UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission File Number 0-10592
September 30, 2006
TRUSTCO BANK CORP NY
(Exact name of registrant as specified in its charter)
NEW YORK 14-1630287
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
5 SARNOWSKI DRIVE, GLENVILLE, NEW YORK 12302
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 377-3311
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. (x) Yes ( ) No
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer (x) Accelerated filer ( ) Non-accelerated filer ( )
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). ( )Yes (x) No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding
Class of Common Stock as of October 30, 2006
---------------------- ----------------------------
$1 Par Value 75,023,326
TrustCo Bank Corp NY
INDEX
Part I. FINANCIAL INFORMATION PAGE NO.
------------------------------------------------------------------------------
Item 1. Interim Financial Statements (Unaudited): Consolidated
Statements of Income for the Three Months and Nine Months
Ended September 30, 2006 and 2005 1
Consolidated Statements of Financial Condition as of September
30, 2006 and December 31, 2005 2
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2006 and 2005 3 - 4
Notes to Consolidated Interim Financial Statements 5 - 13
Report of Independent Registered Public Accounting Firm 14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15 - 29
Item 3. Quantitative and Qualitative Disclosures About Market Risk 30
Item 4. Controls and Procedures 30 - 31
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 32
Item 1A. Risk Factors 32
Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds 33
Item 3. Defaults Upon Senior Securities 33
Item 4. Submissions of Matters to a Vote of Security Holders 33
Item 5. Other Information 33
Item 6. Exhibits and Reports on Form 8-K 34
ii
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share data)
3 Months Ended 9 Months Ended
September 30, September 30,
-----------------------------------------------------------------------
2006 2005 2006 2005
---- ---- ---- ----
Interest and dividend income:
Interest and fees on loans $ 26,696 22,225 76,517 63,195
Interest on U. S. Treasuries and agencies 10,395 9,440 30,797 24,779
Interest on states and political
subdivisions 1,481 1,422 4,294 4,911
Interest on mortgage-backed
securities and collateralized
mortgage obligations 2,108 2,571 6,633 7,272
Interest and dividends on other securities 153 256 480 658
Interest on federal funds sold and other
short term investments 2,009 2,519 6,772 9,519
-----------------------------------------------------------------------
Total interest income 42,842 38,433 125,493 110,334
-----------------------------------------------------------------------
Interest expense:
Interest on deposits:
Interest-bearing checking 364 311 1,008 1,078
Savings 2,877 1,545 7,975 4,752
Money market deposit accounts 3,065 1,002 7,321 2,013
Time deposits 11,183 8,105 31,660 22,637
Interest on short-term borrowings 989 537 2,728 1,350
Interest on long-term debt 1 1 3 4
-----------------------------------------------------------------------
Total interest expense 18,479 11,501 50,695 31,834
-----------------------------------------------------------------------
Net interest income 24,363 26,932 74,798 78,500
Provision (credit) for loan losses - (1,680) (3,575) (4,760)
-----------------------------------------------------------------------
Net interest income after provision (credit)
for loan losses 24,363 28,612 78,373 83,260
-----------------------------------------------------------------------
Noninterest income:
Trust department income 1,313 1,520 4,020 4,476
Fees for other services to customers 2,229 2,120 6,236 6,097
Net gain (loss) on securities transactions 24 776 (264) 5,683
Other 329 2,019 1,125 4,103
-----------------------------------------------------------------------
Total noninterest income 3,895 6,435 11,117 20,359
-----------------------------------------------------------------------
Noninterest expenses:
Salaries and employee benefits 4,640 4,636 14,026 13,951
Net occupancy expense 1,928 1,787 5,781 5,542
Equipment expense 694 638 2,128 2,029
Professional services 908 628 2,584 2,404
Outsourced Services 1,069 1,015 3,178 3,178
Other real estate expenses / (income) 14 (237) 16 (631)
Other 2,446 2,347 7,897 7,180
-----------------------------------------------------------------------
Total noninterest expenses 11,699 10,814 35,610 33,653
-----------------------------------------------------------------------
Income before taxes 16,559 24,233 53,880 69,966
Income taxes 5,380 8,514 17,911 24,355
-----------------------------------------------------------------------
Net income $ 11,179 15,719 35,969 45,611
=======================================================================
Net income per Common Share:
- Basic $ 0.149 0.210 0.480 0.608
=======================================================================
- Diluted $ 0.149 0.208 0.479 0.605
=======================================================================
See accompanying notes to unaudited consolidated interim financial statements.
1
TRUSTCO BANK CORP NY
Consolidated Statements of Financial Condition (Unaudited)
(dollars in thousands, except per share data)
09/30/06 12/31/05
-------- --------
ASSETS:
Cash and due from banks $ 49,324 55,667
Federal funds sold and other short term investments 103,079 257,196
--------------------- --------------------
Total cash and cash equivalents 152,403 312,863
Securities available for sale:
U.S. Treasuries and agencies 782,123 743,763
States and political subdivisions 135,433 118,950
Mortgage-backed securities and collateralized
mortgage obligations 174,155 200,963
Other 12,903 20,400
--------------------- --------------------
Total securities available for sale 1,104,614 1,084,076
--------------------- --------------------
Loans:
Commercial 242,748 214,750
Residential mortgage loans 1,204,817 1,057,937
Home equity line of credit 235,350 192,291
Installment loans 5,993 5,741
--------------------- --------------------
Total loans 1,688,908 1,470,719
--------------------- --------------------
Less:
Allowance for loan losses 42,706 45,377
--------------------- --------------------
Net loans 1,646,202 1,425,342
Bank premises and equipment 23,848 21,734
Other assets 73,802 68,744
--------------------- --------------------
Total assets $ 3,000,869 2,912,759
===================== ====================
LIABILITIES:
Deposits:
Demand $ 243,984 251,012
Interest-bearing checking 276,264 309,668
Savings accounts 682,272 725,336
Money market deposit accounts 307,412 190,560
Certificates of deposit (in denominations of
$100,000 or more) 248,340 225,611
Time deposits 890,991 860,300
--------------------- --------------------
Total deposits 2,649,263 2,562,487
Short-term borrowings 91,705 87,935
Long-term debt 66 87
Accrued expenses and other liabilities 32,332 33,589
--------------------- --------------------
Total liabilities 2,773,366 2,684,098
--------------------- --------------------
SHAREHOLDERS' EQUITY:
Capital stock par value $1; 150,000,000 and 100,000,000 shares
authorized and 82,149,776 and 82,119,360 shares issued at
September 30, 2006 and December 31, 2005, respectively 82,150 82,120
Surplus 119,041 117,770
Undivided profits 103,374 103,315
Accumulated other comprehensive income:
Net unrealized loss on securities available for sale (7,550) (6,054)
Treasury stock at cost - 7,321,540 and 7,343,783 shares at
September 30, 2006 and December 31, 2005, respectively (69,512) (68,490)
--------------------- --------------------
Total shareholders' equity 227,503 228,661
--------------------- --------------------
Total liabilities and shareholders' equity $ 3,000,869 2,912,759
===================== ====================
See accompanying notes to unaudited consolidated interim financial statements.
2
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED SEPTEMBER 30, 2006 2005
---- ----
Cash flows from operating activities:
Net income 35,969 45,611
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,861 2,015
Gain on sale of other real estate owned (34) (690)
Credit for loan losses (3,575) (4,760)
Deferred tax expense 1,164 1,994
Gain on sale of bank premises and equipment (29) (595)
Net loss (gain) on sale of securities available for sale 264 (5,683)
Decrease in taxes receivable 2,884 5,616
Increase in interest receivable (6,711) (3,185)
Increase in interest payable 292 322
Increase in other assets (1,299) (4,512)
Decrease in accrued expenses and other liabilities (1,554) 235
-----------------------------------------
Total adjustments (6,737) (9,243)
-----------------------------------------
Net cash provided by operating activities 29,232 36,368
-----------------------------------------
Cash flows from investing activities:
Proceeds from sales and calls of securities available for sale 61,327 250,312
Purchase of securities available for sale (95,293) (459,810)
Proceeds from maturities of securities available for sale 10,681 1,636
Net increase in loans (217,417) (156,305)
Proceeds from dispositions of other real estate owned 57 690
Proceeds from dispositions of bank premises and equipment 73 2,226
Purchases of bank premises and equipment (4,019) (2,223)
-----------------------------------------
Net cash used in investing activities (244,591) (363,474)
-----------------------------------------
Cash flows from financing activities:
Net increase/(decrease) in deposits 86,776 (42,729)
Net increase in short-term borrowings 3,770 3,287
Repayment of long-term debt (21) (20)
Proceeds from exercise of stock options 584 2,324
Proceeds from sale of treasury stock 6,840 8,929
Purchase of treasury stock (7,145) (13,129)
Dividends paid (35,905) (33,678)
-----------------------------------------
Net cash provided by/(used in) financing activities 54,899 (75,016)
-----------------------------------------
Net decrease in cash and cash equivalents (160,460) (402,122)
Cash and cash equivalents at beginning of period 312,863 696,430
-----------------------------------------
Cash and cash equivalents at end of period 152,403 294,308
=========================================
(Continued)
See accompanying notes to unaudited consolidated interim financial statements
3
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
NINE MONTHS ENDED SEPTEMBER 30, 2006 2005
---- ----
Interest paid 50,403 31,512
Income taxes paid 14,949 17,224
Transfer of loans to other real estate owned 132 56
Increase in dividends payable 5 57
Change in unrealized loss on securities
available for sale-gross of deferred taxes (2,483) (10,265)
Change in deferred tax effect on unrealized loss
on securities available for sale 987 4,095
See accompanying notes to unaudited consolidated interim financial statements
4
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements
(Unaudited)
1. Financial Statement Presentation
The unaudited Consolidated Interim Financial Statements of TrustCo Bank Corp
NY ("TrustCo" or "Company") include the accounts of the subsidiaries after
elimination of all significant intercompany accounts and transactions. Prior
year amounts have been reclassified whenever necessary to conform to the
current year presentation.
In the opinion of the management of the Company, the accompanying unaudited
Consolidated Interim Financial Statements contain all adjustments necessary
to present fairly the financial position as of September 30, 2006 and the
results of operations for the three months and nine months ended September
30, 2006 and 2005 and cash flows for the nine months ended September 30, 2006
and 2005. The accompanying Consolidated Interim Financial Statements should
be read in conjunction with the TrustCo Bank Corp NY year-end Consolidated
Financial Statements, including notes thereto, which are included in TrustCo
Bank Corp NY's 2005 Annual Report to Shareholders on Form 10K.
2. Earnings Per Share
A reconciliation of the component parts of earnings per share for the
three and nine month periods ended September 30, 2006 and 2005 follows:
(In thousands, Net Weighted Average Shares Per Share
except per share data) Income Outstanding Amounts
----------------- -------------------------- -------------------
For the quarter ended September 30, 2006:
Basic EPS:
Net income available to
Common shareholders $11,179 74,920 $0.149
Effect of Dilutive Securities:
Stock options -- 169 --
----------------- -------------------------- -------------------
Diluted EPS $11,179 75,089 $0.149
================= ========================== ===================
For nine months ended September 30, 2006:
Basic EPS:
Net income available to
Common shareholders $35,969 74,896 $0.480
Effect of Dilutive Securities:
Stock options -- 259 (.001)
----------------- -------------------------- -------------------
Diluted EPS $35,969 75,155 $0.479
================= ========================== ===================
5
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
(In thousands, Net Weighted Average Shares Per Share
except per share data) Income Outstanding Amounts
----------------- -------------------------- -------------------
For the quarter ended September 30, 2005:
Basic EPS:
Net income available to
Common shareholders $15,719 74,931 $0.210
Effect of Dilutive Securities:
Stock options -- 509 (0.002)
----------------- -------------------------- -------------------
Diluted EPS $15,719 75,440 $0.208
================= ========================== ===================
For nine months ended September 30, 2005:
Basic EPS:
Net income available to
Common shareholders $45,611 74,958 $0.608
Effect of Dilutive Securities:
Stock options -- 475 (0.003)
----------------- -------------------------- -------------------
Diluted EPS $45,611 75,433 $0.605
================= ========================== ===================
There were approximately 1.9 million and 518 thousand stock options
which, if included, would have been antidilutive in the calculation of
average shares outstanding for the nine months ended September 30, 2006 and
2005, respectively and were therefore excluded from the earnings per share
calculations.
3. Stock Option Plans
The Company has stock option plans for officers and directors. Effective
January 1, 2006 the Company adopted the provisions of FASB Statement No. 123R
("Statement 123R") using the modified prospective method. Previously the
Company had adopted the disclosure only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
(Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation-Transaction and Disclosure" ("Statement 148").
The Company's stock option plans were previously accounted for in accordance
with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issured to Employees" ("APB Opinion 25") and as such,
no compensation expense was ordinarily recorded for these plans.
6
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
In the fourth quarter of 2005 the Board of Director's of the Company
approved the accelerated vesting of all outstanding unvested stock options to
purchase shares of common stock. These options were previously awarded to
executive officers and employees under the 1995 and 2004 Stock Option Plans.
The acceleration of vesting was done in anticipation of the adoption of
Statement 123R. By accelerating the vesting of these options the Company
estimated that approximately $1.3 million of future compensation expense, net
of tax, subsequent to the adoption of FAS123R on January 1, 2006 would be
eliminated.
Options to purchase 882,100 shares of the Company's common stock, which would
otherwise have vested from time to time over the next four years, became
immediately vested and exercisable as a result of this action. The number of
shares and exercise prices of the options subject to the acceleration
remained unchanged. Also, all of the other terms of the options remain the
same. The Company recorded $127 thousand of expense during the fourth quarter
of 2005 related to this acceleration based upon an analysis performed in
accordance with APB Opinion 25.
The accelerated options included 749,500 options held by executive officers
and 132,600 options held by other employees. Based upon the Company's closing
stock price of $12.76 per share on the date of accelerated vesting, certain
of the options were below and others above the closing market price as
follows:
Grant Accelerated Exercise
Date Vesting Shares Price
----- -------------- --------
2005 411,200 $12.15
2004 394,500 $13.55
2002 76,400 $11.83
--------------
882,100
==============
The decision to accelerate the vesting of these options was made primarily to
reduce non-cash compensation expense that would have been recorded in the
Company's income statement in periods subsequent to the adoption of FASB
Statement No. 123R.
7
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
Had compensation expense for the Company's stock option plans been determined
consistent with Statement 123, the Company's net income and earnings per
share for the three and nine months ended September 30, 2005 would have been
as follows:
(dollars in thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2005
------------------- -----------------
Net income:
As reported $15,719 45,611
Deduct: total stock-based
compensation expense determined
under fair value based method for
all awards, net of related tax effects (191) (573)
------------------- -----------------
Pro forma net income $15,528 45,038
=================== =================
Earnings per share:
Basic - as reported $ 0.210 0.608
Basic - pro forma 0.207 0.601
Diluted - as reported 0.208 0.605
Diluted - pro forma 0.206 0.597
The weighted average fair value of each option as of the grant date was
estimated using the Black-Scholes pricing model, and calculated in accordance
with Statement 123 as follows for options granted in the year indicated. No
options were granted in the first three quarters of 2006.
Employees' Directors'
Plan Plan
---------- ----------
2005 $1.675 1.480
The following assumptions were utilized in the calculation of the fair
value of the options under Statement 123:
Employees' Directors'
Plan Plan
---------- ----------
Expected dividend yield: 2005 4.95% 4.95
Risk-free interest rate: 2005 3.91 3.76
Expected volatility rate: 2005 21.25 19.76
Expected lives 7.5 years 6.0 years
Under the 2004 TrustCo Bank Corp NY Stock Option Plan, the Company may grant
options to its eligible employees for up to approximately 2.0 million shares
of common stock. Under the 1995 TrustCo Bank Corp NY Stock Option Plan, the
Company may grant options to its eligible employees for up to approximately
7.9 million shares of common stock. Under the 2004 Directors Stock Option
Plan, the Company may grant options to its directors for up to approximately
200 thousand shares of its common stock. Under the 1993 Directors Stock
Option Plan, the Company could have granted options to its directors for up
to approximately 531 thousand shares of its common stock. The source of
shares issued as a result of stock option exercises is authorized, but
unissued shares as well as treasury shares.
8
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
Under each of these plans, the exercise price of each option equals the
market price of the Company's stock on the date of the grant, and an option's
maximum term is ten years. Options generally vest over five years from the
date the options are granted for the employees plans and they are immediately
vested under the directors' plan. A summary of the status of TrustCo's stock
option plans as of September 30, 2006, and changes during the nine months
then ended, are as follows:
Outstanding Options Exercisable Options
-------------------------------------------------------------
Weighted Weighted
Average Average
Option Option
Shares Price Shares Price
-------------------------------------------------------------
Balance, January 1, 2006 4,178,049 $10.85 4,178,049 $10.85
Exercised Options - 2006 95,133 6.14 95,133 6.14
Cancelled Options - 2006 (26,250) 12.86 (26,250) 12.86
-------------------------------------------------------------
Balance September 30, 2006 4,056,666 $10.95 4,056,666 $10.95
=============================================================
The total intrinsic value of stock options exercised during the first nine
months of 2006 and 2005 was approximately $528 thousand and $4.0 million,
respectively. The shares used for the 2006 and 2005 stock option exercises
were issued from previously unissued shares as well as treasury shares.
The following table summarizes information about total stock options
outstanding and exercisable at September 30, 2006:
Weighted
Average Weighted
Range of Options Remaining Average
Exercise Outstanding Contractual Exercise
Price and Exercisable Life Price
-------- -------------------------------------------------------------------------
Less than $7.50 13,076 2.0 years $ 5.97
Between $7.51 and
$10.00 2,125,340 4.7 years 9.58
Greater than $10.00 1,918,250 8.5 years 12.50
-------------------------------------------------------------------------
Total 4,056,666 6.5 years $10.95
=========================================================================
The aggregate intrinsic value of options outstanding and exercisable as of
September 30, 2006 was approximately $2.8 million.
The Company awarded 2.7 million performance bonus units to the executive
officers and directors. These units become vested and exercisable only under
a change of control as defined in the plan. The units were awarded based upon
the stock price at the time of grant and, if exercised under a change of
control, allow the holder to receive the increase in value offered in the
exchange over the stock price at the date of grant for each unit.
9
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
4. Comprehensive Income
Comprehensive income (loss) includes the reported net income of a company
adjusted for items that are accounted for as direct entries to equity, such
as the mark to market adjustment on securities available for sale, foreign
currency items, minimum pension liability adjustments, and certain derivative
gains and losses. At the Company, comprehensive income represents the sum of
net income and items of other comprehensive income or loss, which are
reported directly in shareholders' equity, net of tax, such as the change in
net unrealized gain or loss on securities available for sale. Accumulated
other comprehensive income or loss, which is a component of shareholders'
equity, represents the net unrealized gain or loss on securities available
for sale, net of tax.
Comprehensive income for the three month periods ended September 30, 2006 and
2005 was $25.4 million and $9.7 million, respectively, and $34.5 million and
$39.4 million for the nine month periods ended September 30, 2006 and 2005,
respectively. The following summarizes the components of other comprehensive
income (loss):
(dollars in thousands)
Three months ended September 30
2006 2005
-------------------------------
Unrealized holding gains (losses) arising during period,
net of tax (pre-tax gain of $23,685 for 2006 and pre-tax
loss of $9,260 for 2005) $14,189 (5,572)
Reclassification adjustment for net gain realized in net
income during the period, net of tax (pre-tax gains of $24
for 2006 and $776 for 2005) (14) (467)
-------------------------------
Other comprehensive income (loss) $14,175 (6,039)
===============================
(dollars in thousands)
Nine months ended September 30
2006 2005
-------------------------------
Unrealized holding losses arising during period,
net of tax (pre-tax losses of $2,747 for 2006 and $4,582
for 2005) $(1,655) (2,753)
Reclassification adjustment for net gain (loss) realized in net
income during the period, net of tax (pre-tax loss of $264
for 2006 and pre-tax gain of $5,683 for 2005) 159 (3,418)
-------------------------------
Other comprehensive loss $(1,496) (6,171)
===============================
10
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
5. Benefit Plans
The table below outlines the component's of the Company's net periodic
expense (benefit) recognized during the three and nine month periods ended
September 30, 2006 and 2005 for its pension and other postretirement benefit
plans:
Components of Net Periodic Expense/(Benefit) for the three months ended September 30,
(dollars in thousands)
Pension Benefits Other Postretirement Benefits
2006 2005 2006 2005
--------------------------- ----------------------------------
Service cost $ 160 201 4 13
Interest cost 338 380 4 23
Expected return on plan assets (411) (473) (71) (101)
Amortization of prior service cost 6 26 (140) (136)
--------------------------- ----------------------------------
Net periodic expense/(benefit) $ 93 134 (203) (201)
=========================== ==================================
Components of Net Periodic Expense/(Benefit) for the nine months ended September 30,
(dollars in thousands)
Pension Benefits Other Postretirement Benefits
2006 2005 2006 2005
--------------------------- ----------------------------------
Service cost $ 549 603 22 32
Interest cost 1,108 1,139 40 59
Expected return on plan assets (1,307) (1,376) (275) (303)
Amortization of prior service cost 59 79 (368) (395)
Curtailment gain, net (362) -- -- --
--------------------------- ----------------------------------
Net periodic expense/(benefit) $ 47 445 (581) (607)
=========================== ==================================
Contributions
The Company previously disclosed in its consolidated financial statements for
the year ended December 31, 2005, that it did not expect to make any
contributions to its pension and postretirement benefit plans in 2006. As of
September 30, 2006, no contributions have been made. The Company presently
anticipates that in accordance with IRS limitations and accounting standards,
it will not make any contributions in 2006.
11
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
In June 2006, the Company recorded a net $362 thousand non-cash
curtailment gain in accordance with SFAS No. 88, "Employer's Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits", ("SFAS No. 88") in connection with freezing the
defined benefit pension plan, using actuarial assumptions consistent with
those used at December 31, 2005 and updated to June 30, 2006. SFAS No. 88
requires curtailment accounting if an event eliminates, for a significant
number of employees, the accrual of defined benefits for some or all of their
future services.
6. Impact of Changes in Accounting Standards
In 2004, the FASB issued a statement to revise Statement of Financial
Accounting Standards ("SFAS") No. 123 and SFAS No. 95, "Share-Based Payment,"
that addresses the accounting for share-based payment transactions in which
an enterprise receives employee services in exchange for (a) equity
instruments of the enterprise or (b) liabilities that are based on the fair
value of the enterprise's equity instruments that may be settled by the
issuance of such equity instruments. The Company adopted the provisions of
SFAS No. 123R using the modified prospective method of transition on January
1, 2006. Under this method, SFAS No. 123R will apply to new awards and to
awards that are outstanding on the effective date and are subsequently
modified or cancelled. Compensation expense for outstanding awards for which
the requisite service period had not been rendered as of the effective date
will be recognized over the remaining service period using the compensation
cost calculated for pro forma disclosure purposes under SFAS No. 123. See
Note 3, Stock Option Plans, for pro-forma earnings per share for stock-based
compensation and information on the acceleration of vesting periods that
occurred in 2005. The adoption of SFAS No. 123R did not have a significant
effect on the Company's consolidated financial condition or results of
operations.
In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments," which eliminates the exemption from applying SFAS 133
to interests in securitized financial assets so that similar instruments are
accounted for similarly regardless of the form of the instruments. SFAS 155
also allows the election of fair value measurement at acquisition, at
issuance, or when a previously recognized financial instrument is subject to
a remeasurement event. Adoption is effective for all financial instruments
acquired or issued after the beginning of the first fiscal year that begins
after September 15, 2006. Early adoption is permitted. The adoption of SFAS
155 is not expected to have a material effect on our consolidated financial
position, results of operations or cash flows.
In July 2006, FASB issued Financial Accounting Standards Interpretation No.
48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes". FIN 48 clarifies
the accounting for uncertainty in income taxes recognized in an enterprises'
financial statements in accordance with FASB Statement No. 109, "Accounting
for Income Taxes". FIN 48 prescribes a recognition threshold and measurement
attributable for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting
in interim periods, disclosures and transitions. FIN 48 is effective for
fiscal years beginning after December 15, 2006. The Company is currently
analyzing the effects of FIN 48.
12
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans." This Statement
is an amendment of FASB Statements No. 87, 88, 106 and 132R. This Statement
requires employers to recognize the overfunded or underfunded status of a
defined benefit pension, retiree healthcare and other postretirement plans as
an asset or liability in their financial statements. In addition, plans are
to recognize changes in that funded status in the year in which the changes
occur through comprehensive income. This Statement also requires an employer
to measure the funded status of a plan as of the date of its year-end
statement of financial position. The requirement to recognize the funded
status of the plan is effective for the Company as of December 31, 2006. The
requirement to measure plan assets and benefit obligations as of the date of
the fiscal year-end statement of financial position is effective for fiscal
years ending after December 15, 2008. The Company will adopt the Statement
and recognize the funded status of its pension and postretirement plans as of
December 31, 2006. The Company is currently evaluating the impact this will
have on its financial statements and will adopt SFAS No. 158 in its annual
report on Form 10-K for the year ending December 31, 2006.
On September 13, 2006, the Securities and Exchange Commission (the "SEC")
issued Staff Accounting Bulletin ("SAB") No. 108 expressing the SEC staff's
views regarding the process of quantifying financial statement misstatements.
This SAB is addressing diversity in practice in quantifying financial
statement misstatements and the build up of amounts on the balance sheet. The
cumulative amounts, while not considered material in the individual years in
which the build up occurred may be considered material in a subsequent year
if a Company were to correct those amounts through current period earnings.
Initial application of SAB No. 108 allows registrants to elect not to restate
prior periods but to reflect the initial application in their annual
financial statements covering the first fiscal year ending after November 15,
2006. The cumulative effect of the initial application should be reported in
the carrying amounts of assets and liabilities as of the beginning of that
fiscal year, and the offsetting adjustment, net of tax, should be made to the
opening balance of equity for that year. The Company is currently evaluating
the impact this will have on its financial statements and will adopt SAB No.
108 in its annual report on Form 10-K for year ending December 31, 2006.
7. Guarantees
The Company does not issue any guarantees that would require
liability-recognition or disclosure, other than its standby letters of
credit. Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Standby
letters of credit generally arise in connection with lending relationships.
The credit risk involved in issuing these instruments is essentially the same
as that involved in extending loans to customers. Contingent obligations
under standby letters of credit totaled approximately $4.1 million at
September 30, 2006 and represent the maximum potential future payments the
Company could be required to make. Typically, these instruments have terms of
twelve months or less and expire unused; therefore, the total amounts do not
necessarily represent future cash requirements. Each customer is evaluated
individually for creditworthiness under the same underwriting standards used
for commitments to extend credit and on-balance sheet instruments. Company
policies governing loan collateral apply to standby letters of credit at the
time of credit extension. Loan-to-value ratios are generally consistent with
loan-to-value requirements for other commercial loans secured by similar
types of collateral. The fair value of the Company's standby letters of
credit at September 30, 2006 was insignificant.
13
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
TrustCo Bank Corp NY:
We have reviewed the consolidated statement of financial condition of TrustCo
Bank Corp NY and subsidiaries (the Company) as of September 30, 2006, the
related consolidated statements of income for the three and nine-month
periods ended September 30, 2006 and 2005 and the related consolidated
statements of cash flows for the nine-month periods ended September 30, 2006
and 2005. These consolidated financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States),
the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion. Based on our review, we are not aware of any material modifications
that should be made to the consolidated financial statements referred to
above for them to be in conformity with U.S. generally accepted accounting
principles.
We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated
statement of financial condition of TrustCo Bank Corp NY and subsidiaries as
of December 31, 2005, and the related consolidated statements of income,
changes in shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 24, 2006, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying consolidated statement
of financial condition as of December 31, 2005 is fairly stated, in all
material respects, in relation to the consolidated statement of financial
condition from which it has been derived.
/s/ KPMG LLP
----------------
KPMG LLP
Albany, New York
November 3, 2006
14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The review that follows focuses on the factors affecting the financial
condition and results of operations of TrustCo Bank Corp NY ("TrustCo" or
"Company") during the three month and nine-month periods ended September 30,
2006, with comparisons to 2005 as applicable. Net interest income and net
interest margin are presented on a fully taxable equivalent basis in this
discussion. The consolidated interim financial statements and related notes,
as well as the 2005 Annual Report to Shareholders, should be read in
conjunction with this review. Amounts in prior period consolidated interim
financial statements are reclassified whenever necessary to conform to the
current period's presentation.
Forward-looking Statements
Statements included in this review and in future filings by TrustCo with the
Securities and Exchange Commission, in TrustCo's press releases, and in oral
statements made with the approval of an authorized executive officer, which
are not historical or current facts, are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, and are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical earnings and
those presently anticipated or projected. TrustCo wishes to caution readers
not to place undue reliance on any such forward-looking statements, which
speak only as of the date made. The following important factors, among
others, in some cases have affected and in the future could affect TrustCo's
actual results, and could cause TrustCo's actual financial performance to
differ materially from that expressed in any forward-looking statement: (1)
credit risk, (2) interest rate risk, (3) competition, (4) changes in the
regulatory environment, and (5) changes in general business and economic
trends. The foregoing list should not be construed as exhaustive, and the
Company disclaims any obligation to subsequently revise any forward-looking
statements to reflect events or circumstances after the date of such
statements, or to reflect the occurrence of anticipated or unanticipated
events.
Following this discussion is the table "Distribution of Assets, Liabilities
and Shareholders' Equity: Interest Rates and Interest Differential" which
gives a detailed breakdown of TrustCo's average interest earning assets and
interest bearing liabilities for the three months and nine months ended
September 30, 2006 and 2005.
Overview
TrustCo recorded net income of $11.2 million, or $0.149 of diluted earnings
per share for the three months ended September 30, 2006, as compared to net
income of $15.7 million or $0.208 of diluted earnings per share in the same
period in 2005. For the nine month period ended September 30, 2006, TrustCo
recorded net income of $36.0 million, or $0.479 of diluted earnings per
share, as compared to $45.6 million, or $0.605 of diluted earnings per share
for the comparable period in 2005.
15
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
The primary factors accounting for the year to date decrease in net income
are as follows:
o A decrease in the net interest margin from 3.92% for 2005 to 3.57%
for 2006 offset by a $114.4 million increase in the average balance
of interest earning assets between 2005 and 2006,
o A decrease in the credit for loan losses from $4.8 million for the
nine months of 2005 as compared to $3.6 million for the comparable
period in 2006,
o A decrease in non interest income from $20.4 million in 2005 to
$11.1 million in 2006. Included in the non interest income balances
are net securities losses of $264 thousand in 2006 compared to net
securities gains of $5.7 million in 2005. Also the 2005 results
include gains from the sale of the former operations center and the
Company's credit card portfolio and
o An increase of $2.0 million in non interest expense.
Asset/Liability Management
The Company strives to generate superior earnings capabilities through a mix
of core deposits, funding a prudent mix of earning assets. This is, in its
most fundamental form, the essence of asset/liability management.
Additionally, TrustCo attempts to maintain adequate liquidity and reduce the
sensitivity of net interest income to changes in interest rates to an
acceptable level while enhancing profitability both on a short-term and long-
term basis.
The following Management's Discussion and Analysis for the third quarter and
first nine months of 2006 compared to the comparable periods in 2005 is
affected by the change in interest rates in the marketplace in which TrustCo
competes. Included in the 2005 Annual Report to Shareholders is a description
of the effect interest rates had on the results for the year 2005 compared to
2004. Most of the same market factors discussed in the 2005 Annual Report
also had a significant impact on 2006 results.
TrustCo competes with other financial service providers based upon many
factors including quality of service, convenience of operations, and rates
paid on deposits and charged on loans. The absolute level of interest rates,
changes in rates and customers' expectations with respect to the direction of
interest rates have a significant impact on the volume of loan and deposit
originations in any particular period.
16
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
One of the most important interest rates used to control national
economic policy is the "federal funds" rate. This is the interest rate
utilized for institutions with the highest credit quality rating. The federal
funds rate increased by 100 basis points during the first nine months of 2006
from 4.25% at the beginning of the year to 5.25% by September 30, 2006. For
2005 the federal funds rates was 2.25% at the beginning of that year and
increased to 3.75% by September 30, 2005. During the first nine months of
2006 the 10 year treasury bond did not change consistently with the increase
in the federal funds rate. The 10 year treasury was 4.36% as of January 1,
2006 and increased only 24 basis points to 4.60% by the end of the third
quarter of 2006. For comparison purposes the 10 year treasury was 4.21% at
the beginning of 2005 and ended the third quarter of 2005 up only 17 basis
points to 4.38%. The Federal Reserve has indicated its intention to continue
to monitor economic expansion in the United States economy which may require
additional changes in the federal funds rate subsequent to September 30,
2006.
These changes in interest rates have an effect on the Company relative to the
interest income on loans, securities and federal funds sold as well as on
interest expense on deposits and borrowings. New originations of residential
real estate loans and new purchases of longer-term investments are most
affected by the changes in longer term market interest rates such as the 10
year treasury. The federal funds sold portfolio and other short term
investments are also affected primarily by changes in the federal funds
target rate. Deposit interest rates are most affected by the short term
market interest rates. Also, changes in interest rates have an effect on the
recorded balance of the securities available for sale portfolio, which is
recorded at fair value. Generally, as interest rates increase, the fair value
of the securities available for sale portfolio will decrease.
The principal loan product for TrustCo is residential real estate loans.
Interest rates on new residential real estate loan originations are also
influenced by the rates established by secondary market participants such as
Freddie Mac and Fannie Mae. Because TrustCo is a portfolio lender and does
not sell loans into the secondary market, the Company establishes rates that
management determines are appropriate in relation to the long-term nature of
a residential real estate loan, while remaining competitive with the
secondary market rates.
For the third quarter of 2006, the net interest margin decreased to
3.46% from 4.03% for the third quarter of 2005. The quarterly results reflect
the following significant factors:
- The average balance of securities available for sale increased by $24.4
million and the average yield increased to 5.32%.
- The average balance of federal funds sold and other short term
investments decreased by $146.2 million as funds were redeployed to the
loan portfolio and the average yield increased 194 basis points to
5.32%. The increase in yield on federal funds sold and other short-term
investments is attributable to the increase in the target federal funds
rate during these time periods.
- The loan portfolio grew by $285.8 million to $1.65 billion and the
average yield decreased 4 basis points to 6.47%.
- The average balance of interest bearing liabilities (primarily deposit
accounts) increased $162.2 million and the average yield increased 99
basis points to 2.94%.
17
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
These changes resulted in a net interest margin decrease of 57 basis
points for the third quarter of 2006 compared to the comparable period in
2005.
During the third quarter and for the full year of 2006 the Company's strategy
was to expand the loan portfolio by offering competitive interest rates as
the rate environment began to increase. TrustCo believes that the Company's
residential real estate loan product is very competitive compared to local
and national competitors.
The strategy on the funding side of the balance sheet continues to be to
attract customers to the Company based upon a combination of service,
convenience and interest rate. The Company offered what it considers to be
attractive deposit rates as part of a strategy to increase deposit balances.
This strategy has been successful but has also resulted in part of the
increase in the deposit costs.
Earning Assets
Total average interest earning assets was $2.92 billion for the third quarter
of 2006 and $2.76 billion for the comparable period in 2005 with an average
yield of 5.68% in 2005 and 5.97% in 2006. Income on earning assets increased
by $4.4 million during this same time-period from $39.2 million in 2005 to
$43.6 million in 2006. The increase in interest income on earning assets was
attributable to the increase in yield and average balance on these assets.
For the nine month period ended September 30, 2006, the average balance of
interest earning assets was $2.88 billion, an increase of $114.4 million from
the average balance for the comparable period in 2005 of $2.76 billion. The
average yield on interest earning assets was 5.93% for 2006, compared to
5.46% in 2005. The increase in the average balance of earning assets and the
increase in the yield earned on these assets, resulted in interest income of
$127.8 million for the nine months of 2006, compared to $113.0 million for
the nine months of 2005.
Loans
The average balance of loans for the third quarter was $1.65 billion in 2006
and $1.36 billion in 2005. The yield on loans decreased from 6.51% in 2005 to
6.47% in 2006. The combination of the increase in average balances offset
with lower rates resulted in an increase of $4.5 million in interest income
on loans. For the third quarter of 2006, the average yield decreased by 4 bp
compared to the prior year due to the relatively low yields being offered as
introductory rates on adjustable loan products and some continual refinancing
of high rate loans since 2005.
18
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
For the nine month period ended September 30, 2006, the average balance
in the loan portfolio was $1.57 billion compared to $1.31 billion for the
comparable period in 2005. The average yield increased from 6.46% in 2005 to
6.50% in 2006. The increase in the average balance of loans outstanding and
the increase in the yield resulted in total interest income of $76.5 million
in 2006 compared to $63.2 million in 2005.
TrustCo actively markets residential mortgage loan products (which include
the residential real estate mortgages and home equity credit lines) within
its geographic territory. Mortgage loan rates are affected by a number of
factors including the prime rate, the federal funds rate, rates set by
competitors and secondary market participants. As noted previously, mortgage
interest rates have changed significantly as a result of national economic
policy in the United States. During this period of changing interest rates,
TrustCo aggressively marketed the unique aspects of its loan products thereby
attempting to create a differentiation from other lenders. These unique
aspects include extremely low closing costs, fast turnaround time on loan
approvals, no escrow or mortgage insurance requirements and the fact that the
Company holds these loans in TrustCo's portfolio and does not sell them into
secondary markets.
Though there is debate among nationally recognized economists, the general
tenor of the national economy is for improvement and continued fluctuations
in long-term interest rates. Consequently the significant amount of
refinancing that occurred during 2003 and 2004 may be completed with only
residual effects into the remainder of 2006. Assuming a rise in long-term
interest rates, the Company would anticipate that the unique features of its
loan product will once again attract customers in the residential mortgage
loan area. Management is expecting continued load growth for the remainder of
2006, however, this is highly contingent upon market interest rates.
The impact of the increase in the benchmark interest rate indexes (prime
rate, federal funds rate, etc.) is apparent in the change in the yield earned
in the commercial and home equity loan portfolios. The average yields earned
on these loan types for the first nine months of 2006 were 34 basis points
and 93 basis points, respectively, greater than the average yields earned
during the comparable period of 2005.
Securities Available for Sale
During the third quarter of 2006, the average balance of securities available
for sale was $1.12 billion with a yield of 5.32%, compared to $1.10 billion
for the third quarter of 2005 with a yield of 5.27%. The combination of the
increase in average balance and the increase in the yields caused an increase
in interest income on securities available for sale of $469 thousand between
the third quarter of 2005 and 2006.
For the nine-month period ended September 30, 2006 the average balance of
securities available for sale were $1.12 billion compared to $999.5 million
for the nine months ended September 30, 2005. The average yield on the
portfolio was 5.31% in 2006 and 5.37% in 2005 which resulted in interest
income of $44.5 million in 2006 and $40.3 million in 2005.
19
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
The largest increase in the securities available for sale portfolio was
within the category of Government Sponsored Enterprises which are debt
instruments issued by FNMA, Freddie Mac and the Federal Home Loan Bank. The
increase was $149.1 million in the average balance for the nine months of
2006 compared to the comparable period in 2005. For the third quarter of 2006
compared to 2005 the increase was $59.5 million. During 2005 and 2006 the
Company increased its investment in these instruments as a means of deploying
excess liquidity that had been invested in federal funds sold and other
short-term investments.
For 2006 the long term interest rates as reflected by the 10 year Treasury
have increased over the levels of 2005. The securities available for sale
portfolio is reflected at fair value and therefore these investments reflect
unrecognized depreciation of $12.6 million at September 30, 2006. The Company
has the ability and intent, as required, to hold these securities to maturity
or to the point that the unrealized loss is reversed. These securities are
accounted for as being available for sale and as such are managed and
maintained within that classification. None of the depreciation in the value
of this portfolio reflects deterioration of the credit worthiness of the
issuers or a concern as to the eventual repayment of the amounts due.
Federal Funds Sold and Other Short-Term Investments
During the third quarter of 2006, the average balance of federal funds sold
and other short-term investments was $150.0 million with an average yield of
5.32%, compared to the average balance for the three month period ended
September 30, 2005 of $296.2 million with an average yield of 3.38%. The
decrease in the average balance and the increase in the average yield,
resulted in total interest income on federal funds sold and other short-term
investments of $2.0 million for 2006 compared to $2.5 million for 2005.
During the nine month period ended September 30, 2006, the average balance of
federal funds sold and other short-term investments was $187.1 million with a
yield of 4.84% compared to an average balance of $456.1 million in 2005 with
an average yield of 2.79%.
The federal funds portfolio is utilized to generate additional interest
income and liquidity as funds are waiting to be deployed into the loan and
securities portfolios. The growth in the loan portfolio was funded primarily
through reductions in federal funds sold and other short-term investments.
Changes in the yield on the federal funds and other short-term investment
portfolios resulted primarily from changes in the target rate set by the
Federal Reserve Board for federal funds sold.
20
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
Funding Opportunities
TrustCo utilizes various funding sources to support its earning asset
portfolio. The vast majority of the Company's funding comes from traditional
deposit vehicles such as savings, interest bearing checking and time deposit
accounts.
During the third quarter, total average interest bearing liabilities were
$2.50 billion for 2006 and $2.33 billion for 2005. The rate paid on total
interest bearing liabilities was 2.94% for 2006 and 1.95% for 2005. Total
interest expense for the third quarter increased approximately $7.0 million
to $18.5 million for 2006 compared to $11.5 million for 2005.
Similar changes in interest bearing liabilities were noted for the nine-month
period as was discussed for the quarter except the average yield increased
from 1.81% in 2005 to 2.76% in 2006. The increase in yield for the nine
months of 2006 versus 2005 of 95 basis points is due primarily to the
increase in interest rates on certificates of deposit and money market
accounts. These deposit yields increased due to general trends in market rate
indices during this time period. Total average interest bearing liabilities
were $2.45 billion for the nine-month period ended September 30, 2006 and
$2.35 billion for 2005.
Average demand deposit balances increased during the third quarter of 2006
compared to the third quarter of 2005. Demand deposits averaged $246.0
million in 2006 and $240.3 million in 2005. On a year to date basis, average
demand deposits were $245.0 million in 2006 compared to $233.3 million in
2005.
Average interest bearing deposit balances have increased from $2.25 billion
for the third quarter of 2005 to $2.40 billion for the same period in 2006.
Each of the deposit categories changed as follows: increases were noted in
money market accounts of $139.8 million, and time deposits of $114.5 million
offset by decreases in interest bearing checking accounts of $33.1 million
and savings accounts of $71.7 million. Comparable trends were noted in the
nine month results for 2006 compared to 2005. For the nine months of 2005 the
average balance of interest bearing deposits was $2.27 billion compared to
$2.36 billion in 2006.
For both the third quarter and year to date, the Company has experienced a
flow of deposits out of the savings category and into time deposits and money
market accounts. The changes in deposit classification between savings and
time deposits and money market accounts reflect the desire by depositors to
maximize the interest they are earning on deposit balances. Overall, the
yield on time deposits has increased during the quarter to 3.96% whereas the
savings yield is 1.62%.
21
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
These changes increase the funding cost for TrustCo as customers move funds
from low rate savings accounts into the higher costing time deposit and money
market accounts.
Average short-term borrowings for the quarter were $95.2 million in 2006
compared to $82.5 million in 2005. The average rate increased during this
time period from 2.59% to 4.12% for the third quarter of 2006, reflecting
recent increases in the federal funds rate.
For the nine months ended September 30, 2006 the average balance of short
term borrowings was $95.4 million as compared to $82.1 million in 2005. The
average yield was 3.82% in 2006 and 2.20% in 2005.
Net Interest Income
Taxable equivalent net interest income decreased to $25.2 million for the
third quarter of 2006 from $27.7 million for the same period in 2005. The net
interest spread decreased 70 basis points between 2005 and 2006 and the net
interest margin decreased by 57 basis points.
Similar changes were noted in taxable equivalent net interest income, net
interest spread and net interest margin for the nine-month period ended
September 30, 2006, compared to the same period in 2005. Net interest income
for the first nine months of 2006 was $77.1 million, a decrease of $4.1
million from the $81.2 million for the first nine months of 2005. Net
interest spread was 3.17% for 2006 and 3.65% for 2005, while net interest
margin decreased 35 basis points to 3.57% for the nine month period ended
September 30, 2006, compared to the nine month period ended September 30,
2005.
Nonperforming Assets
Nonperforming assets include nonperforming loans which are those loans in a
nonaccrual status, loans that have been restructured, and loans past due
three payments or more and still accruing interest. Also included in the
total of nonperforming assets are foreclosed real estate properties, which
are categorized as real estate owned.
Impaired loans are considered to be those commercial and commercial real
estate loans in a nonaccrual status and restructured loans. The following
will describe the nonperforming assets of TrustCo as of September 30, 2006.
22
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
Nonperforming loans: Total nonperforming loans were $6.3 million at
September 30, 2006, an increase from the $2.9 million of nonperforming loans
at September 30, 2005. Nonaccrual loans were $5.1 million at September 30,
2006 and $1.3 million at September 30, 2005. Loans past due 3 payments or
more and still accruing interest were $40 thousand at September 30, 2006 and
$27 thousand at September 30, 2005.
Restructured loans were $1.2 million at September 30, 2006 compared to $1.6
million at September 30, 2005.
While non-accruing loans have increased, as noted above, these loans are
residential real estate loans which are generally placed on non-accrual
status at 3 payments past due, and are generally considered to be reasonably
well secured.
All of the nonperforming loans at September 30, 2006 and 2005 are residential
real estate or retail consumer loans. Since 2000, there has been a continued
shifting in the components of TrustCo's problem loans and chargeoffs from
commercial and commercial real estate to the residential real estate and
retail consumer loan portfolios.
Total impaired loans at September 30, 2006 of $1.2 million consisted of
restructured retail loans. During the first nine months of 2006, there were
$19 thousand of commercial loan chargeoffs, $159 thousand of consumer loan
chargeoffs and $1.2 million of residential mortgage loan chargeoffs as
compared with $431 thousand of commercial loan chargeoffs, $176 thousand of
consumer loan chargeoffs and $1.2 million of residential mortgage loan
chargeoffs in the first nine months of 2005. Recoveries during the first nine
months were $2.3 million in 2006 and $3.8 million in 2005.
Though the economic climate in the Upstate New York area has stagnated
over the last several years, resulting in moderate levels of bankruptcies and
relatively flat real estate prices, overall economic trends in the last two
years have been improving. Bankruptcies in the Capital District area have
laggedstatewide trends and general housing prices have continued to increase.
These trends have helped marginal credits better manage their debt load.
However recent trends indicate that the strong housing market is softening on
a national basis along with the local markets. The Company's net loan
chargeoff (recovery) experience has been significantly improving in recent
years and was in a net loan recovery position on a year to date and quarter
to date basis in 2006. This positive trend is consistent with the positive
trends the Company has noted in general economic conditions in the Company's
market areas. Consideration of net loan chargeoff (recovery) experience is
factored into the Company's estimation of the required level of the allowance
for loan losses and the provision (credit) for loan losses. The continuation
of the positive trend in net loan chargeoff (recovery) experience is a factor
in the Company's estimate of the level of allowance for loan losses that is
necessary. Consideration of this positive trend in net loan chargeoff
(recovery) experience has resulted in the negative provision for loan losses
on a year to date basis in 2006, no provision for the quarter ended September
30, 2006, and the negative provision on a year to date basis in 2005 and the
quarter ended September 30, 2005.
23
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
Other Real estate owned: There was $132 thousand real estate owned as of
September 30, 2006 and $56 thousand at September 30, 2006
Allowance for loan losses: The balance of the allowance for loan losses is
maintained at a level that is, in management's judgment, representative of
the amount of risk inherent in the loan portfolio.
At September 30, 2006, the allowance for loan losses was $42.7 million, which
represents a decrease from the $45.4 million in the allowance at December 31,
2005. The allowance represents 2.53% of the loan portfolio as of September
30, 2006 compared to 3.34% at September 30, 2005.
In deciding on the adequacy of the allowance for loan losses, management
reviews the current nonperforming loan portfolio as well as loans that are
past due and not yet categorized as nonperforming for reporting purposes.
Also, there are a number of other factors that are taken into consideration,
including:
o The magnitude, nature and trends of the recent loan chargeoffs and
recoveries.
o The growth in the loan portfolio and the implication that has in
relation to the economic climate in the bank's business territory,
and
o The improving economic environment in the upstate New York
territory, the Company's largest geographic market over the last
two years.
Management continues to monitor these in determining future provisions for
loan losses or negative provisions for loan losses in relation to the
economic environment, loan chargeoffs, recoveries and the level and trends of
nonperforming loans.
Factoring in the positive trends relative to net loan recoveries offset by
the growth in nonperforming loans and the overall growth in the portfolio the
Company recorded no provisions for loan losses in the third quarter 2006 and
a net credit of $1.7 million in the third quarter 2005.
24
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
Liquidity and Interest Rate Sensitivity
TrustCo seeks to obtain favorable sources of funding and to maintain
prudent levels of liquid assets in order to satisfy varied liquidity demands.
TrustCo's earnings performance and strong capital position enable the Company
to raise funds easily in the marketplace and to secure new sources of
funding. The Company actively manages its liquidity through target ratios
established under its liquidity policies. Continual monitoring of both
historical and prospective ratios allows TrustCo to employ strategies
necessary to maintain adequate liquidity. Management has also defined various
degrees of adverse liquidity situations, which could potentially occur, and
has prepared appropriate contingency plans should such a situation arise.
Noninterest Income
Total noninterest income for the three months ended September 30, 2006 was
$3.9 million, as compared to $6.4 million for the comparable period in 2005.
During these periods, the Company recorded net securities gains of $776
thousand for 2005 and $24 thousand for 2006. Excluding these securities
transactions, noninterest income decreased from $5.7 million in the third
quarter of 2005 to $3.9 million in 2006.
Similar results were also recognized for the nine months of 2006 compared to
2005. Total noninterest income was $11.1 million for 2006 compared to $20.4
million for 2005. Excluding net securities transactions, noninterest income
was $11.4 million for 2006 and $14.7 million for 2005.
Trust department income decreased to $1.3 million for the third quarter of
2006 from $1.5 million for the third quarter of 2005. Service fees and other
income are up slightly between 2005 and 2006 due primarily to loan volume and
deposit activity.
The decrease in other noninterest income for the third quarter of 2006 as
compared to 2005 is primarily attributable to the gain on sale of credit
cards of $1.4 million recorded in 2005. During the third quarter the Company
sold approximately $7.4 million of credit card receivables and entered into a
marketing arrangement with a third party credit card servicer. As a result of
this sale the Company recognized this gain and will have continuing income
from credit cards for new card originations. The anticipated income for
future years is not expected to be material to the Company's operations.
Similarly, for the nine months of 2006 compared to 2005, the decrease is
primarily the result of the credit card sale in the third quarter and the
gain recognized in 2005 on the sale of the former operations center. The
Company recognized in 2005 approximately a $600 thousand gain as a result of
this property sale.
25
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
Noninterest Expenses
Total noninterest expense for the third quarter of 2006 and 2005 was $11.7
million and $10.8 million respectively. For the nine months ended September
30, 2006 total noninterest expense was $35.6 million compared to $33.7
million in 2005.
Salaries and employee benefits expense remained virtually unchanged at $4.6
million for the third quarter of 2006 and 2005. Total salaries and employee
benefits were $14.0 million for the nine months of 2006 and 2005. Increased
salary cost of new employees for the expanded branch locations were offset by
cost reductions in other areas.
Net occupancy expense increased during the quarter from $1.8 million in 2005
to $1.9 million in 2006 due primarily to the new branch operations and the
cost of utilities. Similar increases were also noted during the nine month
period with net occupancy expense of $5.8 million for 2006 compared to $5.5
million in 2005.
Professional services expense for the third quarter of 2006 was $908 thousand
as compared to $628 thousand for the comparable period in 2005. Likewise the
expense for the nine months of 2006 were $2.6 million compared to $2.4
million in 2005. The increase in fees for professional services is a result
of additional fees paid for accounting and tax services in 2006.
Income Taxes
In the third quarter of 2006 and 2005, TrustCo recognized income tax expense
of $5.4 million and $8.5 million, respectively. This resulted in an effective
tax rate of 32.5% for 2006 and 35.1% for 2005. For the nine months of 2006,
total income tax expense was $17.9 million compared to $24.4 million for
2005. This resulted in an effective tax rate of 33.2% for 2006 and 34.8% for
2005. This decrease was primarily the result in the amount of securities
invested in tax advantaged states and political subdivisions during these
time periods.
Capital Resources
Consistent with its long-term goal of operating a sound and profitable
financial organization, TrustCo strives to maintain strong capital ratios.
New issues of equity securities have not been required since traditionally,
most of its capital requirements are met through the capital retained in the
Company (after the dividends on the common stock).
26
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
September 30, 2006
Total shareholders' equity at September 30, 2006 was $227.5 million, a
decrease of $1.2 million from the year-end 2005 balance of $228.7 million.
The change in total shareholders' equity between year-end 2005 and September
30, 2006 reflects net income of $58 thousand retained by TrustCo (net income
of $36.0 million less dividends to shareholders of $35.9 million) and a $290
thousand increase as a result of stock option exercises partially offset by
an $1.5 million increase in the net unrealized loss on securities available
for sale, net of tax, and $44 thousand net increase in treasury stock.
TrustCo declared dividends of $0.480 per share during the first nine months
of 2006 and $0.450 for the comparable period in 2005. These resulted in a
dividend payout ratio of 99.8% in 2006 and 74.0% in 2005. The Company
achieved the following capital ratios as of September 30, 2006 and 2005:
September 30, Minimum Regulatory
2006 2005 Guidelines
------------------------------------------
Tier 1 risk adjusted
capital 15.11% 16.92% 4.00
Total risk adjusted
capital 16.38% 18.19% 8.00
In addition, at September 30, 2006 and 2005, the consolidated equity to total
assets ratio (excluding the mark to market effect of securities available for
sale) was 7.81% and 8.17%, respectively.
Form 10-K is a description of the significant accounting policies that are
utilized by the Company in the preparation of the Consolidated Financial
Statements.
27
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average
balance sheet, related interest income and expense and the average annualized
yields on interest earning assets and annualized rates on interest bearing
liabilities of TrustCo (adjusted for tax equivalency) for each of the
reported periods. Nonaccrual loans are included in loans for this analysis.
The average balances of securities available for sale is calculated using
amortized costs for these securities. Included in the balance of
shareholders' equity is unrealized (depreciation) appreciation, net of tax,
in the available for sale portfolio of ($16.4) million in 2006 and 2.0
million in 2005. The subtotals contained in the following table are the
arithmetic totals of the items contained in that category.
Three Months 2006 Three Months 2005
----------------------------- -----------------------------
Average Interest Average Average Interest Average Change in Variance Variance
(dollars in thousands) Balance Rate Balance Rate Interest Balance Rate
Income/ Change Change
Expense
---------- ------- ----- ---------- ------- ----- ------ ------ ------
Assets
Securities available for sale:
U.S. Treasuries $ 993 $ 12 4.74% $ 1,552 $ 7 1.89% 5 (16) 21
Gov't Sponsored Enterprises 796,523 10,382 5.21% 737,071 9,433 5.12% 949 779 170
Mortgage-backed securities
and collateralized
mortgage obligations 179,831 2,110 4.69% 224,940 2,571 4.57% (461) (885) 424
States and political
subdivisions 131,848 2,252 6.84% 116,302 2,183 7.51% 69 207 (138)
Other 12,511 171 5.48% 17,405 264 6.07% (93) (69) (24)
---------- ------- ----- ---------- ------- ----- ------ ------ ------
Total securities
available for sale 1,121,706 14,927 5.32% 1,097,270 14,458 5.27% 469 16 453
Federal funds sold and other
short-term Investments 150,029 2,009 5.32% 296,222 2,519 3.38% (510) (5,549) 5,039
Commercial Loans 235,294 4,497 7.64% 203,184 3,749 7.37% 748 607 141
Residential mortgage loans 1,179,153 18,315 6.21% 957,335 15,081 6.30% 3,234 4,669 (1,435)
Home equity lines of credit 229,559 3,703 6.40% 193,016 3,091 6.35% 612 588 24
Installment loans 5,297 191 14.28% 9,966 313 12.47% (122) (369) 247
---------- ------- ----- ---------- ------- ----- ------ ------ ------
Loans, net 1,649,303 26,706 6.47% 1,363,501 22,234 6.51% 4,472 5,496 (1,024)
Total interest
earning assets 2,921,038 43,642 5.97% 2,756,993 39,211 5.68% 4,431 (37) 4,468
------- ----- ------- ----- ------ ------ ------
Allowance for loan losses (42,048) (47,630)
Cash & non-interest
earning assets 109,231 124,191
---------- ----------
Total assets $2,988,221 $2,833,554
========== ==========
Liabilities and
shareholders' equity
Deposits:
Interest Bearing
Checking Accounts $ 285,112 364 0.51% $ 318,185 311 0.39% 53 (179) 232
Money market accounts 291,767 3,065 4.17% 152,007 1,002 2.61% 2,063 1,250 813
Savings 703,469 2,878 1.62% 775,151 1,545 0.79% 1,333 (933) 2,266
Time deposits 1,121,216 11,182 3.96% 1,006,731 8,105 3.19% 3,077 985 2,092
---------- ------- ----- ---------- ------- ----- ------ ------ ------
Total interest
bearing deposits 2,401,564 17,489 2.89% 2,252,074 10,963 1.93% 6,526 1,123 5,403
Short-term borrowings 95,178 989 4.12% 82,482 537 2.59% 452 93 359
Long-term debt 68 1 5.18% 96 1 5.18% - - -
---------- ------- ----- ---------- ------- ----- ------ ------ ------
Total Interest
Bearing Liabilities 2,496,810 18,479 2.94% 2,334,652 11,501 1.95% 6,978 1,217 5,761
------- ------- ------ ------ ------
Demand deposits 245,956 240,253
Other liabilities 27,037 28,891
Shareholders' equity 218,418 229,758
---------- ----------
Total liab. &
shareholders' equity $2,988,221 $2,833,554
========== ==========
Net Interest Income 25,163 27,710 (2,547) (1,254) (1,293)
------- ------- ------ ------ ------
Net Interest Spread 3.03% 3.73%
Net Interest margin
(net interest income
to total interest
earning assets) 3.46% 4.03%
Tax equivalent adjustment (801) (778)
------- -------
Net Interest Income
per book 24,362 26,932
======= =======
28
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average
balance sheet, related interest income and expense and the average annualized
yields on interest earning assets and annualized rates on interest bearing
liabilities of TrustCo (adjusted for tax equivalency) for each of the
reported periods. Nonaccrual loans are included in loans for this analysis.
The average balances of securities available for sale is calculated using
amortized costs for these securities. Included in the balance of
shareholders' equity is unrealized (depreciation) appreciation, net of tax,
in the available for sale portfolio of ($13.5) million in 2006 and $2.2
million in 2005. The subtotals contained in the following table are the
arithmetic totals of the items contained in that category.
Nine Months 2006 Nine Months 2005
----------------------------- -----------------------------
Average Interest Average Average Interest Average Change in Variance Variance
(dollars in thousands) Balance Rate Balance Rate Interest Balance Rate
Income/ Change Change
Expense
---------- -------- ----- ---------- -------- ----- ------ ------ ------
Assets
Securities available for sale:
U.S. Treasuries $ 904 $ 31 4.51% $ 1,247 $ 25 2.63% 6 (11) 17
Gov't Sponsored Enterprises 788,904 30,766 5.20% 639,755 24,754 5.16% 6,012 5,819 193
Mortgage-backed securities
and collateralized
mortgage obligations 188,613 6,634 4.69% 211,382 7,271 4.59% (637) (881) 244
States and political
subdivisions 126,002 6,532 6.91% 131,163 7,528 7.65% (996) (288) (708)
Other 12,248 527 5.75% 15,969 677 5.66% (150) (167) 17
---------- -------- ----- ---------- -------- ----- ------ ------ ------
Total securities
available for sale 1,116,671 44,490 5.31% 999,516 40,255 5.37% 4,235 4,470 (235)
Federal funds sold and other
short-term Investments 187,118 6,772 4.84% 456,100 9,519 2.79% (2,747) (9,549) 6,802
Commercial Loans 227,366 12,860 7.54% 200,900 10,846 7.20% 2,014 1,483 531
Residential mortgage loans 1,127,775 52,426 6.20% 900,115 42,934 6.36% 9,492 11,253 (1,761)
Home equity lines of credit 210,987 10,691 6.77% 192,760 8,419 5.84% 2,272 846 1,426
Installment loans 5,336 569 14.26% 11,414 1,021 11.95% (452) (719) 267
---------- -------- ----- ---------- -------- ----- ------ ------ ------
Loans, net 1,571,464 76,546 6.50% 1,305,189 63,220 6.46% 13,326 12,864 462
Total interest
earning assets 2,875,253 127,808 5.93% 2,760,805 112,994 5.46% 14,814 7,785 7,029
-------- ----- -------- ----- ------ ------ ------
Allowance for loan losses (43,260) (48,202)
Cash & non-interest
earning assets 112,673 127,466
---------- ----------
Total assets $2,944,666 $2,840,069
========== ==========
Liabilities and
shareholders' equity
Deposits:
Interest Bearing
Checking Accounts $ 290,722 1,008 0.46% $ 322,664 1,078 0.45% (70) (90) 20
Money market accounts 245,152 7,321 3.99% 147,480 2,013 1.82% 5,308 1,895 3,413
Savings 713,438 7,975 1.49% 801,265 4,752 0.79% 3,223 (880) 4,103
Time deposits 1,107,414 31,659 3.82% 996,629 22,637 3.04% 9,022 2,727 6,295
---------- -------- ----- ---------- -------- ----- ------ ------ ------
Total interest
bearing deposits 2,356,726 47,963 2.72% 2,268,038 30,480 1.80% 17,483 3,652 13,831
Short-term borrowings 95,394 2,728 3.82% 82,148 1,350 2.20% 1,378 248 1,130
Long-term debt 75 3 5.24% 103 4 5.24% (1) (1) -
---------- -------- ----- ---------- -------- ----- ------ ------ ------
Total Interest
Bearing Liabilities 2,452,195 50,694 2.76% 2,350,289 31,834 1.81% 18,860 3,899 14,961
-------- -------- ------ ------ ------
Demand deposits 244,978 233,316
Other liabilities 27,898 27,651
Shareholders' equity 219,595 228,813
---------- ----------
Total liab. &
shareholders' equity $2,944,666 $2,840,069
========== ==========
Net Interest Income 77,114 81,160 (4,046) 3,886 (7,932)
-------- -------- ------ ------ ------
Net Interest Spread 3.17% 3.65%
Net Interest margin
(net interest income
to total interest
earning assets) 3.57% 3.92%
Tax equivalent adjustment (2,315) (2,660)
-------- --------
Net Interest Income
per book 74,799 78,500
======== ========
29
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As detailed in the Annual Report to Shareholders as of December 31, 2005
the Company is subject to interest rate risk as its principal market risk. As
noted throughout this Management's Discussion and Analysis for the three
months and nine months ended September 30, 2006, the Company continues to
respond to changes in interest rates to position the Company to meet short
term earning goals but also allow the Company to respond to changes in
interest rates in the future. Consequently the year-to-date average balance
of federal funds sold and other short-term investments has decreased to
$187.1 million in 2006 from $456.1 million in 2005. As investment
opportunities present themselves, management plans to continue to invest
funds from the federal funds sold and other short-term investment portfolio
into the securities available for sale and loan portfolios. This trend is
expected to continue into the fourth quarter. The Company believes there was
no significant change to its interest rate risk during the third quarter of
2006.
Item 4. Controls and Procedures
An evaluation was carried out under the supervision and with the
participation of the Company's management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the Company's
disclosure controls and procedures as of the end of the period covered by
this report.
The Company maintains disclosure controls and procedures (as that term is
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934 ("Exchange Act") designed to ensure that information required to be
disclosed in the reports that the Company files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission.
Based upon this evaluation of those disclosure controls and procedures, the
Chief Executive and Chief Financial Officer of the Company concluded, as of
the end of the period covered by this report, that the Company's disclosure
controls and procedures were effective to ensure that information required to
be disclosed in the reports the Company files and submits under the Exchange
Act is recorded, processed, summarized and reported as and when required.
In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Further, no evaluation of a cost-effective system of controls
can provide absolute assurance that all control issues and instances of
fraud, if any, will be detected.
30
There have been no changes in internal control over financial reporting (as
defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the
quarter to which this report relates that have materially affected or are
reasonably likely to materially affect, the internal control over financial
reporting.
31
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
While there are no material changes to the Company's risk
factors as discussed in the Annual Report on Form 10-K for
the year ended December 31, 2005, management believes the
following risks should also be considered:
Changes in accounting standards. Our accounting policies
and methods are fundamental to how we record and report our
financial condition and results of operations. From time to
time the Financial Accounting Standards Board ("FASB") and
others change the financial accounting and reporting
standards that govern the preparation of our financial
statements. These changes can be hard to predict and can
materially impact how we record and report our financial
condition and results of operations. In some cases, we
could be required to apply a new or revised standard
retroactively, resulting in our restating prior period
financial statements.
Operational risks. The potential for operational risk
exposure exists throughout the Company. Integral to our
continued efficacy of our technical systems, operational
infrastructure, relationships with third parties and the
vast array of associates and key executives in our
day-to-day and ongoing operations. Failure by any or all of
these resources subjects us to risks that may vary in size,
scale and scope. This includes but is not limited to
operational or technical failures, ineffectiveness or
exposure due to interruption in third party support as
expected, as well as, the loss of key individuals or
failure on the part of the key individuals to perform
properly.
32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number of Maximum Number of
Shares Purchased as Part Shares that May Yet Be
Total Number of Average Price of Publicly Announced Purchased Under the
Period Shares Purchased Paid per Share Plans or Programs Plans or Programs
July 1 - July 31 30,148 $11.07 0 N/A
August 1 - August 31 158,000 $10.94 0 N/A
September 1 - September 30 14,500 $10.90 0 N/A
Total 202,648 $10.95
All 202,648 shares were purchased by other than through a publicly
announced plan or program. All purchases were made in open-market
transactions in satisfaction of the Company's obligations upon exercise of
outstanding stock options issued by the Company and for quarterly sales to
the dividend reinvestment plan.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submissions of Matters to Vote of Security Holders
None.
Item 5. Other Information
None.
33
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Reg S-K (Item 601)
Exhibit No. Description
---------------------------------------------------------------------
31(a) Rule 13a-15(e)/15d-15(e) Certification of Robert J.
McCormick, principal executive officer.
31(b) Rule 13a-15(e)/15d-15(e) Certification of Robert T.
Cushing, principal financial officer.
32 Section 1350 Certifications of Robert J. McCormick,
principal executive officer and Robert T. Cushing,
principal financial officer.
(b) Reports on Form 8-K
During the quarter ended September 30, 2006, TrustCo filed the following
reports on Form 8-K:
July 18, 2006, regarding a press release dated July 18, 2006, detailing 2006
second quarter financial results.
August 15, 2006, regarding a press release dated August 15, 2006, declaring a
cash dividend of $0.16 per share payable on October 2, 2006, to shareholders
of record at the close of business on September 8, 2006.
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TrustCo Bank Corp NY
By: /s/ Robert J. McCormick
---------------------------
Robert J. McCormick
President
and Chief Executive Officer
By: /s/ Robert T. Cushing
---------------------------
Robert T. Cushing
Executive Vice President
and Chief Financial Officer
Date: November 3, 2006
35
Exhibits Index
Reg S-K
Exhibit No. Description
----------------------------------------------------------------------------
31(a) Rule 13a-15(e)/15d-15(e) Certification of Robert J. McCormick,
principal executive officer.
31(b) Rule 13a-15(e)/15d-15(e) Certification of Robert T. Cushing,
principal financial officer.
32 Section 1350 Certifications of Robert J. McCormick,
principal executive officer and Robert T. Cushing,
principal financial officer.
36