Trustco Bank Corp N Y: Form 10-Q for the period ended Sep 30, 2025
Filed with the SEC on Nov 7, 2025 and accepted by EDGAR at Nov 7, 2025, 20:52 ET.
Management's discussion and analysis
As filed, 65,313 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Introduction
The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the three month and nine month periods ended September 30, 2025, with comparisons to the corresponding period in 2024, as applicable. The consolidated interim financial statements and related notes, as well as the Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 14, 2025 (the “2024 Form 10-K”), should also be read in conjunction with this review. Amounts in prior period consolidated interim financial statements are reclassified whenever necessary to conform to the current period’s presentation.
Following this Management’s Discussion and Analysis is the table “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 and nine month periods ended September 30, 2025 and 2024.
Economic Overview
During the third quarter of 2025, financial markets got off to a robust start with each of the major indexes reaching multiple record highs. For the third quarter of 2025, the S&P 500 Index was up 7.8%, Nasdaq was up 11.2%, and the Dow Jones Industrial Average was up 5.22% compared to the second quarter of 2025. The 10‑year Treasury bond averaged 4.26% during the third quarter of 2025 compared to 4.36% in Q2 2025, a decrease of 10 basis points. The 2‑year Treasury bond average rate decreased 14 basis points to 3.72%. The spread between the 10‑year and the 2-year Treasury bonds increased from a 0.50% on average in Q2 2025 to 0.54% in Q3 2025. Generally, steeper yield curves are favorable for portfolio mortgage lenders like TrustCo, and the table below illustrates the range of rate movements for both short-term and longer-term rates. During the first nine months of 2025 the Federal Funds rate was lowered once in September 2025 to a range of 4.00% to 4.25% from 4.25% to 4.50%. It was also subsequently lowered on October 29, 2025 to a range of 3.75% to 4.00%.
Index
| 3 Month Yield (%) | 2 Year Yield (%) | 5 Year Yield (%) | 10 Year Yield (%) | 10 - 2 Year Spread (%) | |||
|---|---|---|---|---|---|---|---|
| Q3/24 | Beg of Q3 | 5.50 | 4.71 | 4.32 | 4.32 | -0.39 | |
| Peak | 5.47 | 4.77 | 4.44 | 4.48 | 0.26 | ||
| Trough | 4.68 | 3.49 | 3.41 | 3.63 | -0.35 | ||
| End of Q3 | 4.73 | 3.66 | 3.58 | 3.81 | 0.15 | ||
| Average in Q3 | 5.23 | 4.04 | 3.80 | 3.95 | -0.09 | ||
| Q4/24 | Beg of Q4 | 4.73 | 3.66 | 3.58 | 3.81 | 0.15 | |
| Peak | 4.77 | 4.37 | 4.45 | 4.62 | 0.33 | ||
| Trough | 4.31 | 3.61 | 3.51 | 3.74 | 0.02 | ||
| End of Q4 | 4.37 | 4.25 | 4.38 | 4.58 | 0.33 | ||
| Average in Q4 | 4.58 | 4.15 | 4.12 | 4.28 | 0.13 | ||
| Q1/25 | Beg of Q1 | 4.37 | 4.25 | 4.38 | 4.58 | 0.33 | |
| Peak | 4.37 | 4.40 | 4.61 | 4.79 | 0.41 | ||
| Trough | 4.30 | 3.89 | 3.96 | 4.16 | 0.20 | ||
| End of Q1 | 4.32 | 3.89 | 3.96 | 4.23 | 0.34 | ||
| Average in Q1 | 4.34 | 4.15 | 4.25 | 4.45 | 0.30 | ||
| Q2/25 | Beg of Q2 | 4.32 | 3.89 | 3.96 | 4.23 | 0.34 | |
| Peak | 4.46 | 4.05 | 4.17 | 4.58 | 0.67 | ||
| Trough | 4.28 | 3.60 | 3.72 | 4.01 | 0.29 | ||
| End of Q2 | 4.41 | 3.72 | 3.79 | 4.24 | 0.52 | ||
| Average in Q2 | 4.37 | 3.86 | 3.97 | 4.36 | 0.50 | ||
| Q3/25 | Beg of Q2 | 4.41 | 3.72 | 3.79 | 4.24 | 0.52 | |
| Peak | 4.42 | 3.95 | 4.05 | 4.50 | 0.65 | ||
| Trough | 4.00 | 3.49 | 3.57 | 4.01 | 0.43 | ||
| End of Q2 | 4.02 | 3.60 | 3.74 | 4.16 | 0.56 | ||
| Average in Q2 | 4.26 | 3.72 | 3.80 | 4.26 | 0.54 |
The country has entered a period of heightened economic uncertainty as markets continue to adjust to rapidly evolving changes in tariff policies. Tariffs have the potential to increase inflation, and it is unknown if that would have a transitory or longer lasting impact. The Federal Open Market Committee (“FOMC”) lowered the federal funds target rate range to 4.00%-4.25% in September 2025, and to a range of 3.75% to 4.00% in October 2025.
On July 4, 2025, legislation referred to as “H.R. 1: One Big Beautiful Bill Act” (the “OBBBA”) was signed into law and, among other changes, will modify the tax year in which certain business deductions, primarily depreciation of capital asset additions, are allowed and therefore will influence the time within which income tax payments must be made. While our initial review of the OBBBA indicates the legislated changes will not significantly modify our future effective income tax rate, we will continue to monitor for further changes and evaluate the enacted provisions of the new law and potential impacts on our consolidated financial statements as appropriate.
Management believes that TrustCo’s long-term focus on traditional banking services and practices historically has enabled the Company to avoid significant impact from asset quality problems, and that the Company’s strong liquidity and solid capital positions have allowed the Company to continue to conduct business in a manner consistent with its past practice. While we continue to adhere to prudent underwriting standards, should general housing prices and other economic measures, such as unemployment in the Company’s market areas, deteriorate as a result of changes in interest rates, financial sector instability, a potential or actual default on the federal debt or other reasons, the Company may experience an increase in the level of credit risk and in the amount of its classified and nonperforming loans.
Financial Overview
TrustCo recorded net income of $16.3 million, or $0.86 of diluted earnings per share, for the three months ended September 30, 2025, compared to net income of $12.9 million, or $0.68 of diluted earnings per share, in the same period in 2024. Return on average assets was 1.02% and 0.84%, respectively, for the three months ended September 30, 2025 and 2024. Return on average equity was 9.29% and 7.74%, respectively, for the three months ended September 30, 2025 and 2024.
The primary factors accounting for the change in net income for the three months ended September 30, 2025 compared to the same period of the prior year were:
- An increase of $4.4 million, or 11.5%, in net interest income compared to the third quarter of 2024, primarily as a result of an increase in interest income on federal funds sold and other short-term investments and interest and fees on loans, partially offset by an increase in interest expense.
- A decrease of $250 thousand in provision for credit losses compared to the third quarter of 2024.
- A decrease of $242 thousand in noninterest income compared to the third quarter of 2024.
- An increase in income tax expense of $1.0 million compared to the third quarter of 2024.
TrustCo recorded net income of $45.6 million, or $2.41 of diluted earnings per share, for the nine months ended September 30, 2025, compared to net income of $37.6 million, or $1.97 of diluted earnings per share, in the same period in 2024. Return on average assets was 0.97% and 0.82%, respectively, for the nine months ended September 30, 2025 and 2024. Return on average equity was 8.84% and 7.68%, respectively, for the nine months ended September 30, 2025 and 2024.
The primary factors accounting for the change in net income for the nine months ended September 30, 2025 compared to the same period of the prior year were:
- An increase of $12.2 million, or 10.8%, in net interest income compared to the first nine months of 2024, primarily as a result of an increase in interest income on federal funds sold and other short-term investments and interest and fees on loans, partially offset by a decrease in interest and dividends on securities available for sale.
- A decrease of $400 thousand in the provision for credit losses compared to the first nine months of 2024.
- A decrease of $910 thousand in noninterest income compared to the first nine months of 2024. The decrease was primarily driven by a gain of $1.4 million in the prior year from the conversion of the Visa Class C common stock as described below.
- An increase of $1.2 million in noninterest expense compared to the first nine months of 2024.
Visa Exchange Offer
During the second quarter of 2024, Visa Inc. accepted the Company’s tender of its 6,528 shares of Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock. As a result of the exchange, the Company marked its Visa Class C common stock to fair value and recorded a gain of $1.4 million based on the conversion privilege of the Visa Class C common stock and the closing price of Visa Class A common stock on June 28, 2024 of $262.47 per share. In 2024, Company’s Visa Class C shares were marked to fair value on a recurring basis using the Visa Class A shares as evidence of orderly transactions between market participants for similar securities issued by Visa. The Company originally obtained the shares in 2008. The carrying value of the Visa Class B-2 shares is nominal as of September 30, 2025 and there was no activity during the three and nine months ended September 30, 2025.
Asset/Liability Management
The Company strives to generate its earnings capabilities through a mix of core deposits funding a prudent mix of earning assets. Additionally, TrustCo attempts to maintain adequate liquidity and reduce the sensitivity of net interest income to changes in interest rates to an acceptable level while enhancing profitability both on a short‑term and long‑term basis.
TrustCo’s results are affected by a variety of factors including competitive and economic conditions in the specific markets in which the Company operates and, more generally, in the national economy, financial 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 2024 Form 10-K is a description of the effect that continued elevated interest rates had on the results for the year 2024 compared to 2023. Many of the same market factors discussed in the 2024 Form 10-K continued to have an impact on results through the third quarter of 2025.
TrustCo competes with other financial service providers based upon many factors including quality of service, convenience of operations and rates paid on deposits and charged on loans. In the experience of management, the absolute level of interest rates, changes in interest rates and customers’ expectations with respect to the direction of interest rates have a significant impact on the volume of loan and deposit originations in any particular period.
Interest rates have a significant impact on the operations and financial results of all financial services companies. One of the most important interest rates used to control national economic policy is the “Federal Funds” rate. This is the interest rate utilized within the banking system for overnight borrowings for institutions with the highest credit rating. During the first nine months of 2025 the Federal Funds rate was lowered once in September 2025 to a range of 4.00% to 4.25% from 4.25% to 4.50%. It was also subsequently lowered in October 2025 to a range of 3.75% to 4.00%.
The interest rate on the 10-year Treasury bond and other long-term interest rates have significant influence on the rates for new residential real estate loans and longer term investments. These changes in interest rates have an effect on the Company relative to the interest income on loans, securities, and Federal Funds sold and other short-term instruments as well as the interest expense on deposits and borrowings. Residential real estate loans and longer term investments are most affected by the changes in longer term market interest rates such as the 10‑year Treasury. The Federal Funds sold portfolio and other short‑term investments are affected primarily by changes in the Federal Funds target rate. Deposit interest rates are most affected by short term market interest rates. Also, changes in interest rates have an effect on the recorded balance of the securities available for sale portfolio, which is recorded at fair value. Generally, as market interest rates increase, the fair value of the securities will decrease and the reverse is also generally applicable. Interest rates on new residential real estate loan originations are also influenced by the rates established by secondary market participants such as Freddie Mac and Fannie Mae. The Company establishes rates that management determines are appropriate in light of the long-term nature of residential real estate loans while remaining competitive. Higher market interest rates also generally increase the value of retail deposits.
TrustCo’s principal loan products are residential real estate loans. Most of TrustCo’s residential real estate loans carry a fixed rate of interest. As noted above, residential real estate loans and longer‑term investments are most affected by the changes in longer term market interest rates such as the 10-year Treasury. The 10‑year Treasury yield decreased 10 basis points, on average, during the third quarter of 2025 compared to the second quarter of 2025 and increased 31 basis points as compared to the third quarter of 2024.
While TrustCo has been affected by changes in financial markets over time, management believes that the impacts have been mitigated by the Company’s generally conservative approach to banking. The Company utilizes a traditional underwriting process in evaluating loan applications, and since originated loans are retained in the portfolio, there is a strong incentive to be conservative in making credit decisions. For additional information concerning TrustCo’s loan portfolio and nonperforming loans, please refer to the discussions under “Loans” and “Nonperforming Assets,” respectively. Further, the Company does not rely on borrowed funds to support its assets and maintains a significant level of liquidity on the asset side of the balance sheet. Management believes that these characteristics provide the Company with increased flexibility and stability during periods of market disruption and interest rate volatility.
A fundamental component of TrustCo’s strategy has been to grow customer relationships and the deposits and loans that are part of those relationships. Management believes that the Company has significant capacity to grow its balance sheet given its extensive branch network. 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 third quarter of 2025, the net interest margin was 2.79%, up 18 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 $196.8 million and the average yield decreased 85 basis points in the third quarter of 2025 compared to the same period in 2024. The increase in the average balance was enough to offset the decrease in average yield, resulting in more interest income.
- The average balance of securities available for sale decreased by $62.3 million and the average yield increased 40 basis points to 2.91%. The increase in the average yield was a result of higher yields on investments purchased during 2024 and the first nine months of 2025 as well as maturities of lower yielding securities over the same periods. The increase in the yield was not enough to offset the decrease in the average balance which resulted in less interest income.
- The average loan portfolio grew by $125.9 million to $5.18 billion and the average yield increased 20 basis points to 4.32% in the third quarter of 2025 compared to the same period in 2024.
- The average balance of interest bearing liabilities increased $200.3 million and the average rate paid decreased four basis points to 1.90% in the third quarter of 2025 compared to the same period in 2024.
During the third quarter of 2025, the Company continued to focus on its strategy to expand its loan portfolio by offering competitive interest rates. Management believes that the TrustCo residential real estate loan product is very competitive compared to local and national competitors. Competition remains strong in the Company’s market areas.
For the nine months ended September 30, 2025, the net interest margin was 2.71%, up 19 basis points versus the prior year. The nine month results reflect the following significant factors:
- The average balance of Federal Funds sold and other short-term investments increased by $151.9 million and the average yield decreased 96 basis points in the third quarter of 2025 compared to the same period in 2024. The increase in the average balance was enough to offset the decrease in average yield, resulting in more interest income.
- The average balance of securities available for sale decreased by $82.9 million and the average yield increased 25 basis points to 2.78% for the first nine months of 2025 compared to the same period in 2024. The increase in the average yield was a result of higher yields on investments purchased during 2024 and the first nine months of 2025 as well as maturities of lower yielding securities over the same period. The increase in the yield was not enough to offset the decrease in the average balance which resulted in less interest income.
- The average loan portfolio grew by $115.6 million to $5.14 billion and the average yield increased 20 basis points to 4.25% for the first nine months of 2025 compared to the same period in 2024.
- The average balance of interest bearing liabilities increased $125.7 million and the average rate paid decreased six basis points to 1.91% for the first nine months of 2025 compared to the same period in 2024.
The strategy on the funding side of the balance sheet was to offer competitive core deposit products coupled with short term time accounts. We believe that this strategy has sustained TrustCo’s strong liquidity position and continues to allow us to cross sell products to new and existing relationships and take advantage of opportunities as they arise.
Earning Assets
Total average interest earning assets increased from $5.94 billion in the third quarter of 2024 to $6.20 billion in the same period of 2025 with an average yield of 4.25% in the third quarter of 2025 and 4.11% in the third quarter of 2024. The mix of assets invested in Federal Funds sold and other short-term investments and loans increased, while securities available for sale and held to maturity securities decreased over the prior year period. Interest income on average earning assets increased from $61.1 million in the third quarter of 2024 to $66.0 million in the third quarter of 2025. This increase was primarily driven by the increase in average balances and an increase in interest income on federal funds sold and other short-term investments and loans due to higher interest rates on loan originations over the last year and variable rate loans repricing upwards.
Loans
The average balance of loans was $5.18 billion in the third quarter of 2025 and $5.05 billion in the comparable period in 2024, and the yield on loans was up 20 basis points to 4.32%. Interest income on loans was $56.0 million in the third quarter of 2025 up $3.8 million from the same period in 2024, primarily as a result of the higher interest rates on new originations compared to the existing portfolio yield.
Compared to the third quarter of 2024, the average balance of residential mortgage loans, home equity credit lines, and commercial loans, all increased, while the average balance of installment loans decreased. We believe that the upward trend in average balances of residential mortgage loans, home equity credit lines and commercial loans reflects improving economic confidence among borrowers, strong credit quality, and the Bank’s focus on relationship lending.
The average balance of residential mortgage loans was $4.41 billion in the third quarter of 2025 compared to $4.38 billion in 2024, an increase of 0.8%. The average yield on residential mortgage loans increased by 18 basis points to 4.00% in the third quarter of 2025 compared to 2024, primarily as a result of the higher interest rates on new originations compared to the existing portfolio yield.
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 target rate and rates set by competitors and secondary market participants. TrustCo aggressively markets the unique aspects of its loan products thereby attempting to create differentiation from other lenders. These unique aspects include low closing costs, fast turn-around time on loan approvals, and no escrow or mortgage insurance requirements for qualified borrowers. Assuming a continued decline 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 $34.6 million to an average balance of $313.8 million in the third quarter of 2025 compared to the same period in the prior year. The average yield on this portfolio was up 19 basis points to 5.64% compared to the prior year period, primarily as a result of higher interest rates on new originations compared to the existing portfolio yield and certain variable rate loans that repriced upwards prior to the recent Federal Funds target rate decrease in September 2025. The Company continues to be selective in underwriting commercial loans, aiming to the apparent risk/reward during the underwriting process.
The average yield on home equity credit lines decreased 3 basis points to 6.50% during the third quarter of 2025 compared to the year earlier period. The average balances of home equity credit lines increased 15.7% to $440.3 million in the third quarter of 2025 as compared to the prior year.
Securities Available for Sale
The average balance of the securities available for sale portfolio for the third quarter of 2025 was $347.0 million compared to $409.3 million for the comparable period in 2024. The decrease in the balance reflects routine paydowns, calls and maturities, partially offset by new investment purchases. The average yield was 2.91% for the third quarter of 2025 compared to 2.51% for the third quarter of 2024. The increase in average yield is a result of higher yields on bonds purchased as well as lower rate bonds maturing since the prior year quarter. This portfolio is primarily comprised of agency issued residential mortgage backed securities, bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank, and Freddie Mac), Small Business Administration participation certificates, corporate bonds and municipal bonds. These securities are recorded at fair value with any adjustment in fair value included in other comprehensive income, net of tax.
The net unrealized loss in the available for sale securities portfolio was $18.5 million as of September 30, 2025 compared to a net unrealized loss of $29.3 million as of December 31, 2024. The decrease in net unrealized losses in the portfolio is the result of the current interest rate environment.
Held to Maturity Securities
The average balance of held to maturity securities was $4.7 million for the third quarter of 2025 compared to $5.8 million in the third quarter of 2024. The decrease in balances reflects routine paydowns. No new securities were added to this portfolio during the period. The average yield was 4.40% for the third quarter of 2025 up from 4.29% for the year earlier period. TrustCo expects to hold the securities in this portfolio until they mature or are called.
The net unrecognized gain in the held to maturity securities portfolio was $36 thousand as of September 30, 2025 compared to a net unrecognized loss of $59 thousand as of December 31, 2024. The increase in the net unrecognized gain in the portfolio is the result of changes in market interest rate levels.
As of September 30, 2025, this portfolio consisted solely of agency issued residential mortgage-backed securities. The balances for these securities are recorded at amortized cost.
Federal Funds Sold and Other Short-Term Investments
The average balance of Federal Funds sold and other short‑term investments was $662.7 million for the third quarter of 2025 compared to $465.9 million in the third quarter of 2024, primarily due to an increase in deposits, loan payments, and funds from maturing and called securities which have not yet been deployed. The yield was 4.42% for the third quarter of 2025 and 5.27% for the comparable period in 2024. Interest income from this portfolio increased $1.2 million from $6.2 million in 2024 to $7.4 million in 2025. The increase in the average balance was enough to offset the decrease in yield over the same period.
The Federal Funds sold and other short-term investments portfolio is utilized to generate additional interest income and liquidity as funds are waiting to be deployed into the loan and securities portfolios.
Funding Opportunities
TrustCo utilizes various funding sources to support its earning asset portfolio. The vast majority of the Company’s funding comes from traditional deposit vehicles such as savings, demand deposit, interest-bearing checking, money market and time deposit accounts.
Total average interest bearing deposit accounts (which includes interest bearing checking, money market accounts, savings and time deposits) increased $200.6 million to $4.70 billion for the third quarter of 2025 versus the third quarter in the prior year, and the average rate paid decreased from 1.96% for 2024 to 1.92% for 2025. Total interest expense on these deposits increased from $22.2 million to $22.7 million in the third quarter of 2025 compared to the year earlier period. From the third quarter of 2024 to the third quarter of 2025, interest bearing checking account average balances were up 3.5%, certificates of deposit average balances were up 13.1%, non-interest demand average balances were up 6.8%, average savings balances decreased 4.0% and money market balances were down 7.0%. Overall, average balances are up from a year ago as we continue to encourage customers to retain their funds in the expanded product offerings of the Bank through aggressive marketing and product differentiation.
At September 30, 2025, the maturity of total time deposits was as follows:
(dollars in thousands)
| Under 1 year | $1,862,732 |
| 1 to 2 years | 275,625 |
| 2 to 3 years | 1,802 |
| 3 to 4 years | 512 |
| 4 to 5 years | 208 |
| Over 5 years | 53 |
| $2,140,932 |
As of September 30, 2025 and December 31, 2024, approximately $1.24 billion and $1.11 billion, respectively, of our deposit portfolio were uninsured. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.
Average short-term borrowings for the third quarter were $87.3 million in 2025 compared to $87.7 million in 2024. The weighted average interest rate for short-term borrowings increased 2 basis points to 0.90% during this time period. The short-term borrowings of the Company are cash management accounts, which represent retail accounts with customers for which the Bank has pledged certain assets as collateral.
The Company has a number of contingent funding alternatives available in addition to the large cash and cash equivalents position and the investment securities positions it maintains on its balance sheet. The Bank is a member of the Federal Home Loan Bank of New York (“FHLBNY”) and is an eligible borrower at the Federal Reserve Bank of New York (“FRBNY”) and has the ability to borrow utilizing securities and/or loans as collateral at either institution. The Bank does not utilize brokered deposits as a part of its funding strategy, but does incorporate them as a potential contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered CDs may be tested from time to time to ensure operational and market readiness. As of September 30, 2025 the Company also has borrowing capacity of $979.1 million available with the Federal Home Loan Bank of New York. The borrowings capacity is secured by the loans pledged by the Company. As of September 30, 2025 and December 31, 2024, the Company had no outstanding borrowings with the Federal Home Loan Bank of New York.
Net Interest Income
Net interest income increased by $4.4 million to $43.1 million in the third quarter of 2025 compared to the same period in 2024. The net interest spread was up 18 basis points to 2.35% in the third quarter of 2025 compared to the same period in 2024. As previously noted, the net interest margin was also up 18 basis points to 2.79% for the third quarter of 2025 compared to the same period in 2024. Yields on earning assets increased in the third quarter of 2025 compared to the third quarter of 2024, and rates on interest-bearing liabilities decreased causing margin expansion. The Federal Reserve’s decision regarding whether to cut or hold rates in upcoming meetings will have an effect on the Company’s timing and ability to cover deposit costs which should help margin in future quarters. During the third quarter of 2025, the Company has been able to lower the rates offered on our time deposits while continuing to retain and grow that product. This is expected bring down the cost of time deposits over time.
Net interest income increased by $12.2 million to $125.2 million in the first nine months of 2025 compared to the same period in 2024. The net interest spread was up 20 basis points to 2.28% in the first nine months of 2025 compared to the same period in 2024. Net interest margin was up 19 basis points to 2.71% for the first nine months of 2025 compared to the same period in 2024.
Nonperforming Assets
Nonperforming assets include nonperforming loans (“NPLs”), which are those loans in a non‑accrual status and loans past due three payments or more and still accruing interest. Also included in the total of nonperforming assets are foreclosed real estate properties, which are included in other assets and categorized as other real estate owned.
The following describes the nonperforming assets of TrustCo as of September 30, 2025:
Nonperforming loans and foreclosed real estate: Total NPLs were $18.5 million at September 30, 2025 compared to $18.8 million at December 31, 2024. There were no loans at September 30, 2025 and December 31, 2024 that were past due 90 days or more and still accruing interest. The coverage ratio, or allowance for credit losses on loans to NPLs, was 280.8% at September 30, 2025 compared to 267.3% at December 31, 2024.
At September 30, 2025, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of $18.5 million at September 30, 2025, $18.1 million were residential real estate loans, $292 thousand were commercial loans and mortgages and $43 thousand were installment loans, compared to $18.3 million, $343 thousand and $130 thousand, respectively, at December 31, 2024.
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 $194 thousand on residential real estate loans (including home equity lines of credit) for the third quarter of 2025 compared to net charge-offs of $104 thousand for the third quarter of 2024. Management believes that these loans have been appropriately written down where required.
Ongoing portfolio management is intended to result in early identification and disengagement from deteriorating credits. TrustCo has a diversified loan portfolio that includes a significant balance of residential mortgage loans to borrowers in the Capital Region of New York and Central Florida, and avoids concentrations to any one borrower or any single industry. TrustCo has no advances to borrowers or projects located outside the United States. TrustCo continues to identify delinquent loans as quickly as possible and to move promptly to resolve problem loans. Efforts to resolve delinquencies begin immediately after the payment grace period expires, with repeated, automatically generated notices, as well as personalized phone calls and letters. Loans are placed in nonaccrual status once they are 90 days past due, or earlier if management has determined that such classification is appropriate. Once in nonaccrual status, loans are either brought current and maintained current, at which point they may be returned to accrual status, or they proceed through the foreclosure process. The collateral on nonaccrual loans is evaluated periodically, and the loan value is written down if the collateral value is insufficient.
The Company originates loans throughout its branch franchise area. At September 30, 2025, 64.4% of its gross loan portfolio balances were in New York State and the immediately surrounding areas (including New Jersey, Vermont and Massachusetts), and 35.6% were in Florida. Those figures compare to 64.3% and 35.7%, respectively, at December 31, 2024.
Economic conditions vary widely by geographic location. As a percentage of the total nonperforming loans as of September 30, 2025, 19.4% were to Florida borrowers, compared to 80.6% to borrowers in New York and surrounding areas. For the three months ended September 30, 2025, New York and surrounding areas experienced net recoveries of approximately $196 thousand and Florida experienced net charge-offs of $20 thousand for the third quarter of 2025.
Other than loans currently identified as nonperforming, management is aware of no other loans in the Bank’s portfolio that pose material risk of the eventual non-collection of principal and interest. Also as of September 30, 2025, there were no other loans classified for regulatory purposes that management reasonably expects will materially impact future operating results, liquidity, or capital resources.
Loans individually evaluated for impairment are non-accrual loans delinquent greater than 180 days, non-accrual commercial loans, as well as loans classified as loan modifications to borrowers experiencing financial difficulty. There were $386 thousand of commercial mortgages and commercial loans classified as individually evaluated as of September 30, 2025 compared to $443 thousand classified as individually evaluated at December 31, 2024. There were $22.6 million of individually evaluated residential loans at September 30, 2025 compared to $23.8 million classified as individually evaluated at December 31, 2024.
As of September 30, 2025 and December 31, 2024, the Company’s loan portfolio did not include any subprime mortgages or loans acquired with deteriorated credit quality.
At September 30, 2025 there was $1.2 million of foreclosed real estate compared to $2.2 million at December 31, 2024.
Allowance for credit losses on loans: As of September 30, 2025, the Company utilized the Baseline scenario model of Moody’s economic scenarios and considered the uncertainty associated with the assumptions in the baseline scenario, including continued actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential impact of those actions, and the potential impact of persistent high inflation on the economy. Outcomes in any or all of these factors could differ from the baseline scenario utilized, and the Company incorporated qualitative considerations reflecting the risk of uncertain economic conditions, and for additional dimensions of risk that may not be captured in the quantitative model.
In the third quarter of 2025, the Company recorded a provision for credit losses of $250 thousand, which is the result of a provision for credit losses on loans of $450 thousand, and benefit for credit losses on unfunded commitments of $200 thousand. The increase in the ACLL during the third quarter of 2025 was primarily a result of loan growth. The benefit for credit losses on unfunded commitments is a result of a corresponding decrease in unfunded loan commitments. In the third quarter of 2024, the Company recorded a provision for credit losses of $500 thousand, which is the result of a provision for credit losses on loans of $400 thousand, and provision for credit losses on unfunded commitments of $100 thousand. The increase in the ACLL during the third quarter of 2024 was primarily a result of loan growth. The increase in the provision for credit losses on unfunded commitments is a result of a corresponding increase in unfunded loan commitments.
See Note 5 of the consolidated interim financial statements for additional discussion related the process for determining the provision for credit losses.
The allocation of the allowance for credit losses on loans is as follows:
(dollars in thousands)
| As of September 30, 2025 Amount | Percent of Loans to Total Loans | As of December 31, 2024 Amount | Percent of Loans to Total Loans | |
|---|---|---|---|---|
| Commercial | $2,830 | 5.42% | $3,195 | 5.25% |
| Real estate - construction | 414 | 0.80% | 328 | 0.58% |
| Real estate mortgage - 1 to 4 family | 42,025 | 84.93% | 40,866 | 85.87% |
| Home equity lines of credit | 6,379 | 8.61% | 5,667 | 8.03% |
| Installment Loans | 243 | 0.24% | 192 | 0.27% |
| $51,891 | 100.00% | $50,248 | 100.00% |
At September 30, 2025, the allowance for loan losses was $51.9 million, compared to $50.2 million at December 31, 2024. The allowance represents 1.00% of the loan portfolio as of September 30, 2025, and 0.99% at December 31, 2024. The coverage ratio, or the allowance for credit losses on loans to NPLs, was 280.8% and 267.3% as of September 30, 2025 and December 31, 2024, respectively.
Net recoveries for the three-month period ended September 30, 2025 were $176 thousand and net charge-offs were $222 thousand for the prior year period.
During the third quarter of 2025, there were no commercial loan charge-offs, no residential loan charge-offs, and $22 thousand of consumer loan charge-offs, compared to $65 thousand of commercial loan charge-offs, $194 thousand of residential loan charge-offs, and $59 thousand of consumer loan charge-offs in the third quarter of 2024. During the third quarter of 2025 there were no commercial loan recoveries, $194 thousand of residential mortgage recoveries, and $4 thousand for consumer loan recoveries, compared to no commercial loan recoveries, $90 thousand of residential mortgage recoveries, and $6 thousand for consumer loan recoveries in the third quarter of 2024.
The following table presents the net charge-off ratio for the three and nine months ended September 30, 2025 and 2024:
| For the three months ended September 30: 2025 | 2024 | |
|---|---|---|
| Commercial | 0.00% | 0.02% |
| Real estate mortgage – 1 to 4 family | 0.00% | 0.00% |
| Installment | 0.15% | 0.37% |
| Total | 0.00% | 0.00% |
| For the nine months ended September 30: 2025 | 2024 | |
|---|---|---|
| Commercial | -0.10% | 0.00% |
| Real estate mortgage – 1 to 4 family | -0.01% | 0.00% |
| Installment | 1.20% | 0.26% |
| Total | -0.01% | 0.00% |
Liquidity and Interest Rate Sensitivity
TrustCo seeks to obtain favorable sources of funding and to maintain prudent levels of liquid assets in order to satisfy varied liquidity demands. Management believes that TrustCo’s earnings performance and strong capital position enable the Company to easily secure new sources of liquidity. The Company actively manages its liquidity through target ratios established under its liquidity policies. Continual monitoring of both historical and prospective ratios allows TrustCo to employ strategies necessary to maintain adequate liquidity. Management has also defined various degrees of adverse liquidity situations which could potentially occur and has prepared appropriate contingency plans should such a situation arise. As noted, the Company has a number of contingent funding alternatives available in addition to the large cash and cash equivalents position and the investment securities positions it maintains on its balance sheet. As previously stated, the Bank is a member of the FHLBNY and is an eligible borrower at the FRBNY and has the ability to borrow utilizing securities and/or loans as collateral at either institution. The Bank does not utilize brokered deposits as a part of its funding strategy, but does incorporate them as a contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered certificates of deposit may be tested from time to time to ensure operational and market readiness. Management believes that the Company has adequate sources of liquidity to cover its contractual obligations and commitments over the next twelve months and beyond.
The Company uses an industry standard external model as the primary tool to identify, quantify and project changes in interest rates and the effect on loan 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 September 30, 2025 are referenced below. The base case (current rates) scenario shows the present estimate of the fair value of capital assuming no change in the operating environment or operating strategies and no change in interest rates from those existing in the marketplace as of September 30, 2025.
The following table indicates the impact on the fair value of capital assuming interest rates were to instantaneously increase or decrease by 100 bp, 200 bp, 300 bp and 400 bp.
| As of September 30, 2025 | Estimated Percentage of Fair value of Capital to Fair value of Assets |
|---|---|
| +400 BP | 21.00% |
| +300 BP | 21.40 |
| +200 BP | 21.70 |
| +100 BP | 23.30 |
| Current rates | 23.90 |
| -100 BP | 23.40 |
| -200 BP | 22.10 |
| -300 BP | 20.20 |
| -400 BP | 16.70 |
Noninterest Income
Total noninterest income for the third quarter of 2025 was $4.7 million compared to $4.9 million in the third quarter of 2024. Financial Services income was down $77 thousand to $2.0 million in the third quarter of 2025 as compared to the year-ago period. The fair value of assets under management was $1.25 billion at September 30, 2025, $1.15 billion as of December 31, 2024, and $1.17 billion at September 30, 2024. Fees for services to customers were down $53 thousand over the same period in the prior year, primarily as a result of less interchange income.
For the nine months ended September 30, 2025 total noninterest income was $14.5 million, down $910 thousand compared to the prior year period. The decrease is primarily the result of the gain of $1.4 million recorded on the Visa Class C Common stock exchange during the nine months ended September 30, 2024 and a decrease in fees for services to customers driven by less interchange income, partially offset by an increase in financial services income due to higher market values of assets under management.
Noninterest Expenses
Total noninterest expenses were $26.2 million for both the three months ended September 30, 2025 and 2024. Significant changes included a $593 thousand increase in salaries and employee benefits, a $199 thousand increase in net occupancy expense, and a $181 thousand increase in equipment expense, partially offset by a $292 thousand decrease in professional services, a $196 thousand decrease in other real estate expense, net and a $275 thousand decrease in other expenses. Full time equivalent headcount was 735 as of September 30, 2024, 737 as of December 31, 2024, and 738 as of September 30, 2025. Changes in headcount represent normal fluctuations.
Total noninterest expenses were $78.8 million for the nine months ended September 30, 2025, compared to $77.6 million for the nine months ended September 30, 2024. Significant changes included an increase of $416 thousand in salaries and employee benefits, an increase of $285 thousand in net occupancy expense, an increase of $315 thousand in equipment expense, an increase of $290 thousand in professional services, an increase of $373 thousand in FDIC and other insurance, and an increase of $264 thousand in other real estate expense, net, partially offset by a decrease of $155 thousand in outsourced services, a decrease of $258 thousand in advertising expense, and a decrease of $298 thousand in other expense
Income Taxes
In the third quarter of 2025, TrustCo recognized income tax expense of $5.1 million compared to $4.0 million for the third quarter of 2024. The effective tax rates were 23.7% and 23.8% for the third quarters of 2025 and 2024, respectively. For the first nine months, income taxes were $14.2 million and $11.7 million in 2025 and 2024, respectively. The effective tax rate was 23.7% and 23.8% for 2025 and 2024, respectively. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, which contains numerous tax provisions. The Company does not believe the OBBBA will have a material impact on its 2025 consolidated financial statements and will continue to evaluate its longer-term impact.
Capital Resources
Consistent with its long-term goal of operating a sound and profitable financial organization, TrustCo strives to maintain strong capital ratios.
Banking regulators have moved towards higher required capital requirements due to the standards included in the “Basel III” banking capital reform measures and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as a general trend towards reducing risk in the banking system by providing a greater capital margin.
Total shareholders’ equity at September 30, 2025 was $692.0 million compared to $669.0 million at September 30, 2024. TrustCo declared a dividend of $0.38 per share in the third-quarter of 2025 and $0.36 per share in the third quarter of 2024. This results in a dividend payout ratio of 43.68% for the third quarter of 2025 based on earnings for the quarter of $16.3 million, compared to a dividend payout ratio of 53.16% for the third quarter of 2024 based on earnings for the quarter of $12.9 million.
The capital rules, which are generally applicable to both the Company and the Bank, include several measures; specifically, a Tier 1 leverage ratio, a common equity tier 1 (“CET1”) capital ratio, a tier 1 risk-based capital ratio and a total risk-based capital ratio. The rules also impose a capital conservation buffer that requires the Company and the Bank to maintain additional levels of Tier 1 common equity over the minimum risk-based capital levels before they may pay dividends, repurchase shares or pay discretionary bonuses.
The Bank and the Company reported the following capital ratios as of September 30, 2025 and December 31, 2024:
(dollars in thousands)
| (Bank Only) | As of September 30, 2025 Amount | Ratio | Well Capitalized(1) | Minimum for Capital Adequacy plus Capital Conservation Buffer (1)(2) |
|---|---|---|---|---|
| Tier 1 leverage ratio | $672,243 | 10.576% | 5.000% | 4.000% |
| Common equity tier 1 capital | 672,243 | 18.669 | 6.500 | 7.000 |
| Tier 1 risk-based capital | 672,243 | 18.669 | 8.000 | 8.500 |
| Total risk-based capital | 717,360 | 19.922 | 10.000 | 10.500 |
(dollars in thousands)
| As of December 31, 2024 Amount | Ratio | Well Capitalized(1) | Minimum for Capital Adequacy plus Capital Conservation Buffer (1)(2) | |
|---|---|---|---|---|
| Tier 1 leverage ratio | $652,668 | 10.618% | 5.000% | 4.000% |
| Common equity tier 1 capital | 652,668 | 18.542 | 6.500 | 7.000 |
| Tier 1 risk-based capital | 652,668 | 18.542 | 8.000 | 8.500 |
| Total risk-based capital | 696,767 | 19.795 | 10.000 | 10.500 |
(dollars in thousands)
| (Consolidated) | As of September 30, 2025 Amount | Ratio | Minimum for Capital Adequacy plus Capital Conservation Buffer (1)(2) |
|---|---|---|---|
| Tier 1 leverage ratio | $688,505 | 10.831% | 4.000% |
| Common equity tier 1 capital | 688,505 | 19.116 | 7.000 |
| Tier 1 risk-based capital | 688,505 | 19.116 | 8.500 |
| Total risk-based capital | 733,634 | 20.369 | 10.500 |
(dollars in thousands)
| As of December 31, 2024 Amount | Ratio | Minimum for Capital Adequacy plus Capital Conservation Buffer (1)(2) | |
|---|---|---|---|
| Tier 1 leverage ratio | $679,651 | 11.054% | 4.000% |
| Common equity Tier 1 capital | 679,651 | 19.303 | 7.000 |
| Tier 1 risk-based capital | 679,651 | 19.303 | 8.500 |
| Total risk-based capital | 723,762 | 20.556 | 10.500 |
(1) Federal regulatory minimum requirements to be considered to be Well Capitalized and Adequately Capitalized
(2) The September 30, 2025 and December 31, 2024 common equity tier 1, tier 1 risk-based, and total risk-based capital ratios include a capital conservation buffer of 2.50 percent
In addition, at September 30, 2025, the consolidated equity to total assets ratio was 10.90%, compared to 10.84% at December 31, 2024 and 10.95% at September 30, 2024.
As of September 30, 2025, the capital levels of both TrustCo and the Bank exceeded the minimum standards, including with the fully phased-in capital conservation buffer taken into account.
Under the Office of the Comptroller of the Currency’s (“OCC”) “prompt corrective action” regulations, a bank is deemed to be “well capitalized” when its CET1, Tier 1, total risk-based and leverage capital ratios are at least 4%, 7%, 8.5%, and 10.5%, respectively. A bank is deemed to be “adequately capitalized” or better if its capital ratios meet or exceed the minimum federal regulatory capital requirements, and “undercapitalized” if it fails to meet these minimal capital requirements. A bank is “significantly undercapitalized” if its CET1, Tier 1, total risk-based and leverage capital ratios fall below 3%, 4%, 6% and 3%, respectively and “critically undercapitalized” if the institution has a ratio of tangible equity to total assets that is equal to or less than 2%. At September 30, 2025 and December 31, 2024, Trustco Bank met the definition of “well capitalized.”
As noted, the Company’s dividend payout ratio was 43.68% of net income for the third quarter of 2025 and 53.16% of net income for the third quarter of 2024. The per-share dividend paid in the third quarter of 2025 was $0.38 per share compared to $0.36 in the third quarter of 2024. The Company’s ability to pay dividends to its shareholders is dependent upon the ability of the Bank to pay dividends to the Company. The payment of dividends by the Bank to the Company is subject to continued compliance with minimum regulatory capital requirements. The OCC may disapprove a dividend if the Bank would be undercapitalized following the distribution; the proposed capital distribution raises safety and soundness concerns; or the capital distribution would violate a prohibition contained in any statute, regulation or agreement.
TrustCo maintains a dividend reinvestment plan (DRP) with approximately 5,843 participants. The DRP allows participants to reinvest dividends in shares of the Company. The DRP also allows for additional purchases by participants and has a discount feature (up to a 5% for safe harbor provisions) that can be activated by management as a tool to raise capital. To date, the discount feature has not been utilized.
Share Repurchase Program
On March 18, 2025 the Company announced that its Board of Directors authorized another share repurchase program of up to 1,000,000 shares, or approximately 5% of its currently outstanding common stock. During the three months ended September 30, 2025, the Company repurchased a total of 298,177 shares at an average price per share of $38.69 for a total of $11.5 million under its Board authorized share repurchase program. During the nine months ended September 30, 2025, the Company repurchased a total of 466,912 shares at an average price per share of $36.13 for a total of $16.9 million under its Board authorized share repurchase program.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, income taxes and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
During the nine months ended September 30, 2025, there were no significant changes to our critical accounting policies and estimates as described in the consolidated financial statements contained in the 2024 Form 10-K other than what is set forth immediately below.
Management considers the accounting policy relating to the allowance for credit losses to be a critical accounting policy given the measurement uncertainty and subjective judgement necessary in evaluating the levels of the allowance required to cover the life-time losses in the loan portfolio and the material effect that such judgments can have on the results of operations.
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 for each of the reported periods. Nonaccrual loans are included in loans for this analysis. The average balances of securities available for sale and held to maturity are calculated using amortized costs for these securities. Included in the average balance of shareholders’ equity is the unrealized loss, net of tax, in the available for sale portfolio of $14.8 million in 2025 and $32.3 million in 2024. The subtotals contained in the following table are the arithmetic totals of the items contained in that category. Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and rate) based on the percentage relationship of such variances to each other.
(dollars in thousands)
| Assets Securities available for sale: | Three months ended September 30, 2025 Average Balance | Interest | Average Rate | Three months ended September 30, 2024 Average Balance | Interest | Average Rate | Change in Interest Income/ Expense | Variance Balance Change | Variance Rate Change |
|---|---|---|---|---|---|---|---|---|---|
| U. S. government sponsored enterprises | $69,294 | $599 | 3.46% | $95,073 | $718 | 3.02% | $(119) | $(621) | $502 |
| Mortgage backed securities and collateralized mortgage obligations-residential | 237,092 | 1,583 | 2.65 | 241,792 | 1,397 | 2.29 | 186 | (171) | 357 |
| State and political subdivisions | 18 | 1 | 6.77 | 26 | - | 6.75 | 1 | 1 | - |
| Corporate bonds | 26,512 | 265 | 4.00 | 55,041 | 361 | 2.63 | (96) | (800) | 704 |
| Small Business Administration-guaranteed participation securities | 13,385 | 72 | 2.15 | 16,663 | 90 | 2.15 | (18) | (18) | - |
| Mortgage backed securities and collateralized mortgage obligations-commercial | - | - | - | - | - | - | |||
| Other | 700 | 7 | 4.00 | 701 | 2 | 1.14 | 5 | - | 5 |
| Total securities available for sale | 347,001 | 2,527 | 2.91 | 409,296 | 2,568 | 2.51 | (41) | (1,609) | 1,568 |
| Federal funds sold and other short-term Investments | 662,737 | 7,376 | 4.42 | 465,922 | 6,174 | 5.27 | 1,202 | 6,624 | (5,422) |
| Held to maturity securities: | |||||||||
| Mortgage backed securities and collateralized mortgage obligations-residential | 4,709 | 52 | 4.40 | 5,779 | 62 | 4.29 | (10) | (20) | 10 |
| Total held to maturity securities | 4,709 | 52 | 4.40 | 5,779 | 62 | 4.29 | (10) | (20) | 10 |
| Federal Reserve Bank and Federal Home Loan Bank stock | 6,601 | 125 | 7.57 | 6,507 | 153 | 9.41 | (28) | 15 | (43) |
| Commercial loans | 313,800 | 4,426 | 5.64 | 279,199 | 3,807 | 5.45 | 619 | 485 | 134 |
| Residential mortgage loans | 4,409,645 | 44,089 | 4.00 | 4,375,641 | 41,811 | 3.82 | 2,278 | 327 | 1,951 |
| Home equity lines of credit | 440,288 | 7,215 | 6.50 | 380,422 | 6,245 | 6.53 | 970 | 1,161 | (191) |
| Installment loans | 11,842 | 223 | 7.48 | 14,443 | 249 | 6.87 | (26) | (135) | 109 |
| Loans, net of unearned income | 5,175,575 | 55,953 | 4.32 | 5,049,705 | 52,112 | 4.12 | 3,841 | 1,838 | 2,003 |
| Total interest earning assets | 6,196,623 | 66,033 | 4.25 | 5,937,209 | 61,069 | 4.11 | 4,964 | 6,848 | (1,884) |
| Allowance for credit losses on loans | (51,706) | (49,973) | |||||||
| Cash & non-interest earning assets | 208,701 | 187,166 | |||||||
| Total assets | $6,353,618 | $6,074,402 | |||||||
| Liabilities and shareholders’ equity | |||||||||
| Deposits: | |||||||||
| Interest bearing checking accounts | $1,035,366 | $483 | 0.18% | $1,000,333 | $311 | 0.12% | 172 | 11 | 161 |
| Money market accounts | 464,334 | 2,065 | 1.76 | 499,408 | 2,154 | 1.72 | (89) | (409) | 320 |
| Savings | 1,077,441 | 741 | 0.27 | 1,122,673 | 770 | 0.27 | (29) | (30) | 1 |
| Time deposits | 2,125,920 | 19,427 | 3.63 | 1,880,021 | 18,969 | 4.01 | 458 | 8,660 | (8,202) |
| Total interest bearing deposits | 4,703,061 | 22,716 | 1.92 | 4,502,435 | 22,204 | 1.96 | 512 | 8,232 | (7,720) |
| Short-term borrowings | 87,348 | 198 | 0.90 | 87,677 | 194 | 0.88 | 4 | (4) | 8 |
| Total interest bearing liabilities | 4,790,409 | $22,914 | 1.90 | 4,590,112 | $22,398 | 1.94 | 516 | 8,228 | (7,712) |
| Demand deposits | 792,621 | 742,164 | |||||||
| Other liabilities | 76,502 | 80,502 | |||||||
| Shareholders’ equity | 694,086 | $661,624 | |||||||
| Total liabilities and shareholders’ equity | $6,353,618 | 6,074,402 | |||||||
| Net interest income | $43,119 | $38,671 | $4,448 | $(1,380) | $5,828 | ||||
| Net interest spread | 2.35% | 2.17% | |||||||
| Net interest margin (net interest income to total interest earning assets) | 2.79% | 2.61% |
70
Management’s Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of the average balance sheet, related interest income and expense and the average annualized yields on interest earning assets and annualized rates on interest bearing liabilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Nonaccrual loans are included in loans for this analysis. The average balances of securities available for sale and held to maturity are calculated using amortized costs for these securities. Included in the average balance of shareholders’ equity is the unrealized loss, net of tax, in the available for sale portfolio of $16.7 million in 2025 and $28.2 million in 2024. The subtotals contained in the following table are the arithmetic totals of the items contained in that category. Increases and decreases in interest income and expense due to both rate and volume have been allocated to the categories of variances (volume and rate) based on the percentage relationship of such variances to each other.
(dollars in thousands)
| Assets Securities available for sale: | Nine months ended September 30, 2025 Average Balance | Interest | Average Rate | Nine months ended September 30, 2024 Average Balance | Interest | Average Rate | Change in Interest Income/ Expense | Variance Balance Change | Variance Rate Change |
|---|---|---|---|---|---|---|---|---|---|
| U. S. government sponsored enterprises | $72,461 | $1,809 | 3.33% | $111,570 | $2,533 | 3.03% | $(724) | $(1,087) | $363 |
| Mortgage backed securities and collateralized mortgage obligations-residential | 240,401 | 4,679 | 2.59 | 250,343 | 4,342 | 2.31 | 337 | (264) | 601 |
| State and political subdivisions | 18 | 1 | 6.77 | 26 | 1 | 6.80 | - | - | - |
| Corporate bonds | 30,696 | 735 | 3.19 | 61,221 | 1,199 | 2.61 | (464) | (812) | 348 |
| Small Business Administration-guaranteed participation securities | 14,151 | 228 | 2.15 | 17,438 | 284 | 2.17 | (56) | (53) | (3) |
| Other | 698 | 22 | 4.20 | 697 | 7 | 1.34 | 15 | - | 15 |
| Total securities available for sale | 358,425 | 7,474 | 2.78 | 441,295 | 8,366 | 2.53 | (892) | (2,216) | 1,324 |
| Federal funds sold and other short-term Investments | 641,793 | 21,320 | 4.44 | 489,934 | 19,818 | 5.40 | 1,502 | 6,939 | (5,437) |
| Mortgage backed securities and collateralized mortgage obligations-residential | 4,969 | 163 | 4.37 | 6,053 | 195 | 4.29 | (32) | (93) | 61 |
| Total held to maturity securities | 4,969 | 163 | 4.37 | 6,053 | 195 | 4.29 | (32) | (93) | 61 |
| Federal Reserve Bank and Federal Home Loan Bank stock | 6,567 | 405 | 8.22 | 6,350 | 452 | 9.49 | (47) | 23 | (70) |
| Commercial loans | 306,091 | 12,851 | 5.60 | 278,981 | 11,232 | 5.37 | 1,619 | 1,124 | 495 |
| Residential mortgage loans | 4,394,245 | 129,940 | 3.94 | 4,364,821 | 123,046 | 3.76 | 6,894 | 833 | 6,061 |
| Home equity lines of credit | 427,830 | 20,480 | 6.40 | 365,932 | 17,522 | 6.40 | 2,958 | 2,947 | 11 |
| Installment loans | 12,440 | 689 | 7.40 | 15,319 | 776 | 6.76 | (87) | (188) | 101 |
| Loans, net of unearned income | 5,140,606 | 163,960 | 4.25 | 5,025,053 | 152,576 | 4.05 | 11,384 | 4,716 | 6,668 |
| Total interest earning assets | 6,152,360 | 193,322 | 4.19 | 5,968,685 | 181,407 | 4.05 | 11,915 | 9,369 | 2,546 |
| Allowance for credit losses on loans | (50,991) | (49,419) | |||||||
| Cash & non-interest earning assets | 204,651 | 187,963 | |||||||
| Total assets | $6,306,020 | $$ 6,107,229 | |||||||
| Liabilities and shareholders’ equity | |||||||||
| Deposits: | |||||||||
| Interest bearing checking accounts | $1,037,598 | $1,577 | 0.20% | $999,839 | $839 | 0.11% | 738 | 33 | 705 |
| Money market accounts | 468,059 | 6,140 | 1.75 | 522,636 | 6,724 | 1.72 | (584) | (796) | 212 |
| Savings | 1,084,712 | 2,208 | 0.27 | 1,142,313 | 2,157 | 0.25 | 51 | (157) | 208 |
| Time deposits | 2,088,844 | 57,605 | 3.69 | 1,881,027 | 58,046 | 4.12 | (441) | 8,143 | (8,584) |
| Total interest bearing deposits | 4,679,213 | 67,530 | 1.93 | 4,545,815 | 67,766 | 1.99 | (236) | 7,223 | (7,459) |
| Short-term borrowings | 83,885 | 554 | 0.88 | 91,551 | 604 | 0.88 | (50) | (51) | 1 |
| Total interest bearing liabilities | 4,763,098 | $68,084 | 1.91 | 4,637,366 | $68,370 | 1.97 | (286) | 7,172 | (7,458) |
| Demand deposits | 777,573 | 734,604 | |||||||
| Other liabilities | 76,372 | 82,233 | |||||||
| Shareholders’ equity | 688,977 | 653,026 | |||||||
| Total liabilities and shareholders’ equity | $6,306,020 | $6,107,229 | |||||||
| Net interest income , tax equivalent | $125,238 | $113,037 | $12,201 | $2,197 | $10,004 | ||||
| Net interest spread | 2.28% | 2.08% | |||||||
| Net interest margin (net interest income to total interest earning assets) | 2.71% | 2.52% |
71
Market risk
As filed, 1,456 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
The information presented in the “Liquidity and Interest Rate Sensitivity” section of Part I, Item 2 of this Quarterly Report on Form 10-Q is incorporated herein by reference.
As detailed in the 2024 Form 10-K, the Company is subject to interest rate risk as its principal market risk. As noted in the Management’s Discussion and Analysis for the three-month and nine-month periods ended September 30, 2025 and 2024, the Company continues to respond to changes in interest rates in such a way that positions the Company to meet short-term earning goals and also allows the Company to respond to changes in interest rates in the future. Consequently, for the third quarter of 2025, the Company had an average balance of Federal Funds sold and other short-term investments of $662.7 million compared to $465.9 million in the third quarter of 2024. As investment opportunities present themselves, management plans to invest funds from the Federal Funds sold and other short-term investment portfolio into the securities available for sale, securities held to maturity and loan portfolios. TrustCo does not engage in activities involving interest rate swaps, forward placement contracts, or any other instruments commonly referred to as “derivatives.” Additional disclosure of interest rate risk can be found under “Liquidity and Interest Rate Sensitivity” and “Asset/Liability Management” in the Management’s Discussion and Analysis section of this document.
Controls and procedures
As filed, 2,165 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation of those disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer of the Company concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.
In designing and evaluating the Company’s disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Further, no evaluation of a cost-effective system of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter to which this report relates that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Risk factors
As filed, 4,012 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
An investment in the Company involves risks, including the risks discussed in Item 1A. “Risk Factors” of the Company’s 2024 Form 10-K, which risk factors have not materially changed except as set forth below. The risk factor below supplements the other risk factors in the 2024 Form 10-K and reflects modifications to the nature of the risks that have developed since the date on which the 2024 Form 10-K was filed.
Our business may be adversely affected by the prevalence of fraud and other financial crimes.
As a bank, we are susceptible to fraudulent activity that may be committed against us or our customers which may result in financial losses or increased costs to us or our customers, disclosure or misuse of our information or our customers’ information, misappropriation of assets, privacy breaches against our customers, litigation or damage to our reputation. Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Consistent with industry trends, we have also experienced attempted electronic fraudulent activity in recent periods. Given such electronic fraudulent activity and the growing level of use of electronic, internet-based and networked systems to conduct business directly or indirectly with our clients, certain fraud losses may not be avoidable regardless of the preventative and detection systems in place. Nationally, reported incidents of fraud and other financial crimes have increased. While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur.
Actions of activist shareholders could negatively affect the Company’s business and the value of its common stock and cause us to incur significant expenses.
Although the Company values constructive input from shareholders, including on strategic matters, and our Board of Directors and management team are committed to acting in the best interests of all of the Company’s shareholders, activist shareholders who disagree with the Company’s strategic direction, the way the Company is managed or the composition of the Board of Directors may seek to effect change through various strategies that range from private engagement to public filings, proxy contests, efforts to force specific agendas, and litigation. Responding to some of these actions can be costly and time-consuming, may disrupt the Company’s business and operations and divert the attention of the Board of Directors, management and employees. Such activities could interfere with the Company’s ability to execute its strategic plan and to attract and retain qualified executive leadership and business partners, and our business could be adversely affected as a result. Any perceived uncertainty as to the Company’s future direction resulting from activist strategies could also affect the market price and volatility of the Company’s common stock. These perceived uncertainties may also be exploited by our competitors and/or other activist shareholders, which could result in lost business opportunities and make it more difficult to execute on our long-term strategic plan. Even if we are successful in defending any such proxy contest, litigation or related actions by an activist shareholder, our business could be adversely affected by such proxy contest, litigation or related actions due to perceived uncertainties as to the future direction of the business, which may result in the loss of strategic opportunities. If individuals are elected or appointed to our Board of Directors with a specific agenda or who do not agree with our strategic plan, the ability of our Board of Directors to function effectively could be adversely affected, which could in turn adversely affect our ability to effectively and timely implement our strategic plan and create additional value for our shareholders, and/or adversely affect our business, operating results and financial condition.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2025-09-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Income tax | 3 months2025-07-01 to 2025-09-30 | $5.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months2025-01-01 to 2025-09-30 | $14.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2025-07-01 to 2025-09-30 | $16.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months2025-01-01 to 2025-09-30 | $45.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2025-07-01 to 2025-09-30 | $0.86 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months2025-01-01 to 2025-09-30 | $2.41 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2025-07-01 to 2025-09-30 | $0.87 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months2025-01-01 to 2025-09-30 | $2.41 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2025-07-01 to 2025-09-30 | 18,805,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months2025-01-01 to 2025-09-30 | 18,947,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2025-01-01 to 2025-09-30 | $41.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months2025-01-01 to 2025-09-30 | $9.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months2025-01-01 to 2025-09-30 | $20.5m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months2025-01-01 to 2025-09-30 | $16.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | At period end2025-09-30 | $695.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | At period end2025-09-30 | $6.35bn | us-gaap:Assets |
| Total liabilities | At period end2025-09-30 | $5.66bn | us-gaap:Liabilities |
| Short-term borrowings | At period end2025-09-30 | $97.7m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | At period end2025-09-30 | $692.0m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001140361-25-041145. Last ingested by Listed: Oct 24, 2026, 14:56 ET. Listed shows no prices and gives no investment advice.