5.	Loans and Allowance for Loan Losses

The following table presents the recorded investment in loans by loan class:

	September 30, 2011
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	193,583		25,622		219,205
Other		25,065		119		25,184
Real estate mortgage - 1 to 4 family:
First mortgages		1,712,435		163,368		1,875,803
Home equity loans		48,206		1,135		49,341
Home equity lines of credit		280,235		25,352		305,587
Installment		3,764		65		3,829
Total loans, net	$	2,263,288		215,661		2,478,949
Less: Allowance for loan losses						47,782
Net loans					$	2,431,167

	December 31, 2010
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	196,803		28,644		225,447
Other		32,542		264		32,806
Real estate mortgage - 1 to 4 family:
First mortgages		1,611,645		139,932		1,751,577
Home equity loans		48,505		960		49,465
Home equity lines of credit		268,509		22,778		291,287
Installment		4,284		399		4,683
Total loans, net	$	2,162,288		192,977		2,355,265
Less: Allowance for loan losses						41,911
Net loans					$	2,313,354

* Includes New York, New Jersey, Vermont and Massachusetts.

At September 30, 2011 and December 31, 2010, the Company had approximately $23.9 million and $14.6 million of real estate construction loans, respectively. Construction loans are included in first mortgages and commercial real estate in the tables above.

The following tables present the recorded investment in non-accrual loans by loan class:

	September 30, 2011
(dollars in thousands)	New York and
	other states*		Florida		Total
Loans in nonaccrual status:
Commercial:
Commercial real estate	$	5,071		5,400		10,471
Other		15		-		15
Real estate mortgage - 1 to 4 family:
First mortgages		22,798		9,536		32,334
Home equity loans		865		48		913
Home equity lines of credit		2,269		647		2,916
Installment		4		-		4
Total non-accrual loans		31,022		15,631		46,653
Other nonperforming real estate mortgages - 1 to 4 family		317		-		317
Total nonperforming loans	$	31,339		15,631		46,970

	December 31, 2010
(dollars in thousands)	New York and
	other states*		Florida		Total
Loans in nonaccrual status:
Commercial:
Commercial real estate	$	5,617		8,281		13,898
Other		126		-		126
Real estate mortgage - 1 to 4 family:
First mortgages		18,067		12,888		30,955
Home equity loans		860		73		933
Home equity lines of credit		2,109		436		2,545
Installment		20		1		21
Total non-accrual loans		26,799		21,679		48,478
Other nonperforming real estate mortgages - 1 to 4 family		336		-		336
Total nonperforming loans	$	27,135		21,679		48,814

* Includes New York, New Jersey, Vermont and Massachusetts.

As of September 30, 2011 and December 31, 2010, the Company's loan portfolio did not include any subprime loans or loans acquired with deteriorated credit quality.

The following tables present the aging of the recorded investment in past due loans by loan class and by region:

	September 30, 2011
New York and other states*:	30-59		60-89		90+		Total
	Days		Days		Days		30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	-		-		3,259		3,259		190,324		193,583
Other		-		-		-		-		25,065		25,065
Real estate mortgage - 1 to 4 family:
First mortgages		6,889		4,976		19,524		31,389		1,681,046		1,712,435
Home equity loans		443		77		792		1,312		46,894		48,206
Home equity lines of credit		1,385		477		1,966		3,828		276,407		280,235
Installment		17		3		3		23		3,741		3,764

Total	$	8,734		5,533		25,544		39,811		2,223,477		2,263,288

Florida:	30-59		60-89		90+		Total
	Days		Days		Days		30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	-		-		5,400		5,400		20,222		25,622
Other		-		-		-		-		119		119
Real estate mortgage - 1 to 4 family:
First mortgages		339		65		8,883		9,287		154,081		163,368
Home equity loans		-		-		48		48		1,087		1,135
Home equity lines of credit		84		-		504		588		24,764		25,352
Installment		-		-		-		-		65		65

Total	$	423		65		14,835		15,323		200,338		215,661

	December 31, 2010
New York and other states*:	30-59		60-89		90+		Total
	Days		Days		Days		30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	-		-		3,870		3,870		192,933		196,803
Other		-		13		126		139		32,403		32,542
Real estate mortgage - 1 to 4 family:
First mortgages		11,129		4,275		15,615		31,019		1,580,626		1,611,645
Home equity loans		228		63		690		981		47,524		48,505
Home equity lines of credit		1,324		19		1,338		2,681		265,828		268,509
Installment		46		4		20		70		4,214		4,284

Total	$	12,727		4,374		21,659		38,760		2,123,528		2,162,288


Florida:	30-59		60-89		90+		Total
	Days		Days		Days		30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	-		-		2,281		2,281		26,363		28,644
Other		-		-		-		-		264		264
Real estate mortgage - 1 to 4 family:
First mortgages		5,219		553		12,427		18,199		121,733		139,932
Home equity loans		26		-		73		99		861		960
Home equity lines of credit		422		10		410		842		21,936		22,778
Installment		-		-		1		1		398		399

Total	$	5,667		563		15,192		21,422		171,555		192,977

As of September 30, 2011 and December 31, 2010, there were no loans that are 90 days past due and still accruing interest. As a result, non-accrual loans includes all loans 90 days past due and greater as well as $6.3 million and $11.6 million of certain loans less than 90 days past due that were placed in non-accruing status for reasons other than delinquent status as of September 30, 2011 and December 31, 2010, respectively.

Approximately $6 thousand and $14 thousand of interest on nonperforming loans was collected and recognized as income for the three months ended September 30, 2011 and 2010 and approximately $28 thousand and $38 thousand of interest on nonperforming loans was collected and recognized as income for the nine months ended September 30, 2011 and 2010, respectively. There are no commitments to extend further credit on nonperforming loans.

Activity in the allowance for loan losses by portfolio segment, is summarized as follows:

(dollars in thousands)	For the quarter ended September 30, 2011
				Real Estate
				Mortgage-
	Commercial			1 to 4 Family		Installment			Total
Balance at beginning of period	$	4,164			41,244		153			45,561
Loans charged off:
New York and other states*		1			1,001		22			1,024
Florida		-			2,008		1			2,009
Total loan chargeoffs		1			3,009		23			3,033

Recoveries of loans previously charged off:
New York and other states*		4			143		5			152
Florida		-			2		-			2
Total recoveries		4			145		5			154
Net loans charged off		(3	)		2,864		18			2,879
Provision for loan losses		(116	)		5,225		(9	)		5,100
Balance at end of period	$	4,051			43,605		126			47,782

(dollars in thousands)	For the nine months ended September 30, 2011
			Real Estate
			Mortgage-
	Commercial		1 to 4 Family		Installment			Total
Balance at beginning of period	$	4,227		37,448		236			41,911
Loans charged off:
New York and other states*		70		2,816		70			2,956
Florida		600		5,626		2			6,228
Total loan chargeoffs		670		8,442		72			9,184

Recoveries of loans previously charged off:
New York and other states*		55		380		36			471
Florida		4		29		1			34
Total recoveries		59		409		37			505
Net loans charged off		611		8,033		35			8,679
Provision for loan losses		435		14,190		(75	)		14,550
Balance at end of period	$	4,051		43,605		126			47,782

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method:

	September 30, 2011
			Real Estate Mortgage-
	Commercial Loans		1 to 4 Family		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		4,051		43,605		126		47,782

Total ending allowance balance	$	4,051		43,605		126		47,782
Loans:
Individually evaluated for impairment	$	10,486		1,608		-		12,094
Collectively evaluated for impairment		233,903		2,229,123		3,829		2,466,855

Total ending loans balance	$	244,389		2,230,731		3,829		2,478,949

	December 31, 2010
			Real Estate Mortgage-
	Commercial Loans		1 to 4 Family		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		4,227		37,448		236		41,911

Total ending allowance balance	$	4,227		37,448		236		41,911


Loans:
Individually evaluated for impairment	$	14,024		336		-		14,360
Collectively evaluated for impairment		244,229		2,091,993		4,683		2,340,905

Total ending loans balance	$	258,253		2,092,329		4,683		2,355,265

As of September 30, 2011, included in the real estate mortgage 1 to 4 family category are $1.3 million of modifications of loans in 2011 that were identified as TDR's upon the adoption of FASB Accounting Standards Update (ASU) No. 2011-02, "A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring" during the third quarter of 2011. These loans were not disclosed as TDR's as of June 30, 2011, but were included in nonaccrual loans as of that date. As a result of the adoption of the new ASU guidance, these loans were individually evaluated for impairment. The impact of this evaluation on the allowance for loan losses was not material.

The Company identifies impaired loans and measures the impairment in accordance with “Accounting by Creditors for Impairment of a Loan” (FASB ASC 310-10-35). A loan is considered impaired when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement or the loan is restructured in a troubled debt restructuring (TDR). These standards are applicable principally to commercial and commercial real estate loans; however, certain provisions dealing with restructured loans also apply to retail loan products. A loan for which the terms have been modified, and for which the borrower is experiencing financial difficulties, is considered a TDR and is classified as impaired. TDR's, which TrustCo includes in nonaccrual loans at September 30, 2011 and December 31, 2010, are measured at the present value of estimated future cash flows using the loan's effective rate at inception or the fair value of the underlying collateral if the loan is considered collateral dependent.

In situations where the Bank considers a non-bankruptcy related loan modification, management determines whether the borrower is experiencing financial difficulty by performing an evaluation of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company's underwriting policy.

The Company has identified nonaccrual commercial and commercial real estate loans, as well as all loans restructured under a troubled debt restructuring, as impaired loans.

The following tables present impaired loans by loan class as of September 30, 2011 and December 31, 2010:

	September 30, 2011
New York and other states*:			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(dollars in thousands)	Investment		Balance		Allowance		Investment		Recognized

Commercial:
Commercial real estate	$	5,071		5,780		-		5,263		-
Other		15		34		-		71		-
Real estate mortgage - 1 to 4 family:
First mortgages		1,433		1,877		-		1,490		22
Home equity loans		39		88		-		39		4
Home equity lines of credit		-		75		-		-		2

Total	$	6,558		7,854		-		6,863		28

Florida:			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(dollars in thousands)	Investment		Balance		Allowance		Investment		Recognized

Commercial:
Commercial real estate	$	5,400		9,042		-		7,321		-
Other		-		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		136		179		-		151		-

Total	$	5,536		9,221		-		7,472		-

	December 31, 2010
New York and other states*:			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(dollars in thousands)	Investment		Balance		Allowance		Investment		Recognized

Commercial:
Commercial real estate	$	5,617		6,217		-		3,792		-
Other		126		189		-		179		-
Real estate mortgage - 1 to 4 family:
First mortgages		336		516		-		373		39
Home equity loans		-		58		-		-		6
Home equity lines of credit		-		77		-		-		3

Total	$	6,079		7,057		-		4,344		48

Florida:			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(dollars in thousands)	Investment		Balance		Allowance		Investment		Recognized

Commercial:
Commercial real estate	$	8,281		12,798		-		9,289		-
Other		-		-		-		1		-
Real estate mortgage - 1 to 4 family:
First mortgages		-		-		-		-		-

Total	$	8,281		12,798		-		9,290		-

The average recorded investment in impaired loans in the preceding table includes the year-to-date average of all impaired loans. The average balance of impaired loans for the three months ended September 30, 2011 included $6.3 million of loans in New York and its surrounding areas and $7.6 million of loans in Florida. In the New York area, approximately $5.3 million were commercial real estate loans, approximately $100 thousand were other commercial loans and approximately $900 thousand were residential 1 to 4 family first mortgages. In Florida, approximately $7.5 million were commercial real estate loans with the remainder in residential 1 to 4 family first mortgages.

The Company has not committed to lend additional amounts to customers with outstanding loans that are classified as impaired.

Management evaluates impairment on commercial and commercial real estate loans that are past due as well as in situations where circumstances dictate that an evaluation is prudent. If, during this evaluation, impairment of the loan is identified, a charge-off is taken at that time. As a result, as of September 30, 2011 and December 31, 2010, based upon management's evaluation and due to the sufficiency of chargeoffs taken, none of the allowance for loan losses has been allocated to a specific impaired loan(s).

As previously noted, during the third quarter of 2011, the Company adopted FASB Accounting Standards Update (ASU) No. 2011-02, "A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring". As a result, certain loans which had not previously met the definition of a TDR have now been identified as TDR's under this new guidance. These loans were not disclosed as TDR's as of June 30, 2011, but were included in nonaccrual loans as of that date.

In accordance with the new guidance, during the three and nine months ended September 30, 2011 the Company identified certain modified loans as TDR's. The modification of the terms of these loans were the result of the borrower filing for bankruptcy protection, and included the deferral of all past due amounts for a period of generally 60 months in accordance with the bankruptcy court order.

As of September 30, 2011, all loans classified as TDR's are on nonaccrual. In addition, due to the sufficiency of prior chargeoffs taken, none of the allowance for loan losses has been allocated to TDR's and the impact of the identification of these loans as TDR's did not have a material impact on the allowance. During the three and nine months ended September 30, 2011, there were $36 thousand and $101 thousand of chargeoffs, respectively, on loans identified as TDR's under the new accounting guidance.

The Company is not committed to lend any additional amounts to borrowers with outstanding loans that are classified as TDR's.

The following tables present modified loans by class that were determined to be TDR's that occurred during the three and nine months ended September 30, 2011:

	During the three months ended September 20, 2011
New York and other states*:			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(dollars in thousands)	Contracts		Investment		Investment

Commercial:
Commercial real estate		-	$	-		-
Other		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1		68		68
Home equity loans		-		-		-
Home equity lines of credit		-		-		-

Total		1	$	68		68

Florida:

Pre-Modification

Post-Modification

Outstanding

Number of

Recorded

(dollars in thousands)

Contracts

Investment

Commercial:

Commercial real estate

Other

Real estate mortgage - 1 to 4 family:

First mortgages

Total

	During the nine months ended September 20, 2011
New York and other states*:			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(dollars in thousands)	Contracts		Investment		Investment

Commercial:
Commercial real estate		-	$	-		-
Other		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		11		1,203		1,116
Home equity loans		1		39		39
Home equity lines of credit		-		-		-

Total		12	$	1,242		1,155

Florida:			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(dollars in thousands)	Contracts		Investment		Investment

Commercial:
Commercial real estate		-	$	-		-
Other		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1		150		136

Total		1	$	150		136

In addition to the loans in the preceding tables, as of September 30, 2011, the Company has approximately $1.8 million of commercial and commercial real estate loans which were classified as TDR's as a result of modifications prior to 2011. In these cases, the loan modification included a reduction in the stated interest rate on the loan to the current market rate available. These loans were in nonaccrual status as of September 30, 2011 and December 31, 2010. As of September 30, 2011, these loans were performing in accordance with their modified terms.

The following table presents loans by class modified as TDR's that occurred during the twelve months ended September 30, 2011 for which there was a payment default during the same period:

New York and other states*:	Number of		Recorded
(dollars in thousands)	Contracts		Investment

Commercial:
Commercial real estate		-	$	-
Other		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		6		500
Home equity loans		-		-
Home equity lines of credit		-		-

Total		6	$	500

Florida:
	Number of		Recorded
(dollars in thousands)	Contracts		Investment

Commercial:
Commercial real estate		-	$	-
Other		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1		136

Total		1	$	136

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In situations involving a borrower filing for bankruptcy protection, however, a loan is considered to be in payment default once it is 30 days contractually past due, consistent with the treatment of the bankruptcy court.

The TDR's that subsequently defaulted described above did not have a material impact on the allowance for loan losses as they were previously identified as nonaccrual loans. As a result, the underlying collateral was evaluated at the time these loans were placed on nonaccrual, and a charge-off was taken at that time, if necessary. Collateral values on these loans, as well as all other nonaccrual loans, are reviewed for collateral sufficiency on a quarterly basis.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. On at least an annual basis, the Company's loan review process analyzes non-homogeneous loans, such as commercial and commercial real estate loans, individually by grading the loans based on credit risk. The Company uses the following definitions for classified loans:

Special Mention: Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company's credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. All substandard loans are considered impaired.

The Company is not committed to lend any additional amounts to borrowers with outstanding loans that are classified as TDR's.

The following tables present modified loans by class that were determined to be TDR's that occurred during the three and nine months ended September 30, 2011:

	As of September 30, 2011
New York and other states*:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	186,200		7,383		193,583
Other		24,930		135		25,065

	$	211,130		7,518		218,648

Florida:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	20,222		5,400		25,622
Other		119		-		119

	$	20,341		5,400		25,741

	As of December 31, 2010
New York and other states*:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	189,809		6,994		196,803
Other		32,286		256		32,542

	$	222,095		7,250		229,345

Florida:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	20,363		8,281		28,644
Other		264		-		264

	$	20,627		8,281		28,908

For homogeneous loan pools, such as residential mortgages, home equity lines of credit, and installment loans, the Company uses payment status to identify the credit risk in these loan portfolios. Payment status is reviewed on a daily basis by the Bank's collection area and on a monthly basis with respect to determining the adequacy of the allowance for loan losses. The payment status of these homogeneous pools at September 30, 2011 and December 31, 2010 is included in the aging of the recorded investment of past due loans table. In addition, the total nonperforming portion of these homogeneous loan pools at September 30, 2011 and December 31, 2010 is presented in the recorded investment in non-accrual loans table.