~~NEW YORK~~New York		~~14‑1630287~~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~~Registrant's telephone number, including area code:

~~(518) 377‑3311~~(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~~ ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

☒Yes ☐ No

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

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

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

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 October 31, ~~2017~~2020
$1 Par Value		~~96,107,596~~96,432,657

TrustCo Bank Corp NY

INDEX

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

		Consolidated Statements of Income for the ~~three month~~three-month and ~~nine month~~nine-month periods ended September 30, ~~2017~~2020 and ~~2016~~2019	3

		Consolidated Statements of Comprehensive Income for the ~~three month~~three-month and ~~nine month~~nine-month periods ended September 30, ~~2017~~2020 and ~~2016~~2019	4

		Consolidated Statements of Financial Condition as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019	5

		Consolidated Statements of Changes in Shareholders’ Equity for the ~~nine month~~three and nine-month periods ended September 30, ~~2017~~2020 and ~~2016~~2019	6

		Consolidated Statements of Cash Flows for the ~~nine month~~nine-month periods ended September 30, ~~2017~~2020 and ~~2016~~2019	7

		Notes to Consolidated Interim Financial Statements	8–3739

		Report of Independent Registered Public Accounting Firm	3840

	Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	~~39-60~~41–65

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6166

	Item 4.	Controls and Procedures	6166

	Part II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	6267

	Item 1A.	Risk Factors	6267

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6267

	Item 3.	Defaults Upon Senior Securities	6267

	Item 4.	Mine Safety	6267

	Item 5.	Other Information	6267

	Item 6.	Exhibits	6268

Index

TRUSTCO BANK CORP NY

Consolidated ~~Consolidated~~ Statements of Income (Unaudited)

(dollars in thousands, except per share data)

	Three months ended September 30,					Nine months ended September 30,
	2020			2019		2020		2019

Interest and dividend income:
Interest and fees on loans	$	41,330			41,923		125,058		124,608
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		14			996		541		2,600
State and political subdivisions		1			2		4		6
Mortgage-backed securities and collateralized mortgage obligations - residential		1,319			2,178		4,959		5,885
Corporate bonds		646			321		1,372		801
Small Business Administration-guaranteed participation securities		216			282		690		868
Other securities		5			6		16		16
Total interest and dividends on securities available for sale		2,201			3,785		7,582		10,176

Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential		138			187		475		613
Total interest on held to maturity securities		138			187		475		613

Federal Reserve Bank and Federal Home Loan Bank stock		77			81		351		365
Interest on federal funds sold and other short-term investments		242			2,552		1,702		8,843
Total interest income		43,988			48,528		135,168		144,605

Interest expense:
Interest on deposits:
Interest-bearing checking		55			52		97		267
Savings accounts		161			323		560		1,067
Money market deposit accounts		637			1,177		2,595		3,122
Time deposits		4,749			7,974		16,739		21,462
Interest on short-term borrowings		221			359		778		1,121
Total interest expense		5,823			9,885		20,769		27,039

Net interest income		38,165			38,643		114,399		117,566
Provision (Credit) for loan losses		1,000			0		5,000		(41	)
Net interest income after provision for loan losses		37,165			38,643		109,399		117,607

Noninterest income:
Trustco financial services income		1,784			1,517		4,752		4,933
Fees for services to customers		2,292			2,602		6,414		7,733
Net gain on securities transactions		0			0		1,155		0
Other		265			806		780		1,810
Total noninterest income		4,341			4,925		13,101		14,476

Noninterest expenses:
Salaries and employee benefits		10,899			11,725		33,920		34,887
Net occupancy expense		4,277			4,094		12,968		12,267
Equipment expense		1,607			1,689		5,015		5,300
Professional services		1,311			1,507		3,974		4,725
Outsourced services		1,875			1,875		5,825		5,675
Advertising expense		305			494		1,394		2,057
FDIC and other insurance		660			282		1,563		1,528
Other real estate (income) expense, net		(115	)		33		47		219
Other		1,855			2,371		6,168		7,181
Total noninterest expenses		22,674			24,070		70,874		73,839

Income before taxes		18,832			19,498		51,626		58,244
Income taxes		4,761			4,790		12,988		14,311

Net income	$	14,071			14,708	$	38,638		43,933

Net income per share:
- Basic	$	0.146			0.152	$	0.400		0.454

- Diluted	$	0.146			0.152	$	0.400		0.453

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016

Interest and dividend income:
Interest and fees on loans $ 37,513 36,171 110,219 107,428
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises 465 408 1,667 1,067
State and political subdivisions 6 13 29 40
Mortgage-backed securities and collateralized mortgage obligations-residential 1,815 1,829 5,717 6,114
Corporate bonds 153 97 458 97
Small Business Administration-guaranteed participation securities 380 445 1,189 1,371
Mortgage-backed securities and collateralized mortgage obligations-commercial 22 36 66 110
Other securities 4 4 12 12
Total interest and dividends on securities available for sale 2,845 2,832 9,138 8,811

Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential 276 347 888 1,123
Corporate bonds 102 156 410 464
Total interest on held to maturity securities 378 503 1,298 1,587

Federal Reserve Bank and Federal Home Loan Bank stock 125 131 393 369
Interest on federal funds sold and other short-term investments 1,927 866 4,900 2,542
Total interest income 42,788 40,503 125,948 120,737

Interest expense:
Interest on deposits:
Interest-bearing checking 113 120 371 350
Savings 435 504 1,300 1,712
Money market deposit accounts 469 463 1,403 1,426
Time deposits 2,247 2,468 6,711 7,301
Interest on short-term borrowings 345 281 1,043 800
Total interest expense 3,609 3,836 10,828 11,589

Net interest income 39,179 36,667 115,120 109,148
Provision for loan losses 550 750 1,700 2,350
Net interest income after provision for loan losses 38,629 35,917 113,420 106,798

Noninterest income:
Trustco financial services income 1,844 1,347 5,127 4,464
Fees for services to customers 2,767 2,664 8,201 8,062
Net gain on securities transactions - - - 668
Other 243 718 757 1,306
Total noninterest income 4,854 4,729 14,085 14,500

Noninterest expenses:
Salaries and employee benefits 10,360 8,995 30,129 26,932
Net occupancy expense 4,027 3,887 12,403 11,893
Equipment expense 1,669 1,596 4,653 4,950
Professional services 1,679 1,959 5,570 6,203
Outsourced services 1,650 1,465 4,650 4,441
Advertising expense 699 489 2,019 1,788
FDIC and other insurance 1,018 1,127 3,077 5,066
Other real estate expense (income), net 275 895 770 1,837
Other 2,149 2,636 7,187 7,352
Total noninterest expenses 23,526 23,049 70,458 70,462

Income before taxes 19,957 17,597 57,047 50,836
Income taxes 7,361 6,667 21,264 19,033

Net income $ 12,596 10,930 35,783 31,803

Net income per share:
- Basic $ 0.131 0.114 0.373 0.333

- Diluted $ 0.131 0.114 0.372 0.333

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 September 30,						Nine months ended September 30,
	2020			2019			2020			2019

Net income	$	14,071			14,708			38,638			43,933

Net unrealized holding (loss) gain on securities available for sale		(267	)		2,418			11,392			14,185
Reclassification adjustments for net gain recognized in income		0			0			(1,155	)		0
Tax effect		69			(628	)		(2,660	)		(3,686	)

Net unrealized (loss) gain on securities available for sale, net of tax		(198	)		1,790			7,577			10,499


Amortization of net actuarial gain		(222	)		(35	)		(531	)		(103	)
Amortization of prior service credit		(49	)		(83	)		(147	)		(250	)
Tax effect		70			31			177			92
Amortization of net actuarial gain and prior service credit on pension and postretirement plans, net of tax		(201	)		(87	)		(501	)		(261	)

Other comprehensive (loss) income, net of tax		(399	)		1,703			7,076			10,238
Comprehensive income	$	13,672			16,411			45,714			54,171

Three Months Ended
September 30

Nine Months Ended
September 30

2017 2016 2017 2016

Net income $ 12,596 10,930 35,783 31,803

Net unrealized holding gain on securities available for sale 938 (125 ) 5,460 12,475
Reclassification adjustments for net gain recognized in income - - - (668 )
Tax effect (376 ) 50 (2,185 ) (4,723 )

Net unrealized gain on securities available for sale, net of tax 562 (75 ) 3,275 7,084

Amortization of net actuarial gain (72 ) (8 ) (208 ) (25 )
Amortization of prior service cost 23 22 68 67
Tax effect 20 (6 ) 56 (17 )
Amortization of net actuarial gain and prior service cost on pension and postretirement plans, net of tax (29 ) 8 (84 ) 25

Other comprehensive income, net of tax 533 (67 ) 3,191 7,109
Comprehensive income $ 13,129 10,863 38,974 38,912

See accompanying notes to unaudited consolidated interim financial statements.

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Financial Condition (Unaudited)

(dollars in thousands, except per share data)

	September 30, 2020			December 31, 2019
ASSETS:

Cash and due from banks	$	47,703			48,198

Federal funds sold and other short term investments		908,616			408,648
Total cash and cash equivalents		956,319			456,846

Securities available for sale		454,743			573,823

Held to maturity securities (fair value 2020 $16,343; 2019 $19,680)		15,094			18,618

Federal Reserve Bank and Federal Home Loan Bank stock		5,506			9,183

Loans, net of deferred net costs		4,214,555			4,062,196
Less:
Allowance for loan losses		49,123			44,317
Net loans		4,165,432			4,017,879

Bank premises and equipment, net		34,417			34,622
Operating lease right-of-use assets		47,174			51,475
Other assets		57,244			58,876

Total assets	$	5,735,929			5,221,322

LIABILITIES:
Deposits:
Demand	$	635,345			463,858
Interest-bearing checking		1,024,290			875,672
Savings accounts		1,235,259			1,113,146
Money market deposit accounts		699,132			599,163
Time deposits		1,305,024			1,398,177
Total deposits		4,899,050			4,450,016

Short-term borrowings		193,455			148,666
Operating lease liabilities		52,125			56,553
Accrued expenses and other liabilities		30,771			27,830

Total liabilities		5,175,401			4,683,065

SHAREHOLDERS' EQUITY:
Capital stock par value $1; 150,000,000 shares authorized; 100,204,832 and 100,204,832 shares issued at September 30, 2020 and December 31, 2019, respectively		100,205			100,205
Surplus		176,441			176,427
Undivided profits		306,741			288,067
Accumulated other comprehensive income, net of tax		11,537			4,461
Treasury stock at cost - 3,772,175 and 3,283,175 shares at September 30, 2020 and December 31, 2019, respectively		(34,396	)		(30,903	)

Total shareholders' equity		560,528			538,257

Total liabilities and shareholders' equity	$	5,735,929			5,221,322

September 30, 2017 December 31, 2016
ASSETS: (Unaudited) (Audited)

Cash and due from banks $ 41,598 48,719

Federal funds sold and other short term investments 582,599 658,555
Total cash and cash equivalents 624,197 707,274

Securities available for sale 580,430 620,360

Held to maturity securities (fair value 2017 $30,731; 2016 $47,526) 29,268 45,490

Federal Reserve Bank and Federal Home Loan Bank stock 8,779 9,579

Loans, net of deferred net costs 3,578,282 3,430,586
Less:
Allowance for loan losses 44,082 43,890
Net loans 3,534,200 3,386,696

Bank premises and equipment, net 35,028 35,466
Other assets 58,373 63,941

Total assets $ 4,870,275 4,868,806

LIABILITIES:
Deposits:
Demand $ 397,623 377,755
Interest-bearing checking 862,067 815,534
Savings accounts 1,265,229 1,271,449
Money market deposit accounts 564,557 571,962
Time deposits 1,075,886 1,159,463
Total deposits 4,165,362 4,196,163

Short-term borrowings 216,508 209,406
Accrued expenses and other liabilities 33,477 30,551

Total liabilities $ 4,415,347 4,436,120

SHAREHOLDERS’ EQUITY:
Capital stock par value $1; 150,000,000 shares authorized; 99,561,882 and 99,214,382 shares issued at September 30, 2017 and December 31, 2016, respectively 99,562 99,214
Surplus 172,712 171,425
Undivided profits 218,401 201,517
Accumulated other comprehensive loss, net of tax (3,060 ) (6,251 )
Treasury stock at cost - 3,454,286 and 3,434,205 shares at
September 30, 2017 and December 31, 2016, respectively (32,687 ) (33,219 )

Total shareholders’ equity 454,928 432,686

Total liabilities and shareholders’ equity $ 4,870,275 4,868,806

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

Beginning balance, January 1, 2019	$	100,175		176,710			256,397			(10,309	)		(33,102	)		489,871
Net income		0		0			14,558			0			0			14,558
Other comprehensive income, net of tax		0		0			0			3,298			0			3,298
Stock options exercised (5,100 shares)		5		30			0			0			0			35
Cash dividend declared, $0.068125 per share		0		0			(6,591	)		0			0			(6,591	)
Purchase of treasury stock (4,131 shares)		0		0			0			0			(35	)		(35	)
Sale of treasury stock (86,297 shares)		0		(218	)		0			0			812			594
Stock based compensation expense		0		(12	)		0			0			0			(12	)

Ending balance, March 31, 2019	$	100,180		176,510			264,364			(7,011	)		(32,325	)		501,718
Net income		0		0			14,667			0			0			14,667
Other comprehensive income, net of tax		0		0			0			5,237			0			5,237
Cash dividend declared, $0.068125 per share		0		0			(6,598	)		0			0			(6,598	)
Sale of treasury stock (76,443 shares)		0		(120	)		0			0			720			600
Stock based compensation expense		0		6			0			0			0			6

Ending balance, June 30, 2019	$	100,180		176,396			272,433			(1,774	)		(31,605	)		515,630
Net income		0		0			14,708			0			0			14,708
Other comprehensive income, net of tax		0		0			0			1,703			0			1,703
Cash dividend declared, $0.068125 per share		0		0			(6,599	)		0			0			(6,599	)
Stock options exercised (19,850 shares)		20		98			0			0			0			118
Sale of treasury stock (74,656 shares)		0		(105	)		0			0			702			597
Stock based compensation expense		0		6			0			0			0			6

Ending balance, September 30, 2019	$	100,200		176,395			280,542			(71	)		(30,903	)		526,163

Beginning balance, January 1, 2020	$	100,205		176,427			288,067			4,461			(30,903	)		538,257
Net income		0		0			13,313			0			0			13,313
Other comprehensive income, net of tax		0		0			0			6,931			0			6,931
Cash dividend declared, $0.068125 per share		0		0			(6,827	)		0			0			(6,827	)
Purchase of treasury stock (489,000 shares)		0		0			0			0			(3,493	)		(3,493	)
Stock based compensation expense		0		4			0			0			0			4

Ending balance, March 31, 2020	$	100,205		176,431			294,553			11,392			(34,396	)		548,185
Net income		0		0			11,254			0			0			11,254
Other comprehensive income, net of tax		0		0			0			544			0			544
Cash dividend declared, $0.068125 per share		0		0			(6,568	)		0			0			(6,568	)
Stock based compensation expense		0		6			0			0			0			6

Ending balance, June 30, 2020	$	100,205		176,437			299,239			11,936			(34,396	)		553,421
Net income		0		0			14,071			0			0			14,071
Other comprehensive income, net of tax		0		0			0			(399	)		0			(399	)
Cash dividend declared, $0.068125 per share		0		0			(6,569	)		0			0			(6,569	)
Stock based compensation expense		0		4			0			0			0			4

Ending balance, September 30, 2020	$	100,205		176,441			306,741			11,537			(34,396	)		560,528

Capital
Stock
Surplus
Undivided
Profits

Accumulated
Other
Comprehensive
(Loss) Income

Treasury
Stock
Total

Beginning balance, January 1, 2016 $ 98,973 171,443 184,009 (4,781 ) (36,334 ) 413,310
Net income - - 31,803 - - 31,803
Other comprehensive income, net of tax - - - 7,109 - 7,109
Cash dividend declared, $.1969 per share - - (18,799 ) - - (18,799 )
Stock options exercised (147,630 shares) 148 612 - - - 760
Purchase of treasury stock (111,906 shares) - - - - (701 ) (701 )
Sale of treasury stock (316,337 shares) - (1,130 ) - - 3,088 1,958
Stock based compensation expense - 168 - - - 168

Ending balance, September 30, 2016 $ 99,121 171,093 197,013 2,328 (33,947 ) 435,608

Beginning balance, January 1, 2017 $ 99,214 171,425 201,517 (6,251 ) (33,219 ) 432,686
Net income - - 35,783 - - 35,783
Other comprehensive income, net of tax - - - 3,191 - 3,191
Cash dividend declared, $.1969 per share - - (18,899 ) - - (18,899 )
Stock options exercised (347,500 shares) 348 1,510 - - - 1,858
Purchase of treasury stock (251,646 shares) - - - - (1,683 ) (1,683 )
Sale of treasury stock (231,750 shares) - (337 ) - - 2,215 1,878
Stock based compensation expense - 114 - - - 114

Ending balance, September 30, 2017 $ 99,562 172,712 218,401 (3,060 ) (32,687 ) 454,928

See accompanying notes to unaudited consolidated interim financial statements.

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)

	Nine months ended September 30,
	2020			2019

Cash flows from operating activities:
Net income	$	38,638			43,933

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,003			2,958
Amortization of right-of-use asset		4,588			4,420
Net gain on sale of other real estate owned		(332	)		(686	)
Writedown of other real estate owned		120			294
Provision (credit) for loan losses		5,000			(41	)
Deferred tax (benefit) expense		(1,199	)		844
Net amortization of securities		2,703			2,128
Stock based compensation expense		14			0
Net gain on sale of bank premises and equipment		0			(3	)
Net gain on sales of securities		(1,155	)		0
Decrease in taxes receivable		570			1,903
Increase in interest receivable		(180	)		(397	)
(Decrease) increase in interest payable		(682	)		510
Increase in other assets		(1,201	)		(2,669	)
Decrease in operating lease liabilities		(4,715	)		(4,489	)
Increase in accrued expenses and other liabilities		2,734			1,066
Total adjustments		9,268			5,838
Net cash provided by operating activities		47,906			49,771

Cash flows from investing activities:
Proceeds from sales and calls of securities available for sale		226,886			101,306
Proceeds from calls and maturities of held to maturity securities		3,398			2,665
Purchases of securities available for sale		(103,991	)		(260,466	)
Proceeds from maturities of securities available for sale		5,000			10,052
Purchases of Federal Reserve Bank and Federal Home Loan Bank stock		(380	)		(230	)
Proceeds from redemption of Federal Reserve Bank stock		4,057			0
Net increase in loans		(152,987	)		(115,120	)
Proceeds from dispositions of other real estate owned		1,802			3,159
Proceeds from dispositions of bank premises and equipment		0			3
Purchases of bank premises and equipment		(2,798	)		(2,432	)
Net cash used in investing activities		(19,013	)		(261,063	)

Cash flows from financing activities:
Net increase in deposits		449,034			186,920
Net increase (decrease) in short-term borrowings		44,789			(10,798	)
Proceeds from exercise of stock options		0			153
Proceeds from sale of treasury stock		0			1,791
Purchases of treasury stock		(3,493	)		(35	)
Dividends paid		(19,750	)		(19,771	)
Net cash provided by financing activities		470,580			158,260
Net increase (decrease) in cash and cash equivalents		499,473			(53,032	)
Cash and cash equivalents at beginning of period		456,846			503,709
Cash and cash equivalents at end of period	$	956,319			450,677

Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest paid	$	21,451			26,529
Income taxes paid		12,274			12,263
Other non cash items:
Transfer of loans to other real estate owned		434			3,501
Increase in dividends payable		214			17
Change in unrealized gain on securities available for sale-gross of deferred taxes		10,237			14,185
Change in deferred tax effect on unrealized gain on securities available for sale		(2,660	)		(3,686	)
Amortization of net actuarial gain and prior service credit on pension and postretirement plans		(678	)		(353	)
Change in deferred tax effect of amortization of net actuarial gain postretirement benefit plans		177			92

Nine months ended September 30,
2017 2016

Cash flows from operating activities:
Net income $ 35,783 31,803

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,857 3,071
Net gain on sale of other real estate owned (897 ) (281 )
Writedown of other real estate owned 823 911
Provision for loan losses 1,700 2,350
Deferred tax expense 1,122 3,899
Net amortization of securities 2,244 3,702
Stock based compensation expense 114 168
Net loss on sale/retirement of bank premises and equipment 43 (480 )
Net gain on sales of securities - (668 )
Decrease in taxes receivable 2,748 2,320
Decrease in interest receivable 257 (610 )
Decrease in interest payable (56 ) (5 )
Increase in other assets (2,214 ) (4,844 )
Increase (decrease) in accrued expenses and other liabilities 2,957 (297 )
Total adjustments 11,698 9,236
Net cash provided by operating activities 47,481 41,039

Cash flows from investing activities:

Proceeds from sales and calls of securities available for sale 109,123 205,312
Proceeds from calls and maturities of held to maturity securities 16,222 8,435
Purchases of securities available for sale (65,977 ) (250,554 )
Proceeds from maturities of securities available for sale - 550
Purchases of Federal Reserve Bank and Federal Home Loan Bank stock (144 ) (99 )
Proceeds from redemption of Federal Reserve Bank and Federal Home Loan Bank stock 944 -
Net increase in loans (152,334 ) (101,292 )
Proceeds from dispositions of other real estate owned 4,593 4,860
Proceeds from dispositions of bank premises and equipment - 674
Purchases of bank premises and equipment (2,462 ) (1,732 )
Net cash (used in) provided by investing activities (90,035 ) (133,846 )

Cash flows from financing activities:

Net change in deposits (30,801 ) 67,860
Net change in short-term borrowings 7,102 (12,022 )
Proceeds from exercise of stock options 1,858 760
Proceeds from sale of treasury stock 1,878 1,958
Purchases of treasury stock (1,683 ) (701 )
Dividends paid (18,877 ) (18,776 )
Net cash provided by financing activities (40,523 ) 39,079
Net decrease in cash and cash equivalents (83,077 ) (53,728 )
Cash and cash equivalents at beginning of period 707,274 718,156
Cash and cash equivalents at end of period $ 624,197 664,428

Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest paid $ 10,884 11,594
Income taxes paid 18,508 16,944
Other non cash items:
Transfer of loans to other real estate owned 3,130 3,803
Increase in dividends payable 22 23
Change in unrealized gain on securities available for sale-gross of deferred taxes 5,460 11,807
Change in deferred tax effect on unrealized gain on securities available for sale (2,185 ) (4,723 )
Amortization of net actuarial (gain) loss and prior service cost on pension and postretirement plans (140 ) 42
Change in deferred tax effect of amortization of net actuarial (gain) loss and prior service cost on pension and postretirement plans 56 (17 )

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 principal subsidiary, Trustco Bank (also referred to as the “Bank”) and other subsidiaries after elimination of all significant intercompany accounts and transactions. Prior period amounts are reclassified when necessary to conform to the current period presentation. The net income reported for the three and nine months ended September 30, ~~2017~~2020 is not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017,~~2020, 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 September 30, 2020, the results of operations for ~~fair presentation.~~the three and nine months ended September 30, 2020 and 2019, and the cash flows for the nine months ended September 30, 2020 and 2019. The accompanying 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~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. The accompanying consolidated 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.

Effective January 1, 2017, the Company adopted FASB issued ASU No. 2016-09, “Improvement to Employee Share-Based Payment Accounting” which amended existing guidance to simplify aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The adoption of these amendments did not have a material impact on the Consolidated Interim Financial Statements.

(2) Earnings Per Share

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

A reconciliation of the component parts of earnings per share for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 is as follows:

(in thousands, except per share data)	For the three months ended September 30,				For the nine months ended September 30,
	2020		2019		2020		2019

Net income	$	14,071		14,708	$	38,638		43,933
Weighted average common shares		96,433		96,907		96,531		96,825
Stock Options		4		70		14		72
Weighted average common shares including potential dilutive shares		96,437		96,977		96,545		96,897

Basic EPS	$	0.146		0.152	$	0.400		0.454

Diluted EPS	$	0.146		0.152	$	0.400		0.453

(in thousands, except per share data)
For the three months ended
September 30:

For the nine months ended
September 30:

2017 2016 2017 2016
Net income $ 12,596 10,930 $ 35,783 31,803
Weighted average common shares 96,102 95,603 95,997 95,486
Stock Options 103 119 94 86
Weighted average common shares including potential dilutive shares 96,205 95,722 96,091 95,572

Basic EPS $ 0.131 0.114 $ 0.373 0.333

Diluted EPS $ 0.131 0.114 $ 0.372 0.333

~~Index~~

For the three and nine months ended September 30, ~~2017,~~2020 and 2019 the weighted average ~~number of~~ antidilutive stock options excluded from ~~diluted~~dilutive earnings ~~per share was~~were approximately ~~995~~452 thousand and ~~1.4 million. For the three and nine months ended September 30, 2016 the weighted average number of antidilutive stock options excluded from diluted earnings per share was approximately 1.6 million.~~-0-, respectively. The stock options are antidilutive because the strike price is greater than the average fair value of the Company’s common stock for the periods presented.

Index

(3) Benefit Plans

The table below outlines the components of the ~~Company’s~~Company's net periodic benefit recognized during the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 for its pension and other postretirement benefit plans:

	Three months ended September 30,
	Pension Benefits						Other Postretirement Benefits
(dollars in thousands)	2020			2019			2020			2019

Service cost	$	9			10			15			17
Interest cost		269			311			40			60
Expected return on plan assets		(755	)		(702	)		(296	)		(248	)
Amortization of net loss (gain)		(5	)		14			(217	)		(49	)
Amortization of prior service credit		0			0			(49	)		(83	)
Net periodic benefit	$	(482	)		(367	)		(507	)		(303	)

For the three months ended September 30,
Pension Benefits Other Postretirement Benefits
(dollars in thousands) 2017 2016 2017 2016

Service cost $ 11 15 26 32
Interest cost 326 343 54 61
Expected return on plan assets (686 ) (669 ) (190 ) (180 )
Amortization of net loss (gain) 17 46 (89 ) (54 )
Amortization of prior service cost - - 23 22
Net periodic benefit $ (332 ) (265 ) (176 ) (119 )

	Nine months ended September 30,
	Pension Benefits						Other Postretirement Benefits
(dollars in thousands)	2020			2019			2020			2019

Service cost	$	28			31			55			49
Interest cost		807			933			152			180
Expected return on plan assets		(2,265	)		(2,108	)		(887	)		(743	)
Amortization of net loss (gain)		0			44			(531	)		(147	)
Amortization of prior service credit		0			0			(147	)		(250	)
Net periodic benefit	$	(1,430	)		(1,100	)		(1,358	)		(911	)

For the nine months ended September 30,
Pension Benefits Other Postretirement Benefits
(dollars in thousands) 2017 2016 2017 2016

Service cost $ 33 46 77 96
Interest cost 977 1,029 164 184
Expected return on plan assets (2,058 ) (1,994 ) (571 ) (540 )
Amortization of net loss (gain) 50 138 (258 ) (163 )
Amortization of prior service cost - - 68 67
Net periodic benefit $ (998 ) (781 ) (520 ) (356 )

The Company does not expect to make contributions to its pension and postretirement benefit plans in ~~2017.~~2020. As of September 30, ~~2017, no~~2020, 0 contributions have been made, however, this decision is reviewed each quarter and is subject to change based upon market conditions.

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

Index

(4) Investment Securities

(a) Securities available for sale

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

	September 30, 2020
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	30,000		3		7		29,996
State and political subdivisions		110		1		0		111
Mortgage backed securities and collateralized mortgage obligations - residential		301,490		8,369		91		309,768
Corporate bonds		69,231		1,048		166		70,113
Small Business Administration - guaranteed participation securities		42,599		1,471		0		44,070
Other		685		0		0		685

Total Securities Available for Sale	$	444,115		10,892		264		454,743

(dollars in thousands) September 30, 2017

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

U.S. government sponsored enterprises $ 125,024 93 1,459 123,658
State and political subdivisions 521 12 - 533
Corporate bonds 40,442 - 61 40,381
Mortgage backed securities and collateralized mortgage obligations - residential 338,519 164 3,152 335,531
Small Business Administration- guaranteed participation securities 71,169 - 1,351 69,818
Mortgage backed securities and collateralized mortgage obligations - commercial 9,875 - 51 9,824
Other 650 - - 650
Total debt securities 586,200 269 6,074 580,395
Equity securities 35 - - 35
Total securities available for sale $ 586,235 269 6,074 580,430

	December 31, 2019
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	104,895		36		419		104,512
State and political subdivisions		160		2		0		162
Mortgage backed securities and collateralized mortgage obligations - residential		388,537		2,406		1,426		389,517
Corporate bonds		30,164		367		95		30,436
Small Business Administration - guaranteed participation securities		48,991		0		480		48,511
Other		685		0		0		685

Total securities available for sale	$	573,432		2,811		2,420		573,823

(dollars in thousands) December 31, 2016

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

U.S. government sponsored enterprises $ 119,887 - 2,621 117,266
State and political subdivisions 873 13 - 886
Mortgage backed securities and collateralized mortgage obligations - residential 378,068 123 5,883 372,308
Corporate bonds 40,956 - 251 40,705
Small Business Administration- guaranteed participation securities 81,026 - 2,527 78,499
Mortgage backed securities and collateralized mortgage obligations - commercial 10,130 - 119 10,011
Other 650 - - 650
Total debt securities 631,590 136 11,401 620,325
Equity securities 35 - - 35
Total securities available for sale $ 631,625 136 11,401 620,360

~~Index~~

The following table distributes the debt securities included in the available for sale portfolio as of September 30, ~~2017,~~2020, 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	$	18,563		18,747
Due in one year through five years		81,445		82,140
Due after five years through ten years		18		18
Mortgage backed securities and collateralized mortgage obligations - residential		301,490		309,768
Small Business Administration - guaranteed participation securities		42,599		44,070
	$	444,115		454,743

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:

	September 30, 2020
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss

U.S. government sponsored enterprises	$	9,993		7		0		0		9,993		7
Mortgage backed securities and collateralized mortgage obligations - residential		20,096		91		0		0		20,096		91
Corporate bonds		15,723		103		4,937		63		20,660		166

Total	$	45,812		201		4,937		63		50,749		264

	December 31, 2019
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss

U.S. government sponsored enterprises	$	19,820		180		74,656		239		94,476		419
Mortgage backed securities and collateralized mortgage obligations - residential		67,322		446		169,169		980		236,491		1,426
Corporate bonds		4,905		95		0		0		4,905		95
Small Business Administration - guaranteed participation securities		48,510		480		0		0		48,510		480

Total	$	140,557		1,201		243,825		1,219		384,382		2,420

The proceeds from sales and calls of securities available for sale, gross realized gains and gross realized losses from sales and calls during the three and nine months ended September 30, 2020 and 2019 are as follows:

	Three months ended September 30,
(dollars in thousands)	2020		2019

Proceeds from sales	$	0	$	0
Proceeds from calls/paydowns		43,052		56,856
Proceeds from maturities		0		0
Gross realized losses		0		0

	Nine months ended September 30,
(dollars in thousands)	2020		2019

Proceeds from sales	$	29,219	$	0
Proceeds from calls/paydowns		197,667		101,306
Proceeds from maturities		5,000		10,052
Gross realized gains		1,155		0

The current interest rate environment has significantly contributed to more bonds being called. There were no transfers of securities available for sale during the three and nine months ended September 30, 2020 and 2019.

Index

(b) Held to maturity securities

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

	September 30, 2020
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	15,094		1,249		0		16,343

Total held to maturity	$	15,094		1,249		0		16,343

	December 31, 2019
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	18,618		1,062		0		19,680

Total held to maturity	$	18,618		1,062		0		19,680

The following table distributes the debt securities included in the held to maturity portfolio as of September 30, 2020, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty. Securities not due at a single maturity date are presented separately:

(dollars in thousands)	Amortized Cost		Fair Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	15,094		16,343
	$	15,094		16,343

(dollars in thousands)
Amortized
Cost

Fair
Value

Due in one year or less $ 50,331 50,283
Due in one year through five years 106,105 104,749
Due after five years through ten years 10,201 10,190
Due after ten years - -
Mortgage backed securities and collateralized mortgage obligations - residential 338,519 335,531
Small Business Administration- guaranteed participation securities 71,169 69,818
Mortgage backed securities and collateralized mortgage obligations - commercial 9,875 9,824
$ 586,200 580,395

(dollars in thousands) September 30, 2017

Less than
12 months

12 months
or more

Total

Fair
Value

Gross
Unreal.
Loss

Fair
Value

Gross
Unreal.
Loss

Fair
Value

Gross
Unreal.
Loss

U.S. government sponsored enterprises $ 24,887 113 88,544 1,346 113,431 1,459
Corporate bonds - - 40,381 61 40,381 61
Mortgage backed securities and collateralized mortgage obligations - residential 228,925 1,972 82,423 1,180 311,348 3,152
Small Business Administration- guaranteed participation securities 20,070 270 49,748 1,081 69,818 1,351
Mortgage backed securities and collateralized mortgage obligations - commercial - - 9,824 51 9,824 51

Total $ 273,882 2,355 270,920 3,719 544,802 6,074

~~Index~~

(dollars in thousands) December 31, 2016

Less than
12 months

12 months
or more

Total

Fair
Value

Gross
Unreal.
Loss

Fair
Value

Gross
Unreal.
Loss

Fair
Value

Gross
Unreal.
Loss

U.S. government sponsored enterprises $ 102,266 2,621 - - 102,266 2,621
Corporate bonds 40,705 251 - - 40,705 251
Mortgage backed securities and collateralized mortgage obligations - residential 359,622 5,766 4,713 117 364,335 5,883
Small Business Administration- guaranteed participation securities 64,560 1,960 13,940 567 78,500 2,527
Mortgage backed securities and collateralized mortgage obligations - commercial 10,011 119 - - 10,011 119

Total $ 577,164 10,717 18,653 684 595,817 11,401

(dollars in thousands) Three months ended September 30,
2017 2016

Proceeds from sales $ - -
Proceeds from calls 35,554 70,762
Gross realized gains - -
Gross realized losses - -

(dollars in thousands) Nine months ended September 30,
2017 2016

Proceeds from sales $ - 44,829
Proceeds from calls 109,123 160,483
Gross realized gains - 668
Gross realized losses - -

There were no sales of securities available for sale during the three and nine months ended September 30, 2017. For the three and nine months ended September 30, 2016, income tax expense recognized on net gains on sales of securities available for sale was approximately $267 thousand.

~~Index~~

~~(b) Held to maturity securities~~

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

(dollars in thousands) September 30, 2017

Amortized
Cost

Gross
Unrecognized
Gains

Gross
Unrecognized
Losses

Fair
Value

Mortgage backed securities and collateralized mortgage obligations - residential $ 29,268 1,463 - 30,731
Total held to maturity $ 29,268 1,463 - 30,731

(dollars in thousands) December 31, 2016

Amortized
Cost

Gross
Unrecognized
Gains

Gross
Unrecognized
Losses

Fair
Value

Mortgage backed securities and collateralized mortgage obligations - residential $ 35,500 1,736 - 37,236
Corporate bonds 9,990 300 - 10,290
Total held to maturity $ 45,490 2,036 - 47,526

~~The following table distributes~~held at cost on the ~~debt securities included in the~~financial statements. There were 0 gross unrecognized losses on held to maturity ~~portfolio~~securities as of September 30, ~~2017, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments~~2020 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:~~December 31, 2019.

(dollars in thousands)
Amortized
Cost

Fair
Value

Mortgage backed securities and collateralized mortgage obligations - residential 29,268 30,731
$ 29,268 30,731

There were ~~no held to maturity securities in an unrecognized loss position as of September 30, 2017 or December 31, 2016.~~

~~There were no~~0 sales or transfers of held to maturity securities during the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~.2019.

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. ~~Investment securities classified as available for sale or held to maturity are evaluated for OTTI under FASB ASC Topic 320~~,~~Investments – Debt and Equity Securities~~ ~~(“ASC 320”)~~.

~~Index~~

In determining OTTI ~~under the ASC 320 model,~~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. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

As of September 30, ~~2017,~~2020, the Company’s security ~~portfolios~~portfolio included certain securities which were in an unrealized loss ~~position. The declines~~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 ~~are~~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 September 30, ~~2017~~.2020.

Mortgage backed securities and collateralized mortgage obligations – residential: At September 30, 2020, 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 September 30, 2020.

14Corporate Bonds: At September 30, 2020, corporate bonds held by the Company are investment grade quality. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2020.

Index

(5) Loans and Allowance for Loan Losses

The following table presents the recorded investment in loans by loan class:

	September 30, 2020
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	152,994		18,579		171,573
Other		59,886		204		60,090
Real estate mortgage - 1 to 4 family:
First mortgages		2,580,577		1,065,903		3,646,480
Home equity loans		62,595		15,671		78,266
Home equity lines of credit		200,605		47,715		248,320
Installment		7,997		1,829		9,826
Total loans, net	$	3,064,654	$	1,149,901		4,214,555
Less: Allowance for loan losses						49,123
Net loans					$	4,165,432

September 30, 2017
(dollars in thousands)
New York and
other states*
Florida Total
Commercial:
Commercial real estate $ 152,228 12,980 165,208
Other 21,754 319 22,073
Real estate mortgage - 1 to 4 family:
First mortgages 2,251,152 742,697 2,993,849
Home equity loans 64,556 12,565 77,121
Home equity lines of credit 267,143 44,610 311,753
Installment 6,796 1,482 8,278
Total loans, net $ 2,763,629 814,653 3,578,282
Less: Allowance for loan losses 44,082
Net loans $ 3,534,200

	December 31, 2019
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	162,186		17,752		179,938
Other		19,326		235		19,561
Real estate mortgage - 1 to 4 family:
First mortgages		2,541,440		953,995		3,495,435
Home equity loans		69,791		18,548		88,339
Home equity lines of credit		221,487		46,435		267,922
Installment		8,706		2,295		11,001
Total loans, net	$	3,022,936		1,039,260		4,062,196
Less: Allowance for loan losses						44,317
Net loans					$	4,017,879

December 31, 2016
(dollars in thousands)

New York and
other states*
Florida
Total

Commercial:

Commercial real estate $ 151,366
12,243

163,609

Other 27,539 46 27,585
Real estate mortgage - 1 to 4 family:
First mortgages 2,158,904 665,183 2,824,087
Home equity loans 60,892 10,754 71,646
Home equity lines of credit 286,586 48,255 334,841
Installment 7,048 1,770 8,818
Total loans, net $ 2,692,335 738,251 3,430,586
Less: Allowance for loan losses 43,890
Net loans $ 3,386,696

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

At September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Company had approximately ~~$27.6~~$26.8 million and ~~$24.8~~$28.5 million of real estate construction loans, respectively. Of the ~~$27.6~~$26.8 million in real estate construction loans at September 30, ~~2017,~~2020, approximately ~~$17.2~~$11.0 million are secured by first mortgages to residential borrowers while approximately ~~$10.4~~$15.8 million were to commercial borrowers for residential construction projects. Of the ~~$24.8~~$28.5 million in real estate construction loans at December 31, ~~2016,~~2019, approximately ~~$16.3~~$10.7 million are secured by first mortgages to residential borrowers while approximately ~~$8.5~~$17.8 million were to commercial borrowers for residential construction projects. The vast majority of construction loans are in the Company’s New York market.

TrustCo 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.

Index

The following tables present the recorded investment in non-accrual loans by loan class:

	September 30, 2020
(dollars in thousands)	New York and other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	378		0		378
Other		113		0		113
Real estate mortgage - 1 to 4 family:
First mortgages		17,193		1,075		18,268
Home equity loans		90		47		137
Home equity lines of credit		2,694		132		2,826
Installment		49		0		49
Total non-accrual loans		20,517		1,254		21,771
Restructured real estate mortgages - 1 to 4 family		25		0		25
Total nonperforming loans	$	20,542		1,254		21,796

	December 31, 2019
(dollars in thousands)	New York and other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	733		0		733
Other		83		0		83
Real estate mortgage - 1 to 4 family:
First mortgages		15,385		1,468		16,853
Home equity loans		218		48		266
Home equity lines of credit		2,804		98		2,902
Installment		3		0		3
Total non-accrual loans		19,226		1,614		20,840
Restructured real estate mortgages - 1 to 4 family		29		0		29
Total nonperforming loans	$	19,255		1,614		20,869

September 30, 2017
(dollars in thousands)
New York and
other states
Florida Total
Loans in non-accrual status:
Commercial:
Commercial real estate $ 1,596 - 1,596
Other 100 - 100
Real estate mortgage - 1 to 4 family:
First mortgages 17,048 1,764 18,812
Home equity loans 35 - 35
Home equity lines of credit 3,843 131 3,974
Installment 30 - 30
Total non-accrual loans 22,652 1,895 24,547
Restructured real estate mortgages - 1 to 4 family 40 - 40
Total nonperforming loans $ 22,692 1,895 24,587
* Includes New York, New Jersey, Vermont and Massachusetts.

December 31, 2016
(dollars in thousands)
New York and
other states
Florida Total
Loans in non-accrual status:
Commercial:
Commercial real estate $ 1,843 - 1,843
Other - - -
Real estate mortgage - 1 to 4 family:
First mortgages 17,727 1,659 19,386
Home equity loans 95 - 95
Home equity lines of credit 3,376 270 3,646
Installment 48 - 48
Total non-accrual loans 23,089 1,929 25,018
Restructured real estate mortgages - 1 to 4 family 42 - 42
Total nonperforming loans $ 23,131 1,929 25,060

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). As of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, other real estate owned included ~~$2.5 million~~$423 thousand and ~~$3.5~~$1.6 million of residential foreclosed properties, respectively. ~~Non-accrual~~In addition, non-accrual residential mortgage loans that are in the process of foreclosure had a recorded investment of ~~$13.3~~$11.5 million and ~~$12.5~~$8.7 million as of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019 respectively.

Index

The following tables present the aging of the recorded investment in past due loans by loan class and by region as of September 30, ~~2017~~2020 and December 31, ~~2016:~~2019:

	September 30, 2020
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	$	0		0		279		279		152,715		152,994
Other		0		0		113		113		59,773		59,886
Real estate mortgage - 1 to 4 family:
First mortgages		3,842		738		12,183		16,763		2,563,814		2,580,577
Home equity loans		147		4		49		200		62,395		62,595
Home equity lines of credit		722		33		1,236		1,991		198,614		200,605
Installment		46		15		49		110		7,887		7,997

Total	$	4,757		790		13,909		19,456		3,045,198		3,064,654

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	$	0		0		0		0		18,579		18,579
Other		0		0		0		0		204		204
Real estate mortgage - 1 to 4 family:
First mortgages		636		0		718		1,354		1,064,549		1,065,903
Home equity loans		0		47		0		47		15,624		15,671
Home equity lines of credit		0		0		0		0		47,715		47,715
Installment		16		8		0		24		1,805		1,829

Total	$	652		55		718		1,425		1,148,476		1,149,901

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	$	0		0		279		279		171,294		171,573
Other		0		0		113		113		59,977		60,090
Real estate mortgage - 1 to 4 family:
First mortgages		4,478		738		12,901		18,117		3,628,363		3,646,480
Home equity loans		147		51		49		247		78,019		78,266
Home equity lines of credit		722		33		1,236		1,991		246,329		248,320
Installment		62		23		49		134		9,692		9,826

Total	$	5,409		845		14,627		20,881		4,193,674		4,214,555

New York and other states:
September 30, 2017
(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 $ - - 1,481 1,481 150,747 152,228
Other - - 100 100 21,654 21,754
Real estate mortgage - 1 to 4 family:
First mortgages 4,972 1,973 9,560 16,505 2,234,647 2,251,152
Home equity loans 70 - 3 73 64,483 64,556
Home equity lines of credit 337 167 2,235 2,739 264,404 267,143
Installment 39 29 10 78 6,718 6,796

Total $ 5,418 2,169 13,389 20,976 2,742,653 2,763,629
* Includes New York, New Jersey, Vermont and Massachusetts.

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 $ - - - - 12,980 12,980
Other - - - - 319 319
Real estate mortgage - 1 to 4 family:
First mortgages 845 291 1,323 2,459 740,238 742,697
Home equity loans - - - - 12,565 12,565
Home equity lines of credit - - - - 44,610 44,610
Installment - - - - 1,482 1,482

Total $ 845 291 1,323 2,459 812,194 814,653

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 $ - - 1,481 1,481 163,727 165,208
Other - - 100 100 21,973 22,073
Real estate mortgage - 1 to 4 family:
First mortgages 5,817 2,264 10,883 18,964 2,974,885 2,993,849
Home equity loans 70 - 3 73 77,048 77,121
Home equity lines of credit 337 167 2,235 2,739 309,014 311,753
Installment 39 29 10 78 8,200 8,278

Total $ 6,263 2,460 14,712 23,435 3,554,847 3,578,282

~~Index~~

New York and other states:
December 31, 2016
(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 $ 50 43 1,706 1,799 149,567 151,366
Other - - - - 27,539 27,539
Real estate mortgage - 1 to 4 family:
First mortgages 6,379 2,924 9,643 18,946 2,139,958 2,158,904
Home equity loans 50 3 74 127 60,765 60,892
Home equity lines of credit 685 111 1,839 2,635 283,951 286,586
Installment 34 32 15 81 6,967 7,048

Total $ 7,198 3,113 13,277 23,588 2,668,747 2,692,335

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 $ - - - - 12,243 12,243
Other - - - - 46 46
Real estate mortgage - 1 to 4 family:
First mortgages 1,942 69 1,255 3,266 661,917 665,183
Home equity loans 19 - - 19 10,735 10,754
Home equity lines of credit - - 156 156 48,099 48,255
Installment 30 6 - 36 1,734 1,770

Total $ 1,991 75 1,411 3,477 734,774 738,251

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 $ 50 43 1,706 1,799 161,810 163,609
Other - - - - 27,585 27,585
Real estate mortgage - 1 to 4 family:
First mortgages 8,321 2,993 10,898 22,212 2,801,875 2,824,087
Home equity loans 69 3 74 146 71,500 71,646
Home equity lines of credit 685 111 1,995 2,791 332,050 334,841
Installment 64 38 15 117 8,701 8,818

Total $ 9,189 3,188 14,688 27,065 3,403,521 3,430,586

Index

	December 31, 2019
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	$	141		0		617		758		161,428		162,186
Other		80		0		33		113		19,213		19,326
Real estate mortgage - 1 to 4 family:
First mortgages		3,444		292		11,328		15,064		2,526,376		2,541,440
Home equity loans		183		7		133		323		69,468		69,791
Home equity lines of credit		232		149		1,141		1,522		219,965		221,487
Installment		37		8		3		48		8,658		8,706

Total	$	4,117		456		13,255		17,828		3,005,108		3,022,936

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	$	0		0		0		0		17,752		17,752
Other		0		0		0		0		235		235
Real estate mortgage - 1 to 4 family:
First mortgages		542		0		617		1,159		952,836		953,995
Home equity loans		63		0		0		63		18,485		18,548
Home equity lines of credit		80		0		50		130		46,305		46,435
Installment		0		0		0		0		2,295		2,295

Total	$	685		0		667		1,352		1,037,908		1,039,260

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	$	141		0		617		758		179,180		179,938
Other		80		0		33		113		19,448		19,561
Real estate mortgage - 1 to 4 family:
First mortgages		3,986		292		11,945		16,223		3,479,212		3,495,435
Home equity loans		246		7		133		386		87,953		88,339
Home equity lines of credit		312		149		1,191		1,652	��	266,270		267,922
Installment		37		8		3		48		10,953		11,001

Total	$	4,802		456		13,922		19,180		4,043,016		4,062,196

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

At September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, 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 no0 commitments to extend further credit on ~~non~~-~~accrual~~non-accrual or restructured loans.

Index

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

(dollars in thousands)	For the three months ended September 30, 2017
	Commercial		Real Estate Mortgage- 1 to 4 Family		Installment		Total		For the three months ended September 30, 2020
(dollars in thousands)									Commercial			Real Estate Mortgage- 1 to 4 Family		Installment		Total
Balance at beginning of period	$	4,596		38,871		695		44,162	$	4,366			43,274		504		48,144
Loans charged off:
New York and other states*		-		747		65		812		0			64		21		85
Florida		-		31		4		35		0			0		0		0
Total loan chargeoffs		-		778		69		847		0			64		21		85

Recoveries of loans previously charged off:
New York and other states*		-		137		8		145		1			60		3		64
Florida		-		72		-		72		0			0		0		0
Total recoveries		-		209		8		217		1			60		3		64
Net loans charged off		-		569		61		630
Provision for loan losses		24		434		92		550
Net loans (recoveries) charged off										(1	)		4		18		21
(Credit) provision for loan losses										(100	)		1,053		47		1,000
Balance at end of period	$	4,620		38,736		726		44,082	$	4,267			44,323		533		49,123

(dollars in thousands)	For the three months ended September 30, 2016
	Commercial		Real Estate Mortgage- 1 to 4 Family			Installment		Total		For the three months ended September 30, 2019
(dollars in thousands)										Commercial			Real Estate Mortgage- 1 to 4 Family			Installment		Total
Balance at beginning of period	$	5,046		38,589			429		44,064	$	3,913			39,963			489		44,365
Loans charged off:
New York and other states*		356		549			57		962		13			147			16		176
Florida		-		2			3		5		0			0			16		16
Total loan chargeoffs		356		551			60		967		13			147			32		192

Recoveries of loans previously charged off:
New York and other states*		3		78			20		101		41			108			7		156
Florida		-		2			-		2		0			0			0		0
Total recoveries		3		80			20		103		41			108			7		156
Net loans charged off		353		471			40		864
Provision (credit) for loan losses		505		(51	)		296		750
Net loans (recoveries) charged off											(28	)		39			25		36
(Credit) provision for loan losses											(70	)		(18	)		88		0
Balance at end of period	$	5,198		38,067			685		43,950	$	3,871			39,906			552		44,329

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

Index

(dollars in thousands) For the nine months ended September 30, 2017
Commercial
Real Estate
Mortgage-
1 to 4 Family
Installment Total
Balance at beginning of period $ 4,929 38,231 730 43,890
Loans charged off:
New York and other states* 72 1,699 146 1,917
Florida - 167 19 186
Total loan chargeoffs 72 1,866 165 2,103

Recoveries of loans previously charged off:
New York and other states* 8 494 21 523
Florida - 72 - 72
Total recoveries 8 566 21 595
Net loans charged off 64 1,300 144 1,508
Provision for loan losses (245 ) 1,805 140 1,700
Balance at end of period $ 4,620 38,736 726 44,082

(dollars in thousands)	For the nine months ended September 30, 2016
									Nine months ended September 30, 2020
	Commercial		Real Estate Mortgage- 1 to 4 Family		Installment		Total		Commercial			Real Estate Mortgage- 1 to 4 Family		Installment		Total
Balance at beginning of period	$	4,491		39,753		518		44,762	$	3,999			39,748		570		44,317
Loans charged off:
New York and other states*		688		2,528		230		3,446		3			277		77		357
Florida		-		103		20		123		0			0		19		19
Total loan chargeoffs		688		2,631		250		3,569		3			277		96		376

Recoveries of loans previously charged off:
New York and other states*		44		313		46		403		9			160		11		180
Florida		-		4		-		4		0			2		0		2
Total recoveries		44		317		46		407		9			162		11		182
Net loans charged off		644		2,314		204		3,162
Net loans charged off (recoveries)										(6	)		115		85		194
Provision for loan losses		1,351		628		371		2,350		262			4,690		48		5,000
Balance at end of period	$	5,198		38,067		685		43,950	$	4,267			44,323		533		49,123

	Nine months ended September 30, 2019
	Commercial			Real Estate Mortgage- 1 to 4 Family		Installment			Total
Balance at beginning of period	$	4,048			39,772		946			44,766
Loans charged off:
New York and other states*		20			744		94			858
Florida		0			29		47			76
Total loan chargeoffs		20			773		141			934

Recoveries of loans previously charged off:
New York and other states*		45			441		17			503
Florida		0			35		0			35
Total recoveries		45			476		17			538
Net loans charged off		(25	)		297		124			396
(Credit) provision for loan losses		(202	)		431		(270	)		(41	)
Balance at end of period	$	3,871		$	39,906		552			44,329

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

The Company has identified ~~non~~-~~accrual~~non-accrual commercial and commercial real estate loans, as well as all loans restructured under a troubled debt restructuring (“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

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 September 30, ~~2017~~2020 and December 31, ~~2016:~~2019:

	September 30, 2017								September 30, 2020
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total		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	$	-		-		-		-	$	0		0		0		0
Collectively evaluated for impairment		4,620		38,736		726		44,082		4,267		44,323		533		49,123

Total ending allowance balance	$	4,620		38,736		726		44,082	$	4,267		44,323		533		49,123

Loans:
Individually evaluated for impairment	$	2,969		21,585		-		24,554	$	1,084		20,648		0		21,732
Collectively evaluated for impairment		184,312		3,361,138		8,278		3,553,728		230,579		3,952,418		9,826		4,192,823

Total ending loans balance	$	187,281		3,382,723		8,278		3,578,282	$	231,663		3,973,066		9,826		4,214,555

	December 31, 2019
(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	$	0		0		0		0
Collectively evaluated for impairment		3,999		39,748		570		44,317

Total ending allowance balance	$	3,999		39,748		570		44,317

Loans:
Individually evaluated for impairment	$	1,437		19,539		0		20,976
Collectively evaluated for impairment		198,062		3,832,157		11,001		4,041,220

Total ending loans balance	$	199,499		3,851,696		11,001		4,062,196

~~Index~~

December 31, 2016
(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 4,929 38,231 730 43,890

Total ending allowance balance $ 4,929 38,231 730 43,890

Loans:
Individually evaluated for impairment $ 2,418 21,607 - 24,025
Collectively evaluated for impairment 188,776 3,208,967 8,818 3,406,561

Total ending loans balance $ 191,194 3,230,574 8,818 3,430,586

A loan for which the terms have been modified, and for which the borrower is experiencing financial difficulties, is considered a TDR and is classified as impaired. TDR’s at September 30, ~~2017~~2020 and December 31, ~~2016~~2019 are measured at the present value of estimated future cash flows using the loan’s effective rate at inception or the fair value of the underlying collateral if the loan is considered collateral dependent.

Index

The following tables present impaired loans by loan class as of September 30, ~~2017~~2020 and December 31, ~~2016:~~2019:

	September 30, 2020
New York and other states*:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment

Commercial:
Commercial real estate	$	839		1,062		0		1,121
Other		145		145		0		112
Real estate mortgage - 1 to 4 family:
First mortgages		14,895		15,282		0		14,062
Home equity loans		223		243		0		235
Home equity lines of credit		2,268		2,408		0		2,249

Total	$	18,370		19,140		0		17,779

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

Commercial:
Commercial real estate	$	100				0		105
Other		0				0		0
Real estate mortgage - 1 to 4 family:
First mortgages		3,018		3,018		0		2,567
Home equity loans		0		0		0		13
Home equity lines of credit		244		244		0		245

Total	$	3,362		3,262		0		2,930

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

Commercial:
Commercial real estate	$	939		1,062		0		1,226
Other		145		145		0		112
Real estate mortgage - 1 to 4 family:
First mortgages		17,913		18,300		0		16,629
Home equity loans		223		243		0		248
Home equity lines of credit		2,512		2,652		0		2,494

Total	$	21,732		22,402		0		20,709

~~The following table presents impaired loans by loan class:~~

* Includes New York, New Jersey, Vermont and ~~other states:~~Massachusetts.

September 30, 2017
(dollars in thousands)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Commercial:
Commercial real estate $ 2,869 3,916 - 2,879
Other 100 100 - 100
Real estate mortgage - 1 to 4 family:
First mortgages 16,043 16,351 - 16,715
Home equity loans 252 272 - 265
Home equity lines of credit 2,330 2,524 - 2,128

Total $ 21,594 23,163 - 22,087

~~Florida:~~

(dollars in thousands)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Commercial:
Commercial real estate $ - - - -
Other - - - -
Real estate mortgage - 1 to 4 family:
First mortgages 2,335 2,441 - 2,217
Home equity loans 90 90 - 92
Home equity lines of credit 535 535 - 568

Total $ 2,960 3,066 - 2,877

~~Total:~~

(dollars in thousands)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Commercial:
Commercial real estate $ 2,869 3,916 - 2,879
Other 100 100 - 100
Real estate mortgage - 1 to 4 family:
First mortgages 18,378 18,792 - 18,932
Home equity loans 342 362 - 358
Home equity lines of credit 2,865 3,059 - 2,696

Total $ 24,554 26,229 - 24,964

Index

	December 31, 2019
New York and other states*:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment

Commercial:
Commercial real estate	$	1,217		1,359		0		1,385
Other		115		115		0		38
Real estate mortgage - 1 to 4 family:
First mortgages		14,414		14,714		0		14,358
Home equity loans		235		255		0		241
Home equity lines of credit		2,160		2,300		0		2,274

Total	$	18,141		18,743		0		18,296

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

Commercial:
Commercial real estate	$	105		105		0		82
Other		0		0		0		26
Real estate mortgage - 1 to 4 family:
First mortgages		2,486		2,486		0		2,259
Home equity loans		0		0		0		51
Home equity lines of credit		244		244		0		249

Total	$	2,835		2,835		0		2,667

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

Commercial:
Commercial real estate	$	1,322		1,464		0		1,467
Other		115		115		0		64
Real estate mortgage - 1 to 4 family:
First mortgages		16,900		17,200		0		16,617
Home equity loans		235		255		0		292
Home equity lines of credit		2,404		2,544		0		2,523

Total	$	20,976		21,578		0		20,963

* Includes New York, New Jersey, Vermont and ~~other states:~~Massachusetts.

December 31, 2016
(dollars in thousands)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Commercial:
Commercial real estate $ 2,418 3,470 - 2,214
Other - - - -
Real estate mortgage - 1 to 4 family:
First mortgages 16,675 17,439 - 15,665
Home equity loans 269 305 - 251
Home equity lines of credit 1,999 2,160 - 1,806

Total $ 21,361 23,374 - 19,936

~~Florida:~~

(dollars in thousands)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Commercial:
Commercial real estate $ - - - -
Other - - - -
Real estate mortgage - 1 to 4 family:
First mortgages 2,009 2,100 - 1,800
Home equity loans 94 94 - 81
Home equity lines of credit 561 633 - 591

Total $ 2,664 2,827 - 2,472

~~Total:~~

(dollars in thousands)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Commercial:
Commercial real estate $ 2,418 3,470 - 2,214
Other - - - -
Real estate mortgage - 1 to 4 family:
First mortgages 18,684 19,539 - 17,465
Home equity loans 363 399 - 332
Home equity lines of credit 2,560 2,793 - 2,397

Total $ 24,025 26,201 - 22,408

~~Index~~

The Company has not committed to lend additional amounts to customers with outstanding loans that are classified as impaired. Interest income recognized on impaired loans was not material during the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~.2019.

Index

As of September 30, ~~2017~~2020 and December 31, ~~2016~~2019 impaired loans included approximately ~~$11.0~~$11.8 million and ~~$11.5~~$11.1 million of loans in accruing status that were identified as TDR’s in accordance with regulatory guidance related to Chapter 7 bankruptcy loans, respectively.

Management evaluates impairment on impaired loans on a quarterly basis. If, during this evaluation, impairment of the loan is identified, a ~~charge off~~chargeoff is taken at that time. As a result, as of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, based upon management’s evaluation and due to the sufficiency of chargeoffs taken, none of the allowance for loan losses has been allocated to a specific impaired loan(s).

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

													Three months ended 9/30/2020						Three months ended 9/30/2019
	Three months ended 9/30/2017						Three months ended 9/30/2016
New York and other states*:			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(dollars in thousands)	Number of Contracts		Outstanding Recorded Investment		Outstanding Recorded Investment		Number of Contracts		Outstanding Recorded Investment		Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-		1	$	126		126		0	$	0		0
Real estate mortgage - 1 to 4 family:
First mortgages		7	$	941	$	941		7	$	655	$	655		6		1,533		1,533		4		537		537
Home equity loans		-		-		-		1		44		44		0		0		0		0		0		0
Home equity lines of credit		3		296		296		2		183		183		1		50		50		0		0		0

Total		10	$	1,237	$	1,237		10	$	882	$	882		8	$	1,709		1,709		4	$	537		537

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

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-		0	$	0		0		0	$	0		0
Real estate mortgage - 1 to 4 family:
First mortgages		2	$	251	$	251		-	$	-	$	-		0		0		0		5		509		509
Home equity loans		-		-		-		-		-		-		0		0		0		0		0		0
Home equity lines of credit		-		-		-		-		-		-		0		0		0		0		0		0

Total		2	$	251	$	251		-	$	-	$	-		0	$	0		0		5	$	509		509

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

Index

													Nine months ended 9/30/2020						Nine months ended 9/30/2019
	Nine months ended 9/30/2017						Nine months ended 9/30/2016
New York and other states*:			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(dollars in thousands)	Number of Contracts		Outstanding Recorded Investment		Outstanding Recorded Investment		Number of Contracts		Outstanding Recorded Investment		Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Commercial:
Commercial real estate		3	$	747	$	747		-	$	-	$	-		1	$	126		126		1	$	127		127
Real estate mortgage - 1 to 4 family:
First mortgages		25	$	3,986		3,986		27	$	2,383		2,383		9		1,982		1,982		12		1,768		1,768
Home equity loans		1		13		13		1		44		44		0		0		0		0		0		0
Home equity lines of credit		8		457		457		10		316		316		3		169		169		2		235		235

Total		37	$	5,203	$	5,203		38	$	2,743	$	2,743		13	$	2,277		2,277		15	$	2,130		2,130

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

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-			0	$	0		0		0	$	0		0
Real estate mortgage - 1 to 4 family:
First mortgages		7	$	718	$	718		2	$	408	$	408			4		589		589		5		509		509
Home equity loans		-		-		-		1		45		45			0		0		0		0		0		0
Home equity lines of credit		1		70		70		1		6		6	��		0		0		0		0		0		0

Total		8	$	788	$	788		4	$	459	$	459			4	$	589		589		5	$	509		509

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

Index

The addition of these TDR’s did not have a significant impact on the allowance for loan ~~losses~~.losses.

In situations where the Company 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.

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.

The following tables present, by class, TDR’s that defaulted during the three and nine months ended September 30, 2020 and 2019 which had been modified within the last twelve months:

	Three months ended 9/30/2020				Three months ended 9/30/2019
New York and other states*:	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
(dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment

Commercial:
Commercial real estate		0	$	0		0	$	0
Real estate mortgage - 1 to 4 family:
First mortgages		3		264		0		0
Home equity lines of credit		1		19		0		0

Total		4	$	283		0	$	0

Florida: (dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment

Commercial:
Commercial real estate		0	$	0		0	$	0
Real estate mortgage - 1 to 4 family:
First mortgages		0		0		0		0
Home equity loans		0		0		0		0
Home equity lines of credit		0		0		0		0

Total		0	$	0		0	$	0

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

Index

~~The following table presents, by class, TDR’s that defaulted during the three~~

	Nine months ended 9/30/2020				Nine months ended 9/30/2019
New York and other states*:	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
(dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment

Commercial:
Commercial real estate		0	$	0		0	$	0
Real estate mortgage - 1 to 4 family:
First mortgages		4		459		0		0
Home equity loans		0		0		0		0
Home equity lines of credit		1		19		0		0

Total		5	$	478		0	$	0

(dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment

Commercial:
Commercial real estate		0	$	0		0	$	0
Real estate mortgage - 1 to 4 family:
First mortgages		0		0		0		0
Home equity lines of credit		0		0		0		0

Total		0	$	0		0	$	0

* Includes New York, New Jersey, Vermont and ~~nine months ended September 30, 2017 and 2016 which had been modified within the last twelve months:~~Massachusetts.

Three months ended 9/30/2017 Three months ended 9/30/2016
New York and other states*:
(dollars in thousands)

Number of
Contracts

Recorded
Investment

Number of
Contracts

Recorded
Investment

Real estate mortgage - 1 to 4 family:
First mortgages 2 $ 236 - $ -
Home equity lines of credit - - - -

Total 2 $ 236 - $ -

~~Florida:~~

~~(dollars in thousands)~~

~~Number of~~

~~Contracts~~

~~Recorded~~

~~Investment~~

~~Number of~~

~~Contracts~~

~~Recorded~~

~~Investment~~

~~Real estate mortgage - 1 to 4 family:~~

~~First mortgages~~

~~Total~~

Nine months ended 9/30/2017 Nine months ended 9/30/2016
New York and other states*:
(dollars in thousands)

Number of
Contracts

Recorded
Investment

Number of
Contracts

Recorded
Investment

Real estate mortgage - 1 to 4 family:
First mortgages 2 $ 236 1 $ 107
Home equity loans - - - -
Home equity lines of credit 1 3 - -

Total 3 $ 239 1 $ 107

~~Florida:~~

(dollars in thousands)
Number of
Contracts

Recorded
Investment

Number of
Contracts

Recorded
Investment

Real estate mortgage - 1 to 4 family:
First mortgages 1 $ 77 - $ -
Home equity lines of credit 1 $ 70 1 $ 46

Total 2 $ 147 1 $ 46

The TDR’s that subsequently defaulted described above did not have a material impact on the allowance for loan losses.

Loan modifications and payment deferrals as a result of COVID-19 that meet the criteria established under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators are excluded from evaluation of TDR classification and will continue to be reported as current during the payment deferral period. The Company’s policy is to continue to accrue interest during the deferral period. Loans not meeting the CARES ACT or regulatory guidance are evaluated for TDR and non-accrual treatment under the Company’s existing policies and procedures. Loan modifications and payment deferrals made pursuant to COVID 19 as of September 30, 2020 totaled approximately $7 million, which included $2 million of commercial loans and $5 million of residential loans. As of June 30, 2020 these amounts totaled approximately $190 million, which included $45 million of commercial loans and $145 million of residential loans. The reduction in loan deferrals represents loans that are now paying in accordance with their terms. As of September 30, 2020, there was no material impact to delinquencies and non-accruals regarding the loans that came out of deferment.

The Company categorizes non-homogenous 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 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.

Index

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.

~~Index~~

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. All doubtful loans are considered impaired.

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

As of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	September 30, 2017						September 30, 2020
New York and other states:

New York and other states*:
(dollars in thousands)							Pass		Classified		Total
	Pass		Classified		Total
Commercial:
Commercial real estate	$	142,390		9,838		152,228	$	149,866		3,128		152,994
Other		20,154		1,600		21,754		59,404		482		59,886

	$	162,544		11,438		173,982	$	209,270		3,610		212,880

Florida:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	18,005		574		18,579
Other		204		0		204

	$	18,209		574		18,783

Total:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	167,871		3,702		171,573
Other		59,608		482		60,090

	$	227,479		4,184		231,663

~~Florida:~~

(dollars in thousands)
Pass Classified Total
Commercial:
Commercial real estate $ 12,980 - 12,980
Other 319 - 319

$ 13,299 - 13,299

~~Total:~~* Includes New York, New Jersey and Massachusetts.

(dollars in thousands)
Pass Classified Total
Commercial:
Commercial real estate $ 155,370 9,838 165,208
Other 20,473 1,600 22,073

$ 175,843 11,438 187,281

Index

December 31, 2016
New York and other states:

(dollars in thousands)
Pass Classified Total
Commercial:
Commercial real estate $ 136,676 14,690 151,366
Other 25,442 2,097 27,539

$ 162,118 16,787 178,905

Florida:
							December 31, 2019

New York and other states:
(dollars in thousands)							Pass		Classified		Total
	Pass		Classified		Total
Commercial:
Commercial real estate	$	12,243		-		12,243	$	157,280		4,906		162,186
Other		46		-		46		18,384		942		19,326

	$	12,289		-		12,289	$	175,664		5,848		181,512

Florida:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	17,752		0		17,752
Other		235		0		235

	$	17,987		0		17,987

Total:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	175,032		4,906		179,938
Other		18,619		942		19,561

	$	193,651		5,848		199,499

~~Total:~~* Includes New York, New Jersey and Massachusetts.

(dollars in thousands)
Pass Classified Total
Commercial:
Commercial real estate $ 148,919 14,690 163,609
Other 25,488 2,097 27,585

$ 174,407 16,787 191,194

Included in classified loans in the above tables are ~~non-accrual~~impaired loans of ~~$1.2 million~~$849 thousand and ~~$1.8 million~~$816 thousand at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively.

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 Company’s collection ~~area~~department 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 September 30, ~~2017~~2020 and December 31, ~~2016~~2019 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 September 30, ~~2017~~2020 and December 31, ~~2016~~2019 is presented in the non-accrual loans table.

~~(6)~~

~~Fair Value of Financial Instruments~~

Index

(6) Fair Value of Financial Instruments

FASB Topic 820,Fair Value ~~Measurement~~ (“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:

~~Index~~

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

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

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

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

Securities Available for Sale: The fair value of securities available for sale is determined utilizing an independent pricing service for identical assets or significantly similar securities. The pricing service uses a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models. Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows. This results in a Level 1 or Level 2 classification of the inputs for determining fair value. Interest and dividend income is recorded on the accrual method and is included in the Consolidated Statements of Income in the respective investment class under total interest and dividend income. ~~Also classified as available for sale securities, the fair value of equity securities is determined by quoted market prices and these are designated as Level 1.~~ 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.

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally have had a chargeoff through the allowance for loan 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. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Index

Indications of value for both collateral-dependent impaired 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.

~~Index~~

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

	Fair Value Measurements at September 30, 2017 Using:
									Fair Value Measurements at
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		September 30, 2020 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	$	123,658	$	-	$	123,658	$	-	$	29,996	$	0	$	29,996	$	0
State and political subdivisions		533		-		533		-		111		0		111		0
Mortgage backed securities and collateralized mortgage obligations - residential										309,768		0		309,768		0
Corporate bonds		40,381		-		40,381		-		70,113		0		70,113		0
Mortgage backed securities and collateralized mortgage obligations - residential		335,531		-		335,531		-
Small Business Administration- guaranteed participation securities		69,818		-		69,818		-		44,070		0		44,070		0
Mortgage backed securities and collateralized mortgage obligations - commercial		9,824		-		9,824		-
Other securities		685		35		650		-		685		0		685		0

Total securities available for sale	$	580,430	$	35	$	580,395	$	-	$	454,743	$	0	$	454,743	$	0


	Fair Value Measurements at December 31, 2016 Using:
									Fair Value Measurements at
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		December 31, 2019 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	$	117,266	$	-	$	117,266	$	-	$	104,512	$	0	$	104,512	$	0
State and political subdivisions		886		-		886		-		162		0		162		0
Mortgage backed securities and collateralized mortgage obligations - residential		372,308		-		372,308		-		389,517		0		389,517		0
Corporate bonds		40,705		-		40,705		-		30,436		0		30,436		0
Small Business Administration- guaranteed participation securities		78,499		-		78,499		-		48,511		0		48,511		0
Mortgage backed securities and collateralized mortgage obligations - commercial		10,011		-		10,011		-
Other securities		685		35		650		-		685		0		685		0

Total securities available for sale	$	620,360	$	35	$	620,325	$	-	$	573,823	$	0	$	573,823	$	0

~~Index~~

There were no0 transfers between Level 1 and Level 2 during the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~.2019.

Index

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

	Fair Value Measurements at September 30, 2017 Using:												Fair Value Measurements at
	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)		September 30, 2020 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	$	2,879	$	-	$	-	$	2,879	Sales comparison approach	Adjustments for differences between comparable sales		2% - 10% (4%)	$	423	$	0	$	0	$	423	Sales comparison approach	Adjustments for differences between comparable sales		1% - 9% (3	%)

Impaired loans:

Real estate mortgage - 1 to 4 family		651		-		-		651	Sales comparison approach	Adjustments for differences between comparable sales		2% - 5% (4%)
Real estate mortgage -1 to 4 family														509		0		0		509	Sales comparison approach	Adjustments for differences between comparable sales		1% - 11% (11	%)


	Fair Value Measurements at December 31, 2016 Using:												Fair Value Measurements at
	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)		December 31, 2019 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	$	4,268	$	-	$	-	$	4,268	Sales comparison approach	Adjustments for differences between comparable sales		1% - 14% (7%)	$	1,579	$	0	$	0	$	1,579	Sales comparison approach	Adjustments for differences between comparable sales		1% - 21% (2	%)

Impaired loans:
Commercial real estate		1,250		-		-		1,250	Sales comparison approach	Adjustments for differences between comparable sales		7% - 35% (23%)

Real estate mortgage - 1 to 4 family		458		-		-		458	Sales comparison approach	Adjustments for differences between comparable sales		5% - 14% (10%)
Real estate mortgage -1 to 4 family														120		0		0		120	Sales comparison approach	Adjustments for differences between comparable sales		1% - 17% (9	%)

Other real estate owned, that is carried at fair value less costs to sell, was approximately $423 thousand at September 30, 2020 and consisted of only residential real estate properties. Valuation charges of $62 thousand and $120 thousand are included in earnings for the three months and nine months ended September 30, 2020, respectively.

Of the total impaired loans of $21.7 million at September 30, 2020, NaN are collateral dependent and carried at fair value measured on a non‑recurring basis.

Other real estate owned, that is carried at fair value less costs to sell, was approximately ~~$2.9~~$1.6 million at ~~September 30, 2017~~December 31, 2019 and consisted of $358 thousand of commercial real estate and ~~$2.5 million of residential real estate properties. Valuation charges of $461 thousand and $823 thousand are included in earnings for the three and nine months ended September 30, 2017, respectively.~~

Of the total impaired loans of $24.6 million at September 30, 2017, $651 thousand 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 September 30, 2017. Gross charge offs related to residential impaired loans included in the table above were $15 thousand and $41 thousand for the three and nine months ended September 30, 2017, respectively.

~~Other real estate owned, that is carried at fair value less costs to sell, was approximately $4.3 million at December 31, 2016 and consisted of $756 thousand of commercial real estate and $3.5~~$1.2 million of residential real estate properties. A valuation charge of ~~$1.2 million~~$366 thousand is included in earnings for the year ended December 31, ~~2016.~~2019.

Of the total impaired loans of ~~$24.0~~$21.0 million at December 31, ~~2016, $1.7 million~~2019, $120 thousand 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, ~~2016.~~2019. Gross ~~charge offs related to commercial impaired loans included in the table above were $482 thousand for the year ended December 31, 2016, while gross~~ charge offs related to residential impaired loans included in the table above amounted to ~~$226~~$22 thousand.

Index

In accordance with FASB Topic 825, Financial Instruments (“ASC 825”), ~~the~~the carrying amounts and estimated fair values (represents exit price) of financial instruments, at September 30, ~~2017~~2020 and December 31, ~~2016~~2019 are as ~~follows:~~follows:

(dollars in thousands)	Carrying		Fair Value Measurements at September 30, 2017 Using:										Fair Value Measurements at
											Carrying		September 30, 2020 Using:
	Value		Level 1		Level 2		Level 3		Total		Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	624,197		624,197		-		-		624,197	$	956,319		956,319		0		0		956,319
Securities available for sale		580,430		35		580,395		-		580,430		454,743		0		454,743		0		454,743
Held to maturity securities		29,268		-		30,731		-		30,731		15,094		0		16,343		0		16,343
Federal Reserve Bank and Federal
Home Loan Bank stock		8,779		N/A		N/A		N/A		N/A
Federal Home Loan Bank stock												5,506		N/A		N/A		N/A		N/A
Net loans		3,534,200		-		-		3,541,135		3,541,135		4,165,432		0		0		4,258,258		4,258,258
Accrued interest receivable		10,813		56		2,473		8,284		10,813		11,095		16		1,471		9,608		11,095
Financial liabilities:
Demand deposits		397,623		397,623		-		-		397,623		635,345		635,345		0		0		635,345
Interest bearing deposits		3,767,739		2,691,853		1,069,906		-		3,761,759		4,263,705		2,958,681		1,308,158		0		4,266,839
Short-term borrowings		216,508		-		216,508		-		216,508		193,455		0		193,455		0		193,455
Accrued interest payable		470		67		402		-		470		777		85		692		0		777

(dollars in thousands)	Carrying		Fair Value Measurements at December 31, 2016 Using:										Fair Value Measurements at
											Carrying		December 31, 2019 Using:
	Value		Level 1		Level 2		Level 3		Total		Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	707,274		707,274		-		-		707,274	$	456,846		456,846		0		0		456,846
Securities available for sale		620,360		35		620,325		-		620,360		573,823		0		573,823		0		573,823
Held to maturity securities		45,490		-		47,526		-		47,526		18,618		0		19,680		0		19,680
Federal Reserve Bank and Federal
Home Loan Bank stock		9,579		N/A		N/A		N/A		N/A		9,183		N/A		N/A		N/A		N/A
Net loans		3,386,696		-		-		3,370,976		3,370,976		4,017,879		0		0		4,078,210		4,078,210
Accrued interest receivable		11,070		145		2,654		8,271		11,070		10,915		216		2,221		8,478		10,915
Financial liabilities:
Demand deposits		377,755		377,755		-		-		377,755		463,858		463,858		0		0		463,858
Interest bearing deposits		3,818,408		2,658,945		1,156,025		-		3,814,970		3,986,158		2,587,981		1,397,271		0		3,985,252
Short-term borrowings		209,406		-		209,406		-		209,406		148,666		0		148,666		0		148,666
Accrued interest payable		526		82		444		-		526		1,459		174		1,285		0		1,459

The specific estimation methods and assumptions used can have a substantial impact on the resulting fair values of financial instruments. The following is a brief summary of the significant methods and assumptions used in estimating fair values:

~~Cash and Cash Equivalents~~

~~The carrying values of these financial instruments approximate fair values and are classified as Level 1.~~

~~Federal Reserve Bank and Federal Home Loan Bank stock~~

~~It is not practical to determine the fair value of Federal Reserve Bank and Federal Home Loan Bank stock due to their restrictive nature.~~

Index

~~Securities Held to Maturity~~

(7) Accumulated Other Comprehensive Income (Loss)

Similar to securities available for sale described previously, the fair value of securities held to maturity are 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 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.

~~Loans~~

The fair values of all loans are estimated using discounted cash flow analyses with discount rates equal to the interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

~~Deposit Liabilities~~

The fair values disclosed for noninterest bearing demand deposits, interest bearing checking accounts, savings accounts, and money market accounts are, by definition, equal to the amount payable on demand at the balance sheet date resulting in a Level 1 classification. The carrying value of all variable rate certificates of deposit approximates fair value resulting in a Level 2 classification. The fair value of fixed rate certificates of deposit is estimated using discounted cash flow analyses with discount rates equal to the interest rates currently being offered on certificates of similar size and remaining maturity resulting in a Level 2 classification.

~~Accrued Interest Receivable/Payable~~

~~The carrying amounts of accrued interest approximate fair value resulting in a Level 1, Level 2 or Level 3 classification consistent with the asset or liability that they are associated with.~~

~~Short-Term Borrowings and Other Financial Instruments~~

~~The fair value of all short-term borrowings, and other financial instruments approximates the carrying value resulting in a Level 2 classification.~~

~~Financial Instruments with Off-Balance Sheet Risk~~

The Company is a party to financial instruments with off-balance sheet risk. Such financial instruments consist of commitments to extend financing and standby letters of credit. If the commitments are exercised by the prospective borrowers, these financial instruments will become interest earning assets of the Company. If the commitments expire, the Company retains any fees paid by the prospective borrower. The fair value of commitments is estimated based upon fees currently charged to enter into similar agreements, taking into consideration the remaining terms of the agreements and the present creditworthiness of the borrower. For fixed rate commitments, the fair value estimation takes into consideration an interest rate risk factor. The fair value of these off-balance sheet items approximates the recorded amounts of the related fees, which are considered to be immaterial.

~~The Company does not engage in activities involving interest rate swaps, forward placement contracts, or any other instruments commonly referred to as derivatives.~~

~~Index~~

~~(7)~~

~~Accumulated Other Comprehensive Income (Loss)~~

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

Three months ended 9/30/17
(dollars in thousands)
Balance at
7/1/2017

Other
Comprehensive
Income (loss)-
Before
Reclassifications

Amount
reclassified
from Accumulated
Other Comprehensive
Income

Other
Comprehensive
Income (loss)-
Three months
ended 9/30/2017

Balance at
9/30/2017

Net unrealized holding gain (loss) on securities available for sale, net of tax $ (4,049 ) 562 - 562 (3,487 )
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax 456 - (29 ) (29 ) 427

Accumulated other comprehensive income (loss), net of tax (3,593 ) 562 (29 ) 533 (3,060 )

	Three months ended 9/30/2020
(dollars in thousands)	Balance at 7/1/2020			Other Comprehensive Income (loss)- Before Reclassifications			Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 9/30/2020			Balance at 9/30/2020

Net unrealized holding loss on securities available for sale, net of tax	$	8,061			(198	)		0			(198	)		7,863
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		4,840			0			0			0			4,840
Net change in net actuarial gain and prior service credit on pension and postretirement benefit plans, net of tax		(965	)		0			(201	)		(201	)		(1,166	)

Accumulated other comprehensive loss, net of tax	$	11,936			(198	)		(201	)		(399	)		11,537

	Three months ended 9/30/2016														Three months ended 9/30/2019
(dollars in thousands)	Balance at 7/1/2016			Other Comprehensive Income (loss)- Before Reclassifications			Amount reclassified from Accumulated Other Comprehensive Income		Other Comprehensive Income (loss)- Three months ended 9/30/2016			Balance at 9/30/2016			Balance at 7/1/2019			Other Comprehensive Income (loss)- Before Reclassifications		Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 9/30/2019			Balance at 9/30/2019


Net unrealized holding gain (loss) on securities available for sale, net of tax	$	2,667			(75	)		-		(75	)		2,592
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax		(272	)		-			8		8			(264	)
Net unrealized holding gain on securities available for sale, net of tax															$	(1,707	)		1,790		0			1,790			83
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax																423			0		0			0			423
Net change in net actuarial gain and prior service credit on pension and postretirement benefit plans, net of tax																(490	)		0		(87	)		(87	)		(577	)

Accumulated other comprehensive income (loss), net of tax		2,395			(75	)		8		(67	)		2,328		$	(1,774	)		1,790		(87	)		1,703			(71	)

Nine months ended 9/30/17
(dollars in thousands)
Balance at
1/1/2017

Other
Comprehensive
Income (loss)-
Before
Reclassifications

Amount
reclassified
from Accumulated
Other Comprehensive
Loss

Other
Comprehensive
Income (loss)-
Six months
ended 9/30/2017

Balance at
9/30/2017

Net unrealized holding gain (loss) on securities available for sale, net of tax $ (6,762 ) 3,275 - 3,275 (3,487 )
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax 511 - (84 ) (84 ) 427

Accumulated other comprehensive income (loss), net of tax (6,251 ) 3,275 (84 ) 3,191 (3,060 )

	Nine months ended 9/30/2020
(dollars in thousands)	Balance at 1/1/2020			Other Comprehensive Income (loss)- Before Reclassifications		Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 9/30/2020			Balance at 9/30/2020

Net unrealized holding gain on securities available for sale, net of tax	$	286			8,432		(855	)		7,577			7,863
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		4,840			0		0			0			4,840
Net change in net actuarial gain and prior service credit on pension and postretirement benefit plans, net of tax		(665	)		0		(501	)		(501	)		(1,166	)

Accumulated other comprehensive loss, net of tax	$	4,461			8,432		(1,356	)		7,076			11,537

	Nine months ended 9/30/16													Nine months ended 9/30/2019
(dollars in thousands)	Balance at 1/1/2016			Other Comprehensive Income (loss)- Before Reclassifications		Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Six months ended 9/30/2016		Balance at 9/30/2016			Balance at 1/1/2019			Other Comprehensive Income (loss)- Before Reclassifications		Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 9/30/2019			Balance at 9/30/2019


Net unrealized holding gain (loss) on securities available for sale, net of tax	$	(4,492	)		7,483		(401	)		7,084		2,592
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax		(289	)		-		25			25		(264	)
Net unrealized holding gain on securities available for sale, net of tax														$	(10,416	)		10,499		0			10,499			83
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax															423			0		0			0			423
Net change in net actuarial gain and prior service credit on pension and postretirement benefit plans, net of tax															(316	)		0		(261	)		(261	)		(577	)

Accumulated other comprehensive income (loss), net of tax		(4,781	)		7,483		(376	)		7,109		2,328		$	(10,309	)		10,499		(261	)		10,238			(71	)

Index

The following represents the reclassifications out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, ~~2017~~2020 and ~~2016:~~2019:

(dollars in thousands)	Three months ended September 30,						Nine months ended September 30,							Three months ended						Nine months ended
	2017			2016			2017			2016			Affected Line Item in Statements	September 30,						September 30,
														2020			2019			2020			2019			Affected Line Item in Financial Statements
Net unrealized holding gain on securities available for sale

Realized gain on securities transactions	$	-			-		$	-			668		Net gain on securities transactions	$	0			0		$	1,155			0		Net gain on securities transactions
Income tax effect		-			-			-			(267	)	Income taxes		0			0			(300	)		0		Income taxes
Net of tax		-			-			-			401				0			0			855			0

Amortization of pension and postretirement benefit items

Amortization of net actuarial gain		72			8			208			25		Salaries and employee benefits
Amortization of prior service cost		(23	)		(22	)		(68	)		(67	)	Salaries and employee benefits
Income tax effect		(20	)		6			(56	)		17		Income taxes
Amortization of pension and postretirement benefit items:
Amortization of net actuarial gain (loss)														$	222			35		$	531			103		Salaries and employee benefits
Amortization of prior service credit (cost)															49			83			147			250		Salaries and employee benefits
Income tax benefit															(70	)		(31	)		(177	)		(92	)	Income taxes
Net of tax		29			(8	)		84			(25	)			201			87			501			261

Total reclassifications, net of tax	$	29			(8	)	$	84			376			$	201			87		$	1,356			261

(8) Revenue from Contracts with Customers

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within Non-Interest Income. The following table presents the Company’s sources of Non-Interest Income for the three months and nine months ended September 30, 2020 and 2019. Items outside the scope of ASC 606 are noted as such.

(dollars in thousands)	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Non-interest income
Service Charges on Deposits
Overdraft fees	$	595	$	931	$	1,920	$	2,630
Other		348		124		1,159		343
Interchange Income		1,195		970		3,072		3,785
Net gain on securities transactions (a)		0		0		1,155		0
Wealth management fees		1,784		1,517		4,752		4,933
Other (a)		419		1,383		1,043		2,785

Total non-interest income	$	4,341	$	4,925	$	13,101	$	14,476

(a) Not within the scope of ASC 606.

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

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

Index

~~(8)~~

~~Agreement with the Office of the Comptroller of the Currency~~

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.

~~On July 21, 2015~~Wealth Management fees: Trustco ~~Bank (the “Bank”),~~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 fees are charged to manage assets for investment or transact on accounts. These fees are earned over time as the ~~wholly owned subsidiary~~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.

Gains/Losses on Sales of Other Real Estate Owned “OREO”: The Company ~~entered into~~records a ~~formal agreement (the “Agreement”) with~~gain or loss from the ~~Comptroller~~sale of OREO when control of the ~~Currency~~property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the ~~United States (the “OCC”).~~

~~The Agreement relates to~~transaction price is probable. Once these criteria are met, the ~~findings of~~OREO asset is derecognized and the OCC following an examination of the Bank. Since the completion of the examination and entry into the Agreement, the Bank believes it has been working diligently to address the findings of the examination and to develop and implement appropriate formal action plans.

The Agreement requires the Bank to take various actions, within prescribed time frames, with respect to certain areas of the Bank. These include, among others, (i) establishment of a committee of at least three Directors to monitor and coordinate the Bank’s response to the Agreement; (ii) adoption of compliance plans to respond to the Agreement with the assistance of an independent qualified consultant; (iii) evaluation and implementation of improvements in corporate governance with the assistance of an independent qualified consultant; (iv) evaluation and implementation of improvements in internal audit; (v) development of a strategic plan; (vi) development of a revised capital plan consistent with the strategic plan; (vii) development and implementation of improvements to the Bank’s loan review system; and (viii) such other necessary steps to address the issues and questions noted by the OCC in the Agreement.

~~(9)~~

~~New Accounting Pronouncements~~

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” which implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09gain or loss on sale is ~~that an entity should recognize revenue to depict~~recorded upon the transfer of ~~promised goods~~control of the property to the buyer. In determining the gain or ~~services to customers in an amount that reflects~~loss on the ~~consideration to which~~sale, the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determineCompany adjusts the transaction price ~~(iv)~~and related gain/(loss) on sale if a significant financing component is present.

(9) Operating Leases

The Company adopted Topic 842 “Leases” effective January 1, 2019 and has applied the guidance to all operating leases within the scope of Topic 842 at that date. The company elected to adopt practical expedients, which among other things, does not require reassessment of lease classification.

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 ~~transaction price~~consideration between lease and non-lease components. The Company’s lease terms may include options to extend when it is reasonably certain that the ~~performance obligations~~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 September 30, 2020 the Company did not have any leases with terms of twelve months or less.

Index

As of September 30, 2020 the Company does not have leases that have not yet commenced. At September 30, 2020 lease expiration dates ranged from three months to 24.0 years and have a weighted average remaining lease term of 8.9 years. Certain leases provide for increases in future minimum annual rental payments as defined in the ~~contract~~lease agreements. As mentioned above the leases generally also include variable lease components which include real estate taxes, insurance, and ~~(v) recognize revenue when (or as)~~common area maintenance (“CAM”) charges in the ~~entity satisfies~~annual rental payments.

Other information related to leases was as follows:

(dollars in thousands)	Three months ended September 30,
	2020		2019
Operating lease cost	$	1,966	$	2,007
Variable lease cost		369		497

Total Lease costs	$	2,335	$	2,504

(dollars in thousands)	Nine months ended September 30,
	2020		2019
Operating lease cost	$	5,893	$	5,828
Variable lease cost		1,524		1,472

Total Lease costs	$	7,417	$	7,300

(dollars in thousands)	Nine months ended September 30,
	2020			2019
Supplemental cash flows information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6,022		$	5,824

Right-of-use assets obtained in exchange for lease obligations:	$	287		$	54,038

Weighted average remaining lease term	8.9 years			9.4 years
Weighted average discount rate		3.25	%		3.30	%

Index

Future minimum lease payments under non-cancellable leases as of September 30, 2020 were as follows:

(dollars in thousands)

Year ending December 31,
2020^(a)	$	2,020
2021		8,062
2022		7,561
2023		7,256
2024		7,128
Thereafter		28,551
Total lease payments	$	60,578
Less: Interest		8,453

Present value of lease liabilities	$	52,125

(a) Excluding the nine months ended September 30, 2020.

During the quarter ended September 30, 2020, the Board of Directors elected a ~~performance obligation. In July 2015, FASB deferred~~new director that owns 6 commercial properties in which the ~~effective date~~Company leases branches from. Total lease payments, which is included in the table above, owed at September 30, 2020 was $4.7 million, which includes $699 thousand of interest.

Future minimum lease payments under non-cancellable leases as of September 30, 2019 were as follows:

(dollars in thousands)

Year ending December 31,
2019^(a)	$	1,967
2020		7,820
2021		7,818
2022		7,300
2023		6,978
Thereafter		32,600
Total lease payments	$	64,483
Less: Interest		9,752

Present value of lease liabilities	$	54,731

(a) Excluding the ~~ASU~~nine months ended September 30, 2019.

(10) Regulatory Capital Requirements

Banks and bank holding companies are subject to regulatory capital requirements administered by ~~one year which means ASU 2014-09 will be~~federal banking agencies. Capital adequacy regulations and, additionally for banks, 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. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company on January 1, ~~2018. In addition,~~2015 with full compliance with all of the ~~FASB has begun~~requirements being phased in over a multi-year schedule, and became fully phased in on January 1, 2019. The capital rules include a capital conservation buffer that is designed to ~~issue targeted updates~~absorb losses during periods of economic stress and to ~~clarify specific implementation issues~~require increased capital levels before capital distributions and certain other payments can be made. Failure to meet the full amount of ASU 2014-09. These updates include ASU No. 2016-08 - Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU No. 2016-10 - Identifying Performance Obligations and Licensing and ASU No. 2016-12 - Narrow-Scope Improvements and Practical Expedients. The Company isthe buffer will result in ~~process of evaluating disclosure impact. Based~~restrictions on the Company’s ~~preliminary evaluation,~~ability to make capital distributions, including dividend payments and stock repurchases, and to pay discretionary bonuses to executive officers. The buffer was fully implemented at 2.5% as of January 1, 2019. As of September 30, 2020, the ~~ASU does not have a material impact on the Company’s financial position or the results of operations. The~~ Company ~~is in process of evaluating disclosure impact.~~and Bank meet all capital adequacy requirements to which they are subject.

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” which amended existing guidance to improve accounting standards for financial instruments including clarification and simplification of accounting and disclosure requirements and the requirement for public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. These amendments are effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2017. The ASU is not expected to significantly impact the Company’s consolidated financial statements.

Index

~~In February 2016, the FASB issued ASU No. 2016-02, “Leases” which amended existing guidance~~

Prompt corrective action regulations provide 5 classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. If a bank is not classified as well capitalized, regulatory approval is required to ~~increase transparency~~accept brokered deposits. If a bank is undercapitalized, capital distributions are limited, as is asset growth and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. These amendments are effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2018. It is expected that assets and liabilities will increase based on the present value of remaining lease payments for leases in place at the adoption date which will impact the financial positionexpansion, and capital ~~ratios of the Company.~~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 September 30, 2020 and December 31, ~~2016,~~2019, 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.

The Bank and the Company ~~has approximately $69.7 million in minimum lease payments for existing operating leases~~reported the following capital ratios as of ~~branch locations with varying expiration dates from 2017~~September 30, 2020 and ~~after. The Company does not expect the ASU to have a material impact on the Company’s results of operations.~~December 31, 2019:

(Bank Only)
									Minimum for Capital Adequacy plus Capital Conservation
	As of September 30, 2020					Well
	As of September 30, 2020					Well
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	533,874		9.329	%		5.000	%		4.000	%
Common equity tier 1 capital		533,874		18.491			6.500			7.000
Tier 1 risk-based capital		533,874		18.491			8.000			8.500
Total risk-based capital		570,127		19.747			10.000			10.500

	As of December 31, 2019					Well			Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Buffer ⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	516,775		9.940	%		5.000	%		4.000	%
Common equity tier 1 capital		516,775		18.412			6.500			7.000
Tier 1 risk-based capital		516,775		18.412			8.000			8.500
Total risk-based capital		551,975		19.666			10.000			10.500

(Consolidated)	As of September 30, 2020					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	548,437		9.582	%		4.000	%
Common equity tier 1 capital		548,437		18.994			7.000
Tier 1 risk-based capital		548,437		18.994			8.500
Total risk-based capital		584,692		20.250			10.500

	As of December 31, 2019					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	533,243		10.254	%		4.000	%
Common equity Tier 1 capital		533,243		18.988			7.000
Tier 1 risk-based capital		533,243		18.988			8.500
Total risk-based capital		568,463		20.242			10.500

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

(2)	The September 30, 2020 and December 31, 2019 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

In ~~June~~September 2016, the FASB released ASU ~~No.~~ 2016-13, “Financial Instruments –- Credit Losses” 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 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 in current GAAP 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. ~~These amendments are effective~~

As previously disclosed, the Company formed a cross-functional team to work through its implementation of the plan. The Company has selected the Discounted Cash Flow modeling method and is running parallel processes and is working to finalize assessment and documentation of processes, data and model validation testing, qualitative factors and forecast periods. The company has selected a third party software solution to assist in the application of the new standard. The Company has elected to delay its adoption of ASU 2016-13, as provided by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act) until the date on which the National Emergency concerning COVID-19 is terminated or December 31, 2020, whichever occurs first. Upon adoption of ASU 2016-13, the Company will recognize a one-time cumulative effect adjustment through retained earnings to increase its allowance for ~~public~~credit loss and to increase its unfunded loan commitment liability as of January 1, 2020.

(12) Risks and Uncertainties

Beginning in March 2020, the Company experienced negative impacts to its business ~~entities~~in the form of requests for ~~annual periods~~loan deferrals of principal and ~~interim periods within those annual periods beginning after December 15, 2019. The ASU represents~~interest due to the business disruption caused by COVID-19. In March 2020, the World Health Organization categorized COVID-19 as a ~~significant departure from current GAAP~~pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. At this time, it is difficult to quantify the impact COVID-19 will have on future periods. The Company ~~is evaluating~~has evaluated the impact of the ~~ASU~~effects of COVID-19 and determined that there were no material or systematic adverse impacts on ~~its consolidated~~the Company’s September 30, 2020 balance sheet and results of operations except for an increase in provision for loan losses and related allowance for loan losses.

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. These reductions in interest rates and other effects of the COVID-19 pandemic may adversely affect the Company’s financial ~~statements.~~condition and results of operations. As a result of the spread of COVID-19, economic uncertainties have arisen which are likely to continue to negatively impact net interest income, provision for loan losses, and noninterest income. Other financial impact could occur though such potential impact is unknown at this time.

As of September 30, 2020, the Company and Bank capital ratios were in excess of all regulatory requirements. While management believes that we have sufficient capital to withstand an extended economic recession brought about 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 further credit losses.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350)” which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead,non-accrual treatment under the ~~amendments~~Company’s existing policies and procedures. Loan Modifications and payment deferrals made pursuant to COVID 19 as of September 30, 2020 totaled approximately $7 million, which included $2 million of commercial loans and $5 million of residential loans. As of June 30, 2020 these amounts totaled approximately $190 million, which included $45 million of commercial loans and $145 million of residential loans. The reduction in loan deferrals represents loans that are now paying in accordance with their terms. As of September 30, 2020, there was no material impact to delinquencies and non-accruals regarding the loans that came out of deferment.

At this ~~ASU, an entity should perform its annual,~~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 ~~interim, goodwill impairment test by comparing~~available-for-sale investment securities due to the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income taxCOVID-19 pandemic. It is uncertain whether prolonged effects ~~from any tax deductible goodwill on the carrying amount~~ of the ~~reporting unit when measuring the goodwill~~COVID-19 pandemic will result in future impairment ~~loss, if applicable. The Board also eliminated the requirements for~~charges related to any ~~reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2~~ of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of netaforementioned assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this ASU for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The ASU is not expected to significantly impact the Company’s consolidated financial statements.

Index

~~In March 2017, the FASB issued ASU No. 2017~~-0~~7, “Compensation-Retirement Benefits (Topic 715)”~~. The amendments in this ASU require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in this ASU are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The ASU is not expected to significantly impact the Company’s consolidated financial statements.

~~In March 2017, the FASB issued ASU No. 2017~~-08, “Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20)”. The amendments in this ASU shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is evaluating the impact of ASU No. 2017-0~~8 on its consolidated financial statements.~~

In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation – Scope of Modification Accounting (Topic 718)”. The amendments in this ASU clarifies the application of the guidance in Topic 718, Compensation – Stock Compensation, by providing guidance about which changes in terms or conditions of a share-based payment award require and entity to apply modification accounting. An entity should account for the effects of a modification unless all the following are met: 1) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; 2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; 3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this ASU. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The ASU is not expected to significantly impact the Company’s consolidated financial statements.

~~Index~~


		Crowe ~~Horwath~~ LLP Independent Member Crowe ~~Horwath International~~Global

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~The~~Shareholders and the Board of Directors ~~and Shareholders~~

of TrustCo Bank Corp NY

Glenville, New York

Results of Review of Interim Financial Information

We have reviewed the ~~accompanying~~ consolidated ~~statements~~statement of financial condition of TrustCo Bank Corp NY (the "Company") as of September 30, ~~2017,~~2020, and the related consolidated statements of income and comprehensive income for the ~~three-month~~three and nine-month periods ended September 30, ~~2017~~2020 and ~~2016~~September 30, 2019 and the related changes in shareholders’ equity and cash flows for the nine-month periods ended September 30, ~~2017~~2020 and ~~2016. These interim~~September 30, 2019, 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 ~~are~~referred to above for them to be in conformity with accounting principles generally accepted in the ~~responsibility~~United States of ~~the Company’s management.~~America.

We ~~conducted our reviews~~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, 2019, 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 28, 2020, 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, 2019, 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 ~~Public Company Accounting Oversight Board,~~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.

	/s/ Crowe LLP

New York, New York
November 6, 2020

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

~~/s/ Crowe Horwath LLP~~

~~New York, New York~~

~~November 7, 2017~~

Index

Item 2.

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

~~Forward-looking~~Forward‑looking Statements

Statements included in this report and in future filings by TrustCo ~~Bank Corp NY (“TrustCo” or the “Company”)~~ with the Securities and Exchange Commission, in TrustCo’s press releases, and in oral statements made with the approval of an authorized executive officer, ~~which~~including statements regarding the effect of the novel coronavirus disease (“COVID-19”) pandemic on our business, financial condition and results of operations 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. Examples of forward-looking statements include, among others, statements TrustCo makes regarding its expectations for complying with the new regulatory capital rules, costs associated with the Formal Agreement that the Company’s subsidiary, Trustco Bank (or the “Bank”) has entered into with the Office of the Comptroller of the Currency (“OCC”), the Company’s ability to grow its balance sheet and the profitability of such growth, the ability of its loan products to continue to attract customers if long-term rates rise and the ability to secure new sources of liquidity should the need arise. 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, if any, and under the Risk Factor discussion in TrustCo’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, the ~~following important~~ 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:~~statement. Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic. Such factors include:

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;

The current pandemic related to COVID-19, causing TrustCo 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 loan losses; 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;

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

~~TrustCo’s ability to comply with the Formal Agreement entered into with Trustco Bank’s regulator, the OCC, and potential regulatory actions if TrustCo or Trustco Bank fails to comply;~~

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

~~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;~~

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;

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

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;

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 allowance or to take other actions that reduce capital or income;

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;

Index

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 chargeoffs, changes in property values, and changes in estimates of the adequacy of the allowance for loan losses;

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;

~~changes in law and policy accompanying the new presidential administration and uncertainty or speculation pending the enactment of such changes;~~

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;

changes in consumer spending, borrowing and savings habits;

~~changes in consumer spending, borrowing and savings habits;~~

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;

~~changes in management personnel;~~

real estate and collateral values;

~~real estate and collateral values;~~

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

~~changes in accounting policies and practices, as may be adopted by the bank regulatory agencies Financial Accounting Standards Board (“FASB”) 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;

~~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;

~~technological changes and electronic, cyber and physical security breaches;~~

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

~~changes in local market areas~~TrustCo’s success at managing the risks involved in the foregoing and managing its business; and ~~general business and economic trends, as well as changes in consumer spending and saving habits;~~

~~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, 2019 and in our Form 10-Q for the quarter ended March 31, 2020.

~~other risks and uncertainties included under “Risk Factors” in our Form 10-K for the year ended December 31, 2016.~~

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.

Following this discussion are the tables ~~“Distribution~~"Distribution of Assets, Liabilities and ~~Shareholders’~~Shareholders' Equity: Interest Rates and Interest ~~Differential”~~Differential" which gives a detailed breakdown of ~~TrustCo’s~~TrustCo's average interest earning assets and interest bearing liabilities for the ~~three~~three-month and ~~nine~~ nine‑month periods ended September 30, ~~2017~~2020 and ~~2016.~~2019.

Index

Introduction

The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the ~~three~~three‑month and ~~nine~~ nine‑month periods ended September 30, ~~2017,~~2020, with comparisons to the corresponding period in ~~2016,~~2019, 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 ~~2016~~2019 Annual Report to Shareholders on Form ~~10-K,~~10‑K, which was filed with the SEC on ~~March 3, 2017,~~February 28, 2020, 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~~period's presentation.

COVID-19 Impact

Beginning in March 2020, we experienced negative impacts to our business in the form of requests for loan deferrals of principal and interest due to the business disruption caused by COVID-19. 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. At this time, it is difficult to quantify the impact COVID-19 will have on future periods. 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 balance sheets and results of operations as of and for the first nine month of 2020, except for an increase in the provision for loan losses as a result of the increased risk inherent in the loan portfolio resulting from the pandemic.

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

Loan modifications

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 are evaluated individually and approved modifications are based on the unique circumstances of each borrower. We are committed to working with our clients to allow time to work through the challenges of this pandemic. At this time, it is uncertain what future impact loan modifications related to COVID-19 difficulties will have on our financial condition, results of operations and provision for loan losses. Loan modifications and payment deferrals as a result of COVID-19 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 are excluded from evaluation of troubled debt restructuring (“TDR”) classification and will continue to be reported as current during the payment deferral period. The Company’s policy is to continue to accrue interest during the deferral period. Loans not meeting the CARES Act or regulatory guidance are evaluated for TDR and non-accrual treatment under the Company’s existing policies and procedures.

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The following table shows the number of loans and the outstanding loan balances at the time the principal and interest deferrals were approved as of September 30, 2020 and June 30, 2020:

	September 30, 2020				June 30, 2020
(Dollars In Thousands)
New York and Other states*:	Number of loans		Outstanding loan balance		Number of loans		Outstanding loan balance
Commercial		5	$	1,351		79	$	39,630
Residential mortgage loans		13		2,780		441		94,028
Home equity line of credit		-		-		13		641
Installment loans		1		88		5		150
Total		19	$	4,219		538	$	134,449


Florida:	Number of loans		Outstanding loan balance		Number of loans		Outstanding loan balance
Commercial		1	$	574		5	$	5,392
Residential mortgage loans		10		2,387		205		49,745
Home equity line of credit		-		-		1		9
Installment loans		-		-		3		86
Total		11	$	2,961		214	$	55,232


Total:	Number of loans		Outstanding loan balance		Number of loans		Outstanding loan balance
Commercial		6	$	1,925		84	$	45,022
Residential mortgage loans		23		5,167		646		143,773
Home equity line of credit		-		-		14		650
Installment loans		1		88		8		236
Total		30	$	7,180		752	$	189,681

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

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The commercial loans that were deferred included various types of businesses. The following table shows the remaining commercial loans and the outstanding loan balances, by industry, at the time the principal and interest deferrals were approved as of September 30, 2020 and June 30, 2020:

	September 30, 2020				June 30, 2020
(Dollars In Thousands)
New York and Other states*	Number of loans		Outstanding loan balance		Number of loans		Outstanding loan balance
Fitness and Recreational Sports Centers		-	$	-		7	$	11,534
Lessors and Property Managers of Nonresidential Buildings		-		-		7		6,551
Lessors and Property Managers of Residential Buildings		-		-		31		9,818
Other various businesses		-		-		14		2,558
Lessors of Nonresidential Buildings - Self Storage Units		-		-		2		2,238
New Single-Family Housing Construction		-		-		3		1,921
Food Service		5		1,351		5		1,351
Retail		-		-		4		1,349
New Single-Family Housing Construction - Land Development		-		-		3		1,260
Commercial Construction		-		-		3		1,050
		5	$	1,351		79	$	39,630


Florida:	Number of loans		Outstanding loan balance		Number of loans		Outstanding loan balance
Fitness and Recreational Sports Centers		-	$	-		-	$	-
Lessors and Property Managers of Nonresidential Buildings		-		-		2		4,533
Lessors and Property Managers of Residential Buildings		-		-		1		46
Other various businesses		-		-		1		319
Lessors of Nonresidential Buildings - Self Storage Units		-		-		1		494
New Single-Family Housing Construction		-		-		-		-
Food Service		1		574		-		-
Retail		-		-		-		-
New Single-Family Housing Construction - Land Development		-		-		-		-
Commercial Construction		-		-		-		-
		1	$	574		5	$	5,392


Total:	Number of loans		Outstanding loan balance		Number of loans		Outstanding loan balance
Fitness and Recreational Sports Centers		-	$	-		7	$	11,534
Lessors and Property Managers of Nonresidential Buildings		-		-		9		11,084
Lessors and Property Managers of Residential Buildings		-		-		32		9,864
Other various businesses		-		-		15		2,877
Lessors of Nonresidential Buildings - Self Storage Units		-		-		3		2,732
New Single-Family Housing Construction		-		-		3		1,921
Food Service		6		1,925		5		1,351
Retail		-		-		4		1,349
New Single-Family Housing Construction - Land Development		-		-		3		1,260
Commercial Construction		-		-		3		1,050
		6	$	1,925		84	$	45,022

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

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Paycheck Protection Program (PPP) and Liquidity

As part of the CARES Act, approved by the President on March 27, 2020, the Small Business Administration (SBA) was authorized to guarantee loans under the PPP through August 8, 2020 for small businesses that met the necessary eligibility requirements in order to keep their workers on the payroll. The Company began accepting applications on April 3, 2020. As of September 30, 2020, 663 PPP loans totaling $45.7 million have been processed. The Company received loan origination fees which are being recognized over the life of the loan using the effective yield method.

On April 9, 2020, the FDIC, Federal Reserve and OCC created the Paycheck Protection Program Liquidity Facility (PPPLF) to bolster the effectiveness of the PPP by providing liquidity to and neutralizing the regulatory capital effects on participating financial institutions. We do not intend to utilize the liquidity relief offered by the PPPLF as we do not expect our participation in the PPP to have a negative impact on our liquidity position, capital resources, financial condition or results of operations.

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 loan losses

See “Allowance for Loan Losses” for more information.

Preventative measures

The Company has instituted preventative measures at branch and back office locations to protect the health of both the customers and our employees, including regular deep cleaning of facilities, adhering to CDC guidelines, and practicing “social distancing.” These additional expenses did not have a material impact on the Company for the nine months ended September 30, 2020.

Federal Reserve Actions

The Federal Reserve Board has taken several actions to support the flow of credit to households and businesses. Some of these pertinent actions include:

The establishment of the Commercial Paper Funding Facility, the Money Market Mutual Fund Liquidity Facility, and the Primary Dealer Credit Facility;

The expansion of central bank liquidity swap lines;

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Steps to enhance the availability and ease terms for borrowing at the discount window;

The elimination of reserve requirements;

Guidance encouraging banks to be flexible with customers experiencing financial challenges related to the COVID-19 and to utilize their liquidity and capital buffers in doing so;

expanding access to its Paycheck Protection Program Liquidity Facility (PPPLF) for additional SBA-qualified lenders;

Statements encouraging the use of daylight credit at the Federal Reserve.

Economic Overview

During the third quarter of ~~2017~~2020 financial markets ~~were~~continued to be influenced by ~~both underlying~~the economic conditions ~~and by political developments. Equity markets ended~~that resulted from the COVID-19 pandemic. After a rebound in the second quarter, stocks continued to show strong gains in the third quarter, ~~up, gaining gradually over the quarter. For the full third quarter,~~pushing the S&P 500 ~~Index was up 4.0%~~index and the ~~Dow Jones Industrial Average was up 4.9%.~~Nasdaq Composite index to record highs in late August. Credit markets continue to be driven by worldwide economic news, effects of COVID-19, and demand ~~shifts between segments of the bond market as investors seek to capture yield in a continued low rate environment.~~shifts. The shape of the yield curve ~~continued to flatten~~remained consistent during the ~~quarter, with average yields flat or down for longer maturities and up for shorter maturities in the third~~ quarter as compared to ~~the second quarter.~~prior quarters. The 10-year Treasury bond averaged ~~2.24%~~.65% during Q3the third quarter compared to ~~2.26%~~.69% in ~~Q2,~~the second quarter of 2020, a decrease of 24 basis ~~points. The~~points, and the 2-year Treasury bond average rate ~~increased 6~~decreased 5 basis points to ~~1.36%, resulting in flattening of the curve.~~.14%. The spread between the 10-year and the 2-year Treasury bonds ~~contracted~~expanded slightly from ~~0.96%~~0.49% on average in Q2the second quarter to ~~0.88%~~0.51% in ~~Q3.~~the third quarter of 2020. This spread had been depressed in recent years and compares to 2.42% during its most recent peak in Q4the fourth quarter of 2013. Steeper yield curves are generally 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 ~~Fed~~Federal Funds ~~range was increased by 25 basis points on June 14, 2017~~rate remained flat at 0.00% to ~~a range of 1.00% to 1.25%. This increase follows a similar 25 basis point increases announced in December of 2016 and March of 2017.~~0.25% for the quarter. Spreads offor most asset classes, including agency securities, corporates, municipals and ~~mortgage-backed~~mortgage‑backed securities, were down by the end of the quarter as compared to the levels ~~seen~~of a year ~~earlier, but generally roughly flat with levels seen at the end of the second quarter of 2017.~~earlier. Changes in rates and spreads during the current quarter ~~were due~~continue to ~~a number~~be from the effects of ~~factors; however, uncertainty about~~ the timing of additional actions that the Federal Reserve Board (“FRB”) would take in regard to the extraordinary accommodations that have influenced markets in recent years and further uncertainty regarding the economy and related issues were key factors. Low risk free rates in major nations have also caused investors to shift into alternative fixed income instruments, contributing to the compression of spreads over the risk free rate. On September 20, 2017 the Federal Open Market Committee announced that it would initiate the balance sheet normalization program discussed in June of 2017. Information regarding this program provided some additional direction to the market.COVID-19 pandemic.

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

Q3/19	Beg of Q3	2.12	1.75	1.76	2.00	0.25
	Peak	2.26	1.92	1.88	2.13	0.28
	Trough	1.80	1.43	1.32	1.47	-0.04
	End of Q3	1.88	1.63	1.55	1.68	0.05
	Average in Q3	2.03	1.69	1.63	1.80	0.11

Q4/19	Beg of Q4	1.88	1.63	1.55	1.68	0.05
	Peak	1.82	1.68	1.75	1.94	0.34
	Trough	1.52	1.39	1.34	1.52	0.09
	End of Q4	1.55	1.58	1.69	1.92	0.34
	Average in Q4	1.61	1.59	1.61	1.79	0.20

Q1/20	Beg of Q1	1.55	1.58	1.69	1.92	0.34
	Peak	1.59	1.58	1.67	1.88	0.68
	Trough	0.00	0.23	0.37	0.54	0.12
	End of Q1	0.11	0.23	0.37	0.70	0.47
	Average in Q1	1.10	1.08	1.14	1.37	0.28

Q2/20	Beg of Q2	0.11	0.23	0.37	0.70	0.47
	Peak	0.26	0.28	0.48	0.91	0.69
	Trough	0.09	0.13	0.28	0.58	0.38
	End of Q2	0.16	0.16	0.29	0.66	0.50
	Average in Q2	0.14	0.19	0.36	0.69	0.49

Q3/20	Beg of Q3	0.16	0.16	0.29	0.66	0.50
	Peak	0.16	0.17	0.32	0.74	0.60
	Trough	0.09	0.11	0.19	0.52	0.41
	End of Q3	0.10	0.13	0.28	0.69	0.56
	Average in Q3	0.14	0.14	0.27	0.65	0.51

3 Month
Yield (%)

2 Year
Yield (%)

5 Year
Yield (%)

10 Year
Yield (%)

10 - 2 Year
Spread (%)

Q3/16 Beg of Q3 0.28 0.59 1.00 1.46 0.87
Peak 0.37 0.84 1.26 1.73 0.97
Trough 0.18 0.56 0.94 1.37 0.76
End of Q3 0.29 0.77 1.14 1.60 0.83
Average in Q3 0.30 0.73 1.13 1.56 0.84

Q4/16 Beg of Q4 0.32 0.80 0.91 1.63 0.83
Peak 0.55 1.29 1.61 2.60 1.34
Trough 0.30 0.80 0.91 1.63 0.83
End of Q4 0.51 1.20 1.47 2.45 1.25
Average in Q4 0.43 1.01 1.24 2.14 1.13

Q1/17 Beg of Q1 0.16 1.06 1.76 2.27 1.21
Peak 0.79 1.40 2.14 2.62 1.30
Trough 0.50 1.12 1.80 2.31 1.11
End of Q1 0.76 1.27 1.93 2.40 1.13
Average in Q1 0.60 1.24 1.95 2.45 1.20

Q2/17 Beg of Q2 0.76 1.27 1.93 2.40 1.13
Peak 1.04 1.38 1.94 2.42 1.11
Trough 0.79 1.18 1.71 2.14 0.78
End of Q2 1.03 1.38 1.89 2.31 0.93
Average in Q2 0.91 1.30 1.81 2.26 0.96

Q3/17 Beg of Q3 1.03 1.38 1.89 2.31 0.93
Peak 1.18 1.47 1.95 2.39 1.00
Trough 0.98 1.27 1.63 2.05 0.77
End of Q3 1.06 1.47 1.92 2.33 0.86
Average in Q3 1.05 1.36 1.81 2.24 0.88

The United States economy ~~continues to show~~showed some modest improvements in ~~some~~various areas ~~but continues~~heading into 2020 until the COVID-19 uncertainty began to ~~face challenges. Employment metrics have generally improved, but remain inconsistent and not particularly robust.~~gain momentum throughout the year. Economic conditions 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. The unprecedented intervention by governments in markets and attempts to stimulate the economy, including the sharp easing of monetary policy during 2007-2008, will eventually be reversed. How and when the Federal Reserve resolves its own balance sheet expansion has been an area of significant focus of economists and market participants. As noted, guidance on this issue was provided in late September. Economic activity in Europe, China and elsewhere has also improved in some aspects, but remains mixed. Finally, regulatory changes that have been enacted are expected to continue to impact the banking industry going forward. These regulatory changes have added significant operating expense and operational burden and have fundamentally changed the way banks conduct business. The current presidential administration has set policy initiatives that include attempts to reduce the regulatory burden; the timing and extent of any success on that front is yet to be determined. Fiscal policy initiatives, particularly a plan to significantly reduce corporate tax rates could have a major impact on the economy and on TrustCo, but there is no certainty that those initiatives will take effect at all or will result in any timely and/or significant change.

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TrustCo believes that its long-term focus on traditional banking services and practices has enabled the Company to avoid significant impact from asset quality problems and that the Company’s strong liquidity and ~~solid capital~~well capitalized 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.~~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. ~~While the Company does not expect to see a significant change in the inherent risk of loss in its loan portfolio at September 30, 2017, should~~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, the Company may experience an increase in the level of credit risk and in the amount of its classified and nonperforming loans.

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In a direct response to the COVID-19 pandemic, on March 27, 2020 Congress passed the CARES Act. 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 ~~$12.6~~$14.1 million, or ~~$0.131~~$0.146 of diluted earnings per share, for the ~~three~~ three‑months ended September 30, ~~2017,~~2020, compared to net income of ~~$10.9~~$14.7 million, or ~~$0.114~~$0.152 of diluted earnings per share, in the same period in ~~2016.~~2019. Return on average assets was ~~1.02%~~.98% and ~~0.90,~~1.12%, respectively, for the ~~three~~ three‑months ended September 30, ~~2017~~2020 and ~~2016.~~2019. Return on average equity was ~~11.06%~~10.04% and ~~10.05%~~11.19%, respectively, for the ~~three~~ three‑months ended September 30, ~~2017~~2020 and ~~2016.~~2019.

For the nine months ended September 30, 2017, net income was $35.8 million or $0.372 of diluted earnings per share, compared to $31.8 million and $0.333 per share, respectively, in the same period in 2016. Return on average assets was 0.98% and 0.89%, respectively, for the nine months ended September 30, 2017 and 2016. Return on average equity was 10.77% and 9.97%, respectively, for the nine months ended September 30, 2017 and 2016.

The primary factors accounting for the slight change in net income for the ~~three~~ three‑months ended September 30, ~~2017~~2020 compared to the same period of the prior year were:

·•

An increase in the average balance of interest earning assets of ~~$55.8~~$501.2 million to ~~$4.80~~$5.58 billion for the third quarter of ~~2017~~2020 compared to the same period in ~~2016~~2019.

~~An increase in taxable equivalent net interest margin for the third quarter of 2017 to 3.26% from 3.09%~~A decrease in taxable equivalent net interest margin for the third quarter of 2020 to 2.73% from 3.04% in the prior year period. The increase in the margin, coupled with the increase in average earning assets, resulted in an increase of $2.5 million in taxable equivalent net interest income in the third quarter of 2017 compared to the third quarter of 2016.

An increase of $497 thousand in Financial Services income for the third quarter of 2017 as compared to the prior year period due to cash received from the settlement of several estates resulting in revenue greater that the estimated accrued amount.

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An increase of $1.4 million in salaries and benefits expense for the third quarter of 2017 compared to the third quarter of 2016, due to a combination of higher staffing levels, the impact of a higher stock price on liability-based stock compensation plans and other factors.

~~A decrease of $280 thousand in Professional Services expense for the third quarter of 2017 compared to the third quarter of 2016.~~

~~A increase of $210 thousand in Advertising expense for the third quarter of 2017 compared to the third quarter of 2016.~~

~~A decrease of $620 thousand in Other Real Estate expense for the third quarter of 2017 compared to the third quarter of 2016 due to increased gains recognized in the sale of properties.~~

~~An increase of $694 thousand in income taxes in the third quarter of 2017 compared to the prior year due primarily to higher pre-tax earnings.~~

An overall decrease in noninterest expense of $1.4 million for the third quarter of 2020 compared to the third quarter of 2019.

~~The primary factors accounting~~A provision for loan losses of $1 million for the ~~change~~third quarter of 2020 as compared with no provision for loan losses in ~~net~~the third quarter of 2019.

A decrease of $584 thousand in noninterest income for the ~~nine~~ third quarter of 2020 compared to the third quarter of 2019.

A decrease of $478 thousand in net interest income for the third quarter of 2020 compared to the third quarter of 2019.

TrustCo recorded net income of $38.6 million, or $0.400 of diluted earnings per share, for the nine-months ended September 30, 2020, compared to net income of $43.9 million, or $0.453 of diluted earnings per share, in the same period in 2019. Return on average assets was .94% and 1.14%, respectively, for the nine‑months ended September 30, ~~2017 compared to~~2020 and 2019. Return on average equity was 9.38% and 11.56%, respectively, for the ~~same periods of the prior year were:~~nine‑months ended September 30, 2020 and 2019.

~~An increase in the average balance of interest earning assets of $104.5 million to $4.90 billion for the first nine months of 2017 compared to the same period in 2016~~.

An increase in taxable equivalent net interest margin for the first nine months of 2017 to 3.20% from 3.10% in the prior year period. The increase in the margin coupled with the increase in average earning assets, resulted in an increase of $6.0 million in taxable equivalent net interest income in the first nine months of 2017 compared to the same period in 2016.

~~A decrease of $668 thousand in securities gains for the first nine months of 2017 as compared to the prior year period.~~

~~An increase of $663 in Financial Services income~~ ~~for the first nine months of 2017 as compared to the prior year period, the majority of which was recognized in the third quarter as noted previously.~~

~~An increase of $3.2 million in salaries and benefits~~ ~~for the first nine months of 2017 as compared to the prior year period, for similar reasons as previously noted in regard to the third quarter of 2017.~~

A decrease of $2.0 million in FDIC and other insurance expense and a decrease of $1.1 million in net other real estate (“ORE”) expense, for the first nine months of 2017 compared to the same period in 2016.

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~~An increase of $2.2 million in income taxes, in the first nine months of 2017 compared to the same period in 2016, due to an increase in pretax earnings.~~

~~Regulatory Agreement~~

~~On July 21, 2015 Trustco Bank, the wholly owned subsidiary of the Company, entered into a formal agreement with the OCC (the “Agreement”).~~

The Agreement relates to the findings of the OCC following its regularly scheduled examination of the Bank in January 2015. Since the completion of the examination and entry into the Agreement, the Bank believes it has been working diligently to address the findings of the examination and to develop and implement appropriate formal action plans.

The Agreement requires the Bank to take various actions, within prescribed time frames, with respect to certain activities of the Bank. These include, among others, (i) establishment of a committee of at least three Directors to monitor and coordinate the Bank’s response to the Formal Agreement; (ii) adoption of compliance plans to respond to the Formal Agreement with the assistance of an independent qualified consultant; (iii) evaluation and implementation of improvements in corporate governance with the assistance of an independent qualified consultant; (iv) evaluation and implementation of improvements in internal audit; (v) development of a strategic plan; (vi) development of a revised capital plan, including dividends, consistent with the strategic plan; (vii) development and implementation of improvements to the Bank’s loan review system; and (viii) such other necessary steps to address the issues and questions noted by the OCC in the Agreement. The costs to implement the recommendations in the agreement are expected to remain elevated, reflecting the Company’s investment in additional personnel and systems within the retail loan, deposit and regulatory compliance areas.

Asset/Liability Management

The Company strives to generate its earnings capabilities through a mix of core deposits funding a prudent mix of interest 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~~short‑term and ~~long-term~~long‑term basis.

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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, inby 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 to Shareholders on Form ~~10-K~~10‑K for the year ended December 31, ~~2016~~2019 is a description of the effect interest rates had on the results for the year ~~2016~~2019 compared to ~~2015.~~2018. Many of the same market factors discussed in the ~~2016~~2019 Annual Report continued to have a significant impact on results through the third quarter of ~~2017.~~2020, as well as the economic effect of COVID-19.

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.

~~Index~~

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 ~~implement~~control national economic policy is the ~~Federal Funds~~“Federal Funds” rate. This is the interest rate utilized within the banking system for overnight borrowings for institutions with the highest credit rating. ~~The~~During 2007‑2008 the FRB aggressively reduced the Federal Funds ~~target~~ rate, ~~decreased~~including a decrease from 4.25% at the beginning of 2008 to a target range of 0.00% to 0.25% by the end of 2008. InThe target range remained at that level until December 2015 when the ~~target~~range was increased to 0.25% to 0.50%. Subsequent increases resulted a range of ~~0.25%~~2.25% to ~~0.50%,~~2.50% until the second half of 2019 when the rate was cut several times before the end of 2019. During the first quarter of 2020 the rate was significantly decreased again as a result of the global pandemic related to COVID-19, and ~~25 basis point increases in~~has returned the ~~target range were also announced in December of 2016 and March and June of 2017, producing the current~~ range of ~~1.00%~~0.00% to ~~1.25%~~0.25%. Additional increases in 2017 and beyond will largely be dependent on the strength of economic conditions. In the November 1, 2017 statement from the Federal Open Market Committee, it was noted that, “In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

Traditionally, interest rates on bank deposit accounts are heavily influenced by the Federal Funds rate. The average rate on interest bearing deposits was 3 basis points lower in the third quarter of 2017 relative to the prior year period. Rates were flat or lower on all deposit categories as compared to the same period in 2016 except money market accounts. 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. The FRB has attempted to influence rates on mortgage loans by means other than targeting a lower Federal Funds rate, including direct intervention in the mortgage-backed securities market through purchasing these securities in an attempt to raise prices and reduce yields. In recent periods this includes the reinvestment of principal payments received on its holdings of agency securities, agency mortgage-backed securities and Treasury securities. The FRB has stated its intent to unwind these positions, which could put upward pressure on rates, although other factors may mitigate this pressure. These changes in interest rates ~~can~~ have an effect on the Company relative to the interest income on loans, securities, and Federal Funds sold and other ~~short term~~short-term instruments as well as onthe interest expense on deposits and borrowings. ~~The FRB plan to reduce its holdings began in October 2017 and will occur gradually.~~

~~Index~~

~~TrustCo’s principal loan products are residential real estate loans. As noted above, residential~~Residential real estate loans and ~~longer-term~~longer‑term investments are most affected by the changes in longer term market interest rates such as the ~~10-year~~10‑year Treasury. The ~~10-year Treasury yield was down 2 basis points,~~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 ~~average, during~~ the ~~third quarter~~recorded balance of ~~2017 compared to~~ the ~~second quarter~~securities available for sale portfolio, which are recorded at fair value. Generally, as market interest rates increase, the fair value of ~~2017 but was up 68 basis points as compared to~~ the ~~third quarter of 2016.~~

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. AsBecause TrustCo is a portfolio lender ~~TrustCo~~and does not sell loans into the secondary market, in the ~~normal course of business and is able to establish~~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. ~~Financial~~Higher market ~~volatility~~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 ~~the problems faced~~longer‑term investments are most affected by the financial services industry have lessened the influence of the secondary market; however, various programs initiated by arms of the federal government have had an impact on rate levels for certain products. Most importantly, a government goal of keeping mortgage rates low has been supported by targeted buying of certain securities, thus supporting prices and constraining yields, as noted above. Very lowchanges in longer term market interest rates ~~in many markets around~~such as the ~~world have also increased demand for US fixed income assets, which has also contributed to the decline of yields~~10-year Treasury. The 10‑year Treasury yield was down 114 basis points, on ~~these assets.~~

The Federal Funds sold and other short term investments portfolios are affected primarily by changes in the Federal Funds target rate. Also, changes in interest rates have an effect on the recorded balance of the securities available for sale portfolio, which is recorded at fair value. Generally, as interest rates increase the fair value of these securities will decrease.

~~Interest rates generally remained below historic norms on both short term and longer term investments~~average, during the third quarter of ~~2017 despite~~2020 compared to the ~~increases seen during~~fourth quarter of 2019 and was down 115 basis points as compared to the ~~quarter.~~third quarter of 2019.

While TrustCo has been affected by changes in financial markets over time, the ~~impact of the financial crisis that began in 2007 was~~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 ~~existing infrastructure.~~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.

~~Index~~

For the third quarter of ~~2017,~~2020, the net interest margin was ~~3.26%~~2.73%, ~~up 17~~down 31 basis points versus the prior year’s quarter. The quarterly results reflect the following significant factors:

The average balance of Federal Funds sold and other ~~short-term~~short‑term investments ~~decreased~~increased by ~~$61.9~~$472.8 million while the average yield ~~increased 74~~decreased 209 basis points in the third quarter of ~~2017~~2020 compared to the same period in ~~2016. The decrease in the average balance helped to fund increases in loans.~~

2019.

The average balance of securities available for sale decreased by ~~$39.8~~$218.1 million ~~while~~and the average yield ~~increased 13~~decreased 29 basis points to ~~1.92%~~2.05%. The average balance of held to maturity securities decreased by ~~$13.1~~$4.4 million and the average yield ~~increased 7~~decreased 18 basis points to ~~4.10%~~3.52% for the third quarter of ~~2017~~2020 compared to the same period in 2016, with the increase in yield in both portfolios due to a combination of slower prepayment speeds on mortgage-backed securities and the fact that corporate securities, which have higher yields, comprised a larger component of the portfolio in the 2017 period than in the 2016 period.

2019.

The average loan portfolio grew by ~~$171.0~~$254.6 million to ~~$3.54~~$4.20 billion ~~and~~while the average yield decreased 532 basis points to ~~4.24%~~3.94% in the third quarter of ~~2017~~2020 compared to the same period in 2016. The decline in the average yield primarily reflects the decline in market interest rates on new loan originations as older, higher rate loans pay down or are paid off, as well as declines in higher yielding commercial and installment loans.

2019.

The average balance of interest bearing liabilities (primarily deposit accounts) increased ~~$13.2~~$292.4 million ~~and~~while the average rate paid decreased 242 basis points to ~~0.36%~~0.52% in the third quarter of ~~2017~~2020 compared to the same period in ~~2016.~~2019.

Index

During the third quarter of ~~2017,~~2020, 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 ~~continues~~was to beoffer competitive shorter term rates which allowed the Bank to ~~attract~~gain market share as well as retain our existing time deposits. This strategy drove growth at a relatively low cost that will sustain TrustCo’s strong liquidity position and ~~retain deposit customers~~continue to ~~the Company based upon a combination~~allow us to cross sell new and existing relationships and take advantage of ~~service, convenience and interest rate.~~opportunities as they arise.

Earning Assets

Total average interest earning assets increased from ~~$4.75~~$5.08 billion in the third quarter of ~~2016~~2019 to ~~$4.80~~$5.58 billion in the same period of ~~2017~~2020 with an average yield of ~~3.56%~~3.15% in the third quarter of ~~2017~~2020 and ~~3.41%~~3.82% in the third quarter of ~~2016. The~~2019. There was a shift in the mix of assets towards a higher proportion of ~~loans, along with~~federal funds sold and other short-term investments from securities available for sale. The sharp decrease in the ~~increase in~~federal funds rate during March of 2020 significantly decreased the average yield on ~~cash, more than offset~~ the ~~declining yields~~federal funds sold and other short-term investments from 2.19% in the third quarter of 2019 to 0.10% in the third quarter of 2020, which drove down the overall yield on ~~loans.~~interest earning assets. Interest income on average earning assets ~~increased~~decreased from ~~$40.5~~$48.5 million in the third quarter of ~~2016~~2019 to ~~$42.8~~$44.0 million in the third quarter of ~~2017,~~2020, on a tax equivalent ~~basis. The increase~~basis, and was primarily driven by the ~~result~~mix of ~~higher volume~~assets shift and ~~yield.~~the lower federal funds rate as mentioned above.

~~Index~~

Loans

The average balance of loans was ~~$3.54~~$4.20 billion in the third quarter of ~~2017~~2020 and ~~$3.37~~$3.94 billion in the comparable period in ~~2016.~~2019. The yield on loans ~~decreased 5~~was down 32 basis points to ~~4.24%~~3.94%. ~~The higher average balances more than offset the lower yield, leading to an increase in interest~~Interest income on loans ~~from $36.2~~was $41.3 million in the third quarter of ~~2016 to $37.5 million~~2020 down $593 thousand from the same period in 2019. The higher average balances did not offset the ~~third quarter of 2017.~~decrease in yield.

Compared to the third quarter of ~~2016,~~2019, the average balance of residential mortgage loans and commercial loans increased ~~however other loan categories~~while home equity lines of credit and installment loans decreased. The average balance of residential mortgage loans was ~~$3.04~~$3.70 billion in ~~2017~~2020 compared to ~~$2.82~~$3.47 billion in ~~2016,~~2019, an increase of ~~7.7%~~6.9%. The average yield on residential mortgage ~~loans~~loan decreased by 1224 basis points to ~~4.16%~~3.89% in the third quarter of ~~2017~~2020 compared to ~~2016.~~2019.

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 Companytypically holds these loans in portfolio and does not sell them into the secondary markets. Assuming aan eventual 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 $11.2~~increased $41.0 million to an average balance of ~~$183.9~~$231.5 million in the third quarter of ~~2017~~2020 compared to the same period in the prior ~~year.~~year, primarily as a result of the issuance of the PPP loans. The average yield on this portfolio was ~~up 8~~down 91 basis points to ~~5.40%~~4.54% compared to the prior year period, primarily ~~reflecting~~as a result of the ~~increase in~~1% interest rate on the ~~prime rate.~~PPP Loans. The Company ~~has been~~remained selective in underwriting non-PPP 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 ~~increased 44~~decreased 97 basis points to ~~4.14%~~3.98% during the third quarter of ~~2017~~2020 compared to the ~~year earlier period.~~same period in 2019. The ~~increase~~decrease in yield is the result of prime rate ~~increases~~decreases which impacted some loans ~~and~~as well as a smaller ~~proportion~~percentage of lower yielding initial rate balances. The average balances of home equity lines decreased ~~9.8%~~8.6% to ~~$312.8~~$251.5 million in the third quarter of ~~2017~~2020 as compared to the prior year. ~~Some~~Consistent with prior periods, customers with home equity lines ~~have refinanced~~continue to refinance their balances into fixed rate mortgage ~~loans.~~loans 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 third quarter of ~~2017~~2020 was ~~$594.2~~$429.3 million compared to ~~$633.9~~$647.5 million for the comparable period in ~~2016.~~2019. The declining balance reflects routine sales, paydowns, calls and maturities, partially offset by new investment purchases. The current interest rate environment has significantly contributed to more bonds being called. The average yield was ~~1.92%~~2.05% for the third quarter of ~~2017~~2020 compared to ~~1.79%~~2.34% for the third quarter of ~~2016.~~2019. This portfolio is primarily comprised of agency issued residential mortgage backed securities and collateralized mortgage obligations, bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank, and Freddie Mac), ~~agency-issued commercial mortgage backed securities,~~ Small Business Administration participation certificates, corporate bonds and municipal bonds. These securities are recorded at fair value with any adjustment in fair value included in accumulated other comprehensive income, ~~(loss),~~ net of tax.

~~Index~~

The net unrealized ~~loss~~gain in the available for sale securities portfolio was ~~$5.8~~$10.6 million as of September 30, ~~2017~~2020 compared to a net unrealized ~~loss~~gain of ~~$11.3 million~~$391 thousand as of December 31, ~~2016.~~2019. The unrealized ~~loss~~gain in the portfolio is primarily the result of changes in market interest rate levels.

Held to Maturity Securities

The average balance of held to maturity securities was ~~$36.9~~$15.8 million for the third quarter of ~~2017~~2020 compared to ~~$50.0~~$20.2 million in the third quarter of ~~2016.~~2019. The decrease in ~~balances~~balance reflects routine ~~paydowns and calls.~~paydowns. No new securities were added to this portfolio during the period. The average yield was ~~4.10%~~3.52% for the third quarter of ~~2017~~2020 compared to ~~4.03%~~3.70% for the ~~year earlier period. The higher yield reflects a change~~same period in ~~mix and slower prepayments on mortgage-backed securities (MBS), which reduced premium amortization.~~2019. TrustCo expects to hold the securities in this portfolio until they mature or are called.

As of September 30, ~~2017,~~2020, this portfolio consisted solely of agency issued residential mortgage-backed securities. The balances for these securities are recorded at amortized cost.

Index

Federal Funds Sold and Other ~~Short-term~~Short‑term Investments

The ~~2017~~2020 third quarter average balance of Federal Funds sold and other ~~short-term~~short‑term investments ~~was $621.9~~were $938.1 million, a ~~$61.9~~$472.8 million ~~decrease~~increase from the ~~$683.8~~$465.3 million average for the same period in ~~2016.~~2019. The yield was ~~1.24%~~0.10% for the third quarter of ~~2017~~2020 and ~~0.50%~~2.19% for the comparable period in ~~2016.~~2019. Interest income from this portfolio ~~increased $1.1~~decreased $2.3 million from ~~$866~~$2.6 million in 2019 to $242 thousand in ~~2016 to $1.9 million in 2017, reflecting the~~2020. The higher average balances did not offset several target rate ~~increases that took effect in December of 2016 and March and June of 2017, partly offset by the decrease in balances.~~decreases.

The Federal Funds sold and other ~~short-term~~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~~interest‑bearing checking, money market and time deposit accounts.

Total average interest bearing ~~deposits~~accounts (which includes interest bearing checking, money market accounts, savings and ~~certificates of deposit) decreased $20.1~~time deposits) increased $258.8 million to ~~$3.79~~$4.28 billion for the third quarter of ~~2017~~2020 versus the third quarter in the prior year, and the average rate paid decreased from ~~0.37%~~0.95% for ~~2016~~2019 to ~~0.34%~~0.52% for ~~2017.~~2020. Total interest expense on these deposits decreased ~~$291 thousand~~$3.9 million to ~~$3.3~~$5.6 million in the third quarter of ~~2017~~2020 compared to the ~~year earlier period.~~same period in 2019. From the third quarter of ~~2016~~2019 to the third quarter of ~~2017,~~2020, interest bearing demand account average balances were up ~~10.4%~~17.2%, certificates of deposit average balances were down ~~8.3%~~7.0%, ~~non-interest~~non‑interest demand average balances were up ~~3.1%~~41.8%, average savings balances ~~decreased 0.3%~~increased 8.5% and money market balances were up ~~0.1%~~20.2%.

~~Index~~

~~The Company has a number of contingent funding alternatives available~~ Our growth in ~~addition~~deposits came at relatively low cost and continues to ~~the large cash~~be offset by higher earnings on loan yields and ~~cash equivalents position and~~returns in the investment ~~securities positions it maintains on its balance sheet. The Bank is a member~~portfolio. Because we offered competitive shorter term CD rates in the past, we expect cost of ~~the Federal Home Loan Bank of New York (FHLBNY) and is an eligible borrower~~interest bearing liabilities to continue to decrease as these reprice 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.lower rates.

At September 30, ~~2017,~~2020, the maturity of total time deposits is as follows:

(dollars in thousands)

Under 1 year	$	773,959	$	1,184,740
1 to 2 years		274,233		106,072
2 to 3 years		23,568		9,774
3 to 4 years		1,912		3,015
4 to 5 years		1,989		1,223
Over 5 years		225		200
	$	1,075,886	$	1,305,024

Average ~~short-term~~short‑term borrowings for the quarter were ~~$223.2~~$193.8 million in ~~2017~~2020 compared to ~~$189.9~~$160.2 million in ~~2016.~~2019. The average rate ~~increased~~decreased during this time period from ~~0.59%~~0.90% in ~~2016~~2019 to ~~0.62%~~0.45% in ~~2017.~~2020. The ~~short-term~~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.

Index

Net Interest Income

Taxable equivalent net interest income ~~increased~~decreased by ~~$2.5 million~~$478 thousand to ~~$39.2~~$38.2 million in the third quarter of ~~2017~~2020 compared to the same period in ~~2016.~~2019. The net interest spread was ~~up 18~~down 25 basis points to ~~3.21%~~2.63% in the third quarter of ~~2017~~2020 compared to the same period in ~~2016.~~2019. As previously noted, the net interest margin was ~~up 17~~down 31 basis points to ~~3.26%~~2.73% for the third quarter of ~~2017~~2020 compared to the same period in ~~2016.~~2019.

Taxable equivalent net interest income decreased by $3.2 million to $114.4 million in the first nine‑months of 2020 compared to the same period in 2019. The net interest spread was down 24 basis points to 2.74% in the first nine‑months of 2020 compared to the same period in 2019. The net interest margin was down 27 basis points to 2.86% for the first nine‑months of 2020 compared to the same period in 2019.

Nonperforming Assets

Nonperforming assets include nonperforming loans (“NPLs”), which are those loans in a ~~non-accrual~~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. As of September 30, 2020, there were no pandemic related deferrals that have been recorded as NPLs or TDRs.

The following describes the nonperforming assets of TrustCo as of September 30, ~~2017:~~2020:

Nonperforming loans and foreclosed real estate: Total NPLs were ~~$24.6~~$21.8 million at September 30, ~~2017,~~2020, compared to ~~$25.1~~$20.9 million at December 31, ~~2016~~2019 and ~~$26.0~~$21.0 million at September 30, ~~2016.~~2019. There were ~~$24.5~~$21.8 million of ~~non-accrual~~non‑accrual loans at September 30, ~~2017~~2020 compared to ~~$25.0~~$20.8 million at December 31, ~~2016~~2019 and ~~$26.0~~$21.0 million at September 30, ~~2016.~~2019. There were no loans at September 30, ~~2017~~2020 and ~~2016~~2019 and December 31, ~~2016~~2019 that were past due 90 days or more and still accruing interest.

~~Index~~

At September 30, ~~2017,~~2020, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of ~~$24.5~~$21.8 million at September 30, ~~2017, $22.8~~2020, $21.2 million were residential real estate loans, ~~$1.7 million~~$491 thousand were commercial loans and mortgages and ~~$30~~$49 thousand were installment loans, compared to ~~$23.2~~$20.0 million, ~~$1.8 million~~$816 thousand and ~~$48~~$3 thousand, respectively, at December 31, ~~2016.~~2019.

A significant percentage of nonperforming loans are residential real estate loans, which are historically ~~lower-risk~~lower‑risk than most other types of loans. ~~Annualized net~~Net chargeoffs were ~~0.07% of average~~$4 thousand on residential real estate loans (including home equity lines of credit) for the third quarter of ~~2017~~2020 compared to ~~0.06%~~net chargeoffs of $39 thousand for the third quarter of ~~2016.~~2019. Management believes that these loans have been appropriately written down where required.

Index

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 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. Due to the recent COVID-19 pandemic, the Bank is monitoring recent state regulatory mandates in regards to a moratorium on foreclosures. The collateral on ~~secured~~ nonaccrual loans is evaluated periodically, and the loan value is written down if the collateral value is insufficient.

The Company originates loans throughout its deposit franchise area. At September 30, ~~2017, 77.2%~~2020, 72.7% of its gross loan portfolio balances were in New York State and the immediately surrounding areas (including New Jersey, Vermont and Massachusetts), and ~~22.8%~~27.3% were in Florida. Those figures compare to ~~78.5%~~74.4% and ~~21.5%~~25.6%, respectively at December 31, 2016. Within these two geographic regions, commercial loans constitute a larger component of the local outstandings in New York than in Florida, at 6.3% and 1.6%, respectively, as of September 30, 2017.2019.

Economic conditions vary widely by geographic location. ~~Florida experienced a more significant downturn than New York during the recession, however conditions in Florida have improved more than in New York in recent periods.~~ As a percentage of the total nonperforming loans as of September 30, ~~2017, 7.7%~~2020, 5.8% were to Florida borrowers, compared to ~~92.3%~~94.2% to borrowers in New York and surrounding areas. For the ~~three~~ three‑months ended September 30, ~~2017,~~2020, New York and surrounding areas experienced net chargeoffs of approximately ~~$667~~$21 thousand, compared to ~~net recoveries of $37 thousand~~none in Florida.

~~Index~~

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~~non‑collection of principal and interest. Also as of September 30, ~~2017,~~2020, 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 troubled debt restructuring (TDR), as impaired loans. There were ~~$3.0~~$1.1 million of commercial mortgages and commercial loans classified as impaired as of September 30, ~~2017~~2020 compared to ~~$2.4~~$1.4 million at December 31, ~~2016.~~2019. There were ~~$21.6~~$20.6 million of impaired residential loans at September 30, ~~2017~~2020 and ~~$21.6~~$19.5 million at December 31, ~~2016~~2019. The average balances of all impaired loans were ~~$25.0~~$20.7 million for the nine months of ~~2017~~2020 and ~~$22.4~~$21.0 million for the full year ~~2016.~~2019.

As of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Company’s loan portfolio did not include any subprime mortgages or loans acquired with deteriorated credit quality.

AtThe 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 deed in lieu). As of September 30, ~~2017 there was $2.9 million~~2020 other real estate owned included $423 thousand of foreclosed real estate compared to ~~$4.3~~$1.6 million at December 31, ~~2016.~~2019.

Index

Allowance for loan losses: The balance of the allowance for loan losses is maintained at a level that is, in management’s judgment, representative of the amount of probable incurred losses in the loan portfolio.

~~Allocation of the Allowance for Loan Losses~~

The allocation of the allowance for loans losses is as follows:

(dollars in thousands)	As of September 30, 2020					As of December 31, 2019
			Percent of					Percent of
			Loans to					Loans to
	Amount		Total Loans			Amount		Total Loans
Commercial	$	4,083		5.12	%	$	3,805		4.47	%
Real estate - construction		315		0.64	%		311		0.70	%
Real estate mortgage - 1 to 4 family		40,458		88.12	%		35,632		87.96	%
Home equity lines of credit		3,734		5.89	%		3,999		6.60	%
Installment Loans		533		0.23	%		570		0.27	%
	$	49,123		100.00	%	$	44,317		100.00	%

(dollars in thousands)
As of
September 30, 2017

As of
December 31, 2016

Amount
Percent of
Loans to
Total Loans
Amount
Percent of
Loans to
Total Loans

Commercial $ 4,490 4.94 % $ 4,820 5.32 %
Real estate - construction $ 343 0.78 % 318 0.72 %
Real estate mortgage - 1 to 4 family $ 33,083 85.34 % 32,452 83.94 %
Home equity lines of credit $ 5,440 8.71 % 5,570 9.76 %
Installment Loans $ 726 0.23 % 730 0.26 %
$ 44,082 100.00 % $ 43,890 100.00 %

At September 30, ~~2017,~~2020, the allowance for loan losses was ~~$44.1~~$49.1 million, compared to ~~$44.0~~$44.3 million at September 30, ~~2016~~2019 and ~~$43.9 million~~ at December 31, ~~2016.~~2019. The allowance represents ~~1.23%~~1.17% of the loan portfolio as of September 30, ~~2017~~2020 compared to ~~1.30%~~1.11% at September 30, ~~2016~~2019 and ~~1.28%~~1.09% at December 31, ~~2016.~~2019.

~~Index~~

The provision for loan losses was ~~$550 thousand~~$1 million for the quarter ended September 30, ~~2017 and $750 thousand~~2020 compared to no provision for loan losses for the quarter ended September 30, ~~2016.~~2019. The increase is primarily driven by the uncertainty in the current economic environment resulting from COVID-19. Net chargeoffs for the ~~three-month~~three‑month period ended September 30, ~~2017~~2020 were ~~$630~~$21 thousand and were ~~$864~~$36 thousand for the prior year period. Net chargeoffs for the nine‑month period ended September 30, 2020 were $194 thousand and were $396 thousand for the prior year period.

During the third quarter of ~~2017,~~2020, there were no commercial loan ~~chargeoffs~~net recoveries of $1 thousand and ~~$847~~$22 thousand of ~~gross~~ residential mortgage and consumer loan net chargeoffs compared with ~~$356~~commercial loan net recoveries of $28 thousand and $64 thousand of ~~gross commercial loan chargeoffs and $611 thousand of gross~~net residential mortgage and consumer loan chargeoffs in the third quarter of 2016. Gross recoveries during the third quarter of 2017 were zero for commercial loans and $217 thousand for residential mortgage and consumer loans, compared to $3 thousand for commercial loans and $100 thousand for residential and consumer in the third quarter of 2016.2019.

In determining the adequacy of the allowance for loan losses, management reviews the current nonperforming loan portfolio as well as loans that are past due and not yet categorized as nonperforming for reporting purposes. Also, there are a number of other factors that are taken into consideration, including:

The magnitude and nature of recent loan chargeoffs and recoveries;

~~The growth in the loan portfolio and the implication that it has in relation to the economic climate in the Bank’s market territories, and;~~

~~The economic environment in the Upstate New York and Florida territories over the last several years, as well as in the Company’s other market areas.~~

The growth in the loan portfolio and the implication that it has in relation to the economic climate in the Bank’s market territories;

The economic environment in the Upstate New York and Florida territories over the last several years, as well as in the Company’s other market areas; and

Index

The economic environment as a result of the global pandemic.

Management continues to monitor these factors in determining the provision for loan losses in relation to loan chargeoffs, recoveries, the level and trends of nonperforming loans and overall economic conditions in the Company’s market territories.

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~~The Bank is a member of the ~~FHLBNY~~Federal Home Loan Bank of New York (“FHLBNY”) and is an eligible borrower at the ~~FRBNY~~Federal Reserve Bank of New York (“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~~deposits may be tested from time to time to ensure operational and market readiness.

~~Index~~

The Company uses an industry standard external model as the primary tool to identify, quantify and project changes in interest rates and prepayment speeds taken both from industry sources and internally generated data based upon historical trends in the Bank’s balance sheet. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in market interest rates are also incorporated into the model. This model calculates an economic or fair value amount with respect to ~~non-time~~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 September 30, ~~2017~~2020 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 September 30, ~~2017.~~2020. The following 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.

Index

As of September 30, ~~2017~~ 2020	Estimated Percentage of Fair value of Capital to Fair value of Assets
+400 BP		~~19.81~~18.50	%
+300 BP		~~21.10~~18.60
+200 BP		~~22.37~~18.60
+100 BP		~~23.41~~18.70
Current rates		~~23.85~~17.90
-100 BP		~~21.57~~13.80

Noninterest Income

Total noninterest income for the third quarter of ~~2017~~2020 was $4.3 million versus $4.9 million for the previous year. Financial services income was $1.8 million in the third quarter of 2020 as compared to ~~$4.7~~$1.5 million in the prior year ~~period. The increase~~period primarily as a result of ~~$125 thousand was due to an increase~~fluctuations in ~~Financial Services income, offset by a decline in other income. There were no net gains on securities transactions in either period. The increase in Financial Services~~asset market values under management and fees associated with estate settlements. Other income was ~~due to the settlement of several estates~~$265 thousand, down $541 thousand in the third quarter of ~~2017 that generated more revenue than previously accrued for.~~2020 as compared to the year ago period. Fees for services to customers were ~~up $103~~down $310 thousand over the same period in the prior ~~year period.~~year. The fair value of assets under management was ~~$876~~$899 million at September 30, ~~2017~~2020 and ~~$846~~$928 million as of December 31, ~~2016~~2019 and ~~$863~~$896 million at September 30, ~~2016.~~2019.

For the nine months through September 30, ~~2017~~2020 total noninterest income was ~~$14.1~~$13.1 million, down $1.4 million compared to ~~$14.5 million for~~ the prior year period. The ~~decline was~~decrease is the result of less financial services income as a result of lower asset market values under management throughout 2020, less fees for services to customers which is driven by lower overdraft fees due to ~~a decrease of $668 thousand in net gains on securities transactions~~higher deposit balances, and a decrease ~~of $549~~ in other income which also included a gain on the sale of the credit card portfolio in 2019, partially offset by ~~an increase of $663 thousand in Financial Services revenue, as noted previously.~~a net gain on securities transactions.

Noninterest Expenses

Total noninterest expenses were ~~$23.5~~$22.7 million for the ~~three~~ three‑months ended September 30, ~~2017,~~2020, compared to ~~$23.0~~$24.1 million for the ~~three~~ three‑months ended September 30, ~~2016~~2019. Significant changes included a decrease of $826 thousand in salaries and employee benefits which is primarily a result of lower stock-based compensation expense due to a decrease in the Company’s stock price, a $196 thousand decrease in professional services, a $189 decrease in advertising expense, a $148 decrease in other real estate expense, a $516 thousand decrease in other expense, partially offset by an increase of $183 thousand in occupancy expense and a $378 thousand increase in FDIC and other insurance. Full time equivalent headcount decreased from 823 as of September 30, 2019 to 771 as of September 30, 2020. The decrease in FTE’s in the period presented was not due to the effects of the pandemic. The Company constantly hires qualified candidates and from time-to-time experiences fluctuations in head count.

Total noninterest expenses were $70.9 million for the nine‑months ended September 30, 2020, compared to $73.8 million for the nine‑months ended September 30, 2019. Significant changes included a ~~$1.4 million increase~~decrease of $967 thousand in salaries and employee benefits, ~~offset by~~ a ~~$620~~$285 thousand decrease in equipment expense, a $751 thousand decrease in professional services, a $663 decrease in advertising expense, a $172 decrease in other real estate ~~costs and~~expense, a ~~$487 thousand~~$1.0 million decrease in other ~~expenses. Full time equivalent headcount increased from 790 as~~expense, partially offset by an increase of $701 thousand in occupancy expense and a $150 thousand increase in outsourced services. The overall decrease in expenses for the three and nine months ended September 30, ~~2016 to 815 as of September 30, 2017, which was~~2020 is primarily a ~~primary cause, along with the increase in the market price of TrustCo shares,~~result of the ~~increase in salary and benefits expense.~~Company’s continued efforts to control costs.

Index

For the nine months through September 30, 2017 total noninterest expense was $70.5 million for both the third quarters of 2017 and 2016. An increase of $3.2 million in salaries and benefits was offset by a decrease of $2.0 million decrease in FDIC and other insurance expenses and a decrease of $1.1 million in other real estate expense. Changes in other categories were less significant.

Income Taxes

In the third quarter of ~~2017,~~2020, TrustCo recognized income tax expense of ~~$7.4~~$4.8 million compared to ~~$6.7 million~~the same for the third quarter of ~~2016.~~2019. The effective tax rates were ~~36.9%~~25.3% and ~~37.9%~~24.6% for the third quarters of ~~2017~~2020 and ~~2016,~~2019, respectively. For the ~~nine month periods through September 30,~~first nine‑months, income taxes ~~increased $2.2~~were $13.0 million ~~with~~in 2020, as compared to $14.3 million in 2019. The effective tax rates ~~of 37.3%~~were 25.2% and ~~37.4%, respectively,~~24.6% for ~~the nine months ended September 30, 2017~~2020 and ~~2016.~~2019, respectively.

Capital Resources

Consistent with its ~~long-term~~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 reform measures and the ~~Dodd-Frank~~Dodd‑Frank Act, as well as a general trend towards reducing risk in the banking system by providing a greater capital margin.

Trustco Bank’s Agreement with the OCC requires the Bank to develop and comply with a capital plan, and the Bank may declare or pay a dividend or make a capital distribution only (a) when the Bank is in compliance with its approved written capital plan, and would remain in compliance with such capital plan immediately following the declaration or payment of any dividend or capital distribution and (b) following OCC approval under OCC capital distribution rules.

Total shareholders’ equity at September 30, ~~2017~~2020 was ~~$454.9~~$560.5 million compared to ~~$435.6~~$526.2 million at September 30, ~~2016.~~2019. TrustCo declared a dividend of ~~$0.065625~~$0.068125 per share in the third quarter of ~~2017.~~2020. This results in a dividend payout ratio of ~~50.07%~~46.68% based on third quarter ~~2017~~2020 earnings of ~~$12.6~~$14.1 million.

Index

The Bank and the Company reported the following capital ratios as of September 30, ~~2017~~2020 and December 31, ~~2016:~~2019:

(Bank Only)	As of September 30, 2020					Well			Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio		533,874		9.329	%		5.000	%		4.000	%
Common equity tier 1 capital		533,874		18.491			6.500			7.000
Tier 1 risk-based capital		533,874		18.491			8.000			8.500
Total risk-based capital		570,127		19.747			10.000			10.500

~~(Bank Only)~~

	As of December 31, 2019					Well			Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	516,775		9.940	%		5.000	%		4.000	%
Common equity tier 1 capital		516,775		18.412			6.500			7.000
Tier 1 risk-based capital		516,775		18.412			8.000			8.500
Total risk-based capital		551,975		19.666			10.000			10.500

(Consolidated)											As of September 30, 2020					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)		As of September 30, 2017				Well Capitalized(1)		Adequately Capitalized(1)(2)			Amount		Ratio			Buffer⁽¹⁾⁽²⁾
		Amount	Ratio			Well Capitalized(1)		Adequately Capitalized(1)(2)

Tier 1 leverage capital	$	443,310		9.071	%	5.000	%		4.000	%
Tier 1 leverage ratio											$	548,437		9.582	%		4.000	%
Common equity tier 1 capital		443,310		17.763		6.500			5.750			548,437		18.994			7.000
Tier 1 risk-based capital		443,310		17.763		8.000			7.250			548,437		18.994			8.500
Total risk-based capital		474,669		19.019		10.000			9.250			584,692		20.250			10.500

												As of December 31, 2019					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	As of December 31, 2016					Well Capitalized(1)			Adequately Capitalized(1)(3)			Amount		Ratio			Buffer⁽¹⁾⁽²⁾
		Amount	Ratio			Well Capitalized(1)			Adequately Capitalized(1)(3)

Tier 1 (core) capital	$	424,802		8.829	%		5.000	%		4.000	%
Common equity tier 1 capital		424,802		17.238			6.500			5.125
Tier 1 leverage ratio												$	533,243		10.254	%		4.000	%
Common equity Tier 1 capital													533,243		18.988			7.000
Tier 1 risk-based capital		424,802		17.238			8.000			6.625			533,243		18.988			8.500
Total risk-based capital		455,772		18.492			10.000			8.625			568,463		20.242			10.500

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

(2)	The September 30, ~~2017~~2020 and December 31, 2019 common equity tier 1, tier 1 risk-based, and total risk-based capital ratios include a ~~transition~~ capital conservation buffer of ~~1.25~~2.50 percent

~~(3)~~

~~The December 31, 2016 common equity tier 1, tier 1 risk-based, and total risk-based capital ratios include a transition capital conservation buffer of 0.625 percent~~

~~(Consolidated)~~

(dollars in thousands)
As of September 30, 2017

Amount Ratio

Tier 1 leverage capital $ 457,434 9.359 %
Common equity tier 1 capital 457,434 18.319
Tier 1 risk-based capital 457,434 18.319
Total risk-based capital 488,810 19.576

(dollars in thousands) As of December 31, 2016
Amount Ratio

Leverage capital $ 438,426 9.110 %
Common equity tier 1 capital 438,426 17.782
Tier 1 risk-based capital 438,426 17.782
Total risk-based capital 469,411 19.038

In addition, at September 30, ~~2017,~~2020, the consolidated equity to total assets ratio was ~~9.34%~~9.77%, compared to ~~8.89%~~10.31% at December 31, ~~2016~~2019 and ~~9.05%~~10.07% at September 30, ~~2016.~~2019.

Both TrustCo and Trustco Bank are subject to regulatory capital requirements. On January 1, 2015, a new capital rule took effect that revised the federal bank regulatory agencies’ risk-based capital requirements and, for the first time, subjected the Company to consolidated regulatory capital requirements. Among other matters, the rule also established a new common equity Tier 1 minimum capital requirement of 4.5% of risk-weighted assets, increased the minimum Tier 1 capital to risk-based assets requirement from 4.0% to 6.0% of risk-weighted assets, changed the risk-weightings of certain assets, and changed what qualifies as capital for purposes of meeting the various capital requirements. In addition, the Company and the Bank are required to maintain additional levels of Tier 1 common equity (the capital conservation buffer) over the minimum risk-based capital levels before they may pay dividends, repurchase shares, or pay discretionary bonuses. The new rule ~~will be~~was phased-in over several years and ~~will be~~is fully in effect in ~~2019. Calendar year 2016 was the third year of implementation of the new capital rules. Prior to January 2015, the Company had not been subject to consolidated regulatory capital requirements.~~2020.

Index

As of September 30, ~~2017,~~2020, the capital levels of both TrustCo and the Bank exceeded the minimum standards, including ifwith the current ~~(and~~and also ~~if the~~ fully ~~phased-in)~~phased‑in capital conservation buffer is taken into account.

~~Index~~

Under the ~~OCC’s~~Office of the Comptroller of the Currency’s (“OCC”) “prompt corrective action” regulations, a bank is deemed to be ~~“well-capitalized”~~“well‑capitalized” when its CET1, Tier 1, total ~~risk-based,~~risk‑based, and leverage capital ratios are at least 6.5%, 8%, 10%, 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~~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 September 30, ~~2017~~2020 and ~~2016,~~2019, Trustco Bank met the definition of ~~“well-capitalized.~~“well‑capitalized.”

As noted, the Company’s dividend payout ratio was ~~50.07%~~46.68% of net income for the third quarter of ~~2017~~2020 and ~~57.40%~~44.85% of net income for the third quarter of ~~2016.~~2019. The ~~per-share~~per‑share dividend paid in ~~both~~ the third quarters of ~~2016~~2020 and ~~2017~~2019 was ~~$0.065625.~~$0.068125. 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 and the Bank’s compliance with the capital plan required under the terms of the Agreement. Under the OCC agreement, the Bank may declare or pay a dividend or make a capital distribution only (a) when the Bank is in compliance with its approved written capital plan, and would remain in compliance with such capital plan immediately following the declaration or payment of any dividend or capital distribution, and (b) following OCC approval under OCC capital distribution rules.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. ~~In addition, under the Agreement, the payment of dividends by the Bank are subject to prior approval.~~

TrustCo maintains a dividend reinvestment plan ~~(DRP)~~(“DRP”) with approximately ~~12,000~~11,077 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.

Share Repurchase Program

The Company did not repurchase any of its shares of common stock during the three months ended September 30, 2020.

Critical Accounting Policies

Pursuant to Securities and Exchange Commission ~~(SEC)~~(“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.

Index

Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the inherent uncertainty in evaluating the levels of the allowance required to cover the inherent risk of losses in the loan portfolio and the material effect that such judgments can have on the results of operations. Included in Note 1 to the Consolidated Financial Statements contained in the Company’s Annual Report on Form ~~10-K~~10‑K for the year ended December 31, ~~2016~~2019 is a description of the significant accounting policies that are utilized by the Company in the preparation of the Consolidated Financial Statements.

Recent Accounting Pronouncements

Please refer to Note 11 to the consolidated financial statements for a detailed discussion of new accounting pronouncements and their impact on the Company. As indicated in Note 11, as allowed by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) the Bank elected to delay the adoption of ASU 2016-13, “Financial Instruments – Credit Losses,” until the earlier of the termination of the national emergency concerning COVID-19 or December 31, 2020.

Index

TrustCo Bank Corp NY

~~Management’s~~Management's Discussion and Analysis

STATISTICAL DISCLOSURE

I. DISTRIBUTION OF ASSETS, LIABILITIES AND ~~SHAREHOLDERS’~~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’~~shareholders' equity is the unrealized gain (loss) ~~gain,~~, net of tax, in the available for sale portfolio of (~~$3.0)~~$8.3 million in 2020 and ($0.4) million in 2019. 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 September 30, 2020									Three months ended September 30, 2019

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

Securities available for sale:
U. S. government sponsored enterprises	$	12,391			14			0.45	%	$	183,580		$	996			2.17	%	$	(982	)		(530	)		(452	)
Mortgage backed securities and collateralized mortgage obligations-residential		313,296			1,319			1.68	%		370,808			2,178			2.35	%		(859	)		(304	)		(555	)
State and political subdivisions		110			2			7.90	%		166			3			7.23	%		(1	)		(1	)		-
Corporate bonds		59,555			646			4.33	%		40,231			321			3.19	%		325			186			139
Small Business Administration-guaranteed participation securities		43,282			216			1.99	%		51,988			282			2.17	%		(66	)		(44	)		(22	)
Other		685			5			2.92	%		685			6			3.50	%		(1	)		-			(1	)

Total securities available for sale		429,319			2,202			2.05	%		647,458			3,786			2.34	%		(1,584	)		(693	)		(891	)

Federal funds sold and other short-term Investments		938,087			242			0.10	%		465,251			2,552			2.19	%		(2,310	)		8,831			(11,141	)

Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential		15,759			138			3.52	%		20,197			187			3.70	%		(49	)		(40	)		(9	)

Total held to maturity securities		15,759			138			3.52	%		20,197			187			3.70	%		(49	)		(40	)		(9	)

Federal Reserve Bank and Federal Home Loan Bank stock		5,506			77			5.59	%		9,183			81			3.53	%		(4	)		(156	)		152

Commercial loans		231,517			2,625			4.54	%		190,538			2,596			5.45	%		29			1,972			(1,943	)
Residential mortgage loans		3,702,680			36,020			3.89	%		3,465,102			35,743			4.13	%		277			9,129			(8,852	)
Home equity lines of credit		251,459			2,515			3.98	%		275,047			3,401			4.95	%		(886	)		(269	)		(617	)
Installment loans		9,632			170			7.02	%		9,967			183			7.34	%		(13	)		(6	)		(7	)

Loans, net of unearned income		4,195,288			41,330			3.94	%		3,940,654			41,923			4.26	%		(593	)		10,826			(11,419	)

Total interest earning assets		5,583,959			43,989			3.15	%		5,082,743			48,529			3.82	%		(4,540	)		18,768			(23,308	)

Allowance for loan losses		(48,483	)								(44,448	)
Cash & non-interest earning assets		201,018									188,528

Total assets	$	5,736,494									5,226,823

Liabilities and shareholders' equity

Deposits:
Interest bearing checking accounts	$	1,024,455			55			0.02	%	$	874,179		$	52			0.02	%		3			3			-
Money market accounts		682,319			637			0.37	%		567,554			1,177			0.83	%		(540	)		1,250			(1,790	)
Savings		1,222,956			161			0.05	%		1,126,935			323			0.11	%		(162	)		159			(321	)
Time deposits		1,355,244			4,749			1.39	%		1,457,510			7,974			2.19	%		(3,225	)		(522	)		(2,703	)

Total interest bearing deposits		4,284,974			5,602			0.52	%		4,026,178			9,526			0.95	%		(3,924	)		890			(4,814	)
Short-term borrowings		193,765			221			0.45	%		160,162			359			0.90	%		(138	)		384			(522	)

Total interest bearing liabilities		4,478,739			5,823			0.52	%		4,186,340			9,885			0.94	%		(4,062	)		1,274			(5,336	)

Demand deposits		622,313									438,789
Other liabilities		78,093									80,188
Shareholders' equity		557,349									521,506

Total liabilities and shareholders' equity	$	5,736,494								$	5,226,823

Net interest income , tax equivalent					38,166									38,644					$	(478	)		17,494			(17,972	)

Net interest spread								2.63	%								2.88	%

Net interest margin (net interest income to total interest earning assets)								2.73	%								3.04	%

Tax equivalent adjustment					(1	)								(1	)

Net interest income					38,165									38,643

~~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.~~

Three months ended
September 30, 2017

Three months ended
September 30, 2016

(dollars in thousands)
Average
Balance
Interest
Average
Rate

Average
Balance
Interest
Average
Rate

Change in
Interest
Income/
Expense

Variance
Balance
Change

Variance
Rate
Change

Assets

Securities available for sale:
U. S. government sponsored enterprises $ 123,055 465 1.51 % $ 109,488 408 1.49 % $ 57 51 6
Mortgage backed securities and collateralized mortgage obligations-residential 345,248 1,815 2.10 % 400,103 1,829 1.83 % (14 ) (1,053 ) 1,039
State and political subdivisions 522 11 8.43 % 953 20 8.39 % (9 ) (10 ) 1
Corporate bonds 42,528 153 1.44 % 27,161 97 1.43 % 56 - -
Small Business Administration-guaranteed participation securities 72,204 380 2.11 % 85,305 445 2.09 % (65 ) (87 ) 22
Mortgage backed securities and
collateralized mortgage obligations-commercial 9,918 22 0.89 10,247 36 1.41 (14 ) (1 ) (13 )
Other 685 4 2.34 % 685 4 2.34 % - - -

Total securities available for sale 594,160 2,850 1.92 % 633,942 2,839 1.79 % 11 (1,099 ) 1,054

Federal funds sold and other short-term Investments 621,878 1,927 1.24 % 683,777 866 0.50 % 1,061 (522 ) 1,583

Held to maturity securities:
Corporate bonds 6,738 102 6.06 % 10,644 156 5.86 % (54 ) (88 ) 34
Mortgage backed securities and collateralized mortgage obligations-residential 30,161 276 3.66 % 39,307 347 3.53 % (71 ) (150 ) 79

Total held to maturity securities 36,899 378 4.10 % 49,951 503 4.03 % (125 ) (237 ) 112

Federal Reserve Bank and Federal Home Loan Bank stock 9,117 125 5.48 % 9,579 131 5.47 % (6 ) (8 ) 2

Commercial loans 183,867 2,482 5.40 % 195,115 2,597 5.32 % (115 ) (338 ) 223
Residential mortgage loans 3,035,745 31,600 4.16 % 2,819,343 30,175 4.28 % 1,425 5,895 (4,470 )
Home equity lines of credit 312,812 3,237 4.14 % 346,744 3,211 3.70 % 26 (1,365 ) 1,391
Installment loans 8,096 200 9.88 % 8,331 195 9.36 % 5 (28 ) 33

Loans, net of unearned income 3,540,520 37,519 4.24 % 3,369,533 36,178 4.29 % 1,341 4,165 (2,824 )

Total interest earning assets 4,802,574 42,799 3.56 % 4,746,782 40,517 3.41 % 2,282 2,298 (72 )

Allowance for loan losses (44,284 ) (44,473 )
Cash & non-interest earning assets 127,004 137,462

Total assets $ 4,885,294 $ 4,839,771

Liabilities and shareholders’ equity

Deposits:
Interest bearing checking accounts $ 861,387 113 0.05 % $ 780,058 120 0.06 % (7 ) 54 (61 )
Money market accounts 572,168 469 0.33 % 571,333 463 0.32 % 6 0 6
Savings 1,280,318 435 0.14 % 1,284,533 504 0.16 % (69 ) (1 ) (68 )
Time deposits 1,078,085 2,247 0.83 % 1,176,115 2,468 0.84 % (221 ) (80 ) (141 )

Total interest bearing deposits 3,791,958 3,264 0.34 % 3,812,039 3,555 0.37 % (291 ) (27 ) (264 )
Short-term borrowings 223,238 345 0.62 % 189,910 281 0.59 % 64 50 14

Total interest bearing liabilities 4,015,196 3,609 0.36 % 4,001,949 3,836 0.38 % (227 ) 23 (250 )

Demand deposits 389,286 377,455
Other liabilities 28,809 27,496
Shareholders’ equity 452,003 432,871

Total liabilities and shareholders’ equity $ 4,885,294 $ 4,839,771

Net interest income , tax equivalent 39,190 36,681 $ 2,509 2,275 178

Net interest spread 3.21 % 3.03 %

Net interest margin (net interest income to total interest earning assets) 3.26 % 3.09 %

Tax equivalent adjustment (11 ) (14 )

Net interest income 39,179 36,667

Index

TrustCo Bank Corp NY

~~Management’s~~Management's Discussion and Analysis

STATISTICAL DISCLOSURE

I. DISTRIBUTION OF ASSETS, LIABILITIES AND ~~SHAREHOLDERS’~~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’~~shareholders' equity is the unrealized ~~loss,~~gain (loss), net of tax, in the available for sale portfolio of (~~$4.2) million~~ ~~in 2017 and ($0.5)~~$7.2 million in ~~2016.~~2020 and ($4.9) million in 2019. 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)																												Nine months ended September 30, 2020									Nine months ended September 30, 2019
	Nine months ended September 30, 2017									Nine months ended September 30, 2016
(dollars in thousands)	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate			Change in Interest Income/ Expense			Variance Balance Change			Variance Rate Change
Assets																												Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate			Change in Interest Income/ Expense			Variance Balance Change			Variance Rate Change

Securities available for sale:
U. S. government sponsored enterprises	$	139,629			1,667			1.59	%	$	97,281			1,067			1.46	%	$	600			497			103		$	42,573			541			1.69	%	$	166,119			2,600			2.09	%	$	(2,059	)		(1,641	)		(418	)
Mortgage backed securities and collateralized mortgage obligations-residential		357,347			5,717			2.13	%		419,185			6,114			1.94	%		(397	)		(1,204	)		807			339,300			4,959			1.95	%		329,188			5,885			2.38	%		(926	)		277			(1,203	)
State and political subdivisions		736			41			7.43	%		1,007			60			7.94	%		(19	)		(11	)		(8	)		111			6			7.79	%		167			9			7.19	%		(3	)		(4	)		1
Corporate bonds		42,272			458			1.44	%		9,120			97			1.42	%		361			359			2			46,508			1,372			3.93	%		33,678			801			3.17	%		571			350			221
Small Business Administration-guaranteed participation securities		75,429			1,189			2.10	%		87,896			1,371			2.08	%		(182	)		(205	)		23			45,313			690			2.03	%		54,414			868			2.13	%		(178	)		(139	)		(39	)
Mortgage backed securities and collateralized mortgage obligations-commercial		10,003			66			0.88	%		10,320			110			1.42	%		(44	)		(3	)		(41	)
Other		685			12			2.34	%		683			12			2.34	%		-			-			-			685			16			3.11	%		685			16			3.11	%		-			-			-

Total securities available for sale		626,101			9,150			1.95	%		625,492			8,831			1.88	%		319			(567	)		886			474,490			7,584			2.13	%		584,251			10,179			2.32	%		(2,595	)		(1,157	)		(1,438	)

Federal funds sold and other short-term Investments		635,450			4,900			1.03	%		675,948			2,542			0.50	%		2,358			(256	)		2,614			693,286			1,702			0.33	%		504,512			8,843			2.34	%		(7,141	)		3,991			(11,132	)

Held to maturity securities:
Corporate bonds		8,897			410			6.14	%		10,202			464			6.06	%		(54	)		(64	)		10
Mortgage backed securities and collateralized mortgage obligations-residential		32,202			888			3.68	%		42,192			1,123			3.55	%		(235	)		(297	)		62			17,029			475			3.72	%		21,123			613			3.87	%		(138	)		(115	)		(23	)

Total held to maturity securities		41,099			1,298			4.21	%		52,394			1,587			4.04	%		(289	)		(361	)		72			17,029			475			3.72	%		21,123			613			3.87	%		(138	)		(115	)		(23	)

Federal Reserve Bank and Federal Home Loan Bank stock		9,467			393			5.54	%		9,545			369			5.15	%		24			(5	)		29			7,998			351			5.85	%		9,104			365			5.35	%		(14	)		(59	)		45

Commercial loans		184,932			7,313			5.27	%		198,461			7,777			5.22	%		(464	)		(586	)		122			217,573			7,778			4.77	%		191,370			7,725			5.38	%		53			1,310			(1,257	)
Residential mortgage loans		2,969,363			92,910			4.17	%		2,768,579			89,523			4.31	%		3,387			7,652			(4,265	)		3,652,766			108,845			3.97	%		3,412,411			105,786			4.13	%		3,059			8,916			(5,857	)
Home equity lines of credit		321,276			9,453			3.92	%		353,461			9,569			3.61	%		(116	)		(1,193	)		1,077			258,956			7,898			4.07	%		280,248			10,441			4.97	%		(2,543	)		(754	)		(1,789	)
Installment loans		8,117			563			9.25	%		8,435			579			9.15	%		(16	)		(22	)		6			10,129			537			7.08	%		10,718			656			8.16	%		(119	)		(35	)		(84	)

Loans, net of unearned income		3,483,688			110,239			4.22	%		3,328,936			107,448			4.30	%		2,791			5,850			(3,059	)		4,139,424			125,058			4.03	%		3,894,747			124,608			4.27	%		450			9,437			(8,987	)

Total interest earning assets		4,795,805			125,980			3.50	%		4,692,315			120,777			3.43	%		5,203			4,660			543			5,332,227			135,170			3.38	%		5,013,737			144,608			3.85	%		(9,438	)		12,097			(21,535	)

Allowance for loan losses		(44,317	)								(44,832	)																	(46,618	)								(44,744	)
Cash & non-interest earning assets		129,384									136,584																		196,835									180,568

Total assets	$	4,880,872								$	4,784,067																	$	5,482,444								$	5,149,561

Liabilities and shareholders’ equity
Liabilities and shareholders' equity

Deposits:
Interest bearing checking accounts	$	840,322			371			0.06	%	$	758,314			350			0.06	%		21			44			(23	)	$	949,909			97			0.01	%	$	878,106			267			0.04	%		(170	)		32			(202	)
Money market accounts		576,518			1,403			0.32	%		585,019			1,426			0.33	%		(23	)		(21	)		(2	)		646,170			2,595			0.54	%		546,601			3,122			0.76	%		(527	)		733			(1,260	)
Savings		1,280,473			1,300			0.14	%		1,273,565			1,712			0.18	%		(412	)		16			(428	)		1,169,316			560			0.06	%		1,141,607			1,067			0.12	%		(507	)		28			(535	)
Time deposits		1,104,731			6,711			0.81	%		1,162,603			7,301			0.84	%		(590	)		(343	)		(247	)		1,372,369			16,739			1.63	%		1,416,306			21,462			2.02	%		(4,723	)		(653	)		(4,070	)

Total interest bearing deposits		3,802,044			9,785			0.34	%		3,779,501			10,789			0.38	%		(1,004	)		(304	)		(700	)		4,137,764			19,991			0.65	%		3,982,620			25,918			0.87	%		(5,927	)		140			(6,067	)
Short-term borrowings		226,447			1,043			0.61	%		182,453			800			0.58	%		243			196			47			173,497			778			0.60	%		160,647			1,121			0.93	%		(343	)		132			(475	)

Total interest bearing liabilities		4,028,491			10,828			0.36	%		3,961,954			11,589			0.39	%		(761	)		(108	)		(653	)		4,311,261			20,769			0.64	%		4,143,267			27,039			0.87	%		(6,270	)		272			(6,542	)

Demand deposits		380,216									368,852																		543,279									418,327
Other liabilities		27,880									27,179																		77,568									79,937
Shareholders’ equity		444,285									426,082
Shareholders' equity																													550,336									508,030

Total liabilities and shareholders’ equity	$	4,880,872								$	4,784,067
Total liabilities and shareholders' equity																												$	5,482,444								$	5,149,561

Net interest income , tax equivalent					115,152									109,188					$	5,964			4,768			1,196						114,401									117,569					$	(3,168	)		11,825			(14,993	)

Net interest spread								3.14	%								3.04	%																	2.74	%								2.98	%

Net interest margin (net interest income to total interest earning assets)								3.20	%								3.10	%																	2.86	%								3.13	%

Tax equivalent adjustment					(32	)								(40	)																	(2	)								(3	)

Net interest income					115,120									109,148																		114,399									117,566

Index

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

As detailed in the Annual Report to Shareholders as of December 31, ~~2016,~~2019, 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~~three‑month and ~~nine~~ nine‑month periods ended September 30, ~~2017~~2020 and ~~2016,~~2019, 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 third quarter of ~~2017,~~2020, the Company had an average balance of Federal Funds sold and other ~~short-term~~short‑term investments of ~~$621.9~~$938.1 million compared to ~~$683.8~~$465.3 million in the third quarter of ~~2016.~~2019. As investment opportunities present themselves, management plans to invest funds from the Federal Funds sold and other ~~short-term~~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)~~13a‑15(e) and ~~15d-15(e)~~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~~cost‑benefit relationship of possible controls and procedures. Further, no evaluation of a ~~cost-effective~~cost‑effective system of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.

Index

There have been no changes in internal control over financial reporting (as defined in Rule ~~13a-15(f)~~13a‑15(f) and ~~15d-15(f)~~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 as previously disclosed in response to Item 1A to Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2019, or in response to Item 1A to Part II of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2020.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Program

~~None.~~

On June 7, 2019, the Company announced that its board of directors approved a stock repurchase program under which the Company was authorized to repurchase over the following twelve months up to 1,000,000 shares of Company common stock, or approximately 1% of its outstanding shares. The Company commenced repurchases under the program during the quarter ended March 31, 2020. On April 16, 2020, the Company announced that it had chosen to suspend the repurchase program and on June 6, 2020 the program expired.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety

None.

Item 5.

Other Information

None.

Index

Item 6.

Exhibits

Reg S‑K (Item 601)

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

15	Crowe ~~Horwath~~ LLP Letter Regarding Unaudited Interim Financial Information

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

31(b)	Rule ~~13a-15(e)~~13a‑15(e)/~~15d-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/~~ /s/ Robert J. McCormick
	Robert J. McCormick
	Chairman, President and Chief Executive Officer


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

~~Date: November 7, 2017~~

~~Index~~

~~Exhibits Index~~

~~Reg S-K~~ ~~Exhibit No.~~	~~Description~~

15 Date: November 6, 2020	~~Crowe Horwath 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~~

6469

	Three Months Ended September 30						Nine Months Ended September 30
	2017			2016			2017			2016

Net income	$	12,596			10,930			35,783			31,803

Net unrealized holding gain on securities available for sale		938			(125	)		5,460			12,475
Reclassification adjustments for net gain recognized in income		-			-			-			(668	)
Tax effect		(376	)		50			(2,185	)		(4,723	)

Net unrealized gain on securities available for sale, net of tax		562			(75	)		3,275			7,084

Amortization of net actuarial gain		(72	)		(8	)		(208	)		(25	)
Amortization of prior service cost		23			22			68			67
Tax effect		20			(6	)		56			(17	)
Amortization of net actuarial gain and prior service cost on pension and postretirement plans, net of tax		(29	)		8			(84	)		25

Other comprehensive income, net of tax		533			(67	)		3,191			7,109
Comprehensive income	$	13,129			10,863			38,974			38,912

	September 30, 2017			December 31, 2016
ASSETS:	(Unaudited)			(Audited)

Cash and due from banks	$	41,598			48,719

Federal funds sold and other short term investments		582,599			658,555
Total cash and cash equivalents		624,197			707,274

Securities available for sale		580,430			620,360

Held to maturity securities (fair value 2017 $30,731; 2016 $47,526)		29,268			45,490

Federal Reserve Bank and Federal Home Loan Bank stock		8,779			9,579

Loans, net of deferred net costs		3,578,282			3,430,586
Less:
Allowance for loan losses		44,082			43,890
Net loans		3,534,200			3,386,696

Bank premises and equipment, net		35,028			35,466
Other assets		58,373			63,941

Total assets	$	4,870,275			4,868,806

LIABILITIES:
Deposits:
Demand	$	397,623			377,755
Interest-bearing checking		862,067			815,534
Savings accounts		1,265,229			1,271,449
Money market deposit accounts		564,557			571,962
Time deposits		1,075,886			1,159,463
Total deposits		4,165,362			4,196,163

Short-term borrowings		216,508			209,406
Accrued expenses and other liabilities		33,477			30,551

Total liabilities	$	4,415,347			4,436,120

SHAREHOLDERS’ EQUITY:
Capital stock par value $1; 150,000,000 shares authorized; 99,561,882 and 99,214,382 shares issued at September 30, 2017 and December 31, 2016, respectively		99,562			99,214
Surplus		172,712			171,425
Undivided profits		218,401			201,517
Accumulated other comprehensive loss, net of tax		(3,060	)		(6,251	)
Treasury stock at cost - 3,454,286 and 3,434,205 shares at
September 30, 2017 and December 31, 2016, respectively		(32,687	)		(33,219	)

Total shareholders’ equity		454,928			432,686

Total liabilities and shareholders’ equity	$	4,870,275			4,868,806

(in thousands, except per share data)	For the three months ended September 30:				For the nine months ended September 30:
	2017		2016		2017		2016
Net income	$	12,596		10,930	$	35,783		31,803
Weighted average common shares		96,102		95,603		95,997		95,486
Stock Options		103		119		94		86
Weighted average common shares including potential dilutive shares		96,205		95,722		96,091		95,572

Basic EPS	$	0.131		0.114	$	0.373		0.333

Diluted EPS	$	0.131		0.114	$	0.372		0.333

	For the nine months ended September 30,
	Pension Benefits					Other Postretirement Benefits
(dollars in thousands)		2017		2016			2017		2016

Service cost	$	33		46			77		96
Interest cost		977		1,029			164		184
Expected return on plan assets		(2,058	)	(1,994	)		(571	)	(540	)
Amortization of net loss (gain)		50		138			(258	)	(163	)
Amortization of prior service cost		-		-			68		67
Net periodic benefit	$	(998	)	(781	)		(520	)	(356	)

	September 30, 2017
(dollars in thousands)	New York and other states		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	1,596		-		1,596
Other		100		-		100
Real estate mortgage - 1 to 4 family:
First mortgages		17,048		1,764		18,812
Home equity loans		35		-		35
Home equity lines of credit		3,843		131		3,974
Installment		30		-		30
Total non-accrual loans		22,652		1,895		24,547
Restructured real estate mortgages - 1 to 4 family		40		-		40
Total nonperforming loans	$	22,692		1,895		24,587

	Three months ended 9/30/2017				Three months ended 9/30/2016
New York and other states*: (dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment

Real estate mortgage - 1 to 4 family:
First mortgages		2	$	236		-	$	-
Home equity lines of credit		-		-		-		-

Total		2	$	236		-	$	-

	Three months ended 9/30/17
(dollars in thousands)	Balance at 7/1/2017			Other Comprehensive Income (loss)- Before Reclassifications		Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 9/30/2017			Balance at 9/30/2017


Net unrealized holding gain (loss) on securities available for sale, net of tax	$	(4,049	)		562		-			562			(3,487	)
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax		456			-		(29	)		(29	)		427

Accumulated other comprehensive income (loss), net of tax		(3,593	)		562		(29	)		533			(3,060	)

	Nine months ended 9/30/17
(dollars in thousands)	Balance at 1/1/2017			Other Comprehensive Income (loss)- Before Reclassifications		Amount reclassified from Accumulated Other Comprehensive Loss			Other Comprehensive Income (loss)- Six months ended 9/30/2017			Balance at 9/30/2017


Net unrealized holding gain (loss) on securities available for sale, net of tax	$	(6,762	)		3,275		-			3,275			(3,487	)
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax		511			-		(84	)		(84	)		427

Accumulated other comprehensive income (loss), net of tax		(6,251	)		3,275		(84	)		3,191			(3,060	)

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

Q3/16	Beg of Q3		0.28		0.59		1.00		1.46		0.87
	Peak		0.37		0.84		1.26		1.73		0.97
	Trough		0.18		0.56		0.94		1.37		0.76
	End of Q3		0.29		0.77		1.14		1.60		0.83
	Average in Q3		0.30		0.73		1.13		1.56		0.84

Q4/16	Beg of Q4		0.32		0.80		0.91		1.63		0.83
	Peak		0.55		1.29		1.61		2.60		1.34
	Trough		0.30		0.80		0.91		1.63		0.83
	End of Q4		0.51		1.20		1.47		2.45		1.25
	Average in Q4		0.43		1.01		1.24		2.14		1.13

Q1/17	Beg of Q1		0.16		1.06		1.76		2.27		1.21
	Peak		0.79		1.40		2.14		2.62		1.30
	Trough		0.50		1.12		1.80		2.31		1.11
	End of Q1		0.76		1.27		1.93		2.40		1.13
	Average in Q1		0.60		1.24		1.95		2.45		1.20

Q2/17	Beg of Q2		0.76		1.27		1.93		2.40		1.13
	Peak		1.04		1.38		1.94		2.42		1.11
	Trough		0.79		1.18		1.71		2.14		0.78
	End of Q2		1.03		1.38		1.89		2.31		0.93
	Average in Q2		0.91		1.30		1.81		2.26		0.96

Q3/17	Beg of Q3		1.03		1.38		1.89		2.31		0.93
	Peak		1.18		1.47		1.95		2.39		1.00
	Trough		0.98		1.27		1.63		2.05		0.77
	End of Q3		1.06		1.47		1.92		2.33		0.86
	Average in Q3		1.05		1.36		1.81		2.24		0.88

(dollars in thousands)	As of September 30, 2017					As of December 31, 2016
	Amount		Percent of Loans to Total Loans			Amount		Percent of Loans to Total Loans
Commercial	$	4,490		4.94	%	$	4,820		5.32	%
Real estate - construction	$	343		0.78	%		318		0.72	%
Real estate mortgage - 1 to 4 family	$	33,083		85.34	%		32,452		83.94	%
Home equity lines of credit	$	5,440		8.71	%		5,570		9.76	%
Installment Loans	$	726		0.23	%		730		0.26	%
	$	44,082		100.00	%	$	43,890		100.00	%

	Three months ended September 30, 2017									Three months ended September 30, 2016
(dollars in thousands)	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate			Change in Interest Income/ Expense			Variance Balance Change			Variance Rate Change
Assets

Securities available for sale:
U. S. government sponsored enterprises	$	123,055			465			1.51	%	$	109,488			408			1.49	%	$	57			51			6
Mortgage backed securities and collateralized mortgage obligations-residential		345,248			1,815			2.10	%		400,103			1,829			1.83	%		(14	)		(1,053	)		1,039
State and political subdivisions		522			11			8.43	%		953			20			8.39	%		(9	)		(10	)		1
Corporate bonds		42,528			153			1.44	%		27,161			97			1.43	%		56			-			-
Small Business Administration-guaranteed participation securities		72,204			380			2.11	%		85,305			445			2.09	%		(65	)		(87	)		22
Mortgage backed securities and
collateralized mortgage obligations-commercial		9,918			22			0.89			10,247			36			1.41			(14	)		(1	)		(13	)
Other		685			4			2.34	%		685			4			2.34	%		-			-			-

Total securities available for sale		594,160			2,850			1.92	%		633,942			2,839			1.79	%		11			(1,099	)		1,054

Federal funds sold and other short-term Investments		621,878			1,927			1.24	%		683,777			866			0.50	%		1,061			(522	)		1,583

Held to maturity securities:
Corporate bonds		6,738			102			6.06	%		10,644			156			5.86	%		(54	)		(88	)		34
Mortgage backed securities and collateralized mortgage obligations-residential		30,161			276			3.66	%		39,307			347			3.53	%		(71	)		(150	)		79

Total held to maturity securities		36,899			378			4.10	%		49,951			503			4.03	%		(125	)		(237	)		112

Federal Reserve Bank and Federal Home Loan Bank stock		9,117			125			5.48	%		9,579			131			5.47	%		(6	)		(8	)		2

Commercial loans		183,867			2,482			5.40	%		195,115			2,597			5.32	%		(115	)		(338	)		223
Residential mortgage loans		3,035,745			31,600			4.16	%		2,819,343			30,175			4.28	%		1,425			5,895			(4,470	)
Home equity lines of credit		312,812			3,237			4.14	%		346,744			3,211			3.70	%		26			(1,365	)		1,391
Installment loans		8,096			200			9.88	%		8,331			195			9.36	%		5			(28	)		33

Loans, net of unearned income		3,540,520			37,519			4.24	%		3,369,533			36,178			4.29	%		1,341			4,165			(2,824	)

Total interest earning assets		4,802,574			42,799			3.56	%		4,746,782			40,517			3.41	%		2,282			2,298			(72	)

Allowance for loan losses		(44,284	)								(44,473	)
Cash & non-interest earning assets		127,004									137,462

Total assets	$	4,885,294								$	4,839,771

Liabilities and shareholders’ equity

Deposits:
Interest bearing checking accounts	$	861,387			113			0.05	%	$	780,058			120			0.06	%		(7	)		54			(61	)
Money market accounts		572,168			469			0.33	%		571,333			463			0.32	%		6			0			6
Savings		1,280,318			435			0.14	%		1,284,533			504			0.16	%		(69	)		(1	)		(68	)
Time deposits		1,078,085			2,247			0.83	%		1,176,115			2,468			0.84	%		(221	)		(80	)		(141	)

Total interest bearing deposits		3,791,958			3,264			0.34	%		3,812,039			3,555			0.37	%		(291	)		(27	)		(264	)
Short-term borrowings		223,238			345			0.62	%		189,910			281			0.59	%		64			50			14

Total interest bearing liabilities		4,015,196			3,609			0.36	%		4,001,949			3,836			0.38	%		(227	)		23			(250	)

Demand deposits		389,286									377,455
Other liabilities		28,809									27,496
Shareholders’ equity		452,003									432,871

Total liabilities and shareholders’ equity	$	4,885,294								$	4,839,771

Net interest income , tax equivalent					39,190									36,681					$	2,509			2,275			178

Net interest spread								3.21	%								3.03	%

Net interest margin (net interest income to total interest earning assets)								3.26	%								3.09	%

Tax equivalent adjustment					(11	)								(14	)

Net interest income					39,179									36,667