TRUSTCO BANK CORP NY

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(dollars in thousands, except per share data)

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

Beginning balance, January 1, 2021 (1)	$	20,041			256,606			313,974			11,936			(34,396	)		568,161		$	20,041			256,606			313,974			11,936			(34,396	)		568,161
Net income		0			0			14,083			0			0			14,083			-			-			14,083			-			-			14,083
Other comprehensive loss, net of tax		0			0			0			(4,668	)		0			(4,668	)		-			-			-			(4,668	)		-			(4,668	)
Stock options exercised (2,650 shares) (1)		3			68												71			3			68												71
Cash dividend declared, $0.340625 per share (2)		0			0			(6,571	)		0			0			(6,571	)		-			-			(6,571	)		-			-			(6,571	)
Purchase of treasury stock (1,261 shares) (2)		0			0			0			0			(45	)		(45	)		-			-			-			-			(45	)		(45	)

Ending balance, March 31, 2021 (1)	$	20,044			256,674			321,486			7,268			(34,441	)		571,031		$	20,044			256,674			321,486			7,268			(34,441	)		571,031
Net income		0			0			14,433			0			0			14,433			-			-			14,433			-			-			14,433
Other comprehensive loss, net of tax		0			0			0			572			0			572			-			-			-			572			-			572
Cash used to settle fractional shares in the Reverse Stock Split		(5	)		(195	)											(200	)		(5	)		(195	)		-			-			-			(200	)
Stock options exercised (2,225 shares)		2			57			0			0			0			59
Stock options exercised (2,225 shares)																				2			57			-			-			-			59
Cash dividend declared, $0.340625 per share		0			0			(6,569	)		0			0			(6,569	)		-			-			(6,569	)		-			-			(6,569	)
Purchase of treasury stock (20,000 shares)		0			0			0			0			(733	)		(733	)
Purchase of treasury stock (20,000 shares)																				-			-			-			-			(733	)		(733	)

Ending balance, June 30, 2021	$	20,041			256,536			329,350			7,840			(35,174	)		578,593
Ending balance, June 30, 2021																			$	20,041			256,536			329,350			7,840			(35,174	)		578,593
Net income																				-			-			16,762			-			-			16,762
Other comprehensive loss, net of tax																				-			-			-			(536	)		-			(536	)

Stock options exercised (1,160 shares)																				1			29			-			-			-			30
Cash dividend declared, $0.340625 per share																				-			-			(6,558	)		-			-			(6,558	)
Purchase of treasury stock (50,000 shares)																				-			-			-			-			(1,608	)		(1,608	)

Ending balance, September 30, 2021 (1)																			$	20,042			256,565			339,554			7,304			(36,782	)		586,683

Beginning balance, January 1, 2022	$	20,046			256,661			349,056			12,147			(36,782	)		601,128		$	20,046			256,661			349,056			12,147			(36,782	)		601,128
Cumulative impact of adoption of ASU 2016-13								(3,470	)								(3,470	)		-			-			(3,470	)		-			-			(3,470	)
Balance, January 1, 2022 as adjusted
For impact of adoption of ASU 2016-13		20,046			256,661			345,586			12,147			(36,782	)		597,658
Balance, January 1, 2022 as adjusted For impact of adoption of ASU 2016-13																				20,046			256,661			345,586			12,147			(36,782	)		597,658

Net income		0			0			17,089			0			0			17,089			-			-			17,089			-			-			17,089
Other comprehensive loss, net of tax		0			0			0			(14,516	)		0			(14,516	)		-			-			-			(14,516	)		-			(14,516	)
Cash dividend declared, $0.35 per share		0			0			(6,727	)		0			0			(6,727	)		-			-			(6,727	)		-			-			(6,727	)
Purchase of treasury stock 18,114 shares		0			0			0			0			(609	)		(609	)		-			-			-			-			(609	)		(609	)

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

Net income		0			0			17,871			0			0			17,871			-			-			17,871			-			-			17,871
Other comprehensive loss, net of tax		0			0			0			(7,053	)		0			(7,053	)		-			-			-			(7,053	)		-			(7,053	)
Cash dividend declared, $0.35 per share		0			0			(6,719	)		0			0			(6,719	)		-			-			(6,719	)		-			-			(6,719	)
Purchase of treasury stock 75,000 shares		0			0			0			0			(2,362	)		(2,362	)		-			-			-			-			(2,362	)		(2,362	)

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

Net income																				-			-			19,364			-			-			19,364
Other comprehensive loss, net of tax																				-			-			-			(15,787	)		-			(15,787	)
Cash dividend declared, $0.35 per share																				-			-			(6,695	)		-			-			(6,695	)
Purchase of treasury stock 75,100 shares																				-			-			-			-			(2,508	)		(2,508	)

Ending balance, September 30, 2022																			$	20,046			256,661			379,769			(25,209	)		(42,261	)		589,006

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

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

~~See accompanying notes to unaudited consolidated interim financial statements.~~

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~~TRUSTCO BANK CORP NY~~

~~Consolidated Statements of Cash Flows~~ ~~(Unaudited)~~

~~(dollars in thousands)~~

Six months ended June 30,
2022 2021

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

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 2,057 2,133
Amortization of right-of-use asset 3,231 3,167
Net gain on sale of other real estate owned (73 ) (86 )
Writedown of other real estate owned 0 121
(Credit) provision for credit losses (691 ) 350
Deferred tax expense (benefit)
1,281 (19 )
Net amortization of securities 1,289 2,099
Net gain on sale of bank premises and equipment
(314 ) 1
Decrease (increase) in taxes receivable 3,077 (166 )
Increase in interest receivable (1,627 ) (62 )
Decrease in interest payable (21 ) (227 )
Increase in other assets (3,378 ) (1,610 )
Decrease in operating lease liabilities (3,427 ) (3,305 )
Decrease in accrued expenses and other liabilities (3,371 ) (3,197 )
Total adjustments (1,967 ) (801 )
Net cash provided by operating activities 32,993 27,715

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

Cash flows from financing activities:
Net increase in deposits 128,712 193,327
Net increase in short-term borrowings (97,404 ) 23,036
Proceeds from exercise of stock options 0 130
Cash used to settle fractional shares in the Reverse Stock Split
0 200
Purchases of treasury stock (2,971 ) (778 )
Dividends paid (13,454 ) (13,140 )
Net cash provided by financing activities 14,883 202,775
Net increase in cash and cash equivalents (173,286 ) 75,689
Cash and cash equivalents at beginning of period 1,219,470 1,107,099
Cash and cash equivalents at end of period $ 1,046,184 1,182,788

Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest paid $ 2,342 4,548
Income taxes paid 8,303 9,665
Other non cash items:
Transfer of loans to other real estate owned 375 0
(Decrease) Increase in dividends payable (8 ) 0
Change in unrealized (loss) gain on securities available for sale-gross of deferred taxes (28,436 ) (5,174 )
Change in deferred tax effect on unrealized loss (gain) on securities available for sale 7,356 1,335
Amortization of net actuarial gain and prior service cost (credit) on pension and postretirement plans (661 ) (347 )
Change in deferred tax effect of amortization of net actuarial gain postretirement benefit plans 172 90
Security purchase settled in subsequent period
(5,000 ) 0
Impact to retained earnings from adoption of ASC 326, net of tax (3,470 ) 0

See accompanying notes to unaudited consolidated interim financial statements.

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TRUSTCO BANK CORP NY

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)

	Nine months ended September 30,
	2022			2021

Cash flows from operating activities:
Net income	$	54,324			45,278

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,091			3,184
Amortization of right-of-use asset		4,841			4,745
Net gain on sale of other real estate owned		(99	)		(86	)
Writedown of other real estate owned		-			121
(Credit) provision for credit losses		(391	)		(2,450	)
Deferred tax expense (benefit)		1,523			(1,247	)
Net amortization of securities		1,802			3,113
Net gain on sale of bank premises and equipment		(314	)		-
Decrease (increase) in taxes receivable		4,062			(463	)
(Increase) decrease in interest receivable		(1,837	)		673
Decrease in interest payable		(1	)		(249	)
Increase in other assets		(4,406	)		(1,442	)
Decrease in operating lease liabilities		(5,127	)		(4,965	)
Decrease in accrued expenses and other liabilities		(1,652	)		(2,106	)
Total adjustments		1,492			(1,172	)
Net cash provided by operating activities		55,816			44,106

Cash flows from investing activities:
Proceeds from sales, paydowns and calls of securities available for sale		57,714			123,550
Proceeds from paydowns of held to maturity securities		1,772			3,028
Purchases of securities available for sale		(184,391	)		(136,543	)
Proceeds from maturities of securities available for sale		15,050			8,555
Purchases of Federal Home Loan Bank stock		(193	)		(98	)
Net increase in loans		(191,052	)		(152,314	)
Proceeds from dispositions of other real estate owned		416			255
Proceeds from dispositions of bank premises and equipment		469			6
Purchases of bank premises and equipment		(2,150	)		(2,011	)
Net cash used in investing activities		(302,365	)		(155,572	)

Cash flows from financing activities:
Net increase in deposits		13,725			203,825
Net change in short-term borrowings		(119,754	)		16,015
Proceeds from exercise of stock options		-			160
Cash used to settle fractional shares in the Reverse Stock Split		-			(200	)
Purchases of treasury stock		(5,479	)		(2,386	)
Dividends paid		(20,149	)		(19,708	)
Net cash (used in) provided by financing activities		(131,657	)		197,706
Net increase in cash and cash equivalents		(378,206	)		86,240
Cash and cash equivalents at beginning of period		1,219,470			1,107,099
Cash and cash equivalents at end of period	$	841,264			1,193,339

Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest paid	$	3,570			6,345
Income taxes paid		13,687			15,430
Other non cash items:
Transfer of loans to other real estate owned		637			260
Decrease in dividends payable		(8	)		(10	)
Change in unrealized (loss) gain on securities available for sale-gross of deferred taxes		(49,379	)		(5,939	)
Change in deferred tax effect on unrealized loss (gain) on securities available for sale		12,777			1,534
Amortization of net actuarial gain and prior service cost (credit) on pension and postretirement plans		(1,019	)		(307	)
Change in deferred tax effect of amortization of net actuarial gain postretirement benefit plans		265			80
Impact to retained earnings from adoption of ASC 326, net of tax		(3,470	)		-

See accompanying notes to unaudited consolidated interim financial statements.

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TRUSTCO BANK CORP NY

Notes to Consolidated Interim Financial Statements

(Unaudited)

(1) Financial Statement Presentation

The unaudited Consolidated Interim Financial Statements of TrustCo Bank Corp NY (the “Company” or “TrustCo”) include the accounts of the Company’s subsidiary, Trustco Bank (also referred to as the “Bank”) and other subsidiaries after elimination of all significant intercompany accounts and transactions. Prior period amounts are reclassified when necessary to conform to the current period presentation. The net income reported for the three and ~~six~~nine months ended ~~June~~September 30, 2022 is not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or any interim periods. These financial statements consider events that occurred through the date of filing.

In the opinion of the management of the Company, the accompanying unaudited Consolidated Interim Financial Statements contain all recurring adjustments necessary to present fairly the financial position as of ~~June~~September 30, 2022, the results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, and the cash flows for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021. The accompanying unaudited Consolidated Interim Financial Statements should be read in conjunction with the Company’s year‑end audited Consolidated Financial Statements, including notes thereto, which are included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2021. The accompanying unaudited Consolidated Interim Financial Statements have been prepared in accordance with the ~~instructions to Form 10‑Q~~applicable rules of the Securities and Exchange Commission (“SEC”) 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. Results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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

Recently Adopted Accounting Standards

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

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In addition, CECL made changes to the accounting for available for sale securities. ~~Once~~One such change is to require credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities that management does not intend to sell or believes that it is more likely than not they will be required to sell.

~~Index~~

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

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

The Company did 0tnot record an allowance for credit losses as of January 1, 2022 on its securities available for sale or held to maturity.

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

(in thousands)	December 31, 2021 Pre-CECL Adoption		Impact of Adoption			January 1, 2022 Post-CECL Adoption		December 31, 2021 Pre-CECL Adoption		Impact of Adoption			January 1, 2022 Post-CECL Adoption
Assets:
Allowance for credit losses on loans	$	44,267	$	2,353		$	46,620	$	44,267	$	2,353		$	46,620
Allowance for credit losses on securities		0		0			0		-		-			-
Liabilities and shareholders’ equity:
Other liabilities (ACL unfunded loan commitments)		18		2,335			2,353		18		2,335			2,353
Tax Effect, net		0		(1,218	)		0		-		(1,218	)		-
Total		44,285		3,470			48,973		44,285		3,470			48,973

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

Loans

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

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

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

~~Index~~

Accrued Interest Receivable

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

Allowance for Credit Losses on Loans

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

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

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

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

Management utilizes externally developed economic forecasts (Moody’s forecast scenarios) of unemployment rates within the key metropolitan areas in New York and Florida of which we serve to forecast probability of defaults and loss given defaults within the model. Management has determined that a reasonable and supportable forecast is 8 quarters after which the historical average probability defaults and loss given defaults will be used. The 2two economic scenarios evaluated by management in detail were the Baseline and Stagflation forecast scenarios. Within both scenarios, Management considered the following:

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•

Unemployment levels in relation to inflationary pressures;

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

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

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

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

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

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

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

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

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

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

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

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

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

Debt Securities

Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities are classified as ~~available-for-sale~~available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax. There were 0no debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2022. Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are generally amortized on the level-yield method without anticipating prepayments. Premiums on callable debt securities are amortized to their earlier call date. Discounts are amortized to maturity date. Gains and losses are recorded on the trade date and determined using the specific identification method.

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

Index

Allowance for Credit Losses – Held to Maturity Securities

The Company’s held to maturity securities are issued by U.S. government entities and agencies such as Ginnie Mae, Fannie Mae, and Freddie Mac. These securities are either explicitly or implicitly guaranteed by the U.S. government and are highly rated by major rating agencies and have a long history of no credit losses. Management measures expected credit losses on held to maturity debt securities on a collective basis by major security type, issuer and payment stream. The estimate of expected credit losses considers historical credit loss information adjusted for current conditions and reasonable and supportable forecasts provided by a third party servicer. Based on the nature of the securities held by the Company and the underlying guarantees, there was 0no allowance for credit losses recorded for held to maturity securities as of January 1, 2022.

Accrued interest receivable on held to maturity securities totaled ~~$35~~$33 thousand and is excluded from the estimate of credit losses. Historically the Company has not experienced uncollectible accrued interest receivable on its held-to-maturity securities portfolio.

Allowance for Credit Losses – Available For Sale Securities

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

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

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

Index

(2) Earnings Per Share

The Company computes earnings per share in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share (“ASC 260”). A reconciliation of the component parts of earnings per share for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 is as ~~follows~~follows::

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

Net income	$	17,871		14,433	$	34,960		28,516	$	19,364		16,762	$	54,324		45,278
Weighted average common shares		19,153		19,281		19,185		19,284		19,111		19,249		19,159		19,272
Stock Options		0		9		0		8		1		3		1		6
Weighted average common shares including potential dilutive shares		19,153		19,290		19,185		19,292		19,112		19,252		19,160		19,278

Basic EPS	$	0.933		0.749	$	1.822		1.479	$	1.013		0.871	$	2.835		2.349

Diluted EPS	$	0.933		0.748	$	1.822		1.478	$	1.013		0.871	$	2.835		2.349

For both the three and ~~six~~nine months ended ~~June~~September 30, 2022 there were ~~9,352~~ one thousand shares ~~and 5,751 shares, respectively,~~ of weighted average antidilutive stock options excluded from dilutive earnings. For the three and ~~six~~nine months ended ~~June~~September 30, 2021 ~~there were 0~~the weighted average antidilutive stock options excluded from dilutive ~~earnings.~~earnings was approximately 60 thousand shares. 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~~presented..

Index

(3) Benefit Plans

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

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

Service cost	$	0			(11	)		(9	)		26		$	-			-			4			9
Interest cost		221			212			51			39			222			214			52			60
Expected return on plan assets		(796	)		(662	)		(333	)		(290	)		(807	)		(712	)		(333	)		(274	)
Amortization of net gain		0			0			(426	)		(169	)		-			-			(280	)		(137	)
Amortization of prior service cost		0			0			123			102
Amortization of prior service (credit) cost														-			-			(78	)		177
Net periodic benefit	$	(575	)		(461	)		(594	)		(292	)	$	(585	)		(498	)		(635	)		(165	)

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

Service cost	$	0			0			9			48		$	-			-			13			57
Interest cost		444			428			103			83			666			642			155			143
Expected return on plan assets		(1,613	)		(1,423	)		(666	)		(617	)		(2,420	)		(2,135	)		(999	)		(891	)
Amortization of net gain		0			0			(504	)		(397	)		-			-			(784	)		(534	)
Amortization of prior service cost (credit)		0			0			(157	)		50			-			-			(235	)		227
Net periodic benefit	$	(1,169	)		(995	)		(1,215	)		(833	)	$	(1,754	)		(1,493	)		(1,850	)		(998	)

The Company does not expect to make contributions to its pension and postretirement benefit plans in 2022. As of ~~June~~September 30, 2022, 0no 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, 2022
											Gross		Gross
	June 30, 2022								Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cost		Gains		Losses		Value

U.S. government sponsored enterprises	$	104,571		106		3,577		101,100	$	109,097		15		6,333		102,779
State and political subdivisions		41		0		0		41		41		-		-		41
Mortgage backed securities and collateralized mortgage obligations - residential		307,819		18		20,387		287,450		297,131		-		35,889		261,242
Corporate bonds		90,883		4		3,147		87,740		85,764		-		4,762		81,002
Small Business Administration - guaranteed participation securities		26,855		0		1,427		25,428		24,883		-		2,385		22,498
Other		686		0		30		656		686		-		29		657
Total Securities Available for Sale	$	530,855		128		28,568		502,415	$	517,602		15		49,398		468,219

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

U.S. government sponsored enterprises	$	59,976		0		797		59,179	$	59,976		-		797		59,179
State and political subdivisions		41		0		0		41		41		-		-		41
Mortgage backed securities and collateralized mortgage obligations - residential		269,907		3,367		2,476		270,798		269,907		3,367		2,476		270,798
Corporate bonds		45,805		157		625		45,337		45,805		157		625		45,337
Small Business Administration - guaranteed participation securities		31,303		371		0		31,674		31,303		371		-		31,674
Other		685		0		1		684		685		-		1		684
Total Securities Available for Sale	$	407,717		3,895		3,899		407,713	$	407,717		3,895		3,899		407,713

The following table ~~distributes~~categorize the debt securities included in the available for sale portfolio as of ~~June~~September 30, 2022, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty. Securities not due at a single maturity date are presented separately:

					Amortized		Fair
(dollars in thousands)	Amortized Cost		Fair Value		Cost		Value

Due in one year or less	$	5,039		5,044	$	5,043		5,018
Due in one year through five years		181,142		174,458
Due after one year through five years						186,045		174,946
Due after five years through ten years		10,000		10,035		4,500		4,515
Mortgage backed securities and collateralized mortgage obligations - residential		307,819		287,450		297,131		261,242
Small Business Administration - guaranteed participation securities		26,855		25,428		24,883		22,498
	$	530,855		502,415	$	517,602		468,219

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, 2022
													Less than				12 months
													12 months				or more				Total
	June 30, 2022														Gross				Gross				Gross
	Less than 12 months				12 months or more				Total				Fair		Unrealized		Fair		Unrealized		Fair		Unreal.
(dollars in thousands)	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Value		Loss		Value		Loss		Value		Loss

U.S. government sponsored enterprises	$	18,705		874		47,289		2,703		65,994		3,577	$	43,300		1,315		54,964		5,018		98,264		6,333
Mortgage backed securities and collateralized mortgage obligations - residential		218,663		10,104		68,251		10,283		286,914		20,387		175,486		17,560		85,755		18,329		261,241		35,889
Corporate bonds		63,768		1,884		18,934		1,263		82,702		3,147		62,343		3,226		18,659		1,536		81,002		4,762
Small Business Administration - guaranteed participation securities		25,428		1,427		0		0		25,428		1,427		22,497		2,385		-		-		22,497		2,385
Other		620		30		0		0		620		30		621		29		-		-		621		29

Total	$	327,184		14,319		134,474		14,249		461,658		28,568	$	304,247		24,515		159,378		24,883		463,625		49,398

													December 31, 2021
													Less than				12 months
													12 months				or more				Total
	December 31, 2021														Gross				Gross				Gross
	Less than 12 months				12 months or more				Total				Fair		Unrealized		Fair		Unrealized		Fair		Unreal.
(dollars in thousands)	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Value		Loss		Value		Loss		Value		Loss

U.S. government sponsored enterprises	$	49,279		697		9,900		100		59,179		797	$	49,279		697		9,900		100		59,179		797
Mortgage backed securities and collateralized mortgage obligations - residential		93,447		1,888		22,098		588		115,545		2,476		93,447		1,888		22,098		588		115,545		2,476
Corporate bonds		15,670		171		14,546		454		30,216		625		15,670		171		14,546		454		30,216		625
Other		648		1		0		0		648		1		648		1		-		-		648		1

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

There were 0no allowance for credit losses recorded for securities available for sale during the three ~~and six~~or nine months ended ~~June~~September 30, 2022.

Index

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

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

Proceeds from sales	$	0	$	0	$	-		-
Proceeds from calls/paydowns		25,415		39,630		14,376		47,100
Proceeds from maturities		5,050		5,000		5,000		3,500
Gross realized gains		0		0		-		-
Gross realized losses		0		0		-		-

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

Proceeds from sales	$	0	$	0	$	-		-
Proceeds from calls/paydowns		43,338		76,450		57,714		123,550
Proceeds from maturities		10,050		5,055		15,050		8,555
Gross realized gains		0		0		-		-
Gross realized losses		0		0		-		-

There were 0no transfers of securities available for sale during the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021.

(b) Held to maturity securities

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

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

Mortgage backed securities and collateralized mortgage obligations - residential	$	8,544		263		74		8,733	$	8,091		122		275		7,938
Total held to maturity	$	8,544		263		74		8,733	$	8,091		122		275		7,938

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

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

Index

The following table ~~distributes~~categorizes the debt securities included in the held to maturity portfolio as of ~~June~~September 30, 2022, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty. Securities not due at a single maturity date are presented separately:

(dollars in thousands)	Amortized Cost		Fair Value		Amortized		Fair
					Cost		Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	8,544		8,733	$	8,091		7,938
	$	8,544		8,733	$	8,091		7,938

All held to maturity securities are held at cost on the financial statements. As of ~~June~~September 30, 2022 and December 31, 2021 held to maturity securities with a fair value of ~~$3.8~~$3.7 million and $442 thousand had an unrecognized loss of less than 12 months of ~~$74~~$275 thousand and 1one thousand, respectively.

There were 0no sales or transfers of held to maturity securities during the three ~~and six~~ months ended ~~June~~September 30, 2022 and 2021.

There were 0no allowance for credit losses recorded for held to maturity securities during the three and ~~six~~nine months ended ~~June~~September 30, 2022. ~~There~~As of September 30, 2022, there were 0no securities on non-accrual status and all securities were performing in accordance with contractual terms.

Debt Securities

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

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

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether management intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If management intends to sell the security 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~~is separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

Index

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

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

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

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

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

Index

(5) Loan Portfolio and Allowance for Credit Losses

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

The ~~Following~~following table presents loans by portfolio segment:

	June 30, 2022						September 30, 2022
(dollars in thousands)	New York and other states*		Florida		Total		New York and
							other states*		Florida		Total
Commercial:
Commercial real estate	$	151,978		27,646		179,624	$	165,888		31,270		197,158
Other		19,134		1,128		20,262		19,089		873		19,962
Real estate mortgage - 1 to 4 family:
First mortgages		2,747,210		1,271,168		4,018,378		2,762,616		1,312,097		4,074,713
Home equity loans		45,428		12,851		58,279		45,115		12,537		57,652
Home equity lines of credit		180,720		73,038		253,758		186,146		83,195		269,341
Installment		8,175		2,083		10,258		8,183		2,482		10,665
Total loans, net	$	3,152,645		1,387,914		4,540,559	$	3,187,037		1,442,454		4,629,491
Less: Allowance for credit losses						45,285						45,517
Net loans					$	4,495,274					$	4,583,974

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

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

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

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

Included in commercial loans above are Paycheck Protection Program (“PPP”) loans totaling $~~1.5~~1.4 million and $10.0 ~~Million~~million as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

Index

At ~~June~~September 30, 2022 and December 31, 2021, the Company had approximately ~~$30.4~~$36.6 million and $37.3 million, respectively, of real estate construction ~~loans, respectively.~~loans. Of the ~~$30.4~~$36.6 million in real estate construction loans at ~~June~~September 30, 2022, approximately $~~10.7~~14.1 million are secured by first mortgages to residential borrowers while approximately ~~$19.7~~$22.5 million were to commercial borrowers for residential construction projects. Of the $37.3 million in real estate construction loans at December 31, 2021, approximately $17.9 million were secured by first mortgages to residential borrowers while approximately $19.4 million were to commercial borrowers for residential construction projects. The vast majority of construction loans are in the Company’s New York market.

~~Index~~

Allowance for credit losses on loans

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

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

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

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

For the three months ended June 30, 2022

(dollars in thousands)
Commercial
Real Estate
Mortgage-
1 to 4 Family
Installment Total
Balance at beginning of period $
2,177 43,931 70 46,178
Loans charged off:
New York and other states* 4 12 14 30
Florida 0 0 0 0
Total loan chargeoffs 4 12 14 30

Recoveries of loans previously charged off:
New York and other states* 4 131 2 137
Florida 0 0 0 0
Total recoveries 4 131 2 137
Net loans (recoveries) charged off 0 (119 ) 12 (107 )
(Credit) provision for credit losses 97 (1,170 ) 73 (1,000 )
Balance at end of period $ 2,274 42,880 131 45,285

Index

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

For the three months ended June 30, 2021

(dollars in thousands)
Commercial
Real Estate
Mortgage-
1 to 4 Family
Installment Total
Balance at beginning of period $ 4,052 45,507 432 49,991
Loans charged off:
New York and other states* 0 20 1 21
Florida 0 0 0 0
Total loan chargeoffs 0 20 1 21

Recoveries of loans previously charged off:
New York and other states* 0 156 28 184
Florida 0 1 0 1
Total recoveries 0 157 28 185
Net loan recoveries
0 (137 ) (27 ) (164 )
(Credit) provision for loan losses 54 (27 ) (27 ) 0
Balance at end of period $ 4,106 45,617 432 50,155

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

Activity in the allowance for credit losses on loans by portfolio segment for the ~~six~~three months ended September 30, 2022 is summarized as follows:

													For the three months ended September 30, 2022
(dollars in thousands)															Real Estate
	For the six months ended June 30, 2022														Mortgage-
	Commercial			Real Estate Mortgage- 1 to 4 Family			Installment			Total			Commercial		1 to 4 Family			Installment		Total
Balance at beginning of period	$	3,135		$	40,689		$	443		$	44,267		$	2,274		42,880			131		45,285
Impact of ASU 2016-13, Current Expected Credit Loss (CECL)		(986	)		3,717			(378	)		2,353
Balance as of January 1, 2022 as adjuste dfor ASU 2016-13		2,149			44,406			65			46,620
Loans charged off:
New York and other states*		40			12			25			77			-		13			34		47
Florida		0			0			0			0			-		-			-		-
Total loan chargeoffs		40			12			25			77			-		13			34		47

Recoveries of loans previously charged off:
New York and other states*		4			228			10			242			-		177			-		177
Florida		0			0			0			0			-		-			2		2
Total recoveries		4			228			10			242			-		177			2		179
Net loans (recoveries) charged off		36			(216	)		15			(165	)		-		(164	)		32		(132	)
(Credit) provision for credit losses		161			(1,742	)		81			(1,500	)		155		(100	)		45		100
Balance at end of period	$	2,274			42,880			131			45,285		$	2,429		42,944			144		45,517

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

~~Index~~

Activity in the allowance for loan losses by portfolio segment for the ~~six~~three months ended September 30, 2021 is summarized as follows:

													For the three months ended September 30, 2021
(dollars in thousands)																Real Estate
	For the six months ended June 30, 2021															Mortgage-
	Commercial			Real Estate Mortgage- 1 to 4 Family			Installment			Total			Commercial			1 to 4 Family			Installment		Total
Balance at beginning of period	$	4,140			44,950			505			49,595		$	4,106			45,617			432		50,155
Loans charged off:
New York and other states*		0			106			8			114			30			72			17		119
Florida		0			0			2			2			-			1			-		1
Total loan chargeoffs		0			106			10			116			30			73			17		120

Recoveries of loans previously charged off:
New York and other states*		32			244			49			325			-			111			3		114
Florida		0			1			0			1			-			1			-		1
Total recoveries		32			245			49			326			-			112			3		115
Net loan recoveries		(32	)		(139	)		(39	)		(210	)		30			(39	)		14		5
(Credit) provision for loan losses		(66	)		528			(112	)		350			(823	)		(2,003	)		26		(2,800	)
Balance at end of period	$	4,106			45,617			432			50,155		$	3,253			43,653			444		47,350

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

Index

Activity in the allowance for credit losses on loans by portfolio segment for the nine months ended September 30, 2022 is summarized as follows:

	For the nine months ended September 30, 2022
(dollars in thousands)				Real Estate
				Mortgage-
	Commercial			1 to 4 Family			Installment			Total
Balance at beginning of period	$	3,135			40,689			443			44,267
Impact of ASU 2016-13, Current Expected Credit Loss (CECL)		(986	)		3,717			(378	)		2,353
Balance as of January 1, 2022 as adjusted for ASU 2016-13		2,149			44,406			65			46,620
Loans charged off:
New York and other states*		40			25			53			118
Florida		-			-			-			-
Total loan chargeoffs	$	40		$	25		$	53		$	118

Recoveries of loans previously charged off:
New York and other states*		4			405			4			414
Florida		-			-			2			2
Total recoveries		4			405			6			416
Net loans charged off		36			(380	)		47			(297	)
Credit for loan losses		316			(1,842	)		126			(1,400	)
Balance at end of period	$	2,429			42,944			144			45,517

Activity in the allowance for loan losses by portfolio segment for the nine months ended September 30, 2021 is summarized as follows:

	For the nine months ended September 30, 2021
(dollars in thousands)				Real Estate
				Mortgage-
	Commercial			1 to 4 Family			Installment			Total
Balance at beginning of period	$	4,140			44,950			505			49,595
Loans charged off:
New York and other states*		30			178			25			233
Florida		-			1			2			3
Total loan chargeoffs		30			179			27			236

Recoveries of loans previously charged off:
New York and other states*		32			355			52			439
Florida		-			2			-			2
Total recoveries		32			357			52			441
Net loan recoveries		(2	)		(178	)		(25	)		(205	)
(Credit) provision for loan losses		(889	)		(1,475	)		(86	)		(2,450	)
Balance at end of period	$	3,253			43,653			444			47,350

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

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

	June 30, 2022								September 30, 2022
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
(dollars in thousands)											1-to-4 Family
									Commercial		Residential		Installment
									Loans		Real Estate		Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	0		0		0		0	$	-		-		-		-
Collectively evaluated for impairment		2,274		42,880		131		45,285		2,429		42,944		144		45,517

Total ending allowance balance	$	2,274		42,880		131		45,285	$	2,429		42,944		144		45,517

Loans:
Individually evaluated for impairment	$	319		26,673		21		27,013	$	294		26,157		16		26,467
Collectively evaluated for impairment		199,567		4,303,742		10,237		4,513,546		216,826		4,375,549		10,649		4,603,024

Total ending loans balance	$	199,886		4,330,415		10,258		4,540,559	$	217,120		4,401,706		10,665		4,629,491

Index

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

	December 31, 2021								December 31, 2021
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
(dollars in thousands)											1-to-4 Family
									Commercial		Residential		Installment
									Loans		Real Estate		Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	0		0		0		0	$	-		-		-		-
Collectively evaluated for impairment		3,135		40,689		443		44,267		3,135		40,689		443		44,267

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

Loans:
Individually evaluated for impairment	$	232		18,272		0		18,504	$	232		18,272		-		18,504
Collectively evaluated for impairment		199,968		4,210,891		9,416		4,420,275		199,968		4,210,891		9,416		4,420,275

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

~~Index~~

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

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

(In thousands)	For the three months ended June 30, 2022		For the three months ended September 30, 2022
Balance at March 31, 2022	$	2,653
Balance at June 30, 2022			$	3,162
Provision for credit losses		509		200
Balance at June 30, 2022	$	3,162
Balance at September 30, 2022			$	3,362


(In thousands)	For the six months ended June 30, 2022		For the nine months ended September 30, 2022
Balance at January 1, 2022	$	18	$	18
Impact of Adopting CECL		2,335		2,335
Adjusted Balance at January 1, 2022		2,353		2,353
Provision for credit losses		809		1,009
Balance at June 30, 2022	$	3,162
Balance at September 30, 2022			$	3,362

Loan Credit Quality

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

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.

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

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

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

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

2526

Index

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

(in thousands) June 30, 2022

Term Loans Amortized Cost Basis by Origination Year
2022 2021 2020 2019 2018 Prior
Revolving Loans
Amortized Cost
Basis

Revolving
Loan
Converted to Term
Total
Commercial :
Risk rating
Pass $ 24,830
32,586
24,467
24,684
20,201
43,368
7,682
0 $ 177,818
Special Mention 0 0 69 0 251 0 0 0 320
Substandard 0 0 116 0 136 1,234 0 0 1,486
Total Commercial Loans $ 24,830
32,586
24,652
24,684
20,588
44,602
7,682
0 $ 179,624
Commercial Loans:
Current-period Gross writeoffs $ 0
0
0
0
0
40
0
0 $ 40
$ 0
0
0
0
0
40
0
0 $ 40
Commercial Other:
Risk rating
Pass $ 1,325
3,623
3,028
722
823
2,535
7,729
0 $ 19,785
Special mention 0 316 0 0 0 0 40 0 356
Substandard 0 23 0 0 0 0 98 0 121
Total Commercial Real Estate Loans $ 1,325
3,962
3,028
722
823
2,535
7,867
0 $ 20,262

Other Commercial Loans:
Current-period Gross writeoffs $ 0
0
0
0
0
0
0
0 0
$ 0
0
0
0
0
0
0
0 $ 0

Residential First Mortgage:
Risk rating
Performing $ 280,214
965,157
815,540
382,448
268,833
1,289,409
1,114
0 $ 4,002,715
Nonperforming 0 173 83 671 773 13,963 0 0 15,663
Total First Mortgage: $ 280,214
965,330
815,623
383,119
269,606
1,303,372
1,114
0 $ 4,018,378

Residential First Mortgage Loans:
Current-period Gross writeoffs $ 0
0
0
0
0
0
0
0 0
$ 0
0
0
0
0
0
0
0 $ 0

Home Equity Lines:
Risk rating
Performing $ 3,335
10,166
7,031
8,108
5,718
23,751
0
0 $ 58,109
Nonperforming 0 0 0 0 0 170 0 0 170
Total Home Equity Lines: $ 3,335
10,166
7,031
8,108
5,718
23,921
0
0 $ 58,279

Home Equity Loans:
Current-period Gross writeoffs $ 0
0
0
0
0
0
0
0 $
0
$ 0
0
0
0
0
0
0
0 $ 0
Home Equity Lines of Credit:
Risk rating
Performing $ 660
847
414
70
94
19,266
229,789
0 $ 251,140
Nonperforming 0 0 0 0 0 2,553 65 0 2,618
Total Home Equity Credit Lines: $ 660
847
414
70
94
21,819
229,854
0 $ 253,758

Home Equity Lines of Credit:
Current-period Gross writeoffs $ 0
0
0
0
0
12
0
0 12
$ 0
0
0
0
0
12
0
0 $ 12
Installments:
Risk rating
Performing $ 2,503
3,047
1,099
1,200
581
690
1,093
0 $ 10,213
Nonperforming 0 0 0 21 0 1 23 0 45
Total Installments $ 2,503
3,047
1,099
1,221
581
691
1,116
0 $ 10,258

Installments Loans:
Current-period Gross writeoffs $ 0
13
5
6
0
1
0
0 25
$ 0
13
5
6
0
1
0
0 $ 25

Loan Credit Quality

(in thousands)	September 30, 2022
	Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
Commercial :
Risk rating
Pass	$	58,331		30,325		18,803		23,713		17,058		38,102		9,089		-	$	195,421
Special Mention		-		-		65		-		247		-		-		-		312
Substandard		-		-		115		-		132		1,178		-		-		1,425
Total Commercial Loans	$	58,331		30,325		18,983		23,713		17,437		39,280		9,089		-	$	197,158
Commercial Loans:
Current-period Gross writeoffs	$	-		-		-		-		-		40		-		-	$	40
	$	-		-		-		-		-		40		-		-	$	40
Commercial Other:
Risk rating
Pass	$	2,302		3,313		2,757		706		752		2,472		7,182		-	$	19,484
Special mention		-		124		-		-		-		-		40		-		164
Substandard		-		216		-		-		-		-		98		-		314
Total Commercial Real Estate Loans	$	2,302		3,653		2,757		706		752		2,472		7,320		-	$	19,962

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

Residential First Mortgage:
Risk rating
Performing	$	417,902		950,363		799,953		374,430		262,084		1,252,690		1,479		-	$	4,058,901
Nonperforming		-		700		83		846		773		13,410		-		-		15,812
Total First Mortgage:	$	417,902		951,063		800,036		375,276		262,857		1,266,100		1,479		-	$	4,074,713

Residential First Mortgage Loans:
Current-period Gross writeoffs	$	-		-		-		-		-		5		-		-	$	5
	$	-		-		-		-		-		5		-		-	$	5

Home Equity Lines:
Risk rating
Performing	$	5,222		9,748		6,535		7,782		5,468		22,729		-		-	$	57,484
Nonperforming		-		-		-		-		-		168		-		-		168
Total Home Equity Lines:	$	5,222		9,748		6,535		7,782		5,468		22,897		-		-	$	57,652

Home Equity Loans:
Current-period Gross writeoffs	$	-		-		-		-		-		-		-		-	$	-
	$	-		-		-		-		-		-		-		-	$	-
Home Equity Lines of Credit:
Risk rating
Performing	$	698		859		335		56		101		18,826		246,047		-	$	266,922
Nonperforming		-		7		-		-		-		2,207		205		-		2,419
Total Home Equity Credit Lines:	$	698		866		335		56		101		21,033		246,252		-	$	269,341

Home Equity Lines of Credit:
Current-period Gross writeoffs	$	-		-		-		-		-		20		-		-		20
	$	-		-		-		-		-		20		-		-	$	20
Installments:
Risk rating
Performing	$	4,068		2,758		943		918		469		293		1,122		-	$	10,571
Nonperforming		-		25		-		67		-		-		2		-		94
Total Installments	$	4,068		2,783		943		985		469		293		1,124		-	$	10,665

Installments Loans:
Current-period Gross writeoffs	$	-		36		6		6		2		3		-		-		53
	$	-		36		6		6		2		3		-		-	$	53

2627

Index

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

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

Commercial:
Commercial real estate	$	0		0		123		123		151,855		151,978	$	39		-		123		162		165,726		165,888
Other		35		6		0		41		19,093		19,134		-		-		6		6		19,083		19,089
Real estate mortgage - 1 to 4 family:
First mortgages		1,554		1,359		9,183		12,096		2,735,114		2,747,210		1,994		2,469		8,128		12,591		2,750,025		2,762,616
Home equity loans		26		50		55		131		45,297		45,428		46		66		55		167		44,948		45,115
Home equity lines of credit		264		264		857		1,385		179,335		180,720		359		150		730		1,239		184,907		186,146
Installment		18		8		23		49		8,126		8,175		3		25		16		44		8,139		8,183

Total	$	1,897		1,687		10,241		13,825		3,138,820		3,152,645	$	2,441		2,710		9,058		14,209		3,172,828		3,187,037

Florida:
													30-59		60-89		90 +		Total
													Days		Days		Days		30+ days				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		Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	0		0		0		0		27,646		27,646	$	-		-		-		-		31,270		31,270
Other		0		0		0		0		1,128		1,128		124		-		-		124		749		873
Real estate mortgage - 1 to 4 family:
First mortgages		78		292		1,552		1,922		1,269,246		1,271,168		81		245		1,608		1,934		1,310,163		1,312,097
Home equity loans		43		0		0		43		12,808		12,851		7		-		-		7		12,530		12,537
Home equity lines of credit		0		89		0		89		72,949		73,038		31		-		-		31		83,164		83,195
Installment		18		46		0		64		2,019		2,083		-		-		62		62		2,420		2,482

Total	$	139		427		1,552		2,118		1,385,796		1,387,914	$	243		245		1,670		2,158		1,440,296		1,442,454

Total:
													30-59		60-89		90 +		Total
													Days		Days		Days		30+ days				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		Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	0		0		123		123		179,501		179,624	$	39		-		123		162		196,996		197,158
Other		35		6		0		41		20,221		20,262		124		-		6		130		19,832		19,962
Real estate mortgage - 1 to 4 family:
First mortgages		1,632		1,651		10,735		14,018		4,004,360		4,018,378		2,075		2,714		9,736		14,525		4,060,188		4,074,713
Home equity loans		69		50		55		174		58,105		58,279		53		66		55		174		57,478		57,652
Home equity lines of credit		264		353		857		1,474		252,284		253,758		390		150		730		1,270		268,071		269,341
Installment		36		54		23		113		10,145		10,258		3		25		78		106		10,559		10,665

Total	$	2,036		2,114		11,793		15,943		4,524,616		4,540,559	$	2,684		2,955		10,728		16,367		4,613,124		4,629,491

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

2728

Index

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

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

Commercial:
Commercial real estate	$	0		233		45		278		146,785		147,063	$	-		233		45		278		146,785		147,063
Other		0		0		0		0		30,889		30,889		-		-		-		-		30,889		30,889
Real estate mortgage - 1 to 4 family:
First mortgages		1,303		239		9,867		11,409		2,712,325		2,723,734		1,303		239		9,867		11,409		2,712,325		2,723,734
Home equity loans		136		0		224		360		47,830		48,190		136		-		224		360		47,830		48,190
Home equity lines of credit		355		458		911		1,724		173,410		175,134		355		458		911		1,724		173,410		175,134
Installment		27		5		4		36		7,332		7,368		27		5		4		36		7,332		7,368

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

Florida:
													30-59		60-89		90 +		Total
													Days		Days		Days		30+ days				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		Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	0		0		0		0		21,653		21,653	$	-		-		-		-		21,653		21,653
Other		0		0		0		0		595		595		-		-		-		-		595		595
Real estate mortgage - 1 to 4 family:
First mortgages		869		180		1,146		2,195		1,210,373		1,212,568		869		180		1,146		2,195		1,210,373		1,212,568
Home equity loans		0		45		0		45		13,650		13,695		-		45		-		45		13,650		13,695
Home equity lines of credit		0		89		0		89		55,753		55,842		-		89		-		89		55,753		55,842
Installment		18		0		5		23		2,025		2,048		18		-		5		23		2,025		2,048

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

Total:
													30-59		60-89		90 +		Total
													Days		Days		Days		30+ days				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		Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	0		233		45		278		168,438		168,716	$	-		233		45		278		168,438		168,716
Other		0		0		0		0		31,484		31,484		-		-		-		-		31,484		31,484
Real estate mortgage - 1 to 4 family:
First mortgages		2,172		419		11,013		13,604		3,922,698		3,936,302		2,172		419		11,013		13,604		3,922,698		3,936,302
Home equity loans		136		45		224		405		61,480		61,885		136		45		224		405		61,480		61,885
Home equity lines of credit		355		547		911		1,813		229,163		230,976		355		547		911		1,813		229,163		230,976
Installment		45		5		9		59		9,357		9,416		45		5		9		59		9,357		9,416

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

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

At ~~June~~September 30, 2022 and December 31, 2021, there were no loans that were 90 days past due and still accruing interest. As a result, non-accrual loans include all loans 90 days or more past due as well as certain loans less than 90 days past due that were placed on non-accrual status for reasons other than delinquent status. There are 0no commitments to extend further credit on non-accrual or restructured loans.

Index

The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). Other real estate owned is included in Other assets on the Balance Sheet. As of ~~June~~September 30,2022 other real estate owned included $ ~~644~~682 thousand of residential foreclosed properties. In addition, non-accrual residential mortgage loans that are in the process of foreclosure had an amortized cost of ~~$10.3~~$9.6 million as of ~~June~~September 30, ~~2022.~~2022 . As of December 31, 2021, other real estate owned included $362 thousand of residential foreclosed properties. In addition, non-accrual residential mortgage loans that ~~are~~were in the process of foreclosure had a recorded investment of $9.7 million as of December 31, 2021.

~~Index~~

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

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

	June 30, 2022						September 30, 2022
(dollars in thousands)	New York and other states*		Florida		Total		New York and
							other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	176		0		176	$	168		-		168
Other		27		0		27		11		-		11
Real estate mortgage - 1 to 4 family:
First mortgages		13,684		1,979		15,663		13,869		1,943		15,812
Home equity loans		127		43		170		126		42		168
Home equity lines of credit		2,448		170		2,618		2,301		118		2,419
Installment		40		5		45		29		65		94
Total non-accrual loans		16,502		2,197		18,699		16,504		2,168		18,672
Restructured real estate mortgages - 1 to 4 family		14		0		14		12		-		12
Total nonperforming loans	$	16,516		2,197		18,713	$	16,516	$	2,168	$	18,684

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

2930

Index

	December 31, 2021						December 31, 2021
(dollars in thousands)	New York and other states*		Florida		Total		New York and
							other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	67		0		67	$	67		-		67
Other		45		0		45		45		-		45
Real estate mortgage - 1 to 4 family:
First mortgages		13,990		1,797		15,787		13,990		1,797		15,787
Home equity loans		247		45		292		247		45		292
Home equity lines of credit		2,337		174		2,511		2,337		174		2,511
Installment		23		14		37		23		14		37
Total non-accrual loans		16,709		2,030		18,739		16,709		2,030		18,739
Restructured real estate mortgages - 1 to 4 family		17		0		17		17		-		17
Total nonperforming loans	$	16,726		2,030		18,756	$	16,726		2,030		18,756

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

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

	June 30, 2022						September 30, 2022
(dollars in thousands)	Non-accrual With No Allowance for Credit Loss		Non-accrual With Allowance for Credit Loss		Loans Past Due Over 89 Days Still Accruing		Non-accrual With		Non-accrual With		Loans Past Due
							No Allowance for		Allowance for		Over 89 Days
							Credit Loss		Credit Loss		Still Accruing
Commercial:
Commercial real estate	$	176	$	0	$	0	$	168		-		-
Other		0		27		0		11		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		14,477		1,186		0		14,640		1,171		-
Home equity loans		152		18		0		168		-		-
Home equity lines of credit		2,497		121		0		2,133		287		-
Installment		21		23		0		16		78		-
Total loans, net	$	17,324	$	1,375	$	0	$	17,136		1,536		-

The non-accrual balance of ~~$1.4~~$1.5 million disclosed above was collectively evaluated and the associated allowance for credit losses on loans was not material as of ~~June~~September 30, ~~2022.~~2022 .

~~Index~~

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

Type of Collateral
(dollars in thousands)

Real Estate
Investment
Securities/Cash
Other
Commercial:
Commercial real estate $ 292 0 0
Other 27 0 0
Real estate mortgage - 1 to 4 family: -
-

First mortgages 22,902 0 0
Home equity loans 272 0 0
Home equity lines of credit 3,499 0 0
Installment 21 0 0
Total Allowance
$ 27,013 0 0

Index

	Type of Collateral
(dollars in thousands)
	Real Estate		Investment Securities/Cash		Other
Commercial:
Commercial real estate	$	283		-		-
Other		11		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		22,720		-		-
Home equity loans		286		-		-
Home equity lines of credit		3,151		-		-
Installment		16		-		-
Total Allowance	$	26,467		-		-

Troubled Debt Restructuring Loans

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

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

As of ~~June~~September 30, 2022loans individually evaluated included approximately ~~$9.5~~$9.3 million of loans in accruing status that were identified as ~~TDR’s.~~TDRs.

~~Index~~

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

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

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

Commercial:
Commercial real estate		0	$	0		0		0	$	0		0		-	$	-		-		-	$	-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1		73		73		2		368		368		3		282		282		2		557		557
Home equity loans		0		0		0		1		2		2		-		-		-		-		-		-
Home equity lines of credit		0		0		0		2		59		59		-		-		-		1		31		31

Total		1	$	73		73		5	$	429		429		3	$	282		282		3	$	588		588

Florida:

(dollars in thousands)

Number of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment

Number of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment

Commercial:
Commercial real estate 0 $ 0 0 0 $ 0 0
Real estate mortgage - 1 to 4 family:
First mortgages 0 0 0 1 78 78
Home equity loans 0 0 0 0 0 0
Home equity lines of credit 0 0 0 0 0 0

Total 0 $ 0 0 1 $ 78 78

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

Six months ended June 30, 2022

Six months ended June 30, 2021

New York and other states*:

(dollars in thousands)

Number of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment

Number of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment

Commercial:
Commercial real estate 0 $ 0
0 0 $
0
0
Real estate mortgage - 1 to 4 family:
First mortgages 4 443 443 2 368 368
Home equity loans 0 0 0 1 2 2
Home equity lines of credit 0 0 0 2 59 59

Total 4 $ 443
443 5 $
429
429

Florida:

(dollars in thousands)

Number of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment

Number of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment

Commercial:
Commercial real estate 0 $ 0
0 0 $
0
0
Real estate mortgage - 1 to 4 family:
First mortgages 0 0 0 1 78 78
Home equity loans 0 0 0 0 0 0
Home equity lines of credit 0 0 0 0 0 0

Total 0 $ 0
0 1 $
78
78

Florida:

Pre-Modification

Post-Modification

Pre-Modification

Post-Modification

��

Outstanding

Number of

Recorded

Number of

Recorded

(dollars in thousands)

Contracts

Investment

Contracts

Investment

Commercial:

Commercial real estate

Real estate mortgage - 1 to 4 family:

First mortgages

Home equity loans

Home equity lines of credit

Total

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

Index

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

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-
Real estate mortgage - 1 to 4 family:
First mortgages		7		719		719		4		923		923
Home equity loans		-		-		-		1		2		2
Home equity lines of credit		-		-		-		3		88		88

Total		7	$	719		719		8	$	1,013		1,013

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

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

Total		-	$	-		-		1	$	78		78

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

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

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

Index

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

	December 31, 2021								December 31, 2021

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

Commercial:
Commercial real estate	$	187		279		0		1,154	$	187		279		-		1,154
Other		45		45		0		107		45		45		-		107
Real estate mortgage - 1 to 4 family:
First mortgages		13,687		13,875		0		14,072		13,687		13,875		-		14,072
Home equity loans		161		161		0		235		161		161		-		235
Home equity lines of credit		1,852		1,939		0		2,256		1,852		1,939		-		2,256

Total	$	15,932		16,299		0		17,824	$	15,932		16,299		-		17,824

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

Commercial:
Commercial real estate	$	0		0		0		105	$	-		-		-		105
Other		0		0		0		0		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		2,368		2,368		0		2,562		2,368		2,368		-		2,562
Home equity loans		0		0		0		16		-		-		-		16
Home equity lines of credit		204		204		0		246		204		204		-		246

Total	$	2,572		2,572		0		2,929	$	2,572		2,572		-		2,929

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

Commercial:
Commercial real estate	$	187		279		0		1,259	$	187		279		-		1,259
Other		45		45		0		107		45		45		-		107
Real estate mortgage - 1 to 4 family:
First mortgages		16,055		16,243		0		16,634		16,055		16,243		-		16,634
Home equity loans		161		161		0		251		161		161		-		251
Home equity lines of credit		2,056		2,143		0		2,502		2,056		2,143		-		2,502

Total	$	18,504		18,871		0		20,753	$	18,504		18,871		-		20,753

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

Index

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

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

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

Florida:
(dollars in thousands)	Pass		Classified		Total		Pass		Classified		Total
Commercial:
Commercial real estate	$	21,113		540		21,653	$	21,113		540		21,653
Other		595		0		595		595		-		595
	$	21,708		540		22,248	$	21,708		540		22,248

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

* Includes New York, New Jersey and Massachusetts.

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

~~Index~~

(6) Fair Value of Financial Instruments

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

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

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

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

Index

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

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

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

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

~~Index~~

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

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

Index

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

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

U.S. government sponsored enterprises	$	101,100	$	0	$	101,100	$	0	$	102,779	$	-	$	102,779	$	-
State and political subdivisions		41		0		41		0		41		-		41		-
Mortgage backed securities and collateralized mortgage obligations - residential		287,450		0		287,450		0		261,242		-		261,242		-
Corporate bonds		87,740		0		87,740		0		81,002		-		81,002		-
Small Business Administration- guaranteed participation securities		25,428		0		25,428		0		22,498		-		22,498		-
Other securities		656		0		656		0		657		-		657		-

Total securities available for sale	$	502,415	$	0	$	502,415	$	0	$	468,219	$	-	$	468,219	$	-

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

Securities available for sale:
U.S. government sponsored enterprises	$	59,179	$	0	$	59,179	$	0	$	59,179	$	-	$	59,179	$	-
State and political subdivisions		41		0		41		0		41		-		41		-
Mortgage backed securities and collateralized mortgage obligations - residential		270,798		0		270,798		0		270,798		-		270,798		-
Corporate bonds		45,337		0		45,337		0		45,337		-		45,337		-
Small Business Administration- guaranteed participation securities		31,674		0		31,674		0		31,674		-		31,674		-
Other securities		684		0		684		0		684		-		684		-

Total securities available for sale	$	407,713	$	0	$	407,713	$	0	$	407,713	$	-	$	407,713	$	-

Index

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

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

Other real estate owned	$	644	$	0	$	0	$	644	Sales comparison approach	Adjustments for differences between comparable sales		1% - 20% (7	%)	$	682	$	-	$	-	$	682	Sales comparison approach	Adjustments for differences between comparable sales		3% - 58% (31	%)

Loans individually evaluated		0		0		0		0	Sales comparison	Adjustments for differences between comparable sales		N/A			-		-		-		-	Sales comparison	Adjustments for differences between comparable sales		N/A

Fair Value Measurements at

December 31, 2021 Using:

Significant

Quoted Prices in

Other

Significant

Fair Value Measurements at

Active Markets for

Observable

Unobservable

December 31, 2021 Using:

Carrying

Identical Assets

Inputs

(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)

Value

(Level 1)

(Level 2)

(Level 3)

Valuation technique

Unobservable inputs

Range (Weighted Average)

Other real estate owned

362

Sales comparison approach

Adjustments for differences between comparable sales

1% - 14% (6

362

Sales comparison approach

Adjustments for differences between comparable sales

1% - 14% (6

Impaired loans:

Real estate mortgage -1 to 4 family

Sales comparison

Adjustments for differences between comparable sales

N/A

Sales comparison

Adjustments for differences between comparable sales

N/A

Other real estate owned, that is carried at fair value less costs to sell was approximately $~~644~~682 thousand at ~~June~~September 30, 2022 and consisted of residential real estate properties. There were 0no commercial real estate properties. There were 0no valuation charges included in earnings for the ~~six~~nine months ended ~~June~~September 30, 2022.

Of the total individually evaluated loans of $~~27.0~~26.5 million at ~~June~~September 30, 2022, there are 0no loans that are collateral dependent and are carried at fair value measured on a non-recurring basis. Due to the sufficiency of charge offs taken on these loans and the adequacy of the underlying collateral, there were 0no specific valuation allowances for these loans at ~~June~~September 30, 2022. There were 0no gross charge offs related to residential individually evaluated loans included in the table above for the three and ~~six~~nine months ended ~~June~~September 30, 2022.

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

Of the total impaired loans of $18.5 million at December 31, 2021, there ~~are 0~~were no impairments that are collateral dependent and are carried at fair value measured on a non-recurring basis. Due to the sufficiency of charge-offs taken on these loans and the adequacy of the underlying collateral, there were 0no specific valuation allowances for these loans at December 31, 2021. There were 0no gross charge-offs related to residential impaired loans included in the table above.

Index

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

(dollars in thousands)			Fair Value Measurements at										Fair Value Measurements at
	Carrying		June 30, 2022 Using:								Carrying		September 30, 2022 Using:
	Value		Level 1		Level 2		Level 3		Total		Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	1,046,184		1,046,184		0		0		1,046,184	$	841,264		841,264		-		-		841,264
Securities available for sale		502,415		0		502,415		0		502,415		468,219		-		468,219		-		468,219
Held to maturity securities		8,544		0		8,733		0		8,733		8,091		-		7,938		-		7,938
Federal Home Loan Bank stock		5,797		N/A		N/A		N/A		N/A		5,797		N/A		N/A		N/A		N/A
Net loans		4,495,274		0		0		4,380,410		4,380,410		4,583,974		-		-		4,304,560		4,304,560
Accrued interest receivable		10,726		692		1,672		8,362		10,726		10,936		616		1,648		8,672		10,936
Financial liabilities:
Demand deposits		851,573		851,573		0		0		851,573		859,829		859,829		-		-		859,829
Interest bearing deposits		4,545,268		3,545,531		976,558		0		4,522,089		4,422,025		3,467,673		925,461		-		4,393,134
Short-term borrowings		147,282		0		147,282		0		147,282		124,932		-		124,932		-		124,932
Accrued interest payable		142		31		111		0		142		162		38		124		-		162

(dollars in thousands)			Fair Value Measurements at										Fair Value Measurements at
	Carrying		December 31, 2021 Using:								Carrying		December 31, 2021 Using:
	Value		Level 1		Level 2		Level 3		Total		Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	1,219,470		1,219,470		0		0		1,219,470	$	1,219,470		1,219,470		-		-		1,219,470
Securities available for sale		407,713		0		407,713		0		407,713		407,713		-		407,713		-		407,713
Held to maturity securities		9,923		0		10,695		0		10,695		9,923		-		10,695		-		10,695
Federal Reserve Bank and Federal
Home Loan Bank stock		5,604		N/A		N/A		N/A		N/A		5,604		N/A		N/A		N/A		N/A
Net loans		4,394,512		0		0		4,451,031		4,451,031		4,394,512		-		-		4,451,031		4,451,031
Accrued interest receivable		9,099		10		1,235		7,854		9,099		9,099		10		1,235		7,854		9,099
Financial liabilities:
Demand deposits		794,878		794,878		0		0		794,878		794,878		794,878		-		-		794,878
Interest bearing deposits		4,473,251		3,477,937		993,676		0		4,471,613		4,473,251		3,477,937		993,676		-		4,471,613
Short-term borrowings		244,686		0		244,686		0		244,686		244,686		-		244,686		-		244,686
Accrued interest payable		163		34		129		0		163		163		34		129		-		163

Index

Item 2.

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

Forward-looking Statements

Statements included in this report and in future filings by TrustCo with the Securities and Exchange Commission, in TrustCo’s press releases, and in oral statements made with the approval of an authorized executive officer, including statements regarding the effect of the ~~novel coronavirus disease (“COVID-19”)~~COVID-19 pandemic on our business and ~~our continuing response~~macroeconomic or geopolitical concerns related to ~~the COVID-19 pandemic,~~inflation and rising interest rates, 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 such as may, will, should, could, would, estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

In addition to any factors described under Part II, Item 1A, Risk Factors, and under the Risk Factor discussion in TrustCo’s Annual Report on Form 10-K for the year ended December 31, 2021, the factors listed below, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement. Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the effects of the COVID-19 pandemic and macroeconomic or geopolitical concerns related to inflation, rising interest rates and the war in Ukraine.

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

~~The current COVID-19 pandemic,~~

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

the impact of hurricanes, including Hurricane Ian, and other severe weather events on the communities we serve, which could have an adverse impact on our business and results of operation;

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

~~future business strategies related to the implementation of CECL;~~

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

Index

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

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

~~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 charge-offs, changes in property values, and changes in estimates of the adequacy of the allowance for credit losses;

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

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

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

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

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

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

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

changes in management personnel;

real estate and collateral values;

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

Index

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

technological changes and electronic, cyber and physical security breaches;

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

Risks related to climate change; and

other risks and uncertainties included under “Risk Factors” in our Form 10-K for the year ended December 31, ~~2021.~~2021, as well as risks and uncertainties, if any, discussed elsewhere in this Form 10-Q and in our other filings made from time to time with the SEC, or in materials incorporated therein by reference.

You should not rely upon forward-looking statements as predictions of future events. Although TrustCo believes that the expectations reflected in the forward‑looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. The foregoing list should not be construed as exhaustive, and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events.

~~Index~~

Following this management discussion and analysis 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 month and ~~six~~nine month periods ended ~~June~~September 30, 2022 and 2021.

Introduction

The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the three month and ~~six~~nine month periods ended ~~June~~September 30, 2022, with comparisons to the corresponding period in 2021, as applicable. Net interest margin is presented on a fully taxable equivalent basis in this discussion. The consolidated interim financial statements and related notes, as well as the ~~2021~~ Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 25, 2022 (the “2021 Form 10-K”), 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

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

Index

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

~~Loan modifications~~

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

~~Index~~

Paycheck Protection Program (“PPP”) and Liquidity

As part of the CARES Act, the Small Business Administration (SBA) was authorized to guarantee loans under the PPP for small businesses that meet the necessary eligibility requirements in order to keep their workers on the payroll. The Company has received loan origination fees from the SBA which are being recognized over the life of the loan using the effective yield method. As of September 30, 2022, TrustCo’s PPP loans outstanding totaled $1.4 million.

Asset impairment

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

Provision for credit losses

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

Economic Overview

During the ~~second~~third quarter of 2022, financial markets declined for the ~~second~~third consecutive quarter as the economy continued to feel the impact from several economic areas, as well as reacting to global concerns. Ongoing inflationary pressures, higher interest rates, pandemic concerns, supply-chain bottlenecks, the war in Ukraine and higher Treasury yields, continued to place worries on investors. For the ~~second~~third quarter of 2022, the S&P 500 Index was down ~~16.45%~~5.28% and the Dow Jones Industrial Average was down ~~11.25%~~6.66%. This consecutive quarter decline in 2022 comes after the economy saw continued improvement throughout 2021. The ~~shape of the yield curve remained tight during the quarter as compared to prior quarters. The~~ 10‑year Treasury bond averaged ~~2.93%~~3.10% during Q2Q3 2022 compared to ~~1.95%~~2.93% in Q1Q2 2022, an increase of 9817 basis points. The 2‑year Treasury bond average rate increased ~~126~~66 basis points to ~~2.72%, resulting in a flattening of the yield curve.~~3.38%. Consequently, the spread between the 10‑year and the 2-year Treasury bonds decreased from ~~0.49%~~0.21% on average in Q1Q2 to ~~0.21%~~-0.28% in ~~Q2. This spread had been depressed~~Q3 resulting in ~~recent years, and compares to 2.42% during its most recent peak in Q4 of 2013. Steeper~~an inverted yield curve. Generally, steeper yield curves are favorable for portfolio mortgage lenders like ~~TrustCo. The~~TrustCo, and the table below illustrates the range of rate movements for both short term and longer term rates. The target Federal Funds rate increased 25 basis points in March 2022, 50 basis points in May 2022, ~~and~~ 75 basis points in June 2022, ~~to end the quarter at 1.50% to 1.75%, and then another increase of~~ 75 basis points in July 2022, 75 basis points in September 2022, and another 75 basis points in November 2022 to arrive at ~~2.25%~~3.75% to ~~2.50%~~4.00%, the highest rate since ~~2018.~~2007, with additional rate increases anticipated. Changes in interest rates could have an effect on interest-earning assets such as loans, investment securities, and cash balances, and also have an effect on interest-bearing liabilities primarily deposits and short-term borrowings. Additionally, unrealized gains and losses on available for sale securities, demand for products, ~~borrower’s~~borrowers ability to repay loans, and the number of delinquencies could also be effected. Spreads of most asset classes to the comparative treasury yield, including agency securities, corporates, municipals and mortgage-backed securities, ~~continue to be down as~~have widened compared to the levels seen ~~before the pandemic.~~in recent years. Accordingly, changes in rates and spreads continue to be ~~effected~~affected by the pandemic and global economic concerns.

Index

3 Month
Yield (%)

2 Year
Yield (%)

5 Year
Yield (%)

10 Year
Yield (%)

10 - 2 Year
Spread (%)

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

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

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

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

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

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

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

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

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

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

Q3/22	Beg of Q3	1.72	2.92	3.01	2.98	0.06
	Peak	3.40	4.30	4.21	3.97	0.04
	Trough	1.73	2.82	2.66	2.60	-0.51
	End of Q3	3.33	4.22	4.06	3.83	-0.39
	Average in Q3	2.75	3.38	3.23	3.10	-0.28

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

TrustCo believes that its long-term focus on traditional banking services and practices historically has enabled the Company to avoid significant impact from asset quality problems, and that the Company’s strong liquidity and solid capital positions have allowed the Company to continue to conduct business in a manner consistent with its past practice. Management believes that 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 during the 2007-2009 financial crisis. Nevertheless, the Company may experience increases in nonperforming loans (“NPLs”) relative to historical levels from time to time.

Index

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

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

Financial Overview

TrustCo recorded net income of ~~$17.9~~$19.4 million, or ~~$0.933~~$1.013 of diluted earnings per share, for the three months ended ~~June~~September 30, 2022, compared to net income of ~~$14.4~~$16.8 million, or ~~$0.748~~$0.871 of diluted earnings per share, in the same period in 2021. Return on average assets was ~~1.15%~~1.24% and ~~0.95%~~1.08%, respectively, for the three-months ended ~~June~~September 30, 2022 and 2021. Return on average equity was ~~12.08%~~12.78% and ~~10.05%~~11.40%, respectively, for the three-months ended ~~June~~September 30, 2022 and 2021.

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

An increase in income of $7.4 million from interest earning assets ~~of $2.1 million, as well as~~and a decrease in ~~the cost~~interest expense of $527 thousand from interest bearing liabilities, ~~of $806 thousand, resulted~~resulting in an increase in taxable equivalent net interest income in the ~~second~~third quarter of 2022 compared to the ~~second~~third quarter of 2021 of $7.9 million.

An increase of $2.9 ~~million. The cost of interest bearing liabilities decreased~~million in provision for credit losses on loans primarily as a result of ~~time deposits repricing over~~ the ~~last year while rates remained low before the recent increases by the Federal Reserve Board.~~

~~A decrease~~ongoing uncertainty surrounding economic conditions and credit risk metrics. An increase of ~~$491~~$200 thousand in ~~provision for credit losses~~unfunded commitments for the ~~second~~third quarter of 2022 compared to the ~~second~~third quarter ~~2021.~~2021 primarily as a result of an increase in unfunded loan commitments.

An increase of ~~$228 thousand~~$1.4 million in noninterest ~~income~~expense for the ~~second~~third quarter of 2022 compared to the ~~second~~third quarter ~~2021. The increase is~~2021, primarily ~~driven by~~as a result of an increase ~~of $172 thousand~~ in ~~fees from customers.~~

~~A decrease of $435 thousand in noninterest~~salaries and employee benefits, net occupancy expense, ~~for the second quarter of 2022 compared to the second quarter 2021.~~outsourced services, advertising expense and other expenses.

TrustCo recorded net income of ~~$35.0~~$54.3 million, or ~~$1.822~~$2.835 of diluted earnings per share, for the ~~six‑~~nine‑months ended ~~June~~September 30, 2022, compared to net income of ~~$28.5~~$45.3 million, or ~~$1.478~~$2.349 of diluted earnings per share, in the same period in 2021. Return on average assets was ~~1.13%~~1.17% and ~~0.96%~~1.00%, respectively, for the ~~six-months~~nine-months ended ~~June~~September 30, 2022 and 2021. Return on average equity was ~~11.84%~~12.16% and ~~10.03%~~10.50%, respectively, for the ~~six-months~~nine-months ended ~~June~~September 30, 2022 and 2021.

Index

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 and long‑term basis.

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

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

Interest rates have a significant impact on the operations and financial results of all financial services companies. One of the most important interest rates used to control national economic policy is the “Federal Funds” rate. This is the interest rate utilized within the banking system for overnight borrowings for institutions with the highest credit rating. Beginning in the second half of 2019, the Federal Reserve Board began lowering the rate in response to a slowing economy. During the first quarter of 2020 the rate was significantly decreased again to 0.00% to 0.25% as a result of the COVID-19 pandemic. The Federal Reserve Board increased the rate in March 2022, May 2022, June 2022, July 2022 and again in ~~June~~September 2022 to end the ~~second~~third quarter at ~~1.50%~~3.00% to ~~1.75%~~3.25% in order to ~~assist with~~address inflationary concerns, with additional rate increases anticipated.

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

Index

TrustCo’s principal loan products are residential real estate loans. As noted above, residential real estate loans and longer‑term investments are most affected by the changes in longer term market interest rates such as the 10-year Treasury. The 10‑year Treasury yield increased 980.17 basis points, on average, during the ~~second~~third quarter of 2022 compared to the ~~first~~second quarter of 2022 and increased ~~134~~1.78 basis points as compared to the ~~second~~third quarter of 2021.

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

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

For the ~~second~~third quarter of 2022, the net interest margin was ~~2.83%~~3.16%, up 1351 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 investments decreased by $247.8 million while the average yield increased 72209 basis points in the ~~second~~third quarter of 2022 compared to the same period in ~~2021 while the average balance remained consistent at $1.1 billion for both periods.~~2021. The increase in the average yield ~~is the~~was a result of ~~the~~ increases in the Federal Funds target rate during 2022 and was more than enough to offset the decrease in ~~2022 as mentioned above.~~the average balance of Federal Funds sold.

The average balance of securities available for sale ~~decreased~~increased by ~~$26.9~~$67.6 million ~~while~~and the average yield also increased 4176 basis points to ~~1.85%~~2.12%. The increase in the average yield was primarily a result of higher bond yields on ~~investments purchased during 2022. The average balance of held to maturity securities decreased by $3.3 million and~~purchases throughout the ~~average yield increased 26 basis points to 3.93% for the second quarter of 2022 compared~~year due to the ~~same period in 2021.~~changing interest rate environment.

~~Index~~

The average loan portfolio grew by ~~$196.2~~$213.5 million to ~~$4.50~~$4.59 billion and the average yield decreased 184 basis points to ~~3.52%~~3.57% in the ~~second~~third quarter of 2022 compared to the same period in 2021. The average yield decreased primarily as a result of lower loan origination rates ~~over the last year~~ while rates remained low before the recent increases by the Federal Reserve ~~Board.~~Board, as well as the timing of PPP loan origination fees.

Index

The average balance of interest bearing liabilities ~~increased $26.2~~decreased $76.0 million and the average rate paid decreased 74 basis points to ~~0.10%~~0.11% in the ~~second~~third quarter of 2022 compared to the same period in 2021. Prior to the recent interest rate increases, time deposits were repricing at lower rates which drove down the rate paid on interest bearing liabilities. As time deposits reprice to current market rates we expect an increase in the average paid on interest bearing liabilities.

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

The strategy on the funding side of the balance sheet was to offer competitive shorter term rates which allowed the Bank to ~~gain market share as well as retain our existing deposits.~~remain competitive in the markets we serve. This strategy drove deposit growth at a relatively low cost that ~~will~~management believes should sustain TrustCo’s strong liquidity position and continue to allow us to cross sell new relationships and take advantage of opportunities as they arise. A significant portion of the Bank’s time deposits repriced during the last year while interest rates remained low. However, the Bank continues to monitor the recent Federal Funds target rate increases and the effects it is having on deposit rates. Continued increases in rates by the Federal Reserve Board will more than likely cause an increase in rates on interest bearing liabilities.

Earning Assets

Total average interest earning assets increased from ~~$5.95~~$6.01 billion in the ~~second~~third quarter of 2021 to ~~$6.09~~$6.04 billion in the same period of 2022 with an average yield of ~~2.90%~~3.24% in the ~~second~~third quarter of 2022 and ~~2.83%~~2.77% in the ~~second~~third quarter of 2021. The mix of assets ~~continued to maintain a higher proportion of~~invested in Federal Funds sold and other short-term investments ~~from~~decreased while loans and securities available for sale ~~as well as from increases in deposits.~~increased over the prior year period. Interest income on average earning assets increased from ~~$42.1~~$41.7 million in the ~~second~~third quarter of 2021 to ~~$44.2~~$49.0 million in the ~~second~~third quarter of 2022, on a tax equivalent basis. This increase was primarily driven by the higher interest rates on Federal Funds sold and other short-term investments and securities available for sale, which resulted from the increases in the Federal Funds target rate ~~in 2022.~~throughout 2022, and also from interest income on loans due to increased volume of originations year over year.

Loans

The average balance of loans was ~~$4.50~~$4.59 billion in the ~~second~~third quarter of 2022 and ~~$4.31~~$4.37 billion in the comparable period in ~~2021. The~~2021, and the yield on loans was down 184 basis points to ~~3.52%~~3.57%. Interest income on loans was ~~$39.6~~$40.9 million in the ~~second~~third quarter of 2022 ~~down $204 thousand~~up $1.4 million from the same period in 2021. As mentioned above, the average yield decreased primarily as a result of lower loan origination rates ~~over the last year~~ while interest rates remained low before the recent increases by the Federal Reserve ~~Board.~~Board, as well as the timing of PPP loan origination fees.

Index

Compared to the ~~second~~third quarter of 2021, the average balance of residential mortgage loans, home equity lines of credit, and installment loans increased while commercial loans decreased. The average balance of residential mortgage loans was ~~$4.05~~$4.11 billion in the ~~second~~third quarter of 2022 compared to ~~$3.85~~$3.92 billion in 2021, an increase of ~~5.3%~~4.7%. The average yield on residential mortgage loans decreased by 198 basis points to ~~3.43%~~3.44% in the ~~second~~third quarter of 2022 compared to 2021.

~~Index~~

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

Commercial loans, which consist primarily of loans secured by commercial real estate, decreased ~~$15.9~~$3.3 million to an average balance of ~~$199.0~~$207.5 million in the ~~second~~third quarter of 2022 compared to the same period in the prior year, primarily as a result of the forgiveness of PPP loans. The average yield on this portfolio was down ~~only 2~~24 basis points to ~~4.83%~~4.79% compared to the prior year ~~period.~~period primarily as a result of less origination fees recognized on the forgiven PPP loans. The Company remains selective in underwriting commercial loans in recent periods as the apparent risk/reward balance has been less favorable in many cases.

The average yield on home equity credit lines ~~decreased 4~~increased 70 basis points to ~~3.74%~~4.39% during the ~~second~~third quarter of 2022 compared to the year earlier period. The average balances of home equity credit lines increased ~~3.9%~~13.1% to ~~$243.6~~$261.6 million in the ~~second~~third quarter of 2022 as compared to the prior year.

Securities Available for Sale

The average balance of the securities available for sale portfolio for the ~~second~~third quarter of 2022 was ~~$470.0~~$520.7 million compared to ~~$496.9~~$453.1 million for the comparable period in 2021. The ~~decrease in the~~increasing balance reflects ~~routine~~new investment purchases offset by paydowns, ~~and~~ calls and ~~maturities, offset by new investment purchases.~~maturities. The average yield was ~~1.85%~~2.12% for the ~~second~~third quarter of 2022 compared to ~~1.44%~~1.36% for the ~~second~~third quarter of 2021. ~~This~~The increase in average yield is ~~primarily~~ a result of higher yields on ~~investment purchases throughout~~bonds purchased in 2022 ~~due to~~as a result of the ~~increase in~~current interest ~~rates.~~rate environment. This portfolio is primarily comprised of agency, mortgage backed securities and collateral mortgage ~~obligations~~obligation bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank and Freddie Mac), Small Business Administration participation certificates, corporate bonds and municipal bonds. These securities are recorded at fair value with any adjustment in fair value included in accumulated other comprehensive income (loss) ~~income,~~, net of tax.

The net unrealized loss in the available for sale securities portfolio was ~~$28.4~~$49.4 million as of ~~June~~September 30, 2022 compared to a net unrealized loss of $4 thousand as of December 31, 2021. The increase in the net unrealized losses in the portfolio is the result of changes in market interest rate levels.

Index

Held to Maturity Securities

The average balance of held to maturity securities was ~~$8.9~~$8.3 million for the ~~second~~third quarter of 2022 compared to ~~$12.2~~$11.2 million in the ~~second~~third quarter of 2021. The decrease in balances reflects routine paydowns and calls. No new securities were added to this portfolio during the period. The average yield was ~~3.93%~~4.08% for the ~~second~~third quarter of 2022 ~~compared to 3.67%~~up from 3.72% for the year earlier period. The increase in the yield is primarily a result of an increase in average lives as well as the timing of mortgage-backed payments. TrustCo expects to hold the securities in this portfolio until they mature or are called.

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

Federal Funds Sold and Other Short-term Investments

The ~~2022 and 2021 second quarter~~ average balance of Federal Funds sold and other short‑term investments was ~~$1.1~~$918.9 million for the third quarter of 2022 compared to $1.2 billion ~~for both periods.~~in the third quarter of 2022. The yield was ~~0.82%~~2.25% for the ~~second~~third quarter of 2022 and ~~0.10%~~0.16% for the comparable period in 2021. Interest income from this portfolio increased ~~$2.0~~$4.8 million from ~~$286~~$470 thousand in 2021 to ~~$2.3~~$5.2 million in 2022. While the average balances ~~were consistent~~decreased year over year, the increase in the federal funds target rate ~~in March, May, and June of~~throughout 2022 resulted in an increase in interest income over the same period in the prior year.

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

Funding Opportunities

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

Total average interest bearing deposit accounts (which includes interest bearing checking, money market accounts, savings and time deposits) increased ~~$62.3~~$26.1 million to ~~$4.52~~$4.50 billion for the ~~second~~third quarter of 2022 versus the ~~second~~third quarter in the prior year, and the average rate paid decreased from ~~0.15%~~0.14% for 2021 to ~~0.08%~~0.10% for 2022. Total interest expense on these deposits decreased from ~~$1.7~~$1.5 million to ~~$951 thousand~~$1.1 million in the ~~second~~third quarter of 2022 compared to the year earlier period. From the ~~second~~third quarter of 2021 to the ~~second~~third quarter of 2022, interest bearing demand account average balances were up ~~5.3%~~3.6%, certificates of deposit average balances were down ~~19.2%~~14.8%, non-interest demand average balances were up ~~12.1%~~10.1%, average savings balances increased ~~13.2%~~10.4% and money market balances were up ~~6.7%~~0.8%. Our growth in deposits came at relatively low cost and continues to be offset by higher earnings on loan yields and returns in the investment portfolios.

Index

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

(dollars in thousands)

Under 1 year	$	831,722	$	786,544
1 to 2 years		71,177		71,291
2 to 3 years		6,045		5,618
3 to 4 years		1,001		936
4 to 5 years		89,659		89,833
Over 5 years		133		130
	$	999,737	$	954,352

Average short-term borrowings for the ~~second~~third quarter 2022 were ~~$197.3~~$138.1 million in 2022 compared to ~~$233.4~~$240.2 million in 2021. The decrease in the average balance from the prior year period is primarily a result of a shift of funds into time deposits. The average rate decreased ~~slightly~~ during this time period from ~~0.39%~~0.38% in 2021 to ~~0.36%~~0.35% in 2022. The short-term borrowings of the Company are cash management accounts, which represent retail accounts with customers for which the Bank has pledged certain assets as collateral.

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

Net Interest Income

Taxable equivalent net interest income increased by ~~$2.9~~$7.9 million to ~~$43.1~~$47.8 million in the ~~second~~third quarter of 2022 compared to the same period in 2021. The net interest spread was up 1451 basis ~~points~~point to ~~2.80%~~3.13% in the ~~second~~third quarter of 2022 compared to the same period in 2021. As previously noted, the net interest margin was also up 1351 basis points to ~~2.83%~~3.16% for the ~~second~~third quarter of 2022 compared to the same period in 2021.

Taxable equivalent net interest income increased by ~~$2.9~~$10.8 million to ~~$83.2~~$130.9 million in the first ~~six-months~~nine-months of 2022 compared to the same period in 2021. The net interest spread was up 219 basis points to ~~2.72%~~2.86% in the first ~~six-months~~nine-months of 2022 compared to the same period in 2021. Net interest margin was ~~consistent at 2.74%~~up 17 basis points to 2.88% for the first ~~six‑~~nine‑months of ~~both~~ 2022 ~~and~~compared to the same period in 2021.

Nonperforming Assets

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

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

Nonperforming loans and foreclosed real estate: Total NPLs and non-accrual loans were $18.7 million at ~~June~~September 30, 2022, compared to $18.8 million at December 31, 2021 and ~~$20.8~~$20.2 million at ~~June 30, 2021. There were also $18.7 million of non-accrual loans at June 30, 2022 compared to $18.7 million at December 31, 2021 and $20.8 million at June~~September 30, 2021. There were no loans at ~~June~~September 30, 2022 and 2021 and December 31, 2021 that were past due 90 days or more and still accruing interest.

At ~~June~~September 30, 2022, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of $18.7 million at ~~June~~September 30, 2022, ~~$18.5~~$18.4 million were residential real estate loans, ~~$203~~$179 thousand were commercial loans and mortgages and ~~$45~~$94 thousand were installment loans, compared to $18.6 million, $112 thousand and $37 thousand, respectively, at December 31, 2021.

A significant percentage of nonperforming loans are residential real estate loans, which are historically lower-risk than most other types of loans. Net recoveries were ~~$119~~$164 thousand on residential real estate loans (including home equity lines of credit) for the ~~second~~third quarter of 2022 compared to net recoveries ~~$137~~of $39 thousand for the ~~second~~third quarter of 2021. Management believes that these loans have been appropriately written down where required.

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

The Company originates loans throughout its branch franchise area. At ~~June~~September 30, 2022, ~~69.4%~~68.8% of its gross loan portfolio balances were in New York State and the immediately surrounding areas (including New Jersey, Vermont and Massachusetts), and ~~30.6%~~31.2% were in Florida. Those figures compare to 70.6% and 29.4%, respectively, at December 31, 2021.

Economic conditions vary widely by geographic location. As a percentage of the total nonperforming loans as of ~~June~~September 30, 2022, ~~11.7%~~11.6% were to Florida borrowers, compared to ~~88.3%~~88.4% to borrowers in New York and surrounding areas. For the three months ended ~~June~~September 30, 2022, New York and surrounding areas experienced net recoveries of approximately ~~$107~~$130 thousand and ~~there were none in~~ Florida experienced net recoveries of $2 thousand for the ~~second~~third quarter of 2022.

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 of principal and interest. Also as of ~~June~~September 30, 2022, there were no other loans classified for regulatory purposes that management reasonably expects will materially impact future operating results, liquidity, or capital resources.

~~Index~~

TrustCo has identified ~~nonaccrual~~non-accrual commercial and commercial real estate loans, all loans restructured under a TDR, and residential non-accrual loans over 180 days as individually evaluated loans. There were ~~$319~~$294 thousand of commercial mortgages and commercial loans classified as individually evaluated as of ~~June~~September 30, 2022 compared to $232 thousand classified as impaired at December 31, 2021. There were ~~$26.7~~$26.2 million of individually evaluated residential loans at ~~June~~September 30, 2022 compared to $18.3 million classified as impaired at December 31, 2021.

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

At ~~June~~September 30, 2022 there was ~~$644~~$682 thousand of foreclosed real estate compared to $362 thousand at December 31, 2021.

In response to Hurricane Ian, the Bank continues to assess the impact to the counties in Florida in which we do business. We are currently monitoring all customer contact in the affected counties and to date have not identified circumstances that would have a material adverse impact on the performance of our loan portfolio.

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

In the ~~second~~third quarter of 2022, the Company recorded a ~~credit to~~ provision for credit losses of ~~$491~~$300 thousand, which includes a ~~credit to~~ provision for credit losses on loans of ~~$1.0 million~~$100 thousand as a result of ~~improving unemployment~~continued growth growth in the loan portfolio partially offset by a sustained low level of NPL’s and ~~housing price forecasts, offset by~~chargeoffs, and a provision for credit losses on unfunded commitments of ~~$509~~$200 thousand as a result of a corresponding increase in unfunded loans.

During the most recent quarter, the Federal Reserve Bank increased the target ~~Federal Funds~~federal funds rate on two occasions by 75 basis points ~~the third hike~~each, and then another 75 basis points in November 2022, resulting in six interest rate hikes this year ~~and the largest since 1994.~~totaling 375 basis points. Rising inflation weighs on consumers’ purchasing power by slowing spending and driving monetary tightening. Inflation has reached a forty-year high, and labor and supply chain challenges have been heightened by the global impacts of the Russian invasion of Ukraine. Management has taken into consideration the possible effects of these changes qualitatively within the reserves.

Index

The Company evaluates several external forecasts in choosing the forecast element for the economic components of the allowance for credit losses on loans. The Company selected the stagflation forecast for both January 1, 2022 and ~~June~~September 30, 2022 for economic modeling.

The following changes in forecasts from ~~March~~June to ~~June~~September impacted the reserves:

unemployment rates declining ~~16%~~2% for both New York and ~~28% for~~ Florida,

an increase in consumer price indices (“CPI”) of 2%0.2% for ~~both NY~~New York and 3% for Florida,

~~a decrease~~an increase in Gross Metro Product (“GMP”) of 4%2% for New York,

an increase in Gross Metro Product (“GMP”) of 1%4% for Florida.

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

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

(dollars in thousands)

As of
June 30, 2022

As of
December 31, 2021

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

Commercial $ 2,051 3.97 %
$
2,942

4.08
%
Real estate - construction 326 0.67 %
375

0.84
%
Real estate mortgage - 1 to 4 family 38,785 89.54 %
37,650

89.67
%
Home equity lines of credit 3,992 5.59 %
2,857

5.20
%
Installment Loans 131 0.23 %
443

0.21
%
$ 45,285 100.00 %
$
44,267

100.00
%

	As of					As of
(dollars in thousands)	September 30, 2022					December 31, 2021
			Percent of					Percent of
			Loans to					Loans to
	Amount		Total Loans			Amount		Total Loans
Commercial	$	2,169		4.20	%	$	2,942		4.08	%
Real estate - construction		393		0.79	%		375		0.84	%
Real estate mortgage - 1 to 4 family		38,649		88.96	%		37,650		89.67	%
Home equity lines of credit		4,162		5.82	%		2,857		5.20	%
Installment Loans		144		0.23	%		443		0.21	%
	$	45,517		100.00	%	$	44,267		100.00	%

At ~~June~~September 30, 2022, the allowance for ~~credit~~loan losses ~~on loans~~ was ~~$45.3~~$45.5 million, compared to ~~$50.2~~$47.4 million at ~~June~~September 30, 2021 and $44.3 million at December 31, 2021. The allowance represents ~~1.00%~~0.98% of the loan portfolio ~~at both June~~as of September 30, 2022, ~~and~~1.00% at December 31, 2021, and ~~1.15%~~1.08% at ~~June~~September 30, 2021.

During the ~~second~~third quarter of 2022, there were ~~$4 thousand of~~no commercial loan chargeoffs, ~~$12~~$13 thousand of residential loan chargeoffs, and ~~$14~~$34 thousand of consumer loan chargeoffs, compared ~~with no~~to $30 thousand of commercial loan chargeoffs, ~~$20~~$73 thousand of gross residential mortgage chargeoffs, and $1$17 thousand of consumer loan chargeoffs in the ~~second~~third quarter of 2021. During the ~~second~~third quarter of 2022 there were ~~$4 thousand of~~no commercial loan recoveries, ~~$131~~$177 thousand of residential mortgage recoveries, and $2 thousand for consumer loan recoveries, compared to no commercial loan recoveries, ~~$157~~$112 thousand of residential mortgage recoveries, and ~~$28~~$3 thousand of consumer loan recoveries in the ~~second~~third quarter of 2021.

Index

Liquidity and Interest Rate Sensitivity

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

~~Index~~

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

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

As of ~~June~~September 30, 2022	Estimated Percentage of Fair value of Capital to Fair value of Assets
+400 BP	~~28.90~~	30.90 %
+300 BP	~~28.40~~	30.60
+200 BP	~~29.10~~	31.50
+100 BP	~~28.90~~	31.60
Current rates	~~27.60~~	30.60
-100 BP	~~25.00~~	28.50
-200 BP	~~21.50~~	25.30
-300 BP		21.60

Noninterest Income

Total noninterest income for the ~~second~~third quarter of 2022 was ~~$4.9~~$4.4 million compared to ~~$4.7~~$4.3 million ~~for the same period~~ in the ~~prior year.~~third quarter of 2021. Financial ~~services~~Services income was ~~$2.0~~down $123 thousand to $1.4 million in ~~both~~ the ~~second~~third quarter of 2022 ~~and~~as compared to the year-ago period, primarily as a result of lower market values of assets under management. The fair value of assets under management was $864.8 million at September 30, 2022, $1.10 billion as of December 31, 2021, and ~~fees~~$1.05 billion at September 30, 2021. Fees for services to customers were up ~~$172~~$174 thousand over the same period in the prior ~~year. The fair value~~year, primarily as a result of ~~assets under management was $910 million at June 30, 2022, and $1.1 billion as of both December 31, 2021 and June 30, 2021.~~more interchange income.

Index

For the ~~six months~~nine-months ended ~~June~~September 30, 2022 total noninterest income was ~~$10.1~~$14.5 million, up ~~$983 thousand~~$1.1 million compared to the prior year period. The increase is primarily the result of more interchange income and a gain on the sale of fixed assets, partially offset by ~~a decrease in~~less financial services income.

~~Index~~

Noninterest Expenses

Total noninterest expenses were ~~$25.0~~$26.1 million for the three-months ended ~~June~~September 30, 2022, compared to ~~$25.4~~$24.7 million for the three-months ended ~~June~~September 30, 2021. Significant changes included a ~~$939~~$225 thousand increase in salaries and employee benefits, a $224 thousand increase in net occupancy expense, a $313 thousand increase in outsourced services, a $198 increase in advertising expense, and a $572 thousand increase in other expenses, partially offset by a $96 thousand decrease in ~~salaries~~equipment expense, and ~~employment benefits,~~ a ~~$130~~$108 thousand decrease in professional ~~services, and a $160 thousand decrease in advertising expense, partially offset by an increase of $331 thousand in outsourced services and a $309 thousand increase in other expense.~~services. Full time equivalent headcount was ~~769~~743 as of ~~June~~September 30, 2021, 759 as of December 31, 2021, and ~~793~~753 as of ~~June~~September 30, 2022. Changes in headcount represent normal fluctuations.

Total noninterest expenses were ~~$47.8~~$73.9 million for the ~~six-months~~nine-months ended ~~June~~September 30, 2022, compared to ~~$50.8~~$75.5 million for the ~~six-months~~nine-months ended ~~June~~September 30, 2021. Significant changes included a decrease of ~~$4.1~~$3.9 million in salaries and employee benefits primarily as a result of a $2 million favorable true-up to the incentive compensation accrual upon payout in the first quarter of 2022, as well as decreases in various other employee benefit plan expenses. This was partially offset by ana $674 thousand increase ~~of $361 thousand~~ in outsourced services, a $301 thousand increase in advertising expense and ana $1.4 million increase in other ~~expenses of $820 thousand.~~expense.

Income Taxes

In the ~~second~~third quarter of 2022, TrustCo recognized income tax expense of ~~$5.6~~$6.4 million compared to ~~$4.9~~$5.5 million for the ~~second~~third quarter of 2021. The effective tax rates were ~~23.8% and 25.5%~~24.8% for both the ~~second~~third quarters of 2022 and ~~2021, respectively.~~2021. For the first ~~six-months,~~nine-months, income taxes were ~~$11.2~~$17.6 million and ~~$9.7~~$15.2 million in 2022 and 2021, respectively. The effective tax ~~rates were 24.3%~~rate was 24.5% and ~~25.4% in~~25.2% for 2022 and 2021, respectively.

Capital Resources

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

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

Total shareholders’ equity at ~~June~~September 30, 2022 was ~~$594.6~~$589.0 million compared to ~~$578.6~~$586.7 million at ~~June~~September 30, 2021. TrustCo declared a dividend of $0.35 per share in the ~~second~~third quarter of 2022. This results in a dividend payout ratio of ~~37.46%~~34.57% based on ~~second~~third quarter 2022 earnings of ~~$17.9~~$19.4 million.

Index

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

(Bank Only)						Well Capitalized⁽¹⁾			Minimum for Capital Adequacy plus Capital Conservation Buffer⁽¹⁾⁽²⁾			As of September 30, 2022					Well			Minimum for Capital Adequacy plus Capital Conservation

	As of June 30, 2022
(dollars in thousands)	Amount		Ratio									Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	585,724		9.390	%		5.000	%		4.000	%	$	597,092		9.648	%		5.000	%		4.000	%
Common equity tier 1 capital		585,724		18.339			6.500			7.000			597,092		18.333			6.500			7.000
Tier 1 risk-based capital		585,724		18.339			8.000			8.500			597,092		18.333			8.000			8.500
Total risk-based capital		625,754		19.592			10.000			10.500			637,906		19.586			10.000			10.500

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

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

As of June 30, 2022
Minimum for
Capital Adequacy plus
Capital Conservation

(dollars in thousands)
Amount Ratio
Buffer⁽¹⁾⁽²⁾

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

(Consolidated)

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

Tier 1 leverage ratio	$	613,661		9.913	%		4.000	%
Common equity tier 1 capital		613,661		18.837			7.000
Tier 1 risk-based capital		613,661		18.837			8.500
Total risk-based capital		654,486		20.090			10.500

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

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

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

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

In addition, at ~~June~~September 30, 2022, the consolidated equity to total assets ratio was ~~9.55%~~9.69%, compared to 9.70% at December 31, 2021 and ~~9.45%~~9.56% at ~~June~~September 30, 2021.

Index

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

Share Repurchase Program

On March 9, 2022 the Company’s Board of Directors authorized, and the Company announced, another share repurchase program of up to 200,000 shares, or approximately 1% of its currently outstanding common stock. During the three months ended ~~June~~September 30, 2022, the Company repurchased a total of 7575,100 thousand shares at an average price per share of ~~$31.47~~$33.37, for a total of ~~$2.4~~$2.5 million, under its Board authorized share repurchase program.

Index

Critical Accounting Policies and Estimates

~~Pursuant~~Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to ~~Securities~~make estimates and ~~Exchange Commission (“SEC”) guidance, management~~assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, income taxes and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

During the ~~Company is encouraged~~nine months ended September30, 2022, there were no significant changes to ~~evaluate and disclose those~~our critical accounting policies ~~judged to be critical policies ‑ those most important to~~and estimates as described in the ~~portrayal of~~financial statements contained in the ~~Company’s financial condition and results, and that require management’s most difficult subjective or complex judgments.~~2021 Form 10-K other than what is set forth immediately below.

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

Index

TrustCo Bank Corp NY

~~Management’s~~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), net of tax, in the available for sale portfolio of $($~~19.5)~~25.4) million in 2022 and ~~$3.8~~$3.9 million in 2021. The subtotals contained in the following table are the arithmetic totals of the items contained in that category. Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and rate) based on the percentage relationship of such variances to each other.

(dollars in thousands)

Three months ended
June 30, 2022

Three months ended
June 30, 2021

Assets
Average
Balance

Interest

Average
Rate

Average
Balance

Interest

Average
Rate

Change in
Interest
Income/
Expense

Variance
Balance
Change

Variance
Rate
Change

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

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

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

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

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

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

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

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

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

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

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

Liabilities and shareholders’ equity

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

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

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

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

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

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

Net interest spread 2.80 % 2.66 %

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

Tax equivalent adjustment - -

Net interest income 43,060 40,122

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

	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	$	104,633		$	479		1.83	%	$	68,505		$	91			0.53	%	$	388			68			320
Mortgage backed securities and collateralized mortgage obligations-residential		302,886			1,617		2.13	%		300,765			1,038			1.38	%		579			7			572
State and political subdivisions		41			1		8.12	%		48			2			6.66	%		(1	)		(1	)		-
Corporate bonds		86,965			526		2.42	%		48,543			220			1.81	%		306			215			91
Small Business Administration-guaranteed participation securities		25,533			133		2.08	%		34,578			181			2.09	%		(48	)		(47	)		(1	)
Other		686			3		1.75	%		686			5			2.92	%		(2	)		-			(2	)

Total securities available for sale		520,744			2,759		2.12	%		453,125			1,537			1.36	%		1,222			242			980

Federal funds sold and other short-term Investments		918,909			5,221		2.25	%		1,166,679			470			0.16	%		4,751			(704	)		5,455

Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential		8,306			85		4.08	%		11,168			104			3.72	%		(19	)		(72	)		53

Total held to maturity securities		8,306			85		4.08	%		11,168			104			3.72	%		(19	)		(72	)		53

Federal Reserve Bank and Federal Home Loan Bank stock		5,797			80		5.52	%		5,604			64			4.57	%		16			2			14

Commercial loans		207,477			2,484		4.79	%		210,825			2,649			5.03	%		(165	)		(42	)		(123	)
Residential mortgage loans		4,105,859			35,342		3.44	%		3,920,903			34,532			3.52	%		810			4,773			(3,963	)
Home equity lines of credit		261,575			2,896		4.39	%		231,269			2,152			3.69	%		744			304			440
Installment loans		10,213			174		6.75	%		8,669			155			7.10	%		19			63			(44	)

Loans, net of unearned income		4,585,124			40,896		3.57	%		4,371,666			39,488			3.61	%		1,408			5,098			(3,690	)

Total interest earning assets		6,038,880			49,041		3.24	%		6,008,242			41,663			2.77	%		7,378			4,566			2,812

Allowance for credit losses on loans		(45,519	)							(50,160	)
Cash & non-interest earning assets		188,672								195,902

Total assets	$	6,182,033							$	6,153,984

Liabilities and shareholders' equity

Deposits:
Interest bearing checking accounts		1,195,370			43		0.01	%	$	1,153,812		$	38			0.01	%		5			1			4
Money market accounts		744,868			237		0.13	%		738,662			202			0.11	%		35			2			33
Savings		1,579,513			200		0.05	%		1,430,558			154			0.04	%		46			17			29
Time deposits		981,704			646		0.26	%		1,152,298			1,149			0.40	%		(503	)		(152	)		(351	)

Total interest bearing deposits		4,501,455			1,126		0.10	%		4,475,330			1,543			0.14	%		(417	)		(132	)		(285	)
Short-term borrowings		138,105			122		0.35	%		240,183			232			0.38	%		(110	)		(90	)		(20	)

Total interest bearing liabilities		4,639,560			1,248		0.11	%		4,715,513			1,775			0.15	%		(527	)		(222	)		(305	)

Demand deposits		859,122								780,163
Other liabilities		82,290								75,116
Shareholders' equity		601,061								583,192

Total liabilities and shareholders' equity	$	6,182,033							$	6,153,984

Net interest income, tax equivalent					47,793								39,888					$	7,905			4,788			3,117

Net interest spread							3.13	%								2.62	%

Net interest margin (net interest income to total interest earning assets)							3.16	%								2.65	%

Tax equivalent adjustment					-								(1	)

Net interest income				$	47,793							$	39,887

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), net of tax, in the available for sale portfolio of ~~$(14.2)~~$(17.9) million in 2022 and ~~$4.2~~$4.1 million in 2021. The subtotals contained in the following table are the arithmetic totals of the items contained in that category. Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and rate) based on the percentage relationship of such variances to each other.

(dollars in thousands)	Nine months ended September 30, 2022								Nine months ended September 30, 2021

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

Securities available for sale:
U. S. government sponsored enterprises	$	79,423		$	712		1.19	%	$	65,103		$	238			0.49	$	474			63			411
Mortgage backed securities and collateralized mortgage obligations-residential		282,423			4,071		1.92	%		318,472			3,442			1.44		629			(615	)		1,244
State and political subdivisions		41			2		6.73	%		49			3			8.16		(1	)		-			(1	)
Corporate bonds		75,957			1,281		2.25	%		56,245			859			2.04		422			325			97
Small Business Administration-guaranteed participation securities		27,623			427		2.06	%		36,981			580			2.09		(153	)		(145	)		(8	)
Other		686			7		2.04	%		686			16			3.11		(9	)		-			(9	)

Total securities available for sale		466,153			6,500		2.79	%		477,536			5,138			1.43		1,362			(372	)		1,734

Federal funds sold and other short-term Investments		1,068,217			8,046		1.01	%		1,108,018			1,026			0.12		7,020			(63	)		7,083

Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential		8,897			262		3.93	%		12,199			338			3.70		(76	)		(108	)		32

Total held to maturity securities		8,897			262		3.93	%		12,199			338			3.70		(76	)		(108	)		32

Federal Reserve Bank and Federal Home Loan Bank stock		5,734			207		7.22	%		5,570			198			4.74		9			-			9

Commercial loans		200,525			7,412		4.93	%		212,832			8,203			5.14		(791	)		(465	)		(326	)
Residential mortgage loans		4,054,657			104,310		3.43	%		3,852,960			104,219			3.61		91			7,109			(7,018	)
Home equity lines of credit		246,026			7,289		3.96	%		234,682			6,622			3.77		667			329			338
Installment loans		9,507			492		6.91	%		8,608			469			7.28		23			58			(35	)

Loans, net of unearned income		4,510,715			119,503		3.53	%		4,309,082			119,513			3.70		(10	)		7,031			(7,041	)

Total interest earning assets		6,059,716			134,518		2.96	%		5,912,405			126,213			2.85		8,305			6,488			1,817

Allowance for credit losses on loans		(46,225	)							(50,101	)
Cash & non-interest earning assets		196,333								196,876

Total assets	$	6,209,824							$	6,059,180

Liabilities and shareholders' equity

Deposits:
Interest bearing checking accounts	$	1,199,154			129		0.01	%	$	1,129,480			136			0.02		(7	)		18			(25	)
Money market accounts		771,301			661		0.11	%		731,171			721			0.13		(60	)		65			(125	)
Savings		1,557,503			519		0.04	%		1,376,494			475			0.05		44			106			(62	)
Time deposits		971,539			1,728		0.24	%		1,203,708			4,076			0.45		(2,348	)		(683	)		(1,665	)

Total interest bearing deposits		4,499,497			3,037		0.09	%		4,440,853			5,408			0.16		(2,371	)		(494	)		(1,877	)
Short-term borrowings		194,228			532		0.37	%		232,532			688			0.40		(156	)		(112	)		(44	)

Total interest bearing liabilities		4,693,725			3,569		0.10	%		4,673,385			6,096			0.17		(2,527	)		(606	)		(1,921	)

Demand deposits		836,953								735,495
Other liabilities		81,780								73,689
Shareholders' equity		597,366								576,611

Total liabilities and shareholders' equity	$	6,209,824							$	6,059,180

Net interest income , tax equivalent					130,949								120,117				$	10,832			7,094			3,738

Net interest spread							2.86	%								2.67

Net interest margin (net interest income to total interest earning assets)							2.88	%								2.71

Tax equivalent adjustment					-								(1	)

Net interest income				$	130,949							$	120,116

(dollars in thousands)

Six months ended
June 30, 2022

Six months ended
June 30, 2021

Assets

Average
Balance
Interest
Average
Rate

Average
Balance
Interest
Average
Rate

Change in
Interest
Income/
Expense

Variance
Balance
Change

Variance
Rate
Change

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

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

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

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

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

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

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

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

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

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

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

Liabilities and shareholders’ equity

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

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

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

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

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

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

Net interest spread 2.72 % 2.70 %

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

Tax equivalent adjustment - -

Net interest income 83,156 80,229

Index

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

The information presented in the "Liquidity and Interest Rate Sensitivity" section of Part I, Item 2 of this Quarterly Report on Form 10-Q is incorporated herein by reference.

As detailed in the Annual Report to Shareholders as of December 31, 2021, the Company is subject to interest rate risk as its principal market risk. As noted in the Management’s Discussion and Analysis for the three-month and ~~six-month~~nine-month month periods ended ~~June~~September 30, 2022 and 2021, the Company continues to respond to changes in interest rates in such a way that positions the Company to meet short term earning goals and also allows the Company to respond to changes in interest rates in the future. Consequently, for the ~~second~~third quarter of ~~both~~ 2022, ~~and 2021,~~ the Company had an average balance of Federal Funds sold and other short-term investments of ~~$1.1 billion.~~$918.9 million compared to $1.2 billion in the third quarter of 2021. As investment opportunities present themselves, management plans to invest funds from the Federal Funds sold and other short-term investment portfolio into the securities available for sale, securities held to maturity and loan portfolios. TrustCo does not engage in activities involving interest rate swaps, forward placement contracts, or any other instruments commonly referred to as “derivatives.” Additional disclosure of interest rate risk can be found under “Liquidity and Interest Rate Sensitivity” and “Asset/Liability Management” in the Management’s Discussion and Analysis section of this document.

Item 4.

Controls and Procedures

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

The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the ~~Securities~~ Exchange ~~Act of 1934 (“Exchange Act”))~~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 Company’s disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Further, no evaluation of a cost-effective system of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.

Index

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

~~Index~~

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

None.

Item 1A.

Risk Factors

In light of the evolving global economic conditions and geopolitical matters, as well as volatility in financial markets, TrustCo (and collectively with the Bank, “we,” “us,” and “our”) have updatedThere were no material changes to the risk factors ~~affecting our business since those presented~~previously disclosed in ~~our~~the Company’s Annual Report on Form 10-K ~~Part I, Item 1A,~~ for the ~~fiscal~~ year ended December 31, 2021 ~~(the “Annual Report”) filed with the Securities~~ and ~~Exchange Commission on February 25, 2022. The following risk factor should be read in conjunction with~~ the risk factors ~~set forth~~contained in ~~the Annual Report.~~

~~Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a material adverse effect on our results~~“Risk Factors” within Item 1A of ~~operations and financial condition.~~

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

Actions taken by the Federal Reserve Board, including changes in its target funds rate, balance sheet management and lending facilities are beyond our control and difficult to predict. These actions can affect interest rates and the value of financial instruments and other assets and liabilities and can impact our borrowers. Sudden changes in monetary policy, for example, in response to high inflation, could lead to financial market volatility, increases in market interest rates and a continued flattening or inversion of the yield curve. Higher inflation, or volatility and uncertainty related to inflation, could reduce demand for our products, adversely affect the creditworthinessPart II of our ~~borrowers or result in lower values~~Quarterly Report on Form 10-Q for ~~our investment securities and other interest-earning assets.~~the quarter ended June 30, 2022, which are incorporated herein by reference.

~~Index~~

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Program

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

Issuer Purchases of Common Shares
Period Total numbers of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs (1)
April 1, 2022 through April 30, 2022

25,000

$
31.42

25,000

156,886

May 1, 2022 through May 31, 2022

50,000

31.49

50,000

106,886

June 1, 2022 through June 30, 2022

-

-

-

106,886

Total

75,000

$
31.47

75,000

106,886

Period	Total Numbers of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs (1)
July 1, 2022 through July 31, 2022		-	$	-		-		106,886
August 1, 2022 through August 31, 2022		-		-		-		106,886
September 1, 2022 through September 30, 2022		75,100		33.37		75,100		32,786
Total		75,100	$	33.37		75,100		32,786

(1)

On March 9, 2022 the Company’s Board of Directors authorized another share repurchase program of up to 200,000 shares, or approximately 1% of its currently outstanding common stock. During the three months ended ~~June~~September 30, 2022, the Company repurchased a total of ~~75 thousand~~75,100 shares at an average price per share of ~~$31.47~~$33.37, for a total of ~~$2.4~~$2.5 million under its Board authorized share repurchase program.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

~~None.~~71

Index

Item 5.

Other Information

The Company’s board of directors adopted the amended and restated Executive Medical Reimbursement Plan on May 17, 2022 (the “Plan”). The Plan, in which all of the Company’s named executive officers participate, is designed to provide for the reimbursement of medical, hospitalization and dental expenses that exceed the deductible or co-payment limits under the Company’s general medical insurance plans. A copy of the Plan is filed herewith as Exhibit 10.1.None.

~~Index~~

Item 6.

Exhibits

Reg S-K (Item 601)

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

~~10.1~~3(a)	Amended and Restated ~~Executive Medical Reimbursement Plan~~Certificate of Incorporation of TrustCo Bank Corp NY (incorporated by reference to Exhibit 3.1 to TrustCo Bank Corp NY's Quarterly Report on Form 10-Q, filed August 5, 2021).

3(b)	Amended and Restated Bylaws of TrustCo Bank Corp NY, dated May 23, 2019 (incorporated by reference to Exhibit 3.2 to TrustCo Bank Corp NY's Quarterly Report on Form 10-Q, filed August 8, 2019).

15	Crowe LLP Letter Regarding Unaudited Interim Financial Information

31(a)	Rule ~~13a-15(e)~~13a-14(a)/~~15d-15(e)~~15d-14(a) Certification of Robert J. McCormick, principal executive officer.

31(b)	Rule ~~13a-15(e)~~13a-14(a)/~~15d-15(e)~~15d-14(a) 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	Sections of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in XBRL (eXtensible Business Reporting Language), submitted in the following files:

	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

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

7372

Index

SIGNATURES

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

	TrustCo Bank Corp NY

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


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

Date: ~~August 8,~~November 7, 2022

7473

NEW YORK	14-1630287
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5 SARNOWSKI DRIVE, GLENVILLE, NEW YORK	12302
(Address of principal executive offices)	(Zip Code)

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

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

Common Stock	Number of Shares Outstanding as of ~~July~~October 31, 2022
$11.00 Par Value	~~19,126,875~~19,051,775

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

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

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

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

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

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

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

	Notes to Consolidated Interim Financial Statements	8-46

	Report of Independent Registered Public Accounting Firm	47

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	70

Item 4.	Controls and Procedures	70

~~Item 4.~~	~~Controls and Procedures~~	70

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	71

Item 1A.	Risk Factors	71

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7271

Item 3.	Defaults Upon Senior Securities	72 71

Item 4.	Mine Safety Disclosures	7271

Item 5.	Other Information	72

Item 6.	Exhibits	7372

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

Interest and dividend income:
Interest and fees on loans	$	39,604			39,808			78,607			80,025	$	40,896		39,488			119,503			119,513
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		147			97			233			147		479		91			712			238
State and political subdivisions		0			0			1			1		1		1			2			2
Mortgage-backed securities and collateralized mortgage obligations - residential		1,367			1,167			2,454			2,404		1,617		1,038			4,071			3,442
Corporate bonds		522			323			755			639		526		220			1,281			859
Small Business Administration-guaranteed participation securities		140			193			294			399		133		181			427			580
Other securities		2			5			4			11		3		5			7			16
Total interest and dividends on securities available for sale		2,178			1,785			3,741			3,601		2,759		1,536			6,500			5,137

Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential		87			111			177			234		85		104			262			338
Total interest on held to maturity securities		87			111			177			234		85		104			262			338

Federal Reserve Bank and Federal Home Loan Bank stock		65			65			127			134
Federal Home Loan Bank stock													80		64			207			198
Interest on federal funds sold and other short-term investments		2,253			286			2,825			556		5,221		470			8,046			1,026
Total interest income		44,187			42,055			85,477			84,550		49,041		41,662			134,518			126,212

Interest expense:
Interest on deposits:
Interest-bearing checking		42			46			86			98		43		38			129			136
Savings accounts		163			162			319			321		200		154			519			475
Money market deposit accounts		210			236			424			519		237		202			661			721
Time deposits		536			1,261			1,082			2,927		646		1,149			1,728			4,076
Interest on short-term borrowings		176			228			410			456		122		232			532			688
Total interest expense		1,127			1,933			2,321			4,321		1,248		1,775			3,569			6,096

Net interest income		43,060			40,122			83,156			80,229		47,793		39,887			130,949			120,116
(Credit) Provision for credit losses		(491	)		0			(691	)		350
Provision (Credt) for credit losses													300		(2,800	)		(391	)		(2,450	)
Net interest income after (credit) provision for credit losses		43,551			40,122			83,847			79,879		47,493		42,687			131,340			122,566

Noninterest income:
Trustco financial services income		1,996			1,999			3,829			4,034		1,435		1,558			5,264			5,592
Fees for services to customers		2,658			2,486			5,459			4,690		2,705		2,531			8,164			7,221
Other		262			203			811			392		246		206			1,057			598
Total noninterest income		4,916			4,688			10,099			9,116		4,386		4,295			14,485			13,411

Noninterest expenses:
Salaries and employee benefits		11,464			12,403			20,703			24,828		12,134		11,909			32,837			36,737
Net occupancy expense		4,254			4,328			8,783			8,914		4,483		4,259			13,266			13,173
Equipment expense		1,667			1,600			3,255			3,231		1,532		1,628			4,787			4,859
Professional services		1,484			1,614			2,951			3,046		1,375		1,483			4,326			4,529
Outsourced services		2,500			2,169			4,780			4,419		2,328		2,015			7,108			6,434
Advertising expense		389			549			1,006			903		508		310			1,514			1,213
FDIC and other insurance		804			777			1,616			1,484		773		746			2,389			2,230
Other real estate expense (income), net		74			(60	)		85			179
Other real estate expense, net													124		32			209			211
Other		2,369			2,060			4,591			3,771		2,887		2,315			7,478			6,086
Total noninterest expenses		25,005			25,440			47,770			50,775		26,144		24,697			73,914			75,472

Income before taxes		23,462			19,370			46,176			38,220		25,735		22,285			71,911			60,505
Income taxes		5,591			4,937			11,216			9,704		6,371		5,523			17,587			15,227

Net income	$	17,871			14,433			34,960			28,516	$	19,364		16,762			54,324			45,278

Net income per share:
- Basic	$	0.933			0.749			1.822			1.479	$	1.013		0.871			2.835			2.349

- Diluted	$	0.933			0.748			1.822			1.478	$	1.013		0.871			2.835			2.349

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

Commercial:
Commercial real estate		0	$	0		0		0	$	0		0
Real estate mortgage - 1 to 4 family:
First mortgages		4		443		443		2		368		368
Home equity loans		0		0		0		1		2		2
Home equity lines of credit		0		0		0		2		59		59

Total		4	$	443		443		5	$	429		429

(dollars in thousands)	Three months ended						Six months ended							Three months ended						Nine months ended
	June 30,						June 30,							September 30,						September 30,
	2022			2021			2022			2021			Affected Line Item in Financial Statements	2022			2021			2022			2021			Affected Line Item in Financial Statements
Amortization of pension and postretirement benefit items:
Amortization of net actuarial gain	$	426			169		$	504			397		Salaries and employee benefits	$	280			137		$	784			534		Salaries and employee benefits
Amortization of prior service (cost) credit		(123	)		(102	)		157			(50	)	Salaries and employee benefits
Income tax benefit		(79	)		(17	)		(172	)		(90	)	Income taxes
Amortization of prior service credit (cost)															78			(177	)		235			(227	)	Salaries and employee benefits
Income tax (benefit) expense															(93	)		10			(265	)		(80	)	Income taxes
Net of tax		224			50			489			257				265			(30	)		754			227

Total reclassifications, net of tax	$	224			50		$	489			257			$	265			(30	)	$	754			227

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

Tier 1 leverage ratio	$	585,724		9.390	%		5.000	%		4.000	%	$	597,092		9.648	%		5.000	%		4.000	%
Common equity tier 1 capital		585,724		18.339			6.500			7.000			597,092		18.333			6.500			7.000
Tier 1 risk-based capital		585,724		18.339			8.000			8.500			597,092		18.333			8.000			8.500
Total risk-based capital		625,754		19.592			10.000			10.500			637,906		19.586			10.000			10.500

New York, New York	/s/ Crowe LLP
~~August 8,~~November 7, 2022

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

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

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

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

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

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

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

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

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

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

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

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

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

Liabilities and shareholders’ equity

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

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

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

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

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

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

Net interest spread							2.80	%							2.66	%

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

Tax equivalent adjustment					-								-

Net interest income					43,060								40,122

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

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

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

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

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

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

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

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

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

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

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

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

Liabilities and shareholders’ equity

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

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

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

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

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

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

Net interest spread								2.72	%							2.70	%

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

Tax equivalent adjustment					-									-

Net interest income					83,156									80,229

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