What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-06 · 259 added, 201 removed, 1295 unchanged (26% of the section changed)

3 unchanged sentences

(in thousands, except for share data)

September 30,

2021 December 31,

6 unchanged sentences

Available for sale debt securities 1,208,277 1,339,473

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)

Held to maturity debt securities (net of allowance for credit losses of $ 1,075 at September 30, 2021 and $ 1,428 at December 31, 2020)

2,583,328 2,171,583

26 unchanged sentences

50,000,000 authorized shares:

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

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

111,590 111,590

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

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

98,101 98,101

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

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

issued 407,317,006 shares at September 30, 2021 and 403,881,488 shares at December 31, 2020)

142,976 141,746

2 unchanged sentences

Accumulated other comprehensive loss ( 21,375 ) ( 7,718 )

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

Treasury stock, at cost ( 3,342 common shares at September 30, 2021 and 22,490 common shares at December 31, 2020)

( 41 ) ( 225 )

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

15 unchanged sentences

Net Interest Income 301,026 283,086 894,600 830,984

(Credit) provision for credit losses for held to maturity securities ( 30 ) 41 ( 388 ) 800

Provision (credit) for credit losses for held to maturity securities 35 ( 112 ) ( 353 ) 688

Provision for credit losses for loans 3,496 31,020 21,287 106,059

7 unchanged sentences

Gains on sales of loans, net 6,442 13,366 20,016 26,253

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

Gains on sales of assets, net 344 894 380 716

Bank owned life insurance 2,018 ( 1,304 ) 6,824 7,661

21 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

3 unchanged sentences

Net (losses) gains arising during the period ( 3,953 ) ( 1,262 ) ( 15,860 ) 27,819

Less reclassification adjustment for net losses included in net income 76 31 120 58

Less reclassification adjustment for net (gains) losses included in net income ( 613 ) 36 ( 493 ) 94

Total ( 4,566 ) ( 1,226 ) ( 16,353 ) 27,913

1 unchanged sentence

Net (losses) gains on derivatives arising during the period ( 96 ) 83 ( 69 ) ( 2,254 )

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

Less reclassification adjustment for net losses included in net income 743 1,127 1,928 1,257

Total 647 1,210 1,859 ( 997 )

5 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Common Stock Accumulated

31 unchanged sentences

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

Net income — — — — 122,580 — — 122,580

Other comprehensive loss, net of tax — — — — — ( 3,640 ) — ( 3,640 )

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

— — — — ( 45,228 ) — — ( 45,228 )

Effect of stock incentive plan, net

— 1,230 426 13,831 ( 168 ) — 62 14,151

Balance - September 30, 2021 $ 209,691 407,314 142,976 $ 3,672,467 $ 818,780 $ ( 21,375 ) $ ( 41 ) $ 4,822,498

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

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2020

Common Stock Accumulated

31 unchanged sentences

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

Net income — — — — 102,374 — — 102,374

Other comprehensive income, net of tax — — — — — 155 — 155

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

— — — — ( 44,770 ) — — ( 44,770 )

Effect of stock incentive plan, net — 83 51 4,529 ( 117 ) — 225 4,688

Balance - September 30, 2020 $ 209,691 403,879 $ 141,718 $ 3,633,321 $ 553,826 $ ( 4,783 ) $ ( 10 ) $ 4,533,763

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

10 unchanged sentences

Originations of loans held for sale ( 774,443 ) ( 829,252 )

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

Gains on sales of assets, net ( 380 ) ( 716 )

Loss on extinguishment of debt 8,406 2,353

10 unchanged sentences

Purchases ( 3,163 ) ( 7,616 )

Sales 1,227 27,867

Held to maturity debt securities:

13 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

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 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.

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 September 30, 2021 and for all periods presented have been made.

The results of operations for the three and nine months ended September 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.

1 unchanged sentence

These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Valley’s Annual Report on Form 10-K for the year ended December 31, 2020.

Correction of an Immaterial Error.

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.

Significant Estimates.

8 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.

Business Combinations

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.

As of June 30, 2021 , Westchester had total assets of $ 1.3 billion, total loans of $ 908 million, and total deposits of $ 1.1 billion.

Westchester 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.

Existing Westchester options will be cashed out for approximately $ 10 million in cash.

Valley has received all the requisite regulatory approvals to complete the merger which is anticipated to close on December 1, 2021, pending the satisfaction of customary closing conditions .

Bank Leumi Le-Israel Corporation .

On September 23, 2021, Valley announced that it will acquire Bank Leumi Le-Israel Corporation (“Leumi”), the U.S.

subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA (“Bank Leumi”).

Bank Leumi maintains its headquarters in New York City and also has commercial banking offices in Chicago, Los Angeles, Palo Alto, and Aventura, Florida.

As of June 30, 2021, Leumi had total

assets of $ 8.4 billion, total deposits of $ 7.1 billion, and gross loans of $ 5.4 billion.

The common stockholders of Leumi will receive 3.8025 shares of Valley common stock and $ 5.08 in cash (subject to specified adjustments) for each Leumi common share they own.

Based on Valley’s closing stock price on September 22, 2021, the transaction is valued at an estimated $ 1.1 billion, inclusive of the value of options and upon completion of the acquisition, Leumi will own approximately 14 percent of Valley's common stock.

The acquisition is expected to close in the first half of 2022, subject to standard regulatory approvals, approval of Valley shareholders, as well as other customary closing conditions.

Dudley Venture s.

On October 8, 2021, Valley acquired Arizona-based Dudley Ventures (DV), an advisory firm specializing in the investment and management of tax credits.

The transaction includes the acquisition of DV's community development entity, DV Community Investment, as well as DV Fund Advisors and DV Advisory Services.

The transaction price included $ 11.3 million of cash at the closing date, fixed future stock consideration totaling $ 3.8 million, and contingent cash earn-out payments based upon revenue growth of the acquired entities over a five-year period.

Merger expenses related to the above acquisitions totaled $ 1.3 million for the three and nine months ended September 30, 2021 and primarily consisted of professional and legal fees.

Earnings Per Common Share

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:

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

11 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 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.

Potential anti-dilutive weighted common shares were immaterial for the three and nine months ended September 30, 2021, respectively, as compared to 4.9 million and 2.2 million shares for the three and nine months ended September 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 and six months ended June 30, 2021:

The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the three and nine months ended September 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 )

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

Other comprehensive loss before reclassification ( 3,953 ) ( 96 ) — ( 4,049 )

Amounts reclassified from other comprehensive income

76 534 278 888

Amounts reclassified from other comprehensive (loss) income ( 613 ) 743 279 409

Other comprehensive (loss) income, net

( 4,566 ) 647 279 ( 3,640 )

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

Balance at September 30, 2021 $ 16,937 $ ( 2,047 ) $ ( 36,265 ) $ ( 21,375 )

Components of Accumulated Other Comprehensive Loss Total

8 unchanged sentences

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

Other comprehensive (loss) income before reclassification ( 11,907 ) 27 — ( 11,880 )

Amounts reclassified from other comprehensive income

120 1,185 558 1,863

Other comprehensive loss before reclassification ( 15,860 ) ( 69 ) — ( 15,929 )

Amounts reclassified from other comprehensive (loss) income ( 493 ) 1,928 837 2,272

Other comprehensive (loss) income, net

( 16,353 ) 1,859 837 ( 13,657 )

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:

Balance at September 30, 2021 $ 16,937 $ ( 2,047 ) $ ( 36,265 ) $ ( 21,375 )

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 nine months ended September 30, 2021 and 2020:

Amounts Reclassified from

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

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

(in thousands)

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

Unrealized gains (losses) on AFS securities before tax $ 825 $ ( 46 ) $ 663 $ ( 127 ) Gains (losses) on securities transactions, net

Tax effect ( 212 ) 10 ( 170 ) 33

Total net of tax 613 ( 36 ) 493 ( 94 )

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

Unrealized losses on derivatives (cash flow hedges) before tax ( 1,044 ) ( 1,586 ) ( 2,708 ) ( 1,763 ) Interest expense

Tax effect 301 459 780 506

34 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 June 30, 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).

September 30,

2021 Fair Value Measurements at Reporting Date Using:

12 unchanged sentences

Available for sale debt securities:

Treasury securities 51,010 51,010 — —

government agency securities 21,442 — 21,442 —

15 unchanged sentences

Collateral dependent loans $ 68,162 $ — $ — $ 68,162

Loan servicing rights 158 — — 158

Foreclosed assets 2,037 — — 2,037

32 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 $ 10.8 million and $ 7.8 million at June 30, 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 $ 11.4 million and $ 7.8 million at September 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 $ 154.2 million and $ 286.4 million at June 30, 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 $ 152.4 million and $ 286.4 million at September 30, 2021 and December 31, 2020, respectively.

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

4 unchanged sentences

Equity securities.

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.

The fair value of equity securities consists of a publicly traded mutual fund, Community Reinvestment Act (CRA) investment fund and an investment related to the development of new financial technologies that are carried at quoted prices in active markets.

Valley also has privately held CRA funds measured at NAV, which are excluded from fair value hierarchy levels in the tables above.

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.

The prices for these investments are derived from market quotations and matrix

pricing obtained through an independent pricing service.

Management reviews the data and assumptions used in pricing the securities by its third-party provider to ensure the highest level of significant inputs are derived from market observable data.

Available for sale debt securities.

When applicable, U.S.

Treasury securities are reported at fair value utilizing Level 1 inputs.

10 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 June 30, 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 September 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 June 30, 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 September 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 June 30, 2021 and December 31, 2020.

The credit valuation adjustments were not significant to the overall valuation of Valley’s derivatives at September 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 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.

At September 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 September 30, 2021, collateral dependent loans with a total amortized cost of $ 136.1 million, including our taxi medallion loan portfolio, were reduced by specific allowance for loan losses allocations totaling $ 67.9 million to a reported total net carrying amount of $ 68.2 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 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.

At September 30, 2021, the fair value model used a blended prepayment speed (stated as constant prepayment rates) of 13.6 percent and a discount rate of 9.0 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 June 30, 2021, certain loan servicing rights were re-measured at fair value totaling $ 158 thousand.

At September 30, 2021, there was no re-measurement of loan servicing rights at fair value.

See Note 9 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 1.3 percent to 7.1 percent at June 30, 2021.

The adjustments to the appraisals of foreclosed assets ranged from 0.6 percent to 4.6 percent at September 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 June 30, 2021 and December 31, 2020 were as follows:

Hierarchy June 30, 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 September 30, 2021 and December 31, 2020 were as follows:

Hierarchy September 30, 2021 December 31, 2020

Amount Fair Value Carrying

37 unchanged sentences

Equity Securities

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.

Equity securities carried at fair value totaled $ 36.1 million and $ 29.4 million at September 30, 2021 and December 31, 2020, respectively.

At September 30, 2021, Valley's equity securities consisted of one publicly traded mutual fund, CRA investments and to a lesser extent, equity investments related to the development of new financial technologies.

Our CRA and other equity investments are a mixture of both publicly traded entities and privately held entities without readily determinable fair market 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.

The fair value of trading securities, consisting of municipal bonds, totaled $ 4.8 million at September 30, 2021.

We had no trading debt securities at December 31, 2020.

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

We recorded net trading losses of $ 2 thousand and net trading gains of $ 705 thousand for three and nine months ended September 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 June 30, 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 September 30, 2021 and December 31, 2020 were as follows:

Losses Fair Value

(in thousands)

June 30, 2021

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

September 30, 2021

government agency securities $ 20,408 $ 1,041 $ ( 7 ) $ 21,442

16 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 June 30, 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 September 30, 2021 and December 31, 2020 were as follows:

Twelve Months More than

4 unchanged sentences

(in thousands)

June 30, 2021

September 30, 2021

government agency securities $ — $ — $ 1,355 $ ( 7 ) $ 1,355 $ ( 7 )

Obligations of states and political subdivisions:

Obligations of states and state agencies

10,344 ( 39 ) — — 10,344 ( 39 )

Municipal bonds 25,100 ( 429 ) — — 25,100 ( 429 )

Total obligations of states and political subdivisions

35,444 ( 468 ) — — 35,444 ( 468 )

Residential mortgage-backed securities 264,495 ( 2,138 ) 12,058 ( 338 ) 276,553 ( 2,476 )

12 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 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.

Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was 111 and 58 at September 30, 2021 and December 31, 2020, respectively.

As of September 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 $ 547.5 million.

The contractual maturities of available for sale debt securities at September 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.

June 30, 2021

September 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 4.4 years at June 30, 2021.

The weighted average remaining expected life for residential mortgage-backed securities available for sale was 4.9 years at September 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 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.

Val ley has evaluated available for sale debt securities that are in an unrealized loss position as of September 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 nine months ended September 30, 2021 and 2020.

There was no allowance for credit losses for available for sale debt securities at September 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 June 30, 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 September 30, 2021 and December 31, 2020 were as follows:

Losses Fair Value

(in thousands)

June 30, 2021

September 30, 2021

Treasury securities $ 67,716 $ 5,182 $ — $ 72,898

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 June 30, 2021 and December 31, 2020 were as follows:

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

Twelve Months More than

4 unchanged sentences

(in thousands)

June 30, 2021

September 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 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.

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 62 and 13 at September 30, 2021 and December 31, 2020, respectively.

As of September 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 $ 955.9 million.

The contractual maturities of investments in debt securities held to maturity at September 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.

June 30, 2021

September 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 6.0 years at June 30, 2021.

The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was 5.9 years at September 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 June 30, 2021 and December 31, 2020.

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

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

(in thousands)

June 30, 2021

September 30, 2021

Treasury securities $ 67,716 $ — $ — $ — $ 67,716

20 unchanged sentences

Corporate and other debt securities — 5,000 — 35,750 40,750

Total investment securities held to maturity $ 2,019,348 $ 5,000 $ 5,650 $ 143,013 $ 2,173,011

Total $ 2,019,348 $ 5,000 $ 5,650 $ 143,013 $ 2,173,011

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

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.

At September 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 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.

At September 30, 2021, held to maturity debt securities were carried net of allowance for credit losses totaling $ 1.1 million and $ 1.4 million at September 30, 2021 and December 31, 2020, respectively.

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

Loans and Allowance for Credit Losses for Loans

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

June 30, 2021 December 31, 2020

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

September 30, 2021 December 31, 2020

(in thousands)

13 unchanged sentences

Total loans $ 32,606,814 $ 32,217,112

* 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.

* Represents SBA Paycheck Protection Program (PPP) loans, net of unearned fees totaling $ 27.6 million and $ 43.2 million at September 30, 2021 and December 31, 2020, respectively.

Total loans includes net unearned discounts and deferre d loan fees of $ 73.0 million an d $ 95.8 million at September 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 September 30, 2021 and December 31, 2020.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 83.4 million and $ 90.2 million at September 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 nine months ended September 30, 2020 .

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

Credit Risk Management

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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, internal loan classification,

concentrations of credit, loan delinquencies, non-performing, and potential problem loans.

A reporting system supplements the management review process by providing management with frequent reports concerning loan production, loan quality, internal loan classification, 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.

1 unchanged sentence

Credit Quality

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:

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

Past Due and Non-Accrual Loans

6 unchanged sentences

(in thousands)

June 30, 2021

September 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 June 30, 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 September 30, 2021 and December 31, 2020:

Amortized Cost Basis by Origination Year

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

September 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 June 30, 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 September 30, 2021 and December 31, 2020.

Amortized Cost Basis by Origination Year

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

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

(in thousands)

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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 $ 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,

Performing TDRs (not reported as non-accrual loans) totaled $ 64.8 million and $ 57.4 million as of September 30, 2021 and December 31, 2020, respectively.

Non-performing TDRs totaled $ 116.7 million and $ 92.8 million as of September 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 nine months ended September 30, 2021 and 2020.

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

Three Months Ended September 30,

Troubled Debt Restructurings Number

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Residential mortgage 4 356 350 1 247 247

Consumer — — — 1 72 72

Total 15 $ 34,874 $ 34,902 32 $ 35,805 $ 35,497

Six Months Ended June 30,

Nine Months Ended September 30,

Troubled Debt Restructurings Number

11 unchanged sentences

Total commercial real estate 13 44,309 44,329 4 8,996 9,000

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

Residential mortgage 12 2,974 2,909 1 247 247

1 unchanged sentence

Total 42 $ 69,275 $ 66,461 39 $ 49,852 $ 47,523

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,

The total TDRs presented in the above table had allocated allowance for loan losses of $ 8.2 million and $ 18.7 million at September 30, 2021 and 2020, respectively.

There were $ 206 thousand and $ 6.0 million of charge-offs related to TDRs for the three and nine months ended September 30, 2021, respectively.

There were $ 1.9 million and $ 5.6 million of charge-offs related to TDRs for the three and nine months ended September 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 nine months ended September 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 nine months ended September 30, 2021 and 2020 were as follows:

Three Months Ended September 30,

Troubled Debt Restructurings Subsequently Defaulted Number of

3 unchanged sentences

Commercial and industrial — $ — 30 $ 17,496

Commercial real estate 1 419 — —

Residential mortgage 1 129 — —

Consumer — — 2 204

Total 2 $ 548 30 $ 17,496

Six Months Ended June 30,

Nine Months Ended September 30,

Troubled Debt Restructurings Subsequently Defaulted Number of

3 unchanged sentences

Commercial and industrial — $ — 35 $ 20,099

Commercial real estate 1 419 — —

Residential mortgage 1 129 — —

2 unchanged sentences

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.

As of September 30, 2021, Valley had approximately $ 98.6 million of outstanding loans remaining in their payment deferral period under short-term modifications as compared to $ 361.0 million of loans in deferral at December 31, 2020.

Under the applicable guidance, none of these loans were classified as TDRs at September 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 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.

Other real estate owned (OREO) totaled $ 4.0 million and $ 5.1 million at September 30, 2021 and December 31, 2020, respectively.

OREO included foreclosed residential real estate properties which wer e immaterial at September 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 $ 3.0 million and $ 1.9 million at September 30, 2021 and December 31, 2020, respectively.

Collateral dependent loans.

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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:

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

September 30,

2021 December 31,

7 unchanged sentences

Allowance for Credit Losses for Loans

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

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

September 30,

2021 December 31,

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

4 unchanged sentences

Total provision for credit losses for loans $ 3,496 $ 31,020 $ 21,287 $ 106,059

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:

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

and Industrial Commercial

3 unchanged sentences

Three Months Ended

June 30, 2021

September 30, 2021

Allowance for loan losses:

6 unchanged sentences

Three Months Ended

June 30, 2020

September 30, 2020

Allowance for losses:

9 unchanged sentences

(in thousands)

Six Months Ended

June 30, 2021

Nine Months Ended

September 30, 2021

Allowance for loan losses:

5 unchanged sentences

Ending balance $ 103,877 $ 199,721 $ 24,732 $ 14,197 $ 342,527

Six Months Ended

June 30, 2020

Nine Months Ended

September 30, 2020

Allowance for losses:

8 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 June 30, 2021 and December 31, 2020.

and Industrial Commercial

2 unchanged sentences

(in thousands)

June 30, 2021

September 30, 2021

Allowance for loan losses:

22 unchanged sentences

Goodwill and Other Intangible Assets

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

Goodwill totaled $ 1.4 billion at both September 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 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:

There was no i mpairment of goodwill recognized during the three and nine months ended September 30, 2021 and 2020.

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

Assets Accumulated

2 unchanged sentences

(in thousands)

June 30, 2021

September 30, 2021

Loan servicing rights $ 111,978 $ ( 89,039 ) $ — $ 22,939

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 $ 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.

Valley recorded net recoveries of impairment charges on its loan servicing rights totaling $ 32 thousand and $ 864 thousand for the three and nine months ended September 30, 2021, respectively.

Valley recorded net impairment charges totaling $ 188 thousand and $ 966 thousand for the three and nine months ended September 30, 2020, respectively.

See the “Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis” section of Note 6 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 and six months ended June 30, 2021 and 2020.

No impairment was recognized during the three and nine months ended September 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 2,047 4,929 103

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.

Valley recognized amortization expense on other intangible assets, including net (recoveries of) impairment charges on loan servicing rights, totaling approximately $ 5.3 million and $ 6.4 million for the three months ended September 30, 2021 and 2020, respectively, and $ 16.8 million and $ 18.5 million for the nine months ended September 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

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

September 30, 2021 December 31, 2020

(in thousands)

2 unchanged sentences

Total short-term borrowings $ 783,346 $ 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.

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

The interest payments on the FHLB advances totaling $ 600 million were hedged with interest rate swaps at September 30, 2021.

See Note 12 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

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

September 30, 2021 December 31, 2020

(in thousands)

5 unchanged sentences

Total long-term borrowings $ 1,427,444 $ 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.

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

The prepayment penalties and other purchase accounting adjustments were fully amortized at September 30, 2021.

(2) Subordinated debt is presented net of unamortized debt issuance costs totaling $ 6.1 million and $ 2.7 million at September 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.

Long-term FHLB advances had a weighted average interest rate of 1.88 percent and 2.02 percent at September 30, 2021 and December 31, 2020, respectively.

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

1 unchanged sentence

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:

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

(in thousands)

9 unchanged sentences

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.

At September 30, 2021, the subordinated notes had a carrying value of $ 296.2 million, net of unamortized 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 12 for additional details.

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

Valley also had the following subordinated debt outstanding at September 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;

2 unchanged sentences

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.

The long-term repos had a weighted average interest rate of 3.37 percent at December 31, 2020.

Long-term repos outstanding as of December 31, 2020 were repaid upon their respective contractual maturity dates during the third quarter 2021.

Stock–Based Compensation

4 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.

As of September 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.

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 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.

Valley granted 30 thousand and 26 thousand of time-based RSUs during the three months ended September 30, 2021 and 2020, respectively, and 1.2 million for both the nine months ended September 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 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 average grant date fair value of the RSUs granted during the nine months ended September 30, 2021 and 2020 was $ 11.98 per share and $ 10.41 per share, respectively.

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

There were no grants of performance-based RSUs during the three months ended September 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 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 grant date fair value of the performance-based RSUs granted during the nine months ended September 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 $ 4.1 million for the three months ended September 30, 2021 and 2020, respectively, and $ 15.9 million and $ 12.3 million for the nine months ended September 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 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 .

As of September 30, 2021, the unrecognized amortization expense for all stock-based employee compensation totaled approximately $ 23.9 million and will be recognized over an average remaining vesting period of approximately two years .

Derivative Instruments and Hedging Activities

22 unchanged sentences

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

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.

At September 30, 2021, Valley had 27 credit swaps with an aggregate notional amount of $ 263.9 million related to risk participation agreements.

At September 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:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Fair Value Fair Value

14 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 June 30, 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 September 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

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands)

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.

Amount of loss reclassified from accumulated other comprehensive loss to interest expense $ ( 1,044 ) $ ( 1,586 ) $ ( 2,708 ) $ ( 1,763 )

Amount of (loss) gain recognized in other comprehensive income ( 144 ) 95 ( 125 ) 3,158

The accumulated net after-tax losses related to effective cash flow hedges included in accumulated other comprehensive loss were $ 2.0 million and $ 4.0 million at September 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.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

6 unchanged sentences

Interest expense 405 — 322 —

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.

The changes in the fair value of the hedged item designated as a qualifying hedge are captured as an

adjustment to the carrying amount of the hedged item (basis adjustment).

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

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

2 unchanged sentences

Other non-interest expense $ 216 $ 600 $ ( 209 ) $ 2,105

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.

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 $ 8.8 million and $ 19.2 million for the three months ended September 30, 2021 and 2020, respectively, and $ 22.6 million and $ 48.1 million for the nine months ended September 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 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.

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

As of September 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 $ 60.5 million.

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

10 unchanged sentences

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 June 30, 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 September 30, 2021 and December 31, 2020.

Gross Amounts Not Offset

6 unchanged sentences

(in thousands)

June 30, 2021

September 30, 2021

Interest rate swaps $ 215,046 $ — $ 215,046 $ — $ — $ 215,046

Interest rate swaps $ 65,212 $ — $ 65,212 $ — $ ( 60,177 ) $ 5,035

Repurchase agreements 300,000 — 300,000 ( 300,000 ) (2)

Total $ 65,212 $ — $ 65,212 $ — $ ( 60,177 ) $ 5,035

15 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 June 30, 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 September 30, 2021 and December 31, 2020:

September 30,

2021 December 31,

8 unchanged sentences

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 and six months ended June 30, 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 nine months ended September 30, 2021 and 2020:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

22 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 and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, 2021

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

Three Months Ended September 30, 2021

Lending Commercial

17 unchanged sentences

2.01 % 2.24 % 0.20 % N/A 1.72 %

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Lending Commercial

8 unchanged sentences

Net interest income (loss) 54,908 218,590 15,785 ( 6,197 ) 283,086

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

Provision (credit) for credit losses 5,383 25,637 ( 112 ) — 30,908

Net interest income (loss) after provision for credit losses

6 unchanged sentences

1.94 % 1.91 % 0.08 % N/A 1.50 %

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Lending Commercial

17 unchanged sentences

1.94 % 2.16 % 0.23 % N/A 1.70 %

Six Months Ended June 30, 2020

Nine Months Ended September 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