Trustco Bank Corp. of Schenectady is proving a formidable contender in a bidding war for two of upstate New York's oldest thrifts.

Cohoes (N.Y.) Bancorp and Hudson River Bancorp of Hudson announced plans to merge in April, but two months later Trustco made its own hostile bids for both companies. Though officials at $727 million-asset Cohoes and $1.1 billion-asset Hudson River say they remain committed to their $89 million merger agreement, others say shareholders should seriously consider Trustco's offers. "As an investor, you must be suspect of average companies pairing," said John L. Pritchard, executive director of the Independent Bankers Association of New York State. Instead of merging the "two mediocre organizations," they would be better off combining with $2.3 billion-asset Trustco, which has produced stronger returns, he said.

Trustco's attempt to derail the Hudson River-Cohoes union illustrates the fierce competition among banks in upstate New York, where the economy remains stagnant. The only way to achieve sizable growth, observers say, is through acquisitions.

Trustco and Hudson River are not the only companies pursuing Cohoes.

Ambanc Holding Co. of Amsterdam entered the bidding war last month when it made its own offer for Cohoes valued at $15.25 per share. While that is better than Hudson River's $11 per share deal, observers do not take the company seriously, because Ambanc has been said to be on the block for two years. Trustco has made stock offers valued at $126 million, or $16 per share, for Cohoes and $250 million, or $14 per share, for Hudson River.

The boards of Cohoes and Hudson River rejected the unsolicited offers last month, though Trustco and Ambanc continue to pursue them.

Meanwhile, Cohoes and Hudson River are urging shareholders to support their deal - billed as a merger of equals - at votes scheduled for Aug. 17.

"We hope to be able to convince shareholders that value lies in the combination of our two banks," said Harry L. Robinson, Cohoes president and chief executive officer. "Now is not the time to sell the bank. That's why we decided to do a merger of equals."

Claus W. Hirsch, an analyst at Corinthian Partners in New York who follows Cohoes, said he prefers Trustco's offer - not just because it would pay more money, but because marrying "two cultures that are both underperformers" does not make sense.

"Maybe they just don't want to work under more pressure. To produce the kind of results [Trustco does], you have to roll up your sleeves," he said.

Trustco is lauded as one of the best performing banking companies in the country. Its return on equity in the last quarter was 24.4%, while Hudson River's and Cohoes' were both around 5%. Trustco's efficiency ratio was also a lean 37%, far below the ratios of the two targeted thrifts.

Achieving such results requires a tight ship - one that some companies have been reluctant to board. In the past 10 years Trustco has made several acquisition attempts, but only one, for Home and City Savings Bank of Albany in 1991, was successful.

Kevin T. Timmons, an analyst at First Albany Corp. in Albany, said Trustco's hostile offers have tended to generate ill will and animosity toward its management.

Trustco made a hostile bid two years ago for Albank Financial Corp. in Albany, but lost out to Charter One Corp. of Cleveland. Albank "refused to negotiate with us," said William F. Terry, Trustco's secretary.

In the Albany, Schenectady, and Troy region, Trustco's 13.6% market share trails only Fleet Boston Corp.'s 17%, Mr. Timmons said. The combined Hudson River-Cohoes company would rank fifth in market share at about 5.3%, while a victory by Trustco would vault it to the coveted top spot.

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