Mar. 18--GLENVILLE -- TrustCo Bank Corp NY, looking to boost its balance sheet, will cut the dividend it pays to shareholders by nearly half.

The move, announced Tuesday, is likely to anger some owners of the bank's stock, particularly those hoping for a healthy payout amid the broad economic downturn.

And they'll get a chance to express that anger at the TrustCo annual shareholder meeting scheduled for May 18 at Mallozzi's Restaurant and Banquet House in Rotterdam.

But Glenville-based TrustCo said the economic downturn contributed to making the move necessary, saying the financial environment is forcing all banks to increase capital levels to support both everyday operations and long-term growth.

The company will cut the quarterly dividend from 11cents per share to 6.25 cents per share, beginning in May.

Robert J. McCormick, the bank's president and CEO, said TrustCo made the cut "to be responsive to the dramatic changes in the banking environment and the added costs that are being assessed on the industry."

TrustCo, unlike many of the larger banks in the Capital Region, did not take money under the federal government's Troubled Asset Relief Program, a move that might have boosted its finances but also would have imposed new levels of regulation.

The bank also could have issued more stock, a common move for financial institutions looking to add capital.

But bank spokesman Kevin Timmons on Tuesday said TrustCo is trying to avoid diluting the value of its shares.

TrustCo officials noted that banks are being assessed significantly higher insurance premiums by the Federal Deposit Insurance Corp. as that agency tries to replenish reserve funds depleted by the financial crisis of recent months.

In fact, TrustCo said its FDIC costs jumped from $500,000 in 2008 to an estimated $10.1 million in 2009.

In cutting its dividend, TrustCo is following a trend: Dozens of banks have done the same, or temporarily eliminated dividends altogether.

Theodore Kovaleff, a bank analyst in New York City, said many banks are making the move because they are worried about potential actions by federal officials in the wake of the financial crisis.

"They do not know how rough federal regulators are going to be," Kovaleff said. "This is a way to pad their capital."

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