What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 405 added, 162 removed, 1091 unchanged (34% of the section changed)

9 unchanged sentences

Equity securities 33,870 29,378

Trading debt securities 21,216 —

Available for sale debt securities 1,075,538 1,339,473

Held to maturity debt securities (net of allowance for credit losses of $ 1,070 at March 31, 2021 and $ 1,428 at December 31, 2020)

Held to maturity debt securities (net of allowance for credit losses of $ 1,040 at June 30, 2021 and $ 1,428 at December 31, 2020)

2,532,772 2,171,583

26 unchanged sentences

50,000,000 authorized shares:

Series A ( 4,600,000 shares issued at March 31, 2021 and December 31, 2020)

Series A ( 4,600,000 shares issued at June 30, 2021 and December 31, 2020)

111,590 111,590

Series B ( 4,000,000 shares issued at March 31, 2021 and December 31, 2020)

Series B ( 4,000,000 shares issued at June 30, 2021 and December 31, 2020)

98,101 98,101

Common stock ( no par value, authorized 650,000,000 shares;

issued 405,801,304 shares at March 31, 2021 and 403,881,488 shares at December 31, 2020)

issued 406,090,983 shares at June 30, 2021 and 403,881,488 shares at December 31, 2020)

142,550 141,746

2 unchanged sentences

Accumulated other comprehensive loss ( 17,735 ) ( 7,718 )

Treasury stock, at cost ( 3,766 common shares at March 31, 2021 and 22,490 common shares at December 31, 2020)

Treasury stock, at cost ( 7,193 common shares at June 30, 2021 and 22,490 common shares at December 31, 2020)

( 103 ) ( 225 )

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Interest Income

21 unchanged sentences

Service charges on deposit accounts 5,083 3,557 10,186 9,237

Losses on securities transactions, net ( 118 ) ( 40 )

Gains (losses) on securities transactions, net 375 ( 41 ) 476 ( 81 )

Fees from loan servicing 3,187 2,227 6,086 4,975

Gains on sales of loans, net 10,061 8,337 13,574 12,887

(Losses) gains on sales of assets, net ( 196 ) 121

Gains (losses) on sales of assets, net 232 ( 299 ) 36 ( 178 )

Bank owned life insurance 2,475 5,823 4,806 8,965

7 unchanged sentences

Professional and legal fees 7,486 7,797 13,758 13,884

Loss on extinguishment of debt 8,406 — 8,406 —

Amortization of tax credit investments 2,972 3,416 5,716 6,644

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Earnings Per Common Share:

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net income $ 120,512 $ 95,601 $ 236,222 $ 182,869

Other comprehensive (loss) income, net of tax:

Other comprehensive income, net of tax:

Unrealized gains and losses on available for sale securities

3 unchanged sentences

Unrealized gains and losses on derivatives (cash flow hedges)

Net gains (losses) on derivatives arising during the period 174 ( 1,057 )

Less reclassification adjustment for net losses included in net income 651 438

Net (losses) gains on derivatives arising during the period ( 147 ) ( 1,280 ) 27 ( 2,337 )

Less reclassification adjustment for net losses (gains) included in net income 534 ( 308 ) 1,185 130

Total 387 ( 1,588 ) 1,212 ( 2,207 )

5 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the Three Months Ended March 31, 2021

For the Six Months Ended June 30, 2021

Common Stock Accumulated

19 unchanged sentences

Balance - March 31, 2021 209,691 405,798 142,435 3,651,948 672,651 ( 17,005 ) ( 50 ) 4,659,670

For the Three Months Ended March 31, 2020

Net income — — — — 120,512 — — 120,512

Other comprehensive loss, net of tax — — — — — ( 730 ) — ( 730 )

Cash dividends declared:

Preferred stock, Series A, $ 0.39 per share

— — — — ( 1,797 ) — — ( 1,797 )

Preferred stock, Series B, $ 0.34 per share

— — — — ( 1,375 ) — — ( 1,375 )

Common stock, $ 0.11 per share

— — — — ( 45,093 ) — — ( 45,093 )

Effect of stock incentive plan, net

— 286 115 6,688 ( 130 ) — ( 53 ) 6,620

Balance - June 30, 2021 $ 209,691 406,084 $ 142,550 $ 3,658,636 $ 744,768 $ ( 17,735 ) $ ( 103 ) $ 4,737,807

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) (continued)

For the Six Months Ended June 30, 2020

Common Stock Accumulated

20 unchanged sentences

Balance - March 31, 2020 209,691 403,744 141,613 3,624,036 452,424 ( 6,566 ) ( 200 ) 4,420,998

Net income — — — — 95,601 — — 95,601

Other comprehensive income, net of tax — — — — — 1,628 — 1,628

Cash dividends declared:

Preferred stock, Series A, $ 0.39 per share

— — — — ( 1,797 ) — — ( 1,797 )

Preferred stock, Series B, $ 0.34 per share

— — — — ( 1,375 ) — — ( 1,375 )

Common stock, $ 0.11 per share

— — — — ( 44,750 ) — — ( 44,750 )

Effect of stock incentive plan, net — 52 54 4,756 ( 592 ) — ( 35 ) 4,183

Balance - June 30, 2020 $ 209,691 403,796 $ 141,667 $ 3,628,792 $ 499,511 $ ( 4,938 ) $ ( 235 ) $ 4,474,488

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

6 unchanged sentences

Amortization of other intangible assets 11,455 12,151

Losses on securities transactions, net 118 40

(Gains) losses on securities transactions, net ( 476 ) 81

Proceeds from sales of loans held for sale 690,844 408,785

1 unchanged sentence

Originations of loans held for sale ( 541,627 ) ( 443,684 )

Losses (gains) on sales of assets, net 196 ( 121 )

(Gains) losses on sales of assets, net ( 36 ) 178

Loss on extinguishment of debt 8,406 —

Net change in:

Trading debt securities ( 21,216 ) —

Cash surrender value of bank owned life insurance ( 4,806 ) ( 8,965 )

22 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from financing activities:

31 unchanged sentences

Certain prior period amounts have been reclassified to conform to the current presentation.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly Valley’s financial position, results of operations, changes in shareholders' equity and cash flows at March 31, 2021 and for all periods presented have been made.

The results of operations for the three months ended on March 31, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year or any subsequent interim period.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly Valley’s financial position, results of operations, changes in shareholders' equity and cash flows at June 30, 2021 and for all periods presented have been made.

The results of operations for the three and six months ended on June 30, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year or any subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

2 unchanged sentences

Correction of an Immaterial Error.

Valley's previously reported consolidated statement of cash flows for the three months ended March 31, 2020 was revised to reflect an adjustment for an intercompany account that was not properly eliminated in consolidation.

The adjustment resulted in a decrease in the “Net change in deposits” line item from a decrease of $ 168.8 million, to a decrease of $ 200.0 million and a corresponding decrease in the “Net change in cash and cash equivalents” line item, from an increase of $ 570.3 million to an increase of $ 539.1 million.

Valley's previously reported consolidated statement of cash flows for the six months ended June 30, 2020 was revised to reflect an adjustment for an intercompany account that was not properly eliminated in consolidation.

The adjustment resulted in a $ 90.8 million decrease in “Net change in deposits” line item to a net increase of $ 2.2 billion.

The corresponding decrease in the “Net change in cash and cash equivalents” line item resulted in a change from a net increase of $ 1.5 billion to a net increase of $ 1.4 billion.

The effect of these revisions was immaterial to the interim period.

9 unchanged sentences

Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date.

The Westchester Bank Holding Corporation.

On June 29, 2021, Valley announced that it will acquire The Westchester Bank Holding Corporation (“Westchester”) and its principal subsidiary, The Westchester Bank which is headquartered in White Plains, New York.

Westchester has approximately $ 1.3 billion in assets, $ 908 million in loans, $ 1.1 billion in deposits, and maintains a seven branch network in Westchester County, New York.

The common shareholders of Westchester will receive 229.645 shares of Valley common stock for each Westchester share they own.

Based on Valley’s closing stock price on June 28, 2021, Westchester’s stockholders will receive approximately $ 210 million in Valley common stock.

Existing Westchester options will be cashed out for approximately $ 10 million in cash.The acquisition is expected to close in the fourth quarter 2021, subject to standard regulatory approvals, approval of Westchester stockholders, as well as other customary conditions.

Earnings Per Common Share

The following table shows the calculation of both basic and diluted earnings per common share for the three months ended March 31, 2021 and 2020:

The following table shows the calculation of both basic and diluted earnings per common share for the three and six months ended June 30, 2021 and 2020:

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(in thousands, except for share data)

10 unchanged sentences

Common stock options with exercise prices that exceed the average market price per share of Valley’s common stock during the periods presented may have an anti-dilutive effect on the diluted earnings per common share calculation and therefore are excluded from the diluted earnings per share calculation along with restricted stock units.

Potential anti-dilutive weighted common shares were immaterial for the three months ended March 31, 2021 as compared to 1.9 million shares for the three months ended March 31, 2020.

Potential anti-dilutive weighted common shares were immaterial for the three and six months ended June 30, 2021, respectively, as compared to 2.7 million and 2.3 million shares for the three and six months ended June 30, 2020, respectively.

Accumulated Other Comprehensive Loss

The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the three months ended March 31, 2021:

The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the three and six months ended June 30, 2021:

Components of Accumulated Other Comprehensive Loss Total

7 unchanged sentences

(in thousands)

Balance at March 31, 2021 $ 22,898 $ ( 3,081 ) $ ( 36,822 ) $ ( 17,005 )

Other comprehensive loss before reclassification ( 1,471 ) ( 147 ) — ( 1,618 )

Amounts reclassified from other comprehensive income

76 534 278 888

Other comprehensive (loss) income, net

( 1,395 ) 387 278 ( 730 )

Balance at June 30, 2021 $ 21,503 $ ( 2,694 ) $ ( 36,544 ) $ ( 17,735 )

Components of Accumulated Other Comprehensive Loss Total

Comprehensive

Unrealized Gains

and Losses on

Available for Sale

(AFS) Securities Unrealized Gains

and Losses on

Derivatives Defined

(in thousands)

Balance at December 31, 2020 $ 33,290 $ ( 3,906 ) $ ( 37,102 ) $ ( 7,718 )

4 unchanged sentences

( 11,787 ) 1,212 558 ( 10,017 )

Balance at March 31, 2021 $ 22,898 $ ( 3,081 ) $ ( 36,822 ) $ ( 17,005 )

The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three months ended March 31, 2021 and 2020:

Balance at June 30, 2021 $ 21,503 $ ( 2,694 ) $ ( 36,544 ) $ ( 17,735 )

The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three and six months ended June 30, 2021 and 2020:

Amounts Reclassified from

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended June 30,

Components of Accumulated Other Comprehensive Loss 2021 2020 2021 2020 Income Statement Line Item

(in thousands)

Unrealized losses on AFS securities before tax $ ( 59 ) $ ( 40 ) Losses on securities transactions, net

Unrealized losses on AFS securities before tax $ ( 103 ) $ ( 41 ) $ ( 162 ) $ ( 81 ) Gains (losses) on securities transactions, net

Tax effect 27 10 42 23

Total net of tax ( 76 ) ( 31 ) ( 120 ) ( 58 )

Unrealized losses on derivatives (cash flow hedges) before tax ( 915 ) ( 615 ) Interest expense

Unrealized (losses) gains on derivatives (cash flow hedges) before tax ( 749 ) 438 ( 1,664 ) ( 177 ) Interest expense

Tax effect 215 ( 130 ) 479 47

20 unchanged sentences

2021-01 is not expected to have a significant impact on Valley’s consolidated financial statements.

2021-05 "Lessors – Certain Leases with Variable Lease Payments".

2021-05 updates guidance in Accounting Standards Codification (ASC) 842, Leases and requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease at lease commencement if:

(i) the lease would have been classified as a sales-type lease or direct financing lease under ASC 842 classification criteria;

and (ii) the lessor would have recognized a selling loss at lease commencement.

2021-05 is effective for Valley for fiscal years and interim periods beginning after December 15, 2021, with early adoption permitted.

2021-05 is not expected to have a significant impact on Valley’s consolidated financial statements.

Fair Value Measurement of Assets and Liabilities

6 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring and Non-Recurring Basis

The following tables present the assets and liabilities that are measured at fair value on a recurring and non-recurring basis by level within the fair value hierarchy as reported on the consolidated statements of financial condition at March 31, 2021 and December 31, 2020.

The assets presented under “non-recurring fair value measurements” in the tables below are not measured at fair value on an ongoing basis but are subject to fair value adjustments under certain circumstances (e.g., when an impairment loss is recognized).

11 unchanged sentences

$ 30,357 $ 19,604 $ — $ —

Available for sale:

Trading debt securities 21,216 — 21,216 —

Available for sale debt securities:

Treasury securities 51,010 51,010 — —

31 unchanged sentences

$ 26,379 $ 18,600 $ — $ —

Available for sale:

Available for sale debt securities:

Treasury securities 51,393 51,393 — —

17 unchanged sentences

Total $ 58,218 $ — $ — $ 58,218

(1) Includes equity securities measured at net asset value (NAV) per share (or its equivalent) as a practical expedient totaling $ 10.0 million and $ 7.8 million at March 31, 2021 and December 31, 2020, respectively.

(1) Includes equity securities measured at net asset value (NAV) per share (or its equivalent) as a practical expedient totaling $ 10.8 million and $ 7.8 million at June 30, 2021 and December 31, 2020, respectively.

These securities have not been classified in the fair value hierarchy.

(2) Represents residential mortgage loans held for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately $ 226.6 million and $ 286.4 million at March 31, 2021 and December 31, 2020, respectively.

(2) Represents residential mortgage loans held for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately $ 154.2 million and $ 286.4 million at June 30, 2021 and December 31, 2020, respectively.

(3) Derivative financial instruments are included in this categor y.

5 unchanged sentences

The fair value of equity securities largely consists of a publicly traded mutual fund, a Community Reinvestment Act (CRA) investment fund that is carried at quoted prices in active markets and privately held CRA funds measured at NAV.

Trading debt securities.

The fair value of trading debt securities, consisting of municipal bonds, is reported at fair value utilizing Level 2 inputs.

The prices for these investments are derived from market quotations and matrix pricing obtained through an independent pricing service.

Available for sale debt securities.

1 unchanged sentence

The majority of other investment securities are reported at fair value utilizing Level 2 inputs.

The prices for these instruments are obtained through an independent pricing service or dealer market participants with whom Valley

has historically transacted both purchases and sales of investment securities.

The prices for these instruments are obtained through an independent pricing service or dealer market participants with whom Valley has historically transacted both purchases and sales of investment securities.

Prices obtained from these sources include prices derived from market quotations and matrix pricing.

3 unchanged sentences

In addition, Valley reviews the volume and level of activity for all available for sale securities and attempts to identify transactions which may not be orderly or reflective of a significant level of activity and volume.

In calculating the fair value of one impaired special revenue bond (within obligations of states and political subdivisions in the table above) under Level 3, Valley prepared its best estimate of the present value of the cash flows to determine an internal price estimate.

In determining the internal price, Valley utilized recent financial information and developments provided by the issuer, as well as other unobservable inputs which reflect Valley’s own assumptions about the inputs that market participants would use in pricing of the defaulted security.

A quoted price received from an independent pricing service was weighted with the internal price estimate to determine the fair value of the instrument at March 31, 2021 and December 31, 2020.

Loans held for sale.

2 unchanged sentences

The market prices represent a delivery price, which reflects the underlying price each institution would pay Valley for an immediate sale of an aggregate pool of mortgages.

Non-performance risk did not materially impact the fair value of mortgage loans held for sale at March 31, 2021 and December 31, 2020 based on the short duration these assets were held, and the credit quality of these loans.

Non-performance risk did not materially impact the fair value of mortgage loans held for sale at June 30, 2021 and December 31, 2020 based on the short duration these assets were held, and the credit quality of these loans.

Derivatives are reported at fair value utilizing Level 2 inputs.

The fair values of Valley’s derivatives are determined using third-party prices that are based on discounted cash flow analysis using observed market inputs, such as the LIBOR, Overnight Index Swap and Secured Overnight Financing Rate (SOFR) curves for all cleared derivatives.

The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at March 31, 2021 and December 31, 2020), is determined based on the current market prices for similar instruments.

The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at June 30, 2021 and December 31, 2020), is determined based on the current market prices for similar instruments.

The fair values of most of the derivatives incorporate credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, to account for potential nonperformance risk of Valley and its counterparties.

The credit valuation adjustments were not significant to the overall valuation of Valley’s derivatives at March 31, 2021 and December 31, 2020.

The credit valuation adjustments were not significant to the overall valuation of Valley’s derivatives at June 30, 2021 and December 31, 2020.

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

5 unchanged sentences

Certain real estate appraisals may be discounted based on specific market data by location and property type.

At March 31, 2021, collateral dependent loans were individually re-measured and reported at fair value through direct loan charge-offs to the allowance for loan losses based on the fair value of the underlying collateral.

At March 31, 2021, collateral dependent loans, primarily consisting of taxi medallion loans, with a total amortized cost of $ 111.5 million were reduced by specific allowance for loan losses allocations totaling $ 72.6 million to a reported total net carrying amount of $ 38.9 million.

At June 30, 2021, collateral dependent loans were individually re-measured and reported at fair value through direct loan charge-offs to the allowance for loan losses based on the fair value of the underlying collateral.

At June 30, 2021, collateral dependent loans, mostly consisting of taxi medallion loans, with a total amortized cost of $ 104.3 million were reduced by specific allowance for loan losses allocations totaling $ 64.6 million to a reported total net carrying amount of $ 39.7 million.

Loan servicing rights.

Fair values for each risk-stratified group of loan servicing rights are calculated using a fair value model from a third-party vendor that requires inputs that are both significant to the fair value measurement and unobservable (Level 3).

The fair value model is based on various assumptions, including but not limited to, prepayment speeds, internal rate of return (discount rate), servicing cost, ancillary income, float rate, tax rate, and inflation.

The fair value model is based on various assumptions, including but not limited to,

prepayment speeds, internal rate of return (discount rate), servicing cost, ancillary income, float rate, tax rate, and inflation.

The prepayment speed and the discount rate are considered two of the most significant inputs in the model.

At March 31, 2021, the fair value model used a blended prepayment speed (stated as constant prepayment rates) of 16.9 percent and a discount rate of 9.6 percent for the valuation of the loan servicing rights.

At June 30, 2021, the fair value model used a blended prepayment speed (stated as constant prepayment rates) of 15.4 percent and a discount rate of 9.1 percent for the valuation of the loan servicing rights.

A significant degree of judgment is involved in valuing the loan servicing rights using Level 3 inputs.

1 unchanged sentence

Impairment charges are recognized on loan servicing rights when the amortized cost of a risk-stratified group of loan servicing rights exceeds the estimated fair value.

At March 31, 2021, certain loan servicing rights were re-measured at fair value totaling $ 682 thousand.

At June 30, 2021, certain loan servicing rights were re-measured at fair value totaling $ 158 thousand.

See Note 8 for additional information.

3 unchanged sentences

If further declines in the estimated fair value of the asset occur, an asset is re-measured and reported at fair value through a write-down recorded in non-interest expense.

The adjustments to the appraisals of foreclosed assets ranged from 2.9 percent to 18 percent at March 31, 2021.

The adjustments to the appraisals of foreclosed assets ranged from 1.3 percent to 7.1 percent at June 30, 2021.

Other Fair Value Disclosures

8 unchanged sentences

In addition, the tax implications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at March 31, 2021 and December 31, 2020 were as follows:

Hierarchy March 31, 2021 December 31, 2020

The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at June 30, 2021 and December 31, 2020 were as follows:

Hierarchy June 30, 2021 December 31, 2020

Amount Fair Value Carrying

37 unchanged sentences

Equity Securities

Equity securities carried at fair value totaled $ 33.0 million and $ 29.4 million at March 31, 2021 and December 31, 2020, respectively.

At March 31, 2021, Valley's equity securities consisted of one publicly traded money market mutual fund, CRA investments both publicly traded and privately held and, to a lesser extent, equity securities without readily determinable fair values.

Equity securities carried at fair value totaled $ 33.9 million and $ 29.4 million at June 30, 2021 and December 31, 2020, respectively.

At June 30, 2021, Valley's equity securities consisted of one publicly traded money market mutual fund, CRA investments both publicly traded and privately held and, to a lesser extent, equity securities without readily determinable fair values.

Trading Debt Securities

The fair value of trading securities, consisting of municipal bonds, totaled $ 21.2 million at June 30, 2021.

Net trading gains are included in net gains and losses on securities transactions within non-interest income.

Net trading gains totaled $ 489 thousand and $ 707 thousand for the three and six months ended June 30, 2021, respectively.

Available for Sale Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of available for sale debt securities at March 31, 2021 and December 31, 2020 were as follows:

The amortized cost, gross unrealized gains and losses and fair value of available for sale debt securities at June 30, 2021 and December 31, 2020 were as follows:

Losses Fair Value

(in thousands)

March 31, 2021

June 30, 2021

Treasury securities $ 50,023 $ 987 $ — $ 51,010

17 unchanged sentences

Total $ 1,293,506 $ 46,886 $ ( 919 ) $ 1,339,473

The age of unrealized losses and fair value of the related available for sale debt securities at March 31, 2021 and December 31, 2020 were as follows:

The age of unrealized losses and fair value of the related available for sale debt securities at June 30, 2021 and December 31, 2020 were as follows:

Twelve Months More than

4 unchanged sentences

(in thousands)

March 31, 2021

June 30, 2021

government agency securities $ — $ — $ 1,396 $ ( 6 ) $ 1,396 $ ( 6 )

14 unchanged sentences

Total $ 60,712 $ ( 601 ) $ 30,400 $ ( 318 ) $ 91,112 $ ( 919 )

Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was 61 and 58 at March 31, 2021 and December 31, 2020, respectively.

As of March 31, 2021, the fair value of available for sale debt securities that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $ 691.4 million.

The contractual maturities of available for sale debt securities at March 31, 2021 are set forth in the following table.

Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was 67 and 58 at June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021, the fair value of available for sale debt securities that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $ 736.2 million.

The contractual maturities of available for sale debt securities at June 30, 2021 are set forth in the following table.

Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties.

Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.

March 31, 2021

June 30, 2021

(in thousands)

6 unchanged sentences

Actual maturities of available for sale debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty.

The weighted average remaining expected life for residential mortgage-backed securities available for sale was 3.4 years at March 31, 2021.

The weighted average remaining expected life for residential mortgage-backed securities available for sale was 4.4 years at June 30, 2021.

Impairment Analysis of Available For Sale Debt Securities

3 unchanged sentences

Available for sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis.

Val ley has evaluated available for sale debt securities that are in an unrealized loss position as of March 31, 2021 included in the table above and has determined that the declines in fair value are mainly attributable to market volatility, not credit quality or other factors.

Based on a comparison of the present value of expected cash flows to the amortized cost, management recognized no impairment during the three months ended March 31, 2021 and, as a result, there was no allowance for credit losses for available for sale debt securities at March 31, 2021.

Val ley has evaluated available for sale debt securities that are in an unrealized loss position as of June 30, 2021 included in the table above and has determined that the declines in fair value are mainly attributable to market volatility, not credit quality or other factors.

Based on a comparison of the present value of expected cash flows to the amortized cost, management recognized no impairment during the three and six months ended June 30, 2021 and 2020.

There was no allowance for credit losses for available for sale debt securities at June 30, 2021 and December 31, 2020.

Held to Maturity Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of debt securities held to maturity at March 31, 2021 and December 31, 2020 were as follows:

The amortized cost, gross unrealized gains and losses and fair value of debt securities held to maturity at June 30, 2021 and December 31, 2020 were as follows:

Losses Fair Value

(in thousands)

March 31, 2021

June 30, 2021

Treasury securities $ 67,874 $ 5,701 $ — $ 73,575

19 unchanged sentences

Total $ 2,173,011 $ 62,326 $ ( 7,725 ) $ 2,227,612

The age of unrealized losses and fair value of related debt securities held to maturity at March 31, 2021 and December 31, 2020 were as follows:

The age of unrealized losses and fair value of related debt securities held to maturity at June 30, 2021 and December 31, 2020 were as follows:

Twelve Months More than

4 unchanged sentences

(in thousands)

March 31, 2021

June 30, 2021

Obligations of states and political subdivisions:

17 unchanged sentences

Total $ 37,894 $ ( 351 ) $ 31,100 $ ( 7,374 ) $ 68,994 $ ( 7,725 )

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 39 and 13 at March 31, 2021 and December 31, 2020, respectively.

As of March 31, 2021, the fair value of debt securities held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $ 1.5 billion.

The contractual maturities of investments in debt securities held to maturity at March 31, 2021 are set forth in the table below.

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 44 and 13 at June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021, the fair value of debt securities held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $ 1.6 billion.

The contractual maturities of investments in debt securities held to maturity at June 30, 2021 are set forth in the table below.

Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties.

Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.

March 31, 2021

June 30, 2021

(in thousands)

6 unchanged sentences

Actual maturities of held to maturity debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty.

The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was 5.8 years at March 31, 2021.

The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was 6.0 years at June 30, 2021.

Credit Quality Indicators

Valley monitors the credit quality of the held to maturity debt securities through the use of the most current credit ratings from external rating agencies.

The following table summarizes the amortized cost of held to maturity debt securities by external credit rating at March 31, 2021 and December 31, 2020.

The following table summarizes the amortized cost of held to maturity debt securities by external credit rating at June 30, 2021 and December 31, 2020.

AAA/AA/A Rated BBB rated Non-investment grade rated Non-rated Total

(in thousands)

March 31, 2021

June 30, 2021

Treasury securities $ 67,874 $ — $ — $ — $ 67,874

22 unchanged sentences

Obligations of states and political subdivisions include municipal bonds and revenue bonds issued by various municipal corporations.

At March 31, 2021, most of the obligations of states and political subdivisions were rated investment grade and a large portion of the "non-rated" category included TEMS securities secured by Ginnie Mae securities.

At June 30, 2021, most of the obligations of states and political subdivisions were rated investment grade and a large portion of the "non-rated" category included TEMS securities secured by Ginnie Mae securities.

Trust preferred securities consist of non-rated single-issuer securities, issued by bank holding companies.

5 unchanged sentences

government agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and collateralized municipal bonds called TEMS.

At March 31, 2021, held to maturity debt securities were carried net of allowance for credit losses totaling $ 1.1 million and $ 1.4 million at March 31, 2021 and December 31, 2020, respectively.

Valley recorded a credit

(negative) provision for credit losses of $ 358 thousand for the three months ended March 31, 2021 and a provision for credit losses of $ 759 thousand for the three months ended March 31, 2020.

There wer e no n et charge-offs of debt securities in the respective periods.

At June 30, 2021, held to maturity debt securities were carried net of allowance for credit losses totaling $ 1.0 million and $ 1.4 million at June 30, 2021 and December 31, 2020, respectively.

There were no net charge-offs of held to maturity debt securities for the three and six months ended June 30, 2021 and 2020.

Loans and Allowance for Credit Losses for Loans

The detail of the loan portfolio as of March 31, 2021 and December 31, 2020 was as follows:

March 31, 2021 December 31, 2020

The detail of the loan portfolio as of June 30, 2021 and December 31, 2020 was as follows:

June 30, 2021 December 31, 2020

(in thousands)

13 unchanged sentences

Total loans $ 32,457,454 $ 32,217,112

* Represents SBA Paycheck Protection Program (PPP) loans, net of unearned fees totaling $ 57.2 million and $ 43.2 million at March 31, 2021 and December 31, 2020, respectively.

Total loans includes net unearned discounts and deferred loan fees of $ 108.6 million and $ 95.8 million at March 31, 2021 and December 31, 2020, respectively.

Net unearned discounts and deferred loan fees include the non-credit discount on purchased credit deterioration (PCD) loans and net unearned fees related to PPP loans at March 31, 2021 and December 31, 2020.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 92.4 million and $ 90.2 million at March 31, 2021 and December 31, 2020, respectively, and is presented separately in the consolidated statements of financial condition .

Valley transferred and sold approximately $ 30.0 million of residential mortgage loans from the loan portfolio to loans held for sale during the three months ended March 31, 2020.

Excluding the loan transfers, there were no other sales of loans from the held for investment portfolio during the three months ended March 31, 2021 and 2020.

* Represents SBA Paycheck Protection Program (PPP) loans, net of unearned fees totaling $ 40.9 million and $ 43.2 million at June 30, 2021 and December 31, 2020, respectively.

Total loans includes net unearned discounts and deferred loan fees of $ 86.1 million and $ 95.8 million at June 30, 2021 and December 31, 2020, respectively.

Net unearned discounts and deferred loan fees include the non-credit discount on purchased credit deterioration (PCD) loans and net unearned fees related to PPP loans at June 30, 2021 and December 31, 2020.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 84.1 million and $ 90.2 million at June 30, 2021 and December 31, 2020, respectively, and is presented separately in the consolidated statements of financial condition .

Valley transferred and sold approximately $ 30.0 million of residential mortgage loans from the loan portfolio to loans held for sale during the six months ended June 30, 2020 .

Excluding the loan transfers, there were no other material sales of loans from the held for investment portfolio during the three and six months ended June 30, 2021 and 2020.

Credit Risk Management

7 unchanged sentences

Credit Quality

The following table presents past due, current and non-accrual loans without an allowance for credit losses by loan portfolio class at March 31, 2021 and December 31, 2020:

The following table presents past due, current and non-accrual loans without an allowance for credit losses by loan portfolio class at June 30, 2021 and December 31, 2020:

Past Due and Non-Accrual Loans

6 unchanged sentences

(in thousands)

March 31, 2021

June 30, 2021

Commercial and industrial

41 unchanged sentences

Risk ratings are updated any time the situation warrants.

The following table presents the internal loan classification risk by loan portfolio class by origination year based on the most recent analysis performed at March 31, 2021 and December 31, 2020:

The following table presents the internal loan classification risk by loan portfolio class by origination year based on the most recent analysis performed at June 30, 2021 and December 31, 2020:

Amortized Cost Basis by Origination Year

March 31, 2021 2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

June 30, 2021 2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

(in thousands)

35 unchanged sentences

For residential mortgages, automobile, home equity and other consumer loan portfolio classes, 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 amortized cost in those loan classes based on payment activity by origination year as of March 31, 2021 and December 31, 2020.

The following table presents the amortized cost in those loan classes based on payment activity by origination year as of June 30, 2021 and December 31, 2020.

Amortized Cost Basis by Origination Year

March 31, 2021 2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

June 30, 2021 2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

(in thousands)

42 unchanged sentences

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 $ 67.1 million and $ 57.4 million as of March 31, 2021 and December 31, 2020, respectively.

Non-performing TDRs totaled $ 91.5 million and $ 92.8 million as of March 31, 2021 and December 31, 2020, respectively.

The following table presents the pre- and post-modification amortized cost of loans by loan class modified as TDRs during the three months ended March 31, 2021 and 2020.

Post-modification amounts are presented as of March 31, 2021 and 2020.

Three Months Ended March 31,

Performing TDRs (not reported as non-accrual loans) totaled $ 64.1 million and $ 57.4 million as of June 30, 2021 and December 31, 2020, respectively.

Non-performing TDRs totaled $ 89.8 million and $ 92.8 million as of June 30, 2021 and December 31, 2020, respectively.

The following table presents the pre- and post-modification amortized cost of loans by loan class modified as TDRs during the three and six months ended June 30, 2021 and 2020.

Post-modification amounts are presented as of June 30, 2021 and 2020.

Three Months Ended June 30,

Troubled Debt Restructurings Number

8 unchanged sentences

Commercial real estate:

Commercial real estate 6 12,237 12,223 1 885 900

Construction — — — 2 435 218

Total commercial real estate

6 12,237 12,223 3 1,320 1,118

Residential mortgage 2 1,089 1,079 — — —

Total 17 $ 21,918 $ 21,831 7 $ 10,372 $ 8,165

Six Months Ended June 30,

Troubled Debt Restructurings Number

Contracts Pre-Modification

Amortized Carrying Amount Post-Modification

Amortized Carrying Amount Number

Contracts Pre-Modification

Amortized Carrying Amount Post-Modification

Amortized Carrying Amount

($ in thousands)

Commercial and industrial 13 $ 20,855 $ 19,648 20 $ 22,196 $ 19,674

Commercial real estate:

Commercial real estate 6 12,237 12,223 2 4,748 4,762

Construction — — — 2 435 218

Total commercial real estate

6 12,237 12,223 4 5,183 4,980

Residential mortgage 8 2,618 2,586 — — —

Consumer 1 169 166 — — —

Total 28 $ 35,879 $ 34,623 24 $ 27,379 $ 24,654

The total TDRs presented in the above table had allocated allowance for loan losses of $ 3.4 million and $ 7.9 million at March 31, 2021 and 2020, respectively.

There were $ 5.1 million and $ 791 thousand of charge-offs mainly related to TDRs for the three months ended March 31, 2021 and 2020, respectively.

Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the three months ended March 31, 2021 and 2020.

Loans modified as TDRs within the previous 12 months and for which there was a payment default ( 90 or more days past due) for the three months ended March 31, 2021 and 2020 were as follows:

Three Months Ended March 31,

The total TDRs presented in the above table had allocated allowance for loan losses of $ 4.5 million and $ 8.4 million at June 30, 2021 and 2020, respectively.

There were $ 697 thousand and $ 5.8 million of charge-offs related to TDRs for the three and six months ended June 30, 2021, respectively.

There were $ 2.9 million and $ 3.7 million of charge-offs were related to TDRs for the three and six months ended June 30, 2020, respectively.

Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the three and six months ended June 30, 2021 and 2020.

Loans modified as TDRs within the previous 12 months and for which there was a payment default ( 90 or more days past due) for the three and six months ended June 30, 2021 and 2020 were as follows:

Three Months Ended June 30,

Troubled Debt Restructurings Subsequently Defaulted Number of

Contracts Amortized Cost Number of

Contracts Recorded Investment Number of

Contracts Recorded

2 unchanged sentences

Residential mortgage 1 445 1 220

Consumer — — 2 204

Total 1 $ 445 23 $ 15,410

In response to the COVID-19 pandemic and its economic impact to certain customers, Valley implemented short-term loan modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant, when requested by customers.

Generally, the modification terms allow for a deferral of payments for up to 90 days, which Valley may extend for an additional 90 days.

Any extensions beyond this period were done in accordance with applicable regulatory guidance.

As of March 31, 2021, Valley had approximately $ 284 million of outstanding loans remaining in their payment deferral period under short-term modifications as compared to $ 361 million of loans in deferral at December 31, 2020.

Under the applicable guidance, none of these loans were classified as TDRs at March 31, 2021 and December 31, 2020.

Six Months Ended June 30,

Troubled Debt Restructurings Subsequently Defaulted Number of

Contracts Recorded Investment Number of

Contracts Recorded

($ in thousands)

Commercial and industrial 15 $ 12,384 20 $ 14,986

Residential mortgage 2 692 1 220

Consumer — — 2 204

Total 17 $ 13,076 23 $ 15,410

In response to the COVID-19 pandemic and its economic impact to certain customers, Valley implemented short-term loan modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment, when requested by customers, all of which were insignificant.

As of June 30, 2021, Valley had approximately $ 142 million of outstanding loans remaining in their payment deferral period under short-term modifications as compared to $ 361 million of loans in deferral at December 31, 2020.

Under the applicable guidance, none of these loans were classified as TDRs at June 30, 2021 and December 31, 2020.

Loans in Process of Foreclosure.

Other real estate owned (OREO) totaled $ 4.5 million and $ 5.1 million at March 31, 2021 and December 31, 2020, respectively.

OREO included foreclosed residential real estate properties totaling $ 413 thousand and $ 1.0 million at March 31, 2021 and December 31, 2020, respectively.

Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $ 1.8 million and $ 1.9 million at March 31, 2021 and December 31, 2020, respectively.

Other real estate owned (OREO) totaled $ 4.5 million and $ 5.1 million at June 30, 2021 and December 31, 2020, respectively.

OREO included foreclosed residential real estate properties which were immaterial at June 30, 2021 and totaled $ 1.0 million at December 31, 2020.

Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $ 2.0 million and $ 1.9 million at June 30, 2021 and December 31, 2020, respectively.

Collateral dependent loans.

Loans are collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral.

When Valley determines that foreclosure is probable, the collateral dependent loan balances are written down to the estimated

current fair value (less estimated selling costs) resulting in an immediate charge-off to the allowance, excluding any consideration for personal guarantees that may be pursued in the Bank’s collection process.

The following table presents collateral dependent loans by class as of March 31, 2021 and December 31, 2020:

When Valley determines that foreclosure is probable, the collateral dependent loan balances are written down to the estimated current fair value (less estimated selling costs) resulting in an immediate charge-off to the allowance, excluding any consideration for personal guarantees that may be pursued in the Bank’s collection process.

The following table presents collateral dependent loans by class as of June 30, 2021 and December 31, 2020:

2021 December 31,

5 unchanged sentences

Total $ 192,816 $ 176,027

Commercial and industrial loans are primarily collateralized by taxi medallions in the table above.

* Commercial and industrial loans are primarily collateralized by taxi medallions.

Allowance for Credit Losses for Loans

The following table summarizes the allowance for credit losses for loans at March 31, 2021 and December 31, 2020:

The following table summarizes the allowance for credit losses for loans at June 30, 2021 and December 31, 2020:

2021 December 31,

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(in thousands)

3 unchanged sentences

Total provision for credit losses for loans $ 8,777 $ 41,115 $ 17,791 $ 75,039

The following table details the activity in the allowance for loan losses by loan portfolio segment for the three months ended March 31, 2021 and 2020:

The following table details the activity in the allowance for loan losses by loan portfolio segment for the three and six months ended June 30, 2021 and 2020:

and Industrial Commercial

3 unchanged sentences

Three Months Ended

March 31, 2021

June 30, 2021

Allowance for loan losses:

3 unchanged sentences

Net (charge-offs) recoveries ( 10,215 ) 665 190 ( 6 ) ( 9,366 )

Provision for loan losses 891 10,436 ( 1,720 ) ( 915 ) 8,692

(Credit) provision for loan losses ( 6,504 ) 14,238 ( 2,059 ) 135 5,810

Ending balance $ 109,689 $ 189,139 $ 25,303 $ 15,193 $ 339,324

Three Months Ended

March 31, 2020

June 30, 2020

Allowance for losses:

Beginning balance $ 127,437 $ 111,585 $ 29,456 $ 14,864 $ 283,342

Loans charged-off ( 14,024 ) ( 27 ) ( 5 ) ( 2,601 ) ( 16,657 )

Charged-off loans recovered 799 51 545 509 1,904

Net (charge-offs) recoveries ( 13,225 ) 24 540 ( 2,092 ) ( 14,753 )

Provision (credit) for loan losses 17,827 20,093 ( 366 ) 3,471 41,025

Ending balance $ 132,039 $ 131,702 $ 29,630 $ 16,243 $ 309,614

and Industrial Commercial

Real Estate Residential

Mortgage Consumer Total

(in thousands)

Six Months Ended

June 30, 2021

Allowance for loan losses:

Beginning balance $ 131,070 $ 164,113 $ 28,873 $ 16,187 $ 340,243

Loans charged-off ( 18,035 ) ( 382 ) ( 139 ) ( 2,618 ) ( 21,174 )

Charged-off loans recovered 2,267 734 348 2,404 5,753

Net (charge-offs) recoveries ( 15,768 ) 352 209 ( 214 ) ( 15,421 )

(Credit) provision for loan losses ( 5,613 ) 24,674 ( 3,779 ) ( 780 ) 14,502

Ending balance $ 109,689 $ 189,139 $ 25,303 $ 15,193 $ 339,324

Six Months Ended

June 30, 2020

Allowance for losses:

Beginning balance $ 104,059 $ 45,673 $ 5,060 $ 6,967 $ 161,759

Impact of ASU 2016-13 adoption* 15,169 49,797 20,575 6,990 92,531

6 unchanged sentences

* Includes a $ 61.6 million increase representing the estimated expected credit losses for PCD loans as a result of the ASU 2016-13 adoption on January 1, 2020.

The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the allowance measurement methodology at March 31, 2021 and December 31, 2020.

and Industrial Commercial

2 unchanged sentences

(in thousands)

March 31, 2021

June 30, 2021

Allowance for loan losses:

22 unchanged sentences

Goodwill and Other Intangible Assets

Goodwill totaled $ 1.4 billion at both March 31, 2021 and December 31, 2020.

Goodwill totaled $ 1.4 billion at both June 30, 2021 and December 31, 2020.

There were no changes to the carrying amounts of goodwill allocated to Valley’s business segments, or reporting units thereof, for goodwill impairment analysis (as reported in Valley’s Annual Report on Form 10-K for the year ended December 31, 2020).

During the three months ended March 31, 2021, there were no triggering events that would more likely than not reduce the fair value of any reporting unit below its carrying amount.

There was no i mpairment of goodwill recognized during the three months ended March 31, 2021 and 2020.

The following table summarizes other intangible assets as of March 31, 2021 and December 31, 2020:

During the second quarter 2021, Valley performed the annual goodwill impairment test at its normal assessment

As a result, there was no i mpairment of goodwill recognized during the three and six months ended June 30, 2021 and 2020.

The following table summarizes other intangible assets as of June 30, 2021 and December 31, 2020:

Assets Accumulated

2 unchanged sentences

(in thousands)

March 31, 2021

June 30, 2021

Loan servicing rights $ 109,678 $ ( 86,681 ) $ ( 32 ) $ 22,965

11 unchanged sentences

Impairment charges on loan servicing rights are recognized in earnings when the book value of a stratified group of loan servicing rights exceeds its estimated fair value.

Valley recorded net recoveries of impairment charges on its loan servicing rights totaling $ 791 thousand and net impairment charges totaling $ 109 thousand for the three months ended March 31, 2021 and 2020, respectively.

Valley recorded net recoveries of impairment charges on its loan servicing rights totaling $ 42 thousand and $ 833 thousand for the three and six months ended June 30, 2021, respectively.

Valley recorded net impairment charges totaling $ 669 thousand and $ 778 thousand for the three and six months ended June 30, 2020, respectively.

See the “Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis” section of Note 5 for additional information regarding the fair valuation.

2 unchanged sentences

Valley evaluates core deposits and other intangibles for impairment when an indication of impairment exists.

No impairment was recognized during the three months ended March 31, 2021 and 2020.

No impairment was recognized during the three and six months ended June 30, 2021 and 2020.

The following table presents the estimated future amortization expense of other intangible assets for the remainder of 2021 through 2025:

7 unchanged sentences

2025 2,030 4,929 103

Valley recognized amortization expense on other intangible assets, including net (recoveries of) impairment charges on loan servicing rights, totaling approximately $ 6.0 million and $ 5.5 million for the three months ended March 31, 2021 and 2020, respectively.

Valley recognized amortization expense on other intangible assets, including net (recoveries of) impairment charges on loan servicing rights, totaling approximately $ 5.4 million and $ 6.7 million for the three months ended June 30, 2021 and 2020, respectively, and $ 11.5 million and $ 12.2 million for the six months ended June 30, 2021 and 2020, respectively.

Borrowed Funds

Short-Term Borrowings

Short-term borrowings at June 30, 2021 and December 31, 2020 consisted of the following:

June 30, 2021 December 31, 2020

(in thousands)

FHLB advances $ 700,000 $ 1,000,000

Securities sold under agreements to repurchase 154,378 147,958

Total short-term borrowings $ 854,378 $ 1,147,958

The weighted average interest rate for short-term borrowings was 0.35 percent and 0.38 percent at June 30, 2021 and December 31, 2020, respectively.

The interest payments on the FHLB advances totaling $ 700 million were hedged with interest rate swaps at June 30, 2021.

See Note 11 for additional details.

Long-Term Borrowings

Long-term borrowings at June 30, 2021 and December 31, 2020 consisted of the following:

June 30, 2021 December 31, 2020

(in thousands)

FHLB advances, net (1)

$ 947,206 $ 1,592,252

Subordinated debt, net (2)

638,484 403,413

Securities sold under agreements to repurchase 300,000 300,000

Total long-term borrowings $ 1,885,690 $ 2,295,665

(1) FHLB advances are presented net of unamortized prepayment penalties and other purchase accounting adjustments totaling $ 2.6 million at December 31, 2020.

(2) Subordinated debt is presented net of unamortized debt issuance costs totaling $ 6.4 billion and $ 2.7 million at June 30, 2021 and December 31, 2020, respectively.

FHLB Advances.

Long-term FHLB advances had a weighted average interest rate of 1.91 percent and 2.02 percent at June 30, 2021 and December 31, 2020, respectively.

FHLB advances are secured by pledges of certain eligible collateral, including but not limited to, U.S.

government and agency mortgage-backed securities and a blanket assignment of qualifying first lien mortgage loans, consisting of both residential mortgage and commercial real estate loans.

In June 2021, Valley prepaid approximately $ 248 million of long-term FHLB advances with maturities scheduled through 2025 and a weighted average effective interest rate of 1.82 percent.

The transaction was funded with excess cash liquidity and accounted for as an early debt extinguishment resulting in a loss of $ 8.4 million reported within non-interest expense for the three and six months ended June 30, 2021.

The long-term FHLB advances at June 30, 2021 are scheduled for contractual balance repayments as follows:

(in thousands)

2021 $ 157,870

Total long-term FHLB advances $ 945,870

There are no FHLB advances with scheduled repayments in years 2021 and thereafter, reported in the table above, which are callable for early redemption by the FHLB during the next 12 months.

Subordinated debt.

On April 1, 2021, Valley redeemed, at par value, $ 60 million of its callable 6.25 percent subordinated notes originally due April 1, 2026.

No gain or loss was incurred on this transaction.

On May 25, 2021, Valley issued $ 300 million of 3.00 percent Fixed-to-Floating Rate subordinated notes due June 15, 2031.

The subordinated notes are callable in whole or in part on or after June 15, 2026 or upon the occurrence of certain events.

Interest on the subordinated notes during the initial five year term through June 15, 2026 is payable semi-annually on June 15 and December 15.

Thereafter, interest is expected to be set based on three-month Secured Overnight Financing Rate (SOFR) plus 236 basis points and paid quarterly through maturity of the notes.

At June 30, 2021, the subordinated notes had a carrying value of $ 296.0 million, net of debt issuance costs.

During June 2021, Valley entered into an interest rate swap transaction used to hedge the change in the fair value of the $ 300 million in subordinated notes.

See Note 11 for additional details.

Valley also had the following subordinated debt outstanding at June 30, 2021:

• $ 125 million aggregate principal amount of 5.125 percent subordinated notes due September 27, 2023 with no call dates or prepayments allowed except upon the occurrence of certain events;

• $ 100 million aggregate principal amount of 4.55 percent subordinated notes due June 30, 2025 with no call dates or prepayments allowed except upon the occurrence of certain events;

• $ 115 million aggregate principal amount of 5.25 percent subordinated notes due June 15, 2030 and callable in whole or in part on or after June 15, 2025 or upon the occurrence of certain events.

Long-term securities sold under agreements to repurchase (repos).

The long-term repos had a weighted average interest rate of 3.41 percent and 3.37 percent at June 30, 2021 and December 31, 2020, respectively.

All long-term repos outstanding as of June 30, 2021 have maturities in the second half of 2021.

Stock–Based Compensation

On April 19, 2021, Valley's shareholders approved the Valley National Bancorp 2021 Incentive Compensation Plan (the 2021 Plan) administered by the Compensation and Human Resources Committee (the Committee) as appointed

by Valley's Board of Directors.

The purposes of the 2021 Plan are to provide additional incentives to officers and key employees of Valley and its subsidiaries, whose substantial contributions are essential to the continued growth and success of Valley, and to attract and retain officers, other employees and non-employee directors whose efforts will result in the continued and long-term growth of Valley's business.

2 unchanged sentences

If after December 31, 2020 any award granted under the 2016 Plan is forfeited, expires, settled for cash, withheld for tax obligations, or otherwise does not result in the issuance of all or a portion of the shares subject to such award, the shares will be added to the 2021 Plan's share reserve.

As of June 30, 2021, 7.4 million shares of common stock were available for issuance under the 2021 Plan.

The essential features of each award are described in the award agreement relating to that award.

The grant, exercise, vesting, settlement or payment of an award may be based upon the fair value of Valley's common stock on the last sale price reported for Valley's common stock on such date or the last sale price reported preceding such date, except for performance-based awards with a market condition.

based awards with a market condition.

The grant date fair values of performance-based awards that vest based on a market condition are determined by a third-party specialist using a Monte Carlo valuation model.

Valley granted 1.1 million and 1.0 million of time-based RSUs during the three months ended March 31, 2021 and 2020, respectively.

Valley granted 109 thousand and 142 thousand of time-based RSUs during the three months ended June 30, 2021 and 2020, respectively, and 1.2 million for both the six months ended June 30, 2021 and 2020.

Generally, time-based RSUs vest ratably over a three-year period.

The average grant date fair value of the RSUs granted during the three months ended March 31, 2021 and 2020 was $ 11.75 per share and $ 10.79 per share, respectively.

Valley granted 604 thousand and 589 thousand of performance-based RSUs to certain executive officers for the three months ended March 31, 2021 and 2020, respectively.

The average grant date fair value of the RSUs granted during the six months ended June 30, 2021 and 2020 was $ 11.63 per share and $ 10.48 per share, respectively.

Valley granted 604 thousand and 589 thousand of performance-based RSUs to certain executive officers for the six months ended June 30, 2021 and 2020, respectively.

There were no grants of performance-based RSUs during the three months ended June 30, 2021 and 2020, respectively.

The performance-based RSU awards include RSUs with vesting conditions based upon certain levels of growth in Valley's tangible book value per share plus dividends and RSUs with vesting conditions based upon Valley's total shareholder return as compared to its peer group.

2 unchanged sentences

Dividend equivalents are accumulated and paid to the grantee at the vesting date or forfeited if the performance conditions are not met.

The grant date fair value of the RSUs granted during the three months ended March 31, 2021 and 2020 was $ 11.75 per share and $ 10.82 per share, respectively.

Valley recorded total stock-based compensation expense of $ 5.5 million and $ 4.0 million for the three months ended March 31, 2021 and 2020, respectively.

The grant date fair value of the performance-based RSUs granted during the six months ended June 30, 2021 and 2020 was $ 11.75 per share and $ 10.82 per share, respectively.

Valley recorded total stock-based compensation expense of $ 5.2 million and $ 4.2 million for the three months ended June 30, 2021 and 2020, respectively, and $ 10.7 million and $ 8.2 million for the six months ended June 30, 2021 and 2020, respectively.

The fair values of stock awards are expensed over the shorter of the vesting or required service period.

As of March 31, 2021, the unrecognized amortization expense for all stock-based employee compensation totaled approximately $ 32.9 million and will be recognized over an average remaining vesting period of 2.16 years.

As of June 30, 2021, the unrecognized amortization expense for all stock-based employee compensation totaled approximately $ 28.9 million and will be recognized over an average remaining vesting period of approximately two years .

Derivative Instruments and Hedging Activities

Valley enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

Fair Value Hedges of Fixed Rate Assets and Liabilities .

Valley is exposed to changes in the fair value of fixed-rate subordinated debt due to changes in interest rates.

From time to time, Valley uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate .

Interest rate swaps designated as fair value hedges involve the receipt of variable rate payments from a counterparty in exchange for Valley making fixed rate payments over the life of the agreements without the exchange of the underlying notional amount.

For derivatives that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the loss or gain on the hedged item attributable to the hedged risk are recognized in earnings.

In June 2021, Valley entered into a $ 300 million forward-starting interest rate swap agreement with a notional amount of $ 300 million, maturing in June 2026, to hedge the change in the fair value of the 3.00 percent subordinated debt issued on May 28, 2021.

Under the swap agreement, beginning in January 2022, Valley will receive fixed rate payments and pay variable rate amounts based on SOFR plus 2.187 percent.

Cash Flow Hedges of Interest Rate Risk .

13 unchanged sentences

Changes in the fair value in credit derivatives are recognized directly in earnings.

At March 31, 2021, Valley h ad 25 cred it swaps with an aggregate notional amount of $ 215.5 million related to risk participation agreements.

At March 31, 2021, Valley had two “steepener” swaps, each with a current notional amount of $ 10.4 million where the receive rate on the swap mirrors the pay rate on the brokered deposits and the rates paid on these types of hybrid instruments are based on a formula derived from the spread between the long and short ends of the constant maturity swap (CMS) rate curve.

At June 30, 2021, Valley had 26 credit swaps with an aggregate notional amount of $ 215.8 million related to risk participation agreements.

At June 30, 2021, Valley had two “steepener” swaps, each with a current notional amount of $ 10.4 million where the receive rate on the swap mirrors the pay rate on the brokered deposits and the rates paid on these types of hybrid instruments are based on a formula derived from the spread between the long and short ends of the constant maturity swap (CMS) rate curve.

Although these types of instruments do not meet the hedge accounting requirements, the change in fair value of both the bifurcated derivative and the stand alone swap tend to move in opposite directions with changes in the three-month LIBOR rate and therefore provide an effective economic hedge.

3 unchanged sentences

Amounts included in the consolidated statements of financial condition related to the fair value of Valley’s derivative financial instruments were as follows:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Fair Value Fair Value

4 unchanged sentences

$ — $ 349 $ 900,000 $ — $ 179 $ 1,100,000

Fair value hedge interest rate swaps 80 — 300,000 — — —

Total derivatives designated as hedging instruments $ 80 $ 349 $ 1,200,000 $ — $ 179 $ 1,100,000

$ — $ 88 $ 1,100,000 $ — $ 179 $ 1,100,000

Derivatives not designated as hedging instruments:

6 unchanged sentences

The Chicago Mercantile Exchange and London Clearing House variation margins are classified as a single-unit of account with the cash flow hedges and over-the-counter (OTC) non-designated derivative instruments.

As a result, the fair value of the applicable derivative assets and liabilities are reported net of variation margin at March 31, 2021 and December 31, 2020 in the table above .

As a result, the fair value of the applicable derivative assets and liabilities are reported net of variation margin at June 30, 2021 and December 31, 2020 in the table above .

Gains (losses) included in the consolidated statements of income and other comprehensive income (loss), on a pre-tax basis, related to interest rate derivatives designated as hedges of cash flows were as follows:

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(in thousands)

Amount of loss reclassified from accumulated other comprehensive loss to interest expense $ ( 915 ) $ ( 615 )

Amount of gain (loss) recognized in other comprehensive income 177 ( 1,480 )

The accumulated net after-tax losses related to effective cash flow hedges included in accumulated other comprehensive loss were $ 3.1 million and $ 4.0 million at March 31, 2021 and December 31, 2020, respectively.

Amount of (loss) gain reclassified from accumulated other comprehensive loss to interest expense $ ( 749 ) $ 438 $ ( 1,664 ) $ ( 177 )

Amount of (loss) gain recognized in other comprehensive income (loss) ( 158 ) ( 1,773 ) 19 ( 3,253 )

The accumulated net after-tax losses related to effective cash flow hedges included in accumulated other comprehensive loss were $ 2.7 million and $ 4.0 million at June 30, 2021 and December 31, 2020, respectively.

Amounts reported in accumulated other comprehensive loss related to cash flow interest rate derivatives are reclassified to interest expense as interest payments are made on the hedged variable interest rate liabilities.

Valley estimates that $ 2.3 million will be reclassified as an increase to interest expense over the next 12 months.

Gains (losses) included in the consolidated statements of income related to interest rate derivatives designated as hedges of fair value were as follows:

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(in thousands)

Derivative - interest rate swap:

Interest income $ — $ 71 $ — $ 82

Interest expense 80 — 80 —

Hedged item - subordinated debt and loans:

Interest income $ — $ ( 71 ) $ — $ ( 82 )

Interest expense ( 83 ) — ( 83 ) —

The following table presents the hedged items related to interest rate derivatives designated as hedges of fair value and the cumulative basis fair value adjustment included in the net carrying amount of the hedged item at June 30, 2021.

Line Item in the Statement of Financial Position in Which the Hedged Item is Included Carrying Amount of the Hedged Liability Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability

(in thousands)

Long-term borrowings $ ( 300,083 ) $ ( 83 )

The net (gains) losses included in the consolidated statements of income related to derivative instruments not designated as hedging instruments were as follows:

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(in thousands)

1 unchanged sentence

Other non-interest expense $ ( 2,210 ) $ 1,416 $ ( 425 ) $ 1,505

Other non-interest income included fee income related to non-designated hedge derivative interest rate swaps (not designated as hedging instruments) executed with commercial loan customers totaling $ 6.2 million and $ 14.2 million for the three months ended March 31, 2021 and 2020, respectively.

Other non-interest income included fee income related to non-designated hedge derivative interest rate swaps (not designated as hedging instruments) executed with commercial loan customers totaling $ 7.6 million and $ 14.7 million for the three months ended June 30, 2021 and 2020, respectively, and $ 13.8 million and $ 28.9 million for the six months ended June 30, 2021 and 2020, respectively.

Credit Risk Related Contingent Features.

6 unchanged sentences

If Valley’s credit rating is reduced below investment grade, or such rating is withdrawn or suspended, then the counterparty could terminate the derivative positions and Valley would be required to settle its obligations under the agreements.

As of March 31, 2021, Valley was in compliance with all of the provisions of its derivative counterparty agreements.

As of March 31, 2021, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk related to these agreements, w as $ 11.6 million.

As of June 30, 2021, Valley was in compliance with all of the provisions of its derivative counterparty agreements.

As of June 30, 2021, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk related to these agreements, w as $ 79.6 million.

Valley has derivative counterparty agreements that require minimum collateral posting thresholds for certain counterparties.

8 unchanged sentences

Master repurchase agreements which include “right of set-off” provisions generally have a legally enforceable right to offset recognized amounts.

In such cases, the collateral would be used to settle the fair value of the repurchase agreement should Valley be in default.

In such cases, the collateral would be used to settle the fair value of the swap or repurchase agreement should Valley be in default.

The total amount of collateral held or pledged cannot exceed the net derivative fair values with the counterparty.

The table below presents information about Valley’s financial instruments eligible for offset in the consolidated statements of financial condition as of March 31, 2021 and December 31, 2020.

The table below presents information about Valley’s financial instruments eligible for offset in the consolidated statements of financial condition as of June 30, 2021 and December 31, 2020.

Gross Amounts Not Offset

6 unchanged sentences

(in thousands)

March 31, 2021

June 30, 2021

Interest rate swaps $ 248,520 $ — $ 248,520 $ — $ — $ 248,520

12 unchanged sentences

Some of these tax-advantaged investments support Valley’s regulatory compliance with the Community Reinvestment Act (CRA).

Valley’s investments in these entities generate a return primarily through the realization of federal income tax

credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods.

Valley’s investments in these entities generate a return primarily through the realization of federal income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods.

These tax credits and deductions are recognized as a reduction of income tax expense.

3 unchanged sentences

After initial measurement, the carrying amounts of tax credit investments with non-readily determinable fair values are increased to reflect Valley's share of income of the investee and are reduced to reflect its share of losses of the investee, dividends received and impairments, if applicable.

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at March 31, 2021 and December 31, 2020:

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at June 30, 2021 and December 31, 2020:

2021 December 31,

7 unchanged sentences

Unfunded affordable housing tax credit commitments $ 1,379 $ 1,379

Unfunded other tax credit commitments — —

Total unfunded tax credit commitments $ 1,379 $ 1,379

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three months ended March 31, 2021 and 2020:

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and six months ended June 30, 2021 and 2020:

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(in thousands)

7 unchanged sentences

Affordable housing tax credit investment impairment losses

431 665 772 1,083

Other tax credit investment losses 351 679 524 1,223

5 unchanged sentences

Valley’s reportable segments have been determined based upon its internal structure of operations and lines of business.

Each business segment is reviewed routinely for its asset growth, contribution to income before income taxes and return on average interest earning assets and impairment (if events or circumstances indicate a possible

inability to realize the carrying amount).

Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are allocated from the corporate and other adjustments segment to each of the other three business segments.

3 unchanged sentences

Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.

The following tables represent the financial data for Valley’s four business segments for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31, 2021

The following tables represent the financial data for Valley’s four business segments for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, 2021

Lending Commercial

8 unchanged sentences

Net interest income (loss) 54,227 237,428 15,372 ( 6,120 ) 300,907

Provision (credit) for credit losses 711 8,066 ( 30 ) — 8,747

Net interest income (loss) after provision for credit losses

53,516 229,362 15,402 ( 6,120 ) 292,160

Non-interest income 21,915 9,819 2,475 8,917 43,126

Non-interest expense 19,792 27,241 ( 258 ) 125,118 171,893

Internal transfer expense (income) 19,862 71,207 14,632 ( 105,701 ) —

Income (loss) before income taxes $ 35,777 $ 140,733 $ 3,503 $ ( 16,620 ) $ 163,393

Return on average interest earning assets (pre-tax)

2.00 % 2.21 % 0.27 % N/A 1.72 %

Three Months Ended June 30, 2020

Lending Commercial

Lending Investment

Management Corporate

Adjustments Total

($ in thousands)

Average interest earning assets

$ 7,214,368 $ 24,826,832 $ 5,737,187 $ — $ 37,778,387

Interest income $ 66,807 $ 255,152 $ 27,623 $ ( 1,057 ) $ 348,525

Interest expense 11,469 40,640 9,728 4,129 65,966

Net interest income (loss) 55,338 214,512 17,895 ( 5,186 ) 282,559

Provision for credit losses 3,106 38,009 41 — 41,156

Net interest income (loss) after provision for credit losses

52,232 176,503 17,854 ( 5,186 ) 241,403

Non-interest income 17,175 16,172 5,823 5,660 44,830

Non-interest expense 20,440 23,250 642 112,834 157,166

Internal transfer expense (income) 19,406 66,858 15,505 ( 101,769 ) —

Income (loss) before income taxes $ 29,561 $ 102,567 $ 7,530 $ ( 10,591 ) $ 129,067

Return on average interest earning assets (pre-tax)

1.64 % 1.65 % 0.52 % N/A 1.37 %

Six Months Ended June 30, 2021

Lending Commercial

Lending Investment

Management Corporate

Adjustments Total

($ in thousands)

Average interest earning assets

$ 7,099,973 $ 25,509,061 $ 5,039,222 $ — $ 37,648,256

Interest income $ 120,264 $ 508,231 $ 38,748 $ ( 1,797 ) $ 665,446

Interest expense 11,607 41,702 8,238 10,325 71,872

Net interest income (loss) 108,657 466,529 30,510 ( 12,122 ) 593,574

(Credit) provision for credit losses ( 1,924 ) 19,715 ( 388 ) — 17,403

7 unchanged sentences

1.89 % 2.12 % 0.25 % N/A 1.69 %

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Lending Commercial

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements