UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2018
Or
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ____________________ to ____________________
Commission file number 0-10592
TRUSTCO BANK CORP NY
(Exact name of registrant as specified in its charter)
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NEW YORK
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14-1630287
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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5 SARNOWSKI DRIVE, GLENVILLE, NEW YORK 12302
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (518) 377-3311
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of exchange on which registered)
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Common Stock, $1.00 Par Value
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The NASDAQ Global Select Market
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes.☒ No.☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes.☐ No. ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes.☒ No.☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yes.☒ No.☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. ☒
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.
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Large Accelerated Filer ☒
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Accelerated Filer ☐
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Non-Accelerated Filer ☐
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Smaller reporting company ☐
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes. ☐ No. ☒
The aggregate market value of the common stock held by non-affiliates as of June 29, 2018, the last business day of the Company’s second fiscal quarter,
was $834 million (based upon the closing price of $8.90 on June 29, 2018 as reported on the NASDAQ Global Select Market).
The number of shares outstanding of the registrant’s common stock as of February 27, 2019 was 96,745,858.
Documents Incorporated by Reference: Portions of registrant’s Proxy Statement filed for its 2019 Annual Meeting of Shareholders to be filed within 120 days of the registrant’s fiscal year end.
INDEX
[NOTE: Index not revised/ updated]
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Description
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Page
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3
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PART I
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Item 1
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3
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Item 1A
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15
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Item 1B
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24
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Item 2
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24
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Item 3
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24
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Item 4
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24
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PART II
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Item 5
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26
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Item 6
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27
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Item 7
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27
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Item 7A
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27
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Item 8
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27
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Item 9
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27
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Item 9A
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28
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Item 9B
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28
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PART III
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Item 10
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28
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Item 11
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28
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Item 12
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28
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Item 13
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29
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Item 14
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29
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PART IV
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Item 15
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29
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30
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31
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USE OF NON-GAAP FINANCIAL MEASURES
The Securities and Exchange Commission (“SEC”) has adopted certain rules with respect to the use of “non-GAAP financial measures”
by companies with a class of securities registered under the Securities Exchange Act of 1934, such as TrustCo. GAAP is generally accepted accounting principles in the United States of America. Under the SEC rules, companies making disclosures
containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure and a
statement of the company’s reasons for utilizing the non-GAAP financial measure as part of its financial disclosures.
A discussion of certain non-GAAP financial measures, including taxable equivalent net interest income and net interest margin and efficiency ratio, used in this
report and in the Annual Report to Shareholders included as Exhibit 13 to this Form 10-K, as well as a reconciliation of these measures to the closest comparable GAAP financial measures, is set forth in the Annual Report to Shareholders included as
Exhibit 13 to this Form 10-K and is incorporated herein by reference.
PART I
General
TrustCo Bank Corp NY (“TrustCo” or the “Company”) is a savings and loan holding company having its principal place of
business at 5 Sarnowski Drive, Glenville, New York 12302. TrustCo was incorporated under the laws of New York in 1981 to be the parent holding company of The Schenectady Trust Company, which subsequently was renamed to Trustco Bank New York and,
later, to Trustco Bank, National Association. The Company’s principal subsidiary, Trustco Bank (also referred to as the “Bank”), is the successor by merger to Trustco Bank, National Association.
Through policy and practice, TrustCo continues to emphasize that it is an equal opportunity employer. There were 854 full-time equivalent employees of TrustCo
at year-end 2018. TrustCo had 11,516 shareholders of record as of December 31, 2018 and the closing price of the TrustCo common stock on that date was $6.86.
Subsidiaries
Trustco Bank
Trustco Bank is a federal savings bank engaged in providing general banking services to individuals, partnerships, and
corporations. At year-end 2018, the Bank operated 161 automatic teller machines and 148 banking offices in Albany, Columbia, Dutchess, Greene, Montgomery, Orange, Putnam, Rensselaer, Rockland, Saratoga, Schenectady, Schoharie, Ulster, Warren,
Washington and Westchester counties of New York, Brevard, Charlotte, Hillsborough, Indian River, Lake, Manatee, Martin, Orange, Osceola, Palm Beach, Polk, Sarasota, Seminole, and Volusia counties in Florida, Bennington County in Vermont, Berkshire
County in Massachusetts and Bergen County in New Jersey. The largest part of such business consists of accepting deposits and making loans and investments. The Bank provides a wide range of both personal and business banking services. The Bank is
supervised and regulated by the federal Office of the Comptroller of the Currency (“OCC”) and is a member of
the Federal Reserve System. Its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) to
the extent permitted by law. The Bank’s subsidiary, Trustco Realty Corp., is a real estate investment trust (or “REIT”) that was formed to acquire, hold and manage real estate mortgage assets, including residential mortgage loans and mortgage backed securities. The income earned on these assets, net
of expenses, is distributed in the form of dividends. Under current New York State tax law, 60% of the dividends received by the Bank from Trustco Realty Corp. are excluded from total taxable income for New York State income tax purposes. The Bank
accounted for substantially all of TrustCo’s 2018 consolidated net income and average assets. The Bank’s other
active subsidiaries, Trustco Insurance Agency, Inc. and ORE Property, Inc., did not engage in any significant business activities during 2018 and 2017.
Trustco Financial Services, the name under which Trustco Bank’s trust department operates, serves as executor of estates and trustee of personal trusts, provides asset and wealth management services, provides estate planning and related advice, provides custodial services, and acts as trustee
for various types of employee benefit plans and corporate pension and profit sharing trusts. The aggregate market value of the assets under trust, custody, or management of the trust department of the Bank was approximately $802.6 million as of
December 31, 2018.
The daily operations of the Bank remain the responsibility of its officers, subject to the oversight of its Board of
Directors and overall supervision by TrustCo. The activities of the Bank are included in TrustCo’s consolidated financial statements.
ORE Subsidiary Corp.
In 1993, TrustCo created ORE Subsidiary Corp., a New York corporation, to hold and manage certain foreclosed properties
acquired by the Bank. The accounts of this subsidiary are included in TrustCo’s consolidated financial statements.
Competition
TrustCo faces strong competition in its market areas, both in attracting deposits and making loans. The Company’s most direct competition for deposits, historically, has come from commercial banks, savings associations, and credit unions that are located or have branches in the Bank’s market areas. The competition ranges from other locally based commercial banks, savings banks and credit unions to branch offices of the largest financial institutions in the United States. In its principal market areas, the
Capital District area of New York State and Central Florida, TrustCo’s principal competitors are local branch operations of super-regional banks, branch offices of money center
banks, and locally based commercial banks and savings institutions. The Bank is the largest depository institution headquartered in the Capital District area of New York State. The Company also faces competition for deposits from national brokerage
houses, short-term money market funds, and other corporate and government securities mutual funds.
Factors affecting the acquisition of deposits include pricing, office locations and hours of operation, the variety of deposit accounts offered, and the quality
of customer service provided. While loan demand has moderated over the last several years, competition for loans has remained strong. Commercial banks, savings institutions, traditional mortgage brokers affiliated with local offices and nationally
franchised real estate brokers are all active and aggressive competitors. The Company competes in this environment by providing a full range of financial services based on a tradition of financial strength and integrity dating from its inception. The
Company competes for loans principally through the interest rates and loan fees it charges and the efficiency and quality of services it provides to borrowers.
Supervision and Regulation
Banking is a highly regulated industry, with numerous federal and state laws and regulations governing the organization
and operation of banks and their affiliates. As a savings and loan holding company, TrustCo and its non-bank subsidiaries are supervised and regulated by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”). The OCC is the Bank’s primary federal regulator that
supervises and examines the Bank. Under the Home Owners’ Loan Act of 1934 and OCC regulations, Trustco Bank must obtain prior OCC approval for acquisitions, and its business
operations and activities are restricted. Because the FDIC provides deposit insurance to the Bank, the Bank is also subject to its supervision and regulation even though the FDIC is not the Bank’s primary federal regulator.
The following summary of laws and regulations applicable to the Company or the Bank is not intended to be a complete
description of those laws and regulations or their effects on the Company and the Bank, and it is qualified in its entirety by reference to the particular statutory and regulatory provisions described.
Dodd-Frank Wall Street Reform and Consumer Protection
Act and Economic Growth, Regulatory Relief and Consumer Protection Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted in July 2010 and created dramatic changes across the financial regulatory system. Implementation of the Dodd-Frank Act required many new rules to be made by various
federal regulatory agencies, including TrustCo’s and the Bank’s regulatory agencies. The Dodd-Frank Act
included provisions that, among other effects, created a new agency, statutorily known as the Bureau of Consumer Financial Protection (the “BCFP”), to centralize responsibility for consumer financial protection and be responsible for implementing, examining and enforcing compliance with major federal consumer financial laws, imposed new consumer
protection requirements in mortgage loan transactions and increased the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor.
In May 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Regulatory Relief Act”), was enacted to modify or remove certain financial
reform rules and regulations, including some of those implemented under the Dodd-Frank Act. While the Regulatory Relief Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory
framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion. Many of these changes could result in meaningful regulatory changes for community banks such as the Bank, and
their holding companies.
The Regulatory Relief Act, among other matters, expands the definition of qualified mortgages which may be held by a financial institution and simplifies the
regulatory capital rules for financial institutions and their holding companies with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” of between 8
and 10 percent. Any qualifying depository institution or its holding company that exceeds the “community bank leverage ratio” will be considered to have met generally applicable leverage and risk-based regulatory capital requirements and any
qualifying depository institution that exceeds the new ratio will be considered to be “well capitalized” under the prompt corrective action rules. In addition, the Regulatory Relief Act includes regulatory relief for community banks regarding
regulatory examination cycles, call reports, the Volcker Rule (proprietary trading prohibitions), mortgage disclosures and risk weights for certain high-risk commercial real estate loans.
It is difficult at this time to predict when or how any new standards under the Dodd-Frank Act or the Regulatory Relief Act will ultimately be applied to the
Bank or the Company or what specific impact the Regulatory Relief Act and the yet-to-be-written implementing rules and regulations will have on the Bank.
Dividends
Most of TrustCo’s revenues consist of cash
dividends paid to TrustCo by the Bank, payment of which is subject to various regulatory limitations. The payment of dividends by the Bank to TrustCo is subject to continued compliance with minimum regulatory capital requirements, and the receipt of
regulatory approval (or non-objection) from the Bank’s and the Company’s regulators.
OCC regulations impose limitations upon all capital distributions by the Bank, including cash dividends, payments to
repurchase bank stock, and payments to stockholders of another institution in a cash-out merger. Under the regulations, an application to and the approval of the OCC is required prior to any capital distribution if the institution does not meet the
criteria for “expedited treatment” of applications under OCC regulations (generally, examination ratings in
the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or
the distribution would otherwise be contrary to a statute, regulation or agreement with the OCC. If an application is not required, the institution must still provide prior notice to the OCC and the Federal Reserve Board of the capital distribution
if, like the Bank, it is a subsidiary of a savings and loan holding company. The OCC may disapprove a dividend if the institution would be undercapitalized following the distribution, the proposed capital distribution raises safety and soundness
concerns, or the capital distribution would violate a prohibition contained in any statue, regulation or agreement between the bank and a regulator or a condition imposed in a previously approved application or notice.
As noted above, a savings institution, such as the Bank, that is a subsidiary of a savings and loan holding company and
that proposes to make a capital distribution must also submit written notice to the Federal Reserve Board prior to such distribution, and Federal Reserve Board may object to the distribution based on safety and soundness or other concerns. The
Federal Reserve Board may deny a dividend notice if following the dividend, the savings association will be less than adequately capitalized, the proposed dividend raises safety and soundness concerns or the proposed dividend violates a prohibition
contained in any statute, regulation, enforcement action or agreement between the thrift or holding company and an appropriate federal banking agency, a condition imposed on the savings association or holding company in an application or notice
approved by an appropriate federal banking agency or any formal or informal enforcement action involving the savings association or holding company.
Compliance with regulatory standards regarding capital distributions could also limit the amount of dividends that
TrustCo may pay to its shareholders.
See Note 14 to the consolidated
financial statements contained in TrustCo’s Annual Report to Shareholders for the year ended December 31, 2018 for information concerning the Bank’s regulatory capital requirements.
Regulatory Capital Requirements and Prompt Corrective Action.
Regulatory Capital Rules. The Company and
the Bank are subject to regulatory capital requirements contained in rules published by the Federal Reserve Board, FDIC and OCC. The rules establish a comprehensive capital framework for all U.S. banking organizations designed to implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. The rules were effective for
the Company and the Bank on January 1, 2015, with full compliance with all of the final rule’s requirements being phased in over a multi-year schedule. Calendar year 2018 was the
final year of implementation of the capital rules and the capital rules are fully phased in effective January 1, 2019. Prior to January 2015, the Company was not subject to consolidated regulatory capital requirements.
The capital rules, among other things, provide a “Common
Equity Tier 1” (“CET1”) capital measure.
CET1 capital is generally defined as common stock instruments that meet the eligibility criteria in the final capital rule (generally, instruments representing the most subordinated claim upon liquidation, having no maturity date and being redeemable
via discretionary purchases only with regulatory approval, not being subject to any expectations that the stock will be repurchased, redeemed or cancelled and not being secured by the banking organization or any related entity), retained earnings,
accumulated other comprehensive income and common equity Tier 1 minority interests, subject to certain limitations. Tier 1 capital for the Company and the Bank consists of CET1 capital plus “additional Tier 1 capital,” which generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity
accounts of consolidated subsidiaries. Also under the capital rules, total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements, and may include
cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum
of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of accumulated other comprehensive income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have
AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). The Company has made this opt-out election. Calculation of all types of regulatory capital is subject to deductions and
adjustments specified in the regulations.
The capital rules also increased the Tier 1 capital ratio requirement, changed the total assets utilized in the Tier 1
leverage ratio calculation from total assets at quarter end to average total assets during the quarter, changed the risk-weightings of certain assets for purposes of risk-based capital ratios, created an additional “capital conservation buffer” over the required capital ratios, and changed what qualifies as capital for purposes of meeting the various
capital requirements.
Under the capital rules, the minimum capital ratios are:
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4.5% CET1 to risk-weighted assets;
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6.0% Tier 1 capital to risk-weighted assets;
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8.0% Total capital to risk-weighted assets; and
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4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (the “leverage ratio”).
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At December 31, 2018, the Bank had a Tier 1 leverage ratio (Tier 1 capital to total average consolidated assets) of 9.77%, CET1 capital ratio (CET1 capital to
risk-weighted assets) of a 18.23% Tier 1 capital ratio (Tier 1 capital to risk-weighted assets) of 18.23%, and a total capital ratio (total capital to risk-weighted assets) of 19.49%. Also at December 31, 2018, the Company had a Tier 1 leverage
ratio (Tier 1 capital to total average consolidated assets) of 10.13% CET1 capital ratio (CET1 capital to risk-weighted assets) of 18.79% a Tier 1 capital ratio (Tier 1 capital to risk-weighted assets) of 18.79% and a total capital ratio (total
capital to risk-weighted assets) of 20.04%.
As noted above, the capital rules require the Company’s
and the Bank’s capital to exceed the regulatory standards plus a capital conservation buffer in order to avoid constraints on dividends, equity repurchases and certain
compensation. To meet the requirement when it is fully phased in, the organization must maintain an amount of CET1 capital that exceeds the buffer level of 2.5% above each of the minimum risk-weighted asset ratios. To avoid capital conservation
buffer constraints, a banking organization must maintain the following capital ratios: (1) CET1 to risk-weighted assets of more than 7.0%, (ii) Tier 1 capital to risk-weighted assets of more than 8.5%, and (iii) total capital (Tier 1 plus Tier 2) to
risk-weighted assets of more than 10.5%.
The OCC has the ability to establish an individual minimum capital requirement for a particular institution, which varies from the capital
levels that would otherwise be required under the capital regulations, based on such factors as concentrations of credit risk, levels of interest rate risk, and the risks of non-traditional activities as well as others. The OCC has not imposed any
such requirement on the Bank.
The new capital rules modify the calculation of risk-weighted assets, although they generally continue the treatment of
residential mortgages under the prior rules. Under the rules, a bank may assign a 50% risk weight to a first-lien residential mortgage exposure that:
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Is secured by property that is owner-occupied or rented,
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Is made in accordance with “prudent underwriting standards,” including loan-to-value ratios,
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Is not 90 days or more past due or in nonaccrual status, and
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Is not restructured or modified.
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Other first-lien residential exposures, as well as junior-lien exposures if the bank does not hold the first lien, are
assigned a 100% risk weight.
The exposure amount for on-balance sheet assets is generally the carrying value of the exposure as determined under
GAAP. If a banking organization has elected to opt out of the accumulated other comprehensive income provisions discussed above, the exposure amount for available for sale or held-to-maturity debt securities is the carrying value (including accrued
but unpaid interest and fees) of the exposure, less any net unrealized gains plus any unrealized losses. Further, the new rules retain the prior risk-weighting rules for exposures to debt directly and unconditionally guaranteed by the U.S. federal
government and its agencies. Such exposures receive a 0% risk weight. Exposures conditionally guaranteed by the federal government, Federal Reserve Board or a federal government agency would receive a 20% risk weight. Further, the capital rules
assign a 20% risk weight to non-equity exposures to government-sponsored entities (“GSEs”) and a 100% risk
weight to preferred stock issued by a GSE. The new rules define a GSE as an entity established or chartered by the federal government to serve public purposes but whose debt obligations are not “explicitly guaranteed” by the full faith and credit of the federal government. Banking organizations must assign a 20% risk weight to general obligations of a
public sector entity (for example, a state, local authority or other governmental subdivision below the sovereign level) that is organized under U.S. law and a 50% risk weight for a revenue obligation of such an entity.
Prompt Corrective Action. Federal banking
regulations also establish a “prompt corrective action” capital framework for the classification of insured
depository institutions, such as Trustco Bank, into five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. The federal banking agencies are required to take
certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution or its holding company. Such actions could have a direct material effect on an institution’s or its holding company’s financial condition and activities. Under the prompt corrective action rules currently in effect, an
institution is deemed to be (a) ”well-capitalized” if it has total risk-based capital of 10.0% or more, has a
Tier 1 risk-based capital ratio of 8.0% or more, has a CET1 risk based capital ratio of 6.5% or more, and has leverage capital ratio of 5.0% or more and is not subject to any order or final capital directive to meet and maintain a specific capital
level for any capital measure; (b) ”adequately capitalized” if it has a total risk-based capital ratio of
8.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more, a CET1 risk based capital ratio of 4.5% or more and has a leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of well-capitalized;
(c) ”undercapitalized” if it has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based
capital ratio that is less than 6.0%, a CET1 capital ratio less than 4.5% or a Tier 1 leverage capital ratio that is less than 4.0%; (d) ”significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital ratio that is less than 4.0%, a CET1 capital ratio less than 3% or a Tier 1 leverage
capital ratio that is less than 3.0%; and (e) ”critically undercapitalized” if it has a ratio of tangible
equity to total assets that is equal to or less than 2.0%. In certain situations, a federal banking agency may reclassify a well-capitalized institution as adequately capitalized and may require an adequately capitalized or undercapitalized
institution to comply with supervisory actions as if the institution were in the next lower category.
A depository institution is generally prohibited from making any capital distributions (including payment of a
dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be undercapitalized. Undercapitalized institutions also are subject to growth limitations and are required to submit a capital
restoration plan to the regulatory agencies. The agencies may not accept such a plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. In addition, for a capital restoration plan to be acceptable, the depository institution’s parent
holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company is limited to the lesser of (i) an amount equal to 5.0% of the depository institution’s total assets at the time it became undercapitalized and (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital
standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.”
“Significantly undercapitalized” depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.
At December 31, 2018 and 2017, each of TrustCo and Trustco Bank met all capital adequacy requirements to which it was
subject under the OCC and FRB regulations.
Holding Company Activities
The activities of savings and loan holding companies are governed, and limited, by the Home Owners’ Loan Act and the Federal Reserve Board’s regulations. In general, TrustCo’s activities are limited to those permissible for “multiple”
savings and loan holding companies (that is, savings and loan holding companies owning more than one savings association subsidiary) as of March 5, 1987, activities permitted for bank holding companies as of November 12, 1999, and activities
permissible for “financial holding companies” (which are described below). Activities permitted to multiple
savings and loan holding companies include certain real estate investment activities, and other activities permitted to bank holding companies under the Bank Holding Company Act. Activities permissible for a financial holding company are those
considered financial in nature (including securities and insurance activities) or those incidental or complementary to financial activities.
A savings and loan holding company is prohibited from, directly or indirectly, acquiring more than 5% of the voting
stock of another financial institution or savings and loan holding company without the prior written approval of the Federal Reserve Board. In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board
considers the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the deposit insurance fund, the convenience and needs of the community and competitive
factors.
The Federal Reserve may not approve any acquisition that would result in a multiple savings and loan holding company
controlling savings institutions in more than one state, subject to two exceptions: (i) the approval of interstate supervisory acquisitions by savings and loan holding companies and (ii) the acquisition of a savings institution in another state if
the laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.
Beginning in 2015, TrustCo became subject to formal regulatory capital requirements and is now obligated to hold
capital in the same amount and type that is required for insured depository institutions such as the Bank. Please refer to the discussion above under “Regulatory Capital
Requirements and Prompt Corrective Action -- New Regulatory Capital Rules.”
In addition, the financial impact of a holding company on its subsidiary institution is a matter that is evaluated by
the Federal Reserve Board, and the agency has authority to order cessation of activities or divestiture of subsidiaries deemed to pose a threat to the safety and soundness of the institution. The Dodd-Frank Act, moreover, codifies the Federal Reserve’s long-standing “source of strength”
doctrine and thus requires that bank or thrift holding companies serve as a source of financial strength for their depository institution subsidiaries. The phrase “source of
financial strength” is defined in the Dodd-Frank Act as “the ability of a company that directly or indirectly
owns or controls an insured depository institution to provide financial assistance to such insured depository institution in the event of the financial distress of the insured depository institution.” The federal banking agencies are authorized to adopt regulations with respect to this requirement, although they have not yet done so.
Securities Regulation and Corporate Governance
The Company’s common stock is registered with the
SEC under Section 12(b) of the Securities Exchange Act of 1934, and the Company is subject to restrictions, reporting requirements and review procedures under federal securities laws and regulations. The Company is also subject to the rules and
reporting requirements of The NASDAQ Stock Market LLC, on which its common stock is traded.
Like other issuers of publicly traded securities, the Company must also comply with provisions of the Dodd-Frank Act
that require publicly traded companies to give stockholders a non-binding vote on executive compensation, and the Company will also be subject to the Dodd-Frank Act provisions that authorize the SEC to promulgate rules that would allow stockholders
to nominate their own candidates using a company’s proxy materials.
The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) implemented legislative reforms intended to address corporate and accounting fraud and contained reforms of various business practices and numerous aspects of corporate governance.
For example, Sarbanes-Oxley addresses accounting oversight and corporate governance matters, including the creation of a five-member oversight board appointed by the Securities and Exchange Commission to set and enforce auditing, quality control and
independence standards for accountants and have investigative and disciplinary powers; increased responsibilities and codified requirements relating to audit committees of public companies and how they interact with a company’s public accounting firm; the prohibition of accounting firms from providing various types of consulting services to public clients and requiring accounting firms to rotate partners among public client
assignments every five years; expanded disclosure of corporate operations and internal controls and certification by chief executive officers and chief financial officers to the accuracy of periodic reports filed with the SEC; and prohibitions on
public company insiders from trading during retirement plan “blackout” periods, restrictions on loans to
company executives and enhanced controls on and reporting of insider trading.
Although the Company has and will continue to incur additional expense in complying with the corporate governance
provisions of the Dodd-Frank Act and Sarbanes-Oxley and the resulting regulations, management does not expect that such compliance will have a material impact on the Company’s
financial condition or results of operations.
Federal Savings Institution Regulation
Business Activities. Federal law and
regulations govern the activities of federal savings banks such as the Bank. These laws and regulations delineate the nature and extent of the activities in which federal savings banks may engage. In particular, certain lending authority for federal
savings banks, e.g., commercial, non-residential real property loans and consumer loans, is limited to a specified percentage of the institution’s capital or assets.
Insurance of Deposit Accounts. Deposits of
Trustco Bank are insured by the Deposit Insurance Fund (“DIF”) of the FDIC, and the Bank is subject to deposit
insurance assessments to maintain the DIF. The FDIC determines insurance premiums based on a number of factors, primarily the risk of loss that insured institutions pose to the DIF. Deposit insurance assessments are based on average consolidated
total assets minus average tangible equity. Under the FDIC’s risk-based assessment system, as revised effective July 1, 2016, insured institutions with less than $10 billion in
assets, such as the Bank, are assigned to one of three categories based on their composite examination ratings, with higher-rated, less risky institutions paying lower assessments. A range of initial base assessment rates applies to each category,
adjusted downward based on unsecured debt issued by the institution to produce total base assessment rates. Total base assessment rates currently range from 1.5 to 16 basis points banks in the least risky category to 11 to 30 basis points for banks
in the most risky category, all subject to further adjustment upward if the institution holds more than a limited amount of unsecured debt issued by another FDIC-insured institution.
The FDIC has the authority to raise or lower assessment rates, subject to limits, and to impose special additional
assessments. The Dodd-Frank Act eliminated the previous statutory maximum limit on the FDIC’s reserve ratio (which is generally the ratio of the DIF balance to the estimated amount
of deposits insured by the DIF) and set the minimum reserve ratio to not less than 1.35% of estimated insured deposits or the comparable percentage of the FDIC’s assessment base.
The act also required the FDIC to take the steps necessary to attain the 1.35 percent ratio by September 30, 2020, subject to an offsetting requirement for certain institutions. As of September 30, 2018 the reserve rate was 1.36%, exceeding the
minimum statutory requirement.
FDIC deposit insurance expense totaled $ 1.5 million, $2.9 million, and $4.7 million, in 2018, 2017, and 2016, respectively. FDIC deposit insurance expense includes deposit insurance assessments and Financing Corporation (“FICO”) assessments related to outstanding bonds issued by FICO in the late 1980s to recapitalize the now defunct Federal Savings & Loan Insurance Corporation. The Federal Housing
Finance Agency, the federal agency with authority to issue regulation relative to FICO, projects that the final FICO assessment will be collected in 2019.
Future changes in insurance premiums could have an adverse effect on the operating expenses and results of operations
of Trustco Bank, and the Bank cannot predict what insurance assessment rates will be in the future.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or
unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OCC. The Bank does not know of any practice, condition or violation
that might lead to termination of its deposit insurance.
Assessments. The Bank is required to pay
assessments to the OCC to fund the agency’s operations. The general assessments, paid on a semi-annual basis, is computed upon the Bank’s total assets, including consolidated subsidiaries, as reported in the Bank’s latest quarterly financial report. The OCC’s assessment schedule includes a surcharge for institutions that require increased supervisory resources. The assessments paid by the Bank for the year ended December 31, 2018 totaled approximately $1.1
million.
Community Reinvestment Act. The Community
Reinvestment Act (“CRA”) requires each savings institution, as well as commercial banks and certain other
lenders, to identify the communities served by the institution’s offices and to identify the types of credit the institution is prepared to extend within those communities. The CRA
also requires the OCC to assess an institution’s performance in meeting the credit needs of its identified communities as part of its examination of the institution, and to take
such assessments into consideration in reviewing applications with respect to branches, mergers and other business combinations, including acquisitions by savings and loan holding companies. An unsatisfactory CRA rating may be the basis for denying
such an application and community groups have successfully protested applications on CRA grounds. In connection with its assessment of CRA performance, the OCC assigns CRA ratings of “outstanding,” “satisfactory,” “needs to improve” or “substantial noncompliance.” The Bank was rated “satisfactory” in its
last CRA examination. Institutions are evaluated based on (i) its record of helping to meet the credit needs of its assessment area through lending activities; (ii) its qualified investments; and (iii) the availability and effectiveness of the
institution’s system for delivering retail banking services. An institution that is found to be deficient in its performance in meeting its community’s credit needs may be subject to enforcement actions, including cease and desist orders and civil money penalties.
Qualified Thrift Lender Test. As a
savings institution regulated by the OCC, the Bank must be a “qualified thrift lender” under either the
Qualified Thrift Lender (“QTL”) test under the Home Owners’ Loan Act or the Internal Revenue Code’s Domestic Building and Loan Association (“DBLA”) test to avoid certain restrictions on its and the Company’s operations and activities. A savings institution
may use either test to qualify and may switch from one test to the other; however, the institution must meet the time requirements of the respective test, that is, nine out of the preceding 12 months for the QTL test and at the close of the taxable
year for the DBLA test.
Under the QTL test, the savings institution must hold qualified thrift investments equal to at least 65% of the institution’s
portfolio assets. The savings institution’s actual thrift investment percentage is the ratio of its qualified thrift investments divided by its portfolio assets. Portfolio assets
are total assets minus goodwill and other intangible assets, office property, and liquid assets not exceeding 20% of total assets. An institution ceases to meet the QTL test when its actual thrift investment percentage falls below 65% of portfolio
assets for four months within any 12-month period. To be a qualified thrift lender under the DBLA test, a savings association must meet a “business operations test” and a “60% of assets test.” The business
operations test requires the business of a DBLA to consist primarily of acquiring the savings of the public and investing in loans. An institution meets the public savings requirement when it meets one of two conditions: (i) the institution acquires
its savings accounts in conformity with OCC rules and regulations and (ii) the general public holds more than 75% of its deposits, withdrawable shares, and other obligations. An institution meets the investing in loans requirement when more than 75%
of its gross income consists of interest on loans and government obligations, and various other specified types of operating income that financial institutions ordinarily earn. The 60% of assets test requires that at least 60% of a DBLA’s assets must consist of assets that thrifts normally hold, except for consumer loans that are not educational loans.
These are significant consequences for failing the QTL Test, including activities limitations and branching
restrictions. In addition, an institution that fails the QTL test would be prohibited from paying dividends, except under circumstances that are permissible for a national bank, that are necessary to meet the obligations of the institution’s holding company, and that are specifically approved by both the OCC and Federal Reserve Bank after a written request submitted by the thrift at least 30 days in advance of the
proposed payment. Finally, failure of the QTL Test will subject the institution to enforcement action. If the Bank fails the qualified thrift lender test, within one year of such failure the Company must register as, and will become subject to, the
activities restrictions applicable to bank holding companies, unless the Bank requalifies within the year. The activities authorized for a bank holding company are generally more limited than are the activities authorized for a savings and loan
holding company. If the Bank fails the test a second time, the Company must immediately register as, and become subject to, the restrictions applicable to a bank holding company. The Bank is currently, and expects to remain, in compliance with the
qualified thrift lender test.
Transactions with Related Parties. The
Bank’s transactions with “affiliates”
(generally, any company that controls or is under common control with the Bank, including TrustCo) is limited by Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve’s
implementing Regulation W. Under these laws, the aggregate amount of “covered transactions” between the Bank
and any one affiliate is limited to 10% of the Bank’s capital stock and surplus, and the aggregate amount of covered transactions by the Bank with all of its affiliates is limited
to 20% of capital stock and surplus. Certain covered transactions (primarily credit-related transactions) are required to be secured by collateral in an amount and of a type described in Section 23A and Regulation W. transactions by the Bank with its
affiliates must be on terms and under circumstances that are at least as favorable to the Bank as those prevailing at the time for comparable transactions with non-affiliates. In addition, savings institutions are prohibited from lending to any
affiliate that is engaged in activities that are not permissible for bank holding companies, and no savings institution may purchase the securities of any affiliate other than a subsidiary.
The definition of “covered transactions” as used in Section 23A includes credit exposure on derivatives transactions and securities lending and borrowing transactions, as well as the acceptance of affiliate-issued debt
obligations as collateral for a loan or an extension of credit. The Dodd-Frank Act revised Section 23A to require that collateral must be maintained at all times for covered transactions, rather than only at the time of the transaction, and
restricted the use of debt obligations issued by an affiliate to satisfy collateral obligations. Finally, the Dodd-Frank Act also authorizes the OCC (with respect to federal savings associations such as the Bank), in conjunction with the Federal
Reserve, to grant exemptions under Section 23A, subject to the FDIC’s determination (or non-objection within a 60-day notice period) that the exemption does not present an
unacceptable risk to the DIF.
The Bank also is restricted in its ability to extend credit to its directors, executive officers and 10% shareholders,
as well as to entities controlled by such persons. Extensions of credit to those insiders must be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for
comparable transactions with unaffiliated persons; may not involve more than the normal risk of repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons, individually and
in the aggregate. In addition, extensions of credit in excess of certain limits must be approved by the Bank’s Board of Directors.
Certain non-credit transactions between an insured depository institution and its insiders, such as asset purchase and
sales, are prohibited unless the transaction is on market terms and, if the transaction represents more than 10% of the capital stock and surplus of the institution, has been approved in advance by a majority of the disinterested members of the board
of directors of the institution. The Dodd-Frank Act also imposed new limits on loans to insiders with respect to derivatives transactions, repurchase and reverse-repurchase agreements and securities lending and borrowing transactions.
Safety and Soundness Regulations. The federal banking agencies (including the OCC) have adopted certain safety and soundness standards for all insured depository institutions. These standards
relate to, among other things, internal controls, information systems and internal audit systems; loan documentation; credit underwriting; interest rate risk exposure; asset growth; asset quality; earnings and compensation, fees and benefits, as well
as other operational and managerial standards as the agency deems appropriate. Interagency Guidelines Establishing Standards for Safety and Soundness set forth the safety and soundness standards that the federal banking agencies use to identify and
address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency (the OCC in the case of the Bank) determines that an institution fails to meet any standard prescribed by the guidelines,
the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard.
Enforcement. The Federal Reserve and the
OCC have extensive enforcement authority over savings institutions and their holding companies, including the Bank and TrustCo. This includes enforcement authority with respect to the actions of the Bank’s and TrustCo’s directors, officers and other “institution-affiliated parties,” including attorneys and auditors. This enforcement authority also includes, among other things, the ability to assess civil money penalties, issue cease-and-desist or removal orders
and initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Public disclosure of final enforcement actions by the OCC and the Federal Reserve is
required.
Institutions in Troubled Condition. Certain events, including entering into a formal written agreement with a bank’s regulator or being informed by the regulator that the bank is in troubled condition, will require that a bank give prior notice to their primary regulator before adding or replacing
any member of the board of directors, employing any person as a senior executive officer, or changing the responsibilities of any senior executive officer so that the person would assume a different senior executive position. Troubled condition banks
are prohibited from making, or agreeing to make, certain “golden parachute payments” to institution
affiliated parties, subject to certain exceptions.
Consumer Laws and Regulations. In addition
to the other laws and regulations discussed above, the Bank is subject to consumer laws and regulations designed to protect consumers in transactions with financial institutions. These laws and regulations include, among others, the Truth in Lending
Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Fair Credit Reporting Act and the Real Estate Settlement Procedures Act. These laws
and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits from, making loans to, or engaging in other types of transactions with, such customers.
The BCFP has adopted rules related to mortgage loan origination and mortgage loan servicing. In particular, the BCFP
has issued a rule implementing the ability-to-repay and qualified mortgage (“QM”) provisions of the Truth in
Lending Act, as amended by the Dodd-Frank Act (the “QM Rule”). The ability-to-repay provision requires
creditors to make reasonable, good faith determinations that borrowers are able to repay their mortgages before extending the credit based on a number of factors and consideration of financial information about the borrower from reasonably reliable
third-party documents. Under the Dodd-Frank Act and the QM Rule, loans meeting the definition of “qualified mortgage”
are entitled to a presumption that the lender satisfied the ability-to-repay requirements. The presumption is a conclusive presumption/safe harbor for prime loans meeting the QM requirements, and a rebuttable presumption for higher-priced/subprime
loans meeting the QM requirements. The definition of a “qualified mortgage” incorporates the statutory
requirements, such as not allowing negative amortization or terms longer than 30 years. The QM Rule also adds an explicit maximum 43% debt-to-income ratio for borrowers if the loan is to meet the QM definition, though some mortgages that meet GSE,
FHA and VA underwriting guidelines may, for a period not to exceed seven years, meet the QM definition without being subject to the 43% debt-to-income limits. The QM Rule became effective in January 2014.
Anti-Money Laundering and Customer Identification.
The Bank is subject to extensive anti-money laundering provisions and requirements, which generally require that it implement a comprehensive customer identification program and an anti-money laundering program and procedures. All financial
institutions, including the Company and the Bank, are required to take certain measures to identify their customers, prevent money laundering, monitor certain customer transactions and report suspicious activity to U.S. law enforcement agencies, and
scrutinize or prohibit altogether certain transactions of special concern. Financial institutions are also required to respond to requests for information from federal banking regulatory agencies and law enforcement agencies concerning their
customers and their transactions. Information-sharing among financial institutions concerning terrorist or money laundering activities is encouraged by an exemption provided from the privacy provisions of the GLB Act (described below) and other laws.
Further, the effectiveness of a financial institution in combating money-laundering activities is a factor to be considered in applications submitted by a financial institution for merger or acquisition proposals. The Company has in place a Bank
Secrecy Act compliance program, and it engages in very few transactions of any kind with foreign financial institutions or foreign persons.
Consumer Privacy. The Gramm-Leach-Bliley
Act of 1999 (the “GLB Act”) generally provided for sweeping financial modernization for commercial banks,
savings banks, securities firms, insurance companies, and other financial institutions operating in the United States. Among other matters, the GLB Act established a federal rule regarding the confidential treatment of nonpublic personal information
about consumers. These provisions of the GLB Act require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. The privacy rules
affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. Because the Company does not sell customer information or give customer information to outside third parties or its affiliates
except under limited circumstances (e.g., providing customer information to the Company’s data processing provider), the rules have not had a significant impact on the Company’s results of operations or financial condition.
Federal Reserve System
Federal Reserve Board regulations require savings institutions to maintain reserves against their transaction accounts.
The reserve for transaction accounts effective as of January 17, 2019 was as follows:
|
Amount of transaction accounts
|
Reserve Requirement
|
| |
|
|
|
$0 to $16.3 million
|
0% of amount.
|
| |
|
|
Over $16.3 million and up to $124.2 million
|
3% of amount.
|
| |
|
|
Over $124.2 million
|
10% of amount over $124.2 million
|
The Bank is in compliance with these requirements.
Federal Home Loan Bank of New York. The
Bank is a member of Federal Home Loan Bank (“FHLB”) of New York, which is one of 11 regional FHLBs that serve
as reserve or central banks for their members. The FHLBs are funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB system and makes loans or advances to members. The Bank is also required to purchase and
maintain stock in the FHLB of New York at or above levels specified in the FHLB of New York capital plan. As of December 31, 2018, the Bank owned $4.9 million in FHLB of New York
stock, which was in compliance with its obligations.
Foreign Operations
Neither TrustCo nor the Bank engage in any operations in foreign countries or have outstanding loans to foreign
debtors.
Statistical Information Analysis
The “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are included in TrustCo’s Annual Report to Shareholders for the year ended December 31, 2018, which contains a presentation and discussion of statistical data relating to TrustCo, is hereby incorporated by reference. This
information should not be construed to imply any conclusion on the part of the management of TrustCo that the results, causes, or trends indicated therein will continue in the future. The nature and effects of governmental monetary policy,
supervision and regulation, future legislation, inflation and other economic conditions and many other factors which affect interest rates, investments, loans, deposits, and other aspects of TrustCo’s operations are extremely complex and could make historical operations, earnings, assets, and liabilities not indicative of what may occur in the future.
Critical
Accounting Policies
Pursuant to recent SEC guidance, management of the Company is encouraged to evaluate and disclose those accounting
policies that are judged to be critical policies, or those most important to the portrayal of the Company’s financial condition and results of operations, 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 subjectivity and uncertainty in estimating the levels of the allowance required to cover credit 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 TrustCo’s Annual Report to Shareholders for the year ended December 31, 2018, is a description of this critical policy and the other
significant accounting policies that are utilized by the Company in the preparation of the Consolidated Financial Statements.
Availability
of Reports
TrustCo’s annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports can be obtained free of charge from its Internet site, www.trustcobank.com under the
“Investor Relations” tab. These reports are available on the Internet site as soon as reasonably practicable
after they are electronically filed with or furnished to the SEC. The information found on the Company’s website is not incorporated by reference in this or any other report the
Company files or furnishes to the SEC. These reports are also available on the SEC’s website at http://www.sec.gov.
Forward-Looking Statements
Statements included in this report and in future filings by TrustCo with the SEC, 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. Forward-looking statements can be identified by the use of such words as may, will, should, could, would,
estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.
TrustCo’s 2018 Annual Report to Shareholders,
which is included as Exhibit 13 hereto, contains a list of certain important factors, in addition to the factors described under Item 1A. Risk Factors, that 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. The list should not be construed as exhaustive, and TrustCo 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.
Investors should not rely upon forward-looking statements as predictions of future events. Although TrustCo believes that the expectations reflected in the
forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur.
The following are general risk factors affecting the Company. Additional risks and uncertainties not currently known to
us or that we currently deem to be immaterial also may materially and adversely affect our business operations. Any of these risks could materially and adversely affect our business, financial condition or results of operations. In such cases, you
may lose all or part of your investment.
Certain interest rate movements may hurt earnings and asset values.
Like other financial institutions, we are subject to interest rate risk. Our primary source of income is net interest
income, which is the difference between interest earned on loans and investments, and interest paid on deposits and borrowings. Over any specific period of time, our interest-earning assets may be more sensitive to changes in market interest rates
than our interest-bearing liabilities, or vice-versa. In addition, the individual market interest rates underlying our loan and deposit products may not change to the same degree over a given time period. In any event, if market interest rates should
move contrary to our position, earnings may be negatively affected. Interest rates have in recent years hit historical low levels. From December 2008 through December 2015, the U.S. Federal Reserve held its target for the federal funds rate at a
range of 0.00% to 0.25%. Starting in December 2015, the Federal Reserve started increasing the target range; on December 20, 2018, the FRB increased the target range by 0.25% to a range of 2.25% to 2.50%. Most economists and financial market
indicators concur that there will be additional increases in rates. Lower rates have helped lead to a lower cost of funds, but have also lowered the yields we earn on loans, securities, and short-term investments. To the extent that the Federal
Reserve raises rates further, our cost of funds may rise faster than the rates we earn on loans and investments, potentially causing a compression of our interest rate spread and net interest margin, which would have a negative effect on Trustco Bank’s profitability.
We also are subject to reinvestment risk associated with changes in interest rates. Changes in interest rates may
affect the average life of loans and mortgage-related securities. Increases in interest rates may decrease loan demand and/or may make it more difficult for borrowers to repay adjustable rate loans. Decreases in interest rates often result in
increased prepayments of loans and mortgage-related securities, as borrowers refinance their loans to reduce borrowings costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash
received from such prepayments in loans or other investments that have interest rates that are comparable to the interest rates on existing loans and securities. Conversely, increases in interest rates often result in slowed prepayments of loans and
mortgage-related securities, reducing cash flows and reinvestment opportunities.
Changes in interest rates also affect the value of the Bank’s interest-earning assets, and in particular the Bank’s securities portfolio. Generally, the value of fixed-rate securities fluctuates inversely with changes in
interest rates. Unrealized gains and losses on securities available for sale are reported as a separate component of equity, net of tax. Decreases in the fair value of securities available for sale resulting from increases in interest rates could
have an adverse effect on shareholders’ equity.
We are exposed to credit risk in our lending activities.
There are inherent risks associated with our lending and trading activities. Loans to individuals and business
entities, our single largest asset group, depend for repayment on the willingness and ability of borrowers to perform as contracted. A material adverse change in the ability of a significant portion of our borrowers to meet their obligation to us,
due to changes in economic conditions, interest rates, natural disaster, acts of war, or other causes over which we have no control, could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing
these loans, and could have a material adverse impact on our earnings and financial condition.
If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could
decrease.
Our borrowers may not repay their loans according to the terms of the loans, and, as a result of the declines in home prices, the
collateral securing the payment of these loans may be insufficient to pay any remaining loan balance. We may experience significant loan losses, which could have a material adverse effect on our operating results. When determining the amount of the
allowance for loan and lease losses (“ALLL”), we make various assumptions and judgments about the
collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In deciding on the adequacy of the allowance for
loan losses, management reviews past due information, historical charge-off and recovery data, and nonperforming loan activity. Also, there are a number of other factors that are taken into consideration, including: the magnitude, nature and trends
of recent loan charge-offs and recoveries, the growth in the loan portfolio and the implication that it has in relation to the economic climate in the Bank’s market territories,
and the economic environment in the Upstate New York territory primarily (the Company’s largest geographical area) over the last several years, as well as in the Company’s other market areas. A significant portion of the allowance is determined using qualitative factors. The determination of qualitative factors involves subjective judgement and
subjective measurement. If our assumptions and analysis prove to be incorrect, our ALLL may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance which is maintained through provisions for loan
losses. Material additions to our allowance would materially decrease our net income.
In June 2016, the FASB issued an accounting standard update, “Financial
Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the current “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss (“CECL”) model. Under the CECL model, we will be required to
present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected. The measurement of expected credit losses is to be based on information
about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount, greatly increasing the type of date we would need to collect and review to
determine the appropriate level of the allowance for loan losses. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the “incurred
loss” model required under GAAP, which provides allowances for loan losses that are probable. Accordingly, we expect that the adoption of the CECL model will materially affect how we determine allowance for loan losses and could require us to
significantly increase our allowance. Any increase in our allowance for loan losses or expenses incurred to determine the appropriate level of the allowance for loan losses may have a material adverse effect on our business, financial condition,
and results of operations.
The new CECL standard will become effective for us for fiscal years beginning after December 15, 2019 and for interim
periods within those fiscal years. We are currently evaluating the impact the CECL model will have on our accounting, but we expect to recognize a one-time cumulative-effect adjustment to our allowance for loan losses as of the beginning of the first
reporting period in which the new standard is effective, consistent with regulatory expectations set forth in interagency guidance issued at the end of 2016. We cannot yet determine the magnitude of any such one-time cumulative adjustment or of the
overall impact of the new standard on our financial condition or results of operations. We have actively created a committee and have assembled a project plan and have begun working toward determining the modeling to be utilized and the magnitude of
any such one-time cumulative adjustment.
As discussed under “Regulation and Supervision -
Regulatory Capital Requirements and Prompt Corrective Action,” the Company and the Bank became subject to new capital requirements in 2015. The new capital rules impose stringent
capital requirements on the Company and the Bank and generally require banking organizations to hold high-quality capital to act as a financial cushion to absorb losses and help banking organizations better withstand periods of financial stress. The
final rule increased the required minimum capital ratios for all banking organizations and introduced a “capital conservation buffer” that is in addition to each capital ratio.
The regulatory capital rules could slow our growth, cause us to seek to raise additional capital, or both.
The application of more stringent capital requirements for us could, among other things, result in lower returns on
equity, require us to limit the growth we may otherwise seek, require the raising of additional capital, and result in regulatory actions such as prohibitions on the payment of dividends, the payment of bonuses to employees or the repurchase of
shares if we were unable to comply with such requirements.
If Trustco Bank fails to comply with the new capital standards, the OCC will have the authority to take “prompt corrective action,” depending on the Bank’s
capital level. Currently, the Bank is considered “well-capitalized” for prompt corrective action purposes. If
it were to be designated by the OCC in one of the lower capital levels - “undercapitalized,” “significantly undercapitalized” and “critically
undercapitalized” - the Bank would be required to raise additional capital and also would be subject to progressively more severe restrictions on operations, management, and
capital distributions; replacement of senior executive officers and directors; and, if it became “critically undercapitalized,” to the appointment of a conservator or receiver.
We currently anticipate that we will continue to be well-capitalized in accordance with the regulatory standards.
A prolonged economic downturn, especially one affecting our geographic market area, will adversely affect our operations and financial
results.
Our primary lending emphasis is the origination of one-to-four family first mortgage loans on residential properties;
therefore, we are particularly exposed to downturns in the U.S. housing market. The primary risks inherent in our one- to four-family loan portfolio are declines in economic conditions, elevated levels of unemployment or underemployment, and declines
in residential real estate values. Any one or a combination of these events may have an adverse impact on borrowers’ ability to repay their loans, which could result in increased
delinquencies, non-performing assets, loan losses, and future loan loss provisions.
Additionally, we have a concentration of loans secured in New York and Florida. Approximately 76.1% of our loan
portfolio is comprised of loans secured by property located in our markets in and around of New York, and approximately 23.9% is comprised of loans secured by property located in Florida. This makes us vulnerable to a downturn in the local economy
and real estate markets. Adverse conditions in the local economy such as inflation, unemployment, recession, natural disasters, or other factors beyond our control could impact the ability of our borrowers to repay their loans. Decreases in local
real estate values could adversely affect the value of the property used as collateral for our loans, which could cause us to realize a loss in the event of a foreclosure. Currently, there is not a single employer or industry in the area on which the
majority of our customers are dependent.
The Company operates in a highly regulated environment and may be adversely affected by changes in
laws, regulations and tax policies.
As described above, the Bank is subject to extensive regulation, supervision and examination by the OCC, its primary
federal regulator, and by the FDIC, as insurer of our deposits. In addition, the Company is subject to regulation and supervision by the Federal Reserve Board. Such regulation and supervision govern the activities in which an institution and its
holding company may engage and are intended primarily for the protection of the deposit insurance fund and the depositors and borrowers of the Bank rather than for holders of the Company’s
common stock. Congress and federal regulatory agencies continually review banking laws, regulations, and policies for possible changes. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the
imposition of restrictions on operations, the classification of the Bank’s assets, and determination of the level of allowance for loan losses. Any change in such regulation and
oversight, whether in the form of regulatory policy, regulations, legislation, or supervisory action, may have a material impact on operations.
The effects of the Tax Cuts and Jobs Act on our business has been fully analyzed and recorded.
The Company operates in an environment that imposes income taxes on its operations at both the federal and state levels to varying degrees. Strategies
and operating routines have been implemented to minimize the impact of these taxes. Consequently, any change in tax legislation could significantly alter the effectiveness of these strategies. On December 22, 2017 H.R.1, commonly known as the Tax Cuts and Jobs Act (the “Act”), was signed into law. The Act includes many provisions that will affect our income tax expense, including reducing our federal tax rate from 35%
to 21%, effective January 1, 2018. As a result of this rate reduction, we are required to re-measure, through income tax expense in the period of enactment, our deferred tax assets and liabilities using the enacted rate at which we expect them to
be recovered or settled. The re-measurement of our net deferred tax asset resulted in additional fourth quarter 2017 income tax expense of $5.1 million.
Also on December 22, 2017, the U.S. Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No.
118 (“SAB 118”) to address any uncertainty or diversity of views in practice in accounting for the income tax effect of the Act in situations where a registrant does not have the necessary information available, prepared, or analyzed in reasonable
detail to complete this accounting in the reporting period that includes the enactment date. SAB 118 allows for a measurement period, not to extend beyond one year of the Act’s enactment date, to complete the necessary accounting.
As of December 31, 2018, the Company’s deferred tax liability for temporary differences between the tax and financial
reporting bases of fixed assets and the implementation of software updates to process the calculations associated with the Act’s provisions has been completed. This Act’s provision allows for 100% bonus depreciation on fixed assets placed in service
after September 27, 2017. The adjustment to the temporary difference between the tax and financial reporting bases of fixed assets resulted in a one-time benefit of $880 thousand.
The new legislation also enacted limitations on certain deductions that will have an impact on the banking industry,
borrowers and the market for single-family residential real estate. These limitations include (1) a lower limit on the deductibility of mortgage interest on a single-family residential mortgage loans, (2) the elimination of interest deductions for
certain home equity loans, (3) a limitation on the deductibility of business interest expense, and (4) a limitation on the deductibility of property taxes and state and local income taxes.
The recent changes in the federal tax laws may have an adverse effect on the market for, and the valuation of, residential properties, and on the demand for
such loans in the future, and could make it harder for borrowers to make their loan payments. In addition, these recent changes may also have a disproportionate effect on taxpayers in states with high residential home prices and high state and local
taxes, like New York. If home ownership becomes less attractive, demand for mortgage loans could decrease. The value of the properties securing loans in our loan portfolio may be adversely impacted as a result of the changing economics of home
ownership, which could require an increase in our provision for loan losses, which would reduce our profitability and could materially adversely affect our business, financial condition and results of operations.
Our ability to pay dividends is subject to regulatory limitations and other limitations which may affect our ability to pay dividends to our
stockholders or to repurchase our common stock.
TrustCo is a separate legal entity from its subsidiary, Trustco Bank, and does not have significant operations of its
own. The availability of dividends from Trustco Bank is limited by various statutes and regulations. It is possible, depending upon the financial condition of the Bank and other factors that the OCC or the Federal Reserve Board could assert that
payment of dividends or other payments may result in an unsafe or unsound practice. In addition, TrustCo is subject to consolidated capital requirements and will be required to serve as a source of strength to Trustco Bank. If the Bank is unable to
pay dividends to TrustCo, or if TrustCo is required to retain capital or contribute capital to the Bank, we may not be able to pay dividends on our common stock or to repurchase shares of common stock.
Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations
may adversely affect our operations and our income.
We are subject to extensive regulation, supervision, and examination by the OCC, FRB, and FDIC. These regulatory
authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on a bank’s operations,
reclassify assets, determine the adequacy of a bank’s loss allowances, and determine the level of deposit insurance premiums assessed. The Dodd-Frank Act significantly affected the
lending, deposit, investment, trading, and operating activities of financial institutions and their holding companies and will continue to do so. Any change in banking regulations and oversight, and the regulation of other agencies, such as the BCFP
and the U.S. Department of Housing and Urban Development, whether in the form of regulatory policy, new regulations or legislation, or additional deposit insurance premiums, could have a material impact on our operations. New or revised rules may
increase our regulatory compliance burden and costs and restrict the financial products and services we offer to our customers.
Further, there may be additional laws and regulations, or changes in policy, affecting lending and funding practices,
regulatory capital limits, interest rate risk management, and liquidity standards. The federal bank regulatory agencies may require us to maintain capital ratios in excess of regulatory requirements, and new laws and regulations may increase our
costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the products we
offer, the fees we can charge and our ongoing operations, costs, and profitability.
Our business could be adversely affected by third-party service providers, data breaches and
cyber-attacks.
We face the risk of operational disruption, failure, or capacity constraints due to our dependency on third-party
vendors for components of our business infrastructure. While we have selected these third-party vendors through our vendor management process, we do not control their operations. As such, any failure on the part of these business partners to perform
their various responsibilities could also adversely affect our business and operations.
Our assets that are at risk for cyber-attacks include financial assets and non-public information belonging to
customers. We use several third-party vendors who have access to our assets via electronic media. Certain cyber security risks arise due to this access, including cyber espionage, blackmail, ransom, and theft. We employ many preventive and detective
controls to protect our assets and provide recurring information security training to all employees. To date, we have not experienced any material losses relating to cyber-attacks or other information security breaches, but there can be no assurance
that we will not suffer such attacks or attempted breaches, or incur resulting losses, in the future. Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, our plans to
continue to implement Internet and mobile banking to meet customer demand, and the current economic and political environment. As cyber and other data security threats continue to evolve, we may be required to expend significant additional resources
to continue to modify and enhance our protective measures or to investigate and remediate any security vulnerabilities.
A failure in or breach of our operational or security systems or infrastructure, or those of third parties, could disrupt our businesses,
and adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm.
The potential for operational risk exposure exists throughout our organization and, as a result of our interactions
with, and reliance on, third parties, is not limited to our own internal operational functions. Our operational and security systems, infrastructure, including our computer systems, data management, and internal processes, as well as those of third
parties, are integral to our performance. We rely on our employees and third parties in our day-to-day and ongoing operations, who may, as a result of human error, misconduct, malfeasance or failure, or breach of third-party systems or
infrastructure, expose us to risk. We have taken measures to implement backup systems and other safeguards to support our operations, but our ability to conduct business may be adversely affected by any significant disruptions to us or to third
parties with whom we interact and rely. For example, strategic technology project implementation challenges may cause business interruptions. In addition, our ability to implement backup systems and other safeguards with respect to third-party
systems is more limited than with respect to our own systems. Our financial, accounting, data processing, backup or other operating or security systems and infrastructure may fail to operate properly or become disabled or damaged as a result of a
number of factors including events that are wholly or partially beyond our control which could adversely affect our ability to process these transactions or provide these services. There could be sudden increases in customer transaction volume;
electrical, telecommunications or other major physical infrastructure outages; natural disasters such as earthquakes, tornadoes, hurricanes and floods; disease pandemics; and events arising from local or larger scale political or social matters,
including terrorist acts. We continuously update these systems to support our operations and growth and to remain compliant with all applicable laws, rules and regulations globally. This updating entails significant costs and creates risks associated
with implementing new systems and integrating them with existing ones, including business interruptions. Operational risk exposures could adversely impact our results of operations, liquidity and financial condition, as well as cause reputational
harm.
Unauthorized disclosure of sensitive or confidential client or customer information, whether through
a breach of our computer systems or otherwise, could severely harm our business.
As part of our financial institution business, we collect, process, and retain sensitive and confidential customer
information. Despite the security measures we have in place, our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming
and/or human errors, or other similar events. If information security is breached, information can be lost or misappropriated, resulting in financial loss or costs to us. Any security breach involving confidential customer information, whether by us
or by our vendors, could severely damage our reputation, expose us to the risks of litigation and liability or disrupt our operations and have a material adverse effect on our business.
We could suffer a material adverse impact from interruptions in the effective operation of, or security breaches affecting, our computer
systems.
We rely heavily on information systems to conduct our business and to process, record, and monitor our transactions.
Risks to the systems result from a variety of factors, including the potential for bad acts on the part of hackers, criminals, employees and others. As one example, in recent years, some banks have experienced denial of service attacks in which
individuals or organizations flood the bank’s website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process
transactions. We are also at risk for the impact of natural disasters, terrorism, and international hostilities on our systems or for the effects of outages or other failures involving power or communications systems operated by others. These risks
also arise from the same types of threats to businesses with which we deal.
Potential adverse consequences of attacks on our computer systems or other threats include damage to our reputation,
loss of customer business, litigation, and increased regulatory scrutiny, which might also result in financial loss and require additional efforts and expense to attempt to prevent such adverse consequences in the future.
Consumers and businesses are increasingly using non-banks to complete their financial transactions,
which could adversely affect our business and results of operations
Technology and other changes are allowing consumers and businesses to complete financial transactions that historically
have involved banks through alternative methods. For example, the wide acceptance of Internet-based commerce has resulted in a number of alternative payment processing systems and lending platforms in which banks play only minor roles. Customers can
now maintain funds in prepaid debit cards or digital currencies, and pay bills and transfer funds directly without the direct assistance of banks. The diminishing role of banks as financial intermediaries has resulted and could continue to result in
the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the potential loss of lower cost deposits as a source of funds could have a material adverse
effect on our business, financial condition and results of operations.
Market volatility levels have experienced significant variations in recent years and a return to very high volatility levels could adversely
affect us.
The stock and credit markets have been experiencing significant variations in volatility levels in recent years. In
some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength.
Current volatility levels have diminished significantly from the peak, but a return to higher levels could cause the Company to experience an adverse effect, which may be material, on our ability to access capital and on our business, financial
condition and results of operations.
The soundness of other financial institutions could adversely affect us.
Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial
soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different counterparties, and we routinely execute
transactions with counterparties in the financial services industry, including brokers and dealers, banks, investment banks, mutual funds, and other institutional entities. As a result, defaults by, or even rumors or questions about, one or more
financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the
event of default of our counterparty or client. Any such losses could be material and could materially and adversely affect our business, financial condition and results of operations.
We are subject to claims and litigation pertaining to fiduciary responsibility and lender liability.
Some of the services we provide, such as trust and investment services, require us to act as fiduciaries for our
customers and others. In addition, loan workout and other activities may expose us or Trustco Bank to legal actions, including lender liability or environmental claims. From time to time, third parties make claims and take legal action against us
pertaining to the performance of our fiduciary responsibilities or loan-related activities. If these claims and legal actions are not resolved in a manner favorable to us, we may be exposed to significant financial liability and/or our reputation
could be damaged. Either of these results may adversely impact demand for our products and services or otherwise have a harmful effect on our business and, in turn, on our financial condition, results of operations and prospects.
We may not be able to meet the cash flow requirements of our depositors or borrowers or meet our operating cash needs to fund corporate
expansion and other activities.
Liquidity is the ability to meet cash flow needs on a timely basis at a reasonable cost. The liquidity of Trustco Bank
is used to make loans and to repay deposit liabilities as they become due or are demanded by customers. Liquidity policies and limits have been established by our board of directors, and our management monitors the overall liquidity position of
Trustco Bank to ensure that various alternative strategies exist to cover unanticipated events that could affect liquidity. Trustco Bank is also a member of the Federal Reserve System and Federal Home Loan Bank System, each of which provides funding
to members through advances and other extensions of credit that are typically collateralized with securities or mortgage-related assets. Our securities portfolio can be used as a secondary source of liquidity, and additional liquidity could be
obtained from securities sold under repurchase agreements, non-core deposits, and debt or equity securities issuances in public or private transactions. If we were unable to access any of these funding sources when needed, we might not be able to
meet the needs of our customers, which could adversely affect our financial condition, our results of operations, cash flows and our level of regulatory capital.
New lines of business or new products and services may subject us to additional risks.
From time to time, we may develop and grow new lines of business or offer new products and services within our existing
lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services,
we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External
factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or
new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services
could have a material adverse effect on our business, results of operations and financial condition. All service offerings, including current offerings and those which may be provided in the future, may become more risky due to changes in economic,
competitive and market conditions beyond our control.
We may be subject to a higher effective tax rate if Trustco Realty Corp. (“Trustco Realty”) fails to
qualify as a real estate investment trust (“REIT”).
Trustco Realty, a subsidiary of Trustco Bank, operates as a REIT for tax purposes. Trustco Realty was established to
acquire, hold and manage mortgage assets and other authorized investments to generate net income for distribution to its shareholders.
For an entity to qualify as a REIT, it must meet certain organizational tests and it must satisfy the following six
asset tests under the Internal Revenue Code each quarter: (1) at least 75% of the value of the REIT’s total assets must consist of real estate assets, cash and cash items, and
government securities; (2) not more than 25% of the value of the REIT’s total assets may consist of securities, other than those includible under the 75% test; (3) not more than 5%
of the value of its total assets may consist of securities of any one issuer, other than those securities includible under the 75% test or securities of a taxable REIT subsidiary; (4) not more than 10% of the outstanding voting power of any one
issuer may be held, other than those securities includible under the 75% test or securities of a taxable REIT subsidiary; (5) not more than 10% of the total value of the outstanding securities of any one issuer may be held, other than those
securities includible under the 75% test or securities of a taxable REIT subsidiary; and (6) a REIT cannot own securities in one or more taxable REIT subsidiaries which comprise more than 25% of the value of its total assets. At December 31, 2018,
Trustco Realty met all six quarterly asset tests.
Also, a REIT must satisfy the following two gross income tests each year: (1) at least 75% of its gross income must be
from qualifying income closely connected with real estate activities; and (2) 95% of its gross income must be derived from sources qualifying for the 75% test and dividends, interest, and gains from the sale of securities. In addition, a REIT must
distribute at least 90% of its taxable income for the taxable year, excluding any net capital gains, to maintain its non-taxable status for federal income tax purposes. For 2018, Trustco Realty had met the two annual income tests and the distribution
test.
If Trustco Realty fails to meet any of the required provisions and, therefore, does not qualify to be a REIT, our
effective tax rate would increase.
The trust wealth management fees we receive may decrease as a result of poor investment performance,
in either relative or absolute terms, which could decrease our revenues and net earnings.
Our Trustco Financial Services department derives its revenues primarily from investment management fees based on assets under management. Our ability to
maintain or increase assets under management is subject to a number of factors, including investors’ perception of our past performance, in either relative or absolute terms,
market and economic conditions, and competition from investment management companies. Financial markets are affected by many factors, all of which are beyond our control, including general economic conditions, securities market conditions, the level
and volatility of interest rates and equity prices, competitive conditions, monetary and fiscal policy and investor sentiment. A decline in the value of the assets under management would decrease our income. Further certain of our investment advisory
and wealth management clients can terminate, with little or no notice, their relationships with us, reduce their aggregate assets under management, or shift their funds to other types of accounts with different rate structures.
Strong competition within the Bank’s market areas could hurt profits and slow growth.
The Bank faces intense competition both in making loans and attracting deposits. This competition comes principally
from other banks, savings and loan associations, credit unions, mortgage companies, other lenders, and institutions offering uninsured investment alternatives. Many of our competitors have competitive advantages, including greater financial resources
and higher lending limits, a wider geographic presence, more accessible branch office locations, more aggressive marketing campaigns and better brand recognition, and the ability to offer a wider array of services or more favorable pricing
alternatives, as well as lower origination and operating costs. Competition has made it more difficult for the Bank to make new loans and at times has forced the Bank to offer higher deposit rates. Price competition for loans and deposits might
result in the Bank earning less on loans and paying more on deposits, which would reduce net interest income. Competition also makes it more difficult to grow loans and deposits and to hire and retain experienced employees. Management expects
competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. The Bank’s profitability depends upon its continued ability to compete successfully in its market areas.
We are dependent upon the services of our management team.
We are dependent upon the ability and experience of a number of our key management personnel who have substantial
experience with our operations, the financial services industry and the markets in which we offer our services. It is possible that the loss of the services of one or more of our senior executives or key managers would have an adverse effect on our
operations. Our success also depends on our ability to continue to attract, manage and retain other qualified middle management personnel as we grow. We cannot assure you that we will continue to attract or retain such personnel.
Provisions in our articles of incorporation and bylaws and New York law may discourage or prevent
takeover attempts, and these provisions may have the effect of reducing the market price of our stock.
Our articles of incorporation and bylaws include several provisions that may have the effect of discouraging or
preventing hostile takeover attempts, and therefore, making the removal of incumbent management difficult. The provisions include staggered terms for our board of directors and requirements of supermajority votes to approve certain business
transactions. In addition, New York law contains several provisions that may make it more difficult for a third party to acquire control of us without the approval of the board of directors, and may make it more difficult or expensive for a third
party to acquire a majority of our outstanding stock. To the extent that these provisions are effective in discouraging or preventing takeover attempts, they may tend to reduce the market price for our stock.
Changes in accounting standards could impact reported earnings.
The accounting standard setting bodies, including the Financial Accounting Standards Board, the Securities and Exchange
Commission and other regulatory bodies, periodically change financial accounting and reporting standards that govern the preparation of our consolidated statements. These changes can be hard to predict and can materially impact how the Company
records and reports its financial condition and results of operations. In some cases, we could be required to apply a new or revised accounting standard retroactively, which could affect beginning of period financial statement amounts.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by
TrustCo in reports we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management, and recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns
can occur because of simple error or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent
limitations in our control system, misstatements due to error or fraud may occur and not be detected.
The preparation of financial statements requires the use of estimates that may vary from actual
results.
Preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles
requires management to make significant estimates that affect the financial statements. One of our most critical estimates is the level of the allowance for loan losses. Due to the inherent nature of this estimate, we cannot provide absolute
assurance that we will not significantly increase the allowance for loan losses higher than the current balance.
We rely on communications, information, operating and financial control systems, and technology from third-party service providers, and we
may suffer an interruption in those systems that may result in lost business. Further, we may not be able to substitute providers on terms that are as favorable if our relationships with our existing service providers are interrupted.
We rely heavily on third-party service providers for much of our communications, information, operating and financial
controls systems, and technology. Any failure or interruption or breach in security of these systems could result in failures or interruptions in our customer relationships management, general ledger, deposit, servicing and/or loan origination
systems. We cannot assure you that such failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third parties on which we rely. The occurrence of any failure or interruption could have a
material adverse effect on our business, financial condition, results of operations and cash flows. If any of our third-party service providers experience financial, operational or technological difficulties, or if there is any other disruption in
our relationships with them, we may be required to locate alternative sources of such services, and we cannot assure you that we could negotiate terms that are as favorable to us, or could obtain services with similar functionality as found in our
existing systems, without the need to expend substantial resources, if at all. Any of these circumstances could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If the business continuity and disaster recovery plans that we have in place are not adequate to continue our operations in the event of a
disaster, the business disruption can adversely impact our operations.
External events, including terrorist or military actions, or an outbreak of disease, and resulting political and social
turmoil could cause unforeseen damage to our physical facilities or could cause delays or disruptions to operational functions, including information processing and financial market settlement functions. Additionally, our customers, vendors and
counterparties could suffer from such events. Should these events affect us, or our customers, or vendors or counterparties with which we conduct business, our results of operations could be adversely affected.
The Company’s risk-management framework may not be effective in mitigating risk and loss.
The Company maintains an enterprise risk management program that is designed to identify, quantify, monitor, report,
and control the risks that it faces. These risks include: interest-rate, credit, liquidity, operations, reputation, compliance and litigation. While the Company assesses and improves this program on an ongoing basis, there can be no assurance that
its approach and framework for risk management and related controls will effectively mitigate all risk and limit losses in its business. If conditions or circumstances arise that expose flaws or gaps in the Company’s risk-management program, or if its controls break down, the performance and value of its business could be adversely affected.
| Item 1B |
Unresolved Staff Comments
|
None.
TrustCo’s executive offices are located at 5 Sarnowski Drive, Glenville, New York, 12302.
The Company operates 148 banking offices, of which 24 are owned and 124 are leased from others. The asset value of these properties, when considered in the aggregate, is not
material to the operation of TrustCo.
In the opinion of management, the physical properties of TrustCo and the Bank are suitable and adequate and are being fully utilized.
The nature of TrustCo’s business generates a certain amount of litigation against TrustCo
and its subsidiaries involving matters arising in the ordinary course of business. In the opinion of management of TrustCo, there are no proceedings pending to which TrustCo or any of its subsidiaries is a party, or of which its property is the
subject which, if determined adversely to TrustCo or such subsidiaries, would be material in relation to TrustCo’s consolidated shareholders’ equity and financial condition.
Not applicable.
Executive Officers of TrustCo
The following is a list of the names and ages of the executive officers of TrustCo and their business history for the past five years:
|
Name, Age and
Position
With Trustco
|
|
Principal Occupations Or Employment Since January 1, 2008
|
|
Year First
Became
Executive of
TrustCo
|
| |
|
|
|
|
|
Robert J. McCormick,
Age 55,
President and Chief Executive Officer
|
|
Chairman, President and Chief Executive Officer of TrustCo from January 2009 to December 2010, President and Chief Executive Officer of TrustCo since
January 2004, Executive Officer of TrustCo since 2001 and President and Chief Executive Officer of Trustco Bank since November 2002. Chairman of TrustCo and Trustco Bank from November 2008 to December 2010. Director of TrustCo and Trustco
Bank since 2005. Robert J. McCormick is the son of Robert A. McCormick. Joined Trustco Bank in 1995.
|
|
2001
|
|
Scot R. Salvador,
Age 52,
Executive Vice President and Chief Lending Officer
|
|
Executive Vice President and Chief Lending Officer of TrustCo and Trustco Bank since January 2004. Executive Officer of TrustCo and Trustco Bank
since 2004. Joined Trustco Bank in 1995.
|
|
2004
|
| |
|
|
|
|
|
Robert M. Leonard,
Age 56,
Executive Vice President and Chief Risk Officer
|
|
Secretary or Assistant Secretary of TrustCo and Trustco Bank since 2003. Executive Vice President of TrustCo and Trustco Bank since 2013. Senior Vice
President of TrustCo and Trustco Bank from 2010 to 2013. Administrative Vice President of TrustCo and Trustco Bank from 2004 to 2010. Executive Officer of TrustCo and Trustco Bank since 2003. Joined Trustco Bank in 1986.
|
|
2003
|
| |
|
|
|
|
|
Michael M. Ozimek
Age 44,
Executive Vice President and Chief Financial Officer
|
|
Executive Vice President of TrustCo and Trustco Bank since December 2018. Senior Vice President and Chief Financial Officer since December 2014.
Administrative Vice President of TrustCo and Trustco Bank from June 2010 to December 2014. Vice President of Trustco Bank from 2004 to June 2010.
|
|
2014
|
| |
|
|
|
|
|
Eric W. Schreck
Age 52,
Senior Vice President
and Treasurer
|
|
Treasurer of TrustCo since 2010. Senior Vice President and Florida Regional President since 2009. Executive Officer of TrustCo and Trustco Bank since
2010. Joined Trustco Bank in 1989.
|
|
2010
|
| |
|
|
|
|
|
Michael Hall
Age 53,
General Counsel and Corporate Secretary
|
|
Secretary of TrustCo and Trustco Bank since 2016. Vice President of Trustco Bank since 2015. Joined Trustco Bank in 2015. Prior to 2015, attorney in
private practice.
|
|
2016
|
|
Kevin M. Curley
Age 53,
Executive Vice President and Chief Operations Officer
|
|
Executive Vice President and Chief Operations Officer of TrustCo and Trustco Bank since December 2018. Joined Trustco Bank in 1990.
|
|
2018
|
PART II
|
|
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
TrustCo’s common stock is traded on The NASDAQ Stock Market, LLC under the symbol “TRST.” TrustCo had approximately 11,575 shareholders of record as of February 27, 2019, and the closing price of TrustCo’s common stock on that date was $8.51.
The following table provides information, as of December 31, 2018, regarding securities authorized for issuance under TrustCo’s equity compensation plans.
|
Plan category
|
|
Number of
securities to
be
issued upon
exercise of
outstanding
options,
warrants
and rights
(a)
|
|
|
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b)
|
|
|
Number of
securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected
in column (a))
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
554,641
|
|
|
$
|
6.65
|
|
|
|
1,517,183
|
|
|
Equity compensation plan not approved by security holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Total
|
|
|
554,641
|
|
|
$
|
6.65
|
|
|
|
1,517,183
|
|
The following details the purchase of shares of TrustCo’s
common stock made by or on behalf of TrustCo in the fourth quarter of the year ended December 31, 2018.
Issuer Purchases of Equity Securities
|
Period
|
|
(a)
Total
Number
of Shares
Purchased*
|
|
|
(b)
Average
Price
Paid Per
Share
|
|
|
(c)
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
|
|
|
(d)
Maximum
Number
of Shares
that May
Yet
Be
Purchased
Under
the Plans
or
Programs
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1 to October 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
November 1 to November 30, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
December 1 to December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
*Purchase relates to an employee exercise of incentive stock options.
The TrustCo Annual Report to Shareholders for the year ended December 31, 2018, which is filed as Exhibit 13 hereto, contains a graph comparing the yearly
percentage change in the Company’s cumulative total shareholder return on its common stock with the cumulative return of the Russell 2000 and the SNL Bank and Thrift indices. Such
graph is incorporated herein by reference.
The information required by this this Item 6 is incorporated herein by reference from the table captioned “FIVE YEAR SUMMARY OF FINANCIAL DATA” in TrustCo’s Annual Report to Shareholders for the
year ended December 31, 2018, which is filed as Exhibit 13 hereto.
|
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
The information required by this this Item 7 is contained in TrustCo’s Annual Report to
Shareholders for the year ended December 31, 2018, which is filed as Exhibit 13 hereto and incorporated herein by reference.
| Item 7A. |
Quantitative and Qualitative Disclosures about Market Risk
|
The information required by this Item 7A is contained in TrustCo’s Annual Report to
Shareholders for the year ended December 31, 2018, which is filed as Exhibit 13 hereto and incorporated herein by reference.
|
|
Financial Statements and Supplementary Data
|
The consolidated financial statements, together with the report thereon of Crowe LLP, and the required supplementary financial data are included in TrustCo’s Annual Report to Shareholders for the year ended December 31, 2018, which is filed as Exhibit 13 hereto and incorporated herein by reference.
|
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
| Item 9A. |
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. Disclosure controls and procedures are procedures that are designed with the objective of ensuring that information required to be disclosed in the Company’s
reports filed under the Securities Exchange Act of 1934, such as this Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are
effective to satisfy the objectives for which they are designed.
Management’s Report on Internal
Control over Financial Reporting, together with the report thereon of Crowe LLP is included in TrustCo’s Annual Report to Shareholders for the year ended December 31,
2018, which is filed as Exhibit 13 hereto, are incorporated herein by reference.
There have been no changes in the Company’s internal control over financial reporting (as
defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the Company’s quarter ended December 31, 2018 that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Item 9B. |
Other Information
|
None.
PART III
| Item 10. |
Directors, Executive Officers and Corporate Governance
|
The information required by this Item 10 is incorporated herein by reference to the disclosure under the headings “Information on TrustCo Directors and Nominees” and “Information on TrustCo
Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s Proxy Statement (Schedule 14A) for its 2019 Annual Meeting of Shareholders to be filed with the SEC within 120 days of
the Company’s fiscal year-end. TrustCo has adopted a code of conduct that applies to all employees, including its principal executive, financial and accounting officers. A copy of
this code of conduct will be provided without charge upon written request. Requests and inquiries should be directed to: Robert M. Leonard, Executive Vice President, TrustCo Bank Corp NY, P.O. Box 1082, Schenectady, New York 12301-1082. The required
information regarding TrustCo’s executive officers is contained in PART I in the item captioned “Executive
Officers of TrustCo.”
| Item 11. |
Executive Compensation
|
The information required by this Item 11 is incorporated herein by reference to the Company’s
Proxy Statement (Schedule 14A) for its 2019 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the Company’s fiscal year-end.
| Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
The information required by this Item 12 is incorporated herein by reference to the Company’s
Proxy Statement (Schedule 14A) for its 2019 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the Company’s fiscal year-end. Additional information
concerning the Company’s equity compensation plans is set forth in Part II, Item 5 hereof.
| Item 13. |
Certain Relationships, Related Transactions and Director Independence
|
The information required by this Item 13 is incorporated herein by reference to the Company’s
Proxy Statement (Schedule 14A) for its 2019 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the Company’s fiscal year-end.
| Item 14. |
Principal Accountant Fees and Services
|
The information required by this Item 14 is incorporated herein by reference to the Company’s
Proxy Statement (Schedule 14A) for its 2019 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the Company’s fiscal year-end.
PART IV
| Item 15. |
Exhibits, Financial Statement Schedules
|
The following financial statements of TrustCo and its consolidated subsidiaries, and the accountants’ report thereon are filed as a part of this report.
Consolidated Statements of Condition -- December 31, 2018 and 2017.
Consolidated Statements of Income -- Years Ended December 31, 2018,
2017 and 2016.
Consolidated Statements of Comprehensive Income -- Years Ended
December 31, 2018, 2017 and 2016.
Consolidated Statements of Changes in Shareholders’ Equity -- Years
Ended December 31, 2018, 2017 and 2016.
Consolidated Statements of Cash Flows -- Years Ended December 31,
2018, 2017 and 2016.
Notes to Consolidated Financial
Statements.
Financial Statement Schedules
Not Applicable. All required schedules for TrustCo and its subsidiaries have been included in the consolidated financial statements or related notes thereto.
Supplementary Financial Information
Summary of Unaudited Quarterly Financial Information for the years ended December 31, 2018 and 2017.
Exhibits
See the Exhibit Index that appears at the end of this document and is incorporated herein.
| Item 16. |
Form 10-K Summary
|
Not applicable.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
| |
TrustCo Bank Corp NY
|
| |
|
|
Date: March 1, 2019
|
By:
|
/s/ Michael M. Ozimek
|
|
| |
|
Michael M. Ozimek
|
|
| |
|
Executive Vice President and Chief Financial Officer
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
|
Name and Signature
|
|
Title
|
|
Date
|
| |
|
|
|
|
|
/s/ Robert J. McCormick
|
|
|
|
|
|
Robert J. McCormick
|
|
Chairman, President and Chief Executive Officer
(principal executive officer)
|
|
March 1, 2019
|
| |
|
|
|
|
|
/s/ Michael M. Ozimek
|
|
|
|
|
|
Michael M. Ozimek
|
|
Executive Vice President and Chief Financial Officer
(principal financial and accounting officer)
|
|
March 1, 2019 |
| |
|
|
|
|
|
*
|
|
|
|
|
|
Dennis A. DeGennaro
|
|
Chairman
|
|
March 1, 2019 |
| |
|
|
|
|
|
*
|
|
|
|
|
|
Brian C. Flynn
|
|
Director
|
|
March 1, 2019 |
| |
|
|
|
|
|
*
|
|
|
|
|
|
Thomas O. Maggs
|
|
Director
|
|
March 1, 2019 |
| |
|
|
|
|
|
*
|
|
|
|
|
|
Dr. Anthony J. Marinello
|
|
Director
|
|
March 1, 2019 |
| |
|
|
|
|
|
*
|
|
|
|
|
|
William D. Powers
|
|
Director
|
|
March 1, 2019 |
| |
|
|
|
|
|
*
|
|
|
|
|
|
Lisa M. Lucarelli
|
|
Director
|
|
March 1, 2019 |
|
*
|
/s/ Robert M. Leonard
|
| By: |
|
| |
Robert M. Leonard, as Agent
|
| |
Pursuant to Power of Attorney
|
|
|
Description
|
| |
|
|
|
Amended and Restated Certificate of Incorporation of TrustCo Bank Corp NY, as amended, incorporated by reference to Exhibit 3(i) to TrustCo Bank Corp
NY’s Report on Form 10-K, filed March 4 2016.
|
| |
|
|
|
Amended and Restated Bylaws of TrustCo Bank Corp NY, dated September 16, 2008, incorporated by reference to Exhibit 99(a) to TrustCo Bank Corp NY’s Report on Form 8-K, filed September 16, 2008.
|
| |
|
|
|
Amended and Restated Trust For Deferred Benefits Provided under Employment Agreements of Trustco Bank, National Association and TrustCo Bank Corp NY,
dated September 18, 2001 incorporated by reference to Exhibit 10(b) to TrustCo Bank Corp NY’s Annual Report on Form 10-K, for the year ended December 31, 2001.
|
| |
|
|
|
Amended and Restated Trust Under Non-Qualified Deferred Compensation Plans of Trustco Bank, National Association and TrustCo Bank Corp NY, dated
September 18, 2001, incorporated by reference to, Exhibit 10(c) to TrustCo Bank Corp NY’s Annual Report on Form 10-K, for the year ended December 31, 2001.
|
| |
|
|
|
Amended and Restated Trustco Bank and TrustCo Bank Corp NY Supplemental Retirement Plan, effective as of January 1, 2008, incorporated by reference
to Exhibit 99.6 to TrustCo Bank Corp NY’s Current Report on Form 8-K filed December 22, 2008.
|
| |
|
|
|
Second Amended and Restated TrustCo Bank Corp NY Performance Bonus Plan, effective as of January 1, 2008, incorporated by reference to Exhibit 99.5
to TrustCo Bank Corp NY’s Current Report on Form 8-K filed December 22, 2008.
|
| |
|
|
|
Amendment No. 1 to Second Amended and Restated TrustCo Bank Corp NY Performance Bonus Plan, effective January 1, 2010, incorporated by reference to
Exhibit 99(e) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed January 19, 2010.
|
| |
|
|
|
Form of 2008 Amended and Restated Employment Agreement between Trustco Bank, TrustCo Bank Corp NY and Robert J. McCormick, Robert T. Cushing and Scot
R. Salvador, effective as of January 1, 2008, incorporated by reference to Exhibit 99.8 to TrustCo Bank Corp NY’s Current Report on Form 8-K filed December 22, 2008.
|
| |
|
|
|
Amendment No. 2 to Amended and Restated TrustCo Bank Corp NY Directors Stock Option Plan, effective January 1, 2010, incorporated by reference to
Exhibit 99(d) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed January 19, 2010.
|
| |
|
|
|
Second Amended and Restated TrustCo Bank Corp NY Directors Performance Bonus Plan, effective as of January 1, 2008, incorporated by reference to
Exhibit 99.4 to TrustCo Bank Corp NY’s Current Report on Form 8-K filed December 22, 2008.
|
| |
|
|
|
Amendment No. 1, Second Amended and Restated TrustCo Bank Corp NY Directors Performance Bonus Plan, effective January 1, 2010, incorporated by
reference to Exhibit 99(f) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed January 19, 2010.
|
| |
|
|
|
Form of Performance Share Award Agreement under the TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan, incorporated by reference
to Exhibit 10(b) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed November 20, 2015.
|
|
|
Amended and Restated Trustco Bank Deferred Compensation Plan for Directors, effective as of January 1, 2008, incorporated by reference to Exhibit
99.3 to TrustCo Bank Corp NY’s Current Report on Form 8-K filed December 22, 2008.
|
| |
|
|
|
Service Bureau Processing Agreement by and between Fidelity Information Services, Inc. and TrustCo Bank Corp NY dated March 3, 2004 incorporated by
reference to Exhibit 10(b) to TrustCo Bank Corp NY’s Quarterly Report on Form 10-Q, for the quarter ended March 31, 2004.
|
| |
|
|
|
Master Service Agreement by and between Sungard Wealth Management Services, LLC and TrustCo Bank Corp NY dated April 1, 2004 (portions omitted
pursuant to a request for confidential treatment) incorporated by reference to Exhibit 10(a) to TrustCo Bank Corp NY’s Quarterly Report on Form 10-Q, for the quarter ended
June 30, 2004.
|
| |
|
|
|
Restatement of Trustco Bank Senior Incentive Plan, effective as of January 1, 2008, incorporated by reference to Exhibit 99.9 to TrustCo Bank Corp NY’s Current Report on Form 8-K filed December 22, 2008.
|
| |
|
|
|
Form of Amendments to 2008 Amended and Restated Employment Agreement between Trustco Bank, TrustCo Bank Corp NY and each of Robert J. McCormick,
Robert T. Cushing and Scot R. Salvador, incorporated by reference to Exhibit 99.1 to TrustCo Bank Corp NY’s Current Report on Form 8-K filed March 17, 2009.
|
|
|
First Amendment to Restatement of Trustco Bank Senior Incentive Plan, incorporated by reference to Exhibit 99.2 to TrustCo Bank Corp NY’s Current Report on Form 8-K filed November 18, 2009.
|
| |
|
|
|
Amended and Restated TrustCo Bank Corp NY 2010 Equity Incentive Plan dated as of March 21, 2017, incorporated by reference to Exhibit 10(a) to
TrustCo Bank Corp NY’s Current Report on Form 8-K filed March 24, 2017.
|
| |
|
|
|
Amended and Restated 2010 Directors Equity Incentive Plan dated March 17, 2015, incorporated by reference to Exhibit 10(b) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed March 23, 2015.
|
| |
|
|
|
Form of Incentive Stock Option Award Agreement under the TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan, incorporated by
reference to Exhibit 10(a) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed November 20, 2015.
|
| |
|
|
|
Director Incentive Stock Option Award Agreement dated November 15, 2011, incorporated by reference to Exhibit 10(c) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed November 18, 2011.
|
| |
|
|
|
Form of Performance Share Award Agreement under the TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan, incorporated by reference
to Exhibit 10(a) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed November 18, 2016.
|
| |
|
|
|
Form of Restricted Stock Unit Award Agreement under the TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan, incorporated by
reference to Exhibit 10(b) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed November 18, 2016.
|
| |
|
|
|
Form of Directors Restricted Stock Unit Award Agreement under the TrustCo Bank Corp NY Amended and Restated 2010 Directors Equity Incentive Plan,
incorporated by reference to Exhibit 10(c) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed November 18, 2016.
|
| |
|
|
|
Employment Agreement among Trustco Bank, TrustCo Bank Corp NY And Robert M. Leonard, effective November 19, 2013, incorporated by reference to
Exhibit 10(a) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed November 25, 2013.
|
|
|
Amendment No. 1 to 2011 Restatement of Trustco Bank Executive Officer Incentive Plan, effective as of December 17, 2013, incorporated by reference to
Exhibit 10(a) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed December 23, 2013.
|
| |
|
|
|
Performance-Based Stock Appreciation Unit Agreement dated as of January 21, 2014, incorporated by reference to Exhibit 10(a) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed January 24, 2014.
|
| |
|
|
|
Trustco Bank Executive Officer Incentive Plan (Amended and Restated as of February 16, 2016), incorporated by reference to Exhibit 10(a) to TrustCo
Bank Corp NY’s Form 8-K filed February 17, 2016.
|
| |
|
|
|
Consulting Agreement between TrustCo Bank Corp NY and Robert T. Cushing effective December 22, 2017, incorporated by reference to Exhibit 10.1 to
TrustCo Bank Corp NY’s Current Report on Form 8-K filed November 22, 2017.
|
| |
|
|
|
Form of 2017 Performance Share Award Agreement under the TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan, incorporated by
reference to Exhibit 10(a) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed November 27, 2017.
|
| |
|
|
|
Form of 2017 Restricted Stock Unit Award Agreement under the TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan, incorporated by
reference to Exhibit 10(b) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed November 27, 2017.
|
| |
|
|
|
Form of 2017 Directors Restricted Stock Unit Award Agreement under the TrustCo Bank Corp NY Amended and Restated 2010 Directors Equity Incentive
Plan, incorporated by reference to Exhibit 10(c) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed on November 27, 2017.
|
| |
|
|
|
Form of 2018 Performance Share Award Agreement under the TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan, incorporated by reference
to Exhibit 10(a) to TrustCo Bank Corp NY’s Current Report on Form 8-K, filed November 23, 2018.
|
| |
|
|
|
Form of 2018 Restricted Stock Unit Agreement under the TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan, incorporated by reference
to Exhibit 10(b) to TrustCo Bank Corp NY’s Current Report on Form 8-K, filed November 23, 2018.
|
| |
|
|
|
Form of 2018 Directors Restricted Stock Unit Agreement under the TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan, incorporated by
reference to Exhibit 10(c) to TrustCo Bank Corp NY’s Current Report on Form 8-K, filed November 23, 2018.
|
| |
|
|
|
Form of Employment Agreement between TrustCo Bank Corp NY and each of Kevin M. Curley and Michael M. Ozimek, effective December 18, 2018, incorporated
by reference to Exhibit 10(a) to TrustCo Bank Corp NY’s Current Report on Form 8-K filed December 18, 2018.
|
| |
|
|
|
Computation of Net Income Per Common Share. Note 11 of TrustCo’s Annual Report to Shareholders for the year ended December 31, 2018 is incorporated
herein by reference.
|
| |
|
|
|
Portions of Annual Report to Security Holders of TrustCo for the year ended December 31, 2018.
|
|
|
List of Subsidiaries of TrustCo.
|
| |
|
|
|
Consent of Independent Registered Public Accounting Firm.
|
| |
|
|
|
Power of Attorney.
|
| |
|
|
|
Rule 13a-14(a)/15d-14(a) Certification of Robert J. McCormick, principal executive officer.
|
| |
|
|
|
Rule 13a-14(a)/15d-14(a) Certification of Michael M. Ozimek, principal financial officer.
|
| |
|
|
|
Section 1350 Certifications of Robert J. McCormick, principal executive officer and Michael M. Ozimek, principal financial officer.
|
| |
|
|
101.INS
|
XBRL Instance Document.
|
| |
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
| |
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
| |
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
| |
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
| |
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
| * |
Management contract or compensatory plan or arrangement.
|
34