form10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended
|
Commission
File Number 0-10592
|
September
30, 2009
|
|
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.
Common
Stock
|
|
|
Number
of Shares Outstanding as of October 30, 2009
|
|
$1
Par Value
|
|
|
|
76,651,429 |
|
TrustCo
Bank Corp NY
Part I.
|
|
FINANCIAL INFORMATION
|
|
PAGE NO.
|
Item
1.
|
|
Consolidated
Interim Financial Statements (Unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
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|
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|
4
|
|
|
|
|
|
|
|
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|
5 –
6
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7
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8 –
18
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19
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|
Item
2.
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|
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|
20
- 34
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|
Item
3.
|
|
|
|
35
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|
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|
|
|
Item
4.
|
|
|
|
35
|
|
|
|
|
|
Part
II.
|
|
OTHER
INFORMATION
|
|
|
|
|
|
|
|
Item
1.
|
|
|
|
36
|
|
|
|
|
|
Item
1A.
|
|
|
|
36
|
|
|
|
|
|
Item
2.
|
|
|
|
36
|
|
|
|
|
|
Item
3.
|
|
|
|
36
|
|
|
|
|
|
Item
4.
|
|
|
|
36
|
|
|
|
|
|
Item
5.
|
|
|
|
36
|
|
|
|
|
|
Item
6.
|
|
|
|
36
|
Consolidated
Statements of Income (Unaudited)
(dollars
in thousands, except per share data)
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and fees on loans
|
|
$ |
31,184 |
|
|
|
31,066 |
|
|
|
93,469 |
|
|
|
91,880 |
|
Interest
and dividends on securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.
S. treasuries and government sponsored enterprises
|
|
|
2,314 |
|
|
|
3,344 |
|
|
|
4,951 |
|
|
|
9,470 |
|
States
and political subdivisions
|
|
|
1,073 |
|
|
|
1,127 |
|
|
|
3,278 |
|
|
|
3,858 |
|
Mortgage-backed
securities and collateralized mortgage obligations
|
|
|
1,464 |
|
|
|
1,700 |
|
|
|
4,626 |
|
|
|
5,210 |
|
Other
securities
|
|
|
302 |
|
|
|
82 |
|
|
|
446 |
|
|
|
419 |
|
Total
interest and dividends on securities available for sale
|
|
|
5,153 |
|
|
|
6,253 |
|
|
|
13,301 |
|
|
|
18,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.
S. government sponsored enterprises
|
|
|
- |
|
|
|
1,394 |
|
|
|
405 |
|
|
|
8,167 |
|
States
and political subdivisions
|
|
|
7 |
|
|
|
15 |
|
|
|
23 |
|
|
|
72 |
|
Total
interest on trading securities
|
|
|
7 |
|
|
|
1,409 |
|
|
|
428 |
|
|
|
8,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on held to maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.
S. government sponsored enterprises
|
|
|
1,614 |
|
|
|
840 |
|
|
|
5,460 |
|
|
|
1,573 |
|
Mortgage-backed
securities and collateralized mortgage obligations
|
|
|
1,781 |
|
|
|
486 |
|
|
|
3,391 |
|
|
|
763 |
|
Corporate
bonds
|
|
|
842 |
|
|
|
- |
|
|
|
2,239 |
|
|
|
- |
|
Total
interest on held to maturity securities
|
|
|
4,237 |
|
|
|
1,326 |
|
|
|
11,090 |
|
|
|
2,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on federal funds sold and other short term investments
|
|
|
565 |
|
|
|
1,999 |
|
|
|
1,705 |
|
|
|
8,017 |
|
Total
interest income
|
|
|
41,146 |
|
|
|
42,053 |
|
|
|
119,993 |
|
|
|
129,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
checking
|
|
|
158 |
|
|
|
187 |
|
|
|
531 |
|
|
|
563 |
|
Savings
|
|
|
774 |
|
|
|
883 |
|
|
|
2,275 |
|
|
|
3,149 |
|
Money
market deposit accounts
|
|
|
1,096 |
|
|
|
1,296 |
|
|
|
3,156 |
|
|
|
4,669 |
|
Time
deposits
|
|
|
9,159 |
|
|
|
14,505 |
|
|
|
31,564 |
|
|
|
46,970 |
|
Interest
on short-term borrowings
|
|
|
422 |
|
|
|
483 |
|
|
|
1,227 |
|
|
|
1,507 |
|
Interest
on long-term debt
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
Total
interest expense
|
|
|
11,609 |
|
|
|
17,354 |
|
|
|
38,753 |
|
|
|
56,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
29,537 |
|
|
|
24,699 |
|
|
|
81,240 |
|
|
|
72,570 |
|
Provision
for loan losses
|
|
|
3,150 |
|
|
|
1,000 |
|
|
|
7,910 |
|
|
|
2,000 |
|
Net
interest income after provision for loan losses
|
|
|
26,387 |
|
|
|
23,699 |
|
|
|
73,330 |
|
|
|
70,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
department income
|
|
|
1,138 |
|
|
|
1,259 |
|
|
|
3,729 |
|
|
|
4,103 |
|
Fees
for other services to customers
|
|
|
2,701 |
|
|
|
3,221 |
|
|
|
7,947 |
|
|
|
7,647 |
|
Net
trading (losses) gains
|
|
|
(6 |
) |
|
|
14 |
|
|
|
(350 |
) |
|
|
(229 |
) |
Net
gain on securities transactions
|
|
|
892 |
|
|
|
21 |
|
|
|
962 |
|
|
|
439 |
|
Other
|
|
|
275 |
|
|
|
279 |
|
|
|
1,976 |
|
|
|
1,312 |
|
Total
noninterest income
|
|
|
5,000 |
|
|
|
4,794 |
|
|
|
14,264 |
|
|
|
13,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
6,707 |
|
|
|
5,786 |
|
|
|
19,916 |
|
|
|
16,943 |
|
Net
occupancy expense
|
|
|
3,436 |
|
|
|
2,964 |
|
|
|
10,510 |
|
|
|
9,007 |
|
Equipment
expense
|
|
|
1,396 |
|
|
|
1,019 |
|
|
|
3,780 |
|
|
|
3,099 |
|
Professional
services
|
|
|
1,306 |
|
|
|
1,050 |
|
|
|
3,966 |
|
|
|
3,318 |
|
Outsourced
Services
|
|
|
1,413 |
|
|
|
1,241 |
|
|
|
4,228 |
|
|
|
3,521 |
|
Advertising
|
|
|
742 |
|
|
|
779 |
|
|
|
2,348 |
|
|
|
1,699 |
|
Insurance
|
|
|
1,540 |
|
|
|
418 |
|
|
|
6,250 |
|
|
|
1,186 |
|
Other
real estate (income) expense
|
|
|
719 |
|
|
|
(63 |
) |
|
|
1,488 |
|
|
|
(80 |
) |
Other
|
|
|
1,427 |
|
|
|
1,532 |
|
|
|
5,039 |
|
|
|
4,944 |
|
Total
noninterest expenses
|
|
|
18,686 |
|
|
|
14,726 |
|
|
|
57,525 |
|
|
|
43,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before taxes
|
|
|
12,701 |
|
|
|
13,767 |
|
|
|
30,069 |
|
|
|
40,205 |
|
Income
taxes
|
|
|
4,792 |
|
|
|
4,733 |
|
|
|
10,431 |
|
|
|
13,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
7,909 |
|
|
|
9,034 |
|
|
|
19,638 |
|
|
|
26,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Basic
|
|
$ |
0.103 |
|
|
|
0.119 |
|
|
|
0.257 |
|
|
|
0.356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Diluted
|
|
$ |
0.103 |
|
|
|
0.119 |
|
|
|
0.257 |
|
|
|
0.356 |
|
See
accompanying notes to unaudited consolidated interim financial
statements.
Consolidated
Statements of Financial Condition (Unaudited)
(dollars
in thousands, except per share data)
|
|
September 30, 2009
|
|
|
December 31, 2008
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$ |
40,145 |
|
|
|
41,924 |
|
|
|
|
|
|
|
|
|
|
Federal
funds sold and other short term investments
|
|
|
223,795 |
|
|
|
207,680 |
|
Total
cash and cash equivalents
|
|
|
263,940 |
|
|
|
249,604 |
|
|
|
|
|
|
|
|
|
|
Trading
securities:
|
|
|
|
|
|
|
|
|
U.
S. government sponsored enterprises
|
|
|
- |
|
|
|
115,273 |
|
States
and political subdivisions
|
|
|
1,040 |
|
|
|
1,053 |
|
Total
trading securities
|
|
|
1,040 |
|
|
|
116,326 |
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
U.
S. treasuries and government sponsored enterprises
|
|
|
332,713 |
|
|
|
426,078 |
|
States
and political subdivisions
|
|
|
96,652 |
|
|
|
105,137 |
|
Mortgage-backed
securities and collateralized mortgage obligations
|
|
|
121,019 |
|
|
|
137,918 |
|
Other
securities
|
|
|
7,838 |
|
|
|
6,869 |
|
Total
securities available for sale
|
|
|
558,222 |
|
|
|
676,002 |
|
|
|
|
|
|
|
|
|
|
Held
to maturity securities:
|
|
|
|
|
|
|
|
|
U.
S. government sponsored enterprises (fair value 2009 $242,645; 2008
$215,776)
|
|
|
241,992 |
|
|
|
214,851 |
|
Mortgage-backed
securities (fair value 2009 $233,386; 2008 $0)
|
|
|
230,774 |
|
|
|
- |
|
Corporate
bonds (fair value 2009 $81,204; 2008 $49,365)
|
|
|
79,286 |
|
|
|
49,838 |
|
Total
held to maturity securities
|
|
|
552,052 |
|
|
|
264,689 |
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
280,802 |
|
|
|
299,191 |
|
Residential
mortgage loans
|
|
|
1,673,001 |
|
|
|
1,607,433 |
|
Home
equity line of credit
|
|
|
272,830 |
|
|
|
250,849 |
|
Installment
loans
|
|
|
4,995 |
|
|
|
5,865 |
|
Total
loans
|
|
|
2,231,628 |
|
|
|
2,163,338 |
|
Less:
|
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
|
36,817 |
|
|
|
36,149 |
|
Net
loans
|
|
|
2,194,811 |
|
|
|
2,127,189 |
|
|
|
|
|
|
|
|
|
|
Bank
premises and equipment, net
|
|
|
37,359 |
|
|
|
35,156 |
|
Other
assets
|
|
|
42,954 |
|
|
|
37,847 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
3,650,378 |
|
|
|
3,506,813 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Demand
|
|
$ |
258,960 |
|
|
|
249,887 |
|
Interest-bearing
checking
|
|
|
371,373 |
|
|
|
331,144 |
|
Savings
accounts
|
|
|
640,983 |
|
|
|
609,444 |
|
Money
market deposit accounts
|
|
|
354,194 |
|
|
|
285,829 |
|
Certificates
of deposit (in denominations of $100,000 or more)
|
|
|
503,662 |
|
|
|
456,583 |
|
Other
time accounts
|
|
|
1,133,917 |
|
|
|
1,203,384 |
|
Total
deposits
|
|
|
3,263,089 |
|
|
|
3,136,271 |
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
121,894 |
|
|
|
109,592 |
|
Accrued
expenses and other liabilities
|
|
|
20,727 |
|
|
|
24,926 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
3,405,710 |
|
|
|
3,270,789 |
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
|
Capital
stock par value $1; 150,000,000 shares authorized and 83,166,423
and 83,166,423 shares issued at September 30, 2009 and December
31, 2008, respectively
|
|
|
83,166 |
|
|
|
83,166 |
|
Surplus
|
|
|
129,044 |
|
|
|
130,142 |
|
Undivided
profits
|
|
|
95,512 |
|
|
|
93,818 |
|
Accumulated
other comprehensive income (loss), net of tax
|
|
|
2,146 |
|
|
|
(1,441 |
) |
Treasury
stock at cost - 6,629,078 and 7,082,494 shares at September 30,
2009 and December 31, 2008, respectively
|
|
|
(65,200 |
) |
|
|
(69,661 |
) |
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
244,668 |
|
|
|
236,024 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
$ |
3,650,378 |
|
|
|
3,506,813 |
|
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, 2008
|
|
$ |
82,373 |
|
|
|
121,961 |
|
|
|
93,099 |
|
|
|
7,230 |
|
|
|
|
|
|
(67,595 |
) |
|
|
237,068 |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income - Nine Months Ended September 30, 2008
|
|
|
- |
|
|
|
- |
|
|
|
26,930 |
|
|
|
- |
|
|
|
26,930 |
|
|
|
- |
|
|
|
26,930 |
|
Other
comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of prior service cost on pension and post retirement plans, net of tax
(pretax of $411)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(247 |
) |
|
|
- |
|
|
|
- |
|
Unrealized
net holding loss on securities available-for-sale arising during the
period, net of tax (pretax loss of $3891)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,338 |
) |
|
|
- |
|
|
|
- |
|
Reclassification
adjustment for net gain realized in net income during the period (pretax
gain $439)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(265 |
) |
|
|
- |
|
|
|
- |
|
Other
comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,850 |
) |
|
|
(2,850 |
) |
|
|
|
|
|
|
(2,850 |
) |
Comprehensive
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
24,080 |
|
|
|
- |
|
|
|
- |
|
Cash
dividend declared, $.33 per share
|
|
|
- |
|
|
|
- |
|
|
|
(24,976 |
) |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
(24,976 |
) |
Stock
options exercised and related tax benefits
|
|
|
16 |
|
|
|
139 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
155 |
|
Sale
of treasury stock (525,138 shares)
|
|
|
- |
|
|
|
(385 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
5,037 |
|
|
|
4,652 |
|
Stock
based compensation expense
|
|
|
- |
|
|
|
139 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance, September 30, 2008
|
|
|
82,389 |
|
|
|
121,854 |
|
|
|
95,053 |
|
|
|
4,380 |
|
|
|
|
|
|
|
(62,558 |
) |
|
|
241,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance, January 1, 2009
|
|
$ |
83,166 |
|
|
|
130,142 |
|
|
|
93,818 |
|
|
|
(1,441 |
) |
|
|
|
|
|
|
(69,661 |
) |
|
|
236,024 |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income - Nine Months Ended September 30, 2009
|
|
|
- |
|
|
|
- |
|
|
|
19,638 |
|
|
|
- |
|
|
|
19,638 |
|
|
|
- |
|
|
|
19,638 |
|
Other
comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of prior service cost on pension and post retirement plans, net of tax
(pretax of $303)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(182 |
) |
|
|
- |
|
|
|
- |
|
Unrealized
net holding gain on securities available-for-sale arising during the
period, net of tax (pretax gain of $7,231)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,349 |
|
|
|
- |
|
|
|
- |
|
Reclassification
adjustment for net gain realized in net income during the period (pretax
gain $962)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(580 |
) |
|
|
- |
|
|
|
- |
|
Other
comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,587 |
|
|
|
3,587 |
|
|
|
|
|
|
|
3,587 |
|
Comprehensive
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
23,225 |
|
|
|
- |
|
|
|
- |
|
Cash
dividend declared, $.235 per share
|
|
|
- |
|
|
|
- |
|
|
|
(17,944 |
) |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
(17,944 |
) |
Sale
of treasury stock (453,416 shares)
|
|
|
- |
|
|
|
(1,258 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
4,461 |
|
|
|
3,203 |
|
Stock
based compensation expense
|
|
|
- |
|
|
|
160 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance, September 30, 2009
|
|
$ |
83,166 |
|
|
|
129,044 |
|
|
|
95,512 |
|
|
|
2,146 |
|
|
|
|
|
|
|
(65,200 |
) |
|
|
244,668 |
|
See
accompanying notes to unaudited consolidated interim financial
statements.
TRUSTCO
BANK CORP NY
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, July 1, 2008
|
|
$ |
82,373 |
|
|
|
122,021 |
|
|
|
94,363 |
|
|
|
4,991 |
|
|
|
|
|
|
(64,244 |
) |
|
|
239,504 |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income - Three Months Ended September 30, 2008
|
|
|
- |
|
|
|
- |
|
|
|
9,034 |
|
|
|
- |
|
|
|
9,034 |
|
|
|
- |
|
|
|
9,034 |
|
Other
comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of prior service cost on pension and post retirement plans, net of tax
(pretax of $136)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(82 |
) |
|
|
- |
|
|
|
- |
|
Unrealized
net holding loss on securities available-for-sale arising during the
period, net of tax (pretax loss of $860)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(516 |
) |
|
|
- |
|
|
|
- |
|
Reclassification
adjustment for net gain realized in net income during the period (pretax
gain $21)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(13 |
) |
|
|
- |
|
|
|
- |
|
Other
comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(611 |
) |
|
|
(611 |
) |
|
|
|
|
|
|
(611 |
) |
Comprehensive
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
8,423 |
|
|
|
- |
|
|
|
- |
|
Cash
dividend declared, $.11 per share
|
|
|
- |
|
|
|
- |
|
|
|
(8,344 |
) |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
(8,344 |
) |
Stock
options exercised and related tax benefits
|
|
|
16 |
|
|
|
139 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
155 |
|
Sale
of treasury stock (175,797 shares)
|
|
|
- |
|
|
|
(359 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
1,686 |
|
|
|
1,327 |
|
Stock
based compensation expense
|
|
|
- |
|
|
|
53 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance, September 30, 2008
|
|
|
82,389 |
|
|
|
121,854 |
|
|
|
95,053 |
|
|
|
4,380 |
|
|
|
|
|
|
|
(62,558 |
) |
|
|
241,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance, July 1, 2009
|
|
$ |
83,166 |
|
|
|
129,431 |
|
|
|
92,387 |
|
|
|
(509 |
) |
|
|
|
|
|
|
(66,340 |
) |
|
|
238,135 |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income - Three Months Ended September 30, 2009
|
|
|
- |
|
|
|
- |
|
|
|
7,909 |
|
|
|
- |
|
|
|
7,909 |
|
|
|
- |
|
|
|
7,909 |
|
Other
comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of prior service cost on pension and post retirement plans, net of tax
(pretax of $101)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(60 |
) |
|
|
- |
|
|
|
- |
|
Unrealized
net holding gain on securities available-for-sale arising during the
period, net of tax (pretax gain of $5,520)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,320 |
|
|
|
- |
|
|
|
- |
|
Reclassification
adjustment for net gain realized in net income during the period (pretax
gain $1,072)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(605 |
) |
|
|
- |
|
|
|
- |
|
Other
comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,655 |
|
|
|
2,655 |
|
|
|
|
|
|
|
2,655 |
|
Comprehensive
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
10,564 |
|
|
|
- |
|
|
|
- |
|
Cash
dividend declared, $.0625 per share
|
|
|
- |
|
|
|
- |
|
|
|
(4,784 |
) |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
(4,784 |
) |
Sale
of treasury stock (115,907 shares)
|
|
|
- |
|
|
|
(440 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
1,140 |
|
|
|
700 |
|
Stock
based compensation expense
|
|
|
- |
|
|
|
53 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance, September 30, 2009
|
|
$ |
83,166 |
|
|
|
129,044 |
|
|
|
95,512 |
|
|
|
2,146 |
|
|
|
|
|
|
|
(65,200 |
) |
|
|
244,668 |
|
See
accompanying notes to unaudited consolidated interim financial
statements.
Consolidated
Statements of Cash Flows (Unaudited)
(dollars
in thousands)
|
|
Nine
months ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
19,638 |
|
|
|
26,930 |
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
3,336 |
|
|
|
2,737 |
|
Loss
(gain) on sale of other real estate owned
|
|
|
327 |
|
|
|
(142 |
) |
Provision
for loan losses
|
|
|
7,910 |
|
|
|
2,000 |
|
Deferred
tax expense
|
|
|
1,188 |
|
|
|
363 |
|
Stock
based compensation expense
|
|
|
160 |
|
|
|
139 |
|
Net
(gain) loss on sale of bank premises and equipment
|
|
|
(48 |
) |
|
|
6 |
|
Net
gain on sales and calls of securities
|
|
|
(962 |
) |
|
|
(435 |
) |
Proceeds
from sales and calls of trading securities
|
|
|
24,936 |
|
|
|
359,499 |
|
Purchases
of trading securities
|
|
|
- |
|
|
|
(312,106 |
) |
Proceeds
from maturities of trading securities
|
|
|
90,000 |
|
|
|
164,650 |
|
Net
trading losses
|
|
|
350 |
|
|
|
229 |
|
Increase
in taxes receivable
|
|
|
(4,243 |
) |
|
|
(5,204 |
) |
Decrease
(increase) in interest receivable
|
|
|
1,794 |
|
|
|
(51 |
) |
Decrease
in interest payable
|
|
|
(1,230 |
) |
|
|
(962 |
) |
Increase
in other assets
|
|
|
(860 |
) |
|
|
(2,365 |
) |
Increase
in accrued expenses and other liabilities
|
|
|
617 |
|
|
|
621 |
|
Total
adjustments
|
|
|
123,275 |
|
|
|
208,979 |
|
Net
cash provided by operating activities
|
|
|
142,913 |
|
|
|
235,909 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sales and calls of securities available for sale
|
|
|
547,599 |
|
|
|
202,012 |
|
Proceeds
from calls and maturities of held to maturity securities
|
|
|
459,106 |
|
|
|
70,000 |
|
Purchases
of securities available for sale
|
|
|
(429,784 |
) |
|
|
(160,589 |
) |
Proceeds
from maturities of securities available for sale
|
|
|
7,194 |
|
|
|
9,094 |
|
Purchases
of held to maturity securities
|
|
|
(746,469 |
) |
|
|
(165,688 |
) |
Net
increase in loans
|
|
|
(84,703 |
) |
|
|
(154,439 |
) |
Proceeds
from dispositions of other real estate owned
|
|
|
3,178 |
|
|
|
680 |
|
Proceeds
from dispositions of bank premises and equipment
|
|
|
171 |
|
|
|
10 |
|
Purchases
of bank premises and equipment
|
|
|
(5,662 |
) |
|
|
(6,400 |
) |
Net
cash used in investing activities
|
|
|
(249,370 |
) |
|
|
(205,320 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
|
126,818 |
|
|
|
32,744 |
|
Net
increase in short-term borrowings
|
|
|
12,302 |
|
|
|
18,001 |
|
Repayment
of long-term debt
|
|
|
- |
|
|
|
(24 |
) |
Proceeds
from exercise of stock options and related tax benefits
|
|
|
- |
|
|
|
155 |
|
Proceeds
from sale of treasury stock
|
|
|
3,203 |
|
|
|
4,652 |
|
Dividends
paid
|
|
|
(21,530 |
) |
|
|
(28,685 |
) |
Net
cash provided by financing activities
|
|
|
120,793 |
|
|
|
26,843 |
|
Net
increase in cash and cash equivalents
|
|
|
14,336 |
|
|
|
57,432 |
|
Cash
and cash equivalents at beginning of period
|
|
|
249,604 |
|
|
|
344,920 |
|
Cash
and cash equivalents at end of period…
|
|
$ |
263,940 |
|
|
|
402,352 |
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
39,983 |
|
|
|
57,821 |
|
Income
taxes paid
|
|
|
14,642 |
|
|
|
15,824 |
|
Non
cash investing and financing activites:
|
|
|
|
|
|
|
|
|
Transfer
of loans to other real estate owned
|
|
|
9,171 |
|
|
|
1,695 |
|
Decrease
in dividends payable
|
|
|
(3,586 |
) |
|
|
(3,709 |
) |
Change
in unrealized gain (loss) on securities available for sale-gross of
deferred taxes, net of reclassification adjustment
|
|
|
6,267 |
|
|
|
(4,330 |
) |
Change
in deferred tax effect on unrealized (gain) loss on securities available
for sale, net of reclassification adjustment
|
|
|
(2,498 |
) |
|
|
1,727 |
|
Amortization
of prior service cost on pension and post retirement plans
|
|
|
(303 |
) |
|
|
(411 |
) |
Change
in deferred tax effect of amortization of prior service
cost
|
|
|
121 |
|
|
|
164 |
|
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 nine months ended
September 30, 2009 is not necessarily indicative of the results that may be
expected for the year ending December 31, 2009, or any interim
periods. These financial statements consider events that occurred
through November 6, 2009, the date the financial statements were
issued.
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 September 30, 2009 and the results
of operations for the three and nine months ended September 30, 2009 and 2008
and cash flows for the nine months ended September 30, 2009 and
2008. 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 2008 Annual Report to Shareholders on Form
10-K.
A
reconciliation of the component parts of earnings per share (EPS) for the three
and nine-month periods ended September 30, 2009 and 2008 follows:
(In
thousands, except per share data)
|
|
Net
Income
|
|
|
Weighted
Average Shares Outstanding
|
|
|
Per
Share Amounts
|
|
For
the quarter ended September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
Net
income available to
|
|
|
|
|
|
|
|
|
|
Common
shareholders
|
|
$ |
7,909 |
|
|
|
76,526 |
|
|
$ |
0.103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
------ |
|
|
|
------ |
|
|
|
----- |
|
Diluted
EPS
|
|
$ |
7,909 |
|
|
|
76,526 |
|
|
$ |
0.103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
quarter ended September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
For
quarter ended September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shareholders
|
|
$ |
9,034 |
|
|
|
75,833 |
|
|
$ |
0.119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
------- |
|
|
|
12 |
|
|
|
----- |
|
Diluted
EPS
|
|
$ |
9,034 |
|
|
|
75,845 |
|
|
$ |
0.119 |
|
(In
thousands, except per share data)
|
|
Net
Income
|
|
|
Weighted
Average Shares Outstanding
|
|
|
Per
Share Amounts
|
|
For
the nine months ended September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
Net
income available to
|
|
|
|
|
|
|
|
|
|
Common
shareholders
|
|
$ |
19,638 |
|
|
|
76,329 |
|
|
$ |
0.257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
------ |
|
|
|
------ |
|
|
|
----- |
|
Diluted
EPS
|
|
$ |
19,638 |
|
|
|
76,329 |
|
|
$ |
0.257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
nine months ended September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shareholders
|
|
$ |
26,930 |
|
|
|
75,672 |
|
|
$ |
0.356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
------- |
|
|
|
8 |
|
|
|
----- |
|
Diluted
EPS
|
|
$ |
26,930 |
|
|
|
75,680 |
|
|
$ |
0.356 |
|
There
were approximately 2.8 million and 3.4 million stock options for the three and
nine months ended September 30, 2009 and 4.0 million and 4.1 million
stock options for the three and nine months ended September 30, 2008 which if
included, would have been antidilutive in the calculation of average shares
outstanding, and were therefore excluded from the earnings per share
calculations. The options are considered antidilutive because the
option price is greater than the current market price.
The table
below outlines the components of the Company’s net periodic expense (benefit)
recognized during the three-month and nine-month periods ended September 30,
2009 and 2008 for its pension and other postretirement benefit
plans:
Components
of Net Periodic Expense (Benefit) for the three months ended September 30, 2009
and 2008 (dollars in thousands)
|
|
Pension
Benefits
|
|
|
Other
Postretirement Benefits
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$ |
11 |
|
|
|
12 |
|
|
|
6 |
|
|
|
6 |
|
Interest
cost
|
|
|
199 |
|
|
|
367 |
|
|
|
18 |
|
|
|
15 |
|
Expected
return on plan assets
|
|
|
(200 |
) |
|
|
(493 |
) |
|
|
(87 |
) |
|
|
(117 |
) |
Amortization
of prior service cost
|
|
|
181 |
|
|
|
- |
|
|
|
(101 |
) |
|
|
(136 |
) |
Net
periodic expense(benefit)
|
|
$ |
191 |
|
|
|
(114 |
) |
|
|
(164 |
) |
|
|
(232 |
) |
Components
of Net Periodic Expense (Benefit) for the nine months ended September 30, 2009
and 2008 (dollars in thousands)
|
|
Pension
Benefits
|
|
|
Other
Postretirement Benefits
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$ |
35 |
|
|
|
37 |
|
|
|
18 |
|
|
|
19 |
|
Interest
cost
|
|
|
1,001 |
|
|
|
1,072 |
|
|
|
50 |
|
|
|
44 |
|
Expected
return on plan assets
|
|
|
(910 |
) |
|
|
(1,495 |
) |
|
|
(257 |
) |
|
|
(350 |
) |
Amortization
of prior service cost
|
|
|
239 |
|
|
|
- |
|
|
|
(303 |
) |
|
|
(411 |
) |
Net
periodic expense(benefit)
|
|
$ |
365 |
|
|
|
(386 |
) |
|
|
(492 |
) |
|
|
(698 |
) |
The
Company previously disclosed in its consolidated financial statements for the
year ended December 31, 2008, that it did not expect to make any contributions
to its pension and postretirement benefit plans in 2009. As of
September 30, 2009, no contributions have been made. The Company
presently anticipates that it will not make any contributions in
2009.
Since
2003, the Company has not subsidized retiree medical insurance
premiums. However, it continues to provide post-retirement medical
benefits to a limited number of retired executives in accordance with the terms
of their employment contracts.
The
following table summarizes the amortized cost and fair value of the
available-for-sale and held-to-maturity investment securities portfolio at
September 30, 2009 and the corresponding amounts of unrealized gains and losses
therein:
|
|
Amortized
Cost
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for
sale
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government-sponsored enterprises
|
|
$ |
331,357 |
|
|
|
1,520 |
|
|
|
164 |
|
|
|
332,713 |
|
State
and political subdivisions
|
|
|
92,661 |
|
|
|
3,992 |
|
|
|
1 |
|
|
|
96,652 |
|
Mortgage-backed
securities
|
|
|
119,647 |
|
|
|
2,319 |
|
|
|
947 |
|
|
|
121,019 |
|
Other
securities
|
|
|
7,796 |
|
|
|
43 |
|
|
|
1 |
|
|
|
7,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale securities
|
|
$ |
551,461 |
|
|
|
7,874 |
|
|
|
1,113 |
|
|
|
558,222 |
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government-sponsored enterprises
|
|
$ |
241,992 |
|
|
|
817 |
|
|
|
164 |
|
|
|
242,645 |
|
Mortgage-backed
securities
|
|
|
230,774 |
|
|
|
2,693 |
|
|
|
81 |
|
|
|
233,386 |
|
Other
securities
|
|
|
79,286 |
|
|
|
1,918 |
|
|
|
- |
|
|
|
81,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
held-to-maturity securities
|
|
$ |
552,052 |
|
|
|
5,428 |
|
|
|
245 |
|
|
|
557,235 |
|
The
following table shows the amortized cost and fair value of the portfolios by
expected maturity. Expected maturities may differ from contractual maturities if
borrowers have the right to call or prepay obligations with or without call or
prepayment penalties.
|
|
September
30, 2009
|
|
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
Within
one year
|
|
$ |
19,704 |
|
|
|
19,961 |
|
One
to five years
|
|
|
321,614 |
|
|
|
325,133 |
|
Five
to ten years
|
|
|
144,829 |
|
|
|
144,843 |
|
Beyond
ten years
|
|
|
65,314 |
|
|
|
68,285 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
551,461 |
|
|
|
558,222 |
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
|
|
|
|
|
|
|
Within
one year
|
|
$ |
40,034 |
|
|
|
40,244 |
|
One
to five years
|
|
|
434,974 |
|
|
|
439,579 |
|
Five
to ten years
|
|
|
77,044 |
|
|
|
77,412 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
552,052 |
|
|
|
557,235 |
|
The
following table summarizes the investment securities with unrealized losses at
September 30, by aggregated major security type and length of time in a
continuous unrealized loss position:
|
|
Less
Than 12 Months
|
|
|
12
Months or Longer
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government-sponsored enterprises
|
|
$ |
65,709 |
|
|
|
164 |
|
|
|
- |
|
|
|
- |
|
|
|
65,709 |
|
|
|
164 |
|
States
and political subdivisions
|
|
|
- |
|
|
|
- |
|
|
|
388 |
|
|
|
1 |
|
|
|
388 |
|
|
|
1 |
|
Mortgage-backed securities
|
|
|
28,736 |
|
|
|
654 |
|
|
|
11,589 |
|
|
|
293 |
|
|
|
40,325 |
|
|
|
947 |
|
Other
securities
|
|
|
513 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
513 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
$ |
94,958 |
|
|
|
819 |
|
|
|
11,977 |
|
|
|
294 |
|
|
|
106,935 |
|
|
|
1,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government-sponsored enterprises
|
|
$ |
47,462 |
|
|
|
164 |
|
|
|
- |
|
|
|
- |
|
|
|
47,462 |
|
|
|
164 |
|
Mortgage-backed
securities
|
|
|
10,019 |
|
|
|
81 |
|
|
|
- |
|
|
|
- |
|
|
|
10,019 |
|
|
|
81 |
|
Other
securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
held-to-maturity
|
|
$ |
57,481 |
|
|
|
245 |
|
|
|
- |
|
|
|
- |
|
|
|
57,481 |
|
|
|
245 |
|
Proceeds
from sales and calls of securities available for sale were $547.6 million and
$202.0 million
for the nine months ended September 30, 2009 and 2008, respectively. Gross gains
of $1.3 million and $972 thousand and gross losses of $288 thousand and $533
thousand were realized on these sales during 2009 and 2008,
respectively.
Proceeds
from sales and calls of securities available for sale were $154.1 million and
$43.0 million for the three months ended September 30, 2009 and 2008,
respectively. Gross gains of $1.1 million and $178 thousand and gross losses of
$245 thousand and $157 thousand were realized on these sales during 2009 and
2008, respectively.
Other-Than-Temporary-Impairment
Management
evaluates securities for other-than-temporary impairment (“OTTI”) at least on a
quarterly basis, and more frequently when economic or market conditions warrant
such an evaluation. The investment securities portfolio is evaluated for OTTI by
segregating the portfolio by type and applying the appropriate OTTI model.
Investment securities classified as available for sale or held-to-maturity are
generally evaluated for OTTI under FASB ASC 320 “Investments – Debt and Equity
Securities.”
In
determining OTTI under the FASB ASC. 320 model, management considers many
factors, including: (1) the length of time and the extent to which the fair
value has been less than cost, (2) the financial condition and near-term
prospects of the issuer, (3) whether the market decline was affected by
macroeconomic conditions, and (4) whether the entity has the intent to sell the
debt security or more likely than not will be required to sell the debt security
before its anticipated recovery. The assessment of whether an
other-than-temporary decline exists involves a high degree of subjectivity and
judgment and is based on the information available to management at a point in
time.
When OTTI
occurs, the amount of the OTTI recognized in earnings depends on whether an
entity intends to sell the security or it is more likely than not it will be
required to sell the security before recovery of its amortized cost basis, less
any current-period credit loss. If an entity intends to sell or it is more
likely than not it will be required to sell the security before recovery of its
amortized cost basis, less any current-period credit loss, the OTTI shall be
recognized in earnings equal to the entire difference between the investment’s
amortized cost basis and its fair value at the balance sheet date. If an entity
does not intend to sell the security and it is not more likely than not that the
entity will be required to sell the security before recovery of its amortized
cost basis less any current-period loss, the OTTI shall be separated into the
amount representing the credit loss and the amount related to all other factors.
The amount of the total OTTI related to the credit loss is determined based on
the present value of cash flows expected to be collected and is recognized in
earnings. The amount of the total OTTI related to other factors is recognized in
other comprehensive income, net of applicable taxes. The previous amortized cost
basis less the OTTI recognized in earnings becomes the new amortized cost basis
of the investment.
As of
September 30, 2009, the Company’s security portfolio consisted of 463
securities, 20 of which were in an unrealized loss position, and are discussed
below.
Mortgage-backed
Securities
At
September 30, 2009, approximately 97% of the mortgage-backed securities held by
the Company were issued by U.S. government-sponsored entities and agencies,
primarily Fannie Mae and Freddie Mac, institutions which the government has
affirmed its commitment to support. Because the decline in fair value is
attributable to changes in interest rates and illiquidity, and not credit
quality, and because the Company does not have the intent to sell these
securities and it is likely that it will not be required to sell the securities
before their anticipated recovery, the Company does not consider these
securities to be other-than-temporarily impaired at September 30,
2009.
The
Company’s mortgage-backed securities portfolio includes non-agency
collateralized mortgage obligations with a market value of $10.5 million which
had unrealized losses of approximately $252 thousand at September 30, 2009.
These non-agency mortgage-backed securities were rated AAA at purchase and are
not within the scope of FASB ASC 325 “Investments – Other, Beneficial Interest
in Securitized Financial Assets.” The Company monitors to insure it
has adequate credit support and as of September 30, 2009, the Company believes
there is no OTTI and does not have the intent to sell these securities and it is
likely that it will not be required to sell the securities before their
anticipated recovery. All the securities are rated AA- or higher by
one or more rating agencies.
Other
Securities
The
Company’s unrealized losses on other securities relate primarily to its
investment in corporate bonds. Because the decline in fair value is
attributable to changes in interest rates and illiquidity, and not credit
quality, and because the Company does not have the intent to sell these
securities and it is likely that it will not be required to sell the securities
before their anticipated recovery, the Company does not consider these
securities to be other-than-temporarily impaired at September 30,
2009. Credit ratings on these securities remain within policy
limits.
As a
result of the above analysis, for the three-month and nine-month periods ended
September 30, 2009, the Company did not recognize any other-than-temporary
impairment losses for credit or any other reason.
FASB ASC
820 “Fair Value Measurement and Disclosures,” defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (exit
price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date.
FASB ASC 820 also establishes a fair value hierarchy which requires an entity to
maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. The standard describes three levels of inputs
that may be used to measure fair values:
Level 1 –
Quoted prices (unadjusted) for identical assets or liabilities in active markets
that the entity has the ability to access as of the measurement
date.
Level 2 –
Quoted prices for similar assets or liabilities in active markets, quoted prices
in markets that are not active, or inputs that are observable, either directly
or indirectly, for substantially the full term of the asset or
liability.
Level 3 –
Significant unobservable inputs that reflect a company’s own assumptions about
the value that market participants would use in pricing an asset or
liability.
The
Company used the following methods and significant assumptions to estimate the
fair value of each type of financial instrument:
Securities Available for
Sale and Trading Securities: Securities available for sale and
trading 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. This results in a Level 2 classification of the
inputs for determining fair value. 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. Included in
earnings as a result of the changes in fair value of trading securities were $6
thousand of net trading losses and $14 thousand of net trading gains for the
three months ended September 30, 2009 and 2008, respectively and $350 thousand
and $229 thousand net trading losses for the nine months ended September 30,
2009 and 2008, respectively.
Other Real Estate
Owned: The fair value of other real estate owned is determined
by observable comparable sales and property valuation
techniques. This results in a Level 2 classification of the inputs
for determining fair value.
Assets
and liabilities measured at fair value under FASB ASC 820 on a recurring basis,
including financial assets and liabilities for which the Company has elected the
fair value option, are summarized below:
Fair
Value Measurements at
September 30, 2009
Using:
|
|
Carrying
Value
|
|
|
Quoted
Prices in Active Markets for Identical Assets (Level 1)
|
|
|
Significant
Other Observable Inputs (Level 2)
|
|
|
Significant
Unobservable Inputs (Level 3)
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available-for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government- sponsored enterprises
|
|
$ |
332,713 |
|
|
|
- |
|
|
|
332,713 |
|
|
|
- |
|
States
and political subdivisions
|
|
|
96,652 |
|
|
|
- |
|
|
|
96,652 |
|
|
|
- |
|
Mortgage-backed
securities
|
|
|
121,019 |
|
|
|
- |
|
|
|
121,019 |
|
|
|
- |
|
Other
securities
|
|
|
7,838 |
|
|
|
- |
|
|
|
7,838 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities available-for-sale
|
|
$ |
558,222 |
|
|
|
- |
|
|
|
558,222 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States
and political subdivisions
|
|
$ |
1,040 |
|
|
|
- |
|
|
|
1,040 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
trading securities
|
|
$ |
1,040 |
|
|
|
- |
|
|
|
1,040 |
|
|
|
- |
|
Fair
Value Measurements at
December 31, 2008
Using:
|
|
Carrying
Value
|
|
|
Quoted
Prices in Active Markets for Identical Assets (Level 1)
|
|
|
Significant
Other Observable Inputs (Level 2)
|
|
|
Significant
Unobservable Inputs (Level 3)
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available-for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government- sponsored enterprises
|
|
$ |
426,078 |
|
|
|
- |
|
|
|
426,078 |
|
|
|
- |
|
States
and political subdivisions
|
|
|
105,137 |
|
|
|
- |
|
|
|
105,137 |
|
|
|
- |
|
Mortgage-backed
securities
|
|
|
137,918 |
|
|
|
- |
|
|
|
137,918 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
securities
|
|
|
6,869 |
|
|
|
- |
|
|
|
6,869 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities available-for-sale
|
|
$ |
676,002 |
|
|
|
- |
|
|
|
676,002 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government- sponsored enterprises
|
|
$ |
115,273 |
|
|
|
- |
|
|
|
115,273 |
|
|
|
- |
|
States
and political subdivisions
|
|
$ |
1,053 |
|
|
|
- |
|
|
|
1,053 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
trading securities
|
|
$ |
116,326 |
|
|
|
- |
|
|
|
116,326 |
|
|
|
- |
|
Assets
measured at fair value on a non-recurring basis are summarized
below:
Fair
Value Measurements at
September 30, 2009
Using:
|
|
Carrying
Value
|
|
|
Quoted
Prices in Active Markets for Identical Assets (Level 1)
|
|
|
Significant
Other Observable Inputs (Level 2)
|
|
|
Significant
Unobservable Inputs (Level 3)
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
real estate owned
|
|
$ |
7,547 |
|
|
|
- |
|
|
|
7,547 |
|
|
|
- |
|
Other
real estate owned, which is carried at lower of cost or fair value, was written
down to fair value of $7.5 million, resulting in a cumulative valuation
allowance of $245 thousand net of dispositions at period-end. A
valuation charge of $761 thousand is included in earnings for the period ending
September 30, 2009.
Fair
Value Measurements at
December 31, 2008
Using:
|
|
Carrying
Value
|
|
|
Quoted
Prices in Active Markets for Identical Assets (Level 1)
|
|
|
Significant
Other Observable Inputs (Level 2)
|
|
|
Significant
Unobservable Inputs (Level 3)
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
real estate owned
|
|
$ |
1,832 |
|
|
|
- |
|
|
|
1,832 |
|
|
|
- |
|
In
accordance with FASB ASC 825 “Financial Instruments,” the carrying amounts and
estimated fair values of financial instruments, at September 30, 2009 are as
follows:
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
Financial
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
263,940 |
|
|
|
263,940 |
|
Trading
securities
|
|
|
1,040 |
|
|
|
1,040 |
|
Securities
available-for-sale
|
|
|
558,222 |
|
|
|
558,222 |
|
Securities
held-to-maturity
|
|
|
552,052 |
|
|
|
557,235 |
|
Loans,
net
|
|
|
2,194,811 |
|
|
|
2,237,213 |
|
Accrued
interest receivable
|
|
|
14,242 |
|
|
|
14,242 |
|
Financial
liabilities:
|
|
|
|
|
|
|
|
|
Demand
deposits
|
|
|
258,960 |
|
|
|
258,960 |
|
Interest
bearing deposits
|
|
|
3,004,129 |
|
|
|
3,015,651 |
|
Short-term
borrowings
|
|
|
121,894 |
|
|
|
121,894 |
|
Accrued
interest payable
|
|
|
1,647 |
|
|
|
1,647 |
|
The
specific estimation methods and assumptions used can have a substantial impact
on the resulting fair values of financial instruments. Following is a brief
summary of the significant methods and assumptions used in estimating fair
values:
Cash
and Cash Equivalents
The
carrying values of these financial instruments approximate fair
values.
Securities
Securities
available for sale, trading account securities and held to maturity are fair
valued utilizing an independent pricing service. The pricing service
uses a variety of techniques to arrive at fair value including market maker bids
and quotes of significantly similar securities and pricing
models. Inputs to the pricing models include recent trades, benchmark
interest rates, spreads and actual and projected cash flows.
Loans
The fair
values of all loans are estimated using discounted cash flow analyses with
discount rates equal to the interest rates currently being offered for loans
with similar terms to borrowers of similar credit quality.
Deposit
Liabilities
The fair
values disclosed for noninterest bearing deposits, interest bearing checking
accounts, savings accounts, and money market accounts are, by definition, equal
to the amount payable on demand at the balance sheet date. The carrying value of
all variable rate certificates of deposit approximates fair value. The fair
value of fixed rate certificates of deposit is estimated using discounted cash
flow analyses with discount rates equal to the interest rates currently being
offered on certificates of similar size and remaining maturity.
Short-Term
Borrowings and Other Financial Instruments
The fair
value of all short-term borrowings, and other financial instruments approximates
the carrying value.
Financial
Instruments with Off-Balance Sheet Risk
The
Company is a party to financial instruments with off-balance sheet risk. Such
financial instruments consist of commitments to extend financing and standby
letters of credit. If the commitments are exercised by the prospective
borrowers, these financial instruments will become interest earning assets of
the Company. If the commitments expire, the Company retains any fees paid by the
prospective borrower. The fair value of commitments is estimated based upon fees
currently charged to enter into similar agreements, taking into consideration
the remaining terms of the agreements and the present creditworthiness of the
borrower. For fixed rate commitments, the fair value estimation takes into
consideration an interest rate risk factor. The fair value of these off-balance
sheet items approximates the recorded amounts of the related fees, which are
considered to be immaterial.
The
Company does not engage in activities involving interest rate swaps, forward
placement contracts, or any other instruments commonly referred to as
derivatives
6.
|
Recent
Accounting Pronouncements
|
In April
2009, the FASB issued Staff Position (FSP) No. 115-2 and No. 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments, which is now a part of FASB ASC 320,
"Investments - Debt and Equity Securities", and which amends existing guidance
for determining whether impairment is other-than-temporary (OTTI) for debt
securities. The FSP requires an entity to assess whether it intends
to sell, or it is more likely than not that it will be required to sell a
security in an unrealized loss position before recovery of its amortized cost
basis. If either of these criteria is met, the entire difference
between amortized cost and fair value is recognized in earnings. For
securities that do not meet the aforementioned criteria, the amount of
impairment recognized in earnings is limited to the amount related to credit
losses, while impairment related to other factors is recognized in other
comprehensive income. Additionally, the FSP expands and
increases the frequency of existing disclosures about other-than-temporary
impairments for debt and equity securities. This FSP is effective for
interim and annual reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. Through
the period ended June 30, 2009, the Company recognized no cumulative other
-than-temporary impairment charges. The Company adopted the FSP effective April
1, 2009. The adoption of this FSP on April 1, 2009 did not have a
material impact on the results of operations or financial
position.
In April
2009, the FASB issued Staff Position (FSP) No. 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset and Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly, which is now
a part of FASB ASC 820, "Fair Value Measurement and
Disclosures." This FSP emphasizes that even if there has been a
significant decrease in the volume and level of activity, the objective of a
fair value measurement remains the same. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction (that is, not a forced liquidation or distressed sale) between
market participants. The FSP provides a number of factors to consider
when evaluating whether there has been a significant decrease in the volume and
level of activity for an asset or liability in relation to normal market
activity. In addition, when transactions or quoted prices are
not considered orderly, adjustments to those prices based on the weight of
available information may be needed to determine the appropriate fair
value. The FSP also requires increased disclosures. This
FSP is effective for interim and annual reporting periods ending after June 15,
2009, and shall be applied prospectively. The adoption of this FSP at
September 30, 2009 did not have a material impact on the results of operations
or financial position.
In April
2009, the FASB issued FSP No. 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments, which is now a part of FASB ASC 825,
"Financial Instruments." This FSP amends FASB Statement No.
107, Disclosures about Fair
Value of Financial Instruments, to require disclosures about fair value
of financial instruments for interim reporting periods of publicly traded
companies that were previously only required in annual financial statements.
This FSP is effective for interim reporting periods ending after June 15,
2009. The adoption of this FSP at September 30, 2009 did not have a
material impact on the results of operations or financial position as it only
required disclosures which are included in Note 5.
In
August, 2009, the FASB issued Accounting Standards Update (ASU) 2009-05,
“Measuring Liabilities at Fair Value”, as subset of Topic 820 – “Fair Value
Measurements and Disclosure”. Among other clarifying points, ASU
2009-05 provides clarification that in circumstance in which a quoted price in
an active market for the identical liability is not available, a reporting
entity is required to measure fair value using one or more of the following
techniques: (1) The quoted price of the identical liability when
traded as an asset, (2) Quoted prices for similar liabilities or similar
liabilities when traded as assets, or (3) Another valuation technique that is
consistent with the principles of Topic 820 such as an income approach or market
approach. The ASU is effective as of September 30,
2009. The adoption of the ASU did not have a material impact on the
Company’s consolidated financial statements.
The Board
of Directors and Shareholders
TrustCo
Bank Corp NY
Glenville,
New York
We have
reviewed the accompanying consolidated statement of financial condition of
TrustCo Bank Corp NY as of September 30, 2009, and the related consolidated
statements of income for the three-month and nine-month periods ended September
30, 2009 and 2008 and the related consolidated statements of changes in
shareholders’ equity and cash flows for the nine-month periods ended September
30, 2009 and 2008. These interim financial statements are the
responsibility of the Company's management.
We
conducted our reviews in accordance with the 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,
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 reviews, we are not aware of any material modifications that should be made
to the accompanying interim financial statements for them to be in conformity
with U.S. generally accepted accounting principles.
Livingston,
New Jersey
November
6, 2009
|
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 nine-month periods ended September 30, 2009, with
comparisons to 2008 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 2008
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.
The third
quarter of 2009 saw a mix of continued improvement in many financial markets,
particularly in equities, but more subdued news in terms of underlying economic
conditions. The sharp volatility in markets that had been occurring
through much of 2008 and into the first quarter of 2009 was generally absent in
the third quarter of 2009. While the pace of bank failures has
remained significantly elevated in 2009, the focus has mostly been on smaller
institutions, and have been more the result of capital and asset quality
problems, rather than the liquidity issues that resulted in the failures and
near-failures of some of the largest financial institutions in the world during
the preceding quarters. The 2008 and early 2009 period saw
unprecedented intervention by governments in markets and the financial services
industry as the United States saw the two largest bank failures in its history
in 2008 as well as failures of other major financial institutions, forced
mergers and massive government bailouts. The United
States Government responded to these events with legislation, including the
Emergency Economic Stabilization Act of 2008, which authorized the Troubled
Asset Relief Program (“TARP”), and the American Recovery and Reinvestment Act of
2009 (“ARRA”) more commonly known as the economic stimulus or economic recovery
package, which was intended to stimulate the economy and provide for extensive
infrastructure, energy, health and education needs. In addition, the
Federal Reserve Bank (“FRB”), implemented a variety of major initiatives,
including a sharp easing of monetary policy and direct intervention in a number
of financial markets, and the Federal Deposit Insurance Corporation (“FDIC”),
the Treasury Department and other bank regulatory agencies also instituted a
wide variety of programs. The economic outlook for the balance of
2009 remains relatively weak. Although many economists expect
stabilization and even improvement in 2010, major uncertainties
remain.
TrustCo’s
long-term focus on traditional banking services has enabled the Company to avoid
significant impact from asset quality problems and the Company’s strong
liquidity and solid capital positions have allowed the Company to continue to
conduct business in a manner consistent with past practice. TrustCo
has not engaged in the types of high risk loans and investments that have led to
the widely reported problems in the industry. Nevertheless, the
Company has experienced an increase in nonperforming loans, although management
believes the level remains readily manageable. To the extent that
housing values continue to decline on a national basis, any housing lender is
subject to some increase in the level of risk. While the Company does
not see a significant increase in the inherent risk of loss in its loan
portfolios at September 30, 2009, should general housing prices and other
economic measures in the Company’s market areas deteriorate, the Company may
experience an increase in the level of risk and/or charge-offs in its loan
portfolios.
In
addition, the natural flight to quality that occurs in financial crisis, cuts in
targeted interest rates and liquidity injections by the Federal government have
served to reduce yields available on both short term liquidity (federal funds
and cash equivalents) as well as the low risk types of securities that the
Company typically invests in. During the quarter, the slope of the
yield curve was relatively positive, showing limited change compared to the
second quarter. The future course of interest rates is subject to
significant uncertainty, as various indicators are providing contradicting
signals. The sheer volume of government financing that is expected in
the coming quarters is likely to be a factor in the direction and level of
rates.
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, including the
Risk Factors described in Item 1A of TrustCo’s Annual Report on Form 10-K for
the year ended December 31, 2008, in some cases have affected and in the future
could affect TrustCo's actual results, and could cause TrustCo's actual
financial performance to differ materially from that expressed in any
forward-looking statement: (1) credit risk, (2) interest rate risk, (3)
competition, (4) changes in the regulatory environment and in the monetary and
fiscal policies of the U.S. Government, including policies of the U.S. Treasury
and the Federal Reserve Board, (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-months and nine-months ended September 30,
2009 and 2008.
Overview
TrustCo
recorded net income of $7.9 million, or $0.103 of diluted earnings per share for
the three months ended September 30, 2009, as compared to net income of $9.0
million or $0.119 of diluted earnings per share in the same period in
2008. For the nine months ended September 30, 2009 TrustCo recorded
net income of $19.6 million or $0.257 per share compared to $26.9 million of net
income and $0.356 earnings per share in the first nine months of
2008.
The
primary factors accounting for the year to date changes were:
|
·
|
Increase
in the average balance of interest earning assets of $120.7 million to
$3.44 billion for the first nine months of 2009 compared to the same
period in 2008,
|
|
·
|
Increase
in the average balance of interest bearing liabilities of $113.4 million
to $3.00 billion for the first nine months of 2009 as compared to
2008,
|
|
·
|
Increase
in net interest margin from 3.00% for the first nine months of 2008 to
3.20% for the nine months of 2009,
|
|
·
|
Increase
in the provision for loan losses from $2.0 million for the first nine
months of 2008 to $7.9 million in the comparable period in
2009,
|
|
·
|
Increase
in noninterest income (excluding net gains on securities transactions and
net trading (losses) / gains) from $13.1 million for the first nine months
of 2008 to $13.7 million for the comparable period in
2009. Excluded from noninterest income were $439 thousand of
net gains on securities transactions for the first nine months of 2008
compared to net gains of $962 thousand for the same period in 2009, and
$229 thousand of net trading losses in the 2008 period compared to $350
thousand of net losses in the first nine months of 2009,
and
|
|
·
|
An
increase of $13.9 million in noninterest expense for the first nine months
of 2009 as compared to the first nine months of 2008, with $5.0 million of
the increase due to higher FDIC insurance
assessments.
|
Asset/Liability
Management
The
Company strives to generate its earnings capabilities through a mix of core
deposits, funding a prudent mix of earning assets. Additionally,
TrustCo attempts to maintain adequate liquidity and reduce the sensitivity of
net interest income to changes in interest rates to an acceptable level while
enhancing profitability both on a short-term and long-term basis.
TrustCo’s
results are affected by a variety of factors including competitive and economic
conditions in the specific markets in which the Company operates and more
generally 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, 2008 is a description of
the effect interest rates had on the results for the year 2008 compared to
2007. Many of the same market factors discussed in the 2008 Annual
Report continued to have a significant impact on the year to date 2009
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.
Interest
rates have a significant impact on the operations and financial results of all
financial services companies. One of the most important interest rates used to
control national economic policy is the “Federal Funds” rate. This is the
interest rate utilized within the banking system for overnight borrowings for
institutions with the highest credit rating. The Federal Funds target rate
decreased from 4.25% at the beginning of 2008 to a target range of 0.00% to
0.25% by the end of 2008, with the reductions occurring throughout the year. The
target range has not been changed thus far in 2009. The effective, or
actual Federal Funds rate was often below the targeted rate, particularly in the
latter part of 2008. Traditionally interest rates on bank deposit
accounts are heavily influenced by the Federal Funds rate; however during 2008
highly competitive conditions in the banking industry resulted in rates on
deposit accounts not declining in line with the Federal Funds
rate. Continued low rates on US Treasuries and the failure of several
significant competitors has led to an improvement in the rate environment thus
far in 2009 in some areas, and the moderation of deposit rates experienced in
the first half of 2009 generally continued in the third quarter of 2009 relative
to prior periods. Please refer to the statistical disclosures in the
table below entitled “Distribution of Assets, Liabilities and Shareholders’
Equity: Interest Rates and Interest Differential.”
As noted
previously, the yield on other financial instruments, including the 10 year
Treasury bond rate did not change in-line with the Federal Funds rate. Despite
the Federal Funds rate declining by approximately 400 basis points, the yield on
the 10 year Treasury declined only 179 basis points, from 4.04% to 2.25% during
2008. In the third quarter of 2009, the 10 year Treasury rate
generally trended up for the first half of the quarter and then downward through
quarter-end. The yield peaked at 3.89% in early August and ended the
period at 3.31%. There was significant rate volatility during the
quarter. The rate on the 10 year treasury bond and other long-term
interest rates has a significant influence on the rates for new residential real
estate loans. The FRB is also attempting to influence rates on mortgage loans by
other means, including direct intervention in the mortgage-backed securities
market, through purchasing these securities in an attempt to raise prices and
reduce yields. The FRB will eventually halt these purchases, which
may contribute to higher rates. These changes in interest rates have
an effect on the Company relative to the interest income on loans, securities,
and Federal Funds sold and other short term instruments as well as on interest
expense on deposits and borrowings. As noted above, residential real estate
loans and longer-term investments are most affected by the changes in longer
term market interest rates such as the 10 year treasury. The Federal Funds sold
portfolio and other short term investments are affected primarily by changes in
the Federal Funds target rate. Deposit interest rates are most affected by short
term market interest rates. Also, changes in interest rates have an effect on
the recorded balance of the trading portfolio and the securities available for
sale portfolio, which are recorded at fair value. Generally, as interest rates
increase the fair value of these securities will decrease. Interest rates on new
residential real estate loan originations are also influenced by the rates
established by secondary market participants such as Freddie Mac and Fannie
Mae. The principal loan product for TrustCo is residential real
estate loans. Because TrustCo is a portfolio lender and does not
generally sell loans into the secondary market, the Company establishes rates
that management determines are appropriate in light of the long-term nature of
residential real estate loans while remaining competitive with the secondary
market rates. Financial market volatility and the problems faced by
the financial services industry have somewhat lessened the influence of the
secondary market, however various programs initiated by arms of the Federal
government have had an impact on rate levels for certain
products. Most importantly, a government goal of keeping mortgage
rates low has been supported by targeted buying of certain securities, thus
supporting prices and constraining yields, as noted above.
The net
effect of these interest rate changes is that the yields earned on both short
term investments and longer term investments generally remain below historic
norms. As noted, deposit costs have declined over the first nine
months of 2009.
While
TrustCo has been affected somewhat by aspects of the overall changes in
financial markets, it has not been directly affected in a significant way by the
mortgage crisis effecting some banks and financial institutions in the United
States. The crisis revolves around actual and anticipated higher
levels of delinquencies and defaults on mortgage loans, in many cases arising
from lenders with overly liberal underwriting standards, changes in the types of
mortgage loans offered, significant upward resets on adjustable rate loans,
fraud and other factors. 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. For additional information concerning
TrustCo’s loan portfolio and non-performing loans, please refer to the
discussions under “Loans” and “Nonperforming Assets,”
respectively. Further, the Company does not rely on borrowed funds to
support its assets and maintains a very significant level of liquidity on the
asset side of the balance sheet.
For the
third quarter of 2009, the net interest margin increased to 3.42% from 3.04% for
the third quarter of 2008. The margin also improved relative to the
3.24% recorded in the second quarter of 2009. The quarterly results
reflect the following significant factors:
-
|
The
average balance of federal funds sold and other short-term investments
decreased by $234.9 million and the average yield decreased 57 basis
points to 1.50% in the third quarter of 2009 compared to the same period
in 2008. 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 decline in the average balance reflects
the decision to reallocate into securities as a result of the low returns
generally available on federal funds and short-term
investments.
|
-
|
The
average balance of securities available for sale, held-to-maturity
securities and trading securities increased by $266.8 million and the
average yield decreased to 3.38% from 4.22% for the third quarter of 2009
compared to the same period in 2008. The increase in balances
is primarily the result of a shift from federal funds, as
noted.
|
-
|
The
average loan portfolio grew by $160.4 million to $2.20 billion and the
average yield decreased 42 basis points to 5.66% in the third quarter of
2009 compared to the same period in 2008. The decline in the
average yield reflects the decline in market interest rates on new loans
and variable rate loans.
|
-
|
The
average balance of interest bearing liabilities (primarily deposit
accounts) increased $184.1 million and the average rate paid decreased 88
basis points to 1.49% in the third quarter of 2009 compared to the same
period in 2008. The decline in the rate paid on interest
bearing liabilities reflects the decline in market interest rates and
changes in competitive conditions.
|
During
the third quarter of 2009 the Company continued to focus on its strategy to
expand the loan portfolio by offering competitive interest rates as the rate
environment changed. Management believes that the TrustCo residential
real estate loan product is very competitive compared to local and national
competitors. As noted, 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 as well as the fact that housing prices in the
Company’s primary markets have not experienced the declines realized in other
areas of the country. The withdrawal from the market 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. As noted, the average balance of federal funds
sold and other short-term investments decreased, reflecting a shift towards a
larger held-to-maturity portfolio of investment securities, a larger
available-for-sale portfolio and continued loan growth. More
significant reductions in trading securities were also reflective of the shift
towards a larger held-to-maturity portfolio.
The
strategy on the funding side of the balance sheet continues to be to attract
deposit 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. The decline in the federal 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. However,
the decline in deposit costs has lagged the decline in the Federal Funds target
rate.
Earning
Assets
Total
average interest earning assets increased from $3.34 billion in the third
quarter of 2008 to $3.53 billion in the same period of 2009 with an average
yield of 5.11% in 2008 and 4.72% in 2009. Interest income on average
earning assets declined from $42.6 million in the third quarter of 2008 to $41.7
in the third quarter of 2009, 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 $2.20 billion in the third quarter of 2009 and
$2.04 billion in the comparable period in 2008. The yield on loans
decreased 42basis points to
5.66%. The higher average balances slightly more than offset the
lower yield, leading to an increase in the interest income on loans from $31.1
million in the third quarter of 2008 to $31.2 million in the third quarter of
2009.
Compared
to the third quarter of 2008, the average balance of the loan portfolio during
the third quarter of 2009 increased in residential and home equity loans, but
declined in commercial and consumer loans. The average balance of
residential mortgage loans was $1.65 billion in 2009 compared to $1.51 billion
in 2008, an increase of 9.0%. The average yield on residential
mortgage loans decreased by 21 basis points to 5.92% in the third quarter of
2009 compared to 2008.
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,
decreased $10.7 million to an average balance of $284.1 million in the third
quarter of 2009 over the prior year. The average yield on this
portfolio decreased 59 basis points to 5.94% 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 decreased 139 basis points to 3.60%
during the third quarter of 2009 compared to 2008. 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 as well as low initial rates for new
lines. The average balances of home equity lines increased 15.7% to
$268.4 million in the third quarter of 2009 as compared to the prior
year.
Securities
Available-for-Sale
The
average balance of the securities available-for-sale portfolio for the third
quarter of 2009 was $612.9 million compared to $546.5 million for the comparable
period in 2008. The average yield was 3.70% for the third quarter of
2009 and 5.00% for the third quarter of 2008. This portfolio is
primarily comprised of bonds issued by government sponsored enterprises (such as
Fannie Mae, the Federal Home Loan Bank, and Freddie Mac), municipal bonds,
mortgage-backed securities and collateralized mortgage obligation
bonds. These securities are recorded at fair value with any
adjustment included in other comprehensive income.
Trading
Securities
The
average balance of trading securities for the third quarter of 2009 was $1.0
million, compared to $220.8 million in the comparable period of
2008. The decline in balances was due to maturities and calls of
securities. The average yield on trading securities was 4.44% for the
third quarter of 2009, compared to 2.57% for the comparable period in
2008. The sole remaining security held as trading securities is a
short term municipal bond. The balance for this bond is recorded at
fair value with any such adjustment recorded to the income
statement. TrustCo does not own any equity securities of Fannie Mae
or Freddie Mac in any of its portfolios.
Held-to-Maturity
Securities
The
average balance of held-to-maturity securities was $560.8 million for the third
quarter of 2009 and the period-end balance was $552.1 million. At
year-end 2008, the balance was $264.7 million. The average yield was
3.02% for the 2009 period compared to 3.77% for the year earlier
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, mortgage-backed securities and corporate bonds. The
balances for these bonds are recorded at amortized cost.
Securities
Portfolios
The
unrealized gain in the available-for-sale securities portfolios increased from
$494 thousand at December 31, 2008 to $6.8 million as of September 30, 2009
primarily due to changes in interest rates.
Federal
Funds Sold and Other Short-term Investments
The 2009
third quarter average balance of federal funds sold and other short-term
investments was $149.4 million, a $234.9 million decline from the $384.3 million
average for the same period in 2008. The portfolio yield decreased
from 2.07% in 2008 to 1.50% in 2009. Changes in the yield resulted
from changes in the target rate set by the Federal Reserve Board for federal
funds sold. Interest income from this portfolio decreased by
approximately $1.4 million from $2.0 million in 2008 to $0.6 million in 2009,
due to both the decline in yield and the lower 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
$2.81 billion during the third quarter of 2008 to $2.99 billion in the third
quarter of 2009, and the average rate paid decreased from 2.39% for 2008 to
1.48% for 2009. Total interest expense on these deposits decreased
$5.7 million to $11.2 million in the third quarter of 2009 compared to the year
earlier period.
Average
short-term borrowings for the quarter were $104.5 million in 2009 compared to
$100.1 million in 2008. The average rate decreased during this time
period from 1.92% in 2008 to 1.60% in 2009. Rates on short-term
borrowings tend to change with the Federal Funds rate.
Net
Interest Income
Taxable
equivalent net interest income increased by $4.8 million to $30.1 million in the
third quarter of 2009 as compared to the same period in 2008. The net
interest spread increased from 2.74% in the third quarter of 2008 to 3.23% in
2009. The net interest margin increased by 38 basis points to 3.42% for the
third quarter of 2009.
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 September 30, 2009:
Nonperforming loans: Total nonperforming loans were
$44.1 million at September 30, 2009, a nominal increase from $43.9 million at
June 30, 2009 and from $33.9 million at December 31, 2008. There were
$43.6 million of nonaccrual loans at September 30, 2009 compared to the $43.5
million at June 30, 2009 and $32.7 million at December 31,
2008. Restructured loans were $405 thousand at September 30, 2009
compared to $418 at June 30, 2009 and $598 thousand at December 31,
2008. There were no loans at September 30, 2009 that were past due 90
days or more and still accruing interest, compared to $594 thousand at December
31, 2008.
At
September 30, 2009, nonperforming loans include a mix of commercial and
residential loans. Of total nonperforming loans of $44.1 million,
$32.0 million were residential real estate loans and $12.0 million were
commercial mortgages, compared to $31.5 million and $12.3 million, respectively
at June 30, 2009 and $24.1 million and $9.8 million, respectively as of December
31, 2008.
As
previously noted, a significant percentage of non-performing loans (NPLs) are
residential real estate loans (73% at September 30, 2009 and 71% at December 31,
2008), which are historically lower-risk than most other types of
loans. The Bank’s loan loss experience on these loans has been very
strong with net charge-offs/(recoveries) of 0.39% of average residential real
estate loans (including home equity lines of credit) for the first nine months
of 2009 (annualized) compared to 0.12% for the same period in
2008. Therefore, while the level of nonperforming loans has
increased, the Company does not believe this represents a significant level of
increased risk of loss in the current loan portfolios. Management
believes that these loans have been appropriately written down where
required.
Further,
a relatively insignificant portion of the Company’s residential real estate
loans are in the Florida markets, which the Company has recently
entered. Loan origination in these areas has decreased and
underwriting standards revised to correspond to the risks in these
markets.
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 primarily in these markets.
Management
is aware of no other loans in the Bank’s portfolio that pose material risk of
the eventual non-collection of principal and interest. Also as of
September 30, 2009, 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 $12.0 million of nonaccrual commercial mortgages
and loans classified as impaired as of September 30, 2009, compared to $12.3
million at June 30, 2009 and $9.8 million as of December 31,
2008. There were $405 thousand of impaired retail loans at September
30, 2009, compared to $418 thousand at June 30, 2009 and $598 thousand at
December 31, 2008. The average balances of all impaired loans were
$12.9 million during the third quarter of 2009 and $12.9 million in the second
quarter of 2009. The Company recognized approximately $42 thousand of
interest income on these loans in the first nine months of 2009 and
approximately $265 thousand for all of 2008.
At
September 30, 2009 there was $7.5 million of foreclosed real estate as compared
to $6.9 million at June 30, 2009 and $1.9 million at December 31,
2008.
During
the third quarter of 2009, there were $500 thousand of gross commercial loan
charge offs and $2.4 million of gross residential mortgage and consumer loan
charge-offs as compared with no commercial loan charge-offs and $1.1 million of
residential mortgage and consumer loan charge-offs in the third quarter of
2008. Gross recoveries during the third quarter of 2009 were $6
thousand for commercial loans and $355 thousand for residential mortgage and
consumer loans, compared to $43 thousand for commercial loans and $247 thousand
for residential and consumer in the third quarter of 2008.
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 incurred in the loan
portfolio.
At
September 30, 2009, the allowance for loan losses was $36.8 million, compared to
the December 31, 2008 balance of $36.1 million. The allowance
represents 1.65% of the loan portfolio as of September 30, 2009 compared to
1.67% at December 31, 2008. The decline in this ratio compared to
prior periods primarily reflects continued growth in the loan
portfolio. The Company considers that there is 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. Further, this slight
reduction reflects the Company’s historically strong net charge-off(recovery)
levels and the high percentage of nonperforming loans which are made up of
lower-risk residential real estate loans.
The
provision for loan losses was $3.2 million for the quarter ended September 30,
2009 compared to $1.0 million for the third quarter of 2008 and to $2.8 million
in the quarter ended June 30, 2009. Net charge-offs for the
three-month period ended September 30, 2009 were $2.5 million compared to net
charge-offs of $807 thousand for the comparable period in 2008 and $2.8 million
in the period ended June 30, 2009. The provision for loan losses was
increased on a quarter-to-date basis primarily due to net charge-offs,
considerations of general economic trends throughout the Company’s market areas
and to a lesser extent the 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:
|
·
|
The
magnitude and nature of the recent loan charge offs and
recoveries,
|
|
·
|
The
growth in the loan portfolio and the implication that has in relation to
the economic climate in the bank’s business territory,
and
|
|
·
|
The
economic environment in the Company’s market
areas.
|
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 third quarter of 2009 was $5.0 million, compared to
$4.8 million in the prior year period. Excluding trading gains and
losses and net securities transactions, non-interest income decreased from $4.7
million in the third quarter of 2008 to $4.1 million in the third quarter of
2009. Trading gains and net gains on securities transactions were
$886 thousand in the third quarter of 2009, compared to gains of $35 thousand in
the third quarter of 2008. With the reduction in the size of the
portfolio of trading securities, the levels of trading gains or losses is likely
to be insignificant going forward.
For the
first nine months of 2009, total noninterest income was $14.3 million, compared
to $13.3 million in the prior year period. Excluding trading gains
and losses and net securities transactions, non-interest income increased to
$13.7 million in 2009 from $13.1 million in 2008. Trading losses and
net losses on securities transactions were $612 thousand in 2009, compared to
gains of $210 thousand in 2008.
Trust
department income decreased to $1.1 million for the third quarter of 2009
compared to $1.3 million in the third quarter of 2008. Trust department assets
under management were $752 million at September 30, 2009 compared to $884
million at September 30, 2008. The decline in trust assets was due
primarily to declines in equity market valuations. The decline in trust fee
income is a result of lower assets under management. For the first
nine months of 2009, trust department income was $3.7 million, down $374
thousand from the prior year, reflecting lower equity market valuations partly
mitigated by a non-recurring estate administration fee earned in the first nine
months of 2009.
Fees for
other services to customers plus other income decreased to $3.0 million in the
third quarter of 2009 compared to $3.5 million in the same period in
2008. For the first nine months of 2009, fees for other services to
customers plus other income were $9.9 million, up from $9.0 million in 2008,
again reflecting changes in fee policies and fees being charged on a larger
customer base.
Noninterest
Expenses
Total
noninterest expense increased from $14.7 million for the three months ended
September 30, 2008 to $18.7 million for the three months ended September 30,
2009, with increases in each major expense category. The most
significant increase was in insurance, which rose from $418 thousand in the
third quarter of 2008 to $1.5 million in the third quarter of
2009. The increase was due to the increase in FDIC
insurance assessments. Similarly, insurance costs for the first nine
months of 2009 were $6.3 million, up $5.1 million from the prior year, with
essentially the entire increase due to higher FDIC assessments. Both
the special and regular assessment changes impacted all FDIC insured
institutions for the nine months ended September 30, 2009. The FDIC
is currently proposing a plan to restore the Deposit Insurance Fund to its
mandated level by having insured depository institutions prepay their estimated
assessments for 2010 through 2012 on December 30, 2009. The estimate
would incorporate a 3 basis point increase in the premium rate beginning in
2011, and would assume 5% annual deposit growth. This prepaid item
would be expensed over the covered time period, with adjustments made for the
premium rate change and actual deposit growth rates.
Salaries
and employee benefits increased $921 thousand to $6.7 million for third quarter
of 2009. Higher salaries and benefits are primarily due to increased
staffing related to the branch expansion initiative. Full time
equivalent headcount was 727 as of September 30, 2009, compared to 726 as of
June 30, 2009 and 696 as of September 30, 2008. For the first nine
months of 2009, salaries and employee benefits were $19.9 million, up $3.0
million from the prior year. Net occupancy expense increased $472
thousand to $3.4 million during the third quarter of 2009 compared to the
year-ago period and were up $1.5 million to $10.5 million for the first nine
months compared to the prior year. 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 $377 thousand to $1.4
million in the third quarter of 2009 and by $681 thousand to $3.8 million for
the first nine months of 2009, also reflecting new offices and general
growth.
Professional
services and outsourced services were up a combined $428 thousand to $2.7
million in the third quarter of 2009 compared to a year earlier, and were up
$1.4 million to $8.2 million for the first nine months of 2009. The
largest component of the increase was related to the increased level of problem
loans. ORE expenses increased by $782 thousand to $719 thousand as
the number of foreclosed properties has increased. Advertising
expenses decreased by $37 thousand to $742 thousand in the third quarter of 2009
compared to the prior year. For the first nine months of 2009,
ORE expenses were up $1.6 million to $1.5 million and advertising was up $649
thousand to $2.3 million compared to the first nine months of 2008.
Income
Taxes
In the
third quarter of 2009, TrustCo recognized income tax expense of $4.8 million as
compared to $4.7 million for the same period in 2008. The effective
tax rates were 37.7% and 34.4% for the third quarters of 2009 and 2008,
respectively. The tax expense on the Company’s income was different
than tax expense at the statutory rate of 35%, due to tax exempt income and the
effect of state income taxes, and in the 2009 period, a $360 thousand charge due
to a final IRS tax decision. In the first nine months of 2009,
TrustCo recognized income tax expense of $10.4 million as compared to $13.3
million for the same period in 2008. The effective tax rates were
34.7% and 33.0% for the first nine months of 2009 and 2008,
respectively.
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 September 30, 2009 was $244.7 million, compared to
$236.0 million at year-end 2008. TrustCo declared a dividend of $0.0625 per
share in the third quarter of 2009. This results in a dividend payout
ratio of 60.5% based on third quarter 2009 earnings per share of
$0.103
The
Company achieved the following ratios as of September 30, 2009 and
2008:
|
|
September
30,
|
|
|
Minimum
Regulatory
|
|
|
|
2009
|
|
|
2008
|
|
|
Guidelines
|
|
Tier
1 risk adjusted capital
|
|
|
12.45 |
% |
|
|
12.62 |
% |
|
|
4.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
risk adjusted capital
|
|
|
13.71 |
% |
|
|
13.88 |
% |
|
|
8.00 |
% |
In
addition, at September 30, 2009, the consolidated equity to total assets ratio
(excluding the mark to market effect of securities available for sale) was
6.65%, compared to 6.73% at December 31, 2008, 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 2008 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.
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 appreciation
(depreciation), net of tax, in the available for sale portfolio of $2.5 million
in 2009 and ($2.9) million in 2008. 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
Month
|
|
|
2009
|
|
|
|
|
|
Three
Month
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars
in thousands)
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Change
in Interest Income/ Expense
|
|
|
Variance
Balance Change
|
|
|
Variance
Rate Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasuries
|
|
$ |
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
$ |
2,027 |
|
|
$ |
10 |
|
|
|
1.99
|
% |
|
|
(10 |
) |
|
|
(10 |
) |
|
|
- |
|
U.
S. Gov't Sponsored Enterprises
|
|
|
366,595 |
|
|
|
2,314 |
|
|
|
2.52
|
% |
|
|
284,470 |
|
|
|
3,334 |
|
|
|
4.69
|
% |
|
|
(1,020 |
) |
|
|
4,352 |
|
|
|
(5,372 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed
securities and collateralized mortgage obligations
|
|
|
125,503 |
|
|
|
1,463 |
|
|
|
4.66
|
% |
|
|
145,757 |
|
|
|
1,700 |
|
|
|
4.67
|
% |
|
|
(237 |
) |
|
|
(233 |
) |
|
|
(4 |
) |
States
and political subdivisions
|
|
|
99,560 |
|
|
|
1,594 |
|
|
|
6.40
|
% |
|
|
104,200 |
|
|
|
1,714 |
|
|
|
6.58
|
% |
|
|
(120 |
) |
|
|
(74 |
) |
|
|
(46 |
) |
Other
|
|
|
21,214 |
|
|
|
302 |
|
|
|
5.69
|
% |
|
|
10,030 |
|
|
|
74 |
|
|
|
2.94
|
% |
|
|
228 |
|
|
|
124 |
|
|
|
104 |
|
Total
securities available for sale
|
|
|
612,872 |
|
|
|
5,673 |
|
|
|
3.70
|
% |
|
|
546,484 |
|
|
|
6,832 |
|
|
|
5.00
|
% |
|
|
(1,159 |
) |
|
|
4,159 |
|
|
|
(5,318 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
funds sold and other short-term Investments
|
|
|
149,440 |
|
|
|
565 |
|
|
|
1.50
|
% |
|
|
384,348 |
|
|
|
1,999 |
|
|
|
2.07
|
% |
|
|
(1,434 |
) |
|
|
(989 |
) |
|
|
(445 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.
S. Gov't Sponsored Enterprises
|
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
217,189 |
|
|
|
1,395 |
|
|
|
2.57
|
% |
|
|
(1,395 |
) |
|
|
(1,395 |
) |
|
|
- |
|
States
and political subdivisions
|
|
|
1,044 |
|
|
|
12 |
|
|
|
4.44
|
% |
|
|
3,611 |
|
|
|
22 |
|
|
|
2.45
|
% |
|
|
(10 |
) |
|
|
(72 |
) |
|
|
62 |
|
Total
Trading Securities
|
|
|
1,044 |
|
|
|
12 |
|
|
|
4.44
|
% |
|
|
220,800 |
|
|
|
1,417 |
|
|
|
2.57 |
|
|
|
(1,405 |
) |
|
|
(1,467 |
) |
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held
to Maturity Agencies
|
|
|
266,921 |
|
|
|
1,614 |
|
|
|
2.42
|
% |
|
|
99,069 |
|
|
|
840 |
|
|
|
3.39
|
% |
|
|
774 |
|
|
|
2,306 |
|
|
|
(1,532 |
) |
Held
to Maturity Corp. Bonds
|
|
|
76,004 |
|
|
|
842 |
|
|
|
4.43
|
% |
|
|
41,621 |
|
|
|
486 |
|
|
|
4.67
|
% |
|
|
356 |
|
|
|
523 |
|
|
|
(167 |
) |
Held
to Maturity GNMA
|
|
|
217,911 |
|
|
|
1,781 |
|
|
|
3.27
|
% |
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
1,781 |
|
|
|
1,781 |
|
|
|
- |
|
Total
Held to Maturities
|
|
|
560,836 |
|
|
|
4,237 |
|
|
|
3.02
|
% |
|
|
140,690 |
|
|
|
1,326 |
|
|
|
3.77
|
% |
|
|
2,911 |
|
|
|
4,610 |
|
|
|
(1,699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Loans
|
|
|
284,123 |
|
|
|
4,218 |
|
|
|
5.94
|
% |
|
|
294,831 |
|
|
|
4,815 |
|
|
|
6.53
|
% |
|
|
(597 |
) |
|
|
(171 |
) |
|
|
(426 |
) |
Residential
mortgage loans
|
|
|
1,646,830 |
|
|
|
24,367 |
|
|
|
5.92
|
% |
|
|
1,511,412 |
|
|
|
23,153 |
|
|
|
6.13
|
% |
|
|
1,214 |
|
|
|
5,470 |
|
|
|
(4,256 |
) |
Home
equity lines of credit
|
|
|
268,387 |
|
|
|
2,436 |
|
|
|
3.60
|
% |
|
|
231,869 |
|
|
|
2,906 |
|
|
|
4.99
|
% |
|
|
(470 |
) |
|
|
2,158 |
|
|
|
(2,628 |
) |
Installment
loans
|
|
|
4,613 |
|
|
|
171 |
|
|
|
14.71
|
% |
|
|
5,436 |
|
|
|
198 |
|
|
|
14.50
|
% |
|
|
(27 |
) |
|
|
(45 |
) |
|
|
18 |
|
Loans,
net of unearned income
|
|
|
2,203,953 |
|
|
|
31,192 |
|
|
|
5.66
|
% |
|
|
2,043,548 |
|
|
|
31,072 |
|
|
|
6.08
|
% |
|
|
120 |
|
|
|
7,412 |
|
|
|
(7,292 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest earning assets
|
|
|
3,528,145 |
|
|
|
41,679 |
|
|
|
4.72
|
% |
|
|
3,335,870 |
|
|
|
42,646 |
|
|
|
5.11
|
% |
|
|
(967 |
) |
|
|
13,725 |
|
|
|
(14,692 |
) |
Allowance
for loan losses
|
|
|
(36,588 |
) |
|
|
|
|
|
|
|
|
|
|
(34,859 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
& non-interest earning assets
|
|
|
126,057 |
|
|
|
|
|
|
|
|
|
|
|
130,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
3,617,614 |
|
|
|
|
|
|
|
|
|
|
$ |
3,431,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Bearing Checking Accounts
|
|
$ |
375,801 |
|
|
|
158 |
|
|
|
0.17
|
% |
|
$ |
316,471 |
|
|
|
187 |
|
|
|
0.23
|
% |
|
|
(29 |
) |
|
|
147 |
|
|
|
(176 |
) |
Money
market accounts
|
|
|
341,040 |
|
|
|
1,096 |
|
|
|
1.27
|
% |
|
|
303,613 |
|
|
|
1,296 |
|
|
|
1.70
|
% |
|
|
(200 |
) |
|
|
790 |
|
|
|
(990 |
) |
Savings
|
|
|
651,897 |
|
|
|
774 |
|
|
|
0.47
|
% |
|
|
619,039 |
|
|
|
883 |
|
|
|
0.57
|
% |
|
|
(109 |
) |
|
|
262 |
|
|
|
(371 |
) |
Time
deposits
|
|
|
1,621,769 |
|
|
|
9,159 |
|
|
|
2.24
|
% |
|
|
1,571,659 |
|
|
|
14,505 |
|
|
|
3.67
|
% |
|
|
(5,346 |
) |
|
|
2,996 |
|
|
|
(8,342 |
) |
Total
interest bearing deposits
|
|
|
2,990,507 |
|
|
|
11,187 |
|
|
|
1.48
|
% |
|
|
2,810,782 |
|
|
|
16,871 |
|
|
|
2.39
|
% |
|
|
(5,684 |
) |
|
|
4,195 |
|
|
|
(9,879 |
) |
Short-term
borrowings
|
|
|
104,520 |
|
|
|
422 |
|
|
|
1.60
|
% |
|
|
100,107 |
|
|
|
483 |
|
|
|
1.92
|
% |
|
|
(61 |
) |
|
|
121 |
|
|
|
(182 |
) |
Long-term
debt
|
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
8 |
|
|
|
- |
|
|
|
5.17
|
% |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total
Interest Bearing Liabilities
|
|
|
3,095,027 |
|
|
|
11,609 |
|
|
|
1.49
|
% |
|
|
2,910,897 |
|
|
|
17,354 |
|
|
|
2.37
|
% |
|
|
(5,745 |
) |
|
|
4,316 |
|
|
|
(10,061 |
) |
Demand
deposits
|
|
|
262,911 |
|
|
|
|
|
|
|
|
|
|
|
262,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
20,041 |
|
|
|
|
|
|
|
|
|
|
|
20,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
239,635 |
|
|
|
|
|
|
|
|
|
|
|
238,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liab. & shareholders' equity
|
|
$ |
3,617,614 |
|
|
|
|
|
|
|
|
|
|
$ |
3,431,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income , tax equivalent
|
|
|
|
|
|
|
30,070 |
|
|
|
|
|
|
|
|
|
|
|
25,292 |
|
|
|
|
|
|
|
4,778 |
|
|
|
9,409 |
|
|
|
(4,631 |
) |
Net
Interest Spread
|
|
|
|
|
|
|
|
|
|
|
3.23
|
% |
|
|
|
|
|
|
|
|
|
|
2.74
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest margin (net interest income to total interest earning
assets)
|
|
|
|
|
|
|
|
|
|
|
3.42
|
% |
|
|
|
|
|
|
|
|
|
|
3.04
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
equivalent adjustment
|
|
|
|
|
|
|
(533 |
) |
|
|
|
|
|
|
|
|
|
|
(593 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income
|
|
|
|
|
|
|
29,537 |
|
|
|
|
|
|
|
|
|
|
|
24,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
appreciation (depreciation), net of tax, in the available for sale portfolio of
$2.2 million in 2009 and ($1.2) million in 2008. 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.
|
|
Nine
Month
|
|
|
2009
|
|
|
|
|
|
Nine
Month
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars
in thousands)
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Rate
|
|
|
Change
in Interest Income/ Expense
|
|
|
Variance
Balance Change
|
|
|
Variance
Rate Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasuries
|
|
|
880 |
|
|
|
13 |
|
|
|
1.92
|
% |
|
$ |
1,676 |
|
|
$ |
45 |
|
|
|
3.55
|
% |
|
|
(32 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
U.
S. Gov't Sponsored Enterprises
|
|
|
249,908 |
|
|
|
4,938 |
|
|
|
2.63
|
% |
|
|
255,038 |
|
|
|
9,425 |
|
|
|
4.93
|
% |
|
|
(4,487 |
) |
|
|
(185 |
) |
|
|
(4,302 |
) |
Mortgage-backed
securities and collateralized mortgage obligations
|
|
|
133,289 |
|
|
|
4,626 |
|
|
|
4.63
|
% |
|
|
149,353 |
|
|
|
5,211 |
|
|
|
4.65
|
% |
|
|
(585 |
) |
|
|
(563 |
) |
|
|
(22 |
) |
States
and political subdivisions
|
|
|
101,173 |
|
|
|
4,869 |
|
|
|
6.42
|
% |
|
|
116,404 |
|
|
|
5,869 |
|
|
|
6.72
|
% |
|
|
(1,000 |
) |
|
|
(746 |
) |
|
|
(254 |
) |
Other
|
|
|
12,556 |
|
|
|
447 |
|
|
|
2.50
|
% |
|
|
11,022 |
|
|
|
439 |
|
|
|
5.32
|
% |
|
|
8 |
|
|
|
131 |
|
|
|
(123 |
) |
Total
securities available for sale
|
|
|
497,806 |
|
|
|
14,893 |
|
|
|
3.93
|
% |
|
|
533,493 |
|
|
|
20,989 |
|
|
|
5.25
|
% |
|
|
(6,096 |
) |
|
|
(1,379 |
) |
|
|
(4,717 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
funds sold and other short-term Investments
|
|
|
219,416 |
|
|
|
1,705 |
|
|
|
1.04
|
% |
|
|
422,701 |
|
|
|
8,017 |
|
|
|
2.53
|
% |
|
|
(6,312 |
) |
|
|
(2,837 |
) |
|
|
(3,475 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.
S. Gov't Sponsored Enterprises
|
|
|
18,190 |
|
|
|
405 |
|
|
|
2.97
|
% |
|
|
287,803 |
|
|
|
8,167 |
|
|
|
3.78
|
% |
|
|
(7,762 |
) |
|
|
(6,317 |
) |
|
|
(1,445 |
) |
States
and political subdivisions
|
|
|
1,048 |
|
|
|
35 |
|
|
|
4.42
|
% |
|
|
4,953 |
|
|
|
109 |
|
|
|
2.94
|
% |
|
|
(74 |
) |
|
|
(135 |
) |
|
|
61 |
|
Total
Trading Securities
|
|
|
19,238 |
|
|
|
440 |
|
|
|
3.05
|
% |
|
|
292,756 |
|
|
|
8,276 |
|
|
|
3.77
|
% |
|
|
(7,836 |
) |
|
|
(6,452 |
) |
|
|
(1,384 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held
to Maturity Agencies
|
|
|
304,648 |
|
|
|
5,460 |
|
|
|
2.39
|
% |
|
|
57,843 |
|
|
|
1,573 |
|
|
|
3.63
|
% |
|
|
3,887 |
|
|
|
4,927 |
|
|
|
(1,040 |
) |
Held
to Maturity Corp. Bonds
|
|
|
67,299 |
|
|
|
2,239 |
|
|
|
4.44
|
% |
|
|
21,851 |
|
|
|
763 |
|
|
|
4.66
|
% |
|
|
1,476 |
|
|
|
1,537 |
|
|
|
(61 |
) |
Held
to Maturity GNMA
|
|
|
146,347 |
|
|
|
3,391 |
|
|
|
3.09
|
% |
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
3,391 |
|
|
|
3,391 |
|
|
|
- |
|
Total
Held to Maturities
|
|
|
518,294 |
|
|
|
11,090 |
|
|
|
2.85
|
% |
|
|
79,694 |
|
|
|
2,336 |
|
|
|
3.91
|
% |
|
|
8,754 |
|
|
|
9,855 |
|
|
|
(1,101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Loans
|
|
|
290,657 |
|
|
|
12,935 |
|
|
|
5.93
|
% |
|
|
290,050 |
|
|
|
14,472 |
|
|
|
6.65
|
% |
|
|
(1,537 |
) |
|
|
50 |
|
|
|
(1,587 |
) |
Residential
mortgage loans
|
|
|
1,629,403 |
|
|
|
72,939 |
|
|
|
5.97
|
% |
|
|
1,466,543 |
|
|
|
67,625 |
|
|
|
6.15
|
% |
|
|
5,314 |
|
|
|
8,384 |
|
|
|
(3,070 |
) |
Home
equity lines of credit
|
|
|
261,129 |
|
|
|
7,090 |
|
|
|
3.63
|
% |
|
|
229,414 |
|
|
|
9,198 |
|
|
|
5.36
|
% |
|
|
(2,108 |
) |
|
|
1,748 |
|
|
|
(3,856 |
) |
Installment
loans
|
|
|
4,785 |
|
|
|
528 |
|
|
|
14.74
|
% |
|
|
5,406 |
|
|
|
600 |
|
|
|
14.83
|
% |
|
|
(72 |
) |
|
|
(68 |
) |
|
|
(4 |
) |
Loans,
net of unearned income
|
|
|
2,185,974 |
|
|
|
93,492 |
|
|
|
5.70
|
% |
|
|
1,991,413 |
|
|
|
91,895 |
|
|
|
6.15
|
% |
|
|
1,597 |
|
|
|
10,114 |
|
|
|
(8,517 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest earning assets
|
|
|
3,440,728 |
|
|
|
121,620 |
|
|
|
4.70
|
% |
|
|
3,320,057 |
|
|
|
131,513 |
|
|
|
5.28
|
% |
|
|
(9,893 |
) |
|
|
9,301 |
|
|
|
(19,194 |
) |
Allowance
for loan losses
|
|
|
(36,265 |
) |
|
|
|
|
|
|
|
|
|
|
(34,688 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
& non-interest earning assets
|
|
|
121,755 |
|
|
|
|
|
|
|
|
|
|
|
126,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
3,526,218 |
|
|
|
|
|
|
|
|
|
|
$ |
3,411,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Bearing Checking Accounts
|
|
|
360,045 |
|
|
|
531 |
|
|
|
0.20
|
% |
|
$ |
296,927 |
|
|
|
563 |
|
|
|
0.25
|
% |
|
|
(32 |
) |
|
|
136 |
|
|
|
(168 |
) |
Money
market accounts
|
|
|
315,546 |
|
|
|
3,156 |
|
|
|
1.34
|
% |
|
|
318,811 |
|
|
|
4,669 |
|
|
|
1.96
|
% |
|
|
(1,513 |
) |
|
|
(47 |
) |
|
|
(1,466 |
) |
Savings
|
|
|
637,404 |
|
|
|
2,275 |
|
|
|
0.48
|
% |
|
|
614,718 |
|
|
|
3,149 |
|
|
|
0.68
|
% |
|
|
(874 |
) |
|
|
177 |
|
|
|
(1,051 |
) |
Time
deposits
|
|
|
1,593,153 |
|
|
|
31,564 |
|
|
|
2.65
|
% |
|
|
1,565,843 |
|
|
|
46,970 |
|
|
|
4.01
|
% |
|
|
(15,406 |
) |
|
|
1,330 |
|
|
|
(16,736 |
) |
Total
interest bearing deposits
|
|
|
2,906,148 |
|
|
|
37,526 |
|
|
|
1.73
|
% |
|
|
2,796,299 |
|
|
|
55,351 |
|
|
|
2.64
|
% |
|
|
(17,825 |
) |
|
|
1,596 |
|
|
|
(19,421 |
) |
Short-term
borrowings
|
|
|
98,833 |
|
|
|
1,227 |
|
|
|
1.66
|
% |
|
|
95,300 |
|
|
|
1,507 |
|
|
|
2.11
|
% |
|
|
(280 |
) |
|
|
86 |
|
|
|
(366 |
) |
Long-term
debt
|
|
|
- |
|
|
|
- |
|
|
|
0.00
|
% |
|
|
16 |
|
|
|
1 |
|
|
|
5.24
|
% |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
- |
|
Total
Interest Bearing Liabilities
|
|
|
3,004,981 |
|
|
|
38,753 |
|
|
|
1.72
|
% |
|
|
2,891,615 |
|
|
|
56,859 |
|
|
|
2.63
|
% |
|
|
(18,106 |
) |
|
|
1,681 |
|
|
|
(19,787 |
) |
Demand
deposits
|
|
|
264,153 |
|
|
|
|
|
|
|
|
|
|
|
260,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
19,112 |
|
|
|
|
|
|
|
|
|
|
|
21,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
237,972 |
|
|
|
|
|
|
|
|
|
|
|
238,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liab. & shareholders' equity
|
|
|
3,526,218 |
|
|
|
|
|
|
|
|
|
|
$ |
3,411,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income , tax equivalent
|
|
|
|
|
|
|
82,867 |
|
|
|
|
|
|
|
|
|
|
|
74,654 |
|
|
|
|
|
|
|
8,213 |
|
|
|
7,620 |
|
|
|
593 |
|
Net
Interest Spread
|
|
|
|
|
|
|
|
|
|
|
2.98
|
% |
|
|
|
|
|
|
|
|
|
|
2.65
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest margin (net interest income to total interest earning
assets)
|
|
|
|
|
|
|
|
|
|
|
3.20
|
% |
|
|
|
|
|
|
|
|
|
|
3.00
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
equivalent adjustment
|
|
|
|
|
|
|
(1,627 |
) |
|
|
|
|
|
|
|
|
|
|
(2,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income
|
|
|
|
|
|
|
81,240 |
|
|
|
|
|
|
|
|
|
|
|
72,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantitative
and Qualitative Disclosures about Market Risk
As
detailed in the Annual Report to Shareholders as of December 31, 2008 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-month and nine- month periods ended September 30, 2009,
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 Company has reduced the average balance of
federal funds sold and other short-term investments from $384.3 million in the
third quarter of 2008 to $149.4 million in the third quarter of
2009. These funds were invested in a combination of conservative
agency securities and mortgage-backed securities with short and
intermediate-term expected average lives, and are primarily held in the
held-to-maturity and available-for-sale portfolios. Cash flow has
been used to fund the growth of the loan portfolio.
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.
PART
II
OTHER
INFORMATION
None.
There
were no material changes to the risk factors previously disclosed in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
|
Defaults
Upon Senior Securities
|
None.
|
Submissions
of Matters to Vote of Security
Holders
|
None.
None.
Reg
S-K (Item 601)
Exhibit No.
|
|
Description
|
|
|
|
15
|
|
Crowe
Horwath 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.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
TrustCo
Bank Corp NY
|
|
|
|
|
|
|
|
|
By: /s/Robert J.
McCormick
|
|
|
Robert
J. McCormick
|
|
|
Chairman,
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
By: /s/Robert T.
Cushing
|
|
|
Robert
T. Cushing
|
|
|
Executive
Vice President and Chief Financial Officer
|
|
Date: November
6, 2009
Exhibits
Index
Reg
S-K Exhibit No.
|
|
Description
|
|
|
|
|
|
Crowe
Horwath 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.
|
38