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OFFON

TRUSTCO BANK CORP NY

(TRST)
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TrustCo Bank NY : CORP N Y Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/07/2021 | 04:32pm EDT
Forward-looking Statements
Statements included in this report and in future filings by TrustCo with the
Securities and Exchange Commission, in TrustCo's press releases, and in oral
statements made with the approval of an authorized executive officer, including
statements regarding the effect of the novel coronavirus disease ("COVID-19")
pandemic on our business and our continuing response to the COVID-19 pandemic,
that are not historical or current facts, are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical earnings and those
presently anticipated or projected.  Forward-looking statements can be
identified by the use of such words as may, will, should, could, would,
estimate, project, believe, intend, anticipate, plan, seek, expect and similar
expressions.  TrustCo wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made.

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

• The current COVID-19 pandemic, the effects of which could, and in some

instances has, caused us to experience a decline in the demand for products and

services; an increase in loan delinquencies; problem assets and foreclosures; a

decline in collateral value; a work stoppage, forced quarantine, or other

interruption or the unavailability of key employees; an increase in the

allowance for loan losses; a reduction in wealth management revenues; an

increase in Federal Deposit Insurance Corporation premiums; a reduction in the

value of the securities portfolio; or a decline in the net worth and liquidity

   of loan guarantors;



• TrustCo's ability to continue to originate a significant volume of one- to-

four family mortgage loans in its market areas and to otherwise maintain or

increase its market share in the areas in which it operates;

• TrustCo's ability to continue to maintain noninterest expense and other

overhead costs at reasonable levels relative to income;

• TrustCo's ability to make accurate assumptions and judgments regarding the

credit risks associated with its lending and investing activities, including

changes in the level and direction of loan delinquencies and charge-offs,

changes in property values, and changes in estimates of the adequacy of the

allowance for loan and lease losses;

• the effects of and changes in, trade, monetary and fiscal policies and laws,

including interest rate policies of the Board of Governors of the Federal

Reserve System, inflation, interest rates, market and monetary fluctuations;

• restrictions or conditions imposed by TrustCo's and Trustco Bank's regulators

   on their operations that may make it more difficult to achieve TrustCo's and
   Trustco Bank's goals;



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• the future earnings and capital levels of TrustCo and Trustco Bank and the

continued non objection from TrustCo's and Trustco Bank's primary federal

banking regulators under regulatory rules to distribute capital from Trustco

Bank to TrustCo, which could affect the ability of TrustCo to pay dividends;

• the results of supervisory monitoring or examinations of Trustco Bank and the

Company by their respective primary federal banking regulators, including the

possibility that the regulators may, among other things, require us to increase

our loss allowances or to take other actions that reduce capital or income;

• adverse conditions in the securities markets that lead to impairment in the

value of securities in TrustCo's investment portfolio;

• the perceived overall value of TrustCo's products and services by users,

including the features, pricing and quality, compared to competitors' products

   and services and the willingness of current and prospective customers to
   substitute competitors' products and services for TrustCo's products and
   services;


• changes in consumer spending, borrowing and savings habits;

• the effect of changes in financial services laws and regulations (including

laws concerning taxation, banking and securities) and the impact of other

governmental initiatives affecting the financial services industry, including

regulatory capital requirements;

• changes in management personnel;

• real estate and collateral values;

• changes in accounting policies and practices, as may be adopted by the bank

regulatory agencies Financial Accounting Standards Board or the Public Company

Accounting Oversight Board;

• disruptions, security breaches, or other adverse events affecting the

third-party vendors who perform several of our critical processing functions;

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

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

• TrustCo's success at managing the risks involved in the foregoing and managing

   its business; and



• other risks and uncertainties included under "Risk Factors" in our Form 10-K

for the year ended December 31, 2020.




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

                                                                            

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

Introduction

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

COVID-19 Impact
Beginning in March 2020, we experienced negative impacts to our business in the
form of requests for loan deferrals of principal and interest due to the
business disruption caused by COVID-19.  In March 2020, the World Health
Organization categorized COVID-19 as a pandemic, and the President of the United
States declared the COVID-19 outbreak a national emergency.  The Company has
evaluated the impact of the effects of COVID-19 and determined that there were
no material or systematic adverse impacts on the Company's balance sheets and
results of operations as of and for the quarter ended March 31, 2021.  At this
time, it is difficult to quantify the impact COVID-19 will have on future
periods.

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

Loan modifications


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

                                                                            

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Paycheck Protection Program (PPP) and Liquidity


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

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

Asset impairment


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

Provision for loan losses

See "Allowance for Loan Losses" for more information.

Preventative measures


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

Federal Reserve Actions

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

• The establishment of the Commercial Paper Funding Facility, the Money Market

Mutual Fund Liquidity Facility, and the Primary Dealer Credit Facility;

• The expansion of central bank liquidity swap lines;

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

window;

• The elimination of reserve requirements;

• Guidance encouraging banks to be flexible with customers experiencing financial

challenges related to the coronavirus and to utilize their liquidity and

capital buffers in doing so;

• expand access to its Paycheck Protection Program Liquidity Facility (PPPLF) for

additional SBA-qualified lenders;

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





Economic Overview
During the first quarter of 2021, financial markets kept the momentum gained
during the fourth quarter of 2020 pushing indexes further into record
territory.  New stimulus funds along with accelerated COVID-19 vaccinations
contributed to the increased confidence in the economy.  For the first quarter
of 2021, the S&P 500 Index was up 5.8% and the Dow Jones Industrial Average was
up 7.8%.  Credit markets continue to be driven by worldwide economic news,
effects of COVID-19, and demand shifts.  The shape of the yield curve steepened
during the quarter as compared to prior quarters.  The 10­year Treasury bond
averaged 1.34% during Q1 2021 compared to 0.86% in Q4 2020, an increase of 48
basis points.  The 2­year Treasury bond average rate decreased 2 basis points to
0.13%, resulting in a steepening of the yield curve.  The spread between the
10­year and the 2-year Treasury bonds expanded from 0.71% on average in Q4 to
1.20% in Q1.  This spread had been depressed in recent years, and compares to
2.42% during its most recent peak in Q4 of 2013.  Steeper yield curves are
favorable for portfolio mortgage lenders like TrustCo.  The table below
illustrates the range of rate movements for both short term and longer term
rates.  The target Federal Funds rate remained flat at 0.00% to 0.25% for the
quarter.  Spreads of most asset classes to the comparative treasury yield,
including agency securities, corporates, municipals and mortgage-backed
securities, continue to be down as compared to the levels seen before the
pandemic.  Accordingly, changes in rates and spreads continue to be effected by
the pandemic.

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

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

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

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

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

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



The United States economy continued to show improvements heading into 2021 as
mentioned above.  Economic conditions vary significantly over geographic areas,
with strength concentrated in and around major population centers on the coasts
and in certain areas where economic activity has been driven by specific
regional factors.

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

                                                                            

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

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

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

• A decrease in the cost of interest bearing liabilities of $5.7 million,

partially offset by a decrease in income from interest earning assets of $4.1

million, resulted in an increase in taxable equivalent net interest income in

   the first quarter of 2021 compared to the first quarter of 2020 of $1.6
   million.


• A decrease of $1.7 million in provision for loan losses for the first quarter

of 2021 compared to the first quarter 2020.

• A decrease of $906 thousand in noninterest income for the first quarter of 2021

compared to the first quarter of 2020, primarily driven by a $1.2 million gain

on securities transactions in the prior period.

• An increase of $1.1 million in noninterest expense for the first quarter 2021

compared to the first quarter 2020.




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

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

                                                                            

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

Interest rates have a significant impact on the operations and financial results
of all financial services companies.  One of the most important interest rates
used to control national economic policy is the "Federal Funds" rate.  This is
the interest rate utilized within the banking system for overnight borrowings
for institutions with the highest credit rating.  From December 2015 through
December 2018, the U.S. Federal Reserve Board increased its federal funds target
rate from a range of 0.00% - 0.25% to a range of 2.25% - 2.50%. Beginning in the
second half of 2019, the Federal Reserve Board began lowering the rate in
response to a slowing economy.  During the first quarter of 2020 the rate was
significantly decreased again as a result of the global pandemic related to
COVID-19, and has returned the range of 0.00% to 0.25%.

Traditionally, interest rates on bank deposit accounts are heavily influenced by
the Federal Funds rate.  The average rate on interest bearing deposits was 58
basis points lower in the first quarter of 2021 relative to the prior year
period.  Rates were lower on all interest bearing deposit accounts as a result
of repricing over the last year due to the pandemic.  Please refer to the
statistical disclosures in the table below entitled "Distribution of Assets,
Liabilities and Shareholders' Equity: Interest Rates and Interest Differential."

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

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

                                                                            

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

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

For the first quarter of 2021, the net interest margin was 2.78%, down 27 basis points versus the prior year's quarter. The quarterly results reflect the following significant factors:

• The average balance of Federal Funds sold and other short-term investments

increased by $617.5 million while the average yield decreased 113 basis points

in the first quarter of 2021 compared to the same period in 2020.

• The average balance of securities available for sale decreased by $57.8 million

while the average yield decreased 76 basis points to 1.50%. The average

balance of held to maturity securities decreased by $4.9 million and the

average yield decreased 16 basis points to 3.70% for the first quarter of 2021

compared to the same period in 2020.

• The average loan portfolio grew by $173.3 million to $4.25 billion and the

average yield decreased 33 basis points to 3.80% in the first quarter of 2021

compared to the same period in 2020.

• The average balance of interest bearing liabilities (primarily deposit

accounts) increased $485.5 million and the average rate paid decreased 58 basis

points to 0.21% in the first quarter of 2021 compared to the same period in

   2020.



During the first quarter of 2021, the Company continued to focus on its strategy
to expand the loan portfolio by offering competitive interest rates.  Management
believes the TrustCo residential real estate loan product is very competitive
compared to local and national competitors.  Competition remains strong in the
Company's market areas.

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

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

Loans

The average balance of loans was $4.25 billion in the first quarter of 2021 and
$4.08 billion in the comparable period in 2020.  The yield on loans decreased 33
basis points to 3.80%.  The higher average balances did not offset the decrease
in yield.

Compared to the first quarter of 2020, the average balance of residential
mortgage loans and commercial loans increased while home equity lines of credit
and installment loans decreased.  The average balance of residential mortgage
loans was $3.79 billion in 2021 compared to $3.60 billion in 2020, an increase
of 5.2%.  The average yield on residential mortgage loans decreased by 36 basis
points to 3.69% in the first quarter of 2021 compared to 2020.

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

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

                                                                            

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The average yield on home equity credit lines decreased 51 basis points to 3.84%
during the first quarter of 2021 compared to the prior year period.  The
decrease in yield is the result of prime rate decreases which impacted some
loans as well as a smaller percentage of lower yielding initial rate balances.
The average balances of home equity lines decreased 10.2% to $238.4 million in
the first quarter of 2021 as compared to the prior year.  Customers with home
equity lines continue to refinance their balances into fixed rate mortgage loans
given the current rate environment and have been less likely to draw on home
equity lines due to reduced tax benefits.

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

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

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

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


Federal Funds Sold and Other Short-term Investments
The 2021 first quarter average balance of Federal Funds sold and other
short-term investments was $1.03 billion, a $617.5 million increase from the
$412.1 million average for the same period in 2020.  The yield was 0.11% for the
first quarter of 2021 and 1.24% for the comparable period in 2020.  Interest
income from this portfolio decreased $1.0 million from $1.3 million in 2020 to
approximately $300 thousand in 2021.  The higher average balances did not offset
the target rate decreases from early 2020.

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

                                                                            

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

Total average interest bearing deposits (which includes interest bearing
checking, money market accounts, savings and time deposits) increased $415.3
million to $4.4 billion for the first quarter of 2021 versus the first quarter
in the prior year, and the average rate paid decreased from 0.78% for 2020 to
0.20% for 2021.  Total interest expense on these deposits decreased $5.6 million
to $2.2 million in the first quarter of 2021 compared to the year earlier
period.  From the first quarter of 2020 to the first quarter of 2021, interest
bearing checking account average balances were up  24.5%, certificates of
deposit average balances were down 7.9%, non­interest demand average balances
were up 46.9%, average savings balances increased 17.8% and money market
balances were up 18.1%.  Our growth in deposits came at relatively low cost and
continues to be offset by higher earnings on loan yields and returns in the
investment portfolio.

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

(dollars in thousands)

Under 1 year             $ 1,060,965
1 to 2 years                 156,531
2 to 3 years                   9,873
3 to 4 years                   2,852
4 to 5 years                     842
Over 5 years                     200
                         $ 1,231,263



Average short-term borrowings for the first quarter of 2021 were $223.8 million
compared to $153.7 million in the same period in 2020.  The average rate
decreased during this period from 0.84% in 2020 to 0.41% in 2021.  The
short-term borrowings of the Company are cash management accounts, which
represent retail accounts with customers for which the Bank has pledged certain
assets as collateral.

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

                                                                            

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Net Interest Income
Taxable equivalent net interest income increased by $1.6 million to $40.1
million in the first quarter of 2021 compared to the same period in 2020.  The
net interest spread was down 17 basis points to 2.74% in the first quarter of
2021 compared to the same period in 2020.  As previously noted, the net interest
margin was down 27 basis points to 2.78 for the first quarter of 2021 compared
to the same period in 2020.

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

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


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

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

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

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

                                                                            

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

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

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

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

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

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

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

51

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

(dollars in thousands)                       March 31, 2021                December 31, 2020
                                                       Percent of                      Percent of
                                                         Loans to                        Loans to
                                         Amount       Total Loans        Amount       Total Loans
Commercial                             $  3,886              4.75 %   $   3,975              4.67 %
Real estate - construction                  338              0.67 %         290              0.58 %
Real estate mortgage - 1 to 4 family     41,892             88.86 %      41,228             88.81 %
Home equity lines of credit               3,443              5.52 %       3,597              5.71 %
Installment Loans                           432              0.20 %         505              0.23 %
                                       $ 49,991            100.00 %   $  49,595            100.00 %



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

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

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

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

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

• The growth in the loan portfolio and the implication that it has in relation to

the economic climate in the Bank's market territories;

• The economic environment in the Upstate New York and Florida territories over

the last several years, as well as in the Company's other market areas, and;

• The economic environment as a result of the global pandemic.




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

                                                                            

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

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

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

                        Estimated Percentage of
                       Fair value of Capital to
As of March 31, 2021     Fair value of Assets
+400 BP                                    21.60 %
+300 BP                                    21.70
+200 BP                                    21.60
+100 BP                                    22.00
Current rates                              21.40
-100 BP                                    18.40



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

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

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

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

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

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

                                                                            

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

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

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



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

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



(Consolidated)

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

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



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

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


(1) Federal regulatory minimum requirements to be considered to be Well

Capitalized and Adequately Capitalized

(2) The March 31, 2021 and December 31, 2020 common equity tier 1, tier 1

    risk-based, and total risk-based capital ratios include a capital
    conservation buffer of 2.50 percent



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

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Both TrustCo and Trustco Bank are subject to regulatory capital requirements.
The capital rules require the Company's and the Bank's capital to exceed the
regulatory standards plus a capital conservation buffer in order to avoid
constraints on dividends, equity repurchases and certain compensation.  On
January 1, 2015, a new capital rule took effect that revised the federal bank
regulatory agencies' risk-based capital requirements and, for the first time,
subjected the Company to consolidated regulatory capital requirements. Among
other matters, the rule also established a new common equity Tier 1 minimum
capital requirement of 4.5% of risk-weighted assets, increased the minimum Tier
1 capital to risk-based assets requirement from 4.0% to 6.0% of risk-weighted
assets, changed the risk-weightings of certain assets, and changed what
qualifies as capital for purposes of meeting the various capital requirements.
In addition, the Company and the Bank are required to maintain additional levels
of Tier 1 common equity (the capital conservation buffer) over the minimum
risk-based capital levels before they may pay dividends, repurchase shares, or
pay discretionary bonuses. The new rule was phased-in over several years and has
been fully in effect since 2020.

As of March 31, 2021, the capital levels of both TrustCo and the Bank exceeded
the minimum standards, including with the current, capital conservation buffer
taken into account.

Under the Office of the Comptroller of the Currency's ("OCC") "prompt corrective
action" regulations, a bank is deemed to be "well capitalized" when its CET1,
Tier 1, total risk-based and leverage capital ratios are at least 7%, 8.5%,
10.5% and 5%, respectively.  A bank is deemed to be "adequately capitalized" or
better if its capital ratios meet or exceed the minimum federal regulatory
capital requirements, and "undercapitalized" if it fails to meet these minimal
capital requirements.  A bank is "significantly undercapitalized" if its CET1,
Tier 1, total risk-based and leverage capital ratios fall below 3%, 4%, 6% and
3%, respectively and "critically undercapitalized" if the institution has a
ratio of tangible equity to total assets that is equal to or less than 2%.  At
March 31, 2021 and 2020, Trustco Bank met the definition of "well capitalized."

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

TrustCo maintains a dividend reinvestment plan (DRP) with approximately 8,936
participants.  The DRP allows participants to reinvest dividends in shares of
the Company.  The DRP also allows for additional purchases by participants and
has a discount feature (up to a 5% for safe harbor provisions) that can be
activated by management as a tool to raise capital.  To date, the discount
feature has not been utilized.

                                                                            

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Reverse Stock Split Proposal


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

Share Repurchase Program


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

Critical Accounting Policies and Estimates
Pursuant to Securities and Exchange Commission ("SEC") guidance, management of
the Company is encouraged to evaluate and disclose those accounting policies
judged to be critical policies ­ those most important to the portrayal of the
Company's financial condition and results, and that require management's most
difficult subjective or complex judgments.

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

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

                                                                            

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  Index
                              TrustCo Bank Corp NY
                      Management's Discussion and Analysis
                             STATISTICAL DISCLOSURE

        I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:
                    INTEREST RATES AND INTEREST DIFFERENTIAL

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

                                                                                           Three months ended                          Three months 

ended

(dollars in thousands)                                                                       March 31, 2021                              March 31, 2020

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

Securities available for sale:
U. S. government sponsored enterprises                                      

$ 51,649 $ 50 0.38 % $ 92,369 $ 421

1.82 % $ (371 ) (133 ) (238 ) Mortgage backed securities and collateralized mortgage obligations-residential 327,614 1,237 1.51 % 371,768 2,113 2.27 % (876 ) (229 ) (647 ) State and political subdivisions

              50             1          6.47 %           114             2          7.59 %            (1 )          (1 )           -
Corporate bonds                                                                       63,334           316          1.99 %        28,332           238          3.36 %            78           641          (563 )

Small Business Administration-guaranteed participation securities

           39,582           206          2.09 %        47,418           245          2.06 %           (39 )         (56 )          17
Other                                                                                    686             6          3.50 %           685             6          3.50 %             -             -             -

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

Federal funds sold and other short-term Investments                                1,029,570           270          0.11 %       412,076         1,267  

1.24 % (997 ) 5,166 (6,163 )

Held to maturity securities: Mortgage backed securities and collateralized mortgage obligations-residential 13,273

           123          3.70 %        18,144           175          3.86 %           (52 )         (45 )          

(7 )


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

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

Commercial loans                                                                     212,781         2,945          5.54 %       198,047         2,542          5.13 %           403           196           207
Residential mortgage loans                                                  

3,789,256 34,852 3.69 % 3,601,728 36,461

4.05 % (1,609 ) 9,054 (10,663 ) Home equity lines of credit

         238,379         2,259          3.84 %       265,461         2,868          4.35 %          (609 )        (285 )        (324 )
Installment loans                                                                      8,795           161          7.41 %        10,717           192          7.20 %           (31 )         (65 )          34

Loans, net of unearned income                                               

4,249,211 40,217 3.80 % 4,075,953 42,063

4.13 % (1,846 ) 8,900 (10,746 )


Total interest earning assets                                               

5,780,475 42,495 2.95 % 5,056,042 46,612

3.69 % (4,117 ) 14,105 (18,222 )


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

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

Liabilities and shareholders' equity

Deposits:

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

Total interest bearing deposits                                             

4,387,154 2,160 0.20 % 3,971,826 7,736

0.78 % (5,576 ) 893 (6,469 ) Short-term borrowings

                                                                223,807           228          0.41 %       153,668           322          0.84 %           (94 )         580          (674 )

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

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

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

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

Net interest spread                                                                                                 2.74 %                                      2.91 %

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

                                        2.78 %                                      3.05 %

Tax equivalent adjustment                                                                                -                                          (1 )

Net interest income                                                        
                        40,107                                      38,553



                                                                              58

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Index

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