UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐
Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock	Number of Shares Outstanding as of April 29, 2022
$1 Par Value	19,196,875

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Income (Unaudited)

(dollars in thousands, except per share data)

	Three months ended March 31,
	2022			2021

Interest and dividend income:
Interest and fees on loans	$	39,003			40,217
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		86			50
State and political subdivisions		1			1
Mortgage-backed securities and collateralized mortgage obligations		1,087			1,237
Corporate bonds		233			316
Small Business Administration-guaranteed participation securities		154			206
Other securities		2			6
Total interest and dividends on securities available for sale		1,563			1,816

Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential		90			123
Total interest on held to maturity securities		90			123

Federal Reserve Bank and Federal Home Loan Bank stock		62			69
Interest on federal funds sold and other short-term investments		572			270
Total interest income		41,290			42,495

Interest expense:
Interest on deposits:
Interest-bearing checking		44			52
Savings accounts		156			159
Money market deposit accounts		214			283
Time deposits		546			1,666
Interest on short-term borrowings		234			228
Total interest expense		1,194			2,388

Net interest income		40,096			40,107
(Credit) Provision for credit losses		(200	)		350
Net interest income after (credit) provision for credit losses		40,296			39,757

Noninterest income:
Trustco financial services income		1,833			2,035
Fees for services to customers		2,801			2,204
Other		549			189
Total noninterest income		5,183			4,428

Noninterest expenses:
Salaries and employee benefits		9,239			12,425
Net occupancy expense		4,529			4,586
Equipment expense		1,588			1,631
Professional services		1,467			1,432
Outsourced services		2,280			2,250
Advertising expense		617			354
FDIC and other insurance		812			707
Other real estate expense, net		11			239
Other		2,222			1,711
Total noninterest expenses		22,765			25,335

Income before taxes		22,714			18,850
Income taxes		5,625			4,767

Net income	$	17,089			14,083

Net income per share (1):
- Basic	$	0.890			0.730

- Diluted	$	0.890			0.730

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

See accompanying notes to unaudited consolidated interim financial statements.

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Comprehensive Income (Unaudited)

(dollars in thousands)

	Three months ended March 31,
	2022			2021

Net income	$	17,089			14,083

Net unrealized holding loss on securities available for sale		(19,225	)		(6,018	)
Tax effect		4,974			1,557

Net unrealized loss on securities available for sale, net of tax		(14,251	)		(4,461	)

Amortization of net actuarial gain		(78	)		(228	)
Amortization of prior service credit		(280	)		(52	)
Tax effect		93			73
Amortization of net actuarial gain and prior service credit on pension and postretirement plans, net of tax		(265	)		(207	)

Other comprehensive loss, net of tax		(14,516	)		(4,668	)
Comprehensive income	$	2,573			9,415

See accompanying notes to unaudited consolidated interim financial statements.

Index

TRUSTCO BNK CORP NY

Consolidated Statements of Financial Condition (Unaudited)

(dollars in thousands, except per share data)

	March 31, 2022			December 31, 2021
ASSETS:

Cash and due from banks	$	47,526			48,357
Federal funds sold and other short term investments		1,225,022			1,171,113
Total cash and cash equivalents		1,272,548			1,219,470

Securities available for sale		408,991			407,713

Held to maturity securities ($9,550 and $10,695 fair value at March 31, 2022 and December 31, 2021, respectively)		9,183			9,923

Federal Reserve Bank and Federal Home Loan Bank stock		5,604			5,604
Loans, net of deferred net costs		4,464,354			4,438,779
Less:
Allowance for credit losses on loans		46,178			44,267
Net loans		4,418,176			4,394,512

Bank premises and equipment, net		32,644			33,027
Operating lease right-of-use assets		48,569			48,090
Other assets		86,158			78,207

Total assets	$	6,281,873			6,196,546

LIABILITIES:
Deposits:
Demand	$	835,281			794,878
Interest-bearing checking		1,225,093			1,191,304
Savings accounts		1,553,152			1,504,554
Money market deposit accounts		796,275			782,079
Time deposits		940,215			995,314
Total deposits		5,350,016			5,268,129

Short-term borrowings		248,371			244,686
Operating lease liabilities		53,094			52,720
Accrued expenses and other liabilities		37,497			29,883

Total liabilities		5,688,978			5,595,418

SHAREHOLDERS’ EQUITY:
Capital stock par value $1; 30,000,000 shares authorized; 20,045,684 shares issued at March 31, 2022 and December 31, 2021 and 19,201,875 and 19,219,989 shares outstanding at March 31, 2022 and December 31, 2021, respectively		20,046			20,046
Surplus		256,661			256,661
Undivided profits		355,948			349,056
Accumulated other comprehensive (loss) income, net of tax		(2,369	)		12,147
Treasury stock at cost - 843,809 and 825,695 shares at March 31, 2022 and December 31, 2021, respectively		(37,391	)		(36,782	)

Total shareholders’ equity		592,895			601,128

Total liabilities and shareholders’ equity	$	6,281,873			6,196,546

See accompanying notes to unaudited consolidated interim financial statements.

Index

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

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

(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.

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)

	Three months ended March 31,
	2022			2021

Cash flows from operating activities:
Net income	$	17,089			14,083

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,024			1,063
Amortization of right-of-use asset		1,608			1,573
Net gain on sale of other real estate owned		(73	)		-
Writedown of other real estate owned		-			121
(Credit) provision for credit losses		(200	)		350
Deferred tax expense		744			1,152
Net amortization of securities		697			1,081
Net gain on sale of bank premises and equipment		(314	)		(4	)
Decrease in taxes receivable		489			101
Decrease in interest receivable		202			392
Decrease in interest payable		(32	)		(164	)
Increase in other assets		(2,601	)		(3,160	)
Decrease in operating lease liabilities		(1,713	)		(1,637	)
Decrease in accrued expenses and other liabilities		(5,943	)		(6,221	)
Total adjustments		(6,112	)		(5,353	)
Net cash provided by operating activities		10,977			8,730

Cash flows from investing activities:
Proceeds from sales, paydowns and calls of securities available for sale		17,923			36,820
Proceeds from paydowns of held to maturity securities		716			1,061
Purchases of securities available for sale		(34,097	)		(132,456	)
Proceeds from maturities of securities available for sale		5,000			55
Net increase in loans		(25,516	)		(24,656	)
Proceeds from dispositions of other real estate owned		166			-
Proceeds from dispositions of bank premises and equipment		469			4
Purchases of bank premises and equipment		(796	)		(663	)
Net cash used in investing activities		(36,135	)		(119,835	)

Cash flows from financing activities:
Net increase in deposits		81,887			135,729
Net increase in short-term borrowings		3,685			15,195
Proceeds from exercise of stock options		-			71
Purchases of treasury stock		(609	)		(45	)
Dividends paid		(6,727	)		(6,571	)
Net cash provided by financing activities		78,236			144,379
Net increase in cash and cash equivalents		53,078			33,274
Cash and cash equivalents at beginning of period		1,219,470			1,107,099
Cash and cash equivalents at end of period	$	1,272,548			1,140,373

Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest paid	$	1,226			2,552
Income taxes paid		5,090			4,661
Other non cash items:
Change in unrealized (loss) gain on securities available for sale-gross of deferred taxes		(19,225	)		(6,018	)
Change in deferred tax effect on unrealized loss (gain) on securities available for sale		4,974			1,557
Amortization of net actuarial gain and prior service cost (credit) on pension and postretirement plans		(358	)		(280	)
Change in deferred tax effect of amortization of net actuarial gain postretirement benefit plans		93			73
Security purchase settled in subsequent period		(10,000	)		-
Impact to retained earnings from adoption of ASC 326, net of tax		(3,470	)		-

See accompanying notes to unaudited consolidated interim financial statements.

Index

(1) Financial Statement Presentation

The unaudited Consolidated Interim Financial Statements of TrustCo Bank Corp NY (the “Company” or “TrustCo”) include the accounts of the Company’s subsidiary, Trustco Bank (also referred to as the “Bank”) and other subsidiaries after elimination of all significant intercompany accounts and transactions. Prior period amounts are reclassified when necessary to conform to the current period presentation. The net income reported for the three months ended March 31, 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 March 31, 2022, the results of operations and cash flows for the three months ended March 31, 2022 and 2021. The accompanying unaudited Consolidated Interim Financial Statements should be read in conjunction with the Company’s year‑end Consolidated Financial Statements, including notes thereto, which are included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 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.

Index

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 unless the loan is well secured and in process of collection. Mortgage loans are charged off at 180 days past due and 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.

Index

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 or added to 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, a portion of its debtors’ ability to repay depends significantly on the economic conditions prevailing in the respective geographic territory. Historical credit loss experience provides the basis for the estimation of expected credit losses. Considerations are made 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.

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 loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In situations involving a borrower filing for Chapter 13 bankruptcy protection, however, 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.

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:

•

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”).

Index

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 utilize the Stagflation forecast scenario with 100% weighting, due to the forecast more appropriately considering inflationary pressures being observed currently and prospectively in the markets we serve. This scenario also takes into the account the relative impacts to unemployment, CPI, GMP and housing. The ACLL reserve is then complimented with qualitative factors based upon regulatory, competition, regional market conditions, legal, and technical environment. Other macroeconomic conditions such as GMP, CPI, and Housing prices and their related forecasts for the respective metropolitan regions of New York and Florida, were qualitatively factored into the calculation using the Stagflation forecast scenario over the 8 quarter forecast period.

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.

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, which are commercial nonaccrual loans and loans identified as troubled debt restructuring (“TDR”). 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.

The TDR that subsequently defaulted described above 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.

Index

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 $2.3 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.

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.

Index

Accrued interest receivable on held to maturity securities totaled $40 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.

(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”).

Index

A reconciliation of the component parts of earnings per share for the three months ended March 31, 2022 and 2021 is as follows:

(in thousands, except per share data)	For the three months ended March 31,
	2022		2021
Net income	$	17,089		14,083
Weighted average common shares (1)		19,209		19,287
Stock Options (1)		1		6
Weighted average common shares including potential dilutive shares (1)		19,210		19,293

Basic EPS (1)	$	0.890		0.730

Diluted EPS (1)	$	0.890		0.730

(1)	Share 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.

For both the three months, ended March 31, 2022 and 2021 there were approximately 60 thousand weighted average anti-dilutive stock options excluded from diluted earnings per share. 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.

(3) Benefit Plans

The table below outlines the components of the Company’s net periodic benefit recognized during the three months ended March 31, 2022 and 2021 for its pension and other postretirement benefit plans:

	Three months ended March 31,
	Pension Benefits						Other Postretirement Benefits
(dollars in thousands)	2022			2021			2022			2021

Service cost	$	-			11			18			22
Interest cost		223			216			52			44
Expected return on plan assets		(817	)		(761	)		(333	)		(327	)
Amortization of net gain		-			-			(78	)		(228	)
Amortization of prior service credit		-			-			(280	)		(52	)
Net periodic benefit	$	(594	)		(534	)		(621	)		(541	)

The Company does not expect to contribute to its pension and postretirement benefit plans in 2022. As of March 31, 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 medical benefits and 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:

	March 31, 2022
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	64,978		-		2,919		62,059
State and political subdivisions		41		-		-		41
Mortgage backed securities and collateralized mortgage obligations - residential		257,248		80		13,283		244,045
Corporate bonds		76,086		49		2,046		74,089
Small Business Administration - guaranteed participation securities		29,181		-		1,095		28,086
Other		686		-		15		671
Total Securities Available for Sale	$	428,220		129		19,358		408,991

	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 March 31, 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	$	10,071		10,120
Due in one year through five years		131,720		126,740
Due after five years through ten years		-		-
Mortgage backed securities and collateralized mortgage obligations - residential		257,248		244,045
Small Business Administration - guaranteed participation securities		29,181		28,086
	$	428,220		408,991

Index

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

	March 31, 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 Unreal. Loss

U.S. government sponsored enterprises	$	23,723		1,264		38,336		1,655		62,059		2,919
Mortgage backed securities and collateralized mortgage obligations - residential		160,318		5,999		73,797		7,284		234,115		13,283
Corporate bonds		49,993		1,115		14,070		931		64,063		2,046
Small Business Administration - guaranteed participation securities		28,086		1,095		-		-		28,086		1,095
Other		585		15		-		-		585		15

Total	$	262,705		9,488		126,203		9,870		388,908		19,358

	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 Unreal. 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 months ended March 31, 2022.

The proceeds from sales and calls and maturities of securities available for sale, gross realized gains and gross realized losses from sales and calls during the three months ended March 31, 2022 and 2021 are as follows:

	Three months ended March 31,
(dollars in thousands)	2022		2021

Proceeds from sales	$	-		-
Proceeds from calls/paydowns		17,923		36,820
Proceeds from maturities		5,000		55
Gross realized gains		-		-
Gross realized losses		-		-

Index

(b) Held to maturity securities

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

	March 31, 2022
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	9,183		383		16		9,550

Total held to maturity	$	9,183		383		16		9,550

	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

The following table distributes the debt securities included in the held to maturity portfolio as of March 31, 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.

(dollars in thousands)	Amortized Cost		Fair Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	9,183		9,550
	$	9,183		9,550

All held to maturity securities are held at cost on the financial statements. As of March 31, 2022 and December 31, 2021 held to maturity securities with a fair value of $2.6 million and $442 thousand had an unrecognized loss of less than 12 months of $16 thousand and one thousand, respectively.

There were no sales or transfers of held to maturity securities during the three months ended March 31, 2022 and 2021.

There were no allowance for credit losses recorded for held to maturity securities during the three months ended March 31, 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.

Index

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 through the provision for credit losses. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes.

The Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of March 31, 2022. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as it’s historically low turnover in the portfolio.

As of March 31, 2022, the Company’s securities 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 March 31, 2022.

Mortgage backed securities and collateralized mortgage obligations – residential: At March 31, 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 March 31, 2022.

Corporate Bonds & Other: At March 31, 2022, corporate and other 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 March 31, 2022.

Small Business Administration (SBA) - guaranteed participation securities: At March 31, 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 March 31, 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:

	March 31, 2022
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	147,295		23,935		171,230
Other		20,198		980		21,178
Real estate mortgage - 1 to 4 family:
First mortgages		2,729,257		1,236,705		3,965,962
Home equity loans		47,043		13,429		60,472
Home equity lines of credit		172,854		63,263		236,117
Installment		7,269		2,126		9,395
Total loans, net	$	3,123,916		1,340,438		4,464,354
Less: Allowance for credit losses on loans						46,178
Net loans					$	4,418,176

Included in commercial loans above are Paycheck Protection Program (“PPP”) loans totaling $3.0 million as of March 31, 2022.

At March 31, 2022, the Company had approximately $30.4 million of real estate construction loans. Of the $30.4 million in real estate construction loans at March 31, 2022, approximately $10.5 million are secured by first mortgages to residential borrowers while approximately $19.9 million were to commercial borrowers for residential construction projects. The vast majority of construction loans are in the Company’s New York market.

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 March 31, 2022 compared to adoption date. Consistent with adoption date, the Company has determined the stagflation forecast scenario to be appropriate for the March 31, 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.

Index

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					January 1, 2022
	Pre-Adoption Balance		Impact of Adoption			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 March 31, 2022
(dollars in thousands)	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 adjusted for ASU 2016-13	$	2,149			44,406			65			46,620
Loans charged off:
New York and other states*		36			-			10			46
Florida		-			-			1			1
Total loan chargeoffs		36			-			11			47

Recoveries of loans previously charged off:
New York and other states*		-			97			8			105
Florida		-			-			-			-
Total recoveries		-			97			8			105
Net loans charged off (recoveries)		36			(97	)		3			(58	)
(Credit) provision for credit losses		64			(572	)		8			(500	)
Balance at end of period	$	2,177			43,931			70			46,178

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 for the three months ended March 31, 2022 was as follows:

(In thousands)	Total
Balance at January 1, 2022	$	18
Impact of Adopting CECL		2,335
Adjusted Balance at January 1, 2022		2,353
Provision for credit losses		300
Balance at March 31, 2022	$	2,653

Index

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 loan grades assigned to all loan types are tested by the Company’s internal loan review department in accordance with the Company’s internal loan review policy.

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 March 31, 2022 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 March 31, 2022, and based on the most recent analysis performed, the risk category of loans by class of loans, and gross chargeoffs for each loan type by origination year was as follows:

(in thousands)	March 31, 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	$	10,701	$	32,756	$	24,411	$	26,575	$	20,900	$	46,493	$	7,424	$	-	$	169,260
Special Mention		-		-		73		-		255		-		-		-		328
Substandard		-		-		118		-		140		1,384		-		-		1,642
Total Commercial Loans	$	10,701	$	32,756	$	24,602	$	26,575	$	21,295	$	47,877	$	7,424	$	-	$	171,230
Commercial Loans:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	36	$	-	$	-	$	36
	$	-	$	-	$	-	$	-	$	-	$	36	$	-	$	-	$	36
Commercial Other:
Risk rating
Pass	$	419	$	5,931	$	3,301	$	786	$	956	$	2,634	$	6,705	$	-	$	20,732
Special mention		-		320		-		-		-		-		-		-		320
Substandard		-		25		-		-		-		101		-		-		126
Total Commercial Real Estate Loans	$	419	$	6,276	$	3,301	$	786	$	956	$	2,735	$	6,705	$	-	$	21,178

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

Residential First Mortgage:
Risk rating
Performing	$	142,158	$	971,838	$	834,631	$	392,717	$	279,365	$	1,328,713	$	545	$	-	$	3,949,967
Nonperforming		-		-		83		671		422		14,819		-		-		15,995
Total First Mortgage:	$	142,158	$	971,838	$	834,714	$	393,388	$	279,787	$	1,343,532	$	545	$	-	$	3,965,962

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

Home Equity Lines:
Risk rating
Performing	$	2,414	$	10,463	$	7,431	$	8,589	$	5,943	$	25,324	$	-	$	-	$	60,164
Nonperforming		-		-		-		-		135		173		-		-		308
Total Home Equity Lines:	$	2,414	$	10,463	$	7,431	$	8,589	$	6,078	$	25,497	$	-	$	-	$	60,472

Home Equity Lines Loans:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-		-
	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Home Equity Credit Lines:
Risk rating
Performing	$	221	$	721	$	492	$	100	$	70	$	19,850	$	211,792	$	-	$	233,246
Nonperforming		-		-		-		-		-		2,603		268		-		2,871
Total Home Equity Credit Lines:	$	221	$	721	$	492	$	100	$	70	$	22,453	$	212,060	$	-	$	236,117

Home Equity Credit Lines Loans:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-		-
	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Installments:
Risk rating
Performing	$	937	$	3,409	$	1,326	$	1,471	$	686	$	375	$	1,150	$	-	$	9,354
Nonperforming		-		12		1		27		-		-		1		-		41
Total Installments	$	937	$	3,421	$	1,327	$	1,498	$	686	$	375	$	1,151	$	-	$	9,395

Installments Loans:
Current-period Gross writeoffs	$	-	$	-	$	5	$	5	$	-	$	1	$	-	$	-		11
	$	-	$	-	$	5	$	5	$	-	$	1	$	-	$	-	$	11

Index

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 March 31, 2022 other real estate owned included $270 thousand of residential foreclosed properties. In addition, non-accrual residential mortgage loans that are in the process of foreclosure had an amortized cost of $11.7 million as of March 31, 2022.

The following tables present the aging of the amortized cost in past due loans by loan class and by region as of March 31, 2022:

	March 31, 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	$	-		106		123		229		147,066		147,295
Other		27		-		4		31		20,167		20,198
Real estate mortgage - 1 to 4 family:
First mortgages		2,114		1,209		9,562		12,885		2,716,372		2,729,257
Home equity loans		19		-		173		192		46,851		47,043
Home equity lines of credit		727		25		1,187		1,939		170,915		172,854
Installment		36		24		14		74		7,195		7,269

Total	$	2,923		1,364		11,063		15,350		3,108,566		3,123,916

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	$	-		-		-		-		23,935		23,935
Other		-		-		-		-		980		980
Real estate mortgage - 1 to 4 family:
First mortgages		623		-		1,552		2,175		1,234,530		1,236,705
Home equity loans		-		-		44		44		13,385		13,429
Home equity lines of credit		-		89		-		89		63,174		63,263
Installment		-		1		-		1		2,125		2,126

Total	$	623		90		1,596		2,309		1,338,129		1,340,438

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	$	-		106		123		229		171,001		171,230
Other		27		-		4		31		21,147		21,178
Real estate mortgage - 1 to 4 family:
First mortgages		2,737		1,209		11,114		15,060		3,950,902		3,965,962
Home equity loans		19		-		217		236		60,236		60,472
Home equity lines of credit		727		114		1,187		2,028		234,089		236,117
Installment		36		25		14		75		9,320		9,395

Total	$	3,546		1,454		12,659		17,659		4,446,695		4,464,354

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

Index

At March 31, 2022, 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.

Loans individually evaluated for impairment are non-accrual commercial loans, as well as all loans classified as troubled debt restructurings. As of March 31, 2022, there was no allowance for credit losses based on the loans individually evaluated for impairment. Residential and installment non-accrual loans which are not TDRs 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:

	March 31, 2022
(dollars in thousands)	New York and other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	183		-		183
Other		4		-		4
Real estate mortgage - 1 to 4 family:
First mortgages		14,102		1,893		15,995
Home equity loans		264		44		308
Home equity lines of credit		2,699		172		2,871
Installment		33		8		41
Total non-accrual loans		17,285		2,117		19,402
Restructured real estate mortgages - 1 to 4 family		16		-		16
Total nonperforming loans	$	17,301		2,117		19,418

The following table presents the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing as of March 31, 2022:

	March 31, 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	$	61	$	123	$	-
Other		-		4		-
Real estate mortgage - 1 to 4 family:
First mortgages		6,762		9,233		-
Home equity loans		37		271		-
Home equity lines of credit		1,030		1,841		-
Installment		-		41		-
Total loans, net	$	7,890	$	11,513	$	-

The non-accrual balance of $11.5 million was collectively evaluated and the associated allowance for credit losses on loans was not material as of March 31, 2022.

Index

The following tables present the balance in the allowance for credit losses on loans by portfolio segment and based on impairment evaluation as of March 31, 2022:

	March 31, 2022
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
Allowance for credit losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		2,177		43,931		70		46,178

Total ending allowance balance	$	2,177		43,931		70		46,178

Loans:
Individually evaluated for impairment	$	305		17,617		-		17,922
Collectively evaluated for impairment		192,103		4,244,934		9,395		4,446,432

Total ending loans balance	$	192,408		4,262,551		9,395		4,464,354

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 March 31, 2022:

	Type of Collateral
(dollars in thousands)
	Real Estate		Investment Securities/Cash		Other
Commercial:
Commercial real estate	$	301		-		-
Other		4		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		15,417		-		-
Home equity loans		159		-		-
Home equity lines of credit		2,041		-		-
Installment		-		-		-
Total Loans	$	17,922		-		-

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 months ended March 31, 2022 and 2021.

As of March 31, 2022 loans individually evaluated included approximately $9.8 million of loans in accruing status that were identified as TDR’s in accordance with regulatory guidance related to Chapter 7 bankruptcy loans.

Index

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

	Three months ended March 31, 2022
New York and other states*:
(dollars in thousands)	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		-		-		-
Home equity loans		3		370		370
Home equity lines of credit		-		-		-

Total		3	$	370		370

Florida:

(dollars in thousands)

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

Home equity loans

Home equity lines of credit

Total

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

For the three months ended March 31, 2021 there were no loans that were modified as TDR’s.

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. There were no TDRs that defaulted during the three months ended March 31, 2022 and 2021 which had been modified within the last twelve months.

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.

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, as previously noted, even though there is no modification of terms, the borrowers’ debt to the Company was discharged and they did not reaffirm the debt.

Index

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In situations involving a borrower filing for Chapter 13 bankruptcy protection, however, 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.

The Following table presents the recorded investment in loans by portfolio segment:

	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 $10.0 million as of December 31, 2021.

At December 31, 2021, the Company had approximately $37.3 million of real estate construction loans. 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

The Following table presents the summary of past due loans by portfolio segment:

	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 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 has identified non-accrual commercial and commercial real estate loans, as well as all loans restructured under a TDR, as impaired loans. A loan is considered impaired when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement or the loan is restructured as a TDR.

Index

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 payment status of these homogeneous pools as of December 31, 2021 is included in the aging of the recorded investment of the past due loans table. In addition, the total nonperforming portion of these homogeneous loan pools as of December 31, 2021 is presented in the non-accrual loans table.

The Following table presents the non-accrual loans by portfolio segment:

	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 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 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.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2021:

	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 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

Activity in the allowance for loan losses for the three months ended March 31, 2021 was as follows:

	For the three months ended March 31, 2021
(dollars in thousands)	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*		-			86			7			93
Florida		-			-			2			2
Total loan chargeoffs		-			86			9			95

Recoveries of loans previously charged off:
New York and other states*		32			88			21			141
Florida		-			-			-			-
Total recoveries		32			88			21			141
Net loans (recoveries) charged off		(32	)		(2	)		(12	)		(46	)
(Credit) provision for loan losses		(120	)		555			(85	)		350
Balance at end of period	$	4,052			45,507			432			49,991

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

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

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 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.

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

	Fair Value Measurements at
	March 31, 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	$	62,059	$	-	$	62,059	$	-
State and political subdivisions		41		-		41		-
Mortgage backed securities and collateralized mortgage obligations - residential		244,045		-		244,045		-
Corporate bonds		74,089		-		74,089		-
Small Business Administration- guaranteed participation securities		28,086		-		28,086		-
Other securities		671		-		671		-

Total securities available for sale	$	408,991	$	-	$	408,991	$	-

	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	$	-

There were no transfers between Level 1 and Level 2 during the three months ended March 31, 2022 and 2021.

Index

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

	Fair Value Measurements at
	March 31, 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	$	269	$	-	$	-	$	269	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 $269 thousand at March 31, 2022 and consisted of only residential real estate properties. There were no valuation charges included in earnings for the three months ended March 31, 2022.

Of the total individually evaluated loans of $17.9 million at March 31, 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 March 31, 2022. There were no gross charge-offs related to residential impaired loans included in the table above.

Other real estate owned, which is carried at fair value less costs to sell, was approximately $362 thousand at December 31, 2021 and consisted of 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

The carrying amounts and estimated fair values (represents exit price) of financial instruments, at March 31, 2022 and December 31, 2021 are as follows:

(dollars in thousands)			Fair Value Measurements at
	Carrying		March 31, 2022 Using:
	Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	1,272,548		1,272,548		-		-		1,272,548
Securities available for sale		408,991		-		408,991		-		408,991
Held to maturity securities		9,183		-		9,550		-		9,550
Federal Home Loan Bank stock		5,604		N/A		N/A		N/A		N/A
Net loans		4,418,176		-		-		4,443,718		4,443,718
Accrued interest receivable		8,897		107		1,073		7,717		8,897
Financial liabilities:
Demand deposits		835,281		835,281		-		-		835,281
Interest bearing deposits		4,514,735		3,574,520		933,385		-		4,507,905
Short-term borrowings		248,371		-		248,371		-		248,371
Accrued interest payable		131		36		95		-		131

(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 income (loss) balances, net of tax:

	Three months ended March 31, 2022
(dollars in thousands)	Balance at 12/31/2021			Other Comprehensive Income (loss)- Before Reclassifications			Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 3/31/2022			Balance at 3/31/2022

Net unrealized holding loss on securities available for sale, net of tax	$	(26	)		(14,251	)		-			(14,251	)		(14,277	)
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 loss and prior service credit on pension and postretirement benefit plans, net of tax		(1,533	)		-			(265	)		(265	)		(1,798	)

Accumulated other comprehensive (loss) income, net of tax	$	12,147			(14,251	)		(265	)		(14,516	)		(2,369	)

	Three months ended March 31, 2021
(dollars in thousands)	Balance at 12/31/2020			Other Comprehensive Income (loss)- Before Reclassifications			Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 3/31/2021			Balance at 3/31/2021

Net unrealized holding loss on securities available for sale, net of tax	$	7,186			(4,461	)		-			(4,461	)		2,725
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) loss and prior service credit on pension and postretirement benefit plans, net of tax		(1,334	)		-			(207	)		(207	)		(1,541	)

Accumulated other comprehensive income (loss), net of tax	$	11,936			(4,461	)		(207	)		(4,668	)		7,268

The following represents the reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2022 and 2021:

(dollars in thousands)	Three months ended March 31,
	2022			2021			Affected Line Item in Financial Statements
Amortization of pension and postretirement benefit items:
Amortization of net actuarial gain	$	78			228		Salaries and employee benefits
Amortization of prior service (cost) credit		280			52		Salaries and employee benefits
Income tax benefit		(93	)		(73	)	Income taxes
Net of tax		265			207

Total reclassifications, net of tax	$	265			207

Index

(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 ended March 31, 2022 and 2021. Items outside the scope of ASC 606 are noted as such.

(dollars in thousands)	Three months ended
	March 31,
	2022		2021
Non-interest income
Service Charges on Deposits
Overdraft fees	$	646		617
Other		790		469
Interchange Income		1,702		1,153
Wealth management fees		1,833		2,035
Other (a)		212		154

Total non-interest income	$	5,183		4,428

(a) Not within the scope of ASC 606.

A description of the Company’s revenue streams accounted for ASC 606 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.

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.

Index

(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 March 31, 2022, the Company did not have any leases with terms of twelve months or less.

As of March 31, 2022, the Company does not have any leases that the construction has not started yet. At March 31, 2022, lease expiration dates ranged from one month to 22.5 years and have a weighted average remaining lease term of 9.3 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 March 31,
	2022		2021
Operating lease cost	$	2,052		2,016
Variable lease cost		596		502

Total Lease costs	$	2,648		2,518

(dollars in thousands)	Three months ended March 31,
	2022			2021
Supplemental cash flows information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,093			2,038

Right-of-use assets obtained in exchange for lease obligations:		2,087			302

Weighted average remaining lease term	9.3 years			8.9 years
Weighted average discount rate		2.96	%		3.16	%

Future minimum lease payments under non-cancellable leases as of March 31, 2022 were as follows:


Year ending December 31,
2022^(a)	$	6,211
2023		8,134
2024		8,012
2025		7,603
2026		6,627
Thereafter		24,435
Total lease payments	$	61,022
Less: Interest		7,928

Present value of lease liabilities	$	53,094

^(a)	Excluding the three months ended March 31, 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 March 31, 2022, were $3.5 million, which includes interest in the amount of $473 thousand.

Index

(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 March 31, 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 March 31, 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.

Index

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

(Bank Only)
									Minimum for Capital Adequacy plus Capital Conservation
	As of March 31, 2022					Well
	As of March 31, 2022					Well
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	575,895		9.286	%		5.000	%		4.000	%
Common equity tier 1 capital		575,895		18.743			6.500			7.000
Tier 1 risk-based capital		575,895		18.743			8.000			8.500
Total risk-based capital		614,433		19.997			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 March 31, 2022					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	594,711		9.585	%		4.000	%
Common equity tier 1 capital	$	594,711		19.349			7.000
Tier 1 risk-based capital	$	594,711		19.349			8.500
Total risk-based capital	$	633,260		20.603			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 March 31, 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, but impact disclosure requirements, and reduce potentially individually evaluated loan totals.

(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 March 31, 2022 financial statements. As of March 31, 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 loan 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 March 31, 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 March 31, 2022, and the related consolidated statements of income and comprehensive income for the three-month periods ended March 31, 2022 and March 31, 2021 and the related changes in shareholders’ equity and cash flows for the three-month periods ended March 31, 2022 and March 31, 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
May 6, 2022

Index

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.

•

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;

•

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;

•

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;

•

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 loan and lease losses;

Index

•

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;

•

changes in local market areas and general business and economic trends;

•

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.

Index

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 periods ended March 31, 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 period ended March 31, 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 quarters ended March 31, 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 meet 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 have been and will be excluded from evaluation of troubled debt restructuring (“TDR”) classification and will continue to be 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 March 31, 2022.

Index

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. As of March 31, 2022 87 PPP loans totaling approximately $3 million remain outstanding. 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 first quarter of 2022, financial markets declined as the economy felt the impact from several economic areas, as well as reacting to global concerns. Investors evaluated inflationary worries, higher interest rates, ongoing pandemic concerns, supply-chain bottlenecks, and the war in Ukraine, while also seeing a rise in Treasury yields. For the first quarter of 2022, the S&P 500 Index was down 5.0% and the Dow Jones Industrial Average was down 4.6%. This comes after the economy saw continued improvement throughout 2021. The shape of the yield curve tightened during the quarter as compared to prior quarters. The 10‑year Treasury bond averaged 1.95% during Q1 2022 compared to 1.53% in Q4 2021, an increase of 42 basis points. The 2‑year Treasury bond average rate increased 93 basis points to 1.46%, resulting in a flattening of the yield curve. Consequently, the spread between the 10‑year and the 2-year Treasury bonds decreased from 1.00% on average in Q4 to 0.49% in Q1. 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 to end the quarter at 0.25% to 0.50%, the first rate increase since 2018. 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.

Index

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

Q1/21	Beg of Q1	0.09	0.13	0.36	0.93	0.80
	Peak	0.09	0.17	0.92	1.74	1.59
	Trough	0.01	0.09	0.36	0.93	0.82
	End of Q1	0.03	0.16	0.92	1.74	1.58
	Average in Q1	0.05	0.13	0.62	1.34	1.20

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

The United States economy experienced several areas of concern as 2022 began as mentioned above. 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, particularly those arising during the 2008-2010 financial crisis. Nevertheless, the Company may experience increases in nonperforming loans (“NPLs”) relative to historical levels from time to time. 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.

Index

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 is 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.

Financial Overview

TrustCo recorded net income of $17.1 million, or $0.890 of diluted earnings per share, for the three months ended March 31, 2022, compared to net income of $14.1 million, or $0.730 of diluted earnings per share, in the same period in 2021. Return on average assets was 1.12% and 0.96%, respectively, for the three months ended March 31, 2022 and 2021. Return on average equity was 11.60% and 10.01%, respectively, for the three months ended March 31, 2022 and 2021.

The primary factors accounting for the change in net income for the three months ended March 31, 2022 compared to the same period of the prior year were:

•

A decrease of $1.2 million in interest income which was mitigated by a corresponding decrease in interest expense also of $1.2 million.

•

A decrease of $550 thousand in provision for credit losses for the first quarter of 2022 compared to the first quarter 2021.

•

A increase of $755 thousand in noninterest income for the first quarter of 2022 compared to the first quarter of 2021, primarily driven by a $597 thousand increase in fees for services to customers.

•

A decrease of $2.6 million in noninterest expense for the first quarter 2022 compared to the first quarter 2021, primarily as a result of a decrease in salaries and employee benefits due of a 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 decrease was partially offset by an increase in other expense primarily as a result of higher mortgage origination volume.

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.

Index

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 first 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. From December 2015 through December 2018, the U.S. Federal Reserve Board increased its federal funds target rate from a range of 0.00% - 0.25% to a range of 2.25% - 2.50%. 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 global pandemic. In March 2022 the Federal Reserve board increased the rate to 0.25% to 0.50% to assist with inflationary concerns, with additional rate increases anticipated.

Traditionally, interest rates on bank deposit accounts are heavily influenced by the Federal Funds rate. The average rate on interest bearing deposits was 11 basis points lower in the first quarter of 2022 relative to the prior year period. Rates were lower on all interest bearing deposit accounts as a result of repricing since the Federal Reserve Board lowered the Federal Funds rate due to the pandemic. Please refer to the statistical disclosures in the table below entitled “Distribution of Assets, Liabilities and Shareholders’ Equity: Interest Rates and Interest Differential.”

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 instruments 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.

Index

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 was up 42 basis points, on average, during the first quarter of 2022 compared to the fourth quarter of 2021 and was up 61 basis points as compared to the first 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 first quarter of 2022, the net interest margin was 2.66%, down 12 basis points versus the prior year’s quarter. The quarterly results reflect the following significant factors:

•

The average balance of securities available for sale decreased by $76.5 million while the average yield increased 4 basis points to 1.54%. The average balance of held to maturity securities decreased by $3.7 million and the average yield increased 9 basis points to 3.79% for the first quarter of 2022 compared to the same period in 2021. For both categories of investments, the slight increase in yield was not enough to offset the decrease in average balances year over year.

•

The average loan portfolio grew by $195.2 million to $4.44 billion and the average yield decreased 28 basis points to 3.52% in the first quarter of 2022 compared to the same period in 2021. The increase in the average balance was not enough to offset the decrease in yield, which was primarily the result of less PPP income as compared to the prior year period.

Index

•

The average balance of interest bearing liabilities (primarily deposit accounts) increased $112.9 million and the average rate paid decreased 11 basis points to 0.10% in the first quarter of 2022 compared to the same period in 2021.

During the first 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 $5.78 billion in the first quarter of 2021 to $6.05 billion in the same period of 2022 with an average yield of 2.74% in the first quarter of 2022 and 2.95% in the first quarter of 2021. There was a continued shift in the mix of assets towards 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 decreased $1.2 million in the first quarter of 2022 from the prior year period, on a tax equivalent basis, and was primarily driven by lower market rates on loans. The increase in interest income from average federal funds sold and other short-term investments, as a result of higher balances and interest rate, was mostly offset by less interest income from securities available for sale and held-to-maturity securities due to their lower average balances.

Loans

The average balance of loans was $4.44 billion in the first quarter of 2022 and $4.25 billion in the comparable period in 2021. The yield on loans decreased 28 basis points to 3.52%. The higher average balances did not offset the decrease in yield.

Compared to the first quarter of 2021, the average balance of residential mortgage loans and installment loans increased while commercial loans and home equity lines of credit decreased. The average balance of residential mortgage loans was $4.01 billion in 2022 compared to $3.79 billion in 2021, an increase of 5.8%. The average yield on residential mortgage loans decreased by 27 basis points to 3.42% in the first quarter of 2022 compared to 2021 primarily as a result of the low interest rate environment.

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.

Index

Commercial loans, which consist primarily of loans secured by commercial real estate, decreased $17.8 million to an average balance of $195.0 million in the first quarter of 2022 compared to the same period in the prior year, primarily as a result of forgiven PPP loans. The average yield on this portfolio was down 36 basis points to 5.18% compared to the prior year period, primarily as a result of the less origination income recognized on forgiven PPP loans as compared to the prior year period. The Company remained 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 13 basis points to 3.71% during the first quarter of 2022 compared to the prior year period. The average balances of home equity lines decreased 2.5% to $232.5 million in the first quarter of 2022 as compared to the prior year. Over the last year, customers with home equity lines continued to refinance their balances into fixed rate mortgage loans given the low rate environment and have been less likely to draw on home equity lines due to reduced tax benefits.

Securities Available for Sale

The average balance of the securities available for sale portfolio for the first quarter of 2022 was $406.5 million compared to $482.9 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 1.54% for the first quarter of 2022 compared to 1.50% for the first quarter of 2021. This portfolio is primarily comprised of agency issued residential mortgage backed securities, bonds 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 other comprehensive income (loss), net of tax.

The net unrealized loss in the available for sale securities portfolio was $19.2 million as of March 31, 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.

Held to Maturity Securities

The average balance of held to maturity securities was $9.5 million for the first quarter of 2022 compared to $13.3 million in the first quarter of 2021. The decrease in balances reflects routine paydowns. No new securities were added to this portfolio during the period. The average yield was 3.79% for the first quarter of 2022 compared to 3.70% for the year earlier period. TrustCo expects to hold the securities in this portfolio until they mature or are called.

As of March 31, 2022, this portfolio consisted solely of residential mortgage-backed securities. The balances for these securities are recorded at amortized cost.

Federal Funds Sold and Other Short-term Investments

The 2022 first quarter average balance of Federal Funds sold and other short-term investments was $1.19 billion, a $157.6 million increase from the $1.03 billion average for the same period in 2021. The yield was 0.20% for the first quarter of 2022 and 0.11% for the comparable period in 2021. Interest income from this portfolio increased $302 thousand from $270 thousand in 2021 to $572 thousand in 2022. The higher average balances, as well as an increase in the interest rate on excess reserves in June 2021, and an increase in the federal funds rate in March 2022, resulted in an increase in interest income over the same period in the prior year.

Index

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 deposits (which includes interest bearing checking, money market accounts, savings and time deposits) increased $88.2 million to $4.48 billion for the first quarter of 2022 versus the first quarter in the prior year, and the average rate paid decreased from 0.20% for 2021 to 0.09% for 2022. Total interest expense on these deposits decreased $1.2 million to $960 thousand in the first quarter of 2022 compared to the year earlier period. From the first quarter of 2021 to the first quarter of 2022, interest bearing checking account average balances were up 9.9%, certificates of deposit average balances were down 23.6%, non‑interest demand average balances were up 20.1%, average savings balances increased 16.2% and money market balances were up 9.1%. 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 portfolio.

At March 31, 2022, the maturity of total time deposits is as follows:

(dollars in thousands)

Under 1 year	$	888,760
1 to 2 years		43,570
2 to 3 years		6,297
3 to 4 years		937
4 to 5 years		518
Over 5 years		133
	$	940,215

Average short-term borrowings for the first quarter of 2022 were $248.5 million compared to $223.8 million in the same period in 2021. The average rate decreased during this period from 0.41% in 2021 to 0.38% 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 contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered CDs may be tested from time to time to ensure operational and market readiness.

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Net Interest Income

Taxable equivalent net interest income was relatively flat at $40.1 million in both the first quarter of 2022 and 2021. The net interest spread was down 11 basis points to 2.63% in the first quarter of 2022 compared to the same period in 2021. As previously noted, the net interest margin was down 12 basis points to 2.66 for the first quarter of 2022 compared to the same period in 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.

The following describes the nonperforming assets of TrustCo as of March 31, 2022:

Nonperforming loans and foreclosed real estate: Total NPLs and non-accrual loans were $19.4 million at March 31, 2022, compared to $21.6 million at March 31, 2021. At December 31, 2021 there were total NPLs of $18.8 million and non-accrual loans of $18.7 million. There were no loans at March 31, 2022 and 2021 and December 31, 2021 that were past due 90 days or more and still accruing interest.

At March 31, 2022, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of $19.4 million at March 31, 2022, $19.2 million were residential real estate loans, $187 thousand were commercial loans and mortgages and $41 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 $97 thousand on residential real estate loans (including home equity lines of credit) for the first quarter of 2022 compared to net recoveries of $2 thousand for the first 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.

Index

The Company originates loans throughout its deposit franchise area. At March 31, 2022, 70.0% of its gross loan portfolio balances were in New York State and the immediately surrounding areas (including New Jersey, Vermont and Massachusetts), and 30.0% 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 March 31, 2022, 10.9% were to Florida borrowers, compared to 89.1% to borrowers in New York and surrounding areas. For the three months ended March 31, 2022, New York and surrounding areas experienced net recoveries of approximately $58 thousand and there was no net chargeoffs or recoveries in Florida.

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 March 31, 2022, there were no other loans classified for regulatory purposes that management reasonably expects will materially impact future operating results, liquidity, or capital resources.

TrustCo has identified nonaccrual commercial and commercial real estate loans, as well as all loans restructured under a TDR, as individually evaluated loans. There were $178 thousand of commercial mortgages and commercial loans classified as individually evaluated as of March 31, 2022. There were $232 thousand classified as impaired at December 31, 2021. There were $17.6 million of individually evaluated residential loans at March 31, 2021. $18.3 million were classified as impaired at December 31, 2021.

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

At March 31, 2022 there was $269 thousand of foreclosed real estate compared to $362 thousand at December 31, 2021.

Allowance for credit on loan losses: The Company implemented 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”). The allowance for credit losses on loans increased by $2.4 Million at period end 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 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 first quarter of 2022, the Company recorded a credit to provision for credit losses of $200 thousand, which includes a credit to provision for credit losses on loans of $500 thousand as a result of improving unemployment and housing price forecasts, offset by a provision for credit losses on unfunded commitments of $300 thousand as a result of a corresponding increase in unfunded loans.

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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 March 31, 2022 for economic modeling. The unemployment forecast impacted the reserves due to unemployment rates declining 13% for New York and 8 % for Florida offset by increases in consumer price indices (“CPI”) of 3% for NY and 1% for Florida and increases in Gross Metro Product (“GMP”) 1% for New York and 3% for Florida from December to March respectively.

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

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

(dollars in thousands)	As of March 31, 2022					As of January 1, 2022
	Amount		Percent of Loans to Total Loans			Amount		Percent of Loans to Total Loans
Commercial	$	1,940		3.86	%	$	1,917		4.07	%
Real estate - construction		341		0.68	%		409		0.84	%
Real estate mortgage - 1 to 4 family		39,173		89.96	%		39,620		89.68	%
Home equity lines of credit		4,654		5.29	%		4,609		5.20	%
Installment Loans		70		0.21	%		65		0.21	%
	$	46,178		100.00	%	$	46,620		100.00	%

At March 31, 2022, the allowance for credit losses on loans was $46.2 million, compared to $50.0 million at March 31, 2021 and $44.3 million at December 31, 2021. The allowance represents 1.03% of the loan portfolio as of March 31, 2022 compared to 1.17% at March 31, 2021 and 1.00% at December 31, 2021.

Net recoveries for the three-month period ended March 31, 2022 were $58 thousand and $46 thousand for the prior year period.

During the first quarter of 2022, there were $36 thousand of commercial loan chargeoffs and $11 thousand of consumer loan chargeoffs compared with no commercial loan chargeoffs and $95 thousand of gross residential mortgage and consumer loan chargeoffs in the first quarter of 2021. During the first quarter of 2022 there were no commercial loan recoveries and $105 thousand for residential mortgage and consumer loan recoveries, compared to $32 thousand for commercial loan recoveries and $109 thousand for residential mortgage and consumer loan recoveries in the first quarter of 2021.

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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 CDs may be tested from time to time to ensure operational and market readiness.

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 March 31, 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 March 31, 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.

As of March 31, 2022	Estimated Percentage of Fair value of Capital to Fair value of Assets
+400 BP		28.10	%
+300 BP		27.60
+200 BP		28.40
+100 BP		27.70
Current rates		26.00
-100 BP		23.00

Index

Noninterest Income

Total noninterest income for the first quarter of 2022 and 2021 was $5.2 million and $4.4 million, respectively. The increase over the same period in the prior year was primarily related to an increase of $549 thousand in interchange fees and a $268 thousand gain on the sale of a building, partially offset by a decrease in financial services income of $202 thousand. The fair value of assets under management was $1.03 billion at March 31, 2022, $1.10 billion as of December 31, 2021 and $1.04 billion at March 31, 2021.

Noninterest Expenses

Total noninterest expenses were $22.8 million for the three months ended March 31, 2022, compared to $25.3 million for the three months ended March 31, 2021. Significant changes included a decrease 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. There were also decreases in net occupancy expense, equipment expense, and other real estate expense, net. These decreases were partially offset by an increase in advertising expense due to more marketing efforts, and other expenses increased primarily due to higher mortgage origination volume. The Company does expect salaries and benefit expense to return to historic levels in future periods. Full time equivalent headcount decreased from 820 as of March 31, 2021 to 769 as of March 31, 2022 primarily as a result of a strategic realignment over the past year and the ongoing impact of the pandemic on the labor market.

Income Taxes

In the first quarter of 2022, TrustCo recognized income tax expense of $5.6 million compared to $4.8 million for the first quarter of 2021. The effective tax rates were 24.8% and 25.3%, respectively, for the first quarters of 2022 and 2021.

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 Street 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 March 31, 2022 was $592.9 million compared to $571.0 million at March 31, 2021. TrustCo declared a dividend of $0.35 per share in the first quarter of 2022. This results in a dividend payout ratio of 39.36% based on first quarter 2022 earnings of $17.1 million.

The capital rules, which are generally applicable to both the Company and the Bank, include several measures; specifically, a Tier 1 leverage ratio, a common equity tier 1 (“CET1”) capital ratio, a tier 1 risk-based capital ratio and a total risk-based capital ratio. The rules also impose a capital conservation buffer that requires the Company and the Bank to maintain additional levels of Tier 1 common equity over the minimum risk-based capital levels before they may pay dividends, repurchase shares or pay discretionary bonuses.

Index

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

(Bank Only)
(dollars in thousands)	As of March 31, 2022					Well			Minimum for Capital Adequacy plus Capital Conservation
	Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	575,895		9.286	%		5.000	%		4.000	%
Common equity tier 1 capital		575,895		18.743			6.500			7.000
Tier 1 risk-based capital		575,895		18.743			8.000			8.500
Total risk-based capital		614,433		19.997			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 March 31, 2022					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	594,711		9.585	%		4.000	%
Common equity tier 1 capital		594,711		19.349			7.000
Tier 1 risk-based capital		594,711		19.349			8.500
Total risk-based capital		633,260		20.603			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 March 31, 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 March 31, 2022, Trustco’s consolidated equity to total assets ratio was 9.44% compared to 9.70% at December 31, 2021 and 9.44% at March 31, 2021.

As of March 31, 2022, the capital levels of both TrustCo and the Bank exceeded the minimum standards, including with the current, capital conservation buffer 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 March 31, 2022 and 2021, Trustco Bank met the definition of “well capitalized.”

As noted, the Company’s dividend payout ratio was 39.36% of net income for the first quarter of 2022 and 46.65% of net income for the first quarter of 2021. The per-share dividend paid in both the first quarter of 2022 and the fourth quarter of 2021, was $0.350 and was $0.341 in the first quarter of 2021. 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 7,110 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.

Share Repurchase Program

On February 18, 2021 the Company’s Board of Directors authorized a share repurchase program of up to 2,000,000 shares, which was adjusted to 400,000 shares as a result of the Reverse Stock Split, and represented approximately 2% of its then outstanding common stock. 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 March 31, 2022, the Company repurchased a total of 18 thousand shares at an average price per share of $33.57 for a total of $609 thousand under its Board authorized share repurchase program.

Index

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 $($8.9) million in 2022 and $3.9 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 March 31, 2022								Three months ended March 31, 2021

	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate			Change in Interest			Variance Balance			Variance Rate
																	Income/			Change			Change
Assets																	Expense

Securities available for sale:
U. S. government sponsored enterprises	$	61,755		$	86		0.55	%	$	51,649		$	50		0.38	%	$	36			11			25
Mortgage backed securities and collateralized mortgage obligations-residential		261,124			1,087		1.67	%		327,614			1,237		1.51	%		(150	)		(774	)		624
State and political subdivisions		41			1		6.73	%		50			1		6.47	%		-			-			-
Corporate bonds		52,977			233		1.76	%		63,334			316		1.99	%		(83	)		(49	)		(34	)
Small Business Administration-guaranteed participation securities		29,871			154		2.06	%		39,582			206		2.09	%		(52	)		(50	)		(2	)
Other		686			2		1.17	%		686			6		3.50	%		(4	)		-			(4	)

Total securities available for sale		406,454			1,563		1.54	%		482,915			1,816		1.50	%		(253	)		(862	)		609

Federal funds sold and other short-term Investments		1,187,201			572		0.20	%		1,029,570			270		0.11	%		302			47			255

Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential		9,541			90		3.79	%		13,273			123		3.70	%		(33	)		(52	)		19

Total held to maturity securities		9,541			90		3.79	%		13,273			123		3.70	%		(33	)		(52	)		19
Federal Reserve Bank and Federal Home Loan Bank stock		5,604			62		4.43	%		5,506			69		5.01	%		(7	)		8			(15	)

Commercial loans		194,989			2,525		5.18	%		212,781			2,945		5.54	%		(420	)		(238	)		(182	)
Residential mortgage loans		4,007,886			34,197		3.42	%		3,789,256			34,852		3.69	%		(655	)		8,684			(9,339	)
Home equity lines of credit		232,535			2,125		3.71	%		238,379			2,259		3.84	%		(134	)		(54	)		(80	)
Installment loans		8,974			156		7.03	%		8,795			161		7.41	%		(5	)		17			(22	)

Loans, net of unearned income		4,444,384			39,003		3.52	%		4,249,211			40,217		3.80	%		(1,214	)		8,409			(9,623	)

Total interest earning assets		6,053,184			41,290		2.74	%		5,780,475			42,495		2.95	%		(1,205	)		7,550			(8,755	)

Allowance for credit losses on loans		(46,759	)							(49,945	)
Cash & non-interest earning assets		207,308								199,769

Total assets	$	6,213,733								5,930,299

Liabilities and shareholders’ equity

Deposits:
Interest bearing checking accounts	$	1,191,496			44		0.01	%	$	1,084,572		$	52		0.02	%		(8	)		27			(35	)
Money market accounts		791,689			214		0.11	%		725,570			283		0.16	%		(69	)		146			(215	)
Savings		1,527,975			156		0.04	%		1,315,049			159		0.05	%		(3	)		101			(104	)
Time deposits		964,158			546		0.23	%		1,261,963			1,666		0.54	%		(1,120	)		(327	)		(793	)

Total interest bearing deposits		4,475,318			960		0.09	%		4,387,154			2,160		0.20	%		(1,200	)		(53	)		(1,147	)
Short-term borrowings		248,535			234		0.38	%		223,807			228		0.41	%		6			87			(81	)

Total interest bearing liabilities		4,723,853			1,194		0.10	%		4,610,961			2,388		0.21	%		(1,194	)		34			(1,228	)

Demand deposits		808,695								673,428
Other liabilities		83,633								75,143
Shareholders’ equity		597,552								570,767

Total liabilities and shareholders’ equity	$	6,213,733							$	5,930,299

Net interest income , tax equivalent					40,096								40,107				$	(11	)		7,516			(7,527	)

Net interest spread							2.63	%							2.74	%

Net interest margin (net interest income to total interest earning assets)							2.66	%							2.78	%

Tax equivalent adjustment					-								-

Net interest income					40,096								40,107

Index

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

As detailed in the Annual Report on Form 10-K 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 periods ended March 31, 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 first quarter of 2022, the Company had an average balance of Federal Funds sold and other short-term investments of $1.2 billion compared to $1.0 billion in the first quarter of 2021. 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.

Market disruptions brought about by the COVID-19 pandemic may adversely affect our sensitivity to market interest rates. We could experience an increase in the cost of funding on our balance sheet. We could also experience increased pricing competition for our existing loans or future borrower prospects, which could decrease rates earned on our earning assets.

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

There were no material changes to the risk factors previously disclosed in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2021.

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 March 31, 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)
January 1, 2022 through January 31, 2022		-		N/A		-		330,000
February 1, 2022 through February 28, 2022		-		N/A		-		-
March 1, 2022 through March 31, 2022		18,114	$	33.57		18,114		181,886
Total		18,114	$	33.57		18,114		181,886

(1)

On February 18, 2021 the Company’s Board of Directors authorized a share repurchase program of up to 400,000 shares as adjusted for the Reverse Stock Split, or approximately 2% of the Company’s outstanding common stock. This program expired on February 17, 2022. 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 March 31, 2022, the Company repurchased a total of 18 thousand shares at an average price per share of $33.57 for a total of $609 thousand under its Board authorized share repurchase program.

Item 3.

Defaults Upon Senior Securities

None.

Index

Item 4.

Mine Safety

None.

Item 5.

Other Information

None.

Item 6.

Exhibits

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

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: May 6, 2022

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

	Consolidated Statements of Income for the three month periods ended March 31, 2022 and 2021	3

	Consolidated Statements of Comprehensive Income for the three month periods ended March 31, 2022 and 2021	4

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

	Consolidated Statements of Changes in Shareholders’ Equity for the three month periods ended March 31, 2022 and 2021	6

	Consolidated Statements of Cash Flows for the three month periods ended March 31, 2022 and 2021	7

	Notes to Consolidated Interim Financial Statements	8-42

	Report of Independent Registered Public Accounting Firm	43

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44-63

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64

Item 4.	Controls and Procedures	64

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	65

Item 1A.	Risk Factors	65

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65

Item 3.	Defaults Upon Senior Securities	65

Item 4.	Mine Safety	66

Item 5.	Other Information	66

Item 6.	Exhibits	66