UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended ~~June~~September 30, 2021


☐			Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-11277

Valley National Bancorp

(Exact name of registrant as specified in its charter)

New Jersey

22-2477875

(State or other jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification Number)

One Penn Plaza

New York,

10119

(Address of principal executive office)

(Zip code)

973-305-8800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols	Name of exchange on which registered
Common Stock, no par value	VLY	The Nasdaq Stock Market LLC
Non-Cumulative Perpetual Preferred Stock, Series A, no par value	VLYPP	The Nasdaq Stock Market LLC
Non-Cumulative Perpetual Preferred Stock, Series B, no par value	VLYPO	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer

☒

Accelerated filer

☐

Smaller reporting company

☐

Non-accelerated filer

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock (no par value), of which~~406,608,663 s~~ 406,953,610 sh~~hares~~ares were outstanding as of ~~August 6,~~November 5, 2021.

TABLE OF CONTENTS


		Page Number
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition as of ~~June~~ 3 0 , September 30, 2021 and December 31, 2020	2
	Consolidated Statements of Income for the Three and Si x Nine Months Ended ~~June~~ 3 0 ,September 30, 2021 and 2020	3
	Consolidated Statements of Comprehensive Income for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020	5
	Consolidated Statements of Changes in Shareholders' Equity for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020	6
	Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30,, 2021 and 2020	8
	Notes to Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8182

Item 4.	Controls and Procedures	8182

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	8283

Item 1A.	Risk Factors	8283

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8384

Item 6.	Exhibits	8485

SIGNATURES		8586

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except for share data)


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Assets	Assets	(Unaudited)				Assets	(Unaudited)
Cash and due from banks	Cash and due from banks	$	329,006	$	257,845	Cash and due from banks	$	304,912	$	257,845
Interest bearing deposits with banks	Interest bearing deposits with banks	1,515,757		1,071,360		Interest bearing deposits with banks	1,195,244		1,071,360
Investment securities:	Investment securities:					Investment securities:
Equity securities	Equity securities	33,870		29,378		Equity securities	36,068		29,378
Trading debt securities	Trading debt securities	21,216		0		Trading debt securities	4,797		—
Available for sale debt securities	Available for sale debt securities	1,075,538		1,339,473		Available for sale debt securities	1,208,277		1,339,473
Held to maturity debt securities (net of allowance for credit losses of $1,040 at June 30, 2021 and $1,428 at December 31, 2020)		2,532,772		2,171,583
Held to maturity debt securities (net of allowance for credit losses of $1,075 at September 30, 2021 and $1,428 at December 31, 2020)						Held to maturity debt securities (net of allowance for credit losses of $1,075 at September 30, 2021 and $1,428 at December 31, 2020)	2,583,328		2,171,583
Total investment securities	Total investment securities	3,663,396		3,540,434		Total investment securities	3,832,470		3,540,434
Loans held for sale, at fair value	Loans held for sale, at fair value	159,256		301,427		Loans held for sale, at fair value	157,084		301,427
Loans	Loans	32,457,454		32,217,112		Loans	32,606,814		32,217,112
Less: Allowance for loan losses	Less: Allowance for loan losses	(339,324)		(340,243)		Less: Allowance for loan losses	(342,527)		(340,243)
Net loans	Net loans	32,118,130		31,876,869		Net loans	32,264,287		31,876,869
Premises and equipment, net	Premises and equipment, net	327,517		319,797		Premises and equipment, net	319,763		319,797
Lease right of use assets	Lease right of use assets	235,165		252,053		Lease right of use assets	258,180		252,053
Bank owned life insurance	Bank owned life insurance	535,283		535,209		Bank owned life insurance	537,301		535,209
Accrued interest receivable	Accrued interest receivable	99,068		106,230		Accrued interest receivable	98,073		106,230
Goodwill	Goodwill	1,382,442		1,382,442		Goodwill	1,382,442		1,382,442
Other intangible assets, net	Other intangible assets, net	65,523		70,449		Other intangible assets, net	62,525		70,449
Other assets	Other assets	843,685		971,961		Other assets	865,726		971,961
Total Assets	Total Assets	$	41,274,228	$	40,686,076	Total Assets	$	41,278,007	$	40,686,076
Liabilities	Liabilities					Liabilities
Deposits:	Deposits:					Deposits:
Non-interest bearing	Non-interest bearing	$	10,528,946	$	9,205,266	Non-interest bearing	$	10,789,237	$	9,205,266
Interest bearing:	Interest bearing:					Interest bearing:
Savings, NOW and money market	Savings, NOW and money market	18,358,279		16,015,658		Savings, NOW and money market	18,883,085		16,015,658
Time	Time	4,307,549		6,714,678		Time	3,960,283		6,714,678
Total deposits	Total deposits	33,194,774		31,935,602		Total deposits	33,632,605		31,935,602
Short-term borrowings	Short-term borrowings	854,378		1,147,958		Short-term borrowings	783,346		1,147,958
Long-term borrowings	Long-term borrowings	1,885,690		2,295,665		Long-term borrowings	1,427,444		2,295,665
Junior subordinated debentures issued to capital trusts	Junior subordinated debentures issued to capital trusts	56,239		56,065		Junior subordinated debentures issued to capital trusts	56,326		56,065
Lease liabilities	Lease liabilities	259,075		276,675		Lease liabilities	282,034		276,675
Accrued expenses and other liabilities	Accrued expenses and other liabilities	286,265		381,991		Accrued expenses and other liabilities	273,754		381,991
Total Liabilities	Total Liabilities	36,536,421		36,093,956		Total Liabilities	36,455,509		36,093,956
Shareholders’ Equity	Shareholders’ Equity					Shareholders’ Equity
Preferred stock, 0 par value; 50,000,000 authorized shares:
Series A (4,600,000 shares issued at June 30, 2021 and December 31, 2020)		111,590		111,590
Series B (4,000,000 shares issued at June 30, 2021 and December 31, 2020)		98,101		98,101
Common stock (0 par value, authorized 650,000,000 shares; issued 406,090,983 shares at June 30, 2021 and 403,881,488 shares at December 31, 2020)		142,550		141,746
Preferred stock, no par value; 50,000,000 authorized shares:						Preferred stock, no par value; 50,000,000 authorized shares:
Series A (4,600,000 shares issued at September 30, 2021 and December 31, 2020)						Series A (4,600,000 shares issued at September 30, 2021 and December 31, 2020)	111,590		111,590
Series B (4,000,000 shares issued at September 30, 2021 and December 31, 2020)						Series B (4,000,000 shares issued at September 30, 2021 and December 31, 2020)	98,101		98,101
Common stock (no par value, authorized 650,000,000 shares; issued 407,317,006 shares at September 30, 2021 and 403,881,488 shares at December 31, 2020)						Common stock (no par value, authorized 650,000,000 shares; issued 407,317,006 shares at September 30, 2021 and 403,881,488 shares at December 31, 2020)	142,976		141,746
Surplus	Surplus	3,658,636		3,637,468		Surplus	3,672,467		3,637,468
Retained earnings	Retained earnings	744,768		611,158		Retained earnings	818,780		611,158
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(17,735)		(7,718)		Accumulated other comprehensive loss	(21,375)		(7,718)
Treasury stock, at cost (7,193 common shares at June 30, 2021 and 22,490 common shares at December 31, 2020)		(103)		(225)
Treasury stock, at cost (3,342 common shares at September 30, 2021 and 22,490 common shares at December 31, 2020)						Treasury stock, at cost (3,342 common shares at September 30, 2021 and 22,490 common shares at December 31, 2020)	(41)		(225)
Total Shareholders’ Equity	Total Shareholders’ Equity	4,737,807		4,592,120		Total Shareholders’ Equity	4,822,498		4,592,120
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	41,274,228	$	40,686,076	Total Liabilities and Shareholders’ Equity	$	41,278,007	$	40,686,076

See accompanying notes to consolidated financial statements.

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except for share data)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Interest Income	Interest Income									Interest Income
Interest and fees on loans	Interest and fees on loans	$	315,314	$	321,883	$	628,495	$	654,951	Interest and fees on loans	$	309,753	$	315,788	$	938,248	$	970,739
Interest and dividends on investment securities:	Interest and dividends on investment securities:									Interest and dividends on investment securities:
Taxable	Taxable	12,716		19,447		25,882		41,380		Taxable	14,292		14,845		40,174		56,225
Tax-exempt	Tax-exempt	3,216		3,692		6,572		7,618		Tax-exempt	2,609		3,606		9,181		11,224
Dividends	Dividends	2,167		3,092		4,038		6,493		Dividends	1,505		2,684		5,543		9,177
Interest on federal funds sold and other short-term investments	Interest on federal funds sold and other short-term investments	235		411		459		1,876		Interest on federal funds sold and other short-term investments	642		420		1,101		2,296
Total interest income	Total interest income	333,648		348,525		665,446		712,318		Total interest income	328,801		337,343		994,247		1,049,661
Interest Expense	Interest Expense									Interest Expense
Interest on deposits:	Interest on deposits:									Interest on deposits:
Savings, NOW and money market	Savings, NOW and money market	11,166		16,627		22,291		51,140		Savings, NOW and money market	10,605		13,323		32,896		64,463
Time	Time	6,279		29,857		17,372		72,671		Time	4,394		19,028		21,766		91,699
Interest on short-term borrowings	Interest on short-term borrowings	1,168		1,980		2,926		6,687		Interest on short-term borrowings	1,464		2,588		4,390		9,275
Interest on long-term borrowings and junior subordinated debentures	Interest on long-term borrowings and junior subordinated debentures	14,128		17,502		29,283		33,922		Interest on long-term borrowings and junior subordinated debentures	11,312		19,318		40,595		53,240
Total interest expense	Total interest expense	32,741		65,966		71,872		164,420		Total interest expense	27,775		54,257		99,647		218,677
Net Interest Income	Net Interest Income	300,907		282,559		593,574		547,898		Net Interest Income	301,026		283,086		894,600		830,984
(Credit) provision for credit losses for held to maturity securities		(30)		41		(388)		800
Provision (credit) for credit losses for held to maturity securities										Provision (credit) for credit losses for held to maturity securities	35		(112)		(353)		688
Provision for credit losses for loans	Provision for credit losses for loans	8,777		41,115		17,791		75,039		Provision for credit losses for loans	3,496		31,020		21,287		106,059
Net Interest Income After Provision for Credit Losses	Net Interest Income After Provision for Credit Losses	292,160		241,403		576,171		472,059		Net Interest Income After Provision for Credit Losses	297,495		252,178		873,666		724,237
Non-Interest Income	Non-Interest Income									Non-Interest Income
Trust and investment services	Trust and investment services	3,532		2,826		6,861		6,239		Trust and investment services	3,550		3,068		10,411		9,307
Insurance commissions	Insurance commissions	2,637		1,659		4,195		3,610		Insurance commissions	1,610		1,816		5,805		5,426
Service charges on deposit accounts	Service charges on deposit accounts	5,083		3,557		10,186		9,237		Service charges on deposit accounts	5,428		3,952		15,614		13,189
Gains (losses) on securities transactions, net	Gains (losses) on securities transactions, net	375		(41)		476		(81)		Gains (losses) on securities transactions, net	787		(46)		1,263		(127)
Fees from loan servicing	Fees from loan servicing	3,187		2,227		6,086		4,975		Fees from loan servicing	2,894		2,551		8,980		7,526
Gains on sales of loans, net	Gains on sales of loans, net	10,061		8,337		13,574		12,887		Gains on sales of loans, net	6,442		13,366		20,016		26,253
Gains (losses) on sales of assets, net		232		(299)		36		(178)
Gains on sales of assets, net										Gains on sales of assets, net	344		894		380		716
Bank owned life insurance	Bank owned life insurance	2,475		5,823		4,806		8,965		Bank owned life insurance	2,018		(1,304)		6,824		7,661
Other	Other	15,544		20,741		28,139		40,573		Other	19,358		24,975		47,497		65,548
Total non-interest income	Total non-interest income	43,126		44,830		74,359		86,227		Total non-interest income	42,431		49,272		116,790		135,499
Non-Interest Expense	Non-Interest Expense									Non-Interest Expense
Salary and employee benefits expense	Salary and employee benefits expense	91,095		78,532		179,198		164,260		Salary and employee benefits expense	93,992		83,626		273,190		247,886
Net occupancy and equipment expense	Net occupancy and equipment expense	32,451		33,217		64,710		65,658		Net occupancy and equipment expense	32,402		31,116		97,112		96,774
FDIC insurance assessment	FDIC insurance assessment	3,374		6,135		6,650		10,011		FDIC insurance assessment	3,644		4,847		10,294		14,858
Amortization of other intangible assets	Amortization of other intangible assets	5,449		6,681		11,455		12,151		Amortization of other intangible assets	5,298		6,377		16,753		18,528
Professional and legal fees	Professional and legal fees	7,486		7,797		13,758		13,884		Professional and legal fees	13,492		8,762		27,250		22,646

Loss on extinguishment of debt	Loss on extinguishment of debt	8,406		0		8,406		0		Loss on extinguishment of debt	—		2,353		8,406		2,353
Amortization of tax credit investments	Amortization of tax credit investments	2,972		3,416		5,716		6,644		Amortization of tax credit investments	3,079		2,759		8,795		9,403
Telecommunication expense	Telecommunication expense	2,732		2,866		5,892		5,153		Telecommunication expense	2,615		2,094		8,507		7,247
Other	Other	17,928		18,522		36,321		35,061		Other	20,400		18,251		56,721		53,312
Total non-interest expense	Total non-interest expense	171,893		157,166		332,106		312,822		Total non-interest expense	174,922		160,185		507,028		473,007
Income Before Income Taxes	Income Before Income Taxes	163,393		129,067		318,424		245,464		Income Before Income Taxes	165,004		141,265		483,428		386,729
Income tax expense	Income tax expense	42,881		33,466		82,202		62,595		Income tax expense	42,424		38,891		124,626		101,486
Net Income	Net Income	120,512		95,601		236,222		182,869		Net Income	122,580		102,374		358,802		285,243
Dividends on preferred stock	Dividends on preferred stock	3,172		3,172		6,344		6,344		Dividends on preferred stock	3,172		3,172		9,516		9,516
Net Income Available to Common Shareholders	Net Income Available to Common Shareholders	$	117,340	$	92,429	$	229,878	$	176,525	Net Income Available to Common Shareholders	$	119,408	$	99,202	$	349,286	$	275,727

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (continued)

(in thousands, except for share data)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Earnings Per Common Share:	Earnings Per Common Share:									Earnings Per Common Share:
Basic	Basic	$	0.29	$	0.23	$	0.57	$	0.44	Basic	$	0.29	$	0.25	$	0.86	$	0.68
Diluted	Diluted	0.29		0.23		0.56		0.44		Diluted	0.29		0.25		0.86		0.68
Cash Dividends Declared per Common Share	Cash Dividends Declared per Common Share	0.11		0.11		0.22		0.22		Cash Dividends Declared per Common Share	0.11		0.11		0.33		0.33
Weighted Average Number of Common Shares Outstanding:	Weighted Average Number of Common Shares Outstanding:									Weighted Average Number of Common Shares Outstanding:
Basic	Basic	405,963,209		403,790,242		405,560,146		403,654,665		Basic	406,824,160		403,833,469		405,986,114		403,714,701
Diluted	Diluted	408,660,778		404,631,845		408,152,458		405,043,183		Diluted	409,238,001		404,788,526		408,509,767		404,912,126

See accompanying notes to consolidated financial statements.

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(in thousands)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net income	Net income	$	120,512	$	95,601	$	236,222	$	182,869	Net income	$	122,580	$	102,374	$	358,802	$	285,243
Other comprehensive income, net of tax:	Other comprehensive income, net of tax:									Other comprehensive income, net of tax:
Unrealized gains and losses on available for sale securities	Unrealized gains and losses on available for sale securities									Unrealized gains and losses on available for sale securities
Net (losses) gains arising during the period	Net (losses) gains arising during the period	(1,471)		3,013		(11,907)		29,081		Net (losses) gains arising during the period	(3,953)		(1,262)		(15,860)		27,819
Less reclassification adjustment for net losses included in net income		76		31		120		58
Less reclassification adjustment for net (gains) losses included in net income										Less reclassification adjustment for net (gains) losses included in net income	(613)		36		(493)		94
Total	Total	(1,395)		3,044		(11,787)		29,139		Total	(4,566)		(1,226)		(16,353)		27,913

Unrealized gains and losses on derivatives (cash flow hedges)	Unrealized gains and losses on derivatives (cash flow hedges)									Unrealized gains and losses on derivatives (cash flow hedges)
Net (losses) gains on derivatives arising during the period	Net (losses) gains on derivatives arising during the period	(147)		(1,280)		27		(2,337)		Net (losses) gains on derivatives arising during the period	(96)		83		(69)		(2,254)
Less reclassification adjustment for net losses (gains) included in net income		534		(308)		1,185		130
Less reclassification adjustment for net losses included in net income										Less reclassification adjustment for net losses included in net income	743		1,127		1,928		1,257
Total	Total	387		(1,588)		1,212		(2,207)		Total	647		1,210		1,859		(997)
Defined benefit pension plan	Defined benefit pension plan									Defined benefit pension plan

Amortization of actuarial net loss	Amortization of actuarial net loss	278		172		558		344		Amortization of actuarial net loss	279		171		837		515
Total other comprehensive (loss) income	Total other comprehensive (loss) income	(730)		1,628		(10,017)		27,276		Total other comprehensive (loss) income	(3,640)		155		(13,657)		27,431
Total comprehensive income	Total comprehensive income	$	119,782	$	97,229	$	226,205	$	210,145	Total comprehensive income	$	118,940	$	102,529	$	345,145	$	312,674

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2021


				Common Stock							Accumulated									Common Stock							Accumulated
		Preferred Stock		Shares	Amount		Surplus		Retained Earnings		Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity			Preferred Stock		Shares	Amount		Surplus		Retained Earnings		Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity
		(in thousands)																(in thousands)
Balance - December 31, 2020	Balance - December 31, 2020	$	209,691	403,859	$	141,746	$	3,637,468	$	611,158	$	(7,718)	$	(225)	$	4,592,120	Balance - December 31, 2020	$	209,691	403,859	$	141,746	$	3,637,468	$	611,158	$	(7,718)	$	(225)	$	4,592,120
Net income	Net income	—		—	—		—		115,710		—		—		115,710		Net income	—		—	—		—		115,710		—		—		115,710
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—		—	—		—		—		(9,287)		—		(9,287)		Other comprehensive loss, net of tax	—		—	—		—		—		(9,287)		—		(9,287)
Cash dividends declared:	Cash dividends declared:																Cash dividends declared:
Preferred stock, Series A, $0.39 per share	Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)		Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share	Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)		Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)
Common stock, $0.11 per share	Common stock, $0.11 per share	—		—	—		—		(45,281)		—		—		(45,281)		Common stock, $0.11 per share	—		—	—		—		(45,281)		—		—		(45,281)
Effect of stock incentive plan, net	Effect of stock incentive plan, net	—		1,939	689		14,480		(5,764)		—		175		9,580		Effect of stock incentive plan, net	—		1,939	689		14,480		(5,764)		—		175		9,580

Balance - March 31, 2021	Balance - March 31, 2021	209,691		405,798	142,435		3,651,948		672,651		(17,005)		(50)		4,659,670		Balance - March 31, 2021	$	209,691	405,798	142,435		$	3,651,948	$	672,651	$	(17,005)	$	(50)	$	4,659,670
Net income	Net income	—		—	—		—		120,512		—		—		120,512		Net income	—		—	—		—		120,512		—		—		120,512
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—		—	—		—		—		(730)		—		(730)		Other comprehensive loss, net of tax	—		—	—		—		—		(730)		—		(730)
Cash dividends declared:	Cash dividends declared:																Cash dividends declared:
Preferred stock, Series A, $0.39 per share	Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)		Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share	Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)		Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)
Common stock, $0.11 per share	Common stock, $0.11 per share	—		—	—		—		(45,093)		—		—		(45,093)		Common stock, $0.11 per share	—		—	—		—		(45,093)		—		—		(45,093)
Effect of stock incentive plan, net	Effect of stock incentive plan, net	—		286	115		6,688		(130)		—		(53)		6,620		Effect of stock incentive plan, net	—		286	115		6,688		(130)		—		(53)		6,620

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

Net income																	Net income	—		—	—		—		122,580		—		—		122,580
Other comprehensive loss, net of tax																	Other comprehensive loss, net of tax	—		—	—		—		—		(3,640)		—		(3,640)
Cash dividends declared:																	Cash dividends declared:
Preferred stock, Series A, $0.39 per share																	Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share																	Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)
Common stock, $0.11 per share																	Common stock, $0.11 per share	—		—	—		—		(45,228)		—		—		(45,228)
Effect of stock incentive plan, net																	Effect of stock incentive plan, net	—		1,230	426		13,831		(168)		—		62		14,151
Balance - September 30, 2021																	Balance - September 30, 2021	$	209,691	407,314	142,976		$	3,672,467	$	818,780	$	(21,375)	$	(41)	$	4,822,498

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

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2020


				Common Stock							Accumulated									Common Stock							Accumulated
		Preferred Stock		Shares	Amount		Surplus		Retained Earnings		Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity			Preferred Stock		Shares	Amount		Surplus		Retained Earnings		Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity
		(in thousands)																(in thousands)
Balance - December 31, 2019	Balance - December 31, 2019	$	209,691	403,278	$	141,423	$	3,622,208	$	443,559	$	(32,214)	$	(479)	$	4,384,188	Balance - December 31, 2019	$	209,691	403,278	$	141,423	$	3,622,208	$	443,559	$	(32,214)	$	(479)	$	4,384,188
Adjustment due to the adoption of ASU No. 2016-13	Adjustment due to the adoption of ASU No. 2016-13	—		—	—		—		(28,187)		—		—		(28,187)		Adjustment due to the adoption of ASU No. 2016-13	—		—	—		—		(28,187)		—		—		(28,187)
Balance - January 1, 2020	Balance - January 1, 2020	209,691		403,278	141,423		3,622,208		415,372		(32,214)		(479)		4,356,001		Balance - January 1, 2020	209,691		403,278	141,423		3,622,208		415,372		(32,214)		(479)		4,356,001
Net income	Net income	—		—	—		—		87,268		—		—		87,268		Net income	—		—	—		—		87,268		—		—		87,268
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—	—		—		—		25,648		—		25,648		Other comprehensive income, net of tax	—		—	—		—		—		25,648		—		25,648
Cash dividends declared:	Cash dividends declared:																Cash dividends declared:
Preferred stock, Series A, $0.39 per share	Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)		Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share	Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)		Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)
Common stock, $0.11 per share	Common stock, $0.11 per share	—		—	—		—		(44,979)		—		—		(44,979)		Common stock, $0.11 per share	—		—	—		—		(44,979)		—		—		(44,979)
Effect of stock incentive plan, net	Effect of stock incentive plan, net	—		466	190		1,828		(2,065)		—		279		232		Effect of stock incentive plan, net	—		466	190		1,828		(2,065)		—		279		232

Balance - March 31, 2020	Balance - March 31, 2020	209,691		403,744	141,613		3,624,036		452,424		(6,566)		(200)		4,420,998		Balance - March 31, 2020	$	209,691	403,744	141,613		$	3,624,036	$	452,424	$	(6,566)	$	(200)	$	4,420,998
Net income	Net income	—		—	—		—		95,601		—		—		95,601		Net income	—		—	—		—		95,601		—		—		95,601
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—	—		—		—		1,628		—		1,628		Other comprehensive income, net of tax	—		—	—		—		—		1,628		—		1,628
Cash dividends declared:	Cash dividends declared:																Cash dividends declared:
Preferred stock, Series A, $0.39 per share	Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)		Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share	Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)		Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)
Common stock, $0.11 per share	Common stock, $0.11 per share	—		—	—		—		(44,750)		—		—		(44,750)		Common stock, $0.11 per share	—		—	—		—		(44,750)		—		—		(44,750)
Effect of stock incentive plan, net	Effect of stock incentive plan, net	—		52	54		4,756		(592)		—		(35)		4,183		Effect of stock incentive plan, net	—		52	54		4,756		(592)		—		(35)		4,183

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

Net income																	Net income	—		—	—		—		102,374		—		—		102,374
Other comprehensive income, net of tax																	Other comprehensive income, net of tax	—		—	—		—		—		155		—		155
Cash dividends declared:																	Cash dividends declared:
Preferred stock, Series A, $0.39 per share																	Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share																	Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)
Common stock, $0.11 per share																	Common stock, $0.11 per share	—		—	—		—		(44,770)		—		—		(44,770)
Effect of stock incentive plan, net																	Effect of stock incentive plan, net	—		83	51		4,529		(117)		—		225		4,688
Balance - September 30, 2020																	Balance - September 30, 2020	$	209,691	403,879	$	141,718	$	3,633,321	$	553,826	$	(4,783)	$	(10)	$	4,533,763

See accompanying notes to consolidated financial statements.

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2021		2020			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	236,222	$	182,869	Net income	$	358,802	$	285,243
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:					Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	27,681		29,608		Depreciation and amortization	40,799		43,975
Stock-based compensation	Stock-based compensation	10,690		8,199		Stock-based compensation	15,852		12,001
Provision for credit losses	Provision for credit losses	17,403		75,839		Provision for credit losses	20,934		106,747
Net amortization of premiums and accretion of discounts on securities and borrowings	Net amortization of premiums and accretion of discounts on securities and borrowings	14,112		15,305		Net amortization of premiums and accretion of discounts on securities and borrowings	22,145		26,051
Amortization of other intangible assets	Amortization of other intangible assets	11,455		12,151		Amortization of other intangible assets	16,753		18,528
(Gains) losses on securities transactions, net	(Gains) losses on securities transactions, net	(476)		81		(Gains) losses on securities transactions, net	(1,263)		127
Proceeds from sales of loans held for sale	Proceeds from sales of loans held for sale	690,844		408,785		Proceeds from sales of loans held for sale	932,274		716,739
Gains on sales of loans, net	Gains on sales of loans, net	(13,574)		(12,887)		Gains on sales of loans, net	(20,016)		(26,253)
Originations of loans held for sale	Originations of loans held for sale	(541,627)		(443,684)		Originations of loans held for sale	(774,443)		(829,252)
(Gains) losses on sales of assets, net		(36)		178
Gains on sales of assets, net						Gains on sales of assets, net	(380)		(716)
Loss on extinguishment of debt	Loss on extinguishment of debt	8,406		0		Loss on extinguishment of debt	8,406		2,353
Net change in:	Net change in:					Net change in:
Trading debt securities	Trading debt securities	(21,216)		0		Trading debt securities	(4,797)		—
Cash surrender value of bank owned life insurance	Cash surrender value of bank owned life insurance	(4,806)		(8,965)		Cash surrender value of bank owned life insurance	(6,824)		(7,661)
Accrued interest receivable	Accrued interest receivable	7,162		(17,170)		Accrued interest receivable	8,157		(30,421)
Other assets	Other assets	131,345		(426,776)		Other assets	97,341		(420,572)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(119,331)		166,490		Accrued expenses and other liabilities	(130,698)		83,591
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	454,254		(9,977)		Net cash provided by (used in) operating activities	583,042		(19,520)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Net loan originations and purchases	Net loan originations and purchases	(264,512)		(2,568,893)		Net loan originations and purchases	(405,204)		(2,686,137)
Equity securities:	Equity securities:					Equity securities:
Purchases	Purchases	(2,482)		(5,365)		Purchases	(3,163)		(7,616)
Sales	Sales	649		0		Sales	1,227		27,867
Held to maturity debt securities:	Held to maturity debt securities:					Held to maturity debt securities:
Purchases	Purchases	(744,868)		(107,136)		Purchases	(1,062,202)		(381,606)

Maturities, calls and principal repayments	Maturities, calls and principal repayments	372,397		301,004		Maturities, calls and principal repayments	633,272		532,151
Available for sale debt securities:	Available for sale debt securities:					Available for sale debt securities:
Purchases	Purchases	(87,366)		(302,071)		Purchases	(367,866)		(306,071)
Sales	Sales	41,134		0		Sales	91,978		—
Maturities, calls and principal repayments	Maturities, calls and principal repayments	287,901		213,348		Maturities, calls and principal repayments	376,875		374,321
Death benefit proceeds from bank owned life insurance	Death benefit proceeds from bank owned life insurance	3,850		13,751		Death benefit proceeds from bank owned life insurance	3,850		14,062
Proceeds from sales of real estate property and equipment	Proceeds from sales of real estate property and equipment	2,747		8,202		Proceeds from sales of real estate property and equipment	4,982		16,136
Proceeds from sales of loans held for investment	Proceeds from sales of loans held for investment	4,498		30,020		Proceeds from sales of loans held for investment	4,498		30,020
Purchases of real estate property and equipment	Purchases of real estate property and equipment	(12,207)		(14,469)		Purchases of real estate property and equipment	(19,805)		(20,715)

Net cash used in investing activities	Net cash used in investing activities	(398,259)		(2,431,609)		Net cash used in investing activities	(741,558)		(2,407,588)


VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) (in thousands)	VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) (in thousands)					VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) (in thousands)
											VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) (in thousands)
		Six Months Ended June 30,					Nine Months Ended September 30,
		2021		2020			2021		2020
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net change in deposits	Net change in deposits	$	1,259,172	$	2,151,400	Net change in deposits	$	1,697,003	$	2,002,145
Net change in short-term borrowings	Net change in short-term borrowings	(293,580)		989,600		Net change in short-term borrowings	(364,612)		337,446
Proceeds from issuance of long-term borrowings, net	Proceeds from issuance of long-term borrowings, net	295,934		838,388		Proceeds from issuance of long-term borrowings, net	295,922		838,388
Repayments of long-term borrowings	Repayments of long-term borrowings	(710,595)		(53,418)		Repayments of long-term borrowings	(1,168,465)		(108,446)

Cash dividends paid to preferred shareholders	Cash dividends paid to preferred shareholders	(6,344)		(6,344)		Cash dividends paid to preferred shareholders	(9,516)		(9,516)
Cash dividends paid to common shareholders	Cash dividends paid to common shareholders	(90,201)		(89,122)		Cash dividends paid to common shareholders	(134,860)		(133,536)
Purchase of common shares to treasury	Purchase of common shares to treasury	(684)		(4,924)		Purchase of common shares to treasury	(699)		(4,972)
Common stock issued, net	Common stock issued, net	6,194		1,140		Common stock issued, net	15,199		2,074
Other, net	Other, net	(333)		(264)		Other, net	(505)		(451)
Net cash provided by financing activities	Net cash provided by financing activities	459,563		3,826,456		Net cash provided by financing activities	329,467		2,923,132
Net change in cash and cash equivalents	Net change in cash and cash equivalents	515,558		1,384,870		Net change in cash and cash equivalents	170,951		496,024
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	1,329,205		434,687		Cash and cash equivalents at beginning of year	1,329,205		434,687
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,844,763	$	1,819,557	Cash and cash equivalents at end of period	$	1,500,156	$	930,711

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash payments for:	Cash payments for:					Cash payments for:
Interest on deposits and borrowings	Interest on deposits and borrowings	$	82,596	$	178,337	Interest on deposits and borrowings	$	109,661	$	229,987
Federal and state income taxes	Federal and state income taxes	117,562		14,731		Federal and state income taxes	148,674		108,302
Supplemental schedule of non-cash investing activities:	Supplemental schedule of non-cash investing activities:					Supplemental schedule of non-cash investing activities:
Transfer of loans to other real estate owned	Transfer of loans to other real estate owned	$	141	$	2,750	Transfer of loans to other real estate owned	$	141	$	3,716
Transfer of loans to loans held for sale	Transfer of loans to loans held for sale	0		30,020		Transfer of loans to loans held for sale	—		30,020
Lease right of use assets obtained in exchange for operating lease liabilities	Lease right of use assets obtained in exchange for operating lease liabilities	1,993		6,407		Lease right of use assets obtained in exchange for operating lease liabilities	40,296		10,141

See accompanying notes to consolidated financial statements.

VALLEY NATIONAL BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The unaudited consolidated financial statements of Valley National Bancorp, a New Jersey corporation (Valley), include the accounts of its commercial bank subsidiary, Valley National Bank (the Bank), and all of Valley’s direct or indirect wholly-owned subsidiaries. All inter-company transactions and balances have been eliminated. The accounting and reporting policies of Valley conform to U.S. generally accepted accounting principles (U.S. GAAP) and general practices within the financial services industry. In accordance with applicable accounting standards, Valley does not consolidate statutory trusts established for the sole purpose of issuing trust preferred securities and related trust common securities. Certain prior period amounts have been reclassified to conform to the current presentation.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly Valley’s financial position, results of operations, changes in shareholders' equity and cash flows at ~~June~~September 30, 2021 and for all periods presented have been made. The results of operations for the three and ~~six~~nine months ended ~~on June~~September 30, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year or any subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP and industry practice have been condensed or omitted pursuant to rules and regulations of the SEC. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Valley’s Annual Report on Form 10-K for the year ended December 31, 2020.

~~Correction of an Immaterial Error.~~ ~~Valley's previously reported consolidated statement of cash flows for the six months ended June 30, 2020 was revised to reflect an adjustment for an intercompany account that was not properly~~ eliminated in consolidation. The adjustment resulted in a $90.8 million decrease in “Net change in deposits” line item to a net increase of $2.2 billion. The corresponding decrease in the “Net change in cash and cash equivalents” line item resulted in a change from a net increase of $1.5 billion to a net increase of $1.4 billion. The effect of these revisions was immaterial to the interim period.

Significant Estimates. In preparing the unaudited consolidated financial statements in conformity with U.S. GAAP, management has made estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of financial condition and results of operations for the periods indicated. Material estimates that require application of management’s most difficult, subjective or complex judgment and are particularly susceptible to change include: the allowance for credit losses, the evaluation of goodwill and other intangible assets for impairment, and income taxes. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual amounts or results could differ significantly from those estimates. The current economic environment has increased the degree of uncertainty inherent in these material estimates. Actual results may differ from those estimates. Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date.

Note 2. Business Combinations

The Westchester Bank Holding Corporation. On June 29, 2021, Valley announced that it will acquire The Westchester Bank Holding Corporation (“Westchester”) and its principal subsidiary, The Westchester Bank which is headquartered in White Plains, New York. As of June 30, 2021, Westchester ~~has approximately~~had total assets of $1.3 billion, ~~in assets,~~total loans of $908 million, ~~in loans,~~and total deposits of $1.1 ~~billion in deposits, and~~billion. Westchester maintains a seven branch network in Westchester County, New York. The common shareholders of Westchester will receive 229.645 shares of Valley common stock for each Westchester share they own. Based on Valley’s closing stock price on June 28, 2021, Westchester’s stockholders will receive approximately $210 million in Valley common stock. Existing Westchester options will be cashed out for approximately $10 million in ~~cash.The~~cash. Valley has received all the requisite regulatory approvals to complete the merger which is anticipated to close on December 1, 2021, pending the satisfaction of customary closing conditions.

Bank Leumi Le-Israel Corporation. On September 23, 2021, Valley announced that it will acquire Bank Leumi Le-Israel Corporation (“Leumi”), the U.S. subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA (“Bank Leumi”). Bank Leumi maintains its headquarters in New York City and also has commercial banking offices in Chicago, Los Angeles, Palo Alto, and Aventura, Florida. As of June 30, 2021, Leumi had total

assets of $8.4 billion, total deposits of $7.1 billion, and gross loans of $5.4 billion. The common stockholders of Leumi will receive 3.8025 shares of Valley common stock and $5.08 in cash (subject to specified adjustments) for each Leumi common share they own. Based on Valley’s closing stock price on September 22, 2021, the transaction is valued at an estimated $1.1 billion, inclusive of the value of options and upon completion of the acquisition, Leumi will own approximately 14 percent of Valley's common stock. The acquisition is expected to close in the ~~fourth quarter 2021,~~first half of 2022, subject to standard regulatory approvals, approval of ~~Westchester stockholders,~~Valley shareholders, as well as other customary closing conditions.

Dudley Ventures. On October 8, 2021, Valley acquired Arizona-based Dudley Ventures (DV), an advisory firm specializing in the investment and management of tax credits. The transaction includes the acquisition of DV's community development entity, DV Community Investment, as well as DV Fund Advisors and DV Advisory Services. The transaction price included $11.3 million of cash at the closing date, fixed future stock consideration totaling $3.8 million, and contingent cash earn-out payments based upon revenue growth of the acquired entities over a five-year period.

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

Note 2.3. Earnings Per Common Share

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands, except for share data)									(in thousands, except for share data)
Net income available to common shareholders	Net income available to common shareholders	$	117,340	$	92,429	$	229,878	$	176,525	Net income available to common shareholders	$	119,408	$	99,202	$	349,286	$	275,727
Basic weighted average number of common shares outstanding	Basic weighted average number of common shares outstanding	405,963,209		403,790,242		405,560,146		403,654,665		Basic weighted average number of common shares outstanding	406,824,160		403,833,469		405,986,114		403,714,701
Plus: Common stock equivalents	Plus: Common stock equivalents	2,697,569		841,603		2,592,312		1,388,518		Plus: Common stock equivalents	2,413,841		955,057		2,523,653		1,197,425
Diluted weighted average number of common shares outstanding	Diluted weighted average number of common shares outstanding	408,660,778		404,631,845		408,152,458		405,043,183		Diluted weighted average number of common shares outstanding	409,238,001		404,788,526		408,509,767		404,912,126
Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic	Basic	$	0.29	$	0.23	$	0.57	$	0.44	Basic	$	0.29	$	0.25	$	0.86	$	0.68
Diluted	Diluted	0.29		0.23		0.56		0.44		Diluted	0.29		0.25		0.86		0.68

Common stock equivalents represent the dilutive effect of additional common shares issuable upon the assumed vesting or exercise, if applicable, of restricted stock units and common stock options to purchase Valley’s common shares. Common stock options with exercise prices that exceed the average market price per share of Valley’s common stock during the periods presented may have an anti-dilutive effect on the diluted earnings per common share calculation and therefore are excluded from the diluted earnings per share calculation along with restricted stock units. Potential anti-dilutive weighted common shares were immaterial for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, as compared to ~~2.7~~4.9 million and ~~2.3~~2.2 million shares for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively.

Note 3.4. Accumulated Other Comprehensive Loss

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


		Components of Accumulated Other Comprehensive Loss						Total Accumulated Other Comprehensive Loss			Components of Accumulated Other Comprehensive Loss						Total Accumulated Other Comprehensive Loss
		Unrealized Gains and Losses on Available for Sale (AFS) Securities		Unrealized Gains and Losses on Derivatives		Defined Benefit Pension Plan					Unrealized Gains and Losses on Available for Sale (AFS) Securities		Unrealized Gains and Losses on Derivatives		Defined Benefit Pension Plan
		(in thousands)									(in thousands)
Balance at March 31, 2021		$	22,898	$	(3,081)	$	(36,822)	$	(17,005)
Balance at June 30, 2021										Balance at June 30, 2021	$	21,503	$	(2,694)	$	(36,544)	$	(17,735)
Other comprehensive loss before reclassification	Other comprehensive loss before reclassification	(1,471)		(147)		0		(1,618)		Other comprehensive loss before reclassification	(3,953)		(96)		—		(4,049)
Amounts reclassified from other comprehensive income		76		534		278		888
Amounts reclassified from other comprehensive (loss) income										Amounts reclassified from other comprehensive (loss) income	(613)		743		279		409
Other comprehensive (loss) income, net	Other comprehensive (loss) income, net	(1,395)		387		278		(730)		Other comprehensive (loss) income, net	(4,566)		647		279		(3,640)
Balance at June 30, 2021		$	21,503	$	(2,694)	$	(36,544)	$	(17,735)
Balance at September 30, 2021										Balance at September 30, 2021	$	16,937	$	(2,047)	$	(36,265)	$	(21,375)

Components of Accumulated Other Comprehensive Loss Total
Accumulated
Other
Comprehensive
Loss
Unrealized Gains
and Losses on
Available for Sale
(AFS) Securities Unrealized Gains
and Losses on
Derivatives Defined
Benefit
Pension Plan
(in thousands)
Balance at December 31, 2020 $ 33,290 $ (3,906) $ (37,102) $ (7,718)
Other comprehensive (loss) income before reclassification (11,907) 27 0 (11,880)
Amounts reclassified from other comprehensive income 120 1,185 558 1,863
Other comprehensive (loss) income, net (11,787) 1,212 558 (10,017)
Balance at June 30, 2021 $ 21,503 $ (2,694) $ (36,544) $ (17,735)


	Components of Accumulated Other Comprehensive Loss						Total Accumulated Other Comprehensive Loss
	Unrealized Gains and Losses on Available for Sale (AFS) Securities		Unrealized Gains and Losses on Derivatives		Defined Benefit Pension Plan
	(in thousands)
Balance at December 31, 2020	$	33,290	$	(3,906)	$	(37,102)	$	(7,718)
Other comprehensive loss before reclassification	(15,860)		(69)		—		(15,929)
Amounts reclassified from other comprehensive (loss) income	(493)		1,928		837		2,272
Other comprehensive (loss) income, net	(16,353)		1,859		837		(13,657)
Balance at September 30, 2021	$	16,937	$	(2,047)	$	(36,265)	$	(21,375)

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


		Amounts Reclassified from Accumulated Other Comprehensive Loss										Amounts Reclassified from Accumulated Other Comprehensive Loss
		Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended September 30,				Nine Months Ended September 30,
Components of Accumulated Other Comprehensive Loss	Components of Accumulated Other Comprehensive Loss	2021		2020		2021		2020		Income Statement Line Item	Components of Accumulated Other Comprehensive Loss	2021		2020		2021		2020		Income Statement Line Item
		(in thousands)										(in thousands)
Unrealized losses on AFS securities before tax		$	(103)	$	(41)	$	(162)	$	(81)	Gains (losses) on securities transactions, net
Unrealized gains (losses) on AFS securities before tax											Unrealized gains (losses) on AFS securities before tax	$	825	$	(46)	$	663	$	(127)	Gains (losses) on securities transactions, net
Tax effect	Tax effect	27		10		42		23			Tax effect	(212)		10		(170)		33
Total net of tax	Total net of tax	(76)		(31)		(120)		(58)			Total net of tax	613		(36)		493		(94)

Unrealized (losses) gains on derivatives (cash flow hedges) before tax		(749)		438		(1,664)		(177)		Interest expense
Unrealized losses on derivatives (cash flow hedges) before tax											Unrealized losses on derivatives (cash flow hedges) before tax	(1,044)		(1,586)		(2,708)		(1,763)		Interest expense
Tax effect	Tax effect	215		(130)		479		47			Tax effect	301		459		780		506
Total net of tax	Total net of tax	(534)		308		(1,185)		(130)			Total net of tax	(743)		(1,127)		(1,928)		(1,257)
Defined benefit pension plan:	Defined benefit pension plan:										Defined benefit pension plan:
Amortization of actuarial net loss	Amortization of actuarial net loss	(387)		(229)		(775)		(465)		*	Amortization of actuarial net loss	(388)		(234)		(1,163)		(699)		*

Tax effect	Tax effect	109		57		217		121			Tax effect	109		63		326		184
Total net of tax	Total net of tax	(278)		(172)		(558)		(344)			Total net of tax	(279)		(171)		(837)		(515)
Total reclassifications, net of tax	Total reclassifications, net of tax	$	(888)	$	105	$	(1,863)	$	(532)		Total reclassifications, net of tax	$	(409)	$	(1,334)	$	(2,272)	$	(1,866)


*			Amortization of actuarial net loss is included in the computation of net periodic pension cost recognized within other non-interest expense.

Note 4.5. New Authoritative Accounting Guidance

New Accounting Guidance Adopted in 2021

Accounting Standards Update (ASU) No. 2020-08, "Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs" provides clarification and affects the guidance previously issued by ASU No. 2017-08 “Receivables -Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” ASU No. 2020-08 clarifies that an entity should reevaluate whether a debt security with multiple call dates is within the scope of paragraph 310-20-35-33. For each reporting period, to the extent that the amortized cost basis of an individual callable debt security exceeds the amount repayable by the issuer at the next call date, the premium should be amortized to the next call date, unless the guidance to consider estimated prepayments is applied. Valley adopted ASU No. 2020-08 on January 1, 2021 and the new guidance did not have a significant impact on Valley’s consolidated financial statements.

New Accounting Guidance issued in 2021

ASU No. 2021-01 "Reference Rate Reform (Topic 848)" extends some of Accounting Standards Codification Topic 848’s optional expedients to derivative contracts impacted by the discounting transition, including for derivatives that do not reference LIBOR or other reference rates that are expected to be discontinued. ASU No. 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. The ASU No. 2021-01 is not expected to have a significant impact on Valley’s consolidated financial statements.

ASU No. 2021-05 "Lessors – Certain Leases with Variable Lease Payments". The ASU No. 2021-05 updates guidance in Accounting Standards Codification (ASC) 842, Leases and requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease at lease commencement if: (i) the lease would have been classified as a sales-type lease or direct financing lease under ASC 842 classification criteria; and (ii) the lessor would have recognized a selling loss at lease commencement. ASU No. 2021-05 is effective for Valley for fiscal years and interim periods beginning after December 15, 2021, with early adoption permitted. The ASU No. 2021-05 is not expected to have a significant impact on Valley’s consolidated financial statements.

Note 5.6. Fair Value Measurement of Assets and Liabilities

ASC Topic 820, “Fair Value Measurements” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

•Level 1 - Unadjusted exchange quoted prices in active markets for identical assets or liabilities, or identical liabilities traded as assets that the reporting entity has the ability to access at the measurement date.

•Level 2 - Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly (i.e., quoted prices on similar assets) for substantially the full term of the asset or liability.

•Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

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

The following tables present the assets and liabilities that are measured at fair value on a recurring and non-recurring basis by level within the fair value hierarchy as reported on the consolidated statements of financial condition at ~~June~~September 30, 2021 and December 31, 2020. The assets presented under “non-recurring fair value measurements” in the tables below are not measured at fair value on an ongoing basis but are subject to fair value adjustments under certain circumstances (e.g., when an impairment loss is recognized).


		June 30, 2021		Fair Value Measurements at Reporting Date Using:							September 30, 2021		Fair Value Measurements at Reporting Date Using:
				Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)					Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(in thousands)									(in thousands)
Recurring fair value measurements:	Recurring fair value measurements:									Recurring fair value measurements:
Assets	Assets									Assets
Investment securities:	Investment securities:									Investment securities:
Equity securities (1)	Equity securities (1)	$	30,357	$	19,604	$	0	$	0��	Equity securities (1)	$	32,300	$	20,890	$	—	$	—
Trading debt securities	Trading debt securities	21,216		0		21,216		0		Trading debt securities	4,797		—		4,797		—
Available for sale debt securities:	Available for sale debt securities:									Available for sale debt securities:
U.S. Treasury securities		51,010		51,010		0		0

U.S. government agency securities	U.S. government agency securities	23,907		0		23,907		0		U.S. government agency securities	21,442		—		21,442		—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	65,685		0		65,685		0		Obligations of states and political subdivisions	83,149		—		83,149		—
Residential mortgage-backed securities	Residential mortgage-backed securities	846,316		0		846,316		0		Residential mortgage-backed securities	992,828		—		992,828		—
Corporate and other debt securities	Corporate and other debt securities	88,620		0		88,620		0		Corporate and other debt securities	110,858		—		110,858		—
Total available for sale debt securities	Total available for sale debt securities	1,075,538		51,010		1,024,528		0		Total available for sale debt securities	1,208,277		—		1,208,277		—
Loans held for sale (2)	Loans held for sale (2)	159,256		0		159,256		0		Loans held for sale (2)	157,084		—		157,084		—
Other assets (3)	Other assets (3)	248,843		0		248,843		0		Other assets (3)	215,919		—		215,919		—
Total assets	Total assets	$	1,535,210	$	70,614	$	1,453,843	$	0	Total assets	$	1,618,377	$	20,890	$	1,586,077	$	—
Liabilities	Liabilities									Liabilities
Other liabilities (3)	Other liabilities (3)	$	81,676	$	0	$	81,676	$	0	Other liabilities (3)	$	66,733	$	—	$	66,733	$	—
Total liabilities	Total liabilities	$	81,676	$	0	$	81,676	$	0	Total liabilities	$	66,733	$	—	$	66,733	$	—
Non-recurring fair value measurements:	Non-recurring fair value measurements:									Non-recurring fair value measurements:

Collateral dependent loans	Collateral dependent loans	$	39,655	$	0	$	0	$	39,655	Collateral dependent loans	$	68,162	$	—	$	—	$	68,162
Loan servicing rights		158		0		0		158

Foreclosed assets	Foreclosed assets	2,202		0		0		2,202		Foreclosed assets	2,037		—		—		2,037
Total	Total	$	42,015	$	0	$	0	$	42,015	Total	$	70,199	$	—	$	—	$	70,199


				Fair Value Measurements at Reporting Date Using:									Fair Value Measurements at Reporting Date Using:
		December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(in thousands)									(in thousands)
Recurring fair value measurements:	Recurring fair value measurements:									Recurring fair value measurements:
Assets	Assets									Assets
Investment securities:	Investment securities:									Investment securities:
Equity securities (1)	Equity securities (1)	$	26,379	$	18,600	$	0	$	0	Equity securities (1)	$	26,379	$	18,600	$	—	$	—
Available for sale debt securities:	Available for sale debt securities:									Available for sale debt securities:
U.S. Treasury securities	U.S. Treasury securities	51,393		51,393		0		0		U.S. Treasury securities	51,393		51,393		—		—
U.S. government agency securities	U.S. government agency securities	26,157		0		26,157		0		U.S. government agency securities	26,157		—		26,157		—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	79,950		0		79,135		815		Obligations of states and political subdivisions	79,950		—		79,135		815
Residential mortgage-backed securities	Residential mortgage-backed securities	1,090,022		0		1,090,022		0		Residential mortgage-backed securities	1,090,022		—		1,090,022		—

Corporate and other debt securities	Corporate and other debt securities	91,951		0		91,951		0		Corporate and other debt securities	91,951		—		91,951		—
Total available for sale	Total available for sale	1,339,473		51,393		1,287,265		815		Total available for sale	1,339,473		51,393		1,287,265		815

Loans held for sale (2)	Loans held for sale (2)	301,427		0		301,427		0		Loans held for sale (2)	301,427		—		301,427		—
Other assets (3)	Other assets (3)	387,452		0		387,452		0		Other assets (3)	387,452		—		387,452		—
Total assets	Total assets	$	2,054,731	$	69,993	$	1,976,144	$	815	Total assets	$	2,054,731	$	69,993	$	1,976,144	$	815
Liabilities	Liabilities									Liabilities
Other liabilities (3)	Other liabilities (3)	$	156,281	$	0	$	156,281	$	0	Other liabilities (3)	$	156,281	$	—	$	156,281	$	—
Total liabilities	Total liabilities	$	156,281	$	0	$	156,281	$	0	Total liabilities	$	156,281	$	—	$	156,281	$	—
Non-recurring fair value measurements:	Non-recurring fair value measurements:									Non-recurring fair value measurements:
Collateral dependent impaired loans	Collateral dependent impaired loans	$	35,228	$	0	$	0	$	35,228	Collateral dependent impaired loans	$	35,228	$	—	$	—	$	35,228
Loan servicing rights	Loan servicing rights	15,603		0		0		15,603		Loan servicing rights	15,603		—		—		15,603
Foreclosed assets	Foreclosed assets	7,387		0		0		7,387		Foreclosed assets	7,387		—		—		7,387
Total	Total	$	58,218	$	0	$	0	$	58,218	Total	$	58,218	$	—	$	—	$	58,218

(1)Includes equity securities measured at net asset value (NAV) per share (or its equivalent) as a practical expedient totaling ~~$10.8~~$11.4 million and $7.8 million at ~~June~~September 30, 2021 and December 31, 2020, respectively. These securities have not been classified in the fair value hierarchy.

(2)Represents residential mortgage loans held for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately ~~$154.2~~$152.4 million and $286.4 million at ~~June~~September 30, 2021 and December 31, 2020, respectively.

(3)Derivative financial instruments are included in this category.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following valuation techniques were used for financial instruments measured at fair value on a recurring basis. All the valuation techniques described below apply to the unpaid principal balance, excluding any accrued interest or dividends at the measurement date. Interest income and expense are recorded within the consolidated statements of income depending on the nature of the instrument using the effective interest method based on acquired discount or premium.

Equity securities. The fair value of equity securities ~~largely~~ consists of a publicly traded mutual fund, a Community Reinvestment Act (CRA) investment fund and an investment related to the development of new financial technologies that isare carried at quoted prices in active ~~markets and~~markets. Valley also has privately held CRA funds measured at ~~NAV.~~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.~~

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

Available for sale debt securities. When applicable, U.S. Treasury securities are reported at fair value utilizing Level 1 inputs. The majority of other investment securities are reported at fair value utilizing Level 2 inputs. The prices for these instruments are obtained through an independent pricing service or dealer market participants with whom Valley has historically transacted both purchases and sales of investment securities. Prices obtained from these sources include prices derived from market quotations and matrix pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Management reviews the data and assumptions used in pricing the securities by its third-party provider to ensure the highest level of significant inputs are derived from market observable data. In addition, Valley reviews the volume and level of activity for all available for sale securities and attempts to identify transactions which may not be orderly or reflective of a significant level of activity and volume.

Loans held for sale. Residential mortgage loans originated for sale are reported at fair value using Level 2 inputs. The fair values were calculated utilizing quoted prices for similar assets in active markets. The market prices represent a delivery price, which reflects the underlying price each institution would pay Valley for an immediate sale of an aggregate pool of mortgages. Non-performance risk did not materially impact the fair value of mortgage loans held for sale at ~~June~~September 30, 2021 and December 31, 2020 based on the short duration these assets were held, and the credit quality of these loans.

Derivatives. Derivatives are reported at fair value utilizing Level 2 inputs. The fair values of Valley’s derivatives are determined using third-party prices that are based on discounted cash flow analysis using observed market inputs, such as the LIBOR, Overnight Index Swap and Secured Overnight Financing Rate (SOFR) curves for all cleared derivatives. The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at ~~June~~September 30, 2021 and December 31, 2020), is determined based on the current market prices for similar instruments. The fair values of most of the derivatives incorporate credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, to account for potential nonperformance risk of Valley and its counterparties. The credit valuation adjustments were not significant to the overall valuation of Valley’s derivatives at ~~June~~September 30, 2021 and December 31, 2020.

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

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

Collateral Dependent Loans. Collateral dependent loans are loans when foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and substantially all of the repayment is expected from the collateral. Collateral dependent loans are reported at the fair value of the underlying collateral. Collateral values are estimated using Level 3 inputs, consisting of individual third-party appraisals that may be adjusted based on certain discounting criteria. Certain real estate appraisals may be discounted based on specific market data by location and property type. At ~~June~~September 30, 2021, collateral dependent loans were individually re-measured and reported at fair value through direct loan charge-offs to the allowance for loan losses based on the fair value of the underlying collateral. At ~~June~~September 30, 2021, collateral dependent ~~loans, mostly consisting of taxi medallion~~ loans with a total amortized cost of ~~$104.3~~$136.1 million, including our taxi medallion loan portfolio, were reduced by specific allowance for loan losses allocations totaling ~~$64.6~~$67.9 million to a reported total net carrying amount of ~~$39.7~~$68.2 million.

Loan servicing rights. Fair values for each risk-stratified group of loan servicing rights are calculated using a fair value model from a third-party vendor that requires inputs that are both significant to the fair value measurement and unobservable (Level 3). The fair value model is based on various assumptions, including but not limited to,

prepayment speeds, internal rate of return (discount rate), servicing cost, ancillary income, float rate, tax rate, and inflation. The prepayment speed and the discount rate are considered two of the most significant inputs in the model. At ~~June~~September 30, 2021, the fair value model used a blended prepayment speed (stated as constant prepayment rates) of ~~15.4~~13.6 percent and a discount rate of ~~9.1~~9.0 percent for the valuation of the loan servicing rights. A significant degree of judgment is involved in valuing the loan servicing rights using Level 3 inputs. The use of different assumptions could have a significant positive or negative effect on the fair value estimate. Impairment charges are recognized on loan servicing rights when the amortized cost of a risk-stratified group of loan servicing rights exceeds the estimated fair value. At ~~June~~September 30, 2021, ~~certain~~there was no re-measurement of loan servicing rights ~~were re-measured~~ at fair ~~value totaling $158 thousand.~~value. See Note 89 for additional information.

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. The adjustments to the appraisals of foreclosed assets ranged from ~~1.3~~0.6 percent to ~~7.1~~4.6 percent at ~~June~~September 30, 2021.

Other Fair Value Disclosures

ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.

The fair value estimates presented in the following table were based on pertinent market data and relevant information on the financial instruments available as of the valuation date. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire portfolio of financial instruments. Because no market exists for a portion of the financial instruments, fair value estimates may be based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For instance, Valley has certain fee-generating business lines (e.g., its mortgage servicing operation, trust and investment management departments) that were not considered in these estimates since these activities are not financial instruments. In addition, the tax implications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

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


		Fair Value Hierarchy	June 30, 2021				December 31, 2020					Fair Value Hierarchy	September 30, 2021				December 31, 2020
			Carrying Amount		Fair Value		Carrying Amount		Fair Value				Carrying Amount		Fair Value		Carrying Amount		Fair Value
			(in thousands)										(in thousands)
Financial assets	Financial assets										Financial assets
Cash and due from banks	Cash and due from banks	Level 1	$	329,006	$	329,006	$	257,845	$	257,845	Cash and due from banks	Level 1	$	304,912	$	304,912	$	257,845	$	257,845
Interest bearing deposits with banks	Interest bearing deposits with banks	Level 1	1,515,757		1,515,757		1,071,360		1,071,360		Interest bearing deposits with banks	Level 1	1,195,244		1,195,244		1,071,360		1,071,360
Equity securities (1)	Equity securities (1)	Level 3	3,513		3,513		2,999		2,999		Equity securities (1)	Level 3	3,768		3,768		2,999		2,999
Held to maturity debt securities:	Held to maturity debt securities:										Held to maturity debt securities:
U.S. Treasury securities	U.S. Treasury securities	Level 1	67,874		73,575		68,126		75,484		U.S. Treasury securities	Level 1	67,716		72,898		68,126		75,484
U.S. government agency securities	U.S. government agency securities	Level 2	5,548		5,813		6,222		6,513		U.S. government agency securities	Level 2	4,817		5,015		6,222		6,513
Obligations of states and political subdivisions	Obligations of states and political subdivisions	Level 2	444,380		454,718		470,259		484,506		Obligations of states and political subdivisions	Level 2	353,406		360,903		470,259		484,506
Residential mortgage-backed securities	Residential mortgage-backed securities	Level 2	1,926,900		1,938,608		1,550,306		1,589,655		Residential mortgage-backed securities	Level 2	2,072,700		2,076,597		1,550,306		1,589,655
Trust preferred securities	Trust preferred securities	Level 2	37,360		31,425		37,348		30,033		Trust preferred securities	Level 2	37,014		31,507		37,348		30,033
Corporate and other debt securities	Corporate and other debt securities	Level 2	51,750		52,380		40,750		41,421		Corporate and other debt securities	Level 2	48,750		49,391		40,750		41,421
Total held to maturity debt securities (2)	Total held to maturity debt securities (2)		2,533,812		2,556,519		2,173,011		2,227,612		Total held to maturity debt securities (2)		2,584,403		2,596,311		2,173,011		2,227,612
Net loans	Net loans	Level 3	32,118,130		31,962,961		31,876,869		31,635,060		Net loans	Level 3	32,264,287		32,113,934		31,876,869		31,635,060
Accrued interest receivable	Accrued interest receivable	Level 1	99,068		99,068		106,230		106,230		Accrued interest receivable	Level 1	98,073		98,073		106,230		106,230
Federal Reserve Bank and Federal Home Loan Bank stock (3)	Federal Reserve Bank and Federal Home Loan Bank stock (3)	Level 2	212,122		212,122		250,116		250,116		Federal Reserve Bank and Federal Home Loan Bank stock (3)	Level 2	207,701		207,701		250,116		250,116
Financial liabilities	Financial liabilities										Financial liabilities
Deposits without stated maturities	Deposits without stated maturities	Level 1	28,887,225		28,887,225		25,220,924		25,220,924		Deposits without stated maturities	Level 1	29,672,322		29,672,322		25,220,924		25,220,924
Deposits with stated maturities	Deposits with stated maturities	Level 2	4,307,549		4,256,745		6,714,678		6,639,022		Deposits with stated maturities	Level 2	3,960,283		3,957,008		6,714,678		6,639,022
Short-term borrowings	Short-term borrowings	Level 1	854,378		838,440		1,147,958		1,151,478		Short-term borrowings	Level 1	783,346		765,636		1,147,958		1,151,478
Long-term borrowings	Long-term borrowings	Level 2	1,885,690		1,882,750		2,295,665		2,405,345		Long-term borrowings	Level 2	1,427,444		1,417,368		2,295,665		2,405,345
Junior subordinated debentures issued to capital trusts	Junior subordinated debentures issued to capital trusts	Level 2	56,239		45,802		56,065		57,779		Junior subordinated debentures issued to capital trusts	Level 2	56,326		46,057		56,065		57,779
Accrued interest payable (4)	Accrued interest payable (4)	Level 1	8,115		8,115		18,839		18,839		Accrued interest payable (4)	Level 1	8,824		8,824		18,839		18,839

(1)Represents equity securities without a readily determinable fair value measured at cost less impairment, if any.

(2)The carrying amount is presented gross without the allowance for credit losses.

(3)Included in other assets.

(4)Included in accrued expenses and other liabilities.

Note 6.7. Investment Securities

Equity Securities

Equity securities carried at fair value totaled ~~$33.9~~$36.1 million and $29.4 million at ~~June~~September 30, 2021 and December 31, 2020, respectively. At ~~June~~September 30, 2021, Valley's equity securities consisted of one publicly traded ~~money market~~ mutual fund, CRA investments ~~both publicly traded and privately held~~ and to a lesser extent, equity ~~securities~~investments related to the development of new financial technologies. Our CRA and other equity investments are a mixture of both publicly traded entities and privately held entities without readily determinable fair market values.

Trading Debt Securities

The fair value of trading securities, consisting of municipal bonds, totaled ~~$21.2~~$4.8 million at ~~June~~September 30, 2021. We had no trading debt securities at December 31, 2020. Net trading gains and losses are included in net gains and losses on securities transactions within non-interest income. ~~Net~~We recorded net trading losses of $2 thousand and net trading gains ~~totaled $489 thousand and $707~~of $705 thousand for ~~the~~ three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.

Available for Sale Debt Securities

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


		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
		(in thousands)									(in thousands)
June 30, 2021
U.S. Treasury securities		$	50,023	$	987	$	0	$	51,010
September 30, 2021										September 30, 2021

U.S. government agency securities	U.S. government agency securities	22,695		1,218		(6)		23,907		U.S. government agency securities	$	20,408	$	1,041	$	(7)	$	21,442
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:									Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	32,098		614		0		32,712		Obligations of states and state agencies	29,752		239		(39)		29,952
Municipal bonds	Municipal bonds	32,440		541		(8)		32,973		Municipal bonds	53,186		440		(429)		53,197
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	64,538		1,155		(8)		65,685		Total obligations of states and political subdivisions	82,938		679		(468)		83,149
Residential mortgage-backed securities	Residential mortgage-backed securities	823,040		24,490		(1,214)		846,316		Residential mortgage-backed securities	973,543		21,761		(2,476)		992,828

Corporate and other debt securities	Corporate and other debt securities	85,441		3,198		(19)		88,620		Corporate and other debt securities	107,901		3,262		(305)		110,858
Total	Total	$	1,045,737	$	31,048	$	(1,247)	$	1,075,538	Total	$	1,184,790	$	26,743	$	(3,256)	$	1,208,277
December 31, 2020	December 31, 2020									December 31, 2020
U.S. Treasury securities	U.S. Treasury securities	$	50,031	$	1,362	$	0	$	51,393	U.S. Treasury securities	$	50,031	$	1,362	$	—	$	51,393
U.S. government agency securities	U.S. government agency securities	25,067		1,103		(13)		26,157		U.S. government agency securities	25,067		1,103		(13)		26,157
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:									Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	40,861		970		(32)		41,799		Obligations of states and state agencies	40,861		970		(32)		41,799
Municipal bonds	Municipal bonds	37,489		731		(69)		38,151		Municipal bonds	37,489		731		(69)		38,151
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	78,350		1,701		(101)		79,950		Total obligations of states and political subdivisions	78,350		1,701		(101)		79,950
Residential mortgage-backed securities	Residential mortgage-backed securities	1,050,369		40,426		(773)		1,090,022		Residential mortgage-backed securities	1,050,369		40,426		(773)		1,090,022

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

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

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


		Less than Twelve Months				More than Twelve Months				Total					Less than Twelve Months				More than Twelve Months				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
		(in thousands)													(in thousands)
June 30, 2021
September 30, 2021														September 30, 2021

U.S. government agency securities	U.S. government agency securities	$	0	$	0	$	1,396	$	(6)	$	1,396	$	(6)	U.S. government agency securities	$	—	$	—	$	1,355��	$	(7)	$	1,355	$	(7)

Obligations of states and political subdivisions:														Obligations of states and political subdivisions:
Obligations of states and state agencies														Obligations of states and state agencies	10,344		(39)		—		—		10,344		(39)
Municipal bonds	Municipal bonds	4,705		(8)		0		0		4,705		(8)		Municipal bonds	25,100		(429)		—		—		25,100		(429)

Total obligations of states and political subdivisions														Total obligations of states and political subdivisions	35,444		(468)		—		—		35,444		(468)
Residential mortgage-backed securities	Residential mortgage-backed securities	116,758		(914)		12,726		(300)		129,484		(1,214)		Residential mortgage-backed securities	264,495		(2,138)		12,058		(338)		276,553		(2,476)

Corporate and other debt securities	Corporate and other debt securities	1,981		(19)		0		0		1,981		(19)		Corporate and other debt securities	19,175		(305)		—		—		19,175		(305)
Total	Total	$	123,444	$	(941)	$	14,122	$	(306)	$	137,566	$	(1,247)	Total	$	319,114	$	(2,911)	$	13,413	$	(345)	$	332,527	$	(3,256)
December 31, 2020	December 31, 2020													December 31, 2020

U.S. government agency securities	U.S. government agency securities	$	0	$	0	$	1,479	$	(13)	$	1,479	$	(13)	U.S. government agency securities	$	—	$	—	$	1,479	$	(13)	$	1,479	$	(13)
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:													Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	0		0		1,010		(32)		1,010		(32)		Obligations of states and state agencies	—		—		1,010		(32)		1,010		(32)
Municipal bonds	Municipal bonds	6,777		(69)		0		0		6,777		(69)		Municipal bonds	6,777		(69)		—		—		6,777		(69)
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	6,777		(69)		1,010		(32)		7,787		(101)		Total obligations of states and political subdivisions	6,777		(69)		1,010		(32)		7,787		(101)
Residential mortgage-backed securities	Residential mortgage-backed securities	41,418		(500)		27,911		(273)		69,329		(773)		Residential mortgage-backed securities	41,418		(500)		27,911		(273)		69,329		(773)

Corporate and other debt securities	Corporate and other debt securities	12,517		(32)		0		0		12,517		(32)		Corporate and other debt securities	12,517		(32)		—		—		12,517		(32)

Total	Total	$	60,712	$	(601)	$	30,400	$	(318)	$	91,112	$	(919)	Total	$	60,712	$	(601)	$	30,400	$	(318)	$	91,112	$	(919)

Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was 67111 and 58 at ~~June~~September 30, 2021 and December 31, 2020, respectively.

As of ~~June~~September 30, 2021, the fair value of available for sale debt securities that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was ~~$736.2~~$547.5 million.

The contractual maturities of available for sale debt securities at ~~June~~September 30, 2021 are set forth in the following table. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.


		June 30, 2021					September 30, 2021
		Amortized Cost		Fair Value			Amortized Cost		Fair Value
		(in thousands)					(in thousands)
Due in one year	Due in one year	$	6,769	$	6,824	Due in one year	$	10,183	$	10,294
Due after one year through five years	Due after one year through five years	84,534		86,491		Due after one year through five years	31,000		31,750
Due after five years through ten years	Due after five years through ten years	79,866		82,581		Due after five years through ten years	84,781		87,587
Due after ten years	Due after ten years	51,528		53,326		Due after ten years	85,283		85,818
Residential mortgage-backed securities	Residential mortgage-backed securities	823,040		846,316		Residential mortgage-backed securities	973,543		992,828
Total	Total	$	1,045,737	$	1,075,538	Total	$	1,184,790	$	1,208,277

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

The weighted average remaining expected life for residential mortgage-backed securities available for sale was ~~4.4~~4.9 years at ~~June~~September 30, 2021.

Impairment Analysis of Available For Sale Debt Securities

Valley's available for sale debt securities portfolio includes corporate bonds and revenue bonds, among other securities. These types of securities may pose a higher risk of future impairment charges by Valley as a result of the unpredictable nature of the U.S. economy and its potential negative effect on the future performance of the security issuers, including due to the economic effects of the COVID-19 pandemic.

Available for sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis. Valley has evaluated available for sale debt securities that are in an unrealized loss position as of ~~June~~September 30, 2021 included in the table above and has determined that the declines in fair value are mainly attributable to market volatility, not credit quality or other factors. Based on a comparison of the present value of expected cash flows to the amortized cost, management recognized no impairment during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. There was no allowance for credit losses for available for sale debt securities at ~~June~~September 30, 2021 and December 31, 2020.

Held to Maturity Debt Securities

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


		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
		(in thousands)									(in thousands)
June 30, 2021
September 30, 2021										September 30, 2021
U.S. Treasury securities	U.S. Treasury securities	$	67,874	$	5,701	$	0	$	73,575	U.S. Treasury securities	$	67,716	$	5,182	$	—	$	72,898
U.S. government agency securities	U.S. government agency securities	5,548		265		0		5,813		U.S. government agency securities	4,817		198		—		5,015
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:									Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	243,374		5,505		(43)		248,836		Obligations of states and state agencies	161,929		3,866		(293)		165,502
Municipal bonds	Municipal bonds	201,006		4,894		(18)		205,882		Municipal bonds	191,477		4,066		(142)		195,401
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	444,380		10,399		(61)		454,718		Total obligations of states and political subdivisions	353,406		7,932		(435)		360,903
Residential mortgage-backed securities	Residential mortgage-backed securities	1,926,900		23,376		(11,668)		1,938,608		Residential mortgage-backed securities	2,072,700		21,898		(18,001)		2,076,597
Trust preferred securities	Trust preferred securities	37,360		51		(5,986)		31,425		Trust preferred securities	37,014		4		(5,511)		31,507
Corporate and other debt securities	Corporate and other debt securities	51,750		640		(10)		52,380		Corporate and other debt securities	48,750		650		(9)		49,391
Total	Total	$	2,533,812	$	40,432	$	(17,725)	$	2,556,519	Total	$	2,584,403	$	35,864	$	(23,956)	$	2,596,311
December 31, 2020	December 31, 2020									December 31, 2020
U.S. Treasury securities	U.S. Treasury securities	$	68,126	$	7,358	$	0	$	75,484	U.S. Treasury securities	$	68,126	$	7,358	$	—	$	75,484
U.S. government agency securities	U.S. government agency securities	6,222		291		0		6,513		U.S. government agency securities	6,222		291		—		6,513
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:									Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	262,762		8,060		(105)		270,717		Obligations of states and state agencies	262,762		8,060		(105)		270,717
Municipal bonds	Municipal bonds	207,497		6,292		0		213,789		Municipal bonds	207,497		6,292		—		213,789
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	470,259		14,352		(105)		484,506		Total obligations of states and political subdivisions	470,259		14,352		(105)		484,506
Residential mortgage-backed securities	Residential mortgage-backed securities	1,550,306		39,603		(254)		1,589,655		Residential mortgage-backed securities	1,550,306		39,603		(254)		1,589,655
Trust preferred securities	Trust preferred securities	37,348		50		(7,365)		30,033		Trust preferred securities	37,348		50		(7,365)		30,033
Corporate and other debt securities	Corporate and other debt securities	40,750		672		(1)		41,421		Corporate and other debt securities	40,750		672		(1)		41,421
Total	Total	$	2,173,011	$	62,326	$	(7,725)	$	2,227,612	Total	$	2,173,011	$	62,326	$	(7,725)	$	2,227,612

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


		Less than Twelve Months				More than Twelve Months				Total					Less than Twelve Months				More than Twelve Months				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
		(in thousands)													(in thousands)
June 30, 2021
September 30, 2021														September 30, 2021

Obligations of states and political subdivisions:	Obligations of states and political subdivisions:													Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	$	0	$	0	$	5,570	$	(43)	$	5,570	$	(43)	Obligations of states and state agencies	$	10,541	$	(218)	$	5,519	$	(75)	$	16,060	$	(293)
Municipal bonds	Municipal bonds	1,328		(18)		0		0		1,328		(18)		Municipal bonds	14,917		(142)		—		—		14,917		(142)
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	1,328		(18)		5,570		(43)		6,898		(61)		Total obligations of states and political subdivisions	25,458		(360)		5,519		(75)		30,977		(435)
Residential mortgage-backed securities	Residential mortgage-backed securities	983,406		(11,606)		4,608		(62)		988,014		(11,668)		Residential mortgage-backed securities	1,292,965		(17,978)		2,546		(23)		1,295,511		(18,001)
Trust preferred securities	Trust preferred securities	0		0		30,021		(5,986)		30,021		(5,986)		Trust preferred securities	—		—		30,503		(5,511)		30,503		(5,511)
Corporate and other debt securities	Corporate and other debt securities	7,990		(10)		0		0		7,990		(10)		Corporate and other debt securities	6,991		(9)		—		—		6,991		(9)
Total	Total	$	992,724	$	(11,634)	$	40,199	$	(6,091)	$	1,032,923	$	(17,725)	Total	$	1,325,414	$	(18,347)	$	38,568	$	(5,609)	$	1,363,982	$	(23,956)
December 31, 2020	December 31, 2020													December 31, 2020

Obligations of states and state agencies	Obligations of states and state agencies	$	5,546	$	(105)	$	0	$	0	$	5,546	$	(105)	Obligations of states and state agencies	$	5,546	$	(105)	$	—	$	—	$	5,546	$	(105)

Residential mortgage-backed securities	Residential mortgage-backed securities	21,599		(245)		2,470		(9)		24,069		(254)		Residential mortgage-backed securities	21,599		(245)		2,470		(9)		24,069		(254)
Trust preferred securities	Trust preferred securities	0		0		28,630		(7,365)		28,630		(7,365)		Trust preferred securities	—		—		28,630		(7,365)		28,630		(7,365)
Corporate and other debt securities	Corporate and other debt securities	10,749		(1)		0		0		10,749		(1)		Corporate and other debt securities	10,749		(1)		—		—		10,749		(1)
Total	Total	$	37,894	$	(351)	$	31,100	$	(7,374)	$	68,994	$	(7,725)	Total	$	37,894	$	(351)	$	31,100	$	(7,374)	$	68,994	$	(7,725)

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 4462 and 13 at ~~June~~September 30, 2021 and December 31, 2020, respectively.

As of ~~June~~September 30, 2021, the fair value of debt securities held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was ~~$1.6 billion.~~$955.9 million.

The contractual maturities of investments in debt securities held to maturity at ~~June~~September 30, 2021 are set forth in the table below. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.


		June 30, 2021					September 30, 2021
		Amortized Cost		Fair Value			Amortized Cost		Fair Value
		(in thousands)					(in thousands)
Due in one year	Due in one year	$	27,218	$	27,365	Due in one year	$	22,683	$	22,845
Due after one year through five years	Due after one year through five years	247,844		257,620		Due after one year through five years	231,112		239,893
Due after five years through ten years	Due after five years through ten years	129,112		130,979		Due after five years through ten years	66,064		67,333
Due after ten years	Due after ten years	202,738		201,947		Due after ten years	191,844		189,643
Residential mortgage-backed securities	Residential mortgage-backed securities	1,926,900		1,938,608		Residential mortgage-backed securities	2,072,700		2,076,597
Total	Total	$	2,533,812	$	2,556,519	Total	$	2,584,403	$	2,596,311

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

The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was ~~6.0~~5.9 years at ~~June~~September 30, 2021.

Credit Quality Indicators

Valley monitors the credit quality of the held to maturity debt securities through the use of the most current credit ratings from external rating agencies. The following table summarizes the amortized cost of held to maturity debt securities by external credit rating at ~~June~~September 30, 2021 and December 31, 2020.


		AAA/AA/A Rated		BBB rated		Non-investment grade rated		Non-rated		Total			AAA/AA/A Rated		BBB rated		Non-investment grade rated		Non-rated		Total
		(in thousands)											(in thousands)
June 30, 2021
September 30, 2021												September 30, 2021
U.S. Treasury securities	U.S. Treasury securities	$	67,874	$	0	$	0	$	0	$	67,874	U.S. Treasury securities	$	67,716	$	—	$	—	$	—	$	67,716
U.S. government agency securities	U.S. government agency securities	5,548		0		0		0��		5,548		U.S. government agency securities	4,817		—		—		—		4,817
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:											Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	210,548		0		5,613		27,213		243,374		Obligations of states and state agencies	135,122		—		5,595		21,212		161,929
Municipal bonds	Municipal bonds	158,111		0		0		42,895		201,006		Municipal bonds	150,468		—		—		41,009		191,477
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	368,659		0		5,613		70,108		444,380		Total obligations of states and political subdivisions	285,590		—		5,595		62,221		353,406
Residential mortgage-backed securities	Residential mortgage-backed securities	1,926,900		0		0		0		1,926,900		Residential mortgage-backed securities	2,072,700		—		—		—		2,072,700
Trust preferred securities	Trust preferred securities	0		0		0		37,360		37,360		Trust preferred securities	—		—		—		37,014		37,014
Corporate and other debt securities	Corporate and other debt securities	0		8,000		0		43,750		51,750		Corporate and other debt securities	2,000		6,000		—		40,750		48,750
Total	Total	$	2,368,981	$	8,000	$	5,613	$	151,218	$	2,533,812	Total	$	2,432,823	$	6,000	$	5,595	$	139,985	$	2,584,403
December 31, 2020	December 31, 2020											December 31, 2020
U.S. Treasury securities	U.S. Treasury securities	$	68,126	$	0	$	0	$	0	$	68,126	U.S. Treasury securities	$	68,126	$	—	$	—	$	—	$	68,126
U.S. government agency securities	U.S. government agency securities	6,222		0		0		0		6,222		U.S. government agency securities	6,222		—		—		—		6,222
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:											Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	228,286		0		5,650		28,826		262,762		Obligations of states and state agencies	228,286		—		5,650		28,826		262,762
Municipal bonds	Municipal bonds	166,408		0		0		41,089		207,497		Municipal bonds	166,408		—		—		41,089		207,497
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	394,694		0		5,650		69,915		470,259		Total obligations of states and political subdivisions	394,694		—		5,650		69,915		470,259
Residential mortgage-backed securities	Residential mortgage-backed securities	1,550,306		0		0		0		1,550,306		Residential mortgage-backed securities	1,550,306		—		—		—		1,550,306
Trust preferred securities	Trust preferred securities	0		0		0		37,348		37,348		Trust preferred securities	—		—		—		37,348		37,348
Corporate and other debt securities	Corporate and other debt securities	0		5,000		0		35,750		40,750		Corporate and other debt securities	—		5,000		—		35,750		40,750
Total investment securities held to maturity		$	2,019,348	$	5,000	$	5,650	$	143,013	$	2,173,011
Total												Total	$	2,019,348	$	5,000	$	5,650	$	143,013	$	2,173,011

Obligations of states and political subdivisions include municipal bonds and revenue bonds issued by various municipal corporations. At ~~June~~September 30, 2021, most of the obligations of states and political subdivisions were rated investment grade and a large portion of the "non-rated" category included TEMS securities secured by Ginnie Mae securities. Trust preferred securities consist of non-rated single-issuer securities, issued by bank holding companies. Corporate bonds consist of debt primarily issued by banks.

Allowance for Credit Losses for Held to Maturity Debt Securities

Valley has a zero loss expectation for certain securities within the held to maturity portfolio, and therefore it is not required to estimate an allowance for credit losses related to these securities under the CECL standard. After an evaluation of qualitative factors, Valley identified the following securities types which it believes qualify for this exclusion: U.S. Treasury securities, U.S. government agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and collateralized municipal bonds called TEMS.

At ~~June~~September 30, 2021, held to maturity debt securities were carried net of allowance for credit losses totaling ~~$1.0~~$1.1 million and $1.4 million at ~~June~~September 30, 2021 and December 31, 2020, respectively. There were 0no net charge-offs of held to maturity debt securities for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

Note 7.8. Loans and Allowance for Credit Losses for Loans

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


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in thousands)					(in thousands)
Loans:	Loans:					Loans:
Commercial and industrial:	Commercial and industrial:					Commercial and industrial:
Commercial and industrial	Commercial and industrial	$	4,733,771	$	4,709,569	Commercial and industrial	$	4,761,227	$	4,709,569
Commercial and industrial PPP loans *	Commercial and industrial PPP loans *	1,350,684		2,152,139		Commercial and industrial PPP loans *	874,033		2,152,139
Total commercial and industrial loans	Total commercial and industrial loans	6,084,455		6,861,708		Total commercial and industrial loans	5,635,260		6,861,708
Commercial real estate:	Commercial real estate:					Commercial real estate:
Commercial real estate	Commercial real estate	17,512,142		16,724,998		Commercial real estate	17,912,070		16,724,998
Construction	Construction	1,752,838		1,745,825		Construction	1,804,580		1,745,825
Total commercial real estate loans	Total commercial real estate loans	19,264,980		18,470,823		Total commercial real estate loans	19,716,650		18,470,823
Residential mortgage	Residential mortgage	4,226,975		4,183,743		Residential mortgage	4,332,422		4,183,743
Consumer:	Consumer:					Consumer:
Home equity	Home equity	410,856		431,553		Home equity	402,658		431,553
Automobile	Automobile	1,531,262		1,355,955		Automobile	1,563,698		1,355,955
Other consumer	Other consumer	938,926		913,330		Other consumer	956,126		913,330
Total consumer loans	Total consumer loans	2,881,044		2,700,838		Total consumer loans	2,922,482		2,700,838
Total loans	Total loans	$	32,457,454	$	32,217,112	Total loans	$	32,606,814	$	32,217,112

*Represents SBA Paycheck Protection Program (PPP) loans, net of unearned fees totaling ~~$40.9~~$27.6 million and $43.2 million at ~~June~~September 30, 2021 and December 31, 2020, respectively.

Total loans includes net unearned discounts and ~~deferred~~deferred loan fees of ~~$86.1~~$73.0 million ~~and~~and $95.8 million at ~~June~~September 30, 2021 and December 31, 2020, respectively. Net unearned discounts and deferred loan fees include the non-credit discount on purchased credit deterioration (PCD) loans and net unearned fees related to PPP loans at ~~June~~September 30, 2021 and December 31, 2020.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled ~~$84.1~~$83.4 million and $90.2 million at ~~June~~September 30, 2021 and December 31, 2020, respectively, and is presented separately in the consolidated statements of financial condition.

Valley transferred and sold approximately $30.0 million of residential mortgage loans from the loan portfolio to loans held for sale during the ~~six~~nine months ended ~~June~~September 30, 2020. Excluding the loan transfers, there were 0no other material sales of loans from the held for investment portfolio during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

Credit Risk Management

For all of its loan types, Valley adheres to a credit policy designed to minimize credit risk while generating the maximum income given the level of risk appetite. Management reviews and approves these policies and procedures on a regular basis with subsequent approval by the Board of Directors annually. Credit authority relating to a significant dollar percentage of the overall portfolio is centralized and controlled by the Credit Risk Management Division and by the Credit Committee. A reporting system supplements the management review process by providing management with frequent reports concerning loan production, loan quality, internal loan classification,

concentrations of credit, loan delinquencies, non-performing, and potential problem loans. Loan portfolio diversification is an important factor utilized by Valley to manage its risk across business sectors and through cyclical economic circumstances. See Valley’s Annual Report on Form 10-K for the year ended December 31, 2020 for further details.

Credit Quality

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


		Past Due and Non-Accrual Loans																	Past Due and Non-Accrual Loans
		30-59 Days Past Due Loans		60-89 Days Past Due Loans		90 Days or More Past Due Loans		Non-Accrual Loans		Total Past Due Loans		Current Loans		Total Loans		Non-Accrual Loans Without Allowance for Credit Losses			30-59 Days Past Due Loans		60-89 Days Past Due Loans		90 Days or More Past Due Loans		Non-Accrual Loans		Total Past Due Loans		Current Loans		Total Loans		Non-Accrual Loans Without Allowance for Credit Losses
		(in thousands)																	(in thousands)
June 30, 2021
September 30, 2021																		September 30, 2021
Commercial and industrial	Commercial and industrial	$	3,867	$	1,361	$	2,351	$	102,594	$	110,173	$	5,974,282	$	6,084,455	$	9,550	Commercial and industrial	$	2,677	$	985	$	2,083	$	100,614	$	106,359	$	5,528,901	$	5,635,260	$	10,407
Commercial real estate:	Commercial real estate:																	Commercial real estate:
Commercial real estate	Commercial real estate	40,524		11,451		1,948		58,893		112,816		17,399,326		17,512,142		37,116		Commercial real estate	22,956		5,897		1,942		95,843		126,638		17,785,432		17,912,070		55,621
Construction	Construction	0		0		0		17,660		17,660		1,735,178		1,752,838		0		Construction	—		—		—		17,653		17,653		1,786,927		1,804,580		—
Total commercial real estate loans	Total commercial real estate loans	40,524		11,451		1,948		76,553		130,476		19,134,504		19,264,980		37,116		Total commercial real estate loans	22,956		5,897		1,942		113,496		144,291		19,572,359		19,716,650		55,621
Residential mortgage	Residential mortgage	8,479		1,608		956		35,941		46,984		4,179,991		4,226,975		16,807		Residential mortgage	9,293		974		1,002		33,648		44,917		4,287,505		4,332,422		21,032
Consumer loans:	Consumer loans:																	Consumer loans:
Home equity	Home equity	592		325		0		4,431		5,348		405,508		410,856		48		Home equity	606		225		—		3,541		4,372		398,286		402,658		5
Automobile	Automobile	5,521		636		441		389		6,987		1,524,275		1,531,262		0		Automobile	4,218		555		233		420		5,426		1,558,272		1,563,698		—
Other consumer	Other consumer	129		24		22		104		279		938,647		938,926		0		Other consumer	639		837		92		112		1,680		954,446		956,126		—
Total consumer loans	Total consumer loans	6,242		985		463		4,924		12,614		2,868,430		2,881,044		48		Total consumer loans	5,463		1,617		325		4,073		11,478		2,911,004		2,922,482		5
Total	Total	$	59,112	$	15,405	$	5,718	$	220,012	$	300,247	$	32,157,207	$	32,457,454	$	63,521	Total	$	40,389	$	9,473	$	5,352	$	251,831	$	307,045	$	32,299,769	$	32,606,814	$	87,065


		Past Due and Non-Accrual Loans																	Past Due and Non-Accrual Loans
		30-59 Days Past Due Loans		60-89 Days Past Due Loans		90 Days or More Past Due Loans		Non-Accrual Loans		Total Past Due Loans		Current Loans		Total Loans		Non-Accrual Loans Without Allowance for Credit Losses			30-59 Days Past Due Loans		60-89 Days Past Due Loans		90 Days or More Past Due Loans		Non-Accrual Loans		Total Past Due Loans		Current Loans		Total Loans		Non-Accrual Loans Without Allowance for Credit Losses
		(in thousands)																	(in thousands)
December 31, 2020	December 31, 2020																	December 31, 2020
Commercial and industrial	Commercial and industrial	$	6,393	$	2,252	$	9,107	$	106,693	$	124,445	$	6,737,263	$	6,861,708	$	4,075	Commercial and industrial	$	6,393	$	2,252	$	9,107	$	106,693	$	124,445	$	6,737,263	$	6,861,708	$	4,075
Commercial real estate:	Commercial real estate:																	Commercial real estate:
Commercial real estate	Commercial real estate	35,030		1,326		993		46,879		84,228		16,640,770		16,724,998		32,416		Commercial real estate	35,030		1,326		993		46,879		84,228		16,640,770		16,724,998		32,416
Construction	Construction	315		0		0		84		399		1,745,426		1,745,825		0		Construction	315		—		—		84		399		1,745,426		1,745,825		—
Total commercial real estate loans	Total commercial real estate loans	35,345		1,326		993		46,963		84,627		18,386,196		18,470,823		32,416		Total commercial real estate loans	35,345		1,326		993		46,963		84,627		18,386,196		18,470,823		32,416
Residential mortgage	Residential mortgage	17,717		10,351		3,170		25,817		57,055		4,126,688		4,183,743		11,610		Residential mortgage	17,717		10,351		3,170		25,817		57,055		4,126,688		4,183,743		11,610
Consumer loans:	Consumer loans:																	Consumer loans:
Home equity	Home equity	953		492		0		4,936		6,381		425,172		431,553		50		Home equity	953		492		—		4,936		6,381		425,172		431,553		50
Automobile	Automobile	8,056		1,107		245		338		9,746		1,346,209		1,355,955		0		Automobile	8,056		1,107		245		338		9,746		1,346,209		1,355,955		—
Other consumer	Other consumer	1,248		224		26		535		2,033		911,297		913,330		0		Other consumer	1,248		224		26		535		2,033		911,297		913,330		—
Total consumer loans	Total consumer loans	10,257		1,823		271		5,809		18,160		2,682,678		2,700,838		50		Total consumer loans	10,257		1,823		271		5,809		18,160		2,682,678		2,700,838		50
Total	Total	$	69,712	$	15,752	$	13,541	$	185,282	$	284,287	$	31,932,825	$	32,217,112	$	48,151	Total	$	69,712	$	15,752	$	13,541	$	185,282	$	284,287	$	31,932,825	$	32,217,112	$	48,151

Credit quality indicators. Valley utilizes an internal loan classification system as a means of reporting problem loans within commercial and industrial, commercial real estate, and construction loan portfolio classes. Under Valley’s internal risk rating system, loan relationships could be classified as "Pass," "Special Mention," "Substandard," "Doubtful," and "Loss." Substandard loans include loans that exhibit well-defined weakness and are characterized by the distinct possibility that Valley will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, based on currently existing facts, conditions and values, highly questionable and improbable. Loans classified as Loss are those considered uncollectible with insignificant value and are charged-off immediately to the allowance for loan losses, and, therefore, not presented in the table below. Loans that do not currently pose a sufficient risk to warrant classification in one of the aforementioned categories but pose weaknesses that deserve management’s close attention are deemed Special Mention. Loans rated as Pass do not currently pose any identified risk and can range from the highest to average quality, depending on the degree of potential risk. Risk ratings are updated any time the situation warrants.

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


		Term Loans																			Term Loans
		Amortized Cost Basis by Origination Year																			Amortized Cost Basis by Origination Year
June 30, 2021		2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
September 30, 2021																				September 30, 2021	2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
		(in thousands)																			(in thousands)
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	1,539,921	$	1,227,478	$	508,228	$	438,246	$	162,119	$	409,413	$	1,571,927	$	225	$	5,857,557	Pass	$	1,526,393	$	840,868	$	462,843	$	388,482	$	149,991	$	328,289	$	1,716,736	$	269	$	5,413,871
Special Mention	Special Mention	1,282		1,550		1,476		11,182		2,159		17,041		59,376		64		94,130		Special Mention	1,809		1,558		1,342		10,770		1,930		14,950		59,905		53		92,317
Substandard	Substandard	3,325		8,658		4,366		8,803		859		1,374		17,141		321		44,847		Substandard	4,587		6,507		3,972		7,853		886		2,532		15,066		288		41,691
Doubtful	Doubtful	129		0		2,739		0		16,370		68,683		0		0		87,921		Doubtful	—		—		2,736		5		16,364		68,276		—		—		87,381

Total commercial and industrial	Total commercial and industrial	$	1,544,657	$	1,237,686	$	516,809	$	458,231	$	181,507	$	496,511	$	1,648,444	$	610	$	6,084,455	Total commercial and industrial	$	1,532,789	$	848,933	$	470,893	$	407,110	$	169,171	$	414,047	$	1,791,707	$	610	$	5,635,260
Commercial real estate	Commercial real estate																			Commercial real estate
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	2,100,741	$	3,055,880	$	2,875,727	$	2,005,122	$	1,552,673	$	4,978,293	$	174,277	$	12,849	$	16,755,562	Pass	$	3,178,182	$	2,936,284	$	2,801,710	$	1,851,162	$	1,498,151	$	4,716,223	$	170,763	$	12,753	$	17,165,228
Special Mention	Special Mention	2,000		51,271		58,418		44,118		43,019		184,694		38,615		0		422,135		Special Mention	1,988		45,305		44,596		43,593		51,875		169,460		38,594		—		395,411
Substandard	Substandard	849		22,209		32,935		39,756		73,103		162,866		2,531		0		334,249		Substandard	743		33,817		39,817		40,568		68,190		165,574		2,531		—		351,240
Doubtful	Doubtful	0		0		0		0		0		196		0		0		196		Doubtful	—		—		—		—		—		191		—		—		191

Total commercial real estate	Total commercial real estate	$	2,103,590	$	3,129,360	$	2,967,080	$	2,088,996	$	1,668,795	$	5,326,049	$	215,423	$	12,849	$	17,512,142	Total commercial real estate	$	3,180,913	$	3,015,406	$	2,886,123	$	1,935,323	$	1,618,216	$	5,051,448	$	211,888	$	12,753	$	17,912,070
Construction	Construction																			Construction
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	112,491	$	147,431	$	87,130	$	78,332	$	6,656	$	29,216	$	1,251,972	$	0	$	1,713,228	Pass	$	160,031	$	109,843	$	62,330	$	65,581	$	6,181	$	28,498	$	1,329,163	$	—	$	1,761,627
Special Mention	Special Mention	0		0		1,026		0		0		1,714		8,871		0		11,611		Special Mention	4,131		—		1,018		—		—		—		9,497		—		14,646
Substandard	Substandard	0		28		16		331		0		17,842		9,782		0		27,999		Substandard	—		23		13		646		—		17,842		9,783		—		28,307

Total construction	Total construction	$	112,491	$	147,459	$	88,172	$	78,663	$	6,656	$	48,772	$	1,270,625	$	0	$	1,752,838	Total construction	$	164,162	$	109,866	$	63,361	$	66,227	$	6,181	$	46,340	$	1,348,443	$	—	$	1,804,580


		Term Loans																			Term Loans
		Amortized Cost Basis by Origination Year																			Amortized Cost Basis by Origination Year
December 31, 2020	December 31, 2020	2020		2019		2018		2017		2016		Prior to 2016		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total		December 31, 2020	2020		2019		2018		2017		2016		Prior to 2016		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
		(in thousands)																			(in thousands)
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	3,058,596	$	605,112	$	556,284	$	212,215	$	162,483	$	337,484	$	1,677,559	$	350	$	6,610,083	Pass	$	3,058,596	$	605,112	$	556,284	$	212,215	$	162,483	$	337,484	$	1,677,559	$	350	$	6,610,083
Special Mention	Special Mention	819		10,236		2,135		9,502		10,228		14,165		49,883		51		97,019		Special Mention	819		10,236		2,135		9,502		10,228		14,165		49,883		51		97,019
Substandard	Substandard	5,215		3,876		12,481		1,798		4,215		12,965		18,913		462		59,925		Substandard	5,215		3,876		12,481		1,798		4,215		12,965		18,913		462		59,925
Doubtful	Doubtful	0		5,203		1		17,010		2,596		69,871		0		0		94,681		Doubtful	—		5,203		1		17,010		2,596		69,871		—		—		94,681

Total commercial and industrial	Total commercial and industrial	$	3,064,630	$	624,427	$	570,901	$	240,525	$	179,522	$	434,485	$	1,746,355	$	863	$	6,861,708	Total commercial and industrial	$	3,064,630	$	624,427	$	570,901	$	240,525	$	179,522	$	434,485	$	1,746,355	$	863	$	6,861,708
Commercial real estate	Commercial real estate																			Commercial real estate
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	3,096,549	$	3,052,076	$	2,230,047	$	1,767,528	$	1,798,137	$	3,916,990	$	199,145	$	15,532	$	16,076,004	Pass	$	3,096,549	$	3,052,076	$	2,230,047	$	1,767,528	$	1,798,137	$	3,916,990	$	199,145	$	15,532	$	16,076,004
Special Mention	Special Mention	50,193		68,203		44,336		48,813		66,845		109,295		1,705		0		389,390		Special Mention	50,193		68,203		44,336		48,813		66,845		109,295		1,705		—		389,390
Substandard	Substandard	18,936		17,049		30,997		59,618		11,541		118,725		2,531		0		259,397		Substandard	18,936		17,049		30,997		59,618		11,541		118,725		2,531		—		259,397
Doubtful	Doubtful	0		0		0		0		0		207		0		0		207		Doubtful	—		—		—		—		—		207		—		—		207

Total commercial real estate	Total commercial real estate	$	3,165,678	$	3,137,328	$	2,305,380	$	1,875,959	$	1,876,523	$	4,145,217	$	203,381	$	15,532	$	16,724,998	Total commercial real estate	$	3,165,678	$	3,137,328	$	2,305,380	$	1,875,959	$	1,876,523	$	4,145,217	$	203,381	$	15,532	$	16,724,998
Construction	Construction																			Construction
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	145,246	$	120,800	$	111,174	$	15,497	$	47,971	$	20,029	$	1,199,034	$	0	$	1,659,751	Pass	$	145,246	$	120,800	$	111,174	$	15,497	$	47,971	$	20,029	$	1,199,034	$	—	$	1,659,751
Special Mention	Special Mention	0		1,043		0		0		9,996		17,414		47,311		0		75,764		Special Mention	—		1,043		—		—		9,996		17,414		47,311		—		75,764
Substandard	Substandard	0		26		246		2,628		17		380		7,013		0		10,310		Substandard	—		26		246		2,628		17		380		7,013		—		10,310

Total construction	Total construction	$	145,246	$	121,869	$	111,420	$	18,125	$	57,984	$	37,823	$	1,253,358	$	0	$	1,745,825	Total construction	$	145,246	$	121,869	$	111,420	$	18,125	$	57,984	$	37,823	$	1,253,358	$	—	$	1,745,825

For residential mortgages, automobile, home equity and other consumer loan portfolio classes, Valley also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the amortized cost in those loan classes based on payment activity by origination year as of ~~June~~September 30, 2021 and December 31, 2020.


		Term Loans																			Term Loans
		Amortized Cost Basis by Origination Year																			Amortized Cost Basis by Origination Year
June 30, 2021		2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
September 30, 2021																				September 30, 2021	2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
		(in thousands)																			(in thousands)
Residential mortgage	Residential mortgage																			Residential mortgage
Performing	Performing	$	687,724	$	701,963	$	671,803	$	519,568	$	446,367	$	1,108,317	$	68,012	$	0	$	4,203,754	Performing	$	1,084,533	$	661,418	$	619,942	$	467,876	$	405,847	$	1,019,676	$	60,510	$	—	$	4,319,802
90 days or more past due	90 days or more past due	0		1,719		1,852		2,021		3,907		13,722		0		0		23,221		90 days or more past due	—		234		2,093		4,072		3,150		3,071		—		—		12,620
Total residential mortgage	Total residential mortgage	$	687,724	$	703,682	$	673,655	$	521,589	$	450,274	$	1,122,039	$	68,012	$	0	$	4,226,975	Total residential mortgage	$	1,084,533	$	661,652	$	622,035	$	471,948	$	408,997	$	1,022,747	$	60,510	$	—	$	4,332,422
Consumer loans	Consumer loans																			Consumer loans
Home equity	Home equity																			Home equity
Performing	Performing	$	7,120	$	7,314	$	8,925	$	9,332	$	6,946	$	15,485	$	307,985	$	46,238	$	409,345	Performing	$	11,096	$	6,593	$	8,055	$	8,745	$	6,031	$	14,327	$	303,235	$	43,502	$	401,584
90 days or more past due	90 days or more past due	0		0		0		0		0		81		876		554		1,511		90 days or more past due	—		—		—		—		—		68		542		464		1,074
Total home equity	Total home equity	7,120		7,314		8,925		9,332		6,946		15,566		308,861		46,792		410,856		Total home equity	11,096		6,593		8,055		8,745		6,031		14,395		303,777		43,966		402,658
Automobile	Automobile																			Automobile
Performing	Performing	447,260		376,473		354,978		210,941		108,085		32,683		0		0		1,530,420		Performing	611,329		342,584		315,330		182,973		89,463		21,302		—		—		1,562,981
90 days or more past due	90 days or more past due	25		89		175		230		198		125		0		0		842		90 days or more past due	73		52		130		162		179		121		—		—		717
Total automobile	Total automobile	447,285		376,562		355,153		211,171		108,283		32,808		0		0		1,531,262		Total automobile	611,402		342,636		315,460		183,135		89,642		21,423		—		—		1,563,698
Other Consumer	Other Consumer																			Other Consumer
Performing	Performing	5,953		7,101		6,626		6,850		1,037		7,905		903,454		0		938,926		Performing	6,518		6,794		6,543		7,231		1,017		9,017		918,946		—		956,066
90 days or more past due	90 days or more past due	0		0		0		0		0		0		0		0		0		90 days or more past due	—		—		—		—		—		—		60		—		60
Total other consumer	Total other consumer	5,953		7,101		6,626		6,850		1,037		7,905		903,454		0		938,926		Total other consumer	6,518		6,794		6,543		7,231		1,017		9,017		919,006		—		956,126
Total consumer	Total consumer	$	460,358	$	390,977	$	370,704	$	227,353	$	116,266	$	56,279	$	1,212,315	$	46,792	$	2,881,044	Total consumer	$	629,016	$	356,023	$	330,058	$	199,111	$	96,690	$	44,835	$	1,222,783	$	43,966	$	2,922,482


		Term Loans																			Term Loans
		Amortized Cost Basis by Origination Year																			Amortized Cost Basis by Origination Year
December 31, 2020	December 31, 2020	2020		2019		2018		2017		2016		Prior to 2016		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total		December 31, 2020	2020		2019		2018		2017		2016		Prior to 2016		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
		(in thousands)																			(in thousands)
Residential mortgage	Residential mortgage																			Residential mortgage
Performing	Performing	$	730,764	$	778,161	$	684,761	$	582,650	$	380,723	$	943,616	$	64,798	$	0	$	4,165,473	Performing	$	730,764	$	778,161	$	684,761	$	582,650	$	380,723	$	943,616	$	64,798	$	—	$	4,165,473
90 days or more past due	90 days or more past due	0		3,085		4,212		3,464		4,144		3,365		0		0		18,270		90 days or more past due	—		3,085		4,212		3,464		4,144		3,365		—		—		18,270
Total residential mortgage	Total residential mortgage	$	730,764	$	781,246	$	688,973	$	586,114	$	384,867	$	946,981	$	64,798	$	0	$	4,183,743	Total residential mortgage	$	730,764	$	781,246	$	688,973	$	586,114	$	384,867	$	946,981	$	64,798	$	—	$	4,183,743
Consumer loans	Consumer loans																			Consumer loans
Home equity	Home equity																			Home equity
Performing	Performing	$	8,580	$	10,634	$	11,756	$	8,886	$	5,340	$	15,393	$	318,869	$	50,879	$	430,337	Performing	$	8,580	$	10,634	$	11,756	$	8,886	$	5,340	$	15,393	$	318,869	$	50,879	$	430,337
90 days or more past due	90 days or more past due	0		0		0		0		25		83		378		730		1,216		90 days or more past due	—		—		—		—		25		83		378		730		1,216
Total home equity	Total home equity	8,580		10,634		11,756		8,886		5,365		15,476		319,247		51,609		431,553		Total home equity	8,580		10,634		11,756		8,886		5,365		15,476		319,247		51,609		431,553
Automobile	Automobile																			Automobile
Performing	Performing	426,121		438,181		272,075		151,523		50,853		16,550		0		0		1,355,303		Performing	426,121		438,181		272,075		151,523		50,853		16,550		—		—		1,355,303
90 days or more past due	90 days or more past due	19		108		173		223		35		94		0		0		652		90 days or more past due	19		108		173		223		35		94		—		—		652
Total automobile	Total automobile	426,140		438,289		272,248		151,746		50,888		16,644		0		0		1,355,955		Total automobile	426,140		438,289		272,248		151,746		50,888		16,644		—		—		1,355,955
Other Consumer	Other Consumer																			Other Consumer
Performing	Performing	12,271		5,558		6,815		1,112		1,077		5,314		880,748		0		912,895		Performing	12,271		5,558		6,815		1,112		1,077		5,314		880,748		—		912,895
90 days or more past due	90 days or more past due	0		0		0		0		0		22		5		408		435		90 days or more past due	—		—		—		—		—		22		5		408		435
Total other consumer	Total other consumer	12,271		5,558		6,815		1,112		1,077		5,336		880,753		408		913,330		Total other consumer	12,271		5,558		6,815		1,112		1,077		5,336		880,753		408		913,330
Total consumer	Total consumer	$	446,991	$	454,481	$	290,819	$	161,744	$	57,330	$	37,456	$	1,200,000	$	52,017	$	2,700,838	Total consumer	$	446,991	$	454,481	$	290,819	$	161,744	$	57,330	$	37,456	$	1,200,000	$	52,017	$	2,700,838

Troubled debt restructured loans. From time to time, Valley may extend, restructure, or otherwise modify the terms of existing loans, on a case-by-case basis, to remain competitive and retain certain customers, as well as assist other customers who may be experiencing financial difficulties. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan (TDR).

Generally the concessions made for TDRs involve lowering the monthly payments on loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. The concessions may also involve payment deferrals but rarely result in the forgiveness of principal or accrued interest. In addition, Valley frequently obtains additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms of the loan and Valley’s underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

Performing TDRs (not reported as non-accrual loans) totaled ~~$64.1~~$64.8 million and $57.4 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively. Non-performing TDRs totaled ~~$89.8~~$116.7 million and $92.8 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

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


		Three Months Ended June 30,											Three Months Ended September 30,
		2021					2020						2021					2020
Troubled Debt Restructurings	Troubled Debt Restructurings	Number of Contracts	Pre-Modification Amortized Carrying Amount		Post-Modification Amortized Carrying Amount		Number of Contracts	Pre-Modification Amortized Carrying Amount		Post-Modification Amortized Carrying Amount		Troubled Debt Restructurings	Number of Contracts	Pre-Modification Amortized Carrying Amount		Post-Modification Amortized Carrying Amount		Number of Contracts	Pre-Modification Amortized Carrying Amount		Post-Modification Amortized Carrying Amount
		($ in thousands)											($ in thousands)
Commercial and industrial	Commercial and industrial	9	$	8,592	$	8,529	4	$	9,052	$	7,047	Commercial and industrial	4	$	2,446	$	2,414	28	$	31,237	$	30,938
Commercial real estate:	Commercial real estate:											Commercial real estate:
Commercial real estate	Commercial real estate	6	12,237		12,223		1	885		900		Commercial real estate	5	14,473		14,539		2	4,249		4,240
Construction	Construction	0	0		0		2	435		218		Construction	2	17,599		17,599		—	—		—
Total commercial real estate	Total commercial real estate	6	12,237		12,223		3	1,320		1,118		Total commercial real estate	7	32,072		32,138		2	4,249		4,240
Residential mortgage	Residential mortgage	2	1,089		1,079		0	0		0		Residential mortgage	4	356		350		1	247		247

Consumer												Consumer	—	—		—		1	72		72
Total	Total	17	$	21,918	$	21,831	7	$	10,372	$	8,165	Total	15	$	34,874	$	34,902	32	$	35,805	$	35,497


		Six Months Ended June 30,											Nine Months Ended September 30,
		2021					2020						2021					2020
Troubled Debt Restructurings	Troubled Debt Restructurings	Number of Contracts	Pre-Modification Amortized Carrying Amount		Post-Modification Amortized Carrying Amount		Number of Contracts	Pre-Modification Amortized Carrying Amount		Post-Modification Amortized Carrying Amount		Troubled Debt Restructurings	Number of Contracts	Pre-Modification Amortized Carrying Amount		Post-Modification Amortized Carrying Amount		Number of Contracts	Pre-Modification Amortized Carrying Amount		Post-Modification Amortized Carrying Amount
		($ in thousands)											($ in thousands)
Commercial and industrial	Commercial and industrial	13	$	20,855	$	19,648	20	$	22,196	$	19,674	Commercial and industrial	16	$	21,822	$	19,060	33	$	40,537	$	38,204
Commercial real estate:	Commercial real estate:											Commercial real estate:
Commercial real estate	Commercial real estate	6	12,237		12,223		2	4,748		4,762		Commercial real estate	11	26,710		26,730		4	8,996		9,000
Construction	Construction	0	0		0		2	435		218		Construction	2	17,599		17,599		—	—		—
Total commercial real estate	Total commercial real estate	6	12,237		12,223		4	5,183		4,980		Total commercial real estate	13	44,309		44,329		4	8,996		9,000
Residential mortgage	Residential mortgage	8	2,618		2,586		0	0		0		Residential mortgage	12	2,974		2,909		1	247		247
Consumer	Consumer	1	169		166		0	0		0		Consumer	1	170		163		1	72		72
Total	Total	28	$	35,879	$	34,623	24	$	27,379	$	24,654	Total	42	$	69,275	$	66,461	39	$	49,852	$	47,523

The total TDRs presented in the above table had allocated allowance for loan losses of ~~$4.5~~$8.2 million and ~~$8.4~~$18.7 million at ~~June~~September 30, 2021 and 2020, respectively. There were ~~$697~~$206 thousand and ~~$5.8~~$6.0 million of charge-offs related to TDRs for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. There were ~~$2.9~~$1.9 million and ~~$3.7~~$5.6 million of charge-offs ~~were~~ related to TDRs for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively. Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

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


		Three Months Ended June 30,							Three Months Ended September 30,
		2021			2020				2021			2020
Troubled Debt Restructurings Subsequently Defaulted	Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
		($ in thousands)							($ in thousands)
Commercial and industrial	Commercial and industrial	0	$	0	20	$	14,986	Commercial and industrial	—	$	—	30	$	17,496
Commercial real estate								Commercial real estate	1	419		—	—
Residential mortgage								Residential mortgage	1	129		—	—

Residential mortgage		1	445		1	220
Consumer		0	0		2	204
Total	Total	1	$	445	23	$	15,410	Total	2	$	548	30	$	17,496


		Six Months Ended June 30,							Nine Months Ended September 30,
		2021			2020				2021			2020
Troubled Debt Restructurings Subsequently Defaulted	Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
		($ in thousands)							($ in thousands)
Commercial and industrial	Commercial and industrial	15	$	12,384	20	$	14,986	Commercial and industrial	—	$	—	35	$	20,099

Commercial real estate								Commercial real estate	1	419		—	—
Residential mortgage	Residential mortgage	2	692		1	220		Residential mortgage	1	129		—	—
Consumer	Consumer	0	0		2	204		Consumer	—	—		1	18
Total	Total	17	$	13,076	23	$	15,410	Total	2	$	548	36	$	20,117

Forbearance. In response to the COVID-19 pandemic and its economic impact to certain customers, Valley implemented short-term loan modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment, when requested by customers, all of which were insignificant. As of ~~June~~September 30, 2021, Valley had approximately ~~$142~~$98.6 million of outstanding loans remaining in their payment deferral period under short-term modifications as compared to ~~$361~~$361.0 million of loans in deferral at December 31, 2020. Under the applicable guidance, none of these loans were classified as TDRs at ~~June~~September 30, 2021 and December 31, 2020.

Loans in Process of Foreclosure. Other real estate owned (OREO) totaled ~~$4.5~~$4.0 million and $5.1 million at ~~June~~September 30, 2021 and December 31, 2020, respectively. OREO included foreclosed residential real estate properties which ~~were~~were immaterial at ~~June~~September 30, 2021 and totaled $1.0 million at December 31, 2020. Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled ~~$2.0~~$3.0 million and $1.9 million at ~~June~~September 30, 2021 and December 31, 2020, 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 ~~June~~September 30, 2021 and December 31, 2020:


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in thousands)					(in thousands)

Commercial and industrial *	Commercial and industrial *	$	95,000	$	106,239	Commercial and industrial *	$	95,509	$	106,239

Commercial real estate	Commercial real estate	66,054		41,562		Commercial real estate	117,609		41,562

Residential mortgage	Residential mortgage	31,714		28,176		Residential mortgage	35,047		28,176
Home equity	Home equity	48		50		Home equity	5		50
Total	Total	$	192,816	$	176,027	Total	$	248,170	$	176,027

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

Allowance for Credit Losses for Loans

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


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in thousands)					(in thousands)
Components of allowance for credit losses for loans:	Components of allowance for credit losses for loans:					Components of allowance for credit losses for loans:
Allowance for loan losses	Allowance for loan losses	$	339,324	$	340,243	Allowance for loan losses	$	342,527	$	340,243
Allowance for unfunded credit commitments	Allowance for unfunded credit commitments	14,400		11,111		Allowance for unfunded credit commitments	14,400		11,111
Total allowance for credit losses for loans	Total allowance for credit losses for loans	$	353,724	$	351,354	Total allowance for credit losses for loans	$	356,927	$	351,354

The following table summarizes the provision for credit losses for loans for the periods indicated:

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
(in thousands)
Components of provision for credit losses for loans:
Provision for loan losses $ 5,810 $ 41,025 $ 14,502 $ 74,876
Provision for unfunded credit commitments 2,967 90 3,289 163
Total provision for credit losses for loans $ 8,777 $ 41,115 $ 17,791 $ 75,039


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in thousands)
Components of provision for credit losses for loans:
Provision for loan losses	$	3,496	$	30,833	$	17,998	$	105,709
Provision for unfunded credit commitments	—		187		3,289		350
Total provision for credit losses for loans	$	3,496	$	31,020	$	21,287	$	106,059

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


		Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total			Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total
		(in thousands)											(in thousands)
Three Months Ended June 30, 2021
Three Months Ended September 30, 2021												Three Months Ended September 30, 2021
Allowance for loan losses:	Allowance for loan losses:											Allowance for loan losses:
Beginning balance	Beginning balance	$	126,408	$	174,236	$	27,172	$	15,064	$	342,880	Beginning balance	$	109,689	$	189,139	$	25,303	$	15,193	$	339,324
Loans charged-off	Loans charged-off	(10,893)		0		(1)		(1,480)		(12,374)		Loans charged-off	(1,248)		—		—		(771)		(2,019)
Charged-off loans recovered	Charged-off loans recovered	678		665		191		1,474		3,008		Charged-off loans recovered	514		29		228		955		1,726
Net (charge-offs) recoveries	Net (charge-offs) recoveries	(10,215)		665		190		(6)		(9,366)		Net (charge-offs) recoveries	(734)		29		228		184		(293)
(Credit) provision for loan losses	(Credit) provision for loan losses	(6,504)		14,238		(2,059)		135		5,810		(Credit) provision for loan losses	(5,078)		10,553		(799)		(1,180)		3,496
Ending balance	Ending balance	$	109,689	$	189,139	$	25,303	$	15,193	$	339,324	Ending balance	$	103,877	$	199,721	$	24,732	$	14,197	$	342,527
Three Months Ended June 30, 2020
Three Months Ended September 30, 2020												Three Months Ended September 30, 2020
Allowance for losses:	Allowance for losses:											Allowance for losses:
Beginning balance	Beginning balance	$	127,437	$	111,585	$	29,456	$	14,864	$	283,342	Beginning balance	$	132,039	$	131,702	$	29,630	$	16,243	$	309,614

Loans charged-off	Loans charged-off	(14,024)		(27)		(5)		(2,601)		(16,657)		Loans charged-off	(13,965)		(695)		(7)		(2,458)		(17,125)
Charged-off loans recovered	Charged-off loans recovered	799		51		545		509		1,904		Charged-off loans recovered	428		100		31		1,151		1,710
Net (charge-offs) recoveries	Net (charge-offs) recoveries	(13,225)		24		540		(2,092)		(14,753)		Net (charge-offs) recoveries	(13,537)		(595)		24		(1,307)		(15,415)
Provision (credit) for loan losses	Provision (credit) for loan losses	17,827		20,093		(366)		3,471		41,025		Provision (credit) for loan losses	11,907		13,543		(1,040)		6,423		30,833
Ending balance	Ending balance	$	132,039	$	131,702	$	29,630	$	16,243	$	309,614	Ending balance	$	130,409	$	144,650	$	28,614	$	21,359	$	325,032


		Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total			Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total
		(in thousands)											(in thousands)
Six Months Ended June 30, 2021
Nine Months Ended September 30, 2021												Nine Months Ended September 30, 2021
Allowance for loan losses:	Allowance for loan losses:											Allowance for loan losses:
Beginning balance	Beginning balance	$	131,070	$	164,113	$	28,873	$	16,187	$	340,243	Beginning balance	$	131,070	$	164,113	$	28,873	$	16,187	$	340,243
Loans charged-off	Loans charged-off	(18,035)		(382)		(139)		(2,618)		(21,174)		Loans charged-off	(19,283)		(382)		(139)		(3,389)		(23,193)
Charged-off loans recovered	Charged-off loans recovered	2,267		734		348		2,404		5,753		Charged-off loans recovered	2,781		763		576		3,359		7,479
Net (charge-offs) recoveries	Net (charge-offs) recoveries	(15,768)		352		209		(214)		(15,421)		Net (charge-offs) recoveries	(16,502)		381		437		(30)		(15,714)
(Credit) provision for loan losses	(Credit) provision for loan losses	(5,613)		24,674		(3,779)		(780)		14,502		(Credit) provision for loan losses	(10,691)		35,227		(4,578)		(1,960)		17,998
Ending balance	Ending balance	$	109,689	$	189,139	$	25,303	$	15,193	$	339,324	Ending balance	$	103,877	$	199,721	$	24,732	$	14,197	$	342,527
Six Months Ended June 30, 2020
Nine Months Ended September 30, 2020												Nine Months Ended September 30, 2020
Allowance for losses:	Allowance for losses:											Allowance for losses:
Beginning balance	Beginning balance	$	104,059	$	45,673	$	5,060	$	6,967	$	161,759	Beginning balance	$	104,059	$	45,673	$	5,060	$	6,967	$	161,759
Impact of ASU 2016-13 adoption*	Impact of ASU 2016-13 adoption*	15,169		49,797		20,575		6,990		92,531		Impact of ASU 2016-13 adoption*	15,169		49,797		20,575		6,990		92,531
Beginning balance, adjusted	Beginning balance, adjusted	119,228		95,470		25,635		13,957		254,290		Beginning balance, adjusted	119,228		95,470		25,635		13,957		254,290
Loans charged-off	Loans charged-off	(17,384)		(71)		(341)		(5,166)		(22,962)		Loans charged-off	(31,349)		(766)		(348)		(7,624)		(40,087)
Charged-off loans recovered	Charged-off loans recovered	1,368		144		595		1,303		3,410		Charged-off loans recovered	1,796		244		626		2,454		5,120
Net (charge-offs) recoveries	Net (charge-offs) recoveries	(16,016)		73		254		(3,863)		(19,552)		Net (charge-offs) recoveries	(29,553)		(522)		278		(5,170)		(34,967)
Provision for loan losses	Provision for loan losses	28,827		36,159		3,741		6,149		74,876		Provision for loan losses	40,734		49,702		2,701		12,572		105,709
Ending balance	Ending balance	$	132,039	$	131,702	$	29,630	$	16,243	$	309,614	Ending balance	$	130,409	$	144,650	$	28,614	$	21,359	$	325,032

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

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


		Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total			Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total
		(in thousands)											(in thousands)
June 30, 2021
September 30, 2021												September 30, 2021
Allowance for loan losses:	Allowance for loan losses:											Allowance for loan losses:
Individually evaluated for credit losses	Individually evaluated for credit losses	$	64,275	$	4,788	$	618	$	885	$	70,566	Individually evaluated for credit losses	$	62,661	$	8,093	$	489	$	574	$	71,817
Collectively evaluated for credit losses	Collectively evaluated for credit losses	45,414		184,351		24,685		14,308		268,758		Collectively evaluated for credit losses	41,216		191,628		24,243		13,623		270,710
Total	Total	$	109,689	$	189,139	$	25,303	$	15,193	$	339,324	Total	$	103,877	$	199,721	$	24,732	$	14,197	$	342,527
Loans:	Loans:											Loans:
Individually evaluated for credit losses	Individually evaluated for credit losses	$	120,559	$	89,464	$	38,660	$	4,488	$	253,171	Individually evaluated for credit losses	$	117,656	$	143,181	$	42,441	$	3,264	$	306,542
Collectively evaluated for credit losses	Collectively evaluated for credit losses	5,963,896		19,175,516		4,188,315		2,876,556		32,204,283		Collectively evaluated for credit losses	5,517,604		19,573,469		4,289,981		2,919,218		32,300,272
Total	Total	$	6,084,455	$	19,264,980	$	4,226,975	$	2,881,044	$	32,457,454	Total	$	5,635,260	$	19,716,650	$	4,332,422	$	2,922,482	$	32,606,814
December 31, 2020	December 31, 2020											December 31, 2020
Allowance for loan losses:	Allowance for loan losses:											Allowance for loan losses:
Individually evaluated for credit losses	Individually evaluated for credit losses	$	73,063	$	1,338	$	1,206	$	264	$	75,871	Individually evaluated for credit losses	$	73,063	$	1,338	$	1,206	$	264	$	75,871
Collectively evaluated for credit losses	Collectively evaluated for credit losses	58,007		162,775		27,667		15,923		264,372		Collectively evaluated for credit losses	58,007		162,775		27,667		15,923		264,372
Total	Total	$	131,070	$	164,113	$	28,873	$	16,187	$	340,243	Total	$	131,070	$	164,113	$	28,873	$	16,187	$	340,243
Loans:	Loans:											Loans:
Individually evaluated for credit losses	Individually evaluated for credit losses	$	131,057	$	61,754	$	35,151	$	1,631	$	229,593	Individually evaluated for credit losses	$	131,057	$	61,754	$	35,151	$	1,631	$	229,593
Collectively evaluated for credit losses	Collectively evaluated for credit losses	6,730,651		18,409,069		4,148,592		2,699,207		31,987,519		Collectively evaluated for credit losses	6,730,651		18,409,069		4,148,592		2,699,207		31,987,519
Total	Total	$	6,861,708	$	18,470,823	$	4,183,743	$	2,700,838	$	32,217,112	Total	$	6,861,708	$	18,470,823	$	4,183,743	$	2,700,838	$	32,217,112

Note 8.9. Goodwill and Other Intangible Assets

Goodwill totaled $1.4 billion at both ~~June~~September 30, 2021 and December 31, 2020. There were no changes to the carrying amounts of goodwill allocated to Valley’s business segments, or reporting units thereof, for goodwill impairment analysis (as reported in Valley’s Annual Report on Form 10-K for the year ended December 31, 2020).

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

date. ~~As a result, there~~There was 0no impairment of goodwill recognized during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

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


		Gross Intangible Assets		Accumulated Amortization		Valuation Allowance		Net Intangible Assets			Gross Intangible Assets		Accumulated Amortization		Valuation Allowance		Net Intangible Assets
		(in thousands)									(in thousands)
June 30, 2021
September 30, 2021										September 30, 2021
Loan servicing rights	Loan servicing rights	$	109,678	$	(86,681)	$	(32)	$	22,965	Loan servicing rights	$	111,978	$	(89,039)	$	—	$	22,939
Core deposits	Core deposits	101,160		(59,590)		0		41,570		Core deposits	101,160		(62,511)		—		38,649
Other	Other	3,945		(2,957)		0		988		Other	3,945		(3,008)		—		937
Total other intangible assets	Total other intangible assets	$	214,783	$	(149,228)	$	(32)	$	65,523	Total other intangible assets	$	217,083	$	(154,558)	$	—	$	62,525
December 31, 2020	December 31, 2020									December 31, 2020
Loan servicing rights	Loan servicing rights	$	103,150	$	(80,340)	$	(865)	$	21,945	Loan servicing rights	$	103,150	$	(80,340)	$	(865)	$	21,945
Core deposits	Core deposits	101,160		(53,747)		0		47,413		Core deposits	101,160		(53,747)		—		47,413
Other	Other	3,945		(2,854)		0		1,091		Other	3,945		(2,854)		—		1,091
Total other intangible assets	Total other intangible assets	$	208,255	$	(136,941)	$	(865)	$	70,449	Total other intangible assets	$	208,255	$	(136,941)	$	(865)	$	70,449

Loan servicing rights are accounted for using the amortization method. Under this method, Valley amortizes the loan servicing assets over the period of the economic life of the assets arising from estimated net servicing revenues. On a quarterly basis, Valley stratifies its loan servicing assets into groupings based on risk characteristics and assesses each group for impairment based on fair value. Impairment charges on loan servicing rights are recognized in earnings when the book value of a stratified group of loan servicing rights exceeds its estimated fair value. Valley recorded net recoveries of impairment charges on its loan servicing rights totaling ~~$42~~$32 thousand and ~~$833~~$864 thousand for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. Valley recorded net impairment charges totaling ~~$669~~$188 thousand and ~~$778~~$966 thousand for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively. See the “Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis” section of Note 56 for additional information regarding the fair valuation.

Core deposits are amortized using an accelerated method and have a weighted average amortization period of 8.9 years. The line item labeled “Other” included in the table above primarily consists of customer lists and covenants not to compete, which are amortized over their expected lives generally using a straight-line method and have a weighted average amortization period of approximately 7.6 years. Valley evaluates core deposits and other intangibles for impairment when an indication of impairment exists. ~~NaN~~No impairment was recognized during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

The following table presents the estimated future amortization expense of other intangible assets for the remainder of 2021 through 2025:


		Loan Servicing Rights		Core Deposits		Other			Loan Servicing Rights		Core Deposits		Other
		(in thousands)							(in thousands)
2021	2021	$	2,331	$	5,764	$	103	2021	$	1,063	$	2,843	$	51
2022	2022	3,901		9,876		191		2022	3,705		9,876		191
2023	2023	3,099		8,146		131		2023	3,015		8,146		131
2024	2024	2,492		6,537		117		2024	2,473		6,537		117
2025	2025	2,030		4,929		103		2025	2,047		4,929		103

Valley recognized amortization expense on other intangible assets, including net (recoveries of) impairment charges on loan servicing rights, totaling approximately ~~$5.4~~$5.3 million and ~~$6.7~~$6.4 million for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and ~~$11.5~~$16.8 million and ~~$12.2~~$18.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

Note 9.10. Borrowed Funds

Short-Term Borrowings

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


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in thousands)					(in thousands)
FHLB advances	FHLB advances	$	700,000	$	1,000,000	FHLB advances	$	600,000	$	1,000,000
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	154,378		147,958		Securities sold under agreements to repurchase	183,346		147,958
Total short-term borrowings	Total short-term borrowings	$	854,378	$	1,147,958	Total short-term borrowings	$	783,346	$	1,147,958

The weighted average interest rate for short-term ~~borrowings~~FHLB advances was 0.35 percent and 0.38 percent at ~~June~~September 30, 2021 and December 31, 2020, respectively. The interest payments on the FHLB advances totaling ~~$700~~$600 million were hedged with interest rate swaps at ~~June~~September 30, 2021. See Note 1112 for additional details.

Long-Term Borrowings

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


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in thousands)					(in thousands)
FHLB advances, net (1)	FHLB advances, net (1)	$	947,206	$	1,592,252	FHLB advances, net (1)	$	789,185	$	1,592,252
Subordinated debt, net (2)	Subordinated debt, net (2)	638,484		403,413		Subordinated debt, net (2)	638,259		403,413
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	300,000		300,000		Securities sold under agreements to repurchase	—		300,000
Total long-term borrowings	Total long-term borrowings	$	1,885,690	$	2,295,665	Total long-term borrowings	$	1,427,444	$	2,295,665


(1)			FHLB advances ~~are~~is presented net of unamortized prepayment penalties and other purchase accounting adjustments totaling $2.6 million at December 31, 2020. The prepayment penalties and other purchase accounting adjustments were fully amortized at September 30, 2021.
(2)			Subordinated debt is presented net of unamortized debt issuance costs totaling ~~$6.4 billion~~$6.1 million and $2.7 million at ~~June~~September 30, 2021 and December 31, 2020, respectively.

FHLB Advances. Long-term FHLB advances had a weighted average interest rate of ~~1.91~~1.88 percent and 2.02 percent at ~~June~~September 30, 2021 and December 31, 2020, respectively. FHLB advances are secured by pledges of certain eligible collateral, including but not limited to, U.S. government and agency mortgage-backed securities and a blanket assignment of qualifying first lien mortgage loans, consisting of both residential mortgage and commercial real estate loans.

In June 2021, Valley prepaid approximately $248 million of long-term FHLB advances with maturities scheduled through 2025 and a weighted average effective interest rate of 1.82 percent. The transaction was funded with excess cash liquidity and accounted for as an early debt extinguishment resulting in a loss of $8.4 million reported within non-interest expense for the ~~three and six~~nine months ended ~~June~~September 30, 2021.

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


Year	Year	Amount		Year	Amount
		(in thousands)			(in thousands)
2021		$	157,870

2023	2023	350,000		2023	$	350,000
2024	2024	165,000		2024	165,000
2025	2025	273,000		2025	273,000

Total long-term FHLB advances	Total long-term FHLB advances	$	945,870	Total long-term FHLB advances	$	788,000

There are 0no FHLB advances with scheduled repayments in years ~~2021~~2023 and thereafter, reported in the table above, which are callable for early redemption by the FHLB during the next 12 months.

Subordinated debt. On April 1, 2021, Valley redeemed, at par value, $60 million of its callable 6.25 percent subordinated notes originally due April 1, 2026. No gain or loss was incurred on this transaction.

On May 25, 2021, Valley issued $300 million of 3.00 percent Fixed-to-Floating Rate subordinated notes due June 15, 2031. The subordinated notes are callable in whole or in part on or after June 15, 2026 or upon the occurrence of certain events. Interest on the subordinated notes during the initial five year term through June 15, 2026 is payable semi-annually on June 15 and December 15. Thereafter, interest is expected to be set based on three-month Secured Overnight Financing Rate (SOFR) plus 236 basis points and paid quarterly through maturity of the notes. At ~~June~~September 30, 2021, the subordinated notes had a carrying value of ~~$296.0~~$296.2 million, net of unamortized debt issuance costs. During June 2021, Valley entered into an interest rate swap transaction used to hedge the change in the fair value of the $300 million in subordinated notes. See Note 1112 for additional details.

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

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

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

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

Long-term securities sold under agreements to repurchase (repos). The long-term repos had a weighted average interest rate of ~~3.41 percent and~~ 3.37 percent at ~~June 30, 2021 and~~ December 31, ~~2020, respectively. All long-term~~2020. Long-term repos outstanding as of ~~June 30, 2021 have maturities in~~December 31, 2020 were repaid upon their respective contractual maturity dates during the ~~second half of~~third quarter 2021.

Note ~~10.~~11. Stock–Based Compensation

On April 19, 2021, Valley's shareholders approved the Valley National Bancorp 2021 Incentive Compensation Plan (the 2021 Plan) administered by the Compensation and Human Resources Committee (the Committee) as appointed by Valley's Board of Directors. The purposes of the 2021 Plan are to provide additional incentives to officers and key employees of Valley and its subsidiaries, whose substantial contributions are essential to the continued growth and success of Valley, and to attract and retain officers, other employees and non-employee directors whose efforts will result in the continued and long-term growth of Valley's business. Upon shareholder approval of the 2021 Plan, Valley ceased granting new awards under the Valley National Bancorp 2016 Long-Term Stock Incentive Plan (the 2016 Plan).

Under the 2021 Plan, Valley may issue awards to its officers, employees and non-employee directors in amounts up to 9 million shares of common stock (less 1 share for every share granted after December 31, 2020 under the 2016 Plan) in the form of stock appreciation rights, both incentive and non-qualified stock options, restricted stock and restricted stock units (RSUs). If after December 31, 2020 any award granted under the 2016 Plan is forfeited, expires, settled for cash, withheld for tax obligations, or otherwise does not result in the issuance of all or a portion of the shares subject to such award, the shares will be added to the 2021 Plan's share reserve. As of ~~June~~September 30, 2021, 7.4 million shares of common stock were available for issuance under the 2021 Plan. The essential features of each award are described in the award agreement relating to that award. The grant, exercise, vesting, settlement or payment of an award may be based upon the fair value of Valley's common stock on the last sale price reported for Valley's common stock on such date or the last sale price reported preceding such date, except for ~~performance-~~

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

Valley granted ~~109~~30 thousand and ~~142~~26 thousand of time-based RSUs during the three months ended ~~June~~September 30, 2021 and 2020, respectively, and 1.2 million for both the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. Generally, time-based RSUs vest ratably over a three-year period. The average grant date fair value of the RSUs granted during the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was ~~$11.63~~$11.98 per share and ~~$10.48~~$10.41 per share, respectively.

Valley granted 604 thousand and 589 thousand of performance-based RSUs to certain executive officers for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. There were 0no grants of performance-based RSUs during the three months ended ~~June~~September 30, 2021 and 2020, respectively. The performance-based RSU awards include RSUs with vesting conditions based upon certain levels of growth in Valley's tangible book value per share plus dividends and RSUs with vesting conditions based upon Valley's total shareholder return as compared to its peer group. The RSUs “cliff” vest after three years based on the cumulative performance of Valley during that time period. The RSUs earn dividend equivalents (equal to cash dividends paid on Valley's common stock) over the applicable performance period. Dividend equivalents are accumulated and paid to the grantee at the vesting date or forfeited if the performance conditions are not met. The grant date fair value of the performance-based RSUs granted during the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was $11.75 per share and $10.82 per share, respectively.

Valley recorded total stock-based compensation expense of $5.2 million and ~~$4.2~~$4.1 million for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and ~~$10.7~~$15.9 million and ~~$8.2~~$12.3 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. The fair values of stock awards are expensed over the shorter of the vesting or required service period. As of ~~June~~September 30, 2021, the unrecognized amortization expense for all stock-based employee compensation totaled approximately ~~$28.9~~$23.9 million and will be recognized over an average remaining vesting period of approximately two years.

Note ~~11.~~12. Derivative Instruments and Hedging Activities

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

Fair Value Hedges of Fixed Rate Assets and Liabilities. Valley is exposed to changes in the fair value of fixed-rate subordinated debt due to changes in interest rates. From time to time, Valley uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the receipt of variable rate payments from a counterparty in exchange for Valley making fixed rate payments over the life of the agreements without the exchange of the underlying notional amount. For derivatives that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the loss or gain on the hedged item attributable to the hedged risk are recognized in earnings.

In June 2021, Valley entered into a $300 million forward-starting interest rate swap agreement with a notional amount of $300 million, maturing in June 2026, to hedge the change in the fair value of the 3.00 percent subordinated debt issued on May 28, 2021. Under the swap agreement, beginning in January 2022, Valley will receive fixed rate payments and pay variable rate amounts based on SOFR plus 2.187 percent.

Cash Flow Hedges of Interest Rate Risk. Valley’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, Valley uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the payment of either fixed or variable-rate amounts in exchange for the receipt of variable or fixed-rate amounts from a counterparty, respectively.

Non-designated Hedges. Derivatives not designated as hedges may be used to manage Valley’s exposure to interest rate movements or to provide service to customers but do not meet the requirements for hedge accounting under U.S. GAAP. Derivatives not designated as hedges are not entered into for speculative purposes.

Valley executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Valley executes with a third party, such that Valley minimizes its net risk exposure resulting from such transactions. As these interest rate swaps do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

Valley sometimes enters into risk participation agreements with external lenders where the banks are sharing their risk of default on the interest rate swaps on participated loans. Valley either pays or receives a fee depending on the participation type. Risk participation agreements are credit derivatives not designated as hedges. Credit derivatives are not speculative and are not used to manage interest rate risk in assets or liabilities. Changes in the fair value in credit derivatives are recognized directly in earnings. At ~~June~~September 30, 2021, Valley had 2627 credit swaps with an aggregate notional amount of ~~$215.8~~$263.9 million related to risk participation agreements.

At ~~June~~September 30, 2021, Valley had 2 “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. These derivatives include interest rate lock commitments provided to customers to fund certain residential mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. Valley enters into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rate on Valley's commitments to fund the loans as well as on its portfolio of mortgage loans held for sale.

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


		June 30, 2021						December 31, 2020							September 30, 2021						December 31, 2020
		Fair Value						Fair Value							Fair Value						Fair Value
		Other Assets		Other Liabilities		Notional Amount		Other Assets		Other Liabilities		Notional Amount			Other Assets		Other Liabilities		Notional Amount		Other Assets		Other Liabilities		Notional Amount
		(in thousands)													(in thousands)
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:													Derivatives designated as hedging instruments:
Cash flow hedge interest rate swaps	Cash flow hedge interest rate swaps	$	0	$	349	$	900,000	$	0	$	179	$	1,100,000	Cash flow hedge interest rate swaps	$	—	$	273	$	800,000	$	—	$	179	$	1,100,000
Fair value hedge interest rate swaps	Fair value hedge interest rate swaps	80		0		300,000		0		0		0		Fair value hedge interest rate swaps	—		316		300,000		—		—		—
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments	$	80	$	349	$	1,200,000	$	0	$	179	$	1,100,000	Total derivatives designated as hedging instruments	$	—	$	589	$	1,100,000	$	—	$	179	$	1,100,000
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:													Derivatives not designated as hedging instruments:
Interest rate swaps and other derivatives *	Interest rate swaps and other derivatives *	$	248,440	$	80,215	$	9,962,230	$	387,008	$	154,025	$	8,889,557	Interest rate swaps and other derivatives *	$	215,046	$	64,623	$	10,296,468	$	387,008	$	154,025	$	8,889,557
Mortgage banking derivatives	Mortgage banking derivatives	323		1,112		330,528		444		2,077		321,486		Mortgage banking derivatives	873		1,521		327,116		444		2,077		321,486
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	$	248,763	$	81,327	$	10,292,758	$	387,452	$	156,102	$	9,211,043	Total derivatives not designated as hedging instruments	$	215,919	$	66,144	$	10,623,584	$	387,452	$	156,102	$	9,211,043

* Other derivatives include risk participation agreements.

The Chicago Mercantile Exchange and London Clearing House variation margins are classified as a single-unit of account with the cash flow hedges and over-the-counter (OTC) non-designated derivative instruments. As a result, the fair value of the applicable derivative assets and liabilities are reported net of variation margin at ~~June~~September 30, 2021 and December 31, 2020 in the table above.

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

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
(in thousands)
Amount of (loss) gain reclassified from accumulated other comprehensive loss to interest expense $ (749) $ 438 $ (1,664) $ (177)
Amount of (loss) gain recognized in other comprehensive income (loss) (158) (1,773) 19 (3,253)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in thousands)
Amount of loss reclassified from accumulated other comprehensive loss to interest expense	$	(1,044)	$	(1,586)	$	(2,708)	$	(1,763)
Amount of (loss) gain recognized in other comprehensive income	(144)		95		(125)		3,158

The accumulated net after-tax losses related to effective cash flow hedges included in accumulated other comprehensive loss were $~~2.7~~2.0 million and $4.0 million at ~~June~~September 30, 2021 and December 31, 2020, respectively.

Amounts reported in accumulated other comprehensive loss related to cash flow interest rate derivatives are reclassified to interest expense as interest payments are made on the hedged variable interest rate liabilities. Valley estimates that $~~2.3~~1.8 million will be reclassified as an increase to interest expense over the next 12 months.

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
Derivative - interest rate swap:	Derivative - interest rate swap:									Derivative - interest rate swap:
Interest income	Interest income	$	0	$	71	$	0	$	82	Interest income	$	—	$	88	$	—	$	170
Interest expense	Interest expense	80		0		80		0		Interest expense	(396)		—		(316)		—
Hedged item - subordinated debt and loans:	Hedged item - subordinated debt and loans:									Hedged item - subordinated debt and loans:
Interest income	Interest income	$	0	$	(71)	$	0	$	(82)	Interest income	$	—	$	(88)	$	—	$	(170)
Interest expense	Interest expense	(83)		0		(83)		0		Interest expense	405		—		322		—

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

adjustment to the carrying amount of the hedged item (basis adjustment). The following table presents the hedged ~~items~~item related to interest rate derivatives designated as ~~hedges of~~ fair value hedges and the cumulative basis fair value adjustment included in the net carrying amount of the hedged item at ~~June~~September 30, 2021.
Line Item in the Statement of Financial Position in Which the Hedged Item is Included Carrying Amount of the Hedged Liability Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
(in thousands)
Long-term borrowings $ (300,083) $ (83)


Line Item in the Statement of Financial Position in Which the Hedged Item is Included	Carrying Amount of the Hedged Liability		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
	(in thousands)
Long-term borrowings	$	(299,678)	$	322

The net (gains) losses 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
June 30,
2021 2020 2021 2020
(in thousands)
Non-designated hedge interest rate swaps and credit derivatives
Other non-interest expense $ (2,210) $ 1,416 $ (425) $ 1,505


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in thousands)
Non-designated hedge interest rate swaps and credit derivatives
Other non-interest expense	$	216	$	600	$	(209)	$	2,105

Other non-interest income included fee income related to non-designated hedge derivative interest rate swaps (not designated as hedging instruments) executed with commercial loan customers totaling ~~$7.6~~$8.8 million and ~~$14.7~~$19.2 million for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and ~~$13.8~~$22.6 million and ~~$28.9~~$48.1 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

Credit Risk Related Contingent Features. By using derivatives, Valley is exposed to credit risk if counterparties to the derivative contracts do not perform as expected. Management attempts to minimize counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral where appropriate. Credit risk exposure associated with derivative contracts is managed at Valley in conjunction with Valley’s consolidated counterparty risk management process. Valley’s counterparties and the risk limits monitored by management are periodically reviewed and approved by the Board of Directors.

Valley has agreements with its derivative counterparties providing that if Valley defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Valley could also be declared in default on its derivative counterparty agreements. Additionally, Valley has an agreement with several of its derivative counterparties that contains provisions that require Valley’s debt to maintain an investment grade credit rating from each of the major credit rating agencies from which it receives a credit rating. If Valley’s credit rating is reduced below investment grade, or such rating is withdrawn or suspended, then the counterparty could terminate the derivative positions and Valley would be required to settle its obligations under the agreements. As of ~~June~~September 30, 2021, Valley was in compliance with all of the provisions of its derivative counterparty agreements. As of ~~June~~September 30, 2021, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk related to these agreements, was ~~$79.6~~$60.5 million. Valley has derivative counterparty agreements that require minimum collateral posting thresholds for certain counterparties.

Note ~~12.~~13. Balance Sheet Offsetting

Certain financial instruments, including certain OTC derivatives (mostly interest rate swaps) and repurchase agreements (accounted for as secured long-term borrowings), may be eligible for offset in the consolidated statements of financial condition and/or subject to master netting arrangements or similar agreements. OTC derivatives include interest rate swaps executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house (presented in the table below). The credit risk associated with bilateral OTC derivatives is managed through obtaining collateral and enforceable master netting agreements.

Valley is party to master netting arrangements with its financial institution counterparties; however, Valley does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of cash or marketable investment securities, is posted by the counterparty with net liability positions in accordance with contract thresholds. Master repurchase agreements which include “right of set-off” provisions generally have a legally enforceable right to offset recognized amounts. In such cases, the collateral would be used to settle the fair value of the swap or repurchase agreement should Valley be in default. The total amount of collateral held or pledged cannot exceed the net derivative fair values with the counterparty.

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


								Gross Amounts Not Offset														Gross Amounts Not Offset
		Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments			Cash Collateral (1)		Net Amount			Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments			Cash Collateral (1)		Net Amount
		(in thousands)														(in thousands)
June 30, 2021
September 30, 2021															September 30, 2021
Assets:	Assets:														Assets:
Interest rate swaps	Interest rate swaps	$	248,520	$	0	$	248,520	$	0		$	0	$	248,520	Interest rate swaps	$	215,046	$	—	$	215,046	$	—		$	—	$	215,046
Liabilities:	Liabilities:														Liabilities:
Interest rate swaps	Interest rate swaps	$	80,564	$	0	$	80,564	$	0		$	(72,732)	$	7,832	Interest rate swaps	$	65,212	$	—	$	65,212	$	—		$	(60,177)	$	5,035
Repurchase agreements		300,000		0		300,000		(300,000)		(2)	0		0

Total	Total	$	380,564	$	0	$	380,564	$	(300,000)		$	(72,732)	$	7,832	Total	$	65,212	$	—	$	65,212	$	—		$	(60,177)	$	5,035
December 31, 2020	December 31, 2020														December 31, 2020
Assets:	Assets:														Assets:
Interest rate swaps	Interest rate swaps	$	150,487	$	0	$	150,487	$	0		$	0	$	150,487	Interest rate swaps	$	150,487	$	—	$	150,487	$	—		$	—	$	150,487
Liabilities:	Liabilities:														Liabilities:
Interest rate swaps	Interest rate swaps	$	150,487	$	0	$	150,487	$	0		$	(150,487)	$	0	Interest rate swaps	$	150,487	$	—	$	150,487	$	—		$	(150,487)	$	—
Repurchase agreements	Repurchase agreements	300,000		0		300,000		(300,000)		(2)	0		0		Repurchase agreements	300,000		—		300,000		(300,000)		(2)	—		—
Total	Total	$	450,487	$	0	$	450,487	$	(300,000)		$	(150,487)	$	0	Total	$	450,487	$	—	$	450,487	$	(300,000)		$	(150,487)	$	—

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

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

Note ~~13.~~14. Tax Credit Investments

Valley’s tax credit investments are primarily related to investments promoting qualified affordable housing projects, and other investments related to community development and renewable energy sources. Some of these tax-advantaged investments support Valley’s regulatory compliance with the Community Reinvestment Act (CRA). Valley’s investments in these entities generate a return primarily through the realization of federal income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These tax credits and deductions are recognized as a reduction of income tax expense.

Valley’s tax credit investments are carried in other assets on the consolidated statements of financial condition. Valley’s unfunded capital and other commitments related to the tax credit investments are carried in accrued expenses and other liabilities on the consolidated statements of financial condition. Valley recognizes amortization 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 ~~June~~September 30, 2021 and December 31, 2020:


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in thousands)					(in thousands)
Other Assets:	Other Assets:					Other Assets:
Affordable housing tax credit investments, net	Affordable housing tax credit investments, net	$	18,298	$	20,074	Affordable housing tax credit investments, net	$	17,231	$	20,074
Other tax credit investments, net	Other tax credit investments, net	43,066		47,301		Other tax credit investments, net	46,880		47,301
Total tax credit investments, net	Total tax credit investments, net	$	61,364	$	67,375	Total tax credit investments, net	$	64,111	$	67,375
Other Liabilities:	Other Liabilities:					Other Liabilities:
Unfunded affordable housing tax credit commitments	Unfunded affordable housing tax credit commitments	$	1,379	$	1,379	Unfunded affordable housing tax credit commitments	$	1,379	$	1,379

Total unfunded tax credit commitments	Total unfunded tax credit commitments	$	1,379	$	1,379	Total unfunded tax credit commitments	$	1,379	$	1,379

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
Components of Income Tax Expense:	Components of Income Tax Expense:									Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	Affordable housing tax credits and other tax benefits	$	899	$	1,393	$	1,796	$	2,627	Affordable housing tax credits and other tax benefits	$	948	$	1,352	$	2,744	$	3,979
Other tax credit investment credits and tax benefits	Other tax credit investment credits and tax benefits	2,743		2,540		5,428		3,840		Other tax credit investment credits and tax benefits	2,702		1,727		8,130		5,567
Total reduction in income tax expense	Total reduction in income tax expense	$	3,642	$	3,933	$	7,224	$	6,467	Total reduction in income tax expense	$	3,650	$	3,079	$	10,874	$	9,546
Amortization of Tax Credit Investments:	Amortization of Tax Credit Investments:									Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	Affordable housing tax credit investment losses	$	460	$	537	$	1,003	$	1,091	Affordable housing tax credit investment losses	$	681	$	642	$	1,684	$	1,733
Affordable housing tax credit investment impairment losses	Affordable housing tax credit investment impairment losses	431		665		772		1,083		Affordable housing tax credit investment impairment losses	387		585		1,159		1,668
Other tax credit investment losses	Other tax credit investment losses	351		679		524		1,223		Other tax credit investment losses	256		12		780		1,235
Other tax credit investment impairment losses	Other tax credit investment impairment losses	1,730		1,535		3,417		3,247		Other tax credit investment impairment losses	1,755		1,520		5,172		4,767
Total amortization of tax credit investments recorded in non-interest expense	Total amortization of tax credit investments recorded in non-interest expense	$	2,972	$	3,416	$	5,716	$	6,644	Total amortization of tax credit investments recorded in non-interest expense	$	3,079	$	2,759	$	8,795	$	9,403

Note ~~14.~~15. Business Segments

Valley has 4 business segments that it monitors and reports on to manage Valley’s business operations. These segments are consumer lending, commercial lending, investment management, and corporate and other adjustments. Valley’s reportable segments have been determined based upon its internal structure of operations and lines of business. Each business segment is reviewed routinely for its asset growth, contribution to income before income taxes and return on average interest earning assets and impairment (if events or circumstances indicate a possible inability to realize the carrying amount). Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are allocated from the corporate and other adjustments segment to each of the other three business segments. Interest expense and internal transfer expense (for general corporate expenses) are allocated to each business segment utilizing a transfer pricing methodology, which involves the allocation of operating and funding costs based on each segment's respective mix of average earning assets and/or liabilities outstanding for the period. The financial reporting for each segment contains allocations and reporting in line with Valley’s operations, which may not necessarily be comparable to any other financial institution. The accounting for each segment includes internal accounting policies designed to measure consistent and reasonable financial reporting and may result in income and expense measurements that differ from amounts under U.S. GAAP. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.

The following tables represent the financial data for Valley’s 4 business segments for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:


		Three Months Ended June 30, 2021															Three Months Ended September 30, 2021
		Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total				Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
		($ in thousands)															($ in thousands)
Average interest earning assets	Average interest earning assets	$	7,150,137		$	25,485,161		$	5,272,116		$	0	$	37,907,414		Average interest earning assets	$	7,373,897		$	25,324,485		$	5,634,492		$	—	$	38,332,874

Interest income	Interest income	$	59,419		$	255,895		$	19,239		$	(905)	$	333,648		Interest income	$	58,887		$	250,866		$	19,766		$	(718)	$	328,801
Interest expense	Interest expense	5,192			18,467			3,867			5,215		32,741			Interest expense	4,032			13,795			3,228			6,720		27,775
Net interest income (loss)	Net interest income (loss)	54,227			237,428			15,372			(6,120)		300,907			Net interest income (loss)	54,855			237,071			16,538			(7,438)		301,026
Provision (credit) for credit losses	Provision (credit) for credit losses	711			8,066			(30)			0		8,747			Provision (credit) for credit losses	(4,614)			8,110			35			—		3,531
Net interest income (loss) after provision for credit losses	Net interest income (loss) after provision for credit losses	53,516			229,362			15,402			(6,120)		292,160			Net interest income (loss) after provision for credit losses	59,469			228,961			16,503			(7,438)		297,495
Non-interest income	Non-interest income	21,915			9,819			2,475			8,917		43,126			Non-interest income	11,845			11,611			2,018			16,957		42,431
Non-interest expense	Non-interest expense	19,792			27,241			(258)			125,118		171,893			Non-interest expense	13,520			27,504			(150)			134,048		174,922
Internal transfer expense (income)	Internal transfer expense (income)	19,862			71,207			14,632			(105,701)		0			Internal transfer expense (income)	20,662			71,141			15,825			(107,628)		—
Income (loss) before income taxes	Income (loss) before income taxes	$	35,777		$	140,733		$	3,503		$	(16,620)	$	163,393		Income (loss) before income taxes	$	37,132		$	141,927		$	2,846		$	(16,901)	$	165,004
Return on average interest earning assets (pre-tax)	Return on average interest earning assets (pre-tax)	2.00		%	2.21		%	0.27		%	N/A		1.72		%	Return on average interest earning assets (pre-tax)	2.01		%	2.24		%	0.20		%	N/A		1.72		%


		Three Months Ended June 30, 2020															Three Months Ended September 30, 2020
		Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total				Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
		($ in thousands)															($ in thousands)
Average interest earning assets	Average interest earning assets	$	7,214,368		$	24,826,832		$	5,737,187		$	0	$	37,778,387		Average interest earning assets	$	7,126,157		$	25,389,107		$	5,252,446		$	—	$	37,767,710

Interest income	Interest income	$	66,807		$	255,152		$	27,623		$	(1,057)	$	348,525		Interest income	$	63,956		$	251,920		$	22,513		$	(1,046)	$	337,343
Interest expense	Interest expense	11,469			40,640			9,728			4,129		65,966			Interest expense	9,048			33,330			6,728			5,151		54,257
Net interest income (loss)	Net interest income (loss)	55,338			214,512			17,895			(5,186)		282,559			Net interest income (loss)	54,908			218,590			15,785			(6,197)		283,086
Provision for credit losses		3,106			38,009			41			0		41,156
Provision (credit) for credit losses																Provision (credit) for credit losses	5,383			25,637			(112)			—		30,908
Net interest income (loss) after provision for credit losses	Net interest income (loss) after provision for credit losses	52,232			176,503			17,854			(5,186)		241,403			Net interest income (loss) after provision for credit losses	49,525			192,953			15,897			(6,197)		252,178
Non-interest income	Non-interest income	17,175			16,172			5,823			5,660		44,830			Non-interest income	23,531			20,421			(1,304)			6,624		49,272
Non-interest expense	Non-interest expense	20,440			23,250			642			112,834		157,166			Non-interest expense	19,877			25,633			(186)			114,861		160,185
Internal transfer expense (income)	Internal transfer expense (income)	19,406			66,858			15,505			(101,769)		0			Internal transfer expense (income)	18,614			66,390			13,713			(98,717)		—
Income (loss) before income taxes	Income (loss) before income taxes	$	29,561		$	102,567		$	7,530		$	(10,591)	$	129,067		Income (loss) before income taxes	$	34,565		$	121,351		$	1,066		$	(15,717)	$	141,265
Return on average interest earning assets (pre-tax)	Return on average interest earning assets (pre-tax)	1.64		%	1.65		%	0.52		%	N/A		1.37		%	Return on average interest earning assets (pre-tax)	1.94		%	1.91		%	0.08		%	N/A		1.50		%


		Six Months Ended June 30, 2021															Nine Months Ended September 30, 2021
		Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total				Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
		($ in thousands)															($ in thousands)
Average interest earning assets	Average interest earning assets	$	7,099,973		$	25,509,061		$	5,039,222		$	0	$	37,648,256		Average interest earning assets	$	7,176,086		$	25,465,276		$	5,261,185		$	—	$	37,902,547

Interest income	Interest income	$	120,264		$	508,231		$	38,748		$	(1,797)	$	665,446		Interest income	$	179,151		$	759,097		$	58,514		$	(2,515)	$	994,247
Interest expense	Interest expense	11,607			41,702			8,238			10,325		71,872			Interest expense	15,639			55,497			11,466			17,045		99,647
Net interest income (loss)	Net interest income (loss)	108,657			466,529			30,510			(12,122)		593,574			Net interest income (loss)	163,512			703,600			47,048			(19,560)		894,600
(Credit) provision for credit losses	(Credit) provision for credit losses	(1,924)			19,715			(388)			0		17,403			(Credit) provision for credit losses	(6,538)			27,825			(353)			—		20,934
Net interest income (loss) after provision for credit losses	Net interest income (loss) after provision for credit losses	110,581			446,814			30,898			(12,122)		576,171			Net interest income (loss) after provision for credit losses	170,050			675,775			47,401			(19,560)		873,666
Non-interest income	Non-interest income	35,600			17,533			4,806			16,420		74,359			Non-interest income	47,445			29,144			6,824			33,377		116,790
Non-interest expense	Non-interest expense	39,641			52,772			1,520			238,173		332,106			Non-interest expense	53,161			80,276			1,370			372,221		507,028
Internal transfer expense (income)	Internal transfer expense (income)	39,364			141,790			27,881			(209,035)		0			Internal transfer expense (income)	60,026			212,931			43,706			(316,663)		—
Income (loss) before income taxes	Income (loss) before income taxes	$	67,176		$	269,785		$	6,303		$	(24,840)	$	318,424		Income (loss) before income taxes	$	104,308		$	411,712		$	9,149		$	(41,741)	$	483,428
Return on average interest earning assets (pre-tax)	Return on average interest earning assets (pre-tax)	1.89		%	2.12		%	0.25		%	N/A		1.69		%	Return on average interest earning assets (pre-tax)	1.94		%	2.16		%	0.23		%	N/A		1.70		%


		Six Months Ended June 30, 2020															Nine Months Ended September 30, 2020
		Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total				Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
		($ in thousands)															($ in thousands)
Average interest earning assets	Average interest earning assets	$	7,215,756		$	23,804,558		$	5,205,918		$	0	$	36,226,232		Average interest earning assets	$	7,187,839		$	24,334,429		$	5,221,538		$	—	$	36,743,806

Interest income	Interest income	$	135,062		$	520,027		$	59,392		$	(2,163)	$	712,318		Interest income	$	199,018		$	771,947		$	81,905		$	(3,209)	$	1,049,661
Interest expense	Interest expense	31,169			102,826			22,488			7,937		164,420			Interest expense	40,217			136,156			29,216			13,088		218,677
Net interest income (loss)	Net interest income (loss)	103,893			417,201			36,904			(10,100)		547,898			Net interest income (loss)	158,801			635,791			52,689			(16,297)		830,984
Provision for credit losses	Provision for credit losses	9,891			65,148			800			0		75,839			Provision for credit losses	15,274			90,785			688			—		106,747
Net interest income (loss) after provision for credit losses	Net interest income (loss) after provision for credit losses	94,002			352,053			36,104			(10,100)		472,059			Net interest income (loss) after provision for credit losses	143,527			545,006			52,001			(16,297)		724,237
Non-interest income	Non-interest income	31,852			31,771			8,965			13,639		86,227			Non-interest income	55,383			52,192			7,661			20,263		135,499
Non-interest expense	Non-interest expense	40,311			47,408			1,029			224,074		312,822			Non-interest expense	60,188			73,041			843			338,935		473,007
Internal transfer expense (income)	Internal transfer expense (income)	39,741			131,054			28,680			(199,475)		0			Internal transfer expense (income)	58,355			197,444			42,393			(298,192)		—
Income (loss) before income taxes	Income (loss) before income taxes	$	45,802		$	205,362		$	15,360		$	(21,060)	$	245,464		Income (loss) before income taxes	$	80,367		$	326,713		$	16,426		$	(36,777)	$	386,729
Return on average interest earning assets (pre-tax)	Return on average interest earning assets (pre-tax)	1.27		%	1.73		%	0.59		%	N/A		1.36		%	Return on average interest earning assets (pre-tax)	1.49		%	1.79		%	0.42		%	N/A		1.40		%

Item 2. Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations

The following MD&A should be read in conjunction with the consolidated financial statements and notes thereto appearing in Part 1, Item 1 of this report. The words "Valley," the "Company," "we," "our" and "us" refer to Valley National Bancorp and its wholly owned subsidiaries, unless we indicate otherwise. Additionally, Valley’s principal subsidiary, Valley National Bank, is commonly referred to as the “Bank” in this MD&A.

The MD&A contains supplemental financial information, described in the sections that follow, which has been determined by methods other than U.S. generally accepted accounting principles (U.S. GAAP) that management uses in its analysis of our performance. Management believes these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance, our business and performance trends and facilitate comparisons with the performance of others in the financial services industry. These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to

financial measures calculated in accordance with U.S. GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.

Cautionary Statement Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q, both in the MD&A and elsewhere, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about our business, new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations, including the potential effects of the COVID-19 pandemic on our businesses and financial results and conditions. These statements may be identified by such forward-looking terminology as “should,” “expect,” “believe,” “view,” “will,” “opportunity,” “allow,” “continues,” “would,” “could,” “typically,” “usually,” “anticipate,” "may," "estimate," or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties and our actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, include, but are not limited to:

•failure to obtain shareholder or regulatory approval for the acquisition of Bank Leumi USA (Bank Leumi) on the anticipated terms and within the anticipated timeframe;

•the inability to realize expected cost savings and synergies from the Westchester and Bank Leumi acquisitions in amounts or in the timeframe anticipated;

•costs or difficulties relating to Westchester and Bank Leumi integration matters might be greater than expected;

•the inability to retain customers and qualified employees of the Westchester and Bank Leumi;

•changes in estimates of non-recurring charges related to Westchester and Bank Leumi acquisitions;

•the continued impact of COVID-19 on the U.S. and global economies, including business disruptions, reductions in employment and an increase in business failures, specifically among our clients;

•the continued impact of COVID-19 on our employees and our ability to provide services to our customers and respond to their needs as more cases of COVID-19 may arise in our primary markets;

•potential judgments, claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory and government actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic or as a result of our actions in response to, or failure to implement or effectively implement, federal, state and local laws, rules or executive orders requiring that we grant forbearances or not act to collect our loans;

•the impact of forbearances or deferrals we are required or agree to as a result of customer requests and/or government actions, including, but not limited to our potential inability to recover fully deferred payments from the borrower or the collateral;

•the risks related to the discontinuation of the London Interbank Offered Rate and other reference rates, including increased expenses and litigation and the effectiveness of hedging strategies;

•~~failure to obtain shareholder or regulatory approval for the acquisition of The Westchester Bank Holding Corporation (Westchester) on the anticipated terms and within the anticipated timeframe;~~

•~~the inability to realize expected cost savings and synergies from the Westchester acquisition in amounts or in the timeframe anticipated;~~

•~~costs or difficulties relating to Westchester integration matters might be greater than expected;~~

•~~the inability to retain customers and qualified employees of Westchester;~~

•damage verdicts or settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent or trademark infringement, employment related claims, and other matters;

•a prolonged downturn in the economy, mainly in New Jersey, New York, Florida and Alabama, as well as an unexpected decline in commercial real estate values within our market areas;

•higher or lower than expected income tax expense or tax rates, including increases or decreases resulting from changes in uncertain tax position liabilities, tax laws, regulations and case law;

•the inability to grow customer deposits to keep pace with loan growth;

•a material change in our allowance for credit losses under CECL due to forecasted economic conditions and/or unexpected credit deterioration in our loan and investment portfolios;

•the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;

•greater than expected technology related costs due to, among other factors, prolonged or failed implementations, additional project staffing and obsolescence caused by continuous and rapid market innovations;

•the loss of or decrease in lower-cost funding sources within our deposit base, including our inability to achieve deposit retention targets under Valley's branch transformation strategy;

•cyber-attacks, ransomware attacks, computer viruses or other malware that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems;

•results of examinations by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank (FRB), the Consumer Financial Protection Bureau (CFPB) and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;

•our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements or a decision to increase capital by retaining more earnings;

•unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, the COVID-19 pandemic or other external events; and

•unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other ~~factors; and~~

•~~the failure of other financial institutions with whom we have trading, clearing, counterparty and other financial relationships.~~factors.

A detailed discussion of factors that could affect our results is included in our SEC filings, including the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020 and Part II, Item 1A of this Quarterly Report.

Critical Accounting Policies and Estimates

Valley’s accounting policies are fundamental to understanding management’s discussion and analysis of its financial condition and results of operations. At ~~June~~September 30, 2021, we identified our policies on the allowance for credit losses, goodwill and other intangible assets, and income taxes to be critical accounting policies because management has to make subjective and/or complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Management has reviewed the application of these policies with the Audit Committee of Valley’s Board of Directors. Our critical accounting policies are described in detail in Part II, Item 7 in Valley’s Annual Report on Form 10-K for the year ended December 31, 2020.

New Authoritative Accounting Guidance

See Note 45 to the consolidated financial statements for a description of new authoritative accounting guidance, including the respective dates of adoption and effects on results of operations and financial condition.

Executive Summary

Company Overview. At ~~June~~September 30, 2021, Valley had consolidated total assets of approximately $41.3 billion, total net loans of ~~$32.1~~$32.3 billion, total deposits of ~~$33.2~~$33.6 billion and total shareholders’ equity of ~~$4.7~~$4.8 billion. Our commercial bank operations include branch office locations in northern and central New Jersey, the New York City Boroughs of Manhattan, Brooklyn, Queens, and Long Island, Florida and Alabama. Of our current 226 branch network, 58 percent, 17 percent, 18 percent and 7 percent of the branches are in New Jersey, New York, Florida and Alabama, respectively. Despite targeted branch consolidation activity, we have significantly grown both in asset size and locations over the past several years primarily through bank acquisitions.

common stock for each Westchester share they own. Based on Valley’s closing stock price on June 28, 2021, Westchester’s stockholders will receive approximately $210 million in Valley common stock. Existing Westchester options will be cashed out for approximately $10 million in cash. The acquisition is anticipated to close on December 1, 2021, pending the satisfaction of customary closing conditions.

Bank Leumi Le-Israel Corporation Merger. On September 23, 2021, Valley announced a merger with Bank Leumi Le-Israel Corporation (Leumi) whereby Valley will acquire Leumi, the U.S. subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA (Bank Leumi). The merger will enable Valley to greatly expand its commercial banking and venture capital banking businesses, as well as help Valley increase its revenue diversity and expand into new geographies. Bank Leumi has its headquarters in New York ~~market.~~City and also operates commercial banking offices in Chicago, Los Angeles, Palo Alto, and Aventura, Fl. As of June 30, 2021, Bank Leumi had total assets of $8.4 billion, total deposits of $7.1 billion, and gross loans of $5.4 billion. The acquisition is expected to close in the ~~fourth quarter 2021,~~first half of 2022, subject to standard regulatory approvals, approval of ~~Westchester stockholders,~~Valley shareholders, as well as other customary closing conditions. ~~See Note 1~~

Dudley Ventures Acquisition. On October 8, 2021, Valley acquired Arizona-based Dudley Ventures (DV), an advisory firm specializing in the investment and management of tax credits. The transaction includes the acquisition of DV's community development entity, DV Community Investment, as well as DV Fund Advisors and DV Advisory Services. The transaction price included $11.3 million of cash at the closing date, fixed future stock consideration totaling $3.8 million, and contingent cash earn-out payments based upon revenue growth of the acquired entities over a five-year period. The acquisition of Dudley Ventures is expected to ~~the consolidated financial statements for additional information.~~support our efforts to build differentiated sources of non-interest income.

Impact of COVID-19. ~~Broad based public vaccination rollouts, government stimulus,~~Economic activity and businesses continued ~~business re-openings and increased consumer activity (as social restrictions have eased) led~~ to ~~a sharp~~ rebound in ~~economic activity during~~ the ~~second~~third quarter 2021. However, ~~there are substantial variations~~the U.S. is experiencing significant global supply chain disruptions and labor shortages which have also increased inflation. We continue to monitor the impact of COVID-19 closely, including its impact on our employees, customers, communities and results of operations and other government stimulus or Federal Reserve actions. The extent to which the COVID-19 pandemic will impact our operations and financial results during the fourth quarter 2021 and beyond is highly uncertain. We continue to closely monitor local conditions in the ~~pace~~areas we serve and will take actions as circumstances warrant and will follow proper protocols designed to ensure safety of ~~recovery across~~our employees and ~~within corporate sectors, and certain industries remain vulnerable to a loss~~customers. See the "Operating Environment" section of ~~the economic momentum due to labor shortages and other factors. In addition, the potential rise of Delta variant cases may threaten to undermine the economic recovery.~~MD&A for more details.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act and additional legislation that followed including the Consolidated Appropriations Act and the American Rescue Plan Act of 2021 provided funding for the SBA's Paycheck Protection Program (PPP) and established rules for qualifying borrowers to receive loan forgiveness by the SBA under this program. Valley extended a total of $3.2 billion PPP loans under the program, of which ~~$1.8~~$2.3 billion of these loans have received forgiveness from the SBA, including ~~$1.0 billion~~$476.7 million during the third quarter 2021~~second quarter 2021.~~. As of ~~June~~September 30, 2021, we had ~~approximately $1.4 billion~~$874.0 million of PPP loans still outstanding.

In response to the COVID-19 pandemic and its economic impact on certain customers and in accordance with provisions set forth by the CARES Act, Valley implemented short-term loan modifications, such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant, when requested by customers. As of ~~June~~September 30, 2021, Valley had ~~$142~~ $98.6 million of outstanding loans remaining in their payment deferral period under short-term modifications representing approximately ~~0.4~~0.3 percent of our total loan portfolio at ~~June~~September 30, 2021 as compared to $361 million, or 1.1 percent of total loans at December 31, 2020.

We continue to monitor the impact of COVID-19 closely, including its impact on our employees, customers, communities and results of operations, as well as any effects that may result from the CARES Act, ~~Appropriations~~ Act and other government stimulus or Federal Reserve actions. However, the extent to which the COVID-19 pandemic will impact our operations and financial results during the second half of 2021 and beyond is highly uncertain. See the "Operating Environment" section of MD&A for more details.

We continue to closely monitor local conditions in the areas we serve and will take actions as circumstances warrant, which may necessitate certain branches or other office closures and reduced lobby services. The majority of our non-customer facing employees have returned to our offices in July 2021 with flexible hybrid work schedules. We continue to follow proper protocols designed to ensure safety of our employees and customers.

Quarterly Results. Net income for the ~~second~~third quarter 2021 was ~~$120.5~~$122.6 million, or $0.29 per diluted common share, compared to ~~$95.6~~$102.4 million, or ~~$0.23~~$0.25 per diluted common share, for the ~~second~~third quarter 2020. The ~~$24.9~~$20.2 million increase in quarterly net income as compared to the same quarter one year ago was largely due to:

•~~an $18.3~~a $17.9 million increase in net interest income mainly due to (i) lower rates on our deposit products combined with a continued customer shift to deposits without stated maturities, (ii) ~~continued~~ run-off of higher cost time deposits, (iii) ~~the prepayment~~lower average other borrowings and related costs driven by normal maturities of FHLB

advances and long-term repos, as well as our prepayments of $534 million and $248 million of long-term FHLB ~~advances with a combined weighted average interest rate of 2.48 percent~~borrowings in December 2020 and ~~(iv) interest~~June 2021, respectively; and ~~fee income from PPP loans and other organic loan growth; and~~

•a ~~$32.4~~$27.4 million decrease in our provision for credit losses mainly due to the improved economic forecast component of the reserve as compared to ~~June~~September 30, 2020,

partially offset by:

•a ~~$1.7~~$6.8 million decrease in non-interest income mainly due to the combination of lower gains on sales of residential mortgage loans and lower fee income related to derivative interest rate swaps executed with commercial ~~loan customer swap fees and BOLI income,~~lending customers, partially offset by moderate increases in other fee categories;

•a $14.7 million increase in non-interest expense primarily due to higher salary and employee benefits expenses, and increased professional and legal fees, including an ~~$8.4~~accrual of $2.1 million for general litigation reserves, partially offset by a $2.4 million decrease in the loss on the early extinguishment ~~of debt in June 2021;~~as compared to the third quarter 2020; and

•a ~~$9.4~~$3.5 million increase in income tax expense mainly due to ~~the increase in~~higher income before income taxes.

See the “Net Interest Income”, “Non-Interest Income”, “Non-Interest Expense”, and “Income Taxes” sections below for more details on the items above impacting our ~~second~~third quarter 2021 results.

Operating Environment. ~~Duri~~ngDuring the ~~second~~third quarter 2021, real gross domestic product ~~expanded 6.5~~expanded 0.5 percent, as compared to ~~6.3~~6.7 percent growth in the ~~first~~second quarter ~~of the year.~~2021. The ~~acceleration~~deceleration in growth was driven ~~primarily~~ by personal consumption ~~particularly for services. Residential~~and business fixed investment ~~was lower and~~as inflation remained elevated, partly offset by inventory restocking continued to drag on overall activity, driven in part by supply chain constraints. Although economic activity has rebounded from the sharp recession in the first half of 2020, the pace of growth is likely to moderate through the remainder of 2021.and government spending.

The Federal Reserve continued to maintain ~~its~~an accommodative stance on monetary ~~policy.~~policy to keep interest rates low and promote liquidity. At ~~the July~~their meeting in September 2021, the Federal Open Market Committee (the "Committee") maintained the target range for the federal funds rate between ~~zero~~0.00 and 0.25 percent. Additionally, the Committee ~~maintained~~decided to maintain several programs, including purchasing U.S. Treasury and ~~mortgage-backed~~mortgage backed securities to support the flow of credit to households and businesses in order to promote its maximum employment and price stability goals. Notwithstanding this, the Committee indicated that a moderation in the pace of asset purchases may soon be warranted.

The 10-year U.S. Treasury note yield ended the ~~second~~third quarter at ~~1.45~~1.52 percent, 297 basis points ~~lower~~higher, as compared with ~~March 31,~~June 30, 2021. The spread between the 2- and 10-year U.S. Treasury note yields ended the ~~second~~third quarter 2021 at ~~1.20~~1.24 percent, 384 basis points ~~narrower~~higher, as compared to the end of the ~~first~~second quarter 2021 and 7068 basis points ~~wider~~higher, as compared to June 30, 2020.

For all commercial banks in the U.S., loans and leases increased approximately ~~0.1~~0.9 percent in the ~~second~~third quarter 2021, as compared to the previous quarter. For the industry, banks reported more relaxed credit standards for most loan types. Additionally, banks reported that demand had firmed or increased during the ~~trend for loans secured by multifamily residential structures persisted and banks~~third quarter which finally translated into stronger loan growth. In the third quarter 2021, Valley continued to ~~relax lending standards which drove~~see strong organic growth demand to its highest level in over a year. However, the picture for other types of commercial lending remained mixed. During the quarter, lending standards in the industry were relaxed for these products, but this did not influence increased demand.

~~In the second quarter 2021, Valley's originations increased from commercial real estate loans, residential mortgage and automobile lending. We witnessed stronger origination pipeline~~ for commercial real estate loans and several other loan types across ~~our market areas. However, should loan demand weaken or the expected recovery from the COVID-19 pandemic in Valley's primary markets be prolonged,~~its geographic footprint. Inflation has been elevated, which could adversely impact companies if they cannot pass along higher input costs to their customers. Should inflation pressures persist, this dynamic, among other external factors, could challenge our business operations ~~and results could be adversely impacted,~~ as highlighted ~~elsewhere in this~~throughout the remaining MD~~&A.~~&A discussion below.

Loans. Total loans ~~decreased $229.0~~increased $149.4 million to ~~$32.5~~$32.6 billion at September 30, 2021 from June 30, 2021 ~~from March 31, 2021 due to~~in spite of a ~~$1.0 billion~~$476.7 million decrease in PPP loans within the commercial and industrial loan category. ~~Offsetting this impact, our~~Our non-PPP loan portfolio increased ~~$785.0~~$626.0 million, or ~~10.4~~8.0 percent on an annualized basis, to $31.7 billion at September 30, 2021 from $31.1 billion at June 30, ~~2021 from $30.3 billion at March 31,~~ 2021. The increase in non-PPP loans was largely driven by increases of ~~$588.5~~$399.9 million, ~~$166.5~~$51.7 million and ~~$86.4~~$105.4 million in the commercial real estate, construction and residential mortgage ~~and auto loan~~ categories, respectively. Additionally, our ~~second~~third quarter 2021 new and refinanced loan originations included

approximately ~~$254~~$233 million of residential mortgage loans originated for sale. Net gains on sales of residential loans were ~~$10.1~~$6.4 million and ~~$3.5~~$10.1 million in the ~~second~~third quarter 2021 and ~~first~~second quarter 2021, respectively. See further details on our loan activities under the “Loan Portfolio” section below.

Asset Quality. Total non-performing assets (NPAs), consisting of non-accrual loans, other real estate owned (OREO), and other repossessed assets increased ~~$16.1~~$31.1 million to ~~$226.6~~$257.7 million at ~~June~~September 30, 2021 as compared to

~~March 31,~~ June 30, 2021. Non-accrual loans increased ~~$16.0~~$31.8 million to ~~$220.0~~$251.8 million at ~~June~~September 30, 2021 as compared to ~~March 31,~~June 30, 2021 mainly due to ~~a $17.6~~the $33.1 million increase in non-accrual ~~construction~~commercial real estate loans ~~almost entirely related to one borrower relationship with $3.0~~from three loan relationships which have $3.7 million of related allowance reserves as of ~~June~~September 30, 2021. Non-accrual loans represented ~~0.68~~0.77 percent of total loans at ~~June~~September 30, 2021, as compared to ~~0.62~~0.68 percent at ~~March 31,~~June 30, 2021.

Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) ~~increased $27.5~~decreased $25.0 million to $55.2 million, or 0.17 percent of total loans, at September 30, 2021 as compared to $80.2 million, or 0.25 percent of total loans, at June 30, ~~2021 as compared to $52.8 million, or 0.16 percent of total loans, at March 31, 2021~~2021. The decrease was driven by ~~a $36.8 million increase in~~ the transition of the aforementioned three commercial real estate loan delinquencies ~~partially offset by an improvement in the early stage delinquencies in the residential mortgage~~from accruing past due loans to non-accrual loan ~~category.~~ status.

See further details in the "Non-performing Assets" section below.

Deposits and Other Borrowings. Overall, average deposits increased by $876.6 million to $33.6 billion for the third quarter 2021 as compared to the second quarter 2021 due to continued growth in both commercial and retail customer balances. Average non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 32 percent, 5456 percent and 1412 percent of total deposits as of ~~June~~September 30, 2021, respectively. ~~Overall,~~Our mix of average deposits ~~increased by $887.9 million~~for the third quarter 2021 also continued to ~~$32.7 billion for~~shift away from time deposits into the non-maturity deposit categories as compared to the second quarter 2021, as ~~compared~~some funding from maturing retail CDs migrate to the ~~first quarter 2021. Our mix of the~~more liquid deposit ~~categories within total average deposits for the second quarter 2021 as compared to the first quarter 2021 experienced a continued shift of maturing time deposits~~products and ~~a consumer preference to non-maturity deposit accounts due to the low level of interest rates.~~normal growth in such categories.

Actual ending balances for deposits increased ~~$609.6~~$437.8 million to approximately ~~$33.2~~$33.6 billion at ~~June~~September 30, 2021 from ~~March 31,~~June 30, 2021 largely due to increases of ~~$1.3 billion~~$524.8 million and ~~$475.9~~$260.3 million in the non-maturity interest bearing deposit and non-interest bearing deposit categories, respectively, partially offset by a ~~$1.1 billion~~$347.3 million decrease in time deposits. The decrease of $347.3 million in time deposits was driven by normal run-off of maturing retail ~~and brokered~~ CDs with ~~some continued~~the aforementioned migration of some retail balances to more liquid, lower cost deposit product categories. Total brokered deposits ~~(consisting of both time and~~(within money market deposit accounts) decreased approximately ~~$321~~$315 million to $1.7 billion at September 30, 2021 as compared to $2.0 billion at June 30, 2021, as ~~compared to $2.3 billion at March 31, 2021.~~our funding profile has benefited from the surge in commercial and retail deposit balances. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 32 percent, 5556 percent and 1312 percent of total deposits as of ~~June~~September 30, 2021, respectively. While we believe the current operating environment will likely continue to be favorable for Valley’s deposit gathering initiatives, we cannot guarantee that we will be able to maintain deposit levels at or near those reported at ~~June~~September 30, 2021.

Average short-term borrowings decreased ~~$294.7~~$13.5 million to ~~$873.9~~$860.5 million for the ~~second~~third quarter 2021 as compared to the ~~first~~second quarter 2021 due to normal debt maturities funded with excess cash ~~liquidity from increased deposits.~~liquidity. Average long-term borrowings (including junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition) decreased by ~~$122.4~~$605.0 million to ~~$2.2~~$1.6 billion for the ~~second~~third quarter 2021 as compared to the ~~first~~second quarter 2021 ~~partly~~largely due to ~~Valley's redemption~~combination of ~~$60~~(i) the $248 million of ~~callable 6.25 percent~~FHLB advances which were prepaid in late June 2021, (ii) repayments upon maturities of FHLB advances and (iii) $300 million of long-term repurchase agreements which matured during the third quarter 2021, with these decreases partially offset by (iv) the $300 million subordinated notes ~~on April 1,~~issued in late May 2021 ~~and other normal repayments of maturing FHLB borrowings.~~which were outstanding for the full quarter in third quarter 2021.

Actual ending balances for short-term borrowings decreased by ~~$230.3~~$71.0 million to ~~$854.4~~$783.3 million at ~~June~~September 30, 2021 as compared to ~~March 31,~~June 30, 2021 largely due to repayments of FHLB ~~borrowings.~~advances. Long-term borrowings decreased by ~~$357.2~~$458.2 million to ~~$1.9~~$1.4 billion at ~~June~~September 30, 2021 as compared to ~~March 31,~~June 30, 2021 mainly due to the combination the prepayment of approximately $248 million of long-term FHLB advances in June 2021, the aforementioned redemption of $60 million in subordinated notes and other normal repayments of maturing FHLB advances, partially offset by the issuancematurity of $300 million of ~~3.00 percent subordinated notes.~~long-term repurchase agreements and $158 million of FHLB advances which were repaid with excess liquidity during the third quarter 2021. See Note 910 to the consolidated financial statements for additional information.

Selected Performance Indicators. The following table presents our annualized performance ratios for the periods indicated:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Return on average assets	Return on average assets	1.17	%	0.92	%	1.15	%	0.92	%	Return on average assets	1.18	%	0.99	%	1.16	%	0.94	%
Return on average assets, as adjusted	Return on average assets, as adjusted	1.23		0.93		1.18		0.93		Return on average assets, as adjusted	1.20		1.01		1.19		0.95

Return on average shareholders’ equity	Return on average shareholders’ equity	10.24		8.54		10.10		8.23		Return on average shareholders’ equity	10.23		9.04		10.14		8.50
Return on average shareholders’ equity, as adjusted	Return on average shareholders’ equity, as adjusted	10.76		8.57		10.37		8.29		Return on average shareholders’ equity, as adjusted	10.41		9.20		10.37		8.59

Return on average tangible shareholders’ equity (ROATE)	Return on average tangible shareholders’ equity (ROATE)	14.79		12.66		14.64		12.26		Return on average tangible shareholders’ equity (ROATE)	14.64		13.30		14.63		12.61
ROATE, as adjusted	ROATE, as adjusted	15.54		12.70		15.03		12.34		ROATE, as adjusted	14.90		13.53		14.97		12.75

Adjusted return on average assets, adjusted return on average shareholders' equity, ROATE and adjusted ROATE included in the table above are non-GAAP measures. Management believes these measures provide information useful to management and investors in understanding our underlying operational performance, business and performance trends, and the measures facilitate comparisons of our prior performance with the performance of others in the financial services industry. These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with U.S. GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies. The non-GAAP measure reconciliations are presented below.

Adjusted net income is computed as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
Net income, as reported	Net income, as reported	$	120,512	$	95,601	$	236,222	$	182,869	Net income, as reported	$	122,580	$	102,374	$	358,802	$	285,243
Add: Loss on extinguishment of debt (net of tax)	Add: Loss on extinguishment of debt (net of tax)	6,024		—		6,024		—		Add: Loss on extinguishment of debt (net of tax)	—		1,691		6,024		1,691
Add: Losses on available for sale and held to maturity securities transactions (net of tax) (a)		81		29		166		58
Add: (Gains) losses on available for sale and held to maturity securities transactions (net of tax) (a)										Add: (Gains) losses on available for sale and held to maturity securities transactions (net of tax) (a)	(565)		33		(399)		91

Add: Merger related expenses (net of tax) (b)	Add: Merger related expenses (net of tax) (b)	—		263		—		1,199		Add: Merger related expenses (net of tax) (b)	1,207		76		1,207		1,275
Add: Litigation reserves (net of tax) (b)										Add: Litigation reserves (net of tax) (b)	1,505		—		1,505		—

Net income, as adjusted	Net income, as adjusted	$	126,617	$	95,893	$	242,412	$	184,126	Net income, as adjusted	$	124,727	$	104,174	$	367,139	$	288,300

(a) Included in gains on securities transactions, ~~net within other non-interest income.~~net.

(b) ~~Merger related expenses are primarily within~~Included in professional and legal ~~fees, and other non-interest expense.~~fees.

In addition to the items used to calculate net income, as adjusted, in the table above, our net income is, from time to time, impacted by fluctuations in the level of net gains on sales of loans and swap fees recognized from commercial loan customer transactions. These amounts can vary widely from period to period due to, among other factors, the amount of residential mortgage loans originated for sale, loan portfolio sales and commercial loan customer demand for certain products. See the “Non-Interest Income” section below for more details.

Adjusted annualized return on average assets is computed by dividing adjusted net income by average assets, as follows:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2021			2020			2021			2020
		($ in thousands)													($ in thousands)
Net income, as adjusted	Net income, as adjusted	$	126,617		$	95,893		$	242,412		$	184,126		Net income, as adjusted	$	124,727		$	104,174		$	367,139		$	288,300
Average assets	Average assets	$	41,161,459		$	41,429,725		$	40,967,174		$	39,773,288		Average assets	$	41,543,930		$	41,356,737		$	41,144,375		$	40,304,956
Annualized return on average assets, as adjusted	Annualized return on average assets, as adjusted	1.23		%	0.93		%	1.18		%	0.93		%	Annualized return on average assets, as adjusted	1.20		%	1.01		%	1.19		%	0.95		%

Adjusted annualized return on average shareholders' equity is computed by dividing adjusted net income by average shareholders' equity, as follows:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2021			2020			2021			2020
		($ in thousands)													($ in thousands)
Net income, as adjusted	Net income, as adjusted	$	126,617		$	95,893		$	242,412		$	184,126		Net income, as adjusted	$	124,727		$	104,174		$	367,139		$	288,300
Average shareholders' equity	Average shareholders' equity	$	4,708,797		$	4,477,446		$	4,677,273		$	4,443,016		Average shareholders' equity	$	4,794,843		$	4,530,671		$	4,718,960		$	4,472,447
Annualized return on average shareholders' equity, as adjusted	Annualized return on average shareholders' equity, as adjusted	10.76		%	8.57		%	10.37		%	8.29		%	Annualized return on average shareholders' equity, as adjusted	10.41		%	9.20		%	10.37		%	8.59		%

ROATE and adjusted ROATE are computed by dividing net income and adjusted net income, respectively, by average shareholders’ equity less average goodwill and average other intangible assets, as follows:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2021			2020			2021			2020
		($ in thousands)													($ in thousands)
Net income	Net income	$	120,512		$	95,601		$	236,222		$	182,869		Net income	$	122,580		$	102,374		$	358,802		$	285,243
Net income, as adjusted	Net income, as adjusted	126,617			95,893			$	242,412		$	184,126		Net income, as adjusted	124,727			104,174			$	367,139		$	288,300
Average shareholders’ equity	Average shareholders’ equity	$	4,708,797		$	4,477,446		$	4,677,273		$	4,443,016		Average shareholders’ equity	$	4,794,843		$	4,530,671		$	4,718,960		$	4,472,447
Less: Average goodwill and other intangible assets	Less: Average goodwill and other intangible assets	1,449,388			1,456,781			1,450,562			1,458,885			Less: Average goodwill and other intangible assets	1,446,760			1,451,889			1,449,285			1,456,536
Average tangible shareholders’ equity	Average tangible shareholders’ equity	$	3,259,409		$	3,020,665		$	3,226,711		$	2,984,131		Average tangible shareholders’ equity	$	3,348,083		$	3,078,782		$	3,269,675		$	3,015,911
Annualized ROATE	Annualized ROATE	14.79		%	12.66		%	14.64		%	12.26		%	Annualized ROATE	14.64		%	13.30		%	14.63		%	12.61		%
Annualized ROATE, as adjusted	Annualized ROATE, as adjusted	15.54		%	12.70		%	15.03		%	12.34		%	Annualized ROATE, as adjusted	14.90		%	13.53		%	14.97		%	12.75		%

~~Valley~~ Net Interest Income

Net interest income consists of interest income and dividends earned on interest earning assets, less interest expense on interest bearing liabilities, and represents the main source of income for Valley.

Net interest income on a tax equivalent basis totaling ~~$301.8~~$301.7 million for the third quarter 2021 decreased $43 thousand as compared to the second quarter 2021 and increased ~~$8.2~~$17.6 million ~~and $18.2~~from the third quarter 2020. Interest expense of $27.8 million for the third quarter 2021 decreased $5.0 million as compared to the ~~first quarter 2021 and~~ second quarter 2020, respectively. The increase as compared to the first quarter 2021 was mainly due to (i) continued run-off of higher cost time deposits and some account balance migration to lower cost deposits without stated maturities, (ii) repayment of FHLB advances upon their maturity, (iii) the redemption of $60 million of callable 6.25 percent subordinated notes on April 1, 2021 and (iv) a slightly higher yield on the PPP loan portfolio due to the accelerated recognition of unearned loan fees for loans forgiven during the second quarter 2021. Interest expense of $32.7 million for the second quarter 2021 decreased $6.4 million as compared to the first quarter 2021 as we continue to reduce our cost of funding ~~in the low rate environment.~~from both deposits and our repayment of other borrowings, primarily FHLB advances. Interest income on a tax equivalent basis in the ~~second~~third quarter 2021 ~~increased~~decreased by ~~$1.8~~$5.0 million to ~~$334.5~~$329.5 million as compared to the ~~first~~second quarter 2021 ~~mainly~~largely due to ~~moderately higher earned~~a $9.4 million decline in PPP loan related interest and fees caused by lower levels of loan forgiveness (prepayments) in the third quarter 2021 and lower yields on ~~our loan~~non-PPP new and renewed loans.

~~portfolio driven by the accelerated recognition of unearned PPP loan fees, partially offset by lower yields on our investment securities portfolio.~~

Average interest earning assets increased ~~$129.0~~$565.2 million to ~~$37.9~~$38.3 billion for the ~~second~~third quarter 2021 as compared to the ~~second~~third quarter 2020 primarily due to organic loan growth, including PPP loans, over the 12-month period, partially offset by principal repayments on residential mortgage-backed securities and lower overall reinvestment in our investment securities portfolio. As compared to the first quarter 2021, average interest earning assets increased by $521.2 million from $37.4 billion, mostly driven by higher levels of excess liquidity held in overnight investments with banks caused by the surge in customer deposit balances and fluctuations in the timing of loan and investment funding. As compared to the second quarter 2021, average interest earning assets increased by $425.5 million from $37.9 billion, mostly driven by higher levels of excess overnight liquidity and purchases of new taxable investments, partially offset by principal repayments in both the taxable and non-taxable investment portfolios.

Average interest bearing liabilities decreased ~~$2.0~~$1.7 billion to ~~$25.5~~$25.4 billion for the ~~second~~third quarter 2021 as compared to the ~~second~~third quarter 2020 primarily due to the ~~repayments~~repayment of ~~overnight and other short-term~~ borrowings ~~repayments of long-term FHLB advances and~~with excess cash liquidity over the ~~redemption of $60 million in callable subordinated debt.~~last 12-month period. As compared to the ~~first~~second quarter 2021, average interest bearing liabilities decreased by ~~$484.7~~$115.4 million in the ~~second~~third quarter 2021 mainly due to ~~the continued~~ repayments of short-term and long-term borrowings, ~~and redemption of $60 million in subordinated debt, partially~~which were largely offset by the surge in both commercial and retail customer ~~deposits, as well as some growth in relatively new deposit initiatives, including our marijuana related business (MRB) with a few large state licensed customers in our primary markets.~~deposits. Total average deposits increased ~~$887.9~~$876.6 million to ~~$32.7~~$33.6 billion for the ~~second~~third quarter 2021 as compared to the ~~first~~second quarter 2021. See additional information under "Deposits and Other Borrowings" in the Executive Summary section above.

Our net interest margin on a tax equivalent basis of 3.15 percent for the third quarter 2021 decreased by 3 basis points and increased by 14 basis points from 3.18 percent and 3.01 percent for the second quarter 2021 ~~increased by 4 basis points~~ and ~~18 basis points from 3.14 percent and 3.00 percent for the first quarter 2021 and second~~third quarter 2020, respectively. The yield on average interest earning assets decreased by 39 basis points on a linked quarter basis mostly due to the lower yield on ~~our investment securities portfolio, a higher mix of excess cash liquidity held in low yielding overnight investments,~~new and renewed loans, partially offset by one additional day in the ~~positive impact of one more day during the second~~third quarter 2021 as compared to ~~first~~the second quarter 2021. The yield on average loans ~~increased~~decreased by 28 basis points to ~~3.87~~3.79 percent for the ~~second~~third quarter 2021 as compared to ~~the first quarter 2021 partially due to the accelerated recognition of unearned PPP loan fees during~~ the second quarter 2021. The overall cost of average interest bearing liabilities decreased 97 basis points to ~~0.51~~0.44 percent for the ~~second~~third quarter 2021 as compared to the ~~linked first~~second quarter 2021. The decrease was mainly due to: (i) the continued run-off of maturing higher cost time deposits, (ii) repayment of maturing FHLB advances and other borrowings during the third quarter 2021, (iii) the prepayment of $248 million of long-term FHLB advances in June 2021 and ~~was largely due to continued runoff of time deposits and~~(iv) the ~~customer shift to~~overall lower cost ~~deposits without stated maturities. Additionally, the net interest margin benefited from a 7 basis point decrease in the average cost~~ of ~~short-term borrowings driven by our greater reliance on funding from deposits and the repayment of FHLB advances during the second quarter 2021.~~deposits. Our cost of total average deposits was ~~0.21~~0.18 percent for the ~~second~~third quarter 2021 as compared to ~~0.28~~0.21 percent for the ~~first~~second quarter 2021.

Looking forward, we expect moderate ongoing interest rate pressures on our net interest margin for the ~~second half of~~fourth quarter 2021 and beyond due to the low level of market rates and the potential negative impact on the overall yield on new and refinanced loan originations. However, we are also encouraged by the continued potential opportunity to selectively redeploy low yielding excess cash liquidity into new loans and investments during the fourth quarter 2021, as well as repay or reprice (at low costs) stated maturity deposits ~~and borrowings maturing at low costs during~~totaling approximately $3.3 billion with an average cost of 31 basis points scheduled to mature over the ~~remainder of 2021.~~next 12-month period.

The following table reflects the components of net interest income for the three months ended September 30, 2021, June 30, 2021 ~~March 31, 2021~~ and ~~June~~September 30, 2020:

Quarterly Analysis of Average Assets, Liabilities and Shareholders’ Equity and

Net Interest Income on a Tax Equivalent Basis


		Three Months Ended																			Three Months Ended
		June 30, 2021						March 31, 2021						June 30, 2020							September 30, 2021						June 30, 2021						September 30, 2020
		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
		($ in thousands)																			($ in thousands)
Assets	Assets																			Assets
Interest earning assets:	Interest earning assets:																			Interest earning assets:
Loans (1)(2)	Loans (1)(2)	$	32,635,298	$	315,339	3.87	%	$	32,582,479	$	313,206	3.85	%	$	32,041,200	$	321,883	4.02	%	Loans (1)(2)	$	32,698,382	$	309,778	3.79	%	$	32,635,298	$	315,339	3.87	%	$	32,515,264	$	315,863	3.89	%
Taxable investments (3)	Taxable investments (3)	3,159,842		14,883		1.88		3,111,116		15,037		1.93		3,673,090		22,539		2.45		Taxable investments (3)	3,302,803		15,797		1.91		3,159,842		14,883		1.88		3,354,373		17,529		2.09
Tax-exempt investments (1)(3)	Tax-exempt investments (1)(3)	498,971		4,071		3.26		513,809		4,248		3.31		562,172		4,673		3.32		Tax-exempt investments (1)(3)	429,941		3,302		3.07		498,971		4,071		3.26		542,450		4,564		3.37
Interest bearing deposits with banks	Interest bearing deposits with banks	1,613,303		235		0.06		1,178,815		224		0.08		1,501,925		411		0.11		Interest bearing deposits with banks	1,901,748		642		0.14		1,613,303		235		0.06		1,355,623		420		0.12
Total interest earning assets	Total interest earning assets	37,907,414		334,528		3.53		37,386,219		332,715		3.56		37,778,387		349,506		3.70		Total interest earning assets	38,332,874		329,519		3.44		37,907,414		334,528		3.53		37,767,710		338,376		3.58
Allowance for credit losses	Allowance for credit losses	(350,388)						(347,262)						(284,184)						Allowance for credit losses	(346,437)						(350,388)						(309,382)
Cash and due from banks	Cash and due from banks	335,083						312,882						424,625						Cash and due from banks	213,452						335,083						291,803
Other assets	Other assets	3,237,689						3,373,506						3,466,724						Other assets	3,314,308						3,237,689						3,558,927
Unrealized gains on securities available for sale, net	Unrealized gains on securities available for sale, net	31,661						45,386						44,173						Unrealized gains on securities available for sale, net	29,733						31,661						47,679
Total assets	Total assets	$	41,161,459					$	40,770,731					$	41,429,725					Total assets	$	41,543,930					$	41,161,459					$	41,356,737
Liabilities and shareholders’ equity	Liabilities and shareholders’ equity																			Liabilities and shareholders’ equity
Interest bearing liabilities:	Interest bearing liabilities:																			Interest bearing liabilities:
Savings, NOW and money market deposits	Savings, NOW and money market deposits	$	17,784,985	$	11,166	0.25	%	$	16,617,762	$	11,125	0.27	%	$	13,715,162	$	16,627	0.48	%	Savings, NOW and money market deposits	$	18,771,619	$	10,605	0.23	%	$	17,784,985	$	11,166	0.25	%	$	14,542,470	$	13,323	0.37	%
Time deposits	Time deposits	4,609,778		6,279		0.54		5,844,524		11,093		0.76		8,585,782		29,857		1.39		Time deposits	4,126,253		4,394		0.43		4,609,778		6,279		0.54		8,027,346		19,028		0.95
Total interest bearing deposits	Total interest bearing deposits	22,394,763		17,445		0.31		22,462,286		22,218		0.40		22,300,944		46,484		0.83		Total interest bearing deposits	22,897,872		14,999		0.26		22,394,763		17,445		0.31		22,569,816		32,351		0.57
Short-term borrowings	Short-term borrowings	873,927		1,168		0.53		1,168,617		1,758		0.60		2,317,992		1,980		0.34		Short-term borrowings	860,474		1,464		0.68		873,927		1,168		0.53		1,533,246		2,588		0.68
Long-term borrowings (4)	Long-term borrowings (4)	2,200,836		14,128		2.57		2,323,279		15,155		2.61		2,886,016		17,502		2.43		Long-term borrowings (4)	1,595,814		11,312		2.84		2,200,836		14,128		2.57		2,959,728		19,318		2.61
Total interest bearing liabilities	Total interest bearing liabilities	25,469,526		32,741		0.51		25,954,182		39,131		0.60		27,504,952		65,966		0.96		Total interest bearing liabilities	25,354,160		27,775		0.44		25,469,526		32,741		0.51		27,062,790		54,257		0.80
Non-interest bearing deposits	Non-interest bearing deposits	10,328,412						9,373,000						8,463,230						Non-interest bearing deposits	10,701,948						10,328,412						8,820,877
Other liabilities	Other liabilities	654,724						798,149						984,097						Other liabilities	692,979						654,724						942,399
Shareholders’ equity	Shareholders’ equity	4,708,797						4,645,400						4,477,446						Shareholders’ equity	4,794,843						4,708,797						4,530,671
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	41,161,459					$	40,770,731					$	41,429,725					Total liabilities and shareholders’ equity	$	41,543,930					$	41,161,459					$	41,356,737
Net interest income/interest rate spread (5)	Net interest income/interest rate spread (5)			$	301,787	3.02	%			$	293,584	2.96	%			$	283,540	2.74	%	Net interest income/interest rate spread (5)			$	301,744	3.00	%			$	301,787	3.02	%			$	284,119	2.78	%
Tax equivalent adjustment	Tax equivalent adjustment			(880)						(917)						(981)				Tax equivalent adjustment			(718)						(880)						(1,033)
Net interest income, as reported	Net interest income, as reported			$	300,907					$	292,667					$	282,559			Net interest income, as reported			$	301,026					$	300,907					$	283,086
Net interest margin (6)	Net interest margin (6)					3.18	%					3.13	%					2.99	%	Net interest margin (6)					3.14	%					3.18	%					3.00	%
Tax equivalent effect	Tax equivalent effect					0.00						0.01						0.01		Tax equivalent effect					0.01						—						0.01
Net interest margin on a fully tax equivalent basis (6)	Net interest margin on a fully tax equivalent basis (6)					3.18	%					3.14	%					3.00	%	Net interest margin on a fully tax equivalent basis (6)					3.15	%					3.18	%					3.01	%

The following table reflects the components of net interest income for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:


		Six Months Ended													Nine Months Ended
		June 30, 2021						June 30, 2020							September 30, 2021						September 30, 2020
		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
		($ in thousands)													($ in thousands)
Assets	Assets													Assets
Interest earning assets:	Interest earning assets:													Interest earning assets:
Loans (1)(2)	Loans (1)(2)	$	32,609,034	$	628,545	3.86	%	$	31,020,314	$	654,951	4.22	%	Loans (1)(2)	$	32,641,362	$	938,323	3.83	%	$	31,522,268	$	970,814	4.11	%
Taxable investments (3)	Taxable investments (3)	3,135,614		29,920		1.91		3,615,502		47,873		2.65		Taxable investments (3)	3,191,930		45,717		1.91		3,527,823		65,402		2.47
Tax-exempt investments (1)(3)	Tax-exempt investments (1)(3)	506,349		8,319		3.29		574,080		9,643		3.36		Tax-exempt investments (1)(3)	480,599		11,621		3.22		563,459		14,207		3.36
Interest bearing deposits with banks	Interest bearing deposits with banks	1,397,259		459		0.07		1,016,336		1,876		0.37		Interest bearing deposits with banks	1,588,656		1,101		0.09		1,130,257		2,296		0.27
Total interest earning assets	Total interest earning assets	37,648,256		667,243		3.54		36,226,232		714,343		3.94		Total interest earning assets	37,902,547		996,762		3.51		36,743,807		1,052,719		3.82
Allowance for credit losses	Allowance for credit losses	(348,834)						(270,430)						Allowance for credit losses	(348,011)						(283,508)
Cash and due from banks	Cash and due from banks	324,044						331,800						Cash and due from banks	263,910						318,370
Other assets	Other assets	3,305,222						3,459,441						Other assets	3,290,439						3,492,846
Unrealized gains (losses) on securities available for sale, net		38,486						26,245
Unrealized gains on securities available for sale, net														Unrealized gains on securities available for sale, net	35,490						33,441
Total assets	Total assets	$	40,967,174					$	39,773,288					Total assets	$	41,144,375					$	40,304,956
Liabilities and shareholders’ equity	Liabilities and shareholders’ equity													Liabilities and shareholders’ equity
Interest bearing liabilities:	Interest bearing liabilities:													Interest bearing liabilities:
Savings, NOW and money market deposits	Savings, NOW and money market deposits	$	17,204,598	$	22,291	0.26	%	$	13,477,273	$	51,140	0.76	%	Savings, NOW and money market deposits	$	17,730,438	$	32,896	0.25	%	$	13,834,930	$	64,463	0.62	%
Time deposits	Time deposits	5,223,740		17,372		0.67		8,741,858		72,671		1.66		Time deposits	4,853,891		21,766		0.60		8,501,949		91,699		1.44
Total interest bearing deposits	Total interest bearing deposits	22,428,338		39,663		0.35		22,219,131		123,811		1.11		Total interest bearing deposits	22,584,329		54,662		0.32		22,336,879		156,162		0.93
Short-term borrowings	Short-term borrowings	1,020,458		2,926		0.57		1,820,346		6,687		0.73		Short-term borrowings	966,544		4,390		0.61		1,723,947		9,275		0.72
Long-term borrowings (4)	Long-term borrowings (4)	2,261,719		29,283		2.59		2,830,533		33,922		2.40		Long-term borrowings (4)	2,037,312		40,595		2.66		2,873,912		53,240		2.47
Total interest bearing liabilities	Total interest bearing liabilities	25,710,515		71,872		0.56		26,870,010		164,420		1.22		Total interest bearing liabilities	25,588,185		99,647		0.52		26,934,738		218,677		1.08
Non-interest bearing deposits	Non-interest bearing deposits	9,853,345						7,578,666						Non-interest bearing deposits	10,147,130						7,995,759
Other liabilities	Other liabilities	726,041						881,596						Other liabilities	690,100						902,012
Shareholders’ equity	Shareholders’ equity	4,677,273						4,443,016						Shareholders’ equity	4,718,960						4,472,447
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	40,967,174					$	39,773,288					Total liabilities and shareholders’ equity	$	41,144,375					$	40,304,956
Net interest income/interest rate spread (5)	Net interest income/interest rate spread (5)			$	595,371	2.98	%			$	549,923	2.72	%	Net interest income/interest rate spread (5)			$	897,115	2.99	%			$	834,042	2.74	%
Tax equivalent adjustment	Tax equivalent adjustment			(1,797)						(2,025)				Tax equivalent adjustment			(2,515)						(3,058)
Net interest income, as reported	Net interest income, as reported			$	593,574					$	547,898			Net interest income, as reported			$	894,600					$	830,984
Net interest margin (6)	Net interest margin (6)					3.15	%					3.02	%	Net interest margin (6)					3.15	%					3.02	%
Tax equivalent effect	Tax equivalent effect					0.01	%					0.02	%	Tax equivalent effect					0.01	%					0.01	%
Net interest margin on a fully tax equivalent basis (6)	Net interest margin on a fully tax equivalent basis (6)					3.16	%					3.04	%	Net interest margin on a fully tax equivalent basis (6)					3.16	%					3.03	%

_____________

(1)Interest income is presented on a tax equivalent basis using a 21 percent federal tax rate.

(2)Loans are stated net of unearned income and include non-accrual loans.

(3)The yield for securities that are classified as available for sale is based on the average historical amortized cost.

(4)Includes junior subordinated debentures issued to capital trusts which are presented separately on the consolidated

statements of financial condition.

(5)Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.

(6)Net interest income as a percentage of total average interest earning assets.

The following table demonstrates the relative impact on net interest income of changes in the volume of interest earning assets and interest bearing liabilities and changes in rates earned and paid by us on such assets and liabilities. Variances resulting from a combination of changes in volume and rates are allocated to the categories in proportion to the absolute dollar amounts of the change in each category.

Change in Net Interest Income on a Tax Equivalent Basis


		Three Months Ended June 30, 2021 Compared to June 30, 2020						Six Months Ended June 30, 2021 Compared to June 30, 2020							Three Months Ended September 30, 2021 Compared to September 30, 2020						Nine Months Ended September 30, 2021 Compared to September 30, 2020
		Change Due to Volume		Change Due to Rate		Total Change		Change Due to Volume		Change Due to Rate		Total Change			Change Due to Volume		Change Due to Rate		Total Change		Change Due to Volume		Change Due to Rate		Total Change
		(in thousands)													(in thousands)
Interest Income:	Interest Income:													Interest Income:
Loans*	Loans*	$	5,894	$	(12,438)	$	(6,544)	$	32,462	$	(58,868)	$	(26,406)	Loans*	$	1,771	$	(7,856)	$	(6,085)	$	33,667	$	(66,158)	$	(32,491)
Taxable investments	Taxable investments	(2,875)		(4,781)		(7,656)		(5,782)		(12,171)		(17,953)		Taxable investments	(266)		(1,466)		(1,732)		(5,809)		(13,876)		(19,685)
Tax-exempt investments*	Tax-exempt investments*	(517)		(85)		(602)		(1,117)		(207)		(1,324)		Tax-exempt investments*	(889)		(373)		(1,262)		(2,022)		(564)		(2,586)
Interest bearing deposits with banks	Interest bearing deposits with banks	29		(205)		(176)		522		(1,939)		(1,417)		Interest bearing deposits with banks	182		40		222		697		(1,892)		(1,195)
Total increase (decrease) in interest income	Total increase (decrease) in interest income	2,531		(17,509)		(14,978)		26,085		(73,185)		(47,100)		Total increase (decrease) in interest income	798		(9,655)		(8,857)		26,533		(82,490)		(55,957)
Interest Expense:	Interest Expense:													Interest Expense:
Savings, NOW and money market deposits	Savings, NOW and money market deposits	4,028		(9,489)		(5,461)		11,389		(40,238)		(28,849)		Savings, NOW and money market deposits	3,234		(5,952)		(2,718)		14,669		(46,236)		(31,567)
Time deposits	Time deposits	(10,191)		(13,387)		(23,578)		(22,202)		(33,097)		(55,299)		Time deposits	(6,860)		(7,774)		(14,634)		(29,613)		(40,320)		(69,933)
Short-term borrowings	Short-term borrowings	(1,599)		787		(812)		(2,508)		(1,253)		(3,761)		Short-term borrowings	(1,144)		20		(1,124)		(3,606)		(1,279)		(4,885)
Long-term borrowings and junior subordinated debentures	Long-term borrowings and junior subordinated debentures	(4,350)		976		(3,374)		(7,208)		2,569		(4,639)		Long-term borrowings and junior subordinated debentures	(9,548)		1,542		(8,006)		(16,428)		3,783		(12,645)
Total decrease in interest expense	Total decrease in interest expense	(12,112)		(21,113)		(33,225)		(20,529)		(72,019)		(92,548)		Total decrease in interest expense	(14,318)		(12,164)		(26,482)		(34,978)		(84,052)		(119,030)
Total increase (decrease) in net interest income		$	14,643	$	3,604	$	18,247	$	46,614	$	(1,166)	$	45,448
Total increase in net interest income														Total increase in net interest income	$	15,116	$	2,509	$	17,625	$	61,511	$	1,562	$	63,073

*Interest income is presented on a tax equivalent basis using 21 percent as the federal tax rate.

Non-Interest Income

Non-interest income decreased ~~$1.7~~$6.8 million and ~~$11.9~~$18.7 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same periods of 2020. The following table presents the components of non-interest income for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
Trust and investment services	Trust and investment services	$	3,532	$	2,826	$	6,861	$	6,239	Trust and investment services	$	3,550	$	3,068	$	10,411	$	9,307
Insurance commissions	Insurance commissions	2,637		1,659		4,195		3,610		Insurance commissions	1,610		1,816		5,805		5,426
Service charges on deposit accounts	Service charges on deposit accounts	5,083		3,557		10,186		9,237		Service charges on deposit accounts	5,428		3,952		15,614		13,189
Gains (losses) on securities transactions, net	Gains (losses) on securities transactions, net	375		(41)		476		(81)		Gains (losses) on securities transactions, net	787		(46)		1,263		(127)
Fees from loan servicing	Fees from loan servicing	3,187		2,227		6,086		4,975		Fees from loan servicing	2,894		2,551		8,980		7,526
Gains on sales of loans, net	Gains on sales of loans, net	10,061		8,337		13,574		12,887		Gains on sales of loans, net	6,442		13,366		20,016		26,253
Gains (losses) on sales of assets, net		232		(299)		36		(178)
Gains on sales of assets, net										Gains on sales of assets, net	344		894		380		716
Bank owned life insurance	Bank owned life insurance	2,475		5,823		4,806		8,965		Bank owned life insurance	2,018		(1,304)		6,824		7,661
Other	Other	15,544		20,741		28,139		40,573		Other	19,358		24,975		47,497		65,548
Total non-interest income	Total non-interest income	$	43,126	$	44,830	$	74,359	$	86,227	Total non-interest income	$	42,431	$	49,272	$	116,790	$	135,499

Service charges ofon deposits accounts increased by $1.5 million and ~~$949 thousand~~$2.4 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, as compared to the same periods in 2020, ~~which was~~ mostly due to a decline in waived fees largely related to COVID-19 customer relief efforts during the second ~~quarter~~and third quarters of 2020.

Net gains on sales of loans ~~increased $1.7~~decreased $6.9 million and $6.2 million for the three and nine months ended ~~June~~September 30, 2021, respectively, as compared to the ~~second quarter~~same periods of 2020. ~~Our net~~Net gains on sales of loans for each period are comprised of both gains on sales of residential mortgages and the net change in the mark to market gains and losses on our loans originated for sale and carried at fair value at each period end. The net ~~decrease~~losses from the change in the fair value of loans held for sale totaled $403 thousand and $10.4 million ~~$460 thousand~~ for the three and nine months ended ~~June~~September 30, 2021, respectively, as compared to a net ~~increase~~gains of $~~3.2~~4.3 million and $8.3 million for the three and nine months ended ~~June~~September 30, ~~2020.~~2020, respectively. During the ~~second~~third quarter 2021, we sold approximately ~~$326.2~~$234.6 million of residential mortgage loans as compared to ~~$237.1~~$301.2 million during the ~~second~~third quarter 2020. See further discussion of our residential mortgage loan origination activity under the “Loan Portfolio” section of this MD&A below.

Bank owned life insurance income ~~decreased~~increased $3.3 million for the three months ended September 30, 2021 as compared to the same period in 2020. The increase was attributable to a mortality contingency reserve adjustment recorded in third quarter 2020.

Other non-interest income decreased $5.6 million and ~~$4.2~~$18.1 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, as compared to the same periods in 2020 ~~partly~~primarily due to ~~lower yields on the underlying fixed income investments held by insurance policies and periodic death benefits received in the second quarter 2020.~~

~~Other non-interest income decreased $5.2 million and $12.4 million for the three and six months ended June 30, 2021, respectively, mainly caused by~~ lower fee income related to derivative interest rate swaps executed with commercial lending customers ~~due to~~caused by lower transaction volumes. Swap fee income totaled ~~$7.6~~$8.8 million and ~~$14.7~~$19.2 million for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and ~~$13.8~~$22.6 million and ~~$28.9~~$48.1 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

Non-Interest Expense

Non-interest expense increased $14.7 million and ~~$19.3~~$34.0 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, as compared to the same periods of 2020. The following table presents the components of non-interest expense for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
Salary and employee benefits expense	Salary and employee benefits expense	$	91,095	$	78,532	$	179,198	$	164,260	Salary and employee benefits expense	$	93,992	$	83,626	$	273,190	$	247,886
Net occupancy and equipment expense	Net occupancy and equipment expense	32,451		33,217		64,710		65,658		Net occupancy and equipment expense	32,402		31,116		97,112		96,774
FDIC insurance assessment	FDIC insurance assessment	3,374		6,135		6,650		10,011		FDIC insurance assessment	3,644		4,847		10,294		14,858
Amortization of other intangible assets	Amortization of other intangible assets	5,449		6,681		11,455		12,151		Amortization of other intangible assets	5,298		6,377		16,753		18,528
Professional and legal fees	Professional and legal fees	7,486		7,797		13,758		13,884		Professional and legal fees	13,492		8,762		27,250		22,646
Loss on extinguishment of debt	Loss on extinguishment of debt	8,406		—		8,406		—		Loss on extinguishment of debt	—		2,353		8,406		2,353
Amortization of tax credit investments	Amortization of tax credit investments	2,972		3,416		5,716		6,644		Amortization of tax credit investments	3,079		2,759		8,795		9,403
Telecommunications expense	Telecommunications expense	2,732		2,866		5,892		5,153		Telecommunications expense	2,615		2,094		8,507		7,247
Other	Other	17,928		18,522		36,321		35,061		Other	20,400		18,251		56,721		53,312
Total non-interest expense	Total non-interest expense	$	171,893	$	157,166	$	332,106	$	312,822	Total non-interest expense	$	174,922	$	160,185	$	507,028	$	473,007

Salary and employee benefits expense increased ~~$12.6~~$10.4 million and ~~$14.9~~$25.3 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, as compared to the same periods of 2020 primarily due to strategic increases in our headcount to enhance lending and operations ~~increased health insurance costs,~~ and ~~higher cash~~increases in our branch compensation to preserve staffing and ~~stock-based incentive compensation accruals. The six months ended June 30, 2020 period included a special bonus expense of $1.8 million paid~~service levels, and to ~~hourly employees impacted by COVID-19 that was incurred~~keep pace with the increases in wage demand across the ~~first quarter 2020.~~

industry. In addition,

higher cash and stock-based incentive compensation accruals and health insurance costs also contributed to the increases in both periods.

FDIC insurance assessment expense decreased ~~$2.8~~$1.2 million and ~~$3.4~~$4.6 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, as compared to the same periods of 2020 ~~partially~~mostly due to the Bank's improved capital position and overall risk profile.

Professional and legal fees increased $4.7 million and $4.6 million for the three and nine months ended September 30, 2021, respectively, as compared to the same periods of 2020. The increases were largely attributable to a $2.1 million accrual for general litigation reserves, $1.3 million of merger related fees, as well as increased consulting expenses during the three and nine months ended September 30, 2021. Higher consulting expenses mostly related to our technology transformation efforts and new product initiatives.

Loss on extinguishment of debt totaled $8.4 million for the nine~~three and six~~ months ended ~~June~~September 30, 2021 reflecting the prepayment of approximately $248 million of long-term FHLB advances during the second quarter 2021. The loss on extinguishment of debt totaling $2.4 million during the three and nine months ended September 30, 2020 was

related to the prepayment of $50 million of long-term institutional repo borrowings. All the prepayments were funded by excess cash liquidity at the Bank. See Note 910 to the consolidated financial statements for additional information regarding our borrowed funds.

Other non-interest expense increased $2.1 million and $3.4 million for the three and nine months ended September 30, 2021, respectively, as compared to the same periods of 2020. These increases were largely due to higher data processing costs, OREO related expenses as well as incrementally higher operating expenses in several categories due to the expansion of our operations.

See Notes 89 and 1314 to the consolidated financial statements for information regarding the amortization of other intangible assets and tax credit investments, respectively.

Efficiency Ratio

The efficiency ratio measures total non-interest expense as a percentage of net interest income plus total non-interest income. We believe this non-GAAP measure provides a meaningful comparison of our operational performance and facilitates investors’ assessments of business performance and trends in comparison to our peers in the banking industry. Our overall efficiency ratio, and its comparability to some of our peers, is negatively impacted primarily by the amortization of tax credit investments, as well as infrequent charges within non-interest income and expense, including, but not limited to loss on extinguishment of debt, litigation reserves and merger related expenses.

The following table presents our efficiency ratio and a reconciliation of the efficiency ratio adjusted for certain items during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2021			2020			2021			2020
		($ in thousands)													($ in thousands)
Total non-interest expense	Total non-interest expense	$	171,893		$	157,166		$	332,106		$	312,822		Total non-interest expense	$	174,922		$	160,185		$	507,028		$	473,007
Less: Loss on extinguishment of debt (pre-tax)	Less: Loss on extinguishment of debt (pre-tax)	8,406			—			8,406			—			Less: Loss on extinguishment of debt (pre-tax)	—			2,353			8,406			2,353

Less: Amortization of tax credit investments (pre-tax)	Less: Amortization of tax credit investments (pre-tax)	2,972			3,416			5,716			6,644			Less: Amortization of tax credit investments (pre-tax)	3,079			2,759			8,795			9,403

Less: Litigation reserve (a)														Less: Litigation reserve (a)	2,100			—			2,100			—
Less: Merger related expenses (pre-tax) (a)	Less: Merger related expenses (pre-tax) (a)	—			366			—			1,668			Less: Merger related expenses (pre-tax) (a)	1,287			106			1,287			1,774
Total non-interest expense, adjusted	Total non-interest expense, adjusted	$	160,515		$	153,384		$	317,984		$	304,510		Total non-interest expense, adjusted	$	168,456		$	154,967		$	486,440		$	459,477
Net interest income	Net interest income	$	300,907		$	282,559		$	593,574		$	547,898		Net interest income	$	301,026		$	283,086		$	894,600		$	830,984
Total non-interest income	Total non-interest income	43,126			44,830			74,359			86,227			Total non-interest income	42,431			49,272			116,790			135,499

Add: Losses on available for sale and held to maturity securities transactions, net (pre-tax) (b)		113			41			231			81

Add: (Gains) losses on available for sale and held to maturity securities transactions, net (pre-tax) (b)														Add: (Gains) losses on available for sale and held to maturity securities transactions, net (pre-tax) (b)	(788)			46			(557)			127
Total net interest income and non-interest income	Total net interest income and non-interest income	$	344,146		$	327,430		$	668,164		$	634,206		Total net interest income and non-interest income	$	342,669		$	332,404		$	1,010,833		$	966,610
Efficiency ratio	Efficiency ratio	49.96		%	48.01		%	49.72		%	49.33		%	Efficiency ratio	50.93		%	48.20		%	50.13		%	48.94		%
Efficiency ratio, adjusted	Efficiency ratio, adjusted	46.64		%	46.84		%	47.59		%	48.01		%	Efficiency ratio, adjusted	49.16		%	46.62		%	48.12		%	47.53		%

(a) ~~Merger related expenses are primarily within~~Included in professional and legal ~~fees, and other non-interest expense.~~fees.

(b) Included in gains on securities transactions, ~~net within other non-interest income.~~net.

Income Taxes

Income tax expense totaled ~~$42.9~~$42.4 million for the ~~second~~third quarter 2021 as compared to ~~$39.3~~$42.9 million and ~~$33.5~~$38.9 million for the ~~first~~second quarter 2021 and ~~second~~third quarter 2020, respectively, and ~~$82.2~~$124.6 million and ~~$62.6~~$101.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. Our effective tax rate was 25.7 percent, 26.2 percent ~~25.4~~and 27.5 percent for the third quarter 2021, second quarter 2021 and ~~25.9 percent for~~third quarter 2020, respectively. The decrease in the effective tax rate in the third quarter 2021 as compared to the second quarter 2021 ~~first~~and the third quarter ~~2021 and second quarter~~ 2020 ~~respectively. The increase in income tax expense as compared to the first quarter 2021~~ was mainly due to the increase in ~~pre-tax incom~~excess stock compensation benefit.e.

U.S. GAAP requires that any change in judgment or change in measurement of a tax position taken in a prior annual period be recognized as a discrete event in the quarter in which it occurs, rather than being recognized as a change in effective tax rate for the current year. Our adherence to these tax guidelines may result in volatile effective income tax rates in future quarterly and annual periods. Factors that could impact management’s judgment include changes in income, tax laws and regulations, and tax planning strategies. For the remainder of 2021, we currently estimate that our effective tax rate will range from 25 percent to 27 percent.

Business Segments

We have four business segments that we monitor and report on to manage our business operations. These segments are consumer lending, commercial lending, investment management, and corporate and other adjustments. Our reportable segments have been determined based upon Valley’s 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. The financial reporting for each segment contains allocations and reporting in line with our operations, which may not necessarily be comparable to any other financial institution. The accounting for each segment includes internal accounting policies designed to measure consistent and reasonable financial reporting and may result in income and expense measurements that differ from amounts under U.S. GAAP. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.

The following tables present the financial data for each business segment for the three months ended ~~June~~September 30, 2021 and 2020:


		Three Months Ended June 30, 2021															Three Months Ended September 30, 2021
		Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total				Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
		($ in thousands)															($ in thousands)
Average interest earning assets	Average interest earning assets	$	7,150,137		$	25,485,161		$	5,272,116		$	—	$	37,907,414		Average interest earning assets	$	7,373,897		$	25,324,485		$	5,634,492		$	—	$	38,332,874
Income (loss) before income taxes	Income (loss) before income taxes	35,777			140,733			3,503			(16,620)		163,393			Income (loss) before income taxes	37,132			141,927			2,846			(16,901)		165,004
Annualized return on average interest earning assets (before tax)	Annualized return on average interest earning assets (before tax)	2.00		%	2.21		%	0.27		%	N/A		1.72		%	Annualized return on average interest earning assets (before tax)	2.01		%	2.24		%	0.20		%	N/A		1.72		%


		Three Months Ended June 30, 2020															Three Months Ended September 30, 2020
		Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total				Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
		($ in thousands)															($ in thousands)
Average interest earning assets	Average interest earning assets	$	7,214,368		$	24,826,832		$	5,737,187		$	—	$	37,778,387		Average interest earning assets	$	7,126,157		$	25,389,107		$	5,252,446		$	—	$	37,767,710
Income (loss) before income taxes	Income (loss) before income taxes	29,561			102,567			7,530			(10,591)		129,067			Income (loss) before income taxes	34,565			121,351			1,066			(15,717)		141,265
Annualized return on average interest earning assets (before tax)	Annualized return on average interest earning assets (before tax)	1.64		%	1.65		%	0.52		%	N/A		1.37		%	Annualized return on average interest earning assets (before tax)	1.94		%	1.91		%	0.08		%	N/A		1.50		%

See Note 1415 to the consolidated financial statements for additional information.

Consumer Lending

This consumer lending segment represented ~~21.9~~22.3 percent of our loan portfolio at ~~June~~September 30, 2021, and was mainly comprised of residential mortgage loans and automobile loans, and to a lesser extent, home equity loans, secured personal lines of credit and other consumer loans (including credit card loans). The duration of the residential mortgage loan portfolio (which represented ~~13.0~~13.3 percent of our loan portfolio at ~~June~~September 30, 2021) is subject to movements in the market level of interest rates and forecasted prepayment speeds. The weighted average life of the automobile loans (representing ~~4.7~~4.8 percent of total loans at ~~June~~September 30, 2021) 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. The consumer lending segment also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, and insurance services.

Average interest earning assets in this segment ~~decreased~~increased $~~64.2~~247.7 million to ~~$7.2~~$7.4 billion for the three months ended ~~June~~September 30, 2021 as compared to the ~~second~~third quarter 2020. The ~~decrease~~increase was largely due to ~~runoff~~loan growth from ~~principal repayments with a higher percentage~~origination of new ~~and refinanced~~residential mortgage loans ~~originated for sale rather than held for investment~~and automobile loans over most of the last ~~12 month~~12-month period. ~~Automobile loan demand was also tempered during the onset of the COVID-19 pandemic before steadily strengthening since the fourth quarter 2020.~~

Income before income taxes generated by the consumer lending ~~segment~~segment increased ~~$6.2~~$2.6 million to ~~$35.8~~$37.1 million for the ~~second~~third quarter 2021 as compared to the ~~second~~third quarter 2020 largely due to a ~~$4.7 million increase in non-interest income coupled with a $2.4~~$10.0 million decrease in the provision for loan losses and lower non-interest expense, partially offset by ~~$1.1~~a $11.7 million decrease in non-interest income

coupled with a $2.0 million increase in the ~~net interest income.~~internal transfer expense. The ~~increase~~decrease of $11.7 million in non-interest income was partly due to a ~~$1.7~~$6.9 million ~~increase~~decrease in net gains on sales of loans for the three months ended ~~June~~September 30, ~~2021, higher fee income from our wealth management division, and moderate increases in other fee categories as compared to the same period in 2020.~~2021. The decrease in the provision for loan losses was mainly due to the improvement in the economic forecast component of the allowance for loan losses at ~~June~~September 30, 2021 as compared to ~~June~~September 30, 2020. See further details in the "Allowance for Credit Losses" section of this MD&A. ~~The decrease in net interest income was largely driven by lower yields on new loans and the decline in average loan balances, partially offset by lower funding costs.~~

The net interest margin on the consumer lending portfolio decreased 211 basis points to ~~3.03~~2.97 percent for the ~~second~~third quarter 2021 as compared to the ~~second~~third quarter 2020 mainly due to a 3840 basis point decrease in the yield on average loans, partially offset by a 3629 basis point decrease in the costs associated with our funding sources. The 3840 basis point decrease in loan yield was largely due to lower yielding new loan volumes and ~~refinanced~~normal loan ~~volumes.~~repayments. The decrease in our funding costs was ~~largely~~mainly due to continued runoff of higher cost time deposits, ~~and the~~some customer ~~shift~~migration to lower cost deposits without stated maturities and lower rates offered on deposit products. See the "Executive Summary" and the "Net Interest Income" sections above for more details on our net interest margin and funding sources.

Commercial Lending

The commercial lending segment is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans. Due to the portfolio’s interest rate characteristics, commercial lending is Valley’s business segment that is most sensitive to movements in market interest rates. Commercial and industrial loans totaled approximately ~~$6.1~~$5.6 billion and represented ~~18.7~~17.3 percent of the total loan portfolio at ~~June~~September 30, 2021. Commercial real estate loans and construction loans totaled ~~$19.3~~$19.7 billion and represented ~~59.4~~60.4 percent of the total loan portfolio at ~~June~~September 30, 2021.

Average interest earning assets in this segment ~~increased~~decreased approximately $~~658.3~~64.6 million to ~~$25.5~~$25.3 billion for the three months ended ~~June~~September 30, 2021 as compared to the ~~second~~third quarter ~~2020.~~ ~~The increase was~~2020 mostly due to commercial and industrial PPP loans which were paid off (forgiven), largely offset by strong ~~organic~~new loan originations concentrated in the commercial real estate loan ~~growth during the first half of 2021.~~portfolio.

For the three months ended ~~June~~September 30, 2021, income before income taxes for the commercial lending segment increased ~~$38.2~~$20.6 million to ~~$140.7~~$141.9 million as compared to the ~~second~~third quarter 2020 mainly driven by a ~~lower~~

~~provision for credit losses coupled with and an~~$18.5 million increase in net interest ~~income.~~income and a $17.5 million decrease in the provision for loan losses, partially offset by lower non-interest income and higher internal expense. Net interest income for this segment increased to $237.1 million for the third quarter 2021 as compared to the same period in 2020 primarily due to lower funding costs. The provision for loan losses decreased by ~~$29.9~~$17.5 million mainly due to the improvement in the economic forecast component of the allowance for loan losses as compared to ~~June~~September 30, 2020. ~~Net interest income for this segment increased~~$22.9 million to $237.4 million for the second quarter 2021 as compared to the same period in 2020 primarily due to lower funding costs and loan growth. The positive impact of the aforementioned items was partially offset by a decrease in non-interest income and higher internal transfer expense. Non-interest income decreased ~~$6.4~~$8.8 million to ~~$9.8~~$11.6 million for the three months ended ~~June~~September 30, 2021 as compared to the ~~second~~third quarter 2020 mainly due to a ~~$7.1~~$10.4 million decrease in swap fee income related to derivative interest rate swaps executed with commercial loan customers. Internal transfer expense increased ~~$4.3~~$4.8 million for the ~~second~~third quarter 2021 as compared to the ~~second~~third quarter 2020 partly due to general increases related to organic growth in our business.

The net interest margin for this segment increased 2728 basis points to ~~3.73~~3.74 percent for the ~~second~~third quarter 2021 as compared to the ~~second~~third quarter 2020 due to a 3629 basis point decrease in the cost of our funding sources, which was ~~partially~~marginally offset by a 91 basis point decrease in the yield on average loans.

Investment Management

The investment management segment generates a large portion of our income through investments in various types of securities and interest-bearing deposits with other banks. These investments are mainly comprised of fixed rate securities and, depending on our liquid cash position, federal funds sold and interest-bearing deposits with banks (primarily the Federal Reserve Bank of New York) as part of our asset/liability management strategies. The fixed

rate investments are one of Valley’s least sensitive assets to changes in market interest rates. However, a portion of the investment portfolio is invested in shorter-duration securities to maintain the overall asset sensitivity of our balance sheet. See the “Asset/Liability Management” section below for further analysis.

Average interest earning assets in this segment ~~decreased $465.1~~increased $382.0 million during the ~~second~~third quarter 2021 as compared to the ~~second~~third quarter 2020 ~~primarily~~ due to a ~~$576.4 million decrease in average investment securities partially offset by a $111.4~~$546.1 million increase in average interest bearing deposits with ~~banks. The~~banks, partially offset by a $164.1 million decrease in average investment ~~securities was mainly driven by principal repayments on securities with lower reinvestment activity due to the low interest rate environment and funding of loan growth.~~securities. The increase in overnight investments and deposits with other banks was largely due to our higher levels of excess liquidity during the third quarter 2021 as we continued to experience a surge in customer deposits. The decrease in average investment securities was mainly driven by principal repayments on securities with a slower rate of reinvestment activity due to the low interest rate environment and our preference to fund loan growth. However, average investments did increase $73.9 million as compared to the linked second quarter 2021 as we modestly increased our investment purchases in the third quarter 2021.

During the second quarter 2021, income before income taxes for the investment management segment ~~decreased $4.0~~increased $1.8 million to ~~$3.5~~$2.8 million as compared to $1.1 million for the ~~second~~third quarter 2020 mostly due to ~~decreases~~an increase in both innet interest income and non-interest income, ~~and~~partially offset by higher internal transfer expense. The increase in net interest ~~income.~~income totaled $753 thousand and was mainly due to the decreased cost of funding, partially offset by lower yields on our investments securities and lower average investment balances. Non-interest income ~~decreased~~increased $3.3 ~~million to $2.5~~ million in the ~~second~~third quarter 2021 as compared to the ~~second~~third quarter 2020 mainly due to ~~lower~~higher bank owned life insurance income. ~~The decrease in net interest income totaling $2.5 million was primarily due to accelerated repayments of higher yielding securities, higher amortization expense and~~See the ~~low yields on the increased overnight investment balances.~~"Non-Interest Income" section for more details.

The net interest margin for this segment decreased 112 basis points to ~~1.17~~1.18 percent for the ~~second~~third quarter 2021 as compared to the same quarter in 2020 largely due to a 4731 basis point decrease in the yield on average investments, partially offset by a 3629 basis point decrease in our cost of funding. The decrease in the yield on average investments as compared to the ~~second~~third quarter 2020 was largely driven by ~~principal repayments on higher yielding residential mortgage-backed securities, acceleration of premium amortization expense related to~~ the ~~increased prepayment of mortgage-backed securities and purchases of~~ lower yielding investment securities ~~over~~and the ~~last 12 months.~~higher average holdings in low yielding overnight cash investments.

Corporate and other adjustments

The amounts disclosed as “corporate and other adjustments” represent income and expense items not directly attributable to a specific segment, including net securities gains and losses not reported in the investment management segment above, interest expense related to subordinated notes, amortization and impairment of tax credit investments, as well as non-core items, including merger expenses.

The corporate segment recognized pre-tax losses of ~~$16.6~~$16.9 million ~~and $10.6~~and $15.7 million for the three months ended ~~June~~September 30, 2021 and 2020, respectively. The$1.2 million increase in the pre-tax loss for the ~~second~~third quarter 2021 was mainly driven by the ~~$12.3~~$19.2 million increase in non-interest expense ~~partially due to a $8.4 million l~~largely caused by higher salaries and employee benefits expense, and professional and legal fees for~~oss on extinguishment of debt during~~ the three months ended ~~June~~September 30, ~~2021,~~2021. These items were partially offset by ~~$3.3~~increases of $10.3 million ~~increase~~and $8.9 million in non-interest ~~income.~~income and internal transfer income, respectively. See further details in the "Non-Interest Income" and "Non-Interest Expense" sections of this MD&A.

The following tables present the financial data for each business segment for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:


		Six Months Ended June 30, 2021															Nine Months Ended September 30, 2021
		Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total				Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
		($ in thousands)															($ in thousands)
Average interest earning assets	Average interest earning assets	$	7,099,973		$	25,509,061		$	5,039,222		$	—	$	37,648,256		Average interest earning assets	$	7,176,086		$	25,465,276		$	5,261,185		$	—	$	37,902,547
Income (loss) before income taxes	Income (loss) before income taxes	67,176			269,785			6,303			(24,840)		318,424			Income (loss) before income taxes	104,308			411,712			9,149			(41,741)		483,428
Annualized return on average interest earning assets (before tax)	Annualized return on average interest earning assets (before tax)	1.89		%	2.12		%	0.25		%	N/A		1.69		%	Annualized return on average interest earning assets (before tax)	1.94		%	2.16		%	0.23		%	N/A		1.70		%


		Six Months Ended June 30, 2020															Nine Months Ended September 30, 2020
		Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total				Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
		($ in thousands)															($ in thousands)
Average interest earning assets	Average interest earning assets	$	7,215,756		$	23,804,558		$	5,205,918		$	—	$	36,226,232		Average interest earning assets	$	7,187,839		$	24,334,429		$	5,221,538		$	—	$	36,743,806
Income (loss) before income taxes	Income (loss) before income taxes	45,802			205,362			15,360			(21,060)		245,464			Income (loss) before income taxes	80,367			326,713			16,426			(36,777)		386,729
Annualized return on average interest earning assets (before tax)	Annualized return on average interest earning assets (before tax)	1.27		%	1.73		%	0.59		%	N/A		1.36		%	Annualized return on average interest earning assets (before tax)	1.49		%	1.79		%	0.42		%	N/A		1.40		%

Consumer Lending

Average interest earning assets in this segment decreased ~~$115.8~~$11.8 million to ~~$7.1~~$7.2 billion for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020. The decrease was largely due to runoff from principal repayments with a higher percentage of new and refinanced mortgage loans originated for sale rather than held for investment over the last 12 month period. ~~Automobile~~However, automobile loan demand, which was ~~also~~ tempered during much of 2020 due to the onset of the COVID-19 pandemic, ~~in early 2020 before steadily strengthening since~~was strong during the ~~fourth quarter 2020.~~nine months ended September 30, 2021 due to built up demand for auto purchases by consumers.

Income before income taxes generated by the consumer lending segment increased ~~$21.4~~$23.9 million to ~~$67.2~~$104.3 million for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020 largely due to a lower provision for loan losses and ~~increases~~non-interest expense, and an increase in ~~both,~~ net interest ~~income and non-interest~~ income. The provision for loan losses decreased ~~$11.8~~$21.8 million ~~from a $9.9 million provision for the six months ended June 30, 2020~~ to a credit (negative) provision of ~~$1.9~~$6.5 million for the ~~corresponding~~nine months ended September 30, 2021 from a $15.3 million provision for the same period ~~in 2021~~of 2020. The lower provision was mainly due to the improved economic forecast component of the allowance for loan losses as compared to ~~June~~September 30, 2020, as well as better actual loan performance within these loan categories. See further details in the "Allowance for Credit Losses" section of this MD&A. ~~The net~~Net interest income ~~and non-interest income~~ increased ~~$4.8~~$4.7 million ~~and $3.7 million, respectively. The increase in net interest income was mainly driven by~~primarily due to the lower funding costs, which were partially offset by lower loan yields, ~~and~~as well as the modest decline in average ~~loans.~~interest earning assets. The ~~increase~~higher net interest income was partially offset by a $7.9 million decrease in non-interest income, which was largely attributable to ~~higher~~lower net gains on sales of loans for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020.

The net interest margin on the consumer lending portfolio increased 1810 basis points to ~~3.06~~3.04 percent for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period one year ago mainly due to a 5346 basis point decrease in the costs associated with our funding sources, partially offset by a 3536 basis point decrease in the yield on average loans. The decrease in our funding costs was mainly due to a greater mix of non-interest bearing deposits, deposits

continuing to reprice at lower interest rates and the repayment of maturing higher cost borrowings. The 3536 basis point decrease in loan yield was largely due to lower yielding new loan volumes and normal loan repayments.

Commercial Lending

Average interest earning assets in this segment increased ~~$1.7~~$1.1 billion to $25.5 billion for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020. This increase was mainly due to PPP ~~loans~~loan originations during the last 12 months, as well as organic commercial real estate loan growth during the ~~first half of~~nine months ended September 30, 2021.

For the ~~six~~nine months ended ~~June~~September 30, 2021, income before income taxes for the commercial lending segment increased ~~$64.4~~$85.0 million to ~~$269.8~~$411.7 million as compared to the same period in 2020 mainly driven by an increase in net interest income and a lower provision for ~~credit losses, partially offset by a decline in non-interest income.~~loan losses. Net interest income increased ~~$49.3~~$67.8 million to ~~$466.5~~$703.6 million for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020 largely due to lower funding costs and the higher average commercial loan balances during the current period. The provision for credit losses decreased ~~$45.4~~$63.0 million to ~~$19.7~~$27.8 million during the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to ~~$65.1~~$90.8 million for the same period in 2020. The decrease in the provision for loan losses was mainly due to an improvement in the economic forecast component of the allowance for loan losses and other qualitative factors related to the COVID-19 pandemic as compared to ~~June~~September 30, 2020. See the "Allowance for Credit Losses" section below for further details. The positive ~~impact~~impact of the aforementioned items ~~was~~was partially offset by a ~~$14.2 million~~ decrease in non-interest income, as well as higher non-interest expense and internal transfer expense. Non-interest income decreased $23.0 million for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020 primarily due to a ~~$15.1~~$25.5 million decrease in fee income related to derivative interest rate swaps executed with commercial loan customers. Internal transfer expense ~~also~~ increased ~~$10.7~~$15.5 million to ~~$141.8~~$212.9 million for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020.

The net interest margin for this segment increased 1420 basis points to ~~3.65~~3.68 percent for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020 due to a 5346 basis point decrease in the cost of our funding sources, partially offset by a 3926 basis point decrease in yield on average loans.

Investment Management

Average interest earning assets in this segment ~~decreased $166.7~~increased $39.6 million during the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in ~~2020 largely due to~~2020. Within the category, a ~~$547.6~~$458.4 million ~~decrease in average investment securities partially offset by an~~ increase ~~of $380.9 million~~ in average interest bearing deposits with ~~banks. The~~banks was largely offset by $418.8 million decrease in average investment ~~securities was mainly driven by principal repayments on securities with lower reinvestment activity due to the low interest rate environment and funding of loan growth.~~securities. The increase in our excess liquidity held in overnight interest bearing deposits with banks was mainly caused by strong deposits growth over the 12-month period and management's lower rate of reinvestment in investment ~~securities.~~securities for most of the same period.

For the ~~six~~nine months ended ~~June~~September 30, 2021, income before income taxes for the investment management segment decreased ~~$9.1~~$7.3 million to ~~$6.3~~$9.1 million as compared to the same period in 2020 mainly due to decreases in the net interest income and non-interest ~~income.~~income and a higher internal expense transfer. The negative impact of these items was partially offset by a decline in the provision for credit losses for held to maturity debt securities from ~~an $800~~a $688 thousand provision for the ~~six~~nine months ended ~~June~~September 30, 2020 to a credit of ~~$388~~$353 thousand for the ~~first half of~~nine months ended September 30, 2021.

The net interest margin for this segment decreased 2115 basis points to ~~1.21~~1.19 percent for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020 largely due to a 7461 basis point decrease in the yield on average investments, partially offset by a 5346 basis point decrease in costs associated with our funding sources. The decrease in the yield on average investments as compared to the same period of 2020 was mainly due to ~~repayment and prepayment of higher yield residential mortgage-backed securities, increased premium amortization and~~ lower yielding ~~new investments purchased over the last 12 months,~~investment securities and ~~low yielding~~ excess liquidity held in low yielding overnight investments.

Corporate and other adjustments

The pre-tax net loss for the corporate segment totaled ~~$24.8~~$41.7 million for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to ~~$21.1~~$36.8 million for the same period in 2020. The negative change of ~~$3.8~~$5.0 million was mainly due to an increase in non-interest expense, partially offset by higher internal transfer income and greater non-interest

income. Non-interest expense increased ~~$14.1~~$33.3 million to ~~$238.2~~$372.2 million for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020 ~~largely~~partially due to increases in salaries and employee benefits expenses, professional and legal fees and the ~~$8.4 million~~ loss on extinguishment of debt during the ~~second quarter 2021 and increases in salaries and employee benefits expenses.~~current period as compared to prior. ~~See further details in the "Non-Interest Expense" section above.~~ Internal transfer income increased ~~$9.6~~$18.5 million to ~~$209.0~~$316.7 million for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the same period in 2020.

ASSET/LIABILITY MANAGEMENT

Interest Rate Sensitivity

Our success is largely dependent upon our ability to manage interest rate risk. Interest rate risk can be defined as the exposure of our interest rate sensitive assets and liabilities to the movement in interest rates. Our Asset/Liability Management Committee is responsible for managing such risks and establishing policies that monitor and coordinate our sources and uses of funds. Asset/Liability management is a continuous process due to the constant change in interest rate risk factors. In assessing the appropriate interest rate risk levels for us, management weighs the potential benefit of each risk management activity within the desired parameters of liquidity, capital levels and management’s tolerance for exposure to income fluctuations. Many of the actions undertaken by management utilize fair value analysis and attempt to achieve consistent accounting and economic benefits for financial assets and their related funding sources. We have predominantly focused on managing our interest rate risk by attempting to match the inherent risk and cash flows of financial assets and liabilities. Specifically, management employs multiple risk management activities such as optimizing the level of new residential mortgage originations retained in our mortgage portfolio through increasing or decreasing loan sales in the secondary market, product pricing levels, the desired maturity levels for new originations, the composition levels of both our interest earning assets and interest bearing liabilities, as well as several other risk management activities.

We use a simulation model to analyze net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on various interest rate scenarios over a 12-month and 24-month period. The model is based on the actual maturity and re-pricing characteristics of rate sensitive assets and liabilities. The model incorporates certain assumptions which management believes to be reasonable regarding the impact of changing interest rates and the prepayment assumptions of certain assets and liabilities as of ~~June~~September 30, 2021. The model assumes immediate changes in interest rates without any proactive change in the composition or size of the balance sheet, or other future actions that management might undertake to mitigate this risk. In the model, the forecasted shape of the yield curve remains static as of ~~June~~September 30, 2021. The impact of interest rate derivatives, such as interest rate swaps, is also included in the model.

Our simulation model is based on market interest rates and prepayment speeds prevalent in the market as of ~~June~~September 30, 2021. Although the size of Valley’s balance sheet is forecasted to remain static as of ~~June~~September 30, 2021 in our model, the composition is adjusted to reflect new interest earning assets and funding originations coupled with rate spreads utilizing our actual originations during the ~~second~~third quarter 2021. The model also utilizes an immediate parallel shift in market interest rates at ~~June~~September 30, 2021.

The assumptions used in the net interest income simulation are inherently uncertain. Actual results may differ significantly from those presented in the table below due to the frequency and timing of changes in interest rates and changes in spreads between maturity and re-pricing categories. Overall, our net interest income is affected by changes in interest rates and cash flows from our loan and investment portfolios. We actively manage these cash flows in conjunction with our liability mix, duration and interest rates to optimize the net interest income, while structuring the balance sheet in response to actual or potential changes in interest rates. Additionally, our net interest income is impacted by the level of competition within our marketplace. Competition can negatively impact the level

of interest rates attainable on loans and increase the cost of deposits, which may result in downward pressure on our net interest margin in future periods. Other factors, including, but not limited to, the slope of the yield curve and projected cash flows will impact our net interest income results and may increase or decrease the level of asset sensitivity of our balance sheet.

Convexity is a measure of how the duration of a financial instrument changes as market interest rates change. Potential movements in the convexity of bonds held in our investment portfolio, as well as the duration of the loan portfolio may have a positive or negative impact on our net interest income in varying interest rate environments. As a result, the increase or decrease in forecasted net interest income may not have a linear relationship to the results reflected in the table below. Management cannot provide any assurance about the actual effect of changes in interest rates on our net interest income.

The following table reflects management’s expectations of the change in our net interest income over the next 12- month period considering the aforementioned assumptions. While an instantaneous and severe shift in interest rates was used in this simulation model, we believe that any actual shift in interest rates would likely be more gradual and would therefore have a more modest impact than shown in the table below.


		Estimated Change in Future Net Interest Income					Estimated Change in Future Net Interest Income
Changes in Interest Rates	Changes in Interest Rates	Dollar Change		Percentage Change		Changes in Interest Rates	Dollar Change		Percentage Change
(in basis points)	(in basis points)	($ in thousands)				(in basis points)	($ in thousands)
+200	+200	$	73,064	6.21	%	+200	$	104,613	8.88	%
+100	+100	35,915		3.05		+100	52,462		4.45
–100	–100	(43,188)		(3.67)		–100	(54,113)		(4.59)
–200	–200	(63,235)		(5.38)		–200	(78,513)		(6.66)

As noted in the table above, a 100 basis point immediate increase in interest rates combined with a static balance

sheet where the size, mix, and proportions of assets and liabilities remain unchanged is projected to increase net interest income over the next 12 month period by ~~3.05~~4.45 percent. Management believes the interest rate sensitivity remains within an acceptable tolerance range at ~~June~~September 30, 2021. However, the level of net interest income sensitivity may increase or decrease in the future as a result of several factors, including potential changes in our balance sheet strategies, the slope of the yield curve and projected cash flows.

Liquidity and Cash Requirements

Bank Liquidity

Liquidity measures the ability to satisfy current and future cash flow needs as they become due. A bank’s liquidity reflects its ability to meet loan demand, to accommodate possible outflows in deposits and to take advantage of interest rate opportunities in the marketplace. Liquidity management is carefully performed and routinely reported by our Treasury Department to two board committees. Among other actions, Treasury reviews historical funding requirements, current liquidity position, sources and stability of funding, marketability of assets, options for attracting additional funds, and anticipated future funding needs, including the level of unfunded commitments. Our goal is to maintain sufficient liquidity to cover current and potential funding requirements.

The Bank has no required regulatory liquidity ratios to maintain; however, it adheres to an internal liquidity policy. The current policy maintains that we may not have a ratio of loans to deposits in ~~excess~~excess of 110 percent or reliance on wholesale funding greater than 25 percent of total funding. The Bank was in compliance with the foregoing policies at ~~June~~September 30, 2021.

Valley's short and long-term cash requirements include contractual obligations under borrowings, deposits, payment related to leases, capital expenditures and other purchase commitments. In the ordinary course of operations, the Bank also enters into various financial obligations, including contractual obligations that may require future cash

payments. Management believes the Bank has the ability to generate and obtain adequate amounts of cash to meet its short-term and long-term obligations as they come due by utilizing various cash resources described below.

On the asset side of the balance sheet, the Bank has numerous sources of liquid funds in the form of cash and due from banks, interest bearing deposits with banks (including the Federal Reserve Bank of New York), investment

securities held to maturity that are maturing within 90 days or would otherwise qualify as maturities if sold (i.e., 85 percent of original cost basis has been repaid), investment securities classified as trading and available for sale, loans held for sale, and from time to time, federal funds sold and receivables related to unsettled securities transactions. Total liquid assets were approximately ~~$3.2~~$3.0 billion, representing ~~8.5~~7.9 percent of earning assets at ~~June~~September 30, 2021 and $3.1 billion, representing 8.3 percent of earning assets at December 31, 2020. Of the ~~$3.2~~$3.0 billion of liquid assets at ~~June~~September 30, 2021, approximately ~~$736.2~~$547.5 million of various investment securities were pledged to counterparties to support our earning asset funding strategies. We anticipate the receipt of approximately $~~758~~747 million in principal payments from securities in the total investment portfolio over the next 12 month period due to normally scheduled principal repayments and expected prepayments of certain securities, primarily residential mortgage-backed securities.

Additional liquidity is derived from scheduled loan payments of principal and interest, as well as prepayments received. Loan principal payments (including loans held for sale at ~~June~~September 30, 2021) are projected in accordance with their scheduled contractual terms to be approximately $~~7.9~~10.4 billion over the next 12 month period. As a contingency plan for any liquidity constraints, liquidity could also be derived from the sale of conforming residential mortgages from our loan portfolio or alleviated from the temporary curtailment of lending activities.

On the liability side of the balance sheet, we utilize multiple sources of funds to meet liquidity needs, including retail and commercial deposits, brokered and municipal deposits, and short-term and long-term borrowings. Our core deposit base, which generally excludes fully insured brokered deposits and both retail and brokered certificates of deposit over $250 thousand, represents the largest of these sources. Average core deposits totaled approximately ~~$29.4~~$29.2 billion and $25.8 billion for the ~~six~~nine months ended ~~June~~September 30, 2021 and for the year ended December 31, 2020, respectively, representing ~~77.7~~77.6 percent and 69.8 percent of average earning assets for the respective periods. The level of interest bearing deposits is affected by interest rates offered, which is often influenced by our need for funds and the need to match the maturities of assets and liabilities.

Additional funding may be provided through deposit gathering networks and in the form of federal funds purchased through our well established relationships with numerous banks. While these lending lines are uncommitted, management believes that the Bank could borrow approximately $1.5 billion from these banks on a collective basis. The Bank is also a member of the Federal Home Loan Bank of New York (FHLB) and has the ability to borrow from them in the form of FHLB advances secured by pledges of certain eligible collateral, including but not limited to U.S. government and agency mortgage-backed securities and a blanket assignment of qualifying first lien mortgage loans, consisting of both residential mortgage and commercial real estate loans. Additionally, Valley's collateral pledged to the FHLB may be used to obtain Municipal Letters of Credit (MULOC) to collateralize certain municipal deposits held by Valley. At ~~June~~September 30, 2021, Valley had ~~$700 million~~$1.0 billion of MULOCs outstanding for this purpose. Furthermore, we can obtain overnight borrowings from the Federal Reserve Bank of New York via the discount window as a contingency for additional liquidity. At ~~June~~September 30, 2021, our borrowing capacity (excluding added capacity available to us by pledging PPP loans) under the Federal Reserve Bank's discount window was $1.8 billion.

We also have access to other short-term and long-term borrowing sources to support our asset base, such as repos (i.e., securities sold under agreements to repurchase). Short-term borrowings (consisting of FHLB advances, repos, and from time to time, federal funds purchased) decreased approximately ~~$293.6~~$364.6 million to ~~$854.4~~$783.3 million at ~~June~~September 30, 2021 as compared to December 31, 2020 due to normal FHLB advance repayments.

Corporation Liquidity

Valley’s recurring cash requirements primarily consist of dividends to preferred and common shareholders and interest expense on subordinated notes and junior subordinated debentures issued to capital trusts. As part of our on-going asset/liability management strategies, Valley could also use cash to repurchase shares of its outstanding common stock under its share repurchase program or redeem its callable junior subordinated debentures and subordinated notes. Valley's cash needs are routinely satisfied by dividends collected from the Bank. Projected cash flows from the Bank are expected to be adequate to pay preferred and common dividends, if declared, and interest

expense payable to subordinated note holders and capital trusts, given the current capital levels and current profitable operations of the Bank. In addition to dividends received from the Bank, Valley can satisfy its cash requirements by utilizing its own cash and potential new funds borrowed from outside sources or capital issuances. Valley also has the right to defer interest payments on the junior subordinated debentures, and therefore distributions on its trust preferred securities for consecutive quarterly periods up to five years, but not beyond the stated maturity dates, and subject to other conditions.

During the second quarter 2021, Valley redeemed $60 million of callable subordinated notes and issued $300 million of 3.00 percent subordinated notes. See Note 910 to the consolidated financial statements for additional information.

Investment Securities Portfolio

As of ~~June~~September 30, 2021, we had ~~$33.9~~$36.1 million, ~~$21.2~~$4.8 million, ~~$1.1~~$1.2 billion and ~~$2.5~~$2.6 billion in equity, trading debt, available for sale and held to maturity debt securities, respectively. Our trading securities portfolio wholly consists of investment grade municipal bonds. The equity securities ~~portfolio is mainly comprised~~consisted of ~~a money market~~one publicly traded mutual fund, CRA investments and several other equity investments we have made in ~~public~~companies that develop new financial technologies and ~~private Community Reinvestment Act funds.~~in a partnership that invests in such companies. Our CRA and other equity investments are a mixture of both publicly traded entities and privately held entities. Held to maturity and available for sale debt securities portfolios include of U.S. Treasury securities, U.S. government agency securities, tax-exempt and taxable issuances of states and political subdivisions, residential mortgage-backed securities, single-issuer trust preferred securities principally issued by bank holding companies, and high quality corporate bonds. Among other securities, our available for sale debt securities include securities such as bank issued and other corporate bonds, as well as municipal special revenue bonds, that may pose a higher risk of future impairment charges to us as a result of the uncertain economic environment and its potential negative effect on the future performance of the security issuers.

There were no securities in the name of any one issuer exceeding 10 percent of shareholders’ equity, except for residential mortgage-backed securities issued by Ginnie Mae and Fannie Mae. Certain securities with limited marketability and/or restrictions, such as Federal Home Loan Bank and Federal Reserve Bank stocks, are carried at cost and are included in other assets.

Allowance for Credit Losses and Impairment Analysis

Available for sale debt securities. Available for sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. In assessing whether a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount the fair value is less than amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes.

We have evaluated all available for sale debt securities that are in an unrealized loss position as of ~~June~~September 30, 2021 and determined that the declines in fair value are mainly attributable to changes in market volatility, due to factors such as interest rates and spread factors, but not attributable to 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 charges during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and, as a result, there was no allowance for credit losses for

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

Held to maturity debt securities. Valley estimates the expected credit losses on held to maturity debt securities that have loss expectations using a discounted cash flow model developed by a third party. Valley has a zero loss expectation for certain securities within the held to maturity portfolio, including U.S. Treasury securities, U.S. agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and

collateralized municipal bonds, which are excluded from the model. Assumptions used in the model for pools of securities with common risk characteristics include the historical lifetime probability of default and severity of loss in the event of default, with the model incorporating several economic cycles of loss history data to calculate expected credit losses given default at the individual security level. Held to maturity debt securities were carried net of allowance for credit losses totaling ~~$1.0~~$1.1 million and $1.4 million at ~~June~~September 30, 2021 and December 31, 2020, respectively. There were no net charge-offs of held to maturity debt securities for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

Investment grades. The investment grades in the table below reflect the most current independent analysis performed by third parties of each security as of the date presented and not necessarily the investment grades at the date of our purchase of the securities. For many securities, the rating agencies may not have performed an independent analysis of the tranches owned by us, but rather an analysis of the entire investment pool. For this and other reasons, we believe the assigned investment grades may not accurately reflect the actual credit quality of each security and should not be viewed in isolation as a measure of the quality of our investment portfolio.

The following table presents the held to maturity and available for sale debt securities portfolios by investment grades at ~~June~~September 30, 2021:


		June 30, 2021									September 30, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
		(in thousands)									(in thousands)
Available for sale investment grades: *	Available for sale investment grades: *									Available for sale investment grades: *
AAA Rated	AAA Rated	$	918,080	$	27,103	$	(1,220)	$	943,963	AAA Rated	$	1,016,325	$	23,138	$	(2,483)	$	1,036,980
AA Rated	AA Rated	28,753		506		(8)		29,251		AA Rated	63,001		339		(722)		62,618
A Rated	A Rated	6,167		117		—		6,284		A Rated	6,173		89		—		6,262
BBB Rated	BBB Rated	29,322		921		—		30,243		BBB Rated	29,313		891		—		30,204
Non-investment grade	Non-investment grade	4,995		36		—		5,031		Non-investment grade	4,996		42		—		5,038
Not rated	Not rated	58,420		2,365		(19)		60,766		Not rated	64,982		2,244		(51)		67,175
Total	Total	$	1,045,737	$	31,048	$	(1,247)	$	1,075,538	Total	$	1,184,790	$	26,743	$	(3,256)	$	1,208,277
Held to maturity investment grades: *	Held to maturity investment grades: *									Held to maturity investment grades: *
AAA Rated	AAA Rated	$	2,190,451	$	33,965	$	(11,668)	$	2,212,748	AAA Rated	$	2,260,843	$	30,971	$	(18,015)	$	2,273,799
AA Rated	AA Rated	165,565		4,943		(18)		170,490		AA Rated	159,468		3,862		(129)		163,201
A Rated	A Rated	12,965		374		—		13,339		A Rated	12,512		389		—		12,901
BBB Rated	BBB Rated	8,000		529		—		8,529		BBB Rated	6,000		418		—		6,418
Non-investment grade	Non-investment grade	5,613		—		(43)		5,570		Non-investment grade	5,595		—		(75)		5,520
Not rated	Not rated	151,218		621		(5,996)		145,843		Not rated	139,985		224		(5,737)		134,472
Total	Total	$	2,533,812	$	40,432	$	(17,725)	$	2,556,519	Total	$	2,584,403	$	35,864	$	(23,956)	$	2,596,311


*			Rated using external rating agencies. Ratings categories include the entire range. For example, “A rated” includes A+, A, and A-. Split rated securities with two ratings are categorized at the higher of the rating levels.

The unrealized losses in the AAA rated category of the held to maturity debt securities (in the above table) are mainly related to residential mortgage-backed securities issued by Ginnie Mae and Fannie Mae. The investment securities held to maturity portfolio included ~~$151.2~~$140.0 million of investments not rated by the rating agencies with

aggregate unrealized losses of ~~$6.0~~$5.7 million at ~~June~~September 30, 2021 related to four single-issuer bank trust preferred issuances with a combined amortized cost of $36.0 million.

See Note 67 to the consolidated financial statements for additional information regarding our investments securities portfolio.

Loan Portfolio

The following table reflects the composition of the loan portfolio as of the dates presented:

June 30,
2021 March 31,
2021 December 31,
2020 September 30,
2020 June 30,
2020
($ in thousands)
Loans
Commercial and industrial:
Commercial and industrial $ 4,733,771 $ 4,784,017 $ 4,709,569 $ 4,625,880 $ 4,670,362
Commercial and industrial PPP loans 1,350,684 2,364,627 2,152,139 2,277,465 2,214,327
Total commercial and industrial * 6,084,455 7,148,644 6,861,708 6,903,345 6,884,689
Commercial real estate:
Commercial real estate 17,512,142 16,923,627 16,724,998 16,815,587 16,571,877
Construction 1,752,838 1,786,331 1,745,825 1,720,775 1,721,352
Total commercial real estate 19,264,980 18,709,958 18,470,823 18,536,362 18,293,229
Residential mortgage 4,226,975 4,060,492 4,183,743 4,284,595 4,405,147
Consumer:
Home equity 410,856 409,576 431,553 457,083 471,115
Automobile 1,531,262 1,444,883 1,355,955 1,341,659 1,369,489
Other consumer 938,926 912,863 913,330 892,542 890,942
Total consumer loans 2,881,044 2,767,322 2,700,838 2,691,284 2,731,546
Total loans*
$ 32,457,454 $ 32,686,416 $ 32,217,112 $ 32,415,586 $ 32,314,611
As a percent of total loans:
Commercial and industrial 18.7 % 21.9 % 21.3 % 21.3 % 21.3 %
Commercial real estate 59.4 57.2 57.3 57.2 56.6
Residential mortgage 13.0 12.4 13.0 13.2 13.6
Consumer loans 8.9 8.5 8.4 8.3 8.5
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %


	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
	($ in thousands)
Loans
Commercial and industrial:
Commercial and industrial	$	4,761,227		$	4,733,771		$	4,784,017		$	4,709,569		$	4,625,880
Commercial and industrial PPP loans	874,033			1,350,684			2,364,627			2,152,139			2,277,465
Total commercial and industrial *	5,635,260			6,084,455			7,148,644			6,861,708			6,903,345
Commercial real estate:
Commercial real estate	17,912,070			17,512,142			16,923,627			16,724,998			16,815,587
Construction	1,804,580			1,752,838			1,786,331			1,745,825			1,720,775
Total commercial real estate	19,716,650			19,264,980			18,709,958			18,470,823			18,536,362
Residential mortgage	4,332,422			4,226,975			4,060,492			4,183,743			4,284,595
Consumer:
Home equity	402,658			410,856			409,576			431,553			457,083
Automobile	1,563,698			1,531,262			1,444,883			1,355,955			1,341,659
Other consumer	956,126			938,926			912,863			913,330			892,542
Total consumer loans	2,922,482			2,881,044			2,767,322			2,700,838			2,691,284
Total loans*	$	32,606,814		$	32,457,454		$	32,686,416		$	32,217,112		$	32,415,586
As a percent of total loans:
Commercial and industrial	17.3		%	18.7		%	21.9		%	21.3		%	21.3		%
Commercial real estate	60.4			59.4			57.2			57.3			57.2
Residential mortgage	13.3			13.0			12.4			13.0			13.2
Consumer loans	9.0			8.9			8.5			8.4			8.3
Total	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

* Includes net unearned discount and deferred loan fees of $73.0 million, $86.1 million, $108.6 million, $95.8 million, and $116.2 million ~~and $131.3 million~~ at September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020, ~~September 30, 2020,~~ and ~~June~~September 30, 2020, respectively. Net unearned discounts and deferred loan fees included $27.6 million, $40.9 million, $57.2 million, $43.2 million ~~$54.4 million~~ and ~~$62.1~~$54.4 million of net unearned fees related to PPP loans at September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020, ~~September 30, 2020,~~ and ~~June~~September 30, 2020, respectively.

Commercial and industrial loans decreased ~~$1.1 billion,~~$449.2 million, or ~~59.5~~29.5 percent on an annualized basis, to ~~$6.1~~$5.6 billion at ~~June~~September 30, 2021 as compared to ~~March 31,~~June 30, 2021 mostly due t~~o $1.0 billion~~ to $476.7 million of PPP loans that were forgiven (i.e., repaid) during the ~~second~~third quarter 2021. As of ~~June~~September 30, 2021 ~~over~~ 75, nearly 100 percent of the PPP loan balances from the first two rounds of our funding under the SBA program have been forgiven. Valley expects the majority of the remaining ~~$1.4 billion~~$874 million of PPP loans on ~~June~~September 30, 2021 to qualify for forgiveness under the guidelines of the SBA program, which ~~will~~is expected to negatively impact our ability to grow the commercial and industrial loan portfolio. Non-PPP commercial and industrial loans modestly ~~decreased~~increased by ~~$50.2~~$27.5 million at ~~June~~September 30, 2021 as compared to March 31, 2021 as demand continues to be tempered by the uncertain sustainability of improving the economic recovery. The usage (i.e., outstanding balances) of commercial lines of credit by our existing borrowers also declined.June 30, 2021.

Commercial real estate loans (excluding construction loans) increased ~~$588.5~~$399.9 million, or ~~13.9~~9.1 percent on an annualized basis, to ~~$17.5~~$17.9 billion at ~~June~~September 30, 2021 from ~~March 31,~~June 30, 2021 reflecting solid organic growth mainly due to a strong demand for non-owner occupied loans across our geographic footprint driven by low interest rates. Construction loans ~~decreased $33.5~~increased $51.7 million to $1.8 billion at September 30, 2021 from June 30, 2021 ~~from March 31, 2021 partly~~partially due to ~~the migration of completed~~higher demand for commercial and residential construction ~~projects to permanent loans.~~projects.

Residential mortgage loans increased ~~$166.5~~$105.4 million, or ~~16.4~~10.0 percent on an annualized basis during the ~~second~~third quarter 2021 due to continued strong origination of new and refinanced residential mortgage loans totaling ~~approximately~~$622.1 million for the third quarter 2021 as compared to $753.2 millionand $540.2 million for the second quarter 2021 ~~as compared to $550.6 million~~and ~~$494.2 million for the first quarter 2021 and second~~ third

quarter 2020, respectively. Florida originations totaled ~~$206~~approximately $163 million and represented 2726 percent of total originations. Of the total originations in the ~~second~~third quarter 2021, approximately ~~$254~~$232.8 million of residential mortgage loans were originated for sale rather than held for ~~investment. During~~investment as compared to $253.9 million during the second quarter 2021. During the third quarter 2021 we retained over 60 percent of the ~~non-conforming~~total residential mortgages originations ~~outpaced conforming loans resulting~~ in ~~a higher percentage of~~ our ~~production~~ held for investment ~~in the~~ loan ~~portfolio as compared the first quarter 2021.~~portfolio. We sold approximately ~~$326~~$235 million of residential mortgage loans ~~originated~~held for sale during the ~~second~~third quarter 2021 and may continue to sell a large portion of our new fixed rate residential mortgage loan originations during the ~~third~~fourth quarter 2021 based upon normal management of the interest rate risk and mix of the interest earning assets on our balance sheet.

Home equity loans ~~increased~~decreased by ~~$1.3~~$8.2 million to ~~$410.9~~$402.7 million at ~~June~~September 30, 2021 from ~~March 31,~~June 30, 2021. New home equity loan volumes and customer usage of existing home equity lines of credit continue to be modest, despite the favorable low interest rate environment.

Automobile loans increased by ~~$86.4~~$32.4 million, or ~~23.9~~8.5 percent on an annualized basis, to ~~$1.5~~$1.6 billion at ~~June~~September 30, 2021 as compared to ~~March 31, 2021 due to strong consumer~~June 30, 2021. Consumer demand seen across the auto industry was solid during the first half of 2021 but started to slow in the third quarter 2021. We originated ~~$251~~$201 million in auto loans through our dealership network during the ~~second~~third quarter 2021 as compared to ~~$243~~$251 million in the ~~first~~second quarter 2021. Of the total originations our Florida dealership network contributed ~~approximately $41~~$30.4 million in auto loan originations, representing approximately 1615 percent of new loans, during the ~~second~~third quarter 2021. ~~However, the strong~~Strong auto loan originations experienced in the ~~second quarter~~first half of 2021 ~~may be~~ slowed during the ~~second half of~~third quarter 2021 ifdue to inventory and auto part shortages ~~remain problematic for~~caused by supply chain disruptions affecting auto industry. In the early stages of the fourth quarter 2021, vehicle inventories are near record lows, driving prices higher. This trend may negatively impact our auto ~~industry.~~loan growth in fourth quarter 2021 and beyond.

Other consumer loans increased ~~$26.1~~$17.2 million to $956.1 million at September 30, 2021 as compared to $938.9 million at June 30, ~~2021 as compared to $912.9 million at March 31,~~ 2021 mainly due to higher new loan originations and consumer usage of collateralized personal lines of credit.

Most of our lending is in northern and central New Jersey, New York City, Long Island, Florida and Alabama, except for smaller auto and residential mortgage loan portfolios derived from other neighboring states of New Jersey. To mitigate our geographic risks, we make efforts to maintain a diversified portfolio as to type of borrower and loan to guard against a potential downward turn in any one economic sector.

For the remainder of 2021, we ~~remain cautiously optimistic about~~continue to believe that our non-PPP loan growth ~~as the economic recovery continues and loan demand has largely returned to pre-pandemic levels~~.will remain strong. In the early stages of the ~~third~~fourth quarter 2021, we are encouraged that our loan origination pipelines remain ~~robust as the economy begins to accelerate as the supply chain for many industries improves.~~robust. During the ~~second~~third quarter 2021, approximately 4557 percent of our commercial real estate loan growth came from ~~Florida, which appears to be somewhat closer to pre-pandemic levels than our Northeast markets.~~the New York and New Jersey market area. However, there can be no assurance that those positive trends will continue, or balances will not decline from ~~June~~September 30, 2021 given the ~~uncertainty associated with~~effects of the COVID-19 ~~and other market conditions, including the recent increase in COVID-19 cases in certain jurisdictions primarily caused by the Delta variant~~pandemic and the potential for unforeseen changes in consumer confidence and the ~~economy.~~economy, and other market conditions and supply chain issues. We believe that many of our SBA PPP loans will continue to be forgiven in the fourth quarter 2021 in accordance with the rules of this program resulting in further reduction in these loan balances.

Non-performing Assets

Non-performing assets (NPA) include non-accrual loans, other real estate owned (OREO), and other repossessed assets (which primarily consists of automobiles and taxi medallions) at ~~June~~September 30, 2021. Loans are generally placed on non-accrual status when they become past due in excess of 90 days as to payment of principal or interest. Exceptions to the non-accrual policy may be permitted if the loan is sufficiently collateralized and in the process of collection. OREO is acquired through foreclosure on loans secured by land or real estate. OREO and other repossessed assets are reported at the lower of cost or fair value, less estimated cost to sell.

Our NPAs increased ~~$16.1~~$31.1 million to ~~$226.6~~$257.7 million at ~~June~~September 30, 2021 as compared to ~~March 31,~~June 30, 2021 mainly due to a ~~$16.0~~$37.0 million increase in non-accrual commercial real estate loans ~~in the second quarter 2021.~~(see table below). NPAs as a percentage of total loans and NPAs totaled 0.78 percent and 0.69 percent ~~and 0.64 percent~~ at ~~June~~September 30, 2021 and ~~March 31,~~June 30, 2021, respectively (as shown in the table below). We believe our total NPAs has remained relatively low as a percentage

of the total loan portfolio over the past 12 months, despite the uptick in non-accrual borrowers mainly caused by COVID-19 pandemic. The level of NPAs is reflective of our consistent approach to the loan underwriting criteria for both Valley originated loans and loans purchased from third parties. For additional details, see the "Credit quality indicators" section in Note 78 to the consolidated financial statements.

Our lending strategy is based on underwriting standards designed to maintain high credit quality and we remain optimistic regarding the overall future performance of our loan ~~portfolio .~~portfolio. However, due to the potential for future credit deterioration caused by the uncertain path of the recovery from the COVID -19 pandemic and some of our borrowers that are still performing under forbearance agreements, management cannot provide assurance that our non-performing assets will not increase substantially from the levels reported at ~~June~~September 30, 2021.

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The following table sets forth by loan category accruing past due and non-performing assets at the dates indicated in conjunction with our asset quality ratios:


		June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020				September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
		($ in thousands)																($ in thousands)
Accruing past due loans:	Accruing past due loans:																Accruing past due loans:
30 to 59 days past due:	30 to 59 days past due:																30 to 59 days past due:
Commercial and industrial	Commercial and industrial	$	3,867		$	3,763		$	6,393		$	6,587		$	6,206		Commercial and industrial	$	2,677		$	3,867		$	3,763		$	6,393		$	6,587
Commercial real estate	Commercial real estate	40,524			11,655			35,030			26,038			13,912			Commercial real estate	22,956			40,524			11,655			35,030			26,038
Construction	Construction	—			—			315			142			—			Construction	—			—			—			315			142
Residential mortgage	Residential mortgage	8,479			16,004			17,717			22,528			35,263			Residential mortgage	9,293			8,479			16,004			17,717			22,528
Total Consumer	Total Consumer	6,242			5,480			10,257			8,979			12,962			Total Consumer	5,463			6,242			5,480			10,257			8,979
Total 30 to 59 days past due	Total 30 to 59 days past due	59,112			36,902			69,712			64,274			68,343			Total 30 to 59 days past due	40,389			59,112			36,902			69,712			64,274
60 to 89 days past due:	60 to 89 days past due:																60 to 89 days past due:
Commercial and industrial	Commercial and industrial	1,361			1,768			2,252			3,954			4,178			Commercial and industrial	985			1,361			1,768			2,252			3,954
Commercial real estate	Commercial real estate	11,451			5,455			1,326			610			1,543			Commercial real estate	5,897			11,451			5,455			1,326			610

Residential mortgage	Residential mortgage	1,608			2,233			10,351			3,760			4,169			Residential mortgage	974			1,608			2,233			10,351			3,760
Total Consumer	Total Consumer	985			1,021			1,823			1,352			3,786			Total Consumer	1,617			985			1,021			1,823			1,352
Total 60 to 89 days past due	Total 60 to 89 days past due	15,405			10,477			15,752			9,676			13,676			Total 60 to 89 days past due	9,473			15,405			10,477			15,752			9,676
90 or more days past due:	90 or more days past due:																90 or more days past due:
Commercial and industrial	Commercial and industrial	2,351			2,515			9,107			6,759			5,220			Commercial and industrial	2,083			2,351			2,515			9,107			6,759
Commercial real estate	Commercial real estate	1,948			—			993			1,538			—			Commercial real estate	1,942			1,948			—			993			1,538

Residential mortgage	Residential mortgage	956			2,472			3,170			891			3,812			Residential mortgage	1,002			956			2,472			3,170			891
Total Consumer	Total Consumer	463			417			271			753			2,082			Total Consumer	325			463			417			271			753
Total 90 or more days past due	Total 90 or more days past due	5,718			5,404			13,541			9,941			11,114			Total 90 or more days past due	5,352			5,718			5,404			13,541			9,941
Total accruing past due loans	Total accruing past due loans	$	80,235		$	52,783		$	99,005		$	83,891		$	93,133		Total accruing past due loans	$	55,214		$	80,235		$	52,783		$	99,005		$	83,891
Non-accrual loans:	Non-accrual loans:																Non-accrual loans:
Commercial and industrial	Commercial and industrial	$	102,594		$	108,988		$	106,693		$	115,667		$	130,876		Commercial and industrial	$	100,614		$	102,594		$	108,988		$	106,693		$	115,667
Commercial real estate	Commercial real estate	58,893			54,004			46,879			41,627			43,678			Commercial real estate	95,843			58,893			54,004			46,879			41,627
Construction	Construction	17,660			71			84			2,497			3,308			Construction	17,653			17,660			71			84			2,497
Residential mortgage	Residential mortgage	35,941			33,655			25,817			23,877			25,776			Residential mortgage	33,648			35,941			33,655			25,817			23,877
Total Consumer	Total Consumer	4,924			7,292			5,809			7,441			6,947			Total Consumer	4,073			4,924			7,292			5,809			7,441
Total non-accrual loans	Total non-accrual loans	220,012			204,010			185,282			191,109			210,585			Total non-accrual loans	251,831			220,012			204,010			185,282			191,109

Other real estate owned (OREO)	Other real estate owned (OREO)	4,523			4,521			5,118			7,746			8,283			Other real estate owned (OREO)	3,967			4,523			4,521			5,118			7,746
Other repossessed assets	Other repossessed assets	2,060			1,857			3,342			3,988			3,920			Other repossessed assets	1,896			2,060			1,857			3,342			3,988
Non-accrual debt securities	Non-accrual debt securities	—			129			815			783			1,365			Non-accrual debt securities	—			—			129			815			783
Total non-performing assets (NPAs)	Total non-performing assets (NPAs)	$	226,595		$	210,517		$	194,557		$	203,626		$	224,153		Total non-performing assets (NPAs)	$	257,694		$	226,595		$	210,517		$	194,557		$	203,626
Performing troubled debt restructured loans	Performing troubled debt restructured loans	$	64,080		$	67,102		$	57,367		$	58,090		$	53,936		Performing troubled debt restructured loans	$	64,832		$	64,080		$	67,102		$	57,367		$	58,090
Total non-accrual loans as a % of loans	Total non-accrual loans as a % of loans	0.68		%	0.62		%	0.58		%	0.59		%	0.65		%	Total non-accrual loans as a % of loans	0.77		%	0.68		%	0.62		%	0.58		%	0.59		%
Total NPAs as a % of loans and NPAs	Total NPAs as a % of loans and NPAs	0.69			0.64			0.60			0.62			0.69			Total NPAs as a % of loans and NPAs	0.78			0.69			0.64			0.60			0.62
Total accruing past due and non-accrual loans as a % of loans	Total accruing past due and non-accrual loans as a % of loans	0.93			0.79			0.88			0.85			0.94			Total accruing past due and non-accrual loans as a % of loans	0.94			0.93			0.79			0.88			0.85
Allowance for loan losses as a % of non-accrual loans	Allowance for loan losses as a % of non-accrual loans	154.23			168.07			183.64			170.08			147.03			Allowance for loan losses as a % of non-accrual loans	136.01			154.23			168.07			183.64			170.08

Loans past due 30 to 59 days ~~increased $22.2~~decreased $18.7 million to ~~$59.1~~$40.4 million at ~~June~~September 30, 2021 as compared to ~~March 31,~~June 30, 2021. Commercial real estate loans past due 30 to 59 days ~~increased $28.9~~decreased $17.6 million to ~~$40.5~~$23.0 million at ~~June~~September 30, 2021 as compared to ~~March 31,~~June 30, 2021 largely due to ~~three loans~~two loan relationships totaling ~~$18.7~~$22.2 million ~~related~~that migrated to ~~borrowers negatively impacted by the COVID-19 pandemic. Offsetting this negative impact, the residential mortgage~~non-accrual loan ~~delinquencies~~status at September 30, 2021.

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decreased by $7.5 million to $8.5 million at June 30, 2021 as compared March 31, 2021 partly due to improved customer performance and results of our collection efforts during the second quarter 2021.

Loans past due 60 to 89 days ~~increased $4.9~~decreased $5.9 million to ~~$15.4~~$9.5 million at ~~June~~September 30, 2021 as compared to ~~March 31, 2021 mainly due to a $6.0 million increase in commercial real estate loan delinquencies~~June 30, 2021.. Commercial real estate loans in this delinquency category ~~totaled $11.5~~decreased $5.6 million to $5.9 million at ~~June~~September 30, 2021 ~~and largely reflected~~mainly as a result of one ~~$11.2~~$10.9 million loan negatively impacted by the COVID-19 ~~pandemic.~~pandemic that migrated to non-accrual status at September 30, 2021, partially offset by the addition of a $5.5 million matured commercial real estate loan in the process of renewal in this delinquency category at September 30, 2021.

Loans past due 90 days or more and still accruing interest totaled ~~$5.7~~$5.4 million at ~~June~~September 30, 2021 as compared to ~~$5.4~~$5.7 million at ~~March 31,~~June 30, 2021. All of the loans past due 90 days or more and still accruing reported at ~~June~~September 30, 2021 are considered to be well secured and in the process of collection.

Non-accrual loans increased ~~$16.0~~$31.8 million to $251.8 million at September 30, 2021 as compared to $220.0 million at June 30, 2021 ~~as compared~~mostly driven by a $37.0 million increase in the commercial real estate loans. This increase was caused by two loans totaling $22.2 million and one loan totaling $10.9 million that migrated to ~~$204.0 million at March 31, 2021 almost entirely related~~non-accrual status from the 30-59 days and 60 to ~~one construction borrower relationship with $3.0 million of related allowance reserves~~89 days past due categories reported at June 30, 2021, respectively. These non-accrual loans totaling $33.1 million have allocated reserves of $3.7 million within our allowance for loan losses at September 30, 2021.

~~During second quarter 2021, we sold the majority of our Chicago taxi medallion loans for $4.5 million and charged-off $1.3 million of these loans to the reserve for credit losses for loans.~~ We continue to closely monitor our non-performing New York City and Chicago taxi medallion loans totaling ~~$86.5~~$86.3 million and ~~the remaining $721~~$577 thousand, ~~of the Chicago taxi medallion portfolio~~respectively, within the commercial and industrial loan category at ~~June~~September 30, 2021.

Due to continued negative trends in estimated fair valuations of the underlying taxi medallion collateral, a weak operating environment for ride services and uncertain borrower performance, all of the taxi medallion loans are on non-accrual status. At ~~June~~September 30, 2021, the taxi medallion loans totaling ~~$87.2~~$86.9 million had related reserves of $58.6 million, or ~~67.2~~67.4 percent of such ~~loans, within the allowance for loan losses~~loans. The related reserves were relatively unchanged as compared to ~~$93.8 million with related reserves of $63.2 million at March 31,~~June 30, 2021.

Potential ~~further~~ declines in the market valuation of taxi medallions and the stressed operating environment mainly within New York City due to the COVID-19 pandemic could ~~also~~ negatively impact the future performance of this portfolio. For example, a 25 percent further decline in our current estimated market value of the taxi medallions would require additional allocated ~~reserves~~ reserves of ~~$6.4~~$5.9 million wwithin the ~~ithin the~~ allowance for loan losses based upon the taxi medallion loan balances at ~~June~~September 30, 2021. See the "Allowance for Credit Losses" section below for further details on our reserves.

OREO properties totaled ~~$4.5~~$4.0 million at ~~June~~September 30, 2021 and ~~remained relatively unchanged~~declined $556 thousand as compared to ~~March 31,~~June 30, 2021. Net ~~gains~~losses and ~~losses~~gains from the sales of OREO properties ~~totaled $300~~totaled a $67 thousand loss and a $268 thousand net gain for the three and nine months ended September 30, 2021, respectively, and net gains totaling $109 thousand and ~~$335~~$540 thousand for the three and ~~six~~nine months ended ~~June 30, 2021, respectively, and $274 thousand and $431 thousand for the three and six months ended June~~September 30, 2020, respectively. The residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled ~~$2.0~~$3.0 million and $1.9 million at ~~June~~September 30, 2021 and December 31, 2020, respectively.

TDRs represent loan modifications for customers experiencing financial difficulties where a concession has been granted. Performing TDRs (i.e., TDRs not reported as loans 90 days or more past due and still accruing or as non-accrual loans) ~~decreased $3.0~~totaled $64.8 million at September 30, 2021 as compared to $64.1 million at June 30, ~~2021 as compared to $67.1 million at March 31,~~ 2021. Performing TDRs consisted of 9396 loans at ~~June~~September 30, 2021. On an aggregate basis, the ~~$64.1~~$64.8 million in performing TDRs at ~~June~~September 30, 2021 had a modified weighted average interest rate of approximately ~~4.31~~4.36 percent as compared to a pre-modification weighted average interest rate of ~~4.54~~4.60 percent.

Loan Forbearance. In response to the ~~COVID-19~~COVID-19 pandemic and its economic impact toon certain customers, Valley implemented short-term loan modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment, when requested by customers, all of which were insignificant. As of June 30, 2021, Valley had approximately $142 million of outstanding loans remaining in their payment deferral period under short-term modifications, as compared to $284 million of loans in deferral at March 31, 2021.Under the applicable guidance, none of these loans were classified as TDRs at ~~June~~September 30, ~~2021, March 31,~~ 2021 and December 31, 2020.

The following table presents the outstanding loan balances and number of loans in an active payment deferral period under short-term modifications as of ~~June~~September 30, 2021:


		June 30, 2021				September 30, 2021
		Amount		Number of loans		Amount		Number of loans
		($ in thousands)				($ in thousands)
Commercial and industrial	Commercial and industrial	$	877	1	Commercial and industrial	$	2,579	4
Commercial real estate	Commercial real estate	93,636		20	Commercial real estate	64,927		17
Residential mortgage	Residential mortgage	46,137		102	Residential mortgage	29,485		63
Consumer	Consumer	1,317		58	Consumer	1,603		76
Total	Total	$	141,967	181	Total	$	98,594	160

~~Higher Risk COVID-19 Credit Exposures~~. V~~alley has identified certain borrower industries that may pose a higher risk of credit losses to us due to the negative impact of the COVID-19 pandemic.~~ ~~The following table presents non-PPP loans in the primary COVID-19 exposure industries~~ at ~~June 30, 2021~~:

June 30, 2021
Non-PPP loan balance % of non-PPP loans

($ in thousands)
Retail trade $ 592,631 1.9 %
Hotels and hospitality 503,837 1.6
Doctors and surgery 485,681 1.6
Restaurants and food service 317,460 1.0
Entertainment and recreation 221,775 0.7
Total $ 2,121,384 6.8 %

As of ~~June~~September 30, 2021, Valley had approximately $98.6 million of outstanding loans remaining in their payment deferral period under short-term modifications as compared to $142.0 million of loans in deferral at June 30, 2021. Commercial real estate forbearances representing approximately ~~$2.1 billion, or 6.8~~66 percent of ~~total loans (excluding PPP loans), that were made to borrowers in these industries. There were no~~the active deferrals ~~in this category~~at September 30, 2021 decreased $28.6 million from $93.6 million at June 30, 2021 ~~as compared~~mainly due to ~~$48.0 million, or 2.3 percent~~loans being returned to normal interest accrual status following the end of ~~total loans at March 31,~~their forebearance periods during the third quarter 2021. ~~As of June 30, 2021, approximately 86 percent of loans within the higher risk industries were pass-rated under Valley’s internal risk rating system as compared to 88 percent at March 31, 2021.~~

Allowance for Credit Losses for Loans

The allowance for credit losses (ACL) for loans includes the allowance for loan losses and the reserve for unfunded credit commitments. Under CECL, our methodology to establish the allowance for loan losses has two basic components: (1) a collective reserve component for estimated expected credit losses for pools of loans that share common risk characteristics and (2) an individual reserve component for loans that do not share risk characteristics, consisting of collateral dependent, TDR, and expected TDR loans. Valley also maintains a separate allowance for unfunded credit commitments mainly consisting of undisbursed non-cancellable lines of credit, new loan commitments and commercial standby letters of credit.

Valley estimated the collective ACL using a current expected credit losses methodology which is based on relevant information about historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the loan balances. In estimating the component of the allowance on a collective basis we use a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by generating probability of default and loss given default metrics. The metrics are based on the migration of loans from performing to loss by credit quality rating or delinquency categories using historical life-of-loan analysis periods for each loan portfolio pool and the severity of loss based on the aggregate net lifetime losses. The model's expected losses based on loss history are adjusted for qualitative factors. Among other things, these adjustments include and account for differences in: (i) the impact of the reasonable and supportable economic forecast, relative probability weightings and reversion period, (ii) other asset specific risks to the extent they do not exist in the historical loss information, and (iii) net expected recoveries of charged off loan balances. These adjustments are based on

qualitative factors not reflected in the quantitative model but are likely to impact the measurement of estimated credit losses. The expected lifetime loss rate is the life of loan loss percentage from the transition matrix model plus the impact of the adjustments for qualitative factors. The expected credit losses are the product of multiplying the model’s expected lifetime loss rate by the exposure at default at period end on an undiscounted basis.

Valley utilizes a two-year reasonable and supportable forecast period followed by a one-year period over which estimated losses revert to historical loss experience for the remaining life of the loan on a straight-line basis. The forecasts consist of a multi-scenario economic forecast model to estimate future credit losses and is governed by a cross-functional committee. The committee meets each quarter to determine which economic scenarios developed by Moody's will be incorporated into the model, as well as the relative probability weightings of the selected scenarios, based upon all readily available information. The model projects economic variables under each scenario based on detailed statistical analyses. We have identified and selected key variables that most closely correlated to our historical credit performance, which include: GDP, unemployment and the Case-Shiller Home Price Index.

For the ~~second~~third quarter 2021, we continued to incorporate a probability weighted three-scenario economic forecast, including Moody's Baseline, S-3 and S-1 ~~scenarios as compared to Moody's Baseline, S-3 and S-4 scenarios used at March 31, 2021.~~scenarios. At ~~June~~September 30, 2021, Valley maintained the majority of its ~~higher~~

weighting to the Moody’s Baseline scenario and ~~placed less~~modestly reduced its combined emphasis on the Moody’s S-3 downside and S-1 upside ~~scenario.~~scenarios as compared to June 30, 2021. The Baseline weighting and the ~~incorporation of the~~ S-1 scenario ~~at June 30, 2021 reflects~~reflect the positive economic developments including federal stimulus and increasing vaccination levels that are expected to ~~lead to improved~~improve labor market conditions and promote stronger economic growth during the remainder of 2021. However, this positive outlook could still be tempered by, ~~continued~~among other factors, the uncertain ongoing impact of the COVID-19 ~~hot spots in various locales, continued high unemployment rates in New York~~pandemic on the economic recovery, as well as supply chain constrains contributing to inventory shortages and ~~New Jersey, and other factors.~~longer than anticipated elevated levels of inflation.

~~The~~At September 30, 2021, the Moody's Baseline forecast ~~carried the highest weighting in our three-scenario forecast and including~~included the following ~~assumptions at June 30, 2021:~~specific assumptions:

•GDP expansion by over ~~6.7~~7.5 percent in the ~~third~~fourth quarter 2021;

•Unemployment of ~~5.2~~4.5 percent in the ~~third~~fourth quarter 2021 and improving to ~~3.5~~3.4 percent by the ~~second~~third quarter ~~2023;~~2022; and

•AStrong U.S. ~~economy poised for robust~~economic growth ~~primarily due to a~~driven by continued ~~surge in~~ consumer spending ~~as the economy fully reopens.~~and congressional passage of another fiscal stimulus package.

See more details regarding our allowance for credit losses for loans in Note 78 to the consolidated financial statements.

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The table below summarizes the relationship among loans, loans charged-off, loan recoveries, the provision for credit losses and the allowance for credit losses for loans for the periods indicated.


		Three Months Ended									Six Months Ended							Three Months Ended									Nine Months Ended
		June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020				September 30, 2021			June 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
		($ in thousands)																($ in thousands)
Average loans outstanding	Average loans outstanding	$	32,635,298		$	32,582,479		$	32,041,200		$	32,609,034		$	31,020,314		Average loans outstanding	$	32,698,382		$	32,635,298		$	32,515,264		$	32,641,362		$	31,522,268
Beginning balance - Allowance for credit losses for loans	Beginning balance - Allowance for credit losses for loans	354,313			351,354			293,361			351,354			164,604			Beginning balance - Allowance for credit losses for loans	353,724			354,313			319,723			351,354			164,604
Impact of ASU No. 2016-13 adoption on January 1, 2020 *	Impact of ASU No. 2016-13 adoption on January 1, 2020 *	—			—			—			—			37,989			Impact of ASU No. 2016-13 adoption on January 1, 2020 *	—			—			—			—			37,989
Allowance for purchased credit deteriorated (PCD) loans *	Allowance for purchased credit deteriorated (PCD) loans *	—			—			—			—			61,643			Allowance for purchased credit deteriorated (PCD) loans *	—			—			—			—			61,643
Beginning balance, adjusted	Beginning balance, adjusted	354,313			351,354			293,361			351,354			264,236			Beginning balance, adjusted	353,724			354,313			319,723			351,354			264,236
Loans charged-off:	Loans charged-off:																Loans charged-off:
Commercial and industrial	Commercial and industrial	(10,893)			(7,142)			(14,024)			(18,035)			(17,384)			Commercial and industrial	(1,248)			(10,893)			(13,965)			(19,283)			(31,349)
Commercial real estate	Commercial real estate	—			(382)			(27)			(382)			(71)			Commercial real estate	—			—			(695)			(382)			(766)

Residential mortgage	Residential mortgage	(1)			(138)			(5)			(139)			(341)			Residential mortgage	—			(1)			(7)			(139)			(348)
Total consumer	Total consumer	(1,480)			(1,138)			(2,601)			(2,618)			(5,166)			Total consumer	(771)			(1,480)			(2,458)			(3,389)			(7,624)
Total charge-offs	Total charge-offs	(12,374)			(8,800)			(16,657)			(21,174)			(22,962)			Total charge-offs	(2,019)			(12,374)			(17,125)			(23,193)			(40,087)
Charged-off loans recovered:	Charged-off loans recovered:																Charged-off loans recovered:
Commercial and industrial	Commercial and industrial	678			1,589			799			2,267			1,368			Commercial and industrial	514			678			428			2,781			1,796
Commercial real estate	Commercial real estate	665			65			31			730			104			Commercial real estate	29			665			60			759			164
Construction	Construction	—			4			20			4			40			Construction	—			—			40			4			80
Residential mortgage	Residential mortgage	191			157			545			348			595			Residential mortgage	228			191			31			576			626
Total consumer	Total consumer	1,474			930			509			2,404			1,303			Total consumer	955			1,474			1,151			3,359			2,454
Total recoveries	Total recoveries	3,008			2,745			1,904			5,753			3,410			Total recoveries	1,726			3,008			1,710			7,479			5,120
Net charge-offs	Net charge-offs	(9,366)			(6,055)			(14,753)			(15,421)			(19,552)			Net charge-offs	(293)			(9,366)			(15,415)			(15,714)			(34,967)
Provision charged for credit losses	Provision charged for credit losses	8,777			9,014			41,115			17,791			75,039			Provision charged for credit losses	3,496			8,777			31,020			21,287			106,059
Ending balance - Allowance for credit losses for loans	Ending balance - Allowance for credit losses for loans	$	353,724		$	354,313		$	319,723		$	353,724		$	319,723		Ending balance - Allowance for credit losses for loans	$	356,927		$	353,724		$	335,328		$	356,927		$	335,328
Components of allowance for credit losses for loans:	Components of allowance for credit losses for loans:																Components of allowance for credit losses for loans:
Allowance for loan losses	Allowance for loan losses	$	339,324		$	342,880		$	309,614		$	339,324		$	309,614		Allowance for loan losses	$	342,527		$	339,324		$	325,032		$	342,527		$	325,032
Allowance for unfunded credit commitments	Allowance for unfunded credit commitments	14,400			11,433			10,109			14,400			10,109			Allowance for unfunded credit commitments	14,400			14,400			10,296			14,400			10,296
Allowance for credit losses for loans	Allowance for credit losses for loans	$	353,724		$	354,313		$	319,723		$	353,724		$	319,723		Allowance for credit losses for loans	$	356,927		$	353,724		$	335,328		$	356,927		$	335,328
Components of provision for credit losses for loans:	Components of provision for credit losses for loans:																Components of provision for credit losses for loans:
Provision for credit losses for loans	Provision for credit losses for loans	$	5,810		$	8,692		$	41,025		$	14,502		$	74,876		Provision for credit losses for loans	$	3,496		$	5,810		$	30,833		$	17,998		$	105,709
Provision for unfunded credit commitments	Provision for unfunded credit commitments	2,967			322			90			3,289			163			Provision for unfunded credit commitments	—			2,967			187			3,289			350
Total provision for credit losses for loans	Total provision for credit losses for loans	$	8,777		$	9,014		$	41,115		$	17,791		$	75,039		Total provision for credit losses for loans	$	3,496		$	8,777		$	31,020		$	21,287		$	106,059

Annualized ratio of net charge-offs to average loans outstanding	Annualized ratio of net charge-offs to average loans outstanding	0.11		%	0.07		%	0.18		%	0.09		%	0.13		%	Annualized ratio of net charge-offs to average loans outstanding	0.00		%	0.11		%	0.19		%	0.06		%	0.15		%

* The adjustment represents an increase in the allowance for credit losses for loans as a result of the adoption of ASU No. 2016-13 effective January 1, 2020.

Net loan charge-offs totaled $293 thousand for the third quarter 2021 as compared to $9.4 million and $15.4 million for the second quarter 2021 ~~as compared to $6.1 million~~ and ~~$14.8 million for the first quarter 2021 and second~~third quarter 2020, respectively. The ~~increase~~decrease in net loan charge-offs for the ~~second~~third quarter 2021 was mainly due to ~~an $8.0 million full charge-off of a~~lower commercial and industrial loan ~~to an insurance~~charge-offs. The partial gross charge-offs of

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~~carrier in bankruptcy. The partial gross charge-offs of~~ taxi medallion loans ~~totaled~~within the commercial and industrial loan category totaled $143 thousand for the third quarter 2021 as compared to $1.4 million and $6.1 million for the second quarter 2021 ~~as compared to $3.3 million~~ and ~~$2.9 million for the first quarter 2021 and second~~third quarter 2020, respectively. Gross charge-offs of taxi medallion loans for the second quarter 2021 were primarily related to partial charge-offs of Chicago taxi medallion loans sold from the loans held for investment portfolio during the period.respectively. The overall level of loan charge-offs (as presented in the above table) ~~continues~~continued to trend within management's expectations for the credit quality of the loan ~~portfolio.~~portfolio for the third quarter 2021.

The following table summarizes the allocation of the allowance for credit losses for loans to loan portfolio categories and the allocations as a percentage of each loan category:

June 30, 2021 March 31, 2021 June 30, 2020
Allowance
Allocation Allocation
as a % of
Loan
Category Allowance
Allocation Allocation
as a % of
Loan
Category Allowance
Allocation Allocation
as a % of
Loan
Category
($ in thousands)
Loan Category:
Commercial and Industrial loans $ 109,689 1.80 % $ 126,408 1.77 % $ 132,039 1.92 %
Commercial real estate loans:
Commercial real estate 168,220 0.96 153,680 0.91 117,743 0.71
Construction 20,919 1.19 20,556 1.15 13,959 0.81
Total commercial real estate loans 189,139 0.98 174,236 0.93 131,702 0.72
Residential mortgage loans 25,303 0.60 27,172 0.67 29,630 0.67
Consumer loans:
Home equity 4,602 1.12 4,199 1.03 4,766 1.01
Auto and other consumer 10,591 0.43 10,865 0.46 11,477 0.51
Total consumer loans 15,193 0.53 15,064 0.54 16,243 0.59
Total allowance for loan losses 339,324 1.05 342,880 1.05 309,614 0.96
Allowance for unfunded credit commitments 14,400 11,433 10,109
Total allowance for credit losses for loans $ 353,724 $ 354,313 $ 319,723
Allowance for credit losses for loans as a % loans 1.09 % 1.08 % 0.99 %


	September 30, 2021				June 30, 2021				September 30, 2020
	Allowance Allocation		Allocation as a % of Loan Category		Allowance Allocation		Allocation as a % of Loan Category		Allowance Allocation		Allocation as a % of Loan Category
	($ in thousands)
Loan Category:
Commercial and Industrial loans	$	103,877	1.84	%	$	109,689	1.80	%	$	130,409	1.89	%
Commercial real estate loans:
Commercial real estate	178,206		0.99		168,220		0.96		128,699		0.77
Construction	21,515		1.19		20,919		1.19		15,951		0.93
Total commercial real estate loans	199,721		1.01		189,139		0.98		144,650		0.78
Residential mortgage loans	24,732		0.57		25,303		0.60		28,614		0.67
Consumer loans:
Home equity	4,110		1.02		4,602		1.12		5,972		1.31
Auto and other consumer	10,087		0.40		10,591		0.43		15,387		0.69
Total consumer loans	14,197		0.49		15,193		0.53		21,359		0.79
Total allowance for loan losses	342,527		1.05		339,324		1.05		325,032		1.00
Allowance for unfunded credit commitments	14,400				14,400				10,296
Total allowance for credit losses for loans	$	356,927			$	353,724			$	335,328
Allowance for credit losses for loans as a % loans			1.09	%			1.09	%			1.03	%

The allowance for credit losses for loans, comprised of our allowance for loan losses and unfunded credit commitments (including standby letters of credit), as a percentage of total loans was 1.09 percent ~~1.08 percent and 0.99 percent~~ at ~~June~~both September 30, ~~2021, March 31,~~ 2021 and June 30, ~~2020, respectively.~~2021, and 1.03 percent at September 30, 2020. During the ~~second~~third quarter 2021, we recorded a ~~$8.8~~$3.5 million provision for credit losses as compared to ~~$9.0~~$8.8 million and ~~$41.1~~$31.0 million for the ~~first~~second quarter 2021 and the ~~second~~third quarter 2020, respectively. The ~~provision in the second~~third quarter 2021 provision reflects, among other factors, additional quantitative reserves related to certain segments of our commercial real estate portfolio, an increase in specific reserves, and non-PPP loan growth, ~~and~~largely offset by a decline in the ~~improvement in our~~ economic forecast component of the reserve at September 30, 2021 as compared to ~~March 31,~~June 30, 2021. ~~The $8.8 million second quarter 2021 provision also included a $3.0 million~~There was no provision for unfunded credit commitments ~~largely related to an increase~~for the third quarter 2021 as the overall level of ~~approximately $375 million in our unfunded construction loan commitments~~such reserves remained materially unchanged at ~~June~~September 30, 2021 as compared to ~~March 31,~~June 30, 2021.

At ~~June~~September 30, 2021, the allowance allocations for credit losses as a percentage of total loans increased in ~~most~~commercial and industrial and commercial real estate loan categories as compared to ~~March 31,~~June 30, 2021. The allocated reserves as a percentage of commercial real estate loans increased 5 basis points mainly due to higher quantitative reserves for non-owner occupied loans, as well as loan growth within this category during the second quarter 2021. The allocated reserves as a percentage of commercial and industrial loans increased by 34 basis points mainly due to the third quarter 2021 repayments (loan forgiveness) of PPP loans guaranteed by the SBA with no related allowance at ~~June~~September 30, 2021. The ~~allowance~~allocated reserves as a percentage of commercial real estate loans increased 3 basis points largely due to higher quantitative reserves for the non-owner occupied loan portfolio during the third quarter 2021. The allowance for credit losses as a percentage

of total non-PPP loans was 1.12 percent, 1.14 percent ~~1.17 percent~~ and ~~1.06~~1.11 percent for the third quarter 2021, second quarter 2021 ~~first quarter 2021~~ and ~~second~~third quarter 2020, respectively.

Capital Adequacy

A significant measure of the strength of a financial institution is its shareholders’ equity. At ~~June~~September 30, 2021 and December 31, 2020, shareholders’ equity totaled approximately ~~$4.7~~$4.8 billion and $4.6 billion, respectively, which represented ~~11.5~~11.7 percent and 11.3 percent of total assets, respectively. During the ~~six~~nine months ended ~~June~~September 30, 2021, total shareholders’ equity increased by ~~$145.7~~$230.4 million primarily due to net income of $~~236.2~~358.8 million and a $~~16.2~~30.4 million increase attributable to the effect of our stock incentive plan. These positive changes were partially offset by cash dividends declared on common and preferred stock totaling a combined ~~$96.7~~$145.1 million and an increase in other comprehensive loss of ~~$10.0 million.~~ $13.7 million.

Valley and Valley National Bank are subject to the regulatory capital requirements administered by the Federal Reserve Bank and the OCC. Quantitative measures established by regulation to ensure capital adequacy require Valley and Valley National Bank to maintain minimum amounts and ratios of common equity Tier 1 capital, total and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets, as defined in the regulations.

We are required to maintain common equity Tier 1 capital to risk-weighted assets ratio of 4.5 percent, Tier 1 capital to risk-weighted assets ratio of 6.0 percent, ratio of total capital to risk-weighted assets of 8.0 percent, and minimum leverage ratio of 4.0 percent, plus a 2.5 percent capital conservation buffer added to the minimum requirements for capital adequacy purposes. As of ~~June~~September 30, 2021 and December 31, 2020, Valley and Valley National Bank exceeded all capital adequacy requirements (see table below).

For regulatory capital purposes, in connection with the Federal Reserve Board’s final interim rule as of April 3, 2020, 100 percent of the CECL Day 1 impact to shareholders' equity equaling $28.2 million after-tax will be deferred over a two-year period ending January 1, 2022, at which time it will be phased in on a pro-rata basis over a three-year period ending January 1, 2025. Additionally, 25 percent of the reserve build since adoption (i.e., provision for credit losses less net charge-offs) will be phased in over the same time frame.

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The following table presents Valley’s and Valley National Bank’s actual capital positions and ratios under Basel III risk-based capital guidelines at ~~June~~September 30, 2021 and December 31, 2020:


		Actual				Minimum Capital Requirements				To Be Well Capitalized Under Prompt Corrective Action Provision					Actual				Minimum Capital Requirements				To Be Well Capitalized Under Prompt Corrective Action Provision
		Amount		Ratio		Amount		Ratio		Amount		Ratio			Amount		Ratio		Amount		Ratio		Amount		Ratio
		($ in thousands)													($ in thousands)
As of June 30, 2021
As of September 30, 2021														As of September 30, 2021
Total Risk-based Capital	Total Risk-based Capital													Total Risk-based Capital
Valley	Valley	$	4,196,323	13.36	%	$	3,297,403	10.50	%	N/A		N/A		Valley	$	4,264,369	13.24	%	$	3,382,946	10.50	%	N/A		N/A
Valley National Bank	Valley National Bank	4,237,436		13.48		3,299,948		10.50		$	3,142,808	10.00	%	Valley National Bank	4,368,271		13.55		3,385,194		10.50		$	3,223,994	10.00	%
Common Equity Tier 1 Capital	Common Equity Tier 1 Capital													Common Equity Tier 1 Capital
Valley	Valley	3,153,222		10.04		2,198,269		7.00		N/A		N/A		Valley	3,241,285		10.06		2,255,297		7.00		N/A		N/A
Valley National Bank	Valley National Bank	3,993,176		12.71		2,199,965		7.00		2,042,825		6.50		Valley National Bank	4,119,028		12.78		2,256,796		7.00		2,095,596		6.50
Tier 1 Risk-based Capital	Tier 1 Risk-based Capital													Tier 1 Risk-based Capital
Valley	Valley	3,368,063		10.73		2,669,326		8.50		N/A		N/A		Valley	3,456,126		10.73		2,738,575		8.50		N/A		N/A
Valley National Bank	Valley National Bank	3,393,176		12.71		2,671,387		8.50		2,514,246		8.00		Valley National Bank	4,119,028		12.78		2,740,395		8.50		2,579,195		8.00
Tier 1 Leverage Capital	Tier 1 Leverage Capital													Tier 1 Leverage Capital
Valley	Valley	3,368,063		8.49		1,586,715		4.00		N/A		N/A		Valley	3,456,126		8.63		1,602,010		4.00		N/A		N/A
Valley National Bank	Valley National Bank	3,993,176		10.07		1,586,790		4.00		1,983,487		5.00		Valley National Bank	4,119,028		10.28		1,602,931		4.00		2,003,664		5.00
As of December 31, 2020	As of December 31, 2020													As of December 31, 2020
Total Risk-based Capital	Total Risk-based Capital													Total Risk-based Capital
Valley	Valley	$	3,802,223	12.64	%	$	3,159,019	10.50	%	N/A		N/A		Valley	$	3,802,223	12.64	%	$	3,159,019	10.50	%	N/A		N/A
Valley National Bank	Valley National Bank	3,839,922		12.76		3,158,842		10.50		$	3,008,421	10.00	%	Valley National Bank	3,839,922		12.76		3,158,842		10.50		$	3,008,421	10.00	%
Common Equity Tier 1 Capital	Common Equity Tier 1 Capital													Common Equity Tier 1 Capital
Valley	Valley	2,991,085		9.94		2,106,013		7.00		N/A		N/A		Valley	2,991,085		9.94		2,106,013		7.00		N/A		N/A
Valley National Bank	Valley National Bank	3,607,625		11.99		2,105,894		7.00		1,955,473		6.50		Valley National Bank	3,607,625		11.99		2,105,894		7.00		1,955,473		6.50
Tier 1 Risk-based Capital	Tier 1 Risk-based Capital													Tier 1 Risk-based Capital
Valley	Valley	3,205,926		10.66		2,557,301		8.50		N/A		N/A		Valley	3,205,926		10.66		2,557,301		8.50		N/A		N/A
Valley National Bank	Valley National Bank	3,607,625		11.99		2,557,158		8.50		2,406,736		8.00		Valley National Bank	3,607,625		11.99		2,557,158		8.50		2,406,736		8.00
Tier 1 Leverage Capital	Tier 1 Leverage Capital													Tier 1 Leverage Capital
Valley	Valley	3,205,926		8.06		1,591,852		4.00		N/A		N/A		Valley	3,205,926		8.06		1,591,852		4.00		N/A		N/A
Valley National Bank	Valley National Bank	3,607,625		9.07		1,591,457		4.00		1,989,321		5.00		Valley National Bank	3,607,625		9.07		1,591,457		4.00		1,989,321		5.00

Tangible book value per common share is computed by dividing shareholders’ equity less preferred stock, goodwill and other intangible assets by common shares outstanding as follows:


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		($ in thousands, except for share data)					($ in thousands, except for share data)
Common shares outstanding	Common shares outstanding	406,083,790		403,858,998		Common shares outstanding	407,313,664		403,858,998
Shareholders’ equity	Shareholders’ equity	$	4,737,807	$	4,592,120	Shareholders’ equity	$	4,822,498	$	4,592,120
Less: Preferred stock	Less: Preferred stock	209,691		209,691		Less: Preferred stock	209,691		209,691
Less: Goodwill and other intangible assets	Less: Goodwill and other intangible assets	1,447,965		1,452,891		Less: Goodwill and other intangible assets	1,444,967		1,452,891
Tangible common shareholders’ equity	Tangible common shareholders’ equity	$	3,080,151	$	2,929,538	Tangible common shareholders’ equity	$	3,167,840	$	2,929,538
Tangible book value per common share	Tangible book value per common share	$	7.59	$	7.25	Tangible book value per common share	$	7.78	$	7.25
Book value per common share	Book value per common share	$	11.15	$	10.85	Book value per common share	$	11.32	$	10.85

Management believes the tangible book value per common share ratio provides information useful to management and investors in understanding our underlying operational performance, our business and performance trends and

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facilitates comparisons with the performance of others in the financial services industry. This non-GAAP financial measure should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with U.S. GAAP. This non-GAAP financial measure may also be calculated differently from similar measures disclosed by other companies.

Typically, our primary source of capital growth is through retention of earnings. Our rate of earnings retention is derived by dividing undistributed earnings per common share by earnings (or net income available to common shareholders) per common share. Our retention ratio was approximately ~~60.7~~61.6 percent for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to 52.7 percent for the year ended December 31, 2020.

Cash dividends declared amounted to ~~$0.22~~$0.33 per common share for each of the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. The Board is committed to examining and weighing relevant facts and considerations, including its commitment to shareholder value, each time it makes a cash dividend decision.

Off-Balance Sheet Arrangements, Contractual Obligations and Other Matters

For a discussion of Valley’s off-balance sheet arrangements and contractual obligations see information included in Valley’s Annual Report on Form 10-K for the year ended December 31, 2020 in the MD&A section - “Liquidity and Cash Requirements” and Notes 1112 and 1213 to the consolidated financial statements included in this report.


Item 3.			Quantitative and Qualitative Disclosures About Market Risk

Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices, and commodity prices. Valley’s market risk is composed primarily of interest rate risk. See page 6566 for a discussion of interest rate sensitivity.


Item 4.			Controls and Procedures

(a) Disclosure controls and procedures. Valley maintains disclosure controls and procedures which, consistent with Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), are defined to mean controls and other procedures that are designed to ensure that information required to be disclosed in the reports that Valley files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that such information is accumulated and communicated to Valley’s management, including Valley’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

Valley’s CEO and CFO, with the assistance of other members of Valley’s management, have evaluated the effectiveness of Valley’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, Valley’s CEO and CFO have concluded that Valley’s disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) Changes in internal controls over financial reporting. During the third quarter 2021, we completed the implementation of our SAP S/4HANA general ledger and enterprise resource planning system. The new system was subject to various testing and review procedures before, during and after implementation. As a result of this implementation, we have experienced certain changes to our processes and procedures which, in turn, resulted in changes to our internal control over financial reporting. Valley’s CEO and CFO have ~~also~~ concluded that except for those changes there ~~have not been any~~were no changes in Valley’s internal control over financial reporting in the quarter ended ~~June~~September 30, 2021 that have materially affected, or are reasonably likely to materially affect, Valley’s internal control over financial reporting.

Valley has not experienced any material impact to its internal controls over financial reporting due to the fact that most of Valley’s employees responsible for financial reporting are working remotely during the COVID-19

pandemic. Valley is continually monitoring and assessing the impact of the COVID-19 pandemic on Valley’s internal controls over financial reporting to minimize the impact to their design and operating effectiveness.

Valley’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all errors and all fraud. A system of internal control, no

matter how well conceived and operated, provides reasonable, not absolute, assurance that the objectives of the system of internal control are met. The design of a system of internal control reflects resource constraints and the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Valley have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns occur because of a simple error or mistake. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of internal control is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions; over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II - OTHER INFORMATION


Item 1.			Legal Proceedings

In the normal course of business, we are a party to various outstanding legal proceedings and claims. There have been no material changes in the legal proceedings, if any, previously disclosed under Part I, Item 3 of Valley’s Annual Report on Form 10-K for the year ended December 31, 2020.


Item 1A.			Risk Factors

The section titled Risk Factors in Part I, Item 1A of our 2020 Annual Report on Form 10-K includes a discussion of the many risks and uncertainties we face, any one or more of which could have a material adverse effect on our business, results of operations, financial condition (including capital and liquidity). The information presented below provides an update to, and should be read in conjunction with, the risk factors and other information contained in our 2020 Annual Report on Form 10-K. Except as presented below, there have been no material changes to these risk factors.

Cyber-attacks could compromise our information or result in the data of our customers being improperly divulged or our systems being disrupted which could expose us to liability, losses and escalating operating costs.

Valley regularly collects, processes, transmits and stores confidential information regarding its customers, employees and others for whom it services loans. In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on Valley’s behalf. Information security risks have increased because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks. Many financial institutions and companies engaged in data processing have reported significant breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, denial-of-service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means. In addition, recently there have been well-publicized “ransomware” attacks against various U.S. companies with the intent to materially disrupt their computer network and services. Valley frequently experiences attempted cybersecurity attacks against its systems. In 2021, there was a breach by a threat actor of a legacy network from an acquired bank. The breach resulted in the unauthorized access of certain data stored on the legacy network. The legacy network was isolated from Valley’s network, which was not affected by the incident. There can be no assurances that Valley will not incur breaches of our systems or that of our vendors which may expose the data of our customers or disrupt our services, exposing us to significant damage, on-going operational costs and/or reputational harm.

Cyber risk exposure will remain elevated or increase in the future due to, among other things, the increasing size and prominence of Valley in the financial services industry, our expansion of Internet and mobile banking tools and new products based on customer needs, and the system and customer account conversions associated with the integration of merger targets. Successful attacks on any one of many our third-party service providers may

adversely affect our business and result in the disclosure or misuse of our confidential information or that of our customers. There can be no assurance that we or our third-party service providers will not suffer a cyber-attack that exposes us to significant damages, operational costs, or reputational harm.


Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter, we did not sell any equity securities not registered under the Securities Act of 1933, as amended. Purchases of equity securities by the issuer and affiliated purchasers during the three months ended ~~June~~September 30, 2021 were as follows:

ISSUER PURCHASES OF EQUITY SECURITIES

Period Total Number of
Shares Purchased (1) Average
Price Paid
Per Share Total Number of Shares
Purchased as Part of
Publicly Announced
Plans (2) Maximum Number of
Shares that May Yet Be
Purchased Under the Plans (2)
April 1, 2021 to April 30, 2021 2,696 $ 13.80 — 4,112,465
May 1, 2021 to May 31, 2021 1,008 13.77 — 4,112,465
June 1, 2021 to June 30, 2021 9,636 14.31 — 4,112,465
Total 13,340 $ 14.17 —


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans (2)	Maximum Number of Shares that May Yet Be Purchased Under the Plans (2)
July 1, 2021 to July 31, 2021	2,073	$	13.30	—	4,112,465
August 1, 2021 to August 31, 2021	7,937	12.85		—	4,112,465
September 1, 2021 to September 30, 2021	—	—		—	4,112,465
Total	10,010	$	12.95	—

(1)Represents repurchases made in connection with the vesting of employee restricted stock awards.

(2)On January 17, 2007, Valley publicly announced its intention to repurchase up to 4.7 million outstanding common shares in the open market or in privately negotiated transactions. The repurchase plan has no stated expiration date. No repurchase plans or programs expired or terminated during the three months ended ~~June~~September 30, 2021.

8384


Item 6.			Exhibits


(3)	Articles of Incorporation and By-laws:
	(3.1)	Restated Certificate of Incorporation of the Registrant, incorporated herein by reference to Exhibit 3.1 to the Registrant's Form 10-Q Quarterly Report filed on August 7, 2020.
	(3.2)	By-laws of the Registrant, as amended and restated, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K Current Report filed on October 24, 2018.
~~(4)~~	~~Instruments Defining the Rights of Security Holders:~~
	~~(4.1)~~	Base Indenture, dated May 28, 2021, by and between Valley National Bancorp and U.S. Bank National Association, incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-K Current Report filed on May 25, 2021.
	~~(4.2)~~	First Supplemental Indenture, dated May 28, 2021, by and between Valley National Bancorp and U.S. Bank National Association, incorporated herein by reference to Exhibit 4.2 to the Registrant’s Form 8-K Current Report filed on May 25, 2021.
(10)	Material Contracts:
	~~(10.1)~~(10.2)	~~Underwriting~~ Agreement and Plan of Merger , dated as of ~~May 25,~~September 22 , 2021, by and among Valley National Bancorp, ~~Valley National~~ Bank ~~Piper Sandler & Co.~~ Leumi Le-Israel Corporation, a New York corporation and ~~BofA Securities, Inc.~~Volcano Merger Sub Corporation, a New York corporation and subsidiary of Valley , incorporated herein by reference to Exhibit 1.1 to the Registrant’s Form 8-K Current Report filed on ~~May 25,~~September 2 7 , 2021.
(31.1)	Certification of Ira Robbins, Chairman of the Board, President and Chief Executive Officer of the Company, pursuant to Securities Exchange Rule 13a-14(a).*
(31.2)	Certification of Michael D. Hagedorn, Senior Executive Vice President and Chief Financial Officer of the Company, pursuant to Securities Exchange Rule 13a-14(a).*
(32)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Ira Robbins, Chairman of the Board, President and Chief Executive Officer of the Company, and Michael D. Hagedorn, Senior Executive Vice President and Chief Financial Officer of the Company.**
(101)	Interactive Data File (XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) **
(104)	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Filed herewith.
**			Furnished herewith

8485

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

VALLEY NATIONAL BANCORP

(Registrant)

Date:

/s/ Ira Robbins

~~August 6,~~November 8, 2021

Ira Robbins

Chairman of the Board, President

and Chief Executive Officer

(Principal Executive Officer)

Date:

/s/ Michael D. Hagedorn

~~August 6,~~November 8, 2021

Michael D. Hagedorn

Senior Executive Vice President and

Chief Financial Officer

(Principal Financial Officer)

8586


	June 30, 2021
	Non-PPP loan balance		% of non-PPP loans

	($ in thousands)
Retail trade	$	592,631	1.9	%
Hotels and hospitality	503,837		1.6
Doctors and surgery	485,681		1.6
Restaurants and food service	317,460		1.0
Entertainment and recreation	221,775		0.7
Total	$	2,121,384	6.8	%