Loans and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2014

Loans and Allowance for Loan Losses [Abstract]

Loans and Allowance for Loan Losses

(5) Loans and Allowance for Loan Losses

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

	March 31, 2014
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	168,226		22,097		190,323
Other		30,047		73		30,120
Real estate mortgage - 1 to 4 family:
First mortgages		1,928,369		394,053		2,322,422
Home equity loans		48,249		4,203		52,452
Home equity lines of credit		303,023		36,948		339,971
Installment		5,114		600		5,714
Total loans, net	$	2,483,028		457,974		2,941,002
Less: Allowance for loan losses						47,035
Net loans					$	2,893,967

	December 31, 2013
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	169,722		21,404		191,126
Other		32,323		32		32,355
Real estate mortgage - 1 to 4 family:
First mortgages		1,909,447		378,361		2,287,808
Home equity loans		47,494		3,642		51,136
Home equity lines of credit		304,044		36,445		340,489
Installment		5,292		603		5,895
Total loans, net	$	2,468,322		440,487		2,908,809
Less: Allowance for loan losses						47,714
Net loans					$	2,861,095

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

At March 31, 2014 and December 31, 2013, the Company had approximately $35.2 million and $35.4 million of real estate construction loans.  As of March 31, 2014, approximately $15.7 million are secured by first mortgages to residential borrowers while approximately $19.5 million were to commercial borrowers for residential construction projects. Of the $35.4 million in real estate construction loans at December 31, 2013, approximately $13.9 million are secured by first mortgages to residential borrowers while approximately $21.5 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 non-accrual loans by loan class:

	March 31, 2014
(dollars in thousands)	New York and
	other states		Florida		Total
Loans in nonaccrual status:
Commercial:
Commercial real estate	$	4,731		517		5,248
Other		122		-		122
Real estate mortgage - 1 to 4 family:
First mortgages		29,589		4,135		33,724
Home equity loans		663		-		663
Home equity lines of credit		4,345		533		4,878
Installment		103		7		110
Total non-accrual loans		39,553		5,192		44,745
Restructured real estate mortgages - 1 to 4 family		162		-		162
Total nonperforming loans	$	39,715		5,192		44,907

	December 31, 2013
(dollars in thousands)	New York and
	other states		Florida		Total
Loans in nonaccrual status:
Commercial:
Commercial real estate	$	6,620		-		6,620
Other		332		-		332
Real estate mortgage - 1 to 4 family:
First mortgages		26,713		4,781		31,494
Home equity loans		691		-		691
Home equity lines of credit		3,641		356		3,997
Installment		93		-		93
Total non-accrual loans		38,090		5,137		43,227
Restructured real estate mortgages - 1 to 4 family		166		-		166
Total nonperforming loans	$	38,256		5,137		43,393

As of March 31, 2014 and December 31, 2013, 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 as of March 31, 2014 and December 31, 2013:

New York and other states:

	March 31, 2014
(dollars in thousands)		30-59		60-89		90+	Total
	Days		Days		Days		30+ days				Total
	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	466		215		3,432		4,113		164,113		168,226
Other		-		-		122		122		29,925		30,047
Real estate mortgage - 1 to 4 family:
First mortgages		6,108		2,215		20,938		29,261		1,899,108		1,928,369
Home equity loans		29		48		469		546		47,703		48,249
Home equity lines of credit		1,238		253		2,172		3,663		299,360		303,023
Installment		37		5		85		127		4,987		5,114
Total	$	7,878		2,736		27,218		37,832		2,445,196		2,483,028

Florida:

(dollars in thousands)		30-59		60-89		90+	Total
	Days		Days		Days		30+ days				Total
	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	-		-		-		-		22,097		22,097
Other		-		-		-		-		73		73
Real estate mortgage - 1 to 4 family:
First mortgages		1,082		1,466		2,909		5,457		388,596		394,053
Home equity loans		22		-		-		22		4,181		4,203
Home equity lines of credit		23		-		533		556		36,392		36,948
Installment		-		4		3		7		593		600
Total	$	1,127		1,470		3,445		6,042		451,932		457,974

Total:

(dollars in thousands)		30-59		60-89		90+	Total
	Days		Days		Days		30+ days				Total
	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	466		215		3,432		4,113		186,210		190,323
Other		-		-		122		122		29,998		30,120
Real estate mortgage - 1 to 4 family:
First mortgages		7,190		3,681		23,847		34,718		2,287,704		2,322,422
Home equity loans		51		48		469		568		51,884		52,452
Home equity lines of credit		1,261		253		2,705		4,219		335,752		339,971
Installment		37		9		88		134		5,580		5,714
Total	$	9,005		4,206		30,663		43,874		2,897,128		2,941,002

New York and other states:

	December 31, 2013
(dollars in thousands)		30-59		60-89		90+	Total
	Days		Days		Days		30+ days				Total
	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	583		1,426		3,379		5,388		164,334		169,722
Other		209		-		123		332		31,991		32,323
Real estate mortgage - 1 to 4 family:
First mortgages		4,664		2,042		17,624		24,330		1,885,117		1,909,447
Home equity loans		46		18		552		616		46,878		47,494
Home equity lines of credit		1,014		331		1,897		3,242		300,802		304,044
Installment		85		12		77		174		5,118		5,292
Total	$	6,601		3,829		23,652		34,082		2,434,240		2,468,322

Florida:

(dollars in thousands)		30-59		60-89		90+	Total
	Days		Days		Days		30+ days				Total
	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	-		-		-		-		21,404		21,404
Other		-		-		-		-		32		32
Real estate mortgage - 1 to 4 family:
First mortgages		552		-		4,229		4,781		373,580		378,361
Home equity loans		-		-		-		-		3,642		3,642
Home equity lines of credit		109		-		247		356		36,089		36,445
Installment		-		2		-		2		601		603
Total	$	661		2		4,476		5,139		435,348		440,487

Total:

(dollars in thousands)		30-59		60-89		90+	Total
	Days		Days		Days		30+ days				Total
	Past Due		Past Due		Past Due		Past Due		Current		Loans
Commercial:
Commercial real estate	$	583		1,426		3,379		5,388		185,738		191,126
Other		209		-		123		332		32,023		32,355
Real estate mortgage - 1 to 4 family:
First mortgages		5,216		2,042		21,853		29,111		2,258,697		2,287,808
Home equity loans		46		18		552		616		50,520		51,136
Home equity lines of credit		1,123		331		2,144		3,598		336,891		340,489
Installment		85		14		77		176		5,719		5,895
Total	$	7,262		3,831		28,128		39,221		2,869,588		2,908,809

At March 31, 2014 and December 31, 2013, 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 on non-accrual status for reasons other than delinquent status. There are no commitments to extend further credit on nonaccrual or restructured loans.

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

(dollars in thousands)	For the three months ended March 31, 2014
	Commercial		Real Estate Mortgage 1 to 4 Family		Installment		Total
Balance at beginning of period	$	4,019		43,597		98		47,714
Loans charged off:
New York and other states		260		925		49		1,234
Florida		613		467		2		1,082
Total loan chargeoffs		873		1,392		51		2,316
Recoveries of loans previously charged off:
New York and other states		18		74		5		97
Florida		1		39		-		40
Total recoveries		19		113		5		137
Net loans charged off		854		1,279		46		2,179
Provision for loan losses		675		773		52		1,500
Balance at end of period	$	3,840		43,091		104		47,035

(dollars in thousands)	For the three months ended March 31, 2013
	Commercial		Real Estate Mortgage 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

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 as of March 31, 2014 and December 31, 2013:

	March 31, 2014
	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		3,840		43,091		104		47,035
Total ending allowance balance	$	3,840		43,091		104		47,035
Loans:
Individually evaluated for impairment	$	5,370		22,541		-		27,911
Collectively evaluated for impairment		215,073		2,692,304		5,714		2,913,091
Total ending loans balance	$	220,443		2,714,845		5,714		2,941,002

(dollars in thousands)	December 31, 2013
	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		4,019		43,597		98		47,714
Total ending allowance balance	$	4,019		43,597		98		47,714
Loans:
Individually evaluated for impairment	$	8,082		21,258		-		29,340
Collectively evaluated for impairment		215,399		2,658,175		5,895		2,879,469
Total ending loans balance	$	223,481		2,679,433		5,895		2,908,809

The Company did not acquire any loans with deteriorated credit quality in 2014 and 2013.

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, 2014 and December 31, 2013 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 March 31, 2014 and December 31, 2013:

New York and other states:

	March 31, 2014
(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment
Commercial:
Commercial real estate	$	4,731		6,813		-		5,339
Other		122		122		-		122
Real estate mortgage - 1 to 4 family:
First mortgages		17,140		18,321		-		17,076
Home equity loans		461		485		-		521
Home equity lines of credit		2,573		2,978		-		2,598
Total	$	25,027		28,719		-		25,656

Florida:

(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment
Commercial:
Commercial real estate	$	517		1,130		-		926
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1,732		2,024		-		1,734
Home equity loans		-		-		-		-
Home equity lines of credit		635		734		-		449
Total	$	2,884		3,888		-		3,109

Total:

(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment
Commercial:
Commercial real estate	$	5,248		7,943		-		6,265
Other		122		122		-		122
Real estate mortgage - 1 to 4 family:
First mortgages		18,872		20,345		-		18,810
Home equity loans		461		485		-		521
Home equity lines of credit		3,208		3,712		-		3,047
Total	$	27,911		32,607		-		28,765

New York and other states:

	December 31, 2013
(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment
Commercial:
Commercial real estate	$	6,620		8,039		-		6,013
Other		332		332		-		165
Real estate mortgage - 1 to 4 family:
First mortgages		16,257		17,353		-		14,706
Home equity loans		561		614		-		636
Home equity lines of credit		2,528		2,825		-		2,051
Total	$	26,298		29,163		-		23,571

Florida:

(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment
Commercial:
Commercial real estate	$	1,130		1,130		-		1,401
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1,630		1,922		-		1,611
Home equity lines of credit		282		380		-		100
Total	$	3,042		3,432		-		3,112

Total:

(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment
Commercial:
Commercial real estate	$	7,750		9,169		-		7,414
Other		332		332		-		165
Real estate mortgage - 1 to 4 family:
First mortgages		17,887		19,275		-		16,317
Home equity loans		561		614		-		636
Home equity lines of credit		2,810		3,205		-		2,151
Total	$	29,340		32,595		-		26,683

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 2014 and 2013.

As of March 31, 2014 and December 31, 2013 impaired loans included in approximately $8.9 million and $8.6 million of 1 to 4 family residential real estate loans in accruing status that were identified as TDR’s in accordance with regulatory guidance related to Chapter 7 bankruptcy loans.

Management evaluates impairment on impaired loans on a quarterly basis. 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, 2014 and December 31, 2013, 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).

The following table presents, by class, loans that were modified as TDR’s during the three months ended March 31, 2014 and 2013:

	During the three months ended 3/31/2014						During the three months ended 3/31/2013
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		8		1,378		1,378		12		1,466		1,466
Home equity loans		1		4		4		3		61		61
Home equity lines of credit		1		122		122		5		134		134
Total		10	$	1,504		1,504		20	$	1,661		1,661

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		2		173		173		3		387		387
Home equity lines of credit		2		354		354		-		-		-
Total		4	$	527		527		3	$	387		387

  The addition of these TDR’s did not have a significant impact on the allowance for loan losses.

The following table presents, by class, TDR’s that defaulted during the three months ended March 31, 2014 and 2013 which had been modified within the last twelve months:

	Three months ended 3/31/2014				Three months ended 3/31/2013
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		4		245		20		2,773
Home equity loans		-		-		4		147
Home equity lines of credit		-		-		9		551
Total		4	$	245		33	$	3,471

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
Home equity lines of credit		1		280		-		-
Total		1	$	280		5	$	607

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.

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 Chapter 13 bankruptcy protection, however, a loan is considered to be in payment default once it is 30 days contractually past due, consistent with the treatment by the bankruptcy court.

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 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 grading 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. In addition, the Company’s internal loan review department reviews non-homogeneous loans over $250 thousand by testing the loan grades assigned through the Company’s grading process.

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.

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, 2014 and December 31, 2013, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	March 31, 2014
New York and other states:
(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	160,244		7,982		168,226
Other		29,555		492		30,047
	$	189,799		8,474		198,273

Florida:
(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	21,580		517		22,097
Other		73		-		73
	$	21,653		517		22,170

	December 31, 2013
New York and other states:
(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	159,024		10,698		169,722
Other		31,691		632		32,323
	$	190,715		11,330		202,045

Florida:
(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	20,274		1,130		21,404
Other		32		-		32
	$	20,306		1,130		21,436

Included in classified loans in the above tables are impaired loans of $5.4 million and $8.1 million at March 31, 2014 and December 31, 2013, respectively.

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, 2014 and December 31, 2013 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, 2014 and December 31, 2013 is presented in the recorded investment in non-accrual loans table.