VALLEY NATIONAL BANCORP 10-Q

Item 1. Financial Statements VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (in thousands, except for share data) March 31, 2022 December 31, 2021 Assets (Unaudited) Cash and due from banks $ 424,035 $ 205,156 Interest bearing deposits with banks 306,885 1,844,764 Investment securities: Equity securities 35,992 36,473 Trading debt securities 11,739 38,130 Available for sale debt securities 1,015,034 1,128,809 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 Total investment securities 4,134,748 3,870,944 Loans held for sale, at fair value 77,632 139,516 Loans 35,364,405 34,153,657 Less: Allowance for loan losses ( 362,510 ) ( 359,202 ) Net loans 35,001,895 33,794,455 Premises and equipment, net 337,479 326,306 Lease right of use assets 258,512 259,117 Bank owned life insurance 566,440 566,770 Accrued interest receivable 102,667 96,882 Goodwill 1,468,354 1,459,008 Other intangible assets, net 74,884 70,386 Other assets 797,926 813,139 Total Assets $ 43,551,457 $ 43,446,443 Liabilities Deposits: Non-interest bearing $ 11,947,001 $ 11,675,748 Interest bearing: Savings, NOW and money market 20,285,967 20,269,620 Time 3,414,368 3,687,044 Total deposits 35,647,336 35,632,412 Short-term borrowings 484,181 655,726 Long-term borrowings 1,409,142 1,423,676 Junior subordinated debentures issued to capital trusts 56,500 56,413 Lease liabilities 282,437 283,106 Accrued expenses and other liabilities 575,477 311,044 Total Liabilities 38,455,073 38,362,377 Shareholders’ Equity Preferred stock, no par value; 50,000,000 authorized shares: 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 March 31, 2022 and December 31, 2021) 98,101 98,101 Common stock ( no par value, authorized 650,000,000 shares; issued 423,034,027 shares at March 31, 2022 and December 31, 2021) 148,482 148,482 Surplus 3,872,236 3,883,035 Retained earnings 945,225 883,645 Accumulated other comprehensive loss ( 56,098 ) ( 17,932 ) 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 ) Total Shareholders’ Equity 5,096,384 5,084,066 Total Liabilities and Shareholders’ Equity $ 43,551,457 $ 43,446,443 See accompanying notes to consolidated financial statements. 2 VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except for share data) Three Months Ended March 31, 2022 2021 Interest Income Interest and fees on loans $ 317,365 $ 313,181 Interest and dividends on investment securities: Taxable 18,439 13,166 Tax-exempt 2,517 3,356 Dividends 1,676 1,871 Interest on federal funds sold and other short-term investments 461 224 Total interest income 340,458 331,798 Interest Expense Interest on deposits: Savings, NOW and money market 9,627 11,125 Time 2,831 11,093 Interest on short-term borrowings 806 1,758 Interest on long-term borrowings and junior subordinated debentures 9,525 15,155 Total interest expense 22,789 39,131 Net Interest Income 317,669 292,667 Provision (credit) for credit losses for held to maturity securities 57 ( 358 ) Provision for credit losses for loans 3,500 9,014 Net Interest Income After Provision for Credit Losses 314,112 284,011 Non-Interest Income Trust and investment services 5,131 3,329 Insurance commissions 1,859 1,558 Service charges on deposit accounts 6,212 5,103 (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 Bank owned life insurance 2,046 2,331 Other 21,327 12,399 Total non-interest income 39,270 31,233 Non-Interest Expense Salary and employee benefits expense 107,733 88,103 Net occupancy and equipment expense 36,806 32,259 FDIC insurance assessment 4,158 3,276 Amortization of other intangible assets 4,437 6,006 Professional and legal fees 14,749 6,272 Amortization of tax credit investments 2,896 2,744 Telecommunication expense 3,271 3,160 Other 23,290 18,393 Total non-interest expense 197,340 160,213 Income Before Income Taxes 156,042 155,031 Income tax expense 39,314 39,321 Net Income 116,728 115,710 Dividends on preferred stock 3,172 3,172 Net Income Available to Common Shareholders $ 113,556 $ 112,538 3 VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (continued) (in thousands, except for share data) Three Months Ended March 31, 2022 2021 Earnings Per Common Share: Basic $ 0.27 $ 0.28 Diluted 0.27 0.28 Cash Dividends Declared per Common Share 0.11 0.11 Weighted Average Number of Common Shares Outstanding: Basic 421,573,843 405,152,605 Diluted 423,506,550 407,636,765 See accompanying notes to consolidated financial statements. 4 VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands) Three Months Ended March 31, 2022 2021 Net income $ 116,728 $ 115,710 Other comprehensive loss, net of tax: Unrealized gains and losses on available for sale securities Net losses arising during the period ( 38,892 ) ( 10,436 ) Less reclassification adjustment for net (gains) losses included in net income ( 10 ) 44 Total ( 38,902 ) ( 10,392 ) Unrealized gains and losses on derivatives (cash flow hedges) Net gains on derivatives arising during the period 218 174 Less reclassification adjustment for net losses included in net income 386 651 Total 604 825 Defined benefit pension plan Amortization of actuarial net loss 132 280 Total other comprehensive loss ( 38,166 ) ( 9,287 ) Total comprehensive income $ 78,562 $ 106,423 See accompanying notes to consolidated financial statements. 5 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) For the Three Months Ended March 31, 2022 Common Stock Accumulated Preferred Stock Shares Amount Surplus Retained Earnings Other Comprehensive Loss Treasury Stock Total Shareholders’ Equity (in thousands) Balance - December 31, 2021 $ 209,691 421,437 $ 148,482 $ 3,883,035 $ 883,645 $ ( 17,932 ) $ ( 22,855 ) $ 5,084,066 Net income — — — — 116,728 — — 116,728 Other comprehensive loss, net of tax — — — — — ( 38,166 ) — ( 38,166 ) 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 — — — — ( 46,803 ) — — ( 46,803 ) Effect of stock incentive plan, net — 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 For the Three Months Ended March 31, 2021 Common Stock Accumulated Preferred Stock Shares Amount Surplus Retained Earnings Other Comprehensive Loss Treasury Stock Total Shareholders’ Equity (in thousands) Balance - December 31, 2020 $ 209,691 403,859 $ 141,746 $ 3,637,468 $ 611,158 $ ( 7,718 ) $ ( 225 ) $ 4,592,120 Net income — — — — 115,710 — — 115,710 Other comprehensive loss, net of tax — — — — — ( 9,287 ) — ( 9,287 ) 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 — — — — ( 45,281 ) — — ( 45,281 ) Effect of stock incentive plan, net — 1,939 689 14,480 ( 5,764 ) — 175 9,580 Balance - March 31, 2021 $ 209,691 405,798 $ 142,435 $ 3,651,948 $ 672,651 $ ( 17,005 ) $ ( 50 ) $ 4,659,670 See accompanying notes to consolidated financial statements. 6 VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended March 31, 2022 2021 Cash flows from operating activities: Net income $ 116,728 $ 115,710 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 14,346 13,848 Stock-based compensation 7,263 5,465 Provision for credit losses 3,557 8,656 Net amortization of premiums and accretion of discounts on securities and borrowings 7,487 8,293 Amortization of other intangible assets 4,437 6,006 Losses (gains) on securities transactions, net 1,072 ( 101 ) Proceeds from sales of loans held for sale 204,628 357,108 Gains on sales of loans, net ( 986 ) ( 3,513 ) Originations of loans held for sale ( 144,485 ) ( 287,765 ) Gains on sales of assets, net 64 196 Net change in: Fair value of borrowings hedged by derivative transactions ( 14,696 ) — Trading debt securities 26,391 — Cash surrender value of bank owned life insurance ( 2,046 ) ( 2,331 ) Accrued interest receivable ( 5,785 ) ( 1,560 ) Other assets 12,999 204,948 Accrued expenses and other liabilities 265,029 ( 111,562 ) Net cash provided by operating activities 496,003 313,398 Cash flows from investing activities: Net loan originations and purchases ( 1,210,754 ) ( 475,142 ) Equity securities: Purchases ( 662 ) ( 1,878 ) Sales 848 319 Held to maturity debt securities: Purchases ( 545,462 ) ( 407,793 ) Maturities, calls and principal repayments 136,024 184,163 Available for sale debt securities: Purchases ( 15,000 ) — Sales — 41,134 Maturities, calls and principal repayments 73,008 164,235 Death benefit proceeds from bank owned life insurance 2,369 1,628 Proceeds from sales of real estate property and equipment 5,692 1,742 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 ) 7 VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) (in thousands) Three Months Ended March 31, 2022 2021 Cash flows from financing activities: Net change in deposits $ 14,924 $ 649,607 Net change in short-term borrowings ( 171,545 ) ( 63,292 ) Repayments of long-term borrowings — ( 51,769 ) Cash dividends paid to preferred shareholders ( 3,172 ) ( 3,172 ) Cash dividends paid to common shareholders ( 46,205 ) ( 45,526 ) Purchase of common shares to treasury ( 23,627 ) ( 542 ) Common stock issued, net 95 5,723 Other, net ( 180 ) ( 165 ) Net cash (used in) provided by financing activities ( 229,710 ) 490,864 Net change in cash and cash equivalents ( 1,319,000 ) 304,628 Cash and cash equivalents at beginning of year 2,049,920 1,329,205 Cash and cash equivalents at end of period $ 730,920 $ 1,633,833 Supplemental disclosures of cash flow information: Cash payments for: Interest on deposits and borrowings $ 19,682 $ 37,997 Federal and state income taxes 6,842 5,855 Supplemental schedule of non-cash investing activities: Transfer of loans to other real estate owned $ — $ 141 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. 8 VALLEY NATIONAL BANCORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Basis of Presentation The unaudited consolidated financial statements of Valley National Bancorp, a New Jersey corporation (Valley), include the accounts of its commercial bank subsidiary, Valley National Bank (the Bank), and all of Valley’s direct or indirect wholly-owned subsidiaries. All inter-company transactions and balances have been eliminated. The accounting and reporting policies of Valley conform to U.S. generally accepted accounting principles (U.S. GAAP) and general practices within the financial services industry. In accordance with applicable accounting standards, Valley does not consolidate statutory trusts established for the sole purpose of issuing trust preferred securities and related trust common securities. Certain prior period amounts have been reclassified to conform to the current presentation. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly Valley’s financial position, results of operations, changes in shareholders' equity and cash flows at March 31, 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. GAAP and industry practice have been condensed or omitted pursuant to rules and regulations of the SEC. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Valley’s Annual Report on Form 10-K for the year ended December 31, 2021. Significant Estimates. In preparing the unaudited consolidated financial statements in conformity with U.S. GAAP, management has made estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of financial condition and results of operations for the periods indicated. Material estimates that require application of management’s most difficult, subjective or complex judgment and are particularly susceptible to change include: the allowance for credit losses, the evaluation of goodwill and other intangible assets for impairment, and income taxes. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual amounts or results could differ significantly from those estimates. The current economic environment has increased the degree of uncertainty inherent in these material estimates. Actual results may differ from those estimates. Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date. Note 2. Business Combinations Acquisitions 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 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 9 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 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. Note 3. Earnings Per Common Share The following table shows the calculation of both basic and diluted earnings per common share for the three months ended March 31, 2022 and 2021: Three Months Ended March 31, 2022 2021 (in thousands, except for share data) Net income available to common shareholders $ 113,556 $ 112,538 Basic weighted average number of common shares outstanding 421,573,843 405,152,605 Plus: Common stock equivalents 1,932,707 2,484,160 Diluted weighted average number of common shares outstanding 423,506,550 407,636,765 Earnings per common share: Basic $ 0.27 $ 0.28 Diluted 0.27 0.28 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 10 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. Note 4. Accumulated Other Comprehensive Loss The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the three months ended March 31, 2022: Components of Accumulated Other Comprehensive Loss Total Accumulated Other Comprehensive Loss Unrealized Gains and Losses on Available for Sale (AFS) Securities Unrealized Gains and Losses on Derivatives Defined Benefit Pension Plan (in thousands) Balance at December 31, 2021 $ 9,186 $ ( 1,332 ) $ ( 25,786 ) $ ( 17,932 ) Other comprehensive (loss) gain before reclassification ( 38,892 ) 218 — ( 38,674 ) Amounts reclassified from other comprehensive (loss) income ( 10 ) 386 132 508 Other comprehensive (loss) income, net ( 38,902 ) 604 132 ( 38,166 ) 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 Accumulated Other Comprehensive Loss Three Months Ended March 31, Components of Accumulated Other Comprehensive Loss 2022 2021 Income Statement Line Item (in thousands) Unrealized gains (losses) on AFS securities before tax $ 14 $ ( 59 ) (Losses) gains on securities transactions, net Tax effect ( 4 ) 15 Total net of tax 10 ( 44 ) Unrealized losses on derivatives (cash flow hedges) before tax ( 542 ) ( 915 ) Interest expense Tax effect 156 264 Total net of tax ( 386 ) ( 651 ) Defined benefit pension plan: Amortization of actuarial net loss ( 183 ) ( 388 ) * Tax effect 51 108 Total net of tax ( 132 ) ( 280 ) Total reclassifications, net of tax $ ( 508 ) $ ( 975 ) * Amortization of actuarial net loss is included in the computation of net periodic pension cost recognized within other non-interest expense. Note 5. New Authoritative Accounting Guidance New Accounting Guidance Adopted in 2022 Accounting Standards Update (ASU) No. 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. ASU No. 2021-01 is effective for all entities immediately upon issuance and may be 11 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. ASU No. 2021-01 is not expected to have a significant impact on Valley’s consolidated financial statements. ASU No. 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. 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 ASU No. 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. ASU No. 2022-01 also clarifies that no assets may be added to a closed portfolio once it is designated in a portfolio layer method hedge. ASU No. 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. ASU No. 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. ASU No. 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. Note 6. Fair Value Measurement of Assets and Liabilities ASC Topic 820, “Fair Value Measurements” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: • Level 1 - Unadjusted exchange quoted prices in active markets for identical assets or liabilities, or identical liabilities traded as assets that the reporting entity has the ability to access at the measurement date. • Level 2 - Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly (i.e., quoted prices on similar assets) for substantially the full term of the asset or liability. • Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). 12 Assets and Liabilities Measured at Fair Value on a Recurring and Non-Recurring Basis The following tables present the assets and liabilities that are measured at fair value on a recurring and non-recurring basis by level within the fair value hierarchy as reported on the consolidated statements of financial condition at March 31, 2022 and December 31, 2021. 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). March 31, 2022 Fair Value Measurements at Reporting Date Using: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in thousands) Recurring fair value measurements: Assets Investment securities: Equity securities (1) $ 30,528 $ 19,009 $ — $ — Trading debt securities 11,739 — 11,739 — Available for sale debt securities: U.S. government agency securities 18,332 — 18,332 — Obligations of states and political subdivisions 67,951 — 67,951 — Residential mortgage-backed securities 795,554 — 795,554 — Corporate and other debt securities 133,197 — 133,197 — Total available for sale debt securities 1,015,034 — 1,015,034 — Loans held for sale (2) 77,632 — 77,632 — Other assets (3) 176,270 — 176,270 — Total assets $ 1,311,203 $ 19,009 $ 1,280,675 $ — Liabilities Other liabilities (3) $ 189,682 $ — $ 189,682 $ — Total liabilities $ 189,682 $ — $ 189,682 $ — Non-recurring fair value measurements: Collateral dependent loans $ 47,603 $ — $ — $ 47,603 Foreclosed assets 1,176 — — 1,176 Total $ 48,779 $ — $ — $ 48,779 13 Fair Value Measurements at Reporting Date Using: December 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in thousands) Recurring fair value measurements: Assets Investment securities: Equity securities (1) $ 32,844 $ 21,284 $ — $ — Trading debt securities 38,130 — 38,130 — Available for sale debt securities: U.S. government agency securities 20,925 — 20,925 — Obligations of states and political subdivisions 79,890 — 79,890 — Residential mortgage-backed securities 904,502 — 904,502 — Corporate and other debt securities 123,492 — 123,492 — Total available for sale debt securities 1,128,809 — 1,128,809 — Loans held for sale (2) 139,516 — 139,516 — Other assets (3) 181,500 — 181,500 — Total assets $ 1,520,799 $ 21,284 $ 1,487,955 $ — Liabilities Other liabilities (3) $ 52,376 $ — $ 52,376 $ — Total liabilities $ 52,376 $ — $ 52,376 $ — Non-recurring fair value measurements: 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 $ 11.5 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 $ 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. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following valuation techniques were used for financial instruments measured at fair value on a recurring basis. All the valuation techniques described below apply to the unpaid principal balance, excluding any accrued interest or dividends at the measurement date. Interest income and expense are recorded within the consolidated statements of income depending on the nature of the instrument using the effective interest method based on acquired discount or premium. Equity securities. The fair value of equity securities consists of a publicly traded mutual fund, Community Reinvestment Act (CRA) investment fund and an investment related to the development of new financial technologies that are carried at quoted prices in active markets. Valley also has privately held CRA funds measured at NAV, which are excluded from fair value hierarchy levels in the tables above. Trading debt securities. The fair value of trading debt securities, consisting of municipal bonds, is reported at fair value utilizing Level 2 inputs. The prices for these investments are derived from market quotations and matrix pricing obtained through an independent pricing service. Management reviews the data and assumptions used in 14 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. U.S. Treasury securities are reported at fair value utilizing Level 1 inputs. The majority of other investment securities are reported at fair value utilizing Level 2 inputs. The prices for these instruments are obtained through an independent pricing service or dealer market participants with whom Valley has historically transacted both purchases and sales of investment securities. Prices obtained from these sources include prices derived from market quotations and matrix pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Management reviews the data and assumptions used in pricing the securities by its third-party provider to ensure the highest level of significant inputs are derived from market observable data. In addition, Valley reviews the volume and level of activity for all available for sale debt securities and attempts to identify transactions which may not be orderly or reflective of a significant level of activity and volume. Loans held for sale. Residential mortgage loans originated for sale are reported at fair value using Level 2 inputs. The fair values were calculated utilizing quoted prices for similar assets in active markets. The market prices represent a delivery price, which reflects the underlying price each institution would pay Valley for an immediate sale of an aggregate pool of mortgages. Non-performance risk did not materially impact the fair value of mortgage loans held for sale at March 31, 2022 and December 31, 2021 based on the short duration these assets were held, and the credit quality of these loans. Derivatives. Derivatives are reported at fair value utilizing Level 2 inputs. The fair values of Valley’s derivatives are determined using third-party prices that are based on discounted cash flow analysis using observed market inputs, such as the LIBOR, Overnight Index Swap and Secured Overnight Financing Rate (SOFR) curves for all cleared derivatives. The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at March 31, 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 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 and foreclosed assets, which are reported at fair value upon initial recognition or subsequent impairment as described below. Collateral Dependent Loans . Collateral dependent loans are loans when foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and substantially all of the repayment is expected from the collateral. Collateral dependent loans are reported at the fair value of the underlying collateral. Collateral values are estimated using Level 3 inputs, consisting of individual third-party appraisals that may be adjusted based on certain discounting criteria. Certain real estate appraisals may be discounted based on specific market data by location and property type. 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 15 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. There were no adjustments to the appraisals of foreclosed assets at March 31, 2022. Other Fair Value Disclosures ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The fair value estimates presented in the following table were based on pertinent market data and relevant information on the financial instruments available as of the valuation date. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire portfolio of financial instruments. Because no market exists for a portion of the financial instruments, fair value estimates may be based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For instance, Valley has certain fee-generating business lines (e.g., its mortgage servicing operation, trust and investment management departments) that were not considered in these estimates since these activities are not financial instruments. 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. 16 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: Fair Value Hierarchy March 31, 2022 December 31, 2021 Carrying Amount Fair Value Carrying Amount Fair Value (in thousands) Financial assets Cash and due from banks Level 1 $ 424,035 $ 424,035 $ 205,156 $ 205,156 Interest bearing deposits with banks Level 1 306,885 306,885 1,844,764 1,844,764 Equity securities (1) Level 3 5,464 5,464 3,629 3,629 Held to maturity debt securities: U.S. Treasury securities Level 1 67,401 68,932 67,558 71,661 U.S. government agency securities Level 2 5,572 5,453 6,265 6,378 Obligations of states and political subdivisions Level 2 319,160 318,021 337,962 344,164 Residential mortgage-backed securities Level 2 2,594,295 2,440,498 2,166,142 2,152,301 Trust preferred securities Level 2 37,027 31,733 37,020 31,916 Corporate and other debt securities Level 2 49,750 49,214 53,750 54,185 Total held to maturity debt securities (2) 3,073,205 2,913,851 2,668,697 2,660,605 Net loans Level 3 35,001,895 33,815,930 33,794,455 33,283,251 Accrued interest receivable Level 1 102,667 102,667 96,882 96,882 Federal Reserve Bank and Federal Home Loan Bank stock (3) Level 2 195,536 195,536 206,450 206,450 Financial liabilities Deposits without stated maturities Level 1 32,232,968 32,232,968 31,945,368 31,945,368 Deposits with stated maturities Level 2 3,414,368 3,365,608 3,687,044 3,670,113 Short-term borrowings Level 1 484,181 478,300 655,726 637,490 Long-term borrowings Level 2 1,409,142 1,336,303 1,423,676 1,404,184 Junior subordinated debentures issued to capital trusts Level 2 56,500 39,578 56,413 46,306 Accrued interest payable (4) Level 1 8,016 8,016 4,909 4,909 (1) Represents equity securities without a readily determinable fair value measured at cost less impairment, if any. (2) The carrying amount is presented gross without the allowance for credit losses. (3) Included in other assets. (4) Included in accrued expenses and other liabilities. Note 7. Investment Securities Equity Securities 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 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 17 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 March 31, 2022 and December 31, 2021 were as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in thousands) March 31, 2022 U.S. government agency securities $ 18,448 $ 32 $ ( 148 ) $ 18,332 Obligations of states and political subdivisions: Obligations of states and state agencies 25,274 22 ( 310 ) 24,986 Municipal bonds 47,270 66 ( 4,371 ) 42,965 Total obligations of states and political subdivisions 72,544 88 ( 4,681 ) 67,951 Residential mortgage-backed securities 829,222 971 ( 34,639 ) 795,554 Corporate and other debt securities 135,550 1,033 ( 3,386 ) 133,197 Total $ 1,055,764 $ 2,124 $ ( 42,854 ) $ 1,015,034 December 31, 2021 U.S. government agency securities $ 20,323 $ 608 $ ( 6 ) $ 20,925 Obligations of states and political subdivisions: Obligations of states and state agencies 26,088 132 ( 93 ) 26,127 Municipal bonds 53,530 349 ( 116 ) 53,763 Total obligations of states and political subdivisions 79,618 481 ( 209 ) 79,890 Residential mortgage-backed securities 895,279 14,986 ( 5,763 ) 904,502 Corporate and other debt securities 120,871 3,177 ( 556 ) 123,492 Total $ 1,116,091 $ 19,252 $ ( 6,534 ) $ 1,128,809 18 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: Less than Twelve Months More than Twelve Months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (in thousands) March 31, 2022 U.S. government agency securities $ 13,880 $ ( 140 ) $ 1,292 $ ( 8 ) $ 15,172 $ ( 148 ) Obligations of states and political subdivisions: Obligations of states and state agencies 10,153 ( 310 ) — — 10,153 ( 310 ) Municipal bonds 31,523 ( 4,371 ) — — 31,523 ( 4,371 ) Total obligations of states and political subdivisions 41,676 ( 4,681 ) — — 41,676 ( 4,681 ) Residential mortgage-backed securities 688,282 ( 31,427 ) 39,143 ( 3,212 ) 727,425 ( 34,639 ) Corporate and other debt securities 74,665 ( 3,386 ) — — 74,665 ( 3,386 ) Total $ 818,503 $ ( 39,634 ) $ 40,435 $ ( 3,220 ) $ 858,938 $ ( 42,854 ) December 31, 2021 U.S. government agency securities $ — $ — $ 1,326 $ ( 6 ) $ 1,326 $ ( 6 ) Obligations of states and political subdivisions: Obligations of states and state agencies 10,549 ( 93 ) — — 10,549 ( 93 ) Municipal bonds 19,100 ( 116 ) — — 19,100 ( 116 ) Total obligations of states and political subdivisions 29,649 ( 209 ) — — 29,649 ( 209 ) Residential mortgage-backed securities 371,256 ( 4,770 ) 25,960 ( 993 ) 397,216 ( 5,763 ) Corporate and other debt securities 59,039 ( 556 ) — — 59,039 ( 556 ) 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 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. March 31, 2022 Amortized Cost Fair Value (in thousands) Due in one year $ 11,305 $ 11,303 Due after one year through five years 23,241 23,375 Due after five years through ten years 103,691 102,991 Due after ten years 88,305 81,811 Residential mortgage-backed securities 829,222 795,554 Total $ 1,055,764 $ 1,015,034 19 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 5.0 years at March 31, 2022. Impairment Analysis of Available For Sale Debt Securities Valley's available for sale debt securities portfolio includes corporate bonds and revenue bonds, among other securities. These types of securities may pose a higher risk of future impairment charges by Valley as a result of the unpredictable nature of the U.S. economy and its potential negative effect on the future performance of the security issuers, including due to the economic effects of the COVID-19 pandemic. Available for sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis. 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 March 31, 2022 and December 31, 2021 were as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in thousands) March 31, 2022 U.S. Treasury securities $ 67,401 $ 1,531 $ — $ 68,932 U.S. government agency securities 5,572 — ( 119 ) 5,453 Obligations of states and political subdivisions: Obligations of states and state agencies 132,017 648 ( 1,054 ) 131,611 Municipal bonds 187,143 871 ( 1,604 ) 186,410 Total obligations of states and political subdivisions 319,160 1,519 ( 2,658 ) 318,021 Residential mortgage-backed securities 2,594,295 1,993 ( 155,790 ) 2,440,498 Trust preferred securities 37,027 4 ( 5,298 ) 31,733 Corporate and other debt securities 49,750 181 ( 717 ) 49,214 Total $ 3,073,205 $ 5,228 $ ( 164,582 ) $ 2,913,851 December 31, 2021 U.S. Treasury securities $ 67,558 $ 4,103 $ — $ 71,661 U.S. government agency securities 6,265 113 — 6,378 Obligations of states and political subdivisions: Obligations of states and state agencies 141,015 3,065 ( 312 ) 143,768 Municipal bonds 196,947 3,536 ( 87 ) 200,396 Total obligations of states and political subdivisions 337,962 6,601 ( 399 ) 344,164 Residential mortgage-backed securities 2,166,142 14,599 ( 28,440 ) 2,152,301 Trust preferred securities 37,020 5 ( 5,109 ) 31,916 Corporate and other debt securities 53,750 559 ( 124 ) 54,185 Total $ 2,668,697 $ 25,980 $ ( 34,072 ) $ 2,660,605 20 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: Less than Twelve Months More than Twelve Months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (in thousands) March 31, 2022 U.S. government agency securities $ 4,092 $ ( 119 ) $ — $ — $ 4,092 $ ( 119 ) Obligations of states and political subdivisions: Obligations of states and state agencies 38,979 ( 815 ) 5,317 ( 239 ) 44,296 ( 1,054 ) Municipal bonds 25,255 ( 1,514 ) 1,305 ( 90 ) 26,560 ( 1,604 ) Total obligations of states and political subdivisions 64,234 ( 2,329 ) 6,622 ( 329 ) 70,856 ( 2,658 ) Residential mortgage-backed securities 1,786,943 ( 105,507 ) 533,425 ( 50,283 ) 2,320,368 ( 155,790 ) Trust preferred securities — — 30,729 ( 5,298 ) 30,729 ( 5,298 ) Corporate and other debt securities 37,783 ( 717 ) — — 37,783 ( 717 ) Total $ 1,893,052 $ ( 108,672 ) $ 570,776 $ ( 55,910 ) $ 2,463,828 $ ( 164,582 ) 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 1,381,405 ( 22,365 ) 206,520 ( 6,075 ) 1,587,925 ( 28,440 ) Trust preferred securities — — 30,912 ( 5,109 ) 30,912 ( 5,109 ) Corporate and other debt securities 32,627 ( 124 ) — — 32,627 ( 124 ) 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 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. March 31, 2022 Amortized Cost Fair Value (in thousands) Due in one year $ 39,603 $ 39,663 Due after one year through five years 215,490 217,668 Due after five years through ten years 46,097 45,919 Due after ten years 177,720 170,103 Residential mortgage-backed securities 2,594,295 2,440,498 Total $ 3,073,205 $ 2,913,851 21 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 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 March 31, 2022 and December 31, 2021. AAA/AA/A Rated BBB rated Non-investment grade rated Non-rated Total (in thousands) March 31, 2022 U.S. Treasury securities $ 67,401 $ — $ — $ — $ 67,401 U.S. government agency securities 5,572 — — — 5,572 Obligations of states and political subdivisions: Obligations of states and state agencies 110,710 — 5,556 15,751 132,017 Municipal bonds 135,463 — — 51,680 187,143 Total obligations of states and political subdivisions 246,173 — 5,556 67,431 319,160 Residential mortgage-backed securities 2,594,295 — — — 2,594,295 Trust preferred securities — — — 37,027 37,027 Corporate and other debt securities 2,000 6,000 — 41,750 49,750 Total $ 2,915,441 $ 6,000 $ 5,556 $ 146,208 $ 3,073,205 December 31, 2021 U.S. Treasury securities $ 67,558 $ — $ — $ — $ 67,558 U.S. government agency securities 6,265 — — — 6,265 Obligations of states and political subdivisions: Obligations of states and state agencies 118,368 — 5,576 17,071 141,015 Municipal bonds 148,854 — — 48,093 196,947 Total obligations of states and political subdivisions 267,222 — 5,576 65,164 337,962 Residential mortgage-backed securities 2,166,142 — — — 2,166,142 Trust preferred securities — — — 37,020 37,020 Corporate and other debt securities 2,000 6,000 — 45,750 53,750 Total $ 2,509,187 $ 6,000 $ 5,576 $ 147,934 $ 2,668,697 Obligations of states and political subdivisions include municipal bonds and revenue bonds issued by various municipal corporations. 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. Corporate bonds consist of debt primarily issued by banks. Allowance for Credit Losses for Held to Maturity Debt Securities 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 22 exclusion: U.S. 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 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. Note 8. Loans and Allowance for Credit Losses for Loans 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) Loans: Commercial and industrial: Commercial and industrial $ 5,587,781 $ 5,411,601 Commercial and industrial PPP loans * 203,609 435,950 Total commercial and industrial loans 5,791,390 5,847,551 Commercial real estate: Commercial real estate 19,763,202 18,935,486 Construction 2,174,542 1,854,580 Total commercial real estate loans 21,937,744 20,790,066 Residential mortgage 4,691,935 4,545,064 Consumer: Home equity 393,538 400,779 Automobile 1,552,928 1,570,036 Other consumer 996,870 1,000,161 Total consumer loans 2,943,336 2,970,976 Total loans $ 35,364,405 $ 34,153,657 * 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 For all of its loan types, Valley adheres to a credit policy designed to minimize credit risk while generating the maximum income given the level of risk appetite. 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 23 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. Loan portfolio diversification is an important factor utilized by Valley to manage its risk across business sectors and through cyclical economic circumstances. See Valley’s Annual Report on Form 10-K for the year ended December 31, 2021 for further details. Credit Quality 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 30-59 Days Past Due Loans 60-89 Days Past Due Loans 90 Days or More Past Due Loans Non-Accrual Loans Total Past Due Loans Current Loans Total Loans Non-Accrual Loans Without Allowance for Loan Losses (in thousands) March 31, 2022 Commercial and industrial $ 6,723 $ 14,461 $ 9,261 $ 96,631 $ 127,076 $ 5,664,314 $ 5,791,390 $ 8,341 Commercial real estate: Commercial real estate 30,807 6,314 — 79,180 116,301 19,646,901 19,763,202 66,191 Construction 1,708 3,125 — 17,618 22,451 2,152,091 2,174,542 — Total commercial real estate loans 32,515 9,439 — 96,798 138,752 21,798,992 21,937,744 66,191 Residential mortgage 9,266 2,560 1,746 33,275 46,847 4,645,088 4,691,935 19,227 Consumer loans: Home equity 38 42 — 3,382 3,462 390,076 393,538 3 Automobile 4,687 458 4 273 5,422 1,547,506 1,552,928 — Other consumer 1,137 54 396 99 1,686 995,184 996,870 — Total consumer loans 5,862 554 400 3,754 10,570 2,932,766 2,943,336 3 Total $ 54,366 $ 27,014 $ 11,407 $ 230,458 $ 323,245 $ 35,041,160 $ 35,364,405 $ 93,762 24 Past Due and Non-Accrual Loans 30-59 Days Past Due Loans 60-89 Days Past Due Loans 90 Days or More Past Due Loans Non-Accrual Loans Total Past Due Loans Current Loans Total Loans Non-Accrual Loans Without Allowance for Loan Losses (in thousands) December 31, 2021 Commercial and industrial $ 6,717 $ 7,870 $ 1,273 $ 99,918 $ 115,778 $ 5,731,773 $ 5,847,551 $ 9,066 Commercial real estate: Commercial real estate 14,421 — 32 83,592 98,045 18,837,441 18,935,486 70,719 Construction 1,941 — — 17,641 19,582 1,834,998 1,854,580 — Total commercial real estate loans 16,362 — 32 101,233 117,627 20,672,439 20,790,066 70,719 Residential mortgage 10,999 3,314 677 35,207 50,197 4,494,867 4,545,064 20,401 Consumer loans: Home equity 242 98 — 3,517 3,857 396,922 400,779 4 Automobile 6,391 656 271 240 7,558 1,562,478 1,570,036 — Other consumer 178 266 518 101 1,063 999,098 1,000,161 — Total consumer loans 6,811 1,020 789 3,858 12,478 2,958,498 2,970,976 4 Total $ 40,889 $ 12,204 $ 2,771 $ 240,216 $ 296,080 $ 33,857,577 $ 34,153,657 $ 100,190 Credit quality indicators. Valley utilizes an internal loan classification system as a means of reporting problem loans within commercial and industrial, commercial real estate, and construction loan portfolio classes. Under Valley’s internal risk rating system, loan relationships could be classified as "Pass," "Special Mention," "Substandard," "Doubtful," and "Loss." Substandard loans include loans that exhibit well-defined weakness and are characterized by the distinct possibility that Valley will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, based on currently existing facts, conditions and values, highly questionable and improbable. Loans classified as Loss are those considered uncollectible with insignificant value and are charged-off immediately to the allowance for loan losses, and, therefore, not presented in the table below. 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. 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. 25 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: Term Loans Amortized Cost Basis by Origination Year 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) Commercial and industrial Risk Rating: Pass $ 337,060 $ 1,224,531 $ 705,495 $ 414,559 $ 327,590 $ 443,359 $ 2,094,405 $ 208 $ 5,547,207 Special Mention 197 4,469 716 3,087 13,566 9,848 97,834 11 129,728 Substandard 28 2,144 5,728 3,387 570 6,286 10,497 110 28,750 Doubtful — — — 2,717 — 82,988 — — 85,705 Total commercial and industrial $ 337,285 $ 1,231,144 $ 711,939 $ 423,750 $ 341,726 $ 542,481 $ 2,202,736 $ 329 $ 5,791,390 Commercial real estate Risk Rating: Pass $ 1,301,030 $ 4,505,671 $ 3,074,999 $ 2,564,818 $ 1,654,197 $ 5,685,062 $ 203,527 $ 13,286 $ 19,002,590 Special Mention 3,890 22,188 69,992 32,837 84,259 176,080 9,684 — 398,930 Substandard — 10,193 39,207 36,344 42,625 224,972 8,160 — 361,501 Doubtful — — — — — 181 — — 181 Total commercial real estate $ 1,304,920 $ 4,538,052 $ 3,184,198 $ 2,633,999 $ 1,781,081 $ 6,086,295 $ 221,371 $ 13,286 $ 19,763,202 Construction Risk Rating: Pass $ 31,645 $ 313,251 $ 88,262 $ 44,544 $ 13,381 $ 17,718 $ 1,623,723 $ — $ 2,132,524 Special Mention — — — 1,001 — — 21,467 — 22,468 Substandard — — — 1 — 17,841 1,708 — 19,550 Total construction $ 31,645 $ 313,251 $ 88,262 $ 45,546 $ 13,381 $ 35,559 $ 1,646,898 $ — $ 2,174,542 26 Term Loans Amortized Cost Basis by Origination Year December 31, 2021 2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total (in thousands) Commercial and industrial Risk Rating: Pass $ 1,563,050 $ 743,165 $ 461,022 $ 362,748 $ 143,753 $ 337,713 $ 1,968,513 $ 247 $ 5,580,211 Special Mention 4,182 1,195 3,217 14,143 1,726 9,869 102,145 40 136,517 Substandard 8,248 4,823 3,139 7,077 910 408 19,642 109 44,356 Doubtful — — 2,733 — 16,355 67,379 — — 86,467 Total commercial and industrial $ 1,575,480 $ 749,183 $ 470,111 $ 383,968 $ 162,744 $ 415,369 $ 2,090,300 $ 396 $ 5,847,551 Commercial real estate Risk Rating: Pass $ 4,517,917 $ 2,983,140 $ 2,702,580 $ 1,734,922 $ 1,474,770 $ 4,557,011 $ 195,851 $ 13,380 $ 18,179,571 Special Mention 7,700 50,019 46,911 44,187 65,623 143,540 50,168 — 408,148 Substandard 735 34,655 29,029 41,231 70,941 169,041 1,949 — 347,581 Doubtful — — — — — 186 — — 186 Total commercial real estate $ 4,526,352 $ 3,067,814 $ 2,778,520 $ 1,820,340 $ 1,611,334 $ 4,869,778 $ 247,968 $ 13,380 $ 18,935,486 Construction Risk Rating: Pass $ 274,097 $ 98,609 $ 48,555 $ 32,781 $ 6,061 $ 28,419 $ 1,313,555 $ — $ 1,802,077 Special Mention 4,131 — 1,009 — — — 18,449 — 23,589 Substandard 199 19 6 246 — 17,842 10,602 — 28,914 Total construction $ 278,427 $ 98,628 $ 49,570 $ 33,027 $ 6,061 $ 46,261 $ 1,342,606 $ — $ 1,854,580 27 For residential mortgages, automobile, home equity and other consumer loan portfolio classes, Valley also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the amortized cost in those loan classes based on payment activity by origination year as of March 31, 2022 and December 31, 2021. Term Loans Amortized Cost Basis by Origination Year 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) Residential mortgage Performing $ 394,913 $ 1,487,234 $ 603,092 $ 563,634 $ 345,807 $ 1,220,733 $ 69,458 $ — $ 4,684,871 90 days or more past due — — 542 1,663 4,094 765 — — 7,064 Total residential mortgage $ 394,913 $ 1,487,234 $ 603,634 $ 565,297 $ 349,901 $ 1,221,498 $ 69,458 $ — $ 4,691,935 Consumer loans Home equity Performing $ 5,735 $ 13,431 $ 5,258 $ 6,173 $ 6,486 $ 16,775 $ 298,122 $ 40,566 $ 392,546 90 days or more past due — — — — — 2 400 590 992 Total home equity 5,735 13,431 5,258 6,173 6,486 16,777 298,522 41,156 393,538 Automobile Performing 142,530 678,425 279,849 245,235 134,274 71,935 — — 1,552,248 90 days or more past due — 134 103 154 159 130 — — 680 Total automobile 142,530 678,559 279,952 245,389 134,433 72,065 — — 1,552,928 Other consumer Performing 7,033 4,215 6,368 6,419 6,836 9,527 956,468 — 996,866 90 days or more past due — — — — — — 4 — 4 Total other consumer 7,033 4,215 6,368 6,419 6,836 9,527 956,472 — 996,870 Total consumer $ 155,298 $ 696,205 $ 291,578 $ 257,981 $ 147,755 $ 98,369 $ 1,254,994 $ 41,156 $ 2,943,336 28 Term Loans Amortized Cost Basis by Origination Year December 31, 2021 2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total (in thousands) Residential mortgage Performing $ 1,448,602 $ 635,531 $ 572,911 $ 425,152 $ 368,164 $ 1,014,190 $ 70,342 $ — $ 4,534,892 90 days or more past due — 357 2,627 2,056 2,794 2,338 — — 10,172 Total residential mortgage $ 1,448,602 $ 635,888 $ 575,538 $ 427,208 $ 370,958 $ 1,016,528 $ 70,342 $ — $ 4,545,064 Consumer loans Home equity Performing $ 13,847 $ 5,723 $ 6,994 $ 7,384 $ 5,359 $ 13,597 $ 303,888 $ 42,822 $ 399,614 90 days or more past due — — — — — 35 536 594 1,165 Total home equity 13,847 5,723 6,994 7,384 5,359 13,632 304,424 43,416 400,779 Automobile Performing 735,446 309,856 278,828 157,450 72,753 15,171 — — 1,569,504 90 days or more past due 129 — 78 163 81 81 — — 532 Total automobile 735,575 309,856 278,906 157,613 72,834 15,252 — — 1,570,036 Other consumer Performing 2,949 6,717 6,468 7,017 1,009 14,483 961,027 — 999,670 90 days or more past due — — — — — — 491 — 491 Total other consumer 2,949 6,717 6,468 7,017 1,009 14,483 961,518 — 1,000,161 Total consumer $ 752,371 $ 322,296 $ 292,368 $ 172,014 $ 79,202 $ 43,367 $ 1,265,942 $ 43,416 $ 2,970,976 Troubled debt restructured loans . From time to time, Valley may extend, restructure, or otherwise modify the terms of existing loans, on a case-by-case basis, to remain competitive and retain certain customers, as well as assist other customers who may be experiencing financial difficulties. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan (TDR). Generally, the concessions made for TDRs involve lowering the monthly payments on loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. The concessions may also involve payment deferrals but rarely result in the forgiveness of principal or accrued interest. In addition, Valley frequently obtains additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms of the loan and Valley’s underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible. Performing TDRs (not reported as non-accrual loans) totaled $ 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. 29 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, 2022 2021 Troubled Debt Restructurings Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment ($ in thousands) Commercial and industrial 11 $ 9,684 $ 9,662 5 $ 13,744 $ 13,307 Commercial real estate 2 5,260 5,251 2 4,197 4,185 Residential mortgage 1 121 117 6 1,528 1,518 Consumer — — — 1 170 168 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 $ 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, 2022 2021 Troubled Debt Restructurings Subsequently Defaulted Number of Contracts Recorded Investment Number of Contracts Recorded Investment ($ in thousands) Commercial and industrial 2 $ 1,850 16 $ 12,384 Construction 2 17,599 — — Residential mortgage — — 3 655 Total 4 $ 19,449 19 $ 13,039 Forbearance. In response to the COVID-19 pandemic and its economic impact to certain customers, Valley implemented short-term loan modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment, when requested by customers. 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 $ 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 30 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: March 31, 2022 December 31, 2021 (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 Home equity 3 4 Total $ 230,805 $ 241,258 * Commercial and industrial loans are primarily collateralized by taxi medallions. Allowance for Credit Losses for Loans The following table summarizes the allowance for credit losses for loans at March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 (in thousands) Components of allowance for credit losses for loans: Allowance for loan losses $ 362,510 $ 359,202 Allowance for unfunded credit commitments 16,742 16,500 Total allowance for credit losses for loans $ 379,252 $ 375,702 The following table summarizes the provision for credit losses for loans for the periods indicated: Three Months Ended March 31, 2022 2021 (in thousands) Components of provision for credit losses for loans: Provision for loan losses $ 3,258 $ 8,692 Provision for unfunded credit commitments 242 322 Total provision for credit losses for loans $ 3,500 $ 9,014 31 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: Commercial and Industrial Commercial Real Estate Residential Mortgage Consumer Total (in thousands) Three Months Ended March 31, 2022 Allowance for loan losses: Beginning balance $ 103,090 $ 217,490 $ 25,120 $ 13,502 $ 359,202 Loans charged-off ( 1,571 ) ( 173 ) ( 26 ) ( 825 ) ( 2,595 ) Charged-off loans recovered 824 107 457 1,257 2,645 Net (charge-offs) recoveries ( 747 ) ( 66 ) 431 432 50 (Credit) provision for loan losses ( 1,140 ) 2,525 2,638 ( 765 ) 3,258 Ending balance $ 101,203 $ 219,949 $ 28,189 $ 13,169 $ 362,510 Three Months Ended March 31, 2021 Allowance for losses: Beginning balance $ 131,070 $ 164,113 $ 28,873 $ 16,187 $ 340,243 Loans charged-off ( 7,142 ) ( 382 ) ( 138 ) ( 1,138 ) ( 8,800 ) Charged-off loans recovered 1,589 69 157 930 2,745 Net (charge-offs) recoveries ( 5,553 ) ( 313 ) 19 ( 208 ) ( 6,055 ) Provision (credit) for loan losses 891 10,436 ( 1,720 ) ( 915 ) 8,692 Ending balance $ 126,408 $ 174,236 $ 27,172 $ 15,064 $ 342,880 The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the allowance measurement methodology at March 31, 2022 and December 31, 2021. Commercial and Industrial Commercial Real Estate Residential Mortgage Consumer Total (in thousands) March 31, 2022 Allowance for loan losses: Individually evaluated for credit losses $ 62,500 $ 6,303 $ 641 $ 179 $ 69,623 Collectively evaluated for credit losses 38,703 213,646 27,548 12,990 292,887 Total $ 101,203 $ 219,949 $ 28,189 $ 13,169 $ 362,510 Loans: Individually evaluated for credit losses $ 103,534 $ 128,583 $ 34,696 $ 1,553 $ 268,366 Collectively evaluated for credit losses 5,687,856 21,809,161 4,657,239 2,941,783 35,096,039 Total $ 5,791,390 $ 21,937,744 $ 4,691,935 $ 2,943,336 $ 35,364,405 December 31, 2021 Allowance for loan losses: Individually evaluated for credit losses $ 64,359 $ 6,277 $ 470 $ 390 $ 71,496 Collectively evaluated for credit losses 38,731 211,213 24,650 13,112 287,706 Total $ 103,090 $ 217,490 $ 25,120 $ 13,502 $ 359,202 Loans: Individually evaluated for credit losses $ 119,760 $ 134,135 $ 42,469 $ 2,431 $ 298,795 Collectively evaluated for credit losses 5,727,791 20,655,931 4,502,595 2,968,545 33,854,862 Total $ 5,847,551 $ 20,790,066 $ 4,545,064 $ 2,970,976 $ 34,153,657 32 Note 9. Goodwill and Other Intangible Assets 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 * Wealth 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: Gross Intangible Assets Accumulated Amortization Net Intangible Assets (in thousands) March 31, 2022 Loan servicing rights $ 117,363 $ ( 92,133 ) $ 25,230 Core deposits 109,290 ( 68,373 ) 40,917 Other 12,299 ( 3,562 ) 8,737 Total other intangible assets $ 238,952 $ ( 164,068 ) $ 74,884 December 31, 2021 Loan servicing rights $ 114,636 $ ( 90,951 ) $ 23,685 Core deposits 109,290 ( 65,488 ) 43,802 Other 6,092 ( 3,193 ) 2,899 Total other intangible assets $ 230,018 $ ( 159,632 ) $ 70,386 Loan servicing rights are accounted for using the amortization method. Under this method, Valley amortizes the loan servicing assets over the period of the economic life of the assets arising from estimated net servicing revenues. On a quarterly basis, Valley stratifies its loan servicing assets into groupings based on risk characteristics and assesses each group for impairment based on fair value. 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. 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 certain financial asset 33 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 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: Loan Servicing Rights Core Deposits Other (in thousands) 2022 $ 2,660 $ 8,516 $ 1,372 2023 3,146 9,510 1,600 2024 2,733 7,740 1,401 2025 2,368 5,970 1,202 2026 2,039 4,225 998 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. Note 10. 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 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. 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. The grant, exercise, vesting, settlement or payment of an award may be based upon the fair value of Valley's common stock on the last sale price reported for Valley's common stock on such date or the last sale price reported preceding such date, except for performance-based awards with a market condition. The grant date fair values of performance-based awards that vest based on a market condition are determined by a third-party specialist using a Monte Carlo valuation model. Valley granted 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 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. The RSUs “cliff” vest after three years based on the cumulative performance of Valley during that time period. The RSUs earn dividend equivalents (equal to cash dividends paid on Valley's common stock) over the applicable performance period. 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 three months ended March 31, 2022 and 2021 was $ 14.82 per share and $ 12.36 per share, respectively. 34 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 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. Note 11. Derivative Instruments and Hedging Activities Valley enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Fair Value Hedges of Fixed Rate Assets and Liabilities . Valley is exposed to changes in the fair value of fixed-rate subordinated debt due to changes in interest rates. From time to time, Valley uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate . Interest rate swaps designated as fair value hedges involve the receipt of variable rate payments from a counterparty in exchange for Valley making fixed rate payments over the life of the agreements without the exchange of the underlying notional amount. For derivatives that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. Cash Flow Hedges of Interest Rate Risk . Valley’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, Valley uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the payment of either fixed or variable-rate amounts in exchange for the receipt of variable or fixed-rate amounts from a counterparty, 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. Derivatives not designated as hedges may be used to manage Valley’s exposure to interest rate movements or to provide service to customers but do not meet the requirements for hedge accounting under U.S. GAAP. Derivatives not designated as hedges are not entered into for speculative purposes. Valley executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Valley executes with a third party, such that Valley minimizes its net risk exposure resulting from such transactions. As these interest rate swaps do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. Valley sometimes enters into risk participation agreements with external lenders where the banks are sharing their risk of default on the interest rate swaps on participated loans. Valley either pays or receives a fee depending on the participation type. Risk participation agreements are credit derivatives not designated as hedges. Credit derivatives are not speculative and are not used to manage interest rate risk in assets or liabilities. Changes in the fair value in credit derivatives are recognized directly in earnings. 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. 35 Valley regularly enters into mortgage banking derivatives which are non-designated hedges. These derivatives include interest rate lock commitments provided to customers to fund certain residential mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. Valley enters into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rate on Valley's commitments to fund the loans as well as on its portfolio of mortgage loans held for sale. Amounts included in the consolidated statements of financial condition related to the fair value of Valley’s derivative financial instruments were as follows: March 31, 2022 December 31, 2021 Fair Value Fair Value Other Assets Other Liabilities Notional Amount Other Assets Other Liabilities Notional Amount (in thousands) Derivatives designated as hedging instruments: Cash flow hedge interest rate swaps $ 590 $ — $ 200,000 $ — $ 310 $ 700,000 Fair value hedge interest rate swaps — 16,634 300,000 — 3,335 300,000 Total derivatives designated as hedging instruments $ 590 $ 16,634 $ 500,000 $ — $ 3,645 $ 1,000,000 Derivatives not designated as hedging instruments: Interest rate swaps and other contracts * $ 172,393 $ 171,610 $ 11,264,601 $ 181,012 $ 47,277 $ 10,301,460 Mortgage banking derivatives 3,287 1,438 181,017 488 1,454 312,428 Total derivatives not designated as hedging instruments $ 175,680 $ 173,048 $ 11,445,618 $ 181,500 $ 48,731 $ 10,613,888 * Other derivatives include risk participation agreements. 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 March 31, 2022 2021 (in thousands) Amount of loss reclassified from accumulated other comprehensive loss to interest expense $ ( 542 ) $ ( 915 ) 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 $ 485 thousand will be reclassified as an increase to interest expense over the next 12 months. 36 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 March 31, 2022 2021 (in thousands) Derivative - interest rate swap: Interest expense 530 — Hedged item - subordinated debt Interest expense ( 530 ) — The changes in the fair value of the hedged item designated as a qualifying hedge are captured as an adjustment to the carrying amount of the hedged item (basis adjustment). The following table presents the hedged item related to interest rate derivatives designated as fair value hedges and the cumulative basis fair value adjustment included in the net carrying amount of the hedged item at March 31, 2022. Line Item in the Statement of Financial Position in Which the Hedged Item is Included Carrying Amount of the Hedged Liability Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability (in thousands) Long-term borrowings $ 282,443 $ ( 17,557 ) 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 March 31, 2022 2021 (in thousands) Non-designated hedge interest rate swaps and credit derivatives 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 $ 14.0 million and $ 6.2 million for the three months ended March 31, 2022 and 2021, respectively. Credit Risk Related Contingent Features. By using derivatives, Valley is exposed to credit risk if counterparties to the derivative contracts do not perform as expected. Management attempts to minimize counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral where appropriate. Credit risk exposure associated with derivative contracts is managed at Valley in conjunction with Valley’s consolidated counterparty risk management process. Valley’s counterparties and the risk limits monitored by management are periodically reviewed and approved by the Board of Directors. Valley has agreements with its derivative counterparties providing that if Valley defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Valley could also be declared in default on its derivative counterparty agreements. Additionally, Valley has an agreement with several of its derivative counterparties that contains provisions that require Valley’s debt to maintain an investment grade credit rating from each of the major credit rating agencies from which it receives a credit rating. If Valley’s credit rating is reduced below investment grade, or such rating is withdrawn or suspended, then the counterparty could terminate the derivative positions and Valley would be required to settle its obligations under the agreements. As of March 31, 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. 37 Note 12. Balance Sheet Offsetting 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). The credit risk associated with bilateral OTC derivatives is managed through obtaining collateral and enforceable master netting agreements. Valley is party to master netting arrangements with its financial institution counterparties; however, Valley does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of cash or marketable investment securities, is posted by the counterparty with net liability positions in accordance with contract thresholds. Master repurchase agreements which include “right of set-off” provisions generally have a legally enforceable right to offset recognized amounts. In such cases, the collateral would be used to settle the fair value of the swap or repurchase agreement should Valley be in default. The total amount of collateral held or pledged cannot exceed the net derivative fair values with the counterparty. The table below presents information about Valley’s financial instruments eligible for offset in the consolidated statements of financial condition as of March 31, 2022 and December 31, 2021. Gross Amounts Not Offset Gross Amounts Recognized Gross Amounts Offset Net Amounts Presented Financial Instruments Cash Collateral * Net Amount (in thousands) March 31, 2022 Assets Interest rate swaps $ 172,983 $ — $ 172,983 $ 12,555 $ 117,289 $ 43,139 Liabilities Interest rate swaps $ 188,244 $ — $ 188,244 $ ( 12,555 ) $ ( 2,323 ) $ 173,366 December 31, 2021 Assets Interest rate swaps $ 181,012 $ — $ 181,012 $ — $ — $ 181,012 Liabilities Interest rate swaps $ 50,922 $ — $ 50,922 $ — $ ( 44,231 ) $ 6,691 * Cash collateral received (pledged) to our counterparties in relation to market value exposures of OTC derivative contacts in a liability position. Note 13. 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 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. These tax credits and deductions are recognized as a reduction of income tax expense. Valley’s tax credit investments are carried in other assets on the consolidated statements of financial condition. 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 38 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 March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 (in thousands) Other Assets: Affordable housing tax credit investments, net $ 14,666 $ 15,343 Other tax credit investments, net 54,687 57,006 Total tax credit investments, net $ 69,353 $ 72,349 Other Liabilities: Unfunded affordable housing tax credit commitments $ 1,360 $ 1,360 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 months ended March 31, 2022 and 2021: Three Months Ended March 31, 2022 2021 (in thousands) Components of Income Tax Expense: Affordable housing tax credits and other tax benefits $ 744 $ 897 Other tax credit investment credits and tax benefits 2,551 2,685 Total reduction in income tax expense $ 3,295 $ 3,582 Amortization of Tax Credit Investments: Affordable housing tax credit investment losses $ 415 $ 543 Affordable housing tax credit investment impairment losses 262 341 Other tax credit investment losses 309 173 Other tax credit investment impairment losses 1,910 1,687 Total amortization of tax credit investments recorded in non-interest expense $ 2,896 $ 2,744 Note 14. Business Segments 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. Valley’s reportable segments have been determined based upon its internal structure of operations and lines of business. Each business segment is reviewed routinely for its asset growth, contribution to income before income taxes and return on average interest earning assets and impairment (if events or circumstances indicate a possible inability to realize the carrying amount). Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are allocated from the corporate and other adjustments segment to each of the other three business segments. 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/ 39 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. GAAP. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. The following tables represent the financial data for Valley’s four business segments for the three months ended March 31, 2022 and 2021: Three Months Ended March 31, 2022 Consumer Lending Commercial Lending Investment Management Corporate and Other Adjustments Total ($ in thousands) Average interest earning assets $ 7,638,942 $ 26,984,460 $ 5,659,646 $ — $ 40,283,048 Interest income $ 59,459 $ 257,906 $ 23,787 $ ( 694 ) $ 340,458 Interest expense 3,207 11,327 2,376 5,879 22,789 Net interest income (loss) 56,252 246,579 21,411 ( 6,573 ) 317,669 Provision for credit losses 1,873 1,627 57 — 3,557 Net interest income (loss) after provision for credit losses 54,379 244,952 21,354 ( 6,573 ) 314,112 Non-interest income 13,817 16,880 2,073 6,500 39,270 Non-interest expense 16,568 25,085 836 154,851 197,340 Internal transfer expense (income) 28,647 99,916 17,061 ( 145,624 ) — Income (loss) before income taxes $ 22,981 $ 136,831 $ 5,530 $ ( 9,300 ) $ 156,042 Return on average interest earning assets (pre-tax) 1.20 % 2.03 % 0.39 % N/A 1.55 % Three Months Ended March 31, 2021 Consumer Lending Commercial Lending Investment Management Corporate and Other Adjustments Total ($ in thousands) Average interest earning assets $ 7,049,252 $ 25,533,227 $ 4,803,740 $ — $ 37,386,219 Interest income $ 60,845 $ 252,336 $ 19,509 $ ( 892 ) $ 331,798 Interest expense 6,415 23,235 4,371 5,110 39,131 Net interest income (loss) 54,430 229,101 15,138 ( 6,002 ) 292,667 (Credit) provision for credit losses ( 2,635 ) 11,676 ( 385 ) — 8,656 Net interest income (loss) after provision for credit losses 57,065 217,425 15,523 ( 6,002 ) 284,011 Non-interest income 13,685 7,713 2,331 7,504 31,233 Non-interest expense 19,849 25,531 1,777 113,056 160,213 Internal transfer expense (income) 19,502 70,555 13,277 ( 103,334 ) — Income (loss) before income taxes $ 31,399 $ 129,052 $ 2,800 $ ( 8,220 ) $ 155,031 Return on average interest earning assets (pre-tax) 1.78 % 2.02 % 0.23 % N/A 1.66 % 40