5. Loans and Allowance for Loan Losses

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

	June 30, 2012
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	183,365		24,696		208,061
Other		27,170		116		27,286
Real estate mortgage - 1 to 4 family:
First mortgages		1,756,019		205,547		1,961,566
Home equity loans		40,493		987		41,480
Home equity lines of credit		288,915		28,242		317,157
Installment		4,009		62		4,071
Total loans, net	$	2,299,971		259,650		2,559,621
Less: Allowance for loan losses						48,018
Net loans					$	2,511,603

	December 31, 2011
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	189,101		25,226		214,327
Other		33,734		102		33,836
Real estate mortgage - 1 to 4 family:
First mortgages		1,731,127		177,518		1,908,645
Home equity loans		46,082		1,224		47,306
Home equity lines of credit		285,762		27,276		313,038
Installment		4,078		73		4,151
Total loans, net	$	2,289,884		231,419		2,521,303
Less: Allowance for loan losses						48,717
Net loans					$	2,472,586

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

At June 30, 2012 and December 31, 2011, the Company had approximately $35.3 million and $32.5 million of real estate construction loans, respectively. As of June 30, 2012, approximately $12.9 million are secured by first mortgages to residential borrowers while approximately $22.4 million were to commercial borrowers for residential constructions projects. Of the $32.5 million in real estate construction loans at December 31, 2011, approximately $11.6 million were secured by first mortgages to residential borrowers with the remaining $20.9 million were to commercial borrowers for residential construction projects. The vast majority of construction loans are secured by residential real estate in the Company's New York market area.

TrustCo lends in the geographic territory of its branch locations in New York, Florida, Massachusetts, New Jersey and Vermont. Although the loan portfolio is diversified, a portion of its debtors' ability to repay depends significantly on the economic conditions prevailing in the respective geographic territory.

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

	June 30, 2012
(dollars in thousands)	New York and
	other states*		Florida		Total
Loans in nonaccrual status:
Commercial:
Commercial real estate	$	5,530		8,435		13,965
Other		126		-		126
Real estate mortgage - 1 to 4 family:
First mortgages		25,296		7,525		32,821
Home equity loans		582		42		624
Home equity lines of credit		3,289		387		3,676
Installment		1		1		2
Total non-accrual loans		34,824		16,390		51,214
Other nonperforming real estate mortgages - 1 to 4 family		243		-		243
Total nonperforming loans	$	35,067		16,390		51,457

	December 31, 2011
(dollars in thousands)	New York and
	other states*		Florida		Total
Loans in nonaccrual status:
Commercial:
Commercial real estate	$	4,968		5,000		9,968
Other		13		-		13
Real estate mortgage - 1 to 4 family:
First mortgages		24,392		9,862		34,254
Home equity loans		968		57		1,025
Home equity lines of credit		2,460		743		3,203
Installment		3		-		3
Total non-accrual loans		32,804		15,662		48,466
Other nonperforming real estate mortgages - 1 to 4 family		312		-		312
Total nonperforming loans	$	33,116		15,662		48,778

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

As of June 30, 2012 and December 31, 2011, 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:

	June 30, 2012
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	$	228		68		3,132		3,428		179,937		183,365
Other		22		6		98		126		27,044		27,170
Real estate mortgage - 1 to 4 family:
First mortgages		3,859		2,947		20,172		26,978		1,729,041		1,756,019
Home equity loans		343		110		449		902		39,591		40,493
Home equity lines of credit		632		307		2,612		3,551		285,364		288,915
Installment		82		16		-		98		3,911		4,009

Total	$	5,166		3,454		26,463		35,083		2,264,888		2,299,971

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	$	-		-		8,435		8,435		16,261		24,696
Other		-		-		-		-		116		116
Real estate mortgage - 1 to 4 family:
First mortgages		666		1,312		5,981		7,959		197,588		205,547
Home equity loans		64		-		42		106		881		987
Home equity lines of credit		288		236		328		852		27,390		28,242
Installment		11		-		1		12		50		62

Total	$	1,029		1,548		14,787		17,364		242,286		259,650

	December 31, 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	$	400		-		3,157		3,557		185,544		189,101
Other		-		-		-		-		33,734		33,734
Real estate mortgage - 1 to 4 family:
First mortgages		7,850		2,313		20,294		30,457		1,700,670		1,731,127
Home equity loans		186		32		852		1,070		45,012		46,082
Home equity lines of credit		871		473		2,371		3,715		282,047		285,762
Installment		29		4		2		35		4,043		4,078

Total	$	9,336		2,822		26,676		38,834		2,251,050		2,289,884

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	$	1,042		-		5,000		6,042		19,184		25,226
Other		-		-		-		-		102		102
Real estate mortgage - 1 to 4 family:
First mortgages		813		1,502		8,973		11,288		166,230		177,518
Home equity loans		68		-		65		133		1,091		1,224
Home equity lines of credit		100		91		684		875		26,401		27,276
Installment		1		-		-		1		72		73

Total	$	2,024		1,593		14,722		18,339		213,080		231,419

As of June 30, 2012 and December 31, 2011, 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 certain loans less than 90 days past due that were placed in non-accruing status for reasons other than delinquent status.

Interest on nonaccrual and restructured loans that was collected and recognized as income during the three months and six months ended June 30, 2012, and 2011, was not material.

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

(dollars in thousands)	For the three months ended June 30, 2012
			Real Estate
			Mortgage-
	Commercial		1 to 4 Family		Installment		Total
Balance at beginning of period	$	3,602		44,851		82		48,535
Loans charged off:
New York and other states*		715		1,956		22		2,693
Florida		288		674		-		962
Total loan chargeoffs		1,003		2,630		22		3,655

Recoveries of loans previously charged off:
New York and other states*		2		112		15		129
Florida		-		9		-		9
Total recoveries		2		121		15		138
Net loans charged off		1,001		2,509		7		3,517
Provision for loan losses		1,191		1,805		4		3,000
Balance at end of period	$	3,792		44,147		79		48,018

(dollars in thousands)	For the three months ended June 30, 2011
			Real Estate
			Mortgage-
	Commercial		1 to 4 Family		Installment			Total
Balance at beginning of period	$	4,150		39,336		194			43,680
Loans charged off:
New York and other states*		19		810		26			855
Florida		600		1,741		-			2,341
Total loan chargeoffs		619		2,551		26			3,196

Recoveries of loans previously charged off:
New York and other states*		51		131		18			200
Florida		1		26		-			27
Total recoveries		52		157		18			227
Net loans charged off		567		2,394		8			2,969
Provision for loan losses		581		4,302		(33	)		4,850
Balance at end of period	$	4,164		41,244		153			45,561

(dollars in thousands)	For the six months ended June 30, 2012
			Real Estate
			Mortgage-
	Commercial		1 to 4 Family		Installment			Total
Balance at beginning of period	$	4,140		44,479		98			48,717
Loans charged off:
New York and other states*		1,039		3,213		30			4,282
Florida		456		2,349		-			2,805
Total loan chargeoffs		1,495		5,562		30			7,087

Recoveries of loans previously charged off:
New York and other states*		5		233		31			269
Florida		8		11		-			19
Total recoveries		13		244		31			288
Net loans charged off		1,482		5,318		(1	)		6,799
Provision for loan losses		1,134		4,986		(20	)		6,100
Balance at end of period	$	3,792		44,147		79			48,018

(dollars in thousands)	For the six months ended June 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*		69		1,815		48			1,932
Florida		600		3,618		1			4,219
Total loan chargeoffs		669		5,433		49			6,151

Recoveries of loans previously charged off:
New York and other states*		51		237		31			319
Florida		4		27		1			32
Total recoveries		55		264		32			351
Net loans charged off		614		5,169		17			5,800
Provision for loan losses		551		8,965		(66	)		9,450
Balance at end of period	$	4,164		41,244		153			45,561

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:

	June 30, 2012
			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		3,792		44,147		79		48,018

Total ending allowance balance	$	3,792		44,147		79		48,018

Loans:
Individually evaluated for impairment	$	14,091		4,951		-		19,042
Collectively evaluated for impairment		221,256		2,315,252		4,071		2,540,579

Total ending loans balance	$	235,347		2,320,203		4,071		2,559,621

	December 31, 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		4,140		44,479		98		48,717

Total ending allowance balance	$	4,140		44,479		98		48,717

Loans:
Individually evaluated for impairment	$	9,981		3,730		-		13,711
Collectively evaluated for impairment		238,182		2,265,259		4,151		2,507,592

Total ending loans balance	$	248,163		2,268,989		4,151		2,521,303

The Company did not acquire any loans with deteriorated credit quality in 2012 and 2011.

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

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 are included in nonaccrual loans at June 30, 2012 and December 31, 2011, 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.

The following tables present impaired loans by loan class as of June 30, 2012 and December 31, 2011:

	June 30, 2012
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	$	5,530		5,958		-		5,411		-
Other		126		116		-		90		-
Real estate mortgage - 1 to 4 family:
First mortgages		3,777		4,407		-		3,345		11
Home equity loans		141		198		-		143		-
Home equity lines of credit		106		180		-		53		-

Total	$	9,680		10,859		-		9,042		11

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

Commercial:
Commercial real estate	$	8,435		12,190		-		7,133		-
Other		-		6		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		927		1,737		-		660		-
Home equity lines of credit		-		-		-		-		-

Total	$	9,362		13,933		-		7,793		-

	December 31, 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	$	4,968		5,684		-		5,198		-
Other		13		32		-		56		-
Real estate mortgage - 1 to 4 family:
First mortgages		2,874		3,299		-		1,664		30
Home equity loans		151		199		-		69		3
Home equity lines of credit		-		75		-		-		2

Total	$	8,006		9,289		-		6,987		35

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

Commercial:
Commercial real estate	$	5,000		9,042		-		6,774		-
Other		-		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		705		1,301		-		224		-

Total	$	5,705		10,343		-		6,998		-

In the preceding tables, the average recorded investment in impaired loans includes the year-to-date average of all impaired loans.

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 June 30, 2012 and December 31, 2011, 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 of June 30, 2012 and December 31, 2011, total TDR's amounted to $6.2 million and $5.2 million, respectively.

As of June 30, 2012, 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 months and six months ended June 30, 2012, there were $233 thousand and $295 thousand of chargeoffs on loans identified as TDR's, respectively.

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 months and the twelve months ended June 30, 2012:

	During the three months ended June 30, 2012
New York and other states*:	Number of		Pre-Modification Outstanding Recorded		Post-Modification Outstanding Recorded


(dollars in thousands)	Contracts		Investment		Investment

Commercial:
Commercial real estate		-	$	-		-
Other		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		9		890		853
Home equity loans		1		5		5
Home equity lines of credit		1		106		106

Total		11	$	1,001		964

Florida:	Number of		Pre-Modification Outstanding Recorded		Post-Modification Outstanding Recorded


(dollars in thousands)	Contracts		Investment		Investment

Commercial:
Commercial real estate		-	$	-		-
Other		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		4		403		386

Total		4	$	403		386

	During the twelve months ended June 30, 2012
New York and other states*:	Number of		Pre-Modification Outstanding Recorded		Post-Modification Outstanding Recorded


(dollars in thousands)	Contracts		Investment		Investment

Commercial:
Commercial real estate		1	$	91		90
Other		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		27		3,348		2,831
Home equity loans		4		125		103
Home equity lines of credit		1		106		106

Total		33	$	3,670		3,130

Florida:	Number of		Pre-Modification Outstanding Recorded		Post-Modification Outstanding Recorded


(dollars in thousands)	Contracts		Investment		Investment

Commercial:
Commercial real estate		-	$	-		-
Other		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		9		1,085		926

Total		9	$	1,085		926

In addition to the loans in the preceding tables, as of June 30, 2012, the Company has approximately $1.5 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 June 30, 2012 and December 31, 2011. As of June 30, 2012, 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 June 30, 2012 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		24		2,560
Home equity loans		3		98
Home equity lines of credit		-		-

Total		27	$	2,658

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

Commercial:
Commercial real estate		-	$	-
Other		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		9		926

Total		9	$	926

In situations where the Bank considers a 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. Generally, modification of the terms of 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.

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 existing substandard loans are considered impaired.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those loans classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. All doubtful loans are considered impaired.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	As of June 30, 2012
New York and other states*:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	172,628		10,737		183,365
Other		26,994		176		27,170

	$	199,622		10,913		210,535

Florida:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	13,661		11,035		24,696
Other		116		-		116

	$	13,777		11,035		24,812

	As of December 31, 2011
New York and other states*:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	181,809		7,384		189,193
Other		33,721		13		33,734

	$	215,530		7,397		222,927

Florida:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	17,534		7,600		25,134
Other		102		-		102

	$	17,636		7,600		25,236

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 June 30, 2012 and December 31, 2011 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 June 30, 2012 and December 31, 2011 is presented in the recorded investment in non-accrual loans table.