Note 7. Loans

The detail of the loan portfolio as of June 30, 2013 and December 31, 2012 was as follows:


	June 30, 2013						December 31, 2012
	Non-PCI Loans		PCI Loans		Total		Non-PCI Loans		PCI Loans		Total
	(in thousands)
Non-covered loans:
Commercial and industrial	$	1,800,818	$	187,586	$	1,988,404	$	1,832,743	$	252,083	$	2,084,826
Commercial real estate:
Commercial real estate		3,893,492		544,220		4,437,712		3,772,084		645,625		4,417,709
Construction		404,084		22,807		426,891		399,855		25,589		425,444

Total commercial real estate loans		4,297,576		567,027		4,864,603		4,171,939		671,214		4,843,153

Residential mortgage		2,397,884		15,084		2,412,968		2,445,627		16,802		2,462,429
Consumer:
Home equity		415,501		39,665		455,166		438,881		46,577		485,458
Automobile		835,271		—		835,271		786,528		—		786,528
Other consumer		184,570		226		184,796		179,417		314		179,731

Total consumer loans		1,435,342		39,891		1,475,233		1,404,826		46,891		1,451,717

Total non-covered loans	$	9,931,620	$	809,588	$	10,741,208	$	9,855,135	$	986,990	$	10,842,125


Covered loans:
Commercial and industrial	$	—	$	32,990	$	32,990	$	—	$	46,517	$	46,517
Commercial real estate		—		95,164		95,164		—		120,268		120,268
Construction		—		3,029		3,029		—		1,924		1,924
Residential mortgage		—		8,920		8,920		—		9,659		9,659
Consumer		—		1,714		1,714		—		2,306		2,306

Total covered loans		—		141,817		141,817		—		180,674		180,674

Total loans	$	9,931,620	$	951,405	$	10,883,025	$	9,855,135	$	1,167,664	$	11,022,799

Total non-covered loans are net of unearned discount and deferred loan fees totaling $8.3 million and $3.4 million at June 30, 2013 and December 31, 2012, respectively. The outstanding balances (representing contractual balances owed to Valley) for non-covered PCI loans and covered loans totaled $886.4 million and $277.8 million at June 30, 2013, and $1.1 billion and $321.9 million at December 31, 2012, respectively.

There were no sales of loans from the held for investment portfolio during the three and six months ended June 30, 2013 and 2012.

Purchased Credit-Impaired Loans (Including Covered Loans)

Purchased Credit-Impaired (PCI) loans, which include loans acquired in FDIC-assisted transactions (“covered loans”) subject to loss-sharing agreements, are acquired at a discount that is due, in part, to credit quality. PCI loans are accounted for in accordance with ASC Subtopic 310-30 and are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance (i.e., the allowance for loan losses), and aggregated and accounted for as pools of loans based on common risk characteristics. The difference between the undiscounted cash flows expected at acquisition and the initial carrying amount (fair value) of the PCI loans, or the “accretable yield,” is recognized as interest income utilizing the level-yield method over the life of each pool. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non-accretable difference,” are not recognized as a yield adjustment, as a loss accrual or a valuation allowance. Reclassifications of the non-accretable difference to the accretable yield may occur subsequent to the loan acquisition dates due to increases in expected cash flows of the loan pools.

The following table presents changes in the accretable yield for PCI loans during the three and six months ended June 30, 2013 and 2012:


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands)
Balance, beginning of period	$	153,138		$	229,802		$	169,309		$	66,724
Acquisitions		—			—			—			186,262
Accretion		(17,639	)		(20,385	)		(33,874	)		(43,569	)
Net increase in expected cash flows		120,884			—			120,948			—

Balance, end of period	$	256,383		$	209,417		$	256,383		$	209,417

The net increase in expected cash flows for certain pools of loans (included in the table above) is recognized prospectively as an adjustment to the yield over the life of the individual pools. The net increase was largely due to additional cash flows caused by longer than originally expected durations for certain non-covered PCI loans which increased the average expected life of our non-covered PCI loans (which represent 85 percent of total PCI loans at June 30, 2013) from 2.5 years (at the date of acquisition) to approximately 4.0 years. Additionally, a $20.1 million decrease in the expected credit losses for certain non-covered pools is another component of the net increase in cash flows.

FDIC Loss-Share Receivable

The receivable arising from the loss-sharing agreements (referred to as the “FDIC loss-share receivable” on our consolidated statements of financial condition) is measured separately from the covered loan portfolio because the agreements are not contractually part of the covered loans and are not transferable should the Bank choose to dispose of the covered loans.

Changes in the FDIC loss-share receivable for the three and six months ended June 30, 2013 and 2012 were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands)
Balance, beginning of the period	$	43,413		$	69,928		$	44,996		$	74,390
Discount accretion of the present value at the acquisition dates		32			81			65			162
Effect of additional cash flows on covered loans (prospective recognition)		(3,467	)		(2,231	)		(4,949	)		(3,868	)
Decrease in the provision for losses on covered loans		(105	)		—			(2,783	)		—
Other reimbursable expenses		1,540			1,088			2,492			2,554
(Reimbursements from) payments to the FDIC		(727	)		(3,165	)		865			(7,537	)
Other		—			(5,960	)		—			(5,960	)

Balance, end of the period	$	40,686		$	59,741		$	40,686		$	59,741

The aggregate effect of changes in the FDIC loss-share receivable was a reduction in non-interest income of $2.0 million and $7.0 million for the three months ended June 30, 2013 and 2012, respectively, and a reduction of $5.2 million and $7.1 million to non-interest income for the six months ended June 30, 2013 and 2012, respectively. The reductions in non-interest income for the three and six months ended June 30, 2012 included $6.0 million related to the FDIC’s portion of the estimated losses on unused lines of credit assumed in the FDIC-assisted transactions, which had expired.

Loan Portfolio Risk Elements and Credit Risk Management

Credit risk management. For all of its loan types discussed below, Valley adheres to a credit policy designed to minimize credit risk while generating the maximum income given the level of risk. Management reviews and approves these policies and procedures on a regular basis with subsequent approval by the Board of Directors annually. Credit authority relating to a significant dollar percentage of the overall portfolio is centralized and controlled by the Credit Risk Management Division and by the Credit Committee. A reporting system supplements the management review process by providing management with frequent reports concerning loan production, loan quality, concentrations of credit, loan delinquencies, non-performing, and potential problem loans. Loan portfolio diversification is an important factor utilized by Valley to manage its risk across business sectors and through cyclical economic circumstances.

Commercial and industrial loans. A significant proportion of Valley’s commercial and industrial loan portfolio is granted to long-standing customers of proven ability, strong repayment performance, and high character. Underwriting standards are designed to assess the borrower’s ability to generate recurring cash flow sufficient to meet the debt service requirements of loans granted. While such recurring cash flow serves as the primary source of repayment, a significant number of the loans are collateralized by borrower assets intended to serve as a secondary source of repayment should the need arise. Anticipated cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value, or in the case of loans secured by accounts receivable, the ability of the borrower to collect all amounts due from its customers. Short-term loans may be made on an unsecured basis based on a borrower’s financial strength and past performance. Valley, in most cases, will obtain the personal guarantee of the borrower’s principals to mitigate the risk. Unsecured loans, when made, are generally granted to the Bank’s most credit worthy borrowers. Unsecured commercial and industrial loans totaled $300.0 million and $307.0 million at June 30, 2013 and December 31, 2012, respectively.

Commercial real estate loans. Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans. Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real property. Loans generally involve larger principal balances and longer repayment periods as compared to commercial and industrial loans. Repayment of most loans is dependent upon the cash flow generated from the property securing the loan or the business that occupies the property. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy and accordingly conservative loan to value ratios are required at origination, as well as stress tested to evaluate the impact of market changes relating to key underwriting elements. The properties securing the commercial real estate portfolio represent diverse types, with most properties located within Valley’s primary markets.

Construction loans. With respect to loans to developers and builders, Valley originates and manages construction loans structured on either a revolving or non-revolving basis, depending on the nature of the underlying development project. These loans are generally secured by the real estate to be developed and may also be secured by additional real estate to mitigate the risk. Non-revolving construction loans often involve the disbursement of substantially all committed funds with repayment substantially dependent on the successful completion and sale, or lease, of the project. Sources of repayment for these types of loans may be from pre-committed permanent loans from other lenders, sales of developed property, or an interim loan commitment from Valley until permanent financing is obtained elsewhere. Revolving construction loans (generally relating to single-family residential construction) are controlled with loan advances dependent upon the presale of housing units financed. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Residential mortgages. Valley originates residential, first mortgage loans based on underwriting standards that generally comply with Fannie Mae and/or Freddie Mac requirements. Appraisals and valuations of real estate collateral are contracted directly with independent appraisers or from valuation services and not through appraisal management companies. The Bank’s appraisal management policy and procedure is in accordance with regulatory requirements and guidance issued by the Bank’s primary regulator. Credit scoring, using FICO^® and other proprietary, credit scoring models is employed in the ultimate, judgmental credit decision by Valley’s underwriting staff. Valley does not use third party contract underwriting services. Residential mortgage loans include fixed and variable interest rate loans secured by one to four family homes generally located in northern and central New Jersey, the New York City metropolitan area, and eastern Pennsylvania. Valley’s ability to be repaid on such loans is closely linked to the economic and real estate market conditions in this region. In deciding whether to originate each residential mortgage, Valley considers the qualifications of the borrower as well as the value of the underlying property.

Home equity loans. Home equity lending consists of both fixed and variable interest rate products. Valley mainly provides home equity loans to its residential mortgage customers within the footprint of its primary lending territory. Valley generally will not exceed a combined (i.e., first and second mortgage) loan-to-value ratio of 75 percent when originating a home equity loan.

Automobile loans. Valley uses both judgmental and scoring systems in the credit decision process for automobile loans. Automobile originations (including light truck and sport utility vehicles) are largely produced via indirect channels, originated through approved automobile dealers. Automotive collateral is generally a depreciating asset and there are times in the life of an automobile loan where the amount owed on a vehicle may exceed its collateral value. Additionally, automobile charge-offs will vary based on strength or weakness in the used vehicle market, original advance rate, when in the life cycle of a loan a default occurs and the condition of the collateral being liquidated. Where permitted by law, and subject to the limitations of the bankruptcy code, deficiency judgments are sought and acted upon to ultimately collect all money owed, even when a default resulted in a loss at collateral liquidation. Valley uses a third party to actively track collision and comprehensive risk insurance required of the borrower on the automobile and this third party provides coverage to Valley in the event of an uninsured collateral loss.

Other consumer loans. Valley’s other consumer loan portfolio includes direct consumer term loans, both secured and unsecured. The other consumer loan portfolio includes minor exposures in credit card loans, personal lines of credit, personal loans and loans secured by cash surrender value of life insurance. Valley believes the aggregate risk exposure of these loans and lines of credit was not significant at June 30, 2013. Unsecured consumer loans totaled approximately $20.7 million and $44.0 million, including $8.2 million and $8.6 million of credit card loans, at June 30, 2013 and December 31, 2012, respectively.

Credit Quality

The following table presents past due, non-accrual and current loans (excluding PCI loans, which are accounted for on a pool basis) by loan portfolio class at June 30, 2013 and December 31, 2012:


	Past Due and Non-Accrual Loans
	30-89 Days Past Due Loans		Accruing Loans 90 Days Or More Past Due		Non-Accrual Loans		Total Past Due Loans		Current Non-PCI Loans		Total Non-PCI Loans
	(in thousands)
June 30, 2013

Commercial and industrial	$	3,525	$	—	$	20,913	$	24,438	$	1,776,380	$	1,800,818
Commercial real estate:
Commercial real estate		18,946		259		55,390		74,595		3,818,897		3,893,492
Construction		5,772		150		13,617		19,539		384,545		404,084

Total commercial real estate loans		24,718		409		69,007		94,134		4,203,442		4,297,576

Residential mortgage		10,619		2,342		26,054		39,015		2,358,869		2,397,884
Consumer loans:
Home equity		724		—		2,328		3,052		412,449		415,501
Automobile		3,307		152		221		3,680		831,591		835,271
Other consumer		107		197		—		304		184,266		184,570

Total consumer loans		4,138		349		2,549		7,036		1,428,306		1,435,342

Total	$	43,000	$	3,100	$	118,523	$	164,623	$	9,766,997	$	9,931,620


December 31, 2012

Commercial and industrial	$	3,578	$	283	$	22,424	$	26,285	$	1,806,458	$	1,832,743
Commercial real estate:
Commercial real estate		13,245		2,950		58,625		74,820		3,697,264		3,772,084
Construction		6,685		2,575		14,805		24,065		375,790		399,855

Total commercial real estate loans		19,930		5,525		73,430		98,885		4,073,054		4,171,939

Residential mortgage		18,951		2,356		32,623		53,930		2,391,697		2,445,627
Consumer loans:
Home equity		702		—		2,398		3,100		435,781		438,881
Automobile		5,443		469		305		6,217		780,311		786,528
Other consumer		1,082		32		628		1,742		177,675		179,417

Total consumer loans		7,227		501		3,331		11,059		1,393,767		1,404,826

Total	$	49,686	$	8,665	$	131,808	$	190,159	$	9,664,976	$	9,855,135

Impaired loans. Impaired loans, consisting of non-accrual commercial and industrial loans and commercial real estate loans over $250 thousand and all loans which were modified in troubled debt restructuring, are individually evaluated for impairment. PCI loans are not classified as impaired loans because they are accounted for on a pool basis. The following table presents the information about impaired loans by loan portfolio class at June 30, 2013 and December 31, 2012:


	Recorded Investment With No Related Allowance		Recorded Investment With Related Allowance		Total Recorded Investment		Unpaid Contractual Principal Balance		Related Allowance
	(in thousands)
June 30, 2013
Commercial and industrial	$	3,670	$	53,925	$	57,595	$	73,152	$	11,420
Commercial real estate:
Commercial real estate		21,747		89,450		111,197		127,316		11,729
Construction		5,744		13,690		19,434		21,595		2,903

Total commercial real estate loans		27,491		103,140		130,631		148,911		14,632

Residential mortgage		11,317		15,562		26,879		30,714		2,677
Consumer loans:
Home equity		1,049		137		1,186		1,529		11

Total consumer loans		1,049		137		1,186		1,529		11

Total	$	43,527	$	172,764	$	216,291	$	254,306	$	28,740


December 31, 2012
Commercial and industrial	$	3,236	$	46,461	$	49,697	$	62,183	$	12,088
Commercial real estate:
Commercial real estate		26,724		84,151		110,875		125,875		11,788
Construction		6,339		14,002		20,341		23,678		4,793

Total commercial real estate loans		33,063		98,153		131,216		149,553		16,581

Residential mortgage		8,232		16,659		24,891		27,059		2,329
Consumer loans:
Home equity		672		258		930		1,169		15

Total consumer loans		672		258		930		1,169		15

Total	$	45,203	$	161,531	$	206,734	$	239,964	$	31,013

The following table presents by loan portfolio class, the average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2013 and 2012:


	Three Months Ended June 30,
	2013				2012
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Commercial and industrial	$	56,017	$	412	$	48,888	$	339
Commercial real estate:
Commercial real estate		114,066		866		98,077		302
Construction		19,932		70		21,412		37

Total commercial real estate loans		133,998		936		119,489		339

Residential mortgage		29,099		349		21,179		238
Consumer loans:
Home equity		1,174		14		274		3

Total consumer loans		1,174		14		274		3

Total	$	220,288	$	1,711	$	189,830	$	919


	Six Months Ended June 30,
	2013				2012
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Commercial and industrial	$	55,644	$	788	$	52,094	$	748
Commercial real estate:
Commercial real estate		113,735		1,617		95,004		991
Construction		19,547		139		21,742		86

Total commercial real estate loans		133,282		1,756		116,746		1,077

Residential mortgage		28,686		532		20,889		374
Consumer loans:
Home equity		1,194		26		277		7

Total consumer loans		1,194		26		277		7

Total	$	218,853	$	3,102	$	190,006	$	2,206

Interest income recognized on a cash basis (included in the table above) was immaterial for the three and six months ended June 30, 2013 and 2012.

Troubled debt restructured loans. From time to time, Valley may extend, restructure, or otherwise modify the terms of existing loans, on a case-by-case basis, to remain competitive and retain certain customers, as well as assist other customers who may be experiencing financial difficulties. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan (TDR). Valley’s PCI loans are excluded from the TDR disclosures below because they are evaluated for impairment on a pool by pool basis. When an individual PCI loan within a pool is modified as a TDR, it is not removed from its pool. All TDRs are classified as impaired loans and are included in the impaired loan disclosures above.

The majority of the concessions made for TDRs involve lowering the monthly payments on loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. The concessions rarely result in the forgiveness of principal or accrued interest. In addition, Valley frequently obtains additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms and Valley’s underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

Performing TDRs (not reported as non-accrual loans) totaled $117.1 million and $105.4 million as of June 30, 2013 and December 31, 2012, respectively. Non-performing TDRs totaled $43.9 million and $41.8 million as of June 30, 2013 and December 31, 2012, respectively.

The following table presents loans by loan portfolio class modified as TDRs during the three and six months ended June 30, 2013 and 2012. The pre-modification and post-modification outstanding recorded investments disclosed in the table below represent the loan carrying amounts immediately prior to the modification and the carrying amounts at June 30, 2013 and 2012, respectively.


	Three Months Ended June 30, 2013						Three Months Ended June 30, 2012
Troubled Debt Restructurings	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
	($ in thousands)
Commercial and industrial		6	$	13,912	$	13,881		8	$	18,278	$	16,623
Commercial real estate:
Commercial real estate		4		7,275		7,266		8		33,677		33,487
Construction		4		4,936		4,979		2		4,557		4,254

Total commercial real estate		8		12,211		12,245		10		38,234		37,741
Residential mortgage		5		1,414		1,259		9		2,926		2,919
Consumer		1		74		74		—		—		—

Total		20	$	27,611	$	27,459		27	$	59,438	$	57,283


	Six Months Ended June 30, 2013						Six Months Ended June 30, 2012
Troubled Debt Restructurings	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
	($ in thousands)
Commercial and industrial		10	$	16,750	$	15,232		13	$	19,700	$	17,574
Commercial real estate:
Commercial real estate		9		11,729		11,727		14		35,726		35,453
Construction		5		5,474		5,510		4		6,711		5,278

Total commercial real estate		14		17,203		17,237		18		42,437		40,731
Residential mortgage		22		4,578		4,016		13		3,778		3,767
Consumer		6		452		397		2		69		67

Total		52	$	38,983	$	36,882		46	$	65,984	$	62,139

The majority of the TDR concessions made during the three and six months ended June 30, 2013 and 2012 involved an extension of the loan term and/or an interest rate reduction. The TDRs presented in the table above had allocated specific reserves for loan losses totaling $3.7 million and $9.5 million at June 30, 2013 and 2012, respectively. These specific reserves are included in the allowance for loan losses for loans individually evaluated for impairment disclosed in Note 8. One commercial loan modified as a TDR included in the table above resulted in a $1.1 million charge-off during the six months ended June 30, 2013. There were no charge-offs resulting from loans modified as TDRs during the second quarter of 2013 and the three and six months ended June 30, 2012.

The following table presents non-PCI loans modified as TDRs within the previous 12 months from, and for which there was a payment default (90 days or more past due) during the three and six months ended June 30, 2013:


Troubled Debt Restructurings Subsequently Defaulted	Three Months Ended June 30, 2013				Six Months Ended June 30, 2013
Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
	($ in thousands)
Commercial and industrial		1	$	1,297		1	$	1,297
Commercial real estate		1		531		1		531
Residential mortgage		—		—		9		2,320
Consumer		—		—		2		220

Total		2	$	1,828		13	$	4,368

Credit quality indicators. Valley utilizes an internal loan classification system as a means of reporting problem loans within commercial and industrial, commercial real estate, and construction loan portfolio classes. Under Valley’s internal risk rating system, loan relationships could be classified as “Pass,” “Special Mention,” “Substandard,” “Doubtful,” and “Loss.” Substandard loans include loans that exhibit well-defined weakness and are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, based on currently existing facts, conditions and values, highly questionable and improbable. Loans classified as Loss are those considered uncollectible with insignificant value and are charged-off immediately to the allowance for loan losses. Loans that do not currently pose a sufficient risk to warrant classification in one of the aforementioned categories, but pose weaknesses that deserve management’s close attention are deemed Special Mention. Loans rated as “Pass” loans do not currently pose any identified risk and can range from the highest to average quality, depending on the degree of potential risk. Risk ratings are updated any time the situation warrants.

The following table presents the risk category of loans (excluding PCI loans) by class of loans based on the most recent analysis performed at June 30, 2013 and December 31, 2012.


Credit exposure - by internally assigned risk rating	Pass		Special Mention		Substandard		Doubtful		Total
	(in thousands)
June 30, 2013
Commercial and industrial	$	1,634,931	$	70,190	$	95,670	$	27	$	1,800,818
Commercial real estate		3,696,473		60,107		136,912		—		3,893,492
Construction		346,560		33,797		17,927		5,800		404,084

Total	$	5,677,964	$	164,094	$	250,509	$	5,827	$	6,098,394


December 31, 2012
Commercial and industrial	$	1,673,604	$	64,777	$	94,184	$	178	$	1,832,743
Commercial real estate		3,563,530		59,175		149,379		—		3,772,084
Construction		340,357		32,817		19,521		7,160		399,855

Total	$	5,577,491	$	156,769	$	263,084	$	7,338	$	6,004,682

For residential mortgages, automobile, home equity and other consumer loan portfolio classes (excluding PCI loans), Valley also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.

The following table presents the recorded investment in those loan classes based on payment activity as of June 30, 2013 and December 31, 2012:


Credit exposure - by payment activity	Performing Loans		Non-Performing Loans		Total Non-PCI Loans
	(in thousands)
June 30, 2013
Residential mortgage	$	2,371,830	$	26,054	$	2,397,884
Home equity		413,173		2,328		415,501
Automobile		835,050		221		835,271
Other consumer		184,570		—		184,570

Total	$	3,804,623	$	28,603	$	3,833,226


December 31, 2012
Residential mortgage	$	2,413,004	$	32,623	$	2,445,627
Home equity		436,483		2,398		438,881
Automobile		786,223		305		786,528
Other consumer		178,789		628		179,417

Total	$	3,814,499	$	35,954	$	3,850,453

Valley evaluates the credit quality of its PCI loan pools based on the expectation of the underlying cash flows of each pool, derived from the aging status and by payment activity of individual loans within the pool. The following table presents the recorded investment in PCI loans by class based on individual loan payment activity as of June 30, 2013 and December 31, 2012.


Credit exposure - by payment activity	Performing Loans		Non-Performing Loans		Total PCI Loans
	(in thousands)
June 30, 2013
Commercial and industrial	$	216,501	$	4,075	$	220,576
Commercial real estate		594,919		44,465		639,384
Construction		17,150		8,686		25,836
Residential mortgage		20,111		3,893		24,004
Consumer		40,310		1,295		41,605

Total	$	888,991	$	62,414	$	951,405


December 31, 2012
Commercial and industrial	$	292,163	$	6,437	$	298,600
Commercial real estate		715,812		50,081		765,893
Construction		17,967		9,546		27,513
Residential mortgage		22,173		4,288		26,461
Consumer		47,689		1,508		49,197

Total	$	1,095,804	$	71,860	$	1,167,664