What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-09 · 505 added, 241 removed, 1082 unchanged (41% of the section changed)

11 unchanged sentences

Available for sale debt securities 1,382,551 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)

Held to maturity debt securities (net of allowance for credit losses of $ 1,508 at June 30, 2022 and $ 1,165 at December 31, 2021)

3,718,469 2,667,532

26 unchanged sentences

50,000,000 authorized shares:

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

Series A ( 4,600,000 shares issued at June 30, 2022 and December 31, 2021)

111,590 111,590

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

Series B ( 4,000,000 shares issued at June 30, 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)

issued 507,896,910 and 423,034,027 shares at June 30, 2022 and December 31, 2021)

178,185 148,482

2 unchanged sentences

Accumulated other comprehensive loss ( 108,337 ) ( 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)

Treasury stock, at cost ( 1,568,384 common shares at June 30, 2022 and 1,596,959 common shares at December 31, 2021)

( 22,260 ) ( 22,855 )

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Interest Income

18 unchanged sentences

Non-Interest Income

Trust and investment services 5,131 3,329

Wealth management and trust fees 9,577 3,532 14,708 6,861

Insurance commissions 3,463 2,637 5,322 4,195

8 unchanged sentences

Salary and employee benefits expense 154,798 91,095 262,531 179,198

Net occupancy and equipment expense 36,806 32,259

Net occupancy expense 22,429 18,550 44,420 39,230

Technology, furniture and equipment expense 49,866 23,220 75,880 43,950

FDIC insurance assessment 5,351 3,374 9,509 6,650

1 unchanged sentence

Professional and legal fees 30,409 7,486 45,158 13,758

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

Amortization of tax credit investments 3,193 2,972 6,089 5,716

Telecommunication expense 3,271 3,160

Other 22,284 11,341 37,646 23,743

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Earnings Per Common Share:

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net income $ 96,413 $ 120,512 $ 213,141 $ 236,222

2 unchanged sentences

Net losses arising during the period ( 52,269 ) ( 1,471 ) ( 91,161 ) ( 11,907 )

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

Less reclassification adjustment for net losses (gains) included in net income — 76 ( 10 ) 120

Total ( 52,269 ) ( 1,395 ) ( 91,171 ) ( 11,787 )

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

Net (losses) gains on derivatives arising during the period ( 23 ) ( 147 ) 195 27

Less reclassification adjustment for net (gains) losses included in net income ( 80 ) 534 306 1,185

Total ( 103 ) 387 501 1,212

5 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the Three Months Ended March 31, 2022

For the Six Months Ended June 30, 2022

Common Stock Accumulated

20 unchanged sentences

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

Net income — — — — 96,413 — — 96,413

Other comprehensive loss, net of tax — — — — — ( 52,239 ) — ( 52,239 )

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

— — — — ( 56,211 ) — — ( 56,211 )

Effect of stock incentive plan, net

— 72 1 5,125 ( 109 ) — 892 5,909

Common stock issued in acquisition — 84,863 29,702 1,088,127 — — — 1,117,829

Balance - June 30, 2022 $ 209,691 506,329 $ 178,185 $ 4,965,488 $ 982,146 $ ( 108,337 ) $ ( 22,260 ) $ 6,204,913

For the Six Months Ended June 30, 2021

Common Stock Accumulated

17 unchanged sentences

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

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

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

Cash dividends declared:

Preferred stock, Series A, $ 0.39 per share

— — — — ( 1,797 ) — — ( 1,797 )

Preferred stock, Series B, $ 0.34 per share

— — — — ( 1,375 ) — — ( 1,375 )

Common stock, $ 0.11 per share

— — — — ( 45,093 ) — — ( 45,093 )

Effect of stock incentive plan, net — 286 115 6,688 ( 130 ) — ( 53 ) 6,620

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

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net income $ 213,141 $ 236,222

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 33,185 27,681

7 unchanged sentences

Originations of loans held for sale ( 210,048 ) ( 541,627 )

Gains on sales of assets, net 64 196

Losses (gains) on sales of assets, net 265 ( 36 )

Loss on extinguishment of debt — 8,406

Net change in:

20 unchanged sentences

Proceeds from sales of real estate property and equipment 7,265 2,747

Proceeds from sales of loans held for investment — 4,498

Purchases of real estate property and equipment ( 35,164 ) ( 12,207 )

Cash paid in acquisition ( 8,607 ) —

Cash and cash equivalent acquired in acquisitions, net 321,540 —

Net cash used in investing activities ( 3,325,958 ) ( 398,259 )

2 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from financing activities:

1 unchanged sentence

Net change in short-term borrowings 763,284 ( 293,580 )

Proceeds from issuance of long-term borrowings, net — 295,934

Repayments of long-term borrowings — ( 710,595 )

4 unchanged sentences

Other, net ( 365 ) ( 333 )

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

Net cash provided by financing activities 1,858,819 459,563

Net change in cash and cash equivalents ( 661,608 ) 515,558

8 unchanged sentences

Lease right of use assets obtained in exchange for operating lease liabilities 24,745 1,993

Acquisitions:

Non-cash assets acquired:

Equity securities 6,239 —

Investment securities available for sale 505,928 —

Investment securities held to maturity 806,627 —

Loans, net 5,844,070 —

Premises and equipment, net 38,827 —

Lease right of use assets 49,434 —

Bank owned life insurance 126,861 —

Accrued interest receivable 25,717 —

Goodwill 407,522 —

Other intangible assets, net 159,587 —

Other assets 158,352 —

Total non-cash assets acquired $ 8,129,164 $ —

Liabilities assumed:

Deposits 7,029,997 —

Short-term borrowings 103,794 —

Lease liabilities 79,844 —

Accrued expenses and other liabilities 119,240 —

Total liabilities assumed $ 7,332,875 $ —

Non-cash net assets acquired $ 796,289 $ —

Net cash and cash equivalents acquired in acquisition $ 321,540 $ —

Common stock issued in acquisition $ 1,117,829 $ —

See accompanying notes to consolidated financial statements.

8 unchanged sentences

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 prior period amounts have been reclassified to conform to the current presentation, including changes to our segment reporting structure, as further discussed in Note 9 and Note 14.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly Valley’s financial position, results of operations, changes in shareholders' equity and cash flows at June 30, 2022 and for all periods presented have been made.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year or any subsequent interim period.

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

12 unchanged sentences

Business Combinations

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.

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.

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

Based on Valley’s closing stock price on March 31, 2022, the transaction was valued at $ 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.

The transaction was accounted for under the acquisition method of accounting and accordingly the results of Bank Leumi USA's operations have been included in Valley's consolidated financial statements for the three and six months ended June 30, 2022 from the date of the acquisition .

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

April 1, 2022

Assets acquired:

Cash and cash equivalents $ 443,588

Equity securities 6,239

Available for sale debt securities 505,928

Held to maturity debt securities 806,627

Loans 5,914,389

Allowance for loan losses ( 70,319 )

Loans, net 5,844,070

Premises and equipment 38,827

Lease right of use assets 49,273

Bank owned life insurance 126,861

Accrued interest receivable 25,717

Goodwill 403,151

Other intangible assets 153,380

Other assets 158,352

Total assets acquired $ 8,562,013

Liabilities assumed:

Non-interest bearing $ 4,511,537

Interest bearing:

Savings, NOW and money market 2,224,834

Total deposits 7,029,997

Short-term borrowings 103,794

Lease liabilities 79,683

Accrued expense and other liabilities 117,269

Total liabilities assumed $ 7,330,743

Common stock issued in acquisition 1,117,829

Cash paid in acquisition 113,441

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

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

Fair Value Measurement of Assets Acquired and Liabilities Assumed

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

Cash and cash equivalents.

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

Investment securities .

The estimated fair value of equity securities, which represents a privately held Community Reinvestment Act (CRA) fund, was measured at net asset value (NAV).

Other investment securities acquired from Bank Leumi USA were classified as available for sale and held to maturity debt securities based on Valley's intent at the acquisition date.

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

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

The acquired loan portfolio was segregated into categories for valuation purposes primarily based on loan type and loan risk rating.

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

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

The expected cash flows from the acquired loan portfolios were discounted to present value based on estimated market rates.

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

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

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

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

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

The acquired loans were also evaluated upon acquisition to determine whether they represented purchased credit-deteriorated (PCD) loans, defined as loans which have experienced a more-than-insignificant deterioration in credit quality since origination.

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

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

The difference between the unpaid principal balance of loans and the calculated amortized cost basis resulted in a net non-credit discount totaling $ 18.8 million.

This net discount will be accreted into interest income over the loan's remaining life using the effective interest method .

The following table provides a reconciliation of the unpaid principal balance and fair value of loans identified as PCD acquired from Bank Leumi USA:

April 1, 2022

($ in thousands)

Unpaid Principal Balance of PCD loans $ 1,922,272

Allowance for credit losses at acquisition * ( 70,319 )

Non-credit discount at acquisition ( 18,814 )

Fair value of acquired PCD loans $ 1,833,139

* Represents the initial reserve for PCD loans, reported net of an additional $ 62.4 million charge-offs recognized at the date of acquisition in accordance with Valley's charge-off policy.

Other intangible assets.

Other intangible assets recorded consist of core deposit intangibles (CDI) and other acquired client relationships.

CDI assets are measures of the value of non-maturity checking, savings, NOW and

money market customer deposits that are acquired in a business combination.

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

The CDI is amortized using an accelerated amortization method over an estimated useful life of 10 years.

For other acquired client relationships, fair value is measured using the multi-period excess earnings methodology under the income approach.

This method measures the future economic income that can be attributed to the existing client relationships acquired, after considering revenue and expense assumptions, expected client attrition rates, and subtracting returns for other complementary assets that contribute to the income over their expected remaining useful lives.

The resulting net cash flows are discounted to present value using an estimated intangible asset discount rate.

The other acquired client relationships are amortized using an accelerated amortization method over an estimated remaining useful life of 14 years .

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

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

Supplemental Pro Forma Financial Information (Unaudited).

The following table summarizes supplemental pro forma financial information giving effect to the merger as if it had been completed on January 1, 2021:

Three Months Ended

June 30, Six Months Ended

2021 2022 2021

(in thousands)

Net interest income $ 369,549 $ 865,766 $ 728,419

Non-interest income 58,069 134,483 105,527

Net income 104,639 358,427 211,823

The supplemental pro forma financial information does not necessarily reflect the results of operations that would have occurred had Valley merged with Bank Leumi USA on January 1, 2021.

Costs savings and other business synergies related to the merger are not included in the supplemental pro forma financial information.

Other Recent Acquisitions

L andmark Insurance of the Palm Beaches .

3 unchanged sentences

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 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 and six months ended June 30, 2022 from the date of acquisition.

The Westchester Bank Holding Corporation.

1 unchanged sentence

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

The common shareholders of Westchester

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

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

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

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

During the six months ended June 30, 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.

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.

Merger expenses mainly related the Bank Leumi USA acquisition ab ove totaled $ 54.5 million and $ 58.9 million for the three and six months ended June 30, 2022, respectively.

The merger expenses largely consisted of salaries and benefits expense, professional and legal fees, and other expense (largely consisting of technology related costs) within non-interest expense on the consolidated statements of income.

Valley incurred no merger related expenses during the three and six months ended June 30, 2021.

Incremental merger expenses related to this acquisition are expected to be incurred in future periods, including professional fees, technology and other expenses related to back office consolidation of the Bank operations.

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:

The following table shows the calculation of both basic and diluted earnings per common share for the three and six months ended June 30, 2022 and 2021:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(in thousands, except for share data)

9 unchanged sentences

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

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.

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

Potential anti-dilutive weighted common shares were immaterial fo r the three and six months ended June 30, 2022 and 2021.

Accumulated Other Comprehensive Loss

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

The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the three and six months ended June 30, 2022:

Components of Accumulated Other Comprehensive Loss Total

7 unchanged sentences

(in thousands)

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

Other comprehensive loss before reclassification ( 52,269 ) ( 23 ) — ( 52,292 )

Amounts reclassified from other comprehensive (loss) income — ( 80 ) 133 53

Other comprehensive (loss) income, net ( 52,269 ) ( 103 ) 133 ( 52,239 )

Balance at June 30, 2022 $ ( 81,985 ) $ ( 831 ) $ ( 25,521 ) $ ( 108,337 )

Components of Accumulated Other Comprehensive Loss Total

Comprehensive

Unrealized Gains

and Losses on

Available for Sale

(AFS) Securities Unrealized Gains

and Losses on

Derivatives Defined

(in thousands)

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

2 unchanged sentences

Other comprehensive (loss) income, net ( 91,171 ) 501 265 ( 90,405 )

( 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:

Balance at June 30, 2022 $ ( 81,985 ) $ ( 831 ) $ ( 25,521 ) $ ( 108,337 )

The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three and six months ended June 30, 2022 and 2021:

Amounts Reclassified from

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

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

(in thousands)

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

Unrealized (losses) gains on AFS securities before tax $ — $ ( 103 ) $ 14 $ ( 162 ) (Losses) gains on securities transactions, net

Tax effect — 27 ( 4 ) 42

Total net of tax — ( 76 ) 10 ( 120 )

Unrealized losses on derivatives (cash flow hedges) before tax ( 542 ) ( 915 ) Interest expense

Unrealized gains (losses) on derivatives (cash flow hedges) before tax 116 ( 749 ) ( 426 ) ( 1,664 ) Interest expense

Tax effect ( 36 ) 215 120 479

10 unchanged sentences

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

2021-01 is effective for all entities immediately upon issuance and may be

elected retrospectively to eligible modifications as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications made on or after any date within the interim period including January 7, 2021 and it can be applied through December 31, 2022, similar to the other reference rate reform relief provided under Topic 848.

2021-01 is effective for all entities immediately upon issuance and may be elected retrospectively to eligible modifications as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications made on or after any date within the interim period including January 7, 2021 and it can be applied through December 31, 2022, similar to the other reference rate reform relief provided under Topic 848.

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

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2022-02 on its consolidated financial statements.

2022-03, "Fair Value Measurement of Equity Securities subject to Contractual Sale Restrictions” updates guidance in ASC 820, Fair Value Measurement and clarifies that a contractual sale restriction should not be considered in measuring fair value.

It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities including (i) the nature and remaining duration of the restriction;

(ii) the circumstances that could cause a lapse in restrictions;

and (iii) the fair value of the securities with contractual sale restrictions.

2022-03 will be effective for Valley on January 1, 2024, and it can be applied prospectively, with any adjustments resulting from

adoption recognized in earnings on the date of adoption.

The adoption of ASU No.

2022-03 is not expected to have a significant impact on Valley's consolidated financial statements.

Fair Value Measurement of Assets and Liabilities

6 unchanged sentences

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

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

11 unchanged sentences

$ 35,931 $ 24,683 $ — $ —

Trading debt securities 11,739 — 11,739 —

Available for sale debt securities:

Treasury securities 292,398 292,398 — —

government agency securities 30,533 — 30,533 —

Obligations of states and political subdivisions 157,478 — 157,478 —

67,951 — 67,951 —

Residential mortgage-backed securities 721,036 — 721,036 —

795,554 — 795,554 —

Corporate and other debt securities 181,106 — 181,106 —

43 unchanged sentences

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.

(1) Includes equity securities measured at net asset value (NAV) per share (or its equivalent) as a practical expedient totaling $ 11.2 million and $ 11.6 million at June 30, 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.

(2) Represents residential mortgage loans held for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately $ 18.3 million and $ 136.3 million at June 30, 2022 and December 31, 2021, respectively.

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

4 unchanged sentences

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.

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

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

Trading debt securities.

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

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

Management reviews the data and assumptions used in

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

Available for sale debt securities.

1 unchanged sentence

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

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

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

has historically transacted both purchases and sales of investment securities.

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

7 unchanged sentences

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

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

Non-performance risk did not materially impact the fair value of mortgage loans held for sale at June 30, 2022 and December 31, 2021 based on the short duration these assets were held, and the credit quality of these loans.

Derivatives are reported at fair value utilizing Level 2 inputs.

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

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

The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at June 30, 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.

The credit valuation adjustments were not significant to the overall valuation of Valley’s derivatives at June 30, 2022 and December 31, 2021.

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

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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.

At June 30, 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 June 30, 2022, collateral dependent loans with a total amortized cost of $ 144.6 million, including our taxi medallion loan portfolio, were reduced by specific allowance for loan losses allocations totaling $ 78.5 million to a reported total net carrying amount of $ 66.1 million.

Foreclosed assets .

Certain foreclosed assets (consisting of other real estate owned and other repossessed assets included in other assets), upon initial recognition and transfer from loans, are re-measured and reported at fair value

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

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.

There were no adjustments to the appraisals of foreclosed assets at June 30, 2022.

Other Fair Value Disclosures

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

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

Hierarchy March 31, 2022 December 31, 2021

The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at June 30, 2022 and December 31, 2021 were as follows:

Hierarchy June 30, 2022 December 31, 2021

Amount Fair Value Carrying

8 unchanged sentences

Treasury securities Level 1 67,238 67,782 67,558 71,661

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

government agency securities Level 2 259,711 243,354 6,265 6,378

Obligations of states and political subdivisions Level 2 504,767 486,334 337,962 344,164

Residential mortgage-backed securities Level 2 2,775,928 2,492,737 2,166,142 2,152,301

Trust preferred securities Level 2 37,033 31,453 37,020 31,916

21 unchanged sentences

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.

Equity securities totaled $ 41.7 million and $ 36.5 million at June 30, 2022 and December 31, 2021, respectively.

See Note 6 for further details on equity securities.

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

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.

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

There were no trading debt securities at June 30, 2022.

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

We recorded net trading losses of $ 387 thousand and $ 1.4 million for three and six months ended June 30, 2022, respectively.

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

Available for Sale Debt Securities

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

The amortized cost, gross unrealized gains and losses and fair value of available for sale debt securities at June 30, 2022 and December 31, 2021 were as follows:

Losses Fair Value

(in thousands)

March 31, 2022

June 30, 2022

Treasury securities $ 305,371 $ — $ ( 12,973 ) $ 292,398

government agency securities 31,083 42 ( 592 ) 30,533

15 unchanged sentences

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

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

The age of unrealized losses and fair value of the related available for sale debt securities at June 30, 2022 and December 31, 2021 were as follows:

Twelve Months More than

4 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

Treasury securities $ 292,397 $ ( 12,973 ) $ — $ — $ 292,397 $ ( 12,973 )

government agency securities 26,224 ( 575 ) 1,202 ( 17 ) 27,426 ( 592 )

19 unchanged sentences

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

Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was 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.

Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was 655 and 139 at June 30, 2022 and December 31, 2021, respectively.

As of June 30, 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 $ 446.4 million.

The contractual maturities of available for sale debt securities at June 30, 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

June 30, 2022

(in thousands)

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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.

The weighted average remaining expected life for residential mortgage-backed securities available for sale was 5.3 years at June 30, 2022.

Impairment Analysis of Available For Sale Debt Securities

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

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

economy and its potential negative effect on the future performance of the security issuers, including due to current economic conditions and the 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.

Val ley has evaluated available for sale debt securities that are in an unrealized loss position as of June 30, 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 and six months ended June 30, 2022 and 2021.

There was no allowance for credit losses for available for sale debt securities at June 30, 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:

The amortized cost, gross unrealized gains and losses and fair value of debt securities held to maturity at June 30, 2022 and December 31, 2021 were as follows:

Losses Fair Value

(in thousands)

March 31, 2022

June 30, 2022

Treasury securities $ 67,238 $ 573 $ ( 29 ) $ 67,782

19 unchanged sentences

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

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

The age of unrealized losses and fair value of related debt securities held to maturity at June 30, 2022 and December 31, 2021 were as follows:

Twelve Months More than

4 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

Treasury securities $ 34,914 $ ( 29 ) $ — $ — $ 34,914 $ ( 29 )

government agency securities 220,737 ( 16,495 ) — — 220,737 ( 16,495 )

22 unchanged sentences

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

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 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.

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 717 and 108 at June 30, 2022 and December 31, 2021, respectively.

As of June 30, 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 $ 892.6 million.

The contractual maturities of investments in debt securities held to maturity at June 30, 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

June 30, 2022

(in thousands)

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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.

The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was 7.7 years at June 30, 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.

The following table summarizes the amortized cost of held to maturity debt securities by external credit rating at June 30, 2022 and December 31, 2021.

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

(in thousands)

March 31, 2022

June 30, 2022

Treasury securities $ 67,238 $ — $ — $ — $ 67,238

22 unchanged sentences

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.

At June 30, 2022, most of the obligations of states and political subdivisions were rated investment grade and a large portion of the "non-rated" category included TEMS securities secured by Ginnie Mae securities.

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

2 unchanged sentences

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

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

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

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.

H eld to maturity debt securities were carried net of allowance for credit losses totaling $ 1.5 million at June 30, 2022 and $ 1.2 million at December 31, 2021.

Valley recorded a provision for credit losses of $ 286 thousand and $ 343

thousand for the three and six months ended June 30, 2022, respectively, and a credit (negative) provision for credit losses of $ 30 thousand and $ 388 thousand, respectively, for the three and six months ended June 30, 2021.

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

The detail of the loan portfolio as of June 30, 2022 and December 31, 2021 was as follows:

June 30, 2022 December 31, 2021

(in thousands)

13 unchanged sentences

Total loans $ 43,560,777 $ 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.

* Represents SBA Paycheck Protection Program (PPP) loans, net of unearned fees totaling $ 2.5 million and $ 12.1 million at June 30, 2022 and December 31, 2021, respectively.

Total loans includes net unearned discounts and deferre d loan fees of $ 141.2 million an d $ 78.5 million at June 30, 2022 and December 31, 2021, respectively.

The increase in total loans at June 30, 2022 is partially attributed to $ 5.9 billion of loans acquired in the Bank Leumi USA acquisition, which was inclusive of a $ 98.6 million net purchase discount at the acquisition date.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 115.7 million and $ 83.7 million at June 30, 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 and six months ended June 30, 2022 and 2021.

Credit Risk Management

1 unchanged sentence

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

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

Division and by the Credit Committee.

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

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

Loan portfolio diversification is an important factor utilized by Valley to manage its risk across business sectors and through cyclical economic circumstances.

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:

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

Past Due and Non-Accrual Loans

6 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

Commercial and industrial

11 unchanged sentences

Total consumer loans 6,009 702 267 3,279 10,257 3,121,534 3,131,791 126

5,862 554 400 3,754 10,570 2,932,766 2,943,336 3

Total $ 45,102 $ 11,474 $ 16,925 $ 313,117 $ 386,618 $ 43,174,159 $ 43,560,777 $ 99,285

27 unchanged sentences

Risk ratings are updated any time the situation warrants.

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

The following table presents the internal loan classification risk by loan portfolio class by origination year based on the most recent analysis performed at June 30, 2022 and December 31, 2021:

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

June 30, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

(in thousands)

14 unchanged sentences

Substandard — 13,059 — — — 17,616 19,531 — 50,206

Doubtful 498 643 11,473 — — — — — 12,614

Total construction $ 501,643 $ 645,101 $ 169,060 $ 59,657 $ 10,664 $ 42,705 $ 1,945,543 $ — $ 3,374,373

18 unchanged sentences

Total construction $ 278,427 $ 98,628 $ 49,570 $ 33,027 $ 6,061 $ 46,261 $ 1,342,606 $ — $ 1,854,580

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.

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 and by payment activity.

The following table presents the amortized cost in those loan classes based on payment activity by origination year as of June 30, 2022 and December 31, 2021.

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

June 30, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

(in thousands)

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Performing 14,481 3,094 7,339 7,610 7,156 4,821 982,353 — 1,026,854

90 days or more past due — — — — — — 4 — 4

Total other consumer 14,481 3,094 7,339 7,610 7,156 4,821 982,353 — 1,026,854

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

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

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

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

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

Three Months Ended March 31,

Performing TDRs (not reported as non-accrual loans) totaled $ 67.3 million and $ 71.3 million as of June 30, 2022 and December 31, 2021, respectively.

Non-performing TDRs totaled $ 154.4 million and $ 117.2 million as of June 30, 2022 and December 31, 2021, respectively.

The following table presents the pre- and post-modification amortized cost of loans by loan class modified as TDRs during the three and six months ended June 30, 2022 and 2021.

Post-modification amounts are presented as of June 30, 2022 and 2021.

Three Months Ended June 30,

Troubled Debt Restructurings Number

11 unchanged sentences

Total 58 $ 96,026 $ 91,879 17 $ 21,918 $ 21,831

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,

Six Months Ended June 30,

Troubled Debt Restructurings Number

Contracts Pre-Modification

Outstanding Recorded Investment Post-Modification

Outstanding Recorded Investment Number

Contracts Pre-Modification

Outstanding Recorded Investment Post-Modification

Outstanding Recorded Investment

($ in thousands)

Commercial and industrial 60 $ 91,804 $ 87,685 13 $ 20,855 $ 19,648

Commercial real estate 3 14,072 13,986 6 12,237 12,223

Residential mortgage 8 5,090 5,087 8 2,618 2,586

Consumer 1 125 124 1 169 166

Total 72 $ 111,091 $ 106,882 28 $ 35,879 $ 34,623

The total TDRs presented in the above table had allocated allowance for loan losses of $ 56.0 million and $ 4.5 million at June 30, 2022 and 2021, respectively.

There were $ 1.5 million in charge-offs related to TDRs for the three and six months ended June 30, 2022.

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

Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the three and six months ended June 30, 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 and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended June 30,

Troubled Debt Restructurings Subsequently Defaulted Number of

2 unchanged sentences

($ in thousands)

Construction 2 $ 17,599 — $ —

Residential mortgage — — 1 445

Total 2 $ 17,599 1 $ 445

Six Months Ended June 30,

Troubled Debt Restructurings Subsequently Defaulted Number of

Contracts Recorded Investment Number of

Contracts Recorded

($ in thousands)

Commercial and industrial — $ — 15 $ 12,384

2 unchanged sentences

Total 2 $ 17,599 17 $ 13,076

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.

Other real estate owned (OREO) totaled $ 422 thousand and $ 2.3 million at June 30, 2022 and December 31, 2021, respectively.

There were no forec losed residential real estate properties included in OREO at June 30, 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 $ 2.0 million and $ 2.5 million at June 30, 2022 and December 31, 2021, respectively.

Collateral dependent loans.

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

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

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

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

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

The following table presents collateral dependent loans by class as of June 30, 2022 and December 31, 2021:

2022 December 31,

9 unchanged sentences

Total $ 266,904 $ 241,258

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

* The majority of the loans are collateralized by taxi medallions for all periods.

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:

The allowance for credit losses (ACL) for loans consists of the allowance for loan losses and the allowance for unfunded credit commitments.

The ACL for loans increased $ 115.3 million from December 31, 2021 largely reflecting a net ACL of $ 70.3 million for PCD loans acquired from Bank Leumi USA that was recorded at April 1, 2022 and recognition of a $ 41.0 million provision related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA during the three months ended June 30, 2022.

Overall, an increased economic forecast reserve component of our CECL model caused by elevated uncertainty in economic conditions was largely offset by lower expected quantitative loss experience at June 30, 2022 as compared to December 31, 2021.

The following table summarizes the ACL for loans at June 30, 2022 and December 31, 2021:

2022 December 31,

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(in thousands)

3 unchanged sentences

Total provision for credit losses for loans $ 43,712 $ 8,777 $ 47,212 $ 17,791

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:

The following table details the activity in the allowance for loan losses by loan portfolio segment for the three and six months ended June 30, 2022 and 2021:

and Industrial Commercial

3 unchanged sentences

Three Months Ended

March 31, 2022

June 30, 2022

Allowance for loan losses:

Beginning balance $ 101,203 $ 219,949 $ 28,189 $ 13,169 $ 362,510

Allowance for purchased credit deteriorated (PCD) loans * 33,452 36,618 206 43 70,319

Loans charged-off ( 4,540 ) — ( 1 ) ( 726 ) ( 5,267 )

1 unchanged sentence

Net (charge-offs) recoveries ( 2,588 ) 224 73 ( 29 ) ( 2,320 )

(Credit) provision for loan losses ( 1,140 ) 2,525 2,638 ( 765 ) 3,258

Provision for loan losses 12,472 20,436 1,421 3,981 38,310

Ending balance $ 144,539 $ 277,227 $ 29,889 $ 17,164 $ 468,819

Three Months Ended

March 31, 2021

June 30, 2021

Allowance for losses:

3 unchanged sentences

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

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

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

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

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.

and Industrial Commercial

2 unchanged sentences

(in thousands)

March 31, 2022

Six Months Ended

June 30, 2022

Allowance for loan losses:

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

Allowance for PCD loans * 33,452 36,618 206 43 70,319

Loans charged-off ( 6,111 ) ( 173 ) ( 27 ) ( 1,551 ) ( 7,862 )

Charged-off loans recovered 2,776 331 531 1,954 5,592

Net (charge-offs) recoveries ( 3,335 ) 158 504 403 ( 2,270 )

Provision for loan losses 11,332 22,961 4,059 3,216 41,568

Ending balance $ 144,539 $ 277,227 $ 29,889 $ 17,164 $ 468,819

Six Months Ended

June 30, 2021

Allowance for losses:

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

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

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

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

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

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

* Represents the allowance for acquired PCD loans, net of PCD loan charge-offs totaling $ 62.4 million in the second quarter 2022.

and Industrial Commercial

Real Estate Residential

Mortgage Consumer Total

(in thousands)

June 30, 2022

Allowance for loan losses:

Individually evaluated for credit losses

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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:

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

Business Segment / Reporting Unit *

1 unchanged sentence

Lending Commercial

Lending Investment

Management Total

Lending Total

(in thousands)

1 unchanged sentence

Goodwill from business combinations 15,564 85 396,848 412,497

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.

Balance at June 30, 2022 $ 51,963 $ 284,451 $ 1,535,091 $ 1,871,505

* Valley’s Wealth Management Division is comprised of trust, asset management, brokerage, 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.

During the second quarter 2022, Valley performed the annual goodwill impairment test at its normal assessment date.

The results of the 2022 annual impairment test resulted in no i mpairment.

As discussed in Note 14, Valley made changes to its operating structure and strategy during the second quarter 2022 (and subsequent to the annual goodwill impairment test), which resulted in changes in its operating segments and reporting units to reflect how the CEO, who is the chief operating decision maker, intends to manage Valley, allocate resources and measure performance.

Goodwill balances were reallocated across the new operating segments and reporting units (as reflected in the table above) based on their relative fair values using the valuation performed during the second quarter 2022.

The goodwill from business combinations set forth in the above table during the six months ended June 30, 2022, related to the acquisitions of Bank Leumi USA and Landmark totaled $ 403.2 million and $ 4.4 million, respectively.

The goodwill from Landmark transaction was allocated entirely to the Wealth Management reporting unit.

During the six months ended June 30, 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:

The following table summarizes other intangible assets as of June 30, 2022 and December 31, 2021:

Assets Accumulated

1 unchanged sentence

(in thousands)

March 31, 2022

June 30, 2022

Loan servicing rights $ 119,142 $ ( 93,697 ) $ 25,445

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

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

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.

There was no net impairment recognized during the three and six months ended June 30, 2022.

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

Core deposits are amortized using an accelerated method over a period of 10 years.

Valley recorded $ 114.4 million of core deposit intangibles resulting from the Bank Leumi USA acquisition.

The line item labeled “Other” included in the table above primarily consists of customer lists, certain financial asset servicing contracts 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 13.3 years.

Valley recorded $ 39.0 million and $ 6.2 million of other intangible assets during the six months ended June 30, 2022 resulting from the Bank Leumi USA and Landmark acquisitions, respectively.

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.

No impairment was recognized during the three and six months ended June 30, 2022 and 2021.

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

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2026 2,153 17,223 4,805

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.

Valley recognized amortization expense on other intangible assets totaling approximately $ 11.4 million and $ 5.4 million (including net recoveries of impairment charges on loan servicing rights) for the three months ended June 30, 2022 and 2021, respectively, and $ 15.8 million and $ 11.5 million for the six months ended June 30, 2022 and 2021, respectively.

Stock–Based Compensation

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

As of June 30, 2022 , 5.2 million shares of common stock were available for issuance under the 2021 Plan.

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

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

Valley granted 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.

On April 1, 2022, Valley issued replacement options for the pre-existing and fully vested stock awards consisting of Bank Leumi USA options for 2.7 million shares of Valley common stock (which all remained outstanding at June 30, 2022) at a weighted average exercise price of $ 8.47 .

The stock plan under which the original Bank Leumi stock awards were issued is no longer active at the acquisition date.

Valley granted 937 thousand and 109 thousand of time-based restricted stock units (RSUs) during the three months ended June 30, 2022 and 2021, respectively, and 2.1 million and 1.2 million for the six months ended June 30, 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 average grant date fair value of the RSUs granted during the six months ended June 30, 2022 and 2021 was $ 13.51 per share and $ 11.63 per share, respectively.

Valley granted 619 thousand and 604 thousand of performance-based RSUs to certain officers for the six months ended June 30, 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.

2 unchanged sentences

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

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

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

The grant date fair value of the performance-based RSUs granted during the six months ended June 30, 2022 and 2021 was $ 14.72 per share and $ 12.36 per share, respectively.

Valley recorded total stock-based compensation expense of $ 6.2 million and $ 5.2 million for the three months ended June 30, 2022 and 2021, respectively, and $ 13.4 million and $ 10.7 million for the six months ended June 30, 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.

As of June 30, 2022, the unrecognized amortization expense for all stock-based employee compensation totaled approximately $ 43.3 million and will be recognized over an average remaining vesting period of approximately 2.18 years .

Derivative Instruments and Hedging Activities

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

Fair Value Hedges of Fixed Rate Assets and Liabilities .

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

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

Valley uses interest rate swaps to manage its exposure to changes in fair value on fixed rate debt 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.

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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.

Valley had five interest rate swaps with a total notional amount of $ 500 million that matured during the six months ended June 30, 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.

Derivatives not designated as hedges are used to manage Valley’s exposure to interest rate movements, foreign currency risk, credit risk, and to provide services to customers or for other purposes.

These derivatives do not meet the requirements for hedge accounting under U.S.

Derivatives not designated as hedges are not entered into for speculative purposes.

7 unchanged sentences

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.

At June 30, 2022, Valley had 26 credit swaps with an aggregate notional amount of $ 243.9 million related to risk participation agreements.

At June 30, 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.

Valley regularly enters into mortgage banking derivatives which are non-designated hedges.

1 unchanged sentence

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.

Valley enters foreign currency forward and option contracts, primarily to accommodate our customers, that are not designated as hedging instruments.

Upon the origination of a certain foreign currency denominated transactions (including foreign currency holdings and non-U.S.

dollar denominated loans) with a client, we enter into a respective hedging contract with a third party financial institution to mitigate the economic impact of foreign currency exchange rate fluctuation.

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

June 30, 2022 December 31, 2021

Fair Value Fair Value

9 unchanged sentences

$ 318,521 $ 318,277 $ 12,523,601 $ 180,701 $ 47,044 $ 10,179,294

Foreign currency derivatives 24,489 23,481 1,590,130 311 233 122,166

Mortgage banking derivatives 689 452 86,421 488 1,454 312,428

3 unchanged sentences

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:

As a result, the fair value of the applicable derivative assets and liabilities are reported net of variation margin at June 30, 2022 and December 31, 2021 in the table above .

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

Three Months Ended

June 30, Six Months Ended

2022 2021 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.

Amount of gain (loss) reclassified from accumulated other comprehensive loss to interest expense $ 116 $ ( 749 ) $ ( 426 ) $ ( 1,664 )

Amount of gain (loss) recognized in other comprehensive loss 121 ( 158 ) 441 19

The accumulated after-tax losses related to effective cash flow hedges included in accumulated other comprehensive loss were $ 831 thousand and $ 1.3 million at June 30, 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.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(in thousands)

5 unchanged sentences

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

1 unchanged sentence

Long-term borrowings $ 277,486 $ ( 22,514 )

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

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

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(in thousands)

1 unchanged sentence

Other non-interest expense $ 1,143 $ ( 2,210 ) $ ( 1,654 ) $ ( 425 )

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.

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 $ 11.1 million and $ 7.6 million for the three months ended June 30, 2022 and 2021, respectively, and $ 25.1 million and $ 13.8 million for the six months ended June 30, 2022 and 2021, respectively.

Credit Risk Related Contingent Features.

6 unchanged sentences

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

As of March 31, 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.

As of June 30, 2022, Valley was in compliance with all of the provisions of its derivative counterparty agreements.

As of June 30, 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.

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

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

The table below presents information about Valley’s financial instruments eligible for offset in the consolidated statements of financial condition as of June 30, 2022 and December 31, 2021.

Gross Amounts Not Offset

6 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

Interest rate swaps $ 319,011 $ — $ 319,011 $ 11,492 $ 307,724 $ —

11 unchanged sentences

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

Valley recognizes amortization

of tax credit investments, including impairment losses, within non-interest expense in the consolidated statements of income using the equity method of accounting.

Valley recognizes amortization of tax credit investments, including impairment losses, within non-interest expense in the consolidated statements of income using the equity method of accounting.

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

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

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at June 30, 2022 and December 31, 2021:

2022 December 31,

8 unchanged sentences

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

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

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and six months ended June 30, 2022 and 2021:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(in thousands)

7 unchanged sentences

Affordable housing tax credit investment impairment losses

363 431 625 772

Other tax credit investment losses 386 351 695 524

1 unchanged sentence

Total amortization of tax credit investments recorded in non-interest expense $ 3,193 $ 2,972 $ 6,089 $ 5,716

Business Segments

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

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/

or liabilities outstanding for the period.

Operating Segments

Prior to the second quarter 2022, Valley operated as four reportable segments:

Consumer Lending, Commercial Lending, Investment Management, and Corporate and Other Adjustments.

Valley re-evaluated its segment reporting during the second quarter 2022 to consider the Bank Leumi USA acquisition on April 1, 2022 along with other factors, including changes in the internal structure of operations, discrete financial information reviewed by key decision-makers, balance sheet management strategies and personnel.

As a result, Valley determined it operated reportable segments consisting of Consumer Lending, Commercial Lending and Treasury and Corporate Other at June 30, 2022.

Treasury and Corporate Other was reorganized to consolidate Treasury and other corporate-wide functions, including the Treasury managed investment securities portfolios and overnight interest earning cash balances formerly reported under Investment Management.

The discrete financial information related to the activities previously reported in the Investment Management segment is no longer provided to Valley's CEO, who is the chief operating decision maker.

Each operating 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).

Valley regularly assesses its strategic plans, operations, and reporting structures to identify its reportable segments.

Consumer Lending is mainly comprised of residential mortgages and automobile loans, and to a lesser extent, secured personal lines of credit, home equity loans and other consumer loans.

The duration of the residential mortgage loan portfolio is subject to movements in the market level of interest rates and forecasted prepayment speeds.

The average weighted life of the automobile loans within the portfolio is relatively unaffected by movements in the market level of interest rates.

However, the average life may be impacted by new loans as a result of the availability of credit within the automobile marketplace and consumer demand for purchasing new or used automobiles.

Consumer Lending also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, brokerage, insurance and tax credit advisory services.

Commercial Lending is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans.

Due to the portfolio’s interest rate characteristics, commercial lending is Valley’s operating segment that is most sensitive to movements in market interest rates.

Treasury and Corporate Other largely consists of the Treasury managed held to maturity debt securities and available for sale debt securities portfolios mainly utilized in the liquidity management needs of our lending segments and income and expense items resulting from support functions not directly attributable to a specific segment.

Interest income is generated through investments in various types of securities (mainly comprised of fixed rate securities) and interest-bearing deposits with other banks (primarily the Federal Reserve Bank of New York).

Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are allocated from Treasury and Corporate Other to the Consumer Lending and Commercial Lending segments.

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

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.

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.

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.

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

The prior period balances presented in the tables below reflect reclassifications to conform the presentation in those periods to the current operating segment structure.

Valley's consolidated results were not impacted by the changes discussed above and remain unchanged for all periods presented.

The following tables represent the financial data for Valley’s operating segments for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30, 2022

Lending Commercial

Lending Investment

Management Corporate

Adjustments Total

Lending Treasury and Corporate Other Total

($ in thousands)

3 unchanged sentences

Interest expense 4,723 19,735 10,329 34,787

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

Net interest income 58,414 332,705 27,041 418,160

Provision for credit losses 5,402 38,310 286 43,998

Net interest income (loss) after provision for credit losses

Net interest income after provision for credit losses 53,012 294,395 26,755 374,162

Non-interest income 17,086 14,425 27,022 58,533

Non-interest expense 18,791 24,448 256,491 299,730

Internal transfer expense (income) 37,629 157,365 ( 194,994 ) —

Income (loss) before income taxes $ 13,678 $ 127,007 $ ( 7,720 ) $ 132,965

Return on average interest earning assets (pre-tax)

0.69 % 1.47 % ( 0.48 ) % 1.09 %

Three Months Ended June 30, 2021

Lending Commercial

Lending Treasury and Corporate Other Total

($ in thousands)

Average interest earning assets

$ 7,150,137 $ 25,485,161 $ 5,272,116 $ 37,907,414

Interest income $ 59,419 $ 255,895 $ 18,334 $ 333,648

Interest expense 5,192 18,467 9,082 32,741

Net interest income 54,227 237,428 9,252 300,907

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

Net interest income after provision for credit losses 53,516 229,362 9,282 292,160

Non-interest income 21,915 9,819 11,392 43,126

3 unchanged sentences

Return on average interest earning assets (pre-tax)

1.20 % 2.03 % 0.39 % N/A 1.55 %

Three Months Ended March 31, 2021

2.00 % 2.21 % ( 1.00 ) % 1.72 %

Six Months Ended June 30, 2022

Lending Commercial

Lending Investment

Management Corporate

Adjustments Total

Lending Treasury and Corporate Other Total

($ in thousands)

4 unchanged sentences

Net interest income (loss) 114,666 579,284 41,879 735,829

(Credit) provision for credit losses ( 2,635 ) 11,676 ( 385 ) — 8,656

Provision for credit losses 7,275 39,937 343 47,555

Net interest income (loss) after provision for credit losses

5 unchanged sentences

Return on average interest earning assets (pre-tax)

1.78 % 2.02 % 0.23 % N/A 1.66 %

0.93 % 1.72 % ( 0.38 ) % 1.30 %

Six Months Ended June 30, 2021

Lending Commercial

Lending Treasury and Corporate Other Total

($ in thousands)

Average interest earning assets

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

Interest income $ 120,264 $ 508,231 $ 36,951 $ 665,446

Interest expense 11,607 41,702 18,563 71,872

Net interest income 108,657 466,529 18,388 593,574

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

Net interest income after provision for credit losses 110,581 446,814 18,776 576,171

Non-interest income 35,600 17,533 21,226 74,359

Non-interest expense 39,641 52,772 239,693 332,106

Internal transfer expense (income) 39,364 141,790 ( 181,154 ) —

Income (loss) before income taxes $ 67,176 $ 269,785 $ ( 18,537 ) $ 318,424

Return on average interest earning assets (pre-tax)

1.89 % 2.12 % ( 0.74 ) % 1.69 %

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

What changed 10-Q

Item 1. Financial Statements