UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended March 31, ~~2020~~2021

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

For the transition period from __________ to _________

Commission File Number 0-10592

TRUSTCO BANK CORP NY

(Exact name of registrant as specified in its charter)

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

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

~~Registrant’s~~Registrant's telephone number, including area code:

(518) 377-3311

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

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

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

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

☒ Yes ☐ No

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

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

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

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

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

Common Stock	Number of Shares Outstanding as of April 30, ~~2020~~2021
$1 Par Value	~~96,432,657~~96,439,602

~~Index~~

TrustCo Bank Corp NY

~~INDEX~~INDEX

Part I.	FINANCIAL INFORMATION	PAGE NO.

Item 1.	Consolidated Interim Financial Statements (Unaudited):

	Consolidated Statements of Income for the three month periods ended March 31, ~~2020~~2021 and ~~2019~~2020	3

	Consolidated Statements of Comprehensive Income for the three month periods ended March 31, ~~2020~~2021 and ~~2019~~2020	4

	Consolidated Statements of Financial Condition as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020	5

	Consolidated Statements of Changes in Shareholders’ Equity for the three month periods ended March 31, ~~2020~~2021 and ~~2019~~2020	6

	Consolidated Statements of Cash Flows for the three month periods ended March 31, ~~2020~~2021 and ~~2019~~2020	7

	Notes to Consolidated Interim Financial Statements	~~8 –~~ 8–36

	Report of Independent Registered Public Accounting Firm	37

Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	~~38-58~~38–58

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59

Item 4.	Controls and Procedures	59

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	60

Item 1A.	Risk Factors	60

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6260

Item 3.	Defaults Upon Senior Securities	6360

Item 4.	Mine Safety	6360

Item 5.	Other Information	6361

Item 6.	Exhibits	6461

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Income (Unaudited)

(dollars in thousands, except per share data)

	Three months ended March 31,					Three months ended March 31,
	2020		2019			2021		2020

Interest and dividend income:
Interest and fees on loans	$	42,063		41,253		$	40,217		42,063
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		421		783			50		421
State and political subdivisions		1		1			1		1
Mortgage-backed securities and collateralized mortgage obligations-residential		2,113		1,555			1,237		2,113
Corporate bonds		238		208			316		238
Small Business Administration-guaranteed participation securities		245		297			206		245
Other securities		6		5			6		6
Total interest and dividends on securities available for sale		3,024		2,849			1,816		3,024

Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage obligations-residential		175		217			123		175
Total interest on held to maturity securities		175		217			123		175

Federal Reserve Bank and Federal Home Loan Bank stock		82		85			69		82
Interest on federal funds sold and other short-term investments		1,267		3,009			270		1,267
Total interest income		46,611		47,413			42,495		46,611

Interest expense:
Interest on deposits:
Interest-bearing checking		16		121			52		16
Savings accounts		233		377			159		233
Money market deposit accounts		1,096		826			283		1,096
Time deposits		6,391		5,976			1,666		6,391
Interest on short-term borrowings		322		381			228		322
Total interest expense		8,058		7,681			2,388		8,058

Net interest income		38,553		39,732			40,107		38,553
Provision for loan losses		2,000		300			350		2,000
Net interest income after provision for loan losses		36,553		39,432			39,757		36,553

Noninterest income:
Trustco financial services income		1,600		1,733			2,035		1,600
Fees for services to customers		2,315		2,520			2,204		2,315
Net gain on securities transactions		1,155		-			0		1,155
Other		264		384			189		264
Total noninterest income		5,334		4,637			4,428		5,334

Noninterest expenses:
Salaries and employee benefits		11,373		11,451			12,425		11,373
Net occupancy expense		4,306		4,167			4,586		4,306
Equipment expense		1,802		1,902			1,631		1,802
Professional services		1,481		1,650			1,432		1,481
Outsourced services		2,075		1,925			2,250		2,075
Advertising expense		488		785			354		488
FDIC and other insurance		294		648			707		294
Other real estate expense (income), net		194		(24	)
Other real estate expense, net							239		194
Other		2,255		2,363			1,711		2,255
Total noninterest expenses		24,268		24,867			25,335		24,268

Income before taxes		17,619		19,202			18,850		17,619
Income taxes		4,306		4,644			4,767		4,306

Net income	$	13,313		14,558		$	14,083		13,313

Net income per share:
- Basic	$	0.138		0.150		$	0.146		0.138

- Diluted	$	0.138		0.150		$	0.146		0.138

See accompanying notes to unaudited consolidated interim financial statements.

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Comprehensive Income (Unaudited)

(dollars in thousands)

	Three months ended March 31,						Three months ended March 31,
	2020			2019			2021			2020

Net income	$	13,313			14,558		$	14,083			13,313

Net unrealized holding gain on securities available for sale		10,732			4,588
Net unrealized holding (loss) gain on securities available for sale								(6,018	)		10,732
Reclassification adjustments for net gain recognized in income		(1,155	)		-			0			(1,155	)
Tax effect		(2,487	)		(1,192	)		1,557			(2,487	)

Net unrealized gain on securities available for sale, net of tax		7,090			3,396

Net unrealized (loss) gain on securities available for sale, net of tax								(4,461	)		7,090

Amortization of net actuarial gain		(166	)		(48	)		(228	)		(166	)
Amortization of prior service credit		(49	)		(85	)		(52	)		(49	)
Tax effect		56			35			73			56
Amortization of net actuarial gain and prior service credit on pension and postretirement plans, net of tax		(159	)		(98	)		(207	)		(159	)

Other comprehensive income, net of tax		6,931			3,298
Other comprehensive (loss) income, net of tax								(4,668	)		6,931
Comprehensive income	$	20,244			17,856		$	9,415			20,244

See accompanying notes to unaudited consolidated interim financial statements.

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Financial Condition (Unaudited)

(dollars in thousands, except per share data)

	March 31, 2020			December 31, 2019			March 31, 2021			December 31, 2020
ASSETS:

Cash and due from banks	$	43,362			48,198		$	45,493			47,196

Federal funds sold and other short term investments		492,691			408,648			1,094,880			1,059,903
Total cash and cash equivalents		536,053			456,846			1,140,373			1,107,099

Securities available for sale		503,166			573,823			527,587			439,071

Held to maturity securities (fair value 2020 $19,035; 2019 $19,680)		17,720			18,618
Held to maturity securities ($13,891 and $14,988 fair value at March 31, 2021 and Decmber 31, 2020, respectively)								12,729			13,824

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

Loans, net of deferred net costs		4,099,392			4,062,196			4,269,172			4,244,470
Less:
Allowance for loan losses		46,155			44,317			49,991			49,595
Net loans		4,053,237			4,017,879			4,219,181			4,194,875

Bank premises and equipment, net		34,428			34,622			34,012			34,412
Operating lease right-of-use assets		49,955			51,475			46,614			47,885
Other assets		52,905			58,876			60,455			59,124

Total assets	$	5,256,647			5,221,322		$	6,046,457			5,901,796

LIABILITIES:
Deposits:
Demand	$	480,255			463,858		$	718,343			652,756
Interest-bearing checking		895,254			875,672			1,141,595			1,086,558
Savings accounts		1,122,116			1,113,146			1,362,141			1,285,501
Money market deposit accounts		617,198			599,163			719,580			716,005
Time deposits		1,367,005			1,398,177			1,231,263			1,296,373
Total deposits		4,481,828			4,450,016			5,172,922			5,037,193

Short-term borrowings		148,090			148,666			229,950			214,755
Operating lease liabilities		54,998			56,553			51,449			52,784
Accrued expenses and other liabilities		23,546			27,830			21,105			28,903

Total liabilities		4,708,462			4,683,065			5,475,426			5,333,635

SHAREHOLDERS’ EQUITY:
Capital stock par value $1; 150,000,000 shares authorized; 100,204,832 and 100,204,832 shares issued at March 31, 2020 and December 31, 2019, respectively		100,205			100,205
SHAREHOLDERS' EQUITY:
Capital stock par value $1; 150,000,000 shares authorized; 100,218,082 and 100,204,832 shares issued at March 31, 2021 and December 31, 2020, respectively								100,218			100,205
Surplus		176,431			176,427			176,500			176,442
Undivided profits		294,553			288,067			321,486			313,974
Accumulated other comprehensive income, net of tax		11,392			4,461			7,268			11,936
Treasury stock at cost - 3,772,175 and 3,283,175 shares at March 31, 2020 and December 31, 2019, respectively		(34,396	)		(30,903	)
Treasury stock at cost - 3,778,480 and 3,772,175 shares at March 31, 2021 and December 31, 2020, respectively								(34,441	)		(34,396	)

Total shareholders’ equity		548,185			538,257
Total shareholders' equity								571,031			568,161

Total liabilities and shareholders’ equity	$	5,256,647		$	5,221,322
Total liabilities and shareholders' equity							$	6,046,457			5,901,796

See accompanying notes to unaudited consolidated interim financial statements.

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Changes in ~~Shareholders’~~Shareholders' Equity (Unaudited)

(dollars in thousands, except per share data)

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

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

Ending balance, March 31, 2019	$	100,180		176,510			264,364			(7,011	)		(32,325	)		501,718

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

Ending balance, March 31, 2020	$	100,205		176,431			294,553			11,392			(34,396	)		548,185		$	100,205		176,431		294,553			11,392			(34,396	)		548,185

Beginning balance, January 1, 2021																		$	100,205		176,442		313,974			11,936			(34,396	)		568,161
Net income																			0		0		14,083			0			0			14,083
Other comprehensive loss, net of tax																			0		0		0			(4,668	)		0			(4,668	)
Stock options exercised (13,250 shares)																			13		58		0			0			0			71
Cash dividend declared, $0.068125 per share																			0		0		(6,571	)		0			0			(6,571	)
Purchase of treasury stock (6,305 Shares)																			0		0		0			0			(45	)		(45	)

Ending balance, March 31, 2021																		$	100,218		176,500		321,486			7,268			(34,441	)		571,031

See accompanying notes to unaudited consolidated interim financial statements.

Index

TRUSTCO BANK CORP NY

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)

	Three months ended March 31,						Three months ended March 31,
	2020			2019			2021			2020

Cash flows from operating activities:
Net income	$	13,313			14,558		$	14,083			13,313

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		999			1,010			1,063			999
Amortization of right-of-use asset		1,520			1,470			1,573			1,520
Net gain on sale of other real estate owned		(82	)		(306	)		0			(82	)
Writedown of other real estate owned		80			140			121			80
Provision for loan losses		2,000			300			350			2,000
Deferred tax expense		846			498			1,152			846
Net amortization of securities		858			688			1,081			858
Stock based compensation expense		4			(12	)		0			4
Net gain on sale of bank premises and equipment								(4	)		0
Net gain on sales of securities		(1,155	)		-			0			(1,155	)
Decrease (increase) in taxes receivable		3,682			(18	)
Decrease (increase) in interest receivable		673			(13	)
(Decrease) increase in interest payable		(200	)		448
Decrease in taxes receivable								101			3,682
Decrease in interest receivable								392			673
Decrease in interest payable								(164	)		(200	)
Increase in other assets		(2,171	)		(1,545	)		(3,160	)		(2,171	)
Decrease in operating lease liabilities		(1,555	)		(1,488	)		(1,637	)		(1,555	)
Decrease in accrued expenses and other liabilities		(4,307	)		(3,141	)		(6,221	)		(4,307	)
Total adjustments		1,192			(1,969	)		(5,353	)		1,192
Net cash provided by operating activities		14,505			12,589			8,730			14,505

Cash flows from investing activities:
Proceeds from sales and calls of securities available for sale		98,363			16,041			36,820			98,363
Proceeds from calls and maturities of held to maturity securities		859			851			1,061			859
Purchases of securities available for sale								(132,456	)		(22,793	)
Proceeds from maturities of securities available for sale		5,000			10,000			55			5,000
Purchases of securities available for sale		(22,793	)		(67,103	)
Net decrease (increase) in loans		(37,792	)		11,863
Net increase in loans								(24,656	)		(37,792	)
Proceeds from dispositions of other real estate owned		731			1,265			0			731
Proceeds from dispositions of bank premises and equipment								4			0
Purchases of bank premises and equipment		(805	)		(744	)		(663	)		(805	)
Net cash provided by (used in) investing activities		43,563			(27,827	)
Net cash (used in) provided by investing activities								(119,835	)		43,563

Cash flows from financing activities:
Net increase in deposits		31,812			138,822			135,729			31,812
Net decrease in short-term borrowings		(576	)		(2,115	)
Net increase (decrease) in short-term borrowings								15,195			(576	)
Proceeds from exercise of stock options		-			35			71			0
Proceeds from sale of treasury stock		-			594
Purchases of treasury stock		(3,493	)		(35	)		(45	)		(3,493	)
Dividends paid		(6,604	)		(6,585	)		(6,571	)		(6,604	)
Net cash provided by financing activities		21,139			130,716			144,379			21,139
Net increase in cash and cash equivalents		79,207			115,478			33,274			79,207
Cash and cash equivalents at beginning of period		456,846			503,709			1,107,099			456,846
Cash and cash equivalents at end of period	$	536,053			619,187		$	1,140,373			536,053

Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest paid	$	8,258			7,233		$	2,552			8,258
Income taxes paid		626			4,662			4,661			626
Other non cash items:
Transfer of loans to other real estate owned		434			685			0			434
Increase in dividends payable		223			6			0			223
Change in unrealized gain on securities available for sale-gross of deferred taxes		9,577			4,588
Change in deferred tax effect on unrealized gain on securities available for sale		(2,487	)		(1,192	)
Change in unrealized (loss) gain on securities available for sale-gross of deferred taxes								(6,018	)		9,577
Change in deferred tax effect on unrealized loss (gain) on securities available for sale								1,557			(2,487	)
Amortization of net actuarial gain and prior service credit on pension and postretirement plans		(215	)		(133	)		(280	)		(215	)
Change in deferred tax effect of amortization of net actuarial gain and prior service credit on pension and postretirement benefit plans		56			35
Change in deferred tax effect of amortization of net actuarial gain postretirement benefit plans								73			56

See accompanying notes to unaudited consolidated interim financial statements.

Index

(1) Financial Statement Presentation

The unaudited Consolidated Interim Financial Statements of TrustCo Bank Corp NY (the “Company” or “TrustCo”) include the accounts of the Company’s subsidiary, Trustco Bank (also referred to as the “Bank”) and other subsidiaries after elimination of all significant intercompany accounts and transactions. Prior period amounts are reclassified when necessary to conform to the current period presentation. The net income reported for the three months ended March 31, ~~2020~~2021 is not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020,~~2021, or any interim periods. These financial statements consider events that occurred through the date of filing.

In the opinion of the management of the Company, the accompanying unaudited Consolidated Interim Financial Statements contain all recurring adjustments necessary to present fairly the financial position as of March 31, ~~2020,~~2021, the results of operations and cash flows for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. The accompanying unaudited Consolidated Interim Financial Statements should be read in conjunction with the Company’s ~~year-end~~year‑end Consolidated Financial Statements, including notes thereto, which are included in the ~~Company’s~~Company's Annual Report on Form ~~10-K~~10‑K for the year ended December 31, ~~2019.~~2020. The accompanying unaudited Consolidated Interim Financial Statements have been prepared in accordance with the instructions to Form ~~10-Q~~10‑Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States.

(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 months ended March 31, ~~2020~~2021 and ~~2019~~2020 is as follows:

(in thousands, except per share data)	For the three months ended March 31,				For the three months ended March 31,
	2020		2019		2021		2020
Net income	$	13,313		14,558	$	14,083	$	13,313
Weighted average common shares		96,727		96,744		96,435		96,727
Stock Options		22		78		31		22
Weighted average common shares including potential dilutive shares		96,749		96,822		96,466		96,749

Basic EPS	$	0.138		0.150	$	0.146	$	0.138

Diluted EPS	$	0.138		0.150	$	0.146	$	0.138

For the three months, ended March 31, ~~2020~~2021 and ~~2019~~2020 the weighted average ~~antidilutive~~anti-dilutive stock options excluded from diluted earnings per share were approximately ~~452~~302 thousand and ~~-0-,~~452 thousand, respectively. The stock options are antidilutive because the strike price is greater than the average fair value of the Company’s common stock for the periods presented.

Index

(3) Benefit Plans

The table below outlines the components of the ~~Company’s~~Company's net periodic benefit recognized during the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 for its pension and other postretirement benefit plans:

	For the three months ended March 31,												Three months ended March 31,
	Pension Benefits						Other Postretirement Benefits						Pension Benefits						Other Postretirement Benefits
(dollars in thousands)	2020			2019			2020			2019			2021			2020			2021			2020

Service cost	$	12			8			19			18		$	11			12			22			19
Interest cost		266			315			54			60			216			266			44			54
Expected return on plan assets		(819	)		(752	)		(296	)		(248	)		(761	)		(819	)		(327	)		(296	)
Amortization of net gain		-			-			(166	)		(48	)		0			0			(228	)		(166	)
Amortization of prior service credit		-			-			(49	)		(85	)		0			0			(52	)		(49	)
Net periodic benefit	$	(541	)		(429	)		(438	)		(303	)	$	(534	)		(541	)		(541	)		(438	)

The Company does not expect to ~~make contributions~~contribute to its pension and postretirement benefit plans in ~~2020.~~2021. As of March 31, ~~2020,~~2021, 0 contributions have been ~~made,~~made; however, this decision is reviewed each quarter and is subject to change based upon market conditions.

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

Index

(4) Investment Securities

(a) Securities available for sale

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

	March 31, 2020								March 31, 2021
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	54,900		70		-		54,970	$	74,970		0		505		74,465
State and political subdivisions		110		2		-		112		48		0		0		48
Mortgage backed securities and collateralized mortgage obligations - residential		343,168		8,906		7		352,067		344,892		5,953		2,528		348,317
Corporate bonds		47,943		779		158		48,564		64,562		661		384		64,839
Small Business Administration - guaranteed participation securities		46,392		376		-		46,768		38,737		495		0		39,232
Other		685		-		-		685		685		1		0		686

Total securities available for sale	$	493,198		10,133		165		503,166
Total Securities Available for Sale									$	523,894		7,110		3,417		527,587

December 31, 2019
(dollars in thousands)
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

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

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

The schedule of maturities of debt securities available for sale is presented below. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty. Securities not due at a single maturity date are presented separately.

(dollars in thousands)
Amortized
Cost

Fair
Value

Due in one year or less $ 10,062 10,104
Due in one year through five years 83,558 84,189
Due after five years through ten years 10,018 10,038
Mortgage backed securities and collateralized mortgage obligations 343,168 352,067
Small Business Administration - guaranteed participation securities 46,392 46,768
$ 493,198 503,166

~~Index~~

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

March 31, 2020

Less than
12 months

12 months
or more
Total
(dollars in thousands)
Fair
Value

Gross
Unreal.
Loss

Fair
Value

Gross
Unreal.
Loss

Fair
Value

Gross
Unreal.
Loss

Mortgage backed securities and collateralized mortgage obligations - residential $ - - 4,390 7 4,390 7
Corporate bonds - - 4,843 158 4,843 158

Total $ - - 9,233 165 9,233 165

December 31, 2019

Less than
12 months

12 months
or more
Total
(dollars in thousands)
Fair
Value

Gross
Unreal.
Loss

Fair
Value

Gross
Unreal.
Loss

Fair
Value

Gross
Unreal.
Loss

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

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

The proceeds from sales and calls and maturities of securities available for sale, gross realized gains and gross realized losses from sales and calls during the three months ended March 31, 2020 and 2019 are as follows:

(dollars in thousands) Three months ended March 31,
2020 2019

Proceeds from sales $ 29,219 -
Proceeds from calls/paydowns 69,144 16,041
Proceeds from maturities 5,000 10,000
Gross realized gains 1,155 -
Gross realized losses - -

~~There were no transfers of securities available for sale during the three months ended March 31, 2020 and 2019.~~

~~Index~~

~~(b) Held to maturity securities~~

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

March 31, 2020
(dollars in thousands)
Amortized
Cost

Gross
Unrecognized
Gains

Gross
Unrecognized
Losses

Fair
Value

Mortgage backed securities and collateralized mortgage obligations - residential $ 17,720 1,315 - 19,035
Total held to maturity $ 17,720 1,315 - 19,035

	December 31, 2019								December 31, 2020
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises									$	20,000		0		32		19,968
State and political subdivisions										103		0		0		103
Mortgage backed securities and collateralized mortgage obligations - residential	$	18,618		1,062		-		19,680		308,432		7,749		23		316,158
Total held to maturity	$	18,618		1,062		-		19,680
Corporate bonds										59,185		916		162		59,939
Small Business Administration - guaranteed participation securities										40,955		1,262		0		42,217
Other										685		1		0		686

Total securities available for sale									$	429,360		9,928		217		439,071

The following table distributes the ~~held to maturity~~debt securities included in the available for sale portfolio as of March 31, ~~2020,~~2021, 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:~~separately.

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

Due in one year or less					$	14,219		14,390
Due in one year through five years						121,037		120,669
Due after five years through ten years						5,009		4,979
Mortgage backed securities and collateralized mortgage obligations - residential	$	17,720		19,035		344,892		348,317
Small Business Administration - guaranteed participation securities						38,737		39,232
	$	17,720		19,035	$	523,894		527,587

Index

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

U.S. government sponsored enterprises	$	74,465		505		0		0		74,465		505
Mortgage backed securities and collateralized mortgage obligations - residential		125,788		2,528		0		0		125,788		2,528
Corporate bonds		20,112		321		4,937		63		25,049		384

Total	$	220,365		3,354		4,937		63		225,302		3,417

	December 31, 2020
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss

U.S. government sponsored enterprises	$	19,968		32		0		0		19,968		32
Mortgage backed securities and collateralized mortgage obligations - residential		19,471		23		0		0		19,471		23
Corporate bonds		14,901		99		4,937		63		19,838		162

Total	$	54,340		154		4,937		63		59,277		217

	Three months ended March 31,
(dollars in thousands)	2021		2020

Proceeds from sales	$	0	$	29,219
Proceeds from calls/paydowns		36,820		69,144
Proceeds from maturities		55		5,000
Gross realized gains		0		1,155
Gross realized losses		0		0

Index

(b) Held to maturity securities

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

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

Mortgage backed securities and collateralized mortgage obligations - residential	$	12,729		1,162		0		13,891
Total held to maturity	$	12,729		1,162		0		13,891

	December 31, 2020
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	13,824		1,164		0		14,988
Total held to maturity	$	13,824		1,164		0		14,988

The following table distributes the debt securities included in the held to maturity portfolio as of March 31, 2021, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty.

(dollars in thousands)	Amortized Cost		Fair Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	12,729		13,891
	$	12,729		13,891

All held to maturity securities are held at cost on the financial statements. There were 0 gross unrealized losses on held to maturity securities as of March 31, ~~2020~~2021 and December 31, ~~2019.~~

2020.

There were 0 sales or transfers of held to maturity securities during the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

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

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

Index

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

As of March 31, ~~2020,~~2021, the Company’s ~~security~~securities portfolio included certain securities, which were in an unrealized loss position, and are discussed below.

U.S. government sponsored enterprises: In the case of unrealized losses on U.S. government sponsored enterprises, because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2021.

Mortgage backed securities and collateralized mortgage obligations – residential: At March 31, ~~2020,~~2021, all mortgage backed securities and collateralized mortgage obligations held by the Company were issued by U.S. government sponsored entities and agencies, primarily Ginnie Mae, Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, ~~2020.~~2021.

Corporate Bonds: At March 31, ~~2020,~~2021, 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 March 31, ~~2020.~~2021.

Index

(5) Loans and Allowance for Loan Losses

	March 31, 2021
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	146,994		17,989		164,983
Other		51,673		365		52,038
Real estate mortgage - 1 to 4 family:
First mortgages		2,615,578		1,122,469		3,738,047
Home equity loans		55,469		14,321		69,790
Home equity lines of credit		185,237		50,407		235,644
Installment		7,072		1,598		8,670
Total loans, net	$	3,062,023		1,207,149		4,269,172
Less: Allowance for loan losses						49,991
Net loans					$	4,219,181

March 31, 2020
(dollars in thousands)
New York and
other states*
Florida Total
Commercial:
Commercial real estate $ 158,630 17,579 176,209
Other 19,221 375 19,596
Real estate mortgage - 1 to 4 family:
First mortgages 2,558,048 982,078 3,540,126
Home equity loans 68,628 18,367 86,995
Home equity lines of credit 217,101 48,652 265,753
Installment 8,386 2,327 10,713
Total loans, net $ 3,030,014 1,069,378 4,099,392
Less: Allowance for loan losses 46,155
Net loans $ 4,053,237

	December 31, 2019						December 31, 2020
(dollars in thousands)	New York and other states*		Florida		Total		New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	162,186		17,752		179,938	$	148,775		18,666		167,441
Other		19,326		235		19,561		44,932		119		45,051
Real estate mortgage - 1 to 4 family:
First mortgages		2,541,440		953,995		3,495,435		2,606,781		1,098,915		3,705,696
Home equity loans		69,791		18,548		88,339		59,400		15,071		74,471
Home equity lines of credit		221,487		46,435		267,922		193,654		48,540		242,194
Installment		8,706		2,295		11,001		7,810		1,807		9,617
Total loans, net	$	3,022,936		1,039,260		4,062,196	$	3,061,352		1,183,118		4,244,470
Less: Allowance for loan losses						44,317						49,595
Net loans					$	4,017,879					$	4,194,875

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

Included in commercial loans above are Paycheck Protection Program (“PPP”) loans totaling $36.6 million and $28.9 million as of March 31, 2021 and December 31, 2020, respectively.

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had approximately ~~$27.6~~$28.5 million and ~~$28.5~~$24.7 million of real estate construction loans, respectively. Of the ~~$27.6~~$28.5 million in real estate construction loans at March 31, ~~2020,~~2021, approximately ~~$9.5~~$14.4 million are secured by first mortgages to residential borrowers while approximately ~~$18.1~~$14.1 million were to commercial borrowers for residential construction projects. Of the ~~$28.5~~$24.7 million in real estate construction loans at December 31, ~~2019,~~2020, approximately ~~$10.7~~$10.5 million ~~are~~were secured by first mortgages to residential borrowers while approximately ~~$17.8~~$14.2 million were to commercial borrowers for residential construction projects. The vast majority of construction loans are in the Company’s New York market.

The Company lends in the geographic territory of its branch locations in New York, Florida, Massachusetts, New Jersey and Vermont. Although the loan portfolio is diversified, a portion of its debtors’ ability to repay depends significantly on the economic conditions prevailing in the respective geographic territory.

Index

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

March 31, 2020
(dollars in thousands)
New York and
other states*
Florida Total
Loans in non-accrual status:
Commercial:
Commercial real estate $ 517 - 517
Other 113 - 113
Real estate mortgage - 1 to 4 family:
First mortgages 15,741 1,258 16,999
Home equity loans 139 48 187
Home equity lines of credit 2,690 186 2,876
Installment 24 - 24
Total non-accrual loans 19,224 1,492 20,716
Restructured real estate mortgages - 1 to 4 family 27 - 27
Total nonperforming loans $ 19,251 1,492 20,743

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

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

The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). Other real estate owned is included in Other assets on the Balance Sheet. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, other real estate owned included ~~$877~~$420 thousand and ~~$1.2 million~~$541 thousand of residential foreclosed properties, respectively. In addition, non-accrual residential mortgage loans that are in the process of foreclosure had a recorded investment of ~~$9.2~~$12.3 million and ~~$8.7~~$11.6 million, respectively, as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

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

	March 31, 2021
(dollars in thousands)	New York and other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	45		0		45
Other		80		0		80
Real estate mortgage - 1 to 4 family:
First mortgages		16,645		1,451		18,096
Home equity loans		78		46		124
Home equity lines of credit		3,103		129		3,232
Installment		32		0		32
Total non-accrual loans		19,983		1,626		21,609
Restructured real estate mortgages - 1 to 4 family		22		0		22
Total nonperforming loans	$	20,005		1,626		21,631

	December 31, 2020
(dollars in thousands)	New York and other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	372		0		372
Other		80		0		80
Real estate mortgage - 1 to 4 family:
First mortgages		16,637		1,010		17,647
Home equity loans		80		47		127
Home equity lines of credit		2,662		130		2,792
Installment		43		0		43
Total non-accrual loans		19,874		1,187		21,061
Restructured real estate mortgages - 1 to 4 family		23		0		23
Total nonperforming loans	$	19,897		1,187		21,084

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

Index

The following tables present the aging of the recorded investment in past due loans by loan class and by region as of March 31, ~~2020~~2021 and December 31, ~~2019:~~2020:

	March 31, 2020												March 31, 2021
New York and other states*:
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total 30+ days Past Due		Current		Total Loans		30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total 30+ days Past Due		Current		Total Loans

Commercial:
Commercial real estate	$	211		-		332		543		158,087		158,630	$	324		0		0		324		146,670		146,994
Other		-		-		113		113		19,108		19,221		0		0		80		80		51,593		51,673
Real estate mortgage - 1 to 4 family:
First mortgages		3,410		2,129		11,114		16,653		2,541,395		2,558,048		1,439		281		11,133		12,853		2,602,725		2,615,578
Home equity loans		205		122		80		407		68,221		68,628		147		0		50		197		55,272		55,469
Home equity lines of credit		729		85		871		1,685		215,416		217,101		413		140		1,484		2,037		183,200		185,237
Installment		17		9		24		50		8,336		8,386		6		0		0		6		7,066		7,072

Total	$	4,572		2,345		12,534		19,451		3,010,563		3,030,014	$	2,329		421		12,747		15,497		3,046,526		3,062,023

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

Commercial:
Commercial real estate	$	-		-		-		-		17,579		17,579	$	0		0		0		0		17,989		17,989
Other		-		-		-		-		375		375		0		0		0		0		365		365
Real estate mortgage - 1 to 4 family:
First mortgages		629		385		500		1,514		980,564		982,078		1,052		163		914		2,129		1,120,340		1,122,469
Home equity loans		62		-		-		62		18,305		18,367		0		1		46		47		14,274		14,321
Home equity lines of credit		99		-		140		239		48,413		48,652		0		221		0		221		50,186		50,407
Installment		16		-		-		16		2,311		2,327		19		0		0		19		1,579		1,598

Total	$	806		385		640		1,831		1,067,547		1,069,378	$	1,071		385		960		2,416		1,204,733		1,207,149

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

Commercial:
Commercial real estate	$	211		-		332		543		175,666		176,209	$	324		0		0		324		164,659		164,983
Other		-		-		113		113		19,483		19,596		0		0		80		80		51,958		52,038
Real estate mortgage - 1 to 4 family:
First mortgages		4,039		2,514		11,614		18,167		3,521,959		3,540,126		2,491		444		12,047		14,982		3,723,065		3,738,047
Home equity loans		267		122		80		469		86,526		86,995		147		1		96		244		69,546		69,790
Home equity lines of credit		828		85		1,011		1,924		263,829		265,753		413		361		1,484		2,258		233,386		235,644
Installment		33		9		24		66		10,647		10,713		25		0		0		25		8,645		8,670

Total	$	5,378		2,730		13,174		21,282		4,078,110		4,099,392	$	3,400		806		13,707		17,913		4,251,259		4,269,172

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

Index

	December 31, 2020
New York and other states*:
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total 30+ days Past Due		Current		Total Loans

Commercial:
Commercial real estate	$	125		77		279		481		148,294		148,775
Other		0		0		80		80		44,852		44,932
Real estate mortgage - 1 to 4 family:
First mortgages		1,220		982		10,927		13,129		2,593,652		2,606,781
Home equity loans		120		1		48		169		59,231		59,400
Home equity lines of credit		401		344		1,273		2,018		191,636		193,654
Installment		3		0		43		46		7,764		7,810

Total	$	1,869		1,404		12,650		15,923		3,045,429		3,061,352

	December 31, 2019
New York and other states*:
Florida:
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total 30+ days Past Due		Current		Total Loans		30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total 30+ days Past Due		Current		Total Loans

Commercial:
Commercial real estate	$	141		-		617		758		161,428		162,186	$	0		-		0		0		18,666		18,666
Other		80		-		33		113		19,213		19,326		0		0		0		0		119		119
Real estate mortgage - 1 to 4 family:
First mortgages		3,444		292		11,328		15,064		2,526,376		2,541,440		365		517		655		1,537		1,097,378		1,098,915
Home equity loans		183		7		133		323		69,468		69,791		0		0		47		47		15,024		15,071
Home equity lines of credit		232		149		1,141		1,522		219,965		221,487		0		0		0		0		48,540		48,540
Installment		37		8		3		48		8,658		8,706		7		10		0		17		1,790		1,807

Total	$	4,117		456		13,255		17,828		3,005,108		3,022,936	$	372		527		702		1,601		1,181,517		1,183,118

Florida:
(dollars in thousands)
30-59
Days
Past Due

60-89
Days
Past Due

90 +
Days
Past Due

Total
30+ days
Past Due
Current
Total
Loans

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

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

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

Commercial:
Commercial real estate	$	141		-		617		758		179,180		179,938	$	125		77		279		481		166,960		167,441
Other		80		-		33		113		19,448		19,561		0		0		80		80		44,971		45,051
Real estate mortgage - 1 to 4 family:
First mortgages		3,986		292		11,945		16,223		3,479,212		3,495,435		1,585		1,499		11,582		14,666		3,691,030		3,705,696
Home equity loans		246		7		133		386		87,953		88,339		120		1		95		216		74,255		74,471
Home equity lines of credit		312		149		1,191		1,652		266,270		267,922		401		344		1,273		2,018		240,176		242,194
Installment		37		8		3		48		10,953		11,001		10		10		43		63		9,554		9,617

Total	$	4,802		456		13,922		19,180		4,043,016		4,062,196	$	2,241		1,931		13,352		17,524		4,226,946		4,244,470

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

~~Index~~

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, 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 0 commitments to extend further credit on non-accrual or restructured loans.

Index

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

	For the three months ended March 31, 2020									For the three months ended March 31, 2021
(dollars in thousands)	Commercial			Real Estate Mortgage- 1 to 4 Family		Installment		Total		Commercial			Real Estate Mortgage- 1 to 4 Family			Installment			Total
Balance at beginning of period	$	3,999			39,748		570		44,317	$	4,140			44,950			505			49,595
Loans charged off:
New York and other states*		3			191		7		201		0			86			7			93
Florida		-			-		19		19		0			0			2			2
Total loan chargeoffs		3			191		26		220		0			86			9			95

Recoveries of loans previously charged off:
New York and other states*		2			51		3		56		32			88			21			141
Florida		-			2		-		2		0			0			0			0
Total recoveries		2			53		3		58		32			88			21			141
Net loans charged off		1			138		23		162
Provision (credit) for loan losses		(38	)		2,033		5		2,000
Net loans (recoveries) charged off											(32	)		(2	)		(12	)		(46	)
(Credit) provision for loan losses											(120	)		555			(85	)		350
Balance at end of period	$	3,960			41,643		552		46,155	$	4,052			45,507			432			49,991

	For the three months ended March 31, 2019									For the three months ended March 31, 2020
(dollars in thousands)	Commercial			Real Estate Mortgage- 1 to 4 Family		Installment		Total		Commercial			Real Estate Mortgage- 1 to 4 Family		Installment		Total
Balance at beginning of period	$	4,048			39,772		946		44,766	$	3,999			39,748		570		44,317
Loans charged off:
New York and other states*		7			392		29		428		3			191		7		201
Florida		-			29		31		60		0			0		19		19
Total loan chargeoffs		7			421		60		488		3			191		26		220

Recoveries of loans previously charged off:
New York and other states*		3			74		6		83		2			51		3		56
Florida		-			10		-		10		0			2		0		2
Total recoveries		3			84		6		93		2			53		3		58
Net loans charged off		4			337		54		395
Provision (credit) for loan losses		(310	)		550		60		300
Net loans (recoveries) charged off											1			138		23		162
(Credit) provision for loan losses											(38	)		2,033		5		2,000
Balance at end of period	$	3,734			39,985		952		44,671	$	3,960			41,643		552		46,155

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

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

Index

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, ~~2020~~2021 and December 31, ~~2019:~~2020:

	March 31, 2020								March 31, 2021
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total		Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-	$	0		0		0		0
Collectively evaluated for impairment		3,960		41,643		552		46,155		4,052		45,507		432		49,991

Total ending allowance balance	$	3,960		41,643		552		46,155	$	4,052		45,507		432		49,991

Loans:
Individually evaluated for impairment	$	1,115		19,172		-		20,287	$	699		19,646		0		20,345
Collectively evaluated for impairment		194,690		3,873,702		10,713		4,079,105		216,322		4,023,835		8,670		4,248,827

Total ending loans balance	$	195,805		3,892,874		10,713		4,099,392	$	217,021		4,043,481		8,670		4,269,172

	December 31, 2019								December 31, 2020
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total		Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-	$	0		0		0		0
Collectively evaluated for impairment		3,999		39,748		570		44,317		4,140		44,950		505		49,595

Total ending allowance balance	$	3,999		39,748		570		44,317	$	4,140		44,950		505		49,595

Loans:
Individually evaluated for impairment	$	1,437		19,539		-		20,976	$	1,028		20,553		0		21,581
Collectively evaluated for impairment		198,062		3,832,157		11,001		4,041,220		211,464		4,001,808		9,617		4,222,889

Total ending loans balance	$	199,499		3,851,696		11,001		4,062,196	$	212,492		4,022,361		9,617		4,244,470

A loan for which the terms have been modified, and for which the borrower is experiencing financial difficulties, is considered a TDR and is classified as impaired. TDR’s at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 are measured at the present value of estimated future cash flows using the loan’s effective rate at inception or the fair value of the underlying collateral if the loan is considered collateral dependent.

Index

The following tables present impaired loans by loan class as of March 31, ~~2020~~2021 and December 31, ~~2019:~~2020:

	March 31, 2020								March 31, 2021
New York and other states*:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment

Commercial:
Commercial real estate	$	866	$	1,006		-		1,245	$	523		616		0		1,152
Other		145		145		-		91		80		80		0		106
Real estate mortgage - 1 to 4 family:
First mortgages		13,872		14,249		-		14,095		14,425		14,812		0		14,059
Home equity loans		232		252		-		237		214		214		0		235
Home equity lines of credit		2,209		2,349		-		2,286		2,005		2,145		0		2,260

Total	$	17,324		18,001		-		17,954	$	17,247		17,867		0		17,812

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

Commercial:
Commercial real estate	$	104		104		-		106	$	96		96		0		106
Other		-		-		-		-		0		0		0		0
Real estate mortgage - 1 to 4 family:
First mortgages		2,615		2,615		-		2,405		2,758		2,758		0		2,547
Home equity loans		-		-		-		30		0		0		0		17
Home equity lines of credit		244		244		-		247		244		244		0		246

Total	$	2,963		2,963		-		2,788	$	3,098		3,098		0		2,916

Total:
(dollars in thousands)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Commercial:
Commercial real estate $ 970 1,110 - 1,352
Other 145 145 - 91
Real estate mortgage - 1 to 4 family:
First mortgages 16,487 16,864 - 16,500
Home equity loans 232 252 - 267
Home equity lines of credit 2,453 2,593 - 2,533

Total $ 20,287 20,964 - 20,743

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

~~Index~~

December 31, 2019
New York and other states*:
(dollars in thousands)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

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

Total $ 18,141 18,743 - 18,296

Florida:
(dollars in thousands)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

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

Total $ 2,835 2,835 - 2,667

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

Commercial:
Commercial real estate	$	1,322		1,464		-		1,467	$	619		712		0		1,258
Other		115		115		-		64		80		80		0		106
Real estate mortgage - 1 to 4 family:
First mortgages		16,900		17,200		-		16,617		17,183		17,570		0		16,606
Home equity loans		235		255		-		292		214		214		0		252
Home equity lines of credit		2,404		2,544		-		2,523		2,249		2,389		0		2,506

Total	$	20,976		21,578		-		20,963	$	20,345		20,965		0		20,728

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

2120

Index

	December 31, 2020
New York and other states*:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment

Commercial:
Commercial real estate	$	819		943		0		1,186
Other		111		111		0		103
Real estate mortgage - 1 to 4 family:
First mortgages		15,024		15,411		0		14,110
Home equity loans		219		240		0		235
Home equity lines of credit		2,158		2,298		0		2,258

Total	$	18,331		19,003		0		17,892

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

Commercial:
Commercial real estate	$	98		98		0		105
Other		0		0		0		0
Real estate mortgage - 1 to 4 family:
First mortgages		2,908		2,908		0		2,555
Home equity loans		0		0		0		16
Home equity lines of credit		244		244		0		246

Total	$	3,250		3,250		0		2,922

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

Commercial:
Commercial real estate	$	917		1,041		0		1,291
Other		111		111		0		103
Real estate mortgage - 1 to 4 family:
First mortgages		17,932		18,319		0		16,665
Home equity loans		219		240		0		251
Home equity lines of credit		2,402		2,542		0		2,504

Total	$	21,581		22,253		0		20,814

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

The Company has not committed to lend additional amounts to customers with outstanding loans that are classified as impaired. Interest income recognized on impaired loans was not material during the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

Index

As of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 impaired loans included approximately ~~$10.7~~$11.1 million and ~~$10.9~~$11.7 million of loans in accruing status that were identified as TDR’s in accordance with regulatory guidance related to Chapter 7 bankruptcy loans.

Management evaluates impairment on impaired loans on a quarterly basis. If, during this evaluation, impairment of the loan is identified, a chargeoff is taken at that time. As a result, as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, based upon management’s evaluation and due to the sufficiency of chargeoffs taken, none of the allowance for loan losses has been allocated to a specific impaired loan(s).

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

	Three months ended 3/31/2020						Three months ended 3/31/2019
													Three months ended March 31, 2021						Three months ended March 31, 2020
New York and other states*:	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-		0	$	0		0		0	$	0		0
Real estate mortgage - 1 to 4 family:
First mortgages		1	$	167		167		4	$	656		656		0		0		0		1		167		167
Home equity loans		-		-		-		-		-		-		0		0		0		0		0		0
Home equity lines of credit		1		70		70		-		-		-		0		0		0		1		70		70

Total		2	$	237	$	237		4	$	656	$	656		0	$	0		0		2	$	237		237

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

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-		0	$	0		0		0	$	0		0
Real estate mortgage - 1 to 4 family:
First mortgages		1	$	147		147		-	$	-		-		0		0		0		0		0		0
Home equity loans		-		-		-		-		-		-		0		0		0		0		0		0
Home equity lines of credit		-		-		-		-		-		-		0		0		0		0		0		0

Total		1	$	147		147		-	$	-		-		0	$	0		0		0	$	0		0

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

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

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

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

~~Index~~

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

Index

There were 0 TDR’s that defaulted during the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 which had been modified within the last twelve ~~months:~~months.

Loan modifications and payment deferrals as a result of COVID-19 that meet the criteria established under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) or under applicable interagency guidance of the federal banking regulators are excluded from evaluation of TDR classification and will continue to be reported as current during the payment deferral period. The Company’s policy is to continue to accrue interest during the deferral period. Loans not meeting the CARES ACT or regulatory guidance are evaluated for TDR and non-accrual treatment under the Company’s existing policies and procedures. Loan modifications made pursuant to the CARES ACT that were in payment deferral at March 31, 2021 were not material.

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 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. All doubtful loans are considered impaired.

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

Index

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	March 31, 2020						March 31, 2021

New York and other states*:
(dollars in thousands)	Pass		Classified		Total		Pass		Classified		Total

Commercial:
Commercial real estate	$	153,910		4,720		158,630	$	144,433		2,561		146,994
Other		18,721		500		19,221		51,444		229		51,673
							$	195,877		2,790		198,667
	$	172,631		5,220		177,851

Florida:
(dollars in thousands)	Pass		Classified		Total		Pass		Classified		Total

Commercial:
Commercial real estate	$	17,579		-		17,579	$	17,419		570		17,989
Other		375		-		375		365		0		365
							$	17,784		570		18,354
	$	17,954		-		17,954

Total:
(dollars in thousands)	Pass		Classified		Total		Pass		Classified		Total

Commercial:
Commercial real estate	$	171,489		4,720		176,209	$	161,852		3,131		164,983
Other		19,096		500		19,596		51,809		229		52,038
							$	213,661		3,360		217,021
	$	190,585		5,220		195,805

* Includes New York, New Jersey and Massachusetts.

Index

	December 31, 2020

New York and other states:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	145,741		3,034		148,775
Other		44,522		410		44,932
	$	190,263		3,444		193,707

	December 31, 2019

New York and other states*:
Florida:
(dollars in thousands)	Pass		Classified		Total		Pass		Classified		Total

Commercial:
Commercial real estate	$	157,280		4,906		162,186	$	18,092		574		18,666
Other		18,384		942		19,326		119		0		119
							$	18,211		574		18,785
	$	175,664		5,848		181,512

Florida:
(dollars in thousands) Pass Classified Total

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

$ 17,987 - 17,987

Total:
(dollars in thousands)	Pass		Classified		Total		Pass		Classified		Total

Commercial:
Commercial real estate	$	175,032		4,906		179,938	$	163,833		3,608		167,441
Other		18,619		942		19,561		44,641		410		45,051
							$	208,474		4,018		212,492
	$	193,651		5,848		199,499

* Includes New York, New Jersey and Massachusetts.

Included in classified loans in the above tables are impaired loans of ~~$874~~$471 thousand and ~~$816~~$796 thousand at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

For homogeneous loan pools, such as residential mortgages, home equity lines of credit, and installment loans, the Company uses payment status to identify the credit risk in these loan portfolios. Payment status is reviewed on a daily basis by the Bank’s collection area and on a monthly basis with respect to determining the adequacy of the allowance for loan losses. The payment status of these homogeneous pools as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 is included in the aging of the recorded investment of the past due loans table. In addition, the total nonperforming portion of these homogeneous loan pools as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 is presented in the non-accrual loans table.

As more fully discussed in Note 12 – Risks and Uncertainties, the Company experienced requests for loan deferrals of principal and interest due to the business disruption caused by Coronavirus Disease 2019 (“COVID-19”), which are excluded from evaluation of TDR classification and will continue to be reported as current during the payment deferral period.

~~Index~~

(6) Fair Value of Financial Instruments

Fair value measurements~~(ASC~~ (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.

Index

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

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

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

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

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

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally have had a chargeoff through the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value. When obtained, non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

~~Index~~

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

Index

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

	Fair Value Measurements at								Fair Value Measurements at
	March 31, 2020 Using:								March 31, 2021 Using:
(dollars in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Securities available for sale:
U.S. government sponsored enterprises	$	54,970	$	-	$	54,970	$	-	$	74,465	$	0	$	74,465	$	0
State and political subdivisions		112		-		112		-		48		0		48		0
Mortgage backed securities and collateralized mortgage obligations - residential		352,067		-		352,067		-		348,317		0		348,317		0
Corporate bonds		48,564		-		48,564		-		64,839		0		64,839		0
Small Business Administration- guaranteed participation securities		46,768		-		46,768		-		39,232		0		39,232		0
Other securities		685		-		685		-		686		0		686		0

Total securities available for sale	$	503,166	$	-	$	503,166	$	-	$	527,587	$	0	$	527,587	$	0

	Fair Value Measurements at								Fair Value Measurements at
	December 31, 2019 Using:								December 31, 2020 Using:
(dollars in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Securities available for sale:
U.S. government sponsored enterprises	$	104,512	$	-	$	104,512	$	-	$	19,968	$	0	$	19,968	$	0
State and political subdivisions		162		-		162		-		103		0		103		0
Mortgage backed securities and collateralized mortgage obligations - residential		389,517		-		389,517		-		316,158		0		316,158		0
Corporate bonds		30,436		-		30,436		-		59,939		0		59,939		0
Small Business Administration- guaranteed participation securities		48,511		-		48,511		-		42,217		0		42,217		0
Other securities		685		-		685		-		686		0		686		0

Total securities available for sale	$	573,823	$	-	$	573,823	$	-	$	439,071	$	0	$	439,071	$	0

There were 0 transfers between Level 1 and Level 2 during the three months ended March 31, ~~2020~~2021 and ~~2019~~.2020.

Index

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

	Fair Value Measurements at													Fair Value Measurements at
	March 31, 2020 Using:													March 31, 2021 Using:
(dollars in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation technique	Unobservable inputs	Range (Weighted Average)			Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation technique	Unobservable inputs	Range (Weighted Average)

Other real estate owned	$	1,284	$	-	$	-	$	1,284	Sales comparison approach	Adjustments for differences between comparable sales		1% - 5% (3	%)	$	420	$	0	$	0	$	420	Sales comparison approach	Adjustments for differences between comparable sales		1% - 7% (2	%)

Impaired loans:
Real estate mortgage -1 to 4 family		417		-		-		417	Sales comparison approach	Adjustments for differences between comparable sales		11% - 13% (12	%)		0		0		0		0	Sales comparison	Adjustments for differences between comparable sales		N/A

	Fair Value Measurements at													Fair Value Measurements at
	December 31, 2019 Using:													December 31, 2020 Using:
(dollars in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation technique	Unobservable inputs	Range (Weighted Average)			Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation technique	Unobservable inputs	Range (Weighted Average)

Other real estate owned	$	1,579	$	-	$	-	$	1,579	Sales comparison approach	Adjustments for differences between comparable sales		1% - 21% (7	%)	$	541	$	0	$	0	$	541	Sales comparison approach	Adjustments for differences between comparable sales		1% - 7% (2	%)

Impaired loans:
Real estate mortgage -1 to 4 family		120		-		-		120	Sales comparison approach	Adjustments for differences between comparable sales		1% - 17% (9	%)		211		0		0		211	Sales comparison	Adjustments for differences between comparable sales		11% - 12% (12	%)
Home equity lines of credit

Other real estate owned, that is carried at fair value less costs to sell was approximately ~~$1.3 million~~$420 thousand at March 31, ~~2020~~2021 and consisted of ~~$407 thousand of commercial real estate and $877 thousand of~~only residential real estate properties. Valuation charges of ~~$80~~$121 thousand are included in earnings for the three months ended March 31, ~~2020.~~2021.

Of the total impaired loans of ~~$20.3~~$20.3 million at March 31, ~~2020, $417 thousand of residential mortgages~~2021, NaN are collateral dependent and ~~are~~ carried at fair value measured on a non-recurring basis. Due to the sufficiency of chargeoffs taken on these loans and the adequacy of the underlying collateral, there were no specific valuation allowances for these loans at March 31, 2020. Gross chargeoffs related to residential impaired loans included in the table above were $77 thousand for the three months ended March 31, 2020basis.

Other real estate owned, that is carried at fair value less costs to sell, was approximately ~~$1.6 million~~$541 thousand at December 31, ~~2019~~2020 and consisted of ~~$358 thousand of commercial real estate and $1.2 million of~~only residential real estate properties. A valuation charge of ~~$366~~$120 thousand is included in earnings for the year ended December 31, ~~2019.~~2020.

Of the total impaired loans of ~~$21.0~~$21.6 million at December 31, ~~2019, $120~~2020, $211 thousand are collateral dependent and are carried at fair value measured on a non-recurring basis. Due to the sufficiency of chargeoffs taken on these loans and the adequacy of the underlying collateral, there were no specific valuation allowances for these loans at December 31, ~~2019.~~2020. Gross chargeoffs related to residential impaired loans included in the table above amounted to ~~$22~~$10 thousand at December 31, ~~2019.~~2020.

Index

~~The~~The carrying amounts and estimated fair values (represents exit price) of financial instruments, at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 are as follows:

(dollars in thousands)			Fair Value Measurements at										Fair Value Measurements at
	Carrying		March 31, 2020 Using:								Carrying		March 31, 2021 Using:
	Value		Level 1		Level 2		Level 3		Total		Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	536,053		536,053		-		-		536,053	$	1,140,373		1,140,373		0		0		1,140,373
Securities available for sale		503,166		-		503,166		-		503,166		527,587		0		527,587		0		527,587
Held to maturity securities		17,720		-		19,035		-		19,035		12,729		0		13,891		0		13,891
Federal Reserve Bank and Federal
Home Loan Bank stock		9,183		N/A		N/A		N/A		N/A
Federal Home Loan Bank stock												5,506		N/A		N/A		N/A		N/A
Net loans		4,099,392		-		-		4,131,365		4,131,365		4,219,181		0		0		4,301,999		4,301,999
Accrued interest receivable		10,242		8		1,841		8,393		10,242		9,639		21		1,368		8,250		9,639
Financial liabilities:
Demand deposits		480,255		480,255		-		-		480,255		718,343		718,343		0		0		718,343
Interest bearing deposits		4,001,573		2,634,568		1,375,391		-		4,009,959		4,454,579		3,223,316		1,232,604		0		4,455,920
Short-term borrowings		148,090		-		148,090		-		148,090		229,950		0		229,950		0		229,950
Accrued interest payable		1,259		145		1,114		-		1,259		310		45		265		0		310

(dollars in thousands)			Fair Value Measurements at										Fair Value Measurements at
	Carrying		December 31, 2019 Using:								Carrying		December 31, 2020 Using:
	Value		Level 1		Level 2		Level 3		Total		Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	456,846		456,846		-		-		456,846	$	1,107,099		1,107,099		0		0		1,107,099
Securities available for sale		573,823		-		573,823		-		573,823		439,071		0		439,071		0		439,071
Held to maturity securities		18,618		-		19,680		-		19,680		13,824		0		14,988		0		14,988
Federal Reserve Bank and Federal
Home Loan Bank stock		9,183		N/A		N/A		N/A		N/A		5,506		N/A		N/A		N/A		N/A
Net loans		4,017,879		-		-		4,078,210		4,078,210		4,194,875		0		0		4,287,585		4,287,585
Accrued interest receivable		10,915		216		2,221		8,478		10,915		10,031		39		1,458		8,534		10,031
Financial liabilities:
Demand deposits		463,858		463,858		-		-		463,858		652,756		652,756		0		0		652,756
Interest bearing deposits		3,986,158		2,587,981		1,397,271		-		3,985,252		4,384,437		3,088,064		1,298,375		0		4,386,439
Short-term borrowings		148,666		-		148,666		-		148,666		214,755		0		214,755		0		214,755
Accrued interest payable		1,459		174		1,285		-		1,459		474		68		406		0		474

Index

(7) Accumulated Other Comprehensive Income (Loss)

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

	Three months ended 3/31/2020														Three months ended 3/31/2021
(dollars in thousands)	Balance at 12/31/2019			Other Comprehensive Income (loss)- Before Reclassifications		Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 3/31/2020			Balance at 3/31/2020			Balance at 12/31/2020			Other Comprehensive Income (loss)- Before Reclassifications			Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 3/31/2021			Balance at 3/31/2021

Net unrealized holding gain on securities available for sale, net of tax	$	286			7,945		(855	)		7,090			7,376
Net unrealized holding loss on securities available for sale, net of tax															$	7,186			(4,461	)		0			(4,461	)		2,725
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax ~~(a)~~		4,840			-		-			-			4,840			6,084			0			0			0			6,084
Net change in net actuarial gain and prior service credit on pension and postretirement benefit plans, net of tax		(665	)		-		(159	)		(159	)		(824	)		(1,334	)		0			(207	)		(207	)		(1,541	)

Accumulated other comprehensive loss, net of tax	$	4,461			7,945		(1,014	)		6,931			11,392		$	11,936			(4,461	)		(207	)		(4,668	)		7,268

Three months ended 3/31/2019
(dollars in thousands)
Balance at
12/31/2018

Other
Comprehensive
Income (loss)-
Before
Reclassifications

Amount
reclassified
from Accumulated
Other Comprehensive
Income

Other
Comprehensive
Income (loss)-
Three months ended
3/31/2019

Balance at
3/31/2019

Net unrealized holding loss on securities available for sale, net of tax $ (10,416 ) 3,396 - 3,396 (7,020 )
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax (a) 423 - - - 423
Net change in net actuarial gain and prior service credit on pension and postretirement benefit plans, net of tax (316 ) - (98 ) (98 ) (414 )

Accumulated other comprehensive income (loss), net of tax $ (10,309 ) 3,396 (98 ) 3,298 (7,011 )

~~(a) Measured annually.~~

	Three months ended 3/31/2020
(dollars in thousands)	Balance at 12/31/2019			Other Comprehensive Income (loss)- Before Reclassifications		Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 3/31/2020			Balance at 3/31/2020

Net unrealized holding gain on securities available for sale, net of tax	$	286			7,945		(855	)		7,090			7,376
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		4,840			0		0			0			4,840
Net change in net actuarial gain and prior service credit on pension and postretirement benefit plans, net of tax		(665	)		0		(159	)		(159	)		(824	)

Accumulated other comprehensive income (loss), net of tax	$	4,461			7,945		(1,014	)		6,931			11,392

The following represents the reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

	Three months ended March 31,							Three months ended March 31,
(dollars in thousands)	2020			2019			Affected Line Item in Financial Statements
								2021			2020			Affected Line Item in Financial Statements
Unrealized gains on securities available for sale

Net unrealized holding gain on securities available for sale
Realized gain on securities transactions	$	1,155			-		Net gain on securities transactions	$	0			1,155		Net gain on securities transactions
Income tax expense		(300	)		-		Income taxes
Income tax effect									0			(300	)	Income taxes
Net of tax		855			-				0			855

Amortization of pension and postretirement benefit items:
Amortization of net actuarial gain	$	166			48		Salaries and employee benefits	$	228			166		Salaries and employee benefits
Amortization of prior service credit		49			85		Salaries and employee benefits		52			49		Salaries and employee benefits
Income tax benefit		(56	)		(35	)	Income taxes		(73	)		(56	)	Income taxes
Net of tax		159			98				207			159

Total reclassifications, net of tax	$	159			98			$	207			159

Index

(8) Revenue from Contracts with Customers

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within Non-Interest Income. The following table presents the Company’s sources of Non-Interest Income for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. Items outside the scope of ASC 606 are noted as such.

(dollars in thousands)					Three months ended
	Three months ended				March 31,
	March 31,				2021		2020
(dollars in thousands)	2020		2019

Non-interest income					��
Service Charges on Deposits
Overdraft fees	$	873	$	850	$	617	$	873
Other		108		110		469		429
Interchange Income		277		1,531		1,153		946
Net gain on securities transactions (a)						0		1,155
Wealth management fees		1,600		1,733		2,035		1,600
Net gain on securities transactions (a)		1,155		-
Other (a)		1,321		413		154		331

Total non-interest income	$	5,334	$	4,637	$	4,428	$	5,334

(a) Not within the scope of ASC 606.

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

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

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

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

Index

(9) Operating Leases

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

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

Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company’s leases do not provide an implicit rate, therefore the Company used its incremental collateralized borrowing rates commensurate with the underlying lease terms to determine present value of operating lease liabilities. Additionally, the Company does allocate the consideration between lease and non-lease components. The Company’s lease terms may include options to extend when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease components, such as fair market value adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. As of March 31, ~~2020~~2021, the Company did not have any leases with terms of twelve months or less.

As of March 31, ~~2020~~2021, the Company ~~does~~has 1 lease that the construction has not ~~have leases that have not yet commenced.~~started yet. At March 31, ~~2020~~2021, lease expiration dates ranged from ~~eight~~six months to ~~24.5~~23.5 years and have a weighted average remaining lease term of ~~9.2~~8.9 years. Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements. As mentioned above the leases generally also include variable lease components which include real estate taxes, insurance, and common area maintenance (“CAM”) charges in the annual rental payments.

Index

Other information related to leases was as follows:

(dollars in thousands)	Three months ended March 31,				Three months ended March 31,
	2020		2019		2021		2020
Operating lease cost	$	1,995	$	1,891	$	2,016	$	1,995
Variable lease cost		480		466		502		480

Total Lease costs	$	2,475	$	2,357	$	2,518	$	2,475

(dollars in thousands)	Three months ended March 31,						Three months ended March 31,
	2020			2019			2021			2020
Supplemental cash flows information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,995			1,949		$	2,038		$	1,995

Right-of-use assets obtained in exchange for lease obligations:		-			53,029			302			0

Weighted average remaining lease term	9.2 years			9.8 years			8.9 years			9.2 years
Weighted average discount rate		3.25	%		3.30	%		3.16	%		3.25	%

Future minimum lease payments under non-cancellable leases as of March 31, ~~2020~~2021 were as follows:

(dollars in thousands)	(dollars in thousands)

Year ending December 31,
2020^(a)		$	6,039
2021			8,033
Year ending December 31,
2021^(a)				$	6,155
2022			7,533		7,780
2023			7,227		7,475
2024			7,100		7,350
2025					6,976
Thereafter			28,361		23,660
Total lease payments		$	64,293	$	59,396
Less: Interest			9,295		7,947

Present value of lease liabilities		$	54,998	$	51,449

^(a)Excluding three months ended March 31, ~~2020.~~2021.

~~The company~~A member of the Board of Directors has ~~not recognized any options~~an ownership interest in 6 entities that own commercial real estate leased by the Company for use as branch locations. Total lease payments from the Company to ~~extend as part~~those entities, which are included in the table above, owed at March 31, 2021, were $4.4 million, which includes interest in the amount of ~~its ROU assets or lease liabilities.~~$620 thousand.

Index

~~The following table presents the minimum annual lease payments under the terms of these leases, exclusive of renewal provisions at December 31, 2019:~~

(dollars in thousands)

Year ending
December 31,

2020 $ 8,039
2021 8,033
2022 7,533
2023 7,227
2024 7,100
Thereafter 28,361
Total lease payments $ 66,293
Less: Interest 9,740

Present value of lease liabilities $ 56,553

~~At March 31, 2020 and December 31, 2019 the operating lease right-of-use asset was $50.0~~ ~~million and $51.5~~ ~~million, respectively~~.

(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. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and became fully phased in on January 1, 2019. The capital rules include a capital conservation buffer that is designed to absorb losses during periods of economic stress and to require increased capital levels before capital distributions and certain other payments can be made. Failure to meet the full amount of the buffer will result in restrictions on the Company’s ability to make capital distributions, including dividend payments and stock repurchases, and to pay discretionary bonuses to executive officers. The buffer was fully implemented at 2.5% as of January 1, 2019. As of March ~~31, 2020,~~31,2021, the Company and Bank meet all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide 5 classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If a bank is not classified as well capitalized, regulatory approval is required to accept brokered deposits. If a bank is undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The federal banking agencies are required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution or its holding company. Such actions could have a direct material effect on an institution’s or its holding company’s financial statements. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Index

The Bank and the Company reported the following capital ratios as of March 31, ~~2020~~2021 and December 31, ~~2019:~~2020:

(Bank Only)
									Minimum for Capital Adequacy plus Capital Conservation											Minimum for Capital Adequacy plus Capital Conservation
	As of March 31, 2020					Well						As of March 31, 2021					Well
	As of March 31, 2020					Well						As of March 31, 2021					Well
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾			Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	522,527		10.058	%		5.000	%		4.000	%	$	546,391		9.235	%		5.000	%		4.000	%
Common equity tier 1 capital		522,527		18.470			6.500			7.000			546,391		18.654			6.500			7.000
Tier 1 risk-based capital		522,527		18.470			8.000			8.500			546,391		18.654			8.000			8.500
Total risk-based capital		558,027		19.724			10.000			10.500			283,171		19.910			10.000			10.500

	As of December 31, 2019					Well			Adequately			As of December 31, 2020					Well			Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Capitalized⁽¹⁾⁽²⁾			Amount		Ratio			Capitalized⁽¹⁾			Buffer ⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	516,775		9.940	%		5.000	%		4.000	%	$	539,897		9.378	%		5.000	%		4.000	%
Common equity tier 1 capital		516,775		18.412			6.500			7.000			539,897		18.646			6.500			7.000
Tier 1 risk-based capital		516,775		18.412			8.000			8.500			539,897		18.646			8.000			8.500
Total risk-based capital		551,975		19.666			10.000			10.500			576,257		19.902			10.000			10.500

(Consolidated)
						Minimum for Capital Adequacy plus Capital Conservation Buffer⁽¹⁾⁽²⁾

	As of March 31, 2020								As of March 31, 2021					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio						Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	536,239		10.316	%		4.000	%	$	563,210		9.515	%		4.000	%
Common equity tier 1 capital		536,239		18.943			7.000			563,210		19.223			7.000
Tier 1 risk-based capital		536,239		18.943			8.500			563,210		19.223			8.500
Total risk-based capital		571,760		20.198			10.500			599,999		20.479			10.500

	As of December 31, 2019					Minimum for Capital Adequacy plus Capital Conservation			As of December 31, 2020					Minimum for Capital Adequacy plus Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer⁽¹⁾⁽²⁾			Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	533,243		10.254	%		4.000	%	$	555,672		9.650	%		4.000	%
Common equity Tier 1 capital		533,243		18.988			7.000			555,672		19.187			7.000
Tier 1 risk-based capital		533,243		18.988			8.500			555,672		19.187			8.500
Total risk-based capital		568,463		20.242			10.500			592,040		20.443			10.500

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

(2)	The March 31, ~~2020~~2021 and December 31, ~~2019~~ 2020 common equity tier 1, tier 1 risk-based, and total risk-based capital ratios include a capital conservation buffer of 2.50 percent

Index

(11) New Accounting Pronouncements

In September 2016, the FASB released ASU 2016-13, ~~“Financial~~"Financial Instruments - Credit ~~Losses”~~Losses" (referred to as “CECL”) which amended existing guidance to replace current generally accepted accounting principles used to measure a reporting ~~entity’s~~entity's credit losses. The main objective of this update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

As previously disclosed, the Company formed a cross-functional team to work through its implementation of ~~the plan.~~CECL. The Company has selected the Discounted Cash Flow modeling method and is running parallel processes and is working to finalize assessment and documentation of processes, data and model validation testing, qualitative factors and forecast periods. The ~~company has selected a third party software solution to assist in the application of the new standard. The~~ Company ~~has~~had previously elected to delay its adoption of ~~ASU 2016-13,~~CECL, as provided by the ~~Coronavirus Aid, Relief, and Economic Security~~CARES Act ~~(“CARES Act)~~ until the date on which the National Emergency concerning COVID-19 iswas terminated or December 31, 2020, whichever ~~occurs~~occurred first. ~~Upon~~The December 31, 2020 adoption date under the CARES Act was extended to January 1, 2022 as a part of ~~ASU 2016-13,~~the COVID-19 Relief Bill, which became law in December 2020, and therefore the Company ~~will recognize a one-time cumulative effect adjustment through retained earnings~~intends to ~~increase its allowance for credit loss and to increase its unfunded loan commitment liability as of~~adopt CECL on January 1, ~~2020.~~2022.

(12) Risks and Uncertainties

~~During~~Beginning in March 2020, the Company experienced negative impacts to ~~our~~its business in the form of requests for loan deferrals of principal and interest due to the business disruption caused by COVID-19. In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. At this time, it is difficult to quantify the impact COVID-19 will have on the rest of 2020, but the Company currently expects it to negatively impact us more in the remaining portion of 2020 than experienced in the first quarter. The Company has evaluated the impact of the effects of COVID-19 and determined that there were no material or systematic adverse impacts on the Company’s first quarter 2020 balance sheet and results of operations except for an increase provision for loan losses and related allowance for loan losses.

On March 3, 2020, the Federal Reserve reduced the target federal funds rate by 50 basis points, followed by an additional reduction of 100 basis points on March 16, 2020. ~~These reductions in interest rates and other~~The Company has evaluated the impact of the effects of ~~the~~ COVID-19 ~~pandemic may adversely affect~~and determined that there have been no lasting material or systematic adverse impacts on the Company’s March 31, 2021 financial ~~condition and results of operations. As~~statements, except for the increase in the allowance for loan losses as a result of the ~~spread~~potential for future credit losses due to the uncertainty of ~~COVID-19, economic uncertainties have arisen which are likely~~borrowers ability to ~~negatively impact net interest income, provision for loan losses, and noninterest income. Other financial impact could occur though such potential impact is unknown at this time.~~

repay during the pandemic. As of March 31, ~~2020,~~2021, the Company and Bank capital ratios were in excess of all regulatory requirements. While management believes that we have sufficient capital to withstand an extended economic recession brought about by the COVID-19 pandemic, our reported and regulatory capital ratios, as well as the ability of the Company and the Bank to pay dividends or make other distributions, could be adversely impacted by ~~further~~unanticipated credit losses.

Loan modifications and payment deferrals as a result of COVID-19 that meet the criteria established under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators are excluded from evaluation of troubled debt restructurings (“TDR”) classification and will continue to be reported as current during the payment deferral period. The Company’s policy is to continue to accrue interest during the deferral period. Loans not meeting the CARES ACT or regulatory guidance are evaluated for TDR and non-accrual treatment under the Company’s existing policies and procedures. Loan Modifications and payment deferrals made pursuant to COVID 19 through March 31, 2020 totaled approximately $4.9 million, which included $4.1 million of commercial loans and $808 thousand of residential loans.

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

assets and continue to negatively impact net interest income, provision for loan losses, and noninterest income.

Loan modifications and payment deferrals as a result of COVID-19 that meet the criteria established under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators are excluded from evaluation of TDR classification and will continue to be reported as current during the payment deferral period. The Company’s policy is to continue to accrue interest during the deferral period. Loans not meeting the CARES ACT or regulatory guidance are evaluated for TDR and non-accrual treatment under the Company’s existing policies and procedures. As of March 31, 2021, loans in deferral were not material.

Index

	~~Crowe LLP~~
		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”~~"Company") as of March 31, ~~2020,~~2021, and the related consolidated statements of income and comprehensive income, ~~for the three-month periods ended March 31, 2020 and March 31, 2019 and~~ the related changes in shareholders’ equity and cash flows for the three month periods ended March 31, ~~2020~~2021 and March 31, ~~2019,~~2020, and the related notes (collectively referred to as the ~~“interim~~"interim financial information or ~~statements”~~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”~~("PCAOB"), the consolidated statement of financial condition of the Company as of December 31, ~~2019,~~2020, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February ~~28, 2020,~~26, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of financial condition as of December 31, ~~2019,~~2020, 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~~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

New York, New York
May 7, 2021

~~New York, New York~~

~~May 8, 2020~~

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Item 2.

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

Forward-looking Statements

Statements included in this report and in future filings by TrustCo with the Securities and Exchange Commission, in TrustCo’s press releases, and in oral statements made with the approval of an authorized executive officer, including statements regarding the effect of the novel coronavirus disease (“COVID-19”) pandemic on our business and our continuing response to the COVID-19 pandemic, that are not historical or current facts, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Forward-looking statements can be identified by the use of such words as may, will, should, could, would, estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

In addition to factors described under Part II, Item 1A, Risk Factors, and under the Risk Factor discussion in TrustCo’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, the factors listed below, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement. Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic.

●

As a result of the current pandemic related to COVID-19, TrustCo may experience a decline in the demand for products and services; an increase in loan delinquencies; problem assets and foreclosures; a decline in collateral value; a work stoppage, forced quarantine, or other interruption or the unavailablilty of key employees; an increase in the allowance for loan losses; a reduction in wealth management revenues; an increase in Federal Deposit Insurance Corporation premiums; a reduction in the value of the securities portfolio; and a decline in the net worth and liquidity of loan guarantors;

●

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

●

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

●

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

●

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

●

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

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

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

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

Index

●

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

●

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

●

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

●

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

●

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

●

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

●

~~changes in management personnel;~~

●

~~real estate and collateral values;~~

●

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

●

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

●

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

●

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

●

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

●

~~other risks and uncertainties included under “Risk Factors” in our Form 10-K for the year ended December 31, 2019.~~

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

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

changes in consumer spending, borrowing and savings habits;

changes in management personnel;

real estate and collateral values;

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

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

technological changes and electronic, cyber and physical security breaches;

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

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

other risks and uncertainties included under “Risk Factors” in our Form 10-K for the year ended December 31, 2020.

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

Index

Following this discussion are the tables ~~“Distribution~~"Distribution of Assets, Liabilities and ~~Shareholders’~~Shareholders' Equity: Interest Rates and Interest ~~Differential”~~Differential" which gives a detailed breakdown of ~~TrustCo’s~~TrustCo's average interest earning assets and interest bearing liabilities for the three month periods ended March 31, ~~2020~~2021 and ~~2019.~~2020.

~~Index~~

Introduction

The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the three month period ended March 31, ~~2020,~~2021, with comparisons to the corresponding period in ~~2019,~~2020, as applicable. Net interest margin is presented on a fully taxable equivalent basis in this discussion. The consolidated interim financial statements and related notes, as well as the ~~2019~~2020 Annual Report on Form 10-K, which was filed with the SEC on February ~~28, 2020,~~26, 2021, should also be read in conjunction with this review. Amounts in prior period consolidated interim financial statements are reclassified whenever necessary to conform to the current ~~period’s~~period's presentation.

COVID-19 Impact

~~During~~Beginning in March 2020, we experienced negative impacts to our business in the form of requests for loan deferrals of principal and interest due to the business disruption caused by COVID-19. In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. At this time, it is difficult to quantify the impact COVID-19 will have on the rest of 2020, but we currently expect it to negatively impact us more in the remaining portion of 2020 than we experienced in the first quarter. The Company has evaluated the impact of the effects of COVID-19 and determined that there were no material or systematic adverse impacts on the Company’s ~~first quarter 2020~~ balance ~~sheet~~sheets and results of operations ~~except~~as of and for ~~an increase in~~ the ~~provision for loan losses as a result of~~quarter ended March 31, 2021. At this time, it is difficult to quantify the ~~increased risk inherent in the loan portfolio resulting from the pandemic.~~impact COVID-19 will have on future periods.

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

Loan modifications

We began receiving requests from our borrowers for loan deferrals in March ~~2020.~~2020 and agreed with many borrowers to modify their loans. Modifications ~~include~~included the deferral of principal ~~and~~and/or interest payments for terms generally up to 90 days. Requests ~~are~~were evaluated individually and approved modifications ~~are~~were based on the unique circumstances of each borrower. We are committed to working with our clients to allow time to work through the challenges of this pandemic. ~~At this time, it is uncertain what future~~The Company has evaluated the impact ~~loan modifications related to~~of the effects of COVID-19 ~~difficulties will~~and determined that there have been no lasting material or systematic adverse impacts on ~~our~~the Company’s March 31, 2021 financial ~~condition, results of operations and provision~~statements, except for the increase in the allowance for loan ~~losses.~~losses as a result of the potential for future credit losses due to the uncertainty of borrowers ability to repay during the pandemic. Loan modifications and payment deferrals as a result of COVID-19 that meet the criteria established under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES ~~Act~~Act”) or under applicable interagency guidance of the federal banking regulators are excluded from evaluation of troubled debt ~~restructurings~~restructuring (“TDR”) classification and will continue to be reported as current during the payment deferral period. The Company’s policy is to continue to accrue interest during the deferral period. Loans not meeting the ~~Coronavirus Aid, Relief, and Economic Security~~CARES Act ~~(“CARES Act”)~~ or regulatory guidance are evaluated for TDR and non-accrual treatment under the Company’s existing policies and procedures. As of March 31, 2021, loans in deferral were not material.

Index

~~The following table shows the number of loans and the outstanding loan balances at the time the principal and interest deferrals were approved as of April 28, 2020:~~

New York and Other states*: Number of loans
Outstanding loan
balance (in thousands)

Commercial 67 $ 35,910
Residential mortgage loans 344 74,534
Home equity line of credit 28 2,050
Installment loans 3 113
Total 442 $ 112,607

Florida: Number of loans
Outstanding loan
balance (in thousands)

Commercial 3 $ 4,579
Residential mortgage loans 150 35,896
Home equity line of credit 6 383
Installment loans 2 84
Total 161 $ 40,942

Total: Number of loans
Outstanding loan
balance (in thousands)

Commercial 70 $ 40,489
Residential mortgage loans 494 110,430
Home equity line of credit 34 2,433
Installment loans 5 197
Total 603 $ 153,549

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

The commercial loans that are deferred include loans from various types of businesses. These loans include borrowers from fitness and recreational sports centers, lessors and property managers of non-residential and residential buildings, general automotive repair, new single family construction, commercial construction, retail, and food service.

~~Index~~

Paycheck Protection Program (PPP) and Liquidity

As part of the CARES Act, approved by the President on March 27, 2020, the Small Business Administration (SBA) has been authorized to guarantee loans under the PPP ~~through June 30, 2020~~ for small businesses who meet the necessary eligibility requirements in order to keep their workers on the payroll. The Company began accepting applications on April 3, 2020. The Bank had originally funded 663 Paycheck Protection Program (“PPP”) loans totaling $46 million in 2020, and an additional $17 million in the first quarter of 2021. As of ~~April 28, 2020, 405~~March 31, 2021, 531 PPP loans totaling ~~$33.8~~$37 million ~~have been processed.~~remain outstanding. The Company ~~will receive~~receives loan origination fees which ~~will be~~are recognized over the life of the loan and apply the effective yield method.

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

Asset impairment

Provision for loan losses

See ~~Part I Financial Information, Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations under the heading~~ “Allowance for Loan Losses” for more information.

Preventative measures

The Company has instituted preventative measures at branch and back office locations to protect the health of both ~~the~~our customers and ~~our~~ employees, including regular deep cleaning of facilities, adhering to CDC guidelines, and practicing “social distancing.” These additional expenses did not have a material impact on the Company for the quarter ended March 31, 2021.

Federal Reserve Actions

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

●

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

●

~~The expansion of central bank liquidity swap lines;~~

●

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

●

~~The elimination of reserve requirements;~~

●

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

●

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

●

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

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

The expansion of central bank liquidity swap lines;

4241

Index

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

The elimination of reserve requirements;

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

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

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

Economic Overview

During the first quarter of ~~2020~~2021, financial markets ~~were drastically influenced by~~kept the ~~economic conditions that resulted from~~momentum gained during the fourth quarter of 2020 pushing indexes further into record territory. New stimulus funds along with accelerated COVID-19 ~~pandemic. Stocks suffered their worst quarterly declines since~~vaccinations contributed to the ~~financial crisis~~increased confidence in ~~late 2008 as~~ the ~~pandemic led to shutdowns of significant portions of the global~~ economy. For the ~~full~~ first quarter of 2021, the S&P 500 Index was ~~down 19.6%~~up 5.8% and the Dow Jones Industrial Average was ~~down 11.15%~~up 7.8%. Credit markets continue to be driven by worldwide economic news, effects of COVID-19, and demand shifts. The shape of the yield curve ~~remained consistent~~steepened during the quarter as compared to prior quarters. The ~~10-year~~10‑year Treasury bond averaged ~~1.37%~~1.34% during Q1 ~~2020~~2021 compared to ~~1.79%~~0.86% in Q4 ~~2019, a decrease~~2020, an increase of 4248 basis points. The ~~2-year~~2‑year Treasury bond average rate decreased 512 basis points to ~~1.08%~~0.13%, resulting in ~~flattening~~a steepening of the yield curve. The spread between the ~~10-year~~10‑year and the 2-year Treasury bonds expanded ~~slightly~~ from ~~0.20%~~0.71% on average in Q4 to ~~0.28%~~1.20% in Q1. This spread had been depressed in recent years, and compares to 2.42% during its most recent peak in Q4 of 2013. Steeper yield curves are favorable for portfolio mortgage lenders like TrustCo. The table below illustrates the range of rate movements for both short term and longer term rates. The target ~~Fed~~Federal Funds ~~range ended the fourth quarter 2019~~rate remained flat at ~~a range of 1.50% to 1.75%, and in response to the current economic downturn, decreased drastically in the first quarter to a range of~~ 0.00% to 0.25%. for the quarter. Spreads of most asset classes to the comparative treasury yield, including agency securities, corporates, municipals and mortgage-backed securities, ~~were~~continue to be down ~~by the end of the quarter~~ as compared to the levels seen ~~a year earlier. Changes~~before the pandemic. Accordingly, changes in rates and spreads ~~during~~continue to be effected by the ~~current quarter were primarily due to the effects of the COVID-19~~ pandemic.

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

Q1/19 Beg of Q1 2.45 2.48 2.51 2.69 0.21
Peak 2.49 2.62 2.62 2.79 0.21
Trough 2.37 2.22 2.18 2.39 0.13
End of Q1 2.40 2.27 2.23 2.41 0.14
Average in Q1 2.44 2.49 2.46 2.65 0.17

Q2/19 Beg of Q2 2.40 2.27 2.23 2.41 0.14
Peak 2.47 2.41 2.41 2.60 0.30
Trough 2.11 1.71 1.73 2.00 0.14
End of Q2 2.12 1.75 1.76 2.00 0.25
Average in Q2 2.35 2.13 2.12 2.34 0.21

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

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

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

Index

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

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

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

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

Q4/20	Beg of Q4	0.10	0.13	0.28	0.69	0.56
	Peak	0.12	0.19	0.46	0.98	0.83
	Trough	0.07	0.11	0.27	0.68	0.54
	End of Q4	0.09	0.13	0.36	0.93	0.80
	Average in Q4	0.09	0.15	0.37	0.86	0.71

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

The United States economy continued to show ~~some modest~~ improvements ~~in various areas~~ heading into ~~2020 until the COVID-19 uncertainty began to gain momentum.~~2021 as mentioned above. Economic conditions vary significantly over geographic areas, with strength concentrated in and around major population centers on the coasts and in certain areas where economic activity has been driven by specific regional factors.

TrustCo believes that its long-term focus on traditional banking services and practices historically has enabled the Company to avoid significant impact from asset quality problems, and that the Company’s strong liquidity and solid capital positions have allowed the Company to continue to conduct business in a manner consistent with its past practice. TrustCo has not engaged in the types of high risk loans and investments that have led to the widely reported problems in the industry, particularly those arising during the 2008-2010 financial crisis. Nevertheless, the Company may experience increases in nonperforming loans (“NPLs”) relative to historical levels from time to time. Should general housing prices and other economic measures, such as unemployment in the Company’s market areas, deteriorate as a result of the COVID-19 pandemic or other reasons, the Company may experience an increase in the level of credit risk and in the amount of its classified and nonperforming loans.

Index

In a direct response to the COVID-19 pandemic, on March 27, 2020 Congress passed the CARES Act. ~~Included~~As previously noted, included in the CARES Act is support for small businesses, direct payments to lower and middle income families, expanded unemployment insurance, additional funding for health care providers, as well as support for other industries. The Federal Reserve Board, in an attempt to increase liquidity and promote the normal functioning of financial markets, also provided support by increasing purchases of Treasury securities and agency mortgage-backed securities.

Financial Overview

TrustCo recorded net income of ~~$13.3~~$14.1 million, or ~~$0.138~~$0.146 of diluted earnings per share, for the three months ended March 31, ~~2020,~~2021, compared to net income of ~~$14.6~~$13.3 million, or ~~$0.150~~$0.138 of diluted earnings per share, in the same period in ~~2019.~~2020. Return on average assets was ~~1.03%~~0.96% and ~~1.17%~~1.03%, respectively, for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. Return on average equity was ~~9.87%~~10.01% and ~~11.93%~~9.87%, respectively, for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

The primary factors accounting for the change in net income for the three months ended March 31, ~~2020~~2021 compared to the same period of the prior year were:

●

~~An increase in the average balance of interest earning assets of $143.2 million to $5.1 billion for the first quarter of 2020 compared to the same period in 2019~~.

A decrease in the cost of interest bearing liabilities of $5.7 million, partially offset by a decrease in income from interest earning assets of $4.1 million, resulted in an increase in taxable equivalent net interest income in the first quarter of 2021 compared to the first quarter of 2020 of $1.6 million.

●

A decrease in taxable equivalent net interest margin for the first quarter of 2020 to 3.05% from 3.24% in the prior year period. The decrease in the margin, coupled with the increase in average earning assets, resulted in a decrease of $1.2 million in taxable equivalent net interest income in the first quarter of 2020 compared to the first quarter of 2019.

A decrease of $1.7 million in provision for loan losses for the first quarter of 2021 compared to the first quarter 2020.

●

~~An increase of $1.7 million in provision for loan losses for the first quarter of 2020 compared to the first quarter 2019.~~

A decrease of $906 thousand in noninterest income for the first quarter of 2021 compared to the first quarter of 2020, primarily driven by a $1.2 million gain on securities transactions in the prior period.

●

~~An increase of $697 thousand in noninterest income for the first quarter of 2020 compared to the first quarter of 2019, primarily driven by a $1.2 million gain on securities transactions.~~

An increase of $1.1 million in noninterest expense for the first quarter 2021 compared to the first quarter 2020.

●

~~A decrease of $599 thousand in noninterest expense for the first quarter 2020 compared to the first quarter 2019.~~

~~Index~~

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~~short‑term and ~~long-term~~long‑term basis.

TrustCo’s results are affected by a variety of factors including competitive and economic conditions in the specific markets in which the Company operates and, more generally, in the national economy, financial market conditions and the regulatory environment. Each of these factors is dynamic, and changes in any area can have an impact on TrustCo’s results. Included in the Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 is a description of the effect interest rates had on the results for the year ~~2019~~2020 compared to ~~2018.~~2019. Many of the same market factors discussed in the ~~2019~~2020 Annual Report continued to have a significant impact on results through the first quarter of ~~2020,~~2021, as well as the ~~impacts form~~economic effect of COVID-19.

Index

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. ~~During 2007‑2008~~From December 2015 through December 2018, the ~~FRB aggressively reduced the~~U.S. Federal ~~Funds~~Reserve Board increased its federal funds target rate ~~including~~from a ~~decrease from 4.25% at the beginning of 2008 to a target~~ range of 0.00% ~~to 0.25% by the end of 2008. The target range remained at that level until December 2015 when the range was increased to~~- 0.25% to ~~0.50%. Subsequent increases resulted in the~~a range of 2.25% to- 2.50% ~~until~~. Beginning in the second half of 2019, ~~when~~the Federal Reserve Board began lowering the rate ~~was cut several times before the end of 2019.~~in response to a slowing economy. During the first quarter of 2020 the rate was significantly decreased again as a result of the global pandemic related to COVID-19, and has returned the range of 0.00% to 0.25%.

Traditionally, interest rates on bank deposit accounts are heavily influenced by the Federal Funds rate. The average rate on interest bearing deposits was 258 basis points ~~higher~~lower in the first quarter of ~~2020~~2021 relative to the prior year period. Rates were ~~slightly~~ lower on all interest bearing ~~checking~~deposit accounts ~~and savings accounts but higher on money market accounts and time deposits.~~as a result of repricing over the last year due to the pandemic. Please refer to the statistical disclosures in the table below entitled “Distribution of Assets, Liabilities and Shareholders’ Equity: Interest Rates and Interest Differential.”

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

~~Index~~

TrustCo’s principal loan products are residential real estate loans. As noted above, residential real estate loans and ~~longer-term~~longer‑term investments are most affected by the changes in longer term market interest rates such as the ten-year Treasury. The ~~10-year~~10‑year Treasury yield was ~~down 42~~up 48 basis points, on average, during the first quarter of ~~2020~~2021 compared to the fourth quarter of ~~2019~~2020 and was down ~~128~~3 basis points as compared to the first quarter of ~~2019.~~2020.

Index

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

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

For the first quarter of ~~2020,~~2021, the net interest margin was ~~3.05%~~2.78%, down 1927 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 $90.9 million while the average yield decreased 119 basis points in the first quarter of 2020 compared to the same period in 2019. The decrease in the average balance helped to fund the $209.1 million increase in loans.

The average balance of Federal Funds sold and other short-term investments increased by $617.5 million while the average yield decreased 113 basis points in the first quarter of 2021 compared to the same period in 2020.

●

The average balance of securities available for sale increased by $28.7 million while the average yield increased 3 basis points to 2.26%. The average balance of held to maturity securities decreased by $3.9 million and the average yield decreased 8 basis points to 3.86% for the first quarter of 2020 compared to the same period in 2019.

The average balance of securities available for sale decreased by $57.8 million while the average yield decreased 76 basis points to 1.50%. The average balance of held to maturity securities decreased by $4.9 million and the average yield decreased 16 basis points to 3.70% for the first quarter of 2021 compared to the same period in 2020.

●

~~The average loan portfolio grew by $209.1 million to $4.08 billion and the average yield decreased 15 basis points to 4.13% in the first quarter of 2020 compared to the same period in 2019.~~

The average loan portfolio grew by $173.3 million to $4.25 billion and the average yield decreased 33 basis points to 3.80% in the first quarter of 2021 compared to the same period in 2020.

●

The average balance of interest bearing liabilities (primarily deposit accounts) increased $54.6 million and the average rate paid increased 2 basis points to 0.79% in the first quarter of 2020 compared to the same period in 2019.

~~Index~~

The average balance of interest bearing liabilities (primarily deposit accounts) increased $485.5 million and the average rate paid decreased 58 basis points to 0.21% in the first quarter of 2021 compared to the same period in 2020.

During the first quarter of ~~2020,~~2021, 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.

Index

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

Earning Assets

Total average interest earning assets increased from ~~$4.91~~$5.06 billion in the first quarter of ~~2019~~2020 to ~~$5.06~~$5.78 billion in the same period of ~~2020~~2021 with an average yield of 2.95% in the first quarter of 2021 and 3.69% in the first quarter of ~~2020 and 3.87% in the first quarter of 2019.~~2020. There was a ~~slight~~ shift in the mix of assets towards a higher ~~proportions~~proportion of ~~loans and securities available for sale from~~ federal funds sold and other short-term ~~investments. However, the~~investments from securities available for sale, as well as from increases in deposits. The sharp decrease in the federal funds rate during ~~the last month~~March of ~~the quarter~~2020 significantly decreased the average yield on the federal funds sold and other short-term investments from ~~2.43% in the first quarter of 2019 to~~ 1.24% in the first quarter of 2020 to 0.11% in the first quarter of 2021, which drove down the overall yield on interest earning assets. Interest income on average earning assets decreased ~~$802 thousand~~$4.1 million in the first quarter of ~~2020~~2021 from the prior year period, on a tax equivalent basis, and was primarily driven by the lower ~~federal funds rate~~market rates as mentioned above.

Loans

The average balance of loans was ~~$4.08~~$4.25 billion in the first quarter of ~~2020~~2021 and ~~$3.87~~$4.08 billion in the comparable period in ~~2019.~~2020. The yield on loans decreased 1533 basis points to ~~4.13%~~3.80%. The higher average balances ~~led to an increase~~did not offset the decrease in ~~interest income on loans from $41.3 million in the first quarter of 2019 to $42.1 million in the first quarter of 2020.~~yield.

Compared to the first quarter of ~~2019,~~2020, the average balance of residential mortgage loans and commercial loans increased while home equity lines of credit and installment loans decreased. The average balance of residential mortgage loans was $3.79 billion in 2021 compared to $3.60 billion in 2020, ~~compared to $3.37 billion in 2019,~~ an increase of ~~6.7%~~5.2%. The average yield on residential mortgage loans decreased by 936 basis points to ~~4.05%~~3.69% in the first quarter of ~~2020~~2021 compared to ~~2019.~~2020.

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

~~Index~~

Commercial loans, which consist primarily of loans secured by commercial real estate, increased ~~$4.3~~$14.7 million to an average balance of ~~$198.0~~$212.8 million in the first quarter of ~~2020~~2021 compared to the same period in the prior ~~year.~~year, primarily as a result of the remaining PPP loans. The average yield on this portfolio was ~~down 20~~up 41 basis points to ~~5.13%~~5.54% compared to the prior year period, primarily ~~reflecting~~as a result of the ~~decrease in the prime rate.~~origination fees recognized on forgiven PPP loans. The Company remains selective in underwriting commercial loans in recent periods as the apparent risk/reward balance has been less favorable in many cases.

Index

The average yield on home equity credit lines decreased 6651 basis points to ~~4.35%~~3.84% during the first quarter of ~~2020~~2021 compared to the prior year ~~earlier~~ period. The decrease in yield is the result of prime rate decreases which impacted some loans as well as a smaller percentage of lower yielding initial rate balances. The average balances of home equity lines decreased ~~7.2%~~10.2% to ~~$265.5~~$238.4 million in the first quarter of ~~2020~~2021 as compared to the prior year. Customers with home equity lines continue to refinance their balances into fixed rate mortgage ~~loans.~~loans given the current rate environment and have been less likely to draw on home equity lines due to reduced tax benefits.

Securities Available for Sale

The average balance of the securities available for sale portfolio for the first quarter of ~~2020~~2021 was ~~$540.7~~$482.9 million compared to ~~$512.0~~$540.7 million for the comparable period in ~~2019.~~2020. The ~~increase~~decrease in the balance reflects routine paydowns, calls and maturities, offset by new investment ~~purchases partially offset by routine paydowns, sales, calls and maturities.~~purchases. The average yield was 1.50% for the first quarter of 2021 compared to 2.26% for the first quarter of ~~2020 compared to 2.23% for the first quarter of 2019.~~2020. This portfolio is primarily comprised of agency issued residential mortgage backed securities, bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank, and Freddie Mac), Small Business Administration participation certificates, corporate bonds and municipal bonds. These securities are recorded at fair value with any adjustment in fair value included in other comprehensive income (loss), net of tax.

The net unrealized gain in the available for sale securities portfolio was ~~$10.0~~$3.7 million as of March 31, ~~2020~~2021 compared to a net unrealized gain of ~~$391 thousand~~$9.7million as of December 31, ~~2019.~~2020. The decrease in the net unrealized ~~loss~~gains in the portfolio is the result of changes in market interest rate levels.

Held to Maturity Securities

The average balance of held to maturity securities was ~~$18.1~~$13.3 million for the first quarter of ~~2020~~2021 compared to ~~$22.0~~$18.1 million in the first quarter of ~~2019.~~2020. The decrease in balances reflects routine paydowns and calls. No new securities were added to this portfolio during the period. The average yield was ~~3.86%~~3.70% for the first quarter of ~~2020~~2021 compared to ~~3.94%~~3.86% for the year earlier period. TrustCo expects to hold the securities in this portfolio until they mature or are called.

As of March 31, ~~2020,~~2021, this portfolio consisted solely of residential mortgage-backed securities. The balances for these securities are recorded at amortized cost.

~~Index~~

Federal Funds Sold and Other Short-term Investments

The ~~2020~~2021 first quarter average balance of Federal Funds sold and other short-term investments was ~~$412.1~~$1.03 billion, a $617.5 million ~~a $90.9 million decrease~~increase from the ~~$503.0~~$412.1 million average for the same period in ~~2019.~~2020. The yield was ~~1.24%~~0.11% for the first quarter of ~~2020~~2021 and ~~2.43%~~1.24% for the comparable period in ~~2019.~~2020. Interest income from this portfolio decreased ~~$1.7~~$1.0 million from ~~$3.0 million in 2019 to~~ $1.3 million in 2020 ~~reflecting several~~to approximately $300 thousand in 2021. The higher average balances did not offset the target rate decreases ~~as previously mentioned, as well as the decrease in balances.~~from early 2020.

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.

Index

Funding Opportunities

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

Total average interest bearing deposits (which includes interest bearing checking, money market accounts, savings and time deposits) increased ~~$60.1~~$415.3 million to ~~$4.0~~$4.4 billion for the first quarter of ~~2020~~2021 versus the first quarter in the prior year, and the average rate paid ~~increased~~decreased from ~~0.76% for 2019 to~~ 0.78% for ~~2020.~~2020 to 0.20% for 2021. Total interest expense on these deposits ~~increased $436 thousand~~decreased $5.6 million to ~~$7.7~~$2.2 million in the first quarter of ~~2020~~2021 compared to the year earlier period. From the first quarter of ~~2019~~2020 to the first quarter of ~~2020,~~2021, interest bearing checking account average balances were ~~down 1.1%~~up 24.5%, certificates of deposit average balances were ~~up 1.2%~~down 7.9%, ~~non-interest~~non‑interest demand average balances were up ~~15.3%~~46.9%, average savings balances ~~decreased 3.8%~~increased 17.8% and money market balances were up ~~18.6%~~18.1%. Our growth in deposits came at relatively ~~the same~~low cost and continues to be offset by higher earnings on loan yields and returns in the investment portfolio. ~~Because we offered competitive shorter term rates in the past, we expect cost of interest bearing liabilities to continue to decrease as these reprice at lower rates.~~

At March 31, ~~2020,~~2021, the maturity of total time deposits is as follows:

(dollars in thousands)

Under 1 year	$	1,274,928	$	1,060,965
1 to 2 years		75,461		156,531
2 to 3 years		10,461		9,873
3 to 4 years		3,161		2,852
4 to 5 years		2,798		842
Over 5 years		196		200
	$	1,367,005	$	1,231,263

Average short-term borrowings for the first quarter of ~~2020~~2021 were ~~$153.7~~$223.8 million compared to ~~$159.1~~$153.7 million in the same period in ~~2019.~~2020. The average rate decreased during this ~~time~~ period from ~~0.97% in 2019 to~~ 0.84% in ~~2020.~~2020 to 0.41% in 2021. 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.

~~Index~~

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)~~(“FHLBNY”) and is an eligible borrower at the Federal Reserve Bank of New York ~~(FRBNY)~~(“FRBNY”) and has the ability to borrow utilizing securities and/or loans as collateral at either. The Bank does not utilize brokered deposits as a part of its funding strategy, but does incorporate them as a contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered CDs may be tested from time to time to ensure operational and market ~~readiness.~~readiness.

Index

Net Interest Income

Taxable equivalent net interest income ~~decreased~~increased by ~~$1.2~~$1.6 million to ~~$38.6~~$40.1 million in the first quarter of ~~2020~~2021 compared to the same period in ~~2019.~~2020. The net interest spread was down 2017 basis points to ~~2.91%~~2.74% in the first quarter of ~~2020~~2021 compared to the same period in ~~2019.~~2020. As previously noted, the net interest margin was down 1927 basis points to ~~3.05~~2.78 for the first quarter of ~~2020~~2021 compared to the same period in ~~2019.~~2020.

Nonperforming Assets

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

The following describes the nonperforming assets of TrustCo as of March 31, ~~2020:~~2021:

Nonperforming loans and foreclosed real estate: Total NPLs and non-accrual loans were $21.6 million at March 31, 2021, compared to $21.1 million at December 31, 2020 and $20.7 million at March 31, 2020, compared to $20.9 million at December 31, 2019 and $24.7 million at March 31, 2019. There were $20.7 million of non-accrual loans at March 31, 2020 compared to $20.8 million at December 31, 2019 and $24.7 million at March 31, 2019.2020. There were no loans at March 31, ~~2020~~2021 and ~~2019~~2020 and December 31, ~~2019~~2020 that were past due 90 days or more and still accruing interest.

At March 31, ~~2020,~~2021, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of ~~$20.7~~$21.6 million at March 31, ~~2020, $20.1~~2021, $21.5 million were residential real estate loans, ~~$630~~$125 thousand were commercial loans and mortgages and ~~$24~~$32 thousand were installment loans, compared to ~~$20.0~~$20.6 million, ~~$816~~$452 thousand and $3$43 thousand, respectively at December 31, ~~2019.~~2020.

A significant percentage of nonperforming loans are residential real estate loans, which are historically lower-risk than most other types of loans. Net ~~chargeoffs~~recoveries were ~~$138~~$2 thousand on residential real estate loans (including home equity lines of credit) for the first quarter of ~~2020~~2021 compared to ~~$337~~net chargeoffs of $138 thousand for the first quarter of ~~2019.~~2020. Management believes that these loans have been appropriately written down where required.

~~Index~~

Ongoing portfolio management is intended to result in early identification and disengagement from deteriorating credits. TrustCo has a diversified loan portfolio that includes a significant balance of residential mortgage loans to borrowers in the Capital Region of New York and avoids concentrations to any one borrower or any single industry. TrustCo has no advances to borrowers or projects located outside the United States. TrustCo continues to identify delinquent loans as quickly as possible and to move promptly to resolve problem loans. Efforts to resolve delinquencies begin immediately after the payment grace period expires, with repeated, automatically generated notices, as well as personalized phone calls and letters. Loans are placed in nonaccrual status once they are 90 days past due, or earlier if management has determined that such classification is appropriate. Once in nonaccrual status, loans are either brought current and maintained current, at which point they may be returned to accrual status, or they proceed through the foreclosure process. The collateral on nonaccrual loans is evaluated periodically, and the loan value is written down if the collateral value is insufficient. Additionally, due to the recent COVID-19 pandemic, the Bank is monitoring recent regulatory mandates by state in regards to a moratorium on foreclosures.

Index

The Company originates loans throughout its deposit franchise area. At March 31, ~~2020, 73.9%~~2021, 71.7% of its gross loan portfolio balances were in New York State and the immediately surrounding areas (including New Jersey, Vermont and Massachusetts), and ~~26.1%~~28.3% were in Florida. Those figures compare to ~~74.4%~~72.1% and ~~25.6%~~27.9%, respectively at December 31, ~~2019.~~2020.

Economic conditions vary widely by geographic location. As a percentage of the total nonperforming loans as of March 31, ~~2020, 7.2%~~2021, 7.5% were to Florida borrowers, compared to ~~92.8%~~92.5% to borrowers in New York and surrounding areas. For the three months ended March 31, ~~2020,~~2021, New York and surrounding areas experienced net ~~chargeoffs~~recoveries of approximately ~~$145~~$48 thousand, compared to net chargeoffs of ~~$17~~$2 thousand in Florida.

Other than loans currently identified as nonperforming and loan deferrals as a result of COVID-19, management is aware of no other loans in the Bank’s portfolio that pose material risk of the eventual non-collection of principal and interest. Also as of March 31, ~~2020,~~2021, there were no other loans classified for regulatory purposes that management reasonably expects will materially impact future operating results, liquidity, or capital resources.

TrustCo has identified nonaccrual commercial and commercial real estate loans, as well as all loans restructured under a troubled debt restructuring (TDR), as impaired loans. There were ~~$1.1 million~~$699 thousand of commercial mortgages and commercial loans classified as impaired as of March 31, ~~2020~~2021 compared to ~~$1.4~~$1.0 million at December 31, ~~2019.~~2020. There were ~~$19.2~~$19.6 million of impaired residential loans at March 31, ~~2020~~2021 and ~~$19.5~~$20.6 million at December 31, ~~2019~~2020. The average balances of all impaired loans were $20.7 million for the three months of ~~2020~~2021 and ~~$21.0~~$20.8 million for the full year ~~2019.~~2020.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company’s loan portfolio did not include any subprime mortgages or loans acquired with deteriorated credit quality.

At March 31, ~~2020~~2021 there was ~~$1.3 million~~$420 thousand of foreclosed real estate compared to ~~$1.6 million~~$541 thousand at December 31, ~~2019.~~2020.

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

Index

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

(dollars in thousands)	As of March 31, 2020					As of December 31, 2019					March 31, 2021					December 31, 2020
	Amount		Percent of Loans to Total Loans			Amount		Percent of Loans to Total Loans			Amount		Percent of Loans to Total Loans			Amount		Percent of Loans to Total Loans
Commercial	$	3,756		4.34	%	$	3,805		4.47	%	$	3,886		4.75	%	$	3,975		4.67	%
Real estate - construction		312		0.67	%		311		0.70	%		338		0.67	%		290		0.58	%
Real estate mortgage - 1 to 4 family		37,625		88.25	%		35,632		87.96	%		41,892		88.86	%		41,228		88.81	%
Home equity lines of credit		3,910		6.48	%		3,999		6.60	%		3,443		5.52	%		3,597		5.71	%
Installment Loans		552		0.26	%		570		0.27	%		432		0.20	%		505		0.23	%
	$	46,155		100.00	%	$	44,317		100.00	%	$	49,991		100.00	%	$	49,595		100.00	%

At March 31, ~~2020,~~2021, the allowance for loan losses was ~~$46.2~~$50.0 million, compared to ~~$44.7~~$46.2 million at March 31, ~~2019~~2020 and ~~$44.3~~$49.6 million at December 31, ~~2019.~~2020. The allowance represents ~~1.13%~~1.17% of the loan portfolio as of March 31, ~~2020~~2021 compared to ~~1.16%~~1.13% at March 31, ~~2019~~2020 and ~~1.09%~~1.17% at December 31, ~~2019.~~2020.

The provision for loan losses was $350 thousand for the quarter ended March 31, 2021 and $2 million for the quarter ended March 31, ~~2020 and $300 thousand for~~2020. The decrease in the ~~quarter ended March 31, 2019. The increase~~provision is primarily driven by the beginning of the uncertainty in the ~~current~~ economic environment resulting from ~~COVID-19.~~the COVID-19 pandemic in the same period in the prior year. Net ~~chargeoffs~~recoveries for the three-month period ended March 31, ~~2020~~2021 were ~~$162~~$46 thousand and ~~were $395~~net chargeoffs of $162 thousand for the prior year period.

During the first quarter of ~~2020,~~2021, there were no commercial loan chargeoffs and $95 thousand of gross residential mortgage and consumer loan chargeoffs compared with $3 thousand of commercial loan chargeoffs and $217 thousand of gross residential mortgage and consumer loan chargeoffs ~~compared with $7 thousand gross commercial loan chargeoffs and $481 thousand of residential mortgage and consumer loan chargeoffs~~ in the first quarter of ~~2019.~~2020. Gross recoveries during the first quarter of ~~2020~~2021 were $32 thousand for commercial loans and $109 thousand for residential mortgage and consumer loans, compared to $2 thousand for commercial loans and $56 thousand for residential mortgage and consumer loans ~~compared to $3 thousand for commercial loans and $90 thousand for residential and consumer~~ in the first quarter of ~~2019.~~2020.

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

●

~~The magnitude and nature of recent loan chargeoffs and recoveries;~~

●

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

●

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

●

~~The economic environment as a result of COVID-19 and resultant business shutdowns and unemployment spikes.~~

The magnitude and nature of recent loan chargeoffs and recoveries;

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

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

The economic environment as a result of the global pandemic.

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

Index

Liquidity and Interest Rate Sensitivity

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

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

Using this model, the fair value of capital projections as of March 31, ~~2020~~2021 are referenced below. The base case (current rates) scenario shows the present estimate of the fair value of capital assuming no change in the operating environment or operating strategies and no change in interest rates from those existing in the marketplace as of March 31, ~~2020.~~2021. The table indicates the impact on the fair value of capital assuming interest rates were to instantaneously increase by 100 bp, 200 bp, 300 bp and 400 bp or to decrease by 100 bp.

As of March 31, ~~2020~~2021	Estimated Percentage of Fair value of Capital to Fair value of Assets
+400 BP	~~19.80%~~	21.60	%
+300 BP	~~20.20~~	21.70
+200 BP	~~20.50~~	21.60
+100 BP	~~20.60~~	22.00
Current rates	~~20.00~~	21.40
-100 BP	~~16.30~~	18.40

Index

Noninterest Income

Total noninterest income for the first quarter of 2021 and 2020 ~~and 2019~~ was ~~$5.3~~$4.4 million and ~~$4.6~~$5.3 million, respectively. The ~~increase~~decrease over the same period in the prior year was primarily related to net gains on securities ~~transactions.~~transactions in the prior year period, partially offset by an increase in financial services income in the current year period. The fair value of assets under management was $1.04 billion at March 31, 2021 and $997 million as of December 31, 2020 and $786 million at March 31, ~~2020 and $928 million as of December 31, 2019 and $867 million at March 31, 2019.~~2020.

Noninterest Expenses

Total noninterest expenses were ~~$24.3~~$25.3 million for the three months ended March 31, ~~2020,~~2021, compared to ~~$24.9~~$24.3 million for the three months ended March 31, ~~2019~~2020. Significant changes included ~~declines~~an increase in ~~professional services, advertising expense,~~salaries and employee benefits primarily as a result of the increase in the Company’s stock price which increased benefit liabilities. FDIC and other ~~Insurance,~~insurance expense also increased primarily as a result of credits in the prior period due to the FDIC reaching the Deposit Reserve Fund reserve ratio. These increases were partially offset by ~~increases~~decreases in ~~outsourced services~~equipment expense, and ~~ORE expenses, net.~~other expense. Full time equivalent headcount ~~decreased~~increased from ~~899 as of March 31, 2019 to~~ 813 as of March 31, ~~2020.~~2020 to 820 as of March 31, 2021.

Income Taxes

In the first quarter of ~~2020,~~2021, TrustCo recognized income tax expense of ~~$4.3~~$4.8 million compared to ~~$4.6~~$4.3 million for the first quarter of ~~2019.~~2020. The effective tax rates were ~~24.4%~~25.3% and ~~24.2%~~24.4%, respectively, for the first quarters of ~~2020~~2021 and ~~2019.~~2020.

Capital Resources

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

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

Total shareholders’ equity at March 31, ~~2020~~2021 was ~~$548.2~~$571.0 million compared to ~~$501.7~~$548.2 million at March 31, ~~2019.~~2020. TrustCo declared a dividend of $0.068125 per share in the first quarter of ~~2020.~~2021. This results in a dividend payout ratio of ~~49.41%~~46.65% based on first quarter ~~2020~~2021 earnings of ~~$13.3~~$14.1 million.

Index

The Bank and the Company reported the following capital ratios as of March 31, ~~2020~~2021 and December 31, ~~2019:~~2020:

(Bank Only)									Minimum for											Minimum for Capital Adequacy plus
									Capital Adequacy plus
	As of March 31, 2020					Well			Capital Conservation			As of March 31, 2021					Well			Capital Conservation
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾			Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾
	��
Tier 1 leverage ratio	$	522,527		10.058	%		5.000	%		4.000	%	$	546,391		9.235	%		5.000	%		4.000	%
Common equity tier 1 capital		522,527		18.470			6.500			7.000			546,391		18.654			6.500			7.000
Tier 1 risk-based capital		522,527		18.470			8.000			8.500			546,391		18.654			8.000			8.500
Total risk-based capital		558,027		19.724			10.000			10.500			283,171		19.910			10.000			10.500


	As of December 31, 2019					Well			Adequately
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Capitalized⁽¹⁾⁽²⁾

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


(Consolidated)
						Minimum for
						Capital Adequacy plus
	As of March 31, 2020					Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	536,239		10.316	%		4.000	%
Common equity tier 1 capital		536,239		18.943			7.000
Tier 1 risk-based capital		536,239		18.943			8.500
Total risk-based capital		571,760		20.198			10.500


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

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

									Minimum for Capital Adequacy plus
	As of December 31, 2020					Well			Capital Conservation
(dollars in thousands)	Amount		Ratio			Capitalized⁽¹⁾			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	539,897		9.378	%		5.000	%		4.000	%
Common equity tier 1 capital		539,897		18.646			6.500			7.000
Tier 1 risk-based capital		539,897		18.646			8.000			8.500
Total risk-based capital		576,257		19.902			10.000			10.500

(Consolidated)

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

Tier 1 leverage ratio	$	563,210		9.515	%		4.000	%
Common equity tier 1 capital		563,210		19.223			7.000
Tier 1 risk-based capital		563,210		19.223			8.500
Total risk-based capital		599,999		20.479			10.500

						Minimum for Capital Adequacy plus
	As of December 31, 2020					Capital Conservation
(dollars in thousands)	Amount		Ratio			Buffer⁽¹⁾⁽²⁾

Tier 1 leverage ratio	$	555,672		9.650	%		4.000	%
Common equity Tier 1 capital		555,672		19.187			7.000
Tier 1 risk-based capital		555,672		19.187			8.500
Total risk-based capital		592,040		20.443			10.500

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

(2)	The March 31, ~~2020~~2021 and December 31, ~~2019~~2020 common equity tier 1, tier 1 risk-based, and total risk-based capital ratios include a capital conservation buffer of 2.50 percent

In addition, at March 31, ~~2020,~~2021, Trustco’s consolidated equity to total assets ratio was ~~10.43%~~9.44% compared to ~~10.31%~~9.63% at December 31, ~~2019~~2020 and ~~9.73%~~10.43% at March 31, ~~2019.~~2020.

Index

Both TrustCo and Trustco Bank are subject to regulatory capital requirements contained in rules published by the Federal Reserve Board, FDIC and OCC. The rules establish a comprehensive capital framework for all U.S. banking organizations designed to implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. The rules were effective for the Company and the Bank on January 1, 2015, with full compliance with all of the final rule’s requirements being phased in over a multi-year schedule. Calendar year 2018 was the final year of implementation of the capital rules and the capital rules were fully phased in effective January 1, 2019.

~~Index~~

requirements. The capital rules require the Company’s and the Bank’s capital to exceed the regulatory standards plus a capital conservation buffer in order to avoid constraints on dividends, equity repurchases and certain compensation. ~~To meet~~On January 1, 2015, a new capital rule took effect that revised the ~~requirement,~~federal bank regulatory agencies’ risk-based capital requirements and, for the first time, subjected the Company to consolidated regulatory capital requirements. Among other matters, the rule also established a ~~banking organization must maintain an amount of~~new common equity Tier 1 ~~(“CET1”)~~minimum capital ~~that exceeds the buffer level~~requirement of ~~2.5% above each~~4.5% of ~~the minimum risk-weighted asset ratios. To avoid capital conservation buffer constraints, the organization must maintain the following capital ratios: (1) CET1 to~~ risk-weighted assets, ~~of more than 7.0%, (ii)~~increased the minimum Tier 1 capital to risk-based assets requirement from 4.0% to 6.0% of risk-weighted assets, changed the risk-weightings of ~~more than 8.5%,~~certain assets, and ~~(iii) total~~changed what qualifies as capital ~~(Tier~~for purposes of meeting the various capital requirements. In addition, the Company and the Bank are required to maintain additional levels of Tier 1 ~~plus Tier 2) to risk-weighted assets of more than 10.5%.~~common equity (the capital conservation buffer) over the minimum risk-based capital levels before they may pay dividends, repurchase shares, or pay discretionary bonuses. The new rule was phased-in over several years and has been fully in effect since 2020.

As of March 31, ~~2020,~~2021, the capital levels of both TrustCo and the Bank exceeded the minimum standards, including with the current, 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 ~~6.5%~~7%, 8%8.5%, ~~10%~~10.5% and 5%, respectively. A bank is deemed to be “adequately capitalized” or better if its capital ratios meet or exceed the minimum federal regulatory capital requirements, and “undercapitalized” if it fails to meet these minimal capital requirements. A bank is “significantly undercapitalized” if its CET1, Tier 1, total risk-based and leverage capital ratios fall below 3%, 4%, 6% and 3%, respectively and “critically undercapitalized” if the institution has a ratio of tangible equity to total assets that is equal to or less than 2%. At March 31, ~~2020~~2021 and ~~2019,~~2020, Trustco Bank met the definition of “well capitalized.”

As noted, the Company’s dividend payout ratio was 46.65% of net income for the first quarter of 2021 and 49.41% of net income for the first quarter of ~~2020 and 45.23% of net income for the first quarter of 2019.~~2020. The per-share dividend paid in both the first quarter of ~~2020,~~2021, the fourth quarter of ~~2019,~~2020, and the first quarter of ~~2018~~2020 was $0.068125. The Company’s ability to pay dividends to its shareholders is dependent upon the ability of the Bank to pay dividends to the Company. The payment of dividends by the Bank to the Company is subject to continued compliance with minimum regulatory capital requirements. The OCC may disapprove a dividend if: the Bank would be undercapitalized following the distribution; the proposed capital distribution raises safety and soundness concerns; or the capital distribution would violate a prohibition contained in any statue, regulation or agreement.

TrustCo maintains a dividend reinvestment plan (DRP) with approximately ~~11,206~~8,936 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.

Index

Reverse Stock Split Proposal

On February 16, 2021, the Company announced that the Board of Directors plans to seek approval at the Company’s annual shareholder meeting on May 20, 2021 for a reverse stock split of the Company’s common stock at a ratio of 1 for 5, and, effective at the same time of the reverse stock split, to reduce the number of authorized shares of the Company’s common stock from 150,000,000 to 30,000,000 shares. The Board of Directors reserves its right to elect not to proceed with the reverse stock split if it determines that implementing a reverse split is no longer in the best interests of TrustCo and its shareholders.

Share Repurchase Program

On June 7, 2019 the Company’s Board of Directors authorized a share repurchase program of up to 1,000,000 shares. During the three months ended March 31, 2020, the Company repurchased a total of 489 thousand shares at an average price per share of $7.11 for a total of $3.5 million under its Board authorized share repurchase program. The shares purchased as of March 31, 2020 represent ~~.51%~~0.51% of our common shares outstanding. On April 16, 2020, the Company announced that it ~~has~~had suspended its share repurchase program. On February 18, 2021 the Company’s Board of Directors authorized another share repurchase program of up to 2,000,000 shares, or approximately 2% of its currently outstanding common stock. The Company did not make any repurchases under this authorization during the three months ended March 31, 2021. If TrustCo’s reverse stock split is consummated, the shares subject to the repurchase program would be proportionately adjusted.

~~Index~~

Critical Accounting Policies and Estimates

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

Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the inherent uncertainty in evaluating the levels of the allowance required to cover the inherent risk of losses in the loan portfolio and the material effect that such judgments can have on the results of operations. Included in Note 1 to the Consolidated Financial Statements contained in the Company’s Annual Report on Form ~~10-K~~10‑K for the year ended December 31, ~~2019~~2020 is a description of the significant accounting policies that are utilized by the Company in the preparation of the Consolidated Financial Statements.

Recent Accounting Pronouncements

Please refer to Note 11 to the consolidated financial statements for a detailed discussion of new accounting pronouncements and their impact on the Company. As indicated in Note 11, as allowed by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) the Bank elected to delay the adoption of ASU 2016-13, “Financial Instruments – Credit Losses,” until the earlier of the termination of the national emergency concerning COVID-19 or December 31, 2020. The December 31, 2020 adoption date under the CARES Act was extended to January 1, 2022 as a part of the COVID-19 Relief Bill, which became law in December 2020, and therefore the Company intends to adopt CECL on January 1, 2022.

Index

TrustCo Bank Corp NY

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

STATISTICAL DISCLOSURE

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

INTEREST RATES AND INTEREST DIFFERENTIAL

The following table summarizes the component distribution of the average balance sheet, related interest income and expense and the average annualized yields on interest earning assets and annualized rates on interest bearing liabilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Nonaccrual loans are included in loans for this analysis. The average balances of securities available for sale and held to maturity are calculated using amortized costs for these securities. Included in the average balance of ~~shareholders’~~shareholders' equity is the unrealized gain, ~~(loss),~~ net of tax, in the available for sale portfolio of $4.6 million in 2021 and $4.9 million in ~~2020 and ($9.2) million in 2019.~~2020. The subtotals contained in the following table are the arithmetic totals of the items contained in that category. Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and rate) based on the percentage relationship of such variances to each other.

(dollars in thousands)
Three months ended
March 31, 2020

Three months ended
March 31, 2019

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 $ 92,369 421 1.82 % $ 154,258 783 2.03 % $ (362 ) (289 ) (73 )
Mortgage backed securities and collateralized mortgage obligations-residential 371,768 2,113 2.27 % 273,004 1,555 2.28 % 558 590 (32 )
State and political subdivisions 114 2 7.59 % 168 2 7.85 % - - -
Corporate bonds 28,332 238 3.36 % 26,862 208 3.09 % 30 12 18
Small Business Administration-guaranteed participation securities 47,418 245 2.06 % 57,057 297 2.08 % (52 ) (50 ) (2 )
Other 685 6 3.50 % 685 5 2.92 % 1 - 1

Total securities available for sale 540,686 3,025 2.26 % 512,034 2,850 2.23 % 175 263 (88 )

Federal funds sold and other short-term Investments 412,076 1,267 1.24 % 502,976 3,009 2.43 % (1,742 ) (469 ) (1,273 )

Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential 18,144 175 3.86 % 22,037 217 3.94 % (42 ) (9 ) (33 )

Total held to maturity securities 18,144 175 3.86 % 22,037 217 3.94 % (42 ) (9 ) (33 )

Federal Reserve Bank and Federal Home Loan Bank stock 9,183 82 3.57 % 8,953 85 3.80 % (3 ) 2 (5 )

Commercial loans 198,047 2,542 5.13 % 193,738 2,583 5.33 % (41 ) 62 (103 )
Residential mortgage loans 3,601,728 36,461 4.05 % 3,374,990 34,864 4.14 % 1,597 2,326 (729 )
Home equity lines of credit 265,461 2,868 4.35 % 286,199 3,537 5.01 % (669 ) (236 ) (433 )
Installment loans 10,717 192 7.20 % 11,897 269 9.17 % (77 ) (24 ) (53 )

Loans, net of unearned income 4,075,953 42,063 4.13 % 3,866,824 41,253 4.28 % 810 2,128 (1,318 )

Total interest earning assets 5,056,042 46,612 3.69 % 4,912,824 47,414 3.87 % (802 ) 1,915 (2,717 )

Allowance for loan losses (44,520 ) (44,947 )
Cash & non-interest earning assets 193,619 176,009

Total assets $ 5,205,141 $ 5,043,886

Liabilities and shareholders’ equity

Deposits:
Interest bearing checking accounts $ 871,153 16 0.01 % $ 880,474 121 0.06 % (105 ) (1 ) (104 )
Money market accounts 614,201 1,096 0.72 % 517,995 826 0.65 % 270 173 97
Savings 1,116,558 233 0.08 % 1,160,142 377 0.13 % (144 ) (14 ) (130 )
Time deposits 1,369,914 6,391 1.88 % 1,353,160 5,976 1.79 % 415 85 330

Total interest bearing deposits 3,971,826 7,736 0.78 % 3,911,771 7,300 0.76 % 436 243 193
Short-term borrowings 153,668 322 0.84 % 159,076 381 0.97 % (59 ) (12 ) (47 )

Total interest bearing liabilities 4,125,494 8,058 0.79 % 4,070,847 7,681 0.77 % 377 231 146

Demand deposits 458,476 397,522
Other liabilities 79,003 80,579
Shareholders’ equity 542,168 494,938

Total liabilities and shareholders’ equity $ 5,205,141 $ 5,043,886

Net interest income , tax equivalent 38,554 39,733 $ (1,179 ) 1,684 (2,863 )

Net interest spread 2.91 % 3.11 %

Net interest margin (net interest income to total interest earning assets) 3.05 % 3.24 %

Tax equivalent adjustment (1 ) (1 )

Net interest income 38,553 39,732

(dollars in thousands)	Three months ended March 31, 2021								Three months ended March 31, 2020

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

Securities available for sale:
U. S. government sponsored enterprises	$	51,649		$	50		0.38	%	$	92,369		$	421			1.82	%	$	(371	)		(133	)		(238	)
Mortgage backed securities and collateralized mortgage obligations-residential		327,614			1,237		1.51	%		371,768			2,113			2.27	%		(876	)		(229	)		(647	)
State and political subdivisions		50			1		6.47	%		114			2			7.59	%		(1	)		(1	)		-
Corporate bonds		63,334			316		1.99	%		28,332			238			3.36	%		78			641			(563	)
Small Business Administration-guaranteed participation securities		39,582			206		2.09	%		47,418			245			2.06	%		(39	)		(56	)		17
Other		686			6		3.50	%		685			6			3.50	%		-			-			-

Total securities available for sale		482,915			1,816		1.50	%		540,686			3,025			2.26	%		(1,209	)		222			(1,431	)

Federal funds sold and other short-term Investments		1,029,570			270		0.11	%		412,076			1,267			1.24	%		(997	)		5,166			(6,163	)

Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential		13,273			123		3.70	%		18,144			175			3.86	%		(52	)		(45	)		(7	)

Total held to maturity securities		13,273			123		3.70	%		18,144			175			3.86	%		(52	)		(45	)		(7	)

Federal Reserve Bank and Federal Home Loan Bank stock		5,506			69		5.01	%		9,183			82			3.57	%		(13	)		(138	)		125

Commercial loans		212,781			2,945		5.54	%		198,047			2,542			5.13	%		403			196			207
Residential mortgage loans		3,789,256			34,852		3.69	%		3,601,728			36,461			4.05	%		(1,609	)		9,054			(10,663	)
Home equity lines of credit		238,379			2,259		3.84	%		265,461			2,868			4.35	%		(609	)		(285	)		(324	)
Installment loans		8,795			161		7.41	%		10,717			192			7.20	%		(31	)		(65	)		34

Loans, net of unearned income		4,249,211			40,217		3.80	%		4,075,953			42,063			4.13	%		(1,846	)		8,900			(10,746	)

Total interest earning assets		5,780,475			42,495		2.95	%		5,056,042			46,612			3.69	%		(4,117	)		14,105			(18,222	)

Allowance for loan losses		(49,945	)							(44,520	)
Cash & non-interest earning assets		199,769								193,619

Total assets	$	5,930,299								5,205,141


Liabilities and shareholders' equity

Deposits:
Interest bearing checking accounts	$	1,084,572			52		0.02	%	$	871,153		$	16			0.01	%		36			6			30
Money market accounts		725,570			283		0.16	%		614,201			1,096			0.72	%		(813	)		1,144			(1,957	)
Savings		1,315,049			159		0.05	%		1,116,558			233			0.08	%		(74	)		212			(286	)
Time deposits		1,261,963			1,666		0.54	%		1,369,914			6,391			1.88	%		(4,725	)		(469	)		(4,256	)

Total interest bearing deposits		4,387,154			2,160		0.20	%		3,971,826			7,736			0.78	%		(5,576	)		893			(6,469	)
Short-term borrowings		223,807			228		0.41	%		153,668			322			0.84	%		(94	)		580			(674	)

Total interest bearing liabilities		4,610,961			2,388		0.21	%		4,125,494			8,058			0.79	%		(5,670	)		1,473			(7,143	)

Demand deposits		673,428								458,476
Other liabilities		75,143								79,003
Shareholders' equity		570,767								542,168

Total liabilities and shareholders' equity	$	5,930,299							$	5,205,141

Net interest income , tax equivalent					40,107								38,554					$	1,553			12,632			(11,079	)

Net interest spread							2.74	%								2.91	%

Net interest margin (net interest income to total interest earning assets)							2.78	%								3.05	%

Tax equivalent adjustment					-								(1	)

Net interest income					40,107								38,553

Index

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

As detailed in the Annual Report on Form 10-K as of December 31, ~~2019,~~2020, the Company is subject to interest rate risk as its principal market risk. As noted in the Management’s Discussion and Analysis for the three month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Company continues to respond to changes in interest rates in such a way that positions the Company to meet short term earning goals and also allows the Company to respond to changes in interest rates in the future. Consequently, for the first quarter of ~~2020,~~2021, the Company had an average balance of Federal Funds sold and other short-term investments of ~~$412.1 million~~$1.0 billion compared to ~~$503.0~~$412.1 million in the first quarter of ~~2019.~~2020. As investment opportunities present themselves, management plans to invest funds from the Federal Funds sold and other short-term investment portfolio into the securities available for sale, securities held to maturity and loan portfolios. Additional disclosure of interest rate risk can be found under “Liquidity and Interest Rate Sensitivity” and “Asset/Liability Management” in the Management’s Discussion and Analysis section of this document.

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

Item 4.

Controls and Procedures

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

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

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

Index

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

~~Index~~

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

None.

Item 1A.

Risk Factors

~~In light of the rapidly evolving COVID-19 pandemic, TrustCo (and collectively with the Bank, “we,” “us,” and “our”) have updated a number of~~There were no material changes to the risk factors ~~affecting our business since those presented~~previously disclosed in ~~our~~the Company’s Annual Report on Form 10-K, Part I, Item 1A, for the fiscal year ended December 31, 2019 (the “Annual Report”) filed with the Securities and Exchange Commission on February 28, 2020. The following risk factors should be read in conjunction with the risk factors set forth in the Annual Report.

~~The COVID-19 outbreak could adversely affect our business activities, financial condition and results of operations.~~

Our banking business, and the business of our industry generally, is dependent upon the willingness and ability of customers to conduct banking and other financial transactions. The spread of COVID-19 has caused, and we expect it to continue to cause, severe disruptions in the U.S. economy, including in the geographic areas in which we operate. Such economic disruptions could result in increased risk of delinquencies, defaults, foreclosures, and losses on our loans, negatively impact national and regional economic conditions, result in declines in loan demand and originations, the value of loan collateral (particularly in our home mortgage loan portfolio), and deposit availability, and negatively impact the implementation of our growth strategy. The spread of COVID-19 may result in a significant decrease in business and/or cause customers to be unable to meet existing payment or other obligations. The effects of the economic disruptions created by the COVID-19 pandemic, depending on their extent, could heighten many of our known risks described in the “Risk Factors” section of our Annual Report on Form 10-K10‑K for the year ended December 31, ~~2019 and could materially and adversely affect our liquidity and financial condition, and the results of our operations could be materially and adversely affected.~~

While the spread of COVID-19 has minimally affected our operations as of March 31, 2020, we may experience temporary closures of offices and/or suspension of certain services. Although we maintain contingency plans for a pandemic, the spread of COVID-19 could negatively affect key employees, including operational management personnel and those charged with preparing, monitoring, and evaluating our financial reporting and internal controls. Such a spread or outbreak could also negatively impact the business and operations of third-party service providers who perform critical services for us. If COVID-19, or another highly infectious or contagious disease, spreads or the response to contain COVID-19 is unsuccessful, we could experience a material adverse effect to our business, financial condition, and results of operations.

~~Index~~

Additionally, the COVID-19 pandemic has significantly affected the financial markets and has resulted in a number of Federal Reserve actions. Market interest rates have declined significantly. Yields on the 30-year Treasury notes and 10-year Treasury notes, which significantly influence home mortgage interest rates, are at historic lows. On March 3, 2020, the Federal Reserve reduced the target federal funds rate by 50 basis points to 1.00% to 1.25%, and on March 15, 2020, it further reduced the target federal funds rate by 100 basis points to 0.00% to 0.25% and announced a quantitative easing program in response to the expected economic downturn caused by the COVID-19 pandemic. The Federal Reserve reduced the interest that it pays on excess reserves from 1.60% to 1.10% on March 3, 2020, and then to 0.10% on March 15, 2020. ~~We expect that these reductions in interest rates, especially if prolonged, could adversely affect net interest income and margins and profitability.~~

The extent to which the COVID-19 pandemic affects our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.

As a participating lender in the SBA’s Paycheck Protection Program, the Company and the Bank are subject to additional risks of litigation from the Bank’s customers or other parties regarding the Bank’s processing of loans for the Payment Protection Program and risks that the SBA may not fund some or all Payment Protection Program loan guaranties.

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which included a $349 billion loan program administered through the SBA referred to as the Payment Protection Program (“PPP”), and Congress has recently approved additional funding for the program. Under the program, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria.

We have experienced increased volume of loan originations, particularly SBA loans pursuant to the PPP. Certain of these SBA loans have mandated interest rates that are lower than our usual rates and may not be purchased by the SBA or other third parties within expected timeframes. In addition, borrowers may draw on existing lines of credit or seek additional loans to finance their businesses. These factors may result in reduced levels of capital and liquidity being available to originate more profitable loans, which will negatively impact our ability to serve our existing customers and our ability to attract new customers.

Since the opening of the PPP on April 3, 2020, several larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications. We may be exposed to the risk of similar litigation, from both customers and non-customers that approached us regarding PPP loans, regarding our process and procedures used in processing applications. If any such litigation is filed against us and is not resolved in a manner favorable to us, it may result in significant financial liability or adversely affect our reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by related litigation could have a material adverse impact on our business, financial condition and results of operations.

~~Index~~

We also have credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by us, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules, and guidance regarding the operation of the PPP. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by us, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from us.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Program

The following table provides certain information with respect to the Company’s purchases of its common shares during the three months ended March 31, ~~2020:~~2021:

Period
Total
numbers of
shares
purchased

Average
price paid
per share

Total number
of shares
purchased as
part of publicly
announced
plans or
programs

Maximum number of
shares that may yet
be purchased under
the plans or
programs (1)

January 1, 2020 through January 31, 2020 75,000 $ 8.04 75,000 925,000
February 1, 2020 through February 29, 2020 225,000 $ 7.50 225,000 700,000
March 1, 2020 through March 31, 2020 189,000 $ 6.28 189,000 511,000
Total 489,000 $ 7.11 489,000 511,000

	Issuer Purchases of Common Shares
Period	Total Numbers of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs (1)
January 1, 2021 through January 31, 2021	-	N/A	-	-
February 1, 2021 through February 28, 2021	-	N/A	-	-
March 1, 2021 through March 31, 2021	-	N/A	-	-

Total	-	N/A	-	-

(1)

On ~~June 7, 2019,~~February 18, 2021 the ~~Company announced that its board~~Company’s Board of ~~directors approved a stock~~Directors authorized another share repurchase program ~~under which the Company may repurchase over the following twelve months~~of up to ~~1,000,000~~2,000,000 shares, ~~of Company common stock,~~ or approximately 1%2% of its ~~current~~currently outstanding shares. Repurchases would be made in open market or private transactions, through block trades, or pursuant to any trading plan that may be adopted in accordance with Securities and Exchange Commission rules and at prices management considered to be attractive and incommon stock. If TrustCo’s previous announced reverse stock split is consummated, the ~~best interests~~then remaining number of ~~both the Company and its stockholders,~~shares subject to the ~~availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. The~~ repurchase program was subject to suspension, termination or modification at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate.would be proportionately adjusted. The Company ~~commenced~~did not make any repurchases under ~~the program~~this authorization during the ~~quarter~~three months ended March 31, ~~2020. On April 16, 2020, the Company announced that it had chosen to suspend the repurchase program.~~2021.

~~Index~~

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety

None.

Index

Item 5.

Other Information

None.

~~Index~~

Item 6.

Exhibits

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

15	Crowe LLP Letter Regarding Unaudited Interim Financial Information

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

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

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

101.INS	Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRLTaxonomy Extension Presentation Linkbase Document

Index

SIGNATURES

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

	TrustCo Bank Corp NY

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


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

Date: May 7, 2021

~~Date: May 8, 2020~~

6562

	Three months ended 3/31/2019
(dollars in thousands)	Balance at 12/31/2018			Other Comprehensive Income (loss)- Before Reclassifications		Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Three months ended 3/31/2019			Balance at 3/31/2019

Net unrealized holding loss on securities available for sale, net of tax	$	(10,416	)		3,396		-			3,396			(7,020	)
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax (a)		423			-		-			-			423
Net change in net actuarial gain and prior service credit on pension and postretirement benefit plans, net of tax		(316	)		-		(98	)		(98	)		(414	)

Accumulated other comprehensive income (loss), net of tax	$	(10,309	)		3,396		(98	)		3,298			(7,011	)

New York and Other states*:	Number of loans		Outstanding loan balance (in thousands)
Commercial		67	$	35,910
Residential mortgage loans		344		74,534
Home equity line of credit		28		2,050
Installment loans		3		113
Total		442	$	112,607

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

Q1/19	Beg of Q1	2.45	2.48	2.51	2.69	0.21
	Peak	2.49	2.62	2.62	2.79	0.21
	Trough	2.37	2.22	2.18	2.39	0.13
	End of Q1	2.40	2.27	2.23	2.41	0.14
	Average in Q1	2.44	2.49	2.46	2.65	0.17

Q2/19	Beg of Q2	2.40	2.27	2.23	2.41	0.14
	Peak	2.47	2.41	2.41	2.60	0.30
	Trough	2.11	1.71	1.73	2.00	0.14
	End of Q2	2.12	1.75	1.76	2.00	0.25
	Average in Q2	2.35	2.13	2.12	2.34	0.21

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

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

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


(dollars in thousands)	Three months ended March 31, 2020									Three months ended March 31, 2019

	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	$	92,369			421			1.82	%	$	154,258			783			2.03	%	$	(362	)		(289	)		(73	)
Mortgage backed securities and collateralized mortgage obligations-residential		371,768			2,113			2.27	%		273,004			1,555			2.28	%		558			590			(32	)
State and political subdivisions		114			2			7.59	%		168			2			7.85	%		-			-			-
Corporate bonds		28,332			238			3.36	%		26,862			208			3.09	%		30			12			18
Small Business Administration-guaranteed participation securities		47,418			245			2.06	%		57,057			297			2.08	%		(52	)		(50	)		(2	)
Other		685			6			3.50	%		685			5			2.92	%		1			-			1

Total securities available for sale		540,686			3,025			2.26	%		512,034			2,850			2.23	%		175			263			(88	)

Federal funds sold and other short-term Investments		412,076			1,267			1.24	%		502,976			3,009			2.43	%		(1,742	)		(469	)		(1,273	)

Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential		18,144			175			3.86	%		22,037			217			3.94	%		(42	)		(9	)		(33	)

Total held to maturity securities		18,144			175			3.86	%		22,037			217			3.94	%		(42	)		(9	)		(33	)

Federal Reserve Bank and Federal Home Loan Bank stock		9,183			82			3.57	%		8,953			85			3.80	%		(3	)		2			(5	)

Commercial loans		198,047			2,542			5.13	%		193,738			2,583			5.33	%		(41	)		62			(103	)
Residential mortgage loans		3,601,728			36,461			4.05	%		3,374,990			34,864			4.14	%		1,597			2,326			(729	)
Home equity lines of credit		265,461			2,868			4.35	%		286,199			3,537			5.01	%		(669	)		(236	)		(433	)
Installment loans		10,717			192			7.20	%		11,897			269			9.17	%		(77	)		(24	)		(53	)

Loans, net of unearned income		4,075,953			42,063			4.13	%		3,866,824			41,253			4.28	%		810			2,128			(1,318	)

Total interest earning assets		5,056,042			46,612			3.69	%		4,912,824			47,414			3.87	%		(802	)		1,915			(2,717	)

Allowance for loan losses		(44,520	)								(44,947	)
Cash & non-interest earning assets		193,619									176,009


Total assets	$	5,205,141								$	5,043,886


Liabilities and shareholders’ equity

Deposits:
Interest bearing checking accounts	$	871,153			16			0.01	%	$	880,474			121			0.06	%		(105	)		(1	)		(104	)
Money market accounts		614,201			1,096			0.72	%		517,995			826			0.65	%		270			173			97
Savings		1,116,558			233			0.08	%		1,160,142			377			0.13	%		(144	)		(14	)		(130	)
Time deposits		1,369,914			6,391			1.88	%		1,353,160			5,976			1.79	%		415			85			330

Total interest bearing deposits		3,971,826			7,736			0.78	%		3,911,771			7,300			0.76	%		436			243			193
Short-term borrowings		153,668			322			0.84	%		159,076			381			0.97	%		(59	)		(12	)		(47	)

Total interest bearing liabilities		4,125,494			8,058			0.79	%		4,070,847			7,681			0.77	%		377			231			146

Demand deposits		458,476									397,522
Other liabilities		79,003									80,579
Shareholders’ equity		542,168									494,938

Total liabilities and shareholders’ equity	$	5,205,141								$	5,043,886

Net interest income , tax equivalent					38,554									39,733					$	(1,179	)		1,684			(2,863	)

Net interest spread								2.91	%								3.11	%

Net interest margin (net interest income to total interest earning assets)								3.05	%								3.24	%

Tax equivalent adjustment					(1	)								(1	)


Net interest income					38,553									39,732

Period	Total numbers of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs (1)
January 1, 2020 through January 31, 2020		75,000	$	8.04		75,000		925,000
February 1, 2020 through February 29, 2020		225,000	$	7.50		225,000		700,000
March 1, 2020 through March 31, 2020		189,000	$	6.28		189,000		511,000
Total		489,000	$	7.11		489,000		511,000