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