10-Q 1 brhc20057083_10q.htm 10-Q
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 June 30, 2023
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 000-10592

TRUSTCO BANK CORP NY
(Exact name of registrant as specified in its charter)

NEW YORK
14-1630287
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

5 SARNOWSKI DRIVE, GLENVILLE, NEW YORK
12302
(Address of principal executive offices)
(Zip Code)
 
(518) 377-3311
 Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol (s)
Name of each exchange on which registered
Common Stock, $1.00 par value
TRST
Nasdaq Global Select Market

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 pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ Yes  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.  (Check one):

Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes  ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock
Number of Shares Outstanding
as of July 31, 2023
$1 Par Value
19,024,433

TrustCo Bank Corp NY
INDEX

DESCRIPTION
PAGE NO.
     
3
     
Part I.
FINANCIAL INFORMATION

     
Item 1.
Consolidated Interim Financial Statements (Unaudited):

 
 
 
 
 4
 
 
 
 
 5
 
 
 
 
 6
 
 
 
 
 7
 
 
 
 
 8
 
 
 
 
9-47
 
 
 
 
48
 
 
 
Item 2.
49-67
 
 
 
Item 3.
 68
 
 
 
Item 4.
 68
 
 
 
Part II.
OTHER INFORMATION
 
 
 
 
Item 1.
 69
 
 
 
Item 1A.
69
 
 
 
Item 2.
 72
 
 
 
Item 3.
 72
 
 
 
Item 4.
 72
 
 
 
Item 5.
 72
 
 
 
Item 6.
 74

2
Forward-looking Statements
Statements included in this report and in future filings by TrustCo with the Securities and Exchange Commission, in TrustCo’s press releases, and in oral statements made with the approval of an authorized executive officer that are not historical or current facts, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected.  Forward-looking statements can be identified by the use of such words as may, will, should, could, would, estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions.  TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

In addition to factors described under Part II, Item 1A, Risk Factors, and under the Risk Factor discussion in TrustCo’s Annual Report on Form 10-K for the year ended December 31, 2022, the factors listed below, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement.  Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the effects of adverse developments in the financial services industry, such as the recent bank failures and any related impact on depositor behavior, macroeconomic or geopolitical concerns related to inflation, rising interest rates and the war in Ukraine.


 •
changes in interest rates, including recent and possible future increases fueled by inflation, may significantly impact our financial condition and results of operations;

•
inflationary pressures and rising prices may affect our results of operations and financial condition;

•
exposure to credit risk in our lending activities;

•
Any downgrade in the credit rating of the U.S. government or default by the U.S. government as a result of political conflicts over legislation to raise the U.S. government’s debt limit may have a material adverse effect on us;

•
the soundness of other financial institutions could adversely affect us;

•
Any  government shutdown could adversely affect the U.S. and global economy and our liquidity, financial condition and earnings;

•
the allowance for credit losses on loans (“ACLL”) is not sufficient to cover expected loan losses, resulting in a decrease in earnings;

•
our inability to meet the cash flow requirements of our depositors or borrowers or meet our operating cash needs to fund corporate expansion and other activities;

•
we are subject to claims and litigation pertaining to fiduciary responsibility and lender liability;

•
our dependency upon the services of the management team;

•
our disclosure controls and procedures may not prevent or detect all errors or acts of fraud;

•
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 its operations;

•
our risk management framework may not be effective in mitigating risk and loss;

•
a prolonged economic downturn, especially one affecting our geographic market area, will adversely affect our operations and financial results;

•
instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a material adverse effect on our results of operations and financial condition;

•
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;

•
regulatory capital rules could slow our growth, cause us to seek to raise additional capital, or both;

•
changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and our income;

•
non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions;

•
changes in tax laws may adversely affect us, and the Internal Revenue Service or a court may disagree with our tax positions, which may result in adverse effects on our business, financial condition, results of operations or cash flows;

•
our ability to pay dividends is subject to regulatory limitations and other limitations that may affect our ability to pay dividends to our stockholders or to repurchase our common stock;

•
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”);

•
changes in accounting standards could impact reported earnings;

•
strong competition within the Bank’s market areas could hurt profits and slow growth;

•
consumers and businesses are increasingly using non-banks to complete their financial transactions, which could adversely affect our business and results of operations;

•
our business could be adversely affected by third-party service providers, data breaches, and cyber-attacks;

•
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;

•
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;

•
we could suffer a material adverse impact from interruptions in the effective operation of, or security breaches affecting, our computer systems;

•
new lines of business or new products and services may subject us to additional risks;

•
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;

•
we cannot guarantee that the allocation of capital to various alternatives, including stock repurchase plans, will enhance long-term stockholder value;

•
we are exposed to climate risk;

•
societal responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers; and,

•
other risks and uncertainties included under “Risk Factors” in our Form 10-K for the year ended December 31, 2022, as well as risks and uncertainties, if any, discussed elsewhere in this Form 10-Q and in our other filings made from time to time with the SEC, or in materials incorporated therein by reference.
 
You should not rely upon forward-looking statements as predictions of future events.  Although TrustCo believes that the expectations reflected in the forward‑looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur.  The foregoing list should not be construed as exhaustive, and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events, except to the extent required by law.
3
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share data)

    Three months ended     Six months ended  

 
June 30,
    
June 30,
  
   
2023
    
2022
    
2023
    
2022
  
                         
Interest and dividend income:
                        
Interest and fees on loans
  
$
46,062
    
$
39,604
    
$
90,334
    
$
78,607
  
Interest and dividends on securities available for sale:
                                
U. S. government sponsored enterprises
    
691
      
147
      
1,383
      
233
  
State and political subdivisions
    
1
      
-
      
1
      
1
  
Mortgage-backed securities and collateralized mortgage obligations - residential
    
1,543
      
1,367
      
3,128
      
2,454
  
Corporate bonds
    
516
      
522
      
1,037
      
755
  
Small Business Administration-guaranteed participation securities
    
111
      
140
      
228
      
294
  
Other securities
    
3
      
2
      
5
      
4
  
Total interest and dividends on securities available for sale
    
2,865
      
2,178
      
5,782
      
3,741
  
                                 
Interest on held to maturity securities:
                                
Mortgage-backed securities and collateralized mortgage obligations-residential
    
75
      
87
      
153
      
177
  
Total interest on held to maturity securities
    
75
      
87
      
153
      
177
  
                                 
Federal Reserve Bank and Federal Home Loan Bank stock
    
110
      
65
      
220
      
127
  
Interest on federal funds sold and other short-term investments
    
6,970
      
2,253
      
13,525
      
2,825
  
Total interest income
    
56,082
      
44,187
      
110,014
      
85,477
  
                                 
Interest expense:
                                
Interest on deposits:
                                
Interest-bearing checking
    
49
      
42
      
115
      
86
  
Savings accounts
    
655
      
163
      
1,185
      
319
  
Money market deposit accounts
    
1,756
      
210
      
2,570
      
424
  
Time deposits
    
9,291
      
536
      
14,563
      
1,082
  
Interest on short-term borrowings
    
279
      
176
      
564
      
410
  
Total interest expense
    
12,030
      
1,127
      
18,997
      
2,321
  
                                 
Net interest income
    
44,052
      
43,060
      
91,017
      
83,156
  
Credit provision for credit losses 
    
(500
)
    
(491
)
    
(200
)
    
(691
)
Net interest income after credit provision for credit losses
    
44,552
      
43,551
      
91,217
      
83,847
  
                                 
Noninterest income:
                                
Trustco financial services income
    
1,412
      
1,996
      
3,186
      
3,829
  
Fees for services to customers
    
2,847
      
2,658
      
5,495
      
5,459
  
Other
    
339
      
262
      
586
      
811
  
Total noninterest income
    
4,598
      
4,916
      
9,267
      
10,099
  
                                 
Noninterest expenses:
                                
Salaries and employee benefits
    
13,122
      
11,464
      
26,405
      
20,703
  
Net occupancy expense
    
4,262
      
4,254
      
8,860
      
8,783
  
Equipment expense
    
1,873
      
1,667
      
3,835
      
3,255
  
Professional services
    
1,360
      
1,484
      
2,967
      
2,951
  
Outsourced services
    
2,491
      
2,500
      
4,787
      
4,780
  
Advertising expense
    
518
      
389
      
908
      
1,006
  
FDIC and other insurance
    
1,085
      
804
      
2,137
      
1,616
  
Other real estate expense, net
    
148
      
74
      
373
      
85
  
Other
    
2,468
      
2,369
      
4,734
      
4,591
  
Total noninterest expenses
    
27,327
      
25,005
      
55,006
      
47,770
  
                                 
Income before taxes
    
21,823
      
23,462
      
45,478
      
46,176
  
Income taxes
    
5,451
      
5,591
      
11,360
      
11,216
  
                                 
Net income
  
$
16,372
     $
17,871
     $
34,118
     $
34,960
  
                                 
Net income per share:
                                
- Basic
  
$
0.86
     $
0.93
     $
1.79
     $
1.82
  
                                 
- Diluted
  
$
0.86
     $
0.93
     $
1.79
     $
1.82
  

See accompanying notes to unaudited consolidated interim financial statements.

4
TRUSTCO BANK CORP NY
Consolidated Statements of Comprehensive Income (Unaudited)
(dollars in thousands)

    Three months ended     Six months ended  
 
June 30,
    
June 30,
  
   
2023
    
2022
    
2023
    
2022
  
                         
Net income
  
$
16,372
     $
17,871
     $
34,118
     $
34,960
  
                                 
Net unrealized holding (loss) gain on securities available for sale
    
(3,718
)
    
(9,211
)
    
1,533
      
(28,436
)
Tax effect
    
963
      
2,382
      
(387
)
    
7,356
  
                                 
Net unrealized (loss) gain on securities available for sale, net of tax
    
(2,755
)
    
(6,829
)
    
1,146
      
(21,080
)
                                 
Amortization of net actuarial gain
    
(114
)
    
(426
)
    
(228
)
    
(504
)
Amortization of prior service cost (credit)
    
3
      
123
      
6
      
(157
)
Tax effect
    
29
      
79
      
58
      
172
  
Amortization of net actuarial gain and prior service cost (credit) on pension and postretirement plans, net of tax
    
(82
)
    
(224
)
    
(164
)
    
(489
)
                                 
Other comprehensive (loss) gain, net of tax
    
(2,837
)
    
(7,053
)
    
982
      
(21,569
)
Comprehensive income
  
$
13,535
     $
10,818
     $
35,100
     $
13,391
  

See accompanying notes to unaudited consolidated interim financial statements.

5
TRUSTCO BANK CORP NY
Consolidated Statements of Financial Condition (Unaudited)
(dollars in thousands, except per share data)

 
June 30, 2023
    
December 31, 2022
  
ASSETS:
            
             
Cash and due from banks
  
$
55,662
    
$
43,429
  
Federal funds sold and other short term investments
    
547,695
      
607,170
  
Total cash and cash equivalents
    
603,357
      
650,599
  
                 
Securities available for sale
    
452,704
      
481,513
  
Held to maturity securities ($6,926 and $7,580 fair value at June 30, 2023 and December 31, 2022, respectively)
    
7,043
      
7,707
  
                 
Federal Reserve Bank and Federal Home Loan Bank stock    
6,203
      
5,797
  
Loans, net of deferred net costs
    
4,886,811
      
4,733,201
  
Less:
                
Allowance for credit losses on loans
    
46,914
      
46,032
  
Net loans
    
4,839,897
      
4,687,169
  
                 
Bank premises and equipment, net
    
32,351
      
32,556
  
Operating lease right-of-use assets
    
43,113
      
44,727
  
Other assets
    
90,957
      
89,984
  
                 
Total assets
  
$
6,075,625
    
$
6,000,052
  
                 
LIABILITIES:
                
Deposits:
                
Demand
  
$
791,353
    
$
838,147
  
Interest-bearing checking
    
1,082,989
      
1,183,321
  
Savings accounts
    
1,315,893
      
1,521,473
  
Money market deposit accounts
    
625,253
      
621,106
  
Time deposits
    
1,442,959
      
1,028,763
  
Total deposits
    
5,258,447
      
5,192,810
  
                 
Short-term borrowings
    
113,765
      
122,700
  
Operating lease liabilities
    
47,172
      
48,980
  
Accrued expenses and other liabilities
    
34,852
      
35,575
  
                 
Total liabilities
    
5,454,236
      
5,400,065
  
                 
SHAREHOLDERS’ EQUITY:
                
Capital stock par value $1.00; 30,000,000 shares authorized;  20,058,142 shares issued at June 30, 2023 and December 31, 2022, and 19,024,433 shares outstanding at June 30, 2023 and December 31, 2022
   
20,058
      
20,058
  
Surplus
    
257,078
      
257,078
  
Undivided profits
    
414,251
      
393,831
  
Accumulated other comprehensive loss, net of tax
    
(26,212
)
    
(27,194
)
Treasury stock at cost - 1,033,709 shares at June 30, 2023 and December 31, 2022, respectively
    
(43,786
)
    
(43,786
)
                 
Total shareholders’ equity
    
621,389
      
599,987
  
                 
Total liabilities and shareholders’ equity
  
$
6,075,625
    
$
6,000,052
  

See accompanying notes to unaudited consolidated interim financial statements.

6
TRUSTCO BANK CORP NY
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(dollars in thousands, except per share data)

                      Accumulated              
                      Other              
    Capital           Undivided     Comprehensive     Treasury        

 
Stock
    
Surplus
    
Profits
    
Loss
    
Stock
    
Total