	2014
	3 Month Yield (%)		2 Year Yield (%)		5 Year Yield (%)		10 Year Yield (%)		10 Year - 2 Year Spread (%)

Beginning of Year		0.07		0.39		1.72		3.00		2.61
Peak		0.08		0.73		1.85		3.01		2.61
Trough		0.01		0.30		1.37		2.07		1.46
End of Year		0.04		0.67		1.65		2.17		1.50
Average		0.03		0.46		1.64		2.54		2.08

	2013
	3 Month Yield (%)		2 Year Yield (%)		5 Year Yield (%)		10 Year Yield (%)		10 Year - 2 Year Spread (%)

Beginning of Year		0.08		0.27		0.76		1.86		1.59
Peak		0.14		0.52		1.85		3.04		2.66
Trough		0.00		0.20		0.65		1.66		1.46
End of Year		0.07		0.38		1.75		3.04		2.66
Average		0.06		0.31		1.17		2.35		2.04

The decrease in the provision for loan losses from $7.0 million in 2013 to $5.1 million in 2014 positively affected net income. Net charge-offs decreased from $7.2 million in 2013 to $6.5 million in 2014. Nonperforming loans decreased from $43.4 million to $34.0 million and the nature of these loans changed in terms of both geographic location and, to a lesser degree, loan type. The decline in the provision for loan losses is primarily a reflection of the improvement in the performance of the loan portfolio and economic conditions, with reductions in both nonperforming loans (“NPLs”) and charge-offs.

TrustCo focuses on providing high quality service to the communities served by its branch-banking network. The financial results for the Company are influenced by economic events that affect those communities, as well as national economic trends, primarily interest rates, affecting the entire banking industry.

TrustCo added five new branches in 2014, bringing the total to 144 at year-end. The Company remains focused on building its customer relationships, deposits and loans throughout its branch network, with a particular emphasis on the branches added during the major branch expansion that was completed in 2010. Although that specific expansion program is complete, the Company typically opens new offices each year, filling in or extending existing markets. The expansion program was established to expand the franchise to areas experiencing economic growth, specifically in central Florida and the downstate New York region. The Company has experienced significant growth in both new markets as measured by deposit balances, and to a lesser extent, by loan balances. All new branches have the same products and features found at other TrustCo locations. With a combination of competitive rates, excellent service and convenient locations, management believes that the new branches will continue to attract deposit and loan customers and be a welcome addition to these communities. The branches opened since the expansion program began have continued to add to the Company’s customer base. As expected, some branches have grown more rapidly than others. Typically, new bank branches continue to grow for years after being opened. The expansion program has contributed significantly to the growth of both deposits and loans in recent years, as well as to non-interest income and non-interest expense. The higher costs are offset by net interest income earned on core loans and deposits generated by these branches, as well as associated non-interest income. The costs associated with the major expansion program are expected to continue to stabilize and reduce the growth rate in non-interest expenses. Revenue growth is expected to continue, as these branches typically continue to add new customers and increase penetration with existing customers over time.

Asset/Liability Management

In managing its balance sheet, TrustCo utilizes funding and capital sources within sound credit, investment, interest rate, and liquidity risk guidelines established by management and approved by the Board of Directors. Loans and securities (including Federal Funds sold and other short term investments) are the Company’s primary earning assets. Average interest earning assets were 98.1% of average total assets for 2014, compared to 98.0% for 2013.

TrustCo, through its management of liabilities, attempts to provide stable and flexible sources of funding within established liquidity and interest rate risk guidelines. This is accomplished through core deposit banking products offered within the markets served by the Company. TrustCo does not actively seek to attract out-of-area deposits or so-called “hot money;” rather the Company focuses on core relationships with both depositors and borrowers.

TrustCo’s objectives in managing its balance sheet are to limit the sensitivity of net interest income to actual or potential changes in interest rates and to enhance profitability through strategies that should provide sufficient reward for predicted and controlled risk. The Company is deliberate in its effort to maintain adequate liquidity under prevailing and projected economic conditions and to maintain an efficient and appropriate mix of core deposit relationships. The Company relies on traditional banking investment instruments and its large base of core deposits to help in asset/liability management. Predicting the impact of changing rates on the Company’s net interest income and net fair value of its balance sheet is complex and subject to uncertainty for a number of reasons. For example, in making a general assumption that rates will rise, a myriad of other assumptions regarding whether the slope of the yield curve remains the same or changes, whether the spreads of various loans, deposits and investments remain unchanged, widen or narrow and what changes occur in customer behavior all need to be made. The Company routinely models various rate changes and monitors basis changes that may be incorporated into that modeling.

Interest Rates

TrustCo competes with other financial service providers based upon many factors including quality of service, convenience of operations and rates paid on deposits and charged on loans. The absolute level of interest rates, changes in rates and customers’ expectations with respect to the direction of interest rates have a significant impact on the volume of loan and deposit originations in any particular year.

Interest rates have a significant impact on the operations and financial results of all financial services companies. One of the most important interest rates used to control national economic policy is the “Federal Funds” rate. This is the interest rate utilized within the banking system for overnight borrowings for institutions with the highest credit rating. As noted previously, during 2007-2008 the FRB aggressively reduced the Federal Funds rate, including a decrease from 4.25% at the beginning of 2008 to a target range of 0.00% to 0.25% by the end of 2008. The target range has remained at that level ever since and statements by the FRB indicate that low rates are likely to remain in place until the economy shows sustained improvement, specifically continued progress toward maximum employment and price stability. Many economists believe the FRB may begin to move rates up later in 2015.

As noted previously, the yield on longer term financial instruments, including the ten year Treasury bond rate, generally trended down during 2014. The yield on the ten year Treasury decreased by 83 basis points from 3.00% at the beginning of 2014 to the year-end level of 2.17%. The rate on the ten year Treasury bond and other long-term interest rates have a significant influence on the rates offered for new residential real estate loans. These changes in interest rates have an effect on the Company relative to the interest income on loans, securities, and Federal Funds sold and other short term instruments as well as the interest expense on deposits and borrowings. Residential real estate loans and longer-term investments are most affected by the changes in longer term market interest rates such as the ten year treasury. The Federal Funds sold portfolio and other short term investments are affected primarily by changes in the Federal Funds target rate. Deposit interest rates are most affected by short term market interest rates. Also, changes in interest rates have an effect on the recorded balance of the securities available for sale portfolio, which are recorded at fair value. Generally, as market interest rates increase the fair value of the securities will decrease. Interest rates on new residential real estate loan originations are also influenced by the rates established by secondary market participants such as Freddie Mac and Fannie Mae. Because TrustCo is a portfolio lender and does not generally sell loans into the secondary market, the Company establishes rates that management determines are appropriate in light of the long-term nature of residential real estate loans while remaining competitive with the secondary market rates. Higher market interest rates also generally increase the value of retail deposits.

The net effect of these interest rate changes is that the yields earned on both short term investments and longer term investments remained quite low for most of 2014, while loan yields declined through most of the year and deposit costs were roughly stable.

Earning Assets

Average earning assets during 2014 were $4.49 billion, which was an increase of $152.3 million from the prior year. This increase was the result of growth in the average balance of net loans of $242.5 million, a $26.0 million decrease in held-to-maturity securities, a $151.8 million decrease in securities available for sale, and a $87.7 million increase in Federal Funds sold and other short-term investments between 2013 and 2014. The increase in the loan portfolio is the result of an increases in each loan category, with the bulk of the growth coming in the residential segment of the portfolio. This increase in real estate loans is a result of a strategic focus on growth of this product throughout the TrustCo branch network through an effective marketing campaign and competitive rates and closing costs.

Total average assets were $4.57 billion for 2014 and $4.42 billion for 2013.

The table “Mix of Average Earning Assets” shows how the mix of the earning assets has changed over the last three years. While the growth in earning assets is critical to improved profitability, changes in the mix also have a significant impact on income levels, as discussed below.

MIX OF AVERAGE EARNING ASSETS

(dollars in thousands)							2014			2013			Components of
							vs.			vs.			Total Earning Assets
	2014		2013		2012		2013			2012			2014			2013		2012
Loans, net	$	3,014,156		2,771,663		2,572,983		242,493			198,680			67.2	%		64.0		60.7
Securities available for sale (1):
U.S. government sponsored enterprises		113,563		221,028		568,425		(107,465	)		(347,397	)		2.5			5.1		13.4
State and political subdivisions		3,924		12,845		35,435		(8,921	)		(22,590	)		0.1			0.3		0.8
Mortgage-backed securities and collateralized mortgage obligations-residential		555,430		545,487		334,616		9,943			210,871			12.4			12.6		7.9
Corporate bonds		3,156		46,049		68,182		(42,893	)		(22,133	)		0.1			1.1		1.6
Small Business Administration-guaranteed participation securities		107,029		109,913		15,707		(2,884	)		94,206			2.4			2.5		0.4
Mortgage-backed securities and collateralized mortgage obligations-commercial		10,837		10,420		-		417			10,420			0.2			0.2		0.0
Other		674		625		660		49			(35	)		0.0			0.0		0.0
Total securities available for sale		794,613		946,367		1,023,025		(151,754	)		(76,658	)		17.7			21.8		24.1
Held-to-maturity securities:
U.S. government sponsored enterprises		-		-		1,048		-			(1,048	)		0.0			0.0		0.0
Mortgage-backed securities and collateralized mortgage obligations - residential		68,404		90,360		131,092		(21,956	)		(40,732	)		1.5			2.1		3.2
Corporate bonds		9,952		14,011		39,570		(4,059	)		(25,559	)		0.2			0.3		0.9
Total held-to-maturity securities		78,356		104,371		171,710		(26,015	)		(67,339	)		1.7			2.4		4.1
Federal Reserve Bank and Federal Home Loan Bank stock		10,135		10,266		9,425		(131	)		841			0.2			0.2		0.2
Federal funds sold and other short-term investments		589,873		502,136		461,495		87,737			40,641			13.1			11.6		10.9

Total earning assets	$	4,487,133	$	4,334,803	$	4,238,638		152,330			96,165			100.0	%		100.0		100.0

(1) The average balances of securities available for sale are presented using amortized cost for these securities.

Loans

In 2014, the Company experienced another year of significant loan growth. The $249.5 million of increase in the Company’s gross loan portfolio from December 31, 2013 to December 31, 2014 came throughout its marketing territories. Average loans increased $242.5 million during 2014 to $3.01 billion. Interest income on the loan portfolio increased to $136.0 million in 2014 from $128.0 million in 2013. The average yield declined 11 basis points to 4.51% in 2014 compared to 2013.

LOAN PORTFOLIO

(dollars in thousands)	As of December 31,
	2014					2013					2012
	Amount		Percent			Amount		Percent			Amount		Percent
Commercial	$	202,469		6.4	%	$	202,038		6.9	%	$	198,750		7.4	%
Real estate - construction		38,522		1.2			35,358		1.2			37,205		1.4
Real estate - mortgage		2,557,613		81.0			2,325,029		80.0			2,110,290		78.6
Home equity lines of credit		352,134		11.1			340,489		11.7			333,909		12.4
Installment loans		7,594		0.2			5,895		0.2			4,579		0.2

Total loans		3,158,332		100.0	%		2,908,809		100.0	%		2,684,733		100.0	%
Less: Allowance for loan losses		46,327					47,714					47,927

Net loans (1)	$	3,112,005				$	2,861,095				$	2,636,806

	Average Balances
	2014					2013					2012					2011					2010
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent
Commercial	$	201,317		6.7	%	$	193,065		7.0	%	$	209,323		8.1	%	$	242,256		10.0	%	$	261,621		11.3	%
Real estate - construction		35,109		1.2			36,689		1.3			34,387		1.3			18,666		0.8			12,971		0.6
Real estate - mortgage		2,428,383		80.6			2,201,348		79.4			2,004,059		77.9			1,859,797		76.8			1,755,791		75.6
Home equity lines of credit		343,264		11.4			335,409		12.1			321,299		12.5			298,996		12.3			285,416		12.3
Installment loans		6,083		0.2			5,152		0.2			3,915		0.2			3,622		0.1			4,211		0.2

Total loans		3,014,156		100.0	%		2,771,663		100.0	%		2,572,983		100.0	%		2,423,337		100.0	%		2,320,010		100.0	%

Less: Allowance for loan losses		47,409					48,452					49,148					46,210					40,846

Net loans (1)	$	2,966,747				$	2,723,211				$	2,523,835				$	2,377,127				$	2,279,164

(1) Presented net of deferred direct loan origination fees and costs.

Through marketing, pricing and a customer-friendly service delivery network, TrustCo has attempted to distinguish itself from other mortgage lenders by highlighting the uniqueness of its loan products. Specifically, low closing costs, no escrow or private mortgage insurance, quick loan decisions and fast closings were identified and marketed. The fact that the Company holds mortgages in its loan portfolio rather than selling them into secondary markets was also highlighted. The average balance of residential real estate loans was $2.44 billion in 2014 and $2.22 billion in 2013. Income on real estate loans increased to $111.7 million in 2014 from $104.6 million in 2013. The yield on the portfolio decreased from 4.72% for 2013 to 4.57% in 2014 due to changes in retail rates in the marketplace. Residential real estate loans at December 31, 2014 were $2.58 billion compared to $2.34 billion at year-end 2013, an increase of $236.3 million. The vast majority of TrustCo’s real estate loans are secured by properties within the Bank’s market area.

TrustCo does not make subprime loans or purchase investments collateralized by subprime loans. A loan may be considered subprime for a number of reasons, but effectively subprime loans are loans where the certainty of repayment of principal and interest is lower than for a traditional prime loan due to the structure of the loan itself, the credit worthiness of the borrower, the underwriting standards of the lender or some combination of these. For instance, adjustable loans underwritten at initial low “teaser” rates instead of the fully indexed rate and loans to borrowers with poor payment history would generally be classified as subprime. TrustCo underwrites its loan originations in a traditional manner, focusing on key factors that have proven to result in good credit decisions, rather than relying on automated systems or basing decisions primarily on one factor, such as a borrower’s credit score.

Average commercial loans of $221.3 million in 2014 increased by $6.5 million from $214.8 million in 2013. The average yield on the commercial loan portfolio decreased to 5.12% for 2014 from 5.22% in 2013 as a result of declining market rates. This resulted in interest income on commercial loans of $11.3 million in 2014 and $11.2 million in 2013.

TrustCo’s commercial lending activities are focused on balancing the Company’s commitment to meeting the credit needs of businesses in its market areas with the necessity of managing its credit risk. In accordance with these goals, the Company has consistently emphasized the origination of loans within its market area. The portfolio contains no foreign loans, nor does it contain any significant concentrations of credit to any single borrower or industry. The Capital Region commercial loan portfolio reflects the diversity of businesses found in the market area, including light manufacturing, retail, service, and real estate related business. Commercial loans made in the downstate New York market area and in the central Florida market area also reflect the businesses in those areas, with a focus on real estate. Market conditions in the central Florida market area continued to improve during most of 2014.

TrustCo strives to maintain strong asset quality in all segments of its loan portfolio, especially commercial loans. Competition for commercial loans continues to be intense in the Bank’s market regions although the dislocations of recent years has resulted in some competitors exiting the business or scaling back their efforts. The Bank competes with large money center and regional banks as well as with smaller locally based banks and thrifts and other financial services companies.

TrustCo has a strong position in the home equity credit line product in its market area. TrustCo was one of the first financial institutions in the area to market and originate this product, and, management believes, has developed significant expertise with respect to its risks and rewards. During 2014, the average balance of home equity credit lines was $343.3 million, an increase from $335.4 million in 2013. The home equity credit line product has developed into a significant business line for many financial services companies. Trustco Bank competes with both regional and national concerns for these lines of credit and faces stiff competition with respect to interest rates, closing costs, and customer service for these loans. TrustCo continuously reviews changes made by competitors with respect to the home equity credit line product and adjusts its offerings to remain competitive. The average yield was 3.57% for 2014 and 3.41% in 2013. This resulted in interest income on home equity credit lines of $12.3 million in 2014, compared to $11.5 million in 2013. The increase in yield during 2014 as compared to 2013 is the result of loans with introductory rates repricing to the product floor during the year as well as the introductory rate offered being higher in 2014.

MATURITIES AND SENSITIVITIES OF LOANS TO CHANGE IN INTEREST RATES

(dollars in thousands)	December 31, 2014
			After 1 Year
	In 1 Year		But Within		After
	or Less		5 Years		5 Years		Total
Commercial	$	62,560		67,310		72,599		202,469
Real estate construction		38,522		-		-		38,522

Total		101,082		67,310		72,599		240,991

Predetermined rates		36,298		67,310		72,599		176,207
Floating rates		64,784		-		-		64,784

Total	$	101,082		67,310		72,599		240,991

At December 31, 2014 and 2013, the Company had approximately $38.5 million and $35.4 million of real estate construction loans. As of December 31, 2014, approximately $17.6 million are secured by first mortgages to residential borrowers while approximately $20.9 million were to commercial borrowers for residential constructions projects. Of the $35.4 million in real estate construction loans at December 31, 2013, approximately $13.9 million were secured by first mortgages to residential borrowers with the remaining $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.

As of December 31, 2014 and 2013, the Company’s loan portfolio did not include any subprime mortgages or loans acquired with deteriorated credit quality.

INVESTMENT SECURITIES

(dollars in thousands)	As of December 31,
	2014				2013				2012
	Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value
Securities available for sale:
U. S. government sponsored enterprises	$	78,420		77,800		200,531		198,829		262,063		263,108
State and political subdivisions		2,232		2,271		7,623		7,758		25,815		26,457
Mortgage backed securities and collateralized mortgage obligations-residential		486,107		483,560		552,230		532,449		515,322		518,776
Corporate bonds		1,500		1,500		10,429		10,471		26,312		26,529
Small Business Adminstration-guaranteed participation securities		103,273		100,496		111,383		103,029		75,674		76,562
Mortgage backed securities and collateralized mortgage obligations-commercial		10,696		10,447		10,965		10,558		-		-
Other		650		650		650		650		650		650
Total debt securities available for sale		682,878		676,724		893,811		863,744		905,836		912,082
Equity securities		35		35		10		10		10		10
Total securities available for sale		682,913		676,759		893,821		863,754		905,846		912,092
Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential		60,986		64,320		76,270		78,876		108,471		114,195
Corporate bonds		9,960		11,022		9,945		11,429		34,955		36,931
Total held to maturity securities		70,946		75,342		86,215		90,305		143,426		151,126
Total investment securities	$	753,859		752,101		980,036		954,059		1,049,272		1,063,218

Securities available for sale: The portfolio of securities available for sale is designed to provide a stable source of interest income and liquidity. The portfolio is also managed by the Company to take advantage of changes in interest rates and is particularly important in providing greater flexibility in the current unusually low interest rate environment. The securities available for sale portfolio is managed under a policy detailing the types and characteristics acceptable in the portfolio. Mortgage backed securities and collateralized mortgage obligations held in the portfolio include only pass-throughs issued by United States Government agencies or sponsored enterprises. During 2013, the Company added Small Business Administration (“SBA”) guaranteed participation securities to the available for sale portfolio. These securities are Government guaranteed, offer better yields than agency securities and have more certainty in regard to final maturity than mortgage-backed securities (“MBS”). During recent years there was a continued shift by the Company to invest more in MBS and less in agency securities as MBS offer a baseline cashflow as opposed to the callable agency securities the Bank has typically invested in, that tend to result in extremely concentrated cashflows, which can expose the Bank to greater reinvestment risk. In addition, the expected yield on MBS is also typically higher for a given duration security than for a similar duration agency security.

Holdings of securities issued by states and political subdivisions have declined in recent years, reflecting management’s concern regarding the potential impact of the economy on the financial condition of the issuing entities. Similarly, corporate bond holdings have declined as the result of concern about economic conditions and the stability of some larger financial institutions in which the Bank had previously invested.

Proceeds from sales, calls and maturities of securities available for sale have been invested in higher yielding assets, such as loans, or temporarily held in Federal Funds sold and other short term investments until deployed to fund future loan growth or FUTURE INVESTMENT OPPoRtunities.

The designation of “available for sale” is made at the time of purchase, based upon management’s intent and ability to hold the securities for an indefinite period of time. These securities are available for sale in response to changes in market interest rates, related changes in prepayment risk, needs for liquidity, or changes in the availability of and yield on alternative investments. At December 31, 2014 some securities in this portfolio had fair values that were less than the amortized cost due to changes in interest rates and market conditions and not related to the credit condition of the issuers. At December 31, 2014, the Company did not intend to sell, and it is not likely that the Company will be required to sell these securities before market recovery. Accordingly, at December 31, 2014 the Company did not consider any of the unrealized losses to be other than temporary.

At December 31, 2014, the carrying value of securities available for sale amounted to $676.8 million, compared to $863.8 million at year end 2013. For 2014, the average balance of securities available for sale was $794.6 million with an average yield of 2.04%, compared to an average balance in 2013 of $946.4 million with an average yield of 1.90%. The taxable equivalent income earned on the securities available for sale portfolio in 2013 was $18.0 million, compared to $16.2 million earned in 2014.

Securities available for sale are recorded at their fair value, with any unrealized gains or losses, net of taxes, recognized as a component of shareholders’ equity. Average balances of securities available for sale are stated at amortized cost. At December 31, 2014, the fair value of TrustCo’s portfolio of securities available for sale carried gross unrealized gains of approximately $1.1 million and gross unrealized losses of approximately $7.3 million. At December 31, 2013, the fair value of the company’s portfolio of securities available for sale carried gross unrealized gains of approximately $467 thousand and gross unrealized losses of approximately $30.5 million. In both periods, unrealized losses were related to market interest rate levels and were not credit related.

Held to Maturity Securities: At December 31, 2014 the Company held $70.9 million of held to maturity securities, compared to $86.2 million at December 31, 2013. For 2014, the average balance of held to maturity securities was $78.4 million, compared to $104.4 million in 2013. Similar to securities available for sale, cash flow from calls and maturities of these securities has been reinvested in higher yielding assets, such as loans, or temporarily held in Federal Funds sold and other short term investments to fund future loan growth OR FUTURE INVESTMENT OPPURTUNITIES. The average yield on held to maturity securities increased from 3.52% in 2013 to 3.67% in 2014 as the mix within the portfolio changed due to calls, maturities and amortization/accretion. Interest income on held to maturity securities declined from $3.7 million in 2013 to $2.9 million in 2014, reflecting the decline in average balances. Held to maturity securities are recorded at amortized cost. The fair value of these securities as of December 31, 2014 was $75.3 million.

The designation of “held to maturity” is made at the time of purchase, based upon management’s intent and ability to hold the securities until final maturity. At December 31, 2014 none of the securities in this portfolio had fair values that were less than the amortized cost. At December 31, 2014, the Company has the intent and ability to hold these securities until maturity.

Securities Gains & Losses: During 2014, TrustCo recognized approximately $717 thousand of net gains from securities transactions, compared to net gains of $1.6 million in 2013 and $2.2 million in 2012. There were no sales or transfers of held to maturity securities in 2014, 2013 and 2012.

TrustCo has not invested in any exotic investment products such as interest rate swaps, forward placement contracts, or other instruments commonly referred to as derivatives. In addition, the Company has not invested in securities backed by subprime mortgages or in collateralized debt obligations (CDOs). By actively managing a portfolio of high quality securities, TrustCo believes it can meet the objectives of asset/liability management and liquidity, while at the same time producing a reasonably predictable earnings stream.

SECURITIES PORTFOLIO MATURITY DISTRIBUTION AND YIELD

(dollars in thousands)	As of December 31, 2014
	Maturing:
				After 1		After 5
	Within			But Within		But Within		After
	1 Year			5 Years		10 Years		10 Years		Total

Debt securities available for sale:
U. S. government sponsored enterprises
Amortized cost	$	2,020			76,400		-		-		78,420
Fair Value		2,010			75,790		-		-		77,800
Weighted average yield		0.88	%		1.15		-		-		1.14
State and political subdivisions
Amortized cost	$	7			382		1,531		312		2,232
Fair Value		7			382		1,568		314		2,271
Weighted average yield		5.39	%		5.71		4.53		4.30		4.70
Mortgage backed securities and collateralized mortgage obligations-residential
Amortized cost	$	632			326,936		158,539		-		486,107
Fair Value		646			325,789		157,125		-		483,560
Weighted average yield		4.48	%		2.14		2.25		-		2.18
Corporate bonds
Amortized cost	$	1,500			-		-		-		1,500
Fair Value		1,500			-		-		-		1,500
Weighted average yield		0.09	%		-		-		-		0.09
Small Business Administration- guaranteed participation securities
Amortized cost	$	-			-		103,273		-		103,273
Fair Value		-			-		100,496		-		100,496
Weighted average yield		-	%		-		2.04		-		2.04
Mortgage backed securities and collateralized mortgage obligations-commercial
Amortized cost	$	-			10,696		-		-		10,696
Fair Value		-			10,447		-		-		10,447
Weighted average yield		-	%		1.40		-		-		1.40
Other
Amortized cost	$	-			650		-		-		650
Fair Value		-			650		-		-		650
Weighted average yield		-	%		2.49		-		-		2.49
Total securities available for sale
Amortized cost	$	4,159			415,064		263,343		312		682,878
Fair Value		4,163			413,058		259,189		314		676,724
Weighted average yield		1.15	%		1.94		2.18		4.30		2.03

Held to maturity securities:
Mortgage backed securities and collateralized mortgage obligations-residential
Amortized cost	$	-			59,638		1,348		-		60,986
Fair Value		-			62,873		1,447		-		64,320
Weighted average yield		-	%		3.81		4.10		-		3.81
Corporate bonds
Amortized cost	$	-			9,960		-		-		9,960
Fair Value		-			11,022		-		-		11,022
Weighted average yield		-	%		6.17		-		-		6.17
Total held to maturity securities
Amortized cost	$	-			69,598		1,348		-		70,946
Fair Value		-			73,895		1,447		-		75,342
Weighted average yield		-	%		4.15		4.10		-		4.14

Weighted average yields have not been adjusted for any tax-equivalent factor.

Maturity and call dates of securities: Many of the securities in the Company’s portfolios have a call date in addition to the stated maturity date. Call dates allow the issuer to redeem the bonds prior to maturity at specified dates and at predetermined prices. Normally, securities are redeemed at the call date when the issuer can reissue the security at a lower interest rate. Therefore, for cash flow, liquidity and interest rate management purposes, it is important to monitor both maturity dates and call dates. During the early part of 2012 the level of securities called was elevated due to the volatile interest rate environment. The level of calls in 2013 and 2014 declined relative to the 2012 level. The probability of future calls will change depending on market interest rate levels. The tables labeled “Securities Portfolio Maturity and Call Date Distribution,” show the distribution, based on both final maturity and call date of each security, broken out by the available for sale and held to maturity portfolios as of December 31, 2014. Mortgage backed securities and collateralized mortgage obligations are reported using an estimate of average life. Actual maturities may differ from contractual maturities because of securities’ prepayments and the right of certain issuers to call or prepay their obligations without penalty. The table “Securities Portfolio Maturity Distribution and Yield,” shows the distribution of maturities for each of the securities portfolios, based on final maturity, as well as the average yields at December 31, 2014 on each type/maturity grouping.

SECURITIES PORTFOLIO MATURITY AND CALL DATE DISTRIBUTION

Debt securities available for sale:

(dollars in thousands)	As of December 31, 2014
	Based on				Based on
	Final Maturity				Call Date
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Within 1 year	$	4,159		4,163		81,527		80,933
1 to 5 years		415,064		413,058		339,379		337,992
5 to 10 years		263,343		259,189		261,954		257,781
After 10 years		312		314		18		18
Total debt securities available for sale	$	682,878		676,724		682,878		676,724

Held to maturity securities:

(dollars in thousands)	As of December 31, 2014
	Based on				Based on
	Final Maturity				Call Date
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
1 to 5 years	$	69,598		73,895		69,598		73,895
5 to 10 years		1,348		1,447		1,348		1,447
Total held to maturity securities	$	70,946		75,342		70,946		75,342

Federal Funds Sold and Other Short-term Investments

During 2014, the average balance of Federal Funds sold and other short term investments was $589.9 million, an increase from $502.1 million in 2013. The average rate earned on these assets was 0.25% in both 2013 and 2014. TrustCo utilizes this category of earning assets as a means of maintaining strong liquidity.

As noted, the target Federal Funds rate set by the Federal Open Market Committee (FOMC) did not change during 2014. The Federal Funds sold and other short-term investments portfolio is significantly affected by changes in the target Federal Funds rate as are virtually all interest sensitive instruments.

The year-end balance of Federal Funds sold and other short term investments was $627.9 million for 2014, compared to $536.6 million at year end 2013. Yields on investment securities with acceptable risk characteristics were insufficient to justify shifting overnight liquidity into other investments despite the low return on Federal Funds. Management will continue to evaluate the overall level of the Federal Funds sold and other short term investments portfolio in 2015 and will make appropriate adjustments based upon market opportunities and interest rates.

Funding Sources

TrustCo utilizes various traditional sources of funds to support its earning asset portfolio. The table, “Mix of Average Sources of Funding,” presents the various categories of funds used and the corresponding average balances for each of the last three years.

Deposits: Average total deposits were $3.98 billion in 2014, compared to $3.86 billion in 2013, an increase of $115.5 million. Increases in deposit categories included: demand deposits up $17.0 million, interest-bearing checking deposits up $57.6 million, savings up $8.8 million, money market up $455 thousand and time deposits up $31.6 million. The increase in deposits reflects the impact of new branches opened over the last several years, and the continuing focus at TrustCo on providing core banking services better, faster and cheaper than its competitors.

MIX OF AVERAGE SOURCES OF FUNDING

(dollars in thousands)							2014			2013			Components of
							vs.			vs.			Total Funding
	2014		2013		2012		2013			2012			2014			2013		2012
Demand deposits	$	319,458		302,437		278,179		17,021			24,258			7.7	%		7.5		7.0
Retail deposits:
Savings		1,227,473		1,218,655		1,115,151		8,818			103,504			29.4			30.1		28.1
Time deposits under $100 thousand		704,249		721,498		833,358		(17,249	)		(111,860	)		16.9			17.8		21.0
Interest bearing checking accounts		636,140		578,531		515,062		57,609			63,469			15.3			14.3		13.0
Money market deposits		650,779		650,324		649,452		455			872			15.6			16.1		16.4
Total retail deposits		3,218,641		3,169,008		3,113,023		49,633			55,985			77.2			78.3		78.5
Total core deposits		3,538,099		3,471,445		3,391,202		66,654			80,243			84.9			85.8		85.5
Time deposits over $100 thousand (1)		440,869		391,975		418,488		48,894			(26,513	)		10.6			9.7		10.6
Short-term borrowings		189,430		180,275		152,982		9,155			27,293			4.5			4.5		3.9
Total purchased liabilities		630,299		572,250		571,470		58,049			780			15.1			14.2		14.5
Total sources of funding	$	4,168,398		4,043,695		3,962,672		124,703			81,023			100.0	%		100.0		100.0

(1) Included in time deposits over $100 thousand was $85.3 million and $70.8 million in time deposits with balances in excess of $250 thousand as of December 31, 2014 and 2013, respectively.

AVERAGE BALANCES, YIELDS AND NET INTEREST MARGINS

(dollars in thousands)	2014									2013									2012
	Average Balance			Interest Income/ Expense			Average Rate			Average Balance			Interest Income/ Expense			Average Rate			Average Balance			Interest Income/ Expense			Average Rate
Assets
Loans, net	$	3,014,156			135,989			4.51	%	$	2,771,663			127,974			4.62	%	$	2,572,983			128,663			5.00	%

Securities available for sale:
U.S. government sponsored enterprises		113,563			1,417			1.25			221,028			2,600			1.18			568,425			8,097			1.42
State and political subdivisions		3,924			280			7.14			12,845			862			6.71			35,435			2,012			5.68
Mortgage backed securities and collateralized mortgage obligations-residential		555,430			12,150			2.19			545,487			11,385			2.09			334,616			6,697			2.00
Corporate bonds		3,156			65			2.04			46,049			812			1.76			68,182			2,231			3.27
Small Business Administration- guaranteed participation securities		107,029			2,154			2.01			109,913			2,180			1.98			15,707			319			2.03
Mortgage backed securities and collateralized mortgage obligations-commercial		10,837			151			1.40			10,420			144			1.38			-			-			-
Other		674			16			2.37			625			17			2.72			660			19			2.88
Total securities available for sale		794,613			16,233			2.04			946,367			18,000			1.90			1,023,025			19,375			1.89
Held to maturity securities:
U.S. government sponsored enterprises		-			-			-			-			-			-			1,048			25			2.43
Mortgage backed securities and collateralized mortgage obligations-residential		68,404			2,259			3.30			90,360			2,840			3.14			131,092			4,287			3.27
Corporate bonds		9,952			615			6.18			14,011			833			5.95			39,570			1,666			4.21
Total held to maturity securities		78,356			2,874			3.67			104,371			3,673			3.52			171,710			5,978			3.48
Federal Reserve Bank and Federal Home Loan Bank stock		10,135			511			5.04			10,266			490			4.77			9,425			486			5.16
Federal funds sold and other short-term investments		589,873			1,464			0.25			502,136			1,240			0.25			461,495			1,142			0.25
Total interest earning assets		4,487,133			157,071			3.50	%		4,334,803			151,377			3.49	%		4,238,638			155,644			3.67	%
Allowance for loan losses		(47,409	)								(48,452	)								(49,148	)
Cash and noninterest earning assets		135,217									136,042									143,303
Total assets	$	4,574,941								$	4,422,393								$	4,332,793
Liabilities and shareholders' equity
Interest bearing deposits:
Interest bearing checking accounts	$	636,140			365			0.06	%	$	578,531			329			0.06	%	$	515,062			315			0.06	%
Savings		1,227,473			2,662			0.22			1,218,655			3,333			0.27			1,115,151			3,872			0.35
Time deposits and money markets		1,795,897			11,064			0.62			1,763,797			10,138			0.57			1,901,298			14,313			0.75
Total interest bearing deposits		3,659,510			14,091			0.39			3,560,983			13,800			0.39			3,531,511			18,500			0.52
Short-term borrowings		189,430			1,397			0.74			180,275			1,483			0.82			152,982			1,475			0.96
Total interest bearing liabilities		3,848,940			15,488			0.40	%		3,741,258			15,283			0.41	%		3,684,493			19,975			0.54	%
Demand deposits		319,458									302,437									278,179
Other liabilities		23,733									21,719									19,441
Shareholders' equity		382,810									356,979									350,680
Total liabilities and shareholders' equity	$	4,574,941								$	4,422,393								$	4,332,793
Net interest income					141,583									136,094									135,669
Taxable equivalent adjustment					(130	)								(330	)								(681	)
Net interest income					141,453									135,764									134,988
Net interest spread								3.10	%								3.08	%								3.13	%
Net interest margin (net interest income to total interest earnings assets)								3.16									3.14									3.20

Portions of income earned on certain commercial loans, obligations of states and political subdivisions, and equity securities are exempt from federal and/or state taxation. Appropriate adjustments have been made to reflect the equivalent amount of taxable income that would have been necessary to generate an equal amount of after tax income. Federal and state tax rates used to calculate income on a tax equivalent basis were 35.0% and 7.5% for 2014, 2013, and 2012. The average balances of securities available for sale and held to maturity were calculated using amortized costs. Included in the average balance of shareholders’ equity is ($5.0) million, ($8.1) million, and $3.1 million in 2014, 2013, and 2012, respectively, of net unrealized (loss) gain, net of tax, in the available for sale securities portfolio. The gross amounts of the net unrealized (loss) gain has been included in cash and noninterest earning assets. Nonaccrual loans are included in average loans.

The overall cost of interest bearing deposits was 0.39% in 2014, unchanged from 2013. The increase in the average balance of interest bearing deposits resulted in an increase of approximately $291 thousand in interest expense on deposits to $14.1 million in 2014.

The Company strives to maintain competitive rates on deposit accounts and to attract customers through a combination of competitive interest rates, quality customer service, and convenient banking locations. In this fashion, management believes, TrustCo is able to attract deposit customers looking for a long-term banking relationship and to cross sell banking services utilizing the deposit account relationship as the starting point.

Other funding sources: The Company had $189.4 million of average short-term borrowings outstanding during 2014 compared to $180.3 million in 2013. These borrowings represent customer repurchase accounts, which behave more like deposit accounts than traditional borrowings. The average cost of short-term borrowings was 0.74% in 2014 and 0.82% in 2013. This resulted in interest expense of approximately $1.4 million in 2014 compared to $1.5 million in 2013.

AVERAGE DEPOSITS BY TYPE OF DEPOSITOR

(dollars in thousands)	Years Ended December 31,
	2014		2013		2012		2011		2010
Individuals, partnerships and corporations	$	3,965,716		3,847,392		3,791,616		3,621,718		3,387,976
U.S. government		2		-		-		3		5
State and political subdivisions		2,141		1,826		1,748		1,584		894
Other (certified and official checks, etc.)		11,109		14,202		16,326		14,290		14,705
Total average deposits by type of depositor	$	3,978,968		3,863,420		3,809,690		3,637,595		3,403,580

MATURITY OF TIME DEPOSITS OVER $100 THOUSAND

(dollars in thousands)


	As of December 31, 2014

Under 3 months	$	33,255
3 to 6 months		74,484
6 to 12 months		219,905
Over 12 months		138,616

Total	$	466,260

VOLUME AND YIELD ANALYSIS

(dollars in thousands)	2014 vs. 2013									2013 vs. 2012
	Increase			Due to			Due to			Increase			Due to			Due to
	(Decrease)			Volume			Rate			(Decrease)			Volume			Rate
Interest income (TE):
Federal funds sold and other short-term investments	$	224			224			-		$	98			98			-
Securities available for sale:
Taxable		(582	)		(634	)		52			(225	)		1,424			(1,649	)
Tax-exempt		(1,185	)		(2,029	)		844			(1,150	)		(1,464	)		314
Total securities available for sale		(1,767	)		(2,663	)		896			(1,375	)		(40	)		(1,335	)
Held to maturity securities (taxable)		(799	)		(969	)		170			(2,305	)		(2,644	)		339
Federal Reserve Bank and Federal Home Loan Bank stock		21			(6	)		27			4			42			(38	)
Loans, net		8,015			11,192			(3,177	)		(689	)		9,706			(10,395	)
Total interest income		5,694			7,778			(2,084	)		(4,267	)		7,162			(11,429	)

Interest expense:
Interest bearing checking accounts		36			36			-			14			14			-
Savings		(671	)		21			(692	)		(539	)		360			(899	)
Time deposits and money markets		926			207			719			(4,175	)		(1,124	)		(3,051	)
Short-term borrowings		(86	)		69			(155	)		8			240			(232	)
Total interest expense		205			333			(128	)		(4,692	)		(510	)		(4,182	)
Net interest income (TE)	$	5,489			7,445			(1,956	)	$	425			7,672			(7,247	)

Capital Resources

Consistent with its long-term goal of operating a sound and profitable financial organization, TrustCo strives to maintain strong capital ratios and to qualify as a well capitalized bank in accordance with federal regulatory requirements. Historically, most of the Company’s capital requirements have been provided through retained earnings generated. Additionally, during 2011, the Company elected to raise additional equity capital in light of expected balance sheet growth and a heightened regulatory emphasis on capital levels. On July 6, 2011, the Company completed a public offering of 15,640,000 shares of $1 par value per share common stock, at $4.60 per share raising net proceeds of 67.6 million.

The dividend payout ratio was 56.3% of net income in 2014 and 62.2% of net income in 2013. The per share dividend paid in both 2013 and 2014 was $0.2625. The Company’s ability to pay dividends to its shareholders is dependent upon the ability of the Bank to pay dividends to the Company. The payment of dividends by the Bank to the Company is subject to continued compliance with minimum regulatory capital requirements. The Office of the Comptroller of the Currency, the Bank’s primary regulator, may disapprove a dividend if: the Bank would be undercapitalized following the distribution; the proposed capital distribution raises safety and soundness concerns; or the capital distribution would violate a prohibition contained in any statue, regulation or agreement. Currently the Bank meets the regulatory definition of a well capitalized institution. During 2015, the Bank could declare dividends of approximately $37.4 million plus any 2015 net profits retained to the date of the dividend declaration.

TrustCo’s Tier 1 capital was 17.04% of risk-adjusted assets at December 31, 2014, and 16.74% of risk-adjusted assets at December 31, 2013. Tier 1 capital to assets (leverage ratio) at December 31, 2014 was 8.55%, as compared to 8.27% at year-end 2013.

At December 31, 2014 and 2013, Trustco Bank met its regulator’s definition of a well capitalized institution.

In July 2013, the federal bank regulatory agencies issued a final rule that will revise their risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. The final rule applies to all depository institutions, top-tier bank holding companies with total consolidated assets of $500 million or more and top-tier savings and loan holding companies. Among other matters, the rule establishes a new common equity Tier 1 minimum capital requirement of 4.5% of risk-weighted assets, increases the minimum Tier 1 capital to risk-based assets requirement from 4.0% to 6.0% of risk-weighted assets, changes the risk-weightings of certain assets, creates an additional capital conservation buffer over the required capital ratios and changes what qualifies as capital for purposes of meeting the various capital requirements. The implementation of the new rule will begin for TrustCo and Trustco Bank on January 1, 2015. As of December 31, 2014, the capital levels of both TrustCo and the Bank exceeded the revised minimums and both continue to meet the regulatory definition of well capitalized.

TrustCo maintains a dividend reinvestment plan (DRP) with approximately 11,154 participants. During 2014, $2.9 million of dividends paid on the shares held in this plan were reinvested in shares of the Company. The DRP also allows for additional purchases by participants and has a discount feature (up to a 5% for safe harbor provisions) that can be activated by management as a tool to raise capital. To date, the discount feature has not been utilized.

Risk Management

The responsibility for balance sheet risk management oversight is the function of the Asset Allocation Committee. The Committee meets monthly and includes the executive officers of the Company as well as other department managers as appropriate. The meetings include a review of balance sheet structure, formulation of strategy in light of anticipated economic conditions, and comparison to Board-established guidelines to control exposures to various types of risk.

Credit Risk

Credit risk is managed through a network of loan officer authorities, review committees, loan policies, and oversight from the senior executives of the Company. In addition, the Company utilizes an internal loan review function to evaluate management’s loan grading of non-homogeneous loans. Management follows a policy of continually identifying, analyzing, and evaluating the credit risk inherent in the loan portfolio. As a result of management’s ongoing reviews of the loan portfolio, loans are placed in nonaccrual status, either due to the delinquent status of the principal and/or interest payments, or based on a judgment by management that, although payment of principal and/or interest is current, such action is prudent. Thereafter, no interest is taken into income unless received in cash or until such time as the borrower demonstrates a sustained ability to make scheduled payments of interest and principal.

Management has also developed policies and procedures to monitor the credit risk in relation to the Federal Funds sold portfolio. TrustCo maintains an approved list of third party banks that they sell Federal Funds to and monitors the credit rating and capital levels of those institutions. At December 31, 2014 virtually all of the Federal Funds sold and other short term investments were funds on deposit at the Federal Reserve Bank of New York and the Federal Home Loan Bank of New York. The Company also monitors the credit ratings on its investment securities.

Nonperforming Assets

Nonperforming assets include loans in nonaccrual status, restructured, loans past due three payments or more and still accruing interest, and foreclosed real estate properties.

Nonperforming assets at year end 2014 and 2013 totaled $40.5 million and $52.1 million, respectively. Nonperforming loans as a percentage of the total loan portfolio were 1.08% in 2014 and 1.49% in 2013. As of December 31, 2014 and December 31, 2013, there were $11.5 million and $15.1 million of loans in non-accruing status that were less than 90 days past due. During 2014, a sale of approximately $1.6 million of nonperforming assets was completed at a gain of $164 thousand.

NONPERFORMING ASSETS

(dollars in thousands)	As of December 31,
	2014			2013		2012		2011		2010
Loans in nonaccrual status	$	33,886			43,227		52,446		48,466		48,478
Loans contractually past due 3 payments or more and still accruing interest		-			-		-		-		-
Restructured retail loans		125			166		231		312		336
Total nonperforming loans (1)		34,011			43,393		52,677		48,778		48,814
Foreclosed real estate		6,441			8,729		8,705		5,265		7,416
Total nonperforming assets	$	40,452			52,122		61,382		54,043		56,230
Allowance for loan losses	$	46,327			47,714		47,927		48,717		41,911
Allowance coverage of nonperforming loans		1.36	x		1.10		0.91		1.00		0.86
Nonperforming loans as a % of total loans		1.08	%		1.49		1.96		1.93		2.07
Nonperforming assets as a % of total assets		0.87			1.15		1.41		1.27		1.42

(1)

As of December 31, 2014 and 2013, the Company also had $9.9 million and $8.6 million, respectively, of performing retail loans for which the borrower has filed for chapter 7 bankruptcy protection and not reaffirmed their debt to Trustco Bank. Under guidance issued by the Office of the Comptroller of the Currency (OCC) in the third quarter of 2012, these loans are deemed to be troubled debt restructurings (TDR’s), and as such have been included in the impaired loan disclosures. For the periods prior to the OCC guidance, these loans were not considered to be TDR’s.

At December 31, 2014, nonperforming loans include a mix of commercial and residential loans. Of the total nonaccrual loans of $33.9 million, $30.1 million were residential real estate loans and $3.8 million were commercial loans. It is the Company’s policy to classify loans as nonperforming if three monthly payments have been missed. Economic conditions remained challenging nationally over the last year. The majority of the Company’s loan portfolio continues to come from its historical market area in Upstate New York. As of December 31, 2014, 82.7% of loans are in New York, including both the Upstate and Downstate areas, as well as nominal loan balances in adjoining states. The Upstate New York region has been affected by the economic downturn to a much lesser degree than markets that previously enjoyed more robust growth and more rapid escalation in housing prices. The remaining 17.3% of the loan portfolio are Florida loans. The Company’s Downstate New York and Florida market areas experienced more of an impact from the economic downturn, but conditions have improved significantly over the recent years. At December 31, 2014, 8.1% of nonperforming loans were in Florida, with the remainder in the Company’s New York area markets. The Company’s traditionally strong underwriting standards and avoidance of exotic loan types has helped it avoid further deterioration in its Florida loan portfolio. At December 31, 2014 nonperforming Florida loans amounted to $2.8 million compared to $5.1 million at December 31, 2013. The improvement in Florida nonperforming levels reflects continued improved conditions in that market during 2014.

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

There were $4.1 million of commercial loans classified as impaired as of December 31, 2014 and $8.1 million as of December 31, 2013. In addition, there were $22.4 million and $21.3 million of residential TDRs classified as impaired at December 31, 2014 and 2013, respectively. Generally, residential TDRs involve the borrower filing for bankruptcy protection. The average balances of all impaired loans were $27.7 million during 2014, $26.7 million in 2013 and $19.4 million in 2012. The 2013 increase in the average level of impaired loans is primarily the result of updated guidance from the Office of the Comptroller of the Currency (OCC) with respect to the identification of troubled debt restructurings that occurred in the third quarter of 2012.

Ongoing portfolio management is intended to result in early identification and disengagement from deteriorating credits. TrustCo has a diversified loan portfolio that includes a significant balance of residential mortgage loans to borrowers in the Capital Region of New York and avoids concentrations to any one borrower or any single industry.

There are inherent risks associated with lending, however based on its review of the loan portfolio, including loans classified as nonperforming loans, TDR’s and impaired loans, management is aware of no other loans in the portfolio that pose significant risk of the eventual non-collection of principal and interest. As of December 31, 2014, there were no other loans classified for regulatory purposes that management reasonably expects will materially impact future operating results, liquidity, or capital resources. TrustCo has no advances to borrowers or projects located outside the United States. The Bank makes loans to executive officers, directors and to associates of such persons. These loans are made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions. These loans do not involve more than normal risk of collectibility or present other unfavorable features.

At year end 2014 there was $6.4 million of foreclosed real estate, compared to $8.7 million at December 31, 2013. Although the length of time to complete a foreclosure has remained elevated in recent years, because TrustCo is a portfolio lender it has not encountered issues such as lost notes and other documents, which have become a significant problem in the foreclosure process for many other mortgagees.

Allowance for Loan Losses

The allowance for loan losses is available to absorb losses on loans that management determines are uncollectible. The balance of the allowance is maintained at a level that is, in management’s judgment, representative of probable incurred losses related to the loan portfolio at the end of the reporting period.

In deciding on the adequacy of the allowance for loan losses, management reviews past due information, historical charge-off and recovery data, and nonperforming loan activity. Also, there are a number of other factors that are taken into consideration, including:

Ÿ	the magnitude, nature and trends of recent loan charge-offs and recoveries,

Ÿ	the growth in the loan portfolio and the implication that it has in relation to the economic climate in the Bank’s market territories, and

Ÿ	the economic environment in the Upstate New York territory primarily (the Company’s largest geographical market) over the last several years, as well as in the Company’s other market areas.

Management continues to monitor these trends in determining provisions for loan losses in relation to loan charge-offs, recoveries, the level and trends of nonperforming loans and overall economic conditions in the Company’s market territories.

The table, “Summary of Loan Loss Experience”, includes an analysis of the changes to the allowance for the past five years. Net loans charged off in 2014 and 2013 were $6.5 million and $7.2 million, respectively. The decrease in net charge-offs was primarily the result of lower gross charge-offs in the residential segment of the portfolio in the Company’s New York market, with smaller improvements in the Florida market as well as lower commercial gross charge-offs in the New York market. New York commercial and residential gross charge-offs were down $675 thousand and $1.1 million, respectively. Florida commercial and residential gross charge-offs were up $513 thousand and down $185 thousand, respectively, from 2013 to 2014. The changes in gross and net charge-offs in these categories reflected economic and market changes. During 2014, 89.5% of net charge-offs were on residential real estate loans, 7.6% were on commercial loans and 2.8% were on installment loans, compared to an average loan mix of 6.7% commercial, 93.1% real estate (including home equity products) and 0.2% installment. Included in the net numbers cited above were recoveries of $1.1 million in 2014 and $1.6 million in 2013. The Company recorded a $5.1 million provision for loan losses in 2014 compared to $7.0 million in 2013. The decrease in the provision for loan losses in 2014 was primarily related to improved portfolio performance and improving economic conditions, especially in Florida.

The allowance for loan losses decreased from $47.7 million at December 31, 2013, or 1.64% of total loans at that date, to $46.3 million at December 31, 2014, or 1.47% of total loans at that date.

Management believes that the allowance for loan losses is adequate at December 31, 2014 and 2013. The decrease in the level of allowance for loan losses relative to total loans at December 31, 2014, as compared to 2013, is due to positive trends in asset quality and the general improvement in economic conditions throughout the Company’s market areas.

While conditions in most of the Bank’s market areas are stable or improving, should general economic conditions weaken and/or real estate values begin to decline again, the level of problem loans may increase, as would the level of the provision for loan losses.

SUMMARY OF LOAN LOSS EXPERIENCE

(dollars in thousands)	2014			2013		2012		2011		2010
Amount of loans outstanding at end of year (less unearned income)	$	3,158,332			2,908,809		2,684,733		2,521,303	$	2,355,265
Average loans outstanding during year (less average unearned income)		3,014,156			2,771,663		2,572,983		2,423,337		2,320,010
Balance of allowance at beginning of year		47,714			47,927		48,717		41,911		37,591
Loans charged off:
Commercial and commercial real estate		1,010			1,172		2,499		1,171		5,081
Real estate mortgage - 1 to 4 family		6,320			7,592		10,839		11,305		14,632
Installment		214			74		141		82		155
Total		7,544			8,838		13,479		12,558		19,868

Recoveries of loans previously charged off:
Commercial and commercial real estate		514			519		138		59		103
Real estate mortgage - 1 to 4 family		511			1,089		502		511		789
Installment		32			17		49		44		96
Total		1,057			1,625		689		614		988
Net loans charged off		6,487			7,213		12,790		11,944		18,880
Provision for loan losses		5,100			7,000		12,000		18,750		23,200
Balance of allowance at end of year	$	46,327			47,714		47,927		48,717		41,911
Net charge offs as a percent of average loans outstanding during year (less average unearned income)		0.22	%		0.26		0.50		0.49		0.81
Allowance as a percent of loans outstanding at end of year		1.47			1.64		1.79		1.93		1.78

Allocation of the Allowance for Loan Losses

The allocation of the allowance for loans losses is as follows:

(dollars in thousands)	As of					As of
	December 31, 2014					December 31, 2013
			Percent of					Percent of
			Loans to					Loans to
	Amount		Total Loans			Amount		Total Loans
Commercial	$	3,764		6.41	%	$	3,667		6.95	%
Real estate - construction		571		1.22	%		585		1.22	%
Real estate mortgage - 1 to 4 family		35,394		80.98	%		36,678		79.92	%
Home equity lines of credit		6,430		11.15	%		6,686		11.71	%
Installment Loans		168		0.24	%		98		0.20	%
	$	46,327		100.00	%	$	47,714		100.00	%

Market Risk

The Company’s principal exposure to market risk is with respect to interest rate risk. Interest rate risk is the potential for economic loss due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current market value.

Quantitative and Qualitative Disclosure about Market Risk

TrustCo realizes income principally from the difference or spread between the interest earned on loans, investments and other interest-earning assets and the interest paid on deposits and borrowings. Loan volume and yield, as well as the volume of and rates on investments, deposits and borrowings are affected by market interest rates. Additionally, because of the terms and conditions of many of the loan documents and deposit accounts, a change in interest rates could also affect the projected maturities of the loan portfolio and/or the deposit base.

In monitoring interest rate risk, management focuses on evaluating the levels of net interest income and the fair value of capital in varying interest rate cycles within Board-approved policy limits. Interest rate risk management also must take into consideration, among other factors, the Company’s overall credit, operating income, operating cost, and capital profile. The Asset Allocation Committee, which includes all members of executive management and reports quarterly to the Board of Directors, monitors and manages interest rate risk to maintain an acceptable level of potential change in the fair value of capital as a result of changes in market interest rates.

The Company uses an industry standard simulation model as the primary tool to identify, quantify and project changes in interest rates and the impact on the balance sheet and forecasted net interest income. The model utilizes assumptions with respect to cash flows and prepayment speeds taken both from industry sources and internally generated data based upon historical trends in the Bank’s balance sheet. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in market interest rates are also incorporated into the model. This model calculates a fair value amount with respect to non-time deposit categories, since these deposits are part of the core deposit products of the Company. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure the fair value of capital or precisely predict the impact of fluctuations in interest rates on the fair value of capital.

Using this model, the fair values of capital projections as of December 31, 2014 are referenced below. The base case scenario shows the present estimate of the fair value of capital assuming no change in the operating environment or operating strategies and no change in interest rates from those existing in the marketplace as of December 31, 2014. The table indicates the impact on the fair value of capital assuming interest rates were to instantaneously increase by 100, 200, 300 and 400 basis points (BP) or to decrease by 100 basis points.

	Estimated Percentage of
	Fair value of Capital to
As of December 31, 2014	Fair value of Assets
+400 BP		19.98	%
+300 BP		21.08
+200 BP		22.10
+100 BP		22.82
Current rates		21.99
-100 BP		20.97

At December 31, 2014 the Company’s Tier 1 capital to assets ratio (leverage capital ratio) was 8.55%.

The fair value of capital is calculated as the fair value of assets less the fair value of liabilities in the interest rate scenario presented. The fair value of capital in the current rate environment is 21.99% of the fair value of assets whereas the current Tier 1 capital to assets ratio was 8.55% at December 31, 2014, as noted. The significant difference between these two capital ratios reflects the impact that a fair value calculation can have on the capital ratios of a company. The fair value of capital calculations take into consideration the fair value of deposits, including those deposits considered core deposits, along with the fair value of assets such as the loan portfolio.

A secondary method to identify and manage the interest rate risk profile is the static gap analysis. Interest sensitivity gap analysis measures the difference between the assets and liabilities repricing or maturing within specific time periods. An asset-sensitive position indicates that there are more rate-sensitive assets than rate-sensitive liabilities repricing or maturing within specific time periods, which would generally imply a favorable impact on net interest income in periods of rising interest rates and a negative impact in periods of falling rates. A liability-sensitive position would generally imply a negative impact on net interest income in periods of rising rates and a positive impact in periods of falling rates.

Static gap analysis has limitations because it cannot measure precisely the effect of interest rate movements, and competitive pressures on the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities. In addition, a significant portion of the interest sensitive assets are fixed rate securities with relatively long lives whereas the interest-bearing liabilities are not subject to these same limitations. As a result, certain assets and liabilities may in fact reprice at different times and at different volumes than the static gap analysis would indicate. The Company deemphasized the use of gap analysis in favor of the more advanced methods provided by the previously noted model, including the sensitivity of the economic value of equity and net interest income.

The Company recognizes the relatively long-term nature of the fixed rate residential loan portfolio. To fund those long-term assets, the Company cultivates long-term deposit relationships (often called core deposits). These core deposit relationships tend to be longer term in nature and not as susceptible to changes in interest rates. Core deposit balances, along with substantial levels of short term liquid assets allows the Company to take on certain interest rate risk with respect to the fixed rate loans on its balance sheet.

The table “Interest Rate Sensitivity” presents an analysis of the interest-sensitivity gap position at December 31, 2014. All interest-earning assets and interest-bearing liabilities are shown based upon their contractual maturity or repricing date adjusted for forecasted prepayment rates. Asset prepayment and liability repricing periods are selected after considering the current rate environment, industry prepayment and data specific to the Company. The interest rate sensitivity table indicates that TrustCo is asset sensitive on a cumulative basis when measured at any of the repricing buckets and on a total basis, due primarily to the substantial excess of interest sensitive assets over interest sensitive liabilities in the shortest repricing bucket of 0 to 90 days. The effect of being asset sensitive is that rising interest rates should result in assets repricing to higher levels faster than liabilities repricing to higher levels, thus increasing net interest income. Conversely, should interest rates decline, the Company’s interest bearing assets would reprice down faster than liabilities, resulting in lower net interest income.

INTEREST RATE SENSITIVITY

(dollars in thousands)	At December 31, 2014
	Repricing in:
	0-90			91-365			1-5			Over 5			Rate
	days			days			years			years			Insensitive		Total
Total assets	$	1,202,886			518,767			1,793,119			1,049,459			80,208		4,644,439
Cumulative total assets		1,202,886			1,721,653			3,514,772			4,564,231			4,644,439
Total liabilities and shareholders' equity		399,681			998,791			2,006,061			816,825			423,082		4,644,439
Cumulative total liabilities and shareholders' equity		399,681			1,398,471			3,404,532			4,221,357			4,644,439
Cumulative interest sensitivity gap	$	803,205			323,182			110,240			342,874
Cumulative gap as a % of interest earning assets for the period		66.8	%		18.8	%		3.1	%		7.5	%
Cumulative interest sensitive assets to liabilities		301.0			123.1			103.2			108.1

In practice, the optionality imbedded in many of the Company’s assets and liabilities, along with other limitations such as differing timing between changes in rates on varying assets and liabilities limits the effectiveness of gap analysis, thus the table should be viewed as a rough framework in the evaluation of interest rate risk. Management takes these factors, and others, into consideration when reviewing the Bank’s gap position and establishing its asset/liability strategy. As noted, the simulation model is better able to consider these aspects of the Bank’s exposure to potential rate changes and thus is viewed as the more important of the two methodologies.

Liquidity Risk

TrustCo seeks to obtain favorable funding sources and to maintain prudent levels of liquid assets in order to satisfy various liquidity demands. In addition to serving as a funding source for maturing obligations, liquidity provides flexibility in responding to customer-initiated needs. Many factors affect the ability to meet liquidity needs, including changes in the markets served by the Bank’s network of branches, the mix of assets and liabilities, and general economic conditions.

The Company actively manages its liquidity position through target ratios established under its Asset/ Liability Management policies. Continual monitoring of these ratios, both historically and through forecasts under multiple interest rate scenarios, allows TrustCo to employ strategies necessary to maintain adequate liquidity levels. Management has also developed various liquidity alternatives, such as borrowings from the Federal Home Loan Bank of New York, should the need develop.

The Company achieves its liability-based liquidity objectives in a variety of ways. Liabilities can be classified into three categories for the purposes of managing liability-based liquidity: core deposits, purchased money, and capital market funds. TrustCo seeks deposits that are dependable and predictable and that are based as much on the level and quality of service as they are on interest rate. Average core deposits (total deposits less time deposits greater than $100 thousand) amounted to $3.54 billion in 2014 and $3.47 billion in 2013. Average balances of core deposits are detailed in the table “Mix of Average Sources of Funding.”

In addition to core deposits, another source of liability-based funding available to TrustCo is purchased money, which consists of long-term and short-term borrowings, Federal Funds purchased, securities sold under repurchase agreements, and time deposits greater than $100 thousand. The average balances of these purchased liabilities are detailed in the table “Mix of Average Sources of Funding.” During 2014, the average balance of purchased liabilities was $630.3 million, compared with $572.3 million in 2013. Although classified as purchased liabilities for the purposes of this analysis, The Company does not offer premium rates on time deposits of greater than $100 thousand and thus views its time deposits as relatively stable funds.

The Bank also has a line of credit available with the Federal Home Loan Bank of New York. The amount of that line is determined by the Bank’s total assets and the amount and types of collateral pledged. Pledgable assets include most loans and securities. The Bank can borrow up to 30% of its total assets from the FHLBNY without special approval and may apply to borrow up to 50% of its total assets. Securities and loans pledged as collateral against any borrowings must cover certain margin requirements. Pledgeable securities have a maximum lendable value of 67% to 97%, depending on the security type, although the securities in the Bank’s investment portfolio generally have maximum lendable values of 80% to 95%. The maximum lendable value against loans is 90% for residential mortgages, 80% for multifamily mortgages and 75% for commercial mortgages. For both securities and loans, the maximum lendable limits are applied to the market value of the asset pledged. At December 31, 2014 there were no outstanding balances associated with this line of credit.

The Company’s overall liquidity position is favorable compared to its peers. A simple liquidity proxy often used in the industry is the ratio of loans to deposits, with a lower number representing a more liquid institution. At December 31, 2014, TrustCo’s loan to deposit ratio was 78.3% compared to 74.1% at December 31, 2013, while the median peer group of all publically traded banks and thrifts tracked by SNL financial with assets between $2 billion and $10 billion had ratios of 90.5% and 85.9%, respectively. In addition, at December 31, 2014 and 2013, the Company had cash and cash equivalents totaling $671.4 million and $583.0 million, respectively, as well as unpledged securities available for sale with a fair value of $392.1 million and $546.7 million, respectively.

Off-Balance Sheet Risk

Commitments to extend credit: The Bank makes contractual commitments to extend credit, and extends lines of credit which are subject to the Bank’s credit approval and monitoring procedures. At December 31, 2014 and 2013, commitments to extend credit in the form of loans, including unused lines of credit, amounted to $446.7 million and $430.3 million, respectively. In management’s opinion, there are no material commitments to extend credit that represent unusual risk.

The Company has issued conditional commitments in the form of standby letters of credit to guarantee payment on behalf of a customer and guarantee the performance of a customer to a third party. Standby letters of credit generally arise in connection with lending relationships. The credit risk involved in issuing these instruments is essentially the same as that involved in extending loans to customers. Contingent obligations under standby letters of credit totaled approximately $8.0 million and $6.5 million at December 31, 2014 and 2013, respectively, and represent the maximum potential future payments the Company could be required to make. Typically, these instruments have terms of 12 months or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements. Each customer is evaluated individually for creditworthiness under the same underwriting standards used for commitments to extend credit and on-balance sheet instruments. Company policies governing loan collateral apply to standby letters of credit at the time of credit extension. Loan-to-value ratios are generally consistent with loan-to-value requirements for other commercial loans secured by similar types of collateral. The fair value of the Company’s standby letters of credit at December 31, 2014 and 2013 was insignificant.

Other off-balance sheet risk: TrustCo does not engage in activities involving interest rate swaps, forward placement contracts, or any other instruments commonly referred to as “derivatives”. Management believes these instruments pose a high degree of risk, and that investing in them is unnecessary. TrustCo has no off-balance sheet partnerships, joint ventures, or other risk sharing entities.

Noninterest Income and Expense

Noninterest income: Noninterest income is a significant source of revenue for the Company and an important factor in overall results. Total noninterest income was $19.9 million in 2014, $19.8 million in 2013 and $21.0 million in 2012. Included in the 2014 results are $717 thousand of net securities gains compared with net gains of $1.6 million in 2013 and $2.2 million in 2012. Excluding securities gains and losses, noninterest income was $19.2 million in 2014, $18.1 million in 2013 and $18.8 million in 2012.

Trustco Financial Services contributes a large recurring portion of noninterest income through fees generated by providing fiduciary and investment management services. Income from these fiduciary activities totaled $5.8 million in 2014, $5.3 million in 2013, and $5.8 million in 2012. Trust fees are generally calculated as a percentage of the assets under management by Trustco Financial Services. In addition, trust fees include fees for estate settlements, tax preparation, and other services. Assets under management by Trustco Financial Services are not included on the Company’s Consolidated Financial Statements because Trustco Financial Services holds these assets in a fiduciary capacity. At December 31, 2014, 2013 and 2012, fair value of assets under management by the Trustco Financial Services were approximately $917.9 million, $839.6 million and $825.0 million, respectively. The changes in levels of assets under management reflects a combination of changing market valuations and the net impact of new customer asset additions, losses of accounts and the settlement of estates.

The Company routinely reviews its service charge policies and levels relative to its competitors. Reflecting those reviews, changes in fees for services to customers in terms of both the levels of fees as well as types of fees are made where appropriate. The changes in reported noninterest income also reflect the volume of services customers utilized and regulatory changes governing overdrafts. During 2014 and 2013 sales of nonperforming loans resulted in gains of $164 thousand and $314 thousand, respectively, and are included in other noninterest income. Also included in other noninterest income in 2014 is a gain of $1.6 million on the sale of a property in Florida that was to be used as a regional headquarters.

NONINTEREST INCOME

(dollars in thousands)	For the year ended December 31,						2014 vs. 2013
	2014		2013		2012		Amount			Percent
Trustco Financial Services income	$	5,837		5,301		5,761		536			10.1	%
Fees for services to customers		10,844		11,675		12,290		(831	)		(7.1	)
Net gain on securities transactions		717		1,622		2,161		(905	)		(55.8	)
Other		2,508		1,172		752		1,336			114.0
Total noninterest income	$	19,906		19,770		20,964		136			0.7	%

Noninterest expense: Noninterest expense was $84.7 million in 2014, compared with $85.0 million in 2013 and $84.0 million in 2012. TrustCo’s operating philosophy stresses the importance of monitoring and controlling the level of noninterest expense. The efficiency ratio is a strong indicator of how well controlled and monitored these expenses are for a banking enterprise. A low ratio indicates highly efficient performance. The median efficiency ratio for a peer group composed of similar sized banking institutions was 63.4% for 2014. TrustCo’s efficiency ratio was 52.6% in 2014, 52.8% in 2013 and 52.3% in 2012. Excluded from the efficiency ratio calculation were $717 thousand of securities gains in 2014 as well as $1.6 million of securities gains in 2013, and $2.2 million of securities gains in 2012. In addition in 2014, the ratio excludes the gain on the sale of the building in Florida and the gain on the sale of NPLs mentioned previously. Other real estate owned expense or income is also excluded from this calculation for all periods presented.

NONINTEREST EXPENSE

(dollars in thousands)	For the year ended December 31,						2014 vs. 2013
	2014		2013		2012		Amount			Percent
Salaries and employee benefits	$	32,879		32,424		31,276		455			1.4	%
Net occupancy expense		16,251		16,100		15,257		151			0.9
Equipment expense		7,219		6,381		6,073		838			13.1
Professional services		5,807		5,649		6,040		158			2.8
Outsourced services		5,350		5,125		5,122		225			4.4
Advertising expense		2,487		2,827		3,841		(340	)		(12.0	)
FDIC and other insurance		3,907		3,975		3,823		(68	)		(1.7	)
Other real estate expense, net		1,009		3,598		3,216		(2,589	)		(72.0	)
Other		9,761		8,926		9,329		835			9.4
Total noninterest expense	$	84,670		85,005		83,977		(335	)		(0.4	)%

Salaries and employee benefits are the most significant component of noninterest expense. For 2014, these expenses amounted to $32.9 million, compared with $32.4 million in 2013, and $31.3 million in 2012. The increase in salaries and benefits in 2014 was primarily due to higher benefit costs and an increase in FTEs related to new branch openings and additional compliance staff. Full time equivalent headcount increased from 708 as of December 31, 2013 to 737 as of December 31, 2014.

Net occupancy expense increased to $16.3 million in 2014, compared to $16.1 million in 2013 and $15.3 million in 2012. These changes primarily reflect the full impact of branches opened in the last three years as well as increases in property taxes on owned and leased premises.

Equipment expense was up $838 thousand to $7.2 million in 2014, compared to $6.4 million in 2013 and $6.1 million in 2012. This was primarily due to computer system upgrades and costs associated with new branch facilities.

Professional services expense increased to $5.8 million in 2014 compared to $5.6 million in 2013 and $6.0 million in 2012. Outsourced service expense was $5.4 million in 2014 and $5.1 million in both 2013 and 2012, reflecting increased volumes as well as outsourced credit card product costs. Advertising expense was $2.5 million in 2014, $2.8 million in 2013 and $3.8 million in 2012. Higher costs in 2012 reflected intensified use of advertising and promotion to attract and grow customers in new markets, particularly with respect to residential mortgage products, with a return to more normalized levels in 2013 and 2014.

FDIC and other insurance expense was $3.9 million in 2014, $4.0 million in 2013 and $3.8 million in 2012.

Other real estate expense decreased to $1.0 million in 2014, as compared to $3.6 million in 2013 and $3.2 million in 2012. Included in ORE expense during 2014, 2013 and 2012 were write downs of properties included in ORE totaling $2.0 million, $2.2 million and $1.1 million, respectively. Also included in 2014 results was a gain of $2.4 million on the sale of a large ORE property. Real estate market conditions in the Company’s service areas, particularly Florida, have improved but remain challenging in some areas.

Changes in other components of noninterest expense are the results of normal banking activities and the increased activities associated with new branching facilities.

Income Tax

In 2014, TrustCo recognized income tax expense of $27.4 million, as compared to $23.7 million in 2013 and $22.4 million in 2012. The effective tax rates were 38.3%, 37.3% and 37.4% in 2014, 2013, and 2012, respectively. The tax expense on the Company’s income was different than tax expense at the federal statutory rate of 35%, due primarily to the effect of state income taxes and to a lesser extent to the effect of tax exempt income. During 2014 the increase in taxes and effective tax rate reflect higher pre-tax income levels and the impact of New York State tax law changes which required a deferred tax asset write-down of $200 thousand during the first quarter of 2014.

Contractual Obligations

The Company is contractually obligated to make the following payments on leases as of December 31, 2014:

(dollars in thousands)	Payments Due by Period:
	Less Than		1-3		3-5		More than
	1 Year		Years		Years		5 Years		Total

Operating leases	$	7,023		13,333		12,379		40,840		73,575

In addition, the Company is contractually obligated to pay data processing vendors approximately $5 million to $6 million per year through 2019.

Also, the Company is obligated under its various employee benefit plans to make certain payments in the future. The payments are approximately $1.8 to $1.9 million per year through 2024. Additionally, the Company is obligated to pay the accumulated benefits under the supplementary pension plan which amounted to $5.6 million as of December 31, 2014 and 2013. Actual payments under the plan would be made in accordance with the plan provisions.

Impact of Inflation and Changing Prices

The Consolidated Financial Statements for the years ended 2014, 2013 and 2012 have been prepared in accordance with U.S. generally accepted accounting principles which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increasing cost of operations.

Unlike most industrial companies, nearly all the assets and liabilities of the Company are monetary. As a result, changes in interest rates have a greater impact on the Company’s performance than do the effects of general levels of inflation, because interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services.

Critical Accounting Policies

Pursuant to recent SEC guidance, management of the Company is encouraged to evaluate and disclose those accounting policies that are judged to be critical policies – those most important to the portrayal of the Company’s financial condition and results, and that require management’s most difficult subjective or complex judgments. Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the inherent uncertainty in evaluating the levels of the allowance required to cover credit losses in the portfolio and the material effect that such judgments can have on the results of operations. Included in Note 1 to the Consolidated Financial Statements contained in the Company’s 2014 Annual Report on Form 10-K is a description of the significant accounting policies that are utilized by the Company in the preparation of the Consolidated Financial Statements.

Recent Accounting Pronouncements

Please refer to Note 17 to the consolidated financial statements for a detailed discussion of new accounting pronouncements and their impact on the Company.

Forward-Looking Statements

Statements included in this report and in future filings by TrustCo with the Securities and Exchange Commission, in TrustCo’s press releases, and in oral statements made with the approval of an authorized executive officer, which are not historical or current facts, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Forward-looking statements can be identified by the use of such words as may, will, should, could, would, estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

The following important factors, among others, in some cases have affected and in the future could affect TrustCo’s actual results, and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement:

TrustCo’s ability to continue to originate a significant volume of one- to- four family mortgage loans in its market areas and to otherwise maintain or increase its market share in the areas in which it operates;

TrustCo’s ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income;

the future earnings and capital levels of Trustco Bank and the continued non-objection by TrustCo’s and Trustco Bank’s primary federal banking regulators, to the extent required, to distribute capital from Trustco Bank to the Company, which could affect the ability of the Company to pay dividends;

TrustCo’s ability to make accurate assumptions and judgments regarding the credit risks associated with its lending and investing activities, including changes in the level and direction of loan delinquencies and charge-offs, changes in property values, and changes in estimates of the adequacy of the allowance for loan and lease losses;

the effects of and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rates, market and monetary fluctuations;

adverse conditions in the securities markets that lead to impairment in the value of securities in TrustCo’s investment portfolio;

the perceived overall value of TrustCo’s products and services by users, including the features, pricing and quality compared to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for TrustCo’s products and services;

changes in consumer spending, borrowing and savings habits;

the effect of changes in financial services laws and regulations (including laws concerning taxation, banking and securities) and the impact of other governmental initiatives affecting the financial services industry, including new regulatory capital requirements that take effect for 2015;

the results of examinations of Trustco Bank and the Company by their respective primary federal banking regulators, including the possibility that the regulators may, among other things, require us to increase our loss allowances or to take other actions that reduce capital or income;

changes in management personnel;

real estate and collateral values;

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies Financial Accounting Standards Board (“FASB”) or the Public Company Accounting Oversight Board;

technological changes and electronic, cyber and physical security breaches;

changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits;

TrustCo’s success at managing the risks involved in the foregoing and managing its business; and

other risks and uncertainties included under “Risk Factors” in our Form 10-K for the year ended December 31, 2014.

You should not rely upon forward-looking statements as predictions of future events. Although TrustCo believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. The foregoing list should not be construed as exhaustive, and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events.

SUMMARY OF UNAUDITED QUARTERLY FINANCIAL INFORMATION

(dollars in thousands, except per share data)
	2014							2013
		Q1	Q2	Q3	Q4	Year			Q1	Q2	Q3	Q4	Year
Income statement:
Interest and dividend income	$	38,446	39,156	39,574	39,765		156,941	$	37,470	37,331	37,882	38,364		151,047
Interest expense		3,790	3,676	3,926	4,096		15,488		3,865	3,791	3,779	3,848		15,283
Net interest income		34,656	35,480	35,648	35,669		141,453		33,605	33,540	34,103	34,516		135,764
Provision for loan losses		1,500	1,500	1,100	1,000		5,100		2,000	2,000	1,500	1,500		7,000
Net interest income after provison for loan losses		33,156	33,980	34,548	34,669		136,353		31,605	31,540	32,603	33,016		128,764
Noninterest income		5,759	4,505	4,890	4,752		19,906		4,592	5,916	4,414	4,848		19,770
Noninterest expense		20,801	19,437	22,192	22,240		84,670		21,557	21,869	20,688	20,891		85,005
Income before income taxes		18,114	19,048	17,246	17,181		71,589		14,640	15,587	16,329	16,973		63,529
Income tax expense		7,103	7,240	6,532	6,521		27,396		5,472	5,824	6,077	6,344		23,717
Net income	$	11,011	11,808	10,714	10,660		44,193	$	9,168	9,763	10,252	10,629		39,812
Per share data:
Basic earnings	$	0.116	0.125	0.113	0.113		0.467	$	0.097	0.104	0.109	0.113		0.422
Diluted earnings		0.116	0.125	0.113	0.112		0.466		0.097	0.104	0.109	0.112		0.422
Cash dividends declared		0.0656	0.0656	0.0656	0.0656		0.2625		0.0656	0.0656	0.0656	0.0656		0.2625

FIVE YEAR SUMMARY OF FINANCIAL DATA

(dollars in thousands, except per share data)	Years Ended December 31,
	2014			2013			2012			2011			2010
Statement of income data:
Interest and dividend income	$	156,941			151,047			154,963			160,748			162,123
Interest expense		15,488			15,283			19,975			26,244			34,998
Net interest income		141,453			135,764			134,988			134,504			127,125
Provision for loan losses		5,100			7,000			12,000			18,750			23,200
Net interest income after provision for loan losses		136,353			128,764			122,988			115,754			103,925
Noninterest income		19,189			18,148			18,803			17,345			17,529
Net gain on securities transactions		717			1,622			2,161			1,428			3,352
Noninterest expense		84,670			85,005			83,977			82,142			80,894
Income before income taxes		71,589			63,529			59,975			52,385			43,912
Income taxes		27,396			23,717			22,441			19,298			14,591
Net income	$	44,193			39,812			37,534			33,087			29,321
Share data:
Average equivalent diluted shares (in thousands)		94,753			94,206			93,637			85,072			76,935
Tangible book value	$	4.14			3.82			3.81			3.62			3.31
Cash dividends		0.263			0.263			0.263			0.263			0.256
Basic earnings		0.467			0.422			0.400			0.389			0.381
Diluted earnings		0.466			0.422			0.400			0.389			0.381
Financial:
Return on average assets		0.97	%		0.90			0.87			0.81			0.77
Return on average shareholders' equity		11.54			11.15			10.70			11.04			11.48
Cash dividend payout ratio		56.30			62.19			65.60			67.71			67.25
Tier 1 capital to assets (leverage ratio)		8.55			8.27			8.21			8.14			6.68
Tier 1 capital as a % of total risk adjusted assets		17.04			16.74			16.68			15.97			12.57
Total capital as a % of total risk adjusted assets		18.30			18.00			17.94			17.23			13.83
Efficiency ratio		52.60			52.78			52.28			49.95			51.42
Net interest margin		3.16			3.14			3.20			3.40			3.50
Average balances:
Total assets	$	4,574,941			4,422,393			4,332,793			4,089,790			3,795,667
Earning assets		4,487,133			4,334,803			4,238,638			3,991,932			3,689,087
Loans, net		3,014,156			2,771,663			2,572,983			2,423,337			2,320,010
Allowance for loan losses		(47,409	)		(48,452	)		(49,148	)		(46,210	)		(40,846	)
Securities available for sale		794,613			946,367			1,023,025			947,482			780,540
Held to maturity securities		78,356			104,371			171,710			181,584			245,191
Federal Reserve Bank and Federal Home Loan Bank stock		10,135			10,266			9,425			6,898			6,774
Deposits		3,978,968			3,863,420			3,809,690			3,637,595			3,403,580
Short-term borrowings		189,430			180,275			152,982			133,803			119,213
Shareholders' equity		382,810			356,979			350,680			299,739			255,332

Non-GAAP Financial Measures Reconciliation

Tangible book value per share is a non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible equity by excluding the balance of intangible assets from shareholders’ equity. We calculate tangible book value per share by dividing tangible equity by common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders’ equity by common shares outstanding.

The efficiency ratio is a non-GAAP measure of expense control relative to recurring revenue. We calculate the efficiency ratio by dividing total noninterest expenses as determined under GAAP, but excluding other real estate owned expense, net, which we refer to below as recurring expense, by net interest income (fully taxable equivalent) and total noninterest income as determined under GAAP, but excluding net gains on securities from this calculation and other non-recurring income sources, if applicable, which we refer to below as recurring revenue. We believe that this provides one reasonable measure of core expenses relative to core revenue.

The taxable equivalent net interest margin is a non-GAAP measure of adjusted net interest income relative to average interest earning assets. We calculate the taxable equivalent net interest margin by dividing GAAP net interest income, adjusted to include the benefit of non-taxable interest income, by average interest earnings assets.

We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titled measures reported by other companies.

(dollars in thousands, except per share amounts)

(Unaudited)

	12/31/14		12/31/13		12/31/12		12/31/11		12/31/10
Tangible Book Value Per Share

Equity	$	393,444		361,813		358,798		338,516		255,440
Less: Intangible assets		553		553		553		553		553
Tangible equity	$	392,891		361,260		358,245		337,963		254,887

Shares outstanding		94,857		94,463		93,935		93,315		77,130
Tangible book value per share	$	4.14		3.82		3.81		3.62		3.30
Book value per share		4.15		3.83		3.82		3.63		3.31

	Years Ended
Efficiency Ratio	12/31/14			12/31/13		12/31/12		12/31/11		12/31/10

Net interest income (fully taxable equivalent)	$	141,583			136,094		135,669		135,717		128,963
Non-interest income		19,906			19,770		20,964		18,773		20,881
Less: Net gain on securities		717			1,622		2,161		1,428		3,352
Less: Net gain on sale of building and net gain on sale of nonperforming loans		1,719			-		-		-		-
Recurring revenue	$	159,053			154,242		154,472		153,062		146,492

Total Noninterest expense		84,670			85,005		83,977		82,142		80,894
Less: Other real estate expense, net		1,009			3,598		3,216		5,693		5,565
Recurring expense	$	83,661			81,407		80,761		76,449		75,329

Efficiency Ratio		52.60	%		52.78		52.28		49.95		51.42

	Years Ended
Taxable Equivalent Net Interest Margin	12/31/14			12/31/13		12/31/12		12/31/11		12/31/10

Net interest income	$	141,453			135,764		134,988		134,504		127,125
Taxable Equivalent Adjustment		130			330		681		1,213		1,838
Net interest income (Taxable Equivalent)	$	141,583			136,094		135,669		135,717		128,963

Total Interest Earning Assets	$	4,487,133			4,334,803		4,238,638		3,991,932		3,689,087

Net Interest Margin		3.15	%		3.13		3.18		3.37		3.45
Taxable Equivalent Net Interest Margin		3.16	%		3.14		3.20		3.40		3.50

Glossary of Terms

Allowance for Loan Losses:

A balance sheet account which represents management’s estimate of probable credit losses in the loan portfolio. The provision for loan losses is added to the allowance account, charge offs of loans decrease the allowance balance and recoveries on previously charged off loans serve to increase the balance.

Basic Earnings Per Share:

Net income divided by the weighted average number of common shares outstanding (including participating securities) during the period.

Cash Dividends Per Share:

Total cash dividends for each share outstanding on the record dates.

Comprehensive Income:

Net income plus the change in selected items recorded directly to capital such as the net change in unrealized market gains and losses on securities available for sale and the overfunded/underfunded positions in the retirement plans.

Core Deposits:

Deposits that are traditionally stable, including all deposits other than time deposits of $100,000 or more.

Derivative Investments:

Investments in futures contracts, forwards, swaps, or other investments with similar characteristics.

Diluted Earnings Per Share:

Net income divided by the weighted average number of common shares outstanding during the period, taking into consideration the effect of any dilutive stock options.

Earning Assets:

The sum of interest-bearing deposits with banks, securities available for sale, securities held to maturity, trading securities, loans, net of unearned income, and Federal Funds sold and other short term investments.

Efficiency Ratio:

Noninterest expense (excluding nonrecurring charges, and other real estate expense) divided by taxable equivalent net interest income plus noninterest income (excluding securities transactions and other non-recurring income items). This is an indicator of the recurring total cost of operating the Company in relation to the recurring total income generated.

Federal Funds Sold:

A short term (generally one business day) investment of excess cash reserves from one bank to another.

Government Sponsored Enterprises (GSE):

Government Sponsored Enterprises are corporations sponsored by the United States government and include the Federal Home Loan Bank (FHLB), the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac), the Federal National Mortgage Association (FNMA or Fannie Mae) and the Small Business Administration (SBA).

Impaired Loans:

Loans, principally commercial, where it is probable that the borrower will be unable to make the principal and interest payments according to the contractual terms of the loan, and all loans considered TDR’s.

Interest Bearing Liabilities:

The sum of interest bearing deposits, Federal Funds purchased, securities sold under agreements to repurchase, short-term borrowings, and long-term debt.

Interest Rate Spread:

The difference between the taxable equivalent yield on earning assets and the rate paid on interest bearing liabilities.

Liquidity:

The ability to meet loan commitments, deposit withdrawals, and maturing borrowings as they come due.

Net Interest Income:

The difference between income on earning assets and interest expense on interest bearing liabilities.

Net Interest Margin:

Fully taxable equivalent net interest income as a percentage of average earning assets.

Net Loans Charged Off:

Reductions to the allowance for loan losses written off as losses, net of the recovery of loans previously charged off.

Nonaccrual Loans:

Loans for which no periodic accrual of interest income is recognized.

Nonperforming Assets:

The sum of nonperforming loans plus foreclosed real estate properties.

Nonperforming Loans:

The sum of loans in a nonaccrual status (for purposes of interest recognition), plus accruing loans three payments or more past due as to principal or interest payments.

Parent Company:

A company that owns or controls a subsidiary through the ownership of voting stock.

Real Estate Owned:

Real estate acquired through foreclosure proceedings.

Return on Average Assets:

Net income as a percentage of average total assets.

Return on Average Equity:

Net income as a percentage of average equity.

Risk-Adjusted Assets:

A regulatory calculation that assigns risk factors to various assets on the balance sheet.

Risk-Based Capital:

The amount of capital required by federal regulatory standards, based on a risk-weighting of assets.

Subprime Loans:

Loans, including mortgages, that are underwritten based on non-traditional guidelines or structured in non-traditional ways, typically with the goal of facilitating the approval of loans that more conservative lenders would likely decline.

Tangible Book Value Per Share:

Total shareholders’ equity (less goodwill) divided by shares outstanding on the same date. This provides an indication of the tangible book value of a share of stock.

Taxable Equivalent (TE):

Tax exempt income that has been adjusted to an amount that would yield the same after tax income had the income been subject to taxation at the statutory federal and/or state income tax rates.

Tier 1 Capital:

Total shareholders’ equity excluding accumulated other comprehensive income.

Troubled Debt Restructurings (TDR's):

A TDR is a refinanced loan in which the bank allows the borrower certain concessions that would normally not be considered. The concessions are made in light of the borrower’s financial difficulties and the bank’s objective to maximize recovery on the loan. TDR’s are considered impaired loans.

Management’s Report on Internal Control over Financial Reporting

The management of TrustCo Bank Corp NY is responsible for establishing and maintaining adequate internal control over financial reporting. TrustCo’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has completed an assessment of TrustCo Bank Corp NY’s internal control over financial reporting as of December 31, 2014. In making this assessment, we used the criteria set forth by the 2013 Internal Control - Integrated Framework promulgated by the Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the “COSO” criteria. Based on our assessment, we believe that, as of December 31, 2014, the Company maintained effective internal control over financial reporting.

The Company’s internal control over financial reporting as of December 31, 2014 has been audited by Crowe Horwath LLP, the Company’s independent registered public accounting firm, as stated in their report which is included herein.

Robert J. McCormick

President and Chief Executive Officer

Michael M. Ozimek

Senior Vice President and Chief Financial Officer

March 6, 2015

Report of Independent Registered Public Accounting Firm

Audit Committee

TrustCo Bank Corp NY

Glenville, New York

We have audited the accompanying consolidated statements of condition of TrustCo Bank Corp NY (“Company”) as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, change in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2014. We also have audited the Company’s internal control over financial reporting as of December 31, 2014, based on criteria established in 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TrustCo Bank Corp NY as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

	/s/ Crowe Horwath LLP

New York, New York
March 6, 2015

Consolidated Statements of Income

(dollars in thousands, except per share data)	Years Ended December 31,
	2014		2013		2012

Interest and dividend income:
Interest and fees on loans	$	135,960		127,944		128,581
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		1,417		2,600		8,097
State and political subdivisions		179		562		1,413
Mortgage-backed securities and collateralized mortgage obligations-residential		12,150		11,385		6,697
Corporate bonds		65		812		2,231
Small Business Administration-guaranteed participation securities		2,154		2,180		319
Mortgage-backed securities and collateralized mortgage obligations-commercial		151		144		-
Other		16		17		19
Total interest and dividends on securities available for sale		16,132		17,700		18,776


Interest on held to maturity securities:
U. S. government sponsored enterprises		-		-		25
Mortgage-backed securities and collateralized mortgage obligations-residential		2,259		2,840		4,287
Corporate bonds		615		833		1,666
Total interest on held to maturity securities		2,874		3,673		5,978


Federal Reserve Bank and Federal Home Loan Bank stock		511		490		486
Interest on federal funds sold and other short-term investments		1,464		1,240		1,142
Total interest and dividend income		156,941		151,047		154,963

Interest expense:
Interest on deposits		14,091		13,800		18,500
Interest on short-term borrowings		1,397		1,483		1,475
Total interest expense		15,488		15,283		19,975

Net interest income		141,453		135,764		134,988
Provision for loan losses		5,100		7,000		12,000
Net interest income after provision for loan losses		136,353		128,764		122,988

Noninterest income:
Trustco Financial Services income		5,837		5,301		5,761
Fees for services to customers		10,844		11,675		12,290
Net gain on securities transactions		717		1,622		2,161
Other		2,508		1,172		752
Total noninterest income		19,906		19,770		20,964

Noninterest expense:
Salaries and employee benefits		32,879		32,424		31,276
Net occupancy expense		16,251		16,100		15,257
Equipment expense		7,219		6,381		6,073
Professional services		5,807		5,649		6,040
Outsourced services		5,350		5,125		5,122
Advertising expense		2,487		2,827		3,841
FDIC and other insurance expense		3,907		3,975		3,823
Other real estate expense, net		1,009		3,598		3,216
Other		9,761		8,926		9,329
Total noninterest expense		84,670		85,005		83,977

Income before income taxes		71,589		63,529		59,975
Income taxes		27,396		23,717		22,441
Net income	$	44,193		39,812		37,534

Earnings per share:
Basic	$	0.467		0.422		0.400
Diluted		0.466		0.422		0.400

See accompanying notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income

(dollars in thousands, except per share data)

	Years Ended December 31,
	2014			2013			2012

Net income	$	44,193			39,812			37,534

Net unrealized holding gain (loss) on securities available for sale		24,630			(34,691	)		10,100
Reclassification adjustments for net gain recognized in income		(717	)		(1,622	)		(2,161	)
Tax effect		(9,528	)		14,480			(3,166	)
Net unrealized gain (loss) on securities available for sale, net of tax		14,385			(21,833	)		4,773

Change in overfunded position in pension and postretirement plans arising during the year		(8,367	)		10,559			(1,244	)
Tax effect		3,336			(4,210	)		496

Change in overfunded position in pension and postretirement plans arising during the year, net of tax		(5,031	)		6,349			(748	)

Amortization of net actuarial (gain) loss		(297	)		467			306
Amortization of prior service cost (credit)		199			(262	)		(262	)
Tax effect		38			(82	)		(18	)
Amortization of net actuarial (gain) loss and prior service cost (credit) on pension and postretirement plans, net of tax		(60	)		123			26

Other comprehensive income (loss), net of tax		9,294			(15,361	)		4,051
Comprehensive income	$	53,487			24,451			41,585

See accompanying notes to consolidated financial statements.

Consolidated Statements of Condition

(dollars in thousands, except per share data)	As of December 31,
	2014			2013

ASSETS

Cash and due from banks	$	43,505			46,453
Federal funds sold and other short term investments		627,943			536,591
Total cash and cash equivalents		671,448			583,044
Securities available for sale		676,759			863,754
Held to maturity securities ($75,342 and $90,305 fair value at December 31, 2014 and 2013, respectively)		70,946			86,215
Federal Reserve Bank and Federal Home Loan Bank stock		9,228			10,500
Loans, net of deferred fees and costs		3,158,332			2,908,809
Less: Allowance for loan losses		46,327			47,714
Net loans		3,112,005			2,861,095
Bank premises and equipment, net		38,565			34,414
Other assets		65,488			82,430

Total assets	$	4,644,439			4,521,452

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand	$	331,425			318,456
Savings accounts		1,216,831			1,218,038
Interest-bearing checking		682,210			611,127
Money market deposit accounts		638,542			648,402
Certificates of deposit (in denominations of $100,000 or more)		466,260			419,301
Other time accounts		696,973			711,747
Total deposits		4,032,241			3,927,071
Short-term borrowings		189,116			204,162
Accrued expenses and other liabilities		29,638			28,406
Total liabilities		4,250,995			4,159,639

Commitments and contingent liabilities

SHAREHOLDERS' EQUITY:

Capital stock: $1 par value; 150,000,000 shares authorized, 98,944,623 and 98,927,123 shares issued at December 31, 2014 and 2013, respectively		98,945			98,927
Surplus		172,353			173,144
Undivided profits		166,745			147,432
Accumulated other comprehensive loss, net of tax		(4,509	)		(13,803	)
Treasury stock: 4,087,295 and 4,463,786 shares, at cost, at December 31, 2014and 2013, respectively		(40,090	)		(43,887	)
Total shareholders' equity		393,444			361,813
Total liabilities and shareholders' equity	$	4,644,439			4,521,452

See accompanying notes to consolidated financial statements.

Consolidated Statements of Changes in Shareholders' Equity

(dollars in thousands, except per share data)

									Accumulated
									Other
									Comprehensive
	Capital					Undivided			(Loss)			Treasury
	Stock		Surplus			Profits			Income			Stock			Total

Beginning balance, January 1, 2012		98,912		176,638			119,465			(2,493	)		(54,006	)		338,516
Net Income - 2012		-		-			37,534			-			-			37,534
Change in other comprehensive loss, net of tax		-		-			-			4,051			-			4,051
Cash dividend declared, $.2625 per share		-		-			(24,621	)		-			-			(24,621	)
Sale of treasury stock (514,097 shares)		-		(2,144	)		-			-			5,057			2,913
Stock based compensation expense		-		405			-			-			-			405
Ending balance, December 31, 2012	$	98,912		174,899			132,378			1,558			(48,949	)		358,798

Net Income - 2013		-		-			39,812			-			-			39,812
Change in other comprehensive income, net of tax		-		-			-			(15,361	)		-			(15,361	)
Stock options and related tax benefits		15		61			-			-			(40	)		36
Cash dividend declared, $.2625 per share		-		-			(24,758	)		-			-			(24,758	)
Sale of treasury stock (518,726 shares)		-		(2,194	)		-			-			5,102			2,908
Stock based compensation expense		-		378			-			-			-			378
Ending balance, December 31, 2013	$	98,927		173,144			147,432			(13,803	)		(43,887	)		361,813

Net Income - 2014		-		-			44,193			-			-			44,193
Change in other comprehensive loss, net of tax		-		-			-			9,294			-			9,294
Stock options and related tax benefits		18		113			-			-			-			131
Cash dividend declared, $.2625 per share		-		-			(24,880	)		-			-			(24,880	)
Purchase of treasury stock (38,390 shares)		-		-			-			-			(282	)		(282	)
Sale of treasury stock (414,881 shares)		-		(1,229	)		-			-			4,079			2,850
Stock based compensation expense		-		325			-			-			-			325
Ending balance, December 31, 2014	$	98,945		172,353			166,745			(4,509	)		(40,090	)		393,444

See accompanying notes to consolidated financial statements.

Consolidated Statements of Cash Flows

(dollars in thousands)

	Years Ended December 31,
	2014			2013			2012


Cash flows from operating activities:
Net income	$	44,193			39,812			37,534
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,776			5,017			5,032
Net (gain) loss on sale of other real estate owned		(2,599	)		(509	)		364
Writedown of other real estate owned		1,967			2,166			1,059
Net gain on sale of building held for sale		(1,556	)		-			-
Provision for loan losses		5,100			7,000			12,000
Deferred tax (benefit) expense		2,964			(1,426	)		1,440
Stock based compensation expense		325			378			405
Net gain on sale of bank premises and equipment		(1	)		(16	)		(3	)
Net gain on securities transactions		(717	)		(1,622	)		(2,161	)
Decrease (increase) in taxes receivable		723			(38	)		1,390
Decrease in interest receivable		398			554			2,200
Increase (decrease) in interest payable		80			19			(313	)
Decrease (increase) in other assets		(7,239	)		7,047			(2,780	)
Increase in accrued expenses and other liabilities.…		1,123			4,577			2,462
Total adjustments		5,344			23,147			21,095
Net cash provided by operating activities		49,537			62,959			58,629
Cash flows from investing activities:
Proceeds from sales and calls of securities available for sale		321,074			417,204			1,204,250
Purchases of securities available for sale		(120,655	)		(416,617	)		(1,199,986	)
Proceeds from maturities of securities available for sale		11,206			13,060			2,462
Proceeds from calls and maturities of held to maturity securities		15,269			57,211			83,165
Purchases of held to maturity securities		-			-			(10,303	)
Purchases of Federal Reserve Bank and Federal Home Loan Bank stock		(451	)		(868	)		(628	)
Proceeds from redemptions of Federal Reserve Bank and Federal Home Loan Bank stock		1,723			-			-
Net increase in loans		(266,630	)		(243,937	)		(190,843	)
Net proceeds from sale of building held for sale		4,745			-			-
Proceeds from dispositions of other real estate owned		12,972			10,967			9,760
Proceeds from dispositions of bank premises and equipment		139			16			3
Purchases of bank premises and equipment		(8,497	)		(6,381	)		(4,265	)
Net cash used in investing activities		(29,105	)		(169,345	)		(106,385	)
Cash flows from financing activities:
Net increase in deposits		105,170			122,878			68,220
Net increase in short-term borrowings		(15,046	)		44,316			12,283
Proceeds from exercise of stock options and related tax benefits		131			36			-
Proceeds from sales of treasury stock		2,850			2,908			2,913
Purchases of treasury stock		(282	)		-			-
Dividends paid		(24,851	)		(24,724	)		(24,587	)
Net cash provided by financing activities		67,972			145,414			58,829
Net increase in cash and cash equivalents		88,404			39,028			11,073
Cash and cash equivalents at beginning of period		583,044			544,016			532,943
Cash and cash equivalents at end of period	$	671,448		$	583,044			544,016

Supplemental Disclosure of Cash Flow Information:

Cash paid during the year for:
Interest paid	$	15,408		$	15,264		20,288
Income taxes paid		26,727			23,821		21,052
Non cash investing and financing activites:
Transfer of loans to real estate owned		10,620			12,648		14,623
Transfer of other real estate owned to fixed assets		568			-		-
Transfer of building to other assets		-			3,189		-
Increase in dividends payable		29			34		34
Change in unrealized gain (loss) on securities available for sale - gross of deferred taxes		23,913			(36,313	)	7,939
Change in deferred tax effect on unrealized gain (loss) on securities available for sale, net of reclassification adjustment		(9,528	)		14,480		(3,166	)
Amortization of net actuarial loss and prior service credit on pension and post retirement plans, gross of deferred taxes		(98	)		205		44
Change in deferred tax effect of amortization of net actuarial loss and prior service credit on pension and post retirement plans		38			(82	)	(18	)
Change in overfunded portion of pension and post retirement benefit plans (ASC 715) - gross of deferred taxes		(8,367	)		10,559		(1,244	)
Deferred tax effect of change in overfunded portion of pension and post retirement benefit plans (ASC 715)		3,336			(4,210	)	496

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

The accounting and financial reporting policies of TrustCo Bank Corp NY (the Company or TrustCo), ORE Subsidiary Corp., Trustco Bank (referred to as Trustco Bank or the Bank), and its wholly owned subsidiaries, Trustco Realty Corporation, Trustco Insurance Agency, Inc., ORE Property, Inc. and its subsidiaries ORE Property One, Inc. and ORE Property Two, Inc. conform to general practices within the banking industry and are in conformity with U.S. generally accepted accounting principles. A description of the more significant policies follows.

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Consolidation

The consolidated financial statements of the Company include the accounts of the subsidiaries after elimination of all significant intercompany accounts and transactions.

Use of Estimates

To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Securities Available for Sale and Held to Maturity

Securities available for sale are carried at fair value with any unrealized appreciation or depreciation of value, net of tax, included as an element of accumulated other comprehensive income or loss in shareholders’ equity. Management maintains an available for sale portfolio in order to provide maximum flexibility in balance sheet management. The designation of available for sale is made at the time of purchase based upon management’s intent to hold the securities for an indefinite period of time. These securities, however, are available for sale in response to changes in market interest rates, related changes in liquidity needs, or changes in the availability of and yield on alternative investments. Unrealized losses on securities that reflect a decline in value which is other than temporary, if any, are charged to earnings and/or accumulated other comprehensive income.

Debt securities that management has the positive intent and ability to hold until maturity are classified as held to maturity and are carried at their remaining unpaid principal balance, net of unamortized premiums or unaccreted discounts.

The cost of debt securities is adjusted for amortization of premium and accretion of discount using the interest method. Premiums and discounts on securities are amortized on the interest method over the estimated remaining term of the underlying security without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated.

Gains and losses on the sale of securities available for sale are based on the amortized cost of the specific security sold at trade date.

Other Than Temporary Impairment (“OTTI”)

A decline in the fair value of any available for sale or held to maturity security below cost that is deemed to be other than temporary is charged to earnings and/or accumulated other comprehensive income, resulting in the establishment of a new cost basis of the security. Management evaluates these types of securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Additional discussion of OTTI is included in Note 3 of the consolidated financial statements.

Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) stock

The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. The Bank is also a member of its regional Federal Reserve Bank. FRB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Any dividends received are reported as income.

Loans

Loans are carried at the principal amount outstanding net of unearned income and unamortized loan fees and costs, which are recognized as adjustments to interest income over the applicable loan term. Interest income on loans is accrued based on the principal amount outstanding.

Nonperforming loans include non-accrual loans, restructured loans, and loans which are three payments or more past due and still accruing interest. Generally, loans are placed in non-accrual status either due to the delinquent status of principal and/or interest payments, or a judgment by management that, although payments of principal and/or interest are current, such action is prudent based upon specific facts and circumstances surrounding the borrower. Typically, a loan is moved to non-accrual status after 90 days of non-payment in accordance with the Company’s policy. Past due status is based on the contractual terms of the loan. All interest accrued but not received for loans placed on non-accrual status is reversed against interest income. Future payments received on nonperforming loans are recorded as interest income or principal reductions based upon management’s ultimate expectation for collection. Loans may be removed from non-accrual status when they become current as to principal and interest and have demonstrated a sustained ability to make loan payments in accordance with the contractual terms of the loan. Loans may also be removed from non-accrual status when, in the opinion of management, the loan is expected to be fully collectable as to principal and interest. When, in the opinion of management, the collection of principal appears unlikely, the loan balance is evaluated in light of its sources of repayment, and a charge-off is recorded when appropriate.

Loan origination fees, net of certain direct origination costs, are deferred and recognized using the level yield method without anticipating prepayments.

Allowance for Loan Losses

The allowance for loan losses is maintained at a level considered adequate by management to provide for probable incurred loan losses. The allowance is increased by provisions charged against income, while loan losses are charged against the allowance when management deems a loan balance to be uncollectible. Subsequent recoveries, if any, are credited to the allowance.

The Company performs an analysis of the adequacy of the allowance on at least a quarterly basis. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations, current economic conditions, past due and charge-off trends and other factors. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to change the allowance based on their judgments of information available to them at the time of their examination. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. The allowance methodology consists of specific and general components. The specific component relates to loans that are individually classified as impaired.

A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Additionally, loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings (TDR’s) and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

TDR’s are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a TDR is considered to be a collateral dependent loan, the loan is reported at the fair value of the collateral with any charge-off recognized at that time. For TDR’s that subsequently default, the Company determines the amount of additional charge-off, if any, in accordance with the accounting policy for the allowance for loan losses with respect to impaired loans described previously.

Commercial and commercial real estate loans in non-accrual status are defined as impaired loans and are individually evaluated for impairment. In addition, residential restructured loans that meet the definition of a TDR are defined as impaired. If a loan is impaired, a charge-off is taken so that the loan is reported at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral, if repayment is expected solely from the collateral. Residential real estate loans and consumer loans are collectively evaluated for impairment.

The general component of the allowance covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by geography for each portfolio segment and is based on the actual net loss history experienced by the Company. This actual loss experience is supplemented with other qualitative factors based on the risks present in each geography and portfolio segment. These factors include consideration of the following: changes in national, regional and local economic trends and conditions; effects of any changes in interest rates; changes in the volume and severity of net charge-offs, delinquencies, and nonperforming loans; changes in the experience, ability, and depth of lending management and other relevant staff; effects of any changes in credit concentrations; effects of any changes in underwriting standards, lending policies, procedures, and practices; and changes in the nature, volume and terms of loans.

The Company’s allowance methodology also includes additional allocation percentages for residential and installment loans in non-accrual status and residential and installment loans three payments past due and still accruing interest, commercial loans classified by the Company’s internal loan review grading process, and residential loans with loan-to-value ratios in excess of 90% at the time of origination. The reserve percentages are determined based upon a review of recent charge-offs and take into consideration the type of loan, the fixed or variable nature of the loan, and the type and geography of the underlying collateral, if any.

The following portfolio segments have been identified: commercial loans, 1-to-4 family residential real estate loans, and installment loans:

Commercial:

Commercial real estate loans and other commercial loans are made based primarily on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. Commercial real estate collateral is generally located within the Bank’s geographic territories; while collateral for non-real estate secured commercial loans is typically accounts receivable, inventory, and/or equipment. Repayment is primarily dependent upon the borrower’s ability to service the debt based upon cash flows generated from the underlying business. Additional support involves liquidation of the pledged collateral and enforcement of a personal guarantee, if a guarantee is obtained.

Residential real estate:

Residential real estate loans, including first mortgages, home equity loans and home equity lines of credit, are collateralized by first or second liens on one-to-four family residences generally located within the Bank’s market areas. Proof of ownership title, clear mortgage title, and hazard insurance coverage are normally required.

Installment:

The Company’s installment loans are primarily made up of installment loans, personal lines of credit, as well as secured and unsecured credit cards. The installment loans represent a relatively small portion of the loan portfolio and are primarily used for personal expenses and are secured by automobiles, equipment and other forms of collateral, while personal lines of credit are unsecured as are most credit card loans.

Bank Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on either the straight-line or accelerated methods over the remaining useful lives of the assets; generally 20 to 40 years for buildings, 3 to 7 years for furniture and equipment, and the shorter of the estimated life of the asset or the lease term for leasehold improvements.

Other Real Estate Owned

Assets that are acquired through or instead of foreclosure are initially recorded at fair value less costs to sell. These assets are subsequently accounted for at the lower of cost or fair value less costs to sell. Subsequent write downs and gains and losses on sale are included in noninterest expense. Operating costs after acquisition are also included in noninterest expense. At December 31, 2014 and 2013 there were $6.4 million and $8.7 million of other real estate owned included in the category of Other Assets in the accompanying Consolidated Statements of Condition.

Income Taxes

Deferred taxes are recorded for the future tax consequences of events that have been recognized in the financial statements or tax returns based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not.

Dividend Restrictions

The Company’s ability to pay dividends to its shareholders is dependent upon the ability of the Bank to pay dividends to the Company. The payment of dividends by the Bank to the Company is subject to continued compliance with minimum regulatory capital requirements and the filing of notices or applications with the Bank’s and the Company’s regulators. The Bank’s primary regulator may disapprove a dividend if: the Bank would be undercapitalized following the distribution; the proposed capital distribution raises safety and soundness concerns; or the capital distribution would violate a prohibition contained in any statue, regulation or agreement between the Bank and a regulator or a condition imposed in a previously approved application or notice. Currently the Bank meets the regulatory definition of a well capitalized institution. During 2015, the Bank could declare dividends of approximately $37.4 million plus any 2015 net profits retained to the date of the dividend declaration.

Benefit Plans

The Company has a defined benefit pension plan covering substantially all of its employees. The benefits are based on years of service and the employee’s compensation. This plan was frozen as of December 31, 2006.

The Company has a postretirement benefit plan that permits retirees under age 65 to participate in the Company’s medical plan by which retirees pay all of their premiums. At age 65, the Company provides access to a Medicare Supplemental program for retirees.

Under certain employment contracts with selected executive officers, the Company is obligated to provide postretirement benefits to these individuals once they attain certain vesting requirements.

The Company recognized in the Consolidated Statement of Condition the funded status of the pension plan and postretirement benefit plan with an offset, net of tax, recorded in accumulated other comprehensive income.

Stock Based Compensation Plans

The Company has stock based compensation plans for employees and directors. Compensation cost is recognized for stock options and restricted stock awards issued to employees and directors based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options while, for restricted stock awards, the fair value of the Company’s common stock at the date of grant is used.

Compensation cost for stock options and restricted stock awards to be settled in stock are recognized over the required service period generally defined as the vesting period. The expense is recognized over the shorter of each award’s vesting period or the retirement date for any awards that vest immediately upon eligible retirement.

Awards to be settled in cash based on the fair value of the Company’s stock at vesting are treated as liability based awards.

Compensation costs for liability based awards are re-measured at each reporting date and recognized over the vesting period. For awards with performance based conditions, compensation cost is recognized over the performance period based on the Company’s expectation of meeting the specific performance criteria.

Earnings Per Share

Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options

Reclassification of Prior Year Statements

It is the Company’s policy to reclassify prior year consolidated financial statements to conform to the current year presentation.

Segment Reporting

The Company’s operations are exclusively in the financial services industry and include the provision of traditional banking services. Management evaluates the performance of the Company based on only one business segment, that of community banking. The Company operates primarily in the geographical region of Upstate New York with branches also in Florida and the mid-Hudson valley region of New York. In the opinion of management, the Company does not have any other reportable segments as defined by “Accounting Standards Codification” (ASC) Topic 280, “Disclosure about Segments of an Enterprise and Related Information”.

Cash and Cash Equivalents

The Company classifies cash on hand, cash due from banks, Federal Funds sold, and other short-term investments as cash and cash equivalents for disclosure purposes.

Trust Assets

Assets under management with the Trustco Financial Services Department are not included in the Company’s consolidated financial statements because Trustco Financial Services holds these assets in a fiduciary capacity.

Comprehensive Income

Comprehensive income represents the sum of net income and items of other comprehensive income or loss, which are reported directly in shareholders’ equity, net of tax, such as the change in net unrealized gain or loss on securities available for sale and changes in the funded position of the pension and postretirement benefit plans. Accumulated other comprehensive income or loss, which is a component of shareholders’ equity, represents the net unrealized gain or loss on securities available for sale, net of tax and the funded position in the Company’s pension plan and postretirement benefit plans, net of tax.

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 13. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.

(2) Balances at Other Banks

The Company is required to maintain certain reserves of vault cash and/or deposits with the Federal Reserve Bank. The amount of this reserve requirement, included in cash and due from banks and federal funds sold and other short term investments, was approximately $91.2 million and $83.6 million at December 31, 2014 and 2013, respectively.

(3) Investment Securities

(a) Securities available for sale

The amortized cost and fair value of the securities available for sale are as follows:

(dollars in thousands)	December 31, 2014
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

U.S. government sponsored enterprises	$	78,420		2		622		77,800
State and political subdivisions		2,232		39		-		2,271
Mortgage backed securities and collateralized mortgage obligations - residential		486,107		1,108		3,655		483,560
Corporate bonds		1,500		-		-		1,500
Small Business Administration- guaranteed participation securities		103,273		-		2,777		100,496
Mortgage backed securities and collateralized mortgage obligations - commercial		10,696		-		249		10,447
Other		650		-		-		650
Total debt securities		682,878		1,149		7,303		676,724
Equity securities		35		-		-		35
Total securities available for sale	$	682,913		1,149		7,303		676,759

(dollars in thousands)	December 31, 2013
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

U.S. government sponsored enterprises	$	200,531		22		1,724		198,829
State and political subdivisions		7,623		135		-		7,758
Mortgage backed securities and collateralized mortgage obligations - residential		552,230		267		20,048		532,449
Corporate bonds		10,429		43		1		10,471
Small Business Administration- guaranteed participation securities		111,383		-		8,354		103,029
Mortgage backed securities and collateralized mortgage obligations - commercial		10,965		-		407		10,558
Other		650		-		-		650
Total debt securities		893,811		467		30,534		863,744
Equity securities		10		-		-		10
Total securities available for sale	$	893,821		467		30,534		863,754

The following table distributes the debt securities included in the available for sale portfolio as of December 31, 2014, based on the securities’ final maturity (mortgage-backed securities and collateralized mortgage obligations are stated using an estimated average life):

(dollars in thousands)	Amortized		Fair
	Cost		Value
Due in one year or less	$	4,159		4,163
Due in one year through five years		415,064		413,058
Due after five years through ten years		263,343		259,189
Due after ten years		312		314
	$	682,878		676,724

Actual maturities may differ from the above because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty.

Gross unrealized losses on securities available for sale and the related fair values aggregated by the length of time that individual securities have been in an unrealized loss position, were as follows:

(dollars in thousands)	December 31, 2014
	Less than				12 months
	12 months				or more				Total
			Gross				Gross				Gross
	Fair		Unreal.		Fair		Unreal.		Fair		Unreal.
	Value		Loss		Value		Loss		Value		Loss

U.S. government sponsored enterprises	$	12,840		81		54,959		541		67,799		622
Mortgage backed securities and collateralized mortgage obligations - residential		65,549		492		325,476		3,163		391,025		3,655
Small Business Administration-guaranteed participation securities		-		-		100,496		2,777		100,496		2,777
Mortgage backed securities and collateralized mortgage obligations - commercial		-		-		10,447		249		10,447		249

Total	$	78,389		573		491,378		6,730		569,767		7,303

(dollars in thousands)	December 31, 2013
	Less than				12 months
	12 months				or more				Total
			Gross				Gross				Gross
	Fair		Unreal.		Fair		Unreal.		Fair		Unreal.
	Value		Loss		Value		Loss		Value		Loss
U.S. government sponsored enterprises	$	198,023		1,724		-		-		198,023		1,724
Mortgage backed securities and collateralized mortgage obligations - residential		466,056		17,698		54,835		2,350		520,891		20,048
Corporate bonds		902		1		-		-		902		1
Small Business Administration-guaranteed participation securities		103,029		8,354		-		-		103,029		8,354
Mortgage backed securities and collateralized mortgage obligations - commercial		10,558		407		-		-		10,558		407

Total	$	778,568		28,184		54,835		2,350		833,403		30,534

The proceeds from sales and calls of securities available for sale, gross realized gains and gross realized losses from sales and calls during 2014, 2013 and 2012 are as follows:

(dollars in thousands)	Year ended December 31,
	2014		2013		2012

Proceeds from sales	$	69,147		160,820		154,944
Proceeds from calls		251,927		256,384		1,049,442
Gross realized gains		720		1,702		2,584
Gross realized losses		3		80		423

Tax expense recognized on net gains on sales of securities available for sale were approximately $287 thousand, $649 thousand, and $864 thousand for the years ended December 31, 2014, 2013, 2012 respectively.

The amount of securities that have been pledged to secure short-term borrowings and for other purposes amounted to $298.5 million and $316.7 million at December 31, 2014 and 2013, respectively.

(b) Held to maturity securities

The amortized cost and fair value of the held to maturity securities are as follows:

(dollars in thousands)	December 31, 2014
			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	60,986		3,334		-		64,320
Corporate bonds		9,960		1,062		-		11,022
Total held to maturity	$	70,946		4,396		-		75,342

(dollars in thousands)	December 31, 2013
			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	76,270		2,744		138		78,876
Corporate bonds		9,945		1,484		-		11,429
Total held to maturity	$	86,215		4,228		138		90,305

The following table distributes the debt securities included in the held to maturity portfolio as of December 31, 2014, based on the securities’ final maturity (mortgage-backed securities and collateralized mortgage obligations are stated using an estimated average life):

(dollars in thousands)	Amortized		Fair
	Cost		Value
Due in one year or less	$	-		-
Due in one year through five years		69,598		73,895
Due in five years through ten years		1,348		1,447
	$	70,946		75,342

Actual maturities may differ from the above because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty.

There were no held to maturity securities with gross unrecognized losses as December 31, 2014. Gross unrecognized losses on held to maturity securities and the related fair values aggregated by the length of time that individual securities have been in an unrecognized loss position at December 31, 2013, were as follows:

(dollars in thousands)

December 31, 2013

Less than

12 months

or more

Total

Gross

Fair

Unrec.

Fair

Unrec.

Fair

Unrec.

Value

Loss

Value

Loss

Value

Loss

Mortgage backed securities and collateralized mortgage obligations - residential

27,091

138

27,091

138

Total

27,091

138

27,091

138

There were no sales or transfers of held to maturity securities during 2014 and 2013.

The Company has the following balances of securities held in the available for sale and held to maturity portfolios as of December 31, 2014 that represent greater than 10% of shareholders’ equity:

(dollars in thousands)	Amortized		Fair
	Cost		Value
Federal Home Loan Mortgage Corporation	$	141,819		141,307
Federal National Mortgage Association		376,197		374,518
Government National Mortgage Association		81,272		83,617
Small Business Administration		103,273		100,496

(d) Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for OTTI by segregating the portfolio by type and applying the appropriate OTTI model. Investment securities classified as available for sale or held-to-maturity are generally evaluated for OTTI under ASC 320 “Investments – Debt and Equity Securities.”

In determining OTTI under the FASB ASC 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether management intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If management intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If management does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, the OTTI on debt securities shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

As of December 31, 2014, the Company’s security portfolio included certain securities which were in an unrealized loss position, and are discussed below.

U.S. government sponsored enterprises

In the case of unrealized losses on U.S. government sponsored enterprises, because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Mortgage backed securities and collateralized mortgage obligations - residential

At December 31, 2014, all of the mortgage backed securities and collateralized mortgage obligations held by the Company were issued by U.S. government sponsored entities and agencies, primarily Ginnie Mae, Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Small Business Administration (SBA) - guaranteed participation securities

At December 31, 2014, all of the SBA securities held by the Company were issued and guaranteed by U.S. Small Business Administration. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Mortgage backed securities and collateralized mortgage obligations - commercial

As of December 31, 2014, all of the mortgage backed securities and collateralized mortgage obligations held by the Company were issued by U.S. government sponsored entities and agencies, are current as to the payment of interest and principal and the Company expects to collect the full amount of the principal and interest payments. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

As a result of the above analysis, for the year ended December 31, 2014, the Company did not recognize any other-than-temporary impairment losses for credit or any other reason.

(4) Loans and Allowance for Loan Losses

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

	December 31, 2014
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	174,788		19,336		194,124
Other		29,200		58		29,258
Real estate mortgage - 1 to 4 family:
First mortgages		2,041,140		476,427		2,517,567
Home equity loans		51,713		5,942		57,655
Home equity lines of credit		308,764		43,370		352,134
Installment		6,774		820		7,594
Total loans, net	$	2,612,379		545,953		3,158,332
Less: Allowance for loan losses						46,327
Net loans					$	3,112,005

	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 December 31, 2014 and 2013, the Company had approximately $38.5 million and $35.4 million of real estate construction loans. Of the $38.5 million in real estate construction loans at December 31, 2014, approximately $17.6 million are secured by first mortgages to residential borrowers while approximately $20.9 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 were secured by first mortgages to residential borrowers with the remaining $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.

At December 31, 2014 and 2013, loans to executive officers, directors, and to associates of such persons aggregated $9.4 million and $9.7 million, respectively. During 2014, approximately $3.9 million of new loans were made and repayments of loans totaled approximately $4.2 million. All loans are current according to their terms.

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:

	December 31, 2014
(dollars in thousands)	New York and
	other states		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	3,835		-		3,835
Real estate mortgage - 1 to 4 family:
First mortgages		23,643		2,488		26,131
Home equity loans		349		-		349
Home equity lines of credit		3,229		252		3,481
Installment		77		13		90
Total non-accrual loans		31,133		2,753		33,886
Restructured real estate mortgages - 1 to 4 family		125		-		125
Total nonperforming loans	$	31,258		2,753		34,011

	December 31, 2013
(dollars in thousands)	New York and
	other states		Florida		Total
Loans in non-accrual 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

The following tables present the aging of the recorded investment in past due loans by loan class and by region as of December 31, 2014 and 2013:

New York and other states:
	December 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	$	618		52		2,627			3,297		171,491		174,788
Other		-		-		-			-		29,200		29,200
Real estate mortgage - 1 to 4 family:
First mortgages		3,340		3,874		16,782			23,996		2,017,144		2,041,140
Home equity loans		141		59		337			537		51,176		51,713
Home equity lines of credit		568		342		1,198			2,108		306,656		308,764
Installment		79		10		58			147		6,627		6,774

Total	$	4,746		4,337		21,002			30,085		2,582,294		2,612,379

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	$	-		-		-			-		19,336		19,336
Other		-		-		-			-		58		58
Real estate mortgage - 1 to 4 family:
First mortgages		801		283		1,225			2,309		474,118		476,427
Home equity loans		-		-		-			-		5,942		5,942
Home equity lines of credit		173		-		116			289		43,081		43,370
Installment		17		-		-			17		803		820

Total	$	991		283		1,341			2,615		543,338		545,953

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	$	618		52		2,627			3,297		190,827		194,124
Other		-		-		-			-		29,258		29,258
Real estate mortgage - 1 to 4 family:
First mortgages		4,141		4,157		18,007			26,305		2,491,262		2,517,567
Home equity loans		141		59		337			537		57,118		57,655
Home equity lines of credit		741		342		1,314			2,397		349,737		352,134
Installment		96		10		58			164		7,430		7,594

Total	$	5,737		4,620		22,343			32,700		3,125,632		3,158,332

New York and other states:
	December 31, 2013
(dollars in thousands)
	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total 30+ days Past Due		Current		Total 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 December 31, 2014 and 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 in non-accruing 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 year ended December 31, 2014
			Real Estate
			Mortgage-
	Commercial		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*		397		5,485		201		6,083
Florida		613		835		13		1,461
Total loan chargeoffs		1,010		6,320		214		7,544

Recoveries of loans previously charged off:
New York and other states*		34		442		28		504
Florida		480		69		4		553
Total recoveries		514		511		32		1,057
Net loans charged off		496		5,809		182		6,487
Provision for loan losses		548		4,300		252		5,100
Balance at end of period	$	4,071		42,088		168		46,327

(dollars in thousands)	For the year ended December 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*		1,072		6,572		68		7,712
Florida		100		1,020		6		1,126
Total loan chargeoffs		1,172		7,592		74		8,838

Recoveries of loans previously charged off:
New York and other states*		14		715		17		746
Florida		505		374		-		879
Total recoveries		519		1,089		17		1,625
Net loans charged off		653		6,503		57		7,213
Provision for loan losses		901		6,031		68		7,000
Balance at end of period	$	4,019		43,597		98		47,714

(dollars in thousands)	For the year ended December 31, 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*		1,307		6,919		128		8,354
Florida		1,192		3,920		13		5,125
Total loan chargeoffs		2,499		10,839		141		13,479

Recoveries of loans previously charged off:
New York and other states*		112		375		49		536
Florida		26		127		-		153
Total recoveries		138		502		49		689
Net loans charged off		2,361		10,337		92		12,790
Provision for loan losses		1,992		9,927		81		12,000
Balance at end of period	$	3,771		44,069		87		47,927

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 December 31, 2014 and 2013:

	December 31, 2014
(dollars in thousands)			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		4,071		42,088		168		46,327

Total ending allowance balance	$	4,071		42,088		168		46,327


Loans:
Individually evaluated for impairment	$	4,129		22,406		-		26,535
Collectively evaluated for impairment		219,253		2,904,950		7,594		3,131,797

Total ending loans balance	$	223,382		2,927,356		7,594		3,158,332

	December 31, 2013
(dollars in thousands)			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		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 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 December 31, 2014 and 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 December 31, 2014, 2013 and 2012:

New York and other states:
	December 31, 2014
(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment

Commercial:
Commercial real estate	$	4,129		5,499		-		4,798
Other		-		-		-		61
Real estate mortgage - 1 to 4 family:
First mortgages		17,579		18,689		-		17,261
Home equity loans		366		410		-		454
Home equity lines of credit		2,492		2,778		-		2,578

Total	$	24,566		27,376		-		25,152

Florida:

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

Commercial:
Commercial real estate	$	-		-		-		577
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1,289		1,380		-		1,422
Home equity loans		56		56		-		5
Home equity lines of credit		624		773		-		581

Total	$	1,969		2,209		-		2,585

Total:

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

Commercial:
Commercial real estate	$	4,129		5,499		-		5,375
Other		-		-		-		61
Real estate mortgage - 1 to 4 family:
First mortgages		18,868		20,069		-		18,683
Home equity loans		422		466		-		459
Home equity lines of credit		3,116		3,551		-		3,159

Total	$	26,535		29,585		-		27,737

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, 2013, and 2012.

In response to the OCC interpretation that was issued in the third quarter of 2012, regarding borrowers who have filed Chapter 7 bankruptcy and did not re-affirm their debt with the Company, the Company classified $10.1 million of previously performing 1-4 family real estate mortgage loans as troubled debt restructurings (“TDR’s”) as of September 30, 2012. Included in the $10.1 million, were $4.0 million of loans that were reclassified from performing status to non-accrual status due to a collateral deficiency of $804 thousand. The collateral deficiency was charged off during the third quarter of 2012.

Included in impaired loans as of December 31, 2014 and 2013 are approximately $9.9 million and $8.6 million, respectively, of 1 to 4 family residential real estate loans in accruing status that were identified as TDR’s in accordance with OCC guidance released in the third quarter of 2012.

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 December 31, 2014 and 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 modified loans by class that were determined to be TDR’s that occurred during the years ended December 31, 2014, 2013 and 2012:

	Year ended 12/31/2014						Year ended 12/31/2013						Year ended 12/31/2012
New York and other states*: (dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Commercial:
Commercial real estate		1	$	294		294		1	$	507		507		2	$	138		138
Real estate mortgage - 1 to 4 family:
First mortgages		41		5,585		5,585		50		5,852		5,852		95		10,636		10,636
Home equity loans		4		77		77		7		120		120		16		488		488
Home equity lines of credit		3		194		194		13		1,061		1,061		30		1,633		1,633

Total		49	$	6,150		6,150		71	$	7,540		7,540		143	$	12,895		12,895

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

Real estate mortgage - 1 to 4 family:
First mortgages		7		676		676		8		1,149		1,149		12		1,265		1,265
Home equity loans		1		56		56		-		-		-		-		-		-
Home equity lines of credit		3		368		368		3		282		282		2		48		48

Total		11	$	1,100		1,100		11	$	1,431		1,431		14	$	1,313		1,313

The addition of these TDR’s did not have a significant impact on the allowance for loan losses. As previously noted, included in loans modified and classified as TDR’s during the year ended December 31, 2012 are approximately $10.6 million of 1 to 4 family residential real estate loans that were determined to be TDR’s in accordance with OCC guidance released in the third quarter of 2012.

The following table presents loans by class modified as TDR’s that occurred during the years ended December 31, 2014, 2013 and 2012 for which there was a payment default during the same period:

	Year ended 12/31/2014				Year ended 12/31/2013				Year ended 12/31/2012
New York and other states*:	Number of		Recorded		Number of		Recorded		Number of		Recorded
(dollars in thousands)	Contracts		Investment		Contracts		Investment		Contracts		Investment

Real estate mortgage - 1 to 4 family:
First mortgages		7		355		5		440		22		2,265
Home equity loans		-		-		1		44		2		13
Home equity lines of credit		1		35		1		56		5		209

Total		8	$	390		7	$	540		29	$	2,487

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

Real estate mortgage - 1 to 4 family:
First mortgages		1	$	60		-	$	-		6	$	605
Home equity lines of credit		1		279		-		-		1		47

Total		2	$	339		-	$	-		7	$	652

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

	December 31, 2014
New York and other states:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	162,589		12,199		174,788
Other		28,677		523		29,200

	$	191,266		12,722		203,988

Florida:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	19,336		-		19,336
Other		58		-		58

	$	19,394		-		19,394

Total:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	181,925		12,199		194,124
Other		28,735		523		29,258

	$	210,660		12,722		223,382

	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

Total:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	179,298		11,828		191,126
Other		31,723		632		32,355

	$	211,021		12,460		223,481

Included in classified loans in the above tables are impaired loans of $4.1 million and $8.1 million at December 31, 2014 and 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 December 31, 2014 and 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 December 31, 2014 and 2013 is presented in the recorded investment in non-accrual loans table.

(5) Bank Premises and Equipment

A summary of premises and equipment at December 31, 2014 and 2013 follows:

(dollars in thousands)
	2014			2013
Land	$	2,413			2,413
Buildings		32,760			30,010
Furniture, fixtures and equipment		47,443			43,697
Leasehold improvements		27,652			25,391
Total bank premises and equipment		110,268			101,511
Accumulated depreciation and amortization		(71,703	)		(67,097	)
Total	$	38,565			34,414

Depreciation and amortization expense approximated $4.8 million, $5.0 million, and $5.0 million for the years 2014, 2013, and 2012, respectively. Occupancy expense of the Bank’s premises included rental expense of $7.3 million in 2014, $7.2 million in 2013, and $6.9 million in 2012.

(6) Deposits

Interest expense on deposits was as follows:

(dollars in thousands)	For the year ended December 31,
	2014		2013		2012

Interest bearing checking accounts	$	365		329		315
Savings accounts		2,662		3,333		3,872
Time deposits and money market accounts		11,064		10,138		14,313
Total	$	14,091		13,800		18,500

At December 31, 2014, the maturity of total time deposits is as follows:

(dollars in thousands)
Under 1 year	$	790,320
1 to 2 years		333,911
2 to 3 years		17,852
3 to 4 years		4,713
4 to 5 years		16,265
Over 5 years		172
	$	1,163,233

Included in total time deposits as of December 31, 2014 is $85.3 million in time deposits with balances in excess of $250,000.

(7) Short-Term Borrowings

Short-term borrowings of the Company were cash management accounts as follows:

(dollars in thousands)	2014			2013		2012
Amount outstanding at December 31,	$	189,116			204,162		159,846
Maximum amount outstanding at any month end		209,370			204,162		166,374
Average amount outstanding		189,430			180,275		152,982
Weighted average interest rate:
For the year		0.74	%		0.82		0.96
As of year end		0.72			0.82		0.89

Cash management accounts represent retail accounts with customers for which the Bank has pledged certain assets as collateral.

Trustco Bank also has an available line of credit with the Federal Home Loan Bank of New York which approximates the balance of securities pledged against such borrowings. The line of credit requires securities to be pledged as collateral for the amount borrowed. As of December 31, 2014 and 2013, the Company had no outstanding borrowings with the Federal Home Loan Bank of New York and, as a result, there were no related securities pledged.

(8) Income Taxes

A summary of income tax expense/(benefit) included in the Consolidated Statements of Income follows:

(dollars in thousands)	For the year ended December 31,
	2014		2013			2012
Current tax expense:
Federal	$	22,046		22,612			19,122
State		2,386		2,531			1,879
Total current tax expense		24,432		25,143			21,001
Deferred tax expense (benefit)		2,964		(1,426	)		1,440
Total income tax expense	$	27,396		23,717			22,441

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2014 and 2013, are as follows:

	December 31,
(dollars in thousands)	2014			2013
	Deductible			Deductible
	temporary			temporary
	differences			differences
Benefits and deferred remuneration	$	(3,885	)	$	(4,256	)
Difference in reporting the allowance for loan losses, net		21,006			22,774
Other income or expense not yet reported for tax purposes		2,325			3,008
Depreciable assets		(1,040	)		(1,309	)
Other items		-			1,153
Net deferred tax asset at end of year		18,406			21,370
Net deferred tax asset at beginning of year		21,370			19,944

Deferred tax expense (benefit)	$	2,964		$	(1,426	)

Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. Based primarily on the sufficiency of historical and expected future taxable income, management believes it is more likely than not that the remaining deferred tax asset of $18.4 million and $21.4 million at December 31, 2014 and 2013, respectively, will be realized.

In addition to the deferred tax items described in the preceding table, the Company has deferred tax assets of $2.4 million and $12.0 million at December 31, 2014 and 2013, respectively, relating to the net unrealized losses on securities available for sale and a deferred tax asset of $535 thousand and a deferred tax liability of $2.8 million at December 31, 2014 and 2013, respectively, as a result of the previously unrecognized overfunded position in the Company’s pension and postretirement benefit plans recorded, net of tax, as an adjustment to accumulated other comprehensive income.

The effective tax rates differ from the statutory federal income tax rate. The reasons for these differences are as follows:

	Year ended December 31,
	2014			2013			2012
Statutory federal income tax rate		35.0	%		35.0			35.0
Increase/(decrease) in taxes resulting from:
Tax exempt income		(0.1	)		(0.3	)		(0.7	)
State income tax (including alternative minimum tax),net of federal tax benefit		2.7			2.3			2.3
Other items		0.7			0.3			0.8
Effective income tax rate		38.3	%		37.3			37.4

TrustCo adopted ASC 740-10, “Accounting for Uncertainty in Income Taxes,” as of January 1, 2008. ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. As a result of the Company’s adoption of ASC 740-10, there were no required adjustments to the Company’s consolidated financial statements.

For the years ended December 31, 2014 and 2013 the unrecognized tax benefits and change in those unrecognized tax benefits from the beginning of the year are as follows:

(dollars in thousands)

Balance as of January 1, 2013	$	213

Change in unrecognized tax reserve		-

Balance as of December 31, 2013	$	213

Change in unrecognized tax reserve		-

Balance as of December 31, 2014	$	213

TrustCo has implemented certain tax return positions that have not been fully recognized for financial statement purposes based upon management’s evaluation of the probability of the benefit being realized. Management will reevaluate the necessity of these unrecognized tax benefits after the affected tax returns have been subject to audit. The Company does not anticipate a material charge to the amount of unrecognized tax benefits in the next twelve months.

The Company recognizes interest and/or penalties related to income tax matters in noninterest expense. For the years 2014, 2013, and 2012, these amounts were not material. The Company's federal and state income tax returns for the years 2011 through 2014 remain open to examination.

(9) Benefit Plans

(a) Retirement Plan

The Company maintains a trusteed non-contributory pension plan covering employees that have completed one year of employment and 1,000 hours of service. The benefits are based on the sum of (a) a benefit equal to a prior service benefit plus the average of the employees’ highest five consecutive years’ compensation in the ten years preceding retirement multiplied by a percentage of service after a specified date plus (b) a benefit based upon career average compensation. The amounts contributed to the plan are determined annually on the basis of (a) the maximum amount that can be deducted for federal income tax purposes or (b) the amount certified by a consulting actuary as necessary to avoid an accumulated funding deficiency as defined by the Employee Retirement Income Security Act of 1974. Contributions are intended to provide for benefits attributed to service to date. Assets of the plan are administered by Trustco Bank’s Financial Services Department. This plan was frozen as of December 31, 2006. The following tables set forth the plan’s funded (unfunded) status and amounts recognized in the Company’s consolidated statements of condition at December 31, 2014 and 2013:

Change in Projected Benefit Obligation:	December 31,
(dollars in thousands)	2014			2013
Projected benefit obligation
at beginning of year	$	27,822			31,990
Service cost		58			69
Interest cost		1,374			1,273
Benefits paid		(1,751	)		(2,045	)
Net actuarial loss (gain)		6,159			(3,465	)
Projected benefit obligation at end of year	$	33,662			27,822

Change in Plan Assets and
Reconciliation of Funded Status:	December 31,
(dollars in thousands)	2014			2013
Fair Value of plan assets at
beginning of year	$	39,419			34,584
Actual gain on plan assets		3,325			6,880
Company contributions		2,000			-
Benefits paid		(1,751	)		(2,045	)
Fair value of plan assets at end of year		42,993			39,419

Funded status at end of year	$	9,331			11,597

Amounts recognized in accumulated other comprehensive income consist of the following as of:

	December 31,
	2014		2013
Net actuarial loss	$	6,150		813

Components of Net Periodic Pension Income and Other Amounts Recognized in Other Comprehensive Income:

	Year ended December 31,
	2014			2013			2012
Service cost	$	58			69			55
Interest cost		1,374			1,273			1,426
Expected return on plan assets		(2,504	)		(2,190	)		(1,912	)
Amortization of net loss		-			516			335
Net periodic pension (credit) expense		(1,072	)		(332	)		(96	)

Amortization of net loss		-			(516	)		(335	)

Net actuarial (gain) / loss included in other comprehensive income		5,337			(8,156	)		1,834

		5,337			(8,672	)		1,499
Total recognized in net periodic benefit (credit) cost and other comprehensive income	$	4,265			(9,004	)		1,401

The estimated net loss for the plan that will be amortized from accumulated other comprehensive income into net periodic pension cost over the next fiscal year is $161 thousand.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

(dollars in thousands)
Year	Pension Benefits
2015	$	1,709
2016		1,749
2017		1,764
2018		1,799
2019		1,828
2020 - 2024		9,474

The assumptions used to determine benefit obligations at December 31 are as follows:

		2014				2013				2012
Discount rate			4.03	%			5.08				4.07

The assumptions used to determine net periodic pension expense (benefit) for the years ended December 31 are as follows:

	2014			2013		2012
Discount rate		5.08	%		4.07		5.17

Expected long-term rate of return on assets		6.50			6.50		6.50

The annual rate assumption used for purposes of computing the service and interest costs components is determined based upon factors including the yields on high quality corporate bonds and other appropriate yield curves along with analysis prepared by the Company’s actuaries.

(b) Supplemental Retirement Plan

The Company also has a supplementary pension plan under which additional retirement benefits are accrued for eligible executive officers. This plan supplements the defined benefit retirement plan for eligible employees that exceed the Internal Revenue Service limit on the amount of pension payments that are allowed from a retirement plan. The supplemental plan provides eligible employees with total benefit payments as calculated by the retirement plan without regard to this limitation. Benefits under this plan are calculated using the same actuarial assumptions and interest rates as used for the retirement plan calculations. The accumulated benefits under this supplementary pension plan was approximately $5.6 million as of both December 31, 2014 and 2013, respectively. Effective as of December 31, 2008, this plan has been frozen and no additional benefits will accrue. Instead, the amount of the Company’s annual contribution to the plan plus interest is paid directly to each eligible employee. The expense recorded for this plan was $1.5 million, $1.3 million, and $823 thousand, in 2014, 2013, and 2012, respectively.

Rabbi trusts have been established for this plan. These trust accounts are administered by the Trustco Financial Services Department and invest primarily in bonds issued by government-sponsored enterprises and money market instruments. These assets are recorded at their fair value and are included in securities available for sale and other short-term investments in the Consolidated Statements of Condition. As of both December 31, 2014 and 2013, the trusts had assets totaling $5.7 million.

The Company permits retirees under age 65 to participate in the Company’s medical plan by making certain payments. At age 65, the Bank provides a Medicare Supplemental program to retirees.

In 2003, the Company amended the medical plan to reflect changes to the retiree medical insurance coverage portion. The Company’s subsidy of the retiree medical insurance premiums was eliminated at that time. The Company continues to provide postretirement medical benefits for a limited number of executives in accordance with their employment contracts.

The following tables show the plan’s funded status and amounts recognized in the Company’s Consolidated Statements of Condition at December 31, 2014 and 2013:

Change in Accumulated Benefit Obligation:	December 31,
(dollars in thousands)	2014			2013
Accumulated benefit obligation at beginning of year	$	2,513			2,413
Service cost		100			50
Interest cost		217			101
Plan amendments		1,811			465
Benefits paid		(83	)		(60	)
Net actuarial (gain) loss		1,897			(456	)
Accumulated benefit obligation at end of year	$	6,455			2,513

Change in Plan Assets and
Reconciliation of Funded Status:	December 31,
(dollars in thousands)	2014			2013
Fair value of plan assets at beginning of year	$	17,935			15,026
Actual gain on plan assets		1,350			2,909
Company contributions		83			60
Benefits paid		(83	)		(60	)
Fair value of plan assets at end of year		19,285			17,935

Funded status at end of year	$	12,830			15,422

Amounts recognized in accumulated other comprehensive	December 31,
income consist of the following as of:	2014			2013
Net actuarial gain	$	(3,429	)		(4,945	)
Prior service credit		(1,367	)		(2,979	)
Total	$	(4,796	)		(7,924	)

Components of Net Periodic Benefit Income and Other Amounts Recognized in Other Comprehensive Income:

	Year ended December 31,
(dollars in thousands)	2014			2013			2012
Service cost	$	100		$	50			33
Interest cost		217			101			97
Expected return on plan assets		(672	)		(495	)		(451	)
Amortization of net actuarial gain		(297	)		(49	)		(29	)
Amortization of prior service credit		199			(262	)		(262	)
Net periodic benefit credit		(453	)		(655	)		(612	)

Net (gain) loss		1,219			(2,868	)		(590	)
Prior service cost		1,811			465			-
Amortization of prior service cost		(199	)		262			262
Amortization of net gain		297			49			29
Total amount recognized in other comprehensive income		3,128			(2,092	)		(299	)

Total amount recognized in net periodic benefit cost and other comprehensive income	$	2,675		$	(2,747	)		(911	)

The estimated amount of net gain that will be amortized from accumulated other comprehensive income into net periodic benefit credit over the next fiscal year is approximately $141 thousand while the estimated amount of prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit credit over the next fiscal year is approximately $90 thousand.

Expected Future Benefit Payments

The following benefit payments are expected to be paid:

(dollars in thousands)
Year	Postretirement Benefits

2015	$	81
2016		86
2017		92
2018		101
2019		115
2020 - 2024		882

The discount rate assumption used to determine benefit obligations at December 31 is as follows:

		2014				2013				2012
Discount rate			4.03	%			5.08				4.07

The assumptions used to determine net periodic pension expense (benefit) for the years ended December 31 are as follows:

	2014			2013		2012
Discount rate		5.08	%		4.07		5.17
Expected long-term rate of return on assets, net of tax		3.75			3.30		3.30

For measurement purposes, a graded annual rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) was assumed for 2014 and thereafter. A one percentage point increase in the assumed health care cost in each year would have an approximate $1.6 million impact on the accumulated postretirement benefit obligation as of December 31, 2014, while a 1% decrease would have an approximate $1.2 million impact. The impact on the interest and service components of net periodic postretirement benefit credit for the year ended December 31, 2014 would be $389 thousand for a one percentage point increase and $56 thousand for a one percentage point decrease.

(d) Components of Accumulated Other Comprehensive Income (Loss) Related to Retirement and Postretirement Benefit Plans

The following table details the change in the components of other comprehensive income related to the retirement plan and the postretirement benefit plan, at December 31, 2014 and 2013, respectively:

(dollars in thousands)
	December 31, 2014
			Post-
	Retirement		Retirement
	Plan		Benefit Plan			Total
Change in overfunded position of pension and postretirement benefits	$	5,337		3,030			8,367
Amortization of net actuarial gain (loss)		-		297			297
Amortization of prior service credit		-		(199	)		(199	)
Total	$	5,337		3,128			8,465

	December 31, 2013
				Post-
	Retirement			Retirement
	Plan			Benefit Plan			Total


Change in overfunded position of pension and postretirement benefits	$	(8,156	)		(2,403	)		(10,559	)
Amortization of net actuarial gain (loss)		(516	)		49			(467	)
Amortization of prior service credit		-			262			262
Total	$	(8,672	)		(2,092	)		(10,764	)

(e) Major Categories of Pension and Postretirement Benefit Plan Assets:

The asset allocations of the Company’s pension and postretirement benefit plans at December 31, were as follows:

	Pension Benefit					Postretirement Benefit
	Plan Assets					Plan Assets
	2014			2013		2014		2013
Debt Securities		32	%		26		33		27
Equity Securities		63			69		65		68
Other		5			5		2		5
Total		100	%		100		100		100

The expected long-term rate-of-return on plan assets, noted in sections (a) and (b) above, reflects long-term earnings expectations on existing plan assets. In estimating that rate, appropriate consideration was given to historical returns earned by plan assets and the rates of return expected to be available for reinvestment. Rates of return were adjusted to reflect current capital market assumptions and changes in investment allocations.

The Company’s investment policies and strategies for the pension benefit and postretirement benefit plans prescribe a target allocation of 50% to 70% equity securities, 25% to 40% debt securities, and 0% to 10% for other securities for the asset categories. The Company’s investment goals are to maximize returns subject to specific risk management policies. Its risk management policies permit direct investments in equity and debt securities and mutual funds while prohibiting direct investment in derivative financial instruments. The Company addresses diversification by the use of mutual fund investments whose underlying investments are in domestic and international debt and equity securities. These mutual funds are readily marketable and can be sold to fund benefit payment obligations as they become payable.

Fair Value of Plan Assets:

Fair value is the exchange price that would be received for an asset in the principal or most advantageous market for the asset in an orderly transaction between market participants on the measurement date.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Equity mutual funds, Fixed Income mutual funds and Debt Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

The fair value of the plan assets at December 31, 2014 and 2013, by asset category, is as follows:

Retirement Plan	Fair Value Measurements at December 31, 2014 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(dollars in thousands)
Plan Assets

Cash and cash equivalents	$	2,043		2,043		-		-
Equity mutual funds		27,149		27,149		-		-
U.S. government sponsored enterprises		6,691		-		6,691		-
Corporate bonds		6,502		-		6,502		-
Fixed income mutual funds		608		608		-		-

Total Plan Assets	$	42,993		29,800		13,193		-

Postretirement Benefits	Fair Value Measurements at December 31, 2014 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(dollars in thousands)
Plan Assets

Cash and cash equivalents	$	285		285		-		-
Equity mutual funds		12,583		12,583		-		-
U.S. government sponsored enterprises		2,342		-		2,342		-
Corporate bonds		1,520		-		1,520		-
State and political subdivisions		2,555		-		2,555		-

Total Plan Assets	$	19,285		12,868		6,417		-

Retirement Plan	Fair Value Measurements at December 31, 2013 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(dollars in thousands)
Plan Assets

Cash and cash equivalents	$	1,916		1,916		-		-
Equity mutual funds		27,296		27,296		-		-
U.S. government sponsored enterprises		5,091		-		5,091		-
Corporate bonds		4,517		-		4,517		-
Fixed income mutual funds		599		599		-		-

Total Plan Assets	$	39,419		29,811		9,608		-

Postretirement Benefits	Fair Value Measurements at December 31, 2013 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(dollars in thousands)
Plan Assets

Cash and cash equivalents	$	950		950		-		-
Equity mutual funds		12,135		12,135		-		-
U.S. government sponsored enterprises		1,020		-		1,020		-
Corporate bonds		449		-		449		-
State and political subdivisions		3,381		-		3,381		-

Total Plan Assets	$	17,935		13,085		4,850		-

At December 31, 2014 and 2013, the majority of the equity mutual funds included in the plan assets of the retirement plan and postretirement benefit plan consist of large-cap index funds, while the remainder of the equity mutual funds consists of mid-cap, small-cap and international funds.

There were no transfers between Level 1 and Level 2 in 2014 and 2013.

The Company made contributions of $2.0 million to its pension plan during 2014. No contributions were made in 2013. The Company does not expect to make any contributions to its pension and postretirement benefit plans in 2015.

(f) Incentive and Bonus Plans

During 2006 the Company amended its profit sharing plan to include a 401(k) feature. Under the 401(k) feature, the Company matches 100% of the aggregate salary contribution up to the first 3% of compensation and 50% of the aggregate contribution of the next 3%. No profit sharing contributions were made in 2014, 2013 or 2012 but were replaced with Company contributions to the 401(k) feature of the plan. Expenses related to the plan aggregated $710 thousand for 2014, $657 thousand in 2013 and $601 thousand in 2012.

The Company also has an officers and executive incentive plan. The expense of these plans generally are based on the Company’s performance and estimated distributions to participants are accrued during the year and generally paid in the following year. The expense recorded for this plan was $1.3 million, $2.0 million and $1.6 million in 2014, 2013 and 2012, respectively.

The Company has also awarded 3.5 million performance bonus units to the executive officers and directors. These units become vested and exercisable only under a change of control as defined in the plan. The units were awarded based upon the stock price at the time of grant and, if exercised under a change of control, allow the holder to receive the increase in value offered in the exchange over the stock price at the date of grant for each unit, if any. As of December 31, 2014, the weighted average strike price of each unit was $7.20.

(g) Stock Based Compensation Plans-Equity Awards

Equity awards are types of stock based compensation that are to be settled in shares. As such, the amount of compensation expense to be paid at the time of settlement is included in surplus in the Consolidated Statement of Condition.

Under the 2010 TrustCo Bank Corp NY Stock Option Plan, the Company may grant stock options and restricted stock to its eligible employees for up to approximately 2.0 million shares of common stock.

Under the 2010 Directors Stock Option Plan, the Company may grant stock options and restricted stock to its directors for up to approximately 250 thousand shares of its common stock.

Under each of these plans, the exercise price of each option equals the fair value of the Company’s stock on the date of grant, and an option’s maximum term is ten years. Options vest over five years from the date the options are granted for the employees plans and they are immediately vested under the directors’ plans. A summary of the status of TrustCo’s stock option plans as of December 31, 2014 and changes during the year then ended, are as follows:

	Outstanding Options
	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Balance, January 1, 2014		3,158,800		$	9.54
New options awarded-2014		188,250			7.22
Expired options - 2014		(636,500	)		13.55
Cancelled options-2014		-			-
Exercised options - 2014		(17,500	)		5.15
Balance, December 31, 2014		2,693,050		$	8.27	4.7 years

	Exercisable Options

Balance, December 31, 2014		1,919,500	$	9.10	3.2 years

At December 31, 2014, the intrinsic value of outstanding stock options and vested stock options was approximately $1.3 million and $695 thousand, respectively. The Company expects all unvested options to vest according to plan provisions.

During 2014 and 2013, 18 thousand and 15 thousand stock options were exercised. The intrinsic value and related tax benefits of stock options exercised in 2014 and 2013 was not material. No stock options were exercised in 2012. It is the Company’s policy to generally issue stock for stock option exercises from previously unissued shares of common stock or treasury shares.

Unrecognized stock-based compensation expense related to non-vested stock options totaled $569 thousand at December 31, 2014. At such date, the weighted-average period over which this unrecognized expense was expected to be recognized was 3.5 years.

Valuation of Stock-Based Compensation: The fair value of the Company’s employee and director stock options granted is estimated on the measurement date, which, for the Company, is the date of grant. The weighted-average fair value of stock options granted during 2014, 2013 and 2012 estimated using the Black-Scholes option pricing model, was $0.93, $1.08 and $0.76, respectively. The Company estimated expected market price volatility and the expected term of the options based on historical data and other factors. The assumptions used to determine the fair value of options granted during 2014, 2013 and 2012 are detailed in the table below:

	2014			2013			2012
	Employees' Plan			Employees' Plan			Employees' Plan
Expected dividend yield		3.64	%		3.72	%		5.08	%
Risk-free interest rate		1.74			1.45			0.80
Expected volatility rate		21.62			25.83			30.18
Expected lives	5.0 years			5.0 years			5.0 years

During 2011, the Company issued 99 thousand restricted common shares to certain eligible executive officers and another 7 thousand restricted common shares to its board of directors. The restricted share awards hold the same voting powers as the Company’s common stock and became 100% vested after three years based upon a cliff-vesting schedule. The shares were also eligible to receive nonforfeitable dividend payments. The fair value of these awards was $5.14 per restricted share, the fair value of the Company’s common stock on the grant date.

The 2014 activity for the restricted common shares was as follows:

Restricted common shares
	Outstanding
	Shares
Balance, December 31, 2013		106,000
New awards granted		-
Awards became vested		(106,000	)
Balance, December 31, 2014		-

During 2014, 2013 and 2012, the Company recognized approximately $141 thousand, $170 thousand and $170 thousand in stock based compensation expense related to the employee awards, respectively. In addition, the Company recognized approximately $10 thousand, $12 thousand and $12 thousand related to the director awards, respectively. All of the awards became fully vested in 2014. Unrecognized stock-based compensation expense related to the outstanding restricted shares totaled $151 thousand and $333 thousand at December 31, 2013 and 2012, respectively.

(h) Stock Based Compensation Plans-Liability Awards

Liability awards are types of stock based compensation that can be settled in cash (not shares). As such, the amount of compensation expense to be paid at the time of settlement is included in accrued expenses and other liabilities in the Consolidated Statement of Condition. The Company granted both service based and performance based liability awards in 2014, 2013 and 2012.

The activity for service based awards during 2014 was as follows:

Restricted share units

	Outstanding
	Units


Balance, December 31, 2013		133,750
New awards granted		68,650
Awards settled		-
Balance, December 31, 2014		202,400

Service Based Awards: During 2014, 2013 and 2012, the Company issued restricted share units to certain eligible officers, executives and its board of directors. The restricted share units do not hold voting powers, nor are they eligible for common stock dividends, and become 100% vested after three years based upon a cliff-vesting schedule. Upon issuance, the fair value of these awards is the fair value of the Company’s common stock on the grant date. Thereafter, the amount of compensation expense recognized, is based on the fair value of the Company’s stock.

During 2014, 2013 and 2012, the Company recognized approximately $352 thousand, $230 thousand and $23 thousand, respectively, in stock based compensation expense related to these awards. Unrecognized stock-based compensation expense related to the outstanding restricted share units totaled $864 thousand at December 31, 2014. At December 31, 2014 all of the awards were unvested. The weighted average period over which the unrecognized expense is expected to be recognized was approximately 26 months as of December 31, 2014.

The liability related to service based liability awards totaled $605 thousand and $253 thousand at December 31, 2014 and 2013, respectively.

The activity for performance based awards during 2014 was as follows:

Performance share units

	Outstanding
	Units


Balance, December 31, 2013		146,500
New awards granted		83,000
Awards settled		-
Balance, December 31, 2014		229,500

Performance Based Awards: During 2014, 2013 and 2012, the Company issued performance share units to certain eligible officers and executives. These units do not hold voting powers, nor are they eligible for common stock dividends, and become 100% vested after three years based upon a cliff-vesting schedule. Upon issuance, fair value of these units was the fair value of the Company’s common stock on the grant date. Thereafter, the amount of compensation expense recognized is based upon the Company’s achievement of certain performance criteria in accordance with Plan provisions as well as the fair value of the Company’s stock.

For units granted in 2013 and 2012, the Company expects to exceed its required performance criteria and therefore has adjusted its calculation for the increased number of units that would be settled in cash upon vesting. For units granted in 2014, the Company expects to meet its required performance criteria. During 2014, 2013 and 2012, the Company recognized approximately $490 thousand, $239 thousand and $19 thousand, respectively, in stock based compensation expense related to these units. Unrecognized stock-based compensation expense related to the outstanding performance share units totaled $1.2 million at December 31, 2014. At December 31, 2014 all of the units were unvested. The weighted average period over which the unrecognized expense is expected to be recognized was approximately 26 months as of December 31, 2014.

The liability related to performance based liability awards totaled $748 thousand and $258 thousand at December 31, 2014 and 2013, respectively.

(i) Stock and Liability Based Compensation Expense

Total compensation expense totaled $1.2 million, $847 thousand and $447 thousand in 2014, 2013 and 2012, respectively, related to the 2010 and 2004 TrustCo Bank Corp NY Stock Option Plans.

Of the $1.2 million of stock based compensation expense recognized in 2014, $870 thousand related to liability awards as they may be settled in cash instead of shares, while the remaining $325 thousand related to equity awards.

Of the $847 thousand of stock based compensation expense recognized in 2013, $469 thousand related to liability awards as they may be settled in cash instead of shares, while the remaining $378 thousand related to equity awards.

Of the $447 thousand of stock based compensation expense recognized in 2012, $42 thousand related to liability awards as they may be settled in cash instead of shares, while the remaining $405 thousand related to equity awards.

Stock-based compensation expense is recognized ratably over the vesting period for all awards. Income tax benefits recognized in the accompanying consolidated statements of income related to stock-based compensation in 2014, 2013 and 2012 was approximately $478 thousand, $296 thousand and $156 thousand, respectively.

(10) Commitments and Contingent Liabilities

(a) Leases

The Bank leases certain banking premises. These leases are accounted for as operating leases with minimum rental commitments in the amounts presented below. The majority of these leases contain options to renew.

(dollars in thousands)
2015	$	7,023
2016		6,824
2017		6,509
2018		6,249
2019		6,130
2020 and after		40,840
	$	73,575

(b) Litigation

Existing litigation arising in the normal course of business is not expected to result in any material loss to the Company.

The Company contracted with third-party service providers to perform certain banking functions. The outsourced services include data and item processing for the Bank and trust operations. The service expense can vary based upon the volume and nature of transactions processed. Outsourced service expense was $5.4 million for 2014 and $5.1 million for both 2013 and 2012. The Company is contractually obligated to pay these third-party service providers approximately $5 to $6 million per year through 2019.

(11) Earnings Per Share

The Company computes earnings per share in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share (“ASC 260”). TrustCo adopted FASB Staff Position on Emerging Issues Task Force 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, as codified in FASB ASC 260-10 (“ASC 260-10”), which clarified that unvested share-based payment awards that contain nonforfeitable rights to receive dividends or divided equivalents (whether paid or unpaid) are participating securities, and thus, should be included in the two-class method of computing earnings per share (“EPS”). Participating securities under this statement include the unvested employees’ and directors’ restricted stock awards with time-based vesting, which receive nonforfeitable dividend payments.

A reconciliation of the component parts of earnings per share for 2014, 2013 and 2012 follows:

(dollars in thousands, except per share data)
	2014		2013		2012
For the years ended December 31:
Net income	$	44,193		39,812		37,534
Less: Net income allocated to participating securities		43		45		43
Net income allocated to common shareholders	$	44,150		39,767		37,491
Basic EPS:
Distributed earnings allocated to common stock	$	24,866		24,745		24,607
Undistributed earnings allocated to common stock		19,284		15,022		12,884
Net income allocated to common shareholders	$	44,150		39,767		37,491
Weighted average common shares outstanding including participating securities		94,721		94,266		93,739
Less: Participating securities		93		106		106
Weighted average common shares		94,628		94,160		93,633
Basic EPS	$	0.467		0.422		0.400

Diluted EPS:
Net income allocated to common shareholders	$	44,150		39,767		37,491
Weighted average common shares for basic EPS		94,628		94,160		93,633
Effect of Dilutive Securities:
Stock Options		125		46		4
Weighted average common shares including potential dilutive shares		94,753		94,206		93,637

Diluted EPS	$	0.466		0.422		0.400

As of December 31, 2014, 2013 and 2012, the weighted average number of antidilutive stock options excluded from diluted earnings per share was approximately 2.3 million, 2.5 million, and 2.9 million, respectively. The stock options are antidilutive because the strike price is greater than the average fair value of the Company’s common stock for the periods presented.

(12) Off-Balance Sheet Financial Instruments

Loan commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require a fee. Commitments sometimes expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. These arrangements have credit risk essentially the same as that involved in extending loans to customers and are subject to the Bank’s normal credit policies, including obtaining collateral. The Bank’s maximum exposure to credit loss for loan commitments, including unused lines of credit, at December 31, 2014 and 2013, was $446.7 million and $430.3 million, respectively. Approximately 80% and 79% of these commitments were for variable rate products at the end of 2014 and 2013, respectively.

The Company does not issue any guarantees that require liability-recognition or disclosure, other than its standby letters of credit. The Company has issued conditional commitments in the form of standby letters of credit to guarantee payment on behalf of a customer and guarantee the performance of a customer to a third party. Standby letters of credit generally arise in connection with lending relationships. The credit risk involved in issuing these instruments is essentially the same as that involved in extending loans to customers. Contingent obligations under standby letters of credit totaled approximately $8.0 million and $6.5 million at December 31, 2014 and 2013, respectively, and represent the maximum potential future payments the Company could be required to make. Typically, these instruments have terms of 12 months or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements. Each customer is evaluated individually for creditworthiness under the same underwriting standards used for commitments to extend credit and on-balance sheet instruments. Company policies governing loan collateral apply to standby letters of credit at the time of credit extension. Loan-to-value ratios are generally consistent with loan-to-value requirements for other commercial loans secured by similar types of collateral. The fair value of the Company’s standby letters of credit at December 31, 2014 and 2013 was insignificant.

No losses are anticipated as a result of loan commitments or standby letters of credit.

(13) Fair Value of Financial Instruments

Fair value measurements (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices or similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the value that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of assets and liabilities:

Securities Available for Sale: The fair value of securities available for sale are determined utilizing an independent pricing service for identical assets or significantly similar securities. The pricing service uses a variety of techniques to arrive at fair value including market maker bids, quotes and pricing models. Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows. This results in a Level 2 classification of the inputs for determining fair value. Interest and dividend income is recorded on the accrual method and included in the income statement in the respective investment class under total interest income. Also classified as available for sale securities are equity securities where fair value is determined by quoted market prices and these are designated as Level 1. The Company does not have any securities that would be designated as level 3.

Other Real Estate Owned: Assets acquired through loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process to adjust for differences between the comparable sales and income data available. This results in a Level 3 classification of the inputs for determining fair value.

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally have had a chargeoff through the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value. When obtained, non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Indications of value for both collateral-dependent impaired loans and other real estate owned are obtained from third party providers or the Company’s internal Appraisal Department. All indications of value are reviewed for reasonableness by a member of the Appraisal Department for the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value via comparison with independent data sources such as recent market data or industry-wide statistics.

Financial Highlights	1

President’s Message	3-4

Management’s Discussion and Analysis of Financial Condition and Results of Operations	5

Average Balances, Yields and Net Interest Margins	17

Glossary of Terms	35-37

Management’s Report on Internal Control Over Financial Reporting	38

Report of Independent Registered Public Accounting Firm	39

Consolidated Financial Statements and Notes	40-94

Branch Locations	95-99

Officers and Board of Directors	100-101

General Information	102

Share Price Information	103-104

							Tangible		Range of Stock
	Basic		Diluted		Cash		Book		Price
	Earnings		Earnings		Dividend		Value		High		Low

2014
First quarter	$	0.116	$	0.116	$	0.0656	$	3.93	$	7.33	$	6.20
Second quarter		0.125		0.125		0.0656		4.06		7.19		6.35
Third quarter		0.113		0.113		0.0656		4.10		7.12		6.43
Fourth quarter		0.113		0.112		0.0656		4.14		7.50		6.42

2013
First quarter		0.097		0.097		0.0656		3.83		5.65		5.13
Second quarter		0.104		0.104		0.0656		3.69		5.74		5.14
Third quarter		0.109		0.109		0.0656		3.75		6.32		5.46
Fourth quarter		0.113		0.112		0.0656		3.82		7.67		5.85

	Fair Value Measurements at December 31, 2014 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(dollars in thousands)
Securities available for sale:
U.S. government sponsored enterprises	$	77,800		-		77,800		-
State and political subdivisions		2,271		-		2,271		-
Mortgage backed securities and collateralized mortgage obligations - residential		483,560		-		483,560		-
Corporate bonds		1,500		-		1,500		-
Small Business Administration- guaranteed participation securities		100,496		-		100,496		-
Mortgage backed securities and collateralized mortgage obligations - commercial		10,447		-		10,447		-
Other securities		685		35		650		-
Total securities available for sale	$	676,759		35		676,724		-

(dollars in thousands)	As of December 31, 2014					Well			Adequately
	Amount		Ratio			Capitalized*			Capitalized*

Tier 1 (core) capital	$	386,913		8.33	%		5.00	%		4.00	%
Tier 1 risk-based capital		386,913		16.60			6.00			4.00
Total risk-based capital		416,269		17.86			10.00			8.00

(dollars in thousands)	As of December 31, 2013					Well			Adequately
	Amount		Ratio			Capitalized*			Capitalized*

Tier 1 (core) capital	$	365,954		8.07	%		5.00	%		4.00	%
Tier 1 risk-based capital		365,954		16.34			6.00			4.00
Total risk-based capital		394,200		17.60			10.00			8.00

(dollars in thousands)	Year ended 12/31/14
	Balance at 12/31/2013			Other Comprehensive Income (loss)- Before Reclassifications			Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Year ended 12/31/14			Balance at 12/31/2014

Net unrealized holding gain (loss) on securities available for sale, net of tax	$	(18,078	)		14,815			(430	)		14,385			(3,693	)
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		3,843			(5,031	)		-			(5,031	)		(1,188	)
Net change in net actuarial loss and prior service credit on pension and postretirement benefit plans, net of tax		432			-			(60	)		(60	)		372
Accumulated other comprehensive income (loss), net of tax		(13,803	)		9,784			(490	)		9,294			(4,509	)

(dollars in thousands)	Year ended 12/31/13
	Balance at 12/31/2012			Other Comprehensive Income (loss)- Before Reclassifications			Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Year ended 12/31/13			Balance at 12/31/2013

Net unrealized holding gain (loss) on securities available for sale, net of tax	$	3,755			(20,860	)		(973	)		(21,833	)		(18,078	)
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		(2,506	)		6,349			-			6,349			3,843
Net change in net actuarial loss and prior service credit on pension and postretirement benefit plans, net of tax		309			-			123			123			432
Accumulated other comprehensive income (loss), net of tax		1,558			(14,511	)		(850	)		(15,361	)		(13,803	)

(dollars in thousands)	Year ended 12/31/12
	Balance at 12/31/2011			Other Comprehensive Income (loss)- Before Reclassifications			Amount reclassified from Accumulated Other Comprehensive Income			Other Comprehensive Income (loss)- Year ended 12/31/12			Balance at 12/31/2012


Net unrealized holding gain (loss) on securities available for sale, net of tax	$	(1,018	)		6,070			(1,297	)		4,773			3,755
Net change in overfunded position in pension and postretirement plans arising during the year, net of tax		(1,758	)		(748	)		-			(748	)		(2,506	)
Net change in net actuarial loss and prior service credit on pension and postretirement benefit plans, net of tax		283			-			26			26			309
Accumulated other comprehensive income (loss), net of tax	$	(2,493	)		5,322			(1,271	)		4,051			1,558

(dollars in thousands)	Year Ended December 31,
Income:	2014			2013			2012

Dividends and interest from subsidiaries	$	24,499			24,491			24,475
Miscellaneous income		18			-			-
Total income		24,517			24,491			24,475
Expense:
Operating supplies		50			81			105
Professional services		557			491			296
Miscellaneous expense		1,350			1,042			737
Total expense		1,957			1,614			1,138
Income before income taxes and subsidiaries' undistributed earnings		22,560			22,877			23,337
Income tax benefit		(663	)		(548	)		(364	)

Income before subsidiaries' undistributed earnings		23,223			23,425			23,701

Equity in undistributed earnings of subsidiaries		20,970			16,387			13,833
Net income	$	44,193			39,812			37,534

Statements of Condition
(dollars in thousands)	As of December 31,
Assets:	2014		2013
Cash in subsidiary bank	$	17,034		15,263
Investments in subsidiaries		382,968		352,717
Securities available for sale		35		10
Other assets		918		227
Total assets		400,955		368,217
Liabilities and shareholders' equity:
Accrued expenses and other liabilities		7,511		6,404
Total liabilities		7,511		6,404
Shareholders' equity		393,444		361,813
Total liabilities and shareholders' equity	$	400,955		368,217

Statements of Cash Flows

(dollars in thousands)	Year Ended December 31,
	2014			2013			2012
Increase/(decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income	$	44,193			39,812			37,534
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries		(20,970	)		(16,387	)		(13,833	)
Stock based compensation expense		325			378			405
Net change in other assets and accrued expenses		388			277			(158	)
Total adjustments		(20,257	)		(15,732	)		(13,586	)
Net cash provided by operating activities		23,936			24,080			23,948
Cash flows from investing activities:
Purchases of securities available for sale		(25	)		-			-
Net cash used in investing activities		(25	)		-			-
Cash flows from financing activities:
Proceeds from exercise of stock options and related tax benefits		131			36			-
Dividends paid		(24,839	)		(24,711	)		(24,574	)
Payments to acquire treasury stock		(282	)		-			-
Proceeds from sales of treasury stock		2,850			2,908			2,913

Net cash used in financing activities		(22,140	)		(21,767	)		(21,661	)

Net increase in cash and cash equivalents		1,771			2,313			2,287

Cash and cash equivalents at beginning of year		15,263			12,950			10,663

Cash and cash equivalents at end of year	$	17,034			15,263			12,950

New York

Airmont Office	Brunswick Office	East Greenbush Office
327 Route 59 East	740 Hoosick Rd.	501 Columbia Tpk.
Airmont, NY	Troy, NY	Rensselaer, NY
Telephone: (845) 357-2435	Telephone: (518) 272-0213	Telephone: (518) 479-7233

Altamont Ave. Office	Campbell West Plaza Office	Elmsford Office
1400 Altamont Ave.	141 West Campbell Rd.	100 Clearbrook Rd.
Schenectady, NY	Rotterdam, NY	Elmsford, NY
Telephone: (518) 356-1317	Telephone: (518) 377-2393	Telephone: (914) 345-1808

Altamont Ave. West Office	Central Ave. Office	Exit 8/Crescent Rd. Office
1900 Altamont Ave.	40 Central Ave.	1532 Crescent Rd.
Rotterdam, NY	Albany, NY	Clifton Park, NY
Telephone: (518) 355-1900	Telephone: (518) 426-7291	Telephone: (518) 383-0039

Amsterdam Office	Chatham Office	Exit 11 Office
4931 Route 30	193 Hudson Ave.	43 Round Lake Rd.
Amsterdam, NY	Chatham, NY	Ballston Lake, NY
Telephone: (518) 842-5459	Telephone: (518) 392-0031	Telephone: (518) 899-1558

Ardsley Office	Clifton Country Road Office	Fishkill Office
33-35 Center St.	7 Clifton Country Rd.	1545 Route 52
Ardsley, NY	Clifton Park, NY	Fishkill, NY
Telephone: (914) 693-3254	Telephone: (518) 371-5002	Telephone: (845) 896-8260

Ballston Spa Office	Clifton Park Office	Freemans Bridge Rd. Office
235 Church Ave.	1018 Route 146	1 Sarnowski Dr.
Ballston Spa, NY	Clifton Park, NY	Glenville, NY
Telephone: (518) 885-1561	Telephone: (518) 371-8451	Telephone: (518) 344-7510

Balltown Road Office	Cobleskill Office	Glenmont Office
1475 Balltown Rd.	104 Merchant Pl.	380 Route 9W
Niskayuna, NY	Cobleskill, NY	Glenmont, NY
Telephone: (518) 377-2460	Telephone: (518) 254-0290	Telephone: (518) 449-2128

Brandywine Office	Colonie Office	Glens Falls Office
1048 State St.	1892 Central Ave.	100 Glen St.
Schenectady, NY	Albany, NY	Glens Falls, NY
Telephone: (518) 346-4295	Telephone: (518) 456-0041	Telephone: (518) 798-8131

Briarcliff Manor Office	Crestwood Plaza Office	Greenwich Office
75 North State Rd.	415 Whitehall Rd.	131 Main St.
Briarcliff Manor, NY	Albany, NY	Greenwich, NY
Telephone: (914) 762-7133	Telephone: (518) 482-0693	Telephone: (518) 692-2233

Bronxville Office	Delmar Office	Guilderland Office
5-7 Park Place	167 Delaware Ave.	3900 Carman Rd.
Bronxville, NY	Delmar, NY	Schenectady, NY
Telephone: (914) 771-4180	Telephone: (518) 439-9941	Telephone: (518) 355-4890

Halfmoon Office	Madison Ave. Office	Newton Plaza Office
215 Guideboard Rd.	1084 Madison Ave.	602 New Loudon Rd.
Country Dollar Plaza	Albany, NY	Latham, NY
Halfmoon, NY	Telephone: (518) 489-4711	Telephone: (518) 786-3687
Telephone: (518) 371-0593
	Malta 4 Corners Office	Niskayuna-Woodlawn Office
Hartsdale Office	2471 Route 9	3461 State St.
220 East Hartsdale Ave.	Malta, NY	Schenectady, NY
Hartsdale, NY	Telephone: (518) 899-1056	Telephone: (518) 377-2264
Telephone: (914) 722-2640
	Mamaroneck Office	Northern Pines Road Office
Highland Office	180-190 East Boston Post Rd.	649 Maple Ave.
3580 Route 9W	Mamaroneck, NY	Saratoga Springs, NY
Highland, NY	Telephone: (914) 777-3023	Telephone: (518) 583-2634
Telephone: (845) 691-7023
	Mayfair Office	Nyack Office
Hoosick Falls Office	286 Saratoga Rd.	21 Route 59
47 Main St.	Glenville, NY	Nyack, NY
Hoosick Falls, NY	Telephone: (518) 399-9121	Telephone: (845) 353-2035
Telephone: (518) 686-5352
	Mechanicville Office	Peekskill Office
Hudson Office	9 Price Chopper Plaza	20 Welcher Ave.
507 Warren St.	Mechanicville, NY	Peekskill, NY
Hudson, NY	Telephone: (518) 664-1059	Telephone: (914) 739-1839
Telephone: (518) 828-9434
	Milton Office	Pelham Office
Hudson Falls Office	2 Trieble Ave.	132 Fifth Ave.
3750 Burgoyne Ave.	Ballston Spa, NY	Pelham, NY
Hudson Falls, NY	Telephone: (518) 885-0498	Telephone: (914) 632-1983
Telephone: (518) 747-0886
	Monroe Office	Pomona Office
Katonah Office	791 Route 17M	1581 Route 202
18 Woods Bridge Road	Monroe, NY	Pomona, NY
Katonah, NY	Telephone: (845) 782-1100	Telephone: (845) 354-0176
Telephone: (914) 666-6230
	Mont Pleasant Office	Poughkeepsie Office
Kingston Office	959 Crane St.	2656 South Rd.
1220 Ulster Ave.	Schenectady, NY	Poughkeepsie, NY
Kingston, NY	Telephone: (518) 346-1267	Telephone: (845) 485-6419
Telephone: (845) 336-5372
	Mt. Kisco Office	Queensbury Office
Lake George Office	222 East Main St.	118 Quaker Rd.
2160 Route 9L	Mt. Kisco, NY	Suite 1
Lake George, NY	Telephone: (914) 666-2362	Queensbury, NY
Telephone: (518) 668-2352		Telephone: (518) 798-7226
	New City Office
Latham Office	20 Squadron Blvd.	Red Hook Office
1 Johnson Rd.	New City, NY	4 Morgans Way
Latham, NY	Telephone: (845) 634-4571	Red Hook, NY
Telephone: (518) 785-0761		Telephone: (845) 752-2224
	New Scotland Office
Loudon Plaza Office	301 New Scotland Ave.	Rotterdam Office
372 Northern Blvd.	Albany, NY	Curry Road Shopping Center
Albany, NY	Telephone: (518) 438-7838	Schenectady, NY
Telephone: (518) 462-6668		Telephone: (518) 355-8330

Route 2 Office	Stuyvesant Plaza Office	Wilton Mall Office
201 Troy-Schenectady Rd.	Western Ave. at Fuller Rd.	Route 50
Latham, NY	Albany, NY	Saratoga Springs, NY
Telephone: (518) 785-7155	Telephone: (518) 489-2616	Telephone: (518) 583-1716

Route 7 Office	Tanners Main Office	Wolf Road Office
1156 Troy-Schenectady Rd.	345 Main St.	34 Wolf Rd.
Latham, NY	Catskill, NY	Albany, NY
Telephone: (518) 785-4744	Telephone: (518) 943-2500	Telephone: (518) 458-7761

Saratoga Office	Tanners West Office	Wynantskill Office
34 Congress St.	238 West Bridge St.	134-136 Main St.
Saratoga Springs, NY	Catskill, NY	Wynantskill, NY
Telephone: (518) 587-3520	Telephone: (518) 943-5090	Telephone: (518) 286-2674

Schaghticoke Office	Troy Office	Florida
2 Main St.	5th Ave. and State St.
Schaghticoke, NY	Troy, NY	Alafaya Woods Office
Telephone: (518) 753-6509	Telephone: (518) 274-5420	1500 Alafaya Trl.
		Oviedo, FL
Scotia Office	Union Street East Office	Telephone: (407) 359-5991
123 Mohawk Ave.	1700 Union St.
Scotia, NY	Schenectady, NY	Aloma Office
Telephone: (518) 372-9416	Telephone: (518) 382-7511	4070 Aloma Ave.
		Winter Park, FL
Sheridan Plaza Office	Upper Union Street Office	Telephone: (407) 677-1969
1350 Gerling St.	1620 Union St.
Schenectady, NY	Schenectady, NY	Apollo Beach Office
Telephone: (518) 377-8517	Telephone: (518) 374-4056	205 Apollo Beach Blvd.
		Apollo Beach, FL
Slingerlands Office	Ushers Road Office	Telephone: (813) 649-0460
1569 New Scotland Rd.	308 Ushers Rd.
Slingerlands, NY	Ballston Lake, NY	Apopka Office
Telephone: (518) 439-9352	Telephone: (518) 877-8069	1134 North Rock Springs Rd.
		Apopka, FL
South Glens Falls Office	Valatie Office	Telephone: (407) 464-7373
133 Saratoga Rd.	2929 Route 9
Suite 1	Valatie, NY	Avalon Park Office
South Glens Falls, NY	Telephone: (518) 758-2265	3662 Avalon Park East Blvd.
Telephone: (518) 793-7668		Orlando, FL
	Wappingers Falls Office	Telephone: (407) 380-2264
State Farm Road Office	1490 Route 9
2050 Western Ave.	Wappingers Falls, NY	BeeLine Center Office
Guilderland, NY	Telephone: (845) 298-9315	10249 South John Young Pkwy.
Telephone: (518) 452-6913		Suite 101
	Warrensburg Office	Orlando, FL
State St. Albany Office	9 Lake George Plaza Rd.	Telephone: (407) 240-0945
112 State St.	Lake George, NY
Albany, NY	Telephone: (518) 623-3707	Beneva Village Office
Telephone: (518) 436-9043		5950 South Beneva Road
	West Sand Lake Office	Sarasota, FL
State St. Schenectady - Main Office	3690 NY Route 43	Telephone: (941) 923-8269
320 State St.	West Sand Lake, NY
Schenectady, NY	Telephone: (518) 674-3327
Telephone: (518) 381-3831

Bradenton Office	Goldenrod Office
5858 Cortez Rd. West	7803 East Colonial Rd.	Maitland Office
Bradenton, FL	Suite 107	9400 US Route 17/92
Telephone: (941) 792-2604	Orlando, FL	Suite 101
	Telephone: (407) 207-3773	Maitland, FL
		Telephone: (407) 332-6071
Colonial Drive Office
4301 East Colonial Dr.	Juno Beach Office	Melbourne Office
Orlando, FL	14051 US Highway 1	2481 Croton Rd.
Telephone: (407) 895-6393	Juno Beach, FL	Melbourne, FL
	Telephone: (561) 630-4521	Telephone: (321) 752 0446
Curry Ford Road Office
3020 Lamberton Blvd.	Lady Lake Office	Metro West Office
Suite 116	873 North US Highway 27/441	2619 S. Hiawasee Rd.
Orlando, FL	Lady Lake, FL	Orlando, FL
Telephone: (407) 277-9663	Telephone: (352) 205-8893	Telephone: (407) 293-1580

Curry Ford West Office	Lake Brantley Office	North Clermont Office
2838 Curry Ford Rd.	909 North SR 434	12302 Roper Blvd.
Orlando, FL	Altamonte Springs, FL	Clermont, FL
Telephone: (407) 893-9878	Telephone: (407) 339-3396	Telephone: (352) 243-2563

Davenport Office	Lake Mary Office	Orange City Office
2300 Deer Creek Commons Ln.	350 West Lake Mary Blvd.	902 Saxon Blvd.
Suite 600	Sanford, FL	Suite 101
Davenport, FL	Telephone: (407) 330-7106	Orange City, FL
Telephone: (863) 424-9493		Telephone: (386) 775-1392

	Lake Nona Office	Ormond Beach Office
Dean Road Office	9360 Narcoossee Rd.	115 North Nova Rd.
3920 Dean Rd.	Orlando, FL	Ormond Beach, FL
Orlando, FL	(407) 801-7330	Telephone: (386) 256-3813
Telephone: (407) 657-8001
	Lake Square Office	Osprey Office
Downtown Orlando Office	10105 Route 441	1300 South Tamiami Trl.
415 East Pine St.	Leesburg, FL	Osprey, FL
Orlando, FL	Telephone: (352) 323-8147	Telephone: (941) 918-9380
Telephone: (407) 422-7129
	Lee Road Office	Oviedo Office
East Colonial Office	1084 Lee Rd.	1875 West County Rd. 419
12901 East Colonial Dr.	Suite 11	Suite 600
Orlando, FL	Orlando, FL	Oviedo, FL
Telephone: (407) 275-3075	Telephone: (407) 532-5211	Telephone: (407) 365-1145

Englewood Office	Lee Vista Office	Pleasant Hill Commons Office
2930 South McCall Rd.	8288 Lee Vista Blvd.	3307 South Orange Blossom Trl.
Englewood, FL	Suite E	Kissimmee, FL
Telephone: (941) 460-0601	Orlando, FL	Telephone: (407) 846-8866
	Telephone: (321) 235-5583
Gateway Commons Office
1525 East Osceola Pkwy.	Leesburg Office	Port Orange Office
Suite 120	1330 Citizens Blvd.	3751 Clyde Morris Blvd.
Kissimmee, FL	Suite 101	Port Orange, FL
Telephone: (407) 932-0398	Leesburg, FL	Telephone: (386) 322-3730
	Telephone: (352) 365-1305

Rinehart Road Office	Westwood Plaza Office	Lee Office
1185 Rinehart Rd.	4942 West State Route 46	43 Park St.
Sanford, FL	Suite 1050	Lee, MA
Telephone: (407) 268-3720	Sanford, FL	Telephone: (413) 243-4300
	Telephone: (407) 321-4925
Sarasota Office		Pittsfield Office
2704 Bee Ridge Rd.	Windermere Office	1 Dan Fox Dr.
Sarasota, FL	2899 Maguire Rd.	Pittsfield, MA
Telephone: (941) 929-9451	Windermere, FL	Telephone: (413) 442-1330
	Telephone: (407) 654-0498
South Clermont Office		New Jersey
16908 High Grove Blvd.	Winter Garden Office
Clermont, FL	16118 Marsh Rd.	Northvale Office
Telephone: (352) 243-9511	Winter Garden, FL	220 Livingston St.
	Telephone: (407) 654-4609	Northvale, NJ
Stuart Office		Telephone: (201) 750-1501
951 SE Federal Highway	Winter Haven Office
Stuart, FL	7476 Cypress Gardens Blvd. Southeast	Ramsey Office
Telephone: (772) 286-4757	Winter Haven, FL	385 North Franklin Tpk.
	Telephone: (863) 326-1918	Ramsey, NJ
Sun City Center		Telephone: (201) 934-1429
4441 Sun City Center	Winter Springs Office
Sun City Center, FL	851 East State Route 434	Vermont
Telephone: (813) 633-1468	Winter Springs, FL
	Telephone: (407) 327-6064	Bennington Office
Sweetwater Office		215 North St.
671 North Hunt Club Rd.	Massachusetts	Bennington, VT
Longwood, FL		Telephone: (802) 447-4952
Telephone: (407) 774-1347	Allendale Office
	5 Cheshire Rd.
Tuskawilla Road Office	Suite 18
1295 Tuskawilla Rd.	Pittsfield, MA
Suite 10	Telephone: (413) 236-8400
Winter Springs, FL
Telephone: (407) 695-5558	Great Barrington Office
	326 Stockbridge Rd.
Venice Office	Great Barrington, MA
2057 South Tamiami Trl.	Telephone: (413) 644-0054
Venice, FL
Telephone: (941) 496-9100

OFFICERS	BOARD OF DIRECTORS

PRESIDENT AND	Dennis A. De Gennaro, President
CHIEF EXECUTIVE OFFICER	Camelot Associates Corporation
Robert J. McCormick	Commercial and Residential Construction
	Joseph A. Lucarelli, President
EXECUTIVE VICE PRESIDENT AND	Traditional Builders
CHIEF OPERATING OFFICER	Residential Construction
Robert T. Cushing	Thomas O. Maggs, President
	Maggs & Associates
EXECUTIVE VICE PRESIDENT AND	Insurance Agency
CHIEF BANKING OFFICER	Chairman, TrustCo Bank Corp NY
Scot R. Salvador	Anthony J. Marinello, M.D., Ph.D.
	Physician
EXECUTIVE VICE PRESIDENT AND	Robert A. McCormick
SECRETARY	Retired Chairman
Robert M. Leonard	TrustCo Bank Corp NY
	Robert J. McCormick,
SENIOR VICE PRESIDENT AND	President and Chief Executive Officer
TREASURER	TrustCo Bank Corp NY
Eric W. Schreck	William D. Powers, Partner
	Powers & Co., LLC
SENIOR VICE PRESIDENT AND	Consulting
CHIEF FINANCIAL OFFICER	William J. Purdy, President
Michael M. Ozimek	Welbourne & Purdy Realty, Inc.
	Real Estate
ASSISTANT SECRETARIES
Sharon J. Parvis
Thomas M. Poitras

Directors of TrustCo Bank Corp NY
are also Directors of Trustco Bank

HONORARY DIRECTORS

Lionel O. Barthold	James H. Murphy, D.D.S.	Edwin O. Salisbury
Nancy A. McNamara	Richard J. Murray, Jr.	William F. Terry
John S. Morris, Ph.D.	Anthony M. Salerno

Trustco Bank Officers

PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Robert J. McCormick

EXECUTIVE VICE PRESIDENT	EXECUTIVE VICE PRESIDENT	EXECUTIVE VICE PRESIDENT
AND CHIEF OPERATING OFFICER	AND CHIEF BANKING OFFICER	Robert M. Leonard
Robert T. Cushing	Scot R. Salvador

ACCOUNTING/FINANCE	BRANCH ADMINISTRATION	FACILITIES/ GENERAL
Senior Vice President and Chief Financial Officer	Senior Vice President/	SERVICES
Michael M. Ozimek	Florida Regional President	Vice President
Vice President	Eric W. Schreck	Michelle L. Simmonds
Daniel R. Saullo	Regional Administrators	Officer
Interest Rate Risk Vice President	Amy E. Anderson	Joseph N. Marley
Kevin T. Timmons	Takla A. Awad
	Clint M. Mallard	LENDING
APPRAISALS	Gloryvel Morales	Administrative Vice President
Officer	Zachary B. Ogden	Michael J. Lofrumento
Lara Ann Gough	Assistant Vice Presidents	Vice Presidents
	Carly K. Batista	Patrick M. Canavan
COLLECTIONS/ OPERATIONS	Ajay D. Murthy	John R. George
Senior Vice President		Officers
Kevin M. Curley	FINANCIAL SERVICES	Daniel A. Centi
Vice President	DEPARTMENT	James M. Poole
Michael V. Pitnell	Administrative Vice President	Ryan J. Vandenburgh
Officer	Patrick J. LaPorta, Esq.
Stacy L. Marble	Vice President	PERSONNEL
	Thomas M. Poitras	Vice President
COMPLIANCE	Assistant Vice President	Mary-Jean Riley
Administrative Vice President	Richard W. Provost
Michael J. Ewell	Officers	QUALITY CONTROL/
Assistant Vice President	Michael D. Bates	TRAINING
Jennifer L. Meadows	Nathan W. Crowder	Vice President
Officer	Kevin T. Smith	Sharon J. Parvis
James A.P. McCarthy, Esq.	John W. Bresonis	Officer
		Joseph M. Rice
INFORMATION TECHNOLOGY	LOAN REVIEW
Chief Technology Officer	Assistant Vice President
Volney R. LaRowe	Paul R. Steenburgh

AUDITOR	MARKETING
Kenneth E. Hughes, Jr.	Officer
	Adam E. Roselan

ANNUAL MEETING	CORPORATE HEADQUARTERS
Thursday, May 21, 2015	5 Sarnowski Drive
4:00 PM	Glenville, NY 12302
Mallozzi’s Restaurant	(518) 377-3311
1930 Curry Road
Schenectady, NY 12303

Trustco Bank	ORE Subsidiary Corporation
Glenville, New York	Glenville, New York
Member FDIC
(and its wholly owned subsidiaries)

Trustco Realty Corp
Glenville, New York
Trustco Insurance Agency, Inc.
Glenville, New York
ORE Property, Inc.
Glenville, New York
(and its wholly owned subsidiaries)
ORE Property One, Inc.
Orlando, Florida
ORE Property Two, Inc.
Orlando, Florida

	Period Ending
Index	12/31/09		12/31/10		12/31/11		12/31/12		12/31/13		12/31/14
TrustCo Bank Corp NY		100.00		105.17		97.70		96.57		137.30		144.30
Russell 2000		100.00		126.86		121.56		141.43		196.34		205.95
SNL Bank and Thrift		100.00		111.64		86.81		116.57		159.61		178.18

	Period Ending
Index	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014
TrustCo Bank Corp NY	100.00	111.12	138.44	124.55	159.82	175.26	165.64	156.85	148.90	149.80	104.52	109.92	102.12	100.94	143.51	150.83
Russell 2000	100.00	96.98	99.39	79.03	116.38	137.71	143.98	170.42	167.75	111.08	141.26	179.19	171.71	199.78	277.34	290.92
SNL Bank and Thrift	100.00	120.80	122.59	115.19	156.16	174.88	177.61	207.54	158.26	91.02	89.79	100.24	77.95	104.67	143.31	159.99