TrustCo Bank Corp NY (TRST) 10-Q 2024 Q3 Quarterly report

0000357301us-gaap:HomeEquityMemberstpr:FLus-gaap:ResidentialMortgageMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2024

OR

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

For the transition period from __________ to _________

Commission File Number 000-10592

TRUSTCO BANK CORP NY

(Exact name of registrant as specified in its charter)

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

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

(518) 377-3311

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common Stock, $1.00 par value	TRST	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ Yes  ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes  ☐ No

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

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

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

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

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

Common Stock	Number of Shares Outstanding as of October 31, 2024
$1.00 Par Value	19,010,433

TrustCo Bank Corp NY

INDEX

DESCRIPTION		PAGE NO.
Forward-Looking Statements		3
Part I.	FINANCIAL INFORMATION
Item 1.	Consolidated Interim Financial Statements (Unaudited):
	Consolidated Statements of Income for the three-month and nine-month periods ended September 30, 2024 and 2023	6
	Consolidated Statements of Comprehensive Income for the three-month and nine-month periods ended September 30, 2024 and 2023	7
	Consolidated Statements of Financial Condition as of September 30, 2024 and December 31, 2023	8
	Consolidated Statements of Changes in Shareholders’ Equity for the three-month and nine-month periods ended September 30, 2024 and 2023	9
	Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2024 and 2023	10
	Notes to Consolidated Interim Financial Statements	11
	Report of Independent Registered Public Accounting Firm	51
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	52
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	72
Item 4.	Controls and Procedures	72
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	73
Item 1A.	Risk Factors	73
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75
Item 3.	Defaults Upon Senior Securities	75
Item 4.	Mine Safety Disclosures	75
Item 5.	Other Information	75
Item 6.	Exhibits	76

2

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 that are not historical or current facts, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected.  Forward-looking statements can be identified by the use of such words as may, will, should, could, would, estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions.  TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

In addition to factors described under Part II, Item 1A, Risk Factors, and under the Risk Factor discussion in TrustCo’s Annual Report on Form 10-K for the year ended December 31, 2023, 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 heightened by volatility in financial markets and macroeconomic or geopolitical concerns related to ongoing inflation, continued elevated interest rates and ongoing armed conflicts (including the Russia/Ukraine conflict and the conflict in Israel and surrounding areas).

Risks Related to Our Operations

• changes in interest rates have impacted and may continue to impact our financial condition and results of operations;

• ongoing inflationary pressures and continued elevated prices have affected and may continue to affect our results of operations and financial condition;

• exposure to credit risk in our lending activities;

• our commercial loan portfolio is increasing and the inherently higher risk of loss may lead to additional provisions for credit losses or charge-offs, which would negatively impact earnings and capital;

• the allowance for credit losses on loans (“ACLL”) is not sufficient to cover expected loan losses, resulting in a decrease in earnings;

• our inability to meet the cash flow requirements of our depositors or borrowers or meet our operating cash needs to fund corporate expansion and other activities;

• we have been and may in the future be subject to claims and litigation pertaining to fiduciary responsibility and lender liability;

• our dependency upon the services of the management team;

• our disclosure controls and procedures may not prevent or detect all errors or acts of fraud;

• if the business continuity and disaster recovery plans that we have in place are not adequate to continue our operations in the event of a disaster, the business disruption can adversely impact its operations;

• our risk management framework may not be effective in mitigating risk and loss;

• new lines of business or new products and services may subject us to additional risks;

• we are exposed to climate risk;

3

• societal responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers;

• increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks

Risks Related to Market Conditions

• a prolonged economic downturn, especially one affecting our geographic market area, will adversely affect our operations and financial results;

• 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;

• any downgrade in the credit rating of the U.S. government or default by the U.S. government as a result of political conflicts over legislation to raise the U.S. government’s debt limit may have a material adverse effect on us;

• the soundness of other financial institutions could adversely affect us;

• any government shutdown could adversely affect the U.S. and global economy and our liquidity, financial condition and earnings;

• the trust wealth management fees we receive may decrease as a result of poor investment performance, in either relative or absolute terms, which could decrease our revenues and net earnings;

Risks Related to Compliance and Regulation

• regulatory capital rules could slow our growth, cause us to seek to raise additional capital, or both;

• changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and our income;

• changes in cybersecurity or privacy regulations may increase our compliance costs, limit our ability to gain insight from data and lead to increased scrutiny;

• restrictions on data collection and use may limit opportunities to gain business insights useful to running our business and offering innovative products and services;

• non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions;

• changes in tax laws may adversely affect us, and the Internal Revenue Service or a court may disagree with our tax positions, which may result in adverse effects on our business, financial condition, and results of operations or cash flows;

• our ability to pay dividends is subject to regulatory limitations and other limitations that may affect our ability to pay dividends to our stockholders or to repurchase our common stock;

• we may be subject to a higher effective tax rate if Trustco Realty Corp. (“Trustco Realty”) fails to qualify as a real estate investment trust (“REIT”);

• changes in accounting standards could impact reported earnings;

4

Risks Related to Competition

• strong competition within the Bank’s market areas could hurt profits and slow growth;

• consumers and businesses are increasingly using non-banks to complete their financial transactions, which could adversely affect our business and results of operations;

Risks Related to Cybersecurity, Third Parties, and Technology

• our business could be adversely affected by third-party service providers, data breaches, and cyber-attacks;

• a failure in or breach of our operational or security systems or infrastructure, or those of third parties, could disrupt our businesses, and adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm;

• unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, could severely harm our business;

• we could suffer a material adverse impact from interruptions in the effective operation of, or security breaches affecting, our computer systems;

Risks Related to Ownership of Our Securities

• provisions in our articles of incorporation and bylaws and New York law may discourage or prevent takeover attempts, and these provisions may have the effect of reducing the market price of our stock; and

• we cannot guarantee that the allocation of capital to various alternatives, including stock repurchase plans, will enhance long-term stockholder value.

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, except to the extent required by law.

5

TRUSTCO BANK CORP NY

Consolidated Statements of Income (Unaudited)

(dollars in thousands, except per share data)

	Three months ended				Nine months ended
	September 30,				September 30,
	2024		2023		2024		2023
Interest and dividend income:
Interest and fees on loans	$	52,112	$	47,921	$	152,576	$	138,255
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		718		672		2,533		2,055
State and political subdivisions		-		-		1		1
Mortgage-backed securities and collateralized mortgage obligations - residential		1,397		1,485		4,342		4,613
Corporate bonds		361		473		1,199		1,510
Small Business Administration-guaranteed participation securities		90		107		284		335
Other securities		2		2		7		7
Total interest and dividends on securities available for sale		2,568		2,739		8,366		8,521
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential		62		73		195		226
Total interest on held to maturity securities		62		73		195		226
Federal Home Loan Bank stock		153		131		452		351
Interest on federal funds sold and other short-term investments		6,174		6,688		19,818		20,213
Total interest income		61,069		57,552		181,407		167,566
Interest expense:
Interest on deposits:
Interest-bearing checking		311		102		839		217
Savings accounts		770		639		2,157		1,824
Money market deposit accounts		2,154		2,384		6,724		4,954
Time deposits		18,969		11,962		58,046		26,525
Interest on short-term borrowings		194		244		604		808
Total interest expense		22,398		15,331		68,370		34,328
Net interest income		38,671		42,221		113,037		133,238
Provision (Credit) for credit losses		500		100		1,600		(100	)
Net interest income after provision (credit) for credit losses		38,171		42,121		111,437		133,338
Noninterest income:
Trustco financial services income		2,044		1,627		5,469		4,813
Fees for services to customers		2,482		2,590		7,626		8,085
Net gains on equity securities		23		-		1,383		-
Other		382		357		947		943
Total noninterest income		4,931		4,574		15,425		13,841
Noninterest expenses:
Salaries and employee benefits		12,134		12,393		36,081		38,798
Net occupancy expense		4,271		4,358		13,257		13,218
Equipment expense		1,757		1,923		5,485		5,758
Professional services		1,863		1,717		4,893		4,684
Outsourced services		2,551		2,720		7,807		7,507
Advertising expense		339		586		1,213		1,494
FDIC and other insurance		1,112		1,078		3,003		3,215
Other real estate expense, net		204		163		294		536
Other		1,969		2,522		5,529		7,256
Total noninterest expenses		26,200		27,460		77,562		82,466
Income before taxes		16,902		19,235		49,300		64,713
Income taxes		4,027		4,555		11,748		15,915
Net income	$	12,875	$	14,680	$	37,552	$	48,798
Net income per share:
- Basic	$	0.68	$	0.77	$	1.97	$	2.57
- Diluted	$	0.68	$	0.77	$	1.97	$	2.57

See accompanying notes to unaudited consolidated interim financial statements.

6

TRUSTCO BANK CORP NY

Consolidated Statements of Comprehensive Income (Unaudited)

(dollars in thousands)

	Three months ended						Nine months ended
	September 30,						September 30,
	2024			2023			2024			2023
Net income	$	12,875		$	14,680		$	37,552		$	48,798
Net unrealized holding gain (loss) on securities available for sale		10,558			(7,063	)		9,546			(5,530	)
Tax effect		(2,742	)		1,851			(2,466	)		1,464
Net unrealized gain (loss) on securities available for sale, net of tax		7,816			(5,212	)		7,080			(4,066	)
Amortization of net actuarial gain		(203	)		(115	)		(608	)		(343	)
Amortization of prior service cost		4			4			10			10
Tax effect		51			29			155			87
Amortization of net actuarial gain and prior service cost on pension and postretirement plans, net of tax		(148	)		(82	)		(443	)		(246	)
Other comprehensive income (loss), net of tax		7,668			(5,294	)		6,637			(4,312	)
Comprehensive income	$	20,543		$	9,386		$	44,189		$	44,486

See accompanying notes to unaudited consolidated interim financial statements.

7

TRUSTCO BANK CORP NY

Consolidated Statements of Financial Condition (Unaudited)

(dollars in thousands, except share and per share data)

	September 30, 2024			December 31, 2023
ASSETS:
Cash and due from banks	$	49,659		$	49,274
Federal funds sold and other short term investments		473,306			528,730
Total cash and cash equivalents		522,965			578,004
Securities available for sale		383,654			452,289
Held to maturity securities ($5,645 and $6,396 fair value at September 30, 2024 and December 31, 2023, respectively)		5,636			6,458
Federal Home Loan Bank stock		6,507			6,203
Loans, net of deferred costs		5,070,856			5,002,879
Less:
Allowance for credit losses on loans		49,950			48,578
Net loans		5,020,906			4,954,301
Bank premises and equipment, net		33,324			34,007
Operating lease right-of-use assets		37,958			40,542
Other assets		98,730			96,387
Total assets	$	6,109,680		$	6,168,191
LIABILITIES:
Deposits:
Demand	$	753,878		$	754,532
Interest-bearing checking		988,527			1,015,213
Savings accounts		1,092,038			1,179,241
Money market deposit accounts		477,113			565,767
Time deposits		1,952,635			1,836,024
Total deposits		5,264,191			5,350,777
Short-term borrowings		91,450			88,990
Operating lease liabilities		41,469			44,471
Accrued expenses and other liabilities		43,549			38,668
Total liabilities		5,440,659			5,522,906
SHAREHOLDERS’ EQUITY:
Capital stock par value $1.00; 30,000,000 shares authorized; 20,058,142 shares issued at September 30, 2024 and December 31, 2023, and 19,010,433 and 19,024,433 shares outstanding at September 30, 2024 and December 31, 2023, respectively		20,058			20,058
Surplus		257,644			257,181
Undivided profits		442,079			425,069
Accumulated other comprehensive loss, net of tax		(6,600	)		(13,237	)
Treasury stock at cost - 1,047,709 and 1,033,709 shares at September 30, 2024 and December 31, 2023, respectively		(44,160	)		(43,786	)
Total shareholders’ equity		669,021			645,285
Total liabilities and shareholders’ equity	$	6,109,680		$	6,168,191

See accompanying notes to unaudited consolidated interim financial statements.

8

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
	Stock		Surplus		Profits			Loss			Stock			Total
Beginning balance, January 1, 2023	$	20,058	$	257,078	$	393,831		$	(27,194	)	$	(43,786	)	$	599,987
Net income		-		-		17,746			-			-			17,746
Other comprehensive income, net of tax		-		-		-			3,819			-			3,819
Cash dividend declared, $0.36 per share		-		-		(6,849	)		-			-			(6,849	)
Ending balance, March 31, 2023	$	20,058	$	257,078	$	404,728		$	(23,375	)	$	(43,786	)	$	614,703
Net income		-		-		16,372			-			-			16,372
Other comprehensive loss, net of tax		-		-		-			(2,837	)		-			(2,837	)
Cash dividend declared, $0.36 per share		-		-		(6,849	)		-			-			(6,849	)
Ending balance, June 30, 2023	$	20,058	$	257,078	$	414,251		$	(26,212	)	$	(43,786	)	$	621,389
Net income		-		-		14,680			-			-			14,680
Other comprehensive loss, net of tax		-		-		-			(5,294	)		-			(5,294	)
Cash dividend declared, $0.36 per share		-		-		(6,849	)		-			-			(6,849	)
Ending balance, September 30, 2023	$	20,058	$	257,078	$	422,082		$	(31,506	)	$	(43,786	)	$	623,926
Beginning balance, January 1, 2024	$	20,058	$	257,181	$	425,069		$	(13,237	)	$	(43,786	)	$	645,285
Net income		-		-		12,126			-			-			12,126
Other comprehensive loss, net of tax		-		-		-			(1,526	)		-			(1,526	)
Stock Based Compensation Expense		-		154		-			-			-			154
Cash dividend declared, $0.36 per share		-		-		(6,849	)		-			-			(6,849	)
Ending balance, March 31, 2024	$	20,058	$	257,335	$	430,346		$	(14,763	)	$	(43,786	)	$	649,190
Net income		-		-		12,551			-			-			12,551
Other comprehensive income, net of tax		-		-		-			495			-			495
Cash dividend declared, $0.36 per share		-		-		(6,849	)		-			-			(6,849	)
Purchase of treasury stock 14,000 shares		-		-		-			-			(374	)		(374	)
Stock Based Compensation Expense		-		155		-			-			-			155
Ending balance, June 30, 2024	$	20,058	$	257,490	$	436,048		$	(14,268	)	$	(44,160	)	$	655,168
Net income		-		-		12,875			-			-			12,875
Other comprehensive income, net of tax		-		-		-			7,668			-			7,668
Cash dividend declared, $0.36 per share		-		-		(6,844	)		-			-			(6,844	)
Stock Based Compensation Expense		-		154		-			-			-			154
Ending balance, September 30, 2024	$	20,058	$	257,644	$	442,079		$	(6,600	)	$	(44,160	)	$	669,021

See accompanying notes to unaudited consolidated interim financial statements.

9

TRUSTCO BANK CORP NY

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)

	Nine months ended September 30,
	2024			2023
Cash flows from operating activities:
Net income	$	37,552		$	48,798
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,182			3,052
Amortization of right-of-use asset		4,981			4,905
Net gain on sale of other real estate owned		-			(181	)
Writedown of other real estate owned		-			143
Provision (credit) for credit losses		1,600			(100	)
Deferred tax expense		1,004			2,112
Net amortization of securities		902			1,332
Stock based compensation expense		463			-
Net gain on sale of bank premises and equipment		(23	)		-
Decrease in taxes receivable		2,897			1,341
Increase in interest receivable		(817	)		(1,937	)
(Decrease) Increase in interest payable		(86	)		1,878
Increase in other assets		(3,149	)		(7,196	)
Decrease in operating lease liabilities		(5,399	)		(5,215	)
Increase (Decrease) in accrued expenses and other liabilities		1,996			(2,619	)
Total adjustments		7,551			(2,485	)
Net cash provided by operating activities		45,103			46,313
Cash flows from investing activities:
Proceeds from sales, paydowns and calls of securities available for sale		54,486			39,346
Proceeds from paydowns of held to maturity securities		791			944
Purchases of securities available for sale		(37,176	)		(7,485	)
Proceeds from maturities of securities available for sale		60,000			5,000
Purchases of Federal Home Loan Bank stock		(304	)		(406	)
Net increase in loans		(70,482	)		(226,980	)
Proceeds from dispositions of other real estate owned		68			1,108
Proceeds from dispositions of bank premises and equipment		64			-
Purchases of bank premises and equipment		(2,540	)		(2,631	)
Net cash provided by (used in) investing activities		4,907			(191,104	)
Cash flows from financing activities:
Net (decrease) increase in deposits		(86,586	)		41,555
Net change in short-term borrowings		2,460			(19,590	)
Purchases of treasury stock		(374	)		-
Dividends paid		(20,549	)		(20,512	)
Net cash (used in) provided by financing activities		(105,049	)		1,453
Net decrease in cash and cash equivalents		(55,039	)		(143,338	)
Cash and cash equivalents at beginning of period		578,004			650,599
Cash and cash equivalents at end of period	$	522,965		$	507,261
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest paid	$	68,456		$	13,453
Income taxes paid		8,869			14,611
Other non cash items:
Transfer of loans to other real estate owned		2,377			194
Increase in dividends payable		(7	)		35
Change in unrealized (loss) gain on securities available for sale-gross of deferred taxes		9,546			(5,530	)
Change in deferred tax effect on unrealized loss (gain) on securities available for sale		(2,466	)		1,464
Amortization of net actuarial gain and prior service cost on pension and postretirement plans		(598	)		(333	)
Change in deferred tax effect of amortization of net actuarial gain postretirement benefit plans		155			87
Securities purchased settled in subsequent period		-			(12,306	)

See accompanying notes to unaudited consolidated interim financial statements.

10

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 nine months ended September 30, 2024 is not necessarily indicative of the results that may be expected for the year ending December 31, 2024, 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 condition as of September 30, 2024, the results of operations for the three and nine months ended September 30, 2024 and 2023, and the cash flows for the nine months ended September 30, 2024 and 2023.  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, 2023.  The accompanying unaudited Consolidated Interim Financial Statements have been prepared in accordance with the 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 condition, 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, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

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, 2023 filed with the SEC on March 11, 2024.

Risks and Uncertainties: Industry events have led to a greater focus by financial institutions, investors and regulators on liquidity positions of and funding sources for financial institutions, the composition of their deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management. Present economic conditions have caused disruption to the banking system and any additional implications are uncertain. The Company believes that it has sufficient liquid assets and borrowing sources should there be a liquidity need.

11

(2) Earnings Per Share

The Company computes earnings per share in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share (“ASC 260”). A reconciliation of the component parts of earnings per share for the three and nine months ended September 30, 2024 and 2023 is as follows:

(in thousands, except per share data)	For the three months ended				For the nine months ended
	September 30,				September 30,
	2024		2023		2024		2023
Net income	$	12,875	$	14,680	$	37,552	$	48,798
Weighted average common shares		19,010		19,024		19,019		19,024
Effect of Dilutive Securities:
Stock Options and Restricted Stock Units		26		-		15		-
Weighted average common shares including potential dilutive shares		19,036		19,024		19,034		19,024
Basic EPS	$	0.68	$	0.77	$	1.97	$	2.57
Diluted EPS	$	0.68	$	0.77	$	1.97	$	2.57

For the three and nine months ended September 30, 2024, there were 22 thousand and 48 thousand, respectively, weighted average antidilutive stock options excluded from dilutive earnings. For both the three and nine months ended September 30, 2023, there were 77 thousand weighted average antidilutive stock options excluded from dilutive earnings. The stock options are antidilutive because the strike price is greater than the average fair value of the Company’s common stock for the periods presented.

12

(3) Benefit Plans

The table below outlines the components of the Company’s net periodic benefit recognized during the three and nine months ended September 30, 2024 and 2023 for its pension and other postretirement benefit plans:

	Three months ended September 30,
	Pension Benefits						Other Postretirement Benefits
(dollars in thousands)	2024			2023			2024			2023
Service cost	$	-		$	-		$	5		$	2
Interest cost		289			304			72			65
Expected return on plan assets		(762	)		(672	)		(332	)		(288	)
Amortization of net actuarial gain		(19	)		-			(184	)		(115	)
Amortization of prior service cost		-			-			4			4
Net periodic benefit	$	(492	)	$	(368	)	$	(435	)	$	(332	)

	Nine months ended September 30,
	Pension Benefits						Other Postretirement Benefits
(dollars in thousands)	2024			2023			2024			2023
Service cost	$	-		$	-		$	14		$	7
Interest cost		867			910			216			197
Expected return on plan assets		(2,286	)		(2,013	)		(995	)		(867	)
Amortization of net actuarial gain		(57	)		-			(551	)		(343	)
Amortization of prior service cost		-			-			10			10
Net periodic benefit	$	(1,476	)	$	(1,103	)	$	(1,306	)	$	(996	)

The Company does not expect to contribute to its pension and postretirement benefit plans in 2024. As of September 30, 2024, no contributions have been made; however, this decision is reviewed each quarter and is subject to change based upon market conditions.

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

13

(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, 2024
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value
U.S. government sponsored enterprises	$	91,807	$	16	$	1,235	$	90,588
State and political subdivisions		26		-		-		26
Mortgage backed securities and collateralized mortgage obligations - residential		242,429		327		19,915		222,841
Corporate bonds		55,030		-		703		54,327
Small Business Administration - guaranteed participation securities		16,352		-		1,181		15,171
Other		688		15		2		701
Total Securities Available for Sale	$	406,332	$	358	$	23,036	$	383,654

	December 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value
U.S. government sponsored enterprises	$	121,728	$	5	$	3,065	$	118,668
State and political subdivisions		26		-		-		26
Mortgage backed securities and collateralized mortgage obligations - residential		263,182		270		25,775		237,677
Corporate bonds		80,150		-		2,098		78,052
Small Business Administration - guaranteed participation securities		18,740		-		1,554		17,186
Other		687		11		18		680
Total Securities Available for Sale	$	484,513	$	286	$	32,510	$	452,289

The following table categorizes the debt securities included in the available for sale portfolio as of September 30, 2024, 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)	Cost		Value
Due in one year or less	$	80,758	$	79,853
Due after one year through five years		54,793		53,810
Due after five years through ten years		12,000		11,979
Due after ten years		-		-
Mortgage backed securities and collateralized mortgage obligations - residential		242,429		222,841
Small Business Administration - guaranteed participation securities		16,352		15,171
	$	406,332	$	383,654

14

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, 2024
	Less than				12 months
	12 months				or more				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
U.S. government sponsored enterprises	$	11,979	$	21	$	68,593	$	1,214	$	80,572	$	1,235
Mortgage backed securities and collateralized mortgage obligations - residential		5,092		83		208,526		19,832		213,618		19,915
Corporate bonds		-		-		54,327		703		54,327		703
Small Business Administration - guaranteed participation securities		-		-		15,171		1,181		15,171		1,181
Other		-		-		648		2		648		2
Total	$	17,071	$	104	$	347,265	$	22,932	$	364,336	$	23,036

	December 31, 2023
	Less than				12 months
	12 months				or more				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
U.S. government sponsored enterprises	$	-		-	$	116,163	$	3,065	$	116,163	$	3,065
Mortgage backed securities and collateralized mortgage obligations - residential		-		-		227,891		25,775		227,891		25,775
Corporate bonds		-		-		78,052		2,098		78,052		2,098
Small Business Administration - guaranteed participation securities		-		-		17,186		1,554		17,186		1,554
Other		-		-		631		18		631		18
Total	$	-		-	$	439,923	$	32,510	$	439,923	$	32,510

There were no allowance for credit losses recorded for securities available for sale as of September 30, 2024 and December 31, 2023. During the three and nine months ended September 30, 2024 and 2023 there were no available for sale securities charged off.

15

The proceeds from sales and calls and maturities of securities available for sale, gross realized gains and gross realized losses from sales and calls during the three and nine months ended September 30, 2024 and 2023 are as follows:

	Three months ended September 30,
(dollars in thousands)	2024		2023
Proceeds from sales	$	-	$	-
Proceeds from calls/paydowns		33,992		9,877
Proceeds from maturities		5,000		-
Gross realized gains		-		-
Gross realized losses		-		-

	Nine months ended September 30,
(dollars in thousands)	2024		2023
Proceeds from sales	$	-	$	-
Proceeds from calls/paydowns		54,486		39,346
Proceeds from maturities		60,000		5,000
Gross realized gains		-		-
Gross realized losses		-		-

There were no transfers of securities available for sale during the three and nine months ended September 30, 2024 and 2023.

(b) Held to maturity securities

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

	September 30, 2024
			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	5,636	$	80	$	71	$	5,645
Total held to maturity	$	5,636	$	80	$	71	$	5,645

	December 31, 2023
			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	6,458	$	74	$	136	$	6,396
Total held to maturity	$	6,458	$	74	$	136	$	6,396

16

The following table categorizes the debt securities included in the held to maturity portfolio as of  September 30, 2024, 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		Fair
	Cost		Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	5,636	$	5,645
	$	5,636	$	5,645

Gross unrecognized losses on held to maturity securities 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, 2024
	Less than				12 months
(dollars in thousands)	12 months				or more				Total
			Gross				Gross				Gross
	Fair		Unrec.		Fair		Unrec.		Fair		Unrec.
	Value		Loss		Value		Loss		Value		Loss
Mortgage backed securities and collateralized mortgage obligations - residential	$	-	$	-	$	2,240	$	71	$	2,240	$	71
Total	$	-	$	-	$	2,240	$	71	$	2,240	$	71

	December 31, 2023
	Less than				12 months
(dollars in thousands)	12 months				or more				Total
			Gross				Gross				Gross
	Fair		Unrec.		Fair		Unrec.		Fair		Unrec.
	Value		Loss		Value		Loss		Value		Loss
Mortgage backed securities and collateralized mortgage obligations - residential	$	283	$	3	$	2,703	$	133	$	2,986	$	136
Total	$	283	$	3	$	2,703	$	133	$	2,986	$	136

There were no sales or transfers of held to maturity securities during the three and nine months ended September 30, 2024 and 2023.

There were no allowance for credit losses recorded for held to maturity securities as of September 30, 2024 and December 31, 2023.  There was no credit loss expense recorded for held to maturity securities for the three and nine months ended September 30, 2024 and 2023.  As of September 30, 2024, there were no securities on non-accrual status and all securities were performing in accordance with contractual terms.

(c) Equity Securities

During the second quarter of 2024, Visa Inc. accepted the Company’s tender of its 6,528 shares of Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock.  As a result, during the second quarter of 2024, the Company marked it Visa Class C common stock to fair value and recorded an unrealized gain of $1.4 million. The Company then sold them all in the third quarter of 2024 and recorded an additional gain of $23 thousand, thus resulting in no remaining carrying value on the Company’s Statement of Financial Condition. Once the Company is able to convert the remaining shares of Visa Class B-2 common stock to Visa Class C shares, the Company will mark these shares to  fair value on a recurring basis using the Visa Class A shares as evidence of orderly transactions between market participants for similar securities issued by Visa. The Company originally obtained the shares in 2008. The carrying value of Visa B-2 shares is nominal as of September 30, 2024.

17

(d) Other-Than-Temporary Impairment

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 that 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 separated into the amount representing the credit loss and the amount related to all other factors.  The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings through the provision for credit losses.  The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes.

The Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of September 30, 2024. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as its historically low turnover in the portfolio.

As of September 30, 2024, 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 September 30, 2024.

18

Mortgage backed securities and collateralized mortgage obligations – residential: At September 30, 2024, all mortgage backed securities and collateralized mortgage obligations held by the Company were issued by U.S. government sponsored entities and agencies, primarily Ginnie Mae, Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support.  Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired  at September 30, 2024.

Small Business Administration (SBA) - guaranteed participation securities:  At September 30, 2024, 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 September 30, 2024.

Corporate Bonds & Other:  At September 30, 2024, corporate bonds held by the Company are investment grade quality.  Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2024.

19

(5) Loan Portfolio and Allowance for Credit Losses

The following tables presents loans by portfolio segment:

	September 30, 2024
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	220,645	$	38,918	$	259,563
Other		19,934		764		20,698
Real estate mortgage - 1 to 4 family:
First mortgages		2,746,180		1,579,684		4,325,864
Home equity loans		43,501		13,309		56,810
Home equity lines of credit		231,275		162,143		393,418
Installment		10,459		4,044		14,503
Total loans, net	$	3,271,994	$	1,798,862	$	5,070,856
Less: Allowance for credit losses						49,950
Net loans					$	5,020,906

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

	December 31, 2023
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	212,754	$	39,501	$	252,255
Other		20,863		397		21,260
Real estate mortgage - 1 to 4 family:
First mortgages		2,756,914		1,550,191		4,307,105
Home equity loans		44,152		13,806		57,958
Home equity lines of credit		212,298		135,117		347,415
Installment		12,057		4,829		16,886
Total loans, net	$	3,259,038	$	1,743,841		5,002,879
Less: Allowance for credit losses						48,578
Net loans					$	4,954,301

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

Included in commercial loans above are Paycheck Protection Program (“PPP”) loans totaling $292 thousand and $620 thousand as of September 30, 2024 and December 31, 2023, respectively.

At September 30, 2024 and December 31, 2023, the Company had approximately $24.7 million and $29.1 million, respectively, of real estate construction loans.  Of the $24.7 million in real estate construction loans at September 30, 2024, approximately $7.9 million are secured by first mortgages to residential borrowers while approximately $16.8 million were to commercial borrowers for residential construction projects.  Of the $29.1 million in real estate construction loans at December 31, 2023, approximately $8.0 million are secured by first mortgages to residential borrowers while approximately $21.1 million were to commercial borrowers for residential construction projects.  The vast majority of construction loans were in the Company’s New York market.

20

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 September 30, 2024. The Company selected the baseline economic forecast for the allowance for credit losses based on current market conditions and portfolio trends. In addition, the Company’s four quarter forecast period and four quarter straight line reversion has not changed for the period ended September 30, 2024.

The Company recorded a provision for credit losses of $500 thousand for the three months ended September 30, 2024, which is the result a provision for credit losses on loans of $400 thousand, and a provision for credit losses on unfunded commitments of $100 thousand.  The Company recorded a provision for credit losses of $1.6 million for the nine months ended September 30, 2024, which is the result of a provision for credit losses on loans of $1.5 million, and a provision for credit losses on unfunded commitments of $100 thousand.

The Company recorded a provision for credit losses of $100 thousand for the three months ended September 30, 2023, which included a provision for credit losses on loans of $300 thousand, and a benefit for credit losses on unfunded commitments of $200 thousand.  The Company recorded a benefit for credit losses of $100 thousand for the nine months ended September 30, 2023, which included a provision for credit losses on loans of $900 thousand, offset by a benefit for credit losses on unfunded commitments of $1.0 million.

Activity in the allowance for credit losses on loans by portfolio segment for the three months ended September 30, 2024 is summarized as follows:

	For the three months ended September 30, 2024
(dollars in thousands)				Real Estate
				Mortgage-
	Commercial			1 to 4 Family		Installment		Total
Balance at beginning of period	$	3,429		$	46,129	$	214	$	49,772
Loans charged off:
New York and other states*		65			194		17		276
Florida		-			-		42		42
Total loan chargeoffs		65			194		59		318
Recoveries of loans previously charged off:
New York and other states*		-			90		6		96
Florida		-			-		-		-
Total recoveries		-			90		6		96
Net loans (recoveries) charged off		65			104		53		222
Provision (credit) for credit losses		(12	)		367		45		400
Balance at end of period	$	3,352		$	46,392	$	206	$	49,950

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

21

Activity in the allowance for credit losses by portfolio segment for the three months ended September 30, 2023 is summarized as follows:

	For the three months ended September 30, 2023
(dollars in thousands)			Real Estate
			Mortgage-
	Commercial		1 to 4 Family			Installment		Total
Balance at beginning of period	$	2,610		44,067			237		46,914
Loans charged off:
New York and other states*		-		27			23		50
Florida		-		-			-		-
Total loan chargeoffs		-		27			23		50
Recoveries of loans previously charged off:
New York and other states*		-		53			9		62
Florida		-		-			-		-
Total recoveries		-		53			9		62
Net loan (recoveries) charged off		-		(26	)		14		(12	)
Provision for credit losses		103		192			5		300
Balance at end of period	$	2,713		44,285			228		47,226

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

Activity in the allowance for credit losses on loans by portfolio segment for the nine months ended September 30, 2024 is summarized as follows:

	For the nine months ended September 30, 2024
(dollars in thousands)			Real Estate
			Mortgage-
	Commercial		1 to 4 Family			Installment		Total
Balance at beginning of period	$	2,735	$	45,625		$	218	$	48,578
Loans charged off:
New York and other states*		65		311			71		447
Florida		-		17			49		66
Total loan chargeoffs		65		328			120		513
Recoveries of loans previously charged off:
New York and other states*		-		359			26		385
Florida		-		-			-		-
Total recoveries		-		359			26		385
Net loans (recoveries) charged off		65		(31	)		94		128
Provision for credit losses		682		736			82		1,500
Balance at end of period	$	3,352	$	46,392		$	206	$	49,950

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

22

Activity in the allowance for credit losses by portfolio segment for the nine months ended September 30, 2023 is summarized as follows:

	For the nine months ended September 30, 2023
(dollars in thousands)				Real Estate
				Mortgage-
	Commercial			1 to 4 Family			Installment		Total
Balance at beginning of period	$	2,596		$	43,271		$	165	$	46,032
Loans charged off:
New York and other states*		-			49			69		118
Florida		-			-			71		71
Total loan chargeoffs		-			49			140		189
Recoveries of loans previously charged off:
New York and other states*		129			289			40		458
Florida		-			25			-		25
Total recoveries		129			314			40		483
Net loans (recoveries) charged off		(129	)		(265	)		100		(294	)
(Credit) provision for credit losses		(12	)		749			163		900
Balance at end of period	$	2,713		$	44,285		$	228	$	47,226

* 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 September 30, 2024 and December 31, 2023:

	As of September 30, 2024
(dollars in thousands)			1-to-4 Family
	Commercial		Residential		Installment
	Loans		Real Estate		Loans		Total
Allowance for credit losses on loans:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-	$	-	$	-	$	-
Collectively evaluated for impairment		3,352		46,392		206		49,950
Total ending allowance balance	$	3,352	$	46,392	$	206	$	49,950
Loans:
Individually evaluated for impairment	$	882	$	24,043	$	130	$	25,055
Collectively evaluated for impairment		279,379		4,752,049		14,373		5,045,801
Total ending loans balance	$	280,261	$	4,776,092	$	14,503	$	5,070,856

23

	As of December 31, 2023
(dollars in thousands)			1-to-4 Family
	Commercial		Residential		Installment
	Loans		Real Estate		Loans		Total
Allowance for credit losses on loans:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		2,735		45,625		218		48,578
Total ending allowance balance	$	2,735		45,625		218		48,578
Loans:
Individually evaluated for impairment	$	957		23,628		144		24,729
Collectively evaluated for impairment		272,558		4,688,850		16,742		4,978,150
Total ending loans balance	$	273,515		4,712,478		16,886		5,002,879

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 provision (credit) for credit losses in the consolidated income statement.

The Company’s activity in the allowance for credit losses on unfunded commitments for the three and nine months ended September 30, 2024 and 2023 was as follows:

(In thousands)	For the three months ended September 30, 2024
Balance at June 30, 2024	$	1,662
Provision for credit losses		100
Balance at September 30, 2024	$	1,762

(In thousands)	For the nine months ended September 30, 2024
Balance at January 1, 2024	$	1,662
Provision for credit losses		100
Balance at September 30, 2024	$	1,762

(In thousands)	For the three months ended September 30, 2023
Balance at June 30, 2023	$	2,112
Credit provision for credit losses		(200	)
Balance at September 30, 2023	$	1,912

(In thousands)	For the nine months ended September 30, 2023
Balance at January 1, 2023	$	2,912
Credit provision for credit losses		(1,000	)
Balance at September 30, 2023	$	1,912

24

Loan Credit Quality

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

The Company uses the following definitions for classified loans:

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

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

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

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

For homogeneous loan pools, such as residential mortgages, home equity loans, 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 September 30, 2024 and December 31, 2023 is also included in the aging of the past due loans table. Nonperforming loans shown in the table below were loans on non-accrual status and loans over 90 days past due and accruing.

25

As of September 30, 2024 and December 31, 2023 and based on the most recent analysis performed, the risk category of loans by class of loans, and gross charge-offs year to date for each loan type by origination year was as follows:

(in thousands)	As of September 30, 2024
	Term Loans Amortized Cost Basis by Origination Year
	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
Commercial :
Risk rating
Pass	$	34,827	$	54,126	$	75,176	$	22,445	$	15,425	$	52,536	$	2,801	$	-	$	257,336
Special Mention		-		-		1,070		-		26		524		-		-		1,620
Substandard		-		-		190		-		-		379		-		-		569
Doubtful		-		-		-		-		-		38		-		-		38
Total Commercial Loans	$	34,827	$	54,126	$	76,436	$	22,445	$	15,451	$	53,477	$	2,801	$	-	$	259,563
Commercial Loans:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial Other:
Risk rating
Pass	$	1,573	$	7,627	$	1,890	$	517	$	265	$	1,745	$	6,201	$	-	$	19,818
Special mention		14		-		-		-		-		37		-		-		51
Substandard		-		-		-		132		-		98		285		-		515
Doubtful		-		-		-		314		-		-		-		-		314
Total Commercial Real Estate Loans	$	1,587	$	7,627	$	1,890	$	963	$	265	$	1,880	$	6,486	$	-	$	20,698
Other Commercial Loans:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Residential First Mortgage:
Risk rating
Performing	$	227,310	$	409,174	$	543,602	$	835,847	$	694,291	$	1,600,046	$	710	$	-	$	4,310,980
Nonperforming		-		553		210		534		243		13,344		-		-		14,884
Total First Mortgage:	$	227,310	$	409,727	$	543,812	$	836,381	$	694,534	$	1,613,390	$	710	$	-	$	4,325,864
Residential First Mortgage Loans:
Current-period Gross writeoffs	$	193	$	-	$	-	$	-	$	-	$	19	$	-	$	-	$	212
	$	193	$	-	$	-	$	-	$	-	$	19	$	-	$	-	$	212
Home Equity Loans:
Risk rating
Performing	$	4,777	$	8,972	$	5,446	$	6,837	$	5,180	$	25,066	$	-	$	-	$	56,278
Nonperforming		-		-		155		-		-		377		-		-		532
Total Home Equity Loans:	$	4,777	$	8,972	$	5,601	$	6,837	$	5,180	$	25,443	$	-	$	-	$	56,810
Home Equity Loans:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Home Equity Lines of Credit:
Risk rating
Performing	$	4,171	$	1,218	$	1,160	$	668	$	227	$	14,127	$	368,767	$	-	$	390,338
Nonperforming		-		-		-		-		-		2,753		327		-		3,080
Total Home Equity Credit Lines:	$	4,171	$	1,218	$	1,160	$	668	$	227	$	16,880	$	369,094	$	-	$	393,418
Home Equity Lines of Credit:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	116	$	-	$	-	$	116
	$	-	$	-	$	-	$	-	$	-	$	116	$	-	$	-	$	116
Installments:
Risk rating
Performing	$	2,313	$	6,296	$	3,141	$	856	$	168	$	606	$	955	$	-	$	14,335
Nonperforming		-		5		60		54		-		49		-		-		168
Total Installments	$	2,313	$	6,301	$	3,201	$	910	$	168	$	655	$	955	$	-	$	14,503
Installments Loans:
Current-period Gross writeoffs	$	-	$	54	$	44	$	-	$	4	$	18	$	-	$	-	$	120
	$	-	$	54	$	44	$	-	$	4	$	18	$	-	$	-	$	120

26

(in thousands)	As of December 31, 2023
	Term Loans Amortized Cost Basis by Origination Year
Commercial :	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loan Converted to Term		Total
Risk rating
Pass	$	61,148	$	82,339	$	23,940	$	16,653	$	19,835	$	41,153	$	5,664	$	-	$	250,732
Special Mention		-		-		-		42		-		225		-		-		267
Substandard		-		-		-		-		-		1,256		-		-		1,256
Total Commercial Loans	$	61,148	$	82,339	$	23,940	$	16,695	$	19,835	$	42,634	$	5,664	$	-	$	252,255
Commercial Loans:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial Other:
Risk rating
Pass	$	7,873	$	2,164	$	1,933	$	1,386	$	321	$	2,641	$	4,482	$	-	$	20,800
Special mention		-		-		-		-		-		-		34		-		34
Substandard		-		-		328		-		-		98		-		-		426
Total Commercial Real Estate Loans	$	7,873	$	2,164	$	2,261	$	1,386	$	321	$	2,739	$	4,516	$	-	$	21,260
Other Commercial Loans:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-		-
	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Residential First Mortgage:
Risk rating
Performing	$	418,891	$	566,617	$	878,015	$	732,851	$	342,559	$	1,354,867	$	-	$	-	$	4,293,800
Nonperforming		64		210		383		229		1,119		11,300		-		-		13,305
Total First Mortgage:	$	418,955	$	566,827	$	878,398	$	733,080	$	343,678	$	1,366,167	$	-	$	-	$	4,307,105
Residential First Mortgage Loans:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	27	$	336	$	-	$	-		363
	$	-	$	-	$	-	$	-	$	27	$	336	$	-	$	-	$	363
Home Equity Loans:
Risk rating
Performing	$	9,660	$	5,963	$	7,770	$	5,668	$	6,542	$	22,076	$	-	$	-	$	57,679
Nonperforming		-		-		-		-		-		279		-		-		279
Total Home Equity Loans:	$	9,660	$	5,963	$	7,770	$	5,668	$	6,542	$	22,355	$	-	$	-	$	57,958
Home Equity Lines Loans:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-		-
	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Home Equity Credit Lines:
Risk rating
Performing	$	355	$	641	$	248	$	75	$	10	$	15,964	$	327,059	$	-	$	344,352
Nonperforming		-		-		8		56		-		2,813		186		-		3,063
Total Home Equity Credit Lines:	$	355	$	641	$	256	$	131	$	10	$	18,777	$	327,245	$	-	$	347,415
Home Equity Credit Lines Loans:
Current-period Gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	8	$	-	$	-		8
	$	-	$	-	$	-	$	-	$	-	$	8	$	-	$	-	$	8
Installments:
Risk rating
Performing	$	8,473	$	4,592	$	1,484	$	360	$	198	$	605	$	1,008	$	-	$	16,720
Nonperforming		-		49		51		-		63		3		-		-		166
Total Installments	$	8,473	$	4,641	$	1,535	$	360	$	261	$	608	$	1,008	$	-	$	16,886
Installments Loans:
Current-period Gross writeoffs	$	16	$	67	$	50	$	1	$	21	$	21	$	-	$	-		176
	$	16	$	67	$	50	$	1	$	21	$	21	$	-	$	-	$	176

27

The following tables present the aging of the amortized cost in past due loans by loan class and by region as of September 30, 2024 and December 31, 2023:

	As of September 30, 2024
New York and other states*:	30-59		60-89		90+		Total
	Days		Days		Days		30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	827	$	190	$	153	$	1,170	$	219,475	$	220,645
Other		8		-		123		131		19,803		19,934
Real estate mortgage - 1 to 4 family:
First mortgages		3,638		1,701		5,728		11,067		2,735,113		2,746,180
Home equity loans		15		-		340		355		43,146		43,501
Home equity lines of credit		379		310		1,339		2,028		229,247		231,275
Installment		12		24		119		155		10,304		10,459
Total	$	4,879	$	2,225	$	7,802	$	14,906	$	3,257,088	$	3,271,994

Florida:	30-59		60-89		90+		Total
	Days		Days		Days		30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	-	$	-	$	-	$	-	$	38,918	$	38,918
Other		-		-		314		314		450		764
Real estate mortgage - 1 to 4 family:
First mortgages		1,832		209		1,588		3,629		1,576,055		1,579,684
Home equity loans		-		85		6		91		13,218		13,309
Home equity lines of credit		217		-		70		287		161,856		162,143
Installment		24		1		-		25		4,019		4,044
Total	$	2,073	$	295	$	1,978	$	4,346	$	1,794,516	$	1,798,862

Total:	30-59		60-89		90+		Total
	Days		Days		Days		30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	827	$	190	$	153	$	1,170	$	258,393	$	259,563
Other		8		-		437		445		20,253		20,698
Real estate mortgage - 1 to 4 family:
First mortgages		5,470		1,910		7,316		14,696		4,311,168		4,325,864
Home equity loans		15		85		346		446		56,364		56,810
Home equity lines of credit		596		310		1,409		2,315		391,103		393,418
Installment		36		25		119		180		14,323		14,503
Total	$	6,952	$	2,520	$	9,780	$	19,252	$	5,051,604	$	5,070,856

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

28

	As of December 31, 2023
New York and other states*:	30-59		60-89		90+		Total
	Days		Days		Days		30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	-		-		521		521		212,233		212,754
Other		-		26		-		26		20,837		20,863
Real estate mortgage - 1 to 4 family:
First mortgages		4,330		811		6,008		11,149		2,745,765		2,756,914
Home equity loans		20		138		157		315		43,837		44,152
Home equity lines of credit		591		135		1,499		2,225		210,073		212,298
Installment		6		18		95		119		11,938		12,057
Total	$	4,947		1,128		8,280		14,355		3,244,683		3,259,038

Florida:	30-59		60-89		90+		Total
	Days		Days		Days		30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	-		-		-		-		39,501		39,501
Other		-		-		314		314		83		397
Real estate mortgage - 1 to 4 family:
First mortgages		1,290		78		1,433		2,801		1,547,390		1,550,191
Home equity loans		73		6		-		79		13,727		13,806
Home equity lines of credit		184		-		56		240		134,877		135,117
Installment		16		-		60		76		4,753		4,829
Total	$	1,563		84		1,863		3,510		1,740,331		1,743,841

Total:	30-59		60-89		90+		Total
	Days		Days		Days		30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	-		-		521		521		251,734		252,255
Other		-		26		314		340		20,920		21,260
Real estate mortgage - 1 to 4 family:
First mortgages		5,620		889		7,441		13,950		4,293,155		4,307,105
Home equity loans		93		144		157		394		57,564		57,958
Home equity lines of credit		775		135		1,555		2,465		344,950		347,415
Installment		22		18		155		195		16,691		16,886
Total	$	6,510		1,212		10,143		17,865		4,985,014		5,002,879

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

At September 30, 2024 and December 31, 2023, there were no loans that were 90 days past due and still accruing interest.  As a result, non-accrual loans include all loans 90 days or more past due, as well as certain loans less than 90 days past due that were placed on non-accrual status for reasons other than delinquent status.  There are no commitments to extend further credit on non-accrual or restructured loans.

The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through foreclosure or through a deed in lieu).  Other real estate owned is included in other assets on the Balance Sheet.  As of September 30, 2024 other real estate owned included $2.2 million and $295 thousand of commercial and residential foreclosed properties, respectively.  In addition, non-accrual residential mortgage loans that are in the process of foreclosure had an amortized cost of $6.4 million as of September 30, 2024. As of December 31, 2023 other real estate owned included $194 thousand of residential foreclosed properties.  In addition, non-accrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $6.6 million as of December 31, 2023.

29

Loans individually evaluated for impairment include are non-accrual loans delinquent great than 180 days, non-accrual commercial loans, as well as all loan modifications. As of September 30, 2024, there was no allowance for credit losses based on loans individually evaluated for impairment.

Residential and installment non-accrual loans which are not loan modifications 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:

	As of September 30, 2024
(dollars in thousands)	New York and
	other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	343	$	-	$	343
Other		123		314		437
Real estate mortgage - 1 to 4 family:
First mortgages		11,999		2,885		14,884
Home equity loans		437		95		532
Home equity lines of credit		2,884		196		3,080
Installment		163		5		168
Total non-accrual loans		15,949		3,495		19,444
Restructured real estate mortgages - 1 to 4 family		-		-		-
Total nonperforming loans	$	15,949	$	3,495	$	19,444

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

	As of December 31, 2023
(dollars in thousands)	New York and
	other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	536	$	-	$	536
Other		-		314		314
Real estate mortgage - 1 to 4 family:
First mortgages		11,324		1,981		13,305
Home equity loans		235		44		279
Home equity lines of credit		2,816		247		3,063
Installment		151		15		166
Total non-accrual loans		15,062		2,601		17,663
Restructured real estate mortgages - 1 to 4 family		3		-		3
Total nonperforming loans	$	15,065	$	2,601	$	17,666

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

30

The following tables present the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing as of September 30, 2024 and December 31, 2023:

	As of September 30, 2024
(dollars in thousands)	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	$	153	$	190		-
Other		437		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		13,438		1,446		-
Home equity loans		412		120		-
Home equity lines of credit		2,710		370		-
Installment		128		40		-
Total loans, net	$	17,278	$	2,166		-

	As of December 31, 2023
(dollars in thousands)	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	$	536	$	-		-
Other		314		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		12,584		721		-
Home equity loans		271		8		-
Home equity lines of credit		2,395		668		-
Installment		144		22		-
Total loans, net	$	16,244	$	1,419		-

The non-accrual balance of $2.2 million and $1.4 million was collectively evaluated and the associated allowance for credit losses on loans was determined not to be material as of September 30, 2024 and December 31, 2023, respectively.

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.

31

 The following tables present the amortized cost basis of individually analyzed collateral dependent loans by portfolio segment as of September 30, 2024 and December 31, 2023:

	As of September 30, 2024
	Type of Collateral
(dollars in thousands)
	Real Estate		Investment Securities/Cash		Other
Commercial:
Commercial real estate	$	445		-		-
Other		437		-		-
Real estate mortgage - 1 to 4 family:		-		-		-
First mortgages		20,255		-		-
Home equity loans		421		-		-
Home equity lines of credit		3,367		-		-
Installment		130		-		-
Total	$	25,055		-		-

	As of December 31, 2023
	Type of Collateral
(dollars in thousands)
	Real Estate		Investment Securities/Cash		Other
Commercial:
Commercial real estate	$	643		-		-
Other		314		-		-
Real estate mortgage - 1 to 4 family:		-		-		-
First mortgages		20,018		-		-
Home equity loans		371		-		-
Home equity lines of credit		3,239		-		-
Installment		144		-		-
Total	$	24,729		-		-

The Company has not committed to lend additional amounts to customers with outstanding loans that are modified.  Interest income recognized on loans that are individually evaluated was not material during the three or nine months ended September 30, 2024 and 2023.

As of September 30, 2024 and 2023 loans individually evaluated included approximately $7.3 and $8.5 million, respectively, of loans in accruing status that were identified as loan modifications in accordance with regulatory guidance related to Chapter 7 bankruptcy loans.

Pursuant to the adoption of ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructuring and Vintage Disclosures (“ASU 2022-02”), a borrower that is experiencing financial difficulty and receives a modification in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay or a term extension in the current period needs to be disclosed.

32

The following table presents the amortized cost basis of loans at September 30, 2024 and 2023 that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2024 and 2023, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:

For the three months ended:
New York and other states*:	September 30, 2024					September 30, 2023
	Payment		% of Total Class			Payment		% of Total Class
(dollars in thousands)	Delay		of Loans			Delay		of Loans
Commercial:
Commercial real estate	$	-		-		$	-		-
Other		-		-			-		-
Real estate mortgage - 1 to 4 family:		-		-			-		-
First mortgages		80		0.00	%		255		0.01	%
Home equity loans		-		-			-		-
Home equity lines of credit		133		0.06	%		-		-
Installment		-		-			-		-
Total	$	213		0.01	%	$	255		0.01	%

Florida:
	Payment		% of Total Class			Payment		% of Total Class
(dollars in thousands)	Delay		of Loans			Delay		of Loans
Commercial:
Commercial real estate	$	-		-		$	-		-
Other		-		-			-		-
Real estate mortgage - 1 to 4 family:				-					-
First mortgages		-		-			-		-
Home equity loans		89		0.67	%		-		-
Home equity lines of credit		-		-			-		-
Installment		-		-			-		-
Total	$	89		0.00	%	$	-		-

Total
	Payment		% of Total Class			Payment		% of Total Class
(dollars in thousands)	Delay		of Loans			Delay		of Loans
Commercial:
Commercial real estate	$	-		-		$	-		-
Other		-		-			-		-
Real estate mortgage - 1 to 4 family:
First mortgages		80		0.00	%		255		0.01	%
Home equity loans		89		0.16	%		-		-
Home equity lines of credit		133		0.03	%		-		-
Installment		-		-			-		-
Total	$	302		0.01	%	$	255		0.01	%

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

33

For the nine months ended:
New York and other states*:	September 30, 2024					September 30, 2023
	Payment		% of Total Class			Payment		% of Total Class
(dollars in thousands)	Delay		of Loans			Delay		of Loans
Commercial:
Commercial real estate	$	-		-		$	-		-
Other		-		-			-		-
Real estate mortgage - 1 to 4 family:		-		-			-		-
First mortgages		270		0.01	%		490		0.02	%
Home equity loans		-		-			-		-
Home equity lines of credit		242		0.10	%		50		0.02	%
Installment		-		-			-		-
Total	$	512		0.02	%	$	540		0.02	%

Florida:
	Payment		% of Total Class			Payment		% of Total Class
(dollars in thousands)	Delay		of Loans			Delay		of Loans
Commercial:
Commercial real estate	$	-		-		$	-		-
Other		-		-			-		-
Real estate mortgage - 1 to 4 family:				-					-
First mortgages		84		0.01	%		340		0.02	%
Home equity loans		89		0.67	%		-		-
Home equity lines of credit		-		-			-		-
Installment		-		-			-		-
Total	$	173		0.01	%	$	340		0.02	%

Total
	Payment		% of Total Class			Payment		% of Total Class
(dollars in thousands)	Delay		of Loans			Delay		of Loans
Commercial:
Commercial real estate	$	-		-		$	-		-
Other		-		-			-		-
Real estate mortgage - 1 to 4 family:
First mortgages		354		0.01	%		830		0.02	%
Home equity loans		89		0.16	%		-		-
Home equity lines of credit		242		0.06	%		50		0.02	%
Installment		-		-			-		-
Total	$	685		0.01	%	$	880		0.02	%

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

34

The Bank monitors the performance of loans modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table describes the performance of loans that have been modified as of September 30, 2024 and 2023:

	As of September 30, 2024
New York and other states*:				30-59		60-89		90+
				Days		Days		Days
(dollars in thousands)	Current			Past Due		Past Due		Past Due	Total
Commercial:
Commercial real estate	$	-	$	-	$	-	$	-	$	-
Other		-		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		270		-		-		-		270
Home equity loans		-		-		-		-		-
Home equity lines of credit		242		-		-		-		242
Installment		-		-		-		-		-
Total	$	512	$	-	$	-	$	-	$	512

Florida:				30-59		60-89		90+
				Days		Days		Days
(dollars in thousands)	Current			Past Due		Past Due		Past Due	Total
Commercial:
Commercial real estate	$	-	$	-	$	-	$	-	$	-
Other		-		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		84		-		-		-		84
Home equity loans		89		-		-		-		89
Home equity lines of credit		-		-		-		-		-
Installment		-		-		-		-		-
Total	$	173	$	-	$	-	$	-	$	173

Total				30-59		60-89		90+
				Days		Days		Days
(dollars in thousands)	Current			Past Due		Past Due		Past Due	Total
Commercial:
Commercial real estate	$	-	$	-	$	-	$	-	$	-
Other		-		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		354		-		-		-		354
Home equity loans		89		-		-		-		89
Home equity lines of credit		242		-		-		-		242
Installment		-		-		-		-		-
Total	$	685	$	-	$	-	$	-	$	685

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

35

	As of September 30, 2023
New York and other states*:				30-59		60-89		90+
				Days		Days		Days
(dollars in thousands)	Current			Past Due		Past Due		Past Due	Total
Commercial:
Commercial real estate	$	-	$	-	$	-	$	-	$	-
Other		-		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		351		139		-		-		490
Home equity loans		-		-		-		-		-
Home equity lines of credit		50		-		-		-		50
Installment		-		-		-		-		-
Total	$	401	$	139	$	-	$	-	$	540

Florida:				30-59		60-89		90+
				Days		Days		Days
(dollars in thousands)	Current			Past Due		Past Due		Past Due	Total
Commercial:
Commercial real estate	$	-	$	-	$	-	$	-	$	-
Other		-		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		340		-		-		-		340
Home equity loans		-		-		-		-		-
Home equity lines of credit		-		-		-		-		-
Installment		-		-		-		-		-
Total	$	340	$	-	$	-	$	-	$	340

Total				30-59		60-89		90+
				Days		Days		Days
(dollars in thousands)	Current			Past Due		Past Due		Past Due	Total
Commercial:
Commercial real estate	$	-	$	-	$	-	$	-	$	-
Other		-		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		691		139		-		-		830
Home equity loans		-		-		-		-		-
Home equity lines of credit		50		-		-		-		50
Installment		-		-		-		-		-
Total	$	741	$	139	$	-	$	-	$	880

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

36

The following tables describes the financial effect of the modifications made to borrowers experiencing financial difficulty for the three and nine months ended September 30, 2024 and 2023:

For the three months ended:
	September 30, 2024		September 30, 2023
	Weighted		Weighted
New York and other states*:	Average		Average
	Payment		Payment
(dollars in thousands)	Delay (Months)		Delay (Months)
Commercial:
Commercial real estate		-		-
Other		-		-
Real estate mortgage - 1 to 4 family:		-		-
First mortgages		22		18
Home equity loans		-		-
Home equity lines of credit		12		-
Installment		-		-
Total		34		18

	Weighted		Weighted
Florida:	Average		Average
	Payment		Payment
(dollars in thousands)	Delay (Months)		Delay (Months)
Commercial:
Commercial real estate		-		-
Other		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		-		-
Home equity loans		9		-
Home equity lines of credit		-		-
Installment		-		-
Total		9		0

	Weighted		Weighted
	Average		Average
	Payment		Payment
(dollars in thousands)	Delay (Months)		Delay (Months)
Commercial:
Commercial real estate		-		-
Other		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		22		18
Home equity loans		9		-
Home equity lines of credit		12		-
Installment		-		-
Total		43		18

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

37

For the nine months ended:
	September 30, 2024		September 30, 2023
	Weighted		Weighted
New York and other states*:	Average		Average
	Payment		Payment
(dollars in thousands)	Delay (Months)		Delay (Months)
Commercial:
Commercial real estate		-		-
Other		-		-
Real estate mortgage - 1 to 4 family:		-		-
First mortgages		15		20
Home equity loans		-		-
Home equity lines of credit		18		18
Installment		-		-
Total		33		38

	Weighted		Weighted
Florida:	Average		Average
	Payment		Payment
(dollars in thousands)	Delay (Months)		Delay (Months)
Commercial:
Commercial real estate		-		-
Other		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		12		24
Home equity loans		9		-
Home equity lines of credit		-		-
Installment		-		-
Total		21		24

	Weighted		Weighted
	Average		Average
	Payment		Payment
(dollars in thousands)	Delay (Months)		Delay (Months)
Commercial:
Commercial real estate		-		-
Other		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		27		44
Home equity loans		9		-
Home equity lines of credit		18		18
Installment		-		-
Total		54		62

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

38

The addition of these loan modifications 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 loan modification was the borrower filing for bankruptcy protection. There were no loans that defaulted during the three and nine months ended September 30, 2024 and 2023 which had been classified as a loan modification within the prior twelve months.

In situations where the Bank considers a loan modification, management determines whether the borrower is experiencing financial difficulty by performing an evaluation of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.  This evaluation is performed under the Company’s underwriting policy.

Generally, the modification of the terms of loans was the result of the borrower filing for bankruptcy protection. Chapter 13 bankruptcies generally include the deferral of all past due amounts for a period of generally 60 months in accordance with the bankruptcy court order. In the case of Chapter 7 bankruptcies even though there is no modification of terms, the borrowers’ debt to the Company was discharged and they did not reaffirm the debt.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In situations involving a borrower filing for Chapter 13 bankruptcy protection, however, a loan is considered to be in payment default once it is 30 days contractually past due, consistent with the treatment by the bankruptcy court.

(6) Fair Value of Financial Instruments

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

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

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

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

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

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

39

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 charge-off 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. Loans individually evaluated are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

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 nine months ended September 30, 2024 and 2023.

Equity Securities: Included in other assets in the Statement of Financial Condition is the Company’s interest of in 3,264 Visa B-2 shares. The Company did not have any Visa B-2 or Visa C shares as of December 31, 2023.  The carrying value of Visa B-2 shares is nominal as of September 30, 2024. There is no carrying value of Visa C shares remaining as they were all sold in the third quarter of 2024. Upon future conversions of Visa B-2 to Visa C shares, the Company has determined that the Visa C shares value will be a Level 1 classification based on using the Visa Class A shares as evidence of orderly transactions between market participants for similar securities issued by Visa.

40

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

	Fair Value Measurements at
	September 30, 2024 Using:
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
(dollars in thousands)	Value		(Level 1)		(Level 2)		(Level 3)
U.S. government sponsored enterprises	$	90,588	$	-	$	90,588	$	-
State and political subdivisions		26		-		26		-
Mortgage backed securities and collateralized mortgage obligations - residential		222,841		-		222,841		-
Corporate bonds		54,327		-		54,327		-
Small Business Administration- guaranteed  participation securities		15,171		-		15,171		-
Other securities		701		-		701		-
Total securities available for sale	$	383,654	$	-	$	383,654	$	-

	Fair Value Measurements at
	December 31, 2023 Using:
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
(dollars in thousands)	Value		(Level 1)		(Level 2)		(Level 3)
Securities available for sale:
U.S. government sponsored enterprises	$	118,668	$	-	$	118,668	$	-
State and political subdivisions		26		-		26		-
Mortgage backed securities and collateralized mortgage obligations - residential		237,677		-		237,677		-
Corporate bonds		78,052		-		78,052		-
Small Business Administration- guaranteed participation securities		17,186		-		17,186		-
Other securities		680		-		680		-
Total securities available for sale	$	452,289	$	-	$	452,289	$	-

41

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

Fair Value Measurements at

September 30, 2024 Using:

Significant

Quoted Prices in

Other

Significant

Active Markets for

Observable

Unobservable

Carrying

Identical Assets

Inputs

Inputs

(dollars in thousands)

Value

(Level 1)

(Level 2)

(Level 3)

Valuation technique

Unobservable inputs

Range (Weighted Average)

Other real estate owned

$

2,503

$

-

$

-

$

2,503

Sales comparison approach

Adjustments for differences between comparable sales

1% - 1% (1%

)

Fair Value Measurements at

December 31, 2023 Using:

Significant

Quoted Prices in

Other

Significant

Active Markets for

Observable

Unobservable

Carrying

Identical Assets

Inputs

Inputs

(dollars in thousands)

Value

(Level 1)

(Level 2)

(Level 3)

Valuation technique

Unobservable inputs

Range (Weighted Average)

Other real estate owned

$

194

$

-

$

-

$

194

Sales comparison approach

Adjustments for differences between comparable sales

0% - 39% (20%

)

Other real estate owned that is carried at fair value less costs to sell was approximately $2.5 million at September 30, 2024 and consisted of residential and commercial real estate properties. There was no valuation charges included in earnings for the three and nine months ended September 30, 2024.

Of the total individually evaluated loans of $25.1 million at September 30, 2024, there are no loans that are collateral dependent and are carried at fair value measured on a non-recurring basis.  Due to the sufficiency of charge-offs taken on these loans and the adequacy of the underlying collateral, there were no specific valuation allowances for these loans during the three and nine months ended September 30, 2024.

Other real estate owned, which is carried at fair value less costs to sell, was approximately $194 thousand at December 31, 2023, and consisted of only residential real estate properties. A valuation charge of $143 thousand is included in earnings for the year ended December 31, 2023.

Of the total individually evaluated loans of $24.7 million at December 31, 2023, there are no loans that were collateral dependent and are carried at fair value measured on a non-recurring basis.  Due to the sufficiency of charge-offs taken on these loans and the adequacy of the underlying collateral, there were no specific valuation allowances for these loans at December 31, 2023.

42

In accordance with FASB Topic 825, Financial Instruments (“ASC 825”), the carrying amounts and estimated fair values of financial instruments, at September 30, 2024 and December 31, 2023 are as follows:

(dollars in thousands)			Fair Value Measurements at
	Carrying		September 30, 2024 Using:
	Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	522,965		522,965		-		-		522,965
Securities available for sale		383,654		-		383,654		-		383,654
Held to maturity securities		5,636		-		5,645		-		5,645
Federal Home Loan Bank stock		6,507		N/A		N/A		N/A		N/A
Net loans		5,020,906		-		-		4,594,539		4,594,539
Accrued interest receivable		14,500		668		1,453		12,379		14,500
Financial liabilities:
Demand deposits		753,878		753,878		-		-		753,878
Interest bearing deposits		4,510,313		2,557,678		1,942,819		-		4,500,497
Short-term borrowings		91,450		-		91,450		-		91,450
Accrued interest payable		3,526		201		3,325		-		3,526

(dollars in thousands)			Fair Value Measurements at
	Carrying		December 31, 2023 Using:
	Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	578,004		578,004		-		-		578,004
Securities available for sale		452,289		-		452,289		-		452,289
Held to maturity securities		6,458		-		6,396		-		6,396
Federal Reserve Bank and Federal
Home Loan Bank stock		6,203		N/A		N/A		N/A		N/A
Net loans		4,954,301		-		-		4,422,027		4,422,027
Accrued interest receivable		13,683		234		1,920		11,529		13,683
Financial liabilities:
Demand deposits		754,532		754,532		-		-		754,532
Interest bearing deposits		4,596,245		2,760,221		1,819,789		-		4,580,010
Short-term borrowings		88,990		-		88,990		-		88,990
Accrued interest payable		3,612		256		3,356		-		3,612

43

(7) Accumulated Other Comprehensive Loss

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

	Three months ended September 30, 2024
						Amount
				Other		reclassified			Other
				Comprehensive		from Accumulated			Comprehensive income-
	Balance at			income-Before		Other Comprehensive			Three months ended			Balance at
(dollars in thousands)	7/1/2024			Reclassifications		Loss			9/30/2024			9/30/2024
Net unrealized holding gain on securities available for sale, net of tax	$	(24,635	)		7,816		-			7,816			(16,819	)
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		13,476			-		-			-			13,476
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax		(3,109	)		-		(148	)		(148	)		(3,257	)
Accumulated other comprehensive income (loss), net of tax	$	(14,268	)		7,816		(148	)		7,668			(6,600	)

	Three months ended September 30, 2023
							Amount
				Other			reclassified			Other
				Comprehensive			from Accumulated			Comprehensive loss-
	Balance at			loss-Before			Other Comprehensive			Three months ended			Balance at
(dollars in thousands)	7/1/2023			Reclassifications			Loss			9/30/2023			9/30/2023
Net unrealized holding loss on securities available for sale, net of tax	$	(31,125	)		(5,212	)		-			(5,212	)		(36,337	)
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		7,588			-			-			-			7,588
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax		(2,675	)		-			(82	)		(82	)		(2,757	)
Accumulated other comprehensive loss, net of tax	$	(26,212	)		(5,212	)		(82	)		(5,294	)		(31,506	)

	Nine months ended September 30, 2024
						Amount
				Other		reclassified			Other Comprehensive
				Comprehensive		from Accumulated			income-
	Balance at			income-Before		Other Comprehensive			Nine months ended			Balance at
(dollars in thousands)	1/1/2024			Reclassifications		Income			9/30/2024			9/30/2024
Net unrealized holding loss on securities available for sale, net of tax	$	(23,899	)		7,080		-			7,080			(16,819	)
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		13,476			-		-			-			13,476
Net change in net actuarial gain and prior service cost on pension and postretirement benefit plans, net of tax		(2,814	)		-		(443	)		(443	)		(3,257	)
Accumulated other comprehensive income (loss), net of tax	$	(13,237	)		7,080		(443	)		6,637			(6,600	)

	Nine months ended September 30, 2023
							Amount
				Other			reclassified			Other
				Comprehensive			from Accumulated			Comprehensive loss-
	Balance at			loss-Before			Other Comprehensive			Nine months ended			Balance at
(dollars in thousands)	1/1/2023			Reclassifications			Income			9/30/2023			9/30/2023
Net unrealized holding gain on securities available for sale, net of tax	$	(32,271	)		(4,066	)		-			(4,066	)		(36,337	)
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		7,588			-			-			-			7,588
Net change in net actuarial gain and prior service credit on pension and postretirement benefit plans, net of tax		(2,511	)		-			(246	)		(246	)		(2,757	)
Accumulated other comprehensive loss, net of tax	$	(27,194	)		(4,066	)		(246	)		(4,312	)		(31,506	)

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The following represents the reclassifications out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023:

(dollars in thousands)	Three months ended						Nine months ended
	September 30,						September 30,
	2024			2023			2024			2023			Affected Line Item in Financial Statements
Amortization of pension and postretirement benefit items:
Amortization of net actuarial gain	$	203			115		$	608			343		Salaries and employee benefits
Amortization of prior service cost		(4	)		(4	)		(10	)		(10	)	Salaries and employee benefits
Income tax benefit		(51	)		(29	)		(155	)		(87	)	Income taxes
Net of tax		148			82			443			246
Total reclassifications, net of tax	$	148			82		$	443			246

(8) Revenue from Contracts with Customers

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The following table presents the Company’s sources of non-Interest Income for the three months and nine months ended September 30, 2024 and 2023. Items outside the scope of ASC 606 are noted as such.

(dollars in thousands)	Three months ended				Nine months ended
	September 30,				September 30,
	2024		2023		2024		2023
Non-interest income
Service Charges on Deposits
Overdraft fees	$	685	$	766	$	2,002	$	2,169
Other		608		515		1,639		1,601
Interchange Income		1,236		1,376		4,121		4,483
Net gains on equity securities (a)		23		-		1,383		-
Wealth management fees		2,044		1,627		5,469		4,813
Other (a)		335		290		811		775
Total non-interest income	$	4,931	$	4,574	$	15,425	$	13,841

(a) Not within the scope of ASC 606.

A description of how the Company’s revenue streams are accounted in accordance with ASC 606 are set forth below:

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

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

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

(9) Operating Leases

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

Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company’s leases do not provide an implicit rate, therefore the Company used its incremental collateralized borrowing rates commensurate with the underlying lease terms to determine present value of operating lease liabilities. Additionally, the Company does allocate the consideration between lease and non-lease components. The Company’s lease terms may include options to extend when it is reasonably certain that the Company will exercise that option.  Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease components, such as fair market value adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. As of September 30, 2024, the Company did not have any leases with terms of twelve months or less.

As of September 30, 2024 the Company did not have any leases for which any related construction had not yet started. At September 30, 2024 lease expiration dates ranged from seven months to 20 years and have a weighted average remaining lease term of 8.3 years. Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements. As mentioned above the leases generally also include variable lease components which include real estate taxes, insurance, and common area maintenance (“CAM”) charges in the annual rental payments.

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Other information related to leases was as follows:

(dollars in thousands)	Three months ended
	September 30,
	2024		2023
Operating lease cost	$	2,054	$	2,045
Variable lease cost		522		527
Total Lease costs	$	2,576	$	2,572

(dollars in thousands)	Nine months ended
	September 30,
	2024		2023
Operating lease cost	$	6,187	$	6,132
Variable lease cost		1,716		1,731
Total Lease costs	$	7,903	$	7,863

(dollars in thousands)	Nine months ended
	September 30,
	2024			2023
Supplemental cash flows information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6,383		$	6,268
Right-of-use assets obtained in exchange for lease obligations:		2,397			1,653
Weighted average remaining lease term	8.3 years			8.6 years
Weighted average discount rate		3.19	%		3.05	%

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Future minimum lease payments under non-cancellable leases as of September 30, 2024 were as follows:

(dollars in thousands)
Year ending
December 31,
2024(a)	$	2,141
2025		8,373
2026		7,385
2027		6,176
2028		4,988
Thereafter		18,355
Total lease payments	$	47,418
Less: Interest		5,949
Present value of lease liabilities	$	41,469

^(a) Excluding the nine months ended September 30, 2024.

A member of the Board of Directors has an ownership interest in five entities that own commercial real estate leased by the Company for use as branch locations. Total lease payments from the Company to those entities, which are included in the table above, owed at September 30, 2024, were $2.4 million, which includes interest of $254 thousand.

(10) Regulatory Capital Requirements

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy regulations and, additionally for banks, the prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory action. As of September 30, 2024, the Company and the Bank met all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.  If a bank is not classified as well capitalized, regulatory approval is required to accept brokered deposits.  If a bank is undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.  The federal banking agencies are required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution or its holding company.  Such actions could have a direct material effect on an institution’s or its holding company’s financial statements.  As of both September 30, 2024 and December 31, 2023, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  There are no conditions or events since that notification that management believes have changed the Bank’s category.

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The Bank and the Company reported the following capital ratios as of September 30, 2024 and December 31, 2023:

(Bank Only)									Minimum for
									Capital Adequacy plus
	As of September 30, 2024					Well			Capital Conservation
(dollars in thousands)	Amount		Ratio			Capitalized(1)			Buffer (1)(2)
Tier 1 leverage ratio		649,481		10.634	%		5.000	%		4.000	%
Common equity tier 1 capital		649,481		18.546			6.500			7.000
Tier 1 risk-based capital		649,481		18.546			8.000			8.500
Total risk-based capital		693,354		19.799			10.000			10.500

									Minimum for
									Capital Adequacy plus
	As of December 31, 2023					Well			Capital Conservation
(dollars in thousands)	Amount		Ratio			Capitalized(1)			Buffer (1)(2)
Tier 1 leverage ratio		636,327		10.428	%		5.000	%		4.000	%
Common equity tier 1 capital		636,327		18.280			6.500			7.000
Tier 1 risk-based capital		636,327		18.280			8.000			8.500
Total risk-based capital		679,924		19.532			10.000			10.500

(Consolidated)
						Minimum for
						Capital Adequacy plus
	As of September 30, 2024					Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer (1)(2)
Tier 1 leverage ratio		675,067		11.051	%		4.000	%
Common equity tier 1 capital		675,067		19.272			7.000
Tier 1 risk-based capital		675,067		19.272			8.500
Total risk-based capital		718,952		20.525			10.500

						Minimum for
						Capital Adequacy plus
	As of December 31, 2023					Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer (1)(2)
Tier 1 leverage ratio		657,968		10.780	%		4.000	%
Common equity Tier 1 capital		657,968		18.896			7.000
Tier 1 risk-based capital		657,968		18.896			8.500
Total risk-based capital		701,577		20.149			10.500

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

(2) The September 30, 2024 and December 31, 2023 common equity tier 1, tier 1 risk-based, and total risk-based capital ratios include a capital conservation buffer of 2.50 percent

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(11) New Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 expands reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. ASU 2023-07 implements a new requirement to disclose significant segment expenses regularly provided to the chief operating decision maker, expands certain annual disclosures to interim periods, clarifies that single reportable segment entities must apply Topic 280 in its entirety and permits more than one measure of segment profit or loss to be reported under certain conditions. ASU 2023-07 is effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the requirements of the expanded segment disclosures but does not currently expect the additional disclosures to have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 is focused on additional income tax disclosures and requires public business entities, on an annual basis, to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income by the applicable statutory income tax rate). ASU 2023-09 is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024, with early adoption permitted. While the Company is currently evaluating the impact applying this standard will have on its income tax disclosures, the adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements.

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Crowe LLP Independent Member Crowe Global

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors of TrustCo Bank Corp NY

Glenville, New York

Results of Review of Interim Financial Information

We have reviewed the consolidated statement of financial condition of TrustCo Bank Corp NY (the “Company”) as of September 30, 2024, and the related consolidated statements of income and comprehensive income for the three and nine-month periods ended September 30, 2024 and September 30, 2023 and the related changes in shareholders’ equity and cash flows for the nine-month periods ended September 30, 2024 and September 30, 2023, and the related notes (collectively referred to as the “interim financial information or statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statement of financial condition of the Company as of December 31, 2023, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 11, 2024, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of financial condition as of December 31, 2023, is fairly stated, in all material respects, in relation to the consolidated statement of condition from which it has been derived.

Basis for Review Results

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

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

	/s/ Crowe LLP
Boston, Massachusetts
November 8, 2024

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

Introduction

The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the three month and nine month periods ended September 30, 2024, with comparisons to the corresponding period in 2023, as applicable.  Unless otherwise indicated, net interest income and interest margin are presented in this discussion on a non-GAAP taxable equivalent basis.  For the periods presented, there is no difference between these measures and GAAP net interest income and GAAP net interest margin. The consolidated interim financial statements and related notes, as well as the Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 11, 2024 (the “2023 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 presentation.

Following this Management’s Discussion and Analysis are the “Distribution of Assets, Liabilities and Shareholders’ Equity: Interest Rates and Interest Differential” tables, which give a detailed breakdown of TrustCo’s average interest earning assets and interest bearing liabilities for the three and nine month periods ended September 30, 2024 and 2023.

Economic Overview

During the third quarter of 2024, financial markets got off to a good start as investors were gauging whether the Federal Reserve might lower interest rates, which it did by 50 basis points in September 2024. For the third quarter of 2024, the S&P 500 Index was up 5.5%, Nasdaq was up 2.6%, and the Dow Jones Industrial Average was up 8.2% compared to the second quarter of 2024.  The 10‑year Treasury bond averaged 3.95% during Q3 2024 compared to 4.45% in Q2 2024, a decrease of 50 basis points.  The 2‑year Treasury bond average rate decreased 79 basis points to 4.04%, which eased the inverted yield curve over the prior quarter.  The spread between the 10‑year and the 2-year Treasury bonds decreased from a -0.38% on average in Q2 2024 to -0.09% in Q3 2024.  Generally, steeper yield curves are favorable for portfolio mortgage lenders like TrustCo, and the table below illustrates the range of rate movements for both short term and longer-term rates.  The Federal Open Market Committee (“FOMC”) increased the target range for the Federal Funds rate eleven times in 2022 and 2023, by a total of 525 basis points, to a range of 5.25% to 5.50%, then lowered it in September 2024 by 50 basis points to a range of 4.75% to 5.00%.  All of the increases prior to 2024 were expressly made in response to inflationary pressures.  Spreads of most asset classes to the comparative treasury yield, including agency securities, corporates, municipals and mortgage-backed securities, continue to be down as compared to the levels seen before the pandemic.  Additionally, changes in rates and spreads continue to be affected by global economic concerns.

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		3 Month		2 Year		5 Year		10 Year		10 - 2 Year
		Yield (%)		Yield (%)		Yield (%)		Yield (%)		Spread (%)
Q3/23	Beg of Q3		5.43		4.87		4.13		3.81		-1.06
	Peak		5.61		5.12		4.67		4.61		-0.44
	Trough		5.44		4.59		3.93		3.75		-1.08
	End of Q3		5.55		5.03		4.60		4.59		-0.44
	Average in Q3		5.54		4.92		4.31		4.15		-0.77
Q4/23	Beg of Q4		5.55		5.03		4.60		4.59		-0.44
	Peak		5.63		5.19		4.95		4.98		-0.13
	Trough		5.40		4.20		3.78		3.79		-0.53
	End of Q4		5.40		4.23		3.84		3.88		-0.35
	Average in Q4		5.52		4.81		4.43		4.45		-0.36
Q1/24	Beg of Q1		5.40		4.23		3.84		3.88		-0.35
	Peak		5.49		4.73		4.36		4.34		-0.14
	Trough		5.42		4.14		3.80		3.87		-0.44
	End of Q1		5.46		4.59		4.21		4.20		-0.39
	Average in Q1		5.45		4.48		4.12		4.16		-0.33
Q2/24	Beg of Q2		5.46		4.59		4.21		4.20		-0.39
	Peak		5.52		5.04		4.72		4.70		-0.24
	Trough		5.41		4.65		4.22		4.20		-0.47
	End of Q2		5.50		4.71		4.32		4.32		-0.39
	Average in Q2		5.47		4.83		4.47		4.45		-0.38
Q3/24	Beg of Q3		5.50		4.71		4.32		4.32		-0.39
	Peak		5.47		4.77		4.44		4.48		0.26
	Trough		4.68		3.49		3.41		3.63		-0.35
	End of Q3		4.73		3.66		3.58		3.81		0.15
	Average in Q3		5.23		4.04		3.80		3.95		-0.09

The United States economy proved to be resilient in 2023 and has also seen improvements as we continue through 2024.  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.

Hurricane Helene made landfall along Florida’s “Big Bend” coast in September, 2024 ultimately impacting parts of the Southeastern United States. The impact of Hurricane Helene on TrustCo’s operations was not significant, and is not expected to be significant to our financial condition or results of operations. Hurricane Milton made landfall near Siesta Key, Florida in October 2024, bringing heavy rain, hurricane or tropical storm force winds, storm surge and power outages to portions of central Florida. All of our branches and office locations have re-opened for business, and damage from the storm was negligible. There were no significant impacts to banking operations. We are still in the process of finalizing our assessment of the potential impact of Hurricane Milton on our customers, credit portfolio, and future lending activity, although we do not expect it to have a significant impact.

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Management believes that TrustCo’s 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.  While we continue to adhere to prudent underwriting standards, should general housing prices and other economic measures, such as unemployment in the Company’s market areas, deteriorate as a result of continued elevated interest rates, financial sector instability, a potential or actual default on the federal debt 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.

Financial Overview

TrustCo recorded net income of $12.9 million, or $0.68 of diluted earnings per share, for the three months ended September 30, 2024, compared to net income of $14.7 million, or $0.77 of diluted earnings per share, in the same period in 2023.  Return on average assets was 0.84% and 0.96%, respectively, for the three months ended September 30, 2024 and 2023.  Return on average equity was 7.74% and 9.32%, respectively, for the three months ended September 30, 2024 and 2023.

The primary factors accounting for the change in net income for the three months ended September 30, 2024 compared to the same period of the prior year were:

• A decrease of $3.6 million, or 8.4%, in GAAP net interest income and taxable equivalent net interest income (non-GAAP) compared to the third quarter of 2023, primarily as a result of an increase in interest expense due to the current interest rate environment.

• An increase of $400 thousand in provision for credit losses for the third quarter of 2024 compared to the third quarter 2023 primarily as a result of loan growth.

• An increase of $357 thousand in noninterest income for the third quarter of 2024 compared to the third quarter 2023.  The increase was primarily driven by an increase in financial services income due to higher assets balances under management.

• A decrease of $1.3 million in noninterest expense for the third quarter of 2024 compared to the third quarter 2023 as a result of lower salaries and employee benefits due to a decrease in full time equivalent employees and lower employee benefits, as well as a decrease in other noninterest expense categories.

TrustCo recorded net income of $37.6 million, or $1.97 of diluted earnings per share, for the nine months ended September 30, 2024, compared to net income of $48.8 million, or $2.57 of diluted earnings per share, in the same period in 2023.  Return on average assets was 0.82% and 1.08%, respectively, for the nine months ended September 30, 2024 and 2023.  Return on average equity was 7.68% and 10.57%, respectively, for the nine months ended September 30, 2024 and 2023.

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The primary factors accounting for the change in net income for the nine months ended September 30, 2024 compared to the same period of the prior year were:

• A decrease of $20.2 million, or 15.2%, in GAAP net interest income and taxable equivalent net interest income (non-GAAP) compared to the first nine months of 2023, primarily as a result of an increase in interest expense due to the current interest rate environment.

• An increase of $1.7 million in provision for credit losses for the first nine months of 2024 compared to the first nine months of 2023 primarily as a result of loan growth.

• An increase of $1.6 million in noninterest income for the first nine months of 2024 compared to the first nine months of 2023.  The increase was primarily driven by a gain of $1.4 million based on the conversion privilege of the Visa Class C common stock as described below, an increase in financial services income due to higher assets balances under management, partially offset by a decrease in fees for services to customers.

• A decrease of $4.9 million in noninterest expense for the first nine months of 2024 compared to the first nine months of 2023 primarily as a result of lower salaries and employee benefits due to a decrease in full time equivalent employees and lower employee benefits, as well as a decrease in other noninterest expense.

Visa Exchange Offer

During the second quarter of 2024, Visa Inc. accepted the Company’s tender of its 6,528 shares of Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock.  As a result, during the second quarter of 2024, the Company marked it Visa Class C common stock to fair value and recorded an unrealized gain of $1.4 million. The Company then sold them all in the third quarter of 2024 and recorded an additional gain of $23 thousand, thus resulting in no remaining carrying value on the Company’s Statement of Financial Condition.  Once the Company is able to convert the remaining shares of Visa Class B-2 common stock to Visa Class C shares, the Company will mark these shares to fair value on a recurring basis using the Visa Class A shares as evidence of orderly transactions between market participants for similar securities issued by Visa.  The Company originally obtained the shares in 2008. The carrying value of Visa B-2 shares is nominal as of September 30, 2024.

Asset/Liability Management

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

TrustCo’s results are affected by a variety of factors including competitive and economic conditions in the specific markets in which the Company operates and, more generally, in the national economy, financial markets 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 2023 Form 10-K is a description of the effect interest rates had on the results for the year 2023 compared to 2022.  Many of the same market factors discussed in the 2023 Annual Report, including instability in the financial services sector and heightened global economic concerns, continued to have a significant impact on results through the third quarter of 2024.  In addition, as the fourth quarter of 2024 progresses, the potential changes in regulatory and economic policy following the U.S. presidential election could give rise to interest rate volatility.

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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.  As discussed above, the FOMC increased the target range for the federal funds rate eleven times in 2022 and 2023 by a total of 525 basis points, to a range of 5.25% to 5.50% by the end of 2023.  In September 2024 the FOMC met and lowered the federal funds rate by 50 basis points, to a range of 4.75% to 5.00% where it remains as of September 30, 2024.

The interest rate on the 10-year Treasury bond and other long-term interest rates have significant influence on the rates for new residential real estate loans and longer term investments.  These changes in interest rates have an effect on the Company relative to the interest income on loans, securities, and Federal Funds sold and other short-term instruments as well as the interest expense on deposits and borrowings.  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.  The Company establishes rates that management determines are appropriate in light of the long-term nature of residential real estate loans while remaining competitive.  Higher market interest rates also generally increase the value of retail deposits.

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 decreased 50 basis points, on average, during the third quarter of 2024 compared to the second quarter of 2024 and decreased 20 basis points as compared to the third quarter of 2023.

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While TrustCo has been affected by changes in financial markets over time, management believes that 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.  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.  Management believes that the Company has significant capacity to grow its balance sheet given its extensive branch network and it expects that growth to be profitable.  The current interest rate environment, however, has narrowed the margin on incremental balance sheet expansion.  While the Company has not changed its fundamental long-term strategy in regard to utilizing its excess capacity, management continually evaluates changing conditions and may seek to limit growth or reduce the size of the balance sheet if its analysis indicates that doing so would be beneficial.

For the third quarter of 2024, the net interest margin was 2.61%, down 24 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 $28.7 million and the average yield decreased 10 basis points in the third quarter of 2024 compared to the same period in 2023, resulting in less interest income.

• The average balance of securities available for sale decreased by $80.5 million and the average yield increased 27 basis points to 2.51%.  The increase in the average yield was a result of higher yields on investments purchased during 2023 and 2024 as well as maturities of lower yielding securities over the same period.  The increase in the yield was not enough to offset the decrease in the average balance which resulted in less interest income.

• The average loan portfolio grew by $127.0 million to $5.05 billion and the average yield increased 23 basis points to 4.12% in the third quarter of 2024 compared to the same period in 2023.  The average yield increased primarily as a result of higher rates on loan originations as a result of the current interest rate environment.

• The average balance of interest bearing liabilities increased $27.7 million and the average rate paid increased 61 basis points to 1.94% in the third quarter of 2024 compared to the same period in 2023.

During the third quarter of 2024, the Company continued to focus on its strategy to expand the loan portfolio by offering competitive interest rates.  Management believes the TrustCo residential real estate loan product is very competitive compared to local and national competitors.  Competition remains strong in the Company’s market areas.

For the nine months ended September 30, 2024, the net interest margin was 2.52%, down 49 basis points versus the prior year.  The nine month results reflect the following significant factors:

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• The average balance of Federal Funds sold and other short-term investments decreased by $50.6 million and the average yield increased 40 basis points for the first nine months of 2024 compared to the same period in 2023.  The increase in the yield was not enough to offset the decrease in the average balance which resulted in less interest income.

• The average balance of securities available for sale decreased by $62.5 million and the average yield increased 84 basis points to 2.53% for the first nine months of 2024 compared to the same period in 2023.  The increase in the average yield was a result of higher yields on investments purchased during 2023 and 2024 as well as maturities of lower yielding securities over the same period.  The increase in the yield was not enough to offset the decrease in the average balance which resulted in less interest income.

• The average loan portfolio grew by $185.7 million to $5.03 billion and the average yield increased 24 basis points to 4.05% for the first nine months of 2024 compared to the same period in 2023.  The average yield increased primarily as a result of higher rates on loan originations as a result of the current interest rate environment.

• The average balance of interest bearing liabilities increased $106.7 million and the average rate paid increased 96 basis points to 1.97% for the first nine months of 2024 compared to the same period in 2023.

The strategy on the funding side of the balance sheet was to offer competitive core deposit products coupled with short term time accounts.  This strategy has sustained TrustCo’s strong liquidity position and continues to allow us to cross sell products to new and existing relationships and take advantage of opportunities as they arise.

Earning Assets

Total average interest earning assets increased from $5.92 billion in the third quarter of 2023 to $5.94 billion in the same period of 2024 with an average yield of 4.11% in the third quarter of 2024 and 3.88% in the third quarter of 2023.  The mix of assets invested in Federal Funds sold and other short-term investments and securities available for sale decreased while loans increased over the prior year period.   Interest income on average earning assets increased from $57.6 million in the third quarter of 2023 to $61.1 million in the third quarter of 2024, on a tax equivalent basis.  This increase was primarily driven by an increase in interest income on loans due to higher interest rates on loan originations over the last year and variable rate loans repricing upwards, which resulted from the continued increases in the Federal Funds target rate throughout 2023 before it was reduced in September 2024.

Loans

The average balance of loans was $5.05 billion in the third quarter of 2024 and $4.92 billion in the comparable period in 2023, and the yield on loans was up 23 basis points to 4.12%.  Interest income on loans was $52.1 million in the third quarter of 2024 up $4.2 million from the same period in 2023.  The increase in the yield on loans is a result of the higher interest rate environment during the third quarter.

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Compared to the third quarter of 2023, the average balance of residential mortgage loans, home equity lines of credit, and commercial loans all increased.  The average balance of residential mortgage loans was $4.38 billion in the third quarter of 2024 compared to $4.33 billion in 2023, an increase of 1.2%.  The average yield on residential mortgage loans increased by 18 basis points to 3.82% in the third quarter of 2024 compared to 2023.

TrustCo actively markets the residential loan products within its market territories.  The prolonged elevated level of higher interest rates has slowed lending across all markets we serve.  As long term interest rates decrease we would expect the volume of lending to increase as rates become more attractive for existing mortgage customers.  Mortgage loan rates are affected by a number of factors including rates on Treasury securities, the Federal Funds target 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, and no escrow or mortgage insurance requirements for qualified borrowers.  Assuming a change 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, increased $18.1 million to an average balance of $279.2 million in the third quarter of 2024 compared to the same period in the prior year.  The average yield on this portfolio was up 24 basis points to 5.45% compared to the prior year period, primarily as a result of the continued elevated interest rates on new originations and variable rate loans repricing. The Company has sought to remain selective in underwriting commercial loans in pursuit of a favorable risk/reward balance.

The average yield on home equity credit lines increased 41 basis points to 6.53% during the third quarter of 2024 compared to the year earlier period. The average balances of home equity credit lines increased 18.7% to $380.4 million in the third quarter of 2024 as compared to the prior year.

Securities Available for Sale

The average balance of the securities available for sale portfolio for the third quarter of 2024 was $409.3 million compared to $489.8 million for the comparable period in 2023.  The decreasing balance reflects routine paydowns, calls and maturities, partially offset by new investment purchases.  The average yield was 2.51% for the third quarter of 2024 compared to 2.24% for the third quarter of 2023.  The increase in average yield is a result of higher yields on bonds purchased as well as lower yielding bonds maturing since the prior year quarter.    This portfolio is primarily comprised of agency issued residential mortgage backed securities, bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank, and Freddie Mac), Small Business Administration participation certificates, corporate bonds and municipal bonds.  These securities are recorded at fair value with any adjustment in fair value included in other comprehensive loss, net of tax.

The net unrealized loss in the available for sale securities portfolio was $22.7 million as of September 30, 2024 compared to a net unrealized loss of $32.2 million as of December 31, 2023.  The net unrealized losses in the portfolio is the result of changes in market interest rate levels.

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Held to Maturity Securities

The average balance of held to maturity securities was $5.8 million for the third quarter of 2024 compared to $6.9 million in the third quarter of 2023.  The decrease in balances reflects routine paydowns.  No new securities were added to this portfolio during the period.  The average yield was 4.29% for the third quarter of 2024 up from 4.22% for the year earlier period.  TrustCo expects to hold the securities in this portfolio until they mature or are called.

The net unrecognized gain in the held to maturity securities portfolio was $9 thousand as of September 30, 2024 compared to a net unrecognized loss of $62 thousand as of December 31, 2023.  The increase in the net unrecognized gain in the portfolio is the result of changes in market interest rate levels.

As of September 30, 2024, this portfolio consisted solely of agency issued residential 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 average balance of Federal Funds sold and other short‑term investments was $465.9 million for the third quarter of 2024 compared to $494.6 million in the third quarter of 2023.  The yield was 5.27% for the third quarter of 2024 and 5.37% for the comparable period in 2023.  Consequently, interest income from this portfolio decreased $514 thousand from $6.7 million in 2023 to $6.2 million in 2024.

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 $50.0 million to $4.50 billion for the third quarter of 2024 versus the third quarter in the prior year, and the average rate paid increased from 1.34% for 2023 to 1.96% for 2024.  Total interest expense on these deposits increased from $15.1 million to $22.2 million in the third quarter of 2024 compared to the year earlier period.  From the third quarter of 2023 to the third quarter of 2024, interest bearing checking account average balances were down 4.8%, certificates of deposit average balances were up 25.8%, non-interest demand average balances were down 4.5%, average savings balances decreased 12.5% and money market balances were down 20.1%.  Overall, average balances are up from a year ago as we continue to encourage customers to retain their funds in the expanded product offerings of the Bank through aggressive marketing and product differentiation.

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At September 30, 2024, the maturity of total time deposits is as follows:

(dollars in thousands)
Under 1 year	$	1,843,170
1 to 2 years		14,060
2 to 3 years		93,539
3 to 4 years		1,127
4 to 5 years		691
Over 5 years		48
	$	1,952,635

As of September 30, 2024 and December 31, 2023, approximately $1.05 billion and $1.03 billion, respectively, of our deposit portfolio were uninsured. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.

Average short-term borrowings for the third quarter were $87.7 million in 2024 compared to $110.0 million in 2023.  The average rate remained the same at 0.88% during this time period.  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 institution.  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.  As of September 30, 2024 the Company also has borrowing capacity of $930.2 million available with the FHLBNY.  The borrowings capacity is secured by the loans pledged by the Company.  As of September 30, 2024 and December 31, 2023, the Company had no outstanding borrowings with the FHLBNY.

Net Interest Income

Taxable equivalent net interest income decreased by $3.6 million to $38.7 million in the third quarter of 2024 compared to the same period in 2023.  The net interest spread was down 38 basis points to 2.17% in the third quarter of 2024 compared to the same period in 2023. As previously noted, the net interest margin was also down 24 basis points to 2.61% for the third quarter of 2024 compared to the same period in 2023.  The Bank experienced some margin compression as funding shifted from demand deposits and savings to higher rate time deposits during the rising interest rate market. Management notes that margin compression has eased over the last quarter as maturing time deposits have been repriced lower due to the recent rate cut by the FRB.  The Company has seen the erosion of margin stop when comparing the increase of net interest income to the prior quarter and management believes that we have reached the bottom of this rate cycle.  Taxable equivalent net interest income has increased by $883 thousand as compared to the second quarter of 2024, and net interest margin has also increased 8 basis points compared to the second quarter of 2024. The Federal Reserve’s decision regarding whether to further cut or hold rates in the upcoming meetings will have an effect on the Company’s ability to continue to decrease deposit costs which will continue to help margin in future quarters. During the second and third quarters of 2024, the Company has been able to lower the rates offered on our time deposits while continuing to substantially retain that product. This is expected bring down the cost of time deposits in future periods.

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Taxable equivalent net interest income decreased by $20.2 million to $113.0 million in the first nine months of 2024 compared to the same period in 2023.  The net interest spread was down 70 basis points to 2.08% in the first nine months of 2024 compared to the same period in 2023.  Net interest margin was down 49 basis points to 2.52% for the first nine months of 2024 compared to the same period in 2023.

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 September 30, 2024:

Nonperforming loans and foreclosed real estate: Total NPLs and non-accrual loans were $19.4 million at September 30, 2024 compared to $17.7 million at December 31, 2023. There were no loans at September 30, 2024 and December 31, 2023 that were past due 90 days or more and still accruing interest.  The coverage ratio, or allowance for credit losses on loans to NPLs, was 256.9% at September 30, 2024 compared to 275.0% at December 31, 2023.

At September 30, 2024, nonperforming loans primarily include a mix of commercial and residential loans.  Of total nonperforming loans of $19.4 million at September 30, 2024, $18.5 million were residential real estate loans, $780 thousand were commercial loans and mortgages and $168 thousand were installment loans, compared to $16.6 million, $850 thousand and $166 thousand, respectively, at December 31, 2023.

A significant percentage of nonperforming loans are residential real estate loans, which are historically lower-risk than most other types of loans.  Net chargeoffs were $104 thousand on residential real estate loans (including home equity lines of credit) for the third quarter of 2024 compared to net recoveries of $26 thousand for the third quarter of 2023.  Management believes that these loans have been appropriately written down where required.

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

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The Company originates loans throughout its branch franchise area.  At September 30, 2024, 64.5% of its gross loan portfolio balances were in New York State and the immediately surrounding areas (including New Jersey, Vermont and Massachusetts), and 35.5% were in Florida.  Those figures compare to 65.1% and 34.9%, respectively, at December 31, 2023.

Economic conditions vary widely by geographic location.  As a percentage of the total nonperforming loans as of September 30, 2024, 18.0% were to Florida borrowers, compared to 82.0% to borrowers in New York and surrounding areas.  For the three months ended September 30, 2024, New York and surrounding areas experienced net charge-offs of approximately $180 thousand and Florida experienced net chargeoffs of $42 thousand for the third quarter of 2024.

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 September 30, 2024, there were no other loans classified for regulatory purposes that management reasonably expects will materially impact future operating results, liquidity, or capital resources.

Loans individually evaluated for impairment are non-accrual loans delinquent greater than 180 days, non-accrual commercial loans, as well as loans classified as loan modifications.   There were $882 thousand of commercial mortgages and commercial loans classified as individually evaluated as of September 30, 2024 compared to $957 thousand classified as individually evaluated at December 31, 2023.  There were $24.0 million of individually evaluated residential loans at September 30, 2024 compared to $23.6 million classified as individually evaluated at December 31, 2023.

As of September 30, 2024 and December 31, 2023, the Company’s loan portfolio did not include any subprime mortgages or loans acquired with deteriorated credit quality.

At September 30, 2024 there was $2.5 million of foreclosed real estate compared to $194 thousand at December 31, 2023.

Allowance for credit losses on loans: As of September 30, 2024, the Company utilized the Baseline scenario model of Moody’s economic scenarios and considered the uncertainty associated with the assumptions in the baseline scenario, including continued actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential impact of those actions, the conflicts in the Middle East and Russia-Ukraine and the magnitude of the resulting market disruptions, and the potential impact of persistent high inflation on the economy. Outcomes in any or all of these factors could differ from the baseline scenario utilized, and the Company incorporated qualitative considerations reflecting the risk of uncertain economic conditions, and for additional dimensions of risk that may not be captured in the quantitative model.

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In the third quarter of 2024, the Company recorded a provision for credit losses of $500 thousand, which is the result of a provision for credit losses on loans of $400 thousand, and provision for credit losses on unfunded commitments of $100 thousand.  The increase in the ACLL during the third quarter of 2024 was primarily a result of loan growth.  The increase in the provision for credit losses on unfunded commitments is a result of a corresponding increase in unfunded loan commitments.  In the third quarter of 2023, the Company recorded a provision for credit losses of $100 thousand, which includes a provision for credit losses on loans of $300 thousand as a result of continued growth in the loan portfolio partially offset by a sustained low level of NPLs and charge-offs, and a benefit for credit losses on unfunded commitments of $200 thousand as a result of a corresponding decrease in unfunded loan commitments.

See Note 5 of the consolidated interim financial statements for additional discussion related the process for determining the provision for credit losses.

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

(dollars in thousands)	As of September 30, 2024					As of December 31, 2023
	Amount		Percent of Loans to Total Loans			Amount		Percent of Loans to Total Loans
Commercial	$	3,150		5.19	%	$	2,519		5.05	%
Real estate - construction		277		0.49	%		291		0.58	%
Real estate mortgage - 1 to 4 family		40,859		86.27	%		40,745		87.09	%
Home equity lines of credit		5,458		7.76	%		4,805		6.94	%
Installment Loans		206		0.29	%		218		0.34	%
	$	49,950		100.00	%	$	48,578		100.00	%

At September 30, 2024, the allowance for loan losses was $50.0 million, compared to $47.2 million at September 30, 2023 and $48.6 million at December 31, 2023.  The allowance represents 0.99% of the loan portfolio as of September 30, 2024, 0.97% at December 31, 2023, and 0.95% at September 30, 2023.

During the third quarter of 2024, there were $65 thousand of commercial loan charge-offs, $194 thousand of residential loan charge-offs, and $59 thousand of consumer loan charge-offs, compared to no commercial loan charge-offs, $27 thousand of residential loan charge-offs, and $23 thousand of consumer loan charge-offs in the third quarter of 2023.  During the third quarter of 2024 there were no commercial loan recoveries, $90 thousand of residential mortgage recoveries, and $6 thousand for consumer loan recoveries, compared to no commercial loan recoveries, $53 thousand of residential mortgage recoveries, and $9 thousand for consumer loan recoveries in the third quarter of 2023.

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Liquidity and Interest Rate Sensitivity

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

The Company uses an industry standard external model as the primary tool to identify, quantify and project changes in interest rates taken both from industry sources and internally generated data including prepayment speeds 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 September 30, 2024 are referenced below. The base case (current rates) scenario shows the present estimate of the fair value of capital assuming no change in the operating environment or operating strategies and no change in interest rates from those existing in the marketplace as of September 30, 2024.

The following table indicates the impact on the fair value of capital assuming interest rates were to instantaneously increase or decrease by 100 bp, 200 bp, 300 bp and 400 bp.

As of September 30, 2024	Estimated Percentage of Fair value of Capital to Fair value of Assets
+400 BP		20.10	%
+300 BP		20.40
+200 BP		20.70
+100 BP		22.30
Current rates		22.80
-100 BP		22.20
-200 BP		20.70
-300 BP		18.50
-400 BP		14.40

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Noninterest Income

Total noninterest income for the third quarter of 2024 was $4.9 million compared to $4.6 million in the third quarter of 2023.  Financial Services income was up $417 thousand to $2.0 million in the third quarter of 2024 as compared to the year-ago period, primarily as a result of higher market values of assets under management.  The fair value of assets under management was $1.2 billion at September 30, 2024, $967 million as of December 31, 2023, and $902 million at September 30, 2023.  Fees for services to customers were down $108 thousand over the same period in the prior year, primarily as a result of less interchange income.

For the nine months ended September 30, 2024 total noninterest income was $15.4 million, up $1.6 million compared to the prior year period.  The increase is primarily the result of a gain of $1.4 million recorded on the Visa Class C Common stock exchange as previously discussed, and an increase in financial services income due to higher market values of assets under management, partially offset by a decrease in fees for services to customers driven by less interchange income.

Noninterest Expenses

Total noninterest expenses were $26.2 million for the three months ended September 30, 2024, compared to $27.5 million for the three months ended September 30, 2023.  Significant changes included a $259 thousand decrease in salaries and employee benefits, a $166 thousand decrease in equipment expense, a $169 thousand decrease in outsourced services, a $247 decrease in advertising expense, and a $553 thousand decrease in other expense, partially offset by a $146 thousand increase in professional service. Full time equivalent headcount was 764 as of September 30, 2023, 750 as of December 31, 2023, and 735 as of September 30, 2024.  Changes in headcount represent normal fluctuations.

Total noninterest expenses were $77.6 million for the nine months ended September 30, 2024, compared to $82.5 million for the nine months ended September 30, 2023.  Significant changes included an decrease of $2.7 million in salaries and employee benefits primarily as a result of fewer employees and lower employee benefits.  Other significant changes were a decrease in equipment expense of $273 thousand, a decrease in advertising expense of $281 thousand, a decrease in other expense of $1.7 million, a decrease in FDIC and other insurance of $212 thousand, and a decrease in other real estate expense, net, of $242 thousand partially offset by an increase in professional services of $209 thousand and an increase in outsourced services of $300 thousand.

Income Taxes

In the third quarter of 2024, TrustCo recognized income tax expense of $4.0 million compared to $4.6 million for the third quarter of 2023.  The effective tax rates were 23.8% and 23.7% for the third quarters of 2024 and 2023, respectively.  For the first nine months, income taxes were $11.7 million and $15.9 million in 2024 and 2023, respectively. The effective tax rate was 23.8% and 24.6% for 2024 and 2023, respectively.

Capital Resources

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

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

Total shareholders’ equity at September 30, 2024 was $669.0 million compared to $645.3 million at December 31, 2023. TrustCo declared a dividend of $0.36 per share in the third quarter of 2024.  This results in a dividend payout ratio of 53.16% based on third quarter 2024 earnings of $12.9 million.

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

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The Bank and the Company reported the following capital ratios as of September 30, 2024 and December 31, 2023:

(Bank Only)						Well Capitalized(1)			Minimum for Capital Adequacy plus Capital Conservation Buffer (1)(2)
	As of September 30, 2024
(dollars in thousands)	Amount		Ratio
Tier 1 leverage ratio		649,481		10.634	%		5.000	%		4.000	%
Common equity tier 1 capital		649,481		18.546			6.500			7.000
Tier 1 risk-based capital		649,481		18.546			8.000			8.500
Total risk-based capital		693,354		19.799			10.000			10.500

(dollars in thousands)	As of December 31, 2023					Well			Minimum for Capital Adequacy plus Capital Conservation
	Amount		Ratio			Capitalized(1)			Buffer (1)(2)
Tier 1 leverage ratio		636,327		10.428	%		5.000	%		4.000	%
Common equity tier 1 capital		636,327		18.280			6.500			7.000
Tier 1 risk-based capital		636,327		18.280			8.000			8.500
Total risk-based capital		679,924		19.532			10.000			10.500

(Consolidated)

						Minimum for Capital Adequacy plus Capital Conservation Buffer (1)(2)
	As of September 30, 2024
(dollars in thousands)	Amount		Ratio
Tier 1 leverage ratio		675,067		11.051	%		4.000	%
Common equity tier 1 capital		675,067		19.272			7.000
Tier 1 risk-based capital		675,067		19.272			8.500
Total risk-based capital		718,952		20.525			10.500

						Minimum for Capital Adequacy plus Capital Conservation Buffer (1)(2)
	As of December 31, 2023
(dollars in thousands)	Amount		Ratio
Tier 1 leverage ratio		657,968		10.780	%		4.000	%
Common equity Tier 1 capital		657,968		18.896			7.000
Tier 1 risk-based capital		657,968		18.896			8.500
Total risk-based capital		701,577		20.149			10.500

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

(2) The September 30, 2024 and December 31, 2023 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 September 30, 2024, the consolidated equity to total assets ratio was 10.95%, compared to 10.46% at December 31, 2023 and 10.31% at September 30, 2023.

As of September 30, 2024, the capital levels of both TrustCo and the Bank exceeded the minimum standards, including with the fully phased-in capital conservation buffer taken into account.

Under the Office of the Comptroller of the Currency’s (“OCC”) “prompt corrective action” regulations, a bank is deemed to be “well capitalized” when its CET1, Tier 1, total risk-based and leverage capital ratios are at least 7%, 8.5%, 10.5% and 5%, respectively.  A bank is deemed to be “adequately capitalized” or better if its capital ratios meet or exceed the minimum federal regulatory capital requirements, and “undercapitalized” if it fails to meet these minimal capital requirements.  A bank is “significantly undercapitalized” if its CET1, Tier 1, total risk-based and leverage capital ratios fall below 3%, 4%, 6% and 3%, respectively and “critically undercapitalized” if the institution has a ratio of tangible equity to total assets that is equal to or less than 2%.  At September 30, 2024 and 2023, Trustco Bank met the definition of “well capitalized.”

68

As noted, the Company’s dividend payout ratio was 53.16% of net income for the third quarter of 2024 and 46.65% of net income for the third quarter of 2023. The per-share dividend paid in the third quarter of 2024 and 2023 was $0.36 for both years.  The Company’s ability to pay dividends to its shareholders is dependent upon the ability of the Bank to pay dividends to the Company. The payment of dividends by the Bank to the Company is subject to continued compliance with minimum regulatory capital requirements. The OCC may disapprove a dividend if the Bank would be undercapitalized following the distribution; the proposed capital distribution raises safety and soundness concerns; or the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

TrustCo maintains a dividend reinvestment plan (“DRP”) with approximately 6,416 participants. The DRP allows participants to reinvest dividends in shares of the Company. The DRP also allows for additional purchases by participants and has a discount feature (up to a 5% for safe harbor provisions) that can be activated by management as a tool to raise capital. To date, the discount feature has not been utilized.

Share Repurchase Program

On March 29, 2024 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 nine months ended September 30, 2024, the Company repurchased a total of 14,000 shares at an average price per share of $26.68 for a total of $374,000 under its Board authorized share repurchase program.  There were no share repurchases during the third quarter of 2024.

Critical Accounting Policies and Estimates

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 make estimates and 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 nine months ended September 30, 2024, there were no significant changes to our critical accounting policies and estimates as described in the financial statements contained in the 2023 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.

69

TrustCo Bank Corp NY

Management’s Discussion and Analysis

STATISTICAL DISCLOSURE

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

INTEREST RATES AND INTEREST DIFFERENTIAL

The following table summarizes the component distribution of the average balance sheet, related interest income and expense and the average annualized yields on interest earning assets and annualized rates on interest bearing liabilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Nonaccrual loans are included in loans for this analysis. The average balances of securities available for sale and held to maturity are calculated using amortized costs for these securities.  Included in the average balance of shareholders’ equity is the unrealized loss, net of tax, in the available for sale portfolio of $32.3 million in 2024 and $33.1 million in 2023.  The subtotals contained in the following table are the arithmetic totals of the items contained in that category.  Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and rate) based on the percentage relationship of such variances to each other.

(dollars in thousands)	Three months ended September 30, 2024								Three months ended September 30, 2023
	Average			Interest		Average			Average			Interest		Average			Change in			Variance			Variance
	Balance					Rate			Balance					Rate			Interest			Balance			Rate
																	Income/			Change			Change
Assets																	Expense
Securities available for sale:
U. S. government sponsored enterprises	$	95,073		$	718		3.02	%	$	119,406		$	672		2.25	%	$	46		$	(669	)	$	715
Mortgage backed securities and collateralized mortgage obligations-residential		241,792			1,397		2.29	%		269,535			1,485		2.19	%		(88	)		(428	)		340
State and political subdivisions		26			-		6.75	%		34			-		6.74	%		-			-			-
Corporate bonds		55,041			361		2.63	%		80,331			473		2.36	%		(112	)		(402	)		290
Small Business Administration-guaranteed participation securities		16,663			90		2.15	%		19,801			107		2.15	%		(17	)		(17	)		-
Other		701			2		1.14	%		686			2		1.17	%		-			-			-
Total securities available for sale		409,296			2,568		2.51	%		489,793			2,739		2.24	%		(171	)		(1,516	)		1,345
Federal funds sold and other short-term Investments		465,922			6,174		5.27	%		494,597			6,688		5.37	%		(514	)		615			(1,129	)
Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential		5,779			62		4.29	%		6,877			73		4.22	%		(11	)		(19	)		8
Total held to maturity securities		5,779			62		4.29	%		6,877			73		4.22	%		(11	)		(19	)		8
Federal Reserve Bank and Federal Home Loan Bank stock		6,507			153		9.41	%		6,203			131		8.45	%		22			7			15
Commercial loans		279,199			3,807		5.45	%		261,061			3,398		5.21	%		409			243			166
Residential mortgage loans		4,375,641			41,811		3.82	%		4,325,219			39,321		3.64	%		2,490			463			2,027
Home equity lines of credit		380,422			6,245		6.53	%		320,446			4,946		6.12	%		1,299			958			341
Installment loans		14,443			249		6.87	%		15,959			256		6.37	%		(7	)		(92	)		85
Loans, net of unearned income		5,049,705			52,112		4.12	%		4,922,685			47,921		3.89	%		4,191			1,572			2,619
Total interest earning assets		5,937,209			61,069		4.11	%		5,920,155			57,552		3.88	%		3,517			659			2,858
Allowance for credit losses on loans		(49,973	)							(47,077	)
Cash & non-interest earning assets		187,166								172,523
Total assets	$	6,074,402							$	6,045,601
Liabilities and shareholders’ equity
Deposits:
Interest bearing checking accounts		1,000,333			311		0.12	%	$	1,050,313		$	102		0.04	%		209			(33	)		242
Money market accounts		499,408			2,154		1.72	%		625,031			2,384		1.51	%		(230	)		(1,659	)		1,429
Savings		1,122,673			770		0.27	%		1,282,641			639		0.20	%		131			(443	)		574
Time deposits		1,880,021			18,969		4.01	%		1,494,402			11,962		3.18	%		7,007			3,463			3,544
Total interest bearing deposits		4,502,435			22,204		1.96	%		4,452,387			15,087		1.34	%		7,117			1,328			5,789
Short-term borrowings		87,677			194		0.88	%		110,018			244		0.88	%		(50	)		(51	)		1
Total interest bearing liabilities		4,590,112			22,398		1.94	%		4,562,405			15,331		1.33	%		7,067			1,277			5,790
Demand deposits		742,164								776,885
Other liabilities		80,502								81,411
Shareholders’ equity		661,624							$	624,900
Total liabilities and shareholders’ equity	$	6,074,402								6,045,601
Net interest income, tax equivalent					38,671								42,221				$	(3,550	)	$	(618	)	$	(2,932	)
Net interest spread							2.17	%							2.55	%
Net interest margin (net interest income to total interest earning assets)							2.61	%							2.85	%
Tax equivalent adjustment					-								-
Net interest income				$	38,671							$	42,221

70

TrustCo Bank Corp NY

Management’s Discussion and Analysis

STATISTICAL DISCLOSURE

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

INTEREST RATES AND INTEREST DIFFERENTIAL

The following table summarizes the component distribution of the average balance sheet, related interest income and expense and the average annualized yields on interest earning assets and annualized rates on interest bearing liabilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Nonaccrual loans are included in loans for this analysis. The average balances of securities available for sale and held to maturity are calculated using amortized costs for these securities.  Included in the average balance of shareholders’ equity is the unrealized loss, net of tax, in the available for sale portfolio of $28.2 million in 2024 and $30.9 million in 2023.  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, 2024							Nine months ended September 30, 2023
	Average			Interest		Average		Average			Interest		Average		Change in			Variance			Variance
	Balance					Rate		Balance					Rate		Interest			Balance			Rate
															Income/			Change			Change
Assets															Expense
Securities available for sale:
U. S. government sponsored enterprises	$	111,570		$	2,533	3.03	%	$	120,243		$	2,055	2.28	%	$	478		$	(238	)	$	716
Mortgage backed securities and collateralized mortgage obligations-residential		250,343			4,342	2.31	%		278,252			4,613	2.21	%		(271	)		(575	)		304
State and political subdivisions		26			1	6.80	%		34			1	6.74	%		-			-			-
Corporate bonds		61,221			1,199	2.61	%		83,732			1,510	2.41	%		(311	)		(498	)		187
Small Business Administration-guaranteed participation securities		17,438			284	2.17	%		20,876			335	2.14	%		(51	)		(59	)		8
Other		697			7	1.34	%		686			7	1.02	%		-			-			-
Total securities available for sale		441,295			8,366	2.53	%		503,823			8,521	1.69	%		(155	)		(1,370	)		1,215
Federal funds sold and other short-term Investments		489,934			19,818	5.40	%		540,570			20,213	5.00	%		(395	)		(2,556	)		2,161
Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential		6,053			195	4.29	%		7,205			226	4.18	%		(31	)		(40	)		9
Total held to maturity securities		6,053			195	4.29	%		7,205			226	4.18	%		(31	)		(40	)		9
Federal Reserve Bank and Federal Home Loan Bank stock		6,350			452	9.49	%		5,957			351	5.89	%		101			10			91
Commercial loans		278,981			11,232	5.37	%		249,738			9,716	5.19	%		1,516			1,169			347
Residential mortgage loans		4,364,821			123,046	3.76	%		4,269,494			114,227	3.57	%		8,819			2,596			6,223
Home equity lines of credit		365,932			17,522	6.40	%		305,075			13,598	5.96	%		3,924			2,869			1,055
Installment loans		15,319			776	6.76	%		15,015			714	6.35	%		62			15			47
Loans, net of unearned income		5,025,053			152,576	4.05	%		4,839,322			138,255	3.81	%		14,321			6,649			7,672
Total interest earning assets		5,968,685			181,407	4.05	%		5,896,877			167,566	3.79	%		13,841			2,693			11,148
Allowance for credit losses on loans		(49,419	)						(46,812	)
Cash & non-interest earning assets		187,963							173,521
Total assets	$	6,107,229						$	6,023,586
Liabilities and shareholders’ equity
Deposits:
Interest bearing checking accounts	$	999,839			839	0.11	%	$	1,088,859			217	0.03	%		622			(31	)		653
Money market accounts		522,636			6,724	1.72	%		613,119			4,954	1.08	%		1,770			(1,211	)		2,981
Savings		1,142,313			2,157	0.25	%		1,363,052			1,824	0.18	%		333			(472	)		805
Time deposits		1,881,027			58,046	4.12	%		1,343,762			26,525	2.64	%		31,521			13,104			18,417
Total interest bearing deposits		4,545,815			67,766	1.99	%		4,408,792			33,520	1.02	%		34,246			11,390			22,856
Short-term borrowings		91,551			604	0.88	%		121,911			808	0.89	%		(204	)		(200	)		(4	)
Total interest bearing liabilities		4,637,366			68,370	1.97	%		4,530,703			34,328	1.01	%		34,042			11,190			22,852
Demand deposits		734,604							793,890
Other liabilities		82,233							81,771
Shareholders’ equity		653,026							617,224
Total liabilities and shareholders’ equity	$	6,107,229						$	6,023,588
Net interest income, tax equivalent					113,037							133,238			$	(20,201	)	$	(8,497	)	$	(11,704	)
Net interest spread						2.08	%						2.78	%
Net interest margin (net interest income to total interest earning assets)						2.52 %							3.01 %
Tax equivalent adjustment					-							-
Net interest income				$	113,037						$	133,238

71

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, 2023, 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 nine-month periods ended September 30, 2024 and 2023, the Company continues to respond to changes in interest rates in such a way that positions the Company to meet short-term earning goals and also allows the Company to respond to changes in interest rates in the future.  Consequently, for the third quarter of 2024, the Company had an average balance of Federal Funds sold and other short-term investments of $465.9 million compared to $494.6 million in the third quarter of 2023.  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.”  As noted, 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

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.  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.  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.

72

Changes in Internal Control over Financial Reporting

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.

PART II     OTHER INFORMATION

Item 1. Legal Proceedings

The nature of TrustCo’s business generates a certain amount of litigation against TrustCo and its subsidiaries involving matters arising in the ordinary course of business. In the opinion of management of TrustCo, there are no proceedings pending to which TrustCo or any of its subsidiaries is a party, or of which its property is the subject which, if determined adversely to TrustCo or such subsidiaries, would be material in relation to TrustCo’s consolidated shareholders’ equity and financial condition.

Item 1A. Risk Factors

An investment in the Company involves risks, including the risks discussed in Item 1A. “Risk Factors” of the Company’s 2023 Form 10-K, which risk factors have not materially changed except as set forth below. The risk factors below supersede the similarly captioned risk factors set forth in the 2023 Form 10-K and supplement the other risk factors in the 2023 Form 10-K. The risk factors below reflect modifications to the nature of the risks that have developed since the date on which the 2023 Form 10-K was filed.

Changes in interest rates may significantly impact our financial condition and results of operations

Like other financial institutions, we are subject to interest rate risk. Our primary source of income is net interest income, which is the difference between interest earned on loans and investments, and interest paid on deposits and borrowings. The level of net interest income is primarily a function of the average balance of our interest-earning assets, the average balance of our interest-bearing liabilities, and the spread between the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by such external factors as the local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the FRB (the “FOMC”), and market interest rates.

Over any specific period of time, our interest-earning assets may be more sensitive to changes in market interest rates than our interest-bearing liabilities, or vice-versa. In addition, the individual market interest rates underlying our loan and deposit products may not change to the same degree over a given time period. In any event, if market interest rates should move contrary to our position, earnings may be negatively affected.  The FOMC increased the target range for the Federal Funds rate eleven times in 2022 and 2023, by a total of 525 basis points, to a range of 5.25% to 5.50%, then lowered it in September 2024 by 50 basis points to a range of 4.75% to 5.00%.  In its August 2024 “Beige Book”, the FRB noted that economic activity grew slightly in three districts, while the number of districts that reported flat or declining activity rose from five in the prior period to nine in the current period. Regional small-to-medium-sized banks in second district (where the Company’s New York branches are located) reported no change in loan demand, though demand for refinancing picked up from low levels. Economic activity in the sixth district (where the Company’s Florida branches are located) declined slightly since the prior report, and loan volumes grew slowly in the sixth district.

73

There can be no assurances as to any future FOMC conduct. If the FOMC further increases the targeted federal funds rates, overall interest rates likely will rise, which will positively impact our interest income but may further negatively impact the entire national economy, including the housing industry in the markets we serve, by reducing refinancing activity and new home purchases. In addition, deflationary pressures, while possibly lowering our operational costs, could have a significant negative effect on our borrowers and the values of collateral securing loans, which could negatively affect our financial performance. A significant portion of our loans have fixed interest rates (or, if adjustable, are initially fixed for periods of five to 10 years) and longer terms than our deposits and borrowings. Our net interest income could be adversely affected if the rates we pay on deposits and borrowings increase more rapidly than the rates we earn on loans.

We also are subject to reinvestment risk associated with changes in interest rates. Changes in interest rates may affect the average life of loans and mortgage-related securities. Increases in interest rates may decrease loan demand and/or may make it more difficult for borrowers to repay adjustable rate loans. Decreases in interest rates often result in increased prepayments of loans and mortgage-related securities, as borrowers refinance their loans to reduce borrowing costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments in loans or other investments that have interest rates that are comparable to the interest rates on existing loans and securities. Conversely, increases in interest rates often result in slowed prepayments of loans and mortgage-related securities, reducing cash flows and reinvestment opportunities.

Changes in interest rates also affect the value of the Bank’s interest-earning assets, and in particular the Bank’s securities portfolio. Generally, the value of fixed-rate securities fluctuates inversely with changes in interest rates. Unrealized gains and losses on securities available for sale are reported as a separate component of equity, net of tax. Decreases in the fair value of securities available for sale resulting from increases in interest rates could have an adverse effect on shareholders’ equity.

74

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 September 30, 2024:

	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)
July 1, 2024 through July 31, 2024		-	$	-		-		186,000
August 1, 2024 through August 31, 2024		-		-		-		186,000
September 1, 2024 through September 30, 2024		-		-		-		186,000
Total		-	$	-		-		186,000

(1) On March 29, 2024 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.  The share repurchase program will expire on March 27, 2025.  There were no repurchases during the three months ended September 30, 2024.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

(a) None.

(b) None.

(c) During the period covered by this report, none of the Company’s directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).

75

Item 6. Exhibits

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

3(a)	Amended and Restated Certificate of Incorporation of TrustCo Bank Corp NY, as amended, 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, effective October 17, 2023, incorporated by reference to Exhibit 3.1 to TrustCo Bank Corp NY’s Current Report on Form 8-K, filed October 17, 2023.

15	Crowe LLP Letter Regarding Unaudited Interim Financial Information
31(a)	Rule 13a-15(e)/15d-15(e) Certification of Robert J. McCormick, principal executive officer.
31(b)	Rule 13a-15(e)/15d-15(e) Certification of Michael M. Ozimek, principal financial officer.
32	Section 1350 Certifications of Robert J. McCormick, principal executive officer and Michael M. Ozimek, principal financial officer.
101	Sections of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL (eXtensible Business Reporting Language), submitted in the following files:
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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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:  November 8, 2024

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