What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-28 compared with 2021-02-26 · 519 added, 573 removed, 2180 unchanged (33% of the section changed)

8 unchanged sentences

36,473 29,378

Trading debt securities 38,130 —

Available for sale debt securities

1,128,809 1,339,473

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

Held to maturity debt securities (net of allowance for credit losses of $ 1,165 at December 31, 2021 and $ 1,428 at December 31, 2020)

2,667,532 2,171,583

63 unchanged sentences

Net Interest Income 1,209,901 1,118,904 898,048

Provision for credit losses for held to maturity securities 635 — —

(Credit) provision for credit losses for held to maturity securities ( 263 ) 635 —

Provision for credit losses for loans 32,896 125,087 24,218

8 unchanged sentences

Gains on sales of loans, net 26,669 42,251 18,914

(Losses) gains on sales of assets, net ( 1,891 ) 78,333 ( 2,401 )

Gains (losses) on sales of assets, net 901 ( 1,891 ) 78,333

Bank owned life insurance 8,817 10,083 8,232

38 unchanged sentences

Net income $ 473,840 $ 390,606 $ 309,793

Other comprehensive income (loss), net of tax:

Other comprehensive income, net of tax:

Unrealized gains and losses on debt securities available for sale

Net gains (losses) arising during the period 27,845 39,262 ( 22,932 )

Net (losses) gains arising during the period ( 23,613 ) 27,845 39,262

Less reclassification adjustment for net (gains) losses included in net income ( 491 ) ( 377 ) 119

1 unchanged sentence

Unrealized gains and losses on derivatives (cash flow hedges)

Net (losses) gains on derivatives arising during the period ( 2,251 ) ( 989 ) 1,874

Net gains (losses) on derivatives arising during the period 127 ( 2,251 ) ( 989 )

Less reclassification adjustment for net losses included in net income

2 unchanged sentences

Defined benefit pension plan

Net losses arising during the period ( 3,418 ) ( 2,561 ) ( 7,151 )

Amortization of prior service (credit) cost ( 98 ) ( 93 ) 146

Net gains (losses) arising during the period 10,306 ( 3,418 ) ( 2,561 )

Amortization of prior service credit ( 96 ) ( 98 ) ( 93 )

Amortization of actuarial net loss 1,106 721 188

Total 11,316 ( 2,795 ) ( 2,466 )

Total other comprehensive income (loss) 24,496 37,217 ( 22,885 )

Total other comprehensive (loss) income ( 10,214 ) 24,496 37,217

Total comprehensive income $ 463,626 $ 415,102 $ 347,010

11 unchanged sentences

Balance - December 31, 2018 $ 209,691 331,431 $ 116,240 $ 2,796,499 $ 299,642 $ ( 69,431 ) $ ( 2,187 ) $ 3,350,454

Reclassification due to the adoption of ASU No.

— — — — 480 ( 480 ) — —

Reclassification due to the adoption of ASU No.

Adjustment due to the adoption of ASU No.

— — — — 4,414 — — 4,414

3 unchanged sentences

Net income — — — — 309,793 — — 309,793

Other comprehensive loss, net of tax

— — — — — ( 22,885 ) — ( 22,885 )

Other comprehensive income, net of tax — — — — — 37,217 — 37,217

Cash dividends declared:

12 unchanged sentences

2016-13 — — — — ( 28,187 ) — — ( 28,187 )

Adjustment due to the adoption of ASU No.

— — — — ( 1,446 ) — — ( 1,446 )

Balance - January 1, 2020 209,691 403,278 141,423 3,622,208 415,372 ( 32,214 ) ( 479 ) 4,356,001

11 unchanged sentences

— 581 323 15,260 ( 2,855 ) — 254 12,982

Common stock issued

— 71,121 24,892 810,363 — — — 835,255

Balance - December 31, 2020 209,691 403,859 141,746 3,637,468 611,158 ( 7,718 ) ( 225 ) 4,592,120

2020 Form 10-K 76

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY—(Continued)

Common Stock Accumulated

Preferred Stock Shares Amount Surplus Retained

Earnings Other

Comprehensive

Loss Treasury

Shareholders’

($ in thousands)

Balance - December 31, 2019 $ 209,691 403,278 $ 141,423 $ 3,622,208 $ 443,559 $ ( 32,214 ) $ ( 479 ) $ 4,384,188

Adjustment due to the adoption of ASU No.

2016-13 — — — — ( 28,187 ) — — ( 28,187 )

Balance - January 1, 2020 209,691 403,278 141,423 3,622,208 415,372 ( 32,214 ) ( 479 ) 4,356,001

Net income — — — — 473,840 — — 473,840

Other comprehensive income, net of tax

— — — — — 24,496 — 24,496

Other comprehensive loss, net of tax — — — — — ( 10,214 ) — ( 10,214 )

Cash dividends declared:

7 unchanged sentences

— 3,484 1,238 39,931 ( 6,295 ) — 484 35,358

Common stock issued in acquisition — 15,709 5,498 205,636 — — — 211,134

Purchase of treasury stock — ( 1,615 ) — — — — ( 23,114 ) ( 23,114 )

Balance - December 31, 2021 $ 209,691 421,437 $ 148,482 $ 3,883,035 $ 883,645 $ ( 17,932 ) $ ( 22,855 ) $ 5,084,066

20 unchanged sentences

Originations of loans held for sale ( 1,003,818 ) ( 1,211,227 ) ( 537,985 )

Losses (gains) on sales of assets, net 1,891 ( 78,333 ) 2,401

Net deferred income tax (benefit) expense ( 5,060 ) 15,228 ( 11,780 )

(Gains) losses on sales of assets, net ( 901 ) 1,891 ( 78,333 )

Loss on extinguishment of debt 8,406 12,036 31,995

Net deferred income tax expense (benefit) 26,827 ( 5,060 ) 15,228

Net change in:

Fair value of borrowings hedged by derivative transactions

( 3,397 ) — —

Trading debt securities ( 38,130 ) — —

Cash surrender value of bank owned life insurance ( 8,817 ) ( 10,083 ) ( 8,232 )

19 unchanged sentences

Purchases of real estate property and equipment ( 39,428 ) ( 24,607 ) ( 23,375 )

Cash and cash equivalents acquired in acquisitions — 22,239 156,612

Cash and cash equivalents acquired in acquisitions, net 321,618 — 22,239

Net cash used in investing activities $ ( 1,080,781 ) $ ( 2,037,662 ) $ ( 897,319 )

28 unchanged sentences

48,453 16,062 312,143

Acquisitions:

Non-cash assets acquired:

Equity securities $ — $ — $ 51,382

Investment securities available for sale — 335,894 308,385

Investment securities held to maturity — 4,877 214,217

Loans — 3,378,358 3,736,984

Available for sale debt securities — — 335,894

Held to maturity debt securities 9,197 — 4,877

Loans, net 908,023 — 3,378,358

Premises and equipment 1,356 — 23,585

Lease right of use assets 6,745 — —

Bank owned life insurance 28,756 — 101,896

8 unchanged sentences

Long-term borrowings — — 430,130

Junior subordinated debentures issued to capital trusts — — 13,249

Accrued expenses and other liabilities 14,692 — 98,751

Total liabilities assumed $ 1,176,676 $ — $ 3,464,097

Net non-cash assets acquired $ — $ 813,016 $ 580,618

Net cash and cash equivalents acquired in acquisition $ — $ 22,239 $ 156,612

Net (liabilities assumed) non-cash assets acquired $ ( 110,484 ) $ — $ 813,016

Cash and cash equivalents acquired in acquisitions, net $ 321,618 $ — $ 22,239

Common stock issued in acquisition $ 211,134 $ — $ 835,255

4 unchanged sentences

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Note 1)

Valley National Bancorp, a New Jersey Corporation (Valley), is a bank holding company whose principal wholly-owned subsidiary is Valley National Bank (the “Bank”), a national banking association providing a full range of commercial, retail and trust and investment services largely through its offices and ATM network throughout northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn and Queens, Long Island, Florida and Alabama.

Valley National Bancorp, a New Jersey Corporation (Valley), is a financial holding company whose princ ipal wholly-owned subsidiary is Valley National Bank (the “Bank”), a national banking association providing a full range of commercial, retail and trust and investment services largely through its offices and ATM network throughout northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn and Queens, Long Island, Westchester County, New York, Florida and Alabama.

The Bank is subject to intense competition from other financial service providers and is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by certain regulatory authorities.

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• a title insurance agency in New York, which also provides services in New Jersey;

• an advisory firm specializing in the investment and management of tax credits;

• subsidiaries which hold, maintain and manage investment assets for the Bank;

6 unchanged sentences

Basis of Presentation

The consolidated financial statements of Valley include the accounts of its commercial bank subsidiary, Valley National Bank and all of Valley’s direct or indirect wholly-owned subsidiaries.

The consolidated financial statements of Valley include the Bank and all of Valley’s direct or indirect wholly-owned subsidiaries.

All inter-company transactions and balances have been eliminated.

5 unchanged sentences

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

Valley's previously reported consolidated statements of cash flows for the years ended December 31, 2020 and 2019 were revised to reflect a change in the presentation for loss on extinguishment of debt.

The revisions resulted in increases of $ 12.0 million and $ 32.0 million in “Loss on extinguishment of debt” and corresponding decreases in “Repayments of the long-term borrowings” for the years ended December 31, 2020 and 2019, respectively.

Management determined that the effect of the changes in presentation was immaterial to these periods.

Significant Estimates.

5 unchanged sentences

While management uses its best judgment, actual amounts or results could differ significantly from those estimates.

The current economic environment has increased the degree of uncertainty inherent in these material estimates.

The current economic environment has increased the degree of uncertainty inherent in these

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material estimates.

Actual results may differ from those estimates.

2 unchanged sentences

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest bearing deposits in other banks (including the Federal Reserve Bank of New York) and, from time to time, overnight federal funds sold.

The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank based on a

2020 Form 10-K 80

percentage of deposits.

These reserve balances totaled $ 896.1 million and $ 114.4 million at December 31, 2020 and 2019, respectively.

Effective March 26, 2020, the Federal Reserve Board reduced reserve requirement ratios to zero, effectively eliminating the requirements, due to a change in its approach to monetary policy.

The Federal Reserve Board indicated that it has no plans to re-impose reserve requirements but could in the future if conditions warrant.

Prior to March 2020, the Bank was required by the Federal Reserve System to maintain cash reserves equal to a percentage of certain deposits.

Investment Securities

Debt securities are classified at the time of purchase based on management’s intention, as securities available-for-sale or securities held-to-maturity.

Debt securities are classified at the time of purchase based on management’s intention, as securities held-to-maturity, securities available-for-sale or trading securities.

Investment securities classified as held-to-maturity are those that management has the positive intent and ability to hold until maturity.

1 unchanged sentence

Investment securities classified as available-for-sale are carried at fair value with unrealized holding gains and losses reported as a component of other comprehensive income or loss, net of tax.

Realized gains or losses on the available-for-sale securities are recognized by the specific identification method and are included in net gains and losses on securities transactions.

Equity securities are stated at fair value with any unrealized and realized gains and losses reported in non-interest income.

Realized gains or losses on the available-for-sale securities are recognized by the specific identification method and are included in net gains and losses on securities transactions within non-interest income.

Trading debt securities wholly consisting of municipal bonds are reported at fair value with the unrealized gains or losses due to changes in fair value reported within non-interest income.

Net trading gains and losses are included in net gains and

losses on securities transactions within non-interest income.

Equity securities are presented on the statements of financial condition at fair value with any unrealized and realized gains and losses reported in non-interest income.

Investments in Federal Home Loan Bank and Federal Reserve Bank stock, which have limited marketability, are carried at cost in other assets.

5 unchanged sentences

On January 1, 2020, Valley adopted Accounting Standards Update (ASU) No.

2016-13, which requires us to estimate and recognize an allowance for credit losses for held to maturity debt securities using the current expected credit loss methodology (CECL).

2016-13 "Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments", which requires us to estimate and recognize an allowance for credit losses for held to maturity debt securities using the current expected credit loss methodology (CECL).

Valley's CECL model includes a zero loss expectation for certain securities within the held to maturity portfolio, and therefore Valley is not required to estimate an allowance for credit losses related to these securities.

8 unchanged sentences

Accrued interest receivable is excluded from the estimate of credit losses.

See the "New Authoritative Accounting Guidance" section below and Note 4 for more details regarding our adoption of ASU No.

2016-13 and the allowance for credit losses for held to maturity securities.

See Note 4 for more details regarding the allowance for credit losses for held to maturity securities.

2021 Form 10-K

Impairment of Available for Sale Debt Securities

6 unchanged sentences

Valley also assesses the intent to sell the securities (as well as the likelihood of a near-term recovery).

If Valley intends to sell

2020 Form 10-K

an available for sale debt security or it is more likely than not that Valley will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged to the debt security’s fair value at the reporting date with any incremental impairment reported in earnings.

If Valley intends to sell an available for sale debt security or it is more likely than not that Valley will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged to the debt security’s fair value at the reporting date with any incremental impairment reported in earnings.

See Note 4 for additional information.

Prior to January 1, 2020, Valley evaluated its investment securities classified as held to maturity and available for sale for other-than temporary impairment.

Valley's evaluation of other-than-temporary impairment considered factors that included, among others, the causes of the decline in fair value, such as credit problems, interest rate fluctuations, or market volatility;

and the severity and duration of the decline.

Valley also assessed the intent and ability to hold the securities (as well as the likelihood of a near-term recovery), and the intent to sell the securities and whether it is more likely than not that Valley was required to sell the securities before the recovery of their amortized cost basis.

Once a debt security was deemed to be other-than-temporarily impaired, it was written down to fair value with the estimated credit related component was recognized as an other-than-temporary impairment charge in non-interest income.

The non-credit related component was recorded as an adjustment to accumulated other comprehensive income (loss), net of tax.

Loans Held for Sale

14 unchanged sentences

Allowance for Credit Losses for Loans

As noted previously, Valley adopted ASU No.

2016-13 on January 1, 2020, and thus 2020 follows the current expected credit losses methodology.

Prior periods have been reported in accordance with previously applicable GAAP, which followed the incurred credit losses methodology.

As previously noted, Valley adopted ASU No.

2016-13 on January 1, 2020, and, as a result, the 2021 and 2020 periods presented in the consolidated financial statements follow the current expected credit losses methodology.

The 2019 period has been reported in accordance with previously applicable GAAP, which followed the incurred credit losses methodology.

The following policies noted are under the current expected credit losses methodology.

A summary of Valley’s previous policies under the incurred credit losses methodology follows at the end of this section.

The allowance for credit losses (ACL) is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loans.

4 unchanged sentences

Previously, an allowance for loan losses was recognized based on probable incurred losses.

2021 Form 10-K 82

Reserves for loans that share common risk characteristics.

Valley estimated the collective ACL using a current expected credit losses methodology which is based on relevant information about historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the loan balances.

In estimating the component of the

2020 Form 10-K 82

allowance on a collective basis, Valley uses a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by generating probability of default and loss given default metrics.

In estimating the component of the allowance on a collective basis, Valley uses a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by generating probability of default and loss given default metrics.

The metrics are based on the migration of loans from performing to loss by credit quality rating or delinquency categories using historical life-of-loan analysis periods for each loan portfolio pool, and the severity of loss, based on the aggregate net lifetime losses.

17 unchanged sentences

This analysis is performed at the relationship manager level for all commercial and industrial loans and commercial real estate loans, and evaluated by the Loan Review Department on a test basis.

Loans with a grade that is below “Pass” grade are adversely classified.

Once a loan is adversely classified, the assigned relationship manager and/or a special assets officer in conjunction with the Credit Risk Management Department analyzes the loan to determine whether the loan is a collateral dependent asset (i.e., repayment is expected to be provided substantially through the sale or operation of the collateral) and the need to specifically assign a specific valuation allowance for loan losses to the loan, as discussed further below.

Loans with a grade that are below a “Pass” grade are adversely classified.

Once a loan becomes adversely classified, it automatically transitions from the "Pass" segment of the model to the corresponding adversely rated pool segment.

Within the transition matrix model, each adverse classification or segment (Special Mention, Substandard, Doubtful, and Loss) has its own lifetime expected credit loss rate derived from loan-level historical transitions between the different loan risk ratings categories.

Reserves for loans that that do not share common risk characteristics.

12 unchanged sentences

Unsecured consumer loans are generally fully charged-off when the loan is 150 days past due.

Under the incurred credit losses methodology utilized in the prior periods, the allowance for credit losses was maintained at a level estimated to absorb probable credit losses inherent in the loan portfolio, as well as other credit risk related charge-offs.

The allowance is based on ongoing evaluations of the probable estimated losses inherent in the non-purchase credit impaired

2021 Form 10-K

(PCI) loan portfolio and off-balance sheet unfunded letters of credit, as well as reserves for impairment of PCI loans subsequent to their acquisition date.

Valley had no allowance reserves related to PCI loans at December 31, 2019.

The Bank’s methodology for evaluating the appropriateness of the allowance included grouping the loan portfolio into loan segments based on common risk characteristics, tracking the historical levels of classified loans and delinquencies, estimating the appropriate loss look-back and loss emergence periods related to historical losses for each loan segment, providing specific reserves on impaired loans, and assigning incremental reserves where necessary based upon qualitative and economic outlook factors including numerous variables, such as the nature and trends of recent loan charge-offs.

Additionally, the volume of non-performing loans, concentration risks by size, type, and geography, new markets, collateral adequacy, credit policies and procedures, staffing, underwriting consistency, loan review and economic conditions are taken into consideration.

The allowance for loan losses consists of four elements:

(i) specific reserves for individually impaired credits, (ii) reserves for adversely classified, or higher risk rated, loans that are not impaired, (iii) reserves for other loans based on historical loss factors (using the appropriate loss look-back and loss emergence periods) adjusted for both internal and external qualitative risk factors to Valley, including the aforementioned factors, as well as changes in both organic and purchased loan portfolio volumes, the composition and concentrations of credit, new market initiatives, and the impact of competition on loan structuring and pricing, and (iv) an allowance for PCI loan pools impaired subsequent to the acquisition date, if applicable.

The allowances established for probable losses on specific loans are based on a regular analysis and evaluation of the loans.

Loans are evaluated based on an internal credit risk rating system for the commercial and industrial loan and commercial real estate loan portfolio segments and non-performing loan status for the residential and consumer loan portfolio segments.

Loans are risk-rated based on an internal credit risk grading process that evaluates, among other things:

(i) the obligor’s ability to repay;

(ii) the underlying collateral, if any;

and (iii) the economic environment and industry in which the borrower operates.

The allowance allocations for other loans (i.e., risk rated loans that are not adversely classified and loans that are not risk rated) are calculated by applying historical loss factors for each loan portfolio segment to the applicable outstanding loan portfolio balances.

Loss factors are calculated using statistical analysis supplemented by management judgment.

The statistical analysis considers historical default rates, historical loss severity in the event of default, and the average loss emergence period for each loan portfolio segment.

The management analysis includes an evaluation of loan portfolio volumes, the composition and concentrations of credit, credit quality and current delinquency trends.

Allowance for Unfunded Credit Commitments

5 unchanged sentences

Valley's lessor arrangements primarily consist of direct financing and sales-type leases for equipment included in the commercial and industrial loan portfolio.

Direct financing and sales-type leases are carried at the aggregate of lease payments receivable plus estimated residual value of the leased assets, net of unearned income, charge-offs and unamortized deferred costs of origination.

Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

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ROU assets are amortized into net occupancy and equipment expense over the expected lives of the leases.

2020 Form 10-K 84

Lease liabilities are discounted to their net present values on the balance sheet based on incremental borrowing rates as determined at the lease commencement dates using quoted interest rates for readily available borrowings, such as fixed rate FHLB borrowings, with similar terms as the lease obligations.

21 unchanged sentences

OREO totaled $ 2.3 million and $ 5.1 million at December 31, 2021 and 2020, respectively.

OREO included foreclosed residential real estate properties totaling $ 1.0 million and $ 2.1 million at December 31, 2020 and 2019, respectively.

Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $ 1.9 million and $ 2.8 million at December 31, 2020 and 2019, respectively.

OREO included foreclosed residential real estate properties totaling $ 1.0 million at December 31, 2020.

There were no forec losed residential real estate properties included in OREO at December 31, 2021.

2021 Form 10-K 84

Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process t otaled $ 2.5 million and $ 1.9 million at December 31, 2021 and 2020, respectively.

Intangible assets resulting from acquisitions under the acquisition method of accounting consist of goodwill and other intangible assets (see “Other Intangible Assets” below).

2 unchanged sentences

Goodwill is subject to annual tests for impairment or more often, if events or circumstances indicate it may be impaired.

Prior to January 1, 2020, goodwill impairment was determined using a two-step quantitative test.

On January 1, 2020, Valley adopted ASU No.

2017-04, which simplified the impairment test by eliminating the step two requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge.

2017-04 "Intangibles—Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment," which simplified the impairment test by eliminating the step two requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge.

Instead, an impairment loss is recognized if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the unit (formerly step one of the two-step test).

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Other Intangible Assets

2020 Form 10-K

deposits (the portion of an acquisition purchase price which represents value assigned to the existing deposit base) and, to a much lesser extent, customer lists obtained through acquisitions.

Other intangible assets primarily consist of loan servicing rights (largely generated from loan servicing retained by the Bank on residential mortgage loan originations sold in the secondary market to government sponsored enterprises), core deposits (the portion of an acquisition purchase price which represents value assigned to the existing deposit base) and, to a much lesser extent, various other types of intangibles obtained through acquisitions.

Other intangible assets are amortized using various methods over their estimated lives and are periodically evaluated for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable from future undiscounted cash flows.

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The amortization of loan servicing rights is recorded in non-interest income.

2021 Form 10-K

Stock-Based Compensation

Compensation expense for restricted stock units, restricted stock and stock option awards (i.e., non-vested stock awards) is based on the fair value of the award on the date of the grant and is recognized ratably over the service period of the award.

Beginning in 2019, Valley's long-term incentive compensation plan was amended to include a service period requirement for award grantees who are eligible for retirement pursuant to which an award will vest at one-twelfth per month after the grant date, which requires the grantees to continue service with Valley for one year in order for the award to fully vest.

Valley's long-term incentive compensation plan includes a service period requirement for award grantees who are eligible for retirement pursuant to which an award will vest at one-twelfth per month after the grant date and requires the grantees to continue service with Valley for one year in order for the award to fully vest.

Compensation expense for these awards is amortized monthly over a one year period after the grant date.

Prior to 2019, award grantees who were eligible for retirement did not have a service period requirement.

Compensation expense for these awards is recognized immediately in earnings.

The service period for non-retirement eligible employees is the shorter of the stated vesting period of the award or the period until the employee’s retirement eligibility date.

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See Note 12 for additional information.

Business Combinations

Business combinations are accounted for under the acquisition method of accounting.

Acquired assets, including separately identifiable intangible assets, and assumed liabilities are recorded at their acquisition-date estimated fair values.

The excess of the cost of acquisition over these fair values is recognized as goodwill.

During the measurement period, which cannot exceed one year from the acquisition date, changes to estimated fair values are recognized as an adjustment to goodwill.

Certain transaction costs are expensed as incurred.

Fair Value Measurements

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Valley's revenue within the scope of ASC Topic 606 includes:

(i) trust and investment services income from investment management, investment advisory, trust, custody and other products;

(ii) service charges on deposit accounts from

2020 Form 10-K 86

checking accounts, savings accounts, overdrafts, insufficient funds, ATM transactions and other activities;

and (iii) other income from fee income related to derivative interest rate swaps executed with commercial loan customers, and fees from interchange, wire transfers, credit cards, safe deposit box, ACH, lockbox and various other products and services-related income.

(i) trust and investment services income from investment management, investment, including tax credit, advisory services, trust, custody and other products;

(ii) service charges on deposit accounts from checking accounts, savings accounts, overdrafts, insufficient funds, ATM transactions and other activities;

and (iii) other income from fee income related to derivative interest rate swaps executed with commercial loan customers, fees from interchange, wire transfers, credit cards, safe deposit box, ACH, lockbox and various other products and services-related income.

Valley uses the asset and liability method to provide income taxes on all transactions recorded in the consolidated financial statements.

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The effect on deferred taxes of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.

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Valley maintains a reserve related to certain tax positions that management believes contain an element of uncertainty.

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Valley’s components of other comprehensive income or loss, net of deferred tax, include:

(i) unrealized gains and losses on securities available for sale;

(i) unrealized gains and losses on debt securities available for sale;

(ii) unrealized gains and losses on derivatives used in cash flow hedging relationships;

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Basic weighted-average number of common shares outstanding 407,445,379 403,754,356 337,792,270

403,754,356 337,792,270 331,258,964

Common stock equivalents 2,572,949 1,291,851 2,325,538

Diluted weighted-average number of common shares outstanding 410,018,328 405,046,207 340,117,808

405,046,207 340,117,808 332,693,718

Earnings per common share:

1 unchanged sentence

Diluted 1.12 0.93 0.87

2020 Form 10-K

Common stock equivalents represent the dilutive effect of additional common shares issuable upon the assumed vesting or exercise, if applicable, of restricted stock units and common stock options to purchase Valley’s common shares.

Common stock options with exercise prices that exceed the average market price 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 totaled approximately 1.7 million, 288 thousand, and 2.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Potential anti-dilutive weighted common shares totaled approximately 411 thousand, 1.7 million, and 288 thousand for the years ended December 31, 2021, 2020 and 2019, respectively.

Preferred and Common Stock Dividends

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Cash dividends to both preferred and common shareholders are payable and accrued when declared by Valley's Board of Directors.

2021 Form 10-K

Treasury Stock

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Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges.

Cash Flow Hedges.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income or loss and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings.

Valley calculates the credit valuation adjustments to the fair value of derivatives designated as fair value hedges on a net basis by counterparty portfolio, as an accounting policy election.

Fair Value Hedges.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings.

1 unchanged sentence

If a hedging relationship is terminated due to ineffectiveness, and the derivative instrument is not re-designated to a new hedging relationship, the subsequent change in fair value of such instrument is charged directly to earnings.

Interest Rate Contracts and Other Non-designated Hedges.

Derivatives not designated as hedges do not meet the hedge accounting requirements under U.S.

Changes in fair value of derivatives not designated in hedging relationships are recorded directly in earnings.

Valley calculates the credit valuation adjustments to the fair value of derivatives designated as fair value hedges on a net basis by counterparty portfolio, as an accounting policy election.

Contracts in an asset position are included in other assets and contracts in a liability position are included in other liabilities.

Changes in fair value of derivatives not designated in hedging relationships are recorded directly in earnings within other non-interest expense.

New Authoritative Accounting Guidance

New Accounting Guidance Adopted in 2020.

2016-13, "Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments" amends the accounting guidance on the impairment of financial instruments.

The FASB issued an amendment to replace the incurred loss impairment methodology under prior accounting guidance with a new CECL model.

Valley adopted ASU No.

2016-13 on January 1, 2020 using the modified retrospective approach for all financial assets measured at amortized cost (except for PCD loans) and off-balance sheet credit exposures.

At adoption, Valley recorded a $ 100.4 million increase to its allowance for credit losses, including reserves of $ 92.5 million, $ 7.1 million and $ 793 thousand

2020 Form 10-K 88

related to loans, unfunded credit commitments and held to maturity debt securities, respectively.

Of the $ 92.5 million in loan reserves, $ 61.6 million represents PCD loan related reserves which were recognized through a gross-up that increased the amortized cost basis of loans with a corresponding increase to the allowance for credit losses, and therefore resulted in no impact to shareholders' equity.

The remaining non-credit discount of $ 97.7 million related to PCD loans is accreted into interest income over the life of the loans at the effective interest rate effective January 1, 2020.

Valley elected the prospective transition approach for PCD loans that were previously classified as purchased-credit impaired (PCI) loans.

Under this guidance, Valley was not required to reassess whether PCI loans met the PCD loans criteria as of the date of the date of adoption.

The non-PCD loan related increase to the allowance for credit losses of $ 38.8 million, including the reserves for unfunded loan commitments and held to maturity debt securities, was offset in shareholders' equity and deferred tax assets.

See Notes 4 and 5 for allowance for credit losses required disclosures.

Reporting periods prior to the adoption date are presented in accordance with previously applicable GAAP.

2017-04, "Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment" eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test guidance) to measure a goodwill impairment charge.

Instead, an entity will be required to record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on Step 1 of the current guidance).

In addition, ASU No.

2017-04 eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.

However, an entity will be required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets.

An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

2017-04 was effective for Valley on January 1, 2020 and Valley applied this new guidance in its annual goodwill impairment test performed during the second quarter 2020.

New Accounting Guidance Issued in 2020.

New Accounting Guidance Issued and Adopted in 2020.

2020-04, "Reference Rate Reform (Topic 848)" provides optional expedients and exceptions for applying U.S.

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2020-04 became effective for all entities as of March 12, 2020 and can apply to all LIBOR reference rate modifications any time through December 31, 2022.

Management is currently evaluating the impact of the ASU on Valley’s consolidated financial statements.

Valley has established a working group to identify and prepare fall back language and replacement provisions.

In addition, the working group is evaluating substitute indices for LIBOR and testing Valley's models and systems that currently use LIBOR to ensure reference rates change readiness.

New Accounting Guidance Adopted in the First Quarter 2021.

Valley’s LIBOR project working group, consisting of key stakeholders from throughout Valley, continue to monitor new developments for transitioning to alternative reference rates to align with regulatory guidelines.

Valley has provided both internal and external communications that reference and educate customers and associates regarding the LIBOR transition and continues to update fall back language that reference LIBOR-based rates to ensure full reference rates change readiness.

Valley’s technology systems have been updated to handle the new replacement rates.

Valley started originating and renewing loans at new alternative benchmark rates after December 31, 2021.

SOFR and Term SOFR are the preferred rates for loans and derivatives.

Loans that were closed before December 31, 2021, may continue to be priced using LIBOR until June 30, 2023.

Management is still assessing the expected impact of LIBOR cessation on Valley’s consolidated financial statements.

New Accounting Guidance Adopted in 2021.

2020-08, "Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs" provides clarification and affects the guidance previously issued by ASU No.

2017-08 “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20):

Premium Amortization on Purchased Callable Debt Securities.” ASU No.

Premium Amortization on Purchased

2021 Form 10-K 88

Callable Debt Securities.” ASU No.

2020-08 clarifies that an entity should reevaluate whether a debt security with multiple call dates is within the scope of paragraph 310-20-35-33.

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Valley adopted ASU No.

2020-08 on January 1, 2021.

This new guidance is not expected to have a significant impact on Valley’s consolidated financial statements.

2021-01 "Reference Rate Reform (Topic 848)" extends some of Topic 848’s optional expedients to derivative contracts impacted by the discounting transition, including for derivatives that do not reference LIBOR or other reference rates that are expected to be discontinued.

2021-01 is effective for all entities immediately upon issuance and may be elected retrospectively to eligible modifications as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications made on or after any date within the interim period including January 7, 2021.

2020-08 on January 1, 2021 and the new guidance did not have a significant impact on Valley’s consolidated financial statements

New Accounting Guidance Issued in 2021.

2021-01 "Reference Rate Reform (Topic 848)" extends some o f Accounting Standards Codification Topic 848’s optional expedients to derivative contracts impacted by the discounting transition, including for derivatives that do not reference LIBOR or other reference rates that are expected to be discontinued.

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

2020 Form 10-K

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

BUSINESS COMBINATIONS (Note 2)

The Westchester Bank Holding Corporation

On December 1, 2021, Valley completed its acquisition of The Westchester Bank Holding Corporation (Westchester) and its principal subsidiary, The Westchester Bank which was headquartered in White Plains, New York.

As of December 1, 2021, Westchester had approximately $ 1.4 billion in assets, $ 915.0 million in loans, and $ 1.2 billion in deposits, after purchase accounting adjustments, and a branch network of seven locations in Westchester County, New York.

The common shareholders of Westchester received 229.645 shares of Valley common stock for each Westchester share they owned prior to the merger.

The total consideration for the merger was $ 211.1 million, consisting of approximately 15.7 million shares of Valley common stock.

The transaction was accounted for under the acquisition method of accounting and accordingly t he results of Westchester's operations have been included in Valley's consolidated financial statements for the year ended December 31, 2021 from the date of acquisition.

2021 Form 10-K

The following table sets forth assets acquired, and liabilities assumed in the Westchester acquisition, at their estimated fair values as of the closing date of the transaction:

December 1, 2021

($ in thousands)

Assets acquired:

Cash and cash equivalents $ 332,221

Held to maturity debt securities 9,197

Loans, net 908,023

Premises and equipment 1,356

Right of use asset 5,873

Bank owned life insurance 28,756

Accrued interest receivable 2,179

Goodwill 63,469

Other intangible assets 8,130

Other assets 22,861

Total assets acquired $ 1,382,065

Liabilities assumed:

Non-interest bearing $ 434,780

Savings, NOW and money market 636,569

Time deposits 90,635

Total deposits 1,161,984

Lease liabilities 5,873

Accrued expense and other liabilities 3,074

Total liabilities assumed $ 1,170,931

Common stock issued in acquisition $ 211,134

The determination of the fair value of the assets acquired and liabilities assumed required management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change.

The fair value estimates are subject to change for up to one year after the closing date of the transaction if additional information (existing at the date of closing) relative to closing date fair values becomes available.

Fair Value Measurement of Assets Acquired and Liabilities Assumed

Described below are the methods used to determine the fair values of the significant assets acquired and liabilities assumed in Westchester acquisition.

Cash and cash equivalents.

The estimated fair values of cash and cash equivalents approximate their stated face amounts, as these financial instruments are either due on demand or have short-term maturities.

Investment securities.

The investment securities acquired from Westchester were classified as held to maturity debt securities based on Valley's intent at the acquisition date.

The estimated fair values of the investment securities were calculated utilizing Level 2 inputs similar to the valuation techniques used for Valley's investment portfolios detailed in Note 3.

The acquired loan portfolio was recorded at its estimated value based on a discounted cash flow methodology.

The acquired loan portfolio was segregated into categories for valuation purposes primarily based on loan type (commercial and industrial, commercial real estate, multifamily, construction, home equity and other consumer) and credit risk rating.

The estimated fair value incorporates adjustments related to market loss assumptions and prevailing market interest rates for comparable assets and other market factors such as liquidity from the perspective of a market participant.

Management estimated the cash flows expected to be collected at the acquisition date by using valuation models that incorporated loan contractual characteristics (such as payment type, amortization type, and term to maturity) as well as estimates of key valuation assumptions (such as prepayment speeds, default rates, and loss severity rates).

The expected cash flows from the acquired loan

2021 Form 10-K 90

portfolios were discounted to present value based on estimated market rates.

The market rates were estimated using a buildup approach based on the following components:

funding cost, servicing cost, and consideration of liquidity premium.

In addition, coupon rates for recently originated loans and available market data regarding origination rates were also considered in the analysis.

The methods used to estimate the Level 3 fair values of loans are extremely sensitive to the assumptions and estimates used.

While management attempted to use assumptions and estimates that best reflected the acquired loan portfolios and current market conditions, a greater degree of subjectivity is inherent in these values than in those determined in active markets.

Also, acquired portfolio loans and leases were evaluated upon acquisition and classified as either PCD, which indicates that the loan has experienced a more-than-insignificant deterioration in credit quality since origination, or non-PCD.

Valley considered a variety of factors in evaluating the acquired loans for a more-than-insignificant deterioration in credit quality, including but not limited to risk grades, delinquency, non-performing status, current or previous troubled debt restructurings, watch list credits and other qualitative factors that indicated a deterioration in credit quality since origination.

For PCD loans, an initial allowance was determined based on Valley’s CECL methodology and was added to the acquisition date fair value of each PCD loan to establish its initial amortized cost basis.

The difference between the unpaid principal balance of loans and the calculated amortized cost basis resulted in a net non-credit discount totaling $ 8.5 million.

The net discount is expected be accreted into interest income on a level-yield method over an average contractual life of the loans totaling 8 years.

The following table provides a reconciliation of the difference between the purchase price and the par value of the PCD loans acquired from Westchester:

December 1, 2021

($ in thousands)

Purchase price of PCD loans $ 346,883

Allowance for credit losses at acquisition 6,542

Non-credit discount at acquisition 8,457

Par value of acquired PCD loans $ 361,882

Other intangible assets.

Other intangible assets consisting of core deposit intangibles (CDI) are measures of the value of non-maturity checking, savings, NOW and money market customer deposits that are acquired in a business combination.

The fair value for CDI was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative costs of funds, and the interest costs associated with the customer deposits.

The CDI is amortized over an estimated useful life of 10 years to approximate the existing deposit relationships acquired.

The fair values of deposit liabilities with no stated maturity (i.e., non-interest bearing accounts and savings, NOW and money market accounts) are equal to the carrying amounts payable on demand.

The fair values of certificates of deposit represent contractual cash flows, discounted to present value using interest rates currently offered on deposits with similar characteristics and remaining maturities.

Dudley Ventures

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

The transaction included the acquisition of DV Fund Advisors and DV Advisory Services which were both subsequently merged and renamed Dudley Ventures, as well as DV's community development entity, DV Community Investment.

The transaction price included $ 11.3 million of cash at the closing date and fixed future stock consideration totaling $ 3.8 million.

On November 16, 2021, Valley also acquired DV Financial Services, a registered broker-dealer regulated by FINRA, which is largely inactive.

Goodwill and other intangible assets related to the acquired DV entities totaled $ 13.1 million and $ 2.1 million, respectively.

See Note 8 for further details.

Oritani Financial Corp.

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Oritani had approximately $ 4.3 billion in assets, $ 3.4 billion in net loans and $ 2.9 billion in deposits, after purchase accounting adjustments, and a branch network of 26 locations.

The acquisition represented a significant addition to Valley's New Jersey franchise, and meaningfully enhanced its presence in the Bergen County market.

The common shareholders of Oritani received 1.60 shares of Valley common stock for each Oritani share that they owned prior to the merger.

The total consideration for the acquisition was approximately $ 835.3 million, consisting of 71.1 million shares of Valley common stock and the outstanding Oritani stock-based awards.

Merger expenses totaled $ 1.9 million and $ 16.6 million for the years ended December 31, 2020 and 2019, respectively, which primarily related to salary and employee benefits, as well as professional and legal, net occupancy and equipment, and other expenses.

These expenses are included in non-interest expense on the consolidated statements of income.

2021 Form 10-K

During 2020, Valley revised the estimated fair values of the acquired assets as of the Oritani acquisition date due to additional information obtained that existed as of December 1, 2019.

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These adjustments resulted in an $ 8.8 million increase in goodwill (see Note 8 for amount of goodwill as allocated to Valley's business segments).

Had the acquisition of Oritani taken place on the beginning of the following annual periods presented, Valley’s revenues (defined as the sum of net interest income and non-interest income), net income, basic earnings per share, and diluted earnings per share would have equaled the amounts indicated in the following table for the years ended December 31, 2019 and 2018:

Had the acquisition of Oritani taken place in the beginning of 2019.

Valley’s revenues (defined as the sum of net interest income and non-interest income), net income, basic earnings per share, and diluted earnings per share would have equaled the amounts indicated in the following table for the year ended December 31, 2019:

(in thousands, except per share data) Unaudited

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Diluted earnings per share 0.85

USAmeriBancorp, Inc.

On January 1, 2018, Valley completed its acquisition of USAmeriBancorp, Inc.

(USAB) headquartered in Clearwater, Florida.

USAB, largely through its wholly-owned subsidiary, USAmeriBank, had approximately $ 5.1 billion in assets, $ 3.7 billion in net loans and $ 3.6 billion in deposits, after purchase accounting adjustments, and maintained a branch network of 29 offices.

The acquisition represented a significant addition to Valley’s Florida presence, primarily in the Tampa Bay market.

The acquisition also brought Valley to the Birmingham, Montgomery, and Tallapoosa areas in Alabama, where USAB maintained 15 of its branches.

The common shareholders of USAB received 6.1 shares of Valley common stock for each USAB share they owned prior to the merger.

The total consideration for the acquisition was approximately $ 737 million, consisting of 64.9 million shares of Valley common stock and the outstanding USAB stock-based awards.

Merger expenses totaled $ 17.4 million for the year ended December 31, 2018, which primarily related to salary and employee benefits and other expenses are included in non-interest expense on the consolidated statements of income.

Pending Acquisition (Unaudited)

Bank Leumi Le-Israel Corporation

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

subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA, and collectively referred to as "Bank Leumi USA".

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

As of December 31, 2021, Bank Leumi USA had total asset s of $ 8.3 billion, total deposits of $ 7.1 billion, and gross loans of $ 5.7 billion.

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

Based on Valley’s closing stock price on December 31, 2021, the transaction is valued at an estimated $ 1.2 billion, inclusive of the value of options and upon completion of the acquisition, Bank Leumi Le-Israel B.M.

will own approximately 14 percent of Valley's common stock.

Valley has received regulatory approval from the Federal Reserve Bank of New York and the Office of the C omptroller of the Currency, as well as Valley shareholder approval of the issuance of Valley common stock in connection with the acquisition.

The acquisition remains subject to regulatory approval by the New York State Department of Financial Services, as well as other customary closing conditions.

The acquisition is anticipated to close in the second quarter 2022.

Merger expenses for all Valley acquisition related activities totaled $ 8.9 million, $ 1.9 million and $ 16.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The merger expenses mainly consisted of salary and employee benefits, as well as professional and legal, net occupancy and equipment, and other expenses included in non-interest expense on the consolidated statements of income.

FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Note 3)

Accounting Standards Codification (ASC) Topic 820, “Fair Value Measurements” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

Accounting Standards Codification (ASC) Topic 820, “Fair Value Measurement” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

18 unchanged sentences

$ 32,844 $ 21,284 $ — $ —

Trading debt securities 38,130 — 38,130 —

Available for sale debt securities:

Treasury securities 51,393 51,393 — —

government agency securities 20,925 — 20,925 —

14 unchanged sentences

Collateral dependent loans $ 47,871 $ — $ — $ 47,871

Loan servicing rights 15,603 — — 15,603

Foreclosed assets 2,931 — — 2,931

10 unchanged sentences

Investment securities:

Equity securities at fair value $ 41,410 $ 41,410 $ — $ —

Equity securities (1)

$ 26,379 $ 18,600 $ — $ —

Available for sale debt securities:

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Total $ 58,218 $ — $ — $ 58,218

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

(1) Includes equity securities measured as net asset value (NAV) per share (or its equivalent) as a practical expedient totaling $ 11.6 million and $ 7.8 million at December 31, 2021 and 2020, respectively.

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

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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.

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.

2021 Form 10-K 94

Available for sale debt securities.

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Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

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

2020 Form 10-K 92

from market observable data.

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 December 31, 2020 and 2019.

See Note 4 for additional information regarding this impaired security.

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.

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

Loans held for sale.

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The collateral dependent loan direct charge-offs to the allowance for loan losses totaled $ 2.1 million and $ 4.5 million for the years ended December 31, 2021 and 2020, respectively.

At December 31, 2020, collateral dependent loans, primarily consisting of taxi medallion loans, with a total amortized cost of $ 104.4 million and $ 74.6 million at December 31, 2020 and 2019, respectively, were reduced by specific allowance for loan losses allocations totaling $ 69.1 million and $ 35.5 million to a reported total net carrying amount of $ 35.2 million and $ 39.1 million at December 31, 2020 and 2019, respectively.

At December 31, 2021, collateral dependent loans with a total amortized cost of $ 114.8 million and $ 104.4 million at December 31, 2021 and 2020, respectively, including our taxi medallion loan portfolio, were reduced by specific allowance for loan losses allocations totaling $ 66.9 million and $ 69.1 million to a reported total net carrying amount of $ 47.9 million and $ 35.2 million at December 31, 2021 and 2020, respectively.

Loan servicing rights.

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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.

Certain loan servicing rights were re-measured at fair value totaling $ 15.6 million and $ 1.6 million at December 31, 2020 and 2019, respectively.

Certain loan servicing rights were re-measured at fair value totaling $ 15.6 million at December 31, 2020.

There were no loan servicing rights re-measured at fair value at December 31, 2021.

See Note 8 for additional information.

2021 Form 10-K

Foreclosed assets.

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When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for loan losses.

If further declines in the estimated fair value

2020 Form 10-K

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 1.5 percent to 22 percent at December 31, 2020 and were no t material at December 31, 2019.

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.

At December 31, 2021, the adjustments to appraisals of foreclosed assets were no t material as compared to adjustments ranging from 1.5 percent to 22 percent at December 31, 2020.

Other Fair Value Disclosures

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(4) Included in accrued expenses and other liabilities.

2020 Form 10-K

INVESTMENT SECURITIES (Note 4)

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Equity securities carried at fair value totaled $ 36.5 million and $ 29.4 million at December 31, 2021 and 2020, respectively.

At December 31, 2020, Valley's equity securities consisted of one publicly traded money market mutual fund, CRA investments both public traded and privately held and, to a lesser extent, equity securities without readily determinable fair values.

At December 31, 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.

Valley's CRA and other equity investments are a mixture of both public traded entities and privately held entities without readily determinable fair market values.

Trading Debt Securities

The fair value of trading debt securities, wholly consisting of municipal bonds, totaled $ 38.1 million at December 31, 2021.

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

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

See the "Realized Gains and Losses" section below.

2021 Form 10-K

Available for Sale Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of investment securities available for sale at December 31, 2020 and 2019 were as follows:

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

(in thousands)

December 31, 2021

Treasury securities $ 50,031 $ 1,362 $ — $ 51,393

government agency securities $ 20,323 $ 608 $ ( 6 ) $ 20,925

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Corporate and other debt securities 120,871 3,177 ( 556 ) 123,492

Total investment securities available for sale $ 1,293,506 $ 46,886 $ ( 919 ) $ 1,339,473

Total $ 1,116,091 $ 19,252 $ ( 6,534 ) $ 1,128,809

December 31, 2020

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Corporate and other debt securities 89,689 2,294 ( 32 ) 91,951

Total investment securities available for sale $ 1,558,787 $ 13,596 $ ( 5,582 ) $ 1,566,801

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

2021 Form 10-K 98

The age of unrealized losses and fair value of related securities available for sale at December 31, 2020 and 2019 were as follows:

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

Twelve Months More than

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December 31, 2020

Treasury securities $ 25,019 $ ( 21 ) $ — $ — $ 25,019 $ ( 21 )

government agency securities

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As of December 31, 2021, the fair value of securities available for sale that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $ 568.7 million.

2020 Form 10-K

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

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Residential mortgage-backed securities 895,279 904,502

Total investment securities available for sale $ 1,293,506 $ 1,339,473

Total $ 1,116,091 $ 1,128,809

2021 Form 10-K

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.

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These types of securities may pose a higher risk of future impairment charges by Valley as a result of the unpredictable nature of the U.S.

economy and its potential negative effect on the future performance of the security issuers, including due to the economic effects of COVID-19 pandemic.

economy and its potential negative effect on the future performance of the security issuers, including due to the economic effects of the COVID-19 pandemic.

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

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Valley has evaluated available for sale debt securities that are in an unrealized loss position as of December 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 year ended December 31, 2020 and, as a result, there was no allowance for credit losses for available for sale debt securities at December 31, 2020.

During 2019, Valley recognized a $ 2.9 million impairment charge on one special revenue bond classified as available for sale (within the obligations of states and state agencies in the tables above).

The impairment was due to severe credit deterioration disclosed by the issuer in the second quarter 2019, as well as the issuer's default on its contractual payment.

At December 31, 2020, the non-accruing impaired security had an adjusted amortized cost and fair value of $ 680 thousand and $ 815 thousand, respectively.

At December 31, 2020, the revenue bonds, included in the obligations of states and political subdivisions, are a mix of municipal bonds with investment grade ratings or non-rated revenue bonds mostly secured by Ginnie Mae securities that are commonly referred to as Tax Exempt Mortgage Securities (TEMS) and paying in accordance with their contractual terms.

2020 Form 10-K 98

Based on a comparison of the present value of expected cash flows to the amortized cost, management recognized no impairment during the years ended December 31, 2021 and 2020, respectively, and, as a result, there was no allowance for credit losses for available for sale debt securities at December 31, 2021 and 2020.

Held to Maturity Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of investment debt securities held to maturity at December 31, 2020 and 2019 were as follows:

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

Losses Fair Value

7 unchanged sentences

Total obligations of states and political subdivisions 337,962 6,601 ( 399 ) 344,164

470,259 14,352 ( 105 ) 484,506

Residential mortgage-backed securities 2,166,142 14,599 ( 28,440 ) 2,152,301

1 unchanged sentence

Corporate and other debt securities 53,750 559 ( 124 ) 54,185

Total investment securities held to maturity $ 2,173,011 $ 62,326 $ ( 7,725 ) $ 2,227,612

Total $ 2,668,697 $ 25,980 $ ( 34,072 ) $ 2,660,605

December 31, 2020

5 unchanged sentences

Total obligations of states and political subdivisions 470,259 14,352 ( 105 ) 484,506

500,705 13,441 ( 539 ) 513,607

Residential mortgage-backed securities 1,550,306 39,603 ( 254 ) 1,589,655

1 unchanged sentence

Corporate and other debt securities 40,750 672 ( 1 ) 41,421

Total investment securities held to maturity $ 2,336,095 $ 34,556 $ ( 11,931 ) $ 2,358,720

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

2021 Form 10-K 100

The age of unrealized losses and fair value of related securities held to maturity at December 31, 2020 and 2019 were as follows:

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

Twelve Months More than

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Obligations of states and political subdivisions:

Obligations of states and state agencies $ 17,000 $ ( 254 ) $ 5,517 $ ( 58 ) $ 22,517 $ ( 312 )

Municipal bonds 9,403 ( 87 ) — — 9,403 ( 87 )

Total obligations of states and political subdivisions 26,403 ( 341 ) 5,517 ( 58 ) 31,920 ( 399 )

Residential mortgage-backed securities

4 unchanged sentences

December 31, 2020

government agency securities $ 5,183 $ ( 41 ) $ — $ — $ 5,183 $ ( 41 )

Obligations of states and political subdivisions:

Obligations of states and state agencies $ 5,546 $ ( 105 ) $ — $ — $ 5,546 $ ( 105 )

11,178 ( 55 ) 32,397 ( 474 ) 43,575 ( 529 )

Municipal bonds — — 798 ( 10 ) 798 ( 10 )

Total obligations of states and political subdivisions

11,178 ( 55 ) 33,195 ( 484 ) 44,373 ( 539 )

Residential mortgage-backed securities

16 unchanged sentences

Residential mortgage-backed securities 2,166,142 2,152,301

Total investment securities held to maturity $ 2,173,011 $ 2,227,612

Total $ 2,668,697 $ 2,660,605

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.

13 unchanged sentences

Total obligations of states and political subdivisions 267,222 — 5,576 65,164 337,962

394,694 — 5,650 69,915 470,259

Residential mortgage-backed securities 2,166,142 — — — 2,166,142

1 unchanged sentence

Corporate and other debt securities 2,000 6,000 — 45,750 53,750

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

Total $ 2,509,187 $ 6,000 $ 5,576 $ 147,934 $ 2,668,697

December 31, 2020

5 unchanged sentences

Total obligations of states and political subdivisions 394,694 — 5,650 69,915 470,259

451,175 5,722 — 43,808 500,705

Residential mortgage-backed securities 1,550,306 — — — 1,550,306

1 unchanged sentence

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

Total investment securities held to maturity $ 2,216,991 $ 10,722 $ — $ 108,382 $ 2,336,095

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.

6 unchanged sentences

Treasury securities, U.S.

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

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

To measure the expected credit losses on held to maturity debt securities that have loss expectations, Valley estimates the expected credit losses using a discounted cash flow model developed by a third-party.

See Note 1 for further details.

At December 31, 2020, held to maturity debt securities were carried net of allowance for credit losses totaling $ 1.4 million.

Valley recorded a provision for credit losses of $ 635 thousand during the year December 31, 2020.

There were no net charge-offs of debt securities in the respective periods.

Realized Gains and Losses

2021 Form 10-K 102

Gross gains and losses realized on sales, maturities and other securities transactions included in earnings for the years ended December 31, 2020, 2019 and 2018 were as follows:

Held to maturity debt securities are carried net of an allowance for credit losses.

The following table details the activity in the allowance for credit losses for the years ended December 31, 2021 and 2020:

(in thousands)

Beginning balance $ 1,428 $ —

Adoption of ASU No.

2016-13 on January 1, 2020 — 793

(Credit) provision for credit losses ( 263 ) 635

Ending balance $ 1,165 $ 1,428

There were no net charge-offs of held to maturity debt securities in the respective periods presented in the table above.

Realized Gains and Losses

Gross gains and losses realized on sales, maturities and other securities transactions related to non-trading securities and net gains on trading debt securities included in earnings for the years ended December 31, 2021, 2020 and 2019 were as follows:

2021 2020 2019

3 unchanged sentences

Gross losses ( 550 ) ( 9 ) —

$ 656 $ — $ ( 2,112 )

Total $ 820 $ 656 $ —

Maturities and other securities transactions:

1 unchanged sentence

Gross losses ( 285 ) ( 166 ) ( 217 )

$ ( 132 ) $ ( 150 ) $ ( 230 )

Total ( 275 ) ( 132 ) ( 150 )

Net gains on trading debt securities 1,213 — —

Net gains (losses) on securities transactions $ 1,758 $ 524 $ ( 150 )

Net gains on sales transactions for the year ended December 31, 2020 (as presented in the table above) primarily related to the sales of $ 30 million of certain available for sale municipal securities.

Net losses on sales transactions in 2018 primarily related to the sales of equity securities previously classified as available for sale, certain municipal securities acquired from USAB and all of Valley's private label mortgage-backed securities classified as available for sale, including securities that were previously impaired.

Net gains on sales transaction s (as presented in the table above) include sales of available for sale debt securit ies related to $ 92.0 million of U.S.

Treasury securities and residential mortgage-backed securities for the year ended December 31, 2021, and $ 30.0 million of certain municipal securities for the for the year ended December 31, 2020.

2021 Form 10-K

LOANS AND ALLOWANCE FOR CREDIT LOSSES FOR LOANS (Note 5)

2 unchanged sentences

Commercial and industrial:

Commercial and industrial $ 5,411,601 $ 4,709,569

Commercial and industrial PPP loans * 435,950 2,152,139

Total commercial and industrial loans 5,847,551 6,861,708

Commercial real estate:

2 unchanged sentences

Total commercial real estate loans 20,790,066 18,470,823

18,470,823 17,643,759

Residential mortgage 4,545,064 4,183,743

4 unchanged sentences

Total loans $ 34,153,657 $ 32,217,112

* Includes $ 2.2 billion of loans originated under the SBA Paycheck Protection Program (PPP), net of unearned fees totaling $ 43.2 million at December 31, 2020.

Total loans include net unearned discounts and deferred loan fees of $ 95.8 million at December 31, 2020 and net unearned premiums and deferred loan costs totaling and $ 12.6 million at December 31, 2019.

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

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 90.2 million and $ 86.3 million at December 31, 2020 and December 31, 2019, respectively, and is presented separately in the consolidated statements of financial condition.

Valley transferred and sold $ 30.0 million and $ 436.5 million of residential mortgage loans from the loan portfolio to loans held for sale in 2020 and 2019, respectively.

Valley transferred and sold $ 798 million of commercial real estate loans

2020 Form 10-K 102

from the loan portfolio to loans held for sale in 2019.

* Represents SBA Paycheck Protection Program (PPP) loans, net of unearned fees totaling $ 12.1 million and $ 43.2 million at December 31, 2021 and 2020, respectively.

Total loans include net unearned discounts and deferred loan fees of $ 78.5 million and $ 95.8 million at December 31, 2021 and 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 December 31, 2021 and 2020.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 83.7 million and $ 90.2 million at December 31, 2021 and 2020, respectively, and is presented within total accrued interest receivable on 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 in 2020.

Excluding the loan transfers, there were no other sales of loans from the held for investment portfolio during the years December 31, 2021 and 2020.

9 unchanged sentences

Outstanding at end of year $ 233,439

2021 Form 10-K 104

Loan Portfolio Risk Elements and Credit Risk Management

12 unchanged sentences

Whenever possible, Valley will obtain the personal guarantee of the borrower’s principals to mitigate the risk.

Unsecured loans, when m ade, are generally granted to the Bank’s most credit worthy borrowers.

Unsecured commercial and industrial loans totaled $ 2.7 billion (including $ 2.2 billion of SBA guaranteed PPP loans) and $ 606.1 million at December 31, 2020 and 2019, respectively.

Unsecured loans, when made, are generally granted to the Bank’s most credit worthy borrowers.

Unsecured commercial and industrial loans totaled $ 1.0 billion and $ 2.7 billion at December 31, 2021 and 2020, respectively (including $ 436.0 million and $ 2.2 billion of SBA guaranteed PPP loans, respectively).

The commercial portfolio also includes taxi medallion loans totaling approximately $ 86.0 million with related reserves of $ 58.5 million at December 31, 2021.

All of these loans are on non-accrual status due to ongoing weakness exhibited in the taxi industry caused by strong competition from alternative ride-sharing services and the economic stress caused by COVID-19 pandemic.

Commercial real estate loans .

7 unchanged sentences

These loans are generally secured by the real estate to be developed and may also be secured by additional real estate to mitigate the risk.

Non-revolving construction loans often involve the disbursement of substantially all committed funds with repayment

2020 Form 10-K

substantially dependent on the successful completion and sale, or lease, of the project.

Non-revolving construction loans often involve the disbursement of substantially all committed funds with repayment substantially dependent on the successful completion and sale, or lease, of the project.

Sources of repayment for these types of loans may be from pre-committed permanent loans from other lenders, sales of developed property, or an interim loan commitment from Valley until permanent financing is obtained elsewhere.

10 unchanged sentences

In deciding whether to originate each residential mortgage, Valley considers the qualifications of the borrower as well as the value of the underlying property.

2021 Form 10-K

Home equity loans.

14 unchanged sentences

Management believes the aggregate risk exposure to unsecured loans and lines of credit was not significant at December 31, 2021.

2020 Form 10-K 104

Credit Quality

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

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

Past Due and Non-Accrual Loans

3 unchanged sentences

Loans Current

Loans Non-Accrual Loans Without Allowance for Credit Losses

Loans Non-Accrual Loans Without Allowance for Loan Losses

(in thousands)

5 unchanged sentences

Total commercial real estate loans 16,362 — 32 101,233 117,627 20,672,439 20,790,066 70,719

35,345 1,326 993 46,963 84,627 18,386,196 18,470,823 32,416

Residential mortgage 10,999 3,314 677 35,207 50,197 4,494,867 4,545,064 20,401

6 unchanged sentences

2021 Form 10-K 106

The following table presents past due, non-accrual and current loans by loan portfolio class at December 31, 2019.

At December 31, 2019, purchased credit-impaired (PCI) loans were excluded from past due and non-accrual loans reported because they continued to earn interest income from the accretable yield at the pool level.

The PCI loan pools are accounted for as PCD loans (on a loan level basis with a related allowance for credit losses) under the CECL standard adopted at January 1, 2020 and reported in the past due loans and non-accrual loans in the table above at December 31, 2020.

Past Due and Non-Accrual Loans

1 unchanged sentence

Loans 90 Days or More

Past Due Non-Accrual

Loans Current

Past Due Loans Non-Accrual

Loans Current Loans Total Loans Non-Accrual Loans Without Allowance for Loan Losses

(in thousands)

20 unchanged sentences

Loans that do not currently pose a sufficient risk to warrant classification in one of the aforementioned categories but pose weaknesses that deserve management’s close attention are deemed Special Mention.

Loans rated as Pass do not currently pose any identified risk and can range from the highest to average quality, depending on the degree of potential risk.

Pass rated loans do not currently pose any identified risk and can range from the highest to average quality, depending on the degree of potential risk.

Risk ratings are updated any time the situation warrants.

2021 Form 10-K

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

Amortized Cost Basis by Origination Year

18 unchanged sentences

2021 Form 10-K 108

Amortized Cost Basis by Origination Year

December 31, 2020 2020 2019 2018 2017 2016 Prior to 2016 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

(in thousands)

Commercial and industrial

Pass $ 3,058,596 $ 605,112 $ 556,284 $ 212,215 $ 162,483 $ 337,484 $ 1,677,559 $ 350 $ 6,610,083

Special Mention 819 10,236 2,135 9,502 10,228 14,165 49,883 51 97,019

Substandard 5,215 3,876 12,481 1,798 4,215 12,965 18,913 462 59,925

Doubtful — 5,203 1 17,010 2,596 69,871 — — 94,681

Total commercial and industrial $ 3,064,630 $ 624,427 $ 570,901 $ 240,525 $ 179,522 $ 434,485 $ 1,746,355 $ 863 $ 6,861,708

Commercial real estate

Pass $ 3,096,549 $ 3,052,076 $ 2,230,047 $ 1,767,528 $ 1,798,137 $ 3,916,990 $ 199,145 $ 15,532 $ 16,076,004

Special Mention 50,193 68,203 44,336 48,813 66,845 109,295 1,705 — 389,390

Substandard 18,936 17,049 30,997 59,618 11,541 118,725 2,531 — 259,397

Doubtful — — — — — 207 — — 207

Total commercial real estate $ 3,165,678 $ 3,137,328 $ 2,305,380 $ 1,875,959 $ 1,876,523 $ 4,145,217 $ 203,381 $ 15,532 $ 16,724,998

Pass $ 145,246 $ 120,800 $ 111,174 $ 15,497 $ 47,971 $ 20,029 $ 1,199,034 $ — $ 1,659,751

Special Mention — 1,043 — — 9,996 17,414 47,311 — 75,764

Substandard — 26 246 2,628 17 380 7,013 — 10,310

Total construction $ 145,246 $ 121,869 $ 111,420 $ 18,125 $ 57,984 $ 37,823 $ 1,253,358 $ — $ 1,745,825

2021 Form 10-K

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 (including PCD loans) based on payment activity by origination year as of December 31, 2020:

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

Amortized Cost Basis by Origination Year

17 unchanged sentences

Total consumer $ 752,371 $ 322,296 $ 292,368 $ 172,014 $ 79,202 $ 43,367 $ 1,265,942 $ 43,416 $ 2,970,976

The following table presents the credit exposure by internally assigned risk rating by class of loans (excluding PCI loans) based on the most recent analysis performed at December 31, 2019:

Credit exposure—

by internally assigned risk rating Special Total Non-PCI

Pass Mention Substandard Doubtful Loans

(in thousands)

December 31, 2019

Commercial and industrial $ 3,982,453 $ 33,718 $ 66,511 $ 61,301 $ 4,143,983

Commercial real estate 10,781,587 77,884 42,560 862 10,902,893

Construction 1,487,877 7,486 354 — 1,495,717

Total $ 16,251,917 $ 119,088 $ 109,425 $ 62,163 $ 16,542,593

2021 Form 10-K 110

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

The following table presents the recorded investment in those loan classes based on payment activity as of December 31, 2019:

Credit exposure—

by payment activity Performing

Loans Non-Performing

Loans Total Non-PCI

Amortized Cost Basis by Origination Year

December 31, 2020 2020 2019 2018 2017 2016 Prior to 2016 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

(in thousands)

December 31, 2019

Residential mortgage

Home equity 374,374 1,646 376,020

Automobile 1,451,018 334 1,451,352

Performing $ 730,764 $ 778,161 $ 684,761 $ 582,650 $ 380,723 $ 943,616 $ 64,798 $ — $ 4,165,473

90 days or more past due — 3,085 4,212 3,464 4,144 3,365 — — 18,270

Total residential mortgage $ 730,764 $ 781,246 $ 688,973 $ 586,114 $ 384,867 $ 946,981 $ 64,798 $ — $ 4,183,743

Consumer loans

Performing $ 8,580 $ 10,634 $ 11,756 $ 8,886 $ 5,340 $ 15,393 $ 318,869 $ 50,879 $ 430,337

90 days or more past due — — — — 25 83 378 730 1,216

Total home equity 8,580 10,634 11,756 8,886 5,365 15,476 319,247 51,609 431,553

Performing 426,121 438,181 272,075 151,523 50,853 16,550 — — 1,355,303

90 days or more past due 19 108 173 223 35 94 — — 652

Total automobile 426,140 438,289 272,248 151,746 50,888 16,644 — — 1,355,955

Other consumer

Total $ 6,511,954 $ 15,062 $ 6,527,016

The following table presents the recorded investment in PCI loans by class based on individual loan payment activity as of December 31, 2019:

Credit exposure— Performing Non-Performing Total

by payment activity Loans Loans PCI Loans

(in thousands)

December 31, 2019

Commercial and industrial $ 653,997 $ 28,017 $ 682,014

Commercial real estate 5,065,388 28,460 5,093,848

Construction 148,692 2,609 151,301

Residential mortgage 571,006 9,163 580,169

Consumer 120,356 1,911 122,267

Total $ 6,559,439 $ 70,160 $ 6,629,599

Performing 12,271 5,558 6,815 1,112 1,077 5,314 880,748 — 912,895

90 days or more past due — — — — — 22 5 408 435

Total other consumer 12,271 5,558 6,815 1,112 1,077 5,336 880,753 408 913,330

Total consumer $ 446,991 $ 454,481 $ 290,819 $ 161,744 $ 57,330 $ 37,456 $ 1,200,000 $ 52,017 $ 2,700,838

Troubled debt restructured loans .

1 unchanged sentence

If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan (TDR).

At the adoption of ASU 2016-13, Valley was not required to reassess whether modifications to individual PCI loans prior to January 1, 2020 met the TDR loan criteria.

Generally, the concessions made for TDRs involve lowering the monthly payments on loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods.

6 unchanged sentences

2021 Form 10-K

The following table presents pre- and post-modification amortized cost of loans by loan class modified as TDRs (excluding PCI loans prior to the adoption of ASU 2016-13) during the years ended December 31, 2020 and 2019.

The pre-modification and post-modification outstanding recorded investments disclosed in the table below represent the loan carrying amounts immediately prior to the modification and the carrying amounts at December 31, 2020 and 2019, respectively.

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

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

Troubled Debt

7 unchanged sentences

Commercial real estate:

Commercial real estate 12 29,480 29,313

Construction 3 22,049 18,418

Total commercial real estate 15 51,529 47,731

Residential mortgage 14 9,663 9,578

4 unchanged sentences

Commercial real estate:

Commercial real estate 6 24,683 21,654

Construction — — —

Total commercial real estate 6 24,683 21,654

Residential mortgage 12 2,377 2,323

2 unchanged sentences

The total TDRs presented in the table above had allocated a specific allowance for loan losses that totaled $ 29.1 million and $ 21.1 million at December 31, 2021 and 2020, respectively.

There were $ 7.7 million and $ 4.9 million in loan charge-offs related to loans modified as TDRs for the years ended December 31, 2020 and 2019, respectively .

There were $ 6.0 million and $ 7.7 million of charge-offs related to TDRs for the years ended December 31, 2021 and 2020, respectively .

At December 31, 2021, the commercial and industrial loan category in the above table mostly consisted of non-accrual TDR taxi medallion loans classified as substandard and doubtful.

Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the year ended December 31, 2021.

Loans modified as TDRs (excluding PCI loan modifications prior to the adoption of ASU 2016-13) in the years ended December 31, 2020 and 2019, and for which there was a payment default ( 90 or more days past due) were as follows:

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

Years Ended December 31,

5 unchanged sentences

Commercial and industrial — $ — 27 $ 23,247

Commercial real estate:

Commercial real estate 1 10,261 — —

Construction 2 17,599 — —

Total commercial real estate 3 27,860 — —

Residential mortgage — — 1 247

Total 3 $ 27,860 28 $ 23,494

Coronavirus Aid, Relief, and Economic Security (CARES) Act loan modifications .

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 were insignificant, when requested by customers.

These modifications complied with the CARES Act to provide temporary payment relief to those borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2019.

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 made in accordance with applicable regulatory guidance.

As of December 31, 2020, Valley had approximately $ 361 million of outstanding loans remaining in their payment deferral period under short-term modifications.

Under the applicable guidance, none of these loans were considered TDRs as of December 31, 2020.

Forbearance .

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 December 31, 2021, Valley had approximately $ 28 million of outstanding loans remaining in their payment deferral period under short-term modifications as compared to

2021 Form 10-K 112

approximately $ 361 million of loans in deferral at December 31, 2020.

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

Collateral dependent loans.

1 unchanged sentence

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.

2020 Form 10-K 110

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

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

(in thousands)

Collateral dependent loans:

Commercial and industrial * $ 95,335 $ 106,239

3 unchanged sentences

Total $ 241,258 $ 176,027

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

Commercial real estate loans are collateralized by real estate and construction loans.

Residential and home equity loans are collateralized by residential real estate.

Purchased Credit-Impaired Loans

The table below includes disclosure requirements prior to the adoption of ASU No.

2016-13 on January 1, 2020, and presents changes in the accretable yield for PCI loans for the year ended December 31, 2019:

(in thousands)

Balance, beginning of period $ 875,958

Acquisition 600,178

Accretion ( 214,415 )

Net decrease in expected cash flows ( 10,995 )

Balance, end of period $ 1,250,726

The net decrease in expected cash flows for certain pools of loans (included in the table above) is recognized prospectively as an adjustment to the yield over the estimated remaining life of the individual pools.

The net decrease in the expected cash flows totaling approximately $ 11.0 million for the year ended December 31, 2019 was largely due to the high volume of contractual principal prepayments caused by the low level of market interest rates.

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

Allowance for Credit Losses for Loans

The allowance for credit losses for loans under the new CECL standard adopted on January 1, 2020, consisted of the allowance for loan losses and the allowance for unfunded credit commitments.

Prior periods reflect the allowance for credit losses for loans under the incurred loss model under the previously applicable U.S.

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

4 unchanged sentences

Total allowance for credit losses for loans $ 375,702 $ 351,354

2020 Form 10-K

The following table summarizes the provision for credit losses for loans for the years ended December 31, 2021, 2020 and 2019:

5 unchanged sentences

Total provision for credit losses for loans $ 32,896 $ 125,087 $ 24,218

2021 Form 10-K

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

6 unchanged sentences

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

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

Beginning balance, adjusted 119,228 95,470 25,635 13,957 254,290

Allowance for purchased credit deteriorated (PCD) loans 3,528 2,953 57 4 6,542

Loans charged-off ( 21,507 ) ( 382 ) ( 140 ) ( 4,303 ) ( 26,332 )

1 unchanged sentence

Net (charge-offs) recoveries ( 17,573 ) 2,175 536 ( 228 ) ( 15,090 )

Provision for loan losses 44,516 67,904 3,166 8,336 123,922

(Credit) provision for loan losses ( 13,935 ) 48,249 ( 4,346 ) ( 2,461 ) 27,507

Ending balance $ 103,090 $ 217,490 $ 25,120 $ 13,502 $ 359,202

2 unchanged sentences

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

Beginning balance, adjusted 119,228 95,470 25,635 13,957 254,290

Loans charged-off ( 34,630 ) ( 767 ) ( 598 ) ( 9,294 ) ( 45,289 )

3 unchanged sentences

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

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

Valley incorporated a multi-scenario economic forecast for estimating lifetime expected credit losses at December 31, 2020.

As a result of the deterioration in economic conditions caused by the COVID-19 pandemic during 2020 and the related increase in economic uncertainty, Valley increased its probability weighting for the most severe economic scenario as compared to those at January 1, 2020.

The increase in the allowance for credit losses for loans from January 1, 2020 reflected the impact of the adverse economic forecast within Valley's lifetime expected credit loss estimate, as well as other qualitative factors.

* 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.

2021 Form 10-K 114

19 unchanged sentences

Collectively evaluated for credit losses 6,730,651 18,409,069 4,148,592 2,699,207 31,987,519

Loans acquired with discounts related to credit quality

682,014 5,245,149 580,169 122,267 6,629,599

Total $ 6,861,708 $ 18,470,823 $ 4,183,743 $ 2,700,838 $ 32,217,112

Impaired loans .

Impaired loans disclosures presented below as of December 31, 2019 represent requirements prior to the adoption of ASU No.

2016-13 on January 1, 2020.

Impaired loans, consisting of non-accrual commercial and industrial loans and commercial real estate loans over $ 250 thousand and all loans which were modified in troubled debt restructurings, are individually evaluated for impairment.

PCI loans were not classified as impaired loans because they are accounted for on a pool basis and were paying as expected.

The following table presents information about impaired loans by loan portfolio class at December 31, 2019:

Allowance Recorded

Allowance Total

Investment Unpaid

Balance Related

(in thousands)

December 31, 2019

Commercial and industrial $ 14,617 $ 86,243 $ 100,860 $ 114,875 $ 36,662

Commercial real estate:

Commercial real estate 26,046 24,842 50,888 51,258 1,338

Construction 354 — 354 354 —

Total commercial real estate loans 26,400 24,842 51,242 51,612 1,338

Residential mortgage 5,836 4,853 10,689 11,800 518

Consumer loans:

Home equity 366 487 853 956 58

Total consumer loans 366 487 853 956 58

Total $ 47,219 $ 116,425 $ 163,644 $ 179,243 $ 38,576

Interest income recognized on a cash basis for impaired loans classified as non-accrual was not material for the years ended December 31, 2019 and 2018.

2020 Form 10-K

LEASES (Note 6)

8 unchanged sentences

Total $ 283,106 $ 276,675

Net occupancy and equipment expense included lease cost of $ 29.0 million, net of sublease income of $ 3.5 million, for the year ended December 31, 2018.

In 2019, Valley closed a sale-leaseback transaction for 26 properties, consisting of 25 branches and 1 corporate office, for an aggregate sales price of $ 100.5 million.

As a result, Valley recorded a pre-tax net gain totaling $ 78.5 million in 2019.

Additionally, Valley recorded ROU assets and lease obligations totaling $ 78.4 million, respectively, for the lease of the 26 properties with an expected term of 12.0 years and operating lease costs of $ 7.9 million within occupancy and equipment expense on a straight-line basis annually over the term of the lease.

2021 Form 10-K

The following table presents the components by lease type, of total lease cost recognized in the consolidated statements of income for the years ended December 31, 2021, 2020, and 2019:

2021 2020 2019

(in thousands)

8 unchanged sentences

The following table presents supplemental cash flow information related to leases for the years ended December 31, 2021, 2020, and 2019:

2021 2020 2019

(in thousands)

3 unchanged sentences

Financing cash flows from finance leases 681 612 492

2020 Form 10-K 114

The following table presents supplemental information related to leases at December 31, 2021 and 2020:

1 unchanged sentence

Operating leases 11.7 years 12.3 years

Finance leases 2.0 years 3.0 years

Finance leases 1.0 year 2.0 years

Weighted-average discount rate

14 unchanged sentences

Total $ 747,796 $ 282,339 $ 767

2021 Form 10-K 116

The total net investment in direct financing and sales-type leases was $ 747.8 million and $ 643.5 million at December 31, 2021 and 2020, respectively, comprised of $ 745.2 million and $ 641.3 million in lease receivables and $ 2.6 million and $ 2.2 million in unguaranteed residuals, respectively.

11 unchanged sentences

Depreciation and amortization of premises and equipment included in non-interest expense for the years ended December 31, 2021, 2020 and 2019 was approximately $ 28.8 million, $ 30.6 million, and $ 29.4 million, respectively.

2020 Form 10-K

GOODWILL AND OTHER INTANGIBLE ASSETS (Note 8)

11 unchanged sentences

Balance at December 31, 2021 $ 34,315 $ 308,248 $ 896,015 $ 220,430 $ 1,459,008

* Valley’s Wealth Management Division is comprised of trust, asset management and insurance services.

* Valley’s Wealth Management Division is comprised of trust, asset management, insurance and tax credit advisory services.

This reporting unit is included in the Consumer Lending segment for financial reporting purposes.

Certain estimates for acquired assets and assumed liabilities are subject to change for up to one year after the acquisition date.

During 2020, goodwill from business combinations reflects the effect of the combined adjustments to the estimated fair values of certain loans, current taxes payable and deferred tax assets as of the acquisition date.

See Note 2 for further details.

The goodwill from business combinations set forth in the table above during 2021 related to the Westchester and DV acquisitions and totaled $ 63.5 million and $ 13.1 million, respectively.

Goodwill resulting from the DV acquisition was allocated entirely to the Wealth Management reporting unit.

During 2020, goodwill from business combinations reflected the effect of the combined adjustments to the estimated fair values of certain loans, current taxes payable and deferred tax assets related to the Oritani acquisition on December 1, 2019.

See Note 2 for further details related to these acquisitions.

There was no imp airment of goodwill during the years ended December 31, 2021, 2020 and 2019.

2021 Form 10-K

The following tables summarize other intangible assets as of December 31, 2021 and 2020:

14 unchanged sentences

Core deposits are amortized using an accelerated method and have a weighted average amortization period of 9.2 years .

The line item labeled “Other” included in the table above primarily consists of customer lists which are amortized over their expected lives generally using a straight-line method and have a weighted average amortization period of 7.6 years.

Valley recorded $ 20.7 million of core deposit intangibles resulting from the Oritani acquisition.

The line item labeled “Other” included in the table above primarily consists of certain financial asset servicing contracts, customer lists and covenants not to compete, which are amortized over their expected lives generally using a straight-line method and have a weighted average amortization period of 6.0 years .

Valley recorded $ 8.1 million of core deposit intangibles res ulting from the Westchester acquisition.

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

No impairment was recognized during the years ended December 31, 2021, 2020 and 2019.

2020 Form 10-K 116

The following table summarizes the change in loan servicing rights during the years ended December 31, 2021, 2020 and 2019:

12 unchanged sentences

Loan servicing rights are accounted for using the amortization method.

As shown in the above table, Valley recorded net impairment charges on its loan servicing rights totaling $ 818 thousand for the year ended December 31, 2020 and net recoveries impairment charges totaling $ 36 thousand and $ 388 thousand for the years ended December 31, 2019 and 2018, respectively.

As shown in the above table, Valley recorded net recoveries of impairment charges totaling $ 865 thousand and $ 36 thousand for the years ended December 31, 2021 and 2019, respectively, and net impairment charges on its loan servicing rights totaling $ 818 thousand for the year ended December 31, 2020.

The Bank is a servicer of residential mortgage loan portfolios, and it is compensated for loan administrative services performed for mortgage servicing rights of loans originated and sold by the Bank, and to a lesser extent, purchased mortgage servicing rights.

2 unchanged sentences

Valley recognized amortization expense on other intangible assets, including net recoveries of impairment charges on loan servicing rights (reflected in the table above), of $ 21.8 million, $ 24.6 million and $ 18.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

2021 Form 10-K 118

The following table presents the estimated amortization expense of other intangible assets over the next five-year period:

7 unchanged sentences

2026 1,917 4,225 304

2020 Form 10-K

DEPOSITS (Note 9)

Included in time deposits are certificates of deposit over $250 thousand totaling $ 1.4 billion and $ 1.7 billion at December 31, 2020 and 2019, respectively.

Included in time deposits are certificates of deposit over $250 thousand totaling $ 861.5 million and $ 1.4 billion at December 31, 2021 and 2020, respectively.

Interest expense on time deposits of $250 thousand or more totaled approximately $ 1.1 million, $ 4.5 million and $ 5.8 million in 2021, 2020 and 2019, respectively.

8 unchanged sentences

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

(in thousands)

FHLB advances $ 500,000 $ 1,000,000

1 unchanged sentence

Total short-term borrowings $ 655,726 $ 1,147,958

The weighted average interest rate for short-term borrowings was 0.38 percent and 1.68 percent at December 31, 2020 and 2019, respectively.

Short-term FHLB advances totaling $ 200 million were hedged with cash flow interest rate swaps at December 31, 2020.

The weighted average interest rate for short-term FHLB advances was 0.37 percent and 0.38 percent at December 31, 2021 and 2020, respectively.

The interest payments on the FHLB advances totaling $ 500 million were hedged with interest rate swaps at December 31, 2021.

See Note 15 for additional details.

2021 Form 10-K

Long-Term Borrowings

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

(in thousands)

FHLB advances, net (1)

4 unchanged sentences

Total long-term borrowings $ 1,423,676 $ 2,295,665

(1) FHLB advances are presented net of unamortized prepayment penalties and other purchase accounting adjustments totaling $ 2.6 million and $ 2.8 million at December 31, 2020 and 2019, respectively.

(1) FHLB advances are presented net of unamortized premiums totaling $ 1.0 million at December 31, 2021 and 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 $ 5.8 million and $ 2.7 million at December 31, 2021 and 2020, respectively.

3 unchanged sentences

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.

Long-term FHLB advances totaling $ 900 million were hedged with cash flow interest rate swaps at December 31, 2020.

See Note 15 for additional details.

2020 Form 10-K 118

In June 2021, Valley prepaid $ 247.5 million of long-term FHLB advances with maturities scheduled through 2025 and a weighted average effective interest rate of 1.82 percent.

In December 2020, Valley prepaid $ 534.3 million of long-term FHLB advances scheduled to mature in 2021 and 2022 with a weighted average effective interest rate of 2.48 percent.

The June 2021 and December 2020 transactions were funded with excess cash liquidity and accounted for as an early debt extinguishment resulting in losses of $ 8.4 million and $ 9.7 million reported within non-interest expense for the years ended December 31, 2021 and 2020, respectively.

Long-Term Borrowings

4 unchanged sentences

There are no FHLB advances with scheduled repayments in years 2023 and thereafter, reported in the table above, which are callable for early redemption by the FHLB during 2022.

In December 2020, Valley prepaid $ 534.3 million of long-term FHLB advances scheduled to mature in 2021 and 2022 with a weighted average effective interest rate of 2.48 percent.

The transaction was funded with excess cash liquidity and accounted for as an early debt extinguishment resulting in a loss of $ 9.7 million reported within non-interest expense for the year ended December 31, 2020.

In December 2019, Valley prepaid $ 635.0 million of long-term FHLB advances.

These prepaid borrowings had contractual maturity dates in 2021 and 2022 and a weighted average interest rate of 3.93 percent.

The debt prepayment was funded by cash proceeds from the sale of commercial real estate loans and overnight borrowings.

The transaction was also accounted for as an early debt extinguishment and resulted in a loss of $ 32.0 million for the year ended December 31, 2019.

Subordinated Debt.

On June 5, 2020, Valley issued $ 115 million of 5.25 percent Fixed-to-Floating Rate subordinated notes issued in due June 15, 2030 and callable in whole or in part on or after June 15, 2025 or upon the occurrence of certain events.

Interest on the subordinated notes during the initial five-year term through June 15, 2025 is payable semi-annually on June 15 and December 15.

Thereafter, interest is expected to be set based on Three-Month Term SOFR plus 514 basis points and paid quarterly through maturity of the notes.

The subordinated notes had a net carrying value of $ 113.3 million at December 31, 2020.

At December 31, 2020, Valley also had the following subordinated debt outstanding:

• $ 100 million of 4.55 percent subordinated debentures (notes) issued in June 2015 and due June 30, 2025 with no call dates or prepayments allowed unless certain conditions exist.

Interest on the subordinated notes is payable semi-annually in arrears on June 30 and December 30 of each year.

The subordinated notes had a net carrying value of $ 99.5 million and $ 99.4 million at December 31, 2020 and 2019, respectively.

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.

At December 31, 2021, Valley had the following subordinated debt outstanding by its maturity date:

• $ 125 million of 5.125 percent subordinated notes issued in September 2013 and due September 27, 2023 with no call dates or prepayments allowed, unless certain conditions exist.

3 unchanged sentences

The subordinated notes had a net carrying value of $ 125.2 million and $ 130.5 million at December 31, 2021 and 2020, respectively.

• $ 60 million of 6.25 percent subordinated notes, assumed on January 1, 2018 in connection with the acquisition of USAB.

The notes are due April 1, 2026 callable beginning April 1, 2021.

Interest on the subordinated debentures is payable semi-annually in arrears on April 1 and October 1 of each year.

After purchase accounting adjustments, the subordinated notes had a net carrying value of $ 60.1 million and $ 60.6 million at December 31, 2020 and 2019, respectively.

• $ 100 million of 4.55 percent subordinated debentures (notes) issued in June 2015 and due June 30, 2025 with no call dates or prepayments allowed unless certain conditions exist.

Interest on the subordinated notes is payable semi-annually in arrears on June 30 and December 30 of each year.

The subordinated notes had a net carrying value of $ 99.6 million and $ 99.5 million at December 31, 2021 and 2020, respectively.

2021 Form 10-K 120

• $ 115 million of 5.25 percent Fixed-to-Floating Rate subordinated notes issued in June 2020 and due June 15, 2030 callable in whole or in part on or after June 15, 2025 or upon the occurrence of certain events.

Interest on the subordinated notes during the initial five-year term through June 15, 2025 is payable semi-annually on June 15 and December 15.

Thereafter, interest is expected to be set based on Three-Month Term Secured Overnight Financing Rate (SOFR) plus 514 basis points and paid quarterly through maturity of the notes.

The subordinated notes had a net carrying value of $ 113.4 million and $ 113.3 million at December 31, 2021 and 2020, respectively.

• $ 300 million of 3.00 percent Fixed-to-Floating Rate subordinated notes issued in May 2021 and 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 SOFR plus 236 basis points and paid quarterly through maturity of the notes.

At December 31, 2021, the subordinated notes had a carrying value of $ 296.4 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 15 for additional details.

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

The long-term repos had a weighted average interest rate of 3.37 percent and 1.94 percent at December 31, 2020 and 2019, respectively.

Long-term repos outstanding as of December 31, 2020 all have maturities in 2021.

The long-term institutional 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.

In September 2020, Valley prepaid $ 50 million of long-term institutional repo borrowings with an interest rate of 3.70 percent and an original contractual maturity date in January 2022.

The debt prepayment was funded by excess cash liquidity.

2020 Form 10-K

The transaction was accounted for as an early debt extinguishment resulting in a loss of $ 2.4 million for the year ended December 31, 2020.

8 unchanged sentences

GAAP but wholly owns all of the common securities of each trust.

2021 Form 10-K

The table below summarizes the outstanding junior subordinated debentures and the related trust preferred securities issued by each trust as of December 31, 2021 and 2020:

34 unchanged sentences

The trust preferred securities are included in Valley’s total risk-based capital (as Tier 2 capital) for regulatory purposes at December 31, 2021 and 2020.

2020 Form 10-K 120

BENEFIT PLANS (Note 12)

7 unchanged sentences

All participants were immediately vested in their frozen accrued benefits if they were employed by the Bank as of December 31, 2013.

2021 Form 10-K 122

The following table sets forth the change in the projected benefit obligation, the change in fair value of plan assets and the funded status and amounts recognized in Valley’s consolidated financial statements for the qualified and non-qualified plans at December 31, 2021 and 2020:

17 unchanged sentences

Amounts recognized as a component of accumulated other comprehensive loss as of year-end that have not been recognized as a component of the net periodic pension expense for Valley’s qualified and non-qualified plans are presented in the following table.

Valley expects to recognize approximately $ 1.5 million of the net actuarial loss reported in the following table as of December 31, 2020 as a component of net periodic pension expense during 2021.

Valley expects to recognize approximately $ 698 thousand of the net actuarial loss reported in the following table as of December 31, 2021 as a component of net periodic pension expense during 2022.

(in thousands)

3 unchanged sentences

Total $ 25,206 $ 36,461

2020 Form 10-K

The non-qualified plans had a projected benefit obligation, accumulated benefit obligation, and fair value of plan assets as follows:

5 unchanged sentences

The weighted average discount rate used in determining the actuarial present value of benefit obligations for the qualified and non-qualified plans was 2.87 percent a nd 2.52 percent as of December 31, 2021 and 2020, respectively.

2021 Form 10-K

The net periodic pension income for the qualified and non-qualified plans reported within other non-interest expense included the following components for the years ended December 31, 2021, 2020 and 2019:

7 unchanged sentences

Valley believes this provides a better estimate of interest costs than a single weighted average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the applicable period.

Other changes in the qualified and non-qualified plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31, 2020 and 2019 were as follows:

Other changes in the qualified and non-qualified plan assets and benefit obligations recognized in other comprehensive (loss) income for the years ended December 31, 2021 and 2020 were as follows:

(in thousands)

Net loss $ 5,026 $ 3,619

Net (gain) loss $ ( 14,381 ) $ 4,754

Amortization of prior service cost 135 136

Amortization of actuarial loss ( 1,538 ) ( 1,003 )

Total recognized in other comprehensive income $ 3,887 $ 3,320

Total recognized in net periodic pension income and other comprehensive income (before tax) $ ( 7,233 ) $ ( 6,721 )

Total recognized in other comprehensive (loss) income $ ( 15,784 ) $ 3,887

Total recognized in net periodic pension income and other comprehensive (loss) income (before tax)

$ ( 26,965 ) $ ( 7,233 )

The benefit payments, which reflect expected future service, as appropriate, expected to be paid in future years are presented in the following table:

1 unchanged sentence

Thereafter 49,629

2020 Form 10-K 122

The weighted average discount rate, expected long-term rate of return on assets and rate of compensation increase used in determining Valley’s pension expense for the years ended December 31, 2021, 2020 and 2019 were as follows:

7 unchanged sentences

The target asset allocation set for the qualified plan is an approximate equal weighting of 50 percent fixed income securities and 50 percent equity securities.

Although much depends upon market conditions, the absolute investment objective for the equity portion is to earn at least a mid-to-high single digit return, after adjustment by the Consumer Price Index (CPI), over rolling five-year periods.

Although much depends upon market conditions, the absolute investment

2021 Form 10-K 124

objective for the equity portion is to earn at least a mid-to-high single digit return, after adjustment by the Consumer Price Index (CPI), over rolling five-year periods.

Relative performance should be above the median of a suitable grouping of other equity portfolios and a suitable index over rolling three-year periods.

17 unchanged sentences

($ in thousands)

Equity securities 37 % $ 94,434 $ 94,434 $ — $ —

Treasury securities 20 52,549 52,549 — —

Corporate bonds 20 51,410 — 51,410 —

Mutual funds 28 % $ 79,462 $ 79,462 $ — $ —

Corporate bonds 23 64,715 — 64,715 —

Treasury securities 22 59,931 59,931 — —

Equity securities 21 57,987 57,987 — —

government agency securities 4 10,590 — 10,590 —

1 unchanged sentence

Total investments 100 % $ 277,637 $ 202,332 $ 75,305 $ —

2020 Form 10-K

Fair Value Measurements at Reporting Date Using:

6 unchanged sentences

($ in thousands)

Equity securities 32 % $ 75,633 $ 75,633 $ — $ —

Treasury securities 22 51,732 51,732 — —

Corporate bonds 21 51,221 — 51,221 —

Mutual funds 18 % $ 48,041 $ 48,041 $ — $ —

Corporate bonds 20 51,410 — 51,410 —

Treasury securities 20 52,549 52,549 — —

Equity securities 37 94,434 94,434 — —

government agency securities 3 8,174 — 8,174 —

3 unchanged sentences

Equity securities, U.S.

Treasury securities and cash and money market funds are valued at fair value in the table above utilizing exchange quoted prices in active markets for identical instruments (Level 1 inputs).

Treasury securities and cash and money market funds are valued at fair value in the tables above utilizing exchange quoted prices in active markets for identical instruments (Level 1 inputs).

Mutual funds are measured at their respective net asset values, which represents fair values of the securities held in the funds based on exchange quoted prices available in active markets (Level 1 inputs).

2021 Form 10-K

Corporate bonds and U.S.

6 unchanged sentences

For tax planning, financial planning, cash flow management or cost reduction purposes, Valley may increase, accelerate, decrease or delay contributions to the plan to the extent permitted by law.

Other Qualified Plan

On December 1, 2019, Valley assumed obligations under Oritani’s Pentegra Defined Benefit Plan for Financial Institutions (“Pentegra DB Plan”).

The Pentegra DB Plan's Employer Identification Number is 13-5645888 and the Plan Number is 333.

The Pentegra DB Plan is a tax-qualified defined-benefit multiple-employer plan.

Under the Pentegra DB Plan, contributions made by a participating employer may be used to provide benefits to participants of other participating employers.

The Pentegra DB Plan was frozen as of December 31, 2008.

During 2020, Valley withdrew from the Pentegra DB Plan and distributed annuities to participants based on the actuarial computation of their pension benefit.

Valley recognized approximately $ 1.1 million of expense included in other non-interest expense related to the final contribution to the Pentegra DB Plan and distribution of the annuities for the year ended December 31, 2020.

Other Non-Qualified Plans

2 unchanged sentences

As of December 31, 2021 and 2020, all of the obligations were included in other liabilities and $ 660 thousand (net of a $ 257 thousand tax benefit) and $ 731 thousand (net of a $ 286 thousand tax benefit), respectively, were recorded in accumulated other comprehensive loss.

The $ 1.0 million in accumulated other comprehensive loss will be reclassified to expense on a straight-line basis over the remaining benefit periods of these non-qualified plans.

2020 Form 10-K 124

The $ 917 thousand in accumulated other comprehensive loss will be reclassified to expense on a straight-line basis over the remaining benefit periods of these non-qualified plans.

Valley assumed, in the Oritani acquisition on December 1, 2019, certain obligations under non-qualified retirement plans described below:

• Non-qualified benefit equalization plans (BEP) that provided supplemental benefits to certain eligible executives and officers.

The BEP plans were terminated on November 30, 2019 and the funded obligation under the BEP plans totaled $ 26.8 million on December 31, 2019.

The accrued benefits were fully distributed to the participants on July 1, 2020.

• Non-qualified benefit equalization pension plan that provided benefits to certain officers who were disallowed certain benefits under former Oritani’s qualified pension plan.

This plan was terminated on November 30, 2019 and the accrued benefits are payable to plan participants in five equal installments beginning annually on December 1, 2020 through December 1, 2024.

The funded obligation under this plan totaled $ 1.3 million and $ 1.6 million at December 31, 2020 and 2019, respectively.

The funded obligation under this plan totaled $ 979 thousand and $ 1.3 million at December 31, 2021 and 2020, respectively.

• Supplemental Executive Retirement Income Agreement (the SERP) for the former CEO of Oritani.

2 unchanged sentences

The funded obligation under the SERP totaled $ 13.9 million and $ 13.6 million at December 31, 2021 and 2020, respectively.

Valley recorded $ 1.5 million of expenses related to the SERP for the year ended December 31, 2020.

Valley recorded $ 357 thousand and $ 1.5 million of expenses related to the SERP for the year ended December 31, 2021 and 2020, respectively.

The above Oritani non-qualified plans are secured by investments in money market mutual funds which are held in a trust and classified as equity securities on the consolidated statements of financial condition at both December 31, 2021 and 2020.

2 unchanged sentences

Participants in the Split-Dollar plan are entitled to up to two times their base annual salary, as defined by the plan.

The accrued liability for the Split-Dollar plan totaled $ 1.8 million and $ 961 thousand at December 31, 2020 and 2019, respectively.

Valley recorded $ 812 thousand of expenses related to the Split-Dollar plan f or the year ended December 31, 2020.

The accrued liability for the Split-Dollar plan totaled $ 1.7 million and $ 1.8 million at December 31, 2021 and 2020 , respectively.

Valley recorded $ 104 thousand and $ 812 thousand of expenses related to the Split-Dollar plan f or the years ended December 31, 2021 and 2020 , respectively .

Valley National Bank and its subsidiaries may award cash incentive and merit bonuses to its officers and employees based upon a percentage of the covered employees’ compensation as determined by the achievement of certain performance objectives.

3 unchanged sentences

The Bank recorded $ 10.7 million, $ 10.1 million and $ 8.6 million in expense for contributions to the plan for the years ended December 31, 2021, 2020 and 2019, respectively.

2021 Form 10-K 126

Deferred Compensation Plan

Valley has a non-qualified, unfunded deferred compensation plan maintained for the purpose of providing deferred compensation for selected employees participating in the 401(k) plan whose contributions are limited as a result of the limitations under section 401(a)(17) of the IRS Code.

Each participant in the plan is permitted to defer per calendar year, up to five percent of the portion of the participant’s salary and cash bonus above the limit in effect under the Company's 401(k) plan and receive employer matching contributions that become fully vested after two years of participation in the plan.

4 unchanged sentences

Stock Based Compensation

Valley currently has one active employee stock plan, the 2016 Long-Term Stock Incentive Plan (the 2016 Plan), adopted by Valley’s Board of Directors on January 29, 2016 and approved by its shareholders on April 28, 2016.

The 2016 Plan is administered by the Compensation and Human Resources Committee (the Committee) appointed by Valley’s Board of Directors.

The Committee can grant awards to officers and key employees of Valley.

The primary purposes of the 2016 Plan are to provide additional incentive to officers and key employees of Valley and its subsidiaries, whose substantial contributions are

2020 Form 10-K

essential to the continued growth and success of Valley, and to attract and retain competent and dedicated officers and other key employees whose efforts will result in the continued and long-term growth of Valley’s business.

Under the 2016 Plan, Valley may award shares of common stock in the form of stock appreciation rights, both incentive and non-qualified stock options, restricted stock and restricted stock units (RSUs) to its employees and non-employee directors (for acting in their roles as board members).

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 Capital Management 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.

Upon shareholder approval of the 2021 Plan, Valley ceased granting new awards under the Valley National Bancorp 2016 Long-Term Stock Incentive Plan (the 2016 Plan).

Under the 2021 Plan, Valley may issue awards to its officers, employees and non-employee directors in amounts up to 9 million shares of common stock (less one share for every share granted after December 31, 2020 under the 2016 Plan) in the form of stock appreciation rights, both incentive and non-qualified stock options, restricted stock and restricted stock units (RSUs).

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 December 31, 2021 , 7.4 million sh ares of common stock were available for issuance under the 2021 Plan.

2 unchanged sentences

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.

On January 26, 2021, the Board of Directors approved the Valley National Bancorp 2021 Incentive Compensation Plan (the 2021 Plan).

The 2021 Plan is subject to approval by Valley shareholders at the Annual Meeting of Shareholders on April 19, 2021.

The 2021 Plan would authorize the Committee to issue up to 9 million shares to Valley's employees and directors.

Awards under the 2021 Plan will be granted in substantially the same manner as the 2016 Plan.

The 2021 Plan is described in more detail in Valley's 2021 definitive proxy statement.

Valley recorded total stock-based compensation expense of $ 20.9 million, $ 16.5 million and $ 15.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The stock-based compensation expense for 2021, 2020 and 2019 included $ 1.6 million, $ 1.5 million and $ 2.1 million, respectively, related to stock awards granted to retirement eligible employees.

In 2020 and 2019, compensation expense for these awards was amortized monthly over a one year period after the grant date.

Prior to 2019, award grantees who were eligible for retirement did not have a service period requirement and the expense was immediately recognized.

Compensation expense for awards to retirement eligible employees is amortized monthly over a one year required service period after the grant date.

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

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The grant date fair value of the performance-based RSUs was $ 12.36 , $ 10.99 and $ 10.14 per share for the years ended December 31, 2021, 2020, and 2019, respectively.

The grant date fair value of time-based RSUs was $ 10.29 and $ 10.32 for the years ended December 31, 2020 and 2019, respectively.

Valley did not award time-based restricted stock units during 2018.

The grant date fair value of time-based RSUs was $ 12.01 , $ 10.29 , $ 10.32 for the years ended December 31, 2021, 2020, and 2019, respectively.

2021 Form 10-K

The following table sets forth the changes in RSUs outstanding for the years ended December 31, 2021, 2020 and 2019:

2 unchanged sentences

Outstanding at beginning of year 3,228,659 2,158,255 1,378,886

Acquired in business combinations — — 336,379

Granted 1,999,376 2,030,026 1,412,941

5 unchanged sentences

Compensation expense is measured based on the grant-date fair value of the shares.

2020 Form 10-K 126

The following table sets forth the changes in restricted stock awards (RSAs) outstanding for the years ended December 31, 2020, 2019 and 2018:

The following table sets forth the changes in restricted stock awards outstanding for the years ended December 31, 2021, 2020 and 2019:

Restricted Stock Awards Outstanding

1 unchanged sentence

Outstanding at beginning of year 413,701 1,058,681 1,720,968

Granted — — 1,263,144

Vested ( 191,104 ) ( 610,607 ) ( 547,653 )

1 unchanged sentence

Outstanding at end of year 213,908 413,701 1,058,681

Valley did not award any shares of restricted stock dur ing 2020 and 20 19.

Included in the RSAs granted (in the table above) during 2018 are 60 thousand shares issued to Valley directors, which are fully vested.

Stock Options .

27 unchanged sentences

217,555 5.2 7

2,986,347 1.3 7

2021 Form 10-K 128

7 unchanged sentences

140,072 144,520 131,774

Deferred (benefit) expense:

Deferred expense (benefit):

Federal 19,709 ( 3,109 ) 10,444

22 unchanged sentences

Valley's federal net operating loss carryforwards totaled approximately $ 56.0 million at December 31, 2021 and expire during the period from 2029 through 2034.

Valley's capital loss carryforwards totaled $ 3.1 million at December 31, 2020 and expire at December 31, 2023.

Valley's capital loss carryforwards totaled $ 3.1 million at December 31, 2021 and begin to expire at December 31, 2022.

State net operating loss carryforwards totaled approximately $ 86.2 million at December 31, 2021 and expire during the period from 2029 through 2038.

13 unchanged sentences

FDIC insurance premium 2,457 3,283 2,507

Impact of the Tax Cuts and Jobs Act of 2017 — — ( 2,274 )

Addition to reserve for uncertainties — — 31,123

1 unchanged sentence

Income tax expense $ 166,899 $ 139,460 $ 147,002

We invest in certain tax-advantaged investments that support qualified affordable housing projects, community development and, prior to 2019, renewable energy resources.

We invest in certain tax-advantaged investments that support qualified affordable housing projects and community development.

Our investments in these projects are designed to generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, over specified time periods.

5 unchanged sentences

DC Solar and related entities are in Chapter 7 bankruptcy.

A group of investors who purchased mobile solar gener ators from, and leased them back to, DC Solar, including us received tax credits for making these renewable resource investments.

A group of investors who purchased mobile solar gener ators from, and leased them back to DC Solar, including Valley received tax credits for making these renewable resource investments.

During the fourth quarter 2019, several of the co- conspirators pleaded guilty to fraud in the on-going federal investigation.

Based upon this information, Valley deemed that its tax positions related to the DC Solar funds did not meet the more likely than not recognition threshold in Valley's tax reserve assessment at December 31, 2019.

The principals pled guilty to fraud in early 2020.

The principals pleaded guilty to fraud in early 2020.

As of December 31, 2021, 2020, and 2019, Valley believes that it was fully reserved for the renewable energy tax credits and other tax benefits previously recognized from the investments in the DC Solar funds plus interest.

Valley will continue to evaluate all its existing tax positions, however, cannot provide assurance that it will not recognize additional tax provisions related to this uncertain tax liability in the future.

A reconciliation of Valley’s gross unrecognized tax benefits for 2020, 2019 and 2018 is presented in the table below:

Valley will continue to evaluate all of its existing tax positions, however, there can be no assurance that Valley will not recognize additional tax provisions related to this uncertain tax liability in the future.

A reconciliation of Valley’s reserve for uncertain tax liability positions for 2021, 2020 and 2019 is presented in the table below:

2021 2020 2019

3 unchanged sentences

Settlements with taxing authorities ( 1,559 ) — —

Reductions due to expiration of statute of limitations — — ( 4,238 )

Ending balance $ 30,359 $ 31,918 $ 31,918

The entire balance of unrecognized tax benefits, if recognized, would favorably affect Valley's effective income tax rate.

It is reasonably possible that the liability for unrecognized tax benefits could increase or decrease in the next twelve months due to completion of tax authorities’ exams or the expiration of statutes of limitations.

Management estimates that the liability for unrecognized tax benefits could decrease by $ 3.5 million within the next twelve months.

Valley’s policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Valley accrued approximately $ 7.6 million and

The entire balance of the reserve for uncertain tax liability positions, if recognized, would favorably affect Valley's effective income tax rate.

It is reasonably possible that the reserve for uncertain tax liability positions could increase or decrease in the next twelve months due to completion of tax authorities’ exams or the expiration of statutes of limitations.

The United States Bankruptcy Court approved the sale of the mobile solar generators resulting in a tax credit recapture of $ 1.6 million in 2021.

Management estimates that the reserve for uncertain tax liability positions could decrease by $ 7.0 million within the next twelve months.

Valley’s policy is to report interest and penalties, if any, related to the reserve for uncertain tax liability positions in income tax expense.

Valley accrued approximately $ 8.7 million, $ 7.6 million, and $ 6.1 million of interest expense associated with Valley’s uncertain tax positions at December 31, 2021, 2020, and 2019, respectively.

2021 Form 10-K 130

$ 6.1 million of interest expense associated with Valley’s uncertain tax positions at December 31, 2020 and 2019, respectively.

There was no interest expense accrued for uncertain tax positions during the year ended December 31, 2018.

Valley monitors its tax positions for the underlying facts, circumstances, and information available including the federal investigation of DC Solar and changes in tax laws, case law and regulations that may necessitate subsequent de-recognition of previous tax benefits.

4 unchanged sentences

Valley is under examination by the IRS and also under routine examination by various state jurisdictions, and we expect the examinations to be completed within the next 12 months.

Valley has considered, for all open audits, any potential adjustments in establishing our reserve for unrecognized tax benefits as of December 31, 2020.

Valley has considered, for all open audits, any potential adjustments in establishing our reserve for uncertain tax liability positions as of December 31, 2021.

TAX CREDIT INVESTMENTS (Note 14)

6 unchanged sentences

Valley recognizes amortization of tax credit investments, including impairment losses, within non-interest expense in the consolidated statements of income using the equity method of accounting.

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 other-than-temporary impairments, if applicable.

See the "Impairment Analysis" section below.

8 unchanged sentences

Unfunded affordable housing tax credit commitments $ 1,360 $ 1,379

Unfunded other tax credit commitments — 1,139

Total unfunded tax credit commitments $ 1,360 $ 1,379

15 unchanged sentences

$ 10,910 $ 13,335 $ 20,392

Impairment A nalysis

Impairment Analysis

An impairment loss is recognized when the fair value of the tax credit investment is less than its carrying value.

6 unchanged sentences

• Change in the economic or technological environment that could adversely affect the investee’s operations.

On a quarterly basis, Valley obtains financial reporting on its underlying tax credit investment assets for each fund from the fund manager who is independent of Valley and the Fund Sponsor.

On a periodic basis, Valley obtains financial reporting on its underlying tax credit investment assets for each fund.

The financial reporting is reviewed for deterioration in the financial condition of the fund, the level of cash flows and any significant losses or impairment charges.

5 unchanged sentences

During the first quarter 2019, Valley determined that future cash flows related to the remaining investments in three federal renewable energy tax credit funds sponsored by DC Solar (previously reported in other tax credit investments, net) were not probable based upon new information available, including the sponsor’s bankruptcy proceedings which were reclassified to Chapter 7 from Chapter 11 in late March 2019.

As a result, Valley recognized impairment charge for the entire aggregate unamortized investment of $ 2.4 million for the first quarter 2019, which is included within amortization of tax credit investments for the year ended December 31, 2019.

As a result, Valley recognized an impairment charge for the entire aggregate unamortized investment of $ 2.4 million in the first quarter 2019, which is included within amortization of tax credit investments for the year ended December 31, 2019.

2021 Form 10-K 132

COMMITMENTS AND CONTINGENCIES (Note 15)

1 unchanged sentence

In the ordinary course of business in meeting the financial needs of its customers, Valley, through its subsidiary Valley National Bank, is a party to various financial instruments, which are not reflected in the consolidated financial statements.

These financial instruments include standby and commercial letters of credit, unused portions of lines of credit and

2020 Form 10-K

commitments to extend various types of credit.

These financial instruments include standby and commercial letters of credit, unused portions of lines of credit and commitments to extend various types of credit.

These instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the consolidated financial statements.

29 unchanged sentences

To accomplish this objective, Valley uses interest rate swaps as part of its interest rate risk management strategy.

Interest rate swaps designated as cash flow hedges involve the payment of either fixed or variable-rate amounts in exchange for the receipt of variable or fixed-rate amounts from a counterparty.

At December 31, 2020, Valley had 10 interest rate swap agreements, with a total notional amount of $ 1.1 billion, to hedge the changes in cash flows associated with certain short-term FHLB advances and brokered deposits.

Interest rate swaps designated as cash flow hedges involve the

2021 Form 10-K

payment of either fixed or variable-rate amounts in exchange for the receipt of variable or fixed-rate amounts from a counterparty.

At December 31, 2021 , Valley had 6 interest rate swap agreements, with a total notional amount of $ 700 million, to hedge the changes in cash flows associated with certain short-term FHLB advances and brokered deposits.

Valley is required to pay fixed-rates of interest ranging from 0.05 percent to 0.63 percent and receives variable rates of interest that reset quarterly based on three-month LIBOR.

Expiration dates for the swaps range from April 2021 to August 2022.

Expiration dates for the swaps range from March 2022 to August 2 022.

Fair Value Hedges of Fixed Rate Assets and Liabilities.

Valley is exposed to changes in the fair value of certain of its fixed rate assets or liabilities due to changes in benchmark interest rates based on one-month LIBOR.

From time to time, Valley uses interest rate swaps to manage its exposure to changes in fair value.

Interest rate swaps designated as fair value hedges

2020 Form 10-K 132

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.

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 va lue 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.

Valley includes the gain or loss on the hedged items in the same income statement line item as the loss or gain on the related derivatives.

Valley's one interest rate swap used to hedge the change in the fair value of a commercial loan matured in November 2020.

Valley did not have any fair value hedges at December 31, 2020.

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.

Non-designated Hedges.

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Valley enters into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on Valley’s commitments to fund the loans as well as on its portfolio of mortgage loans held for sale.

2021 Form 10-K 134

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

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Derivatives designated as hedging instruments:

Cash flow hedge interest swaps $ — $ 179 $ 1,100,000 $ — $ 1,484 $ 180,000

Cash flow hedge interest rate swaps $ — $ 310 $ 700,000 $ — $ 179 $ 1,100,000

Fair value hedge interest rate swaps — 3,335 300,000 — — —

7 unchanged sentences

$ 181,500 $ 48,731 $ 10,301,772 $ 387,452 $ 156,102 $ 9,211,043

2020 Form 10-K

(1) Other contracts include risk participation agreements.

* Other derivatives include risk participation agreements.

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 designated cash flow interest rate swaps assets and designated and non-designated interest rate swaps liabilities were reduced by variation margin treated as settlement of the related derivatives fair values for legal and accounting purposes as required by central clearing houses and reported in the table above on a net basis at December 31, 2020 and 2019.

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

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

2 unchanged sentences

Amount of loss reclassified from accumulated other comprehensive loss to interest expense $ ( 3,436 ) $ ( 2,912 ) $ ( 1,808 )

$ ( 2,912 ) $ ( 1,808 ) $ ( 3,493 )

Amount of (loss) gain recognized in other comprehensive income ( 3,169 ) ( 1,380 ) 2,651

Amount of gain (loss) recognized in other comprehensive income 138 ( 3,169 ) ( 1,380 )

The net gains or losses related to cash flow hedge ineffectiveness were immaterial during the years ended December 31, 2021, 2020 and 2019.

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Interest income $ — $ 229 $ 133

Hedged item—loans, deposits and long-term borrowings:

Interest expense ( 3,335 ) — —

Hedged item—subordinated debt and loans:

Interest income $ — $ ( 229 ) $ ( 133 )

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 items at December 31, 2020 and 2019:

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

2020 2019 2020 2019

Interest expense 3,397 — —

2021 Form 10-K

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 items 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 items at December 31, 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)

Loans $ — $ 7,510 $ — $ 229

Net losses included in the consolidated statements of income related to derivative instruments not designated as hedging instruments were as follows:

Long-term borrowings $ 296,603 $ ( 3,397 )

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

2021 2020 2019

3 unchanged sentences

Fee income related to derivative interest rate swaps executed with commercial loan customers totaled $ 26.9 million , $ 59.0 million and $ 33.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

2020 Form 10-K 134

Collateral Requirements and Credit Risk Related Contingency Features.

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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.

Total amount of collateral held or pledged can not exceed the net derivative fair values with the counterparty.

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

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

2021 Form 10-K 136

11 unchanged sentences

Interest rate swaps $ 50,922 $ — $ 50,922 $ — $ ( 44,231 ) $ 6,691

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

Total liabilities $ 50,922 $ — $ 50,922 $ — $ ( 44,231 ) $ 6,691

17 unchanged sentences

As of December 31, 2021 and 2020, Valley and Valley National Bank exceeded all capital adequacy requirements (see table below).

For regulatory capital purposes, in connection with the Federal Reserve Board’s final interim rule as of April 3, 2020, 100 percent of the CECL Day 1 impact to shareholders' equity equaling $ 28.2 million after-tax will be deferred for a two-year period ending January 1, 2022, at which time it will be phased in on a pro-rata basis over a three-year period ending January 1, 2025.

Additionally, 25 percent of the reserve build (i.e., provision for credit losses less net charge-offs) for the year ended December 31, 2020 will be phased in over the same time frame.

For regulatory capital purposes, in accordance with the Federal Reserve Board’s final interim rule as of April 3, 2020, 100 percent of the CECL Day 1 impact to shareholders' equity equaling $ 28.2 million after-tax was deferred for a two-year period ending January 1, 2022, and will be phased in on a pro-rata basis over a three-year period ending January 1, 2025.

Additionally, 25 percent, or $ 19.1 million on an after tax basis of the reserve build (i.e., provision for credit losses less net charge-offs) since CECL adoption through December 31, 2021 is being phased in over the same time frame.

2021 Form 10-K

33 unchanged sentences

Valley National Bank 3,607,625 9.07 1,591,457 4.00 1,989,321 5.00

2020 Form 10-K

COMMON AND PREFERRED STOCK (Note 18)

Dividend Reinvestment Plan.

Valley's transfer agent maintains its dividend reinvestment plan (DRIP) with shares purchased in the open market.

The ability to issue authorized and previously unissued common stock or reissue treasury stock as part of Valley's DRIP was terminated effective February 12, 2018.

During 2018, 87 thousand common shares were reissued from treasury stock or issued from authorized common shares under the DRIP for net proceeds totaling $ 1.0 million.

Repurchase Plan.

2 unchanged sentences

Repurchased shares are held in treasury and are expected to be used for general corporate purposes.

Under the repurchase plan, Valley made no purchases of its outstanding shares during the years ended December 31, 2020, 2019 and 2018 in the open market.

During the fourth quarter 2021, Valley repurchased approximately 1.6 million of its common shares on the open market at an average price of $ 14.31 per share totaling $ 23.1 million.

Valley made no share repurchases under the plan during the years ended December 31, 2020 and 2019.

Other Stock Repurchases.

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On June 19, 2015, Valley issued 4.6 million shares of its Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, no par value per share, with a liquidation preference of $ 25 per share.

Dividends on the preferred stock accrue and are payable quarterly in arrears, at a fixed rate per annum equal to 6.25 percent from the original issue date to, but excluding, June 30, 2025, and thereafter at a floating rate per annum equal to three-month LIBOR plus a spread of 3.85 percent.

Dividends on the preferred stock accrue and are payable quarterly in arrears, at a fixed rate per annum equal to 6.25 percent from the original

2021 Form 10-K 138

issue date to, but excluding, June 30, 2025, and thereafter at a floating rate per annum equal to three-month LIBOR plus a spread of 3.85 percent.

The net proceeds from the preferred stock offering totaled $ 111.6 million.

6 unchanged sentences

Preferred stock is included in Valley's (additional) Tier 1 capital and total risk-based capital at December 31, 2021 and 2020.

2020 Form 10-K 138

OTHER COMPREHENSIVE INCOME (Note 19)

6 unchanged sentences

Unrealized gains and losses on available for sale (AFS) debt securities

Net gains (losses) arising during the period

$ 38,477 $ ( 10,632 ) $ 27,845 $ 54,723 $ ( 15,461 ) $ 39,262 $ ( 32,123 ) $ 9,191 $ ( 22,932 )

Net (losses) gains arising during the period $ ( 32,586 ) $ 8,973 $ ( 23,613 ) $ 38,477 $ ( 10,632 ) $ 27,845 $ 54,723 $ ( 15,461 ) $ 39,262

Less reclassification adjustment for net (gains) losses included in net income (1)

2 unchanged sentences

Unrealized gains and losses on derivatives (cash flow hedges)

Net (losses) gains arising during the period

( 3,169 ) 918 ( 2,251 ) ( 1,380 ) 391 ( 989 ) 2,651 ( 777 ) 1,874

Net gains (losses) arising during the period 138 ( 11 ) 127 ( 3,169 ) 918 ( 2,251 ) ( 1,380 ) 391 ( 989 )

Less reclassification adjustment for net losses (gains) included in net income (2)

2 unchanged sentences

Defined benefit pension plan

Net (losses) gains arising during the period

( 5,719 ) 2,301 ( 3,418 ) ( 2,385 ) ( 176 ) ( 2,561 ) ( 9,916 ) 2,765 ( 7,151 )

Net gains (losses) arising during the period 14,381 ( 4,075 ) 10,306 ( 5,719 ) 2,301 ( 3,418 ) ( 2,385 ) ( 176 ) ( 2,561 )

Amortization of prior service (cost) credit (3)

3 unchanged sentences

15,784 ( 4,468 ) 11,316 ( 4,852 ) 2,057 ( 2,795 ) ( 2,256 ) ( 210 ) ( 2,466 )

Total other comprehensive income (loss)

$ 32,844 $ ( 8,348 ) $ 24,496 $ 53,045 $ ( 15,828 ) $ 37,217 $ ( 32,185 ) $ 9,300 $ ( 22,885 )

Total other comprehensive (loss) income $ ( 13,891 ) $ 3,677 $ ( 10,214 ) $ 32,844 $ ( 8,348 ) $ 24,496 $ 53,045 $ ( 15,828 ) $ 37,217

(1) Included in gains (losses) on securities transactions, net.

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Balance-December 31, 2018 $ ( 33,559 ) $ ( 4,031 ) $ ( 31,841 ) $ ( 69,431 )

Reclassification due to the adoption of ASU No.

( 480 ) — — ( 480 )

Reclassification due to the adoption of ASU No.

— ( 61 ) — ( 61 )

Balance-January 1, 2018 ( 12,864 ) ( 8,399 ) ( 25,283 ) ( 46,546 )

Other comprehensive (loss) income before reclassifications ( 22,932 ) 1,874 ( 7,151 ) ( 28,209 )

Amounts reclassified from other comprehensive income (loss)

2,237 2,494 593 5,324

Other comprehensive income (loss), net ( 20,695 ) 4,368 ( 6,558 ) ( 22,885 )

Balance-December 31, 2018 ( 33,559 ) ( 4,031 ) ( 31,841 ) ( 69,431 )

Other comprehensive income (loss) before reclassifications 39,262 ( 989 ) ( 2,561 ) 35,712

39,262 ( 989 ) ( 2,561 ) 35,712

Amounts reclassified from other comprehensive income (loss) 119 1,291 95 1,505

119 1,291 95 1,505

Other comprehensive income (loss), net 39,381 302 ( 2,466 ) 37,217

2 unchanged sentences

27,845 ( 2,251 ) ( 3,418 ) 22,176

Amounts reclassified from other comprehensive income (loss)

( 377 ) 2,074 623 2,320

Amounts reclassified from other comprehensive (loss) income ( 377 ) 2,074 623 2,320

Other comprehensive income (loss), net 27,468 ( 177 ) ( 2,795 ) 24,496

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

2020 Form 10-K 140

Other comprehensive (loss) income before reclassifications ( 23,613 ) 127 10,306 ( 13,180 )

Amounts reclassified from other comprehensive (loss) income ( 491 ) 2,447 1,010 2,966

Other comprehensive (loss) income, net ( 24,104 ) 2,574 11,316 ( 10,214 )

Balance-December 31, 2021 $ 9,186 $ ( 1,332 ) $ ( 25,786 ) $ ( 17,932 )

PARENT COMPANY INFORMATION (Note 20)

2 unchanged sentences

Cash $ 77,760 $ 130,163

Interest bearing deposits with banks 250 —

Equity securities 6,135 2,999

9 unchanged sentences

Total Liabilities and Shareholders’ Equity $ 5,872,623 $ 5,143,090

2021 Form 10-K 140

Condensed Statements of Income

4 unchanged sentences

Income from subsidiary — 4,436 4,550

Gains on securities transactions, net — — 3

Losses on sales of assets, net — — ( 147 )

Other interest and income 1,498 21 51

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Adjustments to reconcile net income to net cash provided by operating activities:

Equity in undistributed earnings of subsidiary ( 219,687 ) ( 197,714 ) ( 113,705 )

Equity in undistributed earnings of subsidiaries ( 341,365 ) ( 219,687 ) ( 197,714 )

Stock-based compensation 20,887 16,154 14,726

Net amortization of premiums and accretion of discounts on borrowings

Gains on securities transactions, net — — ( 3 )

Losses on sales of assets, net — — 147

1,152 230 124

Net change in:

4 unchanged sentences

Purchases of equity securities ( 1,644 ) ( 2,500 ) —

Sales of investment securities available for sale — — 257

Cash and cash equivalents acquired in acquisitions — 11,947 7,915

Cash and cash equivalents (paid) acquired in acquisitions, net ( 3,983 ) — 11,947

Repayment of subordinated debt by subsidiary — 100,000 —

4 unchanged sentences

Proceeds from issuance of long-term borrowings, net 295,922 113,146 —

Repayment of long-term borrowings ( 60,000 ) — —

Dividends paid to preferred shareholders ( 12,688 ) ( 12,688 ) ( 12,688 )

2 unchanged sentences

Common stock issued, net 11,245 2,202 2,957

Net cash used in financing activities ( 80,679 ) ( 158,073 ) ( 155,813 )

Net cash provided by (used in) financing activities 30,905 ( 80,679 ) ( 158,073 )

Net change in cash and cash equivalents ( 52,153 ) 10,950 9,374

9 unchanged sentences

The financial reporting for each segment contains allocations and reporting in line with Valley’s operations, which may not necessarily be comparable to any other financial institution.

The accounting for each segment includes internal accounting policies designed to measure consistent and reasonable financial

The accounting for each segment includes internal accounting policies designed to measure consistent and reasonable financial reporting and may result in income and expense measurements that differ from amounts under U.S.

2021 Form 10-K 142

reporting and may result in income and expense measurements that differ from amounts under U.S.

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

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

The consumer lending segment is mainly comprised of residential mortgages and automobile loans, and to a lesser extent, secured personal lines of credit, home equity loans and other consumer loans.

3 unchanged sentences

The consumer lending segment also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, and insurance services.

The commercial lending segment is mainly comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans.

The commercial lending segment is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans.

Due to the portfolio’s interest rate characteristics, commercial lending is Valley’s business segment that is most sensitive to movements in market interest rates.

1 unchanged sentence

These investments are mainly comprised of fixed rate securities and depending on Valley's liquid cash position, federal funds sold and interest-bearing deposits with banks (primarily the Federal Reserve Bank of New York), as part of its asset/liability management strategies.

The fixed rate investments are among Valley’s assets that are least sensitive to changes in market interest rates.

The fixed rate investments are one of Valley’s least sensitive assets to changes in market interest rates.

However, a portion of the investment portfolio is invested in shorter-duration securities to maintain the overall asset sensitivity of Valley’s balance sheet.

The amounts disclosed as “corporate and other adjustments” represent income and expense items not directly attributable to a specific segment, including net securities gains and losses not reported in the investment management segment above, interest expense related to subordinated notes, amortization and impairment of tax credit investments, as well as non-core items, including the loss on extinguishment of debt and merger expenses.

The amounts disclosed as “corporate and other adjustments” represent income and expense items not directly attributable to a specific segment, including net gains and losses on available for sale and held to maturity securities transactions not reported in the investment management segment above, interest expense related to subordinated notes, amortization and impairment of tax credit investments, as well as non-core items, including the loss on extinguishment of debt and merger expenses.

The following tables represent the financial data for Valley’s four business segments for the years ended December 31, 2021, 2020 and 2019:

6 unchanged sentences

Average interest earning assets (unaudited) $ 7,262,808 $ 25,554,177 $ 5,410,830 $ — $ 38,227,815

$ 7,160,793 $ 24,625,066 $ 5,225,074 $ — $ 37,010,933

Interest income $ 238,715 $ 1,018,674 $ 80,051 $ ( 3,214 ) $ 1,334,226

1 unchanged sentence

Net interest income (loss) 219,598 951,409 65,808 ( 26,914 ) 1,209,901

Provision for credit losses 11,502 113,585 635 — 125,722

(Credit) provision for credit losses ( 6,807 ) 39,703 ( 263 ) — 32,633

Net interest income (loss) after provision for credit losses 226,405 911,706 66,071 ( 26,914 ) 1,177,268

197,982 750,136 67,434 ( 22,370 ) 993,182

Non-interest income 72,063 35,600 10,575 36,775 155,013

2 unchanged sentences

Income (loss) before income taxes $ 138,192 $ 552,394 $ 12,441 $ ( 62,288 ) $ 640,739

Return on average interest earning assets (pre-tax) (unaudited)

1.73 % 1.82 % 0.37 % N/A 1.43 %

Return on average interest earning assets (pre-tax) (unaudited) 1.90 % 2.16 % 0.23 % N/A 1.68 %

2021 Form 10-K

6 unchanged sentences

Average interest earning assets (unaudited) $ 7,160,793 $ 24,625,066 $ 5,225,074 $ — $ 37,010,933

$ 6,891,462 $ 19,343,791 $ 4,340,277 $ — $ 30,575,530

Interest income $ 257,196 $ 1,027,796 $ 102,883 $ ( 4,156 ) $ 1,383,719

3 unchanged sentences

Net interest income (loss) after provision for credit losses 197,982 750,136 67,434 ( 22,370 ) 993,182

174,287 651,128 68,908 ( 20,493 ) 873,830

Non-interest income 81,499 64,783 10,083 26,667 183,032

2 unchanged sentences

Income (loss) before income taxes $ 124,064 $ 448,621 $ 19,593 $ ( 62,212 ) $ 530,066

Return on average interest earning assets (pre-tax) (unaudited)

1.12 % 1.91 % 0.62 % N/A 1.49 %

Return on average interest earning assets (pre-tax) (unaudited) 1.73 % 1.82 % 0.37 % N/A 1.43 %

Year Ended December 31, 2019

5 unchanged sentences

Average interest earning assets (unaudited) $ 6,891,462 $ 19,343,791 $ 4,340,277 $ — $ 30,575,530

$ 6,197,161 $ 17,143,169 $ 4,362,581 $ — $ 27,702,911

Interest income $ 272,773 $ 926,328 $ 126,723 $ ( 4,824 ) $ 1,321,000

3 unchanged sentences

Net interest income (loss) after provision for credit losses 174,287 651,128 68,908 ( 20,493 ) 873,830

165,631 594,750 85,859 ( 21,538 ) 824,702

Non-interest income 57,981 41,157 8,818 106,564 214,520

2 unchanged sentences

Income (loss) before income taxes $ 77,479 $ 369,248 $ 27,022 $ ( 16,954 ) $ 456,795

Return on average interest earning assets (pre-tax) (unaudited)

0.92 % 1.80 % 0.89 % N/A 1.19 %

Return on average interest earning assets (pre-tax) (unaudited) 1.12 % 1.91 % 0.62 % N/A 1.49 %

2021 Form 10-K 144

25 unchanged sentences

Allowance for loan losses evaluated on a collective basis

As discussed in Note 1 to the consolidated financial statements, the Company adopted ASU No.

2016-13, Financial Instruments – Credit Losses (ASC Topic 326), as of January 1, 2020.

As discussed in Note 5 to the consolidated financial statements, the Company’s total allowance for loan losses as of December 31, 2021 was $359.2 million, of which $287.7 million related to the loans collectively evaluated for credit losses (the collective ALL).

1 unchanged sentence

In estimating the collective ALL, the Company uses a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by using probability of default and loss given default metrics.

The metrics are based on the migration of loans from performing to loss by credit quality rating or delinquency categories using life-of-loan analysis periods for each loan portfolio pool, and the

2021 Form 10-K

The metrics are based on the migration of loans from performing to loss by credit quality rating or delinquency categories using life-of-loan analysis periods for each loan portfolio pool, and the severity of loss, based on the aggregate net lifetime losses incurred.

severity of loss, based on the aggregate net lifetime losses incurred.

The expected credit losses are the product of multiplying the model’s expected life of loan loss percentages by the exposure at default at period end.

10 unchanged sentences

• development of the collective ALL methodology

• development of the transition matrix model

• continued use and appropriateness of changes made to the transition matrix model

• performance monitoring of the transition matrix model

• identification and determination of the significant assumptions used in the model

• development and ongoing monitoring of the appropriateness of the reasonable and supportable forecast period

• continued use and ongoing monitoring of the appropriateness of the reasonable and supportable forecast period

• development of the qualitative factors, including the significant assumptions used in the measurement of the qualitative factors

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generally accepted accounting principles

• evaluating the judgments made by the Company relative to the development and performance monitoring of the transition matrix model used to calculate the life of loan loss percentage by comparing them to Company-specific metrics and trends and the applicable industry and regulatory practices

• evaluating the judgments made by the Company relative to the assessment and performance monitoring of the transition matrix model used to calculate the life of loan loss percentage by comparing them to Company-specific metrics and trends and the applicable industry and regulatory practices

• testing the conceptual soundness and performance of the transition matrix model by inspecting the model documentation and model validation documentation to determine whether the model is suitable for the intended use

• evaluating the economic forecast scenarios and related weightings by comparing them to the Company’s business environment and relevant industry practices

• testing the reasonable and supportable forecast period and reversion period to evaluate the length of each period by comparison to specific portfolio risk characteristics and trends

• determining whether the loan portfolio is segmented by similar risk characteristics by comparing to the Company’s business environment and relevant industry practices

2020 Form 10-K 146

• testing individual credit risk ratings for a selection of commercial loans by evaluating the financial performance of the borrower, sources of repayment and any relevant guarantees or underlying collateral

2021 Form 10-K 146

• evaluating the methodology used to develop the qualitative factor framework and the effect of those factors on the collective ALL by comparing the qualitative factors to the specific portfolio risk characteristics, trends and relevant industry practices and identified limitations of the underlying quantitative models.

27 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-K

Item 8. Financial Statements and Supplementary Data