Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2016

Loans and Allowance for Loan Losses [Abstract]

Loans and Allowance for Loan Losses

(5) Loans and Allowance for Loan Losses

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

	June 30, 2016
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	158,150		14,272		172,422
Other		23,196		80		23,276
Real estate mortgage - 1 to 4 family:
First mortgages		2,116,506		603,612		2,720,118
Home equity loans		56,580		10,253		66,833
Home equity lines of credit		300,952		51,117		352,069
Installment		6,893		1,583		8,476
Total loans, net	$	2,662,277		680,917		3,343,194
Less: Allowance for loan losses						44,064
Net loans					$	3,299,130

	December 31, 2015
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	160,965		14,908		175,873
Other		27,449		93		27,542
Real estate mortgage - 1 to 4 family:
First mortgages		2,093,957		566,715		2,660,672
Home equity loans		52,251		8,250		60,501
Home equity lines of credit		308,165		51,160		359,325
Installment		8,000		1,391		9,391
Total loans, net	$	2,650,787		642,517		3,293,304
Less: Allowance for loan losses						44,762
Net loans					$	3,248,542

*Includes New York, New Jersey, Vermont and Massachusetts

At June 30, 2016 and December 31, 2015, the Company had approximately $22.8 million and $26.6 million of real estate construction loans, respectively.  Of the $22.8 million in real estate construction loans at June 30, 2016, approximately $13.4 million are secured by second mortgages to residential borrowers while approximately $9.4 million were to commercial borrowers for residential construction projects. Of the $26.6 million in real estate construction loans at December 31, 2015, approximately $16.0 million are secured by second mortgages to residential borrowers while approximately $10.6 million were to commercial borrowers for residential construction projects. The vast majority of construction loans are in the Company’s New York market.

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

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

	June 30, 2016
(dollars in thousands)	New York and other states		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	2,690		-		2,690
Real estate mortgage - 1 to 4 family:
First mortgages		20,287		1,557		21,844
Home equity loans		86		46		132
Home equity lines of credit		3,186		297		3,483
Installment		49		-		49
Total non-accrual loans		26,298		1,900		28,198
Restructured real estate mortgages - 1 to 4 family		45		-		45
Total nonperforming loans	$	26,343		1,900		28,243

	December 31, 2015
(dollars in thousands)	New York and other states		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	3,024		-		3,024
Other		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		19,488		1,488		20,976
Home equity loans		212		-		212
Home equity lines of credit		3,573		329		3,902
Installment		90		8		98
Total non-accrual loans		26,387		1,825		28,212
Restructured real estate mortgages - 1 to 4 family		48		-		48
Total nonperforming loans	$	26,435		1,825		28,260

The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). As of June 30, 2016 and December 31, 2015, other estate owned included $3.9 million and $5.4 million of residential foreclosed properties, respectively. In addition, non-accrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $13.7 million and $13.2 million as of June 30, 2016 and December 31, 2015, respectively.

The following tables present the aging of the recorded investment in past due loans by loan class and by region as of June 30, 2016 and December 31, 2015:

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

New York and other states:
	June 30, 2016
(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	$	580		104		2,060		2,744		155,406		158,150
Other		-		-		-		-		23,196		23,196
Real estate mortgage - 1 to 4 family:
First mortgages		1,896		1,678		12,391		15,965		2,100,541		2,116,506
Home equity loans		109		2		65		176		56,404		56,580
Home equity lines of credit		392		91		1,482		1,965		298,987		300,952
Installment		19		30		45		94		6,799		6,893
Total	$	2,996		1,905		16,043		20,944		2,641,333		2,662,277

Florida:

(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	$	-		-		-		-		14,272		14,272
Other		-		-		-		-		80		80
Real estate mortgage - 1 to 4 family:
First mortgages		525		168		1,136		1,829		601,783		603,612
Home equity loans		-		-		-		-		10,253		10,253
Home equity lines of credit		113		50		180		343		50,774		51,117
Installment		1		3		-		4		1,579		1,583
Total	$	639		221		1,316		2,176		678,741		680,917

Total:

(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	$	580		104		2,060		2,744		169,678		172,422
Other		-		-		-		-		23,276		23,276
Real estate mortgage - 1 to 4 family:
First mortgages		2,421		1,846		13,527		17,794		2,702,324		2,720,118
Home equity loans		109		2		65		176		66,657		66,833
Home equity lines of credit		505		141		1,662		2,308		349,761		352,069
Installment		20		33		45		98		8,378		8,476
Total	$	3,635		2,126		17,359		23,120		3,320,074		3,343,194

New York and other states:
	December 31, 2015
(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	$	-		-		2,340		2,340		158,625		160,965
Other		-		-		-		-		27,449		27,449
Real estate mortgage - 1 to 4 family:
First mortgages		4,321		2,037		12,529		18,887		2,075,070		2,093,957
Home equity loans		43		-		149		192		52,059		52,251
Home equity lines of credit		572		204		1,418		2,194		305,971		308,165
Installment		34		19		88		141		7,859		8,000
Total	$	4,970		2,260		16,524		23,754		2,627,033		2,650,787

Florida:

(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	$	10		-		-		10		14,898		14,908
Other		-		-		-		-		93		93
Real estate mortgage - 1 to 4 family:
First mortgages		665		271		851		1,787		564,928		566,715
Home equity loans		-		-		-		-		8,250		8,250
Home equity lines of credit		159		-		240		399		50,761		51,160
Installment		1		21		-		22		1,369		1,391
Total	$	835		292		1,091		2,218		640,299		642,517

Total:

(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	$	10		-		2,340		2,350		173,523		175,873
Other		-		-		-		-		27,542		27,542
Real estate mortgage - 1 to 4 family:
First mortgages		4,986		2,308		13,380		20,674		2,639,998		2,660,672
Home equity loans		43		-		149		192		60,309		60,501
Home equity lines of credit		731		204		1,658		2,593		356,732		359,325
Installment		35		40		88		163		9,228		9,391
Total	$	5,805		2,552		17,615		25,972		3,267,332		3,293,304

At June 30, 2016 and December 31, 2015, there were no loans that were 90 days past due and still accruing interest. As a result, non-accrual loans include all loans 90 days or more past due as well as certain loans less than 90 days past due that were placed on non-accrual status for reasons other than delinquent status. There are no commitments to extend further credit on non-accrual or restructured loans.

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

(dollars in thousands)	For the three months ended June 30, 2016
	Commercial		Real Estate Mortgage- 1 to 4 Family		Installment		Total
Balance at beginning of period	$	4,919		39,017		462		44,398
Loans charged off:
New York and other states*		68		1,090		92		1,250
Florida		-		17		1		18
Total loan chargeoffs		68		1,107		93		1,268
Recoveries of loans previously charged off:
New York and other states*		1		117		15		133
Florida		-		1		-		1
Total recoveries		1		118		15		134
Net loans charged off		67		989		78		1,134
Provision for loan losses		194		561		45		800
Balance at end of period	$	5,046		38,589		429		44,064

(dollars in thousands)	For the three months ended June 30, 2015
	Commercial		Real Estate Mortgage- 1 to 4 Family		Installment		Total
Balance at beginning of period	$	4,024		41,529		391		45,944
Loans charged off:
New York and other states*		50		1,066		33		1,149
Florida		-		169		-		169
Total loan chargeoffs		50		1,235		33		1,318
Recoveries of loans previously charged off:
New York and other states*		-		133		9		142
Florida		1		2		-		3
Total recoveries		1		135		9		145
Net loans charged off		49		1,100		24		1,173
Provision (credit) for loan losses		47		658		95		800
Balance at end of period	$	4,022		41,087		462		45,571

(dollars in thousands)	For the six months ended June 30, 2016
	Commercial		Real Estate Mortgage- 1 to 4 Family		Installment		Total
Balance at beginning of period	$	4,491		39,753		518		44,762
Loans charged off:
New York and other states*		332		1,979		173		2,484
Florida		-		101		17		118
Total loan chargeoffs		332		2,080		190		2,602
Recoveries of loans previously charged off:
New York and other states*		41		235		26		302
Florida		-		2		-		2
Total recoveries		41		237		26		304
Net loans charged off		291		1,843		164		2,298
Provision for loan losses		846		679		75		1,600
Balance at end of period	$	5,046		38,589		429		44,064

(dollars in thousands)	For the six months ended June 30, 2015
	Commercial		Real Estate Mortgage- 1 to 4 Family		Installment		Total
Balance at beginning of period	$	4,071		42,088		168		46,327
Loans charged off:
New York and other states*		100		2,180		76		2,356
Florida		-		278		-		278
Total loan chargeoffs		100		2,458		76		2,634
Recoveries of loans previously charged off:
New York and other states*		16		243		15		274
Florida		2		2		-		4
Total recoveries		18		245		15		278
Net loans charged off		82		2,213		61		2,356
Provision for loan losses		33		1,212		355		1,600
Balance at end of period	$	4,022		41,087		462		45,571

The Company has identified non-accrual 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 as a TDR.

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 June 30, 2016 and December 31, 2015:

	June 30, 2016
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		5,046		38,589		429		44,064
Total ending allowance balance	$	5,046		38,589		429		44,064
Loans:
Individually evaluated for impairment	$	2,966		22,216		-		25,182
Collectively evaluated for impairment		192,732		3,116,804		8,476		3,318,012
Total ending loans balance	$	195,698		3,139,020		8,476		3,343,194

	December 31, 2015
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		4,491		39,753		518		44,762
Total ending allowance balance	$	4,491		39,753		518		44,762
Loans:
Individually evaluated for impairment	$	3,306		22,575		-		25,881
Collectively evaluated for impairment		200,109		3,057,923		9,391		3,267,423
Total ending loans balance	$	203,415		3,080,498		9,391		3,293,304

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 June 30, 2016 and December 31, 2015 are measured at the present value of estimated future cash flows using the loan’s effective rate at inception or the fair value of the underlying collateral if the loan is considered collateral dependent.

The following tables present impaired loans by loan class as of June 30, 2016 and December 31, 2015:

New York and other states:

	June 30, 2016
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Commercial:
Commercial real estate	$	2,966		3,988		-		3,116
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		17,439		18,350		-		17,146
Home equity loans		241		277		-		265
Home equity lines of credit		1,907		2,070		-		1,909
Total	$	22,553		24,685		-		22,436

Florida:

(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Commercial:
Commercial real estate	$	-		-		-		-
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1,925		2,016		-		1,711
Home equity loans		97		97		-		67
Home equity lines of credit		607		679		-		612
Total	$	2,629		2,792		-		2,390

Total:

(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Commercial:
Commercial real estate	$	2,966		3,988		-		3,116
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		19,364		20,366		-		18,857
Home equity loans		338		374		-		332
Home equity lines of credit		2,514		2,749		-		2,521
Total	$	25,182		27,477		-		24,826

New York and other states:

	December 31, 2015
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Commercial:
Commercial real estate	$	3,306		3,996		-		3,608
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		17,460		18,602		-		18,127
Home equity loans		359		417		-		382
Home equity lines of credit		2,306		2,569		-		2,238
Total	$	23,431		25,584		-		24,355

Florida:

(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Commercial:
Commercial real estate	$	-		-		-		-
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		1,760		1,852		-		1,489
Home equity loans		53		53		-		54
Home equity lines of credit		637		720		-		654
Total	$	2,450		2,625		-		2,197

Total:

(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Commercial:
Commercial real estate	$	3,306		3,996		-		3,608
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		19,220		20,454		-		19,616
Home equity loans		412		470		-		436
Home equity lines of credit		2,943		3,289		-		2,892
Total	$	25,881		28,209		-		26,552

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 during the three months and six months ended June 30, 2016 and 2015.

As of June 30, 2016 and December 31, 2015 impaired loans included approximately $11.0 million and $10.6 million of 1 to 4 family residential real estate loans in accruing status that were identified as TDR’s in accordance with regulatory guidance related to Chapter 7 bankruptcy loans, respectively.

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 June 30, 2016 and December 31, 2015, based upon management’s evaluation and due to the sufficiency of chargeoffs taken, none of the allowance for loan losses has been allocated to a specific impaired loan(s).

The following table presents, by class, loans that were modified as TDR’s:

	Three months ended 6/30/2016						Three months ended 6/30/2015
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
Real estate mortgage - 1 to 4 family:
First mortgages		10	$	753	$	753		13	$	1,542	$	1,542
Home equity loans		-		-		-		1		139		139
Home equity lines of credit		5		66		66		2		44		44
Total		15	$	819	$	819		16	$	1,725	$	1,725

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
Real estate mortgage - 1 to 4 family:
First mortgages		1	$	298	$	298		-	$	-	$	-
Home equity loans		1		46		46		-		-		-
Home equity lines of credit		1		6		6		-		-		-
Total		3	$	350	$	350		-	$	-	$	-

	Six months ended 6/30/2016						Six months ended 6/30/2015
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
Real estate mortgage - 1 to 4 family:
First mortgages		22	$	1,807		1,807		20	$	2,987		2,987
Home equity loans		-		-		-		1		139		139
Home equity lines of credit		9		157		157		2		44		44
Total		31	$	1,964	$	1,964		23	$	3,170	$	3,170

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
Real estate mortgage - 1 to 4 family:
First mortgages		3	$	525	$	525		1	$	157	$	157
Home equity loans		1		46		46		-		-		-
Home equity lines of credit		1		6		6		2		50		50
Total		5	$	577	$	577		3	$	207	$	207

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

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 following table presents, by class, TDR’s that defaulted during the three months and six months ended June 30, 2016 and 2015 which had been modified within the last twelve months:

	Three months ended 6/30/2016				Three months ended 6/30/2015
New York and other states*: (dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Real estate mortgage - 1 to 4 family:
First mortgages		1	$	107		-	$	-
Total		1	$	107		-	$	-

Florida:

(dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Real estate mortgage - 1 to 4 family:
First mortgages		1	$	46		-	$	-
Total		1	$	46		-	$	-

	Six months ended 6/30/2016				Six months ended 6/30/2015
New York and other states*: (dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Real estate mortgage - 1 to 4 family:
First mortgages		3	$	268		-	$	-
Home equity lines of credit		1		48		-		-
Total		4	$	316		-	$	-

Florida:

(dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Real estate mortgage - 1 to 4 family:
Home equity lines of credit		1	$	46		1	$	50
Total		1	$	46		1	$	50

The TDR’s that subsequently defaulted described above did not have a material impact on the allowance for loan losses.

The Company categorizes non-homogenous 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, such as commercial and commercial real estate loans, individually by grading the loans based on credit risk.  The loan grades assigned to all loan types are tested by the Company’s internal loan review department in accordance with the Company’s internal loan review policy.

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 classified as such 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 June 30, 2016 and December 31, 2015, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	June 30, 2016
New York and other states:
(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	143,955		14,195		158,150
Other		22,472		724		23,196
	$	166,427		14,919		181,346

Florida:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	14,272		-		14,272
Other		80		-		80
	$	14,352		-		14,352

Total:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	158,227		14,195		172,422
Other		22,552		724		23,276
	$	180,779		14,919		195,698

	December 31, 2015
New York and other states:
(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	145,335		15,630		160,965
Other		26,715		734		27,449
	$	172,050		16,364		188,414

Florida:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	14,908		-		14,908
Other		93		-		93
	$	15,001		-		15,001

Total:

(dollars in thousands)
	Pass		Classified		Total
Commercial:
Commercial real estate	$	160,243		15,630		175,873
Other		26,808		734		27,542
	$	187,051		16,364		203,415

Included in classified loans in the above tables are impaired loans of $2.7 million and $3.0 million at June 30, 2016 and December 31, 2015, 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 as of June 30, 2016 and December 31, 2015 is included in the aging of the recorded investment of the past due loans table. In addition, the total nonperforming portion of these homogeneous loan pools as of June 30, 2016 and December 31, 2015 is presented in the non-accrual loans table.