ALLOWANCE FOR CREDIT LOSSES

12 Months Ended

Dec. 31, 2012

ALLOWANCE FOR CREDIT LOSSES

ALLOWANCE FOR CREDIT LOSSES (Note 6)

The allowance for credit losses consists of the allowance for losses on non-covered loans and allowance for losses on covered loans related to credit impairment of certain covered loan pools subsequent to acquisition, as well as the allowance for unfunded letters of credit. Management maintains the allowance for credit losses at a level estimated to absorb probable loan losses of the loan portfolio and unfunded letter of credit commitments at the balance sheet date. The allowance for losses on non-covered loans is based on ongoing evaluations of the probable estimated losses inherent in the non-covered loan portfolio, including unexpected credit impairment of non-covered PCI loan pools subsequent to the acquisition date.

The following table summarizes the allowance for credit losses for the years ended December 31, 2012 and 2011:

	2012		2011
	(in thousands)
Components of allowance for credit losses:
Allowance for non-covered loans	$	120,708	$	120,274
Allowance for covered loans		9,492		13,528
Total allowance for loan losses		130,200		133,802
Allowance for unfunded letters of credit		2,295		2,383
Total allowance for credit losses	$	132,495	$	136,185

The following table summarizes the provision for credit losses for the periods indicated:

	2012			2011		2010
	(in thousands)
Components of provision for credit losses:
Provision for non-covered loans	$	25,640		$	31,242	$	42,943
Provision for covered loans		—			21,510		6,378
Total provision for loan losses		25,640			52,752		49,321
Provision for unfunded letters of credit		(88	)		583		135
Total provision for credit losses	$	25,552		$	53,335	$	49,456

The following table details the activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2012 and 2011, including both covered and non-covered loans:

	Commercial and Industrial			Commercial Real Estate			Residential Mortgage			Consumer			Unallocated			Total
	(in thousands)
December 31, 2012
Allowance for loan losses:
Beginning balance	$	73,649		$	34,637		$	9,120		$	8,677		$	7,719		$	133,802
Loans charged-off (1)		(16,103	)		(11,688	)		(3,518	)		(5,339	)		—			(36,648	)
Charged-off loans recovered		4,475			272			701			1,958			—			7,406
Net charge-offs		(11,628	)		(11,416	)		(2,817	)		(3,381	)		—			(29,242	)
Provision for loan losses		2,349			20,848			3,120			246			(923	)		25,640
Ending balance	$	64,370		$	44,069		$	9,423		$	5,542		$	6,796		$	130,200
December 31, 2011
Allowance for loan losses:
Beginning balance	$	61,967		$	30,409		$	9,476		$	14,499		$	8,353		$	124,704
Loans charged-off (1)		(29,229	)		(10,358	)		(3,222	)		(5,906	)		—			(48,715	)
Charged-off loans recovered		2,365			331			129			2,236			—			5,061
Net charge-offs		(26,864	)		(10,027	)		(3,093	)		(3,670	)		—			(43,654	)
Provision for loan losses (2)		38,546			14,255			2,737			(2,152	)		(634	)		52,752
Ending balance	$	73,649		$	34,637		$	9,120		$	8,677		$	7,719		$	133,802

⁽¹⁾  The allowance for covered loans was reduced by loan charge-offs totaling $4.0 million and $14.4 million during 2012 and 2011, respectively, primarily in the commercial and industrial loan portfolio.

⁽²⁾  The provision for covered loan losses totaled $21.5 million for the year ended December 31, 2011.

The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the impairment methodology for the years ended December 31, 2012 and 2011. Loans individually evaluated for impairment represent Valley’s impaired loans. Loans acquired with discounts related to credit quality represent Valley’s PCI loans.

	Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Unallocated		Total
	(in thousands)
December 31, 2012
Allowance for loan losses:
Individually evaluated for impairment	$	12,088	$	16,581	$	2,329	$	15	$	—	$	31,013
Collectively evaluated for impairment		44,877		25,463		7,032		5,527		6,796		89,695
Loans acquired with discounts related to credit quality		7,405		2,025		62		—		—		9,492
Total	$	64,370	$	44,069	$	9,423	$	5,542	$	6,796	$	130,200
Loans:
Individually evaluated for impairment	$	49,697	$	131,216	$	24,891	$	930	$	—	$	206,734
Collectively evaluated for impairment		1,783,046		4,040,723		2,420,736		1,403,896		—		9,648,401
Loans acquired with discounts related to credit quality		298,600		793,406		26,461		49,197		—		1,167,664
Total	$	2,131,343	$	4,965,345	$	2,472,088	$	1,454,023	$	—	$	11,022,799
December 31, 2011
Allowance for loan losses:
Individually evaluated for impairment	$	11,105	$	8,516	$	3,577	$	45	$	—	$	23,243
Collectively evaluated for impairment		51,588		23,611		5,481		8,632		7,719		97,031
Loans acquired with discounts related to credit quality		10,956		2,510		62		—		—		13,528
Total	$	73,649	$	34,637	$	9,120	$	8,677	$	7,719	$	133,802
Loans:
Individually evaluated for impairment	$	54,858	$	107,970	$	21,005	$	242	$	—	$	184,075
Collectively evaluated for impairment		1,823,529		3,877,122		2,264,585		1,378,486		—		9,343,722
Loans acquired with discounts related to credit quality		83,742		167,625		15,546		4,931		—		271,844
Total	$	1,962,129	$	4,152,717	$	2,301,136	$	1,383,659	$	—	$	9,799,641