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 March 31, 2021
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________

Commission File Number 0-10592

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

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

5 SARNOWSKI DRIVE,
GLENVILLE, NEW YORK
 
12302
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number, including area code:
(518) 377-3311

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 April 30, 2021
$1 Par Value
96,439,602







TrustCo Bank Corp NY

INDEX

Part I.
FINANCIAL INFORMATION
PAGE NO.
Item 1.
Consolidated Interim Financial Statements (Unaudited):
 
 
 
 
 
Consolidated Statements of Income for the three month periods ended March 31, 2021 and 2020
3
 
 
 
 
Consolidated Statements of Comprehensive Income for the three month periods ended March 31, 2021 and 2020
4
 
 
 
 
Consolidated Statements of Financial Condition as of March 31, 2021 and December 31, 2020
5
 
 
 
 
Consolidated Statements of Changes in Shareholders’ Equity for the three month periods ended March 31, 2021 and 2020
6
 
 
 
 
Consolidated Statements of Cash Flows for the three month periods ended March 31, 2021 and 2020
7
 
 
 
 
Notes to Consolidated Interim Financial Statements
8–36
 
 
 
 
Report of Independent Registered Public Accounting Firm
37
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
38–58
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
59
 
 
 
Item 4.
Controls and Procedures
59
 
 
 
Part II.
OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
60
 
 
 
Item 1A.
Risk Factors
60
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
60
 
 
 
Item 3.
Defaults Upon Senior Securities
60
 
 
 
Item 4.
Mine Safety
60
 
 
 
Item 5.
Other Information
61
 
 
 
Item 6.
Exhibits
61


2

Index
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share data)

 
Three months ended
March 31,
 
   
2021
   
2020
 
             
Interest and dividend income:
           
Interest and fees on loans
 
$
40,217
     
42,063
 
Interest and dividends on securities available for sale:
               
U. S. government sponsored enterprises
   
50
     
421
 
State and political subdivisions
   
1
     
1
 
Mortgage-backed securities and collateralized mortgage obligations-residential
   
1,237
     
2,113
 
Corporate bonds
   
316
     
238
 
Small Business Administration-guaranteed participation securities
   
206
     
245
 
Other securities
   
6
     
6
 
Total interest and dividends on securities available for sale
   
1,816
     
3,024
 
                 
Interest on held to maturity securities:
               
Mortgage-backed securities and collateralized mortgage obligations-residential
   
123
     
175
 
Total interest on held to maturity securities
   
123
     
175
 
                 
Federal Reserve Bank and Federal Home Loan Bank stock
   
69
     
82
 
Interest on federal funds sold and other short-term investments
   
270
     
1,267
 
Total interest income
   
42,495
     
46,611
 
                 
Interest expense:
               
Interest on deposits:
               
Interest-bearing checking
   
52
     
16
 
Savings accounts
   
159
     
233
 
Money market deposit accounts
   
283
     
1,096
 
Time deposits
   
1,666
     
6,391
 
Interest on short-term borrowings
   
228
     
322
 
Total interest expense
   
2,388
     
8,058
 
                 
Net interest income
   
40,107
     
38,553
 
Provision for loan losses
   
350
     
2,000
 
Net interest income after provision for loan losses
   
39,757
     
36,553
 
                 
Noninterest income:
               
Trustco financial services income
   
2,035
     
1,600
 
Fees for services to customers
   
2,204
     
2,315
 
Net gain on securities transactions
   
-
     
1,155
 
Other
   
189
     
264
 
Total noninterest income
   
4,428
     
5,334
 
                 
Noninterest expenses:
               
Salaries and employee benefits
   
12,425
     
11,373
 
Net occupancy expense
   
4,586
     
4,306
 
Equipment expense
   
1,631
     
1,802
 
Professional services
   
1,432
     
1,481
 
Outsourced services
   
2,250
     
2,075
 
Advertising expense
   
354
     
488
 
FDIC and other insurance
   
707
     
294
 
Other real estate expense, net
   
239
     
194
 
Other
   
1,711
     
2,255
 
Total noninterest expenses
   
25,335
     
24,268
 
                 
Income before taxes
   
18,850
     
17,619
 
Income taxes
   
4,767
     
4,306
 
                 
Net income
 
$
14,083
     
13,313
 
                 
Net income per share:
               
- Basic
 
$
0.146
     
0.138
 
                 
- Diluted
 
$
0.146
     
0.138
 

See accompanying notes to unaudited consolidated interim financial statements.

3

Index

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

 
Three months ended
March 31,
 
   
2021
   
2020
 
             
Net income
 
$
14,083
     
13,313
 
                 
Net unrealized holding (loss) gain on securities available for sale
   
(6,018
)
   
10,732
 
Reclassification adjustments for net gain recognized in income
   
-
     
(1,155
)
Tax effect
   
1,557
     
(2,487
)
                 
Net unrealized (loss) gain on securities available for sale, net of tax
   
(4,461
)
   
7,090
 
                 
Amortization of net actuarial gain
   
(228
)
   
(166
)
Amortization of prior service credit
   
(52
)
   
(49
)
Tax effect
   
73
     
56
 
Amortization of net actuarial gain and prior service credit on pension and postretirement plans, net of tax
   
(207
)
   
(159
)
                 
Other comprehensive (loss) income, net of tax
   
(4,668
)
   
6,931
 
Comprehensive income
 
$
9,415
     
20,244
 

See accompanying notes to unaudited consolidated interim financial statements.
4

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

 
March 31, 2021
   
December 31, 2020
 
ASSETS:
           
             
Cash and due from banks
 
$
45,493
     
47,196
 
Federal funds sold and other short term investments
   
1,094,880
     
1,059,903
 
Total cash and cash equivalents
   
1,140,373
     
1,107,099
 
                 
Securities available for sale
   
527,587
     
439,071
 
                 
Held to maturity securities ($13,891 and $14,988 fair value at March 31, 2021 and Decmber 31, 2020, respectively)
   
12,729
     
13,824
 
                 
Federal Reserve Bank and Federal Home Loan Bank stock
   
5,506
     
5,506
 
                 
Loans, net of deferred net costs
   
4,269,172
     
4,244,470
 
Less:
               
Allowance for loan losses
   
49,991
     
49,595
 
Net loans
   
4,219,181
     
4,194,875
 
                 
Bank premises and equipment, net
   
34,012
     
34,412
 
Operating lease right-of-use assets
   
46,614
     
47,885
 
Other assets
   
60,455
     
59,124
 
                 
Total assets
 
$
6,046,457
     
5,901,796
 
                 
LIABILITIES:
               
Deposits:
               
Demand
 
$
718,343
     
652,756
 
Interest-bearing checking
   
1,141,595
     
1,086,558
 
Savings accounts
   
1,362,141
     
1,285,501
 
Money market deposit accounts
   
719,580
     
716,005
 
Time deposits
   
1,231,263
     
1,296,373
 
Total deposits
   
5,172,922
     
5,037,193
 
                 
Short-term borrowings
   
229,950
     
214,755
 
Operating lease liabilities
   
51,449
     
52,784
 
Accrued expenses and other liabilities
   
21,105
     
28,903
 
                 
Total liabilities
   
5,475,426
     
5,333,635
 
                 
SHAREHOLDERS' EQUITY:
               
Capital stock par value $1; 150,000,000 shares authorized;  100,218,082 and 100,204,832 shares issued at March 31, 2021 and December 31, 2020, respectively
   
100,218
     
100,205
 
Surplus
   
176,500
     
176,442
 
Undivided profits
   
321,486
     
313,974
 
Accumulated other comprehensive income, net of tax
   
7,268
     
11,936
 
Treasury stock at cost - 3,778,480 and 3,772,175 shares at March 31, 2021 and December 31, 2020, respectively
   
(34,441
)
   
(34,396
)
                 
Total shareholders' equity
   
571,031
     
568,161
 
                 
Total liabilities and shareholders' equity
 
$
6,046,457
     
5,901,796
 

See accompanying notes to unaudited consolidated interim financial statements.

5

Index

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

 
Capital
Stock
   
Surplus
   
Undivided
Profits
   
Accumulated
Other
Comprehensive
Income
   
Treasury
Stock
   
Total
 
                                     
Beginning balance, January 1, 2020
 
$
100,205
     
176,427
     
288,067
     
4,461
     
(30,903
)
   
538,257
 
Net income
   
-
     
-
     
13,313
     
-
     
-
     
13,313
 
Other comprehensive income, net of tax
   
-
     
-
     
-
     
6,931
     
-
     
6,931
 
Cash dividend declared, $0.068125 per share
   
-
     
-
     
(6,827
)
   
-
     
-
     
(6,827
)
Purchase of treasury stock (489,000 shares)
   
-
     
-
     
-
     
-
     
(3,493
)
   
(3,493
)
Stock based compensation expense
   
-
     
4
     
-
     
-
     
-
     
4
 
                                                 
Ending balance, March 31, 2020
 
$
100,205
     
176,431
     
294,553
     
11,392
     
(34,396
)
   
548,185
 
                                                 
Beginning balance, January 1, 2021
 
$
100,205
     
176,442
     
313,974
     
11,936
     
(34,396
)
   
568,161
 
Net income
   
-
     
-
     
14,083
     
-
     
-
     
14,083
 
Other comprehensive loss, net of tax
   
-
     
-
     
-
     
(4,668
)
   
-
     
(4,668
)
Stock options exercised (13,250 shares)
   
13
     
58
     
-
     
-
     
-
     
71
 
Cash dividend declared, $0.068125 per share
   
-
     
-
     
(6,571
)
   
-
     
-
     
(6,571
)
Purchase of treasury stock (6,305 Shares)
   
-
     
-
     
-
     
-
     
(45
)
   
(45
)
                                                 
Ending balance, March 31, 2021
 
$
100,218
     
176,500
     
321,486
     
7,268
     
(34,441
)
   
571,031
 

See accompanying notes to unaudited consolidated interim financial statements.

6

Index

TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)

 
Three months ended March 31,
 
   
2021
   
2020
 
             
Cash flows from operating activities:
           
Net income
 
$
14,083
     
13,313
 
                 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
   
1,063
     
999
 
Amortization of right-of-use asset
   
1,573
     
1,520
 
Net gain on sale of other real estate owned
   
-
     
(82
)
Writedown of other real estate owned
   
121
     
80
 
Provision for loan losses
   
350
     
2,000
 
Deferred tax expense
   
1,152
     
846
 
Net amortization of securities
   
1,081
     
858
 
Stock based compensation expense
   
-
     
4
 
Net gain on sale of bank premises and equipment
   
(4
)
   
-
 
Net gain on sales of securities
   
-
     
(1,155
)
Decrease in taxes receivable
   
101
     
3,682
 
Decrease in interest receivable
   
392
     
673
 
Decrease in interest payable
   
(164
)
   
(200
)
Increase in other assets
   
(3,160
)
   
(2,171
)
Decrease in operating lease liabilities
   
(1,637
)
   
(1,555
)
Decrease in accrued expenses and other liabilities
   
(6,221
)
   
(4,307
)
Total adjustments
   
(5,353
)
   
1,192
 
Net cash provided by operating activities
   
8,730
     
14,505
 
                 
Cash flows from investing activities:
               
Proceeds from sales and calls of securities available for sale
   
36,820
     
98,363
 
Proceeds from calls and maturities of held to maturity securities
   
1,061
     
859
 
Purchases of securities available for sale
   
(132,456
)
   
(22,793
)
Proceeds from maturities of securities available for sale
   
55
     
5,000
 
Net increase in loans
   
(24,656
)
   
(37,792
)
Proceeds from dispositions of other real estate owned
   
-
     
731
 
Proceeds from dispositions of bank premises and equipment
   
4
     
-
 
Purchases of bank premises and equipment
   
(663
)
   
(805
)
Net cash (used in) provided by investing activities
   
(119,835
)
   
43,563
 
                 
Cash flows from financing activities:
               
Net increase in deposits
   
135,729
     
31,812
 
Net increase (decrease) in short-term borrowings
   
15,195
     
(576
)
Proceeds from exercise of stock options
   
71
     
-
 
Purchases of treasury stock
   
(45
)
   
(3,493
)
Dividends paid
   
(6,571
)
   
(6,604
)
Net cash provided by financing activities
   
144,379
     
21,139
 
Net increase in cash and cash equivalents
   
33,274
     
79,207
 
Cash and cash equivalents at beginning of period
   
1,107,099
     
456,846
 
Cash and cash equivalents at end of period
 
$
1,140,373
     
536,053
 
                 
Supplemental Disclosure of Cash Flow Information:
               
Cash paid during the year for:
               
Interest paid
 
$
2,552
     
8,258
 
Income taxes paid
   
4,661
     
626
 
Other non cash items:
               
Transfer of loans to other real estate owned
   
-
     
434
 
Increase in dividends payable
   
-
     
223
 
Change in unrealized (loss) gain on securities available for sale-gross of deferred taxes
   
(6,018
)
   
9,577
 
Change in deferred tax effect on unrealized loss (gain) on securities available for sale
   
1,557
     
(2,487
)
Amortization of net actuarial gain and prior service credit on pension and postretirement plans
   
(280
)
   
(215
)
Change in deferred tax effect of amortization of net actuarial gain postretirement benefit plans
   
73
     
56
 

See accompanying notes to unaudited consolidated interim financial statements.

7

Index

(1) Financial Statement Presentation

The unaudited Consolidated Interim Financial Statements of TrustCo Bank Corp NY (the “Company” or “TrustCo”) include the accounts of the Company’s subsidiary, Trustco Bank (also referred to as the “Bank”) and other subsidiaries after elimination of all significant intercompany accounts and transactions.  Prior period amounts are reclassified when necessary to conform to the current period presentation.  The net income reported for the three months ended March 31, 2021 is not necessarily indicative of the results that may be expected for the year ending December 31, 2021, or any interim periods.  These financial statements consider events that occurred through the date of filing.

In the opinion of the management of the Company, the accompanying unaudited Consolidated Interim Financial Statements contain all recurring adjustments necessary to present fairly the financial position as of March 31, 2021, the results of operations and cash flows for the three months ended March 31, 2021 and 2020.  The accompanying unaudited Consolidated Interim Financial Statements should be read in conjunction with the Company’s year‑end Consolidated Financial Statements, including notes thereto, which are included in the Company's Annual Report on Form 10‑K for the year ended December 31, 2020.  The accompanying unaudited Consolidated Interim Financial Statements have been prepared in accordance with the instructions to Form 10‑Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States.

(2) Earnings Per Share

The Company computes earnings per share in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share (“ASC 260”).

A reconciliation of the component parts of earnings per share for the three months ended March 31, 2021 and 2020 is as follows:

(in thousands, except per share data)
 
For the three months ended
March 31,
 
   
2021
   
2020
 
Net income
 
$
14,083
   
$
13,313
 
Weighted average common shares
   
96,435
     
96,727
 
Stock Options
   
31
     
22
 
Weighted average common shares including potential dilutive shares
   
96,466
     
96,749
 
                 
Basic EPS
 
$
0.146
   
$
0.138
 
                 
Diluted EPS
 
$
0.146
   
$
0.138
 

For the three months, ended March 31, 2021 and 2020 the weighted average anti-dilutive stock options excluded from diluted earnings per share were approximately 302 thousand and 452 thousand, respectively.  The stock options are antidilutive because the strike price is greater than the average fair value of the Company’s common stock for the periods presented.

8

Index

(3) Benefit Plans

The table below outlines the components of the Company's net periodic benefit recognized during the three months ended March 31, 2021 and 2020 for its pension and other postretirement benefit plans:

 
Three months ended March 31,
 
 
Pension Benefits
   
Other Postretirement Benefits
 
(dollars in thousands)
 
2021
   
2020
   
2021
   
2020
 
                         
Service cost
 
$
11
     
12
     
22
     
19
 
Interest cost
   
216
     
266
     
44
     
54
 
Expected return on plan assets
   
(761
)
   
(819
)
   
(327
)
   
(296
)
Amortization of net gain
   
-
     
-
     
(228
)
   
(166
)
Amortization of prior service credit
   
-
     
-
     
(52
)
   
(49
)
Net periodic benefit
 
$
(534
)
   
(541
)
   
(541
)
   
(438
)

The Company does not expect to contribute to its pension and postretirement benefit plans in 2021.  As of March 31, 2021, no contributions have been made; however, this decision is reviewed each quarter and is subject to change based upon market conditions.

Since 2003, the Company has not subsidized retiree medical insurance premiums.  However, it continues to provide medical benefits and postretirement medical benefits to a limited number of current and retired executives in accordance with the terms of their employment contracts.

9

Index

(4) Investment Securities

(a) Securities available for sale

The amortized cost and fair value of the securities available for sale are as follows:

 
March 31, 2021
 
(dollars in thousands)
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
U.S. government sponsored enterprises
 
$
74,970
     
-
     
505
     
74,465
 
State and political subdivisions
   
48
     
-
     
-
     
48
 
Mortgage backed securities and collateralized mortgage obligations - residential
   
344,892
     
5,953
     
2,528
     
348,317
 
Corporate bonds
   
64,562
     
661
     
384
     
64,839
 
Small Business Administration - guaranteed participation securities
   
38,737
     
495
     
-
     
39,232
 
Other
   
685
     
1
     
-
     
686
 
Total Securities Available for Sale
 
$
523,894
     
7,110
     
3,417
     
527,587
 

 
December 31, 2020
 
(dollars in thousands)
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
U.S. government sponsored enterprises
 
$
20,000
     
-
     
32
     
19,968
 
State and political subdivisions
   
103
     
-
     
-
     
103
 
Mortgage backed securities and collateralized mortgage obligations - residential
   
308,432
     
7,749
     
23
     
316,158
 
Corporate bonds
   
59,185
     
916
     
162
     
59,939
 
Small Business Administration - guaranteed participation securities
   
40,955
     
1,262
     
-
     
42,217
 
Other
   
685
     
1
     
-
     
686
 
                                 
Total securities available for sale
 
$
429,360
     
9,928
     
217
     
439,071
 

The following table distributes the debt securities included in the available for sale portfolio as of March 31, 2021, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty.  Securities not due at a single maturity date are presented separately.

(dollars in thousands)
 
Amortized
Cost
   
Fair
Value
 
             
Due in one year or less
 
$
14,219
     
14,390
 
Due in one year through five years
   
121,037
     
120,669
 
Due after five years through ten years
   
5,009
     
4,979
 
Mortgage backed securities and collateralized mortgage obligations - residential
   
344,892
     
348,317
 
Small Business Administration - guaranteed participation securities
   
38,737
     
39,232
 
   
$
523,894
     
527,587
 

10

Index
Gross unrealized losses on securities available for sale and the related fair values aggregated by the length of time that individual securities have been in an unrealized loss position, were as follows:

 
March 31, 2021
 
   
Less than
12 months
   
12 months
or more
   
Total
 
(dollars in thousands)
 
Fair
Value
   
Gross
Unrealized
Loss
   
Fair
Value
   
Gross
Unrealized
Loss
   
Fair
Value
   
Gross
Unrealized
Loss
 
                                     
U.S. government sponsored enterprises
 
$
74,465
     
505
     
-
     
-
     
74,465
     
505
 
Mortgage backed securities and collateralized mortgage obligations - residential
   
125,788
     
2,528
     
-
     
-
     
125,788
     
2,528
 
Corporate bonds
   
20,112
     
321
     
4,937
     
63
     
25,049
     
384
 
                                                 
Total
 
$
220,365
     
3,354
     
4,937
     
63
     
225,302
     
3,417