TRUSTCO BANK CORP N Y

Previous wording

The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the three month and six month periods ended June 30, 2025, with comparisons to the corresponding period in 2024, as applicable. The consolidated interim financial statements and related notes, as well as the Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 14, 2025 (the “2024 Form 10-K”), should also be read in conjunction with this review. Amounts in the prior period consolidated interim financial statements are reclassified whenever necessary to conform to the current period's presentation.

Current wording

The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo during the three month and nine month periods ended September 30, 2025, with comparisons to the corresponding period in 2024, as applicable. The consolidated interim financial statements and related notes, as well as the Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 14, 2025 (the “2024 Form 10-K”), should also be read in conjunction with this review. Amounts in prior period consolidated interim financial statements are reclassified whenever necessary to conform to the current period’s presentation.

Previous wording

Following this Management’s Discussion and Analysis is the table "Distribution of Assets, Liabilities and Shareholders' Equity: Interest Rates and Interest Differential" which gives a detailed breakdown of TrustCo's average interest earning assets and interest bearing liabilities for the three and six month periods ended June 30, 2025 and 2024.

Current wording

Following this Management’s Discussion and Analysis is the table “Distribution of Assets, Liabilities and Shareholders’ Equity: Interest Rates and Interest Differential”, which gives a detailed breakdown of TrustCo’s average interest earning assets and interest bearing liabilities for the three and nine month periods ended September 30, 2025 and 2024.

Previous wording

During the second quarter of 2025, financial markets rebounded after posting declines in financial indices during the first quarter of 2025. For the second quarter of 2025, the S&P 500 Index was up 10.57%, Nasdaq was up 17.75%, and the Dow Jones Industrial Average was up 4.98% compared to the end of the first quarter of 2025. The 10‑year Treasury bond averaged 4.36% during Q2 2025 compared to 4.45% in Q1 2025, a decrease of 9 basis points. The 2‑year Treasury bond average rate decreased 29 basis points to 3.86% during Q2 2025, which steepened the yield curve over the prior quarter. The spread between the 10‑year and the 2-year Treasury bonds increased from 0.30% on average in Q1 2025 to 0.50% in Q2 2025. Generally, steeper yield curves are favorable for portfolio mortgage lenders like TrustCo, and the table below illustrates the range of rate movements for both short term and longer-term rates. During the first half of 2025 Federal Funds rate remained flat at a range of 4.25% to 4.50% as of June 30, 2025

Current wording

During the third quarter of 2025, financial markets got off to a robust start with each of the major indexes reaching multiple record highs. For the third quarter of 2025, the S&P 500 Index was up 7.8%, Nasdaq was up 11.2%, and the Dow Jones Industrial Average was up 5.22% compared to the second quarter of 2025. The 10‑year Treasury bond averaged 4.26% during the third quarter of 2025 compared to 4.36% in Q2 2025, a decrease of 10 basis points. The 2‑year Treasury bond average rate decreased 14 basis points to 3.72%. The spread between the 10‑year and the 2-year Treasury bonds increased from a 0.50% on average in Q2 2025 to 0.54% in Q3 2025. Generally, steeper yield curves are favorable for portfolio mortgage lenders like TrustCo, and the table below illustrates the range of rate movements for both short-term and longer-term rates. During the first nine months of 2025 the Federal Funds rate was lowered once in September 2025 to a range of 4.00% to 4.25% from 4.25% to 4.50%. It was also subsequently lowered on October 29, 2025 to a range of 3.75% to 4.00%.

Previous wording

The country has entered a period of heightened economic uncertainty as markets continue to adjust to rapidly evolving changes in tariff policies. Tariffs remain fluid, with the most recent deadline to negotiate trade agreements extended until August 1, 2025 for many countries and later for other countries. Tariffs have the potential to increase inflation, and it is unknown if that would have a transitory or longer lasting impact. The Federal Open Market Committee (“FOMC”) held the federal funds target rate range at 4.25%-4.50% following each of its five meetings to date in 2025. The FOMC stated at its most recent meeting on July 29-30, 2025 that uncertainty about the economic outlook remains elevated and that the committee was attentive to risks on both sides of its dual mandate.

Current wording

The country has entered a period of heightened economic uncertainty as markets continue to adjust to rapidly evolving changes in tariff policies. Tariffs have the potential to increase inflation, and it is unknown if that would have a transitory or longer lasting impact. The Federal Open Market Committee (“FOMC”) lowered the federal funds target rate range to 4.00%-4.25% in September 2025, and to a range of 3.75% to 4.00% in October 2025.

Previous wording

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

Current wording

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

Previous wording

TrustCo recorded net income of $15.0 million, or $0.79 of diluted earnings per share, for the three months ended June 30, 2025, compared to net income of $12.6 million, or $0.66 of diluted earnings per share, in the same period in 2024. Return on average assets was 0.96% and 0.82%, respectively, for the three-months ended June 30, 2025 and 2024. Return on average equity was 8.73% and 7.76%, respectively, for the three-months ended June 30, 2025 and 2024.

Current wording

TrustCo recorded net income of $16.3 million, or $0.86 of diluted earnings per share, for the three months ended September 30, 2025, compared to net income of $12.9 million, or $0.68 of diluted earnings per share, in the same period in 2024. Return on average assets was 1.02% and 0.84%, respectively, for the three months ended September 30, 2025 and 2024. Return on average equity was 9.29% and 7.74%, respectively, for the three months ended September 30, 2025 and 2024.

Previous wording

TrustCo recorded net income of $29.3 million, or $1.54 of diluted earnings per share, for the six months ended June 30, 2025, compared to net income of $24.7 million, or $1.30 of diluted earnings per share, in the same period in 2024. Return on average assets was 0.94% and 0.81%, respectively, for the six months ended June 30, 2025 and 2024. Return on average equity was 8.61% and 7.65%, respectively, for the six months ended June 30, 2025 and 2024.

Current wording

TrustCo recorded net income of $45.6 million, or $2.41 of diluted earnings per share, for the nine months ended September 30, 2025, compared to net income of $37.6 million, or $1.97 of diluted earnings per share, in the same period in 2024. Return on average assets was 0.97% and 0.82%, respectively, for the nine months ended September 30, 2025 and 2024. Return on average equity was 8.84% and 7.68%, respectively, for the nine months ended September 30, 2025 and 2024.

Previous wording

The primary factors accounting for the change in net income for the six months ended June 30, 2025 compared to the same period of the prior year were:

Current wording

The primary factors accounting for the change in net income for the nine months ended September 30, 2025 compared to the same period of the prior year were:

Previous wording

During the second quarter of 2024, Visa Inc. accepted the Company’s tender of its 6,528 shares of Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock. As a result of the exchange, the Company marked its Visa Class C common stock to fair value and recorded a gain of $1.4 million based on the conversion privilege of the Visa Class C common stock and the closing price of Visa Class A common stock on June 28, 2024 of $262.47 per share. In 2024, Company’s Visa Class C shares were marked to fair value on a recurring basis using the Visa Class A shares as evidence of orderly transactions between market participants for similar securities issued by Visa. The Company originally obtained the shares in 2008. The carrying value of the Visa Class B-2 shares is nominal as of June 30, 2025.

Current wording

During the second quarter of 2024, Visa Inc. accepted the Company’s tender of its 6,528 shares of Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock. As a result of the exchange, the Company marked its Visa Class C common stock to fair value and recorded a gain of $1.4 million based on the conversion privilege of the Visa Class C common stock and the closing price of Visa Class A common stock on June 28, 2024 of $262.47 per share. In 2024, Company’s Visa Class C shares were marked to fair value on a recurring basis using the Visa Class A shares as evidence of orderly transactions between market participants for similar securities issued by Visa. The Company originally obtained the shares in 2008. The carrying value of the Visa Class B-2 shares is nominal as of September 30, 2025 and there was no activity during the three and nine months ended September 30, 2025.

Previous wording

TrustCo’s results are affected by a variety of factors including competitive and economic conditions in the specific markets in which the Company operates and, more generally, in the national economy, financial market conditions and the regulatory environment. Each of these factors is dynamic, and changes in any area can have an impact on TrustCo’s results. Included in the 2024 Form 10-K is a description of the effect that continued elevated interest rates had on the results for the year 2024 compared to 2023. Many of the same market factors discussed in the 2024 Form 10-K continued to have an impact on results through the second quarter of 2025.

Current wording

TrustCo’s results are affected by a variety of factors including competitive and economic conditions in the specific markets in which the Company operates and, more generally, in the national economy, financial market conditions and the regulatory environment. Each of these factors is dynamic, and changes in any area can have an impact on TrustCo’s results. Included in the 2024 Form 10-K is a description of the effect that continued elevated interest rates had on the results for the year 2024 compared to 2023. Many of the same market factors discussed in the 2024 Form 10-K continued to have an impact on results through the third quarter of 2025.

Previous wording

Interest rates have a significant impact on the operations and financial results of all financial services companies. One of the most important interest rates used to control national economic policy is the “Federal Funds” rate. This is the interest rate utilized within the banking system for overnight borrowings for institutions with the highest credit rating. During the second quarter of 2025 Federal Funds rate remained flat at a range of 4.25% to 4.50% as of June 30, 2025.

Current wording

Interest rates have a significant impact on the operations and financial results of all financial services companies. One of the most important interest rates used to control national economic policy is the “Federal Funds” rate. This is the interest rate utilized within the banking system for overnight borrowings for institutions with the highest credit rating. During the first nine months of 2025 the Federal Funds rate was lowered once in September 2025 to a range of 4.00% to 4.25% from 4.25% to 4.50%. It was also subsequently lowered in October 2025 to a range of 3.75% to 4.00%.

Previous wording

TrustCo’s principal loan products are residential real estate loans. Most of TrustCo’s residential real estate loans carry a fixed rate of interest. As noted above, residential real estate loans and longer‑term investments are most affected by the changes in longer term market interest rates such as the 10-year Treasury. The 10‑year Treasury yield decreased 9 basis points, on average, during the second quarter of 2025 compared to the first quarter of 2025 and also decreased 9 basis points as compared to the second quarter of 2024.

Current wording

TrustCo’s principal loan products are residential real estate loans. Most of TrustCo’s residential real estate loans carry a fixed rate of interest. As noted above, residential real estate loans and longer‑term investments are most affected by the changes in longer term market interest rates such as the 10-year Treasury. The 10‑year Treasury yield decreased 10 basis points, on average, during the third quarter of 2025 compared to the second quarter of 2025 and increased 31 basis points as compared to the third quarter of 2024.

Previous wording

For the second quarter of 2025, the net interest margin was 2.71%, up 18 basis points versus the prior year’s second quarter. The quarterly results reflect the following significant factors:

Current wording

For the third quarter of 2025, the net interest margin was 2.79%, up 18 basis points versus the prior year’s quarter. The quarterly results reflect the following significant factors:

Previous wording

During the second quarter of 2025, the Company continued to focus on its strategy to expand its loan portfolio by offering competitive interest rates. Management believes the TrustCo residential real estate loan product is very competitive compared to local and national competitors. Competition remains strong in the Company’s market areas.

Current wording

During the third quarter of 2025, the Company continued to focus on its strategy to expand its loan portfolio by offering competitive interest rates. Management believes that the TrustCo residential real estate loan product is very competitive compared to local and national competitors. Competition remains strong in the Company’s market areas.

Previous wording

For the six months ended June 30, 2025, the net interest margin was 2.68%, up 20 basis points versus the prior year. The six month results reflect the following significant factors:

Current wording

For the nine months ended September 30, 2025, the net interest margin was 2.71%, up 19 basis points versus the prior year. The nine month results reflect the following significant factors:

Previous wording

Total average interest earning assets increased from $5.98 billion in the second quarter of 2024 to $6.15 billion in the same period of 2025 with an average yield of 4.19% in the second quarter of 2025 and 4.06% in the second quarter of 2024. The mix of assets invested in Federal Funds sold and other short-term investments and loans increased while securities available for sale and held to maturity securities decreased over the prior year period. Interest income on average earning assets increased from $60.6 million in the second quarter of 2024 to $64.5 million in the second quarter of 2025. This increase was primarily driven by the increase in average balances and an increase in interest income on loans due to higher interest rates on loan originations over the last year and variable rate loans repricing upwards.

Current wording

Total average interest earning assets increased from $5.94 billion in the third quarter of 2024 to $6.20 billion in the same period of 2025 with an average yield of 4.25% in the third quarter of 2025 and 4.11% in the third quarter of 2024. The mix of assets invested in Federal Funds sold and other short-term investments and loans increased, while securities available for sale and held to maturity securities decreased over the prior year period. Interest income on average earning assets increased from $61.1 million in the third quarter of 2024 to $66.0 million in the third quarter of 2025. This increase was primarily driven by the increase in average balances and an increase in interest income on federal funds sold and other short-term investments and loans due to higher interest rates on loan originations over the last year and variable rate loans repricing upwards.

Previous wording

The average balance of loans was $5.14 billion in the second quarter of 2025 and $5.02 billion in the comparable period in 2024. The yield on loans was up 21 basis points to 4.25%. Interest income on loans was $54.6 million in the second quarter of 2025 up $3.9 million from the same period in 2024.

Current wording

The average balance of loans was $5.18 billion in the third quarter of 2025 and $5.05 billion in the comparable period in 2024, and the yield on loans was up 20 basis points to 4.32%. Interest income on loans was $56.0 million in the third quarter of 2025 up $3.8 million from the same period in 2024, primarily as a result of the higher interest rates on new originations compared to the existing portfolio yield.

Previous wording

Compared to the second quarter of 2024, the average balance of residential mortgage loans, home equity credit lines, and commercial loans, all increased, while the average balance of installment loans decreased. We believe that the upward trend in average balances of residential mortgage loans, home equity credit lines and commercial loans reflects improving economic confidence among borrowers, strong credit quality, and the Bank’s focus on relationship lending.

Current wording

Compared to the third quarter of 2024, the average balance of residential mortgage loans, home equity credit lines, and commercial loans, all increased, while the average balance of installment loans decreased. We believe that the upward trend in average balances of residential mortgage loans, home equity credit lines and commercial loans reflects improving economic confidence among borrowers, strong credit quality, and the Bank’s focus on relationship lending.

Previous wording

The average balance of residential mortgage loans was $4.39 billion in the second quarter of 2025 compared to $4.36 billion in 2024, an increase of 0.6%. The average yield on residential mortgage loans increased by 19 basis points to 3.94% in the second quarter of 2025 compared to 2024, primarily as a result of the higher interest rates on new originations compared to the existing portfolio yield.

Current wording

The average balance of residential mortgage loans was $4.41 billion in the third quarter of 2025 compared to $4.38 billion in 2024, an increase of 0.8%. The average yield on residential mortgage loans increased by 18 basis points to 4.00% in the third quarter of 2025 compared to 2024, primarily as a result of the higher interest rates on new originations compared to the existing portfolio yield.

Previous wording

Commercial loans, which consist primarily of loans secured by commercial real estate, increased $25.8 million to an average balance of $306.4 million in the second quarter of 2025 compared to the same period in the prior year. The average yield on this portfolio was up 19 basis points to 5.56% compared to the prior year period, primarily as a result of higher interest rates on new originations compared to the existing portfolio yield and variable rate loans repricing upwards. The Company has sought to remain selective in underwriting commercial loans in recent periods as the apparent risk/reward balance has been less favorable in some cases compared to that of prior periods.

Current wording

Commercial loans, which consist primarily of loans secured by commercial real estate, increased $34.6 million to an average balance of $313.8 million in the third quarter of 2025 compared to the same period in the prior year. The average yield on this portfolio was up 19 basis points to 5.64% compared to the prior year period, primarily as a result of higher interest rates on new originations compared to the existing portfolio yield and certain variable rate loans that repriced upwards prior to the recent Federal Funds target rate decrease in September 2025. The Company continues to be selective in underwriting commercial loans, aiming to the apparent risk/reward during the underwriting process.

Previous wording

The average yield on home equity credit lines decreased 3 basis points to 6.39% during the second quarter of 2025 compared to the year earlier period. The average balances of home equity credit lines increased 17.8% to $428.9 million in the second quarter of 2025 as compared to the prior year.

Current wording

The average yield on home equity credit lines decreased 3 basis points to 6.50% during the third quarter of 2025 compared to the year earlier period. The average balances of home equity credit lines increased 15.7% to $440.3 million in the third quarter of 2025 as compared to the prior year.

Previous wording

The average balance of the securities available for sale portfolio for the second quarter of 2025 was $358.6 million compared to $437.6 million for the comparable period in 2024. The decrease in the balance reflects routine paydowns, calls and maturities, partially offset by new investment purchases. The average yield was 2.81% for the second quarter of 2025 compared to 2.58% for the second quarter of 2024. The increase in average yield is a result of higher yields on bonds purchased as well as lower rate bonds maturing since the prior year quarter. This portfolio is primarily comprised of agency issued residential mortgage backed securities, bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank, and Freddie Mac), Small Business Administration participation certificates, corporate bonds and municipal bonds. These securities are recorded at fair value with any adjustment in fair value included in other comprehensive income (loss), net of tax.

Current wording

The average balance of the securities available for sale portfolio for the third quarter of 2025 was $347.0 million compared to $409.3 million for the comparable period in 2024. The decrease in the balance reflects routine paydowns, calls and maturities, partially offset by new investment purchases. The average yield was 2.91% for the third quarter of 2025 compared to 2.51% for the third quarter of 2024. The increase in average yield is a result of higher yields on bonds purchased as well as lower rate bonds maturing since the prior year quarter. This portfolio is primarily comprised of agency issued residential mortgage backed securities, bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank, and Freddie Mac), Small Business Administration participation certificates, corporate bonds and municipal bonds. These securities are recorded at fair value with any adjustment in fair value included in other comprehensive income, net of tax.

Previous wording

The net unrealized loss in the available for sale securities portfolio was $20.8 million as of June 30, 2025 compared to a net unrealized loss of $29.3 million as of December 31, 2024. The decrease in net unrealized losses in the portfolio is the result of the current interest rate environment.

Current wording

The net unrealized loss in the available for sale securities portfolio was $18.5 million as of September 30, 2025 compared to a net unrealized loss of $29.3 million as of December 31, 2024. The decrease in net unrealized losses in the portfolio is the result of the current interest rate environment.

Previous wording

The average balance of held to maturity securities was $5.0 million for the second quarter of 2025 compared to $6.1 million in the second quarter of 2024. The decrease in balances reflects routine paydowns. No new securities were added to this portfolio during the period. The average yield was 4.37% for the second quarter of 2025 compared to 4.28% for the year earlier period. TrustCo expects to hold the securities in this portfolio until they mature or are called.

Current wording

The average balance of held to maturity securities was $4.7 million for the third quarter of 2025 compared to $5.8 million in the third quarter of 2024. The decrease in balances reflects routine paydowns. No new securities were added to this portfolio during the period. The average yield was 4.40% for the third quarter of 2025 up from 4.29% for the year earlier period. TrustCo expects to hold the securities in this portfolio until they mature or are called.

Previous wording

The net unrecognized gain in the held to maturity securities portfolio was $8 thousand as of June 30, 2025 compared to a net unrecognized loss of $59 thousand as of December 31, 2024. The decrease in the net unrecognized losses in the portfolio is the result of changes in market interest rate levels.

Current wording

The net unrecognized gain in the held to maturity securities portfolio was $36 thousand as of September 30, 2025 compared to a net unrecognized loss of $59 thousand as of December 31, 2024. The increase in the net unrecognized gain in the portfolio is the result of changes in market interest rate levels.

Previous wording

As of June 30, 2025, this portfolio consisted solely of residential mortgage-backed securities. The balances for these securities are recorded at amortized cost.

Current wording

As of September 30, 2025, this portfolio consisted solely of agency issued residential mortgage-backed securities. The balances for these securities are recorded at amortized cost.

Previous wording

The 2025 second quarter average balance of Federal Funds sold and other short-term investments was $648.5 million, a $142.0 million increase from the $506.5 million average for the same period in 2024, primarily due to an increase in deposits and funds from maturing and called securities which have not yet been deployed. The yield was 4.46% for the second quarter of 2025 and 5.48% for the comparable period in 2024. Interest income from this portfolio increased $318 thousand from $6.9 million in 2024 to $7.2 million in 2025. The increase in the average balance was enough to offset the decrease in yield over the same period.

Current wording

The average balance of Federal Funds sold and other short‑term investments was $662.7 million for the third quarter of 2025 compared to $465.9 million in the third quarter of 2024, primarily due to an increase in deposits, loan payments, and funds from maturing and called securities which have not yet been deployed. The yield was 4.42% for the third quarter of 2025 and 5.27% for the comparable period in 2024. Interest income from this portfolio increased $1.2 million from $6.2 million in 2024 to $7.4 million in 2025. The increase in the average balance was enough to offset the decrease in yield over the same period.

Previous wording

Total average interest bearing deposits (which includes interest bearing checking, money market accounts, savings and time deposits) increased $130.7 million to $4.68 billion for the second quarter of 2025 versus the second quarter in the prior year, and the average rate paid decreased from 2.00% for 2024 to 1.93% for 2025. Total interest expense on these deposits decreased $41 thousand to $22.6 million in the second quarter of 2025 compared to the year earlier period. From the second quarter of 2024 to the second quarter of 2025, interest bearing checking account average balances were up 3.0%, certificates of deposit average balances were up 11.3%, non-interest demand average balances were up 5.8%, average savings balances decreased 5.1% and money market balances were down 10.2%. Overall, average balances are up from a year ago as we continue to encourage customers to retain their funds in the expanded product offerings of the Bank through aggressive marketing and product differentiation.

Current wording

Total average interest bearing deposit accounts (which includes interest bearing checking, money market accounts, savings and time deposits) increased $200.6 million to $4.70 billion for the third quarter of 2025 versus the third quarter in the prior year, and the average rate paid decreased from 1.96% for 2024 to 1.92% for 2025. Total interest expense on these deposits increased from $22.2 million to $22.7 million in the third quarter of 2025 compared to the year earlier period. From the third quarter of 2024 to the third quarter of 2025, interest bearing checking account average balances were up 3.5%, certificates of deposit average balances were up 13.1%, non-interest demand average balances were up 6.8%, average savings balances decreased 4.0% and money market balances were down 7.0%. Overall, average balances are up from a year ago as we continue to encourage customers to retain their funds in the expanded product offerings of the Bank through aggressive marketing and product differentiation.

Previous wording

As of June 30, 2025, the maturity of total time deposits was as follows:

Current wording

At September 30, 2025, the maturity of total time deposits was as follows:

Previous wording

As of June 30, 2025 and December 31, 2024, approximately $1.13 billion and $1.11 billion, respectively, of our deposit portfolio were uninsured. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.

Current wording

As of September 30, 2025 and December 31, 2024, approximately $1.24 billion and $1.11 billion, respectively, of our deposit portfolio were uninsured. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.

Previous wording

Average short-term borrowings for the second quarter were $81.1 million in 2025 compared to $93.7 million in 2024. The decrease in the average balance from the prior year period is primarily a result of a shift of funds into time deposits. The weighted average interest rate for short-term borrowings during the second quarter decreased during this time period from 0.89% in 2024 to 0.87% in 2025. The short-term borrowings of the Company are cash management accounts, which represent retail accounts with customers for which the Bank has pledged certain assets as collateral. The customer account balances changed based on the needs of the underlying retail customers.

Current wording

Average short-term borrowings for the third quarter were $87.3 million in 2025 compared to $87.7 million in 2024. The weighted average interest rate for short-term borrowings increased 2 basis points to 0.90% during this time period. The short-term borrowings of the Company are cash management accounts, which represent retail accounts with customers for which the Bank has pledged certain assets as collateral.

Previous wording

The Company has a number of contingent funding alternatives available in addition to the large cash and cash equivalents position and the investment securities positions it maintains on its balance sheet. The Bank is a member of the Federal Home Loan Bank of New York (“FHLBNY”) and is an eligible borrower at the Federal Reserve Bank of New York (“FRBNY”) and has the ability to borrow utilizing securities and/or loans as collateral at either institution. The Bank does not utilize brokered deposits as a part of its funding strategy, but does incorporate them as a potential contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered CDs may be tested from time to time to ensure operational and market readiness. As of June 30, 2025 the Company also has borrowing capacity of $955.7 million available with the Federal Home Loan Bank of New York. The borrowings capacity is secured by the loans pledged by the Company. As of June 30, 2025 and December 31, 2024, the Company had no outstanding borrowings with the Federal Home Loan Bank of New York.

Current wording

The Company has a number of contingent funding alternatives available in addition to the large cash and cash equivalents position and the investment securities positions it maintains on its balance sheet. The Bank is a member of the Federal Home Loan Bank of New York (“FHLBNY”) and is an eligible borrower at the Federal Reserve Bank of New York (“FRBNY”) and has the ability to borrow utilizing securities and/or loans as collateral at either institution. The Bank does not utilize brokered deposits as a part of its funding strategy, but does incorporate them as a potential contingent funding source within its Asset/Liability Management Policy. Like other contingent funding sources, brokered CDs may be tested from time to time to ensure operational and market readiness. As of September 30, 2025 the Company also has borrowing capacity of $979.1 million available with the Federal Home Loan Bank of New York. The borrowings capacity is secured by the loans pledged by the Company. As of September 30, 2025 and December 31, 2024, the Company had no outstanding borrowings with the Federal Home Loan Bank of New York.

Previous wording

Net interest income increased by $4.0 million to $41.7 million in the second quarter of 2025 compared to the same period in 2024 driven by loan growth at higher interest rates and an increase in interest on federal funds sold and other short-term investments, partially offset by lower investment interest income. The net interest spread was up 19 basis points to 2.28% in the second quarter of 2025 compared to the same period in 2024. As previously noted, the net interest margin was up 18 basis points to 2.71% for the second quarter of 2025 compared to the same period in 2024. Yields on earning assets increased in the second quarter of 2025 compared to the second quarter of 2024, and rates on interest-bearing liabilities decreased causing margin expansion. The Federal Reserve’s decision regarding whether to cut or hold rates in upcoming meetings will have an effect on the Company’s ability to decrease deposit costs which should help margin in future quarters. During the second quarter of 2025, the Company has been able to lower the rates offered on our time deposits while continuing to retain and grow that product. This is expected bring down the cost of time deposits over time.

Current wording

Net interest income increased by $4.4 million to $43.1 million in the third quarter of 2025 compared to the same period in 2024. The net interest spread was up 18 basis points to 2.35% in the third quarter of 2025 compared to the same period in 2024. As previously noted, the net interest margin was also up 18 basis points to 2.79% for the third quarter of 2025 compared to the same period in 2024. Yields on earning assets increased in the third quarter of 2025 compared to the third quarter of 2024, and rates on interest-bearing liabilities decreased causing margin expansion. The Federal Reserve’s decision regarding whether to cut or hold rates in upcoming meetings will have an effect on the Company’s timing and ability to cover deposit costs which should help margin in future quarters. During the third quarter of 2025, the Company has been able to lower the rates offered on our time deposits while continuing to retain and grow that product. This is expected bring down the cost of time deposits over time.

Previous wording

Net interest income increased by $7.8 million to $82.1 million in the first six months of 2025 compared to the same period in 2024. The net interest spread was up 19 basis points to 2.24% in the first six months of 2025 compared to the same period in 2024. Net interest margin increased 20 basis points to 2.68% for the first six months of 2025 compared to the same period in 2024.

Current wording

Net interest income increased by $12.2 million to $125.2 million in the first nine months of 2025 compared to the same period in 2024. The net interest spread was up 20 basis points to 2.28% in the first nine months of 2025 compared to the same period in 2024. Net interest margin was up 19 basis points to 2.71% for the first nine months of 2025 compared to the same period in 2024.

Previous wording

Nonperforming loans and foreclosed real estate: Total NPLs were $17.9 million at June 30, 2025, compared to $18.8 million at December 31, 2024. There were no loans as of June 30, 2025 and December 31, 2024 that were past due 90 days or more and still accruing interest.

Current wording

Nonperforming loans and foreclosed real estate: Total NPLs were $18.5 million at September 30, 2025 compared to $18.8 million at December 31, 2024. There were no loans at September 30, 2025 and December 31, 2024 that were past due 90 days or more and still accruing interest. The coverage ratio, or allowance for credit losses on loans to NPLs, was 280.8% at September 30, 2025 compared to 267.3% at December 31,2024.

Previous wording

At June 30, 2025, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of $17.9 million at June 30, 2025, $17.2 million were residential real estate loans, $684 thousand were commercial loans and mortgages and $46 thousand were installment loans, compared to $18.3 million, $343 thousand and $130 thousand, respectively, at December 31, 2024.

Current wording

At September 30, 2025, nonperforming loans primarily include a mix of commercial and residential loans. Of total nonperforming loans of $18.5 million at September 30, 2025, $18.1 million were residential real estate loans, $292 thousand were commercial loans and mortgages and $43 thousand were installment loans, compared to $18.3 million, $343 thousand and $130 thousand, respectively, at December 31, 2024.

Previous wording

A significant percentage of nonperforming loans are residential real estate loans, which are historically lower-risk than most other types of loans. Net recoveries were $121 thousand on residential real estate loans (including home equity lines of credit) for the second quarter of 2025 compared to net recoveries $57 thousand for the second quarter of 2024. Management believes that these loans have been appropriately written down where required.

Current wording

A significant percentage of nonperforming loans are residential real estate loans, which are historically lower-risk than most other types of loans. Net recoveries were $194 thousand on residential real estate loans (including home equity lines of credit) for the third quarter of 2025 compared to net charge-offs of $104 thousand for the third quarter of 2024. Management believes that these loans have been appropriately written down where required.

Previous wording

Economic conditions vary widely by geographic location. As a percentage of the total nonperforming loans as of June 30, 2025, 17.6% were to Florida borrowers, compared to 82.4% to borrowers in New York and surrounding areas. For the three months ended June 30, 2025, New York and surrounding areas experienced net recoveries of approximately $103 thousand and there were net charge-offs of $94 thousand in Florida for the second quarter of 2025.

Current wording

Economic conditions vary widely by geographic location. As a percentage of the total nonperforming loans as of September 30, 2025, 19.4% were to Florida borrowers, compared to 80.6% to borrowers in New York and surrounding areas. For the three months ended September 30, 2025, New York and surrounding areas experienced net recoveries of approximately $196 thousand and Florida experienced net charge-offs of $20 thousand for the third quarter of 2025.

Previous wording

Loans individually evaluated for impairment are non-accrual loans delinquent greater than 180 days, non-accrual commercial loans, as well as loans classified as loan modifications to borrowers experiencing financial difficulty. There were $780 thousand of commercial mortgages and commercial loans classified as individually evaluated as of June 30, 2025 compared to $443 thousand classified as individually evaluated at December 31, 2024. There were $23.5 million of individually evaluated residential loans at June 30, 2025 compared to $23.8 million classified as individually evaluated at December 31, 2024.

Current wording

Loans individually evaluated for impairment are non-accrual loans delinquent greater than 180 days, non-accrual commercial loans, as well as loans classified as loan modifications to borrowers experiencing financial difficulty. There were $386 thousand of commercial mortgages and commercial loans classified as individually evaluated as of September 30, 2025 compared to $443 thousand classified as individually evaluated at December 31, 2024. There were $22.6 million of individually evaluated residential loans at September 30, 2025 compared to $23.8 million classified as individually evaluated at December 31, 2024.

Previous wording

As of June 30, 2025 there was $1.1 million of foreclosed real estate compared to $2.2 million at December 31, 2024.

Current wording

At September 30, 2025 there was $1.2 million of foreclosed real estate compared to $2.2 million at December 31, 2024.