(4)	Loans and Allowance for Loan Losses

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

	December 31, 2018
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	156,278		15,275		171,553
Other		24,330		263		24,593
Real estate mortgage - 1 to 4 family:
First mortgages		2,442,711		845,166		3,287,877
Home equity loans		71,523		17,308		88,831
Home equity lines of credit		243,765		45,775		289,540
Installment		9,462		2,240		11,702
Total loans, net	$	2,948,069		926,027		3,874,096
Less: Allowance for loan losses						44,766
Net loans					$	3,829,330

	December 31, 2017
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	149,368		12,524		161,892
Other		23,606		709		24,315
Real estate mortgage - 1 to 4 family:
First mortgages		2,286,148		765,929		3,052,077
Home equity loans		66,455		13,989		80,444
Home equity lines of credit		263,275		45,641		308,916
Installment		7,141		1,622		8,763
Total loans, net	$	2,795,993		840,414		3,636,407
Less: Allowance for loan losses						44,170
Net loans					$	3,592,237
* Includes New York, New Jersey, Vermont and Massachusetts.

At December 31, 2018 and 2017, the Company had approximately $26.7 million and $30.9 million of real estate construction loans, respectively. Of the $26.7 million in real estate construction loans at December 31, 2018, approximately $14.2 million were secured by first mortgages to residential borrowers with the remaining $12.5 million were to commercial borrowers for residential construction projects. Of the $30.9 million in real estate construction loans at December 31, 2017, approximately $21.1 million were secured by first mortgages to residential borrowers with the remaining $9.8 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, 2018 and 2017, loans to executive officers, directors, and to associates of such persons aggregated $5.5 million and $6.9 million, respectively. During 2018, approximately $1.0 million of new loans were made and repayments of loans totaled approximately $2.4 million. The composition of related parties did not change at December 31, 2018. The composition of related parties did change during the year ended December 31, 2017 resulting in a reduction of approximately $100 thousand to outstanding loans to related parties. 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, 2018
(dollars in thousands)	New York and other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	639		-		639
Other		6		-		6
Real estate mortgage - 1 to 4 family:
First mortgages		18,202		1,812		20,014
Home equity loans		247		-		247
Home equity lines of credit		3,924		103		4,027
Installment		4		15		19
Total non-accrual loans		23,022		1,930		24,952
Restructured real estate mortgages - 1 to 4 family		34		-		34
Total nonperforming loans	$	23,056		1,930		24,986

	December 31, 2017
(dollars in thousands)	New York and other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	1,443		-		1,443
Other		100		-		100
Real estate mortgage - 1 to 4 family:
First mortgages		16,654		2,259		18,913
Home equity loans		93		-		93
Home equity lines of credit		3,603		130		3,733
Installment		57		-		57
Total non-accrual loans		21,950		2,389		24,339
Restructured real estate mortgages - 1 to 4 family		38		-		38
Total nonperforming loans	$	21,988		2,389		24,377

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

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 December 31, 2018 and December 31, 2017, other real estate owned included $1.1 million and $2.7 million, respectively, of residential foreclosed properties. In addition, non‑accrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $12.4 million and $12.6 million as of December 31, 2018 and December 31, 2017, respectively.

The following tables present the aging of the recorded investment in past due loans by loan class and by region as of December 31, 2018 and 2017:

	December 31, 2018

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

Commercial:
Commercial real estate	$	198		-		370		568		155,710		156,278
Other		-		-		-		-		24,330		24,330
Real estate mortgage - 1 to 4 family:
First mortgages		3,276		898		13,267		17,441		2,425,270		2,442,711
Home equity loans		158		94		212		464		71,059		71,523
Home equity lines of credit		963		348		1,691		3,002		240,763		243,765
Installment		44		29		2		75		9,387		9,462

Total	$	4,639		1,369		15,542		21,550		2,926,519		2,948,069

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

Commercial:
Commercial real estate	$	-		-		-		-		15,275		15,275
Other		-		-		-		-		263		263
Real estate mortgage - 1 to 4 family:
First mortgages		417		407		721		1,545		843,621		845,166
Home equity loans		50		-		-		50		17,258		17,308
Home equity lines of credit		40		-		50		90		45,685		45,775
Installment		12		7		15		34		2,206		2,240

Total	$	519		414		786		1,719		924,308		926,027

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

Commercial:
Commercial real estate	$	198		-		370		568		170,985		171,553
Other		-		-		-		-		24,593		24,593
Real estate mortgage - 1 to 4 family:
First mortgages		3,693		1,305		13,988		18,986		3,268,891		3,287,877
Home equity loans		208		94		212		514		88,317		88,831
Home equity lines of credit		1,003		348		1,741		3,092		286,448		289,540
Installment		56		36		17		109		11,593		11,702

Total	$	5,158		1,783		16,328		23,269		3,850,827		3,874,096

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

	December 31, 2017

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

Commercial:
Commercial real estate	$	183		174		1,332		1,689		147,679		149,368
Other		-		-		100		100		23,506		23,606
Real estate mortgage - 1 to 4 family:
First mortgages		5,669		1,300		9,014		15,983		2,270,165		2,286,148
Home equity loans		6		-		45		51		66,404		66,455
Home equity lines of credit		489		18		2,139		2,646		260,629		263,275
Installment		46		17		25		88		7,053		7,141

Total	$	6,393		1,509		12,655		20,557		2,775,436		2,795,993

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

Commercial:
Commercial real estate	$	-		-		-		-		12,524		12,524
Other		-		-		-		-		709		709
Real estate mortgage - 1 to 4 family:
First mortgages		277		-		1,404		1,681		764,248		765,929
Home equity loans		-		-		-		-		13,989		13,989
Home equity lines of credit		-		-		-		-		45,641		45,641
Installment		3		5		26		34		1,588		1,622

Total	$	280		5		1,430		1,715		838,699		840,414

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

Commercial:
Commercial real estate	$	183		174		1,332		1,689		160,203		161,892
Other		-		-		100		100		24,215		24,315
Real estate mortgage - 1 to 4 family:
First mortgages		5,946		1,300		10,418		17,664		3,034,413		3,052,077
Home equity loans		6		-		45		51		80,393		80,444
Home equity lines of credit		489		18		2,139		2,646		306,270		308,916
Installment		49		22		51		122		8,641		8,763

Total	$	6,673		1,514		14,085		22,272		3,614,135		3,636,407

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

At December 31, 2018 and 2017, 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:

	For the year ended December 31, 2018
(dollars in thousands)	Commercial			Real Estate Mortgage- 1 to 4 Family		Installment		Total

Balance at beginning of period	$	4,324			39,077		769		44,170
Loans charged off:
New York and other states*		100			846		224		1,170
Florida		-			-		33		33
Total loan chargeoffs		100			846		257		1,203

Recoveries of loans previously charged off:
New York and other states*		10			348		32		390
Florida		-			3		6		9
Total recoveries		10			351		38		399
Net loans charged off (recoveries)		90			495		219		804
Provision (recoveries) for loan losses		(186	)		1,190		396		1,400
Balance at end of period	$	4,048			39,772		946		44,766

	For the year ended December 31, 2017
(dollars in thousands)	Commercial			Real Estate Mortgage- 1 to 4 Family		Installment		Total

Balance at beginning of period	$	4,929			38,231		730		43,890
Loans charged off:
New York and other states*		72			2,053		200		2,325
Florida		-			167		19		186
Total loan chargeoffs		72			2,220		219		2,511

Recoveries of loans previously charged off:
New York and other states*		96			596		26		718
Florida		-			73		-		73
Total recoveries		96			669		26		791
Net loans charged off (recoveries)		(24	)		1,551		193		1,720
Provision (recoveries) for loan losses		(629	)		2,397		232		2,000
Balance at end of period	$	4,324			39,077		769		44,170

	For the year ended December 31, 2016
(dollars in thousands)	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*		795		3,447		303		4,545
Florida		-		126		39		165
Total loan chargeoffs		795		3,573		342		4,710

Recoveries of loans previously charged off:
New York and other states*		207		613		64		884
Florida		-		4		-		4
Total recoveries		207		617		64		888
Net loans charged off (recoveries)		588		2,956		278		3,822
Provision (recoveries) for loan losses		1,026		1,434		490		2,950
Balance at end of period	$	4,929		38,231		730		43,890

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

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, 2018 and 2017:

	December 31, 2018
(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		4,048		39,772		946		44,766

Total ending allowance balance	$	4,048		39,772		946		44,766

Loans:
Individually evaluated for impairment	$	1,424		20,864		-		22,288
Collectively evaluated for impairment		194,722		3,645,384		11,702		3,851,808

Total ending loans balance	$	196,146		3,666,248		11,702		3,874,096

	December 31, 2017
(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		4,324		39,077		769		44,170

Total ending allowance balance	$	4,324		39,077		769		44,170

Loans:
Individually evaluated for impairment	$	2,248		22,032		-		24,280
Collectively evaluated for impairment		183,959		3,419,405		8,763		3,612,127

Total ending loans balance	$	186,207		3,441,437		8,763		3,636,407

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, 2018 and 2017 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, 2018 and 2017:

	December 31, 2018
New York and other states*:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Avg Recorded Investment

Commercial:
Commercial real estate	$	1,274		1,444		-		1,503
Other		38		88		-		123
Real estate mortgage - 1 to 4 family:
First mortgages		15,210		15,661		-		15,577
Home equity loans		252		272		-		262
Home equity lines of credit		2,772		2,996		-		2,772

Total		19,546		20,461		-		20,237

Florida:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Avg Recorded Investment

Commercial:
Commercial real estate	$	112		112		-		57
Real estate mortgage - 1 to 4 family:
First mortgages		2,293		2,399		-		2,455
Home equity loans		84		84		-		86
Home equity lines of credit		253		253		-		326

Total	$	2,742		2,848		-		2,924

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

Commercial:
Commercial real estate	$	1,386		1,556		-		1,560
Other		38		88		-		123
Real estate mortgage - 1 to 4 family:
First mortgages		17,503		18,060		-		18,032
Home equity loans		336		356		-		348
Home equity lines of credit		3,025		3,249		-		3,098

Total	$	22,288		23,309		-		23,161

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

	December 31, 2017
New York and other states*:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Avg Recorded Investment

Commercial:
Commercial real estate	$	2,148		3,120		-		2,711
Other		100		100		-		87
Real estate mortgage - 1 to 4 family:
First mortgages		15,850		16,540		-		16,508
Home equity loans		270		291		-		263
Home equity lines of credit		2,606		2,847		-		2,193

Total	$	20,974		22,898		-		21,762

Florida:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Avg Recorded Investment

Commercial:
Commercial real estate	$	-		-		-		-
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		2,707		2,813		-		2,335
Home equity loans		89		89		-		92
Home equity lines of credit		510		510		-		561

Total	$	3,306		3,412		-		2,988

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

Commercial:
Commercial real estate	$	2,148		3,120		-		2,711
Other		100		100		-		87
Real estate mortgage - 1 to 4 family:
First mortgages		18,557		19,353		-		18,843
Home equity loans		359		380		-		355
Home equity lines of credit		3,116		3,357		-		2,754

Total	$	24,280		26,310		-		24,750

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

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 2018, 2017, and 2016.

Included in impaired loans as of December 31, 2018 and 2017 are approximately $11.1 million and $11.8 million, respectively, of loans in accruing status that were identified as TDR’s.

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 if necessary. As a result, as of December 31, 2018 and 2017, based upon management’s evaluation and due to the sufficiency of charge‑offs 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, 2018, 2017 and 2016:

	Year ended 12/31/2018						Year ended 12/31/2017						Year ended 12/31/2016
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		6	$	747		747		4	$	426		426		2	$	401		401
Real estate mortgage - 1 to 4 family:
First mortgages		18		2,349		2,349		44		5,653		5,653		30		2,871		2,871
Home equity loans		1		6		6		3		56		56		1		44		44
Home equity lines of credit		5		325		325		18		868		868		10		402		402

Total		30	$	3,427		3,427		69	$	7,003		7,003		43	$	3,718		3,718

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		1	$	35		35		10	$	1,076		1,076		4	$	504		504
Home equity loans		-		-		-		-		-		-		1		45		45
Home equity lines of credit		-		-		-		2		95		95		1		6		6

Total		1	$	35		35		12	$	1,171		1,171		6	$	555		555

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

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

The following table presents loans by class modified as TDR’s that occurred during the years ended December 31, 2018, 2017 and 2016 for which there was a payment default within 12 months of modification:

	Year ended 12/31/2018				Year ended 12/31/2017				Year ended 12/31/2016
New York and other states*: (dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment

Real estate mortgage - 1 to 4 family:
First mortgages		1		101		1		72		3		291
Home equity lines of credit		-		-		1		3		1		141

Total		1	$	101		2	$	75		4	$	432

Florida:

(dollars in thousands)

Number of

Contracts

Recorded

Investment

Number of

Contracts

Recorded

Investment

Number of

Contracts

Recorded

Investment

Real estate mortgage - 1 to 4 family:

First mortgages

Home equity lines of credit

Total

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

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, even though there is no modification of terms, the borrowers’ debt to the Company was discharged and they may 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 are reviewed for collateral sufficiency on a quarterly basis.

The Company categorizes non-homogenous loans such as commercial and commercial real estate 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, in accordance with the Company’s Loan Policy, the Company analyzes non-homogeneous loans, individually by grading the loans based on credit risk. The loan grades assigned to all loan types are also tested by the Company’s external loan review firm in accordance with the Company’s 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 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, 2018 and 2017, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	December 31, 2018
New York and other states*: (dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	152,045		4,233		156,278
Other		23,331		999		24,330
	$	175,376		5,232		180,608

Florida: (dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	15,163		112		15,275
Other		263		-		263
	$	15,426		112		15,538

Total: (dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	167,208		4,345		171,553
Other		23,594		999		24,593
	$	190,802		5,344		196,146

* Includes New York, New Jersey and Massachusetts.

	December 31, 2017
New York and other states: (dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	140,806		8,562		149,368
Other		21,936		1,670		23,606
	$	162,742		10,232		172,974

Florida: (dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	12,406		118		12,524
Other		709		-		709
	$	13,115		118		13,233

Total: (dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	153,212		8,680		161,892
Other		22,645		1,670		24,315
	$	175,857		10,350		186,207

* Includes New York, New Jersey and Massachusetts.

Included in classified loans in the above tables are impaired loans of $1.4 million and $1.5 million at December 31, 2018 and 2017, 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, 2018 and 2017 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, 2018 and 2017 is presented in the recorded investment in non-accrual loans table.