LOANS (Note 5)

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


	December 31, 2013						December 31, 2012
	Non-PCI		PCI				Non-PCI		PCI
	Loans		Loans		Total		Loans		Loans		Total
	(in thousands)
Non-covered loans:
Commercial and industrial	$	1,820,136	$	174,948	$	1,995,084	$	1,832,743	$	252,083	$	2,084,826
Commercial real estate:
Commercial real estate		4,521,920		459,755		4,981,675		3,772,084		645,625		4,417,709
Construction		406,877		22,354		429,231		399,855		25,589		425,444

Total commercial real estate loans		4,928,797		482,109		5,410,906		4,171,939		671,214		4,843,153

Residential mortgage		2,485,239		14,726		2,499,965		2,445,627		16,802		2,462,429
Consumer:
Home equity		410,875		38,134		449,009		438,881		46,577		485,458
Automobile		901,399		—		901,399		786,528		—		786,528
Other consumer		214,898		186		215,084		179,417		314		179,731

Total consumer loans		1,527,172		38,320		1,565,492		1,404,826		46,891		1,451,717

Total non-covered loans		10,761,344		710,103		11,471,447		9,855,135		986,990		10,842,125

Covered loans:
Commercial and industrial		—		26,249		26,249		—		46,517		46,517
Commercial real estate		—		61,494		61,494		—		120,268		120,268
Construction		—		—		—		—		1,924		1,924
Residential mortgage		—		7,623		7,623		—		9,659		9,659
Consumer		—		799		799		—		2,306		2,306

Total covered loans		—		96,165		96,165		—		180,674		180,674

Total loans	$	10,761,344	$	806,268	$	11,567,612	$	9,855,135	$	1,167,664	$	11,022,799

Total non-covered loans are net of unearned discounts and deferred loan fees totaling $5.6 million and $3.4 million at December 31, 2013 and 2012, respectively. The outstanding balances (representing contractual balances owed to Valley) for non-covered PCI loans and covered loans totaled $796.1 million and $227.2 million at December 31, 2013, respectively, and $1.1 billion and $321.9 million at December 31, 2012, respectively.

Valley transferred $124.3 million of residential mortgage loans originated in 2012 from the loan portfolio to loans held for sale during the year ended December 31, 2012. Exclusive of such transfers, there were no sales of loans from the held for investment loan portfolio during the years ended December 31, 2013 and 2012.

Purchased Credit-Impaired Loans (Including Covered Loans)

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. See Note 1 for additional information.

The following table presents changes in the accretable yield for PCI loans for the years ended December 31, 2013 and 2012:


	2013			2012
	(in thousands)
Balance, beginning of period	$	169,309		$	66,724
Acquisitions		—			186,198
Accretion		(66,458	)		(83,613	)
Net increase in expected cash flows		120,948			—

Balance, end of period	$	223,799		$	169,309

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 88 percent of total PCI loans at December 31, 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 FDIC loss-share receivable for the years ended December 31, 2013 and 2012 were as follows:


	2013			2012
	(in thousands)
Balance, beginning of the period	$	44,996		$	74,390
Discount accretion of the present value at the acquisition dates		130			325
Effect of additional cash flows on covered loans (prospective recognition)		(10,465	)		(7,767	)
Decrease in the provision for losses on covered loans		(2,783	)		—
Other reimbursable expenses		4,691			5,467
Reimbursements from the FDIC		(3,812	)		(21,935	)
Other		—			(5,484	)

Balance, end of the period	$	32,757		$	44,996

The aggregate effects of changes in the FDIC loss-share receivable was a reduction in non-interest income of $8.4 million and $7.5 million for the years ended December 31, 2013 and 2012, respectively. The 2012 reductions in non-interest income included $5.5 million mainly related to the FDIC’s portion of the estimated losses on unused lines of credit assumed in the FDIC-assisted transactions, which had expired during the second quarter of 2012.

Related Party Loans

In the ordinary course of business, Valley has granted loans to certain directors, executive officers and their affiliates (collectively referred to as “related parties”). These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other unaffiliated persons and do not involve more than normal risk of collectability.

The following table summarizes the changes in the total amounts of loans and advances to the related parties during the year ended December 31, 2013:


	2013
	(in thousands)
Outstanding at beginning of year	$	232,300
New loans and advances		68,701
Repayments		(58,630	)

Outstanding at end of year	$	242,371

All loans to related parties are performing as of December 31, 2013.

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 $314.6 million and $307.0 million at December 31, 2013 and 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 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 December 31, 2013. Unsecured consumer loans totaled approximately $21.4 million and $44.0 million, including $8.3 million and $8.6 million of credit card loans, at December 31, 2013 and December 31, 2012, respectively.

Credit Quality

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


	Past Due and Non-Accrual Loans
	30-59 Days Past Due Loans		60-89 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)
December 31, 2013
Commercial and industrial	$	6,398	$	571	$	233	$	21,029	$	28,231	$	1,791,905	$	1,820,136
Commercial real estate:
Commercial real estate		9,142		2,442		7,591		43,934		63,109		4,458,811		4,521,920
Construction		1,186		4,577		—		8,116		13,879		392,998		406,877

Total commercial real estate loans		10,328		7,019		7,591		52,050		76,988		4,851,809		4,928,797

Residential mortgage		6,595		1,939		1,549		19,949		30,032		2,455,207		2,485,239
Consumer loans:
Home equity		495		241		—		1,866		2,602		408,273		410,875
Automobile		2,957		489		85		169		3,700		897,699		901,399
Other consumer		340		54		33		—		427		214,471		214,898

Total consumer loans		3,792		784		118		2,035		6,729		1,520,443		1,527,172

Total	$	27,113	$	10,313	$	9,491	$	95,063	$	141,980	$	10,619,364	$	10,761,344


	Past Due and Non-Accrual Loans
	30-59 Days Past Due Loans		60-89 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)
December 31, 2012
Commercial and industrial	$	3,397	$	181	$	283	$	22,424	$	26,285	$	1,806,458	$	1,832,743
Commercial real estate:
Commercial real estate		11,214		2,031		2,950		58,625		74,820		3,697,264		3,772,084
Construction		1,793		4,892		2,575		14,805		24,065		375,790		399,855

Total commercial real estate loans		13,007		6,923		5,525		73,430		98,885		4,073,054		4,171,939

Residential mortgage		13,730		5,221		2,356		32,623		53,930		2,391,697		2,445,627
Consumer loans:
Home equity		391		311		—		2,398		3,100		435,781		438,881
Automobile		4,519		924		469		305		6,217		780,311		786,528
Other consumer		977		105		32		628		1,742		177,675		179,417

Total consumer loans		5,887		1,340		501		3,331		11,059		1,393,767		1,404,826

Total	$	36,021	$	13,665	$	8,665	$	131,808	$	190,159	$	9,664,976	$	9,855,135

If interest on non-accrual loans had been accrued in accordance with the original contractual terms, such interest income would have amounted to approximately $4.8 million, $7.2 million, and $6.9 million for the years ended December 31, 2013, 2012, and 2011, respectively; none of these amounts were included in interest income during these periods. Interest income recognized on a cash basis for loans classified as non-accrual totaled $1.3 million and $590 thousand for the years ended December 31, 2013 and 2012, respectively.

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 restructurings, 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 December 31, 2013 and 2012:


	Recorded Investment With No Related Allowance		Recorded Investment With Related Allowance		Total Recorded Investment		Unpaid Contractual Principal Balance		Related Allowance
	(in thousands)
December 31, 2013

Commercial and industrial	$	3,806	$	43,497	$	47,303	$	59,891	$	11,032
Commercial real estate:
Commercial real estate		46,872		47,973		94,845		110,227		7,874
Construction		11,771		8,022		19,793		21,478		802

Total commercial real estate loans		58,643		55,995		114,638		131,705		8,676

Residential mortgage		10,082		18,231		28,313		32,664		3,735
Consumer loans:
Home equity		1,010		84		1,094		1,211		82

Total consumer loans		1,010		84		1,094		1,211		82

Total	$	73,541	$	117,807	$	191,348	$	225,471	$	23,525

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 years ended December 31, 2013, 2012, and 2011:


	2013				2012				2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Commercial and industrial	$	55,814	$	1,686	$	47,940	$	1,463	$	43,095	$	1,457
Commercial real estate:
Commercial real estate		110,447		2,946		101,972		2,640		76,542		3,043
Construction		20,752		252		21,421		270		31,897		1,141

Total commercial real estate loans		131,199		3,198		123,393		2,910		108,439		4,184

Residential mortgage		29,059		996		31,620		716		19,015		706
Consumer loans:
Home equity		1,191		65		943		14		109		3

Total consumer loans		1,191		65		943		14		109		3

Total	$	217,263	$	5,945	$	203,896	$	5,103	$	170,658	$	6,350

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 $107.0 million and $105.4 million as of December 31, 2013 and 2012, respectively. Non-performing TDRs totaled $48.4 and $41.8 million as of December 31, 2013 and 2012, respectively. Valley classified residential mortgage and home equity loans as non-performing TDRs because each borrower’s obligation was discharged in bankruptcy and the borrower has not re-affirmed the debt. All of these loans were deemed TDRs and collateral dependent impaired loans due to regulatory guidance issued in 2012. To the extent that the recorded principal remains collectible, interest on such loans may be recognized on a cash basis.

The following table presents non-PCI loans by loan class modified as TDRs during the years ended December 31, 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 December 31, 2013 and 2012, respectively.


			Pre-Modification		Post-Modification
Troubled Debt	Number of		Outstanding		Outstanding
Restructurings	Contracts		Recorded Investment		Recorded Investment
			($ in thousands)
December 31, 2013
Commercial and industrial		16	$	27,415	$	22,718
Commercial real estate:
Commercial real estate		13		13,788		13,818
Construction		8		16,682		18,133

Total commercial real estate		21		30,470		31,951
Residential mortgage		38		8,661		7,681
Consumer		7		500		445

Total		82	$	67,046	$	62,795

December 31, 2012
Commercial and industrial		20	$	40,785	$	36,066
Commercial real estate:
Commercial real estate		18		40,499		39,535
Construction		5		7,092		4,885

Total commercial real estate		23		47,591		44,420
Residential mortgage		43		10,133		9,125
Consumer		14		985		737

Total		100	$	99,494	$	90,348

The majority of the TDR concessions within the commercial and industrial loan and commercial real estate loan portfolios made during 2013 and 2012 involved an extension of the loan term and/or an interest rate reduction, and personal bankruptcies (defined as legal concessions in OCC guidance released in 2012) within the residential mortgage and consumer loan portfolios. The TDRs presented in the table above had allocated specific reserves for loan losses that totaled $7.9 million and $15.0 million at December 31, 2013 and 2012, respectively. These specific reserves are included in the allowance for loan losses for loans individually evaluated for impairment disclosed in Note 6.

During 2013, one TDR within the commercial and industrial loan category resulted in a $1.1 million partial charge-off. Additionally, two commercial loans totaling $6.1 million with one borrower that were modified as TDRs during 2013 were fully charged-off during 2013. There were no charge-offs resulting from loans modified as TDRs during 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 year ended December 31, 2013:


	December 31, 2013
Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts		Recorded Investment
	($ in thousands)
Commercial and industrial		1	$	576
Construction		3		6,325
Residential mortgage		2		643
Home equity		1		74

Total		7	$	7,618

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 to be 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 by class of loans (excluding PCI loans) based on the most recent analysis performed at December 31, 2013 and 2012.


Credit exposure— by internally assigned risk rating			Special						Total Non-PCI
	Pass		Mention		Substandard		Doubtful		Loans
	(in thousands)
December 31, 2013
Commercial and industrial	$	1,689,613	$	56,007	$	74,501	$	15	$	1,820,136
Commercial real estate		4,348,642		48,159		125,119		—		4,521,920
Construction		373,480		11,697		15,720		5,980		406,877

Total	$	6,411,735	$	115,863	$	215,340	$	5,995	$	6,748,933

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 December 31, 2013 and 2012:


Credit exposure— by payment activity	Performing Loans		Non-Performing Loans		Total Non-PCI Loans
	(in thousands)
December 31, 2013
Residential mortgage	$	2,465,290	$	19,949	$	2,485,239
Home equity		409,009		1,866		410,875
Automobile		901,230		169		901,399
Other consumer		214,898		—		214,898

Total	$	3,990,427	$	21,984	$	4,012,411

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 December 31, 2013 and 2012:


Credit exposure—	Performing		Non-Performing		Total
by payment activity	Loans		Loans		PCI Loans
	(in thousands)
December 31, 2013
Commercial and industrial	$	185,185	$	16,012	$	201,197
Commercial real estate		498,184		23,065		521,249
Construction		16,791		5,563		22,354
Residential mortgage		21,381		968		22,349
Consumer		37,980		1,139		39,119

Total	$	759,521	$	46,747	$	806,268

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