SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended
|
Commission
File Number 0-10592
|
June
30, 2008
|
|
TRUSTCO
BANK CORP NY
(Exact
name of registrant as specified in its charter)
NEW
YORK
|
14-1630287
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
5
SARNOWSKI DRIVE, GLENVILLE, NEW YORK
|
12302
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
|
Registrant's
telephone number, including area code:
|
(518)
377-3311
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
x
Yes ¨ No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company.” in Rule
12b-2 of the Exchange Act. (Check one):
Large
accelerated filer x
|
|
Accelerated
filer ¨
|
|
Non-accelerated
filer ¨
|
Smaller
reporting company ¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
¨
Yes x No
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
Class
of Common Stock
|
Number
of Shares Outstanding as of July 31, 2008
|
$1
Par Value
|
75,851,006
|
INDEX
Part I.
|
FINANCIAL INFORMATION
|
PAGE NO.
|
Item
1.
|
Consolidated
Interim Financial Statements (Unaudited):
|
|
|
|
|
|
|
3
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
|
6
|
|
|
|
|
|
7 –
13
|
|
|
|
|
|
14
|
|
|
|
Item
2.
|
|
15
- 32
|
|
|
|
Item
3.
|
|
33
|
|
|
|
Item
4.
|
|
33
– 34
|
|
|
|
Part
II.
|
OTHER
INFORMATION
|
|
|
|
|
Item
1.
|
|
35
|
|
|
|
Item
1A.
|
|
35
|
|
|
|
Item
2.
|
|
35
|
|
|
|
Item
3.
|
|
35
|
|
|
|
Item
4.
|
|
35
|
|
|
|
Item
5.
|
|
36
|
|
|
|
Item
6.
|
|
36
– 44
|
|
|
Consolidated
Statements of Income (Unaudited)
|
|
(dollars
in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and fees on loans
|
|
$ |
30,030 |
|
|
|
29,566 |
|
|
|
60,814 |
|
|
|
58,197 |
|
Interest
and dividends on securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.
S. treasuries and government sponsored enterprises
|
|
|
2,871 |
|
|
|
2,753 |
|
|
|
6,126 |
|
|
|
5,609 |
|
States
and political subdivisions
|
|
|
1,336 |
|
|
|
1,434 |
|
|
|
2,731 |
|
|
|
2,883 |
|
Mortgage-backed
securities and collateralized mortgage obligations
|
|
|
1,737 |
|
|
|
1,916 |
|
|
|
3,510 |
|
|
|
3,880 |
|
Other
securities
|
|
|
159 |
|
|
|
176 |
|
|
|
337 |
|
|
|
315 |
|
Total
interest and dividends on securities available for sale
|
|
|
6,103 |
|
|
|
6,279 |
|
|
|
12,704 |
|
|
|
12,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.
S. government sponsored enterprises
|
|
|
2,054 |
|
|
|
4,847 |
|
|
|
6,773 |
|
|
|
11,650 |
|
States
and political subdivisions
|
|
|
48 |
|
|
|
- |
|
|
|
57 |
|
|
|
- |
|
Total
interest on trading securities
|
|
|
2,102 |
|
|
|
4,847 |
|
|
|
6,830 |
|
|
|
11,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on held to maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.
S. government sponsored enterprises
|
|
|
508 |
|
|
|
- |
|
|
|
733 |
|
|
|
- |
|
States
and political subdivisions
|
|
|
277 |
|
|
|
- |
|
|
|
277 |
|
|
|
- |
|
Total
interest on held to maturity securities
|
|
|
785 |
|
|
|
- |
|
|
|
1,010 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on federal funds sold and other short term investments
|
|
|
3,037 |
|
|
|
6,856 |
|
|
|
6,018 |
|
|
|
10,295 |
|
Total
interest income
|
|
|
42,057 |
|
|
|
47,548 |
|
|
|
87,376 |
|
|
|
92,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
checking
|
|
|
172 |
|
|
|
213 |
|
|
|
376 |
|
|
|
415 |
|
Savings
|
|
|
923 |
|
|
|
2,397 |
|
|
|
2,266 |
|
|
|
4,821 |
|
Money
market deposit accounts
|
|
|
1,292 |
|
|
|
3,411 |
|
|
|
3,373 |
|
|
|
6,715 |
|
Time
deposits
|
|
|
15,748 |
|
|
|
16,556 |
|
|
|
32,465 |
|
|
|
31,192 |
|
Interest
on short-term borrowings
|
|
|
448 |
|
|
|
989 |
|
|
|
1,024 |
|
|
|
1,982 |
|
Interest
on long-term debt
|
|
|
1 |
|
|
|
- |
|
|
|
1 |
|
|
|
1 |
|
Total
interest expense
|
|
|
18,584 |
|
|
|
23,566 |
|
|
|
39,505 |
|
|
|
45,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
23,473 |
|
|
|
23,982 |
|
|
|
47,871 |
|
|
|
47,703 |
|
Provision
for loan losses
|
|
|
700 |
|
|
|
- |
|
|
|
1,000 |
|
|
|
- |
|
Net
interest income after provision for loan losses
|
|
|
22,773 |
|
|
|
23,982 |
|
|
|
46,871 |
|
|
|
47,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
department income
|
|
|
1,350 |
|
|
|
1,441 |
|
|
|
2,844 |
|
|
|
2,894 |
|
Fees
for other services to customers
|
|
|
2,286 |
|
|
|
2,289 |
|
|
|
4,426 |
|
|
|
4,595 |
|
Net
trading (losses) gains
|
|
|
(960 |
) |
|
|
(2,844 |
) |
|
|
(243 |
) |
|
|
601 |
|
Net
gain on securities transactions
|
|
|
784 |
|
|
|
3 |
|
|
|
418 |
|
|
|
3 |
|
Other
|
|
|
477 |
|
|
|
257 |
|
|
|
1,033 |
|
|
|
601 |
|
Total
noninterest income
|
|
|
3,937 |
|
|
|
1,146 |
|
|
|
8,478 |
|
|
|
8,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
5,517 |
|
|
|
4,893 |
|
|
|
11,157 |
|
|
|
9,802 |
|
Net
occupancy expense
|
|
|
3,033 |
|
|
|
2,408 |
|
|
|
6,043 |
|
|
|
4,825 |
|
Equipment
expense
|
|
|
978 |
|
|
|
811 |
|
|
|
2,080 |
|
|
|
1,555 |
|
Professional
services
|
|
|
1,167 |
|
|
|
1,071 |
|
|
|
2,268 |
|
|
|
2,009 |
|
Outsourced
Services
|
|
|
1,171 |
|
|
|
1,074 |
|
|
|
2,280 |
|
|
|
2,147 |
|
Other
real estate (income) expense
|
|
|
(9 |
) |
|
|
15 |
|
|
|
(17 |
) |
|
|
35 |
|
Other
|
|
|
2,490 |
|
|
|
3,186 |
|
|
|
5,100 |
|
|
|
5,791 |
|
Total
noninterest expenses
|
|
|
14,347 |
|
|
|
13,458 |
|
|
|
28,911 |
|
|
|
26,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before taxes
|
|
|
12,363 |
|
|
|
11,670 |
|
|
|
26,438 |
|
|
|
30,233 |
|
Income
taxes
|
|
|
3,894 |
|
|
|
3,563 |
|
|
|
8,542 |
|
|
|
9,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
8,469 |
|
|
|
8,107 |
|
|
|
17,896 |
|
|
|
20,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Basic
|
|
$ |
0.112 |
|
|
|
0.108 |
|
|
|
0.237 |
|
|
|
0.272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Diluted
|
|
$ |
0.112 |
|
|
|
0.108 |
|
|
|
0.237 |
|
|
|
0.272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to unaudited consolidated interim financial
statements.
|
|
Consolidated
Statements of Financial Condition (Unaudited)
(dollars
in thousands, except per share data)
|
|
June 30,
2008
|
|
|
December 31,
2007
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$ |
48,177 |
|
|
|
58,156 |
|
|
|
|
|
|
|
|
|
|
Federal
funds sold and other short term investments
|
|
|
466,262 |
|
|
|
286,764 |
|
Total
cash and cash equivalents
|
|
|
514,439 |
|
|
|
344,920 |
|
|
|
|
|
|
|
|
|
|
Trading
securities:
|
|
|
|
|
|
|
|
|
U.
S. government sponsored enterprises
|
|
|
220,063 |
|
|
|
465,151 |
|
States
and political subdivisions
|
|
|
6,300 |
|
|
|
0 |
|
Total
trading securities
|
|
|
226,363 |
|
|
|
465,151 |
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
U.
S. treasuries and government sponsored enterprises
|
|
|
270,943 |
|
|
|
289,690 |
|
States
and political subdivisions
|
|
|
108,617 |
|
|
|
129,271 |
|
Mortgage-backed
securities and collateralized mortgage obligations
|
|
|
140,794 |
|
|
|
148,858 |
|
Other
securities
|
|
|
10,969 |
|
|
|
11,073 |
|
Total
securities available for sale
|
|
|
531,323 |
|
|
|
578,892 |
|
|
|
|
|
|
|
|
|
|
Held
to maturity securities:
|
|
|
|
|
|
|
|
|
U.
S. government sponsored enterprises (fair value 2008 $120,125 2007
$15,175)
|
|
|
120,085 |
|
|
|
15,000 |
|
Corporate
bonds (fair value 2008 $40,694 2007 $0)
|
|
|
41,644 |
|
|
|
0 |
|
Total
held to maturity securities
|
|
|
161,729 |
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
295,440 |
|
|
|
280,248 |
|
Residential
mortgage loans
|
|
|
1,475,743 |
|
|
|
1,419,231 |
|
Home
equity line of credit
|
|
|
229,781 |
|
|
|
229,570 |
|
Installment
loans
|
|
|
5,751 |
|
|
|
5,865 |
|
Total
loans
|
|
|
2,006,715 |
|
|
|
1,934,914 |
|
Less:
|
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
|
34,767 |
|
|
|
34,651 |
|
Net
loans
|
|
|
1,971,948 |
|
|
|
1,900,263 |
|
|
|
|
|
|
|
|
|
|
Bank
premises and equipment, net
|
|
|
31,316 |
|
|
|
29,193 |
|
Other
assets
|
|
|
52,459 |
|
|
|
44,132 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
3,489,577 |
|
|
|
3,377,551 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Demand
|
|
$ |
268,343 |
|
|
|
262,863 |
|
Interest-bearing
checking
|
|
|
300,476 |
|
|
|
293,027 |
|
Savings
accounts
|
|
|
623,411 |
|
|
|
609,064 |
|
Money
market deposit accounts
|
|
|
314,445 |
|
|
|
341,790 |
|
Certificates
of deposit (in denominations of $100,000 or more)
|
|
|
425,549 |
|
|
|
390,328 |
|
Other
time accounts
|
|
|
1,167,152 |
|
|
|
1,123,226 |
|
Total
deposits
|
|
|
3,099,376 |
|
|
|
3,020,298 |
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
97,156 |
|
|
|
92,220 |
|
Long-term
debt
|
|
|
13 |
|
|
|
29 |
|
Due
to broker
|
|
|
30,000 |
|
|
|
0 |
|
Accrued
expenses and other liabilities
|
|
|
23,528 |
|
|
|
27,936 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
3,250,073 |
|
|
|
3,140,483 |
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
|
Capital
stock par value $1; 150,000,000 shares authorized and
82,373,165 and 82,373,165 shares issued at June 30, 2008 and
December 31, 2007, respectively
|
|
|
82,373 |
|
|
|
82,373 |
|
Surplus
|
|
|
122,021 |
|
|
|
121,961 |
|
Undivided
profits
|
|
|
94,363 |
|
|
|
93,099 |
|
Accumulated
other comprehensive income, net of tax
|
|
|
4,991 |
|
|
|
7,230 |
|
Treasury
stock at cost - 6,697,956 and 7,047,297 shares at June 30, 2008
and December 31, 2007, respectively
|
|
|
(64,244 |
) |
|
|
(67,595 |
) |
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
239,504 |
|
|
|
237,068 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
$ |
3,489,577 |
|
|
|
3,377,551 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to unaudited consolidated interim financial
statements.
|
|
Consolidated
Statements of Changes in Shareholders' Equity (Unaudited)
(dollars
in thousands, except per share data)
|
|
Capital
Stock
|
|
|
Surplus
|
|
|
Undivided
Profits
|
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
Comprehensive
Income
|
|
|
Treasury
Stock
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance, January 1, 2007
|
|
$ |
82,150 |
|
|
|
119,313 |
|
|
|
110,304 |
|
|
|
(2,928 |
) |
|
|
|
|
|
(69,316 |
) |
|
|
239,523 |
|
Adjustment
to initially apply FAS No. 159, net of tax
|
|
|
- |
|
|
|
- |
|
|
|
(8,606 |
) |
|
|
8,606 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income - Six Months Ended June, 2007
|
|
|
- |
|
|
|
- |
|
|
|
20,421 |
|
|
|
- |
|
|
|
20,421 |
|
|
|
- |
|
|
|
20,421 |
|
Other
comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of prior service cost on pension and post retirement plans, net of tax
(pretax of $242)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(146 |
) |
|
|
- |
|
|
|
- |
|
Unrealized
net holding loss on securities available-for-sale arising during the
period, net of tax (pretax loss of $12,295)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,392 |
) |
|
|
- |
|
|
|
- |
|
Other
comprehensive loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,538 |
) |
|
|
(7,538 |
) |
|
|
- |
|
|
|
(7,538 |
) |
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,883 |
|
|
|
|
|
|
|
|
|
Cash
dividend declared, $.32 per share
|
|
|
- |
|
|
|
- |
|
|
|
(23,979 |
) |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
(23,979 |
) |
Stock
options exercised and related excess tax benefits
|
|
|
19 |
|
|
|
116 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
135 |
|
Treasury
stock purchased (280,497 shares)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
(2,862 |
) |
|
|
(2,862 |
) |
Sale
of treasury stock (403,953 shares)
|
|
|
- |
|
|
|
330 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
3,854 |
|
|
|
4,184 |
|
Stock
based compensation expense
|
|
|
- |
|
|
|
26 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance, June 30, 2007
|
|
$ |
82,169 |
|
|
|
119,785 |
|
|
|
98,140 |
|
|
|
(1,860 |
) |
|
|
|
|
|
|
(68,324 |
) |
|
|
229,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance, January 1, 2008
|
|
$ |
82,373 |
|
|
|
121,961 |
|
|
|
93,099 |
|
|
|
7,230 |
|
|
|
|
|
|
|
(67,595 |
) |
|
|
237,068 |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income - Six Months Ended June 30, 2008
|
|
|
- |
|
|
|
- |
|
|
|
17,896 |
|
|
|
- |
|
|
|
17,896 |
|
|
|
- |
|
|
|
17,896 |
|
Other
comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of prior service cost on pension and post retirement plans, net of tax
(pretax of $275)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(165 |
) |
|
|
- |
|
|
|
- |
|
Unrealized
net holding loss on securities available-for-sale arising during the
period, net of tax (pretax loss of $3,031)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,822 |
) |
|
|
- |
|
|
|
- |
|
Reclassification
adjustment for net gain realized in net income during the period (pretax
gain $418)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(252 |
) |
|
|
- |
|
|
|
- |
|
Other
comprehensive income, net of tax:
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,239 |
) |
|
|
(2,239 |
) |
|
|
|
|
|
|
(2,239 |
) |
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,657 |
|
|
|
- |
|
|
|
- |
|
Cash
dividend declared, $.22 per share
|
|
|
- |
|
|
|
- |
|
|
|
(16,632 |
) |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
(16,632 |
) |
Sale
of treasury stock (349,341 shares)
|
|
|
- |
|
|
|
(26 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
3,351 |
|
|
|
3,325 |
|
Stock
based compensation expense
|
|
|
- |
|
|
|
86 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance, June 30, 2008
|
|
$ |
82,373 |
|
|
|
122,021 |
|
|
|
94,363 |
|
|
|
4,991 |
|
|
|
|
|
|
|
(64,244 |
) |
|
|
239,504 |
|
See
accompanying notes to unaudited consolidated interim financial
statements.
Consolidated
Statements of Cash Flows (Unaudited)
(dollars
in thousands)
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
17,896 |
|
|
|
20,421 |
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,817 |
|
|
|
1,366 |
|
Gain
on sale of other real estate owned
|
|
|
(128 |
) |
|
|
(89 |
) |
Provision
for loan losses
|
|
|
1,000 |
|
|
|
- |
|
Deferred
tax expense
|
|
|
363 |
|
|
|
1,492 |
|
Stock
based compensation expense
|
|
|
86 |
|
|
|
26 |
|
Net
loss on sale of bank premises and equipment
|
|
|
6 |
|
|
|
- |
|
Net
gain on sale of securities available for sale
|
|
|
(418 |
) |
|
|
(3 |
) |
Proceeds
from sales and calls of trading securities
|
|
|
344,788 |
|
|
|
502,944 |
|
Purchases
of trading securities
|
|
|
(262,393 |
) |
|
|
(450,296 |
) |
Proceeds
from maturities of trading securities
|
|
|
156,150 |
|
|
|
- |
|
Net
trading losses (gains)
|
|
|
243 |
|
|
|
(601 |
) |
(Increase)
decrease in taxes receivable
|
|
|
(7,237 |
) |
|
|
9,322 |
|
(Increase)
decrease in interest receivable
|
|
|
(1,950 |
) |
|
|
3,511 |
|
(Decrease)
increase in interest payable
|
|
|
(462 |
) |
|
|
403 |
|
Decrease
(increase) in other assets
|
|
|
3,062 |
|
|
|
(2,903 |
) |
(Decrease)
increase in accrued expenses and other liabilities
|
|
|
(218 |
) |
|
|
731 |
|
Total
adjustments
|
|
|
234,709 |
|
|
|
65,903 |
|
Net
cash provided by operating activities
|
|
|
252,605 |
|
|
|
86,324 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sales and calls of securities available for sale
|
|
|
158,970 |
|
|
|
15,354 |
|
Purchases
of securities available for sale
|
|
|
(102,452 |
) |
|
|
(31,034 |
) |
Proceeds
from maturities of securities available for sale
|
|
|
8,020 |
|
|
|
46,580 |
|
Purchases
of held to maturity securities
|
|
|
(136,729 |
) |
|
|
- |
|
Net
increase in loans
|
|
|
(74,277 |
) |
|
|
(86,571 |
) |
Proceeds
from dispositions of other real estate owned
|
|
|
365 |
|
|
|
213 |
|
Proceeds
from dispositions of bank premises and equipment
|
|
|
10 |
|
|
|
- |
|
Purchases
of bank premises and equipment
|
|
|
(3,956 |
) |
|
|
(5,174 |
) |
Net
cash provided by investing activities
|
|
|
(150,049 |
) |
|
|
(60,632 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
|
79,078 |
|
|
|
223,153 |
|
Net
increase (decrease) in short-term borrowings
|
|
|
4,936 |
|
|
|
(1,652 |
) |
Repayment
of long-term debt
|
|
|
(16 |
) |
|
|
(15 |
) |
Proceeds
from exercise of stock options and related tax benefits
|
|
|
- |
|
|
|
135 |
|
Proceeds
from sale of treasury stock
|
|
|
3,325 |
|
|
|
4,184 |
|
Purchase
of treasury stock
|
|
|
- |
|
|
|
(2,862 |
) |
Dividends
paid
|
|
|
(20,360 |
) |
|
|
(23,979 |
) |
Net
cash provided by financing activities
|
|
|
66,963 |
|
|
|
198,964 |
|
Net
increase in cash and cash equivalents
|
|
|
169,519 |
|
|
|
224,656 |
|
Cash
and cash equivalents at beginning of period
|
|
|
344,920 |
|
|
|
291,338 |
|
Cash
and cash equivalents at end of period
|
|
$ |
514,439 |
|
|
|
515,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
39,967 |
|
|
|
44,723 |
|
Income
taxes paid
|
|
|
15,778 |
|
|
|
411 |
|
Non
cash investing and financing activites:
|
|
|
|
|
|
|
|
|
Increase
in due to broker
|
|
|
30,000 |
|
|
|
- |
|
Transfer
of loans to other real estate owned
|
|
|
1,592 |
|
|
|
189 |
|
Decrease
in dividends payable
|
|
|
(3,728 |
) |
|
|
- |
|
Change
in unrealized loss on securities available for sale-gross of deferred
taxes (excluding $14,313 unrealized loss transferred to undivided profits
in 2007 from adoption of SFAS No. 159), net of reclassification
adjustment
|
|
|
(3,449 |
) |
|
|
(12,295 |
) |
Change
in deferred tax effect on unrealized loss on securities available for
sale, net of reclassification adjustment
|
|
|
1,375 |
|
|
|
4,903 |
|
Amortization
of prior service cost on pension and post retirement plans
|
|
|
(275 |
) |
|
|
(242 |
) |
Change
in deferred tax effect of amortization of prior service
cost
|
|
|
110 |
|
|
|
96 |
|
Securities
available for sale transferred to trading securities
|
|
|
- |
|
|
|
516,558 |
|
Cumulative
effect of the adoption of SFAS No.No. 159-net of deferred taxes ($14,313
gross of deferred taxes)
|
|
|
- |
|
|
|
8,606 |
|
See
accompanying notes to unaudited consolidated financial
statements.
Notes
to Consolidated Interim Financial Statements
(Unaudited)
1. Financial
Statement Presentation
The
unaudited Consolidated Interim Financial Statements of TrustCo Bank Corp NY (the
Company) include the accounts of the subsidiaries after elimination of all
significant intercompany accounts and transactions. Prior period
amounts are reclassified when necessary to conform to the current period
presentation. The net income reported for the six months ended June
30, 2008 is not necessarily indicative of the results that may be expected for
the year ending December 31, 2008, or any interim periods.
In the
opinion of the management of the Company, the accompanying unaudited
Consolidated Interim Financial Statements contain all adjustments necessary to
present fairly the financial position as of June 30, 2008 and the results of
operations and cash flows for the three months and six months ended June 30,
2008 and 2007. The accompanying Consolidated Interim Financial
Statements should be read in conjunction with the TrustCo Bank Corp NY year-end
Consolidated Financial Statements, including notes thereto, which are included
in TrustCo Bank Corp NY's 2007 Annual Report to Shareholders on Form
10-K.
A
reconciliation of the component parts of earnings per share (EPS) for the three
and six-month periods ended June 30, 2008 and 2007 follows:
(In
thousands, except per share data)
|
|
NetIncome
|
|
|
Weighted
Average Shares Outstanding
|
|
|
Per
ShareAmounts
|
|
For
the quarter ended June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
Net
income available to Common shareholders
|
|
$ |
8,469 |
|
|
|
75,675 |
|
|
$ |
0.112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
------ |
|
|
|
2 |
|
|
|
----- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$ |
8,469 |
|
|
|
75,677 |
|
|
$ |
0.112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
six months ended June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to Common shareholders
|
|
$ |
17,896 |
|
|
|
75,591 |
|
|
$ |
0.237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
------- |
|
|
|
6 |
|
|
|
----- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$ |
17,896 |
|
|
|
75,597 |
|
|
$ |
0.237 |
|
(In
thousands, except per share data)
|
|
NetIncome
|
|
|
Weighted
AverageShares Outstanding
|
|
|
Per
ShareAmounts
|
|
For
the quarter endedJune 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
Net
income available to Common shareholders
|
|
$ |
8,107 |
|
|
|
75,040 |
|
|
$ |
0.108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
------ |
|
|
|
28 |
|
|
|
----- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$ |
8,107 |
|
|
|
75,068 |
|
|
$ |
0.108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
six months ended June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to Common shareholders
|
|
$ |
20,421 |
|
|
|
74,996 |
|
|
$ |
0.272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
------- |
|
|
|
65 |
|
|
|
----- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$ |
20,421 |
|
|
|
75,061 |
|
|
$ |
0.272 |
|
There
were approximately 4.5 million and 4.2 million stock options for the three and
six months ended June 30, 2008 and 3.1 million and 2.7 million stock
options for the three and six months ended June 30, 2007 which if included,
would have been antidilutive in the calculation of average shares outstanding,
and were therefore excluded from the earnings per share
calculations.
3. Benefit Plans
The table
below outlines the components of the Company’s net periodic benefit recognized
during the three and six month periods ended June 30, 2008 and 2007 for its
pension and other postretirement benefit plans:
Components
of Net Periodic Benefit for the three months ended June 30, 2008 and 2007
(dollars in thousands)
|
|
Pension
Benefits
|
|
|
Other
Postretirement Benefits
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$ |
13 |
|
|
|
22 |
|
|
|
6 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
cost
|
|
|
353 |
|
|
|
347 |
|
|
|
15 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
return on plan assets
|
|
|
(501 |
) |
|
|
(515 |
) |
|
|
(109 |
) |
|
|
(98 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of prior service cost
|
|
|
- |
|
|
|
- |
|
|
|
(141 |
) |
|
|
(125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
periodic benefit
|
|
$ |
(135 |
) |
|
|
(146 |
) |
|
|
(229 |
) |
|
|
(202 |
) |
Components
of Net Periodic Benefit for the six months ended June 30, 2008 and 2007 (dollars
in thousands)
|
|
Pension
Benefits
|
|
|
Other
Postretirement Benefits
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
|
25 |
|
|
|
22 |
|
|
|
13 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
cost
|
|
|
705 |
|
|
|
701 |
|
|
|
29 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
return on plan assets
|
|
|
(1,002 |
) |
|
|
(975 |
) |
|
|
(233 |
) |
|
|
(205 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of prior service cost
|
|
|
- |
|
|
|
- |
|
|
|
(275 |
) |
|
|
(242 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
periodic benefit
|
|
$ |
(272 |
) |
|
|
(252 |
) |
|
|
(467 |
) |
|
|
(405 |
) |
The
Company previously disclosed in its consolidated financial statements for the
year ended December 31, 2007, that it did not expect to make any contributions
to its pension and postretirement benefit plans in 2008. As of June
30, 2008, no contributions have been made. The Company presently
anticipates that it will not make any contributions in 2008.
4.
|
Adoption
of New Accounting Pronouncements
|
a)
Statements
of Financial Accounting Standards No. 159 “The Fair Value Option
for Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115”, and No. 157 “Fair Value Measurements”.
Effective
January 1, 2007 TrustCo elected early adoption of Statements of Financial
Accounting Standards (“SFAS”) No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities, including an amendment of FASB Statement No.
115” (SFAS No. 159), and No. 157 “Fair Value Measurements” (SFAS No.
157). SFAS No. 159, which was issued in February 2007, generally
permits the measurement of selected eligible financial instruments at fair value
at specified election dates. SFAS No. 157 generally establishes the
definition of fair value and expands disclosures about fair value
measurement. This statement establishes a hierarchy of the levels of
fair value measurement techniques. Upon adoption of SFAS No. 159,
TrustCo elected to apply the fair value option for certain U.S. government
sponsored enterprises securities with lower yields, which generally had longer
duration, that were classified in the available for sale portfolio totaling
approximately $517 million ($502 million at fair value). Prior to the
adoption of SFAS No. 159, the Company intended to hold these securities until a
market price recovery or possibly to maturity. The Company changed
its intent with respect to these securities and therefore recorded these losses
directly to undivided profits rather than current income based on the transition
provisions of SFAS No. 159 by electing the fair value option for these
securities. As a result, unrealized losses, net of taxes, of $8.6
million were directly recorded to undivided profits. This charge to undivided
profits had no overall impact on total shareholders’ equity because the fair
value adjustment had previously been included as an element of shareholders’
equity in the accumulated other comprehensive income (loss) account, net of
tax.
As a
result of TrustCo’s fair value measurement election for the above financial
instruments, TrustCo recorded $3.4 million of pre-tax unrealized trading gains
in its first quarter of 2007 earnings for the change in fair value of such
instruments from the effective election date of January 1, 2007 to March 31,
2007. Additionally, TrustCo sold in the second quarter of 2007 all of
these securities and recognized pre-tax trading losses of $2.8 million in that
quarter. The Company re-invested these proceeds by purchasing
securities, primarily U.S. government sponsored enterprises, for its trading
portfolio. As of June 30, 2008, $220 million of U.S. government
sponsored enterprises and $6.3 million of states and political subdivisions
securities were held in the trading portfolio. TrustCo believes that
its adoption of the standard has a positive impact on its ability to manage its
investment portfolio because it has enabled the Company to sell the securities
that it has elected the fair value option for without recording
other-than-temporary impairment on the remainder of the available-for-sale
portfolio. Additionally, recording the unrealized losses on these
securities directly to undivided profits as part of the transition adjustment
has benefited subsequent periods’ net income because the loss was not realized
in the income statement when the securities were sold.
As
already stated, the Company recorded a $8.6 million charge, net of tax, to
undivided profits as a result of adopting SFAS No. 159 as of January 1,
2007. Had the Company not adopted this new accounting standard and
reclassified the available for sale securities to trading account assets as of
that date, the charge to capital would have been recorded as a charge
to net income in 2007.
In
determining the fair value for the trading account securities the Company
utilized an independent pricing service.
The
following table presents information relative to the assets identified for the
fair value option of accounting as of the initial implementation date of January
1, 2007:
|
|
Statement
of 12/31/06 Prior to adoption
|
|
|
Net
Loss recognized in undivided profits upon adoption
|
|
|
Statement
of Condition after adoption of Fair Value Option
|
|
($
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale transferred to trading account assets:
|
|
|
|
|
|
|
|
|
|
Amortized
cost
|
|
$ |
516,558 |
|
|
|
(14,313 |
) |
|
|
502,245 |
|
Unrealized
depreciation
|
|
|
(14,313 |
) |
|
|
14,313 |
|
|
-
|
|
Net
transferred to trading account assets
|
|
$ |
502,245 |
|
|
-
|
|
|
|
502,245 |
|
The
securities transferred to trading account assets as of January 1, 2007 were
included previously in the available for sale portfolio as Government sponsored
enterprises.
TrustCo
determined that it would be appropriate to account for certain of the Government
sponsored enterprises securities at fair value based upon the relatively low
interest rate on these bonds. Government sponsored enterprises bonds
held by Trustco Bank in the available for sale portfolio as of January 1, 2007
under a predetermined interest rate (generally 5.45% or below) were identified
as bonds to be recorded at fair value (the bonds also had an average life to
maturity of approximately 9 years). Interest on trading account
securities are recorded in the Consolidated Statements of Income based upon the
coupon of the underlying bond and the par value of the
securities. Unrealized gains and losses on the trading account
securities are recognized based upon the fair value at period end compared to
the beginning of that period.
After the
adoption of SFAS 159 as of January 1, 2007 there were $232.3 million of
remaining Government sponsored enterprises obligations classified as available
for sale securities which had gross unrealized losses of $3.3
million. These securities are primarily higher yielding assets and
generally had shorter terms to final maturity. It is management’s
intention that Government sponsored enterprises securities that remain in the
Available for Sale portfolio after the adoption of SFAS 159 will be held to
generate relatively higher yields or provide liquidity in the form of maturing
or called securities. Upon adoption of SFAS 159, the yield on the
securities in the available for sale portfolio ranged from 4.30% to 5.82%, and
had an average term to maturity of 7 years ranging from 2007 – 2019 final
maturity.
The
Company adopted Statement of Financial Accounting Standard No. 157 “Fair Value
Measurements,” (SFAS No. 157) on January 1, 2007. SFAS No. 157
establishes a three-level hierarchy for disclosure of fair value
measurements. The valuation hierarchy is based upon the transparency
of inputs to the valuation of an asset or liability as of the measurement
date. A financial instrument’s categorization within the valuation
hierarchy is based upon the lowest level of input that is significant to the
fair value measurement. The three levels are defined as
follows.
|
·
|
Level
1 – Inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active
markets.
|
|
·
|
Level
2 – Inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
|
·
|
Level
3 – Inputs to the valuation methodology are unobservable and significant
to the fair value measurement.
|
The
following tables presents the financial instruments recorded at fair value by
the Company as of June 30, 2008 and December 31, 2007. There were no
financial instruments with fair value estimates considered to be categorized as
“Level 1” or “Level 3.”
(dollars
in thousands)
|
|
Fair
value measurements at June 30, 2008 using:
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Total
carrying
amount
in
statement
of
financial
condition
as
of 6/30/08
|
|
|
Fair
value
measurement
as
of
6/30/08
|
|
|
Significant
other
observable
inputs
(Level
2)
|
|
Securities
available for sale
|
|
$ |
531,323 |
|
|
|
531,323 |
|
|
|
531,323 |
|
Trading
securities
|
|
|
226,363 |
|
|
|
226,363 |
|
|
|
226,363 |
|
Other
real estate owned
|
|
|
1,647 |
|
|
|
1,647 |
|
|
|
1,647 |
|
(dollars
in thousands)
|
|
Fair
value measurements at December 31, 2007 using:
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Total
carrying
amount
in
statement
of
financial
condition
as
of 12/31/07
|
|
|
Fair
value
measurement
as
of
12/31/07
|
|
|
Significant
other
observable
inputs
(Level
2)
|
|
Securities
available for sale
|
|
$ |
578,892 |
|
|
|
578,892 |
|
|
|
578,892 |
|
Trading
securities
|
|
|
465,151 |
|
|
|
465,151 |
|
|
|
465,151 |
|
Other
real estate owned
|
|
|
293 |
|
|
|
293 |
|
|
|
293 |
|
Assets
available for sale and trading account securities are fair valued utilizing an
independent pricing service for identical assets or significantly similar
securities. The pricing service uses a variety of techniques to
arrive at fair value including market maker bids, quotes and pricing
models. Inputs to the pricing models include recent trades, benchmark
interest rates, spreads and actual and projected cash flows. Other
real estate owned fair value is determined by observable comparable sales and
property valuation techniques. Interest and dividend income is
recorded on the accrual method and included in the income statement in the
respective investment class under total interest income.
|
b)
|
Statements
of Financial Accounting Standards No. 48 “Accounting for Uncertainty in
Income Taxes” as amended by FSB No. 48-1 “Definition of Settlement in FASB
Interpretation No. 48”.
|
TrustCo
adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes” (“FIN 48”) as of January 1,
2007. FIN 48 prescribes a recognitition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken on a tax return. As a result
of the Company’s adoption of FIN 48, there were no required adjustments to the
Company’s consolidated financial statements.
TrustCo
also adopted FASB Staff Position (FSP) No. 48-1 “Definition of Settlement in
FASB Interpretation No. 48 (FSP 48-1)”. FSP 48-1 provides guidance on
how to determine whether a tax position is effectively settled for the purpose
of recognizing previously unrecognized tax benefits. FSP 48-2 was
effective retroactively to January 1, 2007 and did not significantly impact the
Corporation’s financial statements.
In the
second quarter of 2008 the Company settled with the Internal Revenue Service and
New York State in regard to the audit of the Company’s tax
returns. As a result, the Company reversed an accrual of interest
expense of $311 thousand, net of federal taxes, as an element of other expenses
and $371 thousand, net of federal taxes, of previously unrecognized tax benefit
as a decrease to tax expense in the second quarter of 2008. The
settlement amount approximates the Company’s prior estimate.
For the
six month period ended June 30, 2008 the unrecoginized tax benefit and change in
that benefit from the beginning of the year is as follows:
(dollars
in thousands)
|
|
|
|
|
|
|
|
Balance
January 1, 2008
|
|
$ |
4,023 |
|
|
|
|
|
|
Amount
paid to taxing Authorities for the six month period ended June 30,
2008
|
|
|
(2,839 |
) |
|
|
|
|
|
Balance
June 30, 2008
|
|
$ |
1,184 |
|
The
Company does not believe the unrecognized tax benefit will significantly
increase or decrease within the next twelve months. It is reasonably
possible that a reduction in the estimate may occur, however, a quantification
of a reasonable range cannot be determined. Open Federal tax years
are 2006 and 2007, and for New York State the 2007 tax year is
open. During 2008, no interest or penalties were recorded on the
unrecognized tax benefit.
5. Guarantees
The
Company does not issue any guarantees that would require liability-recognition
or disclosure, other than its standby letters of credit. Standby
letters of credit are conditional commitments issued by the Company to guarantee
the performance of a customer to a third party. Standby letters of
credit generally arise in connection with lending relationships. The credit risk
involved in issuing these instruments is essentially the same as that involved
in extending loans to customers. Contingent obligations under standby
letters of credit totaled approximately $4.6 million at June 30, 2008 and
represent the maximum potential future payments the Company could be required to
make. Typically, these instruments have terms of twelve months or
less and expire unused; therefore, the total amounts do not necessarily
represent future cash requirements. Each customer is evaluated
individually for creditworthiness under the same underwriting standards used for
commitments to extend credit and on-balance sheet
instruments. Company policies governing loan collateral apply to
standby letters of credit at the time of credit
extension. Loan-to-value ratios are generally consistent with
loan-to-value requirements for other commercial loans secured by similar types
of collateral. The fair value of the Company’s standby letters of credit at June
30, 2008 was insignificant.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors and Shareholders
TrustCo
Bank Corp NY:
We have
reviewed the consolidated statement of financial condition of TrustCo Bank Corp
NY and subsidiaries (the Company) as of June 30, 2008, and the related
consolidated statements of income for the three and six-month periods ended June
30, 2008 and 2007, and the consolidated statements of changes in shareholders’
equity and cash flows for the six-month periods ended June 30, 2008 and
2007. These consolidated financial statements are the responsibility
of the Company's management.
We
conducted our review in accordance with standards of the Public Company
Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion. Based on our review, we are not aware
of any material modifications that should be made to the consolidated financial
statements referred to above for them to be in conformity with accounting
principles generally accepted in the United States of America.
As
discussed in Note 4 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities, including an amendment of FASB Statement No.
115” as of January 1, 2007.
We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated statement of
financial condition of TrustCo Bank Corp NY and subsidiaries as of December 31,
2007, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 26, 2008, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated statement
of financial condition as of December 31, 2007 is fairly stated, in
all material respects, in relation to the consolidated statement of financial
condition from which it has been derived.
/s/KPMG
LLP
______________________________
KPMG
LLP
Albany,
New York
August 8,
2008
Item
2. Management's Discussion and Analysis of Financial
Condition and Results
of Operations
The
review that follows focuses on the factors affecting the financial condition and
results of operations of TrustCo Bank Corp NY ("TrustCo" or "Company") during
the three-month and six-month periods ended June 30, 2008, with
comparisons to 2007 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 2007
Annual Report to Shareholders should be read in conjunction with this
review. Amounts in prior period consolidated interim financial
statements are reclassified whenever necessary to conform to the current
period's presentation.
Forward-looking
Statements
Statements
included in this review and in future filings by TrustCo with the Securities and
Exchange Commission, in TrustCo's press releases, and in oral statements made
with the approval of an authorized executive officer, which are not historical
or current facts, are "forward-looking statements" made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995, and
are subject to certain risks and uncertainties that could cause actual results
to differ materially from historical earnings and those presently anticipated or
projected. TrustCo wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. The following important factors, among others, in some cases
have affected and in the future could affect TrustCo's actual results, and could
cause TrustCo's actual financial performance to differ materially from that
expressed in any forward-looking statement: (1) credit risk, (2) interest rate
risk, (3) competition, (4) changes in the regulatory environment, (5) real
estate and collateral values, and (6) changes in market area and general
business and economic trends. The foregoing list should not be
construed as exhaustive, and the Company disclaims any obligation to
subsequently revise any forward-looking statements to reflect events or
circumstances after the date of such statements, or to reflect the occurrence of
anticipated or unanticipated events.
Following
this discussion is the table "Distribution of Assets, Liabilities and
Shareholders' Equity: Interest Rates and Interest Differential" which gives a
detailed breakdown of TrustCo's average interest earning assets and interest
bearing liabilities for the three and six months ended June 30, 2008 and
2007.
Adoption
of New Accounting Pronouncements
a)
Statements
of Financial Accounting Standards No. 159 “The Fair Value Option
for Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115”, and No. 157 “Fair Value Measurements”.
Effective
January 1, 2007 TrustCo elected early adoption of Statements of Financial
Accounting Standards (“SFAS”) No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities, including an amendment of FASB Statement No.
115” (SFAS No. 159), and No. 157 “Fair Value Measurements” (SFAS No.
157). SFAS No. 159, which was issued in February 2007, generally
permits the measurement of selected eligible financial instruments at fair value
at specified election dates. SFAS No. 157 generally establishes the
definition of fair value and expands disclosures about fair value
measurement. This statement establishes a hierarchy of the levels of
fair value measurement techniques. Upon adoption of SFAS No. 159,
TrustCo elected to apply the fair value option for certain U.S. government
sponsored enterprises securities with lower yields, which generally had longer
duration, that were classified in the available for sale portfolio totaling
approximately $517 million ($502 million at fair value). Prior to the
adoption of SFAS No. 159, the Company intended to hold these securities until a
market price recovery or possibly to maturity. The Company changed
its intent with respect to these securities and therefore recorded these losses
directly to undivided profits rather than current income based on the transition
provisions of SFAS No. 159 by electing the fair value option for these
securities. As a result, unrealized losses, net of taxes, of $8.6
million were directly recorded to undivided profits. This charge to undivided
profits had no overall impact on total shareholders’ equity because the fair
value adjustment had previously been included as an element of shareholders’
equity in the accumulated other comprehensive income (loss) account, net of
tax.
As a
result of TrustCo’s fair value measurement election for the above financial
instruments, TrustCo recorded $3.4 million of pre-tax unrealized trading gains
in its first quarter of 2007 earnings for the change in fair value of such
instruments from the effective election date of January 1, 2007 to March 31,
2007. Additionally, TrustCo sold in the second quarter of 2007 all of
these securities and recognized pre-tax trading losses of $2.8 million in that
quarter. The Company re-invested these proceeds by purchasing
securities, primarily U.S. government sponsored enterprises, for its trading
portfolio. As of June 30, 2008, $220 million of U.S. government
sponsored enterprises and $6.3 million of states and political subdivisions
securities were held in the trading portfolio. TrustCo believes that
its adoption of the standard has a positive impact on its ability to manage its
investment portfolio because it has enabled the Company to sell the securities
that it has elected the fair value option for without recording
other-than-temporary impairment on the remainder of the available-for-sale
portfolio. Additionally, recording the unrealized losses on these
securities directly to undivided profits as part of the transition adjustment
has benefited subsequent periods’ net income because the loss was not realized
in the income statement when the securities were sold.
As
already stated, the Company recorded a $8.6 million charge, net of tax, to
undivided profits as a result of adopting SFAS No. 159 as of January 1,
2007. Had the Company not adopted this new accounting standard and
reclassified the available for sale securities to
trading
account assets as of that date, the charge to capital would have been recorded
as
a charge
to net income in 2007.
In
determining the fair value for the trading account securities the Company
utilized an independent pricing service.
The
following table presents information relative to the assets identified for the
fair value option of accounting as of the initial implementation date of January
1, 2007:
|
|
Statement
of Condition 12/31/06 Prior to adoption
|
|
|
Net
Loss recognized in undivided profits upon adoption
|
|
|
Statement
of Condition after adoption of Fair Value Option
|
|
($
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale transferred to trading account assets:
|
|
|
|
|
|
|
|
|
|
Amortized
cost
|
|
$ |
516,558 |
|
|
|
(14,313 |
) |
|
|
502,245 |
|
Unrealized
depreciation
|
|
|
(14,313 |
) |
|
|
14,313 |
|
|
-
|
|
Net
transferred to trading account assets
|
|
$ |
502,245 |
|
|
-
|
|
|
|
502,245 |
|
The
securities transferred to trading account assets as of January 1, 2007 were
included previously in the available for sale portfolio as Government sponsored
enterprises.
TrustCo
determined that it would be appropriate to account for certain of the Government
sponsored enterprises securities at fair value based upon the relatively low
interest rate on these bonds. Government sponsored enterprises bonds
held by Trustco Bank in the available for sale portfolio as of January 1, 2007
under a predetermined interest rate (generally 5.45% or below) were identified
as bonds to be recorded at fair value (the bonds also had an average life to
maturity of approximately 9 years). Interest on trading account
securities are recorded in the Consolidated Statements of Income based upon the
coupon of the underlying bond and the par value of the
securities. Unrealized gains and losses on the trading account
securities are recognized based upon the fair value at period end compared to
the beginning of that period.
After the
adoption of SFAS 159 as of January 1, 2007 there were $232.3 million of
remaining Government sponsored enterprises obligations classified as available
for sale securities which had gross unrealized losses of $3.3
million. These securities are primarily higher yielding assets and
generally had shorter terms to final maturity. It is management’s
intention that Government sponsored enterprises securities that remain in the
Available for Sale portfolio after the adoption of SFAS 159 will be held to
generate relatively higher yields or provide liquidity in the form of maturing
or called securities. Upon adoption of SFAS 159, the yield on the
securities in the available for sale portfolio ranged from 4.30% to 5.82%, and
had an average term to maturity of 7 years ranging from 2007 – 2019 final
maturity.
The
Company adopted Statement of Financial Accounting Standard No. 157 “Fair Value
Measurements,” (SFAS No. 157) on January 1, 2007. SFAS No. 157
establishes a three-level hierarchy for disclosure of fair value
measurements. The valuation hierarchy is based upon the transparency
of inputs to the valuation of an asset or liability as of the measurement
date. A financial instrument’s categorization within the valuation
hierarchy is based upon the lowest level of input that is significant to the
fair value measurement. The three levels are defined as
follows.
|
·
|
Level
1 – Inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active
markets.
|
|
·
|
Level
2 – Inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
|
·
|
Level
3 – Inputs to the valuation methodology are unobservable and significant
to the fair value measurement.
|
The
following tables presents the financial instruments recorded at fair value by
the Company as of June 30, 2008 and December 31, 2007. There were no
financial instruments with fair value estimates considered to be categorized as
“Level 1” or “Level 3.”
(dollars
in thousands)
|
|
Fair
value measurements at June 30, 2008 using:
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Total
carrying
amount
in
statement
of
financial
condition
as
of 6/30/08
|
|
|
Fair
value
measurement
as
of
6/30/08
|
|
|
Significant
other
observable
inputs
(Level
2)
|
|
Securities
available for sale
|
|
$ |
531,323 |
|
|
|
531,323 |
|
|
|
531,323 |
|
Trading
securities
|
|
|
226,363 |
|
|
|
226,363 |
|
|
|
226,363 |
|
Other
real estate owned
|
|
|
1,647 |
|
|
|
1,647 |
|
|
|
1,647 |
|
(dollars
in thousands)
|
|
Fair
value measurements at December 31, 2007 using:
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Total
carrying
amount
in
statement
of
financial
condition
as
of 12/31/07
|
|
|
Fair
value
measurement
as
of
12/31/07
|
|
|
Significant
other
observable
inputs
(Level
2)
|
|
Securities
available for sale
|
|
$ |
578,892 |
|
|
|
578,892 |
|
|
|
578,892 |
|
Trading
securities
|
|
|
465,151 |
|
|
|
465,151 |
|
|
|
465,151 |
|
Other
real estate owned
|
|
|
293 |
|
|
|
293 |
|
|
|
293 |
|
Assets
available for sale and trading account securities are fair valued utilizing an
independent pricing service for identical assets or significantly similar
securities. The pricing service uses a variety of techniques to
arrive at fair value including market maker bids, quotes and pricing
models. Inputs to the pricing models include recent trades, benchmark
interest rates, spreads and actual and projected cash flows. Other
real estate owned fair value is determined by observable comparable sales and
property valuation techniques. Interest and dividend income is
recorded on the accrual method and included in the income statement in the
respective investment class under total interest income.
|
b)
|
Statements
of Financial Accounting Standards No. 48 “Accounting for Uncertainty in
Income Taxes” as amended by FSB No. 48-1 “Definition of Settlement in FASB
Interpretation No. 48”.
|
TrustCo
adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes” (“FIN 48”) as of January 1,
2007. FIN 48 prescribes a recognitition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken on a tax return. As a result
of the Company’s adoption of FIN 48, there were no required adjustments to the
Company’s consolidated financial statements.
TrustCo
also adopted FASB Staff Position (FSP) No. 48-1 “Definition of Settlement in
FASB Interpretation No. 48 (FSP 48-1)”. FSP 48-1 provides guidance on
how to determine whether a tax position is effectively settled for the purpose
of recognizing previously unrecognized tax benefits. FSP 48-2 was
effective retroactively to January 1, 2007 and did not significantly impact the
Corporation’s financial statements.
In the
second quarter of 2008 the Company settled with the Internal Revenue Service and
New York State in regard to the audit of the Company’s tax
returns. As a result, the Company reversed an accrual of interest
expense of $311 thousand, net of federal taxes, as an element of other expenses
and $371 thousand, net of federal taxes, of previously unrecognized tax benefit
as a decrease to tax expense in the second quarter of 2008. The
settlement amount approximates the Company’s prior estimate.
For the
six month period ended June 30, 2008 the unrecoginized tax benefit and change in
that benefit from the beginning of the year is as follows:
(dollars
in thousands)
|
|
|
|
|
|
|
|
Balance
January 1, 2008
|
|
$ |
4,023 |
|
|
|
|
|
|
Amount
paid to taxing Authorities for the six month period ended June 30,
2008
|
|
|
(2,839 |
) |
|
|
|
|
|
Balance
June 30, 2008
|
|
$ |
1,184 |
|
The
Company does not believe the unrecognized tax benefit will significantly
increase or decrease within the next twelve months. It is reasonably
possible that a reduction in the estimate may occur, however, a quantification
of a reasonable range cannot be determined. Open Federal tax years
are 2006 and 2007, and for New York State the 2007 tax year is
open. During 2008, no interest or penalties were recorded on the
unrecognized tax benefit.
Overview
TrustCo
recorded net income of $8.5 million, or $0.112 of diluted earnings per share for
the three months ended June 30, 2008, as compared to net income of $8.1 million
or $0.108 of diluted earnings per share in the same period in
2007. For the six months ended June 30, 2008 TrustCo recorded net
income of $17.9 million or $0.237 per share compared to $20.4 million of net
income and $0.272 earnings per share in the first six months of
2008.
The
primary factors accounting for the year to date changes were:
|
o
|
Increase
in the average balance of interest earning assets of $161.6 million to
$3.31 billion for the first six months of 2008 compared to the same period
in 2007,
|
|
o
|
Increase
in the average balance of interest bearing liabilities of $144.3 million
to $2.88 billion for the first six months of 2008 as compared to
2007,
|
|
o
|
Decrease
in net interest margin from 3.11% for the first six months of 2007 to
2.97% for the six months of 2008,
|
|
o
|
Increase
in the provision for loan losses from zero for the first six months of
2007 to $1.0 million in the comparable period in
2008,
|
|
o
|
Increase
in noninterest income (excluding net gains on securities transactions and
net trading (losses) / gains) from $8.1 million for the first six months
of 2007 to $8.3 million for the comparable period in
2008. Excluded from noninterest income were $418 thousand of
net gains on securities transactions for the first six months of 2008
compared to $3 thousand for the same period in 2007, and $243 thousand of
net trading losses in the 2008 period compared to $601 thousand of net
gains in the first half of 2007,
and
|
|
o
|
An
increase of $2.7 million in noninterest expense for the first six months
of 2008 as compared to the first six months of
2007.
|
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 effected by a variety of factors including competitive and economic
conditions in the specific markets in which the company operates and more
generally in the national economy, financial market conditions and the
regulatory environment. Each of these is dynamic and changes in any
area can have an impact on TrustCo’s results. Included in the Annual
Report to Shareholders for the year ended December 31, 2007 is a description of
the effect interest rates had on the results for the year 2007 compared to
2006. Many of the same market factors discussed in the 2007 Annual
Report continued to have a significant impact on the quarterly and year to date
2008 results.
TrustCo
competes with other financial service providers based upon many factors
including quality of service, convenience of operations, and rates paid on
deposits and charged on loans. The absolute level of interest rates,
changes in rates and customers’ expectations with respect to the direction of
interest rates have a significant impact on the volume of loan and deposit
originations in any particular period.
One of
the most important interest rates used to control national economic policy is
the “federal funds” rate. The federal funds rate is the interest rate
at which depository institutions lend balances at the Federal Reserve to other
depository institutions. The Federal Reserve began reducing the
targeted federal funds rate beginning in the third quarter of 2007, bringing the
target rate down to 2.00%, compared to 5.25% prior to the first reduction in
September, 2007. These actions, and other economic conditions have
led to a somewhat more positively sloped yield curve, following persistently
flat or mildly inverted curves over the prior couple of years. In an
inverted curve, short term rates are higher than long term rates and in a
positively sloped curve, long term rates are higher than short term
rates. The Federal Reserve has indicated that while it remains
concerned about economic conditions, uncertainty about the outlook for inflation
has increased, and that it “will act as needed to promote sustainable economic
growth and price stability.”
These
changes in interest rates have an effect on the Company relative to the interest
income on loans, securities and federal funds sold as well as on interest
expense on deposits and borrowings. New originations of residential
real estate loans and new purchases of longer-term investments are most affected
by the changes in longer term market interest rates such as the 10 year treasury
rate. 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 the short term
market interest rates. Also, changes in interest rates have an effect
on the recorded balance of the securities available for sale portfolio (with the
offset to accumulated other comprehensive income) and trading portfolio (with
the offset to earnings), which are recorded at fair value. Generally
as interest rates increase the fair value of these securities will
decrease.
The
principal loan product for TrustCo is residential real estate
loans. Interest rates on new residential real estate loan
originations are 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 typically sell loans into the secondary market,
the Company establishes rates that management determines are appropriate in
relation to the long-term nature of a residential real estate loan, while
remaining competitive with the secondary market rates.
TrustCo
has not been directly effected by the mortgage crisis effecting some banks and
financial institutions in the United States in recent months. The
Company utilizes a traditional underwriting process in evaluating loan
applications, and since originated loans are retained in portfolio there is a
strong incentive to be conservative in making credit
decisions. Further, the Company does not rely on borrowed funds to
support its assets and maintains a very significant level of liquidity on the
asset side of the balance sheet.
For the
second quarter of 2008, the net interest margin decreased to 2.88% from 3.07%
for the second quarter of 2007. The quarterly results reflect the
following significant factors:
-
|
The
average balance of securities available for sale, held-to-maturity
securities and trading securities decreased by $46.2 million and the
average yield decreased to 4.66% from 5.40% for the second quarter of 2008
compared to the same period in
2007.
|
-
|
The
average balance of federal funds sold and other short-term investments
increased by $20.0 million and the average yield decreased 303 basis
points to 2.26% in the second quarter of 2008 compared to the same period
in 2007 . The decrease in yield on federal funds sold and other
short-term investments is attributable to the decrease in the target
federal funds rate.
|
-
|
The
average loan portfolio grew by $159.8 million to $1.98 billion and the
average yield decreased 43 basis points to 6.07% in the second quarter of
2008 compared to the same period in 2007. The decline in the
average yield reflects the decline in market interest
rates.
|
-
|
The
average balance of interest bearing liabilities (primarily deposit
accounts) increased $124.4 million and the average rate paid decreased 82
basis points to 2.56% in the first quarter of 2008 compared to the same
period in 2007. The decline In the rate paid on interest
bearing liabilities reflects the decline in market interest
rates.
|
During
the second quarter of 2008 the Company continued to focus on its strategy to
expand the loan portfolio by offering competitive interest rates as the rate
environment changed. The TrustCo residential real estate loan product
is very competitive compared to local and national competitors. The
widespread disruptions in the mortgage market have not had a significant impact
on TrustCo, partly because the Company has not originated the types of loans
that have been responsible for many of the problems causing the
disruptions. The withdrawal of some of the troubled lenders that did
focus on subprime and similar loans has slightly improved competitive conditions
for the type of residential mortgage loans that TrustCo focuses
on. The average balance of federal funds sold and other short-term
investments increased, primarily reflecting the a reduction in the Company’s
trading securities and continued deposit growth. The
reduction in trading securities reflects insufficient premiums over federal
funds for the type of securities that the Company has held in that
portfolio.
The
strategy on the funding side of the balance sheet continues to be to attract
customers to the Company based upon a combination of service, convenience and
interest rate. The Company offered attractive long-term deposit rates
as part of a strategy to lengthen deposit lives. This strategy has
been successful but has also resulted in part of the increase in the deposit
costs. The decline in the fed funds rate and slightly lessened
competitive conditions has led to lower deposit rates offered by most depository
institutions, including TrustCo, during much of the quarter.
Earning
Assets
Total
average interest earning assets increased from $3.22 billion in the second
quarter of 2007 to $3.36 billion in the same period of 2008 with an average
yield of 6.00% in 2007 and 5.10% in 2008. Interest income on average
earning assets declined from $48.3 million in second quarter of 2007
to $42.8 in the second quarter of 2008, on a tax equivalent basis, as the
decline in yields more than offset the growth in average earning
assets.
Loans
The
average balance of loans was $1.98 billion in the first quarter of 2008 and
$1.82 billion in the comparable period in 2007. The yield on loans
decreased 43 basis points to 6.07%. The higher average balances more
than offset the lower yield, leading to a small increase in the interest income
on loans from $29.6 million in the second quarter of 2007 to $30.0 million in
the second quarter of 2008.
Compared
to the second quarter of 2007, the average balance of the loan portfolio during
the second quarter of 2008 increased in residential and commercial loans, but
declined in home equity loans and installment loans, a pattern consistent with
the first quarter of 2008. The average balance of residential
mortgage loans was $1.31 billion in 2007 compared to $1.46 billion in 2008, an
increase of 11.5%. The average yield on residential mortgage loans
decreased by 9 basis points to 6.12% in the second quarter of 2008
compared to 2007.
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. As noted earlier,
market interest rates have changed significantly as a result of national
economic policy in the United States, as well as due to disruptions in the
mortgage market. During this period of changing interest rates
TrustCo aggressively marketed the unique aspects of its loan products thereby
attempting to create a differentiation from other lenders. These
unique aspects include extremely 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 a rise in long-term interest rates, the Company
would anticipate that the unique features of its loan product will continue to
attract customers in the residential mortgage loan area.
Commercial
loans, which consist primarily of loans secured by commercial real estate,
increased 7.3% to an average balance of $291.3 million in the second quarter of
2008 over the prior year. The average yield on this portfolio
decreased 106 basis points to 6.47% over the same period. The decline
in yield reflects the reduction in the federal funds rate and the associated
reduction in the prime rate.
The
average yield on home equity credit lines of credit decreased 169 basis points
to 5.00% during the second quarter of 2008 compared to 2007. The
decline in yield was primarily the result of the decline in the underlying index
rate in step with the decline in the fed funds rate. The average
balances of home equity lines decreased 4.1% to $227.6 million in the second
quarter of 2008 as compared to the prior year.
Securities
Available-for-Sale
As
discussed previously, TrustCo adopted the accounting requirements of SFAS No.
159 and, as a result, reclassified assets from the available-for-sale portfolio
to the trading securities portfolio as of January 1, 2007.
The
average balance of the securities available-for-sale portfolio for the second
quarter of 2008 was $521.8 million compared to $511.8 million for the comparable
period in 2007. The average yield was 5.22% for the second quarter of
2008 and 5.50% for the second quarter of 2007.
Trading
Securities
The
average balance of trading securities for the second quarter of 2008 was $230.6
million, compared to $369.5 million in the comparable period of
2007. As stated, there were no trading securities prior to
2007. The average yield on trading securities was 3.69% for the
second quarter of 2008, compared to 5.26% for the comparable period in
2007. The decline in the average yield was due to the decline in
short term interest rates and the sale of securities in the second quarter of
2007. The securities held as trading securities are generally short
term. All of the securities in this portfolio are bonds issued by
Government Sponsored Enterprises (FNMA, FHLB, and Freddie Mac issued bonds or
municipal bonds). The balances for these bonds are recorded at fair
value.
As of
June 30, 2008 $220.1 million of the total trading portfolio of $226.4 million
was composed of U.S. government sponsored enterprises securities, with the
remaining $6.3 million composed of short-term municipal securities
Held-to-Maturity
Securities
The
average balance of held-to-maturity securities was $82.7 million for the second
quarter of 2008 and the period-end balance was $161.7 million. There
were no held-to-maturity securities in the second quarter of
2007. The average yield was 3.80% for the 2008
period. TrustCo expects to hold the securities in this portfolio
until they mature or are called.
The
securities in this portfolio include bonds issued by Government Sponsored
Enterprises (FNMA, FHLB, and Freddie Mac) as well as corporate
bonds. The balances for these bonds are recorded at amortized
cost.
Securities
Portfolios
The
unrealized loss in the securities portfolios is down primarily due to changes in
interest rates and not the result of increasing credit default
risk. The Company has the ability and intent to hold these securities
until a market recovery, and to maturity if necessary. Consequently
no other-than-temporary impairment charge has been recorded.
Federal
Funds Sold and Other Short-term Investments
The 2008
second quarter average balance of federal funds sold and other short-term
investments was $539.6 million, $20.0 million more than the $519.7 million
average in 2007. The portfolio yield decreased from 5.29% in 2007 to
2.26% in 2008. Changes in the yield resulted from changes in the
target rate set by the Federal Reserve Board for federal funds
sold. Interest income on this portfolio decreased by approximately
$3.8 million from $6.9 million in 2007 to $3.0 million in 2008, as the decline
in yield more than offset the higher average balance.
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 and time deposit accounts.
Total
average interest-bearing deposits (which includes interest bearing checking,
money market accounts, savings, and certificates of deposit) increased from
$2.70 billion during the second quarter of 2007 to $2.83 billion in the second
quarter of 2008, and the average rate paid decreased from 3.35% for 2007 to
2.58% for 2008. Total interest expense on these deposits decreased
$4.4 million to $18.1 million in the first quarter of 2008.
Average
short-term borrowings for the quarter were $93.3 million in 2008 compared to
$96.4 million in 2007. The average rate decreased during this time
period from 4.12% in 2007 to 1.93% in 2008. Rates on short-term
borrowings tend to change with the rates on the target Federal
Funds.
Net
Interest Income
Taxable
equivalent net interest income decreased by $540 thousand to $24.2 million in
the second quarter of 2008 as compared to the same period in
2007. The net interest spread decreased from 2.63% in the second
quarter of 2007 to 2.55% in 2008. The net interest
margin decreased by 19 basis points to 2.88% for the second quarter of
2008.
Taxable
equivalent net interest income increased by $104 thousand to $49.4 million in
the first half of 2008 as compared to the same period in 2007. The
net interest spread decreased from 2.68% in the first half of 2007 to 2.61% in
2008. The net interest margin decreased by 14 basis points to 2.97% for the
first half of 2008.
Nonperforming
Assets
Nonperforming
assets include nonperforming loans which are those loans in a nonaccrual status,
loans that have been restructured in a troubled debt restructuring,
and loans
past due three payments or more and still accruing interest. Also
included in the total of nonperforming assets are foreclosed real estate
properties, which are categorized as real estate owned.
Impaired
loans are considered to be those commercial and commercial real estate loans in
a nonaccrual status and restructured loans. The following describes
the nonperforming assets of TrustCo as of June 30, 2008:
Nonperforming loans: Total nonperforming loans were
$20.5 million at June 30, 2008, an increase from the $18.0 million of
nonperforming loans at March 31, 2008. There were $19.8 million of
nonaccrual loans at June 30, 2008 compared to the $17.3 million at March 31,
2008. Restructured loans were $620 thousand at June 30, 2008 compared
to $629 thousand at March 31, 2008. There were $1 thousand of loans
at June 30, 2008 that were past due 90 days or more and still accruing interest,
compared to $101 thousand at March 31, 2008. As of December 31, 2007,
total nonperforming loans were $12.7 million, including nonaccrual loans of
$12.1 million and restructured loans of $640 thousand. There were $19
thousand of loans that were past due 90 days or more and still accruing interest
at December 31, 2007.
At June
30, 2008, nonperforming loans include a mix of commercial and residential
loans. Of total nonperforming loans of $20.5 million, $15.8 million
were residential real estate loans and $4.6 million were commercial mortgages,
compared to $13.4 million and $4.6 million, respectively as of March 31, 2008
and to $10.6 million and $2.1 million respectively on December 31,
2007.
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 avoids concentrations to any one
borrower or any single industry. TrustCo has no advances to borrowers
or projects located outside the United States. TrustCo has increased
its efforts in regard to the identification and resolution of problem loans,
reflecting the increase in non-performing loans and the overall weakness in
economic conditions.
Management
is aware of no other loans in the Bank’s portfolio that pose significant risk of
the eventual non-collection of principal and interest. Also as of
June 30, 2008, 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 troubled debt restructuring, as impaired
loans. There were $4.6 million of nonaccrual commercial mortgages
classified as impaired as of June 30, 2008 and $4.6 million as of March 31,
2008. There were $620 thousand of impaired retail loans at June 30,
2008, compared to $629 thousand at March 31, 2008. The average
balances of all impaired loans were $1.3 million during 2007 and $5.4 million in
the second quarter of 2008. The Company recognized approximately $19
thousand of interest income on these loans in the second quarter of
2008.
At June
30, 2008 there was $1.6 million of foreclosed real estate as compared to $770
thousand at March 31, 2008.
During
the second quarter of 2008, there were $318 thousand of gross commercial loan
charge offs and $1.4 million of gross residential mortgage and consumer loan
charge-offs as compared with $345 thousand commercial loan charge-offs and $569
thousand of residential mortgage and consumer loan charge-offs in the second
quarter of 2007. For the first six months of 2008 there were $339
thousand of gross commercial loan charge offs and $2.1 million of gross
residential mortgage and consumer loan charge-offs as compared with $555
thousand commercial loan charge-offs and $1.4 million of residential mortgage
and consumer loan charge-offs in the first half of 2007. Gross
recoveries during the second quarter of 2008 were $418 thousand for commercial
loans and $634 thousand for residential mortgage and consumer loans, compared to
$5 thousand for commercial loans and $636 thousand in the second quarter of
2007. Gross recoveries during the first half of 2008 were $452
thousand for commercial loans and $1.1 million for residential mortgage and
consumer loans, compared to $70 thousand for commercial loans and $1.4 million
in the first half of 2007.
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 risk inherent in the loan
portfolio.
At June
30, 2008, the allowance for loan losses was $34.8 million, which represents a
nominal increase from the March 31, 2008 balance. The allowance
represents 1.73% of the loan portfolio as of June 30, 2008 compared to 1.77% at
March 31, 2008. The allowance covered 1.79% of the loan portfolio as
of December 31, 2007. The decline in this ratio compared to prior
periods reflects continued growth in the loan portfolio, the lower inherent risk
of loss for newer loans and the fact that less risky residential loans continue
to constitute most of the non-accrual loans. The provision for loan
losses was $700 thousand for the quarter ended June 30, 2008 compared to zero
for the second quarter in 2007. Net charge-offs for the three-month
period ended June 30, 2008 were $658 thousand compared to net charge-offs of
$273 thousand for the comparable period in 2007. Net charge-offs for
the six-month period ended June 30, 2008 were $884 thousand compared to net
charge-offs of $531 thousand for the comparable period in 2007. The
provision for loan losses was increased on a quarter-to-date and year-to-date
basis primarily due to increased inherent risk of losses in the
portfolio as indicated by increased charge-offs as well as increased
non-performing loans. In deciding on the adequacy of the allowance
for loan losses, management reviews the current nonperforming loan portfolio as
well as loans that are past due and not yet categorized as nonperforming for
reporting purposes. Also, there are a number of other factors that
are taken into consideration, including:
|
o
|
The
magnitude and nature of the recent loan charge offs and
recoveries,
|
|
o
|
The
growth in the loan portfolio and the implication that has in relation to
the economic climate in the bank’s business territory,
and
|
|
o
|
The
economic environment in the Company’s market territories over the last two
years.
|
Management
continues to monitor these factors in determining future provisions or credits
for loan losses in relation to the economic environment, loan charge-offs,
recoveries and the level and trends of nonperforming loans.
Liquidity
and Interest Rate Sensitivity
TrustCo
seeks to obtain favorable sources of funding and to maintain prudent levels of
liquid assets in order to satisfy varied liquidity demands. TrustCo’s
earnings performance and strong capital position enable the Company to raise
funds easily in the marketplace and to secure new sources of
funding. The Company actively manages its liquidity
through target ratios established under its liquidity
policies. Continual monitoring of both historical and prospective
ratios allows TrustCo to employ strategies necessary to maintain adequate
liquidity. Management has also defined various degrees of adverse
liquidity situations, which could potentially occur, and has prepared
appropriate
contingency plans should such a situation arise.
Noninterest
Income
Total
noninterest income for the second quarter was $3.9 million, compared to $1.1
million in 2007. The increase of $2.8 million was primarily due to
lower trading losses and higher net gains on securities
transactions. For the first half of 2008 total noninterest income was
$8.5 million compared to $8.7 million in the comparable period of
2007. The decline was primarily due to lower trading losses and
higher net gains on securities transactions and relatively modest reductions in
several categories of other income.
Trust
department income decreased 6.3% to $1.4 million for the second quarter of 2008
compared to the second quarter of 2007. Trust department assets under management
were $855 million at June 30, 2008 compared to $914 million at December 31,
2007. The decline in trust assets was due primarily to declines in
equity market valuations. For the six months ended June 30, 2008,
trust income was $2.8 million, down $50 thousand from the prior
year.
Fees for
other services to customers plus other income increased by 8.5% to $2.8 million
between the second quarter of 2007 and the comparable period in
2008. The increase is the result of changes in fee policies as well
as fees being charged on a larger customer base. For the first half
of 2008 these revenue lines were $5.5 million, up 5.1% compared to the prior
year.
The
Company recognized $960 thousand of net trading losses in the second quarter
of 2008, compared to net trading losses of $2.8 million in the same
period in 2007. A net gain of $784 thousand was reported in the
second quarter 2008 related to net securities transactions on securities
available for sale, compared to a nominal gain of $3 thousand a year
ago. In total, the net of gains and losses in the second quarter of
2008 in the available for sale and trading portfolios, relative to the same
period in 2007, resulted in an improvement of $2.7 million in non-interest
income. For the first six months of 2008, trading losses of $243
thousand were recorded, compared to net trading gains of $601 thousand in 2007
and net securities gains of $418 thousand were recorded in 2008 compared to $3
thousand in 2007.
Noninterest
Expenses
Total
noninterest expense increased from $13.5 million for the three months ended June
31, 2007 to $14.3 million for the three months ended June 30, 2008, with
increases in each major expense category except “other”
expense. Salaries and employee benefits increased $624 thousand to
$5.5 million for 2008. Higher salaries and benefits are primarily due
to increased staffing related to the branch expansion initiative and the impact
of extended service hours. Net occupancy expense increased $625
thousand to $3.0 million during the second quarter of 2008. The
increase is the result of new branch opening costs and the increased cost of
utilities and taxes on branch locations. Equipment expense increased
by $167 thousand to $1.0 million, also reflecting new offices and general
growth. Professional services and outsourced services were up
modestly and a decline in other expenses partly offset overall cost
increases.
Total
noninterest expense increased from $26.2 million for the six months ended June
30, 2007 to $28.9 million for the six months ended June 30, 2008, with increases
in each major expense category except other. Salaries and employee
benefits increased $1.4 million to $11.2 million for 2008. Higher
salaries and benefits are primarily due to increased staffing related to the
branch expansion initiative and the impact of extended service
hours. Net occupancy expense increased $1.2 million to $6.0 million
during the first half of 2008. The increase is the result of new
branch lease costs and the increased cost of utilities and taxes on branch
locations. Other expense categories reflected trends for the first
half of 2008 that were similar to the second quarter of 2008.
Income
Taxes
In the
second quarter of 2008, TrustCo recognized income tax expense of $3.9 million as
compared to $3.6 million for the same period in 2007. The effective
tax rates were 31.5% and 30.5% for the second quarters of 2008 and 2007,
respectively. For the six months ended June 30, 2008 $8.5 million of
income tax expense was recorded compared to $9.8 million recorded for the same
period in 2007. The effective tax rates were 32.3% and 32.5% for the
six months ended June 30, 2008 and 2007, respectively. The tax
expense on the Company’s income was different than tax expense at the statutory
rate of 35%, due primarily to tax exempt income and the effect of state income
taxes.
Capital
Resources
Consistent
with its long-term goal of operating a sound and profitable financial
organization, TrustCo strives to maintain strong capital ratios. New
issues of equity securities have not been required since traditionally, most of
its capital requirements are met through capital retention.
Total
shareholders’ equity at June 30, 2008 was $239.5 million, compared to $237.1
million at year-end 2007. TrustCo declared a dividend of $0.110 per share in the
first quarter of 2008. This results in a dividend payout ratio of
88.2% based on second quarter 2008 earnings per share of $0.112.
The
Company achieved the following ratios as of June 30, 2008 and 2007:
|
|
June
30,
|
|
|
Minimum
Regulatory
|
|
|
|
2008
|
|
|
2007
|
|
|
Guidelines
|
|
Tier
1 risk adjusted capital
|
|
|
12.59 |
% |
|
|
13.29 |
% |
|
|
4.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
risk adjusted capital
|
|
|
13.84 |
% |
|
|
14.55 |
% |
|
|
8.00 |
% |
In
addition, at June 30, 2008 and 2007, the consolidated equity to total assets
ratio (excluding the mark to market effect of securities available for sale) was
6.73% and 6.87%, respectively, compared to a minimum regulatory requirement of
4.00%.
The
decrease in capital ratios reflects growth in the overall consolidated balance
sheet.
Critical
Accounting Policies:
Pursuant
to SEC guidance, management of the Company is encouraged to evaluate and
disclose those accounting policies that are 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
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 2007 Annual Report on Form 10-K is a description of
the significant accounting policies that are utilized by the Company in the
preparation of the Consolidated Financial Statements.
The
Company considers the adoption of SFAS No. 157 and 159 and the resulting fair
value accounting requirements to be considered critical accounting policies
which effect the Company’s financial position and results of
operations. See Footnote 4 “Adoption of New Accounting
Pronouncements” for a description of the Company’s implementation.
TrustCo
Bank Corp NY
Management's
Discussion and Analysis
STATISTICAL
DISCLOSURE
I.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST
RATES AND INTEREST DIFFERENTIAL
The
following table summarizes the component distribution of average balance sheet,
related interest income and expense and the average annualized yields on
interest earning assets and annualized rates on interest bearing liabilities of
TrustCo (adjusted for tax equivalency) for each of the reported periods.
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. The average balance of trading
securities is calculated using fair value for these securities. Included in the
average balance of shareholders' equity is unrealized depreciation, net of tax,
in the available for sale portfolio of $1.4 million in 2008 and $5.4 million in
2007. 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.
|
|
Three
|
|
|
2008
|
|
|
|
|
|
Three
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month
|
|
|
|
|
|
|
|
|
Month
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
Average
|
|
|
Average
|
|
|
Interest
|
|
|
Average
|
|
|
Change
in
|
|
|
Variance
|
|
|
Variance
|
|
(dollars
in thousands)
|
|
Balance
|
|
|
|
|
|
Rate
|
|
|
Balance
|
|
|
|
|
|
Rate
|
|
|
Interest
|
|
|
Balance
|
|
|
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/
|
|
|
Change
|
|
|
Change
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasuries
|
|
$ |
1,650 |
|
|
|
26 |
|
|
|
6.26
|
% |
|
$ |
247 |
|
|
|
3 |
|
|
|
4.95
|
% |
|
$ |
23 |
|
|
|
22 |
|
|
|
1 |
|
U.
S. Gov't Sponsored Enterprises
|
|
|
239,138 |
|
|
|
2,845 |
|
|
|
4.76
|
% |
|
|
206,385 |
|
|
|
2,751 |
|
|
|
5.33
|
% |
|
|
94 |
|
|
|
1,462 |
|
|
|
(1,368 |
) |
Mortgage-backed
securities and collateralized mortgage obligations
|
|
|
149,392 |
|
|
|
1,738 |
|
|
|
4.65
|
% |
|
|
163,979 |
|
|
|
1,916 |
|
|
|
4.67
|
% |
|
|
(178 |
) |
|
|
(170 |
) |
|
|
(8 |
) |
States
and political subdivisions
|
|
|
120,168 |
|
|
|
2,032 |
|
|
|
6.76
|
% |
|
|
128,145 |
|
|
|
2,182 |
|
|
|
6.81
|
% |
|
|
(150 |
) |
|
|
(134 |
) |
|
|
(16 |
) |
Other
|
|
|
11,480 |
|
|
|
173 |
|
|
|
6.04
|
% |
|
|
13,023 |
|
|
|
190 |
|
|
|
5.84
|
% |
|
|
(17 |
) |
|
|
(54 |
) |
|
|
37 |
|
Total
securities available for sale
|
|
|
521,828 |
|
|
|
6,814 |
|
|
|
5.22
|
% |
|
|
511,779 |
|
|
|
7,042 |
|
|
|
5.50
|
% |
|
|
(228 |
) |
|
|
1,126 |
|
|
|
(1,354 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
funds sold and other short-term Investments
|
|
|
539,625 |
|
|
|
3,037 |
|
|
|
2.26
|
% |
|
|
519,651 |
|
|
|
6,856 |
|
|
|
5.29
|
% |
|
|
(3,819 |
) |
|
|
1,740 |
|
|
|
(5,559 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Securities Agency
|
|
|
221,058 |
|
|
|
2,053 |
|
|
|
3.72
|
% |
|
|
369,540 |
|
|
|
4,847 |
|
|
|
5.26
|
% |
|
|
(2,794 |
) |
|
|
(1,616 |
) |
|
|
(1,178 |
) |
Trading
Securities SCM
|
|
|
9,552 |
|
|
|
73 |
|
|
|
3.08
|
% |
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
73 |
|
|
|
73 |
|
|
|
- |
|
Total
Trading Securities
|
|
|
230,610 |
|
|
|
2,126 |
|
|
|
3.69
|
% |
|
|
369,540 |
|
|
|
4,847 |
|
|
|
5.26 |
|
|
|
(2,721 |
) |
|
|
(1,543 |
) |
|
|
(1,178 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held
to Maturity Agencies
|
|
|
59,007 |
|
|
|
508 |
|
|
|
3.44
|
% |
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
508 |
|
|
|
508 |
|
|
|
- |
|
Held
to Maturity Corp. Bonds
|
|
|
23,716 |
|
|
|
277 |
|
|
|
4.68
|
% |
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
277 |
|
|
|
277 |
|
|
|
- |
|
Total
Held to Maturities
|
|
|
82,723 |
|
|
|
785 |
|
|
|
3.80
|
% |
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
785 |
|
|
|
785 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Loans
|
|
|
291,327 |
|
|
|
4,711 |
|
|
|
6.47
|
% |
|
|
271,618 |
|
|
|
5,113 |
|
|
|
7.53
|
% |
|
|
(402 |
) |
|
|
1,822 |
|
|
|
(2,224 |
) |
Residential
mortgage loans
|
|
|
1,456,714 |
|
|
|
22,300 |
|
|
|
6.12
|
% |
|
|
1,306,371 |
|
|
|
20,293 |
|
|
|
6.21
|
% |
|
|
2,007 |
|
|
|
3,871 |
|
|
|
(1,864 |
) |
Home
equity lines of credit
|
|
|
227,585 |
|
|
|
2,829 |
|
|
|
5.00
|
% |
|
|
237,337 |
|
|
|
3,960 |
|
|
|
6.69
|
% |
|
|
(1,131 |
) |
|
|
(158 |
) |
|
|
(973 |
) |
Installment
loans
|
|
|
5,232 |
|
|
|
194 |
|
|
|
14.90
|
% |
|
|
5,699 |
|
|
|
207 |
|
|
|
14.61
|
% |
|
|
(13 |
) |
|
|
(37 |
) |
|
|
24 |
|
Loans,
net of unearned income
|
|
|
1,980,858 |
|
|
|
30,034 |
|
|
|
6.07
|
% |
|
|
1,821,025 |
|
|
|
29,573 |
|
|
|
6.50
|
% |
|
|
461 |
|
|
|
5,498 |
|
|
|
(5,037 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest earning assets
|
|
|
3,355,644 |
|
|
|
42,796 |
|
|
|
5.10
|
% |
|
|
3,221,995 |
|
|
|
48,318 |
|
|
|
6.00
|
% |
|
|
(5,522 |
) |
|
|
7,606 |
|
|
|
(13,128 |
) |
Allowance
for loan losses
|
|
|
(34,609 |
) |
|
|
|
|
|
|
|
|
|
|
(35,229 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
& non-interest earning assets
|
|
|
125,101 |
|
|
|
|
|
|
|
|
|
|
|
123,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
3,446,136 |
|
|
|
|
|
|
|
|
|
|
$ |
3,310,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Bearing Checking Accounts
|
|
$ |
293,566 |
|
|
|
172 |
|
|
|
0.24
|
% |
|
$ |
282,670 |
|
|
|
213 |
|
|
|
0.30
|
% |
|
|
(41 |
) |
|
|
48 |
|
|
|
(89 |
) |
Money
market accounts
|
|
|
318,178 |
|
|
|
1,292 |
|
|
|
1.63
|
% |
|
|
331,303 |
|
|
|
3,411 |
|
|
|
4.13
|
% |
|
|
(2,119 |
) |
|
|
(130 |
) |
|
|
(1,989 |
) |
Savings
|
|
|
618,301 |
|
|
|
923 |
|
|
|
0.60
|
% |
|
|
652,324 |
|
|
|
2,398 |
|
|
|
1.47
|
% |
|
|
(1,475 |
) |
|
|
(119 |
) |
|
|
(1,356 |
) |
Time
deposits
|
|
|
1,599,328 |
|
|
|
15,749 |
|
|
|
3.96
|
% |
|
|
1,435,504 |
|
|
|
16,555 |
|
|
|
4.63
|
% |
|
|
(806 |
) |
|
|
8,126 |
|
|
|
(8,932 |
) |
Total
interest bearing deposits
|
|
|
2,829,373 |
|
|
|
18,136 |
|
|
|
2.58
|
% |
|
|
2,701,801 |
|
|
|
22,577 |
|
|
|
3.35
|
% |
|
|
(4,441 |
) |
|
|
7,925 |
|
|
|
(12,366 |
) |
Short-term
borrowings
|
|
|
93,315 |
|
|
|
448 |
|
|
|
1.93
|
% |
|
|
96,417 |
|
|
|
989 |
|
|
|
4.12
|
% |
|
|
(541 |
) |
|
|
(31 |
) |
|
|
(510 |
) |
Long-term
debt
|
|
|
16 |
|
|
|
- |
|
|
|
5.25
|
% |
|
|
46 |
|
|
|
- |
|
|
|
5.24
|
% |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total
Interest Bearing Liabilities
|
|
|
2,922,704 |
|
|
|
18,584 |
|
|
|
2.56
|
% |
|
|
2,798,264 |
|
|
|
23,566 |
|
|
|
3.38
|
% |
|
|
(4,982 |
) |
|
|
7,894 |
|
|
|
(12,876 |
) |
Demand
deposits
|
|
|
262,928 |
|
|
|
|
|
|
|
|
|
|
|
254,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
21,262 |
|
|
|
|
|
|
|
|
|
|
|
23,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
239,242 |
|
|
|
|
|
|
|
|
|
|
|
233,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liab. & shareholders' equity
|
|
$ |
3,446,136 |
|
|
|
|
|
|
|
|
|
|
$ |
3,310,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income , tax equivalent
|
|
|
|
|
|
|
24,212 |
|
|
|
|
|
|
|
|
|
|
|
24,752 |
|
|
|
|
|
|
$ |
(540 |
) |
|
|
(288 |
) |
|
|
(252 |
) |
Net
Interest Spread
|
|
|
|
|
|
|
|
|
|
|
2.55
|
% |
|
|
|
|
|
|
|
|
|
|
2.63
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest margin (net interest income to total interest earning
assets)
|
|
|
|
|
|
|
|
|
|
|
2.88
|
% |
|
|
|
|
|
|
|
|
|
|
3.07
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
equivalent adjustment
|
|
|
|
|
|
|
(739 |
) |
|
|
|
|
|
|
|
|
|
|
(770 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income
|
|
|
|
|
|
$ |
23,473 |
|
|
|
|
|
|
|
|
|
|
$ |
23,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TrustCo
Bank Corp NY
Management's
Discussion and Analysis
STATISTICAL
DISCLOSURE
I.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST
RATES AND INTEREST DIFFERENTIAL
The
following table summarizes the component distribution of average balance sheet,
related interest income and expense and the average annualized yields on
interest earning assets and annualized rates on interest bearing liabilities of
TrustCo (adjusted for tax equivalency) for each of the reported periods.
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. The average balance of trading
securities is calculated using fair value for these securities. Included in the
average balance of shareholders' equity is unrealized depreciation, net of tax,
in the available for sale portfolio of $294 thousand in 2008 and $7.0 million in
2007. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
|
|
|
2008
|
|
|
|
|
|
Six
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month
|
|
|
|
|
|
|
|
|
Month
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Change
in
Interest
Income/
Expense
|
|
|
Variance
Balance
Change
|
|
|
Variance
Rate
Change
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasuries
|
|
$ |
1,498 |
|
|
|
35 |
|
|
|
4.62
|
% |
|
$ |
455 |
|
|
|
11 |
|
|
|
4.71
|
% |
|
$ |
24 |
|
|
|
25 |
|
|
|
(1 |
) |
U.
S. Gov't Sponsored Enterprises
|
|
|
240,160 |
|
|
|
6,091 |
|
|
|
5.07
|
% |
|
|
211,958 |
|
|
|
5,599 |
|
|
|
5.28
|
% |
|
|
492 |
|
|
|
1,064 |
|
|
|
(572 |
) |
Mortgage-backed
securities and collateralized mortgage obligations
|
|
|
151,171 |
|
|
|
3,510 |
|
|
|
4.64
|
% |
|
|
166,087 |
|
|
|
3,880 |
|
|
|
4.67
|
% |
|
|
(370 |
) |
|
|
(345 |
) |
|
|
(25 |
) |
States
and political subdivisions
|
|
|
122,573 |
|
|
|
4,154 |
|
|
|
6.78
|
% |
|
|
128,761 |
|
|
|
4,386 |
|
|
|
6.81
|
% |
|
|
(232 |
) |
|
|
(213 |
) |
|
|
(19 |
) |
Other
|
|
|
11,523 |
|
|
|
365 |
|
|
|
6.36
|
% |
|
|
12,825 |
|
|
|
350 |
|
|
|
5.48
|
% |
|
|
15 |
|
|
|
(82 |
) |
|
|
97 |
|
Total
securities available for sale
|
|
|
526,925 |
|
|
|
14,155 |
|
|
|
5.37
|
% |
|
|
520,086 |
|
|
|
14,226 |
|
|
|
5.47
|
% |
|
|
(71 |
) |
|
|
449 |
|
|
|
(520 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
funds sold and other short-term Investments
|
|
|
442,089 |
|
|
|
6,018 |
|
|
|
2.73
|
% |
|
|
393,555 |
|
|
|
10,295 |
|
|
|
5.26
|
% |
|
|
(4,277 |
) |
|
|
3,191 |
|
|
|
(7,468 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Securities Agency
|
|
|
323,498 |
|
|
|
6,773 |
|
|
|
4.19
|
% |
|
|
435,545 |
|
|
|
11,650 |
|
|
|
5.35
|
% |
|
|
(4,877 |
) |
|
|
(2,646 |
) |
|
|
(2,231 |
) |
Trading
Securities SCM
|
|
|
5,631 |
|
|
|
87 |
|
|
|
3.09
|
% |
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
87 |
|
|
|
87 |
|
|
|
- |
|
Total
Trading Securities
|
|
|
329,129 |
|
|
|
6,860 |
|
|
|
4.17
|
% |
|
|
435,545 |
|
|
|
11,650 |
|
|
|
5.35
|
% |
|
|
(4,790 |
) |
|
|
(2,559 |
) |
|
|
(2,231 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held
to Maturity Agencies
|
|
|
37,003 |
|
|
|
733 |
|
|
|
3.96
|
% |
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
733 |
|
|
|
733 |
|
|
|
- |
|
Held
to Maturity Corp. Bonds
|
|
|
11,858 |
|
|
|
277 |
|
|
|
4.68
|
% |
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
277 |
|
|
|
277 |
|
|
|
- |
|
Total
Held to Maturities
|
|
|
48,861 |
|
|
|
1,010 |
|
|
|
4.13
|
% |
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
1,010 |
|
|
|
1,010 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Loans
|
|
|
287,634 |
|
|
|
9,658 |
|
|
|
6.72
|
% |
|
|
269,029 |
|
|
|
10,135 |
|
|
|
7.54
|
% |
|
|
(477 |
) |
|
|
1,530 |
|
|
|
(2,007 |
) |
Residential
mortgage loans
|
|
|
1,443,862 |
|
|
|
44,471 |
|
|
|
6.16
|
% |
|
|
1,286,135 |
|
|
|
39,978 |
|
|
|
6.22
|
% |
|
|
4,493 |
|
|
|
5,596 |
|
|
|
(1,103 |
) |
Home
equity lines of credit
|
|
|
228,173 |
|
|
|
6,292 |
|
|
|
5.55
|
% |
|
|
240,488 |
|
|
|
7,697 |
|
|
|
6.45
|
% |
|
|
(1,405 |
) |
|
|
(377 |
) |
|
|
(1,028 |
) |
Installment
loans
|
|
|
5,391 |
|
|
|
403 |
|
|
|
15.00
|
% |
|
|
5,636 |
|
|
|
403 |
|
|
|
14.43
|
% |
|
|
- |
|
|
|
(34 |
) |
|
|
34 |
|
Loans,
net of unearned income
|
|
|
1,965,060 |
|
|
|
60,824 |
|
|
|
6.19
|
% |
|
|
1,801,288 |
|
|
|
58,213 |
|
|
|
6.47
|
% |
|
|
2,611 |
|
|
|
6,715 |
|
|
|
(4,104 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest earning assets
|
|
|
3,312,064 |
|
|
|
88,867 |
|
|
|
5.37
|
% |
|
|
3,150,474 |
|
|
|
94,384 |
|
|
|
6.00
|
% |
|
|
(5,517 |
) |
|
|
8,806 |
|
|
|
(14,323 |
) |
Allowance
for loan losses
|
|
|
(34,602 |
) |
|
|
|
|
|
|
|
|
|
|
(35,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
& non-interest earning assets
|
|
|
124,217 |
|
|
|
|
|
|
|
|
|
|
|
130,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
3,401,679 |
|
|
|
|
|
|
|
|
|
|
$ |
3,245,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Bearing Checking Accounts
|
|
$ |
287,048 |
|
|
|
376 |
|
|
|
0.26
|
% |
|
$ |
280,443 |
|
|
|
415 |
|
|
|
0.30
|
% |
|
|
(39 |
) |
|
|
28 |
|
|
|
(67 |
) |
Money
market accounts
|
|
|
326,494 |
|
|
|
3,373 |
|
|
|
2.08
|
% |
|
|
327,797 |
|
|
|
6,715 |
|
|
|
4.13
|
% |
|
|
(3,342 |
) |
|
|
(27 |
) |
|
|
(3,315 |
) |
Savings
|
|
|
612,533 |
|
|
|
2,266 |
|
|
|
0.74
|
% |
|
|
654,255 |
|
|
|
4,821 |
|
|
|
1.49
|
% |
|
|
(2,555 |
) |
|
|
(287 |
) |
|
|
(2,268 |
) |
Time
deposits
|
|
|
1,562,903 |
|
|
|
32,465 |
|
|
|
4.18
|
% |
|
|
1,377,866 |
|
|
|
31,192 |
|
|
|
4.57
|
% |
|
|
1,273 |
|
|
|
7,350 |
|
|
|
(6,077 |
) |
Total
interest bearing deposits
|
|
|
2,788,978 |
|
|
|
38,480 |
|
|
|
2.77
|
% |
|
|
2,640,361 |
|
|
|
43,143 |
|
|
|
3.30
|
% |
|
|
(4,663 |
) |
|
|
7,064 |
|
|
|
(11,727 |
) |
Short-term
borrowings
|
|
|
92,870 |
|
|
|
1,024 |
|
|
|
2.22
|
% |
|
|
97,146 |
|
|
|
1,982 |
|
|
|
4.11
|
% |
|
|
(958 |
) |
|
|
(84 |
) |
|
|
(874 |
) |
Long-term
debt
|
|
|
20 |
|
|
|
1 |
|
|
|
5.25
|
% |
|
|
50 |
|
|
|
1 |
|
|
|
5.27
|
% |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total
Interest Bearing Liabilities
|
|
|
2,881,868 |
|
|
|
39,505 |
|
|
|
2.76
|
% |
|
|
2,737,557 |
|
|
|
45,126 |
|
|
|
3.32
|
% |
|
|
(5,621 |
) |
|
|
6,980 |
|
|
|
(12,601 |
) |
Demand
deposits
|
|
|
259,837 |
|
|
|
|
|
|
|
|
|
|
|
249,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
21,455 |
|
|
|
|
|
|
|
|
|
|
|
23,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
238,519 |
|
|
|
|
|
|
|
|
|
|
|
234,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liab. & shareholders' equity
|
|
$ |
3,401,679 |
|
|
|
|
|
|
|
|
|
|
$ |
3,245,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income , tax equivalent
|
|
|
|
|
|
|
49,362 |
|
|
|
|
|
|
|
|
|
|
|
49,258 |
|
|
|
|
|
|
$ |
104 |
|
|
|
1,826 |
|
|
|
(1,722 |
) |
Net
Interest Spread
|
|
|
|
|
|
|
|
|
|
|
2.61
|
% |
|
|
|
|
|
|
|
|
|
|
2.68
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest margin (net interest income to total interest earning
assets)
|
|
|
|
|
|
|
|
|
|
|
2.97
|
% |
|
|
|
|
|
|
|
|
|
|
3.11
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
equivalent adjustment
|
|
|
|
|
|
|
(1,491 |
) |
|
|
|
|
|
|
|
|
|
|
(1,555 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income
|
|
|
|
|
|
$ |
47,871 |
|
|
|
|
|
|
|
|
|
|
$ |
47,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantitative
and Qualitative Disclosures about Market Risk
As
detailed in the Annual Report to Shareholders as of December 31, 2007 the
Company is subject to interest rate risk as its principal market
risk. As noted in detail throughout this Management’s Discussion and
Analysis for the three and six months ended June 30, 2008, the Company continues
to respond to changes in interest rates in a fashion to position the Company to
meet both short term earning goals but to also allow the Company to respond to
changes in interest rates in the future. Consequently the
year-to-date average balance of federal funds sold and other short-term
investments has increased to $442.1 million in 2008 from $373.0 million in
2007. As investment opportunities present themselves, management
plans to continue to invest funds from the federal funds sold and other
short-term investment portfolio into the trading securities, securities
available for sale, held-to-maturity and loan portfolios. This trend
is expected to continue for the remainder of the year.
The
Company had $226.4 million of trading account assets at June 30, 2008 and $465.2
million as of December 31, 2007. These trading account assets have
been recorded at their fair value as determined by quoted market prices from a
third party pricing service. The trading account securities at June
30, 2008 were substantially all fixed rate callable bonds issued by Government
Sponsored Enterprises with a final average maturity of approximately 7 months
and weighted average yield of 2.57%. Changes in market interest rates
could affect the fair value of this portfolio and net trading gains and losses
recorded in periodic earnings results.
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
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.
There are
no material changes to the Company’s risk factors as discussed in The Annual
Report on Form 10K for the year ended December 31, 2007.
Item
2.
|
Unregistered Sales of Equity Securities and Use of
Proceeds
|
None.
Item
3.
|
Defaults Upon Senior
Securities
|
None.
Item
4.
|
Submissions of Matters to Vote of Security
Holders
|
At the
annual meeting held May 19, 2008, shareholders of the Company were asked to
consider the Company’s nominees for directors and to elect two (2)
directors. The Company’s nominees for director were Anthony J.
Marinello, M.D., Ph.D. (three-year term) and William D. Powers (three-year
term).
The
results of shareholder voting are as follows:
1.
|
Election
of Directors:
|
Director
|
|
For
|
|
|
Withheld
|
|
Anthony
J. Marinello, M.D., Ph.D
|
|
|
57,652,861 |
|
|
|
4,127,598 |
|
William
D. Powers
|
|
|
54,057,779 |
|
|
|
7,722,680 |
|
Directors
continuing in office are Thomas O. Maggs, Joseph A. Lucarelli, Robert A.
McCormick, Robert J. McCormick and William J. Purdy.
2.
|
Proposal
to ratify the appointment of KPMG LLP as the independent
certified
|
public
accountants of TrustCo for the fiscal year ending December 31,
2008.
For
|
|
Against
|
|
|
Abstain
|
|
59,339,729
|
|
|
2,060,463 |
|
|
|
380,260 |
|
None.
Item
6.
|
Exhibits and Reports on Form
8-K
|
(a)
Exhibits Reg S-K (Item 601) Exhibit
No.
|
Description
|
|
|
15
|
KPMG
LLP Letter Regarding Unaudited Interim Financial
Information
|
|
|
31(a)
|
Rule
13a-15(e)/15d-15(e) Certification of Robert J. McCormick, principal
executive officer.
|
|
|
31(b)
|
Rule
13a-15(e)/15d-15(e) Certification of Robert T. Cushing, principal
financial officer.
|
|
|
32
|
Section
1350 Certifications of Robert J. McCormick, principal executive officer
and Robert T. Cushing, principal financial
officer.
|
During
the quarter ended June 30, 2008, TrustCo filed the following reports on Form
8-K:
April 15,
2008, regarding a press release dated April 15, 2008, detailing first quarter
results for the quarter ending March 31, 2008.
May 19,
2008, regarding presentation materials presented at the Annual Meeting of
Shareholders held May 19, 2008.
May 20,
2008, regarding a press release dated May 20, 2008, announcing results of the
Annual Meeting held May 19, 2008 and declaring a cash dividend of $0.11 per
share payable on July 1, 2008, to shareholders of record at the close of
business on June 6, 2008.
June 17,
2008, regarding a shareholder letter issued May 22, 2008 discussing the annual
meeting held on May 19, 2008.
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
|
|
President and
Chief Executive Officer
|
|
|
|
|
|
By: /s/Robert T.
Cushing
|
|
|
Robert
T. Cushing
|
|
Executive
Vice President and Chief Financial
Officer
|
Date: August
8, 2008
Exhibits
Index
Reg
S-K Exhibit No.
|
Description
|
|
|
|
KPMG
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 Robert T. Cushing, principal
financial officer.
|
|
|
|
Section
1350 Certifications of Robert J. McCormick, principal executive officer and Robert T.
Cushing, principal financial
officer.
|