# TRUSTCO BANK CORP N Y (TRST) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from TRUSTCO BANK CORP N Y's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/357301/000114036125008827/ef20039040_10k.htm
Accession: 0001140361-25-008827
Filing date: 2025-03-14
Report date: 2024-12-31
Extracted from a later financial-section MD&A body after the formal Item 7 span was a short reference. Source document followed from filing index: ef20039040_ex13.htm.
Confidence: high

Company profile: /company/TRST/
All MD&A years: /company/TRST/mda/
Previous year: /company/TRST/mda/fy2023/ (FY 2023)
Next year: /company/TRST/mda/fy2025/ (FY 2025)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operations and financial
condition for 2024, 2023 and 2022.  This discussion should be read in conjunction with our audited financial statements included in “Consolidated Financial Statements and Notes” herein and Part I, Item 1, “Business” set forth in our Annual
Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”).  The following analysis contains forward-looking statements about our future revenues, operating results and expectations.  See “Cautionary Note Regarding
Forward-Looking Statements” herein for a discussion of the risks, assumptions and uncertainties affecting these statements, as well as Part I, Item 1A. “Risk Factors” set forth in our 2024 Form 10-K.

To review our financial condition and results of operations for 2022 and a comparison between the 2022 and 2023 results, see Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations of our 2023 Form 10-K filed with the SEC on March 11, 2024.  Balances discussed are daily averages unless otherwise described.

Financial Review

In 2024, a year that was extraordinary for the economy and the markets, TrustCo continued to make great progress.  In management’s view, the key results for 2024 are:

[[GREPCENT_TABLE]]
[["\u2022","Net income after taxes was $48.8 million or $2.57 diluted earnings per share in 2024;"]]
[[/GREPCENT_TABLE]]

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[["\u2022","Period-end loans were up $95.2 million for 2024 compared to the prior year;"]]
[[/GREPCENT_TABLE]]

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[["\u2022","Period-end deposits were up $40.2 million for 2024 compared to the prior year;"]]
[[/GREPCENT_TABLE]]

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[["\u2022","Nonperforming assets was $21.0 million for 2024;"]]
[[/GREPCENT_TABLE]]

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[["\u2022","GAAP net interest income was $151.9 million in 2024;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","At 61.55% and 61.60%, the efficiency ratio (GAAP) and adjusted efficiency ratio (non-GAAP), respectively, remained stronger than our peer group levels (see Non-GAAP Financial Measures Reconciliation); and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The regulatory capital levels of both the Company and the Bank continued to remain strong as of December 31, 2024, and the Bank continues to meet the definition of \u201cwell capitalized\u201d for regulatory purposes."]]
[[/GREPCENT_TABLE]]

Management believes that the Company was able to achieve these accomplishments, by executing its long-term plan focused on traditional lending criteria and sound balance sheet management. 
Achievement of specific business goals such as the continued expansion of loans, along with tight control of operating expenses and manageable levels of nonperforming assets, is fundamental to the long-term success of the Company as a whole.

Return on average equity was 7.43% in 2024 compared to 9.46% in 2023, while return on average assets was 0.80% in 2024 as compared to 0.97% in 2023.

The U.S. economy proved to be resilient during 2024, with the GDP growing during three out of the four quarters and consumer spending remaining strong. Commencing in March 2022, the Federal
Open Market Committee (“FOMC”) increased the target range for the federal funds rate seven times in 2022 by a total of 425 basis points, and four times in 2023 by a total of 100 basis points, for a total of 525 basis points.  All of these
increases were expressly made in response to inflationary pressures. At its FOMC meeting in September 2024, the Federal Reserve implemented a 50 basis points rate cut resulting in a federal funds target rate range of 4.75 percent to 5.00
percent. The rate cut represented the first interest rate change in a year and the first rate cut in more than four years. The Federal Reserve subsequently cut the federal funds target rate another 25 basis points in November 2024 and again
in December 2024 to a current range of 4.25 percent to 4.50 percent.

For the year ended 2024, the Dow Jones Industrial Average ended up 12.9%, and the S&P 500 Index also was up 23.3%, resulting in two straight years of growth for both indices.  United
States three-month Treasury bills experienced a decrease in rates ending the year at 4.37%, 21 basis points behind the ten-year Treasury yield at year-end of 4.58%.  These yields compare to 2023 year-end yields of 5.45% for the three-month
Treasury bills and 3.84% for the ten-year Treasury bills.  These rates are important to the banking industry because deposit rates tend to track the changes in the shorter-term Treasury markets and the mortgage loan products tend to track
with the ten-year Treasury yields.  Beginning in 2024, the yield on the two-year Treasury bond was 4.26% and decreased 1 basis point during the year to close 2024 at 4.25% and the ten-year Treasury bond began 2024 at 3.84% and closed the year
up 74 basis points to 4.58% at year-end.  These rate changes have a significant implication to the broader economic cycle.

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[["","Page 7 of 111"]]
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While the FOMC has initiated a rate easing cycle, the range of potential rate paths over the coming year is wide and will ultimately be driven by the path of inflation, labor market
performance and economic growth. In its January 2025 “Beige Book”, the Federal Reserve Bank noted that overall economic activity increased slightly to moderately in late November and December. In the Second District (including New York),
regional banks reported that demand declined for all loan types, including business loans, consumer loans, and commercial and residential mortgages, as well as refinances, during the most recent reporting period; however, credit standards
eased and delinquency rates improved. Deposit rates continued to decline. In the Sixth District (including Florida), construction, land development, and auto loans contracted modestly; all other major loan categories increased moderately.
Asset quality remained stable with low levels of nonperforming loans as a percentage of total loans. Both deposit balances and borrowings by banks increased, as loan-to-deposit ratios fell amid rising loan growth. Cash balances grew in the
Sixth District, outpacing asset growth.

TrustCo, like most other banking organizations, prices its liabilities (deposits and short-term borrowings) in relation to the shorter end of the Treasury maturity curve.  The average for
the three-month treasury was 10 basis points lower in 2024 than in 2023, with the median yield of 5.43% in 2024 down 1 basis point over the median yield in 2023.  These trends generally reflect a decrease in the cost for deposit products that
price in relation to the short-term treasury market yields.  At the same time the average yield of the ten-year Treasury has increased to 4.21% in 2024, up 25 basis points from 2023 when the average was 3.96%.  Generally longer-term loans are
priced consistent with the changes in the ten-year Treasury markets.  These two trends – lower shorter-term rates and an increase in longer-term rates – could result in an increase of new loan yields and a decrease in deposit yields.

In November 2023, the FDIC issued a final rule to implement a special assessment to recoup losses to the Deposit Insurance Fund associated with bank failures in the first half of 2023.
Under the rule, the assessment base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion of uninsured deposits. The
total amount of the special assessment is to be paid in ten equal quarterly installments that began with the invoice for the first quarter of 2024 (received in June 2024) and ends with the invoice for the second quarter of 2026.  There will
be no additional cost to TrustCo as a result of its uninsured deposits being under $5 billion.

Management believes that TrustCo’s long-term focus on traditional banking services has enabled the Company to avoid significant impact from asset quality problems, and the
Company’s strong liquidity and solid capital positions have allowed the Company to continue to conduct business in a manner consistent with past practices.  While we continue to adhere to prudent underwriting standards, should
general housing prices and other economic measures, such as unemployment in the Company’s market areas, deteriorate as a result of unexpected changes, financial sector instability, a potential or actual default on the federal debt or other
reasons, the Company may experience an increase in the level of credit risk and in the amount of its classified and nonperforming loans.

Overview

2024 results were marked by growth in the Company’s loan portfolio despite a challenging year for loan rates and housing prices.  The loan portfolio grew to a total of $5.10 billion, an
increase of $95 million or 1.9% over the 2023 year-end balance.  Deposits ended 2024 at $5.39 billion, up from $5.35 billion the prior year-end.  The year-over-year increase in loans reflects the success the Company has had in attracting
customers to the Bank given its array of loan products.  Management believes that the increase in deposits was driven by the Banks effective market and pricing strategy.    Moreover, management believes that TrustCo’s success is predicated on
providing core banking services to a wider number of customers and continuing to provide added services to existing customers where possible.  Growing the customer base should contribute to continued growth of loans and a renewed growth of
deposits, as well as growth in net interest income and non-interest income.

TrustCo earned $48.8 million in net income or $2.57 of diluted earnings per share for the year ended December 31, 2024, compared to $58.6 million in net income or $3.08 of diluted earnings
per share for the year ended December 31, 2023.

During 2024, the following items had a significant effect on net income:

[[GREPCENT_TABLE]]
[["\u2022","A decrease of $19.9 million in net interest income from 2023 to 2024 primarily as a result of the increase in interest expense reflecting the current interest rate environment;"]]
[[/GREPCENT_TABLE]]

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[["\u2022","an increase in the provision for credit losses of $750 thousand;"]]
[[/GREPCENT_TABLE]]

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[["\u2022","an increase in non-interest income of $1.5 million; and"]]
[[/GREPCENT_TABLE]]

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[["","Page 8 of 111"]]
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[["\u2022","a decrease in non-interest expense of $5.6 million."]]
[[/GREPCENT_TABLE]]

Management believes that TrustCo performed well in comparison to its peers with respect to a number of key performance ratios during 2024 and 2023, including:

[[GREPCENT_TABLE]]
[["\u2022","Tier 1 risk-based capital ratio of 19.30% for 2024 and 18.90% for 2023, compared to medians of 12.41% in 2024 and 12.01% in 2024 for a peer group comprised of all publicly traded banks and thrifts tracked by S&P Global Market Intelligence with assets of $2 billion to $10 billion, and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","an efficiency ratio and an adjusted efficiency ratio of 61.55% and 61.60% for 2024, and 58.53%and 56.72% for 2023, respectively, as calculated by S&P Global Market Intelligence, compared to the peer group medians of 61.84% in 2024 and 60.85% in 2023."]]
[[/GREPCENT_TABLE]]

During 2024, TrustCo’s results were affected by loan growth and a changing interest rate environment.  The decrease in net interest income was due to a 37 basis-point
contraction in the net interest margin to 2.54% from 2.91%, partially offset by a $65.7 million, or 1.1%, increase in average interest-earning assets. The net interest margin contraction was due to a 79-basis point increase in the average
cost of deposits, and was partially offset by a 24 basis-point increase in the loan portfolio yield to 4.08%. Average loan balances increased 3.4% from 2023 to 2024, while the total of average Federal Funds Sold and other short-term
investments, available for sale securities and held to maturity securities decreased 9.8%. Average net loans increased to 84.4% of average earning assets in 2024 from 82.5% in 2023.  On average for 2024, non-maturity deposits were 63.8% of
total deposits, down from 72.5% in 2023.  Overall, the cost of interest-bearing liabilities increased 78 basis points to 1.97% in 2024 as compared to 2023. The Company has traditionally sought to maintain a high liquidity position and taken a
conservative stance in its investment portfolio through the use of relatively short-term securities.

Market interest rates moved significantly during the course of 2023 and 2024, with shorter-term three-month treasury rates decreasing year-over-year while the longer
term ten-year rates increased, resulting in the slope of the yield curve returning to slightly positive by the end of 2024.  The average daily spread between the ten-year Treasury and the two-year Treasury was negative 0.16 basis points in
2024, up from an average of negative 63 basis points in 2023.  The spread between the ten-year Treasury and the two-year Treasury changed throughout the year and ended 2024 at a positive 33 basis points. Generally, a more positive slope in
the yield curve is beneficial for the Company’s earnings derived from its core mix of loans and deposits.

The tables below illustrate the range of key Treasury bond interest rates during 2024 and 2023.

[[GREPCENT_TABLE]]
[["","","3 Month T Bill (BEY) Yield(%)","","","2 Year T Note Yield(%)","","","5 Year T Note Yield(%)","","","10 Year T Note Yield(%)","","","10 Year - 2 Year Spread(%)"],["2024"],["Beginning of Year","","","5.45","","","","4.26","","","","3.83","","","","3.84","","","","(0.42",")"],["Peak","","","5.52","","","","5.04","","","","4.72","","","","4.70","","","","0.33"],["Trough","","","4.31","","","","3.49","","","","3.41","","","","3.63","","","","(0.47",")"],["End of Year","","","4.37","","","","4.25","","","","4.38","","","","4.58","","","","0.33"],["Average","","","5.18","","","","4.37","","","","4.13","","","","4.21","","","","(0.16",")"],["Median","","","5.43","","","","4.37","","","","4.17","","","","4.25","","","","(0.25",")"],["2023"],["Beginning of Year","","","4.42","","","","4.41","","","","3.99","","","","3.88","","","","(0.53",")"],["Peak","","","5.63","","","","5.19","","","","4.95","","","","4.98","","","","(0.13",")"],["Trough","","","4.52","","","","3.75","","","","3.29","","","","3.30","","","","(1.08",")"],["End of Year","","","5.45","","","","4.26","","","","3.83","","","","3.84","","","","(0.42",")"],["Average","","","5.28","","","","4.58","","","","4.06","","","","3.96","","","","(0.63",")"],["Median","","","5.44","","","","4.68","","","","4.06","","","","3.86","","","","(0.65",")"]]
[[/GREPCENT_TABLE]]

Source: www.treasury.gov

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TrustCo focuses on providing high quality service to the communities served by its branch network.  The financial results for the Company are influenced by economic events that affect those
communities, as well as national economic trends, primarily interest rates, affecting the entire banking industry.

The Company remains focused on building its customer relationships, and deposits and loans throughout its branch network, with a particular emphasis on the newest branches added to our
network in recent years.

The Company continually looks for opportunities to open new offices each year by filling in or extending existing markets.  The Company has experienced continued
growth in all markets as measured by the growth in our loan balances.  Branches in all geographies have the same products and features found at other Trustco Bank locations.  Additionally, over the last several years the Company has made
significant investments in its online and mobile banking platforms, including new automated tools.  With a combination of competitive rates, excellent service, technology, and convenient locations, management believes that as branches mature,
they will continue to attract deposit and loan customers.  As expected, some branches have grown more rapidly than others.  Generally, new bank branches continue to grow for years after being opened, although there is no specific time frame
that could be characterized as typical.  The Company also took the opportunity in 2024 to close four underperforming branches.

Asset/Liability Management

In managing its balance sheet, TrustCo utilizes funding and capital sources within credit, investment, interest rate, and liquidity risk guidelines established by management and approved
by the Board of Directors.  Loans and securities (including Federal Funds sold and other short-term investments) are the Company’s primary earning assets.  Average interest earning assets were 97.7% and 97.9% of average total assets for 2024
and 2023, respectively.

TrustCo, through its management of liabilities, attempts to provide stable and flexible sources of funding within established liquidity and interest rate risk guidelines.  This is
accomplished through core deposit banking products offered within the markets served by the Company.  TrustCo does not actively seek to attract out‑of‑area deposits or so‑called “hot money,” but rather focuses on core relationships with both
depositors and borrowers.

TrustCo’s objectives in managing its balance sheet are to limit the sensitivity of net interest income to actual or potential changes in interest rates and to enhance profitability through
strategies that should provide sufficient reward for predicted and controlled risk.  The Company is deliberate in its efforts to maintain adequate liquidity under prevailing and projected economic conditions and to maintain an efficient and
appropriate mix of core deposit relationships.  The Company relies on traditional banking investment instruments and its large base of core deposits to help in asset and liability management.  Predicting the impact of changing rates on the
Company’s net interest income and net fair value of its balance sheet is complex and subject to uncertainty for a number of reasons.  For example, in making a general assumption that rates will rise, a myriad of other assumptions regarding
whether the slope of the yield curve remains the same or changes, whether the spreads of various loans, deposits and investments remain unchanged, widen or narrow and what changes occur in customer behavior all need to be made.  The Company
routinely models various rate change assumptions to determine expected impact on net interest income.

Interest Rates

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. 
The absolute level of interest rates, changes in 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 year.

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.  Commencing in March 2022, the FOMC increased the target
range for the federal funds rate seven times in 2022 by a total of 425 basis points, and four times in 2023 by a total of 100 basis point, for a total of 525 basis points, to a range of 5.25% to 5.50% as of the end of 2023.  All of these
increases were expressly made in response to inflationary pressures. At its FOMC meeting in September 2024, the Federal Reserve implemented a 50 basis point cut resulting in a federal funds target rate range of 4.75 percent to 5.00 percent.
The rate cut represented the first interest rate change in a year and the first rate cut in more than four years. The Federal Reserve subsequently cut the federal funds target rate another 25 basis points in November 2024 and again in
December 2024 to a current range of 4.25 percent to 4.50 percent.

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[["","Page 10 of 111"]]
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The yield on the ten-year Treasury bond increased 74 basis points from 3.84% at the beginning of 2024 to the year‑end level of 4.58%.  The rate on the ten-year Treasury bond and other
long-term interest rates have a significant influence on the rates offered 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 on 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 ten‑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 decrease, the fair value of the securities will
increase and the reverse is also generally applicable.  Interest rates on new residential real estate loan originations are also influenced by the rates established by secondary market participants, such as Freddie Mac and Fannie Mae.  The
Company establishes rates that management determines are appropriate in light of the long-term nature of residential real estate loans while remaining competitive with the secondary market rates.  The Company continued to originate loans for
sale into the secondary market during 2024.  We believe that this has allowed the Company to have greater flexibility with respect to mortgage rate volatility and the loans we choose to include in our portfolio.  Higher market interest rates
also generally increase the value of retail deposits.

The increase in the Federal Funds target range throughout 2022 and 2023, had a positive impact on earnings and on the Company’s cash position.  The net effect of market changes in interest
rates during 2020 was that yields earned on both the investment portfolios and loans remained quite low in 2020 and 2021 relative to historic levels, which also had driven down deposit costs.  However, as interest rates had increased
throughout 2022 and remained elevated in 2023, we experienced increased yields on our Federal Fund Sold and other short-term investments, investment portfolios, loans, and deposits.  During the third and fourth quarters of 2024, the Federal
Funds target range was lowered three times which management believes could provide opportunity for margin expansion if deposit yields fall at a faster pace than investment and loan yields.

Earning Assets

Average earning assets during 2024 were $6.0 billion, which was an increase of $65.7 million from 2023.  This increase was primarily the result of an increase in net loans of $165.7
million, partially offset by a decreases in Federal Funds Sold and other short-term investments of $27.5 million and securities available for sale of $71.8 million. The increase in the average loan portfolio is primarily the result of an
increase in commercial loans, residential mortgage loans, and home equity lines of credit.  TrustCo continues to prioritize the growth of residential real estate loans throughout the Trustco Bank branch network through an effective marketing
campaign, competitive rates, and closing costs.

Total average assets were $6.1 billion for 2024 and $6.0 billion for 2023.

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The table “Mix of Average Earning Assets” shows how the mix of the earning assets has changed over the last three years.  While the growth in earning assets is critical to improved
profitability, changes in the mix also have a significant impact on income levels, as discussed below.

MIX OF AVERAGE EARNING ASSETS

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","","2024 vs. 2023","","","2023 vs. 2022","","","Components of Total Earning Assets"],["","","2024","","","2023","","","2022","","","2024","","","2023","","","2022"],["Loans, net","","$","5,040,915","","","$","4,875,166","","","$","4,551,281","","","$","165,749","","","$","323,885","","","","84.3","%","","","82.5","%","","","75.7"],["Securities available for sale (1):"],["U.S. government sponsored enterprises","","","105,729","","","","121,574","","","","89,557","","","","(15,845",")","","","32,017","","","","1.8","","","","2.1","","","","1.5"],["State and political subdivisions","","","25","","","","33","","","","41","","","","(8",")","","","(8",")","","","-","","","","-","","","","-"],["Mortgage-backed securities and collateralized mortgage obligations-residential","","","247,466","","","","275,565","","","","284,901","","","","(28,099",")","","","(9,336",")","","","4.1","","","","4.7","","","","4.7"],["Corporate bonds","","","58,447","","","","82,865","","","","78,266","","","","(24,418",")","","","4,599","","","","1.0","","","","1.4","","","","1.3"],["Small Business Administration-guaranteed participation securities","","","17,003","","","","20,410","","","","26,679","","","","(3,407",")","","","(6,269",")","","","0.3","","","","0.3","","","","0.4"],["Other","","","698","","","","686","","","","686","","","","12","","","","-","","","","-","","","","-","","","","-"],["Total securities available for sale","","","429,368","","","","501,133","","","","480,130","","","","(71,765",")","","","21,003","","","","7.2","","","","8.5","","","","7.9"],["Held-to-maturity securities"],["Mortgage-backed securities and collateralized mortgage obligations-residential","","","5,916","","","","7,053","","","","8,647","","","","(1,137",")","","","(1,594",")","","","0.1","","","","0.1","","","","0.1"],["Total held-to-maturity securities","","","5,916","","","","7,053","","","","8,647","","","","(1,137",")","","","(1,594",")","","","0.1","","","","0.1","","","","0.1"],["Federal Reserve Bank and Federal Home Loan Bank stock","","","6,389","","","","6,018","","","","5,749","","","","371","","","","269","","","","0.1","","","","0.1","","","","0.1"],["Federal funds sold and other short-term investments","","","493,546","","","","521,021","","","","969,043","","","","(27,475",")","","","(448,022",")","","","8.3","","","","8.8","","","","16.2"],["Total earning assets","","$","5,976,134","","","$","5,910,391","","","$","6,014,850","","","$","65,743","","","$","(104,459",")","","","100.0","%","","","100.0","%","","","100.0"]]
[[/GREPCENT_TABLE]]

(1) The average balances of securities available for sale are presented using amortized cost for these securities.

Loans

In 2024, the Company experienced another year of loan growth.  The $95.2 million increase or 1.9% in the Company’s gross loan portfolio from December 31, 2023 to December 31, 2024 was
primarily due to higher balances in commercial and residential loan categories.  Average loans increased $165.7 million during 2024 to $5.04 billion.  Interest income on the loan portfolio increased to $205.6 million in 2024 from $187.5
million in 2023.  The average yield increased 24 basis points to 4.08% in 2024 compared to 3.84% in 2023.

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LOAN PORTFOLIO

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","As of December 31,"],["","","2024","","","2023","","","2022"],["","","Amount","","","Percent","","","Amount","","","Percent","","","Amount","","","Percent"],["Commercial","","$","267,805","","","","5.3","%","","$","252,479","","","","5.0","%","","$","208,737","","","","4.4","%"],["Real estate - construction","","","29,724","","","","0.6","","","","29,053","","","","0.6","","","","36,351","","","","0.8"],["Real estate - mortgage","","","4,377,630","","","","85.8","","","","4,357,046","","","","87.2","","","","4,189,374","","","","88.5"],["Home equity lines of credit","","","409,261","","","","8.0","","","","347,415","","","","6.9","","","","286,432","","","","6.0"],["Installment loans","","","13,638","","","","0.3","","","","16,886","","","","0.3","","","","12,307","","","","0.3"],["Total loans","","","5,098,058","","","","100.0","%","","","5,002,879","","","","100.0","%","","","4,733,201","","","","100.0","%"],["Less: Allowance for loan losses","","","50,248","","","","","","","","48,578","","","","","","","","46,032"],["Net loans (1)","","$","5,047,810","","","","","","","$","4,954,301","","","","","","","$","4,687,169"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","Average Balances"],["","","2024","","","2023","","","2022","","","2021","","","2020"],["","","Amount","","","Percent","","","Amount","","","Percent","","","Amount","","","Percent","","","Amount","","","Percent","","","Amount","","","Percent"],["Commercial","","$","260,522","","","","5.20","%","","$","234,011","","","","4.8","%","","$","185,314","","","","4.1","%","","$","193,370","","","","4.5","%","","$","203,314","","","","4.9","%"],["Real estate - construction","","","29,388","","","","0.60","","","","32,702","","","","0.7","","","","36,815","","","","0.8","","","","31,014","","","","0.7","","","","26,641","","","","0.6"],["Real estate - mortgage","","","4,361,238","","","","86.50","","","","4,279,194","","","","87.8","","","","4,065,135","","","","89.3","","","","3,870,097","","","","89.2","","","","3,667,909","","","","88.2"],["Home equity lines of credit","","","374,841","","","","7.40","","","","313,914","","","","6.4","","","","254,168","","","","5.6","","","","233,628","","","","5.4","","","","255,583","","","","6.1"],["Installment loans","","","14,926","","","","0.30","","","","15,345","","","","0.3","","","","9,849","","","","0.2","","","","8,725","","","","0.2","","","","9,952","","","","0.2"],["Total loans","","","5,040,915","","","","100.0","%","","","4,875,166","","","","100.0","%","","","4,551,281","","","","100.0","%","","","4,336,834","","","","100.0","%","","","4,163,399","","","","100.0","%"],["Less: Allowance for loan losses","","","49,648","","","","","","","","46,971","","","","","","","","46,124","","","","","","","","49,421","","","","","","","","47,330"],["Net loans (1)","","$","4,991,267","","","","","","","$","4,828,195","","","","","","","$","4,505,157","","","","","","","$","4,287,413","","","","","","","$","4,116,069"]]
[[/GREPCENT_TABLE]]

(1) Presented net of deferred direct loan origination fees and costs.

Through marketing, pricing, and a customer-friendly service delivery network, TrustCo has attempted to distinguish itself from other mortgage lenders by highlighting the uniqueness of its loan products, as well
as by offering competitive interest rates to expand the loan portfolio.  Specifically, key selling points such as low closing costs, no private mortgage insurance for qualified borrowers, quick loan decisions, and fast closings were
identified and marketed to prospective customers.  The average balance of residential real estate mortgage loans was approximately $4.37 billion in 2024 and approximately $4.29 billion in 2023.  Income on residential real estate loans
increased to $165.5 million in 2024 from $154.2 million in 2023.  The yield on the portfolio increased from 3.60% in 2023 to 3.79% in 2024.  The vast majority of TrustCo’s real estate loans are secured by properties within the Bank’s market
areas.

TrustCo does not make subprime loans or purchase investments collateralized by subprime loans.  A loan may be considered subprime for a number of reasons, but effectively subprime loans are
loans where the certainty of repayment of principal and interest is lower than for a traditional prime loan due to the structure of the loan itself, the credit worthiness of the borrower, the underwriting standards of the lender, or some
combination of these.  For instance, adjustable loans underwritten at initial low “teaser” rates instead of the fully indexed rate and loans to borrowers with poor payment history would generally be classified as subprime.  TrustCo
underwrites its loan originations in a traditional manner, focusing on key factors that have proven to result in good credit decisions, rather than relying on automated systems or basing decisions primarily on one factor, such as a borrower’s
credit score.

Average commercial loans increased by $24.9 million from $255.7 million in 2023 to $280.6 million in 2024.  Average commercial loans included $19.0 million and $21.0 million of commercial
real estate construction loans in 2024 and 2023, respectively.  The average yield on the commercial loan portfolio increased to 5.38% for 2024 from 5.20% in 2023, primarily as a result of higher interest rates on originations and repricing of
variable rate loans due to the current interest rate environment.  Interest income on commercial loans was $15.1 million in 2024 compared to $13.3 million in 2023, up also primarily as a result of the interest rate environment and more
originations.

TrustCo’s commercial lending activities are focused on balancing the Company’s commitment to meeting the credit needs of businesses in its market areas with the necessity of managing its
credit risk.  In accordance with these goals, the Company has consistently emphasized the origination of loans within its market areas. TrustCo’s commercial loan portfolio contains no foreign loans, nor does it contain any significant
concentrations of credit to any single borrower or industry.  The Capital Region commercial loan portfolio reflects the diversity of businesses found in the market area, including light manufacturing, retail, service, and real estate-related
businesses.  Commercial loans made in the downstate New York market area and in the central Florida market area also reflect the businesses in those areas, with a focus on real estate.  TrustCo strives to maintain strong asset quality in all
segments of its loan portfolio, especially commercial loans.  There is significant competition for commercial loans in the Bank’s market regions.

During 2024, the average balance of home equity credit lines was $374.8 million, an increase from $313.9 million in 2023.  Trustco Bank competes with both regional and national companies for
these lines of credit and faces stiff competition with respect to interest rates, closing costs, and customer service for these loans.  TrustCo continuously reviews changes made by competitors with respect to the home equity credit line
product and adjusts its offerings to remain competitive while meeting evolving needs.  TrustCo’s average yield on this portfolio was 6.39% for 2024 and 6.03% for 2023 reflecting increases in the prime lending rate that occurred in 2024 and
2023.  Interest income on home equity credit lines increased from $18.9 million in 2023 to $23.9 million in 2024.  Management would expect that a decline in interest rates during 2025 should increase demand for residential mortgages,
including home equity credit lines.

[[GREPCENT_TABLE]]
[["","Page 13 of 111"]]
[[/GREPCENT_TABLE]]

At December 31, 2024 and 2023, the Company had approximately $29.7 million and $29.1 million of real estate construction loans, respectively.  Of the $29.7 million in real estate construction
loans at December 31, 2024, approximately $10.7 million was secured by first mortgages to residential borrowers with the remaining $19.0 million were loans to commercial borrowers for residential construction projects.  Of the $29.1 million
in real estate construction loans at December 31, 2023, approximately $8.0 million was secured by first mortgages to residential borrowers with the remaining $21.1 million comprised of loans to commercial borrowers for residential
construction projects.  The vast majority of the Company’s construction loans are in the Company’s New York market.

LOAN MATURITY SCHEDULE

The following table sets forth the maturities of our loan portfolio at December 31, 2024.  Loans having no stated maturity and overdrafts are shown as due in one year or less.  Loans are
stated in the following table at contractual maturity and actual maturities could differ due to prepayments.

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","Amounts Due:"],["","","","","","","","","","","","","","","Total Due"],["","","Within 1 Year","","","1 to 5 Years","","","5 to 15 Years","","","Over 15 Years","","","After 1 Year","","","Total"],["Commercial","","$","9,010","","","$","62,220","","","$","166,899","","","$","29,171","","","$","258,290","","","$","267,300"],["Commercial - other","","","6,768","","","","4,342","","","","8,447","","","","-","","","","12,789","","","","19,557"],["First Mortgage","","","12,681","","","","11,386","","","","480,316","","","","3,827,180","","","","4,318,882","","","","4,331,563"],["Home Equity Loans","","","76","","","","2,002","","","","25,955","","","","28,706","","","","56,663","","","","56,739"],["Home Equity Lines of Credit","","","9,262","","","","171,008","","","","167,019","","","","61,972","","","","399,999","","","","409,261"],["Installment","","","1,788","","","","10,648","","","","1,202","","","","-","","","","11,850","","","","13,638"],["","","$","39,585","","","$","261,606","","","$","849,838","","","$","3,947,029","","","$","5,058,473","","","$","5,098,058"]]
[[/GREPCENT_TABLE]]

The following table shows the loans as of December 31, 2024 due after December 31, 2025 according to type and loan category:

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","Fixed Rates","","","Floating or Adjustable Rates","","","Total"],["Commercial","","$","258,290","","","","-","","","$","258,290"],["Commercial - other","","","12,789","","","","-","","","","12,789"],["First Mortgage","","","4,318,882","","","","-","","","","4,318,882"],["Home Equity Loans","","","56,663","","","","-","","","","56,663"],["Home Equity Lines of Credit","","","-","","","","399,999","","","","399,999"],["Installment","","","11,850","","","","-","","","","11,850"],["","","$","4,658,474","","","$","399,999","","","$","5,058,473"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Page 14 of 111"]]
[[/GREPCENT_TABLE]]

INVESTMENT SECURITIES

The following table sets forth the amortized cost and fair value of our securities portfolio at the dates indicated:

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","As of December 31,"],["","","2024","","","2023","","","2022"],["","","Amortized Cost","","","Fair Value","","","Amortized Cost","","","Fair Value","","","Amortized Cost","","","Fair Value"],["Securities available for sale:"],["U. S. government sponsored enterprises","","$","86,833","","","$","85,617","","","$","121,728","","","$","118,668","","","$","124,123","","","$","118,187"],["State and political subdivisions","","","18","","","","18","","","","26","","","","26","","","","34","","","","34"],["Mortgage backed securities and collateralized mortgage obligations-residential","","","239,420","","","","213,128","","","","263,182","","","","237,677","","","","291,431","","","","260,316"],["Corporate bonds","","","45,033","","","","44,581","","","","80,150","","","","78,052","","","","85,641","","","","81,346"],["Small Business Adminstration-guaranteed participation securities","","","15,471","","","","14,141","","","","18,740","","","","17,186","","","","23,115","","","","20,977"],["Other","","","688","","","","700","","","","687","","","","680","","","","686","","","","653"],["Total securities available for sale","","","387,463","","","","358,185","","","","484,513","","","","452,289","","","","525,030","","","","481,513"],["Held to maturity securities:"],["Mortgage backed securities and collateralized mortgage obligations-residential","","","5,365","","","","5,306","","","","6,458","","","","6,396","","","","7,707","","","","7,580"],["Total held to maturity securities","","","5,365","","","","5,306","","","","6,458","","","","6,396","","","","7,707","","","","7,580"],["Total investment securities","","$","392,828","","","$","363,491","","","$","490,971","","","$","458,685","","","$","532,737","","","$","489,093"]]
[[/GREPCENT_TABLE]]

Securities Available for Sale:

The portfolio of securities available for sale is designed to provide a stable source of interest income and liquidity.  The portfolio is also managed by the Company to take advantage of
changes in interest rates and is particularly important in providing greater flexibility in the current volatile interest rate environment.  The securities available for sale portfolio is managed under a policy detailing the types and
characteristics acceptable in the portfolio.  Mortgage backed securities and collateralized mortgage obligations held in the portfolio include only pass‑throughs issued by United States government agencies or sponsored enterprises.

Holdings of various types of securities may vary from year‑to‑year depending on management’s assessment of relative risk and reward, and also due to the timing of
calls, maturities, prepayments and purchases.  Holdings of both municipal and corporate securities are subject to additional monitoring requirements under current regulations, adding to the costs of owning those securities.

Proceeds from sales, calls and maturities of securities available for sale have been typically invested in higher yielding assets, such as loans, or temporarily held
in Federal Funds sold and other short-term investments until deployed to fund future loan growth or future investment opportunities.

The designation of securities as “available for sale” is made at the time of purchase, based upon management’s intent and ability to hold the securities for an
indefinite period of time.  These securities are available for sale in response to changes in market interest rates, related changes in prepayment risk, needs for liquidity, or changes in the availability of and yield on alternative
investments.  At December 31, 2024, some securities in this portfolio had fair values that were less than the amortized cost due to changes in interest rates and market conditions and not related to the credit condition of the issuers.  At
December 31, 2024, the Company did not intend to sell, and it is not likely that the Company will be required to sell, these securities before market recovery.  Accordingly, at December 31, 2024 due to elevated market interest rates, the net
fair value of the investment securities portfolio was below amortized cost and unrealized losses were not credit related.

At December 31, 2024, the carrying value of securities available for sale amounted to $358.2 million, compared to $452.3 million at year-end 2023.  For 2024, the
average balance of securities available for sale was $429.4 million with an average yield of 2.54%, compared to an average balance in 2023 of $501.1 million with an average yield of 2.27%.  The income earned on the securities available for
sale portfolio in 2024 was $10.9 million, compared to $11.4 million earned in 2023.

Securities available for sale are recorded at their fair value, with any unrealized gains or losses, net of taxes, recognized as a component of shareholders’ equity. 
Average balances of securities available for sale are stated at amortized cost.  At December 31, 2024, the fair value of TrustCo’s portfolio of securities available for sale carried gross unrealized gains of approximately $130 thousand and
gross unrealized losses of approximately $29.4 million.  At December 31, 2023, the fair value of TrustCo’s portfolio of securities available for sale carried gross unrealized gains of approximately $286 thousand and gross unrealized losses of
approximately $32.5 million.   As previously noted, in both periods, unrealized losses were related to market interest rate levels and were not credit related.

[[GREPCENT_TABLE]]
[["","Page 15 of 111"]]
[[/GREPCENT_TABLE]]

Held to Maturity Securities

At December 31, 2024, the Company held $5.4 million of held to maturity securities, compared to $6.5 million at December 31, 2023.  For 2024, the average balance of
held to maturity securities was $5.9 million, compared to $7.1 million in 2023.  Similar to securities available for sale, cash flow from these securities has been reinvested in higher yielding assets, such as loans, or temporarily held in
Federal Funds Sold and other short-term investments to fund future loan growth or future investment opportunities.  The average yield on held to maturity securities increased slightly from 4.20% in 2023 to 4.29% in 2024 due primarily to
changes in average lives from normal pay downs and prepayments on the mortgage-backed securities held in the portfolio.  Interest income on held to maturity securities declined from $296 thousand in 2023 to $254 thousand in 2024, reflecting
the decline in average balances.  Held to maturity securities are recorded at amortized cost.  The fair value of these securities as of December 31, 2024 was $5.3 million.

The designation of securities as “held to maturity” is made at the time of purchase, based upon management’s intent and ability to hold the securities until final
maturity.  At December 31, 2024 there were $104 thousand of unrecognized losses and $45 thousand of unrecognized gains on securities in this portfolio.

Equity Securities

During the second quarter of 2024, Visa Inc. accepted the Company’s tender of its 6,528 shares of Visa Class B-1 common stock
in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock.  As a result, the Company marked its Visa Class C common stock to fair value and recorded an unrealized gain of $1.4 million. The Visa Class C
common stock was sold during the year, thus resulting in no remaining carrying value on the Company’s Statement of Financial Condition.   The Company originally obtained the shares in 2008. The carrying value of Visa B-2 shares is nominal
as of December 31, 2024.

Securities Gains

During 2024 TrustCo recognized net gain on the sale of equity securities of $1.4 million as described above.  During 2023 and 2022, TrustCo did not recognize any net
gains from securities transactions.  There were no sales or transfers of held to maturity securities in 2024, 2023 or 2022.

TrustCo has not invested in any exotic investment products such as interest rate swaps, forward placement contracts, or other instruments commonly referred to as
derivatives.  In addition, the Company has not invested in securities backed by subprime mortgages or in collateralized debt obligations (CDOs).  By actively managing a portfolio of high quality securities, TrustCo believes it can meet the
objectives of asset/liability management and liquidity, while at the same time producing a reasonably predictable earnings stream.

Securities pledged totaled $149.5 million, which results in $213.9 million in unpledged securities.  In addition to unpledged securities, TrustCo had $641.8 million of
cash and cash equivalents and borrowing capacity of $938.4 million as of December 31, 2024.

[[GREPCENT_TABLE]]
[["","Page 16 of 111"]]
[[/GREPCENT_TABLE]]

SECURITIES PORTFOLIO MATURITY DISTRIBUTION AND YIELD

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","As of December 31, 2024"],["","","Maturing:"],["Debt securities available for sale:","","Within 1 Year","","","After 1 But Within 5 Years","","","After 5 But Within 10 Years","","","After 10 Years","","","Total"],["U. S. government sponsored enterprises"],["Amortized cost","","$","25,000","","","$","49,833","","","$","12,000","","","$","-","","","$","86,833"],["Fair Value","","","24,933","","","","48,723","","","","11,961","","","","-","","","","85,617"],["Weighted average yield","","","2.01","%","","","2.56","","","","5.13","","","","-","","","","2.75"],["State and political subdivisions"],["Amortized cost","","","9","","","","9","","","","-","","","","-","","","","18"],["Fair Value","","","9","","","","9","","","","-","","","","-","","","","18"],["Weighted average yield","","","5.28","%","","","5.29","","","","-","","","","-","","","","5.29"],["Mortgage backed securities and collateralized mortgage obligations-residential"],["Amortized cost","","","1,722","","","","127,190","","","","110,508","","","","-","","","","239,420"],["Fair Value","","","1,666","","","","115,812","","","","95,650","","","","-","","","","213,128"],["Weighted average yield","","","2.69","%","","","2.42","","","","3.15","","","","-","","","","2.76"],["Corporate bonds"],["Amortized cost","","","45,033","","","","-","","","","-","","","","-","","","","45,033"],["Fair Value","","","44,581","","","","-","","","","-","","","","-","","","","44,581"],["Weighted average yield","","","2.67","%","","","-","","","","-","","","","-","","","","2.67"],["Small Business Administration-guaranteed participation securities"],["Amortized cost","","","4,344","","","","11,127","","","","-","","","","-","","","","15,471"],["Fair Value","","","3,949","","","","10,192","","","","-","","","","-","","","","14,141"],["Weighted average yield","","","2.07","%","","","2.25","","","","-","","","","-","","","","2.20"],["Other"],["Amortized cost","","","88","","","","600","","","","-","","","","-","","","","688"],["Fair Value","","","100","","","","600","","","","-","","","","-","","","","700"],["Weighted average yield","","","3.16","%","","","4.53","","","","-","","","","-","","","","4.35"],["Total securities available for sale"],["Amortized cost","","$","76,196","","","$","188,759","","","$","122,508","","","$","-","","","$","387,463"],["Fair Value","","$","75,238","","","$","175,336","","","$","107,611","","","$","-","","","$","358,185"],["Weighted average yield","","","2.62","%","","","2.44","","","","3.34","","","","-","","","","2.73"],["Held to maturity securities:"],["Mortgage backed securities and collateralized mortgage obligations-residential"],["Amortized cost","","$","-","","","$","52","","","$","1,876","","","$","3,437","","","$","5,365"],["Fair Value","","","-","","","","51","","","","1,781","","","","3,474","","","","5,306"],["Weighted average yield","","","-","%","","","3.38","","","","2.93","","","","5.60","","","","4.65"],["Total held to maturity securities"],["Amortized cost","","$","-","","","$","52","","","$","1,876","","","$","3,437","","","","5,365"],["Fair Value","","$","-","","","$","51","","","$","1,781","","","$","3,474","","","$","5,306"],["Weighted average yield","","","-","%","","","3.38","","","","2.93","","","","5.60","","","","4.65"]]
[[/GREPCENT_TABLE]]

Weighted average yields have not been adjusted for any tax-equivalent factor.

Maturity and Call Dates of Securities

Many of the securities in the Company’s portfolios have a call date in addition to the stated maturity date.  Call dates allow the issuer to redeem the bonds prior to maturity at specified
dates and at predetermined prices.  Normally, securities are redeemed at the call date when the issuer can reissue the security at a lower interest rate.  Therefore, for cash flow, liquidity and interest rate risk management purposes, it is
important for TrustCo to monitor both maturity dates and call dates.  Given the current interest rate environment, the probability of future calls will depend on market interest rate levels.  The tables labeled “Securities Portfolio Maturity
and Call Date Distribution,” show the distribution, based on both final maturity and call date of each security, broken out by the available for sale and held to maturity portfolios as of December 31, 2024.  Mortgage backed securities,
collateralized mortgage obligations and Small Business Administration securities are reported using an estimate of average life.  Actual maturities may differ from contractual maturities because of securities’ prepayments and the right of
certain issuers to call or prepay their obligations without penalty.  The table, “Securities Portfolio Maturity Distribution and Yield,” shows the distribution of maturities for each of the securities portfolios, based on final maturity, as
well as the average yields at December 31, 2024 on each type/maturity grouping.

[[GREPCENT_TABLE]]
[["","Page 17 of 111"]]
[[/GREPCENT_TABLE]]

SECURITIES PORTFOLIO MATURITY AND CALL DATE DISTRIBUTION

Debt securities available for sale:

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","As of December 31, 2024"],["","","Based on Final Maturity","","","Based on Call Date"],["","","Amortized Cost","","","Fair Value","","","Amortized Cost","","","Fair Value"],["Within 1 year","","$","70,130","","","$","69,623","","","$","138,029","","","$","135,922"],["1 to 5 years","","","51,284","","","","50,147","","","","138,926","","","","126,613"],["5 to 10 years","","","83,693","","","","78,295","","","","110,508","","","","95,650"],["After 10 years","","","182,356","","","","160,120","","","","-","","","","-"],["Total debt securities available for sale","","$","387,463","","","$","358,185","","","$","387,463","","","$","358,185"]]
[[/GREPCENT_TABLE]]

Held to maturity securities:

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","As of December 31, 2024"],["","","Based on Final Maturity","","","Based on Call Date"],["","","Amortized Cost","","","Fair Value","","","Amortized Cost","","","Fair Value"],["Within 1 year","","$","-","","","$","-","","","$","266","","","$","263"],["1 to 5 years","","","52","","","","51","","","","2,933","","","","2,847"],["5 to 10 years","","","1,876","","","","1,781","","","","2,166","","","","2,196"],["After 10 years","","","3,437","","","","3,474","","","","-","","","","-"],["Total held to maturity securities","","$","5,365","","","$","5,306","","","$","5,365","","","$","5,306"]]
[[/GREPCENT_TABLE]]

Federal Funds Sold and Other Short-term Investments

During 2024, the average balance of Federal Funds sold and other short-term investments was $493.5 million, a decrease from $521.0 million in 2023.  The average rate
earned on these assets was 5.26% in 2024 and 5.10% in 2023. TrustCo utilizes this category of earning assets as a means of maintaining strong liquidity.  The Federal Funds sold and other short-term investments portfolio is significantly
affected by changes in the target Federal Funds rate, as are virtually all short-term interest-sensitive instruments.

The year-end balance of Federal Funds sold and other short-term investments was approximately $594.4 million for 2024, compared to $528.7 million at year-end 2023.  While yields on
investment securities with acceptable risk characteristics were insufficient to justify shifting overnight liquidity into other investment types during 2024, some funds were shifted into higher yielding loans.  Management will continue to
evaluate the overall level of Federal Funds sold and other short-term investments in 2025 and make appropriate adjustments based upon market opportunities and interest rates.

Funding Sources

TrustCo utilizes various traditional sources of funds to support its earning asset portfolio.  The table, “Mix of Average Sources of Funding,” presents the various categories of funds used
and the corresponding average balances for each of the last three years.

Deposits: Average total deposits were approximately $5.3 billion in 2024, compared to approximately $5.2 billion in 2023, an increase of $66.5 million.  Changes in deposit categories
(average balances 2024 versus 2023) included: demand deposits down $45.2 million, interest-bearing checking deposits down $69.5 million, savings down $195.8 million, money market down $96.8 million and time deposits up $473.8 million.  While
many customers remain in one product type for many years, others may move funds between product types to maximize the yield earned or as a result of increased or decreased liquidity needs.  The balance in time deposits over $250 thousand is
not the result of any incentive pricing as TrustCo does not offer premium rates on large certificates of deposit.

[[GREPCENT_TABLE]]
[["","Page 18 of 111"]]
[[/GREPCENT_TABLE]]

The Company has been proactive in retaining deposits, which is evident since total deposits have increased since December 31, 2023.  Total deposits as of December 31, 2024 increased $40.2 million to $5.39 billion
compared to $5.35 billion as of December 31, 2023.  As we move forward, TrustCo’s objective is to continue to encourage customers to retain these funds in the expanded product offerings of the Bank through aggressive marketing and product
differentiation.

MIX OF AVERAGE SOURCES OF FUNDING

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","2024","","","2023","","","2022","","","2024 vs. 2023","","","2023 vs. 2022","","","Components of Total Funding"],["","2024","","","2023","","","2022"],["Retail deposits"],["Demand deposits","","$","738,816","","","$","784,021","","","$","838,944","","","$","(45,205",")","","$","(54,923",")","","","13.7","%","","","14.7","%","","","15.3"],["Savings","","","1,128,190","","","","1,323,995","","","","1,553,016","","","","(195,805",")","","","(229,021",")","","","21.0","","","","24.8","","","","28.3"],["Time deposits under $250 thousand","","","1,395,126","","","","1,057,048","","","","755,842","","","","338,078","","","","301,206","","","","26.0","","","","19.8","","","","13.8"],["Interest bearing checking accounts","","","998,501","","","","1,067,972","","","","1,190,337","","","","(69,471",")","","","(122,365",")","","","18.6","","","","20.0","","","","21.7"],["Money market deposits","","","509,409","","","","606,230","","","","745,714","","","","(96,821",")","","","(139,484",")","","","9.5","","","","11.4","","","","13.6"],["Total retail deposits","","","4,770,042","","","","4,839,266","","","","5,083,853","","","","(69,224",")","","","(244,587",")","","","88.8","","","","90.7","","","","92.7"],["Time deposits over $250 thousand","","","515,990","","","","380,288","","","","218,586","","","","135,702","","","","161,702","","","","9.6","","","","7.1","","","","4.0"],["Short-term borrowings","","","89,707","","","","114,639","","","","177,599","","","","(24,932",")","","","(62,960",")","","","1.6","","","","2.2","","","","3.3"],["Total purchased liabilities","","","605,697","","","","494,927","","","","396,185","","","","110,770","","","","98,742","","","","11.2","","","","9.3","","","","7.3"],["Total sources of funding","","$","5,375,739","","","$","5,334,193","","","$","5,480,038","","","$","41,546","","","$","(145,845",")","","","100.0","%","","","100.0","%","","","100.0"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Page 19 of 111"]]
[[/GREPCENT_TABLE]]

AVERAGE BALANCES, YIELDS AND NET INTEREST MARGINS

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","2024","","","2023","","","2022"],["","","Average Balance","","","Interest Income/ Expense","","","Average Rate","","","Average Balance","","","Interest Income/ Expense","","","Average Rate","","","Average Balance","","","Interest Income/ Expense","","","Average Rate"],["Assets"],["Loans, net","","$","5,040,915","","","$","205,600","","","","4.08","%","","$","4,875,166","","","$","187,456","","","","3.84","%","","$","4,551,281","","","$","162,214","","","","3.56","%"],["Securities available for sale:"],["U.S. government sponsored enterprises","","","105,729","","","","3,213","","","","3.04","","","","121,574","","","","2,805","","","","2.31","","","","89,557","","","","1,405","","","","1.57"],["State and political subdivisions","","","25","","","","1","","","","6.69","","","","33","","","","2","","","","6.71","","","","41","","","","2","","","","6.66"],["Mortgage backed securities and collateralized mortgage obligations-residential","","","247,466","","","","5,760","","","","2.33","","","","275,565","","","","6,146","","","","2.23","","","","284,901","","","","5,677","","","","1.99"],["Corporate bonds","","","58,447","","","","1,557","","","","2.66","","","","82,865","","","","1,987","","","","2.40","","","","78,266","","","","1,804","","","","2.31"],["Small Business Administration- guaranteed participation securities","","","17,003","","","","368","","","","2.17","","","","20,410","","","","437","","","","2.14","","","","26,679","","","","551","","","","2.07"],["Other","","","698","","","","13","","","","1.86","","","","686","","","","10","","","","1.46","","","","686","","","","9","","","","1.31"],["Total securities available for sale","","","429,368","","","","10,912","","","","2.54","","","","501,133","","","","11,387","","","","2.27","","","","480,130","","","","9,448","","","","1.97"],["Held to maturity securities:"],["Mortgage backed securities and collateralized mortgage obligations-residential","","","5,916","","","","254","","","","4.29","","","","7,053","","","","296","","","","4.20","","","","8,647","","","","343","","","","3.97"],["Total held to maturity securities","","","5,916","","","","254","","","","4.29","","","","7,053","","","","296","","","","4.20","","","","8,647","","","","343","","","","3.97"],["Federal Reserve Bank and Federal Home"],["Loan Bank stock","","","6,389","","","","604","","","","9.45","","","","6,018","","","","500","","","","8.31","","","","5,749","","","","305","","","","5.31"],["Federal funds sold and other short-term investments","","","493,546","","","","25,946","","","","5.26","","","","521,021","","","","26,567","","","","5.10","","","","969,043","","","","14,292","","","","1.47"],["Total interest earning assets","","","5,976,134","","","","243,316","","","","4.07","%","","","5,910,391","","","","226,206","","","","3.83","%","","","6,014,850","","","","186,602","","","","3.10","%"],["Allowance for loan losses","","","(49,648",")","","","","","","","","","","","(46,971",")","","","","","","","","","","","(46,124",")"],["Cash and noninterest earning assets","","","188,748","","","","","","","","","","","","172,641","","","","","","","","","","","","190,278"],["Total assets","","$","6,115,234","","","","","","","","","","","$","6,036,061","","","","","","","","","","","$","6,159,004"],["Liabilities and shareholders' equity"],["Interest bearing deposits:"],["Interest bearing checking accounts","","$","998,501","","","","1,236","","","","0.12","%","","$","1,067,972","","","","382","","","","0.04","%","","$","1,190,337","","","","190","","","","0.02","%"],["Savings","","","1,128,190","","","","2,876","","","","0.25","","","","1,323,995","","","","2,531","","","","0.19","","","","1,553,016","","","","920","","","","0.06"],["Time deposits and money markets","","","2,420,525","","","","86,474","","","","3.57","","","","2,043,566","","","","50,439","","","","2.47","","","","1,720,142","","","","4,617","","","","0.27"],["Total interest bearing deposits","","","4,547,216","","","","90,586","","","","1.99","","","","4,435,533","","","","53,352","","","","1.20","","","","4,463,495","","","","5,727","","","","0.13"],["Short-term borrowings","","","89,707","","","","791","","","","0.88","","","","114,639","","","","1,009","","","","0.88","","","","177,599","","","","740","","","","0.42"],["Total interest bearing liabilities","","","4,636,923","","","","91,377","","","","1.97","%","","","4,550,172","","","","54,361","","","","1.19","%","","","4,641,094","","","","6,467","","","","0.14","%"],["Demand deposits","","","738,816","","","","","","","","","","","","784,021","","","","","","","","","","","","838,944"],["Other liabilities","","","82,398","","","","","","","","","","","","81,656","","","","","","","","","","","","81,880"],["Shareholders' equity","","","657,097","","","","","","","","","","","","620,212","","","","","","","","","","","","597,086"],["Total liabilities and shareholders' equity","","$","6,115,234","","","","","","","","","","","$","6,036,061","","","","","","","","","","","$","6,159,004"],["Net interest income","","","","","","","151,939","","","","","","","","","","","","171,845","","","","","","","","","","","","180,135"],["Taxable equivalent adjustment","","","","","","","-","","","","","","","","","","","","-","","","","","","","","","","","","1"],["Net interest income (Non-GAAP)*","","","","","","$","151,939","","","","","","","","","","","$","171,845","","","","","","","","","","","$","180,136"],["Net interest spread","","","","","","","","","","","2.10","%","","","","","","","","","","","2.64","%","","","","","","","","","","","2.96","%"],["Net interest margin (net interest income to total interest earnings assets)","","","","","","","","","","","2.54","","","","","","","","","","","","2.91","","","","","","","","","","","","2.99"]]
[[/GREPCENT_TABLE]]

* Net interest income (non-GAAP) is determined by a method other than in accordance with GAAP. See the Non-GAAP Financial Measures Reconciliation presented herein.

Portions of income earned on certain commercial loans, obligations of states and political subdivisions, and equity securities are exempt from federal and/or state taxation.  Appropriate
adjustments have been made to reflect the equivalent amount of taxable income that would have been necessary to generate an equal amount of after tax income.  Federal and state tax rates used to calculate income tax on a tax equivalent basis
were 21% and 6%, respectively, for 2024, 2023 and 2022.  The average balances of securities available for sale and held to maturity were calculated using amortized costs.  Included in the average balance of shareholders’ equity is $30.1
million, $30.7 million, and $22.0 million in 2024, 2023, and 2022, respectively, of net unrealized loss, net of tax, in the available for sale securities portfolio.  The gross amounts of the net unrealized income (loss) has been included in
cash and noninterest earning assets.  Nonaccrual loans are included in average loans.

The overall cost of interest bearing deposits increased as a result of higher deposit rates throughout the year as a result of the current interest rate environment.  The Company strives
to maintain competitive rates on deposit accounts and to attract customers through a combination of competitive interest rates, quality customer service, and convenient banking locations.  In this fashion, management believes TrustCo is able
to attract deposit customers looking for a long-term banking relationship and to cross-sell banking services utilizing the deposit account relationship as the starting point.

[[GREPCENT_TABLE]]
[["","Page 20 of 111"]]
[[/GREPCENT_TABLE]]

Other Funding Sources

Other Funding Sources: The Company had $89.7 million of average short‑term borrowings outstanding during 2024, compared to $114.6 million in 2023.  The decrease over the prior year is
attributable to customer behavior and the products they choose.  These borrowings represent customer repurchase accounts, which behave more like deposit accounts than traditional borrowings.  The average cost of short-term borrowings was
consistent at 0.88% in both 2024 and 2023.  The lower balance in 2024 resulted in a reduction of interest expense to approximately $791 thousand in 2024, compared to $1.0 million in 2023.

AVERAGE DEPOSITS BY TYPE OF DEPOSITOR

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","Years ended December 31,"],["","","2024","","","2023","","","2022","","","2021","","","2020"],["Individuals, partnerships and corporations","","$","5,261,526","","","$","5,195,100","","","$","5,262,996","","","$","5,144,071","","","$","4,700,635"],["States and political subdivisions","","","5,055","","","","5,421","","","","14,854","","","","15,761","","","","15,709"],["Other (certified and official checks, etc.)","","","19,451","","","","19,033","","","","24,589","","","","28,515","","","","26,108"],["Total average deposits by type of depositor","","$","5,286,032","","","$","5,219,554","","","$","5,302,439","","","$","5,188,347","","","$","4,742,452"]]
[[/GREPCENT_TABLE]]

MATURITY OF TIME DEPOSITS IN EXCESS OF THE FDIC INSURANCE LIMIT

[[GREPCENT_TABLE]]
[["(dollars in thousands)"],["","","As of December 31, 2024"],["Under 3 months","","$","267,267"],["3 to 6 months","","","94,288"],["6 to 12 months","","","105,919"],["Over 12 months","","","93,817"],["Total","","$","561,291"]]
[[/GREPCENT_TABLE]]

As of December 31, 2024 and 2023, approximately $1.11 billion and $1.03 billion, respectively, of our deposit portfolio was uninsured. The uninsured amounts are estimates based on the methodologies and
assumptions used for the Bank's regulatory reporting requirements.

[[GREPCENT_TABLE]]
[["","Page 21 of 111"]]
[[/GREPCENT_TABLE]]

VOLUME AND YIELD ANALYSIS

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","2024 vs. 2023","","","2023 vs. 2022"],["","","Increase (Decrease)","","","","Due to Volume","","","Due to Rate","","","Increase (Decrease)","","","Due to Volume","","","Due to Rate"],["Interest income:"],["Federal funds sold and other short-term investments","","$","(621",")","","$","(1,428",")","","$","807","","","$","12,275","","","$","(9,179",")","","$","21,454"],["Trading securities (taxable)","","","-","","","","-","","","","-","","","","-","","","","-","","","","-"],["Securities available for sale:"],["Taxable","","","(474",")","","","(1,752",")","","","1,278","","","","1,939","","","","389","","","","1,550"],["Tax-exempt","","","(1",")","","","(1",")","","","-","","","","-","","","","-","","","","-"],["Total securities available for sale","","","(475",")","","","(1,753",")","","","1,278","","","","1,939","","","","389","","","","1,550"],["Held to maturity securities (taxable)","","","(42",")","","","(49",")","","","7","","","","(47",")","","","(65",")","","","18"],["Federal Reserve Bank and Federal Home Loan Bank stock","","","104","","","","32","","","","72","","","","195","","","","15","","","","180"],["Loans, net","","","18,144","","","","8,070","","","","10,074","","","","25,242","","","","13,228","","","","12,014"],["Total interest income","","","17,110","","","","4,872","","","","12,238","","","","39,604","","","","4,388","","","","35,216"],["Interest expense:"],["Interest bearing checking accounts","","","854","","","","(27",")","","","881","","","","192","","","","(22",")","","","214"],["Savings","","","345","","","","(412",")","","","757","","","","1,611","","","","(155",")","","","1,766"],["Time deposits and money markets","","","36,035","","","","15,281","","","","20,754","","","","45,822","","","","2,217","","","","43,605"],["Short-term borrowings","","","(218",")","","","(220",")","","","2","","","","269","","","","(333",")","","","602"],["Total interest expense","","","37,016","","","","14,622","","","","22,394","","","","47,894","","","","1,707","","","","46,187"],["Net interest income","","","(19,906",")","","","(9,750",")","","","(10,156",")","","","(8,290",")","","","2,681","","","","(10,971",")"],["Tax equivalent adjustment","","","-","","","","-","","","","-","","","","(1",")","","","(1",")","","","-"],["Net interest income (TE)*","","$","(19,906",")","","$","(9,750",")","","$","(10,156",")","","$","(8,291",")","","$","2,680","","","$","(10,971",")"]]
[[/GREPCENT_TABLE]]

* Net interest income (TE) is determined by a method other than in accordance with GAAP. See the Non-GAAP Financial Measures Reconciliation presented herein.

Capital Resources

Consistent with its long-term goal of operating a sound and profitable financial organization, TrustCo strives to maintain strong capital ratios and to qualify Trustco
Bank as a well-capitalized institution in accordance with federal regulatory requirements. Historically, most of the Company’s capital requirements have been provided through retained earnings.

Both TrustCo and Trustco Bank are subject to regulatory capital requirements.  The regulatory capital rules require a Tier 1 leverage ratio of 4.0% of consolidated assets, a common equity
Tier 1 minimum capital requirement of 4.5% of risk-weighted assets, a minimum Tier 1 capital to risk-based assets requirement of 6.0% of risk-weighted assets, and a total risk-based capital ratio or 8.0% of risk-weighted assets.  In addition,
the Company and the Bank are required to maintain additional levels of Tier 1 common equity (known as the capital conservation buffer) above the minimum risk-based capital levels in order to avoid restrictions on dividends, share repurchases,
or payment of discretionary bonuses.

As of December 31, 2024, the capital levels of both TrustCo and the Bank exceeded the minimum standards, including with the capital conservation buffer taken into account.

Under the OCC’s “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%,
8%, 10%, and 5%, respectively.  A bank is deemed to be “adequately capitalized” or better if its capital ratios meet or exceed the minimum federal regulatory capital requirements, and “undercapitalized” if it fails to meet these minimal
capital requirements.  A bank is “significantly undercapitalized” if its CET1, Tier 1, total risk-based 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 December 31, 2024 and 2023, Trustco Bank met the definition of “well-capitalized.”

In January 2020, the federal bank regulatory agencies have adopted rules creating a “community bank leverage ratio” framework designed to simplify capital requirements
for qualifying banks and bank or thrift holding companies.  Although TrustCo would qualify to take advantage of the community bank leverage ratio framework, it decided not to opt into the framework.

[[GREPCENT_TABLE]]
[["","Page 22 of 111"]]
[[/GREPCENT_TABLE]]

The Company’s dividend payout ratio was 56.09% of net income in 2024 and 46.71% of net income in 2023. The per-share dividend paid was $1.44 in both 2024 and 2023.  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.

TrustCo’s consolidated Tier 1 risk-based capital was 19.30% of risk-adjusted assets at December 31, 2024, and 18.90% of risk‑adjusted assets at December 31, 2023.  Consolidated Tier 1
capital to assets (leverage ratio) at December 31, 2024 was 11.05%, as compared to 10.78% at year-end 2023.  Note 14 to the financial statements includes information on all regulatory capital ratios.

TrustCo maintains a dividend reinvestment and stock purchase plan (DRSPP) with approximately 6,284 participants.  During 2024, $2.1 million of dividends paid on the shares held in this
plan were reinvested in shares of the Company.  The DRSPP also allows for additional purchases of stock by participants and has a discount feature (up to 5%) that can be activated by management as a tool to raise capital. To date, the
discount feature has not been utilized.

On March 17, 2023 the Company’s Board of Directors authorized, and the Company announced, another share repurchase program of up to 200,000 shares, or approximately 1%
of its currently outstanding common stock.  There were no repurchases during 2023. On March 29, 2024 the Company’s Board of Directors authorized, and the Company announced, another share repurchase program of up to 200,000 shares, or
approximately 1% of its currently outstanding common stock.  During the twelve months ended December 31, 2024, the Company repurchased a total of 14,000 shares at an average price per share of $26.68 for a total of $374,000 under its Board
authorized share repurchase program.

Risk Management

The responsibility for balance sheet risk management oversight is the function of the Company’s Asset Allocation Committee.  The Committee meets monthly and includes the executive officers of
the Company as well as other department managers as appropriate.  The meetings include a review of balance sheet structure, formulation of strategy in light of anticipated economic conditions, and comparison to Board-established guidelines to
control exposures to various types of risk.

Credit Risk

Credit risk is managed through a network of loan officer authorities, review committees, loan policies, and oversight from the senior executives of the Company.  In addition, the Company
utilizes an independent loan review function to evaluate management’s loan grading of non-homogeneous loans.  Management follows a policy of continually identifying, analyzing, and evaluating the credit risk inherent in the loan portfolio. 
As a result of management’s ongoing reviews of the loan portfolio, loans are placed in non-accrual status, either due to the delinquent status of the principal and/or interest payments, or based on a judgment by management that, although
payment of principal and/or interest is current, such action is prudent.  Thereafter, no interest is taken into income unless received in cash or until such time as the borrower demonstrates a sustained ability to make scheduled payments of
interest and principal.

Management has also developed policies and procedures to monitor the credit risk in relation to the Federal Funds sold portfolio.  TrustCo maintains an approved list of third party banks to
which Trustco can sell Federal Funds and monitors the credit rating and capital levels of those institutions.  At December 31, 2024, virtually all of the Federal Funds sold and other short-term investments were funds on deposit at the Federal
Reserve Bank of New York (“FRBNY”) and the Federal Home Loan Bank of New York (“FHLBNY”).  The Company also monitors the credit ratings on its investment securities and performs initial and periodic reviews of financial information for the
issuers of corporate and municipal bonds.

Nonperforming Assets

Nonperforming assets include loans in non-accrual status, restructured loans, loans past due by three payments or more and still accruing interest, and foreclosed real estate properties.

Nonperforming assets at year-end 2024 and 2023 totaled $21.0 million and $17.9 million, respectively.  Nonperforming loans as a percentage of the total loan portfolio were 0.37%
in 2024 and 0.35% in 2023.  As of December 31, 2024 and 2023, there were $8.9 million and $7.5 million, respectively, of loans in non-accruing status that were less than 90 days past due.

[[GREPCENT_TABLE]]
[["","Page 23 of 111"]]
[[/GREPCENT_TABLE]]

At December 31, 2024, nonperforming loans included a mix of commercial and residential loans.  Of the total nonperforming loans of $18.8 million, $18.3 were residential real estate loans and
$343 thousand were commercial loans.  Economic conditions generally improved as compared to the prior year.  The majority of the Company’s loan portfolio continues to come from its historical market area in Upstate New York.  As of December
31, 2024, 64.3% of loans are in New York, including both the Upstate and Downstate areas, as well as nominal loan balances in adjoining states.  The remaining 35.7% of the loan portfolio are Florida loans.  At December 31, 2024, 19.6% of
nonperforming loans were in Florida and 80.4% were in the Company’s New York area markets.  At December 31, 2024 nonperforming Florida loans amounted to $3.7 million compared to $2.6 million at December 31, 2023.

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","As of December 31,"],["","","2024","","","2023","","","2022","","","2021","","","2020"],["Loans in non-accrual status","","$","18,800","","","$","17,663","","","$","17,483","","","$","18,739","","","$","21,061"],["Restructured retail loans","","","-","","","","3","","","","10","","","","17","","","","23"],["Total nonperforming loans","","","18,800","","","","17,666","","","","17,493","","","","18,756","","","","21,084"],["Other real estate owned","","","2,175","","","","194","","","","2,061","","","","362","","","","541"],["Total nonperforming assets","","$","20,975","","","$","17,860","","","$","19,554","","","$","19,118","","","$","21,625"],["Allowance for credit losses on loans","","$","50,248","","","$","48,578","","","$","46,032","","","$","44,267","","","$","49,595"],["Allowance coverage of nonperforming loans","","","2.67","x","","","2.75","x","","","2.63","x","","","2.36","x","","","2.35","","x"],["Allowance for credit losses on loans to nonaccrual loans","","","2.67","x","","","2.75","x","","","2.63","x","","","2.36","x","","","2.35","","x"],["Nonperforming loans as a % of total loans","","","0.37","%","","","0.35","%","","","0.37","%","","","0.42","%","","","0.50","","%"],["Nonperforming assets as a % of total assets","","","0.34","%","","","0.29","%","","","0.33","%","","","0.31","%","","","0.37","","%"],["Non-accrual loans to total loans outstanding","","","0.37","%","","","0.35","%","","","0.37","%","","","0.42","%","","","0.50","","%"]]
[[/GREPCENT_TABLE]]

The Company places loans on non-accrual at the time the loan is 90 days delinquent unless facts and circumstances warrant classification of non-accrual even if the borrower is not 90 days
past due.

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.

There are inherent risks associated with lending; however based on its review of the loan portfolio, including loans classified as nonperforming, management is aware of
no other loans in the portfolio that pose significant risk of the eventual non-collection of principal and interest.  As of December 31, 2024, 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 no advances to borrowers or projects located outside the United States.  The Bank makes loans to executive officers, directors and to associates of
such persons in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions.

At year-end 2024 and 2023 there were $2.2 million and $194 thousand of foreclosed real estate, respectively.  We generally initiate foreclosure
proceedings on real estate loans when a loan enters non-accrual status based upon non-payment, unless the borrower is paying in accordance with an agreed upon modified payment agreement. We obtain an updated appraisal upon the commencement of
legal action to calculate a potential collateral shortfall and to reserve appropriately for the potential loss. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure
action is completed, the property securing the loan is transferred to Other Real Estate Owned (“OREO”). We generally attempt to utilize all available remedies, such as note sales in lieu of foreclosure, in an effort to resolve non-accrual
loans and OREO properties as quickly and prudently as possible in consideration of market conditions, the physical condition of the property and any other mitigating circumstances. We have not initiated any expected or imminent foreclosure
proceedings that are likely to have a material adverse impact on our consolidated financial statements. In the event that a non-accrual loan is subsequently brought current, it is returned to accrual status once the doubt concerning
collectability has been removed and the borrower has demonstrated performance in accordance with the loan terms and conditions for a period of generally at least six months.  Although the length of time to
complete a foreclosure has remained elevated in recent years, TrustCo, as a portfolio lender, has generally not encountered issues such as lost notes and other documents, which have been a problem in the foreclosure process for many other
mortgagees.

[[GREPCENT_TABLE]]
[["","Page 24 of 111"]]
[[/GREPCENT_TABLE]]

Allowance for Credit Losses on Loans

On January 1, 2022, the Company adopted ASU 2016-13, "Financial Instruments - Credit Losses" (referred to as “CECL” and as Accounting Standards Codification Topic 326 (“ASC 326”)). Under this standard, allowances have been established for loans and commitments to lend. The allowance for credit losses on loans (“ACLL”) replaces the previous allowance for loan losses (“ALL”). Upon adoption of CECL, the ACLL
increased by $2.4 million to $46.6 million from $44.3 at December 31, 2021 under the ALL.  The allowance for credit losses on unfunded commitments (“ACLUC’) increased from $18 thousand to $2.4 million and is recorded in accrued expenses and
other liabilities. The Company recorded a net decrease to undivided profits of $3.5 million, net of $1.2 million in deferred tax balances as of January 1, 2022 for the cumulative effect of adopting CECL.

During the year ended December 31, 2024, the Company enhanced its ACLL calculation.  The enhancement was completed on the heels of our previously utilized forecast period and continued
periods of minimal losses. The enhancement produces more granular results of expected loan loss, incorporates more extensive peer historical loss data, and allows for a more efficient process. This enhancement did not result in a material
impact to the Company’s financial statements.  The primary reason for the Company’s change in methodology relates to continued periods of low to minimal losses and to gain operational efficiencies in the allowance process. The Company did not
change how quantitative losses are calculated, i.e. utilizing a discounted cash flow approach, rather we enhanced the discounted cash flow calculation to incorporate peer data and updated our forecast and reversion periods.  Since the
adoption of CECL, the Company has been estimating the quantitative reserves based on internal data and an 8-quarter forecast and immediate reversion. As described above, we are now utilizing peer data, given our continued low to minimal loss
history, and using baseline scenario with a 4-quarter forecast and 4-quarter straight line reversion to produce reasonable and supportable results.  The estimate of expected credit losses are based on relevant information about current
conditions, past events, and reasonable and supportable forecasts regarding collectability of the reported amounts. In order to estimate the expected credit losses for loans, the Company utilized a discounted cash flow model which calculated
a historical loss rate for each of the identified loan segments. The historical loss rates were then adjusted with qualitative factors.  The Company uses the regulatory interagency qualitative framework under a weighted scorecard approach.
The weighted scorecard approach considers each qualitative factor with respect to risks in the Company’s portfolio and the economic environment, weighting is assigned based on the Company’s  evaluation and understanding of the underlying
risks and economic conditions within each portfolio segment. The determination of qualitative factors involves significant judgement and subjective measurement.

The ACLL reflects management's estimate of expected credit losses over the life of the loan portfolio. The ACLL level is influenced by past events and current conditions, as well as
reasonable and supportable forecasts of future economic conditions. The ACLL level is updated quarterly based on the latest available information and assumptions. During the year ended December 31, 2024, the Company’s ACLL calculation
incorporated the following:

[[GREPCENT_TABLE]]
[["","\u2022","The use of a Discounted Cash Flow Methodology using the probability of default and loss given default approach, incorporating peer data."]]
[[/GREPCENT_TABLE]]

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[["","\u2022","Reasonable and supportable forecast period, which is based on a Moody's baseline scenario for four quarters."]]
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[[GREPCENT_TABLE]]
[["","\u2022","Reversion period, which is the period after the forecast period when the ACLL factors revert to historical averages, using a four-quarter straight line reversion."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Qualitative considerations, which are adjustments to the ACLL quantitative reserves to account for changes in various internal and external factors that affect the credit quality of the loan portfolio, were allocated utilizing a weighted scorecard framework. The qualitative factors utilized are based on regulatory (interagency) guidelines."]]
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For the year ended December 31, 2024, the Company recorded a provision for credit losses of $2.0 million, which includes a provision for credit losses on loans of $1.9 million as a result of
a combination of factors such as loan growth, peer loss data and economic conditions, and a provision for credit losses on unfunded commitments of $100 thousand as a result of a corresponding increase in unfunded commitments.  For the year
ended December 31, 2023, the Company recorded a provision for credit losses of $1.3 million, which includes a provision for credit losses on loans of $2.5 million as a result of increased unemployment forecast offset by a sustained low level
of NPL’s and actual charge-offs, and a benefit for credit losses on unfunded commitments of $1.3 million as a result of a corresponding decrease in unfunded commitments.  For the year ended December 31, 2022, the Company recorded a credit to
the provision for credit losses of $341 thousand, which included a credit to the provision for credit losses on loans of $900 thousand as a result of improving unemployment, housing price forecasts and a sustained low level of NPLs and
charge-offs, and a provision for credit losses on unfunded commitments of $659 thousand as a result of a corresponding increase in unfunded commitments.

The Company evaluates several external forecasts in choosing the forecast element for the economic components of the allowance for credit losses on loans. The Company selected the Moody’s
baseline forecast scenario for December 31, 2024 for economic modeling.

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As of December 31, 2024, the Company utilized Moody's baseline scenario model to assess economic conditions. This model incorporates recent developments, including the presidential election
in November 2024 and subsequent policy implementations. Key considerations include the administration's introduction of tariffs, which may influence trade dynamics and inflation. Additionally, the Federal Reserve's recent indications of a
higher-than-expected inflation rate at the end of 2024 suggest potential adjustments in monetary policy. The Company also acknowledges ongoing geopolitical tensions, such as the conflicts in the Middle East and the Russia-Ukraine situation,
which continue to pose risks to market stability. Recognizing that actual outcomes may diverge from the baseline scenario, the Company has incorporated qualitative considerations to account for uncertainties in economic conditions and
additional risk factors not fully captured by the quantitative model.

See Notes 1 and 4 of the consolidated financial statements for additional discussion related to the adoption of CECL, and the process for determining the provision for credit losses.

The table, “Summary of Loan Loss Experience”, includes an analysis of the changes to the allowance for the past five years.  Net loans charged off (recovered) in 2024
and 2023 were $230 thousand and $(46) thousand, respectively.  The increase in net charge-offs was primarily the result of an increase number of gross charge-offs in the Florida commercial segment of the portfolio partially offset by more
recoveries in the New York residential segment.   New York commercial, residential, and installment gross recoveries were down $129 thousand, up $283 thousand, and down $11 thousand, respectively, from 2024 to 2023. Total gross charge-offs in
2024 were $939 thousand versus $547 thousand in 2023.  The increase in gross charge-offs was primarily the result of the Florida commercial charge-offs increasing $314 thousand in 2024, and New York commercial charge-offs increasing $127
thousand from 2024 to 2023.  Residential gross charge-offs decreased $43 thousand from 2024 to 2023 and gross installment charge‑offs decreased $6 thousand from 2024 to 2023.  The changes in gross and net charge-offs in these categories
reflected economic and real estate market changes.

Conditions in most of the Bank’s market areas are stabilizing or improving as compared to 2023; however, should general economic conditions weaken and/or real estate values begin to decline, the level of
problem loans may increase, as would the level of the provision for credit losses.

SUMMARY OF LOAN LOSS EXPERIENCE

[[GREPCENT_TABLE]]
[["(dollars in thousands)"],["","","2024","","","2023","","","2022","","","2021","","","2020"],["Amount of loans outstanding at end of year (less unearned income)","","$","5,098,058","","","$","5,002,879","","","$","4,733,201","","","$","4,438,779","","","$","4,244,470"],["Average loans outstanding during year (less average unearned income)","","","5,040,915","","","","4,875,166","","","","4,551,281","","","","4,336,834","","","","4,163,399"],["Balance of allowance at beginning of year","","","48,578","","","","46,032","","","","44,267","","","","49,595","","","","44,317"],["Impact of ASU 2016-13, Current Expected Credit Loss (CECL)","","","-","","","","-","","","","2,353","","","","-","","","","-"],["Balance as of January 1, 2022 as adjusted for ASU 2016-13","","","48,578","","","","46,032","","","","46,620","","","","49,595","","","","44,317"],["Loans charged off:"],["Commercial and commercial real estate","","","441","","","","-","","","","40","","","","30","","","","36"],["Real estate mortgage - 1 to 4 family","","","328","","","","371","","","","24","","","","340","","","","404"],["Installment","","","170","","","","176","","","","88","","","","60","","","","221"],["Total","","","939","","","","547","","","","152","","","","430","","","","661"],["Recoveries of loans previously charged off:"],["Commercial and commercial real estate","","","-","","","","129","","","","4","","","","32","","","","10"],["Real estate mortgage - 1 to 4 family","","","675","","","","417","","","","450","","","","466","","","","317"],["Installment","","","34","","","","47","","","","10","","","","54","","","","12"],["Total","","","709","","","","593","","","","464","","","","552","","","","339"],["Net loan chargeoffs (recoveries)","","","230","","","","(46",")","","","(312",")","","","(122",")","","","322"],["Provision (credit) for credit losses on loans","","","1,900","","","","2,500","","","","(900",")","","","(5,450",")","","","5,600"],["Balance of allowance at end of year","","$","50,248","","","$","48,578","","","$","46,032","","","$","44,267","","","$","49,595"],["Net charge offs as a percent of average loans outstanding during year (less average unearned income)","","","0.00","%","","","0.00","%","","","(0.01",")%","","","-","%","","","0.01","%"],["Allowance as a percent of loans outstanding at end of year","","","0.99","","","","0.97","","","","0.97","","","","1.00","","","","1.17"]]
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[["","Page 26 of 111"]]
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The following table presents the ratio of net charge-offs (recoveries) to average loans outstanding by loan category, along with the components of the calculation, for the periods indicated:

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["(dollars in thousands)","","2024","","","2023","","","2022"],["","","Net charge-offs (recoveries)","","","Average loans outstanding","","","Net charge- offs as a percent of average loans outstanding","","","Net charge-offs (recoveries)","","","Average loans outstanding","","","Net charge- offs as a percent of average loans outstanding","","","Net charge-offs (recoveries)","","","Average loans outstanding","","","Net charge- offs as a percent of average loans outstanding"],["Commercial","","$","441","","","$","280,566","","","","0.16","%","","$","(129",")","","$","255,666","","","","0.05","%","","$","36","","","$","206,144","","","","0.02","%"],["Real estate mortgage - 1 to 4 family","","","(347",")","","","4,745,423","","","","-0.01","%","","","(46",")","","","4,604,155","","","","0.00","%","","","(426",")","","","4,335,288","","","","-0.01","%"],["Installment","","","136","","","","14,926","","","","0.91","%","","","129","","","","15,345","","","","0.84","%","","","78","","","","9,849","","","","0.79","%"],["Total net (recoveries) chargeoffs","","$","230","","","$","5,040,915","","","","0.00","%","","$","(46",")","","$","4,875,166","","","","0.00","%","","$","(312",")","","$","4,551,281","","","","-0.01","%"]]
[[/GREPCENT_TABLE]]

Our loan portfolio experienced an annualized net charge-off rate of 0.00% for the year ended December 31, 2024 flat from the year ended December 31, 2023.

Allocation of the Allowance for Credit Losses on Loans

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

[[GREPCENT_TABLE]]
[["(dollars in thousands)","","As of December 31, 2024","","","As of December 31, 2023"],["","","Amount","","","Percent of Loans to Total Loans","","","Amount","","","Percent of Loans to Total Loans"],["Commercial","","$","3,195","","","","5.25","%","","$","2,519","","","","5.05","%"],["Real estate - construction","","","328","","","","0.58","%","","","291","","","","0.58","%"],["Real estate mortgage - 1 to 4 family","","","40,866","","","","85.87","%","","","40,745","","","","87.09","%"],["Home equity lines of credit","","","5,667","","","","8.03","%","","","4,805","","","","6.94","%"],["Installment Loans","","","192","","","","0.27","%","","","218","","","","0.34","%"],["","","$","50,248","","","","100.00","%","","$","48,578","","","","100.00","%"]]
[[/GREPCENT_TABLE]]

MARKET RISK

The Company’s principal exposure to market risk is with respect to interest rate risk.  Interest rate risk is the potential for economic loss due to future interest rate
changes.  These economic losses can be reflected as a loss of future net interest income and/or a loss of current market value.