TRST US Equity☆

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ Annual Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2022

Or

☐ Transition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the transition period from ____________________ to ____________________

Commission file number0-10592

TRUSTCO BANK CORP NY

(Exact name of registrant as specified in its charter)

5 SARNOWSKI DRIVE, GLENVILLE, NEW YORK12302

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (518) 377-3311

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

Title of each class Trading Symbol(s) Name of exchange on which registered)

Common Stock, $1.00 par value TRST The Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes. ☒ No.☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes.☐No. ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during

the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes.☒ No.☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes.☒ No.☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange

Act.

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has

elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control

over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the

filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those errors corrections are restatements that required a recovery analysis of incentive-based compensation received by

any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the common stock held by non-affiliates as of June 30, 2022,

the last business day of the Company’s second fiscal quarter, was $573 million (based upon the closing price of $30.84 on June 30,

2022 as reported on the Nasdaq Global Select Market).

The number of shares outstanding of the registrant’s common stock as of February 23, 2023 was 19,024,433 .

Documents Incorporated by Reference: Portions of the registrant’s Annual Report to Shareholders for the year ended December 31, 2022 are incorporated by reference

into Parts I and II, and portion of the registrant’s Proxy Statement filed for its 2023 Annual Meeting of Shareholders to be filed within 120 days of the registrant’s fiscal year end are incorporated into Part III.

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Description Page

PART I

Item 1 Business 3

Item 1A Risk Factors 18

Item 1B Unresolved Staff Comments 29

Item 2 Properties 29

Item 3 Legal Proceedings 29

Item 4 Mine Safety Disclosures 29

PART II

Item 6 [Reserved] 32

Item 7A Quantitative and Qualitative Disclosures about Market Risk 32

Item 8 Financial Statements and Supplementary Data 32

Item 9A Controls and Procedures 32

Item 9B Other Information 33

Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 33

PART III

Item 10 Directors, Executive Officers and Corporate Governance 33

Item 11 Executive Compensation 33

Item 14 Principal Accounting Fees and Services 33

PART IV

Item 15 Exhibits, Financial Statement Schedules 34

EXHIBITS INDEX 34

Signatures 39

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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Statements included in this report and in future filings by TrustCo with the Securities and Exchange Commission (“SEC”), 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 COVID-19 pandemic on our business and macroeconomic or geopolitical concerns related to inflation and rising interest rates, 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 such 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.

The risk factors listed in Item 1A, Risk Factors of this Annual Report on Form 10-K and TrustCo’s 2022 Annual Report to Shareholders, which is included

as Exhibit 13 hereto, and in TrustCo’s other filings with the SEC, 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 effects of the COVID-19

pandemic and macroeconomic or geopolitical concerns related to inflation, rising interest rates and the war in Ukraine.

You should not rely upon forward-looking statements as predictions of future events. Although TrustCo believes that the expectations reflected in the forward‐looking statements are reasonable, it cannot guarantee that

the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. The 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.

PART I

Item 1. Business

General

TrustCo Bank Corp NY (“TrustCo” or the “Company”) is a savings and loan

holding company having its principal place of business at 5 Sarnowski Drive, Glenville, New York 12302. TrustCo was incorporated under the laws of New York in 1981 to be the parent holding company of The Schenectady Trust Company, which

subsequently was renamed Trustco Bank New York and, later, Trustco Bank, National Association. The Company’s principal subsidiary, Trustco Bank (also referred to as the “Bank”), is the successor by merger to Trustco Bank, National Association.

Through policy and practice, TrustCo continues to emphasize that it is an equal opportunity employer. There were 750 full-time equivalent employees of TrustCo at year-end. TrustCo had 7,593 shareholders of record as of December 31, 2022 and

the closing price of the TrustCo common stock on December 30, 2022 (the last trading day of 2022) was $37.59.

Subsidiaries

Trustco Bank

Trustco Bank is a federal savings bank engaged in providing general banking services to individuals and business. At year-end 2022, the Bank operated 158 automatic teller machines and 143

banking offices in Albany, Columbia, Dutchess, Greene, Montgomery, Orange, Putnam, Rensselaer, Rockland, Saratoga, Schenectady, Schoharie, Ulster, Warren, Washington, and Westchester counties of New York, Brevard, Charlotte, Flagler,

Hillsborough, Indian River, Lake, Manatee, Martin, Orange, Osceola, Palm Beach, Polk, Sarasota, Seminole, and Volusia counties in Florida, Bennington County in Vermont, Berkshire County in Massachusetts and Bergen County in New Jersey.

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The largest part of such business consists of accepting deposits and making loans and investments. Trustco Bank also lends in Essex and Fulton counties of New York, Essex, Hudson, Morris, and

Passaic counties of New Jersey, Collier, Lee, Marion, Pasco, Pinellas, St. Johns, St. Lucie, and Sumter counties of Florida, where it has no branch locations.

The Bank provides a wide range of both personal and business banking services, including a full array of deposit products for both individuals and businesses. Trustco Bank also offers trust and

investment services through its Financial Services Department. The Bank is supervised and regulated by the federal Office of the Comptroller of the Currency (“OCC”).

Its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the extent permitted by law. The Bank’s

subsidiary, Trustco Realty Corp., is a real estate investment trust (or “REIT”) that was formed to acquire, hold and manage real estate mortgage assets,

including residential mortgage loans and mortgage backed securities. The income earned on these assets, net of expenses, is distributed in the form of dividends. Under current New York State tax law, 60% of the dividends received by the Bank

from Trustco Realty Corp. are excluded from total taxable income for New York State income tax purposes. The Bank accounted for substantially all of TrustCo’s 2022 consolidated net income and average

assets. The Bank’s other active subsidiaries, Trustco Insurance Agency, Inc. and ORE Property, Inc., did not engage in any significant business activities during 2022 and 2021.

Trustco Financial Services, the name under which Trustco Bank’s trust department operates, serves as executor of estates and trustee of personal trusts,

provides asset and wealth management services, provides estate planning and related advice, provides custodial services, and acts as trustee for various types of employee benefit plans and corporate pension and profit sharing trusts. The

aggregate market value of the assets under trust, custody, or management of the trust department of the Bank was approximately $918 million as of December 31, 2022.

The daily operations of the Bank remain the responsibility of its officers, subject to the oversight of its Board of Directors and overall supervision by TrustCo. The activities of the Bank are

included in TrustCo’s consolidated financial statements.

ORE Subsidiary Corp.

In 1993, TrustCo created ORE Subsidiary Corp., a New York corporation, to hold and manage certain foreclosed properties acquired by the Bank. The accounts of this subsidiary are included in

TrustCo’s consolidated financial statements.

Competition

TrustCo faces strong competition in its market areas, both in attracting deposits and making loans. The Company’s most direct competition for deposits, historically, has come from commercial banks,

savings associations, and credit unions that are located or have branches in the Bank’s market areas. The competition ranges from other locally based commercial banks, savings banks, and credit unions to

branch offices of the largest financial institutions in the United States. In its principal market areas, the Capital District area of New York State and central Florida, TrustCo’s principal competitors

are local branch operations of super-regional banks, branch offices of money center banks, and locally based commercial banks and savings institutions. The Bank is the largest depository institution headquartered in the Capital District area of

New York State. The Company also faces competition for deposits from national brokerage houses, short-term money market funds, and other corporate and government securities mutual funds.

Factors affecting the acquisition of deposits include pricing, office locations and hours of operation, the variety of deposit accounts offered, and the quality of customer service provided. Competition for loans has increased as interest

rates have increased and housing inventory has tightened in many of the Bank’s market areas. Commercial banks, savings institutions, traditional mortgage brokers affiliated with local offices, and nationally franchised real estate brokers are all

active and aggressive competitors. The Company competes in this environment by providing a full range of financial services based on a tradition of financial strength and integrity dating from its inception. The Company also expects competition

to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered barriers to entry, allowed

banks and other financial services companies to expand their geographic reach by providing services over the internet, and made it possible for non-depository institutions to offer products and services that traditionally have been provided by

banks. The Company competes for loans principally through the interest rates and loan fees it charges and the efficiency and quality of services it provides to borrowers.

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Supervision and Regulation

Banking is a highly regulated industry, with numerous federal and state laws and regulations governing the organization and operation of banks and their affiliates. As a savings and loan holding

company, TrustCo and its non-bank subsidiaries are supervised and regulated by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”). The

OCC is the Bank’s primary federal regulator and supervises and examines the Bank. Under the Home Owners’ Loan Act of 1934 and OCC regulations, Trustco Bank must

obtain prior OCC approval for acquisitions, and its business operations and activities are restricted. Because the FDIC provides deposit insurance to the Bank, the Bank is also subject to its supervision and regulation even though the FDIC is not

the Bank’s primary federal regulator.

The following summary of laws and regulations applicable to the Company or the Bank is not intended to be a complete description of those laws and regulations or their effects on the Company and

the Bank, and it is qualified in its entirety by reference to the particular statutory and regulatory provisions described. Changes in applicable law or regulation, and in their interpretation and application

by regulatory agencies and other governmental authorities, cannot be predicted, but may have a material effect on our business, financial condition or results of operations.

Key Legislation

Certain Regulatory Developments Relating to the COVID-19 Pandemic

Congress took significant action to address the disruptions caused by the COVID-19 pandemic, including by passing the Coronavirus Aid, Relief and Economic Security Act, a $2.2 trillion economic stimulus bill, and the Economic Aid Act. There

have also been a number of regulatory actions intended to help mitigate the adverse economic impact of the COVID-19 pandemic on borrowers, including several mandates from the bank regulatory agencies requiring financial institutions to work

constructively with borrowers affected by the pandemic. Many of these actions were temporary and have expired; however, certain aspects of the regulatory framework that were modified as a result of the pandemic remain in effect. For example, in

response to the pandemic, the Federal Reserve implemented an interim final rule allowing banks to suspend enforcement of the six-transfer limit on convenient transfers from savings deposits under Regulation D in order to permit customers to make

an unlimited number of convenient transfers and withdrawals amid pandemic-related financial disruptions and uncertainty. This amendment since has been adopted on a permanent basis.

Economic Growth, Regulatory Relief and Consumer Protection Act

In May 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the "Regulatory Relief Act"), was enacted to modify or remove certain financial reform rules and regulations. The Regulatory Relief Act

amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion. Many of these changes resulted in meaningful regulatory changes

for community banks such as the Bank, and their holding companies.

The Regulatory Relief Act also expanded the definition of qualified mortgages that may be held by a financial institution and simplifies the regulatory capital rules for financial institutions and their holding

companies with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single "Community Bank Leverage Ratio" of 9 percent. Any qualifying depository institution or its holding company that

exceeds the "community bank leverage ratio" will be considered to have met generally applicable leverage and risk-based regulatory capital requirements and any qualifying depository institution that exceeds the ratio will be considered to be

"well capitalized" under the prompt corrective action rules. In addition, the Regulatory Relief Act included regulatory relief for community banks regarding regulatory examination cycles, call reports, the Volcker Rule (proprietary trading

prohibitions), mortgage disclosures and risk weights for certain high-risk commercial real estate loans. The new rule was effective as of January 1, 2020. Although TrustCo would qualify to take advantage of the community bank leverage ratio

framework, it has decided it would not opt-in to the framework.

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Dividends

Most of TrustCo’s revenues consist of cash dividends paid to TrustCo by the Bank, payment of which is subject to various regulatory limitations,

including continued compliance with minimum regulatory capital requirements, and the receipt of regulatory approval (or non-objection) from the Bank’s and the Company’s

regulators.

OCC regulations impose limitations upon all capital distributions by the Bank, including cash dividends. Under the regulations, an application to and the approval of the OCC is required prior to

any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under OCC regulations (generally, examination

ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the

distribution, or the distribution would otherwise be contrary to a statute, regulation, or agreement with the OCC. If an application is not required, the institution must still provide prior notice of the capital distribution to the OCC and the

Federal Reserve Board if, like the Bank, the institution is a subsidiary of a savings and loan holding company. The OCC may disapprove a dividend if the institution 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 between the bank and a regulator or a condition imposed in a previously approved

application or notice.

As noted above, a savings institution, such as the Bank, that is a subsidiary of a savings and loan holding company and that proposes to make a capital distribution must also submit written

notice to the Federal Reserve Board prior to such distribution, and Federal Reserve Board may object to the distribution based on safety and soundness or other concerns. The Federal Reserve Board may deny a dividend notice if following the

dividend, the savings association will be less than adequately capitalized, the proposed dividend raises safety and soundness concerns, or the proposed dividend violates a prohibition contained in any statute, regulation, enforcement action, or

agreement between the association or holding company and an appropriate federal banking agency, a condition imposed on the association or holding company in an application or notice approved by an appropriate federal banking agency, or any formal

or informal enforcement action involving the association or holding company.

Compliance with regulatory standards regarding capital distributions could also limit the amount of dividends that TrustCo may pay to its shareholders.

See Note 14 to the consolidated financial statements contained in TrustCo’s Annual Report to Shareholders for the year ended December 31, 2022 for

information concerning the Bank’s regulatory capital requirements.

Regulatory Capital Requirements and Prompt Corrective Action.

Regulatory Capital Rules. The Company and the Bank are subject to regulatory capital requirements contained

in rules published by the Federal Reserve Board, OCC, and FDIC that establish a comprehensive capital framework for all U.S. banking organizations, including the Company and the Bank.

The capital rules, among other things, provide a “Common Equity Tier 1” (“CET1”) capital measure, Tier 1 capital and total capital to risk-weighted assets ratios and a Tier 1 capital to average consolidated assets (or “leverage”) ratio. CET1 capital is generally defined as common stock

instruments that meet eligibility criteria in the final capital rule (principally, instruments representing the most subordinated claim upon liquidation, having no maturity date and being redeemable via discretionary purchases only with

regulatory approval, not being subject to any expectations that the stock will be repurchased, redeemed, or cancelled, and not being secured by the banking organization or any related entity), retained earnings, accumulated other comprehensive

income, and common equity Tier 1 minority interests, subject to certain limitations. Tier 1 capital for the Company and the Bank consists of CET1 capital plus “additional Tier 1 capital,” which generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital and

Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities,

intermediate preferred stock, and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election

regarding the treatment of accumulated other comprehensive income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily

determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). The Company has made this

opt-out election. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

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Under the capital rules, the minimum capital ratios are:

• 4.5% CET1 to risk-weighted assets;

• 6.0% Tier 1 capital to risk-weighted assets;

• 8.0% Total capital to risk-weighted assets; and

At December 31, 2022, the Bank had a Tier 1 leverage ratio (Tier 1 capital to total average consolidated assets) of 10.12%, CET1 capital ratio (CET1 capital to risk-weighted assets) of a 18.43%, Tier 1 capital ratio (Tier 1 capital to

risk-weighted assets) of 18.43%, and a total capital ratio (total capital to risk-weighted assets) of 19.68%. Also at December 31, 2022, the Company had a Tier 1 leverage ratio (Tier 1 capital to total average consolidated assets) of 10.39%,

CET1 capital ratio (CET1 capital to risk-weighted assets) of 18.93%, a Tier 1 capital ratio (Tier 1 capital to risk-weighted assets) of 18.93% and a total capital ratio (total capital to risk-weighted assets) of 20.18%.

In order to avoid constraints on dividends, equity repurchases and certain compensation, the capital rules require the Company’s and the Bank’s capital to exceed the regulatory standards plus a capital conservation buffer. To meet the requirement, the organization must maintain an amount of CET1 capital that exceeds the buffer level of 2.5% above

each of the minimum risk-weighted asset ratios, (i) CET1 to risk-weighted assets of more than 7.0%, (ii) Tier 1 capital to risk-weighted assets of more than 8.5%, and (iii) total capital (Tier 1 plus Tier 2) to risk-weighted assets of more than

10.5%.

The OCC has the ability to establish an individual minimum capital requirement for a particular institution, which would vary from the capital levels that would otherwise be required under the capital regulations,

based on such factors as concentrations of credit risk, levels of interest rate risk, and the risks of non-traditional activities, as well as others. The OCC has not imposed any such requirement on the Bank.

The capital rules contain standards for the calculation of risk-weighted assets. The exposure amount for on-balance sheet assets is generally the carrying value of the exposure as determined

under GAAP. A bank may assign a 50% risk weight to a first-lien residential mortgage exposure that:

• is secured by property that is owner-occupied or rented,

• is not 90 days or more past due or in nonaccrual status, and

• is not restructured or modified.

Other first-lien residential exposures, as well as junior-lien exposures if the bank does not hold the first lien, are assigned a 100% risk weight.

If a banking organization has elected to opt out of the AOCI provisions discussed above, the exposure amount for available for sale or held-to-maturity debt securities is the carrying value

(including accrued but unpaid interest and fees) of the exposure, less any net unrealized gains plus any unrealized losses. Exposures to debt directly and unconditionally guaranteed by the U.S. federal government and its agencies receive a 0%

risk weight. Exposures conditionally guaranteed by the federal government, Federal Reserve Board, or a federal government agency would receive a 20% risk weight. Further, the capital rules assign a 20% risk weight to non-equity exposures to

government-sponsored entities (“GSEs”) and a 100% risk weight to preferred stock issued by a GSE. A GSE is defined as an entity established or chartered by the

federal government to serve public purposes but whose debt obligations are not “explicitly guaranteed” by the full faith and credit of the federal government.

Banking organizations must assign a 20% risk weight to general obligations of a public sector entity (for example, a state, local authority or other governmental subdivision below the sovereign level) that is organized under U.S. law and a 50%

risk weight for a revenue obligation of such an entity.

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In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms. Among other things, these

standards revise the Basel Committee’s standardized approach for credit risk (including recalibrating risk weights and introducing new capital requirements for certain “unconditionally cancellable commitments,” such as unused credit card and home

equity lines of credit) and provide a new standardized approach for operational risk capital. Under the Basel framework, these standards will generally be effective on January 1, 2023, with an aggregate output floor phasing in through January 1,

2028.

Prompt Corrective Action. Federal banking regulations also establish a “prompt

corrective action” capital framework for the classification of insured depository institutions, such as Trustco Bank, into five categories: well capitalized, adequately capitalized, undercapitalized,

significantly undercapitalized, and critically undercapitalized. Under the prompt corrective action rules currently in effect, an institution is deemed to be (a) ”well-capitalized” if it has total risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio of 8.0% or more, has a CET1 risk based capital ratio of 6.5% or more, and has leverage capital ratio of 5.0% or more and is not

subject to any order or final capital directive to meet and maintain a specific capital level for any capital measure; (b) ”adequately capitalized” if it has a

total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more, a CET1 risk based capital ratio of 4.5% or more and has a leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not

meet the definition of well-capitalized; (c) ”undercapitalized” if it has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital

ratio that is less than 6.0%, a CET1 capital ratio less than 4.5% or a Tier 1 leverage capital ratio that is less than 4.0%; (d) ”significantly undercapitalized”

if it has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital ratio that is less than 4.0%, a CET1 capital ratio less than 3% or a Tier 1 leverage capital ratio that is less than 3.0%; and (e) ”critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. The federal banking agencies are required to take certain

supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution or its holding company. Such actions could have a direct material effect on an institution’s

or its holding company’s financial condition and activities. In certain situations, a federal banking agency may reclassify a well-capitalized institution as adequately capitalized and may require an

adequately capitalized or undercapitalized institution to comply with supervisory actions as if the institution were in the next lower category.

A depository institution is generally prohibited from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the

depository institution would thereafter be undercapitalized. Undercapitalized institutions also are subject to growth limitations and are required to submit a capital restoration plan to the regulatory agencies. The agencies may not accept such a

plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. In addition, for a capital

restoration plan to be acceptable, the depository institution’s parent holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the

parent holding company is limited to the lesser of (i) an amount equal to 5.0% of the depository institution’s total assets at the time it became undercapitalized and (ii) the amount which is necessary

(or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit an

acceptable plan, it is treated as if it is “significantly undercapitalized.”

“Significantly undercapitalized” depository institutions may be subject to a number of requirements and

restrictions, including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets, and cessation of receipt

of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.

At December 31, 2022 and 2021, each of TrustCo and Trustco Bank met all capital adequacy requirements to which it was subject under the OCC and Federal Reserve Board regulations. As of December

31, 2022, the most recent notification from the OCC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action.

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Holding Company Activities

The activities of savings and loan holding companies are governed, and limited, by the Home Owners’ Loan Act and the Federal Reserve Board’s regulations. In general, TrustCo’s activities are limited to those permissible for “multiple” savings and loan holding companies (that is, savings and loan holding companies owning more than one savings association subsidiary) as of March 5, 1987, activities permitted for bank holding companies as of November 12, 1999,

and activities permissible for “financial holding companies” (which are described below). Activities permitted to multiple savings and loan holding companies

include certain real estate investment activities, and other activities permitted to bank holding companies under the Bank Holding Company Act. Activities permissible for a financial holding company are those considered financial in nature

(including securities and insurance activities) or those incidental or complementary to financial activities.

A savings and loan holding company is prohibited from, directly or indirectly, acquiring more than 5% of the voting stock of another financial institution or savings and loan holding company

without the prior written approval of the Federal Reserve Board. In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board considers the financial and managerial resources and future prospects of

the company and institution involved, the effect of the acquisition on the risk to the deposit insurance fund, the convenience and needs of the community and competitive factors.

The financial impact of a holding company on its subsidiary institution is a matter that is evaluated by the Federal Reserve Board, and the Federal Reserve Board has authority to order cessation

of activities or divestiture of subsidiaries deemed to pose a threat to the safety and soundness of the institution. The Federal Reserve’s long-standing “source

of strength” doctrine requires that bank or thrift holding companies serve as a source of financial strength for their depository institution subsidiaries. The phrase “source

of financial strength” is defined as “the ability of a company that directly or indirectly owns or controls an insured depository institution to provide

financial assistance to such insured depository institution in the event of the financial distress of the insured depository institution.” The federal banking agencies are authorized to adopt regulations

with respect to this requirement.

Securities Regulation and Corporate Governance

The Company’s common stock is registered with the SEC under Section 12(b) of the Exchange Act, and the Company is subject to restrictions, reporting

requirements and review procedures under federal securities laws and regulations. The Company is also subject to the rules and reporting requirements of The Nasdaq Stock Market LLC, on which its common stock is traded.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) significantly changed the regulation of financial institutions, such as community banks,

thrifts, and small bank and thrift holding companies, and the financial services industry. Among other things, the Dodd-Frank Act abolished the Office of Thrift Supervision and transferred its functions to the other federal banking agencies,

relaxed rules regarding interstate branching, allowed financial institutions to pay interest on business checking accounts, and imposed new capital requirements on bank and thrift holding companies. The Dodd-Frank Act has affected our business in

substantial ways, including by causing us to incur higher operating costs to comply with the Dodd-Frank Act. Certain provisions of the Dodd-Frank Act have yet to be fully implemented and may be impacted by future legislation, rulemaking or

executive orders. Our management continues to monitor the ongoing implementation of the Dodd-Frank Act and as new regulations are issued, will assess their effect on our business, financial condition and results of operations.

The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to

protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The Company has policies, procedures and systems designed to comply with these regulations, and it reviews and documents such

policies, procedures and systems to ensure continued compliance with these regulations.

Although the Company has and will continue to incur additional expense in complying with the corporate governance provisions of federal law and the resulting regulations, management does not

expect that such compliance will have a material impact on the Company’s financial condition or results of operations.

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Federal Savings Institution Regulation

Business Activities. Federal law and regulations govern the activities of federal savings banks such as the

Bank. These laws and regulations delineate the nature and extent of the activities in which federal savings banks may engage. In particular, certain lending authority for federal savings banks, e.g., commercial, non-residential real property loans and consumer loans, is limited to a specified percentage of the institution’s capital or assets.

Insurance of Deposit Accounts. Deposits of Trustco Bank are insured by the Deposit Insurance Fund (“DIF”) of the FDIC, and the Bank is subject to deposit insurance assessments to maintain the DIF. The FDIC determines insurance premiums based on a number of factors,

primarily the risk of loss that insured institutions pose to the DIF. Deposit insurance assessments are based on average consolidated total assets minus average tangible equity. Under the FDIC’s

risk-based assessment system, insured institutions with less than $10 billion in assets, such as the Bank, are assigned to one of three categories based on their composite examination ratings, with higher-rated, less risky institutions paying

lower assessments. A range of initial base assessment rates applies to each category, adjusted downward based on unsecured debt issued by the institution to produce total base assessment rates. Total base assessment rates currently range from 2.5

to 18 basis points for banks in the least risky category to 13 to 32 basis points for banks in the most risky category, all subject to further adjustment upward if the institution holds more than a limited amount of unsecured debt issued by

another FDIC-insured institution.

The FDIC has the authority to raise or lower assessment rates, subject to limits, and to impose special additional assessments. The Dodd-Frank Act set the minimum reserve ratio to not less than 1.35% of estimated insured deposits or the

comparable percentage of the FDIC’s assessment base. The act also required the FDIC to take the steps necessary to attain the 1.35 percent ratio by September 30, 2020, subject to an offsetting requirement

for certain institutions. As of September 30, 2020, the FDIC had announced that the ratio declined to 1.30% due largely to consequences of the COVID-19 pandemic and adopted a plan to restore the fund to the 1.35% ratio (the “Restoration Plan”)

within eight years but did not change its assessment rate schedule. The Restoration Plan requires the FDIC to update its analysis and projections for the fund balance and reserve ratio at least semiannually and, if necessary, recommend any

modifications, such as increasing assessment rates. In the semiannual update for the Restoration Plan in June 2022, the FDIC projected that the reserve ratio was at risk of not reaching the statutory minimum of 1.35 percent by September 30, 2028,

the statutory deadline to restore the reserve ratio. Based on this update, the FDIC Board approved an amended Restoration Plan, and concurrently proposed an increase in initial base deposit insurance assessment rate schedules uniformly by 2 basis

points, applicable to all insured depository institutions. In October 2022, the FDIC Board finalized the increase with an effective date of January, 1, 2023, applicable to the first quarterly assessment period of 2023 (i.e., January 1 through

March 31, 2023).

FDIC deposit insurance expense totaled $1.8 million in both 2022 and 2021, and 1.0 million, in 2020. FDIC deposit insurance expense includes deposit

insurance assessments and, until 2019, Financing Corporation (“FICO”) assessments related to outstanding bonds issued by FICO in the late 1980s to recapitalize

the now defunct Federal Savings & Loan Insurance Corporation. The final FICO assessment was collected in 2019.

Future changes in insurance premiums could have an adverse effect on the operating expenses and results of operations of Trustco Bank, and the Bank cannot predict what insurance assessment rates

will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or

has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OCC. The Bank does not know of any practice, condition or violation that might lead to termination of its deposit insurance.

Other Regulation

Assessments. The Bank is required to pay assessments to the OCC to fund the agency’s operations. The general assessments, paid on a semi-annual basis, is computed upon the Bank’s total assets, including consolidated subsidiaries, as reported in the Bank’s latest quarterly financial report. The OCC’s assessment schedule includes a surcharge for institutions that require increased supervisory resources. The

assessments paid by the Bank for the year ended December 31, 2022 totaled approximately 845 thousand.

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Community Reinvestment Act. The Community Reinvestment Act (“CRA”) requires each savings institution, as well as commercial banks and certain other lenders, to identify the communities served by the institution’s offices and to

identify the types of credit the institution is prepared to extend within those communities. The CRA also requires the OCC to assess an institution’s performance in meeting the credit needs of its

identified communities as part of its examination of the institution, and to take such assessments into consideration in reviewing applications with respect to branches, mergers and other business combinations, including acquisitions by savings

and loan holding companies. An unsatisfactory CRA rating may be the basis for denying such an application and community groups have successfully protested applications on CRA grounds. In connection with its assessment of CRA performance, the OCC

assigns CRA ratings of “outstanding,”“satisfactory,”“needs to improve” or “substantial noncompliance.” The Bank was rated “satisfactory” in its last CRA examination. Institutions are evaluated based on (i) its record of helping to meet the credit needs of its assessment area through lending

activities; (ii) its qualified investments; and (iii) the availability and effectiveness of the institution’s system for delivering retail banking services. An institution that is found to be deficient in

its performance in meeting its community’s credit needs may be subject to enforcement actions, including cease and desist orders and civil money penalties. In December 2021, the OCC issued a final rule

rescinding its June 2020 Community Reinvestment Act Rule and replacing it with the rules that were jointly adopted by the federal bank regulatory agencies. This action is intended to facilitate the ongoing interagency work to modernize the CRA

regulatory framework and promote consistency for all insured depository institutions. The final rule became effective on January 1, 2022. On May 5, 2022, the FDIC, the Federal Reserve Board and the OCC released a notice of proposed rulemaking to

“strengthen and modernize” the CRA regulations and the related regulatory framework.

Qualified Thrift Lender Test. As a savings institution regulated by the OCC, the Bank must be a “qualified thrift lender” under either the Qualified Thrift Lender (“QTL”) test

under the Home Owners’ Loan Act or the Internal Revenue Code’s Domestic Building and Loan Association (“DBLA”) test to avoid certain restrictions on its and the Company’s operations and activities. A savings institution may use either test to qualify and may switch from one

test to the other; however, the institution must meet the time requirements of the respective test, that is, nine out of the preceding 12 months for the QTL test and at the close of the taxable year for the DBLA test.

Under the QTL test, the savings institution must hold qualified thrift investments equal to at least 65% of the institution’s portfolio assets. The

savings institution’s actual thrift investment percentage is the ratio of its qualified thrift investments divided by its portfolio assets. Portfolio assets are total assets minus goodwill and other

intangible assets, office property, and liquid assets not exceeding 20% of total assets. An institution ceases to meet the QTL test when its actual thrift investment percentage falls below 65% of portfolio assets for four months within any

12-month period. To be a qualified thrift lender under the DBLA test, a savings association must meet a “business operations test” and a “60% of assets test.” The business operations test requires the business of a DBLA to consist primarily of acquiring the savings of the public and investing in loans. An

institution meets the public savings requirement when it meets one of two conditions: (i) the institution acquires its savings accounts in conformity with OCC rules and regulations and (ii) the general public holds more than 75% of its deposits,

withdrawable shares, and other obligations. An institution meets the investing in loans requirement when more than 75% of its gross income consists of interest on loans and government obligations, and various other specified types of operating

income that financial institutions ordinarily earn. The 60% of assets test requires that at least 60% of a DBLA’s assets must consist of assets that thrifts normally hold, except for consumer loans that

are not educational loans.

These are significant consequences for failing the QTL Test, including activities limitations and branching restrictions. In addition, an institution that fails the QTL test would be prohibited

from paying dividends, except under circumstances that are permissible for a national bank, that are necessary to meet the obligations of the institution’s holding company, and that are specifically

approved by both the OCC and Federal Reserve Bank after a written request submitted by the thrift at least 30 days in advance of the proposed payment. Finally, failure of the QTL Test will subject the institution to enforcement action. If the

Bank fails the qualified thrift lender test, within one year of such failure the Company must register as, and will become subject to, the activities restrictions applicable to bank holding companies, unless the Bank requalifies within the year.

The activities authorized for a bank holding company are generally more limited than are the activities authorized for a savings and loan holding company. If the Bank fails the test a second time, the Company must immediately register as, and

become subject to, the restrictions applicable to a bank holding company. The Bank is currently, and expects to remain, in compliance with the qualified thrift lender test.

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Transactions with Affiliates and Other Related Parties. The Bank’s

transactions with “affiliates” (generally, any company that controls or is under common control with the Bank, including TrustCo) is limited by Sections 23A and

23B of the Federal Reserve Act and the Federal Reserve Board’s implementing Regulation W. Under these laws, the aggregate amount of “covered transactions” between the Bank and any one affiliate is limited to 10% of the Bank’s capital stock and surplus, and the aggregate amount of covered transactions by the Bank with

all of its affiliates is limited to 20% of capital stock and surplus. Certain covered transactions (primarily credit-related transactions) are required to be secured by collateral in an amount and of a type described in Section 23A and Regulation

W. Transactions by the Bank with its affiliates must be on terms and under circumstances that are at least as favorable to the Bank as those prevailing at the time for comparable transactions with non-affiliates. In addition, savings institutions

are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies, and no savings institution may purchase the securities of any affiliate other than a subsidiary.

The definition of “covered transactions” as used in Section 23A includes credit exposure on derivatives

transactions and securities lending and borrowing transactions, as well as the acceptance of affiliate-issued debt obligations as collateral for a loan or an extension of credit.

The Bank also is restricted in its ability to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons. Extensions of credit to

those insiders must be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons; may not involve more than

the normal risk of repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate. In addition, extensions of credit in excess of certain

limits must be approved by the Bank’s board of directors.

Certain non-credit transactions between an insured depository institution and its insiders, such as asset purchase and sales, are prohibited unless the transaction is on market terms and, if the

transaction represents more than 10% of the capital stock and surplus of the institution, has been approved in advance by a majority of the disinterested members of the board of directors of the institution.

Safety and Soundness Regulations. The federal

banking agencies (including the OCC) have adopted certain safety and soundness standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and internal audit systems;

loan documentation; credit underwriting; interest rate risk exposure; asset growth; asset quality; earnings and compensation, fees, and benefits, as well as other operational and managerial standards as the agency deems appropriate. Interagency

Guidelines Establishing Standards for Safety and Soundness set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If

the appropriate federal banking agency (the OCC in the case of the Bank) determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to

achieve compliance with the standard. The Bank is subject to periodic examinations by the OCC regarding these and related matters. During these examinations, the examiners may require the Bank to increase its allowance for loan losses, change

the classification of loans, and/or recognize additional charge-offs based on their judgments, which can impact our capital and earnings.

Enforcement. The Federal Reserve Board and the OCC have extensive enforcement authority over savings

institutions and their holding companies, including the Bank and TrustCo. This includes enforcement authority with respect to the actions of the Bank’s and TrustCo’s

directors, officers and other “institution-affiliated parties,” including attorneys and auditors. This enforcement authority also includes, among other things,

the ability to assess civil money penalties, issue cease-and-desist or removal orders and initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices.

Public disclosure of final enforcement actions by the OCC and the Federal Reserve is required.

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Institutions in Troubled Condition. Certain events, including entering into a formal written agreement with a bank’s regulator or being informed by the regulator that the bank is in troubled condition, will require that a bank give prior notice to their primary regulator before adding or replacing any member of the board of directors, employing

any person as a senior executive officer, or changing the responsibilities of any senior executive officer so that the person would assume a different senior executive position. Troubled condition banks are prohibited from making, or agreeing to

make, certain “golden parachute payments” to institution-affiliated parties, subject to certain exceptions.

Consumer Laws and Regulations. In addition to the other laws and regulations discussed above, the Bank is

subject to consumer laws and regulations designed to protect consumers in transactions with financial institutions. These laws and regulations include, among others, the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds

Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Fair Credit Reporting Act and the Real Estate Settlement Procedures Act. These laws and regulations mandate certain disclosure

requirements and regulate the manner in which financial institutions must deal with customers when taking deposits from, making loans to, or engaging in other types of transactions with, such customers.

The federal Consumer Financial Protection Bureau (“CFPB”) has adopted rules related to mortgage loan origination and mortgage loan servicing. In particular, the CFPB has issued a rule

implementing the ability-to-repay and qualified mortgage (“QM”) provisions of the Truth in Lending Act, as amended by the Dodd-Frank Act (the “QM Rule”). The ability-to-repay provision requires creditors to make reasonable, good faith determinations that borrowers are able to repay their mortgages before extending the

credit based on a number of factors and consideration of financial information about the borrower from reasonably reliable third-party documents. Under the Dodd-Frank Act and the QM Rule, loans meeting the definition of “qualified mortgage” are entitled to a presumption that the lender satisfied the ability-to-repay requirements. The presumption is a conclusive presumption/safe harbor for prime

loans meeting the QM requirements, and a rebuttable presumption for higher-priced/subprime loans meeting the QM requirements.

Volcker Rule. The Dodd-Frank Act required the federal financial regulatory agencies to adopt rules that prohibit certain banks

and their affiliates from engaging in proprietary trading and investing in certain covered funds. The statutory provision is commonly called the “Volcker Rule,” and is not applicable to depository institutions and their holding companies whose

total assets do not exceed $10 billion. As of December 31, 2022, the Company’s total assets on a consolidated basis did not exceed $10 billion.

Office of Foreign

Assets and Control Regulation. The U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC, administers and enforces economic and

trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries. The Company is

responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence. Failure

to comply with these sanctions could have serious legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to

prohibit such transactions even if approval is not required.

Bank Secrecy Act/Anti-Money Laundering and Customer Identification. The Bank is subject to the Bank Secrecy

Act (“BSA”) and other anti-money laundering provisions and requirements, including the USA PATRIOT Act of 2001 and regulations thereunder, which generally require that it implement a comprehensive customer identification program and an anti-money

laundering program and procedures. All financial institutions, including the Company and the Bank, are required to take certain measures to identify their customers, prevent money laundering, monitor certain customer transactions and report

suspicious activity to U.S. law enforcement agencies, and scrutinize or prohibit altogether certain transactions of special concern. Financial institutions are also required to respond to requests for information from federal banking regulatory

agencies and law enforcement agencies concerning their customers and their transactions. Further, the effectiveness of a financial institution in combating money-laundering activities is a factor to be considered in applications submitted by a

financial institution for merger or acquisition proposals. The Company has in place a Bank Secrecy Act compliance program, and it engages in very few transactions of any kind with foreign financial institutions or foreign persons. The Anti-Money

Laundering Act of 2020 (“AMLA”), which amends the Bank Secrecy Act of 1970, was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws. Among other things,

it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; expands

enforcement-and-investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections. Violations of these laws and regulations can result in substantial

civil and criminal sanctions.

Consumer Privacy and Cybersecurity. Federal regulations generally require that the Company disclose its

privacy policy and practices concerning its sharing of “non-public personal information,” to individual customers at the time of establishing the customer relationship and annually thereafter. In addition, the Company is required to provide its

customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties in certain circumstances.

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State privacy laws currently in effect and laws taking effect in the near future impact how companies can process other categories of personal information. These laws require substantial

disclosures to consumers about personal information collection, use and sharing practices, while also allowing consumers the right to access, delete, correct, or move their data.

In addition, federal banking agencies, through the Federal Financial Institutions Examination Council, have adopted guidelines to encourage financial institutions to address cybersecurity risks

and identify, assess and mitigate these risks, both internally and at critical third party service providers. For example, federal banking regulators have highlighted that financial institutions should establish several lines of defense and

design their risk management processes to address the risk posed by compromised customer credentials. Further, financial institutions are expected to maintain sufficient business continuity planning processes designed to facilitate a recovery,

resumption and maintenance of the institution’s operations after a cyber-attack.

In November 2021, the federal banking agencies adopted new rules requiring banking organizations to notify their primary regulator within 36 hours of becoming aware of a “computer-security incident” that rises to

the level of a “notification incident.” The new rules also require bank service providers to notify their banking organization customers when it becomes aware of similar incidents. Compliance with the new rules was required by May 1, 2022.

Identity Theft Protection. The Fair Credit Reporting Act’s Red Flags Rule requires financial institutions with covered accounts (e.g., consumer

bank accounts and loans) to develop, implement and administer an identity theft prevention program. This program must include reasonable policies and procedures to detect suspicious patterns or practices that indicate the possibility of

identity theft, such as inconsistencies in personal information or changes in account activity.

Federal Home Loan Bank of New York. The Bank is a member of Federal Home Loan Bank (“FHLB”) of New York, which is one of 11 regional FHLBs that serve as reserve or central banks for their members. The FHLBs are funded primarily from proceeds derived from the sale

of consolidated obligations of the FHLB system and makes loans or advances to members. The FHLBs also provide access to a line of credit and letters of credit in accordance with policies and procedures established by the Board of Directors of

FHLB. The loans, lines of credit and letters of credit are subject to the oversight of the Federal Housing Finance Agency. At December 31, 2022, the Bank hadno FHLB advances an available line of credit

with the FHLB which approximates the balance of securities and/or loans pledged against such borrowings. The Bank is also required to purchase and maintain stock in the FHLB of New York at or above levels specified in the FHLB of New York capital

plan. As of December 31, 2021, the Bank owned $5.6million in FHLB of New York stock, which was in compliance with its obligations. The Bank is also required to purchase and maintain stock in the FHLB of

New York at or above levels specified in the FHLB of New York capital plan. As of December 31, 2022, the Bank owned $5.8million in FHLB of New York stock, which was in compliance with its obligations.

Mergers and Acquisitions. The Bank Holding Company Act of 1956, the Bank Merger Act, the Change in Bank Control Act and other

federal and state statutes regulate acquisitions of interests in commercial banks. The BHC Act requires the prior approval of the FRB for the direct or indirect acquisition by a bank holding company of more than 5.0% of the voting shares of a

commercial bank or its parent holding company and for a person, other than a bank holding company, to acquire 25% or more of any class of voting securities of a bank or bank holding company. Under the Bank Merger Act, the prior approval of the

appropriate bank regulatory agencies is required for a member bank to merge with another bank or purchase the assets or assume the deposits of another bank. In reviewing applications seeking approval of merger and acquisition transactions, the

bank regulatory authorities will consider, among other things, the competitive effect and public benefits of the transactions, the capital position of the combined organization, the risks to the stability of the U.S. banking or financial system,

the applicant’s performance record under the CRA and fair housing laws and the effectiveness of the subject organizations in combating money laundering activities.

Compensation Practices. Our compensation practices are subject to oversight by the FRB and the OCC. Applicable regulatory

guidance on incentive compensation seek to ensure that the incentive compensation practices of banking organizations do not encourage excessive risk-taking and undermine the safety and soundness of those organizations. The guidance provides that

supervisory findings with respect to incentive compensation will be incorporated, as appropriate, into the organization’s supervisory ratings. To be consistent with safety and soundness, incentive compensation arrangements at a banking

organization should comply with the following principles:

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• Provide employees incentives that appropriately balance risk and reward;

• Be compatible with effective controls and risk management; and

The board maintains a Compensation Committee made up of independent directors which exercises full oversight over the Company’s executive compensation program. The Compensation Committee annually

reviews a comprehensive risk assessment which addresses all aspects of the program and the controls that exist to mitigate any associated risk. Detailed disclosure of our compensation practices are set forth in the annual Proxy Statement.

The U.S. financial regulators, including the FRB, the OCC, and the SEC, jointly proposed regulations in 2011 and again in 2016 to implement the incentive compensation

requirements of Section 956 of the Dodd-Frank Act. These regulations have not been finalized.

Climate-Related Risk Management and Regulation. Climate

change may be associated with rising sea levels as well as extreme weather conditions such as more intense hurricanes, thunderstorms, tornadoes, drought and snow or ice storms. Extreme weather conditions may increase our costs or cause damage to

our facilities, and any damage resulting from extreme weather may not be fully insured. Many of our facilities are located near coastal areas or waterways where rising sea levels or flooding could disrupt our operations or adversely impact our

facilities. Furthermore, periods of extended inclement weather or associated flooding may inhibit construction activity adversely affecting the use of some of our lending products. Any such events could have a material adverse effect on our

costs or results of operations. These same issues also could impact the value of mortgage collateral and the security for residential and commercial loans.

As a mortgage lender, Trustco Bank has identified credit, market, liquidity, and operational factors as climate-related risks. Adverse climate factors could impact the ability of loan customers to timely repay

their loans. Adverse climate impacts also could adversely impact the stock and bond markets which could adversely affect TrustCo’s non-interest income earning potential. Severe physical impacts from climate change, such as rising sea levels,

could reduce the value of residential and/or commercial portfolio. These two factors, given sufficiently severe impacts, could affect liquidity.

Additionally, severe weather and other climate events could impact hiring and retention of employees, facilities management, retail services, and technology infrastructure, thus creating

operational risk.

Other Governmental Initiatives. From time to time, various legislative and regulatory initiatives are introduced in Congress, as well as by

regulatory authorities. These initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions, proposals to change the financial institution regulatory environment, or proposals that

affect public companies generally. Such legislation could change banking laws and the operating environment of the Company in substantial, but unpredictable ways. The Company cannot predict whether any such legislation will be enacted, and, if

enacted, the effect that it, or any implementing regulations would have on its financial condition or results of operations.

Human Capital Resources

Our Human Capital Strategic Plan guides us on our journey to foster a multicultural, collaborative, and inclusive work environment that promotes the exchange of different ideas, philosophies and perspectives, which continues to be a top

priority at TrustCo and Trustco Bank.

Headcount

As of December 31, 2022, we had 818 employees (which collectively amount to 754 full-time equivalents), all based in the United States, with 557 employees (68%) at bank branches, 243 (30%) located in corporate offices and 18 (2%) in call

centers.

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Hiring & Promotion Practices

At TrustCo and Trustco Bank we are continuously educating our hiring managers about recruitment and selection processes, and we strive to build our workforce from within when possible. All employees are eligible to apply for open department

and branch positions following their introductory period, and during 2022, 140 (roughly 17%) of our employees were promoted within the Bank. If the best candidate for an available position is not identified from within our existing talent pool,

we will look externally for the best talent, and our recruitment strategy focuses on searching for candidates directly through our participation in job fairs and social media advertising, and through our professional networks and other

associations that represent diverse groups. Additionally, we have an active recruitment incentive program which awards existing employees for referring new employees to the Bank, which in turn helps us diversify our workforce.

Talent Development

We believe in investing for the future which includes the future of our workforce, and we actively encourage and support the growth of our employees throughout their educational and career development, ensuring employees are given

opportunities to develop and refine their skills to be successful within the Bank’s competitive environment. We aim to accomplish this through a multitude of training and development programs, which include opportunities to engage in

interdepartmental experiential learning, voluntary training seminars, ongoing training through our Cornerstone platform, tuition reimbursement program, BSA-AML certificate program with SUNY Schenectady County Community College and certification

reimbursement for certain levels of employment. Currently, we have 42 (5.1%) employees that hold professional certificates and/or licenses. Additionally, our employees participated in over 20,000 hours of training, which included a recently

expanded Leadership Program.

During 2022, Trustco Bank continued its Leadership Program for our management level staff members. The Trustco Leadership Program is an experiential learning opportunity for high-performing employees. It is designed to help managers gain more

self-awareness, learn essential leadership skills, and build a collaborative peer network. The development program consists of 4 components: Assess, Learn, Coach, Apply. The goal is for managers to gain a greater understanding of themselves and

the significant impact they have on the business.

Employee Feedback

Through our training and mentoring programs, we actively encourage employee feedback. Following each training session, employees complete evaluations designed to provide constructive feedback on their trainer’s knowledge, the overall training

structure, and the employee’s confidence in their ability to be successful in their new role. We are also gathering data on an ongoing basis which focuses on the tenure of current staff. We’ve consistently improved our average tenure over the

past four years, with an average tenure of about 5 years currently. Furthermore, the Human Resources Department conducts stay and exit interviews, which capture feedback from high turnover positions. These interviews are used to improve

processes and procedures and inform future policy.

Diversity and Inclusion

We recognize that everyone deserves respect and equal treatment, regardless of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information.

TrustCo is committed to creating an inclusive environment that promotes diversity, equity and inclusion through training, recruiting and recognition practices to support our employees. Our Human Capital Strategic Plan focuses on identifying areas

of opportunity to further diversify our workforce over time. As of December 2022, approximately 59% of our workforce identify as female and 41% identify as male. The workforce is 42% ethnically diverse, being made up of 15.04% Hispanic or Latino

employees, 11.37% Asian employees, 11% Black or African American employees, 3.79% of employees from two or more races, 0.98% American Indian or Alaska Native employees, and 0.24% Native Hawaiian or other Pacific Islander employees. Additionally,

8.68% of our workforce identifies as disabled. Furthermore, our inclusion efforts focus on age, where we seek to recruit younger candidates to create long-term career potential, while seeking to retain our experienced team members for the many

benefits their presence yields.

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Employee Compensation and Benefits

Our human capital strategy objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and future employees. We strive to attract and retain the most talented employees by offering compensation and benefit

structures that support their health, financial and emotional well-being, which includes competitive base salaries, annual bonuses, generous paid time off balances and Holiday Pay, an Employee Stock Purchase Club Program, life insurance, a 401(k)

plan, the Trustco Bank Scholarship Program, a Tuition Reimbursement Program, a Student Loan Benefit Program, an Employee Assistance Program for mental and emotional support and various Company-organized wellness competitions.

Employee Recruitment and Retention

Hometown Pledge Program: This year we also started the Hometown Pledge Program, which allows newly hired Trustco Bank employees to direct a contribution to the community group of their choosing. Through this program, we have made 427

donations to 80 charities. Participants report increased satisfaction with their decision to join Trustco Bank. Participant’s also report feeling better about their employer as a good corporate citizen, which has positive impacts upon employee

retention.

Payment of Equity Awards to More Employees: Since 2019, TrustCo has made equity awards deeper into the corporate organization to recognize and provide additional incentive compensation to individuals who consistently made an exceptional

contribution to the bank by originating more mortgage loans and greater deposits. In 2020, that practice was expanded it to include Assistant Vice Presidents who play key roles in the day-to-day activities that are essential to the bank’s

overall success. These two actions have been highly successful. In a time when employee attrition is prevalent and presents significant challenges for companies throughout the country, Trustco Bank has retained 93% of the employees receiving

officer equity awards.

Foreign Operations

Neither TrustCo nor the Bank engage in any operations in foreign countries or have outstanding loans to foreign debtors.

Disclosure Pursuant to Subpart 1400 of Regulation S-K

The financial disclosures related to the Company as required under Subpart 1400 of Regulation S-K are incorporated herein by reference from TrustCo’s

Annual Report to Shareholders for the year ended December 31, 2022 (the “Annual Report to Shareholders”), which is attached as Exhibit 13 hereto and incorporated herein by reference. See the cross-references below to locate such disclosures in

the Annual Report to Shareholders.

Disclosure Page Number in Annual Report to Shareholders

A. Average balance sheets 16

C. Rate/volume variances 17

II. Investments in debt securities

A. Maturity schedule and weighted average yield 13

III. Loan Portfolio

A. Maturity schedule 10

IV. Allowance for Credit Losses

B. Allocation of the allowance for credit losses 22

V. Deposits

A. Average balances and rates 17

B. Uninsured and time deposits over $250,000 17

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This information should not be construed to imply any conclusion on the part of the management of TrustCo that the results, causes, or trends indicated therein will continue in the future. The

nature and effects of governmental monetary policy, supervision and regulation, future legislation, inflation and other economic conditions and many other factors which affect interest rates, investments, loans, deposits, and other aspects of

TrustCo’s operations are extremely complex and could make historical operations, earnings, assets, and liabilities not indicative of what may occur in the future.

Availability of Reports

TrustCo’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports can be obtained

free of charge from its website, www.trustcobank.com under the “Investor Relations” tab. These reports are available on the website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. These reports are also available on the SEC’s

website at http://www.sec.gov. Various other documents related to corporate operations, including the Company’s Corporate Governance Guidelines, the

charters of its principal board committees, and the Company’s Code of Conduct are available on the website. The information found on the Company’s website is not incorporated by reference in this or any

other report the Company files or furnishes to the SEC.

Item 1A. Risk Factors

The following are general risk factors affecting the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and

adversely affect our business operations. Any of these risks could materially and adversely affect our business, financial condition or results of operations. In such cases, you may lose all or part of your investment.

Risks Related to Our Lending Activities

Changes in interest rates, including recent and possible future increases fueled by inflation, may significantly impact our financial condition and results of operations

Like other financial institutions, we are subject to interest rate risk. Our primary source of income is net interest income, which is the difference between interest earned on loans and investments, and interest paid on deposits and

borrowings. The level of net interest income is primarily a function of the average balance of our interest-earning assets, the average balance of our interest-bearing liabilities, and the spread between the

yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by such external factors as the

local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the FRB (the “FOMC”), and market interest rates.

Over any specific period of time, our interest-earning assets may be more sensitive to changes in market interest rates than our interest-bearing liabilities, or vice-versa. In addition, the individual market interest rates underlying our loan

and deposit products may not change to the same degree over a given time period. In any event, if market interest rates should move contrary to our position, earnings may be negatively affected. In March

2022, the Federal Open Market Committee (“FOMC”) increased the target range for the federal funds rate seven times in 2022 by a total of 425 basis points, to a range of 4.25% to 4.50% as of end of 2022. At its meeting on February 1, 2023, the

FOMC increased the target range for the federal funds by an additional 25 basis points, to a range of 4.50% to 4.75%. All of these increases were expressly made in response to inflationary pressures, which are currently expected to continue.

In its October 2022 “Beige Book”, the FRB noted that national economic activity had expanded at a modest pace on net since the previous report, while conditions varied across industries and districts. Rising mortgage rates and elevated housing

prices further weakened single-family starts, while commercial real estate slowed in both construction and sales amid supply shortages and elevated construction and borrowing costs, and there were scattered reports of declining property prices.

More locally, the New York district, the district in which the Company’s primary operations are located, stated economic activity continued to contract at a modest pace and that conditions in the broad finance sector deteriorated, and regional

banks reported widening loan spreads and weakening loan demand.

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There can be no assurances as to any future FOMC conduct. If the FOMC further increases the targeted federal funds rates, overall interest rates likely will rise, which will positively impact our interest income but may

further negatively impact the entire national economy, including the housing industry in the markets we serve, by reducing refinancing activity and new home purchases. In addition, deflationary pressures, while possibly lowering our operational

costs, could have a significant negative effect on our borrowers and the values of collateral securing loans, which could negatively affect our financial performance. A significant portion of our loans have fixed interest rates (or, if

adjustable, are initially fixed for periods of five to 10 years) and longer terms than our deposits and borrowings. Our net interest income could be adversely affected if the rates we pay on deposits and borrowings increase more rapidly than the

rates we earn on loans.

We also are subject to reinvestment risk associated with changes in interest rates. Changes in interest rates may affect the average life of loans and mortgage-related securities. Increases in

interest rates may decrease loan demand and/or may make it more difficult for borrowers to repay adjustable rate loans. Decreases in interest rates often result in increased prepayments of loans and mortgage-related securities, as borrowers

refinance their loans to reduce borrowing costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments in loans or other investments that have interest

rates that are comparable to the interest rates on existing loans and securities. Conversely, increases in interest rates often result in slowed prepayments of loans and mortgage-related securities, reducing cash flows and reinvestment

opportunities.

Changes in interest rates also affect the value of the Bank’s interest-earning assets, and in particular the Bank’s

securities portfolio. Generally, the value of fixed-rate securities fluctuates inversely with changes in interest rates. Unrealized gains and losses on securities available for sale are reported as a separate component of equity, net of tax.

Decreases in the fair value of securities available for sale resulting from increases in interest rates could have an adverse effect on shareholders’ equity.

Inflationary pressures and rising prices may affect our results of operations and financial condition.

Inflation rose sharply at the end of 2021 and has continued rising in 2022 at levels not seen for over 40 years. Inflationary pressures are currently expected to remain elevated throughout 2022.

Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business

customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition. Furthermore, a prolonged period of inflation could cause wages

and other costs to the Company to increase, which could adversely affect our results of operations and financial condition

We are exposed to credit risk in our lending activities.

There are inherent risks associated with our lending and trading activities. Loans to individuals and business entities, our single largest asset group, depend for repayment on the willingness

and ability of borrowers to perform as contracted. A material adverse change in the ability of a significant portion of our borrowers to meet their obligation to us, due to changes in economic conditions, interest rates, natural disaster, acts of

war, or other causes over which we have no control, could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans, and could have a material adverse impact on our earnings and

financial condition.

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If our allowance for credit losses on loans (“ACLL”) is not sufficient to cover expected

loan losses, our earnings could decrease.

Our borrowers may not repay their loans according to the terms of the loans, and, as a result of potential declines in home prices, the collateral securing the payment

of these loans may be insufficient to pay any remaining loan balance. We may experience significant loan losses, which could have a material adverse effect on our operating results. TrustCo adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”) effective January 1, 2022. This standard requires financial

institutions to determine periodic estimates of lifetime expected credit losses on financial instruments and other commitments to extend credit. When determining the amount of the ACLL, we make various assumptions and judgments about the

collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans, as well as about the current and expected future

economic environment. In deciding on the adequacy of the allowance for credit losses, management reviews past due information, historical charge-off and recovery data, nonperforming loan activity and reasonable and supportable forecasts. Also,

there are a number of other factors that are taken into consideration, including: the magnitude, nature and trends of recent loan charge-offs 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, and the economic environment in the Upstate New York territory (the Company’s largest geographical area) primarily over the last several years, as well as in the Company’s other

market areas. A significant portion of the ACLL is determined using qualitative factors. The determination of qualitative factors involves subjective judgement and subjective measurement. We cannot predict loan losses with certainty that

charge-offs in future periods will not exceed our estimate of expected losses as determined through our ACLL. If our assumptions and analysis prove to be incorrect, including with respect to the economic environment, our ACLL may not be

sufficient to cover expected losses in our loan portfolio, resulting in additions to our ACLL which is maintained through provisions for credit losses. In addition, regulatory agencies, as an integral part of their examination process, may

require additions to the allowance based on their judgment about information available to them at the time of their examination. Material additions to our ACLL would materially decrease our net income.

We may not be able to meet the cash flow requirements of our depositors or borrowers or meet our operating cash needs to fund corporate expansion and other activities.

Liquidity is the ability to meet cash flow needs on a timely basis at a reasonable cost. The liquidity of Trustco Bank is used to make loans and to repay deposit liabilities as they become due or are demanded by customers. Liquidity policies

and limits have been established by our board of directors, and our management monitors the overall liquidity position of Trustco Bank to ensure that various alternative strategies exist to cover unanticipated events that could affect liquidity.

Trustco Bank is also a member of the Federal Home Loan Bank which provides funding to members through advances and other extensions of credit that are typically collateralized with securities or mortgage-related assets. Our securities portfolio

can be used as a secondary source of liquidity, and additional liquidity could be obtained from securities sold under repurchase agreements, non-core deposits, and debt or equity securities issuances in public or private transactions. If we were

unable to access any of these funding sources when needed, we might not be able to meet the needs of our customers, which could adversely affect our financial condition, our results of operations, cash flows and our level of regulatory capital.

We are subject to claims and litigation pertaining to fiduciary responsibility and lender liability.

Some of the services we provide, such as trust and investment services, require us to act as fiduciaries for our customers and others. In addition, loan workout and other activities may expose us or Trustco Bank to legal actions, including

lender liability or environmental claims. From time to time, third parties make claims and take legal action against us pertaining to the performance of our fiduciary responsibilities or loan-related activities. If these claims and legal actions

are not resolved in a manner favorable to us, we may be exposed to significant financial liability and/or our reputation could be damaged. Either of these results may adversely impact demand for our products and services or otherwise have a

harmful effect on our business and, in turn, on our financial condition, results of operations and prospects.

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Risks Related to Our Operations

We are dependent upon the services of our management team.

We are dependent upon the ability and experience of a number of our key management personnel who have substantial experience with our operations, the financial services industry and the markets