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, 2022

☐ 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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post 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, 2022
$1 Par Value	19,126,875

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TRUSTCO BANK CORP NY

Consolidated Statements of Income (Unaudited)

(dollars in thousands, except per share data)

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021

Interest and dividend income:
Interest and fees on loans	$	39,604			39,808			78,607			80,025
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		147			97			233			147
State and political subdivisions		-			-			1			1
Mortgage-backed securities and collateralized mortgage obligations - residential		1,367			1,167			2,454			2,404
Corporate bonds		522			323			755			639
Small Business Administration-guaranteed participation securities		140			193			294			399
Other securities		2			5			4			11
Total interest and dividends on securities available for sale		2,178			1,785			3,741			3,601

Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential		87			111			177			234
Total interest on held to maturity securities		87			111			177			234

Federal Reserve Bank and Federal Home Loan Bank stock		65			65			127			134
Interest on federal funds sold and other short-term investments		2,253			286			2,825			556
Total interest income		44,187			42,055			85,477			84,550

Interest expense:
Interest on deposits:
Interest-bearing checking		42			46			86			98
Savings accounts		163			162			319			321
Money market deposit accounts		210			236			424			519
Time deposits		536			1,261			1,082			2,927
Interest on short-term borrowings		176			228			410			456
Total interest expense		1,127			1,933			2,321			4,321

Net interest income		43,060			40,122			83,156			80,229
(Credit) Provision for credit losses		(491	)		-			(691	)		350
Net interest income after (credit) provision for credit losses		43,551			40,122			83,847			79,879

Noninterest income:
Trustco financial services income		1,996			1,999			3,829			4,034
Fees for services to customers		2,658			2,486			5,459			4,690
Other		262			203			811			392
Total noninterest income		4,916			4,688			10,099			9,116

Noninterest expenses:
Salaries and employee benefits		11,464			12,403			20,703			24,828
Net occupancy expense		4,254			4,328			8,783			8,914
Equipment expense		1,667			1,600			3,255			3,231
Professional services		1,484			1,614			2,951			3,046
Outsourced services		2,500			2,169			4,780			4,419
Advertising expense		389			549			1,006			903
FDIC and other insurance		804			777			1,616			1,484
Other real estate expense (income), net		74			(60	)		85			179
Other		2,369			2,060			4,591			3,771
Total noninterest expenses		25,005			25,440			47,770			50,775

Income before taxes		23,462			19,370			46,176			38,220
Income taxes		5,591			4,937			11,216			9,704

Net income	$	17,871			14,433			34,960			28,516

Net income per share:
- Basic	$	0.933			0.749			1.822			1.479

- Diluted	$	0.933			0.748			1.822			1.478

See accompanying notes to unaudited consolidated interim financial statements.

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TRUSTCO BANK CORP NY

Consolidated Statements of Comprehensive Income (Unaudited)

(dollars in thousands)

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021

Net income	$	17,871			14,433			34,960			28,516

Net unrealized holding (loss) gain on securities available for sale		(9,211	)		844			(28,436	)		(5,174	)
Tax effect		2,382			(222	)		7,356			1,335

Net unrealized (loss) gain on securities available for sale, net of tax		(6,829	)		622			(21,080	)		(3,839	)

Amortization of net actuarial gain		(426	)		(169	)		(504	)		(397	)
Amortization of prior service cost (credit)		123			102			(157	)		50
Tax effect		79			17			172			90
Amortization of net actuarial gain and prior service cost (credit) on pension and postretirement plans, net of tax		(224	)		(50	)		(489	)		(257	)

Other comprehensive (loss) gain, net of tax		(7,053	)		572			(21,569	)		(4,096	)
Comprehensive income	$	10,818			15,005			13,391			24,420

See accompanying notes to unaudited consolidated interim financial statements.

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TRUSTCO BANK CORP NY

Consolidated Statements of Financial Condition (Unaudited)

(dollars in thousands, except per share data)

	June 30, 2022			December 31, 2021
ASSETS:

Cash and due from banks	$	46,611			48,357
Federal funds sold and other short term investments		999,573			1,171,113
Total cash and cash equivalents		1,046,184			1,219,470

Securities available for sale		502,415			407,713
Held to maturity securities ($8,733 and $10,695 fair value at June 30, 2022 and December 31, 2021, respectively)		8,544			9,923

Federal Reserve Bank and Federal Home Loan Bank stock		5,797			5,604
Loans, net of deferred net costs		4,540,559			4,438,779
Less:
Allowance for credit losses on loans		45,285			44,267
Net loans		4,495,274			4,394,512

Bank premises and equipment, net		32,381			33,027
Operating lease right-of-use assets		47,343			48,090
Other assets		88,853			78,207

Total assets	$	6,226,791			6,196,546

LIABILITIES:
Deposits:
Demand	$	851,573			794,878
Interest-bearing checking		1,208,159			1,191,304
Savings accounts		1,577,034			1,504,554
Money market deposit accounts		760,338			782,079
Time deposits		999,737			995,314
Total deposits		5,396,841			5,268,129

Short-term borrowings		147,282			244,686
Operating lease liabilities		51,777			52,720
Accrued expenses and other liabilities		36,259			29,883

Total liabilities		5,632,159			5,595,418

SHAREHOLDERS’ EQUITY:
Capital stock par value $1; 30,000,000 shares authorized; 20,045,684 shares issued at June 30, 2022 and December 31, 2021, and 19,126,875 and 19,219,989 shares outstanding at June 30, 2022 and December 31, 2021, respectively		20,046			20,046
Surplus		256,661			256,661
Undivided profits		367,100			349,056
Accumulated other comprehensive (loss) income, net of tax		(9,422	)		12,147
Treasury stock at cost - 918,809 and 825,695 shares at June 30, 2022 and December 31, 2021, respectively		(39,753	)		(36,782	)

Total shareholders’ equity		594,632			601,128

Total liabilities and shareholders’ equity	$	6,226,791			6,196,546

See accompanying notes to unaudited consolidated interim financial statements.

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TRUSTCO BANK CORP NY

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(dollars in thousands, except per share data)

	Capital Stock (1)			Surplus (1)			Undivided Profits			Accumulated Other Comprehensive Income			Treasury Stock			Total

Beginning balance, January 1, 2021 (1)	$	20,041			256,606			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 (2,650 shares) (1)		3			68												71
Cash dividend declared, $0.340625 per share (2)		-			-			(6,571	)		-			-			(6,571	)
Purchase of treasury stock (1,261 shares) (2)		-			-			-			-			(45	)		(45	)

Ending balance, March 31, 2021 (1)	$	20,044			256,674			321,486			7,268			(34,441	)		571,031
Net income		-			-			14,433			-			-			14,433
Other comprehensive loss, net of tax		-			-			-			572			-			572
Cash used to settle fractional shares in the Reverse Stock Split		(5	)		(195	)											(200	)
Stock options exercised (2,225 shares)		2			57			-			-			-			59
Cash dividend declared, $0.340625 per share		-			-			(6,569	)		-			-			(6,569	)
Purchase of treasury stock (20,000 shares)		-			-			-			-			(733	)		(733	)

Ending balance, June 30, 2021	$	20,041			256,536			329,350			7,840			(35,174	)		578,593

Beginning balance, January 1, 2022	$	20,046			256,661			349,056			12,147			(36,782	)		601,128
Cumulative impact of adoption of ASU 2016-13								(3,470	)								(3,470	)
Balance, January 1, 2022 as adjusted
For impact of adoption of ASU 2016-13		20,046			256,661			345,586			12,147			(36,782	)		597,658
Net income		-			-			17,089			-			-			17,089
Other comprehensive loss, net of tax		-			-			-			(14,516	)		-			(14,516	)
Cash dividend declared, $0.35 per share		-			-			(6,727	)		-			-			(6,727	)
Purchase of treasury stock 18,114 shares		-			-			-			-			(609	)		(609	)

Ending balance, March 31, 2022	$	20,046			256,661			355,948			(2,369	)		(37,391	)		592,895

Net income		-			-			17,871			-			-			17,871
Other comprehensive loss, net of tax		-			-			-			(7,053	)		-			(7,053	)
Cash dividend declared, $0.35 per share		-			-			(6,719	)		-			-			(6,719	)
Purchase of treasury stock 75,000 shares		-			-			-			-			(2,362	)		(2,362	)

Ending balance, June 30, 2022	$	20,046			256,661			367,100			(9,422	)		(39,753	)		594,632

(1)	All periods presented have been adjusted for the 1 for 5 reverse stock split which occurred on May 28, 2021.

(2)	Share amounts and per share amounts have been adjusted for all periods presented for the 1 for 5 reverse stock split which occurred on May 28, 2021.

See accompanying notes to unaudited consolidated interim financial statements.

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TRUSTCO BANK CORP NY

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)

	Six months ended June 30,
	2022			2021

Cash flows from operating activities:
Net income	$	34,960			28,516

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,057			2,133
Amortization of right-of-use asset		3,231			3,167
Net gain on sale of other real estate owned		(73	)		(86	)
Writedown of other real estate owned		-			121
(Credit) provision for credit losses		(691	)		350
Deferred tax expense (benefit)		1,281			(19	)
Net amortization of securities		1,289			2,099
Net gain on sale of bank premises and equipment		(314	)		1
Decrease (increase) in taxes receivable		3,077			(166	)
Increase in interest receivable		(1,627	)		(62	)
Decrease in interest payable		(21	)		(227	)
Increase in other assets		(3,378	)		(1,610	)
Decrease in operating lease liabilities		(3,427	)		(3,305	)
Decrease in accrued expenses and other liabilities		(3,371	)		(3,197	)
Total adjustments		(1,967	)		(801	)
Net cash provided by operating activities		32,993			27,715

Cash flows from investing activities:
Proceeds from sales, paydowns and calls of securities available for sale		43,338			76,450
Proceeds from paydowns of held to maturity securities		1,335			2,093
Purchases of securities available for sale		(172,771	)		(132,456	)
Proceeds from maturities of securities available for sale		10,050			5,055
Purchases of Federal Home Loan Bank stock		(193	)		(98	)
Net increase in loans		(101,990	)		(104,687	)
Proceeds from dispositions of other real estate owned		166			255
Proceeds from dispositions of bank premises and equipment		469			4
Purchases of bank premises and equipment		(1,566	)		(1,417	)
Net cash used in investing activities		(221,162	)		(154,801	)

Cash flows from financing activities:
Net increase in deposits		128,712			193,327
Net increase in short-term borrowings		(97,404	)		23,036
Proceeds from exercise of stock options		-			130
Cash used to settle fractional shares in the Reverse Stock Split		-			200
Purchases of treasury stock		(2,971	)		(778	)
Dividends paid		(13,454	)		(13,140	)
Net cash provided by financing activities		14,883			202,775
Net increase in cash and cash equivalents		(173,286	)		75,689
Cash and cash equivalents at beginning of period		1,219,470			1,107,099
Cash and cash equivalents at end of period	$	1,046,184			1,182,788

Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest paid	$	2,342			4,548
Income taxes paid		8,303			9,665
Other non cash items:
Transfer of loans to other real estate owned		375			-
(Decrease) Increase in dividends payable		(8	)		-
Change in unrealized (loss) gain on securities available for sale-gross of deferred taxes		(28,436	)		(5,174	)
Change in deferred tax effect on unrealized loss (gain) on securities available for sale		7,356			1,335
Amortization of net actuarial gain and prior service cost (credit) on pension and postretirement plans		(661	)		(347	)
Change in deferred tax effect of amortization of net actuarial gain postretirement benefit plans		172			90
Security purchase settled in subsequent period		(5,000	)		-
Impact to retained earnings from adoption of ASC 326, net of tax		(3,470	)		-

See accompanying notes to unaudited consolidated interim financial statements.

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(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 and six months ended June 30, 2022 is not necessarily indicative of the results that may be expected for the year ending December 31, 2022, 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 June 30, 2022, the results of operations for the three and six months ended June 30, 2022 and 2021, and the cash flows for the six months ended June 30, 2022 and 2021. The accompanying unaudited Consolidated Interim Financial Statements should be read in conjunction with the Company’s year‑end audited 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, 2021. 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.

The accounting policies of the Company, as applied in the Consolidated Interim Financial Statements presented herein, are substantially the same as those followed on an annual basis in the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022 except as noted below. The accounting policies of the Company effective for the comparative periods presented prior to the adoption of ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) are presented on the Form 10-K referenced above.

Recently Adopted Accounting Standards

On January 1, 2022, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses” (referred to as “CECL” and as Accounting Standards Codification Topic 326 (“ASC 326”)) which amended existing guidance to replace current generally accepted accounting principles used to measure a reporting entity’s credit losses. The main objective of this update is to provide financial statement users with enhanced financial disclosures for more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The allowance for credit losses on loans is a valuation account that is deducted from, or added to, the loans’ amortized cost basis to present the net, lifetime amount expected to be collected on the loans. The measurement of expected credit losses under the CECL methodology applies to financial assets measured at amortized cost including loan receivables and held-to-maturity debt securities. The update additionally applies to off-balance sheet exposures not accounted for as insurance (Loan commitments, standby letters of credit, financial guarantees and other similar instruments). In addition, CECL made changes to the accounting for available for sale securities. Once such change is to require credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities that management does not intend to sell or believes that it is more likely than not they will be required to sell.

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As previously disclosed, the Company assembled a cross-functional working group that met regularly to oversee the implementation plan for CECL which included the assessment and documentation of the processes and internal controls, model development and documentation, assessing existing loan and loss data, assessing models for default and loss estimates and conducting parallel runs and reviews through January 1, 2022.

The Company adopted CECL using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet (“OBS”) credit exposures. Results for reporting periods beginning after January 1, 2022 are presented under CECL while prior period amounts continue to be reported in accordance with previous applicable GAAP. On the adoption date, the Company increased the allowance for credit losses on loans by $2.4 million and increased the allowance for credit losses for unfunded commitments by $2.3 million (included in Accrued expenses and other liabilities). The Company recorded a net decrease to undivided profits of $3.5 million, net of $1.2 million in deferred tax balances as of January 1, 2022 for the cumulative effect of adopting CECL.

The Company did not record an allowance for credit losses as of January 1, 2022 on its securities available for sale or held to maturity.

The impact of the January 1, 2022 adoption entry is summarized in the table below:

(in thousands)	December 31, 2021 Pre-CECL Adoption		Impact of Adoption			January 1, 2022 Post-CECL Adoption
Assets:
Allowance for credit losses on loans	$	44,267	$	2,353		$	46,620
Allowance for credit losses on securities		-		-			-
Liabilities and shareholders’ equity:
Other liabilities (ACL unfunded loan commitments)		18		2,335			2,353
Tax Effect, net		-		(1,218	)		-
Total		44,285		3,470			48,973

Undivided Profits	$	349,056	$	(3,470	)	$	345,586

Loans

Loans that management has the intent and ability to hold for the near future or until maturity or payoff are reported at amortized cost net of allowance for credit losses on loans. Amortized cost is the principal balance outstanding, net of deferred loan fees and costs. Interest income is accrued on unpaid principal balances. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Interest income of mortgage and commercial loans is discontinued and placed on nonaccrual status at the time the loan is 90 days delinquent. Non accrual loans are individually reviewed and charged off at 180 days past due. Commercial loans are charged off to the extent principal or interest is deemed uncollectible. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought to current and future payments are reasonably assured.

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Accrued Interest Receivable

The Company has made the following elections with regards to accrued interest receivable: the Company will continue to write off accrued interest receivable by reversing interest income; the Company has made the accounting policy election not to measure an allowance for credit losses for accrued interest receivables; and the Company elected to exclude accrued interest receivable balances from tabular disclosures and will present accrued interest receivable balances in other assets.

Allowance for Credit Losses on Loans

The allowance for credit losses on loans (“ACLL”) is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loan are charged off against the allowance when management believes the uncollectibility of the loan balance is confirmed. Expected recoveries are not to exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The Company has elected the Discounted Cash Flow (“DCF”) methodology to determine its ACLL. Management estimates the allowance for credit loss on loans balance using relevant available information from internal and external sources related to past events, current conditions, and a reasonable and supportable forecast provided by a third party. The Company lends in the geographic territory of its branch locations in New York, Florida, Massachusetts, New Jersey and Vermont. Although the loan portfolio is diversified, historical credit loss experience by Florida and New York provides the quantitative basis for the estimation of expected credit losses. Complementary to that, a portion of its debtors’ ability to repay depends significantly on the economic employment conditions prevailing in the respective geographic territory. The ACLL reserve is overlaid with qualitative considerations for changes in underwriting standards, portfolio mix, delinquency levels, or economic conditions such as changes in the unemployment rates, property values, and gross metro product to make adjustments to historical loss information. Management judgment is required at each point in the measurement process.

The allowance for unfunded commitments is maintained at a level by the Company to be sufficient to absorb expected lifetime losses related to unfunded credit facilities (including unfunded loan commitments and letters of credit).

Management utilized the historical loss rate experience on its own loan portfolio as the initial basis of the estimate using probability of default (“PD”) and loss given defaults (“LGD”) derived from September 30, 2011 to January 1, 2022. A defaulted loan is a loan payment default once it is 90 days contractually past due.

Management utilizes externally developed economic forecasts (Moody’s forecast scenarios) of unemployment rates within the key metropolitan areas in New York and Florida of which we serve to forecast probability of defaults and loss given defaults within the model. Management has determined that a reasonable and supportable forecast is 8 quarters after which the historical average probability defaults and loss given defaults will be used. The two economic scenarios evaluated by management in detail were the Baseline and Stagflation forecast scenarios. Within both scenarios, Management considered the following:

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•

Unemployment levels in relation to inflationary pressures;

•

Monetary and fiscal policy assumptions and movement of the federal funds rate in 2022;

•

Supply chain conditions and their impacts on Consumer Price indices (“CPI”), and

•

Inflationary pressures on housing, and Gross Metro Product (“GMP”).

In determining the appropriate forecast to utilize, management considered the range of forecasted unemployment as well as a number of other economic indicators. Unemployment levels in the Baseline continued to be optimistic while not providing what management determined to be a full reflection of supply chain, workforce challenges, and inflationary pressures. The rising inflation, volatility in consumer confidence, supply chain, and workforce environment challenges, as well as monetary and geopolitical environmental considerations, drove management to elect the Stagflation forecast scenario.

As of January 1, 2022, the Company has elected to fully utilize the Stagflation forecast scenario. The Company determined the forecast more appropriately considers inflationary pressures, and monetary policies observed currently and prospectively in the markets served. The ACLL reserve is then complemented with qualitative factors based upon GMP, CPI, Housing forecasts using the same scenario, their related forecasts for the respective metropolitan regions of New York and Florida, were qualitatively factored into the calculation.

The effective interest rate used to discount expected cash flows considered the timing of the expected cash flows resulting from prepayments that existed as of January 1, 2022. The prepayment-adjusted effective interest rate uses the original contractual rate and prepayment assumptions as of January 1, 2022.

There were no changes in the Company’s methodology for the Allowance for credit losses on loans for the period ended June 30, 2022 compared to adoption date.

The Company determined a contractual term excluding expected extensions, renewals and modifications. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

The Company determined its allowance for credit losses on loans using a pool of assets with similar risk characteristics. The company evaluates its risk characteristics based on regulatory call report codes where it was determined that the loans within the call codes were homogenous in nature and could be aggregated into the main categories for the Company portfolio. There were no changes to the loan pools under CECL for January 1, 2022 compared to previously disclosed loan segments. Loans that no longer match the risk profile of the pool are individually assessed for credit losses. Nonaccrual loans that have been delinquent 180 days or greater, commercial nonaccrual loans and loans identified as troubled debt restructuring (“TDR”) are individually assessed. The individual assessment for credit impairment is generally based on a discounted cash flow approach unless the asset is collateral dependent. The loan is considered collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans are individually assessed and the expected credit loss is based on the fair value of the collateral.

A loan for which terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties is considered a TDR. In situations where the Bank considers a loan modification, management determines whether the borrower is experiencing financial difficulty by performing an evaluation of the probability that the borrower will be in payment default on any of its debt in the near future without the modification. This evaluation is performed under the Company’s underwriting policy. Generally, the modification of the terms of loans was the result of the borrower filing for bankruptcy protection. Chapter 13 bankruptcies generally include the deferral of all past due amounts for a period of generally 60 months in accordance with the bankruptcy court order. In the case of Chapter 7 bankruptcies, even though there is no modification of terms, the borrowers’ debt to the Company was discharged and they may not reaffirm the debt.

Index

The TDR that subsequently defaulted have the underlying collateral evaluated at the time these loans were identified as TDRs, and a charge‑off was taken at that time, if necessary. Collateral values on these loans are reviewed for collateral sufficiency on a quarterly basis.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Company estimates credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration that funding will occur and an estimate of expected credit losses on commitments is expected to be funded over its estimated life. The Company lends in the geographic territory of its branch locations in New York, Florida, Massachusetts, New Jersey and Vermont. Although the loan portfolio is diversified, a portion of its debtors’ ability to repay depends significantly on the economic conditions prevailing in the respective geographic territory. The following categories of off-balance sheet credit exposures have been identified: unfunded commitments to extend credit, unfunded lines of credit, residential mortgage pending closings and standby letters of credit. Each of these unfunded commitments is analyzed for a probability of funding to calculate a probable funding amount. The life of loan loss factor by related portfolio segment from the allowance for credit losses on loans calculation is then applied to the probable funding amount to calculate the estimated credit losses on off-balance sheet credit exposures recognized in other liabilities. The post adoption balance of $3.2 million is included with Accrued expenses and other liabilities on consolidated statements of financial condition. Prospective changes in the reserve will be recorded through the provision for credit losses on the consolidated statements of income.

Debt Securities

Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax. There were no debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2022. Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are generally amortized on the level-yield method without anticipating prepayments. Premiums on callable debt securities are amortized to their earlier call date. Discounts are amortized to maturity date. Gains and losses are recorded on the trade date and determined using the specific identification method.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security placed on non-accrual is reversed against interest income. Timely principal and interest payments continue to be made on the securities. The unrealized losses in the portfolio are primarily attributable to changes in interest rates.

Index

Allowance for Credit Losses – Held to Maturity Securities

The Company’s held to maturity securities are issued by U.S. government entities and agencies such as Ginnie Mae, Fannie Mae, and Freddie Mac. These securities are either explicitly or implicitly guaranteed by the U.S. government and are highly rated by major rating agencies and have a long history of no credit losses. Management measures expected credit losses on held to maturity debt securities on a collective basis by major security type, issuer and payment stream. The estimate of expected credit losses considers historical credit loss information adjusted for current conditions and reasonable and supportable forecasts provided by a third party servicer. Based on the nature of the securities held by the Company and the underlying guarantees, there was no allowance for credit losses recorded for held to maturity securities as of January 1, 2022.

Accrued interest receivable on held to maturity securities totaled $35 thousand and is excluded from the estimate of credit losses. Historically the Company has not experienced uncollectible accrued interest receivable on held-to-maturity securities portfolio.

Allowance for Credit Losses – Available For Sale Securities

For available for sale debit securities in an unrealized loss position, the entity first assesses whether it intends to sell, or if it is more likely that not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For debt securities available for sale that do not meet the aforementioned criteria, in making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security and its issuer, among other factors. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income.

Change in the allowance for credit losses is recorded as a provision for credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either criteria regarding the intent or requirement to sell is met.

The unrealized losses reported pertaining to securities issued by the U.S. government and its sponsored entities, include agencies, and mortgage backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, which are currently well rated and guaranteed by the U.S. government. The Company does not intend to sell the securities, and it is not considered likely the Company will be required to sell these securities prior to recovery of the amortized cost. Timely principal and interest payments continue to be made on the securities. The unrealized losses in the portfolio are primarily attributable to changes in interest rates. Management does not believe any individual unrealized loss as of January 1, 2022 represents any credit loss and no realized losses have been recognized into provision for credit loss.

Index

(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 and six months ended June 30, 2022 and 2021 is as follows:

(in thousands, except per share data)	For the three months ended June 30,				For the six months ended June 30,
	2022		2021		2022		2021

Net income	$	17,871		14,433	$	34,960		28,516
Weighted average common shares		19,153		19,281		19,185		19,284
Stock Options		-		9		-		8
Weighted average common shares including potential dilutive shares		19,153		19,290		19,185		19,292

Basic EPS	$	0.933		0.749	$	1.822		1.479

Diluted EPS	$	0.933		0.748	$	1.822		1.478

For the three and six months ended June 30, 2022 there were 9,352 shares and 5,751 shares, respectively, of weighted average antidilutive stock options excluded from dilutive earnings. For the three and six months ended June 30, 2021 there were no weighted average antidilutive stock options excluded from dilutive earnings. 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.

Index

(3) Benefit Plans

The table below outlines the components of the Company’s net periodic benefit recognized during the three and six months ended June 30, 2022 and 2021 for its pension and other postretirement benefit plans:

	Three months ended June 30,
	Pension Benefits						Other Postretirement Benefits
(dollars in thousands)	2022			2021			2022			2021

Service cost	$	-			(11	)		(9	)		26
Interest cost		221			212			51			39
Expected return on plan assets		(796	)		(662	)		(333	)		(290	)
Amortization of net gain		-			-			(426	)		(169	)
Amortization of prior service cost		-			-			123			102
Net periodic benefit	$	(575	)		(461	)		(594	)		(292	)

	Six months ended June 30,
	Pension Benefits						Other Postretirement Benefits
(dollars in thousands)	2022			2021			2022			2021

Service cost	$	-			-			9			48
Interest cost		444			428			103			83
Expected return on plan assets		(1,613	)		(1,423	)		(666	)		(617	)
Amortization of net gain		-			-			(504	)		(397	)
Amortization of prior service cost (credit)		-			-			(157	)		50
Net periodic benefit	$	(1,169	)		(995	)		(1,215	)		(833	)

The Company does not expect to make contributions to its pension and postretirement benefit plans in 2022. As of June 30, 2022, 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 postretirement medical benefits to a limited number of current and retired executives in accordance with the terms of their employment contracts.

Index

(4) Investment Securities

(a) Securities available for sale

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

	June 30, 2022
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	104,571		106		3,577		101,100
State and political subdivisions		41		-		-		41
Mortgage backed securities and collateralized mortgage obligations - residential		307,819		18		20,387		287,450
Corporate bonds		90,883		4		3,147		87,740
Small Business Administration - guaranteed participation securities		26,855		-		1,427		25,428
Other		686		-		30		656
Total Securities Available for Sale	$	530,855		128		28,568		502,415

	December 31, 2021
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	59,976		-		797		59,179
State and political subdivisions		41		-		-		41
Mortgage backed securities and collateralized mortgage obligations - residential		269,907		3,367		2,476		270,798
Corporate bonds		45,805		157		625		45,337
Small Business Administration - guaranteed participation securities		31,303		371		-		31,674
Other		685		-		1		684
Total Securities Available for Sale	$	407,717		3,895		3,899		407,713

The following table distributes the debt securities included in the available for sale portfolio as of June 30, 2022, 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	$	5,039		5,044
Due in one year through five years		181,142		174,458
Due after five years through ten years		10,000		10,035
Mortgage backed securities and collateralized mortgage obligations - residential		307,819		287,450
Small Business Administration - guaranteed participation securities		26,855		25,428
	$	530,855		502,415

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:

	June 30, 2022
	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	$	18,705		874		47,289		2,703		65,994		3,577
Mortgage backed securities and collateralized mortgage obligations - residential		218,663		10,104		68,251		10,283		286,914		20,387
Corporate bonds		63,768		1,884		18,934		1,263		82,702		3,147
Small Business Administration - guaranteed participation securities		25,428		1,427		-		-		25,428		1,427
Other		620		30		-		-		620		30

Total	$	327,184		14,319		134,474		14,249		461,658		28,568

	December 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	$	49,279		697		9,900		100		59,179		797
Mortgage backed securities and collateralized mortgage obligations - residential		93,447		1,888		22,098		588		115,545		2,476
Corporate bonds		15,670		171		14,546		454		30,216		625
Other		648		1		-		-		648		1

Total	$	159,044		2,757		46,544		1,142		205,588		3,899

There were no allowance for credit losses recorded for securities available for sale during the three and six months ended June 30, 2022.

Index

The proceeds from sales and calls of securities available for sale, gross realized gains and gross realized losses from sales and calls during the three and six months ended June 30, 2022 and 2021 are as follows:

	Three months ended June 30,
(dollars in thousands)	2022		2021

Proceeds from sales	$	-	$	-
Proceeds from calls/paydowns		25,415		39,630
Proceeds from maturities		5,050		5,000
Gross realized gains		-		-
Gross realized losses		-		-

	Six months ended June 30,
(dollars in thousands)	2022		2021

Proceeds from sales	$	-	$	-
Proceeds from calls/paydowns		43,338		76,450
Proceeds from maturities		10,050		5,055
Gross realized gains		-		-
Gross realized losses		-		-

There were no transfers of securities available for sale during the three and six months ended June 30, 2022 and 2021.

(b) Held to maturity securities

The amortized cost and fair value of the held to maturity securities are as follows:

	June 30, 2022
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	8,544		263		74		8,733
Total held to maturity	$	8,544		263		74		8,733

	December 31, 2021
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	9,923		773		1		10,695
Total held to maturity	$	9,923		773		1		10,695

Index

The following table distributes the debt securities included in the held to maturity portfolio as of June 30, 2022, 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
Mortgage backed securities and collateralized mortgage obligations - residential	$	8,544		8,733
	$	8,544		8,733

All held to maturity securities are held at cost on the financial statements. As of June 30, 2022 and December 31, 2021 held to maturity securities with a fair value of $3.8 million and $442 thousand had an unrecognized loss of less than 12 months of $74 thousand and one thousand, respectively.

There were no sales or transfers of held to maturity securities during the three and six months ended June 30, 2022 and 2021.

There were no allowance for credit losses recorded for held to maturity securities during the three and six months ended June 30, 2022. There were no securities on non-accrual status and all securities were performing in accordance with contractual terms.

Debt Securities

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for OTTI by segregating the portfolio by type and applying the appropriate OTTI model.

In determining OTTI for debt securities, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether any other‑than‑temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether management intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If management intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If management does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, the OTTI on debt securities shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

Index

As of June 30, 2022, the Company’s security portfolio included certain securities which were in an unrealized loss position, and are discussed below.

U.S. government sponsored enterprises: In the case of unrealized losses on U.S. government sponsored enterprises, because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2022.

Mortgage backed securities and collateralized mortgage obligations – residential: At June 30, 2022, all mortgage backed securities and collateralized mortgage obligations held by the Company were issued by U.S. government sponsored entities and agencies, primarily Ginnie Mae, Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other‑than‑temporarily impaired at June 30, 2022.

Small Business Administration (SBA) - guaranteed participation securities: At June 30, 2022, all of the SBA securities held by the Company were issued and guaranteed by U.S. Small Business Administration. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2022.

Corporate Bonds & Other: At June 30, 2022, corporate bonds held by the Company are investment grade quality. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2022.

Index

(5) Loan Portfolio and Allowance for Credit Losses

Upon adoption of CECL, management pooled loans with similar risk characteristics. The portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses on loans.

The Following table presents loans by portfolio segment:

	June 30, 2022
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	151,978		27,646		179,624
Other		19,134		1,128		20,262
Real estate mortgage - 1 to 4 family:
First mortgages		2,747,210		1,271,168		4,018,378
Home equity loans		45,428		12,851		58,279
Home equity lines of credit		180,720		73,038		253,758
Installment		8,175		2,083		10,258
Total loans, net	$	3,152,645		1,387,914		4,540,559
Less: Allowance for credit losses						45,285
Net loans					$	4,495,274

Prior to the adoption of CECL on January 1, 2022, the Company calculated allowance for loan losses using the incurred losses methodology.

	December 31, 2021
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	147,063		21,653		168,716
Other		30,889		595		31,484
Real estate mortgage - 1 to 4 family:
First mortgages		2,723,734		1,212,568		3,936,302
Home equity loans		48,190		13,695		61,885
Home equity lines of credit		175,134		55,842		230,976
Installment		7,368		2,048		9,416
Total loans, net	$	3,132,378		1,306,401		4,438,779
Less: Allowance for loan losses						44,267
Net loans					$	4,394,512

Included in commercial loans above are Paycheck Protection Program (“PPP”) loans totaling $1.5 million and $10.0 Million as of June 30, 2022 and December 31, 2021, respectively.

At June 30, 2022 and December 31, 2021, the Company had approximately $30.4 million and $37.3 million of real estate construction loans, respectively. Of the $30.4 million in real estate construction loans at June 30, 2022, approximately $10.7 million are secured by first mortgages to residential borrowers while approximately $19.7 million were to commercial borrowers for residential construction projects. Of the $37.3 million in real estate construction loans at December 31, 2021, approximately $17.9 million were secured by first mortgages to residential borrowers while approximately $19.4 million were to commercial borrowers for residential construction projects. The vast majority of construction loans are in the Company’s New York market.

Index

Allowance for credit losses on loans

The level of the ACLL is based on factors that influence management’s current estimate of expected credit losses including past events, current conditions. There were no changes in the Company’s methodology for the allowance for credit losses on loans for the period ended June 30, 2022 compared to adoption date. Consistent with adoption date, the Company has determined the stagflation forecast scenario to be appropriate for the June 30, 2022 ACLL calculation. The Company selected the stagflation economic forecast for credit losses as management expects that markets will experience a slight decline in economic conditions and a slight increase in the unemployment rate over the next two years.

The following table presents the impact of the January 1, 2022 adoption entry in the allowance for credit losses on loans by loan type:

(dollars in thousands)	December 31, 2021 Pre-Adoption Balance		Impact of Adoption			January 1, 2022 Post CECL Adoption
	Total					Total
Commercial:
Commercial real estate	$	3,121		(1,100	)		2,021
Other		14		114			128
Real estate mortgage - 1 to 4 family:
First mortgages		37,249		1,703			38,952
Home equity loans		583		262			845
Home equity lines of credit		2,857		1,752			4,609
Installment		443		(378	)		65
Total Allowance	$	44,267		2,353			46,620

Activity in the allowance for credit losses on loans by portfolio segment is summarized as follows:

	For the three months ended June 30, 2022
(dollars in thousands)	Commercial		Real Estate Mortgage- 1 to 4 Family			Installment		Total
Balance at beginning of period	$	2,177		43,931			70		46,178
Loans charged off:
New York and other states*		4		12			14		30
Florida		-		-			-		-
Total loan chargeoffs		4		12			14		30

Recoveries of loans previously charged off:
New York and other states*		4		131			2		137
Florida		-		-			-		-
Total recoveries		4		131			2		137
Net loans (recoveries) charged off		-		(119	)		12		(107	)
(Credit) provision for credit losses		97		(1,170	)		73		(1,000	)
Balance at end of period	$	2,274		42,880			131		45,285

Index

Activity in the allowance for loan losses by portfolio segment as of June 30, 2021 is summarized as follows:

	For the three months ended June 30, 2021
(dollars in thousands)	Commercial		Real Estate Mortgage- 1 to 4 Family			Installment			Total
Balance at beginning of period	$	4,052		45,507			432			49,991
Loans charged off:
New York and other states*		-		20			1			21
Florida		-		-			-			-
Total loan chargeoffs		-		20			1			21

Recoveries of loans previously charged off:
New York and other states*		-		156			28			184
Florida		-		1			-			1
Total recoveries		-		157			28			185
Net loan recoveries		-		(137	)		(27	)		(164	)
(Credit) provision for loan losses		54		(27	)		(27	)		-
Balance at end of period	$	4,106		45,617			432			50,155

* Includes New York, New Jersey, Vermont and Massachusetts.

Activity in the allowance for credit losses on loans by portfolio segment for the six months ended is summarized as follows:

	For the six months ended June 30, 2022
	Commercial			Real Estate Mortgage- 1 to 4 Family			Installment			Total
Balance at beginning of period	$	3,135		$	40,689		$	443		$	44,267
Impact of ASU 2016-13, Current Expected Credit Loss (CECL)		(986	)		3,717			(378	)		2,353
Balance as of January 1, 2022 as adjuste dfor ASU 2016-13		2,149			44,406			65			46,620
Loans charged off:
New York and other states*		40			12			25			77
Florida		-			-			-			-
Total loan chargeoffs		40			12			25			77

Recoveries of loans previously charged off:
New York and other states*		4			228			10			242
Florida		-			-			-			-
Total recoveries		4			228			10			242
Net loans (recoveries) charged off		36			(216	)		15			(165	)
(Credit) provision for credit losses		161			(1,742	)		81			(1,500	)
Balance at end of period	$	2,274			42,880			131			45,285

Index

Activity in the allowance for loan losses by portfolio segment for the six months ended is summarized as follows:

	For the six months ended June 30, 2021
	Commercial			Real Estate Mortgage- 1 to 4 Family			Installment			Total
Balance at beginning of period	$	4,140			44,950			505			49,595
Loans charged off:
New York and other states*		-			106			8			114
Florida		-			-			2			2
Total loan chargeoffs		-			106			10			116

Recoveries of loans previously charged off:
New York and other states*		32			244			49			325
Florida		-			1			-			1
Total recoveries		32			245			49			326
Net loan recoveries		(32	)		(139	)		(39	)		(210	)
(Credit) provision for loan losses		(66	)		528			(112	)		350
Balance at end of period	$	4,106			45,617			432			50,155

* Includes New York, New Jersey, Vermont and Massachusetts.

The following tables present the balance in the allowance for credit losses on loans by portfolio segment and based on impairment evaluation as of June 30, 2022: :

	June 30, 2022
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		2,274		42,880		131		45,285

Total ending allowance balance	$	2,274		42,880		131		45,285

Loans:
Individually evaluated for impairment	$	319		26,673		21		27,013
Collectively evaluated for impairment		199,567		4,303,742		10,237		4,513,546

Total ending loans balance	$	199,886		4,330,415		10,258		4,540,559

Prior to the adoption of CECL on January 1, 2022, the Company calculated allowance for loan losses using the incurred losses methodology. Activity in the allowance for loan losses by portfolio segment is summarized as follows:

	December 31, 2021
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		3,135		40,689		443		44,267

Total ending allowance balance		3,135		40,689		443		44,267

Loans:
Individually evaluated for impairment	$	232		18,272		-		18,504
Collectively evaluated for impairment		199,968		4,210,891		9,416		4,420,275

Total ending loans balance	$	200,200		4,229,163		9,416		4,438,779

Index

The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (accrued expenses and other liabilities) with adjustments to the reserve recognized in (credit) provision for credit losses in the consolidated income statement.

The Company’s activity in the allowance for credit losses on unfunded commitments were as follows:

(In thousands)	For the three months ended June 30, 2022
Balance at March 31, 2022	$	2,653
Provision for credit losses		509
Balance at June 30, 2022	$	3,162


(In thousands)	For the six months ended June 30, 2022
Balance at January 1, 2022	$	18
Impact of Adopting CECL		2,335
Adjusted Balance at January 1, 2022		2,353
Provision for credit losses		809
Balance at June 30, 2022	$	3,162

Loan Credit Quality

The Company categorizes commercial loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. On at least an annual basis, the Company’s loan grading process analyzes non-homogeneous loans, such as commercial loans and commercial real estate loans, individually by grading the loans based on credit risk. The Company’s internal loan review department in accordance with the Company’s internal loan review policy tests the loan grades assigned to all loan types.

The Company uses the following definitions for classified loans:

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as such have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those loans classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “pass” rated loans.

For homogeneous loan pools, such as residential mortgages, home equity lines of credit, and installment loans, the Company uses payment status to identify the credit risk in these loan portfolios. Payment status is reviewed on a daily basis by the Bank’s collection area and on a monthly basis with respect to determining the adequacy of the allowance for credit losses on loans. The payment status of these homogeneous pools as of June 30, 2022 and December 31, 2021 is also included in the aging of the past due loans table. Nonperforming loans shown in the table below were loans on nonaccrual status and loans over 90 days past due and accruing.

Index

As of June 30, 2022, and based on the most recent analysis performed, the risk category of loans by class of loans, and gross chargeoffs year to date for each loan type by origination year was as follows:

(in thousands)	June 30, 2022
	Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
Commercial :
Risk rating
Pass	$	24,830		32,586		24,467		24,684		20,201		43,368		7,682		-	$	177,818
Special Mention		-		-		69		-		251		-		-		-		320
Substandard		-		-		116		-		136		1,234		-		-		1,486
Total Commercial Loans	$	24,830		32,586		24,652		24,684		20,588		44,602		7,682		-	$	179,624
Commercial Loans:
Current-period Gross writeoffs	$	-		-		-		-		-		40		-		-	$	40
	$	-		-		-		-		-		40		-		-	$	40
Commercial Other:
Risk rating
Pass	$	1,325		3,623		3,028		722		823		2,535		7,729		-	$	19,785
Special mention		-		316		-		-		-		-		40		-		356
Substandard		-		23		-		-		-		-		98		-		121
Total Commercial Real Estate Loans	$	1,325		3,962		3,028		722		823		2,535		7,867		-	$	20,262

Other Commercial Loans:
Current-period Gross writeoffs	$	-		-		-		-		-		-		-		-		-
	$	-		-		-		-		-		-		-		-	$	-

Residential First Mortgage:
Risk rating
Performing	$	280,214		965,157		815,540		382,448		268,833		1,289,409		1,114		-	$	4,002,715
Nonperforming		-		173		83		671		773		13,963		-		-		15,663
Total First Mortgage:	$	280,214		965,330		815,623		383,119		269,606		1,303,372		1,114		-	$	4,018,378

Residential First Mortgage Loans:
Current-period Gross writeoffs	$	-		-		-		-		-		-		-		-		-
	$	-		-		-		-		-		-		-		-	$	-

Home Equity Lines:
Risk rating
Performing	$	3,335		10,166		7,031		8,108		5,718		23,751		-		-	$	58,109
Nonperforming		-		-		-		-		-		170		-		-		170
Total Home Equity Lines:	$	3,335		10,166		7,031		8,108		5,718		23,921		-		-	$	58,279

Home Equity Loans:
Current-period Gross writeoffs	$	-		-		-		-		-		-		-		-	$	-
	$	-		-		-		-		-		-		-		-	$	-
Home Equity Lines of Credit:
Risk rating
Performing	$	660		847		414		70		94		19,266		229,789		-	$	251,140
Nonperforming		-		-		-		-		-		2,553		65		-		2,618
Total Home Equity Credit Lines:	$	660		847		414		70		94		21,819		229,854		-	$	253,758

Home Equity Lines of Credit:
Current-period Gross writeoffs	$	-		-		-		-		-		12		-		-		12
	$	-		-		-		-		-		12		-		-	$	12
Installments:
Risk rating
Performing	$	2,503		3,047		1,099		1,200		581		690		1,093		-	$	10,213
Nonperforming		-		-		-		21		-		1		23		-		45
Total Installments	$	2,503		3,047		1,099		1,221		581		691		1,116		-	$	10,258

Installments Loans:
Current-period Gross writeoffs	$	-		13		5		6		-		1		-		-		25
	$	-		13		5		6		-		1		-		-	$	25

Index

The following tables present the aging of the amortized cost in past due loans by loan class and by region as of June 30, 2022:

	June 30, 2022
New York and other states*:
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total 30+ days Past Due		Current		Total Loans

Commercial:
Commercial real estate	$	-		-		123		123		151,855		151,978
Other		35		6		-		41		19,093		19,134
Real estate mortgage - 1 to 4 family:
First mortgages		1,554		1,359		9,183		12,096		2,735,114		2,747,210
Home equity loans		26		50		55		131		45,297		45,428
Home equity lines of credit		264		264		857		1,385		179,335		180,720
Installment		18		8		23		49		8,126		8,175

Total	$	1,897		1,687		10,241		13,825		3,138,820		3,152,645

Florida:
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total 30+ days Past Due		Current		Total Loans

Commercial:
Commercial real estate	$	-		-		-		-		27,646		27,646
Other		-		-		-		-		1,128		1,128
Real estate mortgage - 1 to 4 family:
First mortgages		78		292		1,552		1,922		1,269,246		1,271,168
Home equity loans		43		-		-		43		12,808		12,851
Home equity lines of credit		-		89		-		89		72,949		73,038
Installment		18		46		-		64		2,019		2,083

Total	$	139		427		1,552		2,118		1,385,796		1,387,914

Total:
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total 30+ days Past Due		Current		Total Loans

Commercial:
Commercial real estate	$	-		-		123		123		179,501		179,624
Other		35		6		-		41		20,221		20,262
Real estate mortgage - 1 to 4 family:
First mortgages		1,632		1,651		10,735		14,018		4,004,360		4,018,378
Home equity loans		69		50		55		174		58,105		58,279
Home equity lines of credit		264		353		857		1,474		252,284		253,758
Installment		36		54		23		113		10,145		10,258

Total	$	2,036		2,114		11,793		15,943		4,524,616		4,540,559

* Includes New York, New Jersey, Vermont and Massachusetts.

Index

The following tables present the aging of the recorded investment in past due loans by loan class and by region as of December 31, 2021:

	December 31, 2021
New York and other states*:
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total 30+ days Past Due		Current		Total Loans

Commercial:
Commercial real estate	$	-		233		45		278		146,785		147,063
Other		-		-		-		-		30,889		30,889
Real estate mortgage - 1 to 4 family:
First mortgages		1,303		239		9,867		11,409		2,712,325		2,723,734
Home equity loans		136		-		224		360		47,830		48,190
Home equity lines of credit		355		458		911		1,724		173,410		175,134
Installment		27		5		4		36		7,332		7,368

Total	$	1,821		935		11,051		13,807		3,118,571		3,132,378

Florida:
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total 30+ days Past Due		Current		Total Loans

Commercial:
Commercial real estate	$	-		-		-		-		21,653		21,653
Other		-		-		-		-		595		595
Real estate mortgage - 1 to 4 family:
First mortgages		869		180		1,146		2,195		1,210,373		1,212,568
Home equity loans		-		45		-		45		13,650		13,695
Home equity lines of credit		-		89		-		89		55,753		55,842
Installment		18		-		5		23		2,025		2,048

Total	$	887		314		1,151		2,352		1,304,049		1,306,401

Total:
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total 30+ days Past Due		Current		Total Loans

Commercial:
Commercial real estate	$	-		233		45		278		168,438		168,716
Other		-		-		-		-		31,484		31,484
Real estate mortgage - 1 to 4 family:
First mortgages		2,172		419		11,013		13,604		3,922,698		3,936,302
Home equity loans		136		45		224		405		61,480		61,885
Home equity lines of credit		355		547		911		1,813		229,163		230,976
Installment		45		5		9		59		9,357		9,416

Total	$	2,708		1,249		12,202		16,159		4,422,620		4,438,779

* Includes New York, New Jersey, Vermont and Massachusetts.

At June 30, 2022 and December 31, 2021, there were no loans that were 90 days past due and still accruing interest. As a result, non-accrual loans include all loans 90 days or more past due as well as certain loans less than 90 days past due that were placed on non-accrual status for reasons other than delinquent status. There are no commitments to extend further credit on non-accrual or restructured loans.

The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). Other real estate owned is included in Other assets on the Balance Sheet. As of June 30,2022 other real estate owned included $ 644 thousand of residential foreclosed properties. In addition, non-accrual residential mortgage loans that are in the process of foreclosure had an amortized cost of $10.3 million as of June 30, 2022. As of December 31, 2021, other real estate owned included $362 thousand of residential foreclosed properties. In addition, non-accrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $9.7 million as of December 31, 2021.

Index

Loans individually evaluated for impairment are non-accrual loans delinquent greater than 180 days, non-accrual commercial loans, as well as loans classified as troubled debt restructurings. As of June 30, 2022, there was no allowance for credit losses based on the loan individually evaluated for impairment. Residential and installment non-accrual loans which are not TDRs or greater than 180 days delinquent are collectively evaluated to determine the allowance for credit loss.

The following table presents the amortized cost basis in non-accrual loans by portfolio segment:

	June 30, 2022
(dollars in thousands)	New York and other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	176		-		176
Other		27		-		27
Real estate mortgage - 1 to 4 family:
First mortgages		13,684		1,979		15,663
Home equity loans		127		43		170
Home equity lines of credit		2,448		170		2,618
Installment		40		5		45
Total non-accrual loans		16,502		2,197		18,699
Restructured real estate mortgages - 1 to 4 family		14		-		14
Total nonperforming loans	$	16,516		2,197		18,713

For homogeneous loan pools, such as residential mortgages, home equity lines of credit, and installment loans, the Company uses payment status to identify the credit risk in these loan portfolios. Payment status is reviewed on a daily basis by the Bank’s collection area and on a monthly basis with respect to determining the adequacy of the allowance for loan losses. The total nonperforming portion of these homogeneous loan pools as of December 31, 2021 is presented in the non-accrual loans table below.

Index

	December 31, 2021
(dollars in thousands)	New York and other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	67		-		67
Other		45		-		45
Real estate mortgage - 1 to 4 family:
First mortgages		13,990		1,797		15,787
Home equity loans		247		45		292
Home equity lines of credit		2,337		174		2,511
Installment		23		14		37
Total non-accrual loans		16,709		2,030		18,739
Restructured real estate mortgages - 1 to 4 family		17		-		17
Total nonperforming loans	$	16,726		2,030		18,756

* Includes New York, New Jersey, Vermont and Massachusetts.

The following table presents the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing:

	June 30, 2022
(dollars in thousands)	Non-accrual With No Allowance for Credit Loss		Non-accrual With Allowance for Credit Loss		Loans Past Due Over 89 Days Still Accruing
Commercial:
Commercial real estate	$	176	$	-	$	-
Other		-		27		-
Real estate mortgage - 1 to 4 family:
First mortgages		14,477		1,186		-
Home equity loans		152		18		-
Home equity lines of credit		2,497		121		-
Installment		21		23		-
Total loans, net	$	17,324	$	1,375	$	-

The non-accrual balance of $1.4 million disclosed above was collectively evaluated and the associated allowance for credit losses on loans was not material as of June 30, 2022.

Index

A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected Credit losses for the collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. The following table presents the amortized cost basis of individually analyzed collateral dependent loans by portfolio segment as of June 30, 2022:

	Type of Collateral
(dollars in thousands)
	Real Estate		Investment Securities/Cash		Other
Commercial:
Commercial real estate	$	292		-		-
Other		27		-		-
Real estate mortgage - 1 to 4 family:				-		-
First mortgages		22,902		-		-
Home equity loans		272		-		-
Home equity lines of credit		3,499		-		-
Installment		21		-		-
Total Allowance	$	27,013		-		-

Troubled Debt Restructuring Loans

The Company has not committed to lend additional amounts to customers with outstanding loans that are classified as TDRs. Interest income recognized on loans that are individually evaluated was not material during the three and six months ended June 30, 2022 and 2021.

A loan for which the terms have been modified, and for which a borrower is experiencing financial difficulties, is considered a TDR and is classified as individually evaluated. TDR’s at June 30, 2022 are measured at the amortized cost using the loan’s effective rate at inception or fair value of the underlying collateral if the loan is considered collateral dependent.

As of June 30, 2022 loans individually evaluated included approximately $9.5 million of loans in accruing status that were identified as TDR’s.

Index

The following table presents, by class, loans that were modified as TDR’s:

	Three months ended June 30, 2022						Three months ended June 30, 2021

New York and other states* (dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1		73		73		2		368		368
Home equity loans		-		-		-		1		2		2
Home equity lines of credit		-		-		-		2		59		59

Total		1	$	73		73		5	$	429		429

Florida: (dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-
Real estate mortgage - 1 to 4 family:
First mortgages		-		-		-		1		78		78
Home equity loans		-		-		-		-		-		-
Home equity lines of credit		-		-		-		-		-		-

Total		-	$	-		-		1	$	78		78

* Includes New York, New Jersey, Vermont and Massachusetts.

	Six months ended June 30, 2022						Six months ended June 30, 2021
New York and other states*: (dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-
Real estate mortgage - 1 to 4 family:
First mortgages		4		443		443		2		368		368
Home equity loans		-		-		-		1		2		2
Home equity lines of credit		-		-		-		2		59		59

Total		4	$	443		443		5	$	429		429

Florida: (dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-
Real estate mortgage - 1 to 4 family:
First mortgages		-		-		-		1		78		78
Home equity loans		-		-		-		-		-		-
Home equity lines of credit		-		-		-		-		-		-

Total		-	$	-		-		1	$	78		78

* Includes New York, New Jersey, Vermont and Massachusetts.

Index

The addition of these TDR’s did not have a significant impact on the allowance for credit losses on loans. The nature of the modifications that resulted in them being classified as a TDR was the borrower filing for bankruptcy protection.

In situations where the Bank considers a loan modification, management determines whether the borrower is experiencing financial difficulty by performing an evaluation of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s underwriting policy. In situations involving a borrower filing for Chapter 13 bankruptcy protection, a loan is considered to be in payment default once it is 30 days contractually past due, consistent with the treatment by the bankruptcy court.

Prior to the adoption of CECL on January 1, 2022, the Company calculated allowance for loan losses using the incurred losses methodology. The following tables are the disclosures related to loans in prior periods.

Index

The following table presents impaired loans by loan class as of December 31, 2021:

	December 31, 2021

New York and other states*: (dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Avg Recorded Investment

Commercial:
Commercial real estate	$	187		279		-		1,154
Other		45		45		-		107
Real estate mortgage - 1 to 4 family:
First mortgages		13,687		13,875		-		14,072
Home equity loans		161		161		-		235
Home equity lines of credit		1,852		1,939		-		2,256

Total	$	15,932		16,299		-		17,824

Florida: (dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Avg Recorded Investment

Commercial:
Commercial real estate	$	-		-		-		105
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		2,368		2,368		-		2,562
Home equity loans		-		-		-		16
Home equity lines of credit		204		204		-		246

Total	$	2,572		2,572		-		2,929

Total: (dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Avg Recorded Investment

Commercial:
Commercial real estate	$	187		279		-		1,259
Other		45		45		-		107
Real estate mortgage - 1 to 4 family:
First mortgages		16,055		16,243		-		16,634
Home equity loans		161		161		-		251
Home equity lines of credit		2,056		2,143		-		2,502

Total	$	18,504		18,871		-		20,753

* Includes New York, New Jersey, Vermont and Massachusetts.

Index

As of December 31, 2021 the risk category of loans by class of loans is as follows:

	December 31, 2021
New York and other states:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	145,500		1,563		147,063
Other		30,726		163		30,889
	$	176,226		1,726		177,952

Florida:
(dollars in thousands)	Pass		Classified		Total
Commercial:
Commercial real estate	$	21,113		540		21,653
Other		595		-		595
	$	21,708		540		22,248

Total:
(dollars in thousands)	Pass		Classified		Total
Commercial:
Commercial real estate	$	166,613		2,103		168,716
Other		31,321		163		31,484
	$	197,934		2,266		200,200

* Includes New York, New Jersey and Massachusetts.

Included in classified loans in the above tables are impaired loans of $226 thousand at December 31, 2021.

Index

(6) Fair Value of Financial Instruments

FASB Topic 820, Fair Value Measurements (“ASC 820”) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the value that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of assets and liabilities:

Securities Available for Sale: The fair value of securities available for sale is determined utilizing an independent pricing service for identical assets or significantly similar securities. The pricing service uses a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models. Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows. This results in a Level 1 or Level 2 classification of the inputs for determining fair value. Interest and dividend income is recorded on the accrual method and is included in the Consolidated Statements of Income in the respective investment class under total interest and dividend income. The Company does not have any securities that would be designated as Level 3.

Other Real Estate Owned: Assets acquired through loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process to adjust for differences between the comparable sales and income data available. This results in a Level 3 classification of the inputs for determining fair value.

Individually evaluated loans: Periodically the Company records non-recurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Non-recurring adjustments can also include certain adjustments for collateral-dependent loans to adjust balances to fair value and generally have had a chargeoff through the allowance for Credit losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value. When obtained, non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. These loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Index

Indications of value for both collateral-dependent loans and other real estate owned are obtained from third party providers or the Company’s internal Appraisal Department. All indications of value are reviewed for reasonableness by a member of the Appraisal Department for the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value via comparison with independent data sources such as recent market data or industry-wide statistics.

There were no transfers between Level 1 and Level 2 during the three and six months ended June 30, 2022 and 2021.

Assets and liabilities measured at fair value under ASC 820 on a recurring basis are summarized below:

	Fair Value Measurements at
	June 30, 2022 Using:
(dollars in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

U.S. government sponsored enterprises	$	101,100	$	-	$	101,100	$	-
State and political subdivisions		41		-		41		-
Mortgage backed securities and collateralized mortgage obligations - residential		287,450		-		287,450		-
Corporate bonds		87,740		-		87,740		-
Small Business Administration- guaranteed participation securities		25,428		-		25,428		-
Other securities		656		-		656		-

Total securities available for sale	$	502,415	$	-	$	502,415	$	-

	Fair Value Measurements at
	December 31, 2021 Using:
(dollars in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Securities available for sale:
U.S. government sponsored enterprises	$	59,179	$	-	$	59,179	$	-
State and political subdivisions		41		-		41		-
Mortgage backed securities and collateralized mortgage obligations - residential		270,798		-		270,798		-
Corporate bonds		45,337		-		45,337		-
Small Business Administration- guaranteed participation securities		31,674		-		31,674		-
Other securities		684		-		684		-

Total securities available for sale	$	407,713	$	-	$	407,713	$	-

Index

Assets measured at fair value on a non-recurring basis are summarized below:

	Fair Value Measurements at
	June 30, 2022 Using:
(dollars in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation technique	Unobservable inputs	Range (Weighted Average)

Other real estate owned	$	644	$	-	$	-	$	644	Sales comparison approach	Adjustments for differences between comparable sales		1% - 20% (7	%)

Loans individually evaluated		-		-		-		-	Sales comparison	Adjustments for differences between comparable sales		N/A

	Fair Value Measurements at
	December 31, 2021 Using:
(dollars in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation technique	Unobservable inputs	Range (Weighted Average)

Other real estate owned	$	362	$	-	$	-	$	362	Sales comparison approach	Adjustments for differences between comparable sales		1% - 14% (6	%)

Impaired loans:
Real estate mortgage -1 to 4 family		-		-		-		-	Sales comparison	Adjustments for differences between comparable sales		N/A

Other real estate owned, that is carried at fair value less costs to sell was approximately $644 thousand at June 30, 2022 and consisted of residential real estate properties. There were no commercial real estate properties. There were no valuation charges included in earnings for the six months ended June 30, 2022.

Of the total individually evaluated loans of $27.0 million at June 30, 2022, there are no loans that are collateral dependent and are carried at fair value measured on a non-recurring basis. Due to the sufficiency of charge offs taken on these loans and the adequacy of the underlying collateral, there were no specific valuation allowances for these loans at June 30, 2022. There were no gross charge offs related to residential individually evaluated loans included in the table above for the three and six months ended June 30, 2022.

Other real estate owned, that is carried at fair value less costs to sell, was approximately $362 thousand at December 31, 2021 and consisted only residential real estate properties. A valuation charge of $121 thousand is included in earnings for the year ended December 31, 2021.

Of the total impaired loans of $18.5 million at December 31, 2021, there are no impairments that are collateral dependent and are carried at fair value measured on a non-recurring basis. Due to the sufficiency of charge-offs taken on these loans and the adequacy of the underlying collateral, there were no specific valuation allowances for these loans at December 31, 2021. There were no gross charge-offs related to residential impaired loans included in the table above.

Index

In accordance with FASB Topic 825, Financial Instruments (“ASC 825”), the carrying amounts and estimated fair values of financial instruments, at June 30, 2022 and December 31, 2021 are as follows:

(dollars in thousands)			Fair Value Measurements at
	Carrying		June 30, 2022 Using:
	Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	1,046,184		1,046,184		-		-		1,046,184
Securities available for sale		502,415		-		502,415		-		502,415
Held to maturity securities		8,544		-		8,733		-		8,733
Federal Home Loan Bank stock		5,797		N/A		N/A		N/A		N/A
Net loans		4,495,274		-		-		4,380,410		4,380,410
Accrued interest receivable		10,726		692		1,672		8,362		10,726
Financial liabilities:
Demand deposits		851,573		851,573		-		-		851,573
Interest bearing deposits		4,545,268		3,545,531		976,558		-		4,522,089
Short-term borrowings		147,282		-		147,282		-		147,282
Accrued interest payable		142		31		111		-		142

(dollars in thousands)			Fair Value Measurements at
	Carrying		December 31, 2021 Using:
	Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	1,219,470		1,219,470		-		-		1,219,470
Securities available for sale		407,713		-		407,713		-		407,713
Held to maturity securities		9,923		-		10,695		-		10,695
Federal Reserve Bank and Federal
Home Loan Bank stock		5,604		N/A		N/A		N/A		N/A
Net loans		4,394,512		-		-		4,451,031		4,451,031
Accrued interest receivable		9,099		10		1,235		7,854		9,099
Financial liabilities:
Demand deposits		794,878		794,878		-		-		794,878
Interest bearing deposits		4,473,251		3,477,937		993,676		-		4,471,613
Short-term borrowings		244,686		-		244,686		-		244,686
Accrued interest payable		163		34		129		-		163

Index

(7) Accumulated Other Comprehensive Income (Loss)

The following is a summary of the accumulated other comprehensive (loss) income balances, net of tax:

	Three months ended June 30, 2022
(dollars in thousands)	Balance at 4/1/2022			Other Comprehensive Income (loss)- Before Reclassifications			Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 6/30/2022			Balance at 6/30/2022

Net unrealized holding loss on securities available for sale, net of tax	$	(14,277	)		(6,829	)		-			(6,829	)		(21,106	)
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		13,706			-			-			-			13,706
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax		(1,798	)		-			(224	)		(224	)		(2,022	)

Accumulated other comprehensive loss, net of tax	$	(2,369	)		(6,829	)		(224	)		(7,053	)		(9,422	)

	Three months ended June 30, 2021
(dollars in thousands)	Balance at 4/1/2021			Other Comprehensive Income (loss)- Before Reclassifications		Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 6/30/2021			Balance at 6/30/2021

Net unrealized holding gain on securities available for sale, net of tax	$	2,725			622		-			622			3,347
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		6,084			-		-			-			6,084
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax		(1,541	)		-		(50	)		(50	)		(1,591	)

Accumulated other comprehensive income, net of tax	$	7,268			622		(50	)		572			7,840

	Six months ended June 30, 2022
(dollars in thousands)	Balance at 1/1/2022			Other Comprehensive Income (loss)- Before Reclassifications			Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 6/30/2022			Balance at 6/30/2022

Net unrealized holding loss on securities available for sale, net of tax	$	(26	)		(21,080	)		-			(21,080	)		(21,106	)
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		13,706			-			-			-			13,706
Net change in net actuarial gain and prior service credit on pension and postretirement benefit plans, net of tax		(1,533	)		-			(489	)		(489	)		(2,022	)

Accumulated other comprehensive income (loss), net of tax	$	12,147			(21,080	)		(489	)		(21,569	)		(9,422	)

	Six months ended June 30, 2021
(dollars in thousands)	Balance at 1/1/2021			Other Comprehensive Income (loss)- Before Reclassifications			Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 6/30/2021			Balance at 6/30/2021

Net unrealized holding loss on securities available for sale, net of tax	$	7,186			(3,839	)		-			(3,839	)		3,347
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		6,084			-			-			-			6,084
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax		(1,334	)		-			(257	)		(257	)		(1,591	)

Accumulated other comprehensive income (loss), net of tax	$	11,936			(3,839	)		(257	)		(4,096	)		7,840

Index

The following represents the reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021:

(dollars in thousands)	Three months ended						Six months ended
	June 30,						June 30,
	2022			2021			2022			2021			Affected Line Item in Financial Statements
Amortization of pension and postretirement benefit items:
Amortization of net actuarial gain	$	426			169		$	504			397		Salaries and employee benefits
Amortization of prior service (cost) credit		(123	)		(102	)		157			(50	)	Salaries and employee benefits
Income tax benefit		(79	)		(17	)		(172	)		(90	)	Income taxes
Net of tax		224			50			489			257

Total reclassifications, net of tax	$	224			50		$	489			257

(8) Revenue from Contracts with Customers

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within Non-Interest Income. The following table presents the Company’s sources of Non-Interest Income for the three months and six months ended June 30, 2022 and 2021. Items outside the scope of ASC 606 are noted as such.

(dollars in thousands)	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Non-interest income
Service Charges on Deposits
Overdraft fees	$	647		612	$	1,293		1,229
Other		495		492		972		961
Interchange Income		1,544		1,380		3,246		2,533
Wealth management fees		1,996		1,999		3,829		4,034
Other (a)		234		205		759		359

Total non-interest income	$	4,916		4,688	$	10,099		9,116

(a)	Not within the scope of ASC 606.

A description of the Company’s revenue streams accounted in accordance with ASC 606 as follows:

Service charges on Deposit Accounts: The Company earns fees from its deposit customers for transaction-based, account maintenance and overdraft services. Transaction-based fees, which include services such as stop payment charges, statement rendering and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Index

Interchange Income: Interchange revenue primarily consists of interchange fees, volume-related incentives and ATM charges. As the card-issuing bank, interchange fees represent our portion of discount fees paid by merchants for credit/debit card transactions processed through the interchange network. The levels and structure of interchange rates are set by the card processing companies and are based on cardholder purchase volumes. The Company earns interchange income as cardholder transactions occur and interchange fees are settled on a daily basis concurrent with the transaction processing services provided to the cardholder.

Wealth Management fees: Trustco Financial Services provides a comprehensive suite of trust and wealth management products and services, including financial and estate planning, trustee and custodial services, investment management, corporate retirement plan recordkeeping and administration of which a fee is charged to manage assets for investment or transact on accounts. These fees are earned over time as the Company provides the contracted monthly or quarterly services and are generally assessed over the period in which services are performed based on a percentage of the fair value of assets under management or administration. Other services are based on a fixed fee for certain account types, or based on transaction activity and are recognized when services are rendered. Fees are withdrawn from the customer’s account balance.

(9) Operating Leases

The Company has committed to rent premises used in business operations under non-cancelable operating leases and determines if an arrangement meets the definition of a lease upon inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the Company’s balance sheets.

Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company’s leases do not provide an implicit rate, therefore the Company used its incremental collateralized borrowing rates commensurate with the underlying lease terms to determine present value of operating lease liabilities. Additionally, the Company does allocate the consideration between lease and non-lease components. The Company’s lease terms may include options to extend when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease components, such as fair market value adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. As of June 30, 2022 the Company did not have any leases with terms of twelve months or less.

As of June 30, 2022, the Company does not have any leases that the construction has not started yet. At June 30, 2022 lease expiration dates ranged from three months to 22.3 years and have a weighted average remaining lease term of 9.2 years. Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements. As mentioned above the leases generally also include variable lease components which include real estate taxes, insurance, and common area maintenance (“CAM”) charges in the annual rental payments.

Index

Other information related to leases was as follows:

(dollars in thousands)	Three months ended June 30,
	2022		2021
Operating lease cost	$	2,071		2,003
Variable lease cost		545		507

Total Lease costs	$	2,616		2,510

(dollars in thousands)	Six months ended June 30,
	2022		2021
Operating lease cost	$	4,123		4,019
Variable lease cost		1,141		1,009

Total Lease costs	$	5,264		5,028

(dollars in thousands)	Six months ended June 30,
	2022			2021
Supplemental cash flows information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,186			4,074

Right-of-use assets obtained in exchange for lease obligations:		2,484			1,107

Weighted average remaining lease term	9.2 years			8.9 years
Weighted average discount rate		2.97	%		3.13	%

Index

Future minimum lease payments under non-cancellable leases as of June 30, 2022 were as follows:

(dollars in thousands)

Year ending December 31,
2022^(a)	$	4,140
2023		8,234
2024		8,082
2025		7,675
2026		6,700
Thereafter		24,529
Total lease payments	$	59,360
Less: Interest		7,583

Present value of lease liabilities	$	51,777

(a)	Excluding the six months ended June 30, 2022.

A member of the Board of Directors has an ownership interest in five entities that own commercial real estate leased by the Company for use as branch locations. Total lease payments from the Company to those entities, which are included in the table above, owed at June 30, 2022, were $3.4 million, which includes interest in the amount of $448 thousand.

(10) Regulatory Capital Requirements

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy regulations and, additionally for banks, the prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory action. As of June 30, 2022, the Company and Bank meet all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If a bank is not classified as well capitalized, regulatory approval is required to accept brokered deposits. If a bank is undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The federal banking agencies are required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution or its holding company. Such actions could have a direct material effect on an institution’s or its holding company’s financial statements. As of June, 2022 and December 31, 2021, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Index

The Bank and the Company reported the following capital ratios as of June 30, 2022 and December 31, 2021:

(Bank Only)
									Minimum for Capital Adequacy plus Capital Conservation
	As of June 30, 2022					Well
	As of June 30, 2022					Well
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	585,724		9.390	%		5.000	%		4.000	%
Common equity tier 1 capital		585,724		18.339			6.500			7.000
Tier 1 risk-based capital		585,724		18.339			8.000			8.500
Total risk-based capital		625,754		19.592			10.000			10.500

	As of December 31, 2021					Well			Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Buffer ⁽¹⁾⁽²⁾

Tier 1 leverage ratio		570,594		9.324	%		5.000	%		4.000	%
Common equity tier 1 capital		570,594		18.954			6.500			7.000
Tier 1 risk-based capital		570,594		18.954			8.000			8.500
Total risk-based capital		608,308		20.206			10.000			10.500

(Consolidated)
	As of June 30, 2022					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	603,500		9.673	%		4.000	%
Common equity tier 1 capital	$	603,500		18.891			7.000
Tier 1 risk-based capital	$	603,500		18.891			8.500
Total risk-based capital	$	643,541		20.144			10.500

	As of December 31, 2021					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	588,427		9.614	%		4.000	%
Common equity Tier 1 capital		588,427		19.541			7.000
Tier 1 risk-based capital		588,427		19.541			8.500
Total risk-based capital		626,150		20.794			10.500

(1)	Federal regulatory minimum requirements to be considered to be Well Capitalized and Adequately Capitalized

(2)	The June 30, 2022 and December 31, 2021 common equity tier 1, tier 1 risk-based, and total risk-based capital ratios include a capital conservation buffer of 2.50 percent

Index

(11) New Accounting Pronouncements

ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures: In March 2022, FASB issued ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructuring and Vintage Disclosures. ASU 2022-02 eliminates the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, the amendments in this ASU require that public business entities disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments - Credit Losses -Measured at Amortized Cost. For entities, like TrustCo, that have adopted the amendments in ASU 2016-13, the amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted, including adoption in an interim period. An entity may elect to adopt the loan modification guidance and related disclosure enhancements separately from the amendments related to vintage disclosures. The amendments in this ASU should be applied prospectively, except for the amendments related to the recognition and measurement of TDRs which may be applied prospectively or using a modified retrospective transition method. The adoption of ASU13 2022-02 is not expected to have a material impact on the financial statements.

(12) Risks and Uncertainties

In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. On March 3, 2020, the Federal Reserve reduced the target federal funds rate by 50 basis points, followed by an additional reduction of 100 basis points on March 16, 2020. The Company has evaluated the impact of the effects of COVID-19 and determined that there were no material or systematic adverse impacts on the Company’s June 30, 2022 financial statements. As of June 30, 2022 the Company and Bank capital ratios were in excess of all regulatory requirements. While management believes that we have sufficient capital to withstand any further economic challenges brought on by the COVID-19 pandemic, our reported and regulatory capital ratios, as well as the ability of the Company and the Bank to pay dividends or make other distributions, could be adversely impacted by unanticipated credit losses. At this time, we do not believe there exists any impairment to our goodwill, long-lived assets, right of use assets, held to maturity investment securities, or available-for-sale investment securities due to the COVID-19 pandemic. It is uncertain whether prolonged effects of the COVID-19 pandemic will result in future impairment charges related to any of the aforementioned assets and continue to negatively impact net interest income, provision for credit losses, and noninterest income.

Loan modifications and payment deferrals as a result of COVID-19 that met the criteria established under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators were excluded from evaluation of TDR classification and were reported as current during the payment deferral period. The Company’s policy was to continue to accrue interest during the deferral period. Loans not meeting the CARES ACT or regulatory guidance were evaluated for TDR and non-accrual treatment under the Company’s existing policies and procedures. The relief provided by the CARES ACT expired on December 31, 2021. The Company doesn’t have any loan deferrals as of June 30, 2022.

Index

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors of TrustCo Bank Corp NY

Glenville, New York

Results of Review of Interim Financial Information

We have reviewed the consolidated statement of financial condition of TrustCo Bank Corp NY (the “Company”) as of June 30, 2022, and the related consolidated statements of income and comprehensive income for the three and six-month periods ended June 30, 2022 and June 30, 2021 and the related changes in shareholders’ equity and cash flows for the six-month periods ended June 30, 2022 and June 30, 2021, and the related notes (collectively referred to as the “interim financial information or statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statement of financial condition of the Company as of December 31, 2021, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of financial condition as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated statement of condition from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We conducted our review in accordance with the standards of the PCAOB. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the company in accordance with the U.S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

New York, New York	/s/ Crowe LLP
August 8, 2022

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, including statements regarding the effect of the novel coronavirus disease (“COVID-19”) pandemic on our business and our continuing response to the COVID-19 pandemic, 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, 2021, 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 the COVID-19 pandemic and macroeconomic or geopolitical concerns related to inflation, rising interest rates and the war in Ukraine.

•

changes in local market areas and general business and economic trends, as well as changes in consumer spending, borrowing and savings habits; and our ability to assess and react effectively to such changes;

•

The current COVID-19 pandemic, the effects of which could, and in some instances has, caused us to experience a decline in the demand for products and services; an increase in loan delinquencies; problem assets and foreclosures; a decline in collateral value; a work stoppage, forced quarantine, or other interruption or the unavailability of key employees; an increase in the allowance for credit losses on loans; a reduction in wealth management revenues; an increase in Federal Deposit Insurance Corporation premiums; a reduction in the value of the securities portfolio; or a decline in the net worth and liquidity of loan guarantors;

•

changes in and uncertainty related to benchmark interest rates used to price loans and deposits;

•

future business strategies related to the implementation of CECL;

•

credit risks and risks from concentrations (by geographic area and by loan product) within our loan portfolio;

•

TrustCo’s ability to continue to originate a significant volume of one- to- four family mortgage loans in its market areas and to otherwise maintain or increase its market share in the areas in which it operates;

•

TrustCo’s ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income;

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•

TrustCo’s ability to make accurate assumptions and judgments regarding the credit risks associated with its lending and investing activities, including changes in the level and direction of loan delinquencies and charge-offs, changes in property values, and changes in estimates of the adequacy of the allowance for credit losses;

•

the effects of and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rates, market and monetary fluctuations;

•

restrictions or conditions imposed by TrustCo’s and Trustco Bank’s regulators on their operations that may make it more difficult to achieve TrustCo’s and Trustco Bank’s goals;

•

the future earnings and capital levels of TrustCo and Trustco Bank and the continued non objection from TrustCo’s and Trustco Bank’s primary federal banking regulators under regulatory rules to distribute capital from Trustco Bank to TrustCo, which could affect the ability of TrustCo to pay dividends;

•

the results of supervisory monitoring or examinations of Trustco Bank and the Company by their respective primary federal banking regulators, including the possibility that the regulators may, among other things, require us to increase our loss allowances or to take other actions that reduce capital or income;

•

adverse conditions in the securities markets that lead to impairment in the value of securities in TrustCo’s investment portfolio;

•

the perceived overall value of TrustCo’s products and services by users, including the features, pricing and quality, compared to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for TrustCo’s products and services;

•

the effect of changes in financial services laws and regulations (including laws concerning taxation, banking and securities) and the impact of other governmental initiatives affecting the financial services industry, including regulatory capital requirements;

•

changes in management personnel;

•

real estate and collateral values;

•

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, Financial Accounting Standards Board or the Public Company Accounting Oversight Board;

•

disruptions, security breaches or other adverse events affecting the third-party vendors who perform several of our critical processing functions;

•

technological changes and electronic, cyber and physical security breaches;

•

TrustCo’s success at managing the risks involved in the foregoing and managing its business; and

•

other risks and uncertainties included under “Risk Factors” in our Form 10-K for the year ended December 31, 2021.

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.

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Following this discussion are the tables “Distribution of Assets, Liabilities and Shareholders’ Equity: Interest Rates and Interest Differential” which gives a detailed breakdown of TrustCo’s average interest earning assets and interest bearing liabilities for the three month and six month periods ended June 30, 2022 and 2021.

Introduction

The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the three month and six month periods ended June 30, 2022, with comparisons to the corresponding period in 2021, as applicable. Net interest margin is presented on a fully taxable equivalent basis in this discussion. The consolidated interim financial statements and related notes, as well as the 2021 Annual Report on Form 10-K, which was filed with the SEC on February 25, 2022, should also be read in conjunction with this review. Amounts in prior period consolidated interim financial statements are reclassified whenever necessary to conform to the current period’s presentation.

COVID-19 Impact

The Company evaluated the impact of the effects of the COVID-19 pandemic and determined that there were no material or systematic adverse impacts on the Company’s balance sheets and results of operations as of and for the years December 31, 2021 and 2020, as well as for the three month and six month periods ended June 30, 2022 and 2021. At this time, it is difficult to quantify the impact the pandemic will have on future periods due to various uncertainties, including the duration, severity, spread, variants and resurgences of COVID-19.

The following is a description of the impact the COVID-19 global pandemic is having on certain elements of our business:

Loan modifications

We have always been committed to working with our customers or borrowers to allow time to work through the challenges of the pandemic. At this time, it is uncertain what future impact, if any, further loan modifications related to COVID-19 difficulties may have on our financial condition, results of operations and provision for credit losses. We began receiving requests from our borrowers for loan deferrals in March 2020 and agreed with many borrowers to modify their loans. Modifications included the deferral of principal and/or interest payments for terms generally up to 90 days. Requests were evaluated individually and approved modifications were based on the unique circumstances of each borrower. Loan modifications and payment deferrals as a result of the COVID-19 pandemic that met the criteria established under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) or under applicable interagency guidance of the federal banking regulators were excluded from evaluation of troubled debt restructuring (“TDR”) classification and were reported as current during the payment deferral period. The relief provided by CARES Act expired on December 31, 2021. The Company doesn’t have any loans on deferral as of June 30, 2022.

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Paycheck Protection Program (“PPP”) and Liquidity

As part of the CARES Act, the Small Business Administration (SBA) was authorized to guarantee loans under the PPP for small businesses that meet the necessary eligibility requirements in order to keep their workers on the payroll. The Company has received loan origination fees from the SBA which are being recognized over the life of the loan using the effective yield method.

Asset impairment

At this time, we do not believe there exists any impairment to our goodwill, long-lived assets, right of use assets, held to maturity investment securities or available-for-sale investment securities due to the COVID-19 pandemic. It is uncertain whether prolonged effects of the COVID-19 pandemic will result in future impairment charges related to any of the aforementioned assets.

Provision for credit losses

•

See “Allowance for Credit Losses on Loans” for more information.

Economic Overview

During the second quarter of 2022, financial markets declined for the second consecutive quarter as the economy continued to feel the impact from several economic areas, as well as reacting to global concerns. Ongoing inflationary pressures, higher interest rates, pandemic concerns, supply-chain bottlenecks, the war in Ukraine, and higher Treasury yields, continued to place worries on investors. For the second quarter of 2022, the S&P 500 Index was down 16.45% and the Dow Jones Industrial Average was down 11.25%. This consecutive quarter decline comes after the economy saw continued improvement throughout 2021. The shape of the yield curve remained tight during the quarter as compared to prior quarters. The 10‑year Treasury bond averaged 2.93% during Q2 2022 compared to 1.95% in Q1 2022, an increase of 98 basis points. The 2‑year Treasury bond average rate increased 126 basis points to 2.72%, resulting in a flattening of the yield curve. Consequently, the spread between the 10‑year and the 2-year Treasury bonds decreased from 0.49% on average in Q1 to 0.21% in Q2. This spread had been depressed in recent years, and compares to 2.42% during its most recent peak in Q4 of 2013. Steeper yield curves are favorable for portfolio mortgage lenders like TrustCo. The table below illustrates the range of rate movements for both short term and longer term rates. The target Federal Funds rate increased 25 basis points in March 2022, 50 basis points in May 2022, and 75 basis points in June 2022, to end the quarter at 1.50% to 1.75%, and then another increase of 75 basis points in July 2022 to arrive at 2.25% to 2.50%, the highest rate since 2018. Changes in interest rates could have an effect on interest-earning assets such as loans, investment securities, and cash balances, and also have an effect on interest-bearing liabilities primarily deposits and short-term borrowings. Additionally, unrealized gains and losses on available for sale securities, demand for products, borrower’s ability to repay loans, and the number of delinquencies could also be effected. Spreads of most asset classes to the comparative treasury yield, including agency securities, corporates, municipals and mortgage-backed securities, continue to be down as compared to the levels seen before the pandemic. Accordingly, changes in rates and spreads continue to be effected by the pandemic and global economic concerns.

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		3 Month Yield (%)		2 Year Yield (%)		5 Year Yield (%)		10 Year Yield (%)		10 - 2 Year Spread (%)
		3 Month Yield (%)		2 Year Yield (%)		5 Year Yield (%)		10 Year Yield (%)		10 - 2 Year Spread (%)

Q2/21	Beg of Q2		0.03		0.16		0.92		1.74		1.58
	Peak		0.06		0.28		0.97		1.73		1.56
	Trough		0.01		0.13		0.73		1.45		1.19
	End of Q2		0.05		0.25		0.87		1.45		1.20
	Average in Q2		0.03		0.17		0.84		1.59		1.42

Q3/21	Beg of Q3		0.05		0.25		0.87		1.45		1.20
	Peak		0.07		0.31		1.02		1.55		1.25
	Trough		0.03		0.17		0.65		1.19		0.98
	End of Q3		0.04		0.28		0.98		1.52		1.24
	Average in Q3		0.05		0.23		0.80		1.32		1.10

Q4/21	Beg of Q4		0.04		0.28		0.98		1.52		1.24
	Peak		0.08		0.76		1.34		1.68		1.29
	Trough		0.04		0.27		0.93		1.35		0.72
	End of Q4		0.06		0.73		1.26		1.52		0.79
	Average in Q4		0.05		0.53		1.18		1.53		1.00

Q1/22	Beg of Q1		0.06		0.73		1.26		1.52		0.79
	Peak		0.59		2.35		2.55		2.48		0.89
	Trough		0.08		0.77		1.37		1.63		0.04
	End of Q1		0.52		2.28		2.42		2.32		0.04
	Average in Q1		0.31		1.46		1.83		1.95		0.49

Q2/22	Beg of Q2		0.52		2.28		2.42		2.32		0.04
	Peak		1.83		3.45		3.61		3.49		0.44
	Trough		0.53		2.37		2.55		2.39		-0.05
	End of Q2		1.72		2.92		3.01		2.98		0.06
	Average in Q2		1.10		2.72		2.95		2.93		0.21

The United States economy experienced several areas of concern as 2022 began after experiencing significant progress throughout 2021. Economic conditions can vary significantly over geographic areas, with strength concentrated in and around major population centers on the coasts and in certain areas where economic activity has been driven by specific regional factors.

TrustCo believes that its long-term focus on traditional banking services and practices historically has enabled the Company to avoid significant impact from asset quality problems, and that the Company’s strong liquidity and solid capital positions have allowed the Company to continue to conduct business in a manner consistent with its past practice. TrustCo has not engaged in the types of high risk loans and investments that have led to the widely reported problems in the industry. Nevertheless, the Company may experience increases in nonperforming loans (“NPLs”) relative to historical levels from time to time.

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Should general housing prices and other economic measures, such as unemployment in the Company’s market areas, deteriorate as a result of the COVID-19 pandemic or other reasons, the Company may experience an increase in the level of credit risk and in the amount of its classified and nonperforming loans.

In a direct response to the COVID-19 pandemic, on March 27, 2020 Congress passed the CARES Act. As previously noted, included in the CARES Act was support for small businesses, direct payments to lower and middle income families, expanded unemployment insurance, additional funding for health care providers, as well as support for other industries. The Federal Reserve Board, in an attempt to increase liquidity and promote the normal functioning of financial markets, also provided support by increasing purchases of Treasury securities and agency mortgage-backed securities. Recently, the Federal Reserve Board announced plans to reduce the size of the Federal Reserve’s balance sheet by reducing the amount of securities holdings over time until they reach an acceptable level.

Financial Overview

TrustCo recorded net income of $17.9 million, or $0.933 of diluted earnings per share, for the three months ended June 30, 2022, compared to net income of $14.4 million, or $0.748 of diluted earnings per share, in the same period in 2021. Return on average assets was 1.15% and 0.95%, respectively, for the three-months ended June 30, 2022 and 2021. Return on average equity was 12.08% and 10.05%, respectively, for the three-months ended June 30, 2022 and 2021.

The primary factors accounting for the change in net income for the three months ended June 30, 2022 compared to the same period of the prior year were:

•

An increase in income from interest earning assets of $2.1 million, as well as a decrease in the cost of interest bearing liabilities of $806 thousand, resulted in an increase in taxable equivalent net interest income in the second quarter of 2022 compared to the second quarter of 2021 of $2.9 million. The cost of interest bearing liabilities decreased primarily as a result of time deposits repricing over the last year while rates remained low before the recent increases by the Federal Reserve Board.

•

A decrease of $491 thousand in provision for credit losses for the second quarter of 2022 compared to the second quarter 2021.

•

An increase of $228 thousand in noninterest income for the second quarter of 2022 compared to the second quarter 2021. The increase is primarily driven by an increase of $172 thousand in fees from customers.

•

A decrease of $435 thousand in noninterest expense for the second quarter of 2022 compared to the second quarter 2021.

TrustCo recorded net income of $35.0 million, or $1.822 of diluted earnings per share, for the six‑months ended June 30, 2022, compared to net income of $28.5 million, or $1.478 of diluted earnings per share, in the same period in 2021. Return on average assets was 1.13% and 0.96%, respectively, for the six-months ended June 30, 2022 and 2021. Return on average equity was 11.84% and 10.03%, respectively, for the six-months ended June 30, 2022 and 2021.

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Asset/Liability Management

The Company strives to generate its earnings capabilities through a mix of core deposits funding a prudent mix of earning assets. Additionally, TrustCo attempts to maintain adequate liquidity and reduce the sensitivity of net interest income to changes in interest rates to an acceptable level while enhancing profitability both on a short‑term and long‑term basis.

TrustCo’s results are affected by a variety of factors including competitive and economic conditions in the specific markets in which the Company operates and, more generally, in the national economy, financial market conditions and the regulatory environment. Each of these factors is dynamic, and changes in any area can have an impact on TrustCo’s results. Included in the Annual Report on Form 10-K for the year ended December 31, 2021 is a description of the effect interest rates had on the results for the year 2021 compared to 2020. Many of the same market factors discussed in the 2021 Annual Report continued to have a significant impact on results through the second quarter of 2022, as well as the economic effect of COVID-19 and heightened global concerns.

TrustCo competes with other financial service providers based upon many factors including quality of service, convenience of operations and rates paid on deposits and charged on loans. In the experience of management, the absolute level of interest rates, changes in interest rates and customers’ expectations with respect to the direction of interest rates have a significant impact on the volume of loan and deposit originations in any particular period.

Interest rates have a significant impact on the operations and financial results of all financial services companies. One of the most important interest rates used to control national economic policy is the “Federal Funds” rate. This is the interest rate utilized within the banking system for overnight borrowings for institutions with the highest credit rating. Beginning in the second half of 2019, the Federal Reserve Board began lowering the rate in response to a slowing economy. During the first quarter of 2020 the rate was significantly decreased again to 0.00% to 0.25% as a result of the COVID-19 pandemic. The Federal Reserve Board increased the rate in March 2022, May 2022, and again in June 2022 to end the second quarter at 1.50% to 1.75% to assist with inflationary concerns, with additional rate increases anticipated.

The interest rate on the 10-year Treasury bond and other long-term interest rates have significant influence on the rates for new residential real estate loans. These changes in interest rates have an effect on the Company relative to the interest income on loans, securities, and Federal Funds sold and other short-term investments as well as the interest expense on deposits and borrowings. Residential real estate loans and longer‑term investments are most affected by the changes in longer term market interest rates such as the 10‑year Treasury. The Federal Funds sold portfolio and other short‑term investments are affected primarily by changes in the Federal Funds target rate. Deposit interest rates are most affected by short term market interest rates. Also, changes in interest rates have an effect on the recorded balance of the securities available for sale portfolio, which are recorded at fair value. Generally, as market interest rates increase, the fair value of the securities will decrease and the reverse is also generally applicable. Interest rates on new residential real estate loan originations are also influenced by the rates established by secondary market participants such as Freddie Mac and Fannie Mae. Because TrustCo is a portfolio lender and does not sell loans into the secondary market, the Company establishes rates that management determines are appropriate in light of the long-term nature of residential real estate loans while remaining competitive with the secondary market rates. Higher market interest rates also generally increase the value of retail deposits.

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TrustCo’s principal loan products are residential real estate loans. As noted above, residential real estate loans and longer‑term investments are most affected by the changes in longer term market interest rates such as the 10-year Treasury. The 10‑year Treasury yield increased 98 basis points, on average, during the second quarter of 2022 compared to the first quarter of 2022 and increased 134 basis points as compared to the second quarter of 2021.

While TrustCo has been affected by changes in financial markets over time, the impacts have been mitigated by the Company’s generally conservative approach to banking. The Company utilizes a traditional underwriting process in evaluating loan applications, and since originated loans are retained in the portfolio, there is a strong incentive to be conservative in making credit decisions. For additional information concerning TrustCo’s loan portfolio and nonperforming loans, please refer to the discussions under “Loans” and “Nonperforming Assets,” respectively. Further, the Company does not rely on borrowed funds to support its assets and maintains a significant level of liquidity on the asset side of the balance sheet. These characteristics provide the Company with increased flexibility and stability during periods of market disruption and interest rate volatility.

A fundamental component of TrustCo’s strategy has been to grow customer relationships and the deposits and loans that are part of those relationships. The Company has significant capacity to grow its balance sheet given its extensive branch network. The Company expects that growth to be profitable. The current interest rate environment, however, has narrowed the margin on incremental balance sheet expansion. While the Company has not changed its fundamental long term strategy in regard to utilizing its excess capacity, management continually evaluates changing conditions and may seek to limit growth or reduce the size of the balance sheet if its analysis indicates that doing so would be beneficial.

For the second quarter of 2022, the net interest margin was 2.83%, up 13 basis points versus the prior year’s quarter. The quarterly results reflect the following significant factors:

•

The Federal Funds sold and other short-term investments average yield increased 72 basis points in the second quarter of 2022 compared to the same period in 2021 while the average balance remained consistent at $1.1 billion for both periods. The increase in the yield is the result of the increases in the Federal Funds target rate in 2022 as mentioned above.

•

The average balance of securities available for sale decreased by $26.9 million while the average yield increased 41 basis points to 1.85%. The increase in the average yield was a result of higher yields on investments purchased during 2022. The average balance of held to maturity securities decreased by $3.3 million and the average yield increased 26 basis points to 3.93% for the second quarter of 2022 compared to the same period in 2021.

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•

The average loan portfolio grew by $196.2 million to $4.50 billion and the average yield decreased 18 basis points to 3.52% in the second quarter of 2022 compared to the same period in 2021. The average yield decreased primarily as a result of lower loan origination rates over the last year while rates remained low before the recent increases by the Federal Reserve Board.

•

The average balance of interest bearing liabilities increased $26.2 million and the average rate paid decreased 7 basis points to 0.10% in the second quarter of 2022 compared to the same period in 2021.

During the second quarter of 2022, the Company continued to focus on its strategy to expand the loan portfolio by offering competitive interest rates. Management believes the TrustCo residential real estate loan product is very competitive compared to local and national competitors. Competition remains strong in the Company’s market areas.

The strategy on the funding side of the balance sheet was to offer competitive shorter term rates which allowed the Bank to gain market share as well as retain our existing deposits. This strategy drove growth at a relatively low cost that will sustain TrustCo’s strong liquidity position and continue to allow us to cross sell new relationships and take advantage of opportunities as they arise.

Earning Assets

Total average interest earning assets increased from $5.95 billion in the second quarter of 2021 to $6.09 billion in the same period of 2022 with an average yield of 2.90% in the second quarter of 2022 and 2.83% in the second quarter of 2021. The mix of assets continued to maintain a higher proportion of Federal Funds sold and other short-term investments from securities available for sale, as well as from increases in deposits. Interest income on average earning assets increased from $42.1 million in the second quarter of 2021 to $44.2 million in the second quarter of 2022, on a tax equivalent basis. This increase was primarily driven by the higher interest rates on Federal Funds sold and other short-term investments and securities available for sale, which resulted from the increases in the Federal Funds target rate in 2022.

Loans

The average balance of loans was $4.50 billion in the second quarter of 2022 and $4.31 billion in the comparable period in 2021. The yield on loans was down 18 basis points to 3.52%. Interest income on loans was $39.6 million in the second quarter of 2022 down $204 thousand from the same period in 2021. As mentioned above, the average yield decreased primarily as a result of lower loan origination rates over the last year while rates remained low before the recent increases by the Federal Reserve Board.

Compared to the second quarter of 2021, the average balance of residential mortgage loans, home equity lines of credit, and installment loans increased, while commercial loans decreased. The average balance of residential mortgage loans was $4.05 billion in the second quarter of 2022 compared to $3.85 billion in 2021, an increase of 5.3%. The average yield on residential mortgage loans decreased by 19 basis points to 3.43% in the second quarter of 2022 compared to 2021.

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TrustCo actively markets the residential loan products within its market territories. Mortgage loan rates are affected by a number of factors including rates on Treasury securities, the Federal Funds rate and rates set by competitors and secondary market participants. TrustCo aggressively markets the unique aspects of its loan products thereby attempting to create a differentiation from other lenders. These unique aspects include low closing costs, fast turn-around time on loan approvals, no escrow or mortgage insurance requirements for qualified borrowers and the fact that the Company typically holds these loans in portfolio and does not sell them into the secondary markets. Assuming a continued rise in long-term interest rates, the Company would anticipate that the unique features of its loan products will continue to attract customers in the residential mortgage loan area.

Commercial loans, which consist primarily of loans secured by commercial real estate, decreased $15.9 million to an average balance of $199.0 million in the second quarter of 2022 compared to the same period in the prior year, primarily as a result of the forgiveness of PPP loans. The average yield on this portfolio was down only 2 basis points to 4.83% compared to the prior year period. The Company remains selective in underwriting commercial loans in recent periods as the apparent risk/reward balance has been less favorable in many cases.

The average yield on home equity credit lines decreased 4 basis points to 3.74% during the second quarter of 2022 compared to the year earlier period. The average balances of home equity credit lines increased 3.9% to $243.6 million in the second quarter of 2022 as compared to the prior year.

Securities Available for Sale

The average balance of the securities available for sale portfolio for the second quarter of 2022 was $470.0 million compared to $496.9 million for the comparable period in 2021. The decrease in the balance reflects routine paydowns, and calls and maturities, offset by new investment purchases. The average yield was 1.85% for the second quarter of 2022 compared to 1.44% for the second quarter of 2021. This increase is primarily a result of higher yields on investment purchases throughout 2022 due to the increase in interest rates. This portfolio is primarily comprised of agency, mortgage backed securities and collateral mortgage obligations issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank and Freddie Mac), Small Business Administration participation certificates, corporate bonds and municipal bonds. These securities are recorded at fair value with any adjustment in fair value included in accumulated other comprehensive (loss) income, net of tax.

The net unrealized loss in the available for sale securities portfolio was $28.4 million as of June 30, 2022 compared to a net unrealized loss of $4 thousand as of December 31, 2021. The increase in the net unrealized losses in the portfolio is the result of changes in market interest rate levels.

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Held to Maturity Securities

The average balance of held to maturity securities was $8.9 million for the second quarter of 2022 compared to $12.2 million in the second quarter of 2021. The decrease in balances reflects routine paydowns and calls. No new securities were added to this portfolio during the period. The average yield was 3.93% for the second quarter of 2022 compared to 3.67% for the year earlier period. TrustCo expects to hold the securities in this portfolio until they mature or are called.

As of June 30, 2022, this portfolio consisted solely of agency issued mortgage-backed securities and collateralized mortgage obligations. The balances for these securities are recorded at amortized cost.

Federal Funds Sold and Other Short-term Investments

The 2022 and 2021 second quarter average balance of Federal Funds sold and other short‑term investments was $1.1 billion for both periods. The yield was 0.82% for the second quarter of 2022 and 0.10% for the comparable period in 2021. Interest income from this portfolio increased $2.0 million from $286 thousand in 2021 to $2.3 million in 2022. While the average balances were consistent year over year, the increase in the federal funds target rate in March, May, and June of 2022 resulted in an increase in interest income over the same period in the prior year.

The Federal Funds sold and other short-term investments portfolio is utilized to generate additional interest income and liquidity as funds are waiting to be deployed into the loan and securities portfolios.

Funding Opportunities

TrustCo utilizes various funding sources to support its earning asset portfolio. The vast majority of the Company’s funding comes from traditional deposit vehicles such as savings, demand deposits, interest-bearing checking, money market and time deposit accounts.

Total average interest bearing deposit accounts (which includes interest bearing checking, money market accounts, savings and time deposits) increased $62.3 million to $4.52 billion for the second quarter of 2022 versus the second quarter in the prior year, and the average rate paid decreased from 0.15% for 2021 to 0.08% for 2022. Total interest expense on these deposits decreased from $1.7 million to $951 thousand in the second quarter of 2022 compared to the year earlier period. From the second quarter of 2021 to the second quarter of 2022, interest bearing demand account average balances were up 5.3%, certificates of deposit average balances were down 19.2%, non-interest demand average balances were up 12.1%, average savings balances increased 13.2% and money market balances were up 6.7%. Our growth in deposits came at relatively low cost and continues to be offset by higher earnings on loan yields and returns in the investment portfolios.

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At June 30, 2022, the maturity of total time deposits is as follows:

(dollars in thousands)

Under 1 year	$	831,722
1 to 2 years		71,177
2 to 3 years		6,045
3 to 4 years		1,001
4 to 5 years		89,659
Over 5 years		133
	$	999,737

Average short-term borrowings for the second quarter were $197.3 million in 2022 compared to $233.4 million in 2021. The average rate decreased slightly during this time period from 0.39% in 2021 to 0.36% in 2022. The short-term borrowings of the Company are cash management accounts, which represent retail accounts with customers for which the Bank has pledged certain assets as collateral.

The Company has a number of contingent funding alternatives available in addition to the large cash and cash equivalents position and the investment securities positions it maintains on its balance sheet. The Bank is a member of the Federal Home Loan Bank of New York (“FHLBNY”) and is an eligible borrower at the Federal Reserve Bank of New York (“FRBNY”) and has the ability to borrow utilizing securities and/or loans as collateral at either. The Bank does not utilize brokered deposits as a part of its funding strategy, but does incorporate them as a potential contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered deposits may be tested from time to time to ensure operational and market readiness.

Net Interest Income

Taxable equivalent net interest income increased by $2.9 million to $43.1 million in the second quarter of 2022 compared to the same period in 2021. The net interest spread was up 14 basis points to 2.80% in the second quarter of 2022 compared to the same period in 2021. As previously noted, the net interest margin was up 13 basis points to 2.83% for the second quarter of 2022 compared to the same period in 2021.

Taxable equivalent net interest income increased by $2.9 million to $83.2 million in the first six-months of 2022 compared to the same period in 2021. The net interest spread was up 2 basis points to 2.72% in the first six-months of 2022 compared to the same period in 2021. Net interest margin was consistent at 2.74% for the first six‑months of both 2022 and 2021.

Nonperforming Assets

Nonperforming assets include nonperforming loans (“NPLs”), which are those loans in a non‑accrual status and loans past due three payments or more and still accruing interest. Also included in the total of nonperforming assets are foreclosed real estate properties, which are included in other assets and categorized as other real estate owned.

Index

The following describes the nonperforming assets of TrustCo as of June 30, 2022:

Nonperforming loans and foreclosed real estate: Total NPLs were $18.7 million at June 30, 2022, compared to $18.8 million at December 31, 2021 and $20.8 million at June 30, 2021. There were also $18.7 million of non-accrual loans at June 30, 2022 compared to $18.7 million at December 31, 2021 and $20.8 million at June 30, 2021. There were no loans at June 30, 2022 and 2021 and December 31, 2021 that were past due 90 days or more and still accruing interest.

At June 30, 2022, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of $18.7 million at June 30, 2022, $18.5 million were residential real estate loans, $203 thousand were commercial loans and mortgages and $45 thousand were installment loans, compared to $18.6 million, $112 thousand and $37 thousand, respectively, at December 31, 2021.

A significant percentage of nonperforming loans are residential real estate loans, which are historically lower-risk than most other types of loans. Net recoveries were $119 thousand on residential real estate loans (including home equity lines of credit) for the second quarter of 2022 compared to net recoveries $137 thousand for the second quarter of 2021. Management believes that these loans have been appropriately written down where required.

Ongoing portfolio management is intended to result in early identification and disengagement from deteriorating credits. TrustCo has a diversified loan portfolio that includes a significant balance of residential mortgage loans to borrowers in the Capital Region of New York and Central Florida, and avoids concentrations to any one borrower or any single industry. TrustCo has no advances to borrowers or projects located outside the United States. TrustCo continues to identify delinquent loans as quickly as possible and to move promptly to resolve problem loans. Efforts to resolve delinquencies begin immediately after the payment grace period expires, with repeated, automatically generated notices, as well as personalized phone calls and letters. Loans are placed in nonaccrual status once they are 90 days past due, or earlier if management has determined that such classification is appropriate. Once in nonaccrual status, loans are either brought current and maintained current, at which point they may be returned to accrual status, or they proceed through the foreclosure process. The collateral on nonaccrual loans is evaluated periodically, and the loan value is written down if the collateral value is insufficient.

The Company originates loans throughout its branch franchise area. At June 30, 2022, 69.4% of its gross loan portfolio balances were in New York State and the immediately surrounding areas (including New Jersey, Vermont and Massachusetts), and 30.6% were in Florida. Those figures compare to 70.6% and 29.4%, respectively at December 31, 2021.

Economic conditions vary widely by geographic location. As a percentage of the total nonperforming loans as of June 30, 2022, 11.7% were to Florida borrowers, compared to 88.3% to borrowers in New York and surrounding areas. For the three months ended June 30, 2022, New York and surrounding areas experienced net recoveries of approximately $107 thousand and there were none in Florida for the second quarter of 2022.

Other than loans currently identified as nonperforming, management is aware of no other loans in the Bank’s portfolio that pose material risk of the eventual non-collection of principal and interest. Also as of June 30, 2022, there were no other loans classified for regulatory purposes that management reasonably expects will materially impact future operating results, liquidity, or capital resources.

Index

TrustCo has identified nonaccrual commercial and commercial real estate loans, all loans restructured under a TDR, and residential non-accrual loans over 180 days as individually evaluated loans. There were $319 thousand of commercial mortgages and commercial loans classified as individually evaluated as of June 30, 2022 compared to $232 thousand classified as impaired at December 31, 2021. There were $26.7 million of individually evaluated residential loans at June 30, 2022 compared to $18.3 million classified as impaired at December 31, 2021.

As of June 30, 2022 and December 31, 2021, the Company’s loan portfolio did not include any subprime mortgages or loans acquired with deteriorated credit quality.

At June 30, 2022 there was $644 thousand of foreclosed real estate compared to $362 thousand at December 31, 2021.

Allowance for credit on loan losses: The Company adopted CECL on January 1, 2022. Under this standard, allowances have been established for loans and commitments to lend. The allowance for credit losses on loans (“ACLL”) replaces the previous allowance for loan losses (“ALLL”). Upon adoption, the allowance for credit losses on loans increased by $2.4 million to $46.6 million from $44.2 at December 31, 2021 under the ALLL. The allowance for credit losses on unfunded commitments increased from $18 thousand to $2.4 million and is recorded in accrued expenses and other liabilities. The Company recorded a net decrease to undivided profits of $3.5 million, net of $1.2 million in deferred tax balances as of January 1, 2022 for the cumulative effect of adopting CECL.

In the second quarter of 2022, the Company recorded a credit to provision for credit losses of $491 thousand, which includes a credit to provision for credit losses on loans of $1.0 million as a result of improving unemployment and housing price forecasts, offset by a provision for credit losses on unfunded commitments of $509 thousand as a result of a corresponding increase in unfunded loans.

During the most recent quarter, the Federal Reserve Bank increased the target Federal Funds rate by 75 basis points, the third hike this year and the largest since 1994. Rising inflation weighs on consumers’ purchasing power by slowing spending and driving monetary tightening. Inflation has reached a forty-year high, and labor and supply chain challenges have been heightened by the global impacts of the Russian invasion of Ukraine. Management has taken into consideration the possible effects of these changes qualitatively within the reserves.

Index

The Company evaluates several external forecasts in choosing the forecast element for the economic components of the allowance for credit losses on loans. The Company selected the stagflation forecast for both January 1, 2022 and June 30, 2022 for economic modeling. The following changes in forecasts from March to June impacted the reserves:

•

unemployment rates declining 16% for New York and 28% for Florida,

•

an increase in consumer price indices (“CPI”) of 2% for both NY and Florida,

•

a decrease in Gross Metro Product (“GMP”) of 4% for New York,

•

an increase in Gross Metro Product (“GMP”) of 1% for Florida.

See Notes 1 and 5 of the financial statements for additional discussion related to the adoption of CECL, and the process for determining the provision for credit losses.

The allocation of the allowance for credit losses on loans as follows:

(dollars in thousands)	As of June 30, 2022					As of December 31, 2021
	Amount		Percent of Loans to Total Loans			Amount		Percent of Loans to Total Loans
Commercial	$	2,051		3.97	%	$	2,942		4.08	%
Real estate - construction		326		0.67	%		375		0.84	%
Real estate mortgage - 1 to 4 family		38,785		89.54	%		37,650		89.67	%
Home equity lines of credit		3,992		5.59	%		2,857		5.20	%
Installment Loans		131		0.23	%		443		0.21	%
	$	45,285		100.00	%	$	44,267		100.00	%

At June 30, 2022, the allowance for credit losses on loans was $45.3 million, compared to $50.2 million at June 30, 2021 and $44.3 million at December 31, 2021. The allowance represents 1.00% of the loan portfolio at both June 30, 2022 and December 31, 2021, and 1.15% at June 30, 2021.

During the second quarter of 2022, there were $4 thousand of commercial loan chargeoffs, $12 thousand of residential loan chargeoffs, and $14 thousand of consumer loan chargeoffs, compared with no commercial loan chargeoffs, $20 thousand of gross residential mortgage chargeoffs, and $1 thousand of consumer loan chargeoffs in the second quarter of 2021. During the second quarter of 2022 there were $4 thousand of commercial loan recoveries, $131 thousand of residential mortgage recoveries, and $2 thousand for consumer loan recoveries, compared to no commercial loan recoveries, $157 thousand of residential mortgage recoveries, and $28 thousand of consumer loan recoveries in the second quarter of 2021.

Liquidity and Interest Rate Sensitivity

TrustCo seeks to obtain favorable sources of funding and to maintain prudent levels of liquid assets in order to satisfy varied liquidity demands. Management believes that TrustCo’s earnings performance and strong capital position enable the Company to easily secure new sources of liquidity. The Company actively manages its liquidity through target ratios established under its liquidity policies. Continual monitoring of both historical and prospective ratios allows TrustCo to employ strategies necessary to maintain adequate liquidity. Management has also defined various degrees of adverse liquidity situations which could potentially occur and has prepared appropriate contingency plans should such a situation arise. As noted, the Company has a number of contingent funding alternatives available in addition to the large cash and cash equivalents position and the investment securities positions it maintains on its balance sheet. As previously stated, the Bank is a member of the FHLBNY and is an eligible borrower at the FRBNY and has the ability to borrow utilizing securities and/or loans as collateral at either institution. The Bank does not utilize brokered deposits as a part of its funding strategy, but does incorporate them as a contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered deposits may be tested from time to time to ensure operational and market readiness.

Index

The Company uses an industry standard external model as the primary tool to identify, quantify and project changes in interest rates and prepayment speeds taken both from industry sources and internally generated data based upon historical trends in the Bank’s balance sheet. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in market interest rates are also incorporated into the model. This model calculates an economic or fair value amount with respect to non-time deposit categories since these deposits are part of the core deposit products of the Company. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure the fair value of capital or precisely predict the impact of fluctuations in interest rates on the fair value of capital.

Using this model, the fair value of capital projections as of June 30, 2022 are referenced below. The base case (current rates) scenario shows the present estimate of the fair value of capital assuming no change in the operating environment or operating strategies and no change in interest rates from those existing in the marketplace as of June 30, 2022. The table indicates the impact on the fair value of capital assuming interest rates were to instantaneously increase by 100 bp, 200 bp, 300 bp and 400 bp or to decrease by 100 bp and 200 bp.

As of June 30, 2022	Estimated Percentage of Fair value of Capital to Fair value of Assets
+400 BP	28.90	%
+300 BP	28.40
+200 BP	29.10
+100 BP	28.90
Current rates	27.60
-100 BP	25.00
-200 BP	21.50

Noninterest Income

Total noninterest income for the second quarter of 2022 was $4.9 million compared to $4.7 million for the same period in the prior year. Financial services income was $2.0 million in both the second quarter of 2022 and 2021, and fees for services to customers were up $172 thousand over the same period in the prior year. The fair value of assets under management was $910 million at June 30, 2022, and $1.1 billion as of both December 31, 2021 and June 30, 2021.

For the six months ended June 30, 2022 total noninterest income was $10.1 million, up $983 thousand compared to the prior year period. The increase is primarily the result of more interchange income and a gain on the sale of fixed assets, partially offset by a decrease in financial services income.

Index

Noninterest Expenses

Total noninterest expenses were $25.0 million for the three-months ended June 30, 2022, compared to $25.4 million for the three-months ended June 30, 2021. Significant changes included a $939 thousand decrease in salaries and employment benefits, a $130 thousand decrease in professional services, and a $160 thousand decrease in advertising expense, partially offset by an increase of $331 thousand in outsourced services and a $309 thousand increase in other expense. Full time equivalent headcount was 769 as of June 30, 2021, 759 as of December 31, 2021, and 793 as of June 30, 2022. Changes in headcount represent normal fluctuations.

Total noninterest expenses were $47.8 million for the six-months ended June 30, 2022, compared to $50.8 million for the six-months ended June 30, 2021. Significant changes included a decrease of $4.1 million in salaries and employee benefits primarily as a result of a $2 million favorable true-up to the incentive compensation accrual upon payout in the first quarter of 2022, as well as decreases in various other employee benefit plan expenses. This was partially offset by an increase of $361 thousand in outsourced services, and an increase in other expenses of $820 thousand.

Income Taxes

In the second quarter of 2022, TrustCo recognized income tax expense of $5.6 million compared to $4.9 million for the second quarter of 2021. The effective tax rates were 23.8% and 25.5% for the second quarters of 2022 and 2021, respectively. For the first six-months, income taxes were $11.2 million and $9.7 million in 2022 and 2021, respectively. The effective tax rates were 24.3% and 25.4% in 2022 and 2021, respectively.

Capital Resources

Consistent with its long-term goal of operating a sound and profitable financial organization, TrustCo strives to maintain strong capital ratios.

Banking regulators have moved towards higher required capital requirements due to the standards included in the “Basel III” banking capital reform measures and the Dodd-Frank Wall Streeet Reform and Consumer Protection Act, as well as a general trend towards reducing risk in the banking system by providing a greater capital margin.

Total shareholders’ equity at June 30, 2022 was $594.6 million compared to $578.6 million at June 30, 2021. TrustCo declared a dividend of $0.35 per share in the second quarter of 2022. This results in a dividend payout ratio of 37.46% based on second quarter 2022 earnings of $17.9 million.

Index

The Bank and the Company reported the following capital ratios as of June 30, 2022 and December 31, 2021:

(Bank Only)						Well Capitalized⁽¹⁾			Minimum for Capital Adequacy plus Capital Conservation Buffer⁽¹⁾⁽²⁾

	As of June 30, 2022
(dollars in thousands)	Amount		Ratio

Tier 1 leverage ratio	$	585,724		9.390	%		5.000	%		4.000	%
Common equity tier 1 capital		585,724		18.339			6.500			7.000
Tier 1 risk-based capital		585,724		18.339			8.000			8.500
Total risk-based capital		625,754		19.592			10.000			10.500

	As of December 31, 2021					Well			Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	570,594		9.324	%		5.000	%		4.000	%
Common equity tier 1 capital		570,594		18.954			6.500			7.000
Tier 1 risk-based capital		570,594		18.954			8.000			8.500
Total risk-based capital		608,308		20.206			10.000			10.500

	As of June 30, 2022					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	603,500		9.673	%		4.000	%
Common equity tier 1 capital		603,500		18.891			7.000
Tier 1 risk-based capital		603,500		18.891			8.500
Total risk-based capital		643,541		20.144			10.500

	As of December 31, 2021					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	588,427		9.614	%		4.000	%
Common equity Tier 1 capital		588,427		19.541			7.000
Tier 1 risk-based capital		588,427		19.541			8.500
Total risk-based capital		626,150		20.794			10.500

(1)	Federal regulatory minimum requirements to be considered to be Well Capitalized and Adequately Capitalized

(2)	The June 30, 2022 and December 31, 2021 common equity tier 1, tier 1 risk-based, and total risk-based capital ratios include a capital conservation buffer of 2.50 percent

In addition, at June 30, 2022, the consolidated equity to total assets ratio was 9.55%, compared to 9.70% at December 31, 2021 and 9.45% at June 30, 2021.

As of June 30, 2022, the capital levels of both TrustCo and the Bank exceeded the minimum standards, including with the fully phased-in capital conservation buffer is taken into account.

Index

Under the Office of the Comptroller of the Currency’s (“OCC”) “prompt corrective action” regulations, a bank is deemed to be “well capitalized” when its CET1, Tier 1, total risk-based and leverage capital ratios are at least 7%, 8.5%, 10.5% and 5%, respectively. A bank is deemed to be “adequately capitalized” or better if its capital ratios meet or exceed the minimum federal regulatory capital requirements, and “undercapitalized” if it fails to meet these minimal capital requirements. A bank is “significantly undercapitalized” if its CET1, Tier 1, total risk-based and leverage capital ratios fall below 3%, 4%, 6% and 3%, respectively and “critically undercapitalized” if the institution has a ratio of tangible equity to total assets that is equal to or less than 2%. At June 30, 2022 and 2021, Trustco Bank met the definition of “well capitalized.”

As noted, the Company’s dividend payout ratio was 37.46% of net income for the second quarter of 2022 and 45.51% of net income for the second quarter of 2021. The per-share dividend paid in the second quarter of 2022 and 2021 was $0.350 and $0.341, respectively. The Company’s ability to pay dividends to its shareholders is dependent upon the ability of the Bank to pay dividends to the Company. The payment of dividends by the Bank to the Company is subject to continued compliance with minimum regulatory capital requirements. The OCC may disapprove a dividend if: the Bank would be undercapitalized following the distribution; the proposed capital distribution raises safety and soundness concerns; or the capital distribution would violate a prohibition contained in any statue, regulation or agreement.

TrustCo maintains a dividend reinvestment plan (“DRP”) with approximately 7,064 participants. The DRP allows participants to reinvest dividends in shares of the Company. The DRP also allows for additional purchases by participants and has a discount feature (up to a 5% for safe harbor provisions) that can be activated by management as a tool to raise capital. To date, the discount feature has not been utilized.

Reverse Stock Split

Effective as of May 28, 2021, the Company completed a 1-for-5 reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding shares of common stock, par value $1.00 per share, as previously approved by our shareholders. Proportional adjustments were made to the Company’s issued and outstanding common stock and to the exercise price and number of shares issuable upon exercise of the options outstanding under the Company’s equity incentive plans, and the number of shares subject to restricted stock units under the Company’s equity incentive plans. No fractional shares of common stock were issued in connection with the Reverse Stock Split, and shareholders received cash in lieu of any fractional shares. All references herein to common stock and per share data for all periods presented in the consolidated financial statements and notes thereto, have been retrospectively adjusted to reflect the Reverse Stock Split.

Index

Share Repurchase Program

On March 9, 2022 the Company’s Board of Directors authorized, and the Company announced another share repurchase program of up to 200,000 shares, or approximately 1% of its currently outstanding common stock. During the three months ended June 30, 2022, the Company repurchased a total of 75 thousand shares at an average price per share of $31.47 for a total of $2.4 million under its Board authorized share repurchase program.

Critical Accounting Policies and Estimates

Pursuant to Securities and Exchange Commission (“SEC”) guidance, management of the Company is encouraged to evaluate and disclose those accounting policies judged to be critical policies ‑ those most important to the portrayal of the Company’s financial condition and results, and that require management’s most difficult subjective or complex judgments.

Management considers the accounting policy relating to the allowance for credit losses to be a critical accounting policy given the measurement uncertainty and subjective judgement necessary in evaluating the levels of the allowance required to cover the life time losses in the loan portfolio and the material effect that such judgments can have on the results of operations.

Index

TrustCo Bank Corp NY

Management’s Discussion and Analysis

STATISTICAL DISCLOSURE

I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY:

INTEREST RATES AND INTEREST DIFFERENTIAL

The following table summarizes the component distribution of the average balance sheet, related interest income and expense and the average annualized yields on interest earning assets and annualized rates on interest bearing liabilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Nonaccrual loans are included in loans for this analysis. The average balances of securities available for sale and held to maturity are calculated using amortized costs for these securities. Included in the average balance of shareholders’ equity is the unrealized gain (loss), net of tax, in the available for sale portfolio of $($19.5) million in 2022 and $3.8 million in 2021. The subtotals contained in the following table are the arithmetic totals of the items contained in that category. Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and rate) based on the percentage relationship of such variances to each other.

(dollars in thousands)	Three months ended June 30, 2022								Three months ended June 30, 2021
Assets	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate			Change in Interest Income/ Expense			Variance Balance Change			Variance Rate Change

Securities available for sale:
U. S. government sponsored enterprises	$	71,409		$	147		0.83	%	$	74,971		$	97		0.52	%	$	50			(31	)		81
Mortgage backed securities and collateralized mortgage obligations-residential		282,800			1,367		1.92	%		327,332			1,167		1.43	%		200			(858	)		1,058
State and political subdivisions		41			-		-	%		48			-		-	%		-			-			-
Corporate bonds		87,556			522		2.38	%		57,021			323		2.27	%		199			182			17
Small Business Administration-guaranteed participation securities		27,512			140		2.04	%		36,839			193		2.09	%		(53	)		(48	)		(5	)
Other		686			2		1.17	%		686			5		2.92	%		(3	)		-			(3	)

Total securities available for sale		470,004			2,178		1.85	%		496,897			1,785		1.44	%		393			(755	)		1,148

Federal funds sold and other short-term Investments		1,101,489			2,253		0.82	%		1,126,298			286		0.10	%		1,967			(44	)		2,011

Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential		8,859			87		3.93	%		12,179			111		3.67	%		(24	)		(70	)		46

Total held to maturity securities		8,859			87		3.93	%		12,179			111		3.67	%		(24	)		(70	)		46

Federal Reserve Bank and Federal Home Loan Bank stock		5,797			65		4.49	%		5,598			65		4.64	%		-			9			(9	)

Commercial loans		198,972			2,402		4.83	%		214,912			2,608		4.85	%		(206	)		(192	)		(14	)
Residential mortgage loans		4,049,271			34,771		3.43	%		3,847,274			34,836		3.62	%		(65	)		7,221			(7,286	)
Home equity lines of credit		243,648			2,269		3.74	%		234,476			2,211		3.78	%		58			214			(156	)
Installment loans		9,321			162		6.98	%		8,349			153		7.34	%		9			49			(40	)

Loans, net of unearned income		4,501,212			39,604		3.52	%		4,305,011			39,808		3.70	%		(204	)		7,292			(7,496	)

Total interest earning assets		6,087,361			44,187		2.90	%		5,945,983			42,055		2.83	%		2,132			6,432			(4,300	)

Allowance for credit losses on loans		(46,411	)							(50,196	)
Cash & non-interest earning assets		193,099								197,561

Total assets	$	6,234,049								6,093,348

Liabilities and shareholders’ equity

Deposits:
Interest bearing checking accounts	$	1,210,554			42		0.01	%	$	1,149,296		$	46		0.02	%		(4	)		13			(17	)
Money market accounts		777,860			210		0.11	%		729,136			236		0.13	%		(26	)		83			(109	)
Savings		1,564,454			163		0.04	%		1,382,604			162		0.05	%		1			78			(77	)
Time deposits		968,560			536		0.22	%		1,198,064			1,261		0.42	%		(725	)		(209	)		(516	)

Total interest bearing deposits		4,521,428			951		0.08	%		4,459,100			1,705		0.15	%		(754	)		(35	)		(719	)
Short-term borrowings		197,259			176		0.36	%		233,426			228		0.39	%		(52	)		209			(261	)

Total interest bearing liabilities		4,718,687			1,127		0.10	%		4,692,526			1,933		0.17	%		(806	)		174			(980	)

Demand deposits		842,487								751,719
Other liabilities		79,431								73,368
Shareholders’ equity		593,444								575,735

Total liabilities and shareholders’ equity	$	6,234,049							$	6,093,348

Net interest income, tax equivalent					43,060								40,122				$	2,938			6,258			(3,320	)

Net interest spread							2.80	%							2.66	%

Net interest margin (net interest income to total interest earning assets)							2.83	%							2.70	%

Tax equivalent adjustment					-								-

Net interest income					43,060								40,122

Index

TrustCo Bank Corp NY

Management’s Discussion and Analysis

STATISTICAL DISCLOSURE

I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY:

INTEREST RATES AND INTEREST DIFFERENTIAL

The following table summarizes the component distribution of the average balance sheet, related interest income and expense and the average annualized yields on interest earning assets and annualized rates on interest bearing liabilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Nonaccrual loans are included in loans for this analysis. The average balances of securities available for sale and held to maturity are calculated using amortized costs for these securities. Included in the average balance of shareholders’ equity is the unrealized gain (loss), net of tax, in the available for sale portfolio of $(14.2) million in 2022 and $4.2 million in 2021. The subtotals contained in the following table are the arithmetic totals of the items contained in that category. Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and rate) based on the percentage relationship of such variances to each other.

(dollars in thousands)	Six months ended June 30, 2022								Six months ended June 30, 2021
Assets	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate			Change in Interest Income/ Expense			Variance Balance Change			Variance Rate Change

Securities available for sale:
U.S. government sponsored enterprises	$	66,609			233		0.70	%		63,374			147		0.46	%	$	86			8			78
Mortgage backed securities and collateralized mortgage obligations-residential		272,022			2,454		1.80	%		327,472			2,404		1.47	%		50			(908	)		958
State and political subdivisions		41			1		6.73	%		49			1		6.60	%		-			-			-
Corporate bonds		70,362			755		2.15	%		60,160			639		2.12	%		116			107			9
Small Business Administration-guaranteed participation securities		28,685			294		2.05	%		38,203			399		2.09	%		(105	)		(98	)		(7	)
Other		686			4		1.17	%		687			11		3.20	%		(7	)		-			(7	)

Total securities available for sale		438,405			3,741		1.71	%		489,945			3,601		1.47	%		140			(891	)		1,031

Federal funds sold and other short-term Investments		1,144,108			2,825		0.50	%		1,078,201			556		0.10	%		2,269			34			2,235

Held to maturity securities: Mortgage backed securities and collateralized mortgage obligations-residential		9,198			177		3.86	%		12,723			234		3.68	%		(57	)		(87	)		30

Total held to maturity securities		9,198			177		3.86	%		12,723			234		3.68	%		(57	)		(87	)		30

Federal Reserve Bank and Federal Home Loan Bank stock		5,701			127		4.46	%		5,552			134		4.83	%		(7	)		9			(16	)

Commercial loans		196,991			4,928		5.00	%		213,853			5,554		5.19	%		(626	)		(428	)		(198	)
Residential mortgage loans		4,028,667			68,968		3.43	%		3,818,426			69,687		3.65	%		(719	)		7,677			(8,396	)
Home equity lines of credit		238,122			4,393		3.72	%		236,417			4,471		3.81	%		(78	)		81			(159	)
Installment loans		9,148			318		7.00	%		8,573			313		7.37	%		5			39			(34	)

Loans, net of unearned income		4,472,928			78,607		3.52	%		4,277,269			80,025		3.75	%		(1,418	)		7,369			(8,787	)

Total interest earning assets		6,070,340			85,477		2.82	%		5,863,690			84,550		2.89	%		927			6,434			(5,507	)

Allowance for credit losses on loans		(46,584	)							(50,071	)
Cash & non-interest earning assets		200,193								197,682

Total assets	$	6,223,949							$	6,011,301

Liabilities and shareholders’ equity

Deposits:
Interest bearing checking accounts	$	1,201,078			86		0.01	%	$	1,117,113			98		0.02	%		(12	)		28			(40	)
Money market accounts		784,737			424		0.11	%		727,363			519		0.14	%		(95	)		92			(187	)
Savings		1,546,316			319		0.04	%		1,349,013			321		0.05	%		(2	)		113			(115	)
Time deposits		966,372			1,082		0.23	%		1,229,838			2,927		0.48	%		(1,845	)		(538	)		(1,307	)

Total interest bearing deposits		4,498,503			1,911		0.09	%		4,423,327			3,865		0.18	%		(1,954	)		(305	)		(1,649	)
Short-term borrowings		222,755			410		0.37	%		228,643			456		0.40	%		(46	)		(12	)		(34	)

Total interest bearing liabilities		4,721,258			2,321		0.10	%		4,651,970			4,321		0.19	%		(2,000	)		(317	)		(1,683	)

Demand deposits		825,685								712,790
Other liabilities		81,520								73,276
Shareholders’ equity		595,486								573,265

Total liabilities and shareholders’ equity	$	6,223,949							$	6,011,301

Net interest income , tax equivalent					83,156								80,229				$	2,927			6,751			(3,824	)

Net interest spread							2.72	%							2.70	%

Net interest margin (net interest income to total interest earning assets)							2.74	%							2.74	%

Tax equivalent adjustment					-								-

Net interest income					83,156								80,229

Index

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

As detailed in the Annual Report to Shareholders as of December 31, 2021, the Company is subject to interest rate risk as its principal market risk. As noted in the Management’s Discussion and Analysis for the three-month and six-month month periods ended June 30, 2022 and 2021, the Company continues to respond to changes in interest rates in such a way that positions the Company to meet short term earning goals and also allows the Company to respond to changes in interest rates in the future. Consequently, for the second quarter of both 2022 and 2021, the Company had an average balance of Federal Funds sold and other short-term investments of $1.1 billion. As investment opportunities present themselves, management plans to invest funds from the Federal Funds sold and other short-term investment portfolio into the securities available for sale, securities held to maturity and loan portfolios. Additional disclosure of interest rate risk can be found under “Liquidity and Interest Rate Sensitivity” and “Asset/Liability Management” in the Management’s Discussion and Analysis section of this document.

Item 4.

Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report.

The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (“Exchange Act”)) designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon this evaluation of those disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer of the Company concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.

In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Further, no evaluation of a cost-effective system of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.

There have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter to which this report relates that have materially affected or are reasonably likely to materially affect, the internal control over financial reporting.

Index

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

None.

Item 1A.

Risk Factors

In light of the evolving global economic conditions and geopolitical matters, as well as volatility in financial markets, TrustCo (and collectively with the Bank, “we,” “us,” and “our”) have updated the risk factors affecting our business since those presented in our Annual Report on Form 10-K, Part I, Item 1A, for the fiscal year ended December 31, 2021 (the “Annual Report”) filed with the Securities and Exchange Commission on February 25, 2022. The following risk factor should be read in conjunction with the risk factors set forth in the Annual Report.

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 macroeconomic environment in the United States is susceptible to global events and volatility in financial markets. The conflict with Russia and Ukraine has lead, and could continue to lead, to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increase in cyberattacks and espionage. In addition, global demand for products may exceed supply during the economic recovery from the COVID-19 pandemic, and such shortages may cause inflation, adversely impact consumer and business confidence, and adversely affect the economy as well as our financial condition and results.

Actions taken by the Federal Reserve Board, including changes in its target funds rate, balance sheet management and lending facilities are beyond our control and difficult to predict. These actions can affect interest rates and the value of financial instruments and other assets and liabilities and can impact our borrowers. Sudden changes in monetary policy, for example, in response to high inflation, could lead to financial market volatility, increases in market interest rates and a continued flattening or inversion of the yield curve. Higher inflation, or volatility and uncertainty related to inflation, could reduce demand for our products, adversely affect the creditworthiness of our borrowers or result in lower values for our investment securities and other interest-earning assets.

Index

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Program

The following table provides certain information with respect to the Company’s purchases of its common shares during the three months ended June 30, 2022:

	Issuer Purchases of Common Shares
Period	Total numbers of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs (1)
April 1, 2022 through April 30, 2022		25,000	$	31.42		25,000		156,886
May 1, 2022 through May 31, 2022		50,000		31.49		50,000		106,886
June 1, 2022 through June 30, 2022		-		-		-		106,886
Total		75,000	$	31.47		75,000		106,886

(1)

On March 9, 2022 the Company’s Board of Directors authorized another share repurchase program of up to 200,000 shares, or approximately 1% of its currently outstanding common stock. During the three months ended June 30, 2022, the Company repurchased a total of 75 thousand shares at an average price per share of $31.47 for a total of $2.4 million under its Board authorized share repurchase program.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety

None.

Item 5.

Other Information

The Company’s board of directors adopted the amended and restated Executive Medical Reimbursement Plan on May 17, 2022 (the “Plan”). The Plan, in which all of the Company’s named executive officers participate, is designed to provide for the reimbursement of medical, hospitalization and dental expenses that exceed the deductible or co-payment limits under the Company’s general medical insurance plans. A copy of the Plan is filed herewith as Exhibit 10.1.

Index

Item 6.

Exhibits

Reg S-K (Item 601)
Exhibit No.	Description

10.1	Amended and Restated Executive Medical Reimbursement Plan

15	Crowe LLP Letter Regarding Unaudited Interim Financial Information

31(a)	Rule 13a-15(e)/15d-15(e) Certification of Robert J. McCormick, principal executive officer.

31(b)	Rule 13a-15(e)/15d-15(e) Certification of Michael M. Ozimek, principal financial officer.

32	Section 1350 Certifications of Robert J. McCormick, principal executive officer and Michael M. Ozimek, principal financial officer.

101.INS	Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRLTaxonomy Extension Presentation Linkbase Document

Index

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TrustCo Bank Corp NY

	By: /s/ Robert J. McCormick
	Robert J. McCormick
	Chairman, President and Chief Executive Officer


	By: /s/ Michael M. Ozimek
	Michael M. Ozimek
	Executive Vice President and Chief Financial Officer

Date: August 8, 2022

Exhibit 10.1

EXECUTIVE MEDICAL REIMBURSEMENT PLAN

ARTICLE I - PURPOSE

1.01 The purpose of the Trustco Bank Executive Medical Reimbursement Plan (the “Plan”) is to help provide full and complete health care for Participants and their current spouse and Eligible Dependents as defined herein. The Plan is intended to provide reimbursement of medical, hospitalization, dental, and other similar expenses described in Article VI herein, which are not otherwise covered by insurance or provided by Trustco Bank (the “Company”). All benefits paid under this plan are fully taxable to the plan Participants.

ARTICLE II - PERMANENT PROGRAM OR ARRANGEMENT

2.01 The Company intends that this program be a permanent program or arrangement for the exclusive benefit of its designated participants and current spouse and Eligible Dependents. Nothing herein, however, shall prevent the Company from amending or terminating this Plan, provided such amendment or termination is permissible under applicable law and such amendment or termination shall not affect a claimant’s rights to benefits hereunder with respect to reimbursable expenses that have been incurred prior to the date Company action is taken to terminate the Plan or the effective date of such termination, whichever occurs last.

2.02 The exclusive purpose of this Plan is to provide the medical benefits described herein for covered participants and their current spouse and Eligible Dependents. No benefits payable under this Plan shall be applied for any other purpose.

ARTICLE III - EFFECTIVE DATE

3.01 The original effective date of this Plan was October 1, 1997. The Plan was restated effective May 17, 2022. The records of the Plan shall be kept on a Plan Year basis. The Plan Year shall be October 1 through September 30.

ARTICLE IV - ELIGIBILITY

4.01 Only those employees who are specifically designated by the Company from time to time pursuant to the following process are eligible to participate in this Plan. To become eligible to participate in the Plan, an employee must be specifically designated in writing as eligible for benefits under the Plan and such designation must be authorized by the Company’s Board of Directors.

ARTICLE V - PARTICIPATION

5.01 Each employee who is eligible to participate in the Plan under Article IV (an “Eligible Employee”) shall become a participant in the Plan (a “Participant”) on the first day the Company designates him or her as an Eligible Employee under Article IV. Amounts received that are attributable to reimbursements due the Participant’s current spouse or Eligible Dependents shall be considered to have been received by the Participant. For purposes of this Plan, an “Eligible Dependent” is a dependent who would meet the coverage requirements of the health plan maintained by the Company if the Eligible Employee were covered by that plan. For avoidance of doubt, only an Eligible Employee’s current spouse’s (or surviving spouse’s) claims are eligible for reimbursement. A divorced former spouse is not eligible for benefits under this Plan and a divorced former spouse’s claims are not eligible for reimbursement.

5.02 An Eligible Employee (and his or her current spouse and Eligible Dependents) will continue to be a Participant in the Plan after the Eligible Employee ceases employment with the Company, except if the Eligible Employee’s termination of employment is due to Good Cause. For purposes of this Plan, “Good Cause” shall be limited to the Eligible Employee’s commission of an act of fraud, embezzlement or theft constituting a felony against either of the Company as finally determined by a court of competent jurisdiction or an unequivocal admission by the Eligible Employee. On the date an Eligible Employee is terminated for Good Cause, the Eligible Employee will cease to be a Participant in the Plan. Any expenses incurred on or after that date by the Eligible Employee, his or her Eligible Dependents, or current spouse will not be eligible for reimbursement.

5.03 If an Eligible Employee dies, the Eligible Employee’s surviving spouse will continue to be a Participant in the Plan until the surviving spouse’s death. An Eligible Dependent of the decedent Eligible Employee will continue to be a Participant until the earlier of the Eligible Dependent’s death or the date the Eligible Dependent ceases to meet the coverage requirements of the health plan maintained by the Company if the Eligible Employee were covered by that plan.

ARTICLE VI - BENEFITS

6.01 The Company shall pay to each Participant such amounts as he or she had expended while a Participant for medical care for himself or herself and his or her current spouse and Eligible Dependents, subject to the limits described in Section 7, below.

6.02 For purposes of this Plan the following terms shall have the definitions set forth below:

(a)

“Amounts expended for medical care” means amounts paid for:

(1)

hospitalization, medical and dental bills, prescription drugs and eyeglasses;

(2)

medical benefits allowable as a deduction under Internal Revenue Code Section 213, without regard to any adjusted gross income limitation, and

(3)

transportation primarily for, and essential to, medical care.

ARTICLE VII - LIMITATION ON BENEFITS PROVIDED

7.01 The amount a Participant shall be entitled to receive in reimbursements under this Plan for any calendar year is unlimited. However, in order for a claim to be eligible for reimbursement, the Participant (and any covered spouse or Eligible Dependent) must also have current coverage under a major medical plan. The Plan Administrator in his or her sole discretion will determine what major medical coverage will be deemed sufficient.

ARTICLE VIII - BENEFITS FROM ANOTHER SOURCE

8.01 Reimbursement under this Plan shall be made only in the event, and to the extent that reimbursement for amounts expended, or payment, for medical care is not provided for under any insurance policy or under any other plan of the Company or another employer or under any federal or state law. If there is such a policy, plan or law in effect providing for such reimbursement or payment in whole or in part, then, to the extent of the coverage under such policy, plan or law, the Company shall be relieved of any and all liability hereunder.

ARTICLE IX - CLAIMS AND CLAIMS REVIEW PROCEDURE

9.01 Claims for benefits under this Plan shall be made on forms maintained by the Company. To obtain reimbursement for medical expenses hereunder, a Participant must submit within 30 days after the end of each calendar quarter a request for reimbursement for medical expenses incurred by him or her during the preceding quarter, together with such evidence of payment of such expenses as shall be required by the Company in accordance with rules uniformly applied.

9.02 If any claim for benefits under this Plan is denied in whole or in part, the Company shall promptly furnish the claimant with a written notice:

(a)

setting forth the reason for the denial;

(b)

citing the Plan provisions, upon which such denial is based;

(c)

describing any additional material or information from the claimant which is necessary in order for the claimant to perfect his or her claim and why; and

(d)

explaining the claim review procedure set forth herein.

9.03 Failure by the Company to respond to a claim within a reasonable time shall be deemed a denial. Within 60 days after denial of any claim for benefits under this Plan, the claimant may request in writing a review of the denial by Plan Administrator.

9.04 Any claimant seeking review hereunder is entitled to examine all pertinent documents, and to submit issues and comments in writing. The Plan Administrator shall render a decision on review of a claim not later than 60 days after receipt of a request for review hereunder. The decision of the Plan Administrator on review shall be in writing and shall state the reason for the decision, referring to the Plan provisions upon which it is based.

ARTICLE X - ADMINISTRATION

10.01 The Plan Administrator is the Board of Directors’ Compensation Committee, or its designee. The Plan Administrator shall have authority and responsibility to control and manage the operation and administration of this Plan. This includes the authority to interpret all terms, provisions, conditions and limitations of the Plan and to determine all questions arising out of or in connection with the provisions of the Plan or its administration in any and all cases.

ARTICLE XI - MISCELLANEOUS

11.01 All terms expressed herein shall be deemed to include the feminine and neuter genders and all references to the plural shall be deemed to include the singular and vice versa all as proper construction shall dictate.

11.02 To the extent not pre-empted by the Employee Retirement Income Security Act of 1974 (ERISA), as amended, questions concerning the proper interpretation of the terms of this Plan shall be determined in accordance with the law of the State of New York, where the Company’s principal business office is located.

11.03 The Plan Administrator shall keep a copy of this plan document and any other disclosure documents relating thereto (including, but not limited to, summary plan descriptions) that are in the public domain on file at his office where Participants may inspect them during the Company’s regular business hours. Upon request, the Company shall provide a Participant, current spouse, or Eligible Dependent with copies of such documents. When the Administrator provides such documents, the Administrator may charge the requesting party a reasonable charge for photocopying these materials.

11.04 This document contains all of the operative provisions of this Plan. Any conflict between the provisions of this document and any other Company document purporting to explain the rights, benefits, or obligations of the parties hereunder shall be resolved in favor of this Plan document. In the event that a tribunal of competent jurisdiction shall determine in a final judgement or decree that one or more of the provisions of this Plan is invalid due to the provisions of applicable law, this Plan shall be interpreted as if the offending language had been stricken from its provisions and the remainder of the Plan document shall continue in full force and effect.

The foregoing Plan was amended, restated, and adopted by resolution of the board of directors of Trustco Bank on May 17, 2022.

		/s/ Michael Hall
	MICHAEL HALL
	Secretary

Exhibit 15

August 8, 2022

Securities and Exchange Commission

450 Fifth Street, NW

Washington, DC 20549

RE: FILING OF THE JUNE 30, 2022 FORM 10-Q FOR TRUSTCO BANK CORP NY

Commissioners:

We are aware that our report dated August 8, 2022, on our reviews of the interim financial information of TrustCo Bank Corp NY as of June 30, 2022 and for the three-month and six-month periods ended June 30, 2022 and 2021, included in the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2022, is incorporated by reference in its Registration Statements, Form S-8 (No. 333-175868), Form S-8 (No. 333-233122), Form S-8 (No. 333-175867), Form S-8 (No. 333-206685), and Form S-3 (No. 333-238208).

Yours very truly,

/s/ Crowe LLP

Exhibit 31(a)

Certification

I, Robert J. McCormick, certify that:

I have reviewed this Form 10-Q of TrustCo Bank Corp NY;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2022

/s/ Robert J. McCormick
Robert J. McCormick
Chairman, President and
Chief Executive Officer

Exhibit 31(b)

Certification

I, Michael M. Ozimek, certify that:

I have reviewed this Form 10-Q of TrustCo Bank Corp NY;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2022

/s/ Michael M. Ozimek
Michael M. Ozimek
Executive Vice President and
Chief Financial Officer

Exhibit 32

Certification

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 Of The Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of TrustCo Bank Corp NY (the “Company”) on Form 10-Q for the period ending June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	/s/ Robert J. McCormick
	Robert J. McCormick
	Chairman, President and
	Chief Executive Officer

	/s/ Michael M. Ozimek
	Michael M. Ozimek
	Executive Vice President and
	Chief Financial Officer

Date: August 8, 2022

Part I.	FINANCIAL INFORMATION	PAGE NO.
Item 1.	Consolidated Interim Financial Statements (Unaudited):

	Consolidated Statements of Income for the three-month and six-month periods ended June 30, 2022 and 2021	3

	Consolidated Statements of Comprehensive Income for the three-month and six-month periods ended June 30, 2022 and 2021	4

	Consolidated Statements of Financial Condition as of June 30, 2022 and December 31, 2021	5

	Consolidated Statements of Changes in Shareholders’ Equity for the three-month and six-month periods ended June 30, 2022 and 2021	6

	Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2022 and 2021	7

	Notes to Consolidated Interim Financial Statements	8-46

	Report of Independent Registered Public Accounting Firm	47

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48-69

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	70

Item 4.	Controls and Procedures	70

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	71

Item 1A.	Risk Factors	71

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72

Item 3.	Defaults Upon Senior Securities	72

Item 4.	Mine Safety	72

Item 5.	Other Information	72

Item 6.	Exhibits	73