(5) Loans and Allowance for Loan Losses

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

	March 31, 2013
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	164,449		19,422		183,871
Other		28,708		58		28,766
Real estate mortgage - 1 to 4 family:
First mortgages		1,824,116		296,169		2,120,285
Home equity loans		32,746		1,157		33,903
Home equity lines of credit		298,619		33,492		332,111
Installment		4,354		477		4,831
Total loans, net	$	2,352,992		350,775		2,703,767
Less: Allowance for loan losses						47,658
Net loans					$	2,656,109

	December 31, 2012
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	167,249		18,882		186,131
Other		33,381		65		33,446
Real estate mortgage - 1 to 4 family:
First mortgages		1,814,214		275,764		2,089,978
Home equity loans		35,601		1,089		36,690
Home equity lines of credit		301,338		32,571		333,909
Installment		4,183		396		4,579
Total loans, net	$	2,355,966		328,767		2,684,733
Less: Allowance for loan losses						47,927
Net loans					$	2,636,806

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

At March 31, 2013 and December 31, 2012, the Company had approximately $36.8 million and $37.2 million of real estate construction loans. As of March 31, 2013, approximately $15.5 million are secured by first mortgages to residential borrowers while approximately $21.3 million were to commercial borrowers for residential constructions projects. Of the $37.2 million in real estate construction loans at December 31, 2012, approximately $16.4 million were secured by first mortgages to residential borrowers and the remaining $20.8 million were to commercial borrowers for residential construction projects. The vast majority of construction loans are in the Company's New York market.

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 nonaccrual loans by loan class:

	March 31, 2013
(dollars in thousands)	New York and
	other states*		Florida		Total
Loans in nonaccrual status:
Commercial:
Commercial real estate	$	5,854		2,595		8,449
Other		124		-		124
Real estate mortgage - 1 to 4 family:
First mortgages		28,660		6,534		35,194
Home equity loans		734		-		734
Home equity lines of credit		4,633		479		5,112
Installment		35		1		36
Total non-accrual loans		40,040		9,609		49,649
Restructured real estate mortgages - 1 to 4 family		225		-		225
Total nonperforming loans	$	40,265		9,609		49,874

	December 31, 2012
(dollars in thousands)	New York and
	other states*		Florida		Total
Loans in nonaccrual status:
Commercial:
Commercial real estate	$	6,511		2,698		9,209
Other		124		-		124
Real estate mortgage - 1 to 4 family:
First mortgages		30,329		7,319		37,648
Home equity loans		694		-		694
Home equity lines of credit		4,263		501		4,764
Installment		6		1		7
Total non-accrual loans		41,927		10,519		52,446
Restructured real estate mortgages - 1 to 4 family		231		-		231
Total nonperforming loans	$	42,158		10,519		52,677

As of March 31, 2013 and December 31, 2012, the Company's loan portfolio did not include any subprime mortgages 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:

New York and other states:
	March 31, 2013
(dollars in thousands)	30-59 Days		60-89 Days		90+ Days		Total 30+ days				Total
	Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	507		737		2,979		4,223		160,226		164,449
Other		30		120		4		154		28,554		28,708
Real estate mortgage - 1 to 4 family:
First mortgages		4,839		1,726		21,328		27,893		1,796,223		1,824,116
Home equity loans		75		93		537		705		32,041		32,746
Home equity lines of credit		794		330		3,599		4,723		293,896		298,619
Installment		79		12		7		98		4,256		4,354

Total	$	6,324		3,018		28,454		37,796		2,315,196		2,352,992


Florida:

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

Commercial:
Commercial real estate	$	-		-		2,595		2,595		16,827		19,422
Other		-		-		-		-		58		58
Real estate mortgage - 1 to 4 family:
First mortgages		796		501		4,461		5,758		290,411		296,169
Home equity loans		-		-		-		-		1,157		1,157
Home equity lines of credit		215		-		420		635		32,857		33,492
Installment		3		-		-		3		474		477

Total	$	1,014		501		7,476		8,991		341,784		350,775


Total:

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

Commercial:
Commercial real estate	$	507		737		5,574		6,818		177,053		183,871
Other		30		120		4		154		28,612		28,766
Real estate mortgage - 1 to 4 family:
First mortgages		5,635		2,227		25,789		33,651		2,086,634		2,120,285
Home equity loans		75		93		537		705		33,198		33,903
Home equity lines of credit		1,009		330		4,019		5,358		326,753		332,111
Installment		82		12		7		101		4,730		4,831

Total	$	7,338		3,519		35,930		46,787		2,656,980		2,703,767

New York and other states:
	December 31, 2012
	30-59 Days		60-89 Days		90+ Days		Total 30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	-		-		3,225		3,225		164,024		167,249
Other		-		-		4		4		33,377		33,381
Real estate mortgage - 1 to 4 family:
First mortgages		6,364		2,248		21,341		29,953		1,784,261		1,814,214
Home equity loans		177		216		464		857		34,744		35,601
Home equity lines of credit		604		350		3,044		3,998		297,340		301,338
Installment		40		27		-		67		4,116		4,183

Total	$	7,185		2,841		28,078		38,104		2,317,862		2,355,966

Florida:

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

Commercial:
Commercial real estate	$	-		-		2,698		2,698		16,184		18,882
Other		-		-		-		-		65		65
Real estate mortgage - 1 to 4 family:
First mortgages		862		452		5,390		6,704		269,060		275,764
Home equity loans		-		-		-		-		1,089		1,089
Home equity lines of credit		59		29		442		530		32,041		32,571
Installment		9		-		1		10		386		396

Total	$	930		481		8,531		9,942		318,825		328,767

Total:


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

Commercial:
Commercial real estate	$	-		-		5,923		5,923		180,208		186,131
Other		-		-		4		4		33,442		33,446
Real estate mortgage - 1 to 4 family:
First mortgages		7,226		2,700		26,731		36,657		2,053,321		2,089,978
Home equity loans		177		216		464		857		35,833		36,690
Home equity lines of credit		663		379		3,486		4,528		329,381		333,909
Installment		49		27		1		77		4,502		4,579

Total	$	8,115		3,322		36,609		48,046		2,636,687		2,684,733

At March 31, 2013 and December 31, 2012, there were no loans that are 90 days past due and still accruing interest. As a result, nonaccrual 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. There are no commitments to extend further credit on nonaccrual or restructured loans.

Transactions in the allowance for loan losses are summarized as follows:

(dollars in thousands)	For the three months ended March 31, 2013
			Real Estate
			Mortgage-
	Commercial		1 to 4 Family		Installment		Total
Balance at beginning of period	$	3,771		44,069		87		47,927
Loans charged off:
New York and other states*		250		1,637		19		1,906
Florida		100		405		-		505
Total loan chargeoffs		350		2,042		19		2,411

Recoveries of loans previously charged off:
New York and other states*		2		74		4		80
Florida		1		61		-		62
Total recoveries		3		135		4		142
Net loans charged off		347		1,907		15		2,269
Provision for loan losses		540		1,433		27		2,000
Balance at end of period	$	3,964		43,595		99		47,658

(dollars in thousands)	For the three months ended March 31, 2012
			Real Estate
			Mortgage-
	Commercial		1 to 4 Family		Installment			Total
Balance at beginning of period	$	3,737		44,882		98			48,717
Loans charged off:
New York and other states*		324		1,257		8			1,589
Florida		168		1,675		-			1,843
Total loan chargeoffs		492		2,932		8			3,432

Recoveries of loans previously charged off:
New York and other states*		3		121		16			140
Florida		8		2		-			10
Total recoveries		11		123		16			150
Net loans charged off		481		2,809		(8	)		3,282
Provision for loan losses		346		2,778		(24	)		3,100
Balance at end of period	$	3,602		44,851		82			48,535

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:

	March 31, 2013
			1-to-4 Family
	Commercial Loans		Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		3,964		43,595		99		47,658

Total ending allowance balance	$	3,964		43,595		99		47,658


Loans:
Individually evaluated for impairment	$	8,573		18,018		-		26,591
Collectively evaluated for impairment		204,064		2,468,281		4,831		2,677,176

Total ending loans balance	$	212,637		2,486,299		4,831		2,703,767


	December 31, 2012
			1-to-4 Family
	Commercial Loans		Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		3,771		44,069		87		47,927

Total ending allowance balance	$	3,771		44,069		87		47,927


Loans:
Individually evaluated for impairment	$	9,333		16,740		-		26,073
Collectively evaluated for impairment		210,244		2,443,837		4,579		2,658,660

Total ending loans balance	$	219,577		2,460,577		4,579		2,684,733

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 at March 31, 2013 and December 31, 2012 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:

New York and other states:
	March 31, 2013
(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment

Commercial:
Commercial real estate	$	5,854		6,762		-		6,025
Other		124		124		-		124
Real estate mortgage - 1 to 4 family:
First mortgages		13,892		15,080		-		13,340
Home equity loans		677		719		-		676
Home equity lines of credit		1,765		2,079		-		1,733

Total	$	22,312		24,764		-		21,898

Florida:

(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment

Commercial:
Commercial real estate	$	2,595		3,887		-		2,630
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1,636		2,658		-		1,466
Home equity loans		-		-		-		-
Home equity lines of credit		48		176		-		48

Total	$	4,279		6,721		-		4,144


Total:
(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment

Commercial:
Commercial real estate	$	8,449		10,649		-		8,655
Other		124		124		-		124
Real estate mortgage - 1 to 4 family:
First mortgages		15,528		17,738		-		14,806
Home equity loans		677		719		-		676
Home equity lines of credit		1,813		2,255		-		1,781

Total	$	26,591		31,485		-		26,042

New York and other states:
	December 31, 2012
(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment

Commercial:
Commercial real estate	$	6,511		7,169		-		5,615
Other		124		124		-		107
Real estate mortgage - 1 to 4 family:
First mortgages		12,964		14,143		-		6,075
Home equity loans		623		664		-		260
Home equity lines of credit		1,633		1,735		-		458

Total	$	21,855		23,835		-		12,515

Florida:

(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment

Commercial:
Commercial real estate	$	2,698		3,890		-		5,871
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1,472		2,665		-		948
Home equity lines of credit		48		176		-		24

Total	$	4,218		6,731		-		6,843

Total:

(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment

Commercial:
Commercial real estate	$	9,209		11,059		-		11,486
Other		124		124		-		107
Real estate mortgage - 1 to 4 family:
First mortgages		14,436		16,808		-		7,023
Home equity loans		623		664		-		260
Home equity lines of credit		1,681		1,911		-		482

Total	$	26,073		30,566		-		19,358

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. Interest income recognized on impaired loans was not material in 2013 or 2012.

Included in impaired loans as of March 31, 2013 are approximately $11.4 million of 1 to 4 family residential real estate loans that were identified as TDR's in accordance with OCC guidance on Chapter 7 bankruptcy loans.

Management evaluates impairment on commercial and commercial real estate loans that are on nonaccrual status 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 March 31, 2013 and December 31, 2012, based upon management's evaluation of the adequacy of the underlying collateral, if any, and due to the sufficiency of chargeoffs taken, none of the allowance for loan losses has been allocated to impaired loan(s), including TDR's.

During the three months ended March 31, 2013 and 2012, there were $68 thousandand $28 thousand of chargeoffs on loans identified as TDR's.

The following table presents modified loans by class that were determined to be TDR's that occurred during the three months and twelve months ended March 31, 2013 and 2012:

	During the three months ended 3/31/2013						During the three months ended 3/31/2012
New York and other states*:			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification
			Outstanding		Outstanding				Outstanding		Outstanding
	Number of		Recorded		Recorded		Number of		Recorded		Recorded
(dollars in thousands)	Contracts		Investment		Investment		Contracts		Investment		Investment

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-
Real estate mortgage - 1 to 4 family:
First mortgages		12		1,466		1,466		4		442		434
Home equity loans		3		61		61		-		-		-
Home equity lines of credit		5		134		134		-		-		-

Total		20	$	1,661		1,661		4	$	442		434

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

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-
Real estate mortgage - 1 to 4 family:
First mortgages		3		387		387		1		163		154
Home equity lines of credit		-		-		-		-		-		-

Total		3	$	387		387		1	$	163		154

	During the twelve months ended 3/31/2013						During the twelve months ended 3/31/2012
New York and other states*:			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification
			Outstanding		Outstanding				Outstanding		Outstanding
	Number of		Recorded		Recorded		Number of		Recorded		Recorded
(dollars in thousands)	Contracts		Investment		Investment		Contracts		Investment		Investment

Commercial:
Commercial real estate		2	$	136		136		1	$	91		90
Real estate mortgage - 1 to 4 family:
First mortgages		108		12,125		12,125		25		2,763		2,516
Home equity loans		20		519		519		3		120		106
Home equity lines of credit		37		1,882		1,882		-		-		-

Total		167	$	14,662		14,662		29	$	2,974		2,712

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

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-
Real estate mortgage - 1 to 4 family:
First mortgages		13		1,432		1,432		5		682		549
Home equity lines of credit		2		48		48		-		-		-

Total		15	$	1,480		1,480		5	$	682		549

The following table presents loans by class modified as TDR's that occurred during the twelve months ended March 31, 2013 and 2012 for which there was a payment default during the same period:

	Twelve months ended 3/31/2013				Twelve months ended 3/31/2012
New York and other states*:	Number of		Recorded		Number of		Recorded
(dollars in thousands)	Contracts		Investment		Contracts		Investment

Commercial:
Commercial real estate		-	$	-		-	$	-
Real estate mortgage - 1 to 4 family:
First mortgages		20		2,773		20		2,151
Home equity loans		4		147		3		106
Home equity lines of credit		9		551		-		-

Total		33	$	3,471		23	$	2,257

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

Commercial:
Commercial real estate		-	$	-		-	$	-
Real estate mortgage - 1 to 4 family:
First mortgages		5		607		5		549
Home equity lines of credit		-		-		-		-

Total		5	$	607		5	$	549

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, the modification of the terms of loans was the result of the borrower filing for bankruptcy protection. Chapter 13 bankruptcies generally include the deferral of all past due amounts for a period of generally 60 months in accordance with the bankruptcy court order. In the case of Chapter 7 bankruptcies, as previously noted, even though there is no modification of terms, the borrowers' debt to the Company was discharged and they did not reaffirm the debt.

The TDR's that subsequently defaulted described above did not have a material impact on the allowance for loan losses as the underlying collateral was evaluated at the time these loans were identified as TDR's, 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 over $150 thousand, 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.

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.

As of March 31, 2013 and December 31, 2012, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	March 31, 2013
New York and other states:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	153,740		10,709		164,449
Other		28,394		314		28,708

	$	182,134		11,023		193,157

Florida:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	13,236		6,186		19,422
Other		58		-		58

	$	13,294		6,186		19,480

	December 31, 2012
New York and other states:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	155,981		11,268		167,249
Other		33,067		314		33,381

	$	189,048		11,582		200,630

Florida:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	12,454		6,428		18,882
Other		65		-		65

	$	12,519		6,428		18,947

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 March 31, 2013 and December 31, 2012 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 March 31, 2013 and December 31, 2012 is presented in the recorded investment in nonaccrual loans table.