Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Leases

Leases

Lessor Arrangements

Valley's lessor arrangements primarily consist of direct financing and sales-type leases for equipment included in the commercial and industrial loan portfolio. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

At March 31, 2019, the total net investment in direct financing and sales-type leases was $351.2 million, comprised of $350.0 million in lease receivables and $1.2 million in unguaranteed residuals. Total lease income was $4.3 million for the three months ended March 31, 2019.

Lessee Arrangements

Valley's lessee arrangements predominantly consist of operating and finance leases for premises and equipment. The majority of the operating leases include one or more options to renew, that can significantly extend the lease terms. Valley’s leases have a wide range of lease expirations through the year 2062. 

Operating and finance leases are recognized as right of use (ROU) assets and lease liabilities in the consolidated statements of financial position. The ROU assets represent the right to use underlying assets for the lease terms and

lease liabilities represent Valley’s obligations to make lease payments arising from the lease. The ROU assets include any prepaid lease payments and initial direct costs, less any lease incentives. At the commencement dates of leases, ROU assets and lease liabilities are initially recognized based on their net present values with the lease terms including options to extend or terminate the lease when Valley is reasonably certain that the options will be exercised to extend. ROU assets are amortized into net occupancy and equipment expense over the expected lives of the leases.

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

During March 2019, Valley closed a sale-leaseback transaction for 26 properties, consisting of 25 branches and 1 corporate office, for an aggregate sales price of $100.5 million. As a result, Valley recorded a pre-tax net gain totaling $78.5 million during the first quarter of 2019. Additionally, Valley recorded ROU assets and lease obligations totaling $78.4 million, respectively, for the lease of the 26 properties with an expected term of 12 years. The lease was determined to be an operating lease and Valley expects to record lease costs of approximately $7.9 million within occupancy and equipment expense on a straight-line basis annually over the term of the lease. 

The following table presents the components of ROU assets and lease liabilities by lease type at March 31, 2019.

	March 31, 2019
	(in thousands)
ROU assets:
Operating leases	$	288,577
Finance leases	1,092
Total	$	289,669
Lease liabilities:
Operating leases	$	311,362
Finance leases	2,163
Total	$	313,525

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three months ended March 31, 2019:

	Three Months Ended
	March 31, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73
Interest on lease liabilities	52
Operating lease cost	6,974
Short-term lease cost	75
Variable lease cost	948
Sublease income	(903		)
Total lease cost (included in net occupancy and equipment expense)	$	7,219

The following table presents supplemental cash flow information related to leases for the three months ended March 31, 2019:

	Three Months Ended
	March 31, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	8,199
Operating cash flows from finance leases	52
Financing cash flows from finance leases	119

The following table presents supplemental information related to leases at March 31, 2019:

	March 31, 2019
Weighted-average remaining lease term
Operating leases	13.23 years
Finance leases	3.75 years
Weighted-average discount rate
Operating leases	3.72	%
Finance leases	8.25	%

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of March 31, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	86,787		$	26,352		$	513
2020	96,830			35,103			684
2021	80,580			34,295			684
2022	59,226			32,639			684
2023	37,135			29,195			—
Thereafter	23,260			244,608			—
Total lease payments	383,818			402,192			2,565
Less: present value discount	(33,823		)	(90,830		)	(402		)
Total	$	349,995		$	311,362		$	2,163

The following table presents minimum aggregate lease payments in accordance with Topic 840 at March 31, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	20,776	$	1,644	$	19,132
2019	27,570		2,124		25,446
2020	27,709		2,077		25,632
2021	26,872		2,009		24,863
2022	25,860		1,891		23,969
Thereafter	270,431		8,130		262,301
Total lease payments	$	399,218	$	17,875	$	381,343

Net occupancy and equipment expense included lease cost of $8.2 million, net of sublease income of $911 thousand for the three months ended March 31, 2018.

Leases

Leases

Lessor Arrangements

Valley's lessor arrangements primarily consist of direct financing and sales-type leases for equipment included in the commercial and industrial loan portfolio. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

At March 31, 2019, the total net investment in direct financing and sales-type leases was $351.2 million, comprised of $350.0 million in lease receivables and $1.2 million in unguaranteed residuals. Total lease income was $4.3 million for the three months ended March 31, 2019.

Lessee Arrangements

Valley's lessee arrangements predominantly consist of operating and finance leases for premises and equipment. The majority of the operating leases include one or more options to renew, that can significantly extend the lease terms. Valley’s leases have a wide range of lease expirations through the year 2062. 

Operating and finance leases are recognized as right of use (ROU) assets and lease liabilities in the consolidated statements of financial position. The ROU assets represent the right to use underlying assets for the lease terms and

lease liabilities represent Valley’s obligations to make lease payments arising from the lease. The ROU assets include any prepaid lease payments and initial direct costs, less any lease incentives. At the commencement dates of leases, ROU assets and lease liabilities are initially recognized based on their net present values with the lease terms including options to extend or terminate the lease when Valley is reasonably certain that the options will be exercised to extend. ROU assets are amortized into net occupancy and equipment expense over the expected lives of the leases.

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

During March 2019, Valley closed a sale-leaseback transaction for 26 properties, consisting of 25 branches and 1 corporate office, for an aggregate sales price of $100.5 million. As a result, Valley recorded a pre-tax net gain totaling $78.5 million during the first quarter of 2019. Additionally, Valley recorded ROU assets and lease obligations totaling $78.4 million, respectively, for the lease of the 26 properties with an expected term of 12 years. The lease was determined to be an operating lease and Valley expects to record lease costs of approximately $7.9 million within occupancy and equipment expense on a straight-line basis annually over the term of the lease. 

The following table presents the components of ROU assets and lease liabilities by lease type at March 31, 2019.

	March 31, 2019
	(in thousands)
ROU assets:
Operating leases	$	288,577
Finance leases	1,092
Total	$	289,669
Lease liabilities:
Operating leases	$	311,362
Finance leases	2,163
Total	$	313,525

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three months ended March 31, 2019:

	Three Months Ended
	March 31, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73
Interest on lease liabilities	52
Operating lease cost	6,974
Short-term lease cost	75
Variable lease cost	948
Sublease income	(903		)
Total lease cost (included in net occupancy and equipment expense)	$	7,219

The following table presents supplemental cash flow information related to leases for the three months ended March 31, 2019:

	Three Months Ended
	March 31, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	8,199
Operating cash flows from finance leases	52
Financing cash flows from finance leases	119

The following table presents supplemental information related to leases at March 31, 2019:

	March 31, 2019
Weighted-average remaining lease term
Operating leases	13.23 years
Finance leases	3.75 years
Weighted-average discount rate
Operating leases	3.72	%
Finance leases	8.25	%

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of March 31, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	86,787		$	26,352		$	513
2020	96,830			35,103			684
2021	80,580			34,295			684
2022	59,226			32,639			684
2023	37,135			29,195			—
Thereafter	23,260			244,608			—
Total lease payments	383,818			402,192			2,565
Less: present value discount	(33,823		)	(90,830		)	(402		)
Total	$	349,995		$	311,362		$	2,163

The following table presents minimum aggregate lease payments in accordance with Topic 840 at March 31, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	20,776	$	1,644	$	19,132
2019	27,570		2,124		25,446
2020	27,709		2,077		25,632
2021	26,872		2,009		24,863
2022	25,860		1,891		23,969
Thereafter	270,431		8,130		262,301
Total lease payments	$	399,218	$	17,875	$	381,343

Net occupancy and equipment expense included lease cost of $8.2 million, net of sublease income of $911 thousand for the three months ended March 31, 2018.

Leases

Leases

Lessor Arrangements

Valley's lessor arrangements primarily consist of direct financing and sales-type leases for equipment included in the commercial and industrial loan portfolio. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

At March 31, 2019, the total net investment in direct financing and sales-type leases was $351.2 million, comprised of $350.0 million in lease receivables and $1.2 million in unguaranteed residuals. Total lease income was $4.3 million for the three months ended March 31, 2019.

Lessee Arrangements

Valley's lessee arrangements predominantly consist of operating and finance leases for premises and equipment. The majority of the operating leases include one or more options to renew, that can significantly extend the lease terms. Valley’s leases have a wide range of lease expirations through the year 2062. 

Operating and finance leases are recognized as right of use (ROU) assets and lease liabilities in the consolidated statements of financial position. The ROU assets represent the right to use underlying assets for the lease terms and

lease liabilities represent Valley’s obligations to make lease payments arising from the lease. The ROU assets include any prepaid lease payments and initial direct costs, less any lease incentives. At the commencement dates of leases, ROU assets and lease liabilities are initially recognized based on their net present values with the lease terms including options to extend or terminate the lease when Valley is reasonably certain that the options will be exercised to extend. ROU assets are amortized into net occupancy and equipment expense over the expected lives of the leases.

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

During March 2019, Valley closed a sale-leaseback transaction for 26 properties, consisting of 25 branches and 1 corporate office, for an aggregate sales price of $100.5 million. As a result, Valley recorded a pre-tax net gain totaling $78.5 million during the first quarter of 2019. Additionally, Valley recorded ROU assets and lease obligations totaling $78.4 million, respectively, for the lease of the 26 properties with an expected term of 12 years. The lease was determined to be an operating lease and Valley expects to record lease costs of approximately $7.9 million within occupancy and equipment expense on a straight-line basis annually over the term of the lease. 

The following table presents the components of ROU assets and lease liabilities by lease type at March 31, 2019.

	March 31, 2019
	(in thousands)
ROU assets:
Operating leases	$	288,577
Finance leases	1,092
Total	$	289,669
Lease liabilities:
Operating leases	$	311,362
Finance leases	2,163
Total	$	313,525

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three months ended March 31, 2019:

	Three Months Ended
	March 31, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73
Interest on lease liabilities	52
Operating lease cost	6,974
Short-term lease cost	75
Variable lease cost	948
Sublease income	(903		)
Total lease cost (included in net occupancy and equipment expense)	$	7,219

The following table presents supplemental cash flow information related to leases for the three months ended March 31, 2019:

	Three Months Ended
	March 31, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	8,199
Operating cash flows from finance leases	52
Financing cash flows from finance leases	119

The following table presents supplemental information related to leases at March 31, 2019:

	March 31, 2019
Weighted-average remaining lease term
Operating leases	13.23 years
Finance leases	3.75 years
Weighted-average discount rate
Operating leases	3.72	%
Finance leases	8.25	%

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of March 31, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	86,787		$	26,352		$	513
2020	96,830			35,103			684
2021	80,580			34,295			684
2022	59,226			32,639			684
2023	37,135			29,195			—
Thereafter	23,260			244,608			—
Total lease payments	383,818			402,192			2,565
Less: present value discount	(33,823		)	(90,830		)	(402		)
Total	$	349,995		$	311,362		$	2,163

The following table presents minimum aggregate lease payments in accordance with Topic 840 at March 31, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	20,776	$	1,644	$	19,132
2019	27,570		2,124		25,446
2020	27,709		2,077		25,632
2021	26,872		2,009		24,863
2022	25,860		1,891		23,969
Thereafter	270,431		8,130		262,301
Total lease payments	$	399,218	$	17,875	$	381,343

Net occupancy and equipment expense included lease cost of $8.2 million, net of sublease income of $911 thousand for the three months ended March 31, 2018.

Leases

Leases

Lessor Arrangements

Valley's lessor arrangements primarily consist of direct financing and sales-type leases for equipment included in the commercial and industrial loan portfolio. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

At March 31, 2019, the total net investment in direct financing and sales-type leases was $351.2 million, comprised of $350.0 million in lease receivables and $1.2 million in unguaranteed residuals. Total lease income was $4.3 million for the three months ended March 31, 2019.

Lessee Arrangements

Valley's lessee arrangements predominantly consist of operating and finance leases for premises and equipment. The majority of the operating leases include one or more options to renew, that can significantly extend the lease terms. Valley’s leases have a wide range of lease expirations through the year 2062. 

Operating and finance leases are recognized as right of use (ROU) assets and lease liabilities in the consolidated statements of financial position. The ROU assets represent the right to use underlying assets for the lease terms and

lease liabilities represent Valley’s obligations to make lease payments arising from the lease. The ROU assets include any prepaid lease payments and initial direct costs, less any lease incentives. At the commencement dates of leases, ROU assets and lease liabilities are initially recognized based on their net present values with the lease terms including options to extend or terminate the lease when Valley is reasonably certain that the options will be exercised to extend. ROU assets are amortized into net occupancy and equipment expense over the expected lives of the leases.

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

During March 2019, Valley closed a sale-leaseback transaction for 26 properties, consisting of 25 branches and 1 corporate office, for an aggregate sales price of $100.5 million. As a result, Valley recorded a pre-tax net gain totaling $78.5 million during the first quarter of 2019. Additionally, Valley recorded ROU assets and lease obligations totaling $78.4 million, respectively, for the lease of the 26 properties with an expected term of 12 years. The lease was determined to be an operating lease and Valley expects to record lease costs of approximately $7.9 million within occupancy and equipment expense on a straight-line basis annually over the term of the lease. 

The following table presents the components of ROU assets and lease liabilities by lease type at March 31, 2019.

	March 31, 2019
	(in thousands)
ROU assets:
Operating leases	$	288,577
Finance leases	1,092
Total	$	289,669
Lease liabilities:
Operating leases	$	311,362
Finance leases	2,163
Total	$	313,525

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three months ended March 31, 2019:

	Three Months Ended
	March 31, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73
Interest on lease liabilities	52
Operating lease cost	6,974
Short-term lease cost	75
Variable lease cost	948
Sublease income	(903		)
Total lease cost (included in net occupancy and equipment expense)	$	7,219

The following table presents supplemental cash flow information related to leases for the three months ended March 31, 2019:

	Three Months Ended
	March 31, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	8,199
Operating cash flows from finance leases	52
Financing cash flows from finance leases	119

The following table presents supplemental information related to leases at March 31, 2019:

	March 31, 2019
Weighted-average remaining lease term
Operating leases	13.23 years
Finance leases	3.75 years
Weighted-average discount rate
Operating leases	3.72	%
Finance leases	8.25	%

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of March 31, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	86,787		$	26,352		$	513
2020	96,830			35,103			684
2021	80,580			34,295			684
2022	59,226			32,639			684
2023	37,135			29,195			—
Thereafter	23,260			244,608			—
Total lease payments	383,818			402,192			2,565
Less: present value discount	(33,823		)	(90,830		)	(402		)
Total	$	349,995		$	311,362		$	2,163

The following table presents minimum aggregate lease payments in accordance with Topic 840 at March 31, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	20,776	$	1,644	$	19,132
2019	27,570		2,124		25,446
2020	27,709		2,077		25,632
2021	26,872		2,009		24,863
2022	25,860		1,891		23,969
Thereafter	270,431		8,130		262,301
Total lease payments	$	399,218	$	17,875	$	381,343

Net occupancy and equipment expense included lease cost of $8.2 million, net of sublease income of $911 thousand for the three months ended March 31, 2018.

Leases

Leases

Lessor Arrangements

Valley's lessor arrangements primarily consist of direct financing and sales-type leases for equipment included in the commercial and industrial loan portfolio. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

At March 31, 2019, the total net investment in direct financing and sales-type leases was $351.2 million, comprised of $350.0 million in lease receivables and $1.2 million in unguaranteed residuals. Total lease income was $4.3 million for the three months ended March 31, 2019.

Lessee Arrangements

Valley's lessee arrangements predominantly consist of operating and finance leases for premises and equipment. The majority of the operating leases include one or more options to renew, that can significantly extend the lease terms. Valley’s leases have a wide range of lease expirations through the year 2062. 

Operating and finance leases are recognized as right of use (ROU) assets and lease liabilities in the consolidated statements of financial position. The ROU assets represent the right to use underlying assets for the lease terms and

lease liabilities represent Valley’s obligations to make lease payments arising from the lease. The ROU assets include any prepaid lease payments and initial direct costs, less any lease incentives. At the commencement dates of leases, ROU assets and lease liabilities are initially recognized based on their net present values with the lease terms including options to extend or terminate the lease when Valley is reasonably certain that the options will be exercised to extend. ROU assets are amortized into net occupancy and equipment expense over the expected lives of the leases.

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

During March 2019, Valley closed a sale-leaseback transaction for 26 properties, consisting of 25 branches and 1 corporate office, for an aggregate sales price of $100.5 million. As a result, Valley recorded a pre-tax net gain totaling $78.5 million during the first quarter of 2019. Additionally, Valley recorded ROU assets and lease obligations totaling $78.4 million, respectively, for the lease of the 26 properties with an expected term of 12 years. The lease was determined to be an operating lease and Valley expects to record lease costs of approximately $7.9 million within occupancy and equipment expense on a straight-line basis annually over the term of the lease. 

The following table presents the components of ROU assets and lease liabilities by lease type at March 31, 2019.

	March 31, 2019
	(in thousands)
ROU assets:
Operating leases	$	288,577
Finance leases	1,092
Total	$	289,669
Lease liabilities:
Operating leases	$	311,362
Finance leases	2,163
Total	$	313,525

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three months ended March 31, 2019:

	Three Months Ended
	March 31, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73
Interest on lease liabilities	52
Operating lease cost	6,974
Short-term lease cost	75
Variable lease cost	948
Sublease income	(903		)
Total lease cost (included in net occupancy and equipment expense)	$	7,219

The following table presents supplemental cash flow information related to leases for the three months ended March 31, 2019:

	Three Months Ended
	March 31, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	8,199
Operating cash flows from finance leases	52
Financing cash flows from finance leases	119

The following table presents supplemental information related to leases at March 31, 2019:

	March 31, 2019
Weighted-average remaining lease term
Operating leases	13.23 years
Finance leases	3.75 years
Weighted-average discount rate
Operating leases	3.72	%
Finance leases	8.25	%

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of March 31, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	86,787		$	26,352		$	513
2020	96,830			35,103			684
2021	80,580			34,295			684
2022	59,226			32,639			684
2023	37,135			29,195			—
Thereafter	23,260			244,608			—
Total lease payments	383,818			402,192			2,565
Less: present value discount	(33,823		)	(90,830		)	(402		)
Total	$	349,995		$	311,362		$	2,163

The following table presents minimum aggregate lease payments in accordance with Topic 840 at March 31, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	20,776	$	1,644	$	19,132
2019	27,570		2,124		25,446
2020	27,709		2,077		25,632
2021	26,872		2,009		24,863
2022	25,860		1,891		23,969
Thereafter	270,431		8,130		262,301
Total lease payments	$	399,218	$	17,875	$	381,343

Net occupancy and equipment expense included lease cost of $8.2 million, net of sublease income of $911 thousand for the three months ended March 31, 2018.