Adirondack Trust : 2021 ANNUAL REPORT

Directors

GUY ALONGE, III

DR. MARC CONNER

SUSAN LAW DAKE

MARY C. GAVIN

JOHN T. HEDBRING

DOUGLASS M. MABEE

DOUGLASS T. MABEE

J. THOMAS ROOHAN, JR.

BRIAN A. STRAUGHTER, Ed.D

STEPHEN F. SULLIVAN

STEPHAN R. von SCHENK

CHARLES V. WAIT

CHARLES V. WAIT, JR.

Senior Management Team

CHARLES V. WAIT

Chairman of the Board

CHARLES V. WAIT, JR., ESQ.

President & CEO

A Note to Our Stockholders:

The mythical phoenix is a bird that dies and is reborn from its own ashes. One of the most commonly cited records of this myth in classical Greek literature is Herodotus's Histories. His description of the phoenix is vague, however, concerning the most distinctive aspect of the phoenix - its rebirth.1 The phoenix also appears in Ovid's Metamorphoses, in which it

JACK ARNOLD, CPA

Executive Vice President,

Chief Administrative Officer,

Chief Financial Officer

& Treasurer

MICHAEL S. BRODT

Senior Vice President

PATRICK B. REILLY

Senior Vice President

ROBERT F. LOUGHRAN

Senior Vice President

BRYAN M. BOOTH

Vice President

EDWARD M. CONNELL, ESQ.

Vice President

MATTHEW C. HARRISON

Vice President

DEAN A. KOLLIGIAN

Vice President

CHRISTINE H. MESICK

Vice President

KELLEY H. PELUSO

Vice President

CHRISTOPHER J. ROSE

Vice President

MICHAEL J. O'CONNELL

Executive Vice President

KATHLEEN M. MacAREVEY

Corporate Secretary & Executive Assistant

MATTHEW P. D'ABATE

Senior Vice President

EDWARD P. HART, III

Senior Vice President

JOHN W. MURPHY

Senior Vice President

BRIAN D. CHARBONNEAU

Vice President

ANDREW R. FERRARA

Vice President

ANGELA M. KEDIK

Vice President

EDWARD M. LENZ

Vice President

MICHAEL D. MURRAY

Vice President

SUSANNE M. ROGAN

Vice President

* * * * * * * * * * * *

more closely resembles the form with which we are familiar today.2 The legend has been told and retold countless times since then, but the core element, the rebirth of the bird from its own ashes, has remained. One of the most eloquent depictions of the phoenix comes from Shakespeare, when Archbishop Cranmer describes the future Queen Elizabeth I:

Nor shall this peace sleep with her; but as when The bird of wonder dies, the maiden phoenix, Her ashes new create another heir

As great in admiration as herself,

So shall she leave her blessedness to one, When heaven shall call her from this cloud of darkness,

Who from the sacred ashes of her honor Shall starlike rise as great in fame as she was

And so stand fixed.3

The communities your Bank serves experienced such a revival in 2021. In 2020, safety concerns surrounding the novel coronavirus prevented the Saratoga Race Course from welcoming fans in person, and the Saratoga Performing Arts

NINA GUIDI	NATALIE I. WAIT, ESQ.
Vice President - Audit	Vice President - Regulatory Affairs

Center from offering a typical season. This led to a dramatic

1. Herodotus, Histories 124 (Aubrey De Sélincourt trans., Penguin Books 2003) (1954).
2. Ovid, Metamorphoses 429 (Stanley Lombardo trans., Hackett Publishing Co., Inc. 2010).
3. William Shakespeare, King Henry the Eighth Act 5, sc. 4.

decline in hotel occupancy, restaurant patronage and other economic activity in 2020. Many local businesses would have failed but for the timely partnership between your Bank and the Small Business Administration through its Paycheck Protection Program. As vital as this program was, it could not continue indefinitely.

Fortunately, vaccines against COVID-19 became available for those most vulnerable to it in early 2021. This amazing feat made it possible to reopen the Saratoga Race Course and for SPAC to have a more extensive summer season. This, in turn, led to a dramatic increase in economic activity. For example, the Saratoga Race Course returned to more than 1 million in-person attendees, and the $815.5 million handle broke 2019's record by more than 15 percent. Hotel room tax revenue increased by more than threefold for the months of June through August, as compared to the prior year's revenues. And our local restaurants, shops and other businesses were able to welcome customers back in person.

Your Bank benefited from this revival. Our Chief Financial Officer discusses this in more detail in his financial report, but the highlights are these: Our Wealth Management and Amsure divisions each reported record revenue in 2021. Deposits increased more than 14 percent to a new record of more than $1.5 billion. This also drove record-setting asset growth of 14 percent to just under $1.7 billion. Despite record prepayments on loans, due in part to government stimulus, strong new loan origination further drove increased revenue. All of this resulted in an increase in net income of 73 percent, to a new record of more than $14 million. We are very pleased with these results.

The cycle of death and rebirth encapsulated in the myth of the phoenix is widely appealing because it is a good metaphor for many aspects of life. We all face difficult times. These times do not last forever, and better times follow. The cycle repeats.

Likewise, fresh challenges face your Bank and the communities it serves following the economic revival of 2021. Although cases of COVID-19 have been declining rapidly, they are still at elevated levels and are still causing disruption, especially for working parents. Quarantines keep workers from their jobs and children from school. These absences compound existing problems in both the market for goods and in the market for labor, which limits economic growth in our communities.

Business challenges aside from COVID-19 continue to present themselves as well. We must continually update our technology to stay ahead of the cybercriminals as well as the competition. Inflation is a problem. Not only is it destructive of wealth, but it makes life even harder for the least fortunate among us. And an ever-increasing web of complex regulations requires ever more effort and cost to navigate.

Despite all of this, your Bank will continue to reinvent itself in the face of these difficulties. In this, as in many things, we both lead and follow the communities we serve. Particular actions of leadership serve to inspire other such actions, creating a cycle of positive reinforcement. That is what makes our community such a great place to live and work.

Sincerely,

Charles V. Wait, Jr.

President & CEO

Financial Narrative:

New records were achieved in total assets, deposits and earnings during 2021. Consolidated total assets of $1.7 billion and total deposits of $1.5 billion were both up 14%. Loan growth was also strong, excluding the paydown of SBA-Paycheck Protection Program (PPP) loans. Total loans of $824 million were down just under 1% after receiving payoff of a substantial amount from the SBA for PPP loans provided to local businesses during the past two years, totaling just over $163 million. Investments grew by $351 million, to $563 million, funded by excess cash held in our account at the Federal Reserve Bank of New York. Investment growth was primarily added to our US Treasury bond portfolio.

Net income of $14 million in 2021 was up 73% compared to last year, a new record. We also achieved new revenue records for both our Trust/Wealth Management and Insurance Agency. In 2020, we provided $8.5 million to our loan loss reserve in response to the risk and uncertainty associated with the ongoing COVID-19 pandemic. We did not add to our loan loss reserve in 2021. We continue to monitor our local market during the ongoing effects and reaction to the pandemic. We again ended this year in a net recovery position.

Non-interest expense increased 8%, due in part to the recognition of fixed, upfront acquisition costs totaling $1.5 million, associated with our purchase agreement for a new BOLI (Bank Owned Life Insurance) program. We also realized increases in compensation and benefits expense and data

processing fees as we continue our strategy to grow our Insurance Agency team, invest in the ongoing advancement of our technology platforms and actively enhance our data security systems.

Return on average assets and equity was .90% and 9.85%, respectively.

Respectfully submitted,

Jack Arnold, CPA

EVP, CAO, CFO & Treasurer