, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of $20.2 million at September 30, 2021, $19.9 million were
residential real estate loans, $176 thousand were commercial loans and mortgages and $32 thousand were installment loans, compared to $20.6 million, $452 thousand and $43 thousand, respectively, at December 31, 2020.
A significant percentage of nonperforming loans are residential real estate loans, which are historically lower-risk than most other types of loans. Net recoveries were $39 thousand on
residential real estate loans (including home equity lines of credit) for the third quarter of 2021 compared to net chargeoffs of $4 thousand for the third quarter of 2020. Management believes that these loans have been appropriately written down
where required.
Ongoing portfolio management is intended to result in early identification and disengagement from deteriorating credits. TrustCo has a diversified loan portfolio that includes a significant
balance of residential mortgage loans to borrowers in the Capital Region of New York and Central Florida, and avoids concentrations to any one borrower or any single industry. TrustCo has no advances to borrowers or projects located outside the
United States. TrustCo continues to identify delinquent loans as quickly as possible and to move promptly to resolve problem loans. Efforts to resolve delinquencies begin immediately after the payment grace period expires, with repeated,
automatically generated notices, as well as personalized phone calls and letters. Loans are placed in nonaccrual status once they are 90 days past due, or earlier if management has determined that such classification is appropriate. Once in
nonaccrual status, loans are either brought current and maintained current, at which point they may be returned to accrual status, or they proceed through the foreclosure process. The collateral on nonaccrual loans is evaluated periodically, and
the loan value is written down if the collateral value is insufficient. Additionally, due to the COVID-19 pandemic, the Bank is monitoring recent regulatory mandates by state in regards to a moratorium on foreclosures.
The Company originates loans throughout its branch franchise area. At September 30, 2021, 70.9% of its gross loan portfolio balances were in New York State and the immediately surrounding areas
(including New Jersey, Vermont and Massachusetts), and 29.1% were in Florida. Those figures compare to 72.1% and 27.9%, respectively, at December 31, 2020.
Economic conditions vary widely by geographic location. As a percentage of the total nonperforming loans as of September 30, 2021, 10.2% were to Florida borrowers, compared to 89.8% to borrowers
in New York and surrounding areas. For the three months ended September 30, 2021, New York and surrounding areas experienced net chargeoffs of approximately $5 thousand and Florida experienced no net chargeoffs for the third quarter of 2021.
Other than loans currently identified as nonperforming and loan deferrals as a result of COVID-19, management is aware of no other loans in the Bank’s portfolio that pose material risk of the
eventual non-collection of principal and interest. Also as of September 30, 2021, there were no other loans classified for regulatory purposes that management reasonably expects will materially impact future operating results, liquidity, or
capital resources.
TrustCo has identified nonaccrual commercial and commercial real estate loans, as well as all loans restructured under a TDR, as impaired loans.
There were $521 thousand of commercial mortgages and commercial loans classified as impaired as of September 30, 2021 compared to $1.0 million at December 31, 2020. There were $19.3 million of impaired residential loans at September 30, 2021 and
$20.6 million at December 31, 2020. The average balances of all impaired loans were $20.7 million for the nine months of 2021 and $20.8 million for the full year 2020.
As of September 30, 2021 and December 31, 2020, the Company’s loan portfolio did not include any subprime mortgages or loans acquired with deteriorated credit quality.
At September 30, 2021 there was $511 thousand of foreclosed real estate compared to $541 thousand at December 31, 2020.
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 probable incurred losses in the loan portfolio.
|
(dollars in thousands)
|
|
As of
September 30, 2021
|
|
|
As of
December 31, 2020
|
|
| |
|
Amount
|
|
|
Percent of
Loans to
Total Loans
|
|
|
Amount
|
|
|
Percent of
Loans to
Total Loans
|
|
|
Commercial
|
|
$
|
3,083
|
|
|
|
4.30
|
%
|
|
$
|
3,975
|
|
|
|
4.67
|
%
|
|
Real estate - construction
|
|
|
411
|
|
|
|
0.86
|
%
|
|
|
290
|
|
|
|
0.58
|
%
|
|
Real estate mortgage - 1 to 4 family
|
|
|
40,339
|
|
|
|
89.37
|
%
|
|
|
41,228
|
|
|
|
88.81
|
%
|
|
Home equity lines of credit
|
|
|
3,073
|
|
|
|
5.26
|
%
|
|
|
3,597
|
|
|
|
5.71
|
%
|
|
Installment Loans
|
|
|
444
|
|
|
|
0.21
|
%
|
|
|
505
|
|
|
|
0.23
|
%
|
| |
|
$
|
47,350
|
|
|
|
100.00
|
%
|
|
$
|
49,595
|
|
|
|
100.00
|
%
|
At September 30, 2021, the allowance for loan losses was $47.4 million, compared to $49.1 million at September 30, 2020 and $49.6 million at December 31, 2020. The allowance represents 1.08% of the loan portfolio as
of September 30, 2021, and 1.17% at December 31, 2020 and September 30, 2020.
Provision for loan losses for the quarter ended September 30, 2021 was a credit of $2.8 compared to a provision for loan losses of $1 million for the quarter ended September 30, 2020. The decrease is primarily
driven by sustained improvements in the current economic environment and credit quality metrics. Net chargeoffs for the three-month period ended September 30, 2021 were $5 thousand compared to net chargeoffs of $21 thousand for the prior year
period.
During the third quarter of 2021, there was $30 thousand of commercial loan net chargeoffs, $39 thousand of residential mortgage net recoveries, and $14 thousand of consumer loan net chargeoffs, compared with $1
thousand of net commercial loan recoveries, $4 thousand of residential mortgage net chargeoffs, and $18 thousand of consumer loan net chargeoffs for the same period in the prior year.
In determining 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 recent loan chargeoffs and recoveries;
|
|
• |
The growth in the loan portfolio and the implication that it has in relation to the economic climate in the Bank’s market territories;
|
|
• |
The economic environment in the Upstate New York and Florida territories over the last several years, as well as in the Company’s other market areas; and
|
|
• |
The economic environment as a result of the global pandemic.
|
Management continues to monitor these factors in determining the provision for loan losses in relation to loan chargeoffs, recoveries, the level and trends of nonperforming loans and overall economic conditions in
the Company’s market territories.
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. Management believes that TrustCo’s earnings performance and strong
capital position enable the Company to easily secure new sources of liquidity. 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. As noted, the Company has a number of contingent funding alternatives available in addition to the large cash and cash equivalents position and the investment securities positions it maintains on its balance sheet. As
previously stated, the Bank is a member of the FHLBNY and is an eligible borrower at the FRBNY and has the ability to borrow utilizing securities and/or loans as collateral at either institution. The Bank does not utilize brokered deposits as a
part of its funding strategy, but does incorporate them as a contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered CDs may be tested from time to time to ensure operational and
market readiness.
The Company uses an industry standard external model as the primary tool to identify, quantify and project changes in interest rates and prepayment speeds taken both from industry sources and internally generated
data based upon historical trends in the Bank’s balance sheet. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in market interest rates are also incorporated into the model. This model calculates an
economic or fair value amount with respect to non-time deposit categories since these deposits are part of the core deposit products of the Company. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure
the fair value of capital or precisely predict the impact of fluctuations in interest rates on the fair value of capital.
Using this model, the fair value of capital projections as of September 30, 2021 are referenced below. The base case (current rates) scenario shows the present estimate of the fair value of capital assuming no change
in the operating environment or operating strategies and no change in interest rates from those existing in the marketplace as of September 30, 2021. The table indicates the impact on the fair value of capital assuming interest rates were to
instantaneously increase by 100 bp, 200 bp, 300 bp and 400 bp or to decrease by 100 bp.
|
As of September 30, 2021
|
Estimated Percentage of
Fair value of Capital to
Fair value of Assets
|
|
+400 BP
|
22.20
|
% |
|
+300 BP
|
22.20
|
|
|
+200 BP
|
22.10
|
|
|
+100 BP
|
22.30
|
|
|
Current rates
|
21.40
|
|
|
-100 BP
|
18.30
|
|
Noninterest Income
Total noninterest income for the third quarter of both 2021 and 2020 was $4.3 million. Financial Services income was down $226 thousand to $1.6 million in the third quarter of 2021 as compared to the year-ago
period, primarily as a result of estate settlements in the prior year. Fees for services to customers were up $239 thousand over the same period in the prior year, primarily as a result of more overdraft fees and interchange income. The fair
value of assets under management was $1.1 billion at September 30, 2021, $996.7 million as of December 31, 2020, and $899 million at September 30, 2020.
For the nine-months ended September 30, 2021 total noninterest income was $13.4 million, up $310 thousand compared to the prior year period. The increase is primarily the result of more Financial Services income as
a result of higher asset market values under management, and more interchange income, partially offset by net gains on securities transactions of $1.2 million in the prior period.
Noninterest Expenses
Total noninterest expenses were $24.7 million for the three-months ended September 30, 2021, compared to $22.7 million for the three-months ended September 30, 2020.
Significant changes included a $1.0 million increase in salaries and employee benefits, a $172 thousand increase in professional services, a $140 thousand increase in outsourced services, and a $460 thousand increase in other expenses. Full time
equivalent headcount was 771 as of September 30, 2020, 778 as of December 31, 2020, and 743 as of September 30, 2021. Full time equivalent employees decreased and salaries and employee benefits expense on existing employees has increased from the
prior year partially due to a challenging labor market from the impact of the pandemic. In addition, other benefits has increased primarily as a result of a higher stock price on the liability-based equity awards, and the increase in costs
associated with existing employee benefit plans.
Total noninterest expenses were $75.5 million for the nine-months ended September 30, 2021, compared to $70.9 million for the nine-months ended September 30, 2020.
Significant changes included an increase of $2.8 million in salaries and employee benefits for the same reasons as mentioned above, a $555 thousand increase in professional services, a $609 thousand increase in outsourced services, a $667 thousand
increase FDIC and other insurance expense as a result of credits in the prior period due to the FDIC reaching the Deposit Reserve Fund reserve ratio, partially offset by a $181 thousand decrease in advertising expense, and a decrease of $156
thousand in equipment expense.
Income Taxes
In the third quarter of 2021, TrustCo recognized income tax expense of $5.5 million compared to $4.8 million for the third quarter of 2020. The effective tax rates were 24.8% and 25.3% for the third quarters of 2021
and 2020, respectively. For the first nine-months, income taxes were $15.2 million and $13.0 million in 2021 and 2020, respectively. The effective tax rate was 25.2% for both 2021 and 2020.
Capital Resources
Consistent with its long-term goal of operating a sound and profitable financial organization, TrustCo strives to maintain strong capital ratios.
Banking regulators have moved towards higher required capital requirements due to the standards included in the Basel III reform measures and the Dodd-Frank Act, as well as a general trend towards reducing risk in
the banking system by providing a greater capital margin.
Total shareholders’ equity at September 30, 2021 was $586.7 million compared to $560.5 million at September 30, 2020. TrustCo declared a dividend of $0.340625 per share in the third quarter of
2021 and is adjusted for the Reverse Stock Split which occurred on May 28, 2021. This results in a dividend payout ratio of 39.13% based on third quarter 2021 earnings of $16.8 million.
The Bank and the Company reported the following capital ratios as of September 30, 2021 and December 31, 2020:
(Bank Only)
|
(dollars in thousands)
|
|
|
|
|
Well
Capitalized(1)
|
|
|
Minimum for
Capital Adequacy plus
Capital Conservation
Buffer (1)(2)
|
|
| |
|
As of September 30, 2021
|
|
Amount
|
|
|
Ratio
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage ratio
|
|
$
|
561,969
|
|
|
|
9.148
|
%
|
|
|
5.000
|
%
|
|
|
4.000
|
%
|
|
Common equity tier 1 capital
|
|
|
561,969
|
|
|
|
18.899
|
|
|
|
6.500
|
|
|
|
7.000
|
|
|
Tier 1 risk-based capital
|
|
|
561,969
|
|
|
|
18.899
|
|
|
|
8.000
|
|
|
|
8.500
|
|
|
Total risk-based capital
|
|
|
599,265
|
|
|
|
20.153
|
|
|
|
10.000
|
|
|
|
10.500
|
|
|
(dollars in thousands)
|
|
|
|
|
Well
Capitalized(1)
|
|
|
Minimum for
Capital Adequacy plus
Capital Conservation
Buffer (1)(2)
|
|
| |
|
As of December 31, 2020
|
|
Amount
|
|
|
Ratio
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage ratio
|
|
$
|
539,897
|
|
|
|
9.378
|
%
|
|
|
5.000
|
%
|
|
|
4.000
|
%
|
|
Common equity tier 1 capital
|
|
|
539,897
|
|
|
|
18.646
|
|
|
|
6.500
|
|
|
|
7.000
|
|
|
Tier 1 risk-based capital
|
|
|
539,897
|
|
|
|
18.646
|
|
|
|
8.000
|
|
|
|
8.500
|
|
|
Total risk-based capital
|
|
|
576,257
|
|
|
|
19.902
|
|
|
|
10.000
|
|
|
|
10.500
|
|
(Consolidated)
|
(dollars in thousands)
|
|
|
|
|
Minimum for
Capital Adequacy plus
Capital Conservation
Buffer (1)(2)
|
|
| |
|
As of September 30, 2021
|
|
Amount
|
|
|
Ratio
|
| |
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage ratio
|
|
$
|
578,825
|
|
|
|
9.420
|
%
|
|
|
4.000
|
%
|
|
Common equity tier 1 capital
|
|
|
578,825
|
|
|
|
19.461
|
|
|
|
7.000
|
|
|
Tier 1 risk-based capital
|
|
|
578,825
|
|
|
|
19.461
|
|
|
|
8.500
|
|
|
Total risk-based capital
|
|
|
616,131
|
|
|
|
20.715
|
|
|
|
10.500
|
|
|
(dollars in thousands)
|
|
|
|
|
Minimum for
Capital Adequacy plus
Capital Conservation
Buffer (1)(2)
|
|
| |
|
As of December 31, 2020
|
| |
Amount
|
|
|
Ratio
|
| |
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage ratio
|
|
$
|
555,672
|
|
|
|
9.650
|
%
|
|
|
4.000
|
%
|
|
Common equity Tier 1 capital
|
|
|
555,672
|
|
|
|
19.187
|
|
|
|
7.000
|
|
|
Tier 1 risk-based capital
|
|
|
555,672
|
|
|
|
19.187
|
|
|
|
8.500
|
|
|
Total risk-based capital
|
|
|
592,040
|
|
|
|
20.443
|
|
|
|
10.500
|
|
|
(1)
|
Federal regulatory minimum requirements to be considered to be Well Capitalized and Adequately Capitalized
|
|
(2)
|
The September 30, 2021 and December 31, 2020 common equity tier 1, tier 1 risk-based, and total risk-based capital ratios include a capital conservation buffer of 2.50 percent
|
In addition, at September 30, 2021, the consolidated equity to total assets ratio was 9.56%, compared to 9.63% at December 31, 2020 and 9.77% at September 30, 2020.
Both TrustCo and Trustco Bank are subject to regulatory capital requirements. On January 1, 2015, a new capital rule took effect that revised the federal bank regulatory agencies’ risk-based capital requirements and,
for the first time, subjected the Company to consolidated regulatory capital requirements. Among other matters, the rule also established a new common equity Tier 1 minimum capital requirement of 4.5% of risk-weighted assets, increased the minimum
Tier 1 capital to risk-based assets requirement from 4.0% to 6.0% of risk-weighted assets, changed the risk-weightings of certain assets, and changed what qualifies as capital for purposes of meeting the various capital requirements. In addition,
the Company and the Bank are required to maintain additional levels of Tier 1 common equity (the capital conservation buffer) over the minimum risk-based capital levels before they may pay dividends, repurchase shares, or pay discretionary bonuses.
The new rule was phased-in over several years and was fully in effect.
As of September 30, 2021, the capital levels of both TrustCo and the Bank exceeded the minimum standards, including with the fully phased-in capital conservation buffer is taken into account.
Under the Office of the Comptroller of the Currency’s (“OCC”) “prompt corrective action” regulations, a bank is deemed to be “well-capitalized” when its CET1, Tier 1, total risk-based, and leverage capital ratios are
at least 6.5%, 8%, 10%, and 5%, respectively. A bank is deemed to be “adequately capitalized” or better if its capital ratios meet or exceed the minimum federal regulatory capital requirements, and “undercapitalized” if it fails to meet these
minimal capital requirements. A bank is “significantly undercapitalized” if its CET1, Tier 1, total risk-based and leverage capital ratios fall below 3%, 4%, 6%, and 3%, respectively and “critically undercapitalized” if the institution has a ratio
of tangible equity to total assets that is equal to or less than 2%. At September 30, 2021 and 2020, Trustco Bank met the definition of “well-capitalized.”
As noted, the Company’s dividend payout ratio was 39.13% of net income for the third quarter of 2021 and 46.68% of net income for the third quarter of 2020. The per-share dividend paid in the third quarter of 2021
and 2020 was $0.340625 and is adjusted for the Reverse Stock Split. The Company’s ability to pay dividends to its shareholders is dependent upon the ability of the Bank to pay dividends to the Company. The payment of dividends by the Bank to the
Company is subject to continued compliance with minimum regulatory capital requirements. The OCC may disapprove a dividend if: the Bank would be undercapitalized following the distribution; the proposed capital distribution raises safety and
soundness concerns; or the capital distribution would violate a prohibition contained in any statue, regulation or agreement.
TrustCo maintains a dividend reinvestment plan (“DRP”) with approximately 7,198 participants. The DRP allows participants to reinvest dividends in shares of the Company. The DRP also allows for additional purchases
by participants and has a discount feature (up to a 5% for safe harbor provisions) that can be activated by management as a tool to raise capital. To date, the discount feature has not been utilized.
Reverse Stock Split
On February 16, 2021, the Company announced that the Board of Directors planned to seek shareholder approval for a reverse stock split of the Company’s common stock at a ratio of 1 for 5, and, effective at the same
time of the reverse stock split, to reduce the number of authorized shares of the Company’s common stock from 150,000,000 to 30,000,000 shares. On May 20, 2021 the Reverse Stock Split was approved at the annual shareholder meeting. All references
herein to common stock and per share data for all periods presented have been retrospectively adjusted to reflect the Reverse Stock Split.
Share Repurchase Program
On June 7, 2019 the Company’s Board of Directors authorized a share repurchase program of up to 1,000,000 shares. During the three months ended March 31, 2020, the Company repurchased a total of 489 thousand shares
at an average price per share of $7.11 for a total of $3.5 million under its Board authorized share repurchase program. The shares purchased as of March 31, 2020 represented 0.51% of our common shares outstanding. On April 16, 2020 the Company
announced that it has suspended its share repurchase program. On February 18, 2021 the Company’s Board of Directors authorized another share repurchase program of up to 2,000,000 shares and was adjusted to 400,000 shares as a result of the
approval of the Reverse Stock Split, and represents approximately 2% of its currently outstanding common stock. During the three months ended September 30, 2021, the Company repurchased a total of 50 thousand shares at an average price per share
of $32.24 for a total of $1.6 million under its Board authorized share repurchase program.
Critical Accounting Policies and Estimates
Pursuant to Securities and Exchange Commission (“SEC”) guidance, management of the Company is encouraged to evaluate and disclose those accounting policies judged to be critical policies ‑ those most important to the
portrayal of the Company’s financial condition and results, and that require management’s most difficult subjective or complex judgments.
Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the inherent uncertainty in evaluating the levels of the allowance required to cover the
inherent risk of losses in the loan portfolio and the material effect that such judgments can have on the results of operations. Included in Note 1 to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10‑K for
the year ended December 31, 2020 is a description of the significant accounting policies that are utilized by the Company in the preparation of the Consolidated Financial Statements.
Recent Accounting Pronouncements
Please refer to Note 11 to the consolidated financial statements for a detailed discussion of new accounting pronouncements and their impact on the Company. As indicated in Note 11, as allowed by the CARES Act the
Bank elected to delay the adoption of ASU 2016-13, “Financial Instruments – Credit Losses,” until the earlier of the termination of the national emergency concerning COVID-19 or December 31, 2020. The December 31, 2020 adoption date under the
CARES Act was extended to January 1, 2022 as a part of the COVID-19 Relief Bill, which became law in December 2020, and therefore the Company intends to adopt CECL on January 1, 2022.
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 the 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. Nonaccrual loans are included in loans for this analysis. The average balances of securities available for sale and held to maturity are calculated
using amortized costs for these securities. Included in the average balance of shareholders' equity is the unrealized gain, net of tax, in the available for sale portfolio of $3.9 million in 2021 and $8.3 million in 2020. The subtotals contained
in the following table are the arithmetic totals of the items contained in that category. Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and rate) based
on the percentage relationship of such variances to each other.
|
(dollars in thousands)
|
|
Three months ended
September 30, 2021
|
|
|
Three months ended
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Change in
Interest
Income/
Expense
|
|
|
Variance
Balance
Change
|
|
|
Variance
Rate
Change
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. government sponsored enterprises
|
|
$
|
68,505
|
|
|
$
|
91
|
|
|
|
0.53
|
%
|
|
$
|
12,391
|
|
|
$
|
14
|
|
|
|
0.45
|
%
|
|
$
|
77
|
|
|
|
74
|
|
|
|
3
|
|
|
Mortgage backed securities and collateralized mortgage obligations-residential
|
|
|
300,765
|
|
|
|
1,038
|
|
|
|
1.38
|
%
|
|
|
313,296
|
|
|
|
1,319
|
|
|
|
1.68
|
%
|
|
|
(281
|
)
|
|
|
(51
|
)
|
|
|
(230
|
)
|
|
State and political subdivisions
|
|
|
48
|
|
|
|
2
|
|
|
|
6.66
|
%
|
|
|
110
|
|
|
|
2
|
|
|
|
7.90
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Corporate bonds
|
|
|
48,543
|
|
|
|
220
|
|
|
|
1.81
|
%
|
|
|
59,555
|
|
|
|
646
|
|
|
|
4.33
|
%
|
|
|
(426
|
)
|
|
|
(103
|
)
|
|
|
(323
|
)
|
|
Small Business Administration-guaranteed participation securities
|
|
|
34,578
|
|
|
|
181
|
|
|
|
2.09
|
%
|
|
|
43,282
|
|
|
|
216
|
|
|
|
1.99
|
%
|
|
|
(35
|
)
|
|
|
(98
|
)
|
|
|
63
|
|
|
Other
|
|
|
686
|
|
|
|
5
|
|
|
|
2.92
|
%
|
|
|
685
|
|
|
|
5
|
|
|
|
2.92
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
|
453,125
|
|
|
|
1,537
|
|
|
|
1.36
|
%
|
|
|
429,319
|
|
|
|
2,202
|
|
|
|
2.05
|
%
|
|
|
(665
|
)
|
|
|
(178
|
)
|
|
|
(487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and other short-term Investments
|
|
|
1,166,679
|
|
|
|
470
|
|
|
|
0.16
|
%
|
|
|
938,087
|
|
|
|
242
|
|
|
|
0.10
|
%
|
|
|
228
|
|
|
|
69
|
|
|
|
159
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities and collateralized mortgage obligations-residential
|
|
|
11,168
|
|
|
|
104
|
|
|
|
3.72
|
%
|
|
|
15,759
|
|
|
|
138
|
|
|
|
3.52
|
%
|
|
|
(34
|
)
|
|
|
(81
|
)
|
|
|
47
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity securities
|
|
|
11,168
|
|
|
|
104
|
|
|
|
3.72
|
%
|
|
|
15,759
|
|
|
|
138
|
|
|
|
3.52
|
%
|
|
|
(34
|
)
|
|
|
(81
|
)
|
|
|
47
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Reserve Bank and Federal Home Loan Bank stock
|
|
|
5,604
|
|
|
|
64
|
|
|
|
4.57
|
%
|
|
|
5,506
|
|
|
|
77
|
|
|
|
5.59
|
%
|
|
|
(13
|
)
|
|
|
8
|
|
|
|
(21
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans
|
|
|
210,825
|
|
|
|
2,649
|
|
|
|
5.03
|
%
|
|
|
231,517
|
|
|
|
2,625
|
|
|
|
4.54
|
%
|
|
|
24
|
|
|
|
(1,016
|
)
|
|
|
1,040
|
|
|
Residential mortgage loans
|
|
|
3,920,903
|
|
|
|
34,532
|
|
|
|
3.52
|
%
|
|
|
3,702,680
|
|
|
|
36,020
|
|
|
|
3.89
|
%
|
|
|
(1,488
|
)
|
|
|
9,896
|
|
|
|
(11,384
|
)
|
|
Home equity lines of credit
|
|
|
231,269
|
|
|
|
2,152
|
|
|
|
3.69
|
%
|
|
|
251,459
|
|
|
|
2,515
|
|
|
|
3.98
|
%
|
|
|
(363
|
)
|
|
|
(191
|
)
|
|
|
(172
|
)
|
|
Installment loans
|
|
|
8,669
|
|
|
|
155
|
|
|
|
7.10
|
%
|
|
|
9,632
|
|
|
|
170
|
|
|
|
7.02
|
%
|
|
|
(15
|
)
|
|
|
(28
|
)
|
|
|
13
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned income
|
|
|
4,371,666
|
|
|
|
39,488
|
|
|
|
3.61
|
%
|
|
|
4,195,288
|
|
|
|
41,330
|
|
|
|
3.94
|
%
|
|
|
(1,842
|
)
|
|
|
8,661
|
|
|
|
(10,503
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets
|
|
|
6,008,242
|
|
|
|
41,663
|
|
|
|
2.77
|
%
|
|
|
5,583,959
|
|
|
|
43,989
|
|
|
|
3.15
|
%
|
|
|
(2,326
|
)
|
|
|
8,479
|
|
|
|
(10,805
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(50,160
|
)
|
|
|
|
|
|
|
|
|
|
|
(48,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & non-interest earning assets
|
|
|
195,902
|
|
|
|
|
|
|
|
|
|
|
|
201,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,153,984
|
|
|
|
|
|
|
|
|
|
|
|
5,736,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing checking accounts
|
|
$
|
1,153,812
|
|
|
|
38
|
|
|
|
0.01
|
%
|
|
$
|
1,024,455
|
|
|
$
|
55
|
|
|
|
0.02
|
%
|
|
|
(17
|
)
|
|
|
39
|
|
|
|
(56
|
)
|
|
Money market accounts
|
|
|
738,662
|
|
|
|
202
|
|
|
|
0.11
|
%
|
|
|
682,319
|
|
|
|
637
|
|
|
|
0.37
|
%
|
|
|
(435
|
)
|
|
|
329
|
|
|
|
(764
|
)
|
|
Savings
|
|
|
1,430,558
|
|
|
|
154
|
|
|
|
0.04
|
%
|
|
|
1,222,956
|
|
|
|
161
|
|
|
|
0.05
|
%
|
|
|
(7
|
)
|
|
|
108
|
|
|
|
(115
|
)
|
|
Time deposits
|
|
|
1,152,298
|
|
|
|
1,149
|
|
|
|
0.40
|
%
|
|
|
1,355,244
|
|
|
|
4,749
|
|
|
|
1.39
|
%
|
|
|
(3,600
|
)
|
|
|
(623
|
)
|
|
|
(2,977
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing deposits
|
|
|
4,475,330
|
|
|
|
1,543
|
|
|
|
0.14
|
%
|
|
|
4,284,974
|
|
|
|
5,602
|
|
|
|
0.52
|
%
|
|
|
(4,059
|
)
|
|
|
(147
|
)
|
|
|
(3,912
|
)
|
|
Short-term borrowings
|
|
|
240,183
|
|
|
|
232
|
|
|
|
0.38
|
%
|
|
|
193,765
|
|
|
|
221
|
|
|
|
0.45
|
%
|
|
|
11
|
|
|
|
173
|
|
|
|
(162
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities
|
|
|
4,715,513
|
|
|
|
1,775
|
|
|
|
0.15
|
%
|
|
|
4,478,739
|
|
|
|
5,823
|
|
|
|
0.52
|
%
|
|
|
(4,048
|
)
|
|
|
26
|
|
|
|
(4,074
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
780,163
|
|
|
|
|
|
|
|
|
|
|
|
622,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
75,116
|
|
|
|
|
|
|
|
|
|
|
|
78,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
583,192
|
|
|
|
|
|
|
|
|
|
|
|
557,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
6,153,984
|
|
|
|
|
|
|
|
|
|
|
$
|
5,736,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income, tax equivalent
|
|
|
|
|
|
|
39,888
|
|
|
|
|
|
|
|
|
|
|
|
38,166
|
|
|
|
|
|
|
$
|
1,722
|
|
|
|
8,453
|
|
|
|
(6,731
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
2.62
|
%
|
|
|
|
|
|
|
|
|
|
|
2.63
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (net interest income to total interest earning assets)
|
|
|
|
|
|
|
|
|
|
|
2.65
|
%
|
|
|
|
|
|
|
|
|
|
|
2.73
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax equivalent adjustment
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
|
39,887
|
|
|
|
|
|
|
|
|
|
|
|
38,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 the 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. Nonaccrual loans are included in loans for this analysis. The average balances of securities available for sale and held to maturity are calculated
using amortized costs for these securities. Included in the average balance of shareholders' equity is the unrealized gain (loss), net of tax, in the available for sale portfolio of $4.1 million in 2021 and $7.2 million in 2020. The subtotals
contained in the following table are the arithmetic totals of the items contained in that category. Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and
rate) based on the percentage relationship of such variances to each other.
|
(dollars in thousands)
|
|
Nine months ended
September 30, 2021
|
|
|
Nine months ended
September 30, 2020
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Change in
Interest
Income/
Expense
|
|
|
Variance
Balance
Change
|
|
|
Variance
Rate
Change
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. government sponsored enterprises
|
|
$
|
65,103
|
|
|
|
238
|
|
|
|
0.49
|
%
|
|
$
|
42,573
|
|
|
|
541
|
|
|
|
1.69
|
%
|
|
$
|
(303
|
)
|
|
|
308
|
|
|
|
(611
|
)
|
Mortgage backed securities and collateralized mortgage obligations-residential
|
|
|
318,472
|
|
|
|
3,442
|
|
|
|
1.44
|
%
|
|
|
339,300
|
|
|
|
4,959
|
|
|
|
1.95
|
%
|
|
|
(1,517
|
)
|
|
|
(289
|
)
|
|
|
(1,228
|
)
|
|
State and political subdivisions
|
|
|
49
|
|
|
|
3
|
|
|
|
8.16
|
%
|
|
|
111
|
|
|
|
6
|
|
|
|
7.79
|
%
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
1
|
|
|
Corporate bonds
|
|
|
56,245
|
|
|
|
859
|
|
|
|
2.04
|
%
|
|
|
46,508
|
|
|
|
1,372
|
|
|
|
3.93
|
%
|
|
|
(513
|
)
|
|
|
378
|
|
|
|
(891
|
)
|
Small Business Administration-guaranteed participation securities
|
|
|
36,981
|
|
|
|
580
|
|
|
|
2.09
|
%
|
|
|
45,313
|
|
|
|
690
|
|
|
|
2.03
|
%
|
|
|
(110
|
)
|
|
|
(142
|
)
|
|
|
32
|
|
|
Other
|
|
|
686
|
|
|
|
16
|
|
|
|
3.11
|
%
|
|
|
685
|
|
|
|
16
|
|
|
|
3.11
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
|
477,536
|
|
|
|
5,138
|
|
|
|
1.43
|
%
|
|
|
474,490
|
|
|
|
7,584
|
|
|
|
2.13
|
%
|
|
|
(2,446
|
)
|
|
|
251
|
|
|
|
(2,697
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and other short-term Investments
|
|
|
1,108,018
|
|
|
|
1,026
|
|
|
|
0.12
|
%
|
|
|
693,286
|
|
|
|
1,702
|
|
|
|
0.33
|
%
|
|
|
(676
|
)
|
|
|
1,071
|
|
|
|
(1,747
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities and collateralized mortgage obligations-residential
|
|
|
12,199
|
|
|
|
338
|
|
|
|
3.70
|
%
|
|
|
17,029
|
|
|
|
475
|
|
|
|
3.72
|
%
|
|
|
(137
|
)
|
|
|
(134
|
)
|
|
|
(3
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity securities
|
|
|
12,199
|
|
|
|
338
|
|
|
|
3.70
|
%
|
|
|
17,029
|
|
|
|
475
|
|
|
|
3.72
|
%
|
|
|
(137
|
)
|
|
|
(134
|
)
|
|
|
(3
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Reserve Bank and Federal Home Loan Bank stock
|
|
|
5,570
|
|
|
|
198
|
|
|
|
4.74
|
%
|
|
|
7,998
|
|
|
|
351
|
|
|
|
5.85
|
%
|
|
|
(153
|
)
|
|
|
(94
|
)
|
|
|
(59
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans
|
|
|
212,832
|
|
|
|
8,203
|
|
|
|
5.14
|
%
|
|
|
217,573
|
|
|
|
7,778
|
|
|
|
4.77
|
%
|
|
|
425
|
|
|
|
(261
|
)
|
|
|
686
|
|
|
Residential mortgage loans
|
|
|
3,852,960
|
|
|
|
104,219
|
|
|
|
3.61
|
%
|
|
|
3,652,766
|
|
|
|
108,845
|
|
|
|
3.97
|
%
|
|
|
(4,626
|
)
|
|
|
8,226
|
|
|
|
(12,852
|
)
|
|
Home equity lines of credit
|
|
|
234,682
|
|
|
|
6,622
|
|
|
|
3.77
|
%
|
|
|
258,956
|
|
|
|
7,898
|
|
|
|
4.07
|
%
|
|
|
(1,276
|
)
|
|
|
(710
|
)
|
|
|
(566
|
)
|
|
Installment loans
|
|
|
8,608
|
|
|
|
469
|
|
|
|
7.28
|
%
|
|
|
10,129
|
|
|
|
537
|
|
|
|
7.08
|
%
|
|
|
(68
|
)
|
|
|
(91
|
)
|
|
|
23
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned income
|
|
|
4,309,082
|
|
|
|
119,513
|
|
|
|
3.70
|
%
|
|
|
4,139,424
|
|
|
|
125,058
|
|
|
|
4.03
|
%
|
|
|
(5,545
|
)
|
|
|
7,164
|
|
|
|
(12,709
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets
|
|
|
5,912,405
|
|
|
|
126,213
|
|
|
|
2.85
|
%
|
|
|
5,332,227
|
|
|
|
135,170
|
|
|
|
3.38
|
%
|
|
|
(8,957
|
)
|
|
|
8,258
|
|
|
|
(17,215
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(50,101
|
)
|
|
|
|
|
|
|
|
|
|
|
(46,618
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & non-interest earning assets
|
|
|
196,876
|
|
|
|
|
|
|
|
|
|
|
|
196,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,059,180
|
|
|
|
|
|
|
|
|
|
|
$
|
5,482,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing checking accounts
|
|
$
|
1,129,480
|
|
|
|
136
|
|
|
|
0.02
|
%
|
|
$
|
949,909
|
|
|
|
97
|
|
|
|
0.01
|
%
|
|
|
39
|
|
|
|
11
|
|
|
|
28
|
|
|
Money market accounts
|
|
|
731,171
|
|
|
|
721
|
|
|
|
0.13
|
%
|
|
|
646,170
|
|
|
|
2,595
|
|
|
|
0.54
|
%
|
|
|
(1,874
|
)
|
|
|
500
|
|
|
|
(2,374
|
)
|
|
Savings
|
|
|
1,376,494
|
|
|
|
475
|
|
|
|
0.05
|
%
|
|
|
1,169,316
|
|
|
|
560
|
|
|
|
0.06
|
%
|
|
|
(85
|
)
|
|
|
108
|
|
|
|
(193
|
)
|
|
Time deposits
|
|
|
1,203,708
|
|
|
|
4,076
|
|
|
|
0.45
|
%
|
|
|
1,372,369
|
|
|
|
16,739
|
|
|
|
1.63
|
%
|
|
|
(12,663
|
)
|
|
|
(1,838
|
)
|
|
|
(10,825
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing deposits
|
|
|
4,440,853
|
|
|
|
5,408
|
|
|
|
0.16
|
%
|
|
|
4,137,764
|
|
|
|
19,991
|
|
|
|
0.65
|
%
|
|
|
(14,583
|
)
|
|
|
(1,219
|
)
|
|
|
(13,364
|
)
|
|
Short-term borrowings
|
|
|
232,532
|
|
|
|
688
|
|
|
|
0.40
|
%
|
|
|
173,497
|
|
|
|
778
|
|
|
|
0.60
|
%
|
|
|
(90
|
)
|
|
|
304
|
|
|
|
(394
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities
|
|
|
4,673,385
|
|
|
|
6,096
|
|
|
|
0.17
|
%
|
|
|
4,311,261
|
|
|
|
20,769
|
|
|
|
0.64
|
%
|
|
|
(14,673
|
)
|
|
|
(915
|
)
|
|
|
(13,758
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
735,495
|
|
|
|
|
|
|
|
|
|
|
|
543,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
73,689
|
|
|
|
|
|
|
|
|
|
|
|
77,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
576,611
|
|
|
|
|
|
|
|
|
|
|
|
550,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
6,059,180
|
|
|
|
|
|
|
|
|
|
|
$
|
5,482,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income , tax equivalent
|
|
|
|
|
|
|
120,117
|
|
|
|
|
|
|
|
|
|
|
|
114,401
|
|
|
|
|
|
|
$
|
5,716
|
|
|
|
9,173
|
|
|
|
(3,457
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
2.67
|
%
|
|
|
|
|
|
|
|
|
|
|
2.74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (net interest income to total interest earning assets)
|
|
|
|
|
|
|
|
|
|
|
2.71
|
%
|
|
|
|
|
|
|
|
|
|
|
2.86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax equivalent adjustment
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
|
120,116
|
|
|
|
|
|
|
|
|
|
|
|
114,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk
|
As detailed in the Annual Report to Shareholders as of December 31, 2020, the Company is subject to interest rate risk as its principal market risk. As noted in the Management’s Discussion and Analysis for the
three-month and nine-month month periods ended September 30, 2021 and 2020, the Company continues to respond to changes in interest rates in such a way that positions the Company to meet short term earning goals and also allows the Company to
respond to changes in interest rates in the future. Consequently, for the third quarter of 2021, the Company had an average balance of Federal Funds sold and other short-term investments of $1.2 billion compared to $938.1 million in the third
quarter of 2020. As investment opportunities present themselves, management plans to invest funds from the Federal Funds sold and other short-term investment portfolio into the securities available for sale, securities held to maturity and loan
portfolios. Additional disclosure of interest rate risk can be found under “Liquidity and Interest Rate Sensitivity” and “Asset/Liability Management” in the Management’s Discussion and Analysis section of this document.
Market disruptions brought about by the COVID-19 pandemic may adversely affect our sensitivity to market interest rates. For example, we could experience an increase in the cost of funding on our balance sheet. We
could also experience increased pricing competition for our existing loans or future borrower prospects, which could decrease rates earned on our earning assets.
| Item 4. |
Controls and Procedures
|
An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by this report.
The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (“Exchange Act”)) designed to ensure that information required
to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon
this evaluation of those disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer of the Company concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures
were effective to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.
In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving
the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Further, no evaluation of a cost-effective system of controls can
provide absolute assurance that all control issues and instances of fraud, if any, will be detected.
There have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter to which this report relates that have materially affected
or are reasonably likely to materially affect, the internal control over financial reporting.
| PART II |
OTHER INFORMATION
|
| Item 1. |
Legal Proceedings
|
None.
There were no material changes to the risk factors previously disclosed in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2020.
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
Share Repurchase Program
The following table provides certain information with respect to the Company’s purchases of its common shares during the three months ended September 30, 2021:
|
Period
|
|
Total numbers of shares purchased
|
|
|
Average price paid per
share
|
|
|
Total number of
shares purchased as
part of publicly
announced plans or
programs
|
|
|
Maximum number of
shares that may yet
be purchased under
the plans or programs
(1)
|
|
|
July 1, 2021 through July 30, 2021
|
|
|
10,000
|
|
|
$
|
33.82
|
|
|
|
10,000
|
|
|
|
370,000
|
|
|
August 1, 2021 through August 31, 2021
|
|
|
-
|
|
|
|
N/A
|
|
|
|
-
|
|
|
|
370,000
|
|
|
September 1, 2021 through September 30, 2021
|
|
|
40,000
|
|
|
$
|
31.61
|
|
|
|
40,000
|
|
|
|
330,000
|
|
|
Total
|
|
|
50,000
|
|
|
$
|
32.24
|
|
|
|
50,000
|
|
|
|
330,000
|
|
|
(1) |
On February 18, 2021 the Company’s Board of Directors authorized a share repurchase program of up to 400,000 shares as adjusted for the Reverse Stock Split, or approximately 2% of the Company’s outstanding common stock. The Company
commenced repurchases under the program during the quarter ended June 30, 2021.
|
| Item 3. |
Defaults Upon Senior Securities
|
None.
None.
| Item 5. |
Other Information
|
None.
|
Reg S-K (Item 601)
|
|
Exhibit No.
|
Description
|
| |
|
|
|
Crowe LLP Letter Regarding Unaudited Interim Financial Information
|
| |
|
|
|
Rule 13a-15(e)/15d-15(e) Certification of Robert J. McCormick, principal executive officer.
|
| |
|
|
|
Rule 13a-15(e)/15d-15(e) Certification of Michael M. Ozimek, principal financial officer.
|
| |
|
|
|
Section 1350 Certifications of Robert J. McCormick, principal executive officer and Michael M. Ozimek, principal financial officer.
|
| |
|
|
101.INS
|
Instance Document
|
| |
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
| |
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
| |
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
| |
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
| |
|
|
101.PRE
|
XBRLTaxonomy Extension Presentation Linkbase Document
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
| |
|
TrustCo Bank Corp NY
|
| |
|
|
|
| |
|
|
|
| |
|
By:
|
/s/ Robert J. McCormick
|
| |
|
Robert J. McCormick
|
| |
|
Chairman, President and Chief Executive Officer
|
| |
|
|
|
| |
|
|
|
| |
|
By:
|
/s/ Michael M. Ozimek
|
| |
|
Michael M. Ozimek
|
| |
|
Executive Vice President and Chief Financial Officer
|
| |
|
|
|
|
Date:
|
November 5, 2021
|
|
|
69
