What changed in this filing

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Item 1. Financial Statements

2022-05-09 compared with 2021-11-08 · 265 added, 496 removed, 1058 unchanged (42% of the section changed)

3 unchanged sentences

(in thousands, except for share data)

September 30,

2022 December 31,

6 unchanged sentences

Available for sale debt securities 1,015,034 1,128,809

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

Held to maturity debt securities (net of allowance for credit losses of $ 1,222 at March 31, 2022 and $ 1,165 at December 31, 2021)

3,071,983 2,667,532

26 unchanged sentences

50,000,000 authorized shares:

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

Series A ( 4,600,000 shares issued at March 31, 2022 and December 31, 2021)

111,590 111,590

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

Series B ( 4,000,000 shares issued at March 31, 2022 and December 31, 2021)

98,101 98,101

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

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

issued 423,034,027 shares at March 31, 2022 and December 31, 2021)

148,482 148,482

2 unchanged sentences

Accumulated other comprehensive loss ( 56,098 ) ( 17,932 )

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

Treasury stock, at cost ( 1,639,750 common shares at March 31, 2022 and 1,596,959 common shares at December 31, 2021)

( 23,152 ) ( 22,855 )

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Interest Income

21 unchanged sentences

Service charges on deposit accounts 6,212 5,103

Gains (losses) on securities transactions, net 787 ( 46 ) 1,263 ( 127 )

(Losses) gains on securities transactions, net ( 1,072 ) 101

Fees from loan servicing 2,781 2,899

Gains on sales of loans, net 986 3,513

Gains on sales of assets, net 344 894 380 716

Bank owned life insurance 2,046 2,331

7 unchanged sentences

Professional and legal fees 14,749 6,272

Loss on extinguishment of debt — 2,353 8,406 2,353

Amortization of tax credit investments 2,896 2,744

11 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Earnings Per Common Share:

10 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net income $ 116,728 $ 115,710

Other comprehensive income, net of tax:

Other comprehensive loss, net of tax:

Unrealized gains and losses on available for sale securities

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

Net losses arising during the period ( 38,892 ) ( 10,436 )

Less reclassification adjustment for net (gains) losses included in net income ( 10 ) 44

1 unchanged sentence

Unrealized gains and losses on derivatives (cash flow hedges)

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

Net gains on derivatives arising during the period 218 174

Less reclassification adjustment for net losses included in net income 386 651

2 unchanged sentences

Amortization of actuarial net loss 132 280

Total other comprehensive (loss) income ( 3,640 ) 155 ( 13,657 ) 27,431

Total other comprehensive loss ( 38,166 ) ( 9,287 )

Total comprehensive income $ 78,562 $ 106,423

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the Nine Months Ended September 30, 2021

For the Three Months Ended March 31, 2022

Common Stock Accumulated

18 unchanged sentences

— 972 — ( 10,799 ) ( 5,173 ) — 13,220 ( 2,752 )

Purchase of treasury stock — ( 1,015 ) — — — — ( 13,517 ) ( 13,517 )

Balance - March 31, 2022 $ 209,691 421,394 $ 148,482 $ 3,872,236 $ 945,225 $ ( 56,098 ) $ ( 23,152 ) $ 5,096,384

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

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

Cash dividends declared:

Preferred stock, Series A, $ 0.39 per share

— — — — ( 1,797 ) — — ( 1,797 )

Preferred stock, Series B, $ 0.34 per share

— — — — ( 1,375 ) — — ( 1,375 )

Common stock, $ 0.11 per share

— — — — ( 45,093 ) — — ( 45,093 )

Effect of stock incentive plan, net

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

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

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

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

Cash dividends declared:

Preferred stock, Series A, $ 0.39 per share

— — — — ( 1,797 ) — — ( 1,797 )

Preferred stock, Series B, $ 0.34 per share

— — — — ( 1,375 ) — — ( 1,375 )

Common stock, $ 0.11 per share

— — — — ( 45,228 ) — — ( 45,228 )

Effect of stock incentive plan, net

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

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

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

For the Nine Months Ended September 30, 2020

For the Three Months Ended March 31, 2021

Common Stock Accumulated

6 unchanged sentences

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

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 — — — — 115,710 — — 115,710

Other comprehensive income, net of tax — — — — — 25,648 — 25,648

Other comprehensive loss, net of tax — — — — — ( 9,287 ) — ( 9,287 )

Cash dividends declared:

7 unchanged sentences

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

Net income — — — — 95,601 — — 95,601

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

Cash dividends declared:

Preferred stock, Series A, $ 0.39 per share

— — — — ( 1,797 ) — — ( 1,797 )

Preferred stock, Series B, $ 0.34 per share

— — — — ( 1,375 ) — — ( 1,375 )

Common stock, $ 0.11 per share

— — — — ( 44,750 ) — — ( 44,750 )

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

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

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

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

Cash dividends declared:

Preferred stock, Series A, $ 0.39 per share

— — — — ( 1,797 ) — — ( 1,797 )

Preferred stock, Series B, $ 0.34 per share

— — — — ( 1,375 ) — — ( 1,375 )

Common stock, $ 0.11 per share

— — — — ( 44,770 ) — — ( 44,770 )

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

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

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

6 unchanged sentences

Amortization of other intangible assets 4,437 6,006

(Gains) losses on securities transactions, net ( 1,263 ) 127

Losses (gains) on securities transactions, net 1,072 ( 101 )

Proceeds from sales of loans held for sale 204,628 357,108

2 unchanged sentences

Gains on sales of assets, net 64 196

Loss on extinguishment of debt 8,406 2,353

Net change in:

Fair value of borrowings hedged by derivative transactions ( 14,696 ) —

Trading debt securities 26,391 —

3 unchanged sentences

Accrued expenses and other liabilities 265,029 ( 111,562 )

Net cash provided by (used in) operating activities 583,042 ( 19,520 )

Net cash provided by operating activities 496,003 313,398

Cash flows from investing activities:

12 unchanged sentences

Proceeds from sales of real estate property and equipment 5,692 1,742

Proceeds from sales of loans held for investment 4,498 30,020

Purchases of real estate property and equipment ( 22,749 ) ( 8,042 )

Cash paid in acquisition ( 8,607 ) —

Net cash used in investing activities ( 1,585,293 ) ( 499,634 )

2 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from financing activities:

1 unchanged sentence

Net change in short-term borrowings ( 171,545 ) ( 63,292 )

Proceeds from issuance of long-term borrowings, net 295,922 838,388

Repayments of long-term borrowings — ( 51,769 )

4 unchanged sentences

Other, net ( 180 ) ( 165 )

Net cash provided by financing activities 329,467 2,923,132

Net cash (used in) provided by financing activities ( 229,710 ) 490,864

Net change in cash and cash equivalents ( 1,319,000 ) 304,628

7 unchanged sentences

Transfer of loans to other real estate owned $ — $ 141

Transfer of loans to loans held for sale — 30,020

Lease right of use assets obtained in exchange for operating lease liabilities 6,836 21

Non-cash net assets acquired 8,607 —

See accompanying notes to consolidated financial statements.

9 unchanged sentences

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

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

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

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly Valley’s financial position, results of operations, changes in shareholders' equity and cash flows at March 31, 2022 and for all periods presented have been made.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year or any subsequent interim period.

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

12 unchanged sentences

Business Combinations

L andmark Insurance of the Palm Beaches .

On February 1, 2022, the Bank's insurance agency subsidiary, Valley Insurance Services, acquired Landmark Insurance of the Palm Beaches Inc.

(Landmark) agency.

The purchase price included $ 8.6 million in cash and $ 1.0 million in contingent consideration.

Goodwill and other intangible assets totaled $ 4.4 million and $ 6.2 million, respectively.

The transaction was accounted for under the acquisition method of accounting and accordingly the results of Landmark's operations have been included in Valley's consolidated financial statements for the three months ended March 31, 2022 from the date of acquisition.

The Westchester Bank Holding Corporation.

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

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

Westchester maintains a seven branch network in Westchester County, New York.

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

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

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

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

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.

During the first quarter 2022, Valley revised the estimated fair values of the acquired assets as of the acquisition date of Westchester based upon additional information obtained that existed as of December 1, 2021.

The adjustments related to the fair value of deferred tax assets and resulted in a $ 5.0 million increase in goodwill (see Note 9 for more information).

If additional information (that existed as of the acquisition date) becomes available, the fair value estimates for acquired assets and assumed liabilities are subject to change for up to one year after the acquisition date.

Recent Acquisition

Bank Leumi Le-Israel Corporation.

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

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

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

As of June 30, 2021, Leumi had total

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

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

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

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

Dudley Venture s.

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

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

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

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

On April 1, 2022, Valley completed its acquisition of 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 maintained its headquarters in New York City with commercial banking offices in Chicago, Los Angeles, Palo Alto, and Aventura, Florida.

Valley issued approximately 85 million shares of common stock and paid $ 113.4 million in cash in the transaction.

The common shareholders of Bank Leumi USA received 3.8025 shares of Valley common stock and $ 5.08 in cash for each Bank Leumi USA common share that they owned.

Based on Valley’s closing stock price on March 31, 2022, the transaction was valued at an estimated $ 1.2 billion, inclusive of the value of options.

As a result of the acquisition, Bank Leumi Le-Israel B.M.

owned approximately 14 percent of Valley's common stock as of April 1, 2022.

As of March 31, 2022 , Bank Leumi had approximately $ 8.3 billion in assets, $ 6.1 billion of loans and $ 7.1 billion of deposits.

The acquisition supplements Valley’s commercial banking expertise and provides new business capabilities in the technology banking and private banking areas.

In addition, the acquisition further diversifies our loan portfolio from a geographic perspective by allowing Valley to enter new markets.

Merger expenses related to the completed and subsequent acquisition activity above totaled $ 4.4 million for the three months ended March 31, 2022.

The merger expenses mainly consisted of salaries and benefits expense, professional and legal fees, and other expense within non-interest expense on the consolidated statements of income.

Valley incurred no merger related expenses during the three months ended March 31, 2021.

Earnings Per Common Share

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

The following table shows the calculation of both basic and diluted earnings per common share for the three months ended March 31, 2022 and 2021:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands, except for share data)

9 unchanged sentences

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 per share of Valley’s common stock during the periods presented may have an anti-dilutive effect on the diluted earnings per common share calculation and therefore are excluded from the diluted earnings per share calculation along with restricted stock units.

Potential anti-dilutive weighted common shares were immaterial for the three and nine months ended September 30, 2021, respectively, as compared to 4.9 million and 2.2 million shares for the three and nine months ended September 30, 2020, respectively.

share calculation and therefore are excluded from the diluted earnings per share calculation along with restricted stock units.

Potential anti-dilutive weighted common shares were immaterial for the three months ended March 31, 2022 and 2021.

Accumulated Other Comprehensive Loss

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

Components of Accumulated Other Comprehensive Loss Total

Comprehensive

Unrealized Gains

and Losses on

Available for Sale

(AFS) Securities Unrealized Gains

and Losses on

Derivatives Defined

(in thousands)

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

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

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

Other comprehensive (loss) income, net

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

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

The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the three months ended March 31, 2022:

Components of Accumulated Other Comprehensive Loss Total

8 unchanged sentences

Balance at December 31, 2021 $ 9,186 $ ( 1,332 ) $ ( 25,786 ) $ ( 17,932 )

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

Other comprehensive (loss) gain before reclassification ( 38,892 ) 218 — ( 38,674 )

Amounts reclassified from other comprehensive (loss) income ( 10 ) 386 132 508

1 unchanged sentence

( 38,902 ) 604 132 ( 38,166 )

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

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

Balance at March 31, 2022 $ ( 29,716 ) $ ( 728 ) $ ( 25,654 ) $ ( 56,098 )

The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three months ended March 31, 2022 and 2021:

Amounts Reclassified from

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended September 30,

Components of Accumulated Other Comprehensive Loss 2022 2021 Income Statement Line Item

(in thousands)

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

Unrealized gains (losses) on AFS securities before tax $ 14 $ ( 59 ) (Losses) gains on securities transactions, net

Tax effect ( 4 ) 15

12 unchanged sentences

Accounting Standards Update (ASU) No.

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.

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.

For each reporting period, to the extent that the amortized cost basis of an individual callable debt security exceeds the amount repayable by the issuer at the next call date, the premium should be amortized to the next call date, unless the guidance to consider estimated prepayments is applied.

Valley adopted ASU No.

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 of 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 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 and it can be applied through December 31, 2022, similar to the other reference rate reform relief provided under Topic 848.

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 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 and it can be applied through December 31, 2022, similar to the other reference rate reform relief provided under Topic 848.

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

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

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

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

Valley adopted ASU No.

2021-05 on January 1, 2022, and the new guidance did not have a significant impact on Valley’s consolidated financial statements.

New Accounting Guidance Issued in 2022

2022-01, “Derivatives and Hedging (Topic 815):

Fair Value Hedging –Portfolio Layer Method” expands and clarifies the current guidance on accounting for fair value hedge basis adjustments under the portfolio layer method for both single-layer and multiple-layer hedges.

This method allows entities to designate multiple hedging relationships with a single closed portfolio, and therefore a larger portion of the interest rate risk associated with such a portfolio is eligible to be hedged.

2022-01 also clarifies that no assets may be added to a closed portfolio once it is designated in a portfolio layer method hedge.

2022-01 will be effective for Valley on January 1, 2023, and it is not expected to have a significant impact on Valley's consolidated financial statements.

2022-02, “Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures” eliminates the troubled debt restructuring (TDR) accounting model for creditors, such as Valley, that have adopted Topic 326, “Financial Instruments – Credit Losses.” ASU No.

2022-02 will require all loan modifications to be accounted for under the general loan modification guidance in Subtopic 310-20.

On a prospective basis, entities will also be subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty.

Public business entities within the scope of the Topic 326 vintage disclosure requirements also will be required to prospectively disclose current-period gross write-off information by vintage.

However, gross recoveries will not be required.

2022-02 will be effective for Valley on January 1, 2023, with early adoption permitted.

Valley is currently evaluating the impact of ASU No.

2022-02 on its consolidated financial statements.

Fair Value Measurement of Assets and Liabilities

6 unchanged sentences

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

The following tables present the assets and liabilities that are measured at fair value on a recurring and non-recurring basis by level within the fair value hierarchy as reported on the consolidated statements of financial condition at September 30, 2021 and December 31, 2020.

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

September 30,

2022 Fair Value Measurements at Reporting Date Using:

43 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 —

2 unchanged sentences

Corporate and other debt securities 123,492 — 123,492 —

Total available for sale 1,339,473 51,393 1,287,265 815

Total available for sale debt securities 1,128,809 — 1,128,809 —

Loans held for sale (2)

7 unchanged sentences

Non-recurring fair value measurements:

Collateral dependent impaired loans $ 35,228 $ — $ — $ 35,228

Loan servicing rights 15,603 — — 15,603

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

Foreclosed assets 2,931 — — 2,931

Total $ 50,802 $ — $ — $ 50,802

(1) Includes equity securities measured at net asset value (NAV) per share (or its equivalent) as a practical expedient totaling $ 11.4 million and $ 7.8 million at September 30, 2021 and December 31, 2020, respectively.

(1) Includes equity securities measured at net asset value (NAV) per share (or its equivalent) as a practical expedient totaling $ 11.5 million and $ 11.6 million at March 31, 2022 and December 31, 2021, respectively.

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

(2) Represents residential mortgage loans held for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately $ 152.4 million and $ 286.4 million at September 30, 2021 and December 31, 2020, respectively.

(2) Represents residential mortgage loans held for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately $ 79.1 million and $ 136.3 million at March 31, 2022 and December 31, 2021, respectively.

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

8 unchanged sentences

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.

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

Management reviews the data and assumptions used in

pricing the securities by its third-party provider to ensure the highest level of significant inputs are derived from market observable data.

Available for sale debt securities.

When applicable, U.S.

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

5 unchanged sentences

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 securities and attempts to identify transactions which may not be orderly or reflective of a significant level of activity and volume.

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.

2 unchanged sentences

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

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

Non-performance risk did not materially impact the fair value of mortgage loans held for sale at March 31, 2022 and December 31, 2021 based on the short duration these assets were held, and the credit quality of these loans.

Derivatives are reported at fair value utilizing Level 2 inputs.

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

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

The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at March 31, 2022 and December 31, 2021), is determined based on the current market prices for similar instruments.

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

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

The credit valuation adjustments were not significant to the overall valuation of Valley’s derivatives at March 31, 2022 and December 31, 2021.

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

The following valuation techniques were used for certain non-financial assets measured at fair value on a non-recurring basis, including collateral dependent loans reported at the fair value of the underlying collateral, loan servicing rights and foreclosed assets, which are reported at fair value upon initial recognition or subsequent impairment as described below.

The following valuation techniques were used for certain non-financial assets measured at fair value on a non-recurring basis, including collateral dependent loans reported at the fair value of the underlying collateral and foreclosed assets, which are reported at fair value upon initial recognition or subsequent impairment as described below.

Collateral Dependent Loans .

3 unchanged sentences

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

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

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

Loan servicing rights.

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

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

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

At September 30, 2021, the fair value model used a blended prepayment speed (stated as constant prepayment rates) of 13.6 percent and a discount rate of 9.0 percent for the valuation of the loan servicing rights.

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

The use of different assumptions could have a significant positive or negative effect on the fair value estimate.

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

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

See Note 9 for additional information.

At March 31, 2022, collateral dependent loans were individually re-measured and reported at fair value through direct loan charge-offs to the allowance for loan losses based on the fair value of the underlying collateral.

At March 31, 2022, collateral dependent loans with a total amortized cost of $ 114.4 million, including our taxi medallion loan portfolio, were reduced by specific allowance for loan losses allocations totaling $ 66.8 million to a reported total net carrying amount of $ 47.6 million.

Foreclosed assets .

Certain foreclosed assets (consisting of other real estate owned and other repossessed assets included in other assets), upon initial recognition and transfer from loans, are re-measured and reported at fair value using Level 3 inputs, consisting of a third-party appraisal less estimated cost to sell.

using Level 3 inputs, consisting of a third-party appraisal less estimated cost to sell.

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 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 0.6 percent to 4.6 percent at September 30, 2021.

There were no adjustments to the appraisals of foreclosed assets at March 31, 2022.

Other Fair Value Disclosures

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

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

Hierarchy September 30, 2021 December 31, 2020

The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at March 31, 2022 and December 31, 2021 were as follows:

Hierarchy March 31, 2022 December 31, 2021

Amount Fair Value Carrying

37 unchanged sentences

Equity Securities

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

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

Equity securities carried at fair value totaled $ 36.0 million and $ 36.5 million at March 31, 2022 and December 31, 2021, respectively.

At March 31, 2022, Valley's equity securities consisted of one publicly traded mutual fund, CRA investments and to a lesser extent, equity investments related to the development of new financial technologies.

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

Trading Debt Securities

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

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

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

We recorded net trading losses of $ 2 thousand and net trading gains of $ 705 thousand for three and nine months ended September 30, 2021, respectively.

The fair value of trading debt securities, wholly consisting of municipal bonds, totaled $ 11.7 million and $ 38.1 million at March 31, 2022 and December 31, 2021, respectively.

Net trading gains and losses were included in net

gains and losses on securities transactions within non-interest income.

We recorded net trading losses of $ 1.1 million and net trading gains of $ 219 thousand for three months ended March 31, 2022 and 2021, respectively.

Available for Sale Debt Securities

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

The amortized cost, gross unrealized gains and losses and fair value of available for sale debt securities at March 31, 2022 and December 31, 2021 were as follows:

Losses Fair Value

(in thousands)

September 30, 2021

March 31, 2022

government agency securities $ 18,448 $ 32 $ ( 148 ) $ 18,332

7 unchanged sentences

December 31, 2021

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

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

6 unchanged sentences

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

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

The age of unrealized losses and fair value of the related available for sale debt securities at March 31, 2022 and December 31, 2021 were as follows:

Twelve Months More than

4 unchanged sentences

(in thousands)

September 30, 2021

March 31, 2022

government agency securities $ 13,880 $ ( 140 ) $ 1,292 $ ( 8 ) $ 15,172 $ ( 148 )

19 unchanged sentences

Total $ 459,944 $ ( 5,535 ) $ 27,286 $ ( 999 ) $ 487,230 $ ( 6,534 )

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

As of September 30, 2021, the fair value of available for sale debt securities that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $ 547.5 million.

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

Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was 404 and 139 at March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022, the fair value of available for sale debt securities that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $ 488.5 million.

The contractual maturities of available for sale debt securities at March 31, 2022 are set forth in the following table.

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

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

September 30, 2021

March 31, 2022

(in thousands)

6 unchanged sentences

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

The weighted average remaining expected life for residential mortgage-backed securities available for sale was 4.9 years at September 30, 2021.

The weighted average remaining expected life for residential mortgage-backed securities available for sale was 5.0 years at March 31, 2022.

Impairment Analysis of Available For Sale Debt Securities

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

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

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

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

Val ley has evaluated available for sale debt securities that are in an unrealized loss position as of March 31, 2022 included in the table above and has determined that the declines in fair value are mainly attributable to market volatility, not credit quality or other factors.

Based on a comparison of the present value of expected cash flows to the amortized cost, management recognized no impairment during the three months ended March 31, 2022 and 2021.

There was no allowance for credit losses for available for sale debt securities at March 31, 2022 and December 31, 2021.

Held to Maturity Debt Securities

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

The amortized cost, gross unrealized gains and losses and fair value of debt securities held to maturity at March 31, 2022 and December 31, 2021 were as follows:

Losses Fair Value

(in thousands)

September 30, 2021

March 31, 2022

Treasury securities $ 67,401 $ 1,531 $ — $ 68,932

19 unchanged sentences

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

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

The age of unrealized losses and fair value of related debt securities held to maturity at March 31, 2022 and December 31, 2021 were as follows:

Twelve Months More than

4 unchanged sentences

(in thousands)

September 30, 2021

March 31, 2022

government agency securities $ 4,092 $ ( 119 ) $ — $ — $ 4,092 $ ( 119 )

Obligations of states and political subdivisions:

10 unchanged sentences

December 31, 2021

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

Total $ 1,440,435 $ ( 22,830 ) $ 242,949 $ ( 11,242 ) $ 1,683,384 $ ( 34,072 )

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

As of September 30, 2021, the fair value of debt securities held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $ 955.9 million.

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

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 303 and 108 at March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022, the fair value of debt securities held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $ 909.7 million.

The contractual maturities of investments in debt securities held to maturity at March 31, 2022 are set forth in the table below.

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

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

September 30, 2021

March 31, 2022

(in thousands)

6 unchanged sentences

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

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

The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was 7.9 years at March 31, 2022.

Credit Quality Indicators

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

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

The following table summarizes the amortized cost of held to maturity debt securities by external credit rating at March 31, 2022 and December 31, 2021.

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

(in thousands)

September 30, 2021

March 31, 2022

Treasury securities $ 67,401 $ — $ — $ — $ 67,401

22 unchanged sentences

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

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

At March 31, 2022, most of the obligations of states and political subdivisions were rated investment grade and a large portion of the "non-rated" category included TEMS securities secured by Ginnie Mae securities.

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

2 unchanged sentences

Valley has a zero loss expectation for certain securities within the held to maturity portfolio, and therefore it is not required to estimate an allowance for credit losses related to these securities under the CECL standard.

After an evaluation of qualitative factors, Valley identified the following securities types which it believes qualify for this exclusion:

After an evaluation of qualitative factors, Valley identified the following securities types which it believes qualify for this

Treasury securities, U.S.

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

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

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

At March 31, 2022, held to maturity debt securities were carried net of allowance for credit losses totaling $ 1.2 million and $ 1.2 million at March 31, 2022 and December 31, 2021, respectively.

Valley recorded provision for credit losses of $ 57 thousand for the three months ended March 31, 2022 and a credit (negative) provision for credit losses of $ 358 thousand for the three months ended March 31, 2021.

Loans and Allowance for Credit Losses for Loans

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

September 30, 2021 December 31, 2020

The detail of the loan portfolio as of March 31, 2022 and December 31, 2021 was as follows:

March 31, 2022 December 31, 2021

(in thousands)

13 unchanged sentences

Total loans $ 35,364,405 $ 34,153,657

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

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

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

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 83.4 million and $ 90.2 million at September 30, 2021 and December 31, 2020, respectively, and is presented separately in the consolidated statements of financial condition .

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

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

* Represents SBA Paycheck Protection Program (PPP) loans, net of unearned fees totaling $ 5.9 million and $ 12.1 million at March 31, 2022 and December 31, 2021, respectively.

Total loans includes net unearned discounts and deferre d loan fees of $ 62.0 million an d $ 78.5 million at March 31, 2022 and December 31, 2021, respectively.

Net unearned discounts and deferred loan fees include the non-credit discount on purchased credit deterioration (PCD) loans and net unearned fees related to PPP loans at March 31, 2022 and December 31, 2021.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 87.6 million and $ 83.7 million at March 31, 2022 and December 31, 2021, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition .

There were no sales of loans from the held for investment portfolio during the three months ended March 31, 2022 and 2021.

Credit Risk Management

1 unchanged sentence

Management reviews and approves these policies and procedures on a regular basis with subsequent approval by the Board of Directors annually.

Credit authority relating to a significant dollar percentage of the overall portfolio is centralized and controlled by the Credit Risk Management Division and by the Credit Committee.

Credit authority relating to a significant dollar percentage of the overall portfolio is centralized and controlled by the Credit Risk Management

Division and by the Credit Committee.

A reporting system supplements the management review process by providing management with frequent reports concerning loan production, loan quality, internal loan classification, concentrations of credit, loan delinquencies, non-performing, and potential problem loans.

2 unchanged sentences

Credit Quality

The following table presents past due, current and non-accrual loans without an allowance for credit losses by loan portfolio class at September 30, 2021 and 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 March 31, 2022 and December 31, 2021:

Past Due and Non-Accrual Loans

4 unchanged sentences

Current Loans

Total Loans Non-Accrual Loans Without Allowance for Credit Losses

Total Loans Non-Accrual Loans Without Allowance for Loan Losses

(in thousands)

September 30, 2021

March 31, 2022

Commercial and industrial

18 unchanged sentences

Total Past Due Loans

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

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

(in thousands)

18 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.

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

The following table presents the internal loan classification risk by loan portfolio class by origination year based on the most recent analysis performed at March 31, 2022 and December 31, 2021:

Amortized Cost Basis by Origination Year

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

March 31, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

(in thousands)

35 unchanged sentences

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

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

The following table presents the amortized cost in those loan classes based on payment activity by origination year as of March 31, 2022 and December 31, 2021.

Amortized Cost Basis by Origination Year

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

March 31, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

(in thousands)

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Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

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

Non-performing TDRs totaled $ 116.7 million and $ 92.8 million as of September 30, 2021 and December 31, 2020, respectively.

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

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

Three Months Ended September 30,

Troubled Debt Restructurings Number

Contracts Pre-Modification

Amortized Carrying Amount Post-Modification

Amortized Carrying Amount Number

Contracts Pre-Modification

Amortized Carrying Amount Post-Modification

Amortized Carrying Amount

($ in thousands)

Commercial and industrial 4 $ 2,446 $ 2,414 28 $ 31,237 $ 30,938

Commercial real estate:

Commercial real estate 5 14,473 14,539 2 4,249 4,240

Construction 2 17,599 17,599 — — —

Total commercial real estate

7 32,072 32,138 2 4,249 4,240

Residential mortgage 4 356 350 1 247 247

Consumer — — — 1 72 72

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

Nine Months Ended September 30,

Performing TDRs (not reported as non-accrual loans) totaled $ 56.5 million and $ 71.3 million as of March 31, 2022 and December 31, 2021, respectively.

Non-performing TDRs totaled $ 104.7 million and $ 117.2 million as of March 31, 2022 and December 31, 2021, respectively.

The following table presents the pre- and post-modification amortized cost of loans by loan class modified as TDRs during the three months ended March 31, 2022 and 2021.

Post-modification amounts are presented as of March 31, 2022 and 2021.

Three Months Ended March 31,

Troubled Debt Restructurings Number

Contracts Pre-Modification

Amortized Carrying Amount Post-Modification

Amortized Carrying Amount Number

Outstanding Recorded Investment Post-Modification

Outstanding Recorded Investment Number

Contracts Pre-Modification

Amortized Carrying Amount Post-Modification

Amortized Carrying Amount

Outstanding Recorded Investment Post-Modification

Outstanding Recorded Investment

($ in thousands)

1 unchanged sentence

Commercial real estate 2 5,260 5,251 2 4,197 4,185

Commercial real estate 11 26,710 26,730 4 8,996 9,000

Construction 2 17,599 17,599 — — —

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

Residential mortgage 1 121 117 6 1,528 1,518

1 unchanged sentence

Total 14 $ 15,065 $ 15,030 14 $ 19,639 $ 19,178

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

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

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

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

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

Three Months Ended September 30,

Troubled Debt Restructurings Subsequently Defaulted Number of

Contracts Recorded Investment Number of

Contracts Recorded

($ in thousands)

Commercial and industrial — $ — 30 $ 17,496

Commercial real estate 1 419 — —

Residential mortgage 1 129 — —

Total 2 $ 548 30 $ 17,496

Nine Months Ended September 30,

The total TDRs presented in the above table had allocated allowance for loan losses of $ 7.8 million and $ 3.4 million at March 31, 2022 and 2021, respectively.

There were no charge-offs related to TDRs for the three months ended March 31, 2022.

There were charge-offs of $ 5.1 million related to TDRs for the three months ended March 31, 2021.

Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the three months ended March 31, 2022 and 2021.

Loans modified as TDRs within the previous 12 months and for which there was a payment default ( 90 or more days past due) for the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended March 31,

Troubled Debt Restructurings Subsequently Defaulted Number of

3 unchanged sentences

Commercial and industrial 2 $ 1,850 16 $ 12,384

Commercial real estate 1 419 — —

Construction 2 17,599 — —

Residential mortgage — — 3 655

Consumer — — 1 18

Total 4 $ 19,449 19 $ 13,039

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

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

As of March 31, 2022, Valley had $ 23.0 million of outstanding loans remaining in their payment deferral period under short-term modifications as compared to $ 27.9 million of loans in deferral at December 31, 2021.

Under the applicable accounting and regulatory guidance, none of these loans were classified as TDRs at March 31, 2022 and December 31, 2021.

Loans in Process of Foreclosure.

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

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

Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $ 3.0 million and $ 1.9 million at September 30, 2021 and December 31, 2020, respectively.

Other real estate owned (OREO) totaled $ 1.0 million and $ 2.3 million at March 31, 2022 and December 31, 2021, respectively.

There were no forec losed residential real estate properties included in OREO at March 31, 2022 and at December 31, 2021.

Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $ 2.8 million and $ 2.5 million at March 31, 2022 and December 31, 2021, respectively.

Collateral dependent loans.

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

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

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

September 30,

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

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

The following table presents collateral dependent loans by class as of March 31, 2022 and December 31, 2021:

2022 December 31,

(in thousands)

Collateral dependent loans:

Commercial and industrial * $ 93,389 $ 95,335

Commercial real estate:

Commercial real estate 92,402 110,174

Construction 19,307 —

Total commercial real estate loans 111,709 110,174

Residential mortgage 25,704 35,745

3 unchanged sentences

Allowance for Credit Losses for Loans

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

September 30,

The following table summarizes the allowance for credit losses for loans at March 31, 2022 and December 31, 2021:

2022 December 31,

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands)

3 unchanged sentences

Total provision for credit losses for loans $ 3,500 $ 9,014

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

The following table details the activity in the allowance for loan losses by loan portfolio segment for the three months ended March 31, 2022 and 2021:

and Industrial Commercial

3 unchanged sentences

Three Months Ended

September 30, 2021

March 31, 2022

Allowance for loan losses:

6 unchanged sentences

Three Months Ended

September 30, 2020

March 31, 2021

Allowance for losses:

5 unchanged sentences

Ending balance $ 126,408 $ 174,236 $ 27,172 $ 15,064 $ 342,880

and Industrial Commercial

Real Estate Residential

Mortgage Consumer Total

(in thousands)

Nine Months Ended

September 30, 2021

Allowance for loan losses:

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

Loans charged-off ( 19,283 ) ( 382 ) ( 139 ) ( 3,389 ) ( 23,193 )

Charged-off loans recovered 2,781 763 576 3,359 7,479

Net (charge-offs) recoveries ( 16,502 ) 381 437 ( 30 ) ( 15,714 )

(Credit) provision for loan losses ( 10,691 ) 35,227 ( 4,578 ) ( 1,960 ) 17,998

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

Nine Months Ended

September 30, 2020

Allowance for losses:

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

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

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

Loans charged-off ( 31,349 ) ( 766 ) ( 348 ) ( 7,624 ) ( 40,087 )

Charged-off loans recovered 1,796 244 626 2,454 5,120

Net (charge-offs) recoveries ( 29,553 ) ( 522 ) 278 ( 5,170 ) ( 34,967 )

Provision for loan losses 40,734 49,702 2,701 12,572 105,709

Ending balance $ 130,409 $ 144,650 $ 28,614 $ 21,359 $ 325,032

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

The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the allowance measurement methodology at September 30, 2021 and December 31, 2020.

and Industrial Commercial

2 unchanged sentences

(in thousands)

September 30, 2021

March 31, 2022

Allowance for loan losses:

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Goodwill and Other Intangible Assets

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

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

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

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

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

The changes in the carrying amount of goodwill as allocated to our business segments, or reporting units thereof, for goodwill impairment analysis were:

Business Segment / Reporting Unit *

Management Consumer

Lending Commercial

Lending Investment

Management Total

(in thousands)

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

Goodwill from business combinations 4,370 85 4,866 25 9,346

Balance at March 31, 2022 $ 38,685 $ 308,333 $ 900,881 $ 220,455 $ 1,468,354

* 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.

The goodwill from business combinations set forth in the above table during the three months ended March 31, 2022, related to the acquisition of Landmark by our insurance agency subsidiary and an adjustment to goodwill from the Westchester acquisition.

The Landmark transaction resulted in $ 4.4 million of goodwill which was allocated entirely to the Wealth Management reporting unit.

During the three months ended March 31, 2022, Valley recorded $ 5.0 million of additional goodwill reflecting an adjustment to the deferred tax assets acquired from Westchester as of the acquisition date.

See Note 2 for details related to these acquisitions.

There was no i mpairment of goodwill recognized during the three months ended March 31, 2022 and 2021.

The following table summarizes other intangible assets as of March 31, 2022 and December 31, 2021:

Assets Accumulated

Amortization Valuation

Allowance Net

Amortization Net

(in thousands)

September 30, 2021

March 31, 2022

Loan servicing rights $ 117,363 $ ( 92,133 ) $ 25,230

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

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

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

See the “Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis” section of Note 6 for additional information regarding the fair valuation.

There was no net impairment recognized during the three months ended March 31, 2022.

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

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 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 approximately 7.6 years.

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 approximately 4.8 years.

Valley recorded $ 6.2 million of other intangible assets during the three months ended March 31, 2022 resulting from the Landmark acquisition.

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

No impairment was recognized during the three and nine months ended September 30, 2021 and 2020.

No impairment was recognized during the three months ended March 31, 2022 and 2021.

The following table presents the estimated future amortization expense of other intangible assets for the remainder of 2022 through 2026:

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2026 2,039 4,225 998

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

Borrowed Funds

Short-Term Borrowings

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

September 30, 2021 December 31, 2020

(in thousands)

FHLB advances $ 600,000 $ 1,000,000

Securities sold under agreements to repurchase 183,346 147,958

Total short-term borrowings $ 783,346 $ 1,147,958

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

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

See Note 12 for additional details.

Long-Term Borrowings

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

September 30, 2021 December 31, 2020

(in thousands)

FHLB advances, net (1)

$ 789,185 $ 1,592,252

Subordinated debt, net (2)

638,259 403,413

Securities sold under agreements to repurchase — 300,000

Total long-term borrowings $ 1,427,444 $ 2,295,665

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

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

(2) Subordinated debt is presented net of unamortized debt issuance costs totaling $ 6.1 million and $ 2.7 million at September 30, 2021 and December 31, 2020, respectively.

FHLB Advances.

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

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

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

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

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

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

(in thousands)

2023 $ 350,000

Total long-term FHLB advances $ 788,000

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 the next 12 months.

Subordinated debt.

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

No gain or loss was incurred on this transaction.

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

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

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

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

At September 30, 2021, the subordinated notes had a carrying value of $ 296.2 million, net of unamortized debt issuance costs.

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

See Note 12 for additional details.

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

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

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

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

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

The long-term repos had a weighted average interest rate of 3.37 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.

Valley recognized amortization expense on other intangible assets totaling approximately $ 4.4 million and $ 6.0 million (including net recoveries of impairment charges on loan servicing rights) for the three months ended March 31, 2022 and 2021, respectively.

Stock–Based Compensation

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

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

As of March 31, 2022 , 6.1 million shares of common stock were available for issuance under the 2021 Plan.

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

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

Valley granted 30 thousand and 26 thousand of time-based RSUs during the three months ended September 30, 2021 and 2020, respectively, and 1.2 million for both the nine months ended September 30, 2021 and 2020.

Valley granted 1.2 million and 1.1 million of time-based restricted stock units (RSUs) during the three months ended March 31, 2022 and 2021, respectively.

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

The average grant date fair value of the RSUs granted during the nine months ended September 30, 2021 and 2020 was $ 11.98 per share and $ 10.41 per share, respectively.

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

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

The average grant date fair value of the RSUs granted during the three months ended March 31, 2022 and 2021 was $ 14.05 per share and $ 11.75 per share, respectively.

Valley granted 567 thousand and 604 thousand of performance-based RSUs to certain officers for the three months ended March 31, 2022 and 2021, respectively.

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

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

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

Valley recorded total stock-based compensation expense of $ 5.2 million and $ 4.1 million for the three months ended September 30, 2021 and 2020, respectively, and $ 15.9 million and $ 12.3 million for the nine months ended September 30, 2021 and 2020, respectively.

The grant date fair value of the performance-based RSUs granted during the three months ended March 31, 2022 and 2021 was $ 14.82 per share and $ 12.36 per share, respectively.

Valley recorded total stock-based compensation expense of $ 7.3 million and $ 5.5 million for the three months ended March 31, 2022 and 2021, respectively.

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

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

As of March 31, 2022, the unrecognized amortization expense for all stock-based employee compensation totaled approximately $ 38.4 million and will be recognized over an average remaining vesting period of approximately 2.21 years.

Derivative Instruments and Hedging Activities

5 unchanged sentences

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

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

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

Cash Flow Hedges of Interest Rate Risk .

2 unchanged sentences

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, respectively.

Valley had five interest rate swaps with a total notional amount of $ 500 million mature during the three months ended March 31, 2022.

These swaps were used to hedge the changes in cash flows associated with certain short-term Federal Home Loan Bank of New York (FHLB) advances.

Non-designated Hedges.

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

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

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

At March 31, 2022, Valley had 25 credit swaps with an aggregate notional amount of $ 245.6 million related to risk participation agreements.

At March 31, 2022, Valley had two “steepener” swaps, each with a current notional amount of $ 10.4 million where the receive rate on the swap mirrors the pay rate on the brokered deposits and the rates paid on these types of hybrid instruments are based on a formula derived from the spread between the long and short ends of the constant maturity swap (CMS) rate curve.

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

3 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Fair Value Fair Value

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Derivatives not designated as hedging instruments:

Interest rate swaps and other derivatives *

Interest rate swaps and other contracts *

$ 172,393 $ 171,610 $ 11,264,601 $ 181,012 $ 47,277 $ 10,301,460

3 unchanged sentences

* 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 applicable derivative assets and liabilities are reported net of variation margin at September 30, 2021 and December 31, 2020 in the table above .

The Chicago Mercantile Exchange and London Clearing House variation margins are classified as a single-unit of account as settlements of the cash flow hedges and other non-designated derivative instruments.

As a result, the fair value of the applicable derivative assets and liabilities are reported net of variation margin at March 31, 2022 and December 31, 2021 in the table above .

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands)

Amount of loss reclassified from accumulated other comprehensive loss to interest expense $ ( 542 ) $ ( 915 )

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

The accumulated net after-tax losses related to effective cash flow hedges included in accumulated other comprehensive loss were $ 2.0 million and $ 4.0 million at September 30, 2021 and December 31, 2020, respectively.

Amount of gain recognized in other comprehensive income (loss) 320 177

The accumulated net after-tax losses related to effective cash flow hedges included in accumulated other comprehensive loss were $ 728 thousand and $ 1.3 million at March 31, 2022 and December 31, 2021, respectively.

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

Valley estimates that $ 1.8 million will be reclassified as an increase to interest expense over the next 12 months.

Valley estimates that $ 485 thousand will be reclassified as an increase to interest expense over the next 12 months.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands)

Derivative - interest rate swap:

Interest income $ — $ 88 $ — $ 170

Interest expense 530 —

Hedged item - subordinated debt and loans:

Interest income $ — $ ( 88 ) $ — $ ( 170 )

Hedged item - subordinated debt

Interest expense ( 530 ) —

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

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

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

1 unchanged sentence

Long-term borrowings $ 282,443 $ ( 17,557 )

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands)

1 unchanged sentence

Other non-interest expense $ ( 2,797 ) $ ( 1,785 )

Other non-interest income included fee income related to non-designated hedge derivative interest rate swaps (not designated as hedging instruments) executed with commercial loan customers totaling $ 8.8 million and $ 19.2 million for the three months ended September 30, 2021 and 2020, respectively, and $ 22.6 million and $ 48.1 million for the nine months ended September 30, 2021 and 2020, respectively.

Other non-interest income included fee income related to non-designated hedge derivative interest rate swaps (not designated as hedging instruments) executed with commercial loan customers totaling $ 14.0 million and $ 6.2 million for the three months ended March 31, 2022 and 2021, respectively.

Credit Risk Related Contingent Features.

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

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

As of September 30, 2021, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk related to these agreements, w as $ 60.5 million.

As of March 31, 2022, Valley was in compliance with all of the provisions of its derivative counterparty agreements.

As of March 31, 2022, there were no derivatives in an aggregate net liability position.

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

Balance Sheet Offsetting

Certain financial instruments, including certain OTC derivatives (mostly interest rate swaps) and repurchase agreements (accounted for as secured long-term borrowings), may be eligible for offset in the consolidated statements of financial condition and/or subject to master netting arrangements or similar agreements.

Certain financial instruments, including certain over-the-counter (OTC) derivatives (mostly interest rate swaps) and repurchase agreements (accounted for as secured long-term borrowings), may be eligible for offset in the consolidated statements of financial condition and/or subject to master netting arrangements or similar agreements.

OTC derivatives include interest rate swaps executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house (presented in the table below).

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

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

The table below presents information about Valley’s financial instruments eligible for offset in the consolidated statements of financial condition as of March 31, 2022 and December 31, 2021.

Gross Amounts Not Offset

4 unchanged sentences

Instruments Cash

Collateral (1)

Collateral * Net

(in thousands)

September 30, 2021

March 31, 2022

Interest rate swaps $ 172,983 $ — $ 172,983 $ 12,555 $ 117,289 $ 43,139

Interest rate swaps $ 188,244 $ — $ 188,244 $ ( 12,555 ) $ ( 2,323 ) $ 173,366

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

December 31, 2021

1 unchanged sentence

Interest rate swaps $ 50,922 $ — $ 50,922 $ — $ ( 44,231 ) $ 6,691

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

Total $ 450,487 $ — $ 450,487 $ ( 300,000 ) $ ( 150,487 ) $ —

(1) Cash collateral pledged to our counterparties in relation to market value exposures of OTC derivative contacts in a liability position.

(2) Represents the fair value of non-cash pledged investment securities.

* Cash collateral received (pledged) to our counterparties in relation to market value exposures of OTC derivative contacts in a liability position.

Tax Credit Investments

Valley’s tax credit investments are primarily related to investments promoting qualified affordable housing projects, and other investments related to community development and renewable energy sources.

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

Some of these tax-advantaged investments support Valley’s regulatory compliance with the CRA.

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

2 unchanged sentences

Valley’s unfunded capital and other commitments related to the tax credit investments are carried in accrued expenses and other liabilities on the consolidated statements of financial condition.

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.

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 impairments, if applicable.

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

September 30,

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at March 31, 2022 and December 31, 2021:

2022 December 31,

8 unchanged sentences

Total unfunded tax credit commitments $ 1,360 $ 1,360

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

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three months ended March 31, 2022 and 2021:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands)

7 unchanged sentences

Affordable housing tax credit investment impairment losses

387 585 1,159 1,668

Other tax credit investment losses 309 173

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Valley has four business segments that it monitors and reports on to manage Valley’s business operations.

These segments are consumer lending, commercial lending, investment management, and corporate and other adjustments.

segments are consumer lending, commercial lending, investment management, and corporate and other adjustments.

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

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

Interest expense and internal transfer expense (for general corporate expenses) are allocated to each business segment utilizing a transfer pricing methodology, which involves the allocation of operating and funding costs based on each segment's respective mix of average earning assets and/or liabilities outstanding for the period.

or liabilities outstanding for the period.

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 reporting and may result in income and expense measurements that differ from amounts under U.S.

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.

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

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

Three Months Ended September 30, 2021

Lending Commercial

Lending Investment

Management Corporate

Adjustments Total

($ in thousands)

Average interest earning assets

$ 7,373,897 $ 25,324,485 $ 5,634,492 $ — $ 38,332,874

Interest income $ 58,887 $ 250,866 $ 19,766 $ ( 718 ) $ 328,801

Interest expense 4,032 13,795 3,228 6,720 27,775

Net interest income (loss) 54,855 237,071 16,538 ( 7,438 ) 301,026

Provision (credit) for credit losses ( 4,614 ) 8,110 35 — 3,531

Net interest income (loss) after provision for credit losses

59,469 228,961 16,503 ( 7,438 ) 297,495

Non-interest income 11,845 11,611 2,018 16,957 42,431

Non-interest expense 13,520 27,504 ( 150 ) 134,048 174,922

Internal transfer expense (income) 20,662 71,141 15,825 ( 107,628 ) —

Income (loss) before income taxes $ 37,132 $ 141,927 $ 2,846 $ ( 16,901 ) $ 165,004

Return on average interest earning assets (pre-tax)

2.01 % 2.24 % 0.20 % N/A 1.72 %

Three Months Ended September 30, 2020

The following tables represent the financial data for Valley’s four business segments for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31, 2022

Lending Commercial

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Net interest income (loss) 56,252 246,579 21,411 ( 6,573 ) 317,669

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

Provision for credit losses 1,873 1,627 57 — 3,557

Net interest income (loss) after provision for credit losses

6 unchanged sentences

1.20 % 2.03 % 0.39 % N/A 1.55 %

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2021

Lending Commercial

17 unchanged sentences

1.78 % 2.02 % 0.23 % N/A 1.66 %

Nine Months Ended September 30, 2020

Lending Commercial

Lending Investment

Management Corporate

Adjustments Total

($ in thousands)

Average interest earning assets

$ 7,187,839 $ 24,334,429 $ 5,221,538 $ — $ 36,743,806

Interest income $ 199,018 $ 771,947 $ 81,905 $ ( 3,209 ) $ 1,049,661

Interest expense 40,217 136,156 29,216 13,088 218,677

Net interest income (loss) 158,801 635,791 52,689 ( 16,297 ) 830,984

Provision for credit losses 15,274 90,785 688 — 106,747

Net interest income (loss) after provision for credit losses

143,527 545,006 52,001 ( 16,297 ) 724,237

Non-interest income 55,383 52,192 7,661 20,263 135,499

Non-interest expense 60,188 73,041 843 338,935 473,007

Internal transfer expense (income) 58,355 197,444 42,393 ( 298,192 ) —

Income (loss) before income taxes $ 80,367 $ 326,713 $ 16,426 $ ( 36,777 ) $ 386,729

Return on average interest earning assets (pre-tax)

1.49 % 1.79 % 0.42 % N/A 1.40 %

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

What changed 10-Q

Item 1. Financial Statements