Summary of TRUSTCO BANK CORP N Y

Management's Discussion and Analysis of Financial Condition and Results of Operations

The review that follows focuses on the factors affecting the financial condition and results of operations of TrustCo Bank Corp NY ("TrustCo" or "Company") during the three-month periods ended March 31, 2009, with comparisons to 2008 as applicable. Net interest margin is presented on a fully taxable equivalent basis in this discussion. The consolidated interim financial statements and related notes, as well as the 2008 Annual Report to Shareholders should be read in conjunction with this review. Amounts in prior period consolidated interim financial statements are reclassified whenever necessary to conform to the current period's presentation.

The first quarter of 2009 generally saw a continuation of the historic economic and financial market conditions that were prevalent through much of 2008. Dramatic declines in market values for a wide variety of asset classes, market conditions that severely strained normal functioning of, and in some cases resulted in effectively frozen markets for periods of time, failures and near-failures of some of the largest financial institutions in the world, declining economic activity and unprecedented intervention by governments in markets and the financial services industry became part of the landscape, particularly in the second half of 2008. The United States saw the two largest bank failures in its history in 2008, failures of other major financial institutions, forced mergers and massive government bailouts. The pace of bank failures has increased in 2009 although the focus has been on smaller institutions. The United States Government responded to these events with legislation, including the Emergency Economic Stabilization Act of 2008, which authorized the Troubled Asset Relief Program ("TARP"), a variety of major initiatives by the Federal Reserve Bank ("FRB"), including a sharp easing of monetary policy and direct intervention in a number of financial markets, and a wide variety of programs instituted by the Federal Deposit Insurance Corporation ("FDIC"), the Treasury Department and other bank regulatory agencies. The economic outlook for the balance of 2009 is generally regarded as weak, but with the possibility of stabilization in the second half of the year; however major uncertainties remain.

TrustCo's long-term focus on traditional banking services has enabled the Company to avoid significant impact from asset quality problems and the Company's strong liquidity and solid capital positions have allowed the Company to continue to conduct business in a manner consistent with past practice. TrustCo has not engaged in the types of high risk loans and investments that have led to the widely reported problems in the industry. Nevertheless, the Company has experienced an increase in nonperforming loans, although management believes the level remains readily manageable. To the extent that housing values continue to decline on a national basis, any housing lender is subject to some increase in the level of risk. While the Company does not see a significant increase in the inherent risk of loss in its loan portfolios at March 31, 2009, should general housing prices and other economic measures in the Company's market areas deteriorate, the Company may experience an increase in the level of risk and/or charge-offs in its loan portfolios.

In addition, the natural flight to quality that occurs in financial crisis, cuts in targeted interest rates and liquidity injections by the Federal government have served to reduce yields available on both short term liquidity (federal funds and cash equivalents) as well as the low risk types of securities that the Company typically invests in.

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Forward-looking Statements
Statements included in this review 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. 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, including the Risk Factors described in Item 1A of TrustCo's Annual Report on Form 10-K for the year ended December 31, 2008, 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: (1) credit risk, (2) interest rate risk, (3) competition, (4) changes in the regulatory environment and in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, (5) real estate and collateral values, and (6) changes in market area and general business and economic trends. 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.

Following this discussion is the table "Distribution of Assets, Liabilities and Shareholders' Equity: Interest Rates and Interest Differential" which gives a detailed breakdown of TrustCo's average interest earning assets and interest bearing liabilities for the three-months ended March 31, 2009 and 2008.

Overview
TrustCo recorded net income of $6.3 million, or $0.083 of diluted earnings per share for the three months ended March 31, 2009, as compared to net income of $9.4 million or $0.125 of diluted earnings per share in the same period in 2008.

The primary factors accounting for the year to date changes were:

· Increase in the average balance of interest earning assets of $92.0 million to $3.36 billion for the first three months of 2009 compared to the same period in 2008,

· Increase in the average balance of interest bearing liabilities of $86.0 million to $2.93 billion for the first three months of 2009 as compared to 2008,

· Decrease in net interest margin from 3.07% for the first three months of 2008 to 2.96% for the three months of 2009,

· Increase in the provision for loan losses from $300 thousand for the first three months of 2008 to $2.0 million in the comparable period in 2009,

· Increase in noninterest income (excluding net gains on securities transactions and net trading (losses) / gains) from $4.2 million for the first three months of 2008 to $5.5 million for the comparable period in 2009. Excluded from noninterest income were $111 thousand of net gains on securities transactions for the first three months of 2009 compared to net losses of $366 thousand for the same period in 2008, and $308 thousand of net trading losses in the 2009 period compared to $717 thousand of net gains in the first three months of 2008, and

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· An increase of $3.9 million in noninterest expense for the first three-months of 2009 as compared to the first three-months of 2008.

Asset/Liability Management
The Company strives to generate its earnings capabilities through a mix of core deposits, funding a prudent mix of earning assets. Additionally, TrustCo attempts to maintain adequate liquidity and reduce the sensitivity of net interest income to changes in interest rates to an acceptable level while enhancing profitability both on a short-term and long-term basis.

TrustCo's results are affected by a variety of factors including competitive and economic conditions in the specific markets in which the company operates and more generally in the national economy, financial market conditions and the regulatory environment. Each of these is dynamic and changes in any area can have an impact on TrustCo's results. Included in the Annual Report to Shareholders for the year ended December 31, 2008 is a description of the effect interest rates had on the results for the year 2008 compared to 2007. Many of the same market factors discussed in the 2008 Annual Report continued to have a significant impact on the year to date 2009 results.

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 period.

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. The Federal Funds target rate decreased from 4.25% at the beginning of 2008 to a target range of 0.00% to 0.25% by the end of 2008, with the reductions occurring throughout the year. The target range has not been changed thus far in 2009. The effective, or actual Federal Funds rate was often below the targeted rate, particularly in the latter part of 2008. Traditionally interest rates on bank deposit accounts are heavily influenced by the Federal Funds rate; however during 2008 highly competitive conditions in the banking industry resulted in rates on deposit accounts not declining in line with the Federal Funds rate. The failure of several significant competitors has led to an improvement in the rate environment in some areas, and deposit rates moderated somewhat in the first quarter of 2009 compared to prior periods.

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As noted previously, the yield on other financial instruments, including the 10 year Treasury bond rate did not change in-line with the Federal Funds rate. Despite the Federal Funds rate declining by approximately 400 basis points, the yield on the 10 year Treasury declined only 179 basis points, from 4.04% to 2.25% during 2008. In the first quarter of 2009, the 10 year Treasury rate generally trended up, and ended the period at 2.71%. The rate on the 10 year treasury bond and other long-term interest rates has a significant influence on the rates for new residential real estate loans. The FRB is also attempting to influence rates on mortgage loans by other means, including direct intervention in the mortgage-backed securities market, by purchasing these securities in an attempt to raise prices and reduce yields. 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 on 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 10 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 trading portfolio and the securities available for sale portfolio, which are recorded at fair value. Generally, as interest rates increase the fair value of these 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. The principal loan product for TrustCo is residential real estate loans. 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. Financial market volatility and the problems faced by the financial services industry have somewhat lessened the influence of the secondary market, however various programs initiated by arms of the Federal government have had an impact on rate levels for certain products. Most importantly, a government goal of keeping mortgage rates low has been supported by targeted buying of certain securities, thus supporting prices and constraining yields.

The net effect of these interest rate changes is that the yields earned on both short term investments and longer term investments have generally declined since mid-year 2008, while deposit costs remained comparatively flat through most of 2009. Yields on investments have not changed significantly in 2009, however deposit costs have declined.

While TrustCo has been affected somewhat by aspects of the overall changes in financial markets, it has not been directly affected in a significant way by the mortgage crisis effecting some banks and financial institutions in the United States. The crisis revolves around actual and anticipated higher levels of delinquencies and defaults on mortgage loans, in many cases arising from lenders with overly liberal underwriting standards, changes in the types of mortgage loans offered, significant upward resets on adjustable rate loans, fraud and other factors. The Company utilizes a traditional underwriting process in evaluating loan applications, and since originated loans are retained in portfolio there is a strong incentive to be conservative in making credit decisions. For additional information concerning TrustCo's loan portfolio and non-performing loans, please refer to the discussions under "Loans" and "Nonperforming Assets," respectively. Further, the Company does not rely on borrowed funds to support its assets and maintains a very significant level of liquidity on the asset side of the balance sheet.

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For the first quarter of 2009, the net interest margin decreased to 2.96% from 3.07% for the first quarter of 2008. The margin was equal to the 2.96% recorded in the fourth quarter of 2008. The quarterly results reflect the following significant factors:

- The average balance of federal funds sold and other short-term investments decreased by $32.9 million and the average yield decreased 280 basis points to 0.67% in the first quarter of 2009 compared to the same period in 2008 . The decrease in yield on federal funds sold and other short-term investments is attributable to the decrease in the target federal funds rate.

- The average balance of securities available for sale, held-to-maturity securities and trading securities decreased by $95.3 million and the average yield decreased to 3.59% from 5.05% for the first quarter of 2009 compared to the same period in 2008.

- The average loan portfolio grew by $220.0 million to $2.17 billion and the average yield decreased 56 basis points to 5.76% in the first quarter of 2009 compared to the same period in 2008. The decline in the average yield reflects the decline in market interest rates on new loans and variable rate loans.

- The average balance of interest bearing liabilities (primarily deposit accounts) increased $86.0 million and the average rate paid decreased 94 basis points to 2.02% in the first quarter of 2009 compared to the same period in 2008. The decline In the rate paid on interest bearing liabilities reflects the decline in market interest rates.

During the first quarter of 2009 the Company continued to focus on its strategy to expand the loan portfolio by offering competitive interest rates as the rate environment changed. Management believes that the TrustCo residential real estate loan product is very competitive compared to local and national competitors. As noted, the widespread disruptions in the mortgage market have not had a significant impact on TrustCo, partly because the Company has not originated the types of loans that have been responsible for many of the problems causing the disruptions as well as the fact that housing prices in the Company's primary markets have not experienced the declines realized in other areas of the country. The withdrawal from the market of some of the troubled lenders that did focus on subprime and similar loans has slightly improved competitive conditions for the type of residential mortgage loans that TrustCo focuses on. The average balance of federal funds sold and other short-term investments decreased slightly, reflecting a shift towards a larger held-to-maturity portfolio of investment securities as well as continued loan growth. More significant reductions in trading securities and securities available for sale were also reflective of the shift towards a larger held-to-maturity portfolio.

The strategy on the funding side of the balance sheet continues to be to attract deposit customers to the Company based upon a combination of service, convenience and interest rate. The Company offered attractive long-term deposit rates as part of a strategy to lengthen deposit lives. The decline in the federal funds rate and slightly lessened competitive conditions has led to lower deposit rates offered by most depository institutions, including TrustCo, during much of the quarter. However, the decline in deposit costs has lagged the decline in the Federal Funds target rate.

Earning Assets
Total average interest earning assets increased from $3.27 billion in the first quarter of 2008 to $3.36 billion in the same period of 2009 with an average yield of 5.64% in 2008 and 4.72% in 2009. Interest income on average earning assets declined from $46.1 million in the first quarter of 2008 to $39.6 in the first quarter of 2009, on a tax equivalent basis, as the decline in yields more than offset the growth in average earning assets.

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Loans
The average balance of loans was $2.17 billion in the first quarter of 2009 and $1.95 billion in the comparable period in 2008. The yield on loans decreased 56 basis points to 5.76%. The higher average balances more than offset the lower yield, leading to a nominal increase in the interest income on loans from $30.8 million in the first quarter of 2008 to $31.2 million in the first quarter of 2009.

Compared to the first quarter of 2008, the average balance of the loan portfolio during the first quarter of 2009 increased in residential, home equity and commercial loans, but declined slightly in installment loans. The average balance of residential mortgage loans was $1.43 billion in 2008 compared to $1.61 billion in 2009, an increase of 12.7%. The average yield on residential mortgage loans decreased by 16 basis points to 6.04% in the first quarter of 2009 compared to 2008.

TrustCo actively markets the residential loan products within its market territories. Mortgage loan rates are affected by a number of factors including rates on treasury securities, the federal funds rate and rates set by competitors and secondary market participants. As noted earlier, market interest rates have changed significantly as a result of national economic policy in the United States, as well as due to disruptions in the mortgage market. During this period of changing interest rates, TrustCo aggressively marketed the unique aspects of its loan products thereby attempting to create a differentiation from other lenders. These unique aspects include extremely low closing costs, fast turn-around time on loan approvals, no escrow or mortgage insurance requirements for qualified borrowers and the fact that the Company typically holds these loans in portfolio and does not sell them into the secondary markets. Assuming a rise in long-term interest rates, the Company would anticipate that the unique features of its loan product will continue to attract customers in the residential mortgage loan area. Loan volume remained relatively strong during the first quarter of 2009.

Commercial loans, which consist primarily of loans secured by commercial real estate, increased 4.5% to an average balance of $296.8 million in the first quarter of 2009 over the prior year. The average yield on this portfolio decreased 112 basis points to 5.85% over the same period. The decline in yield reflects the reduction in the federal funds rate and the associated reduction in the prime rate.

The average yield on home equity credit lines decreased 242 basis points to 3.67% during the first quarter of 2009 compared to 2008. The decline in yield was primarily the result of the decline in the underlying index rate in step with the decline in the fed funds rate as well as low initial rates for new lines. The average balances of home equity lines increased 11.3% to $254.5 million in the first quarter of 2009 as compared to the prior year.

Securities Available-for-Sale
The average balance of the securities available-for-sale portfolio for the first quarter of 2009 was $432.1 million compared to $532.0 million for the comparable period in 2008. The average yield was 4.38% for the first quarter of 2009 and 5.52% for the first quarter of 2008. This portfolio is primarily comprised of bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank, and Freddie Mac), municipal bonds, mortgage-backed securities and collateralized mortgage obligation bonds. These securities are recorded at fair value with any adjustment included in other comprehensive income.

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Trading Securities
The average balance of trading securities for the first quarter of 2009 was $50.6 million, compared to $427.6 million in the comparable period of 2008. The decline in balances was due to maturities and calls of securities. The average yield on trading securities was 3.00% for the first quarter of 2009, compared to 4.43% for the comparable period in 2008. The decline in the average yield was due to the decline in short term interest rates. The securities held as trading securities are generally short term. All of the securities in this portfolio are bonds issued by government sponsored enterprises (such as Fannie Mae, the Federal Home Loan Bank, and Freddie Mac) or municipal bonds. The balances for these bonds are recorded at fair value with any such adjustment recorded to the income statement. TrustCo does not own any equity securities of Fannie Mae or Freddie Mac in any of its portfolios.

For the first quarter of 2009, the average $50.6 million total trading portfolio was comprised of $49.5 million of U.S. government sponsored enterprises securities, with the remaining $1.1 million composed of short-term municipal securities.

Held-to-Maturity Securities
The average balance of held-to-maturity securities was $396.7 million for the first quarter of 2009 and the period-end balance was $634.7 million. At year-end 2008, the balance was $264.7 million. For the first quarter of 2008, the average balance of held-to-maturity securities was $15.0 million. The average yield was 2.81% for the 2009 period compared to 6.00% for the year earlier period. TrustCo expects to hold the securities in this portfolio until they mature or are called.

The securities in this portfolio include bonds issued by government sponsored enterprises, mortgage-backed securities and corporate bonds. The balances for these bonds are recorded at amortized cost. As of March 31, 2009, there was $34.4 million due to brokers recorded on the balance sheet as the result of a pending security settlement in this portfolio.

Securities Portfolios
The unrealized gain in the available-for-sale securities portfolios increased from $494 thousand at December 31, 2008 to $4.3 million as of March 31, 2009 primarily due to changes in interest rates.

Federal Funds Sold and Other Short-term Investments The 2009 first quarter average balance of federal funds sold and other short-term investments was $311.7 million, a $32.9 million decline from the $344.6 million average for the same period in 2008. The portfolio yield decreased from 3.47% in 2008 to 0.67% in 2009. Changes in the yield resulted from changes in the target rate set by the Federal Reserve Board for federal funds sold. Interest income from this portfolio decreased by approximately $2.5 million from $3.0 million in 2008 to $0.5 million in 2009, due to both the decline in yield and the lower average balance.

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The federal funds sold and other short-term investments portfolio is utilized to generate additional interest income and liquidity as funds are waiting to be deployed into the loan and securities portfolios.

Funding Opportunities
TrustCo utilizes various funding sources to support its earning asset portfolio. The vast majority of the Company's funding comes from traditional deposit vehicles such as savings, demand deposits, interest-bearing checking and time deposit accounts.

Total average interest-bearing deposits (which includes interest-bearing checking, money market accounts, savings, and certificates of deposit) increased from $2.75 billion during the first quarter of 2008 to $2.82 billion in the first quarter of 2009, and the average rate paid decreased from 2.98% for 2008 to 2.04% for 2009. Total interest expense on these deposits decreased $6.2 million to $14.1 million in the first quarter of 2009 compared to the year earlier period.

Average short-term borrowings for the quarter were $108.7 million in 2009 compared to $92.4 million in 2008. The average rate decreased during this time period from 2.51% in 2008 to 1.73% in 2009. Rates on short-term borrowings tend to change with the Federal Funds rate.

Net Interest Income
Taxable equivalent net interest income decreased by $143 thousand to $25.0 million in the first quarter of 2009 as compared to the same period in 2008. The net interest spread increased from 2.68% in the first quarter of 2008 to 2.70% in 2009. The net interest margin decreased by 11 basis points to 2.96% for the first quarter of 2009.

Nonperforming Assets
Nonperforming assets include nonperforming loans, which are those loans in a nonaccrual status, loans that have been restructured in a troubled debt restructuring, and loans past due three payments or more and still accruing interest. Also included in the total of nonperforming assets are foreclosed real estate properties, which are categorized as real estate owned.

Impaired loans are considered to be those commercial and commercial real estate loans in a nonaccrual status and restructured loans. The following describes the nonperforming assets of TrustCo as of March 31, 2009:

Nonperforming loans: Total nonperforming loans were $42.3 million at March 31, 2009, an increase from $33.9 million of nonperforming loans at December 31, 2008. There were $41.8 million of nonaccrual loans at March 31, 2009 compared to the $32.7 million at December 31, 2008. Restructured loans were $514 thousand at March 31, 2009 compared to $598 thousand at December 31, 2008. There were no loans at March 31, 2009 that were past due 90 days or more and still accruing interest, compared to $594 thousand at December 31, 2008.

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At March 31, 2009, nonperforming loans include a mix of commercial and residential loans. Of total nonperforming loans of $42.3 million, $27.3 million . . .