10-Q

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 30, 2019

OR

☐ 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,	NY	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 331,792,538 shares were outstanding as of August 6, 2019.

TABLE OF CONTENTS

		Page Number
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition as of June 30, 2019 and December 31, 2018	2
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2019 and 2018	3
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018	5
	Consolidated Statements of Changes in Shareholders' Equity for the Six Months Ended June 30, 2019 and 2018	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	8
	Notes to Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	82
Item 4.	Controls and Procedures	83
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	83
Item 1A.	Risk Factors	83
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
Item 6.	Exhibits	84
SIGNATURES		85

1

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except for share data)

	June 30, 2019			December 31, 2018
Assets	(Unaudited)
Cash and due from banks	$	276,291		$	251,541
Interest bearing deposits with banks	178,905			177,088
Investment securities:
Held to maturity (fair value of $2,184,792 at June 30, 2019 and $2,034,943 at December 31, 2018)	2,168,236			2,068,246
Available for sale	1,679,350			1,749,544
Total investment securities	3,847,586			3,817,790
Loans held for sale, at fair value	36,641			35,155
Loans	25,802,162			25,035,469
Less: Allowance for loan losses	(155,105		)	(151,859		)
Net loans	25,647,057			24,883,610
Premises and equipment, net	312,627			341,630
Lease right of use assets	283,348			—
Bank owned life insurance	442,343			439,602
Accrued interest receivable	99,065			95,296
Goodwill	1,084,665			1,084,665
Other intangible assets, net	70,585			76,990
Other assets	748,628			659,721
Total Assets	$	33,027,741		$	31,863,088
Liabilities
Deposits:
Non-interest bearing	$	6,327,789		$	6,175,495
Interest bearing:
Savings, NOW and money market	11,107,952			11,213,495
Time	7,338,188			7,063,984
Total deposits	24,773,929			24,452,974
Short-term borrowings	2,387,784			2,118,914
Long-term borrowings	1,800,182			1,654,268
Junior subordinated debentures issued to capital trusts	55,544			55,370
Lease liabilities	307,405			3,125
Accrued expenses and other liabilities	198,779			227,983
Total Liabilities	29,523,623			28,512,634
Shareholders’ Equity
Preferred stock, no par value; 50,000,000 authorized shares:
Series A (4,600,000 shares issued at June 30, 2019 and December 31, 2018)	111,590			111,590
Series B (4,000,000 shares issued at June 30, 2019 and December 31, 2018)	98,101			98,101
Common stock (no par value, authorized 450,000,000 shares; issued 332,101,525 shares at June 30, 2019 and 331,634,951 shares at December 31, 2018)	116,571			116,240
Surplus	2,804,059			2,796,499
Retained earnings	412,190			299,642
Accumulated other comprehensive loss	(35,131		)	(69,431		)
Treasury stock, at cost (313,376 common shares at June 30, 2019 and 203,734 common shares at December 31, 2018)	(3,262		)	(2,187		)
Total Shareholders’ Equity	3,504,118			3,350,454
Total Liabilities and Shareholders’ Equity	$	33,027,741		$	31,863,088

See accompanying notes to consolidated financial statements.

2

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except for share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Interest Income
Interest and fees on loans	$	296,934		$	247,690		$	585,211		$	485,276
Interest and dividends on investment securities:
Taxable	22,489			22,222			45,365			43,545
Tax-exempt	4,356			5,639			9,160			11,360
Dividends	2,795			3,728			5,969			5,667
Interest on federal funds sold and other short-term investments	1,168			839			2,261			1,765
Total interest income	327,742			280,118			647,966			547,613
Interest Expense
Interest on deposits:
Savings, NOW and money market	38,020			24,756			74,303			47,073
Time	40,331			16,635			78,502			31,251
Interest on short-term borrowings	14,860			10,913			27,409			16,645
Interest on long-term borrowings and junior subordinated debentures	14,297			17,062			28,870			34,294
Total interest expense	107,508			69,366			209,084			129,263
Net Interest Income	220,234			210,752			438,882			418,350
Provision for credit losses	2,100			7,142			10,100			18,090
Net Interest Income After Provision for Credit Losses	218,134			203,610			428,782			400,260
Non-Interest Income
Trust and investment services	3,096			3,262			6,000			6,492
Insurance commissions	2,649			4,026			5,174			7,847
Service charges on deposit accounts	5,827			6,679			11,730			13,932
Gains (losses) on securities transactions, net	11			(36		)	(21		)	(801		)
Other-than-temporary impairment losses on securities	(2,928		)	—			(2,928		)	—
Portion recognized in other comprehensive income (before taxes)	—			—			—			—
Net impairment losses on securities recognized in earnings	(2,928		)	—			(2,928		)	—
Fees from loan servicing	2,367			2,045			4,797			4,268
Gains on sales of loans, net	3,930			7,642			8,506			14,395
(Losses) gains on sales of assets, net	(564		)	(125		)	77,156			(222		)
Bank owned life insurance	2,205			2,652			4,092			4,415
Other	11,010			11,924			20,770			19,994
Total non-interest income	27,603			38,069			135,276			70,320
Non-Interest Expense
Salary and employee benefits expense	76,183			78,944			159,288			172,236
Net occupancy and equipment expense	29,700			26,901			57,586			54,825
FDIC insurance assessment	4,931			8,044			11,052			13,542
Amortization of other intangible assets	4,170			4,617			8,481			8,910
Professional and legal fees	4,145			5,337			9,416			22,384
Amortization of tax credit investments	4,863			4,470			12,036			9,744
Telecommunication expense	2,351			3,015			4,619			6,609
Other	15,394			18,588			27,054			35,418
Total non-interest expense	141,737			149,916			289,532			323,668
Income Before Income Taxes	104,000			91,763			274,526			146,912
Income tax expense	27,532			18,961			84,728			32,145
Net Income	76,468			72,802			189,798			114,767
Dividends on preferred stock	3,172			3,172			6,344			6,344
Net Income Available to Common Shareholders	$	73,296		$	69,630		$	183,454		$	108,423

3

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Earnings Per Common Share:
Basic	$	0.22	$	0.21	$	0.55	$	0.33
Diluted	0.22		0.21		0.55		0.33
Cash Dividends Declared per Common Share	0.11		0.11		0.22		0.22
Weighted Average Number of Common Shares Outstanding:
Basic	331,748,552		331,318,381		331,675,313		331,024,531
Diluted	332,959,802		332,895,483		332,929,359		332,599,991

See accompanying notes to consolidated financial statements.

4

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income	$	76,468		$	72,802		$	189,798		$	114,767
Other comprehensive income, net of tax:
Unrealized gains and losses on available for sale securities
Net gains (losses) arising during the period	18,488			(6,249		)	34,755			(27,446		)
Less reclassification adjustment for net (gains) losses included in net income	(8		)	42			18			574
Total	18,480			(6,207		)	34,773			(26,872		)
Unrealized gains and losses on derivatives (cash flow hedges)
Net (losses) gains on derivatives arising during the period	(683		)	455			(1,065		)	2,415
Less reclassification adjustment for net losses included in net income	274			619			482			1,655
Total	(409		)	1,074			(583		)	4,070
Defined benefit pension plan
Amortization of net loss	55			112			110			224
Total other comprehensive income (loss)	18,126			(5,021		)	34,300			(22,578		)
Total comprehensive income	$	94,594		$	67,781		$	224,098		$	92,189

See accompanying notes to consolidated financial statements.

5

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Six Months Ended June 30, 2019

			Common Stock								Accumulated
	Preferred Stock		Shares	Amount		Surplus		Retained Earnings			Other Comprehensive Loss			Treasury Stock			Total Shareholders’ Equity
	($ in thousands)
Balance - December 31, 2018	$	209,691	331,431	$	116,240	$	2,796,499	$	299,642		$	(69,431	)	$	(2,187	)	$	3,350,454
Adjustment due to the adoption of ASU No. 2016-02	—		—	—		—		4,414			—			—			4,414
Adjustment due to the adoption of ASU No. 2017-08	—		—	—		—		(1,446		)	—			—			(1,446		)
Balance - January 1, 2019	209,691		331,431	116,240		2,796,499		302,610			(69,431		)	(2,187		)	3,353,422
Net income	—		—	—		—		113,330			—			—			113,330
Other comprehensive income, net of tax	—		—	—		—		—			16,174			—			16,174
Cash dividends declared:
Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797		)	—			—			(1,797		)
Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375		)	—			—			(1,375		)
Common stock, $0.11 per share	—		—	—		—		(36,686		)	—			—			(36,686		)
Effect of stock incentive plan, net	—		302	226		2,935		(99		)	—			(1,251		)	1,811
Balance - March 31, 2019	209,691		331,733	116,466		2,799,434		375,983			(53,257		)	(3,438		)	3,444,879
Net income	—		—	—		—		76,468			—			—			76,468
Other comprehensive income, net of tax	—		—	—		—		—			18,126			—			18,126
Cash dividends declared:
Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797		)	—			—			(1,797		)
Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375		)	—			—			(1,375		)
Common stock, $0.11 per share	—		—	—		—		(36,712		)	—			—			(36,712		)
Effect of stock incentive plan, net	—		55	105		4,625		(377		)	—			176			4,529
Balance - June 30, 2019	$	209,691	331,788	$	116,571	$	2,804,059	$	412,190		$	(35,131	)	$	(3,262	)	$	3,504,118

6

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)

For the Six Months Ended June 30, 2018

			Common Stock								Accumulated
	Preferred Stock		Shares	Amount		Surplus		Retained Earnings			Other Comprehensive Loss			Treasury Stock			Total Shareholders’ Equity
	($ in thousands)
Balance - December 31, 2017	$	209,691	264,469	$	92,727	$	2,060,356	$	216,733		$	(46,005	)	$	(337	)	$	2,533,165
Reclassification due to the adoption of ASU No. 2016-01	—		—	—		—		480			(480		)	—			—
Reclassification due to the adoption of ASU No. 2017-12	—		—	—		—		61			(61		)	—			—
Adjustment due to the adoption of ASU No. 2016-16	—		—	—		—		(17,611		)	—			—			(17,611		)
Balance - January 1, 2018	209,691		264,469	92,727		2,060,356		199,663			(46,546		)	(337		)	2,515,554
Net income	—		—	—		—		41,965			—			—			41,965
Other comprehensive loss, net of tax	—		—	—		—		—			(17,557		)	—			(17,557		)
Cash dividends declared:
Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797		)	—			—			(1,797		)
Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375		)	—			—			(1,375		)
Common stock, $0.11 per share	—		—	—		—		(36,635		)	—			—			(36,635		)
Effect of stock incentive plan, net	—		1,714	355		8,717		(2,266		)	—			(169		)	6,637
Common stock issued	—		65,007	22,742		715,121		—			—			348			738,211
Balance - March 31, 2018	209,691		331,190	115,824		2,784,194		199,555			(64,103		)	(158		)	3,245,003
Net income	—		—	—		—		72,802			—			—			72,802
Other comprehensive income, net of tax	—		—	—		—		—			(5,021		)	—			(5,021		)
Cash dividends declared:
Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797		)	—			—			(1,797		)
Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375		)	—			—			(1,375		)
Common stock, $0.11 per share	—		—	—		—		(36,534		)	—			—			(36,534		)
Effect of stock incentive plan, net	—		264	203		4,996		(58		)	—			(907		)	4,234
Balance - June 30, 2018	$	209,691	331,454	$	116,027	$	2,789,190	$	232,593		$	(69,124	)	$	(1,065	)	$	3,277,312

See accompanying notes to consolidated financial statements.

7

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)

	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	189,798		$	114,767
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	25,240			13,783
Stock-based compensation	8,282			12,153
Provision for credit losses	10,100			18,090
Net amortization of premiums and accretion of discounts on securities and borrowings	14,287			17,212
Amortization of other intangible assets	8,481			8,910
Losses on securities transactions, net	21			801
Proceeds from sales of loans held for sale	421,730			437,876
Gains on sales of loans, net	(8,506		)	(14,395		)
Net impairment losses on securities, recognized in earnings	2,928			—
Originations of loans held for sale	(200,877		)	(446,849		)
(Gains) losses on sales of assets, net	(77,156		)	222
Net change in:
Cash surrender value of bank owned life insurance	(4,092		)	(4,415		)
Accrued interest receivable	(3,769		)	(2,042		)
Other assets	(186,674		)	(55,464		)
Accrued expenses and other liabilities	65,970			(16,281		)
Net cash provided by operating activities	265,763			84,368
Cash flows from investing activities:
Net loan originations and purchases	(992,236		)	(1,158,514		)
Investment securities held to maturity:
Purchases	(261,446		)	(100,160		)
Maturities, calls and principal repayments	155,002			120,876
Investment securities available for sale:
Purchases	—			(239,226		)
Sales	—			38,625
Maturities, calls and principal repayments	109,045			124,635
Death benefit proceeds from bank owned life insurance	1,350			2,652
Proceeds from sales of real estate property and equipment	102,500			9,773
Purchases of real estate property and equipment	(9,336		)	(12,811		)
Cash and cash equivalents acquired in acquisition	—			156,612
Net cash used in investing activities	(895,121		)	(1,057,538		)
Cash flows from financing activities:
Net change in deposits	320,955			(77,533		)
Net change in short-term borrowings	268,870			1,479,305
Advances of long-term borrowings	400,000			—
Repayments of long-term borrowings	(255,000		)	(300,027		)
Cash dividends paid to preferred shareholders	(3,172		)	(6,344		)
Cash dividends paid to common shareholders	(73,546		)	(65,989		)
Purchase of common shares to treasury	(1,462		)	(2,598		)
Common stock issued, net	(480		)	2,512
Other, net	(240		)	—
Net cash provided by financing activities	655,925			1,029,326
Net change in cash and cash equivalents	26,567			56,156
Cash and cash equivalents at beginning of year	428,629			416,110
Cash and cash equivalents at end of period	$	455,196		$	472,266

8

VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (in thousands)
	Six Months Ended June 30,
	2019		2018
Supplemental disclosures of cash flow information:
Cash payments for:
Interest on deposits and borrowings	$	198,815	$	124,816
Federal and state income taxes	80,116		29,280
Supplemental schedule of non-cash investing activities:
Transfer of loans to other real estate owned	$	1,016	$	672
Transfer of loans to loans held for sale	216,211		263,324
Lease right of use assets obtained in exchange for operating lease liabilities	296,064		—
Acquisition:
Non-cash assets acquired:
Investment securities held to maturity	$	—	$	214,217
Investment securities available for sale	—		308,385
Loans	—		3,736,984
Premises and equipment	—		62,066
Bank owned life insurance	—		49,052
Accrued interest receivable	—		12,123
Goodwill	—		394,028
Other intangible assets	—		45,906
Other assets	—		100,059
Total non-cash assets acquired	$	—	$	4,922,820
Liabilities assumed:
Deposits	$	—	$	3,564,843
Short-term borrowings	—		649,979
Long-term borrowings	—		87,283
Junior subordinated debentures issued to capital trusts	—		13,249
Accrued expenses and other liabilities	—		26,848
Total liabilities assumed	—		4,342,202
Net non-cash assets acquired	$	—	$	580,618
Net cash and cash equivalents acquired in acquisition	$	—	$	156,612
Common stock issued in acquisition	$	—	$	737,230

See accompanying notes to consolidated financial statements.

9

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 30, 2019 and for all periods presented have been made. The results of operations for the three and six months ended on June 30, 2019 are not necessarily indicative of the results to be expected for the entire fiscal year.

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 are particularly susceptible to change are: the allowance for loan losses, purchased credit impaired loans, 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.

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, 2018.

Note 2. Earnings Per Common Share

The following table shows the calculation of both basic and diluted earnings per common share for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(in thousands, except for share data)
Net income available to common shareholders	$	73,296	$	69,630	$	183,454	$	108,423
Basic weighted average number of common shares outstanding	331,748,552		331,318,381		331,675,313		331,024,531
Plus: Common stock equivalents	1,211,250		1,577,102		1,254,046		1,575,460
Diluted weighted average number of common shares outstanding	332,959,802		332,895,483		332,929,359		332,599,991
Earnings per common share:
Basic	$	0.22	$	0.21	$	0.55	$	0.33
Diluted	0.22		0.21		0.55		0.33

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

10

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

common stock options equaled approximately 482 thousand and 494 thousand shares for the three and six months ended June 30, 2019, respectively. Anti-dilutive warrants and common stock options equaled 2.9 million shares for both the three and six months ended June 30, 2018. All of Valley's outstanding warrants expired unexercised in the fourth quarter of 2018.

Note 3. 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 months ended June 30, 2019: 

	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 March 31, 2019	$	(17,266	)	$	(4,205	)	$	(31,786	)	$	(53,257	)
Other comprehensive income (loss) before reclassification	18,488			(683		)	—			17,805
Amounts reclassified from other comprehensive income (loss)	(8		)	274			55			321
Other comprehensive income (loss), net	18,480			(409		)	55			18,126
Balance at June 30, 2019	$	1,214		$	(4,614	)	$	(31,731	)	$	(35,131	)

	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, 2018	$	(33,559	)	$	(4,031	)	$	(31,841	)	$	(69,431	)
Other comprehensive income (loss) before reclassification	34,755			(1,065		)	—			33,690
Amounts reclassified from other comprehensive income (loss)	18			482			110			610
Other comprehensive income (loss), net	34,773			(583		)	110			34,300
Balance at June 30, 2019	$	1,214		$	(4,614	)	$	(31,731	)	$	(35,131	)

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The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three and six months ended June 30, 2019 and 2018:

	Amounts Reclassified from Accumulated Other Comprehensive Loss
	Three Months Ended June 30,						Six Months Ended June 30,
Components of Accumulated Other Comprehensive Loss	2019			2018			2019			2018			Income Statement Line Item
	(in thousands)
Unrealized gains (losses) on AFS securities before tax	$	11		$	(52	)	$	(21	)	$	(795	)	Gains (losses) on securities transactions, net
Tax effect	(3		)	10			3			221
Total net of tax	8			(42		)	(18		)	(574		)
Unrealized losses on derivatives (cash flow hedges) before tax	(383		)	(866		)	(673		)	(2,317		)	Interest expense
Tax effect	109			247			191			662
Total net of tax	(274		)	(619		)	(482		)	(1,655		)
Defined benefit pension plan:
Amortization of net loss	(78		)	(157		)	(156		)	(314		)	*
Tax effect	23			45			46			90
Total net of tax	(55		)	(112		)	(110		)	(224		)
Total reclassifications, net of tax	$	(321	)	$	(773	)	$	(610	)	$	(2,453	)

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

Note 4. New Authoritative Accounting Guidance

New Accounting Guidance Adopted in 2019

Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842)” and subsequent related updates require lessees to recognize leases on balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use model that requires lessees to recognize a right of use (ROU) asset and related lease liability for all leases with a term longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize right of use assets and lease liabilities. Leases will continue to be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

Effective January 1, 2019, Valley adopted ASU No. 2016-02 (and subsequent related updates) and recorded ROU assets of approximately $216 million (net of the reversal of the deferred rent liability at such date) and lease obligations of approximately $241 million. Valley elected the "package of practical expedients," as permitted under the transition guidance within Topic 842.  The practical expedients enable Valley to carry forward lease classifications under the prior accounting guidance (Topic 840). Additionally, the expedients enable the use of hindsight, through which Valley reassessed the likelihood of extending leases under extension clauses available to Valley. This shortened the expected lives of certain leases. As a result, Valley recorded a $4.4 million (net of tax) credit adjustment to the opening balance of retained earnings as of January 1, 2019. Valley also made accounting policy elections to (i) separate non-lease components from its lease obligations with the non-lease components being charged to earnings when incurred and to (ii) exclude short-term leases of 12 months or less from the balance sheet. The comparative periods prior to the adoption date of Topic 842 will continue to be presented in the financial statements in accordance with prior GAAP (Topic 840). See Note 9 for the additional required disclosures.

ASU No. 2017-08, "Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities" shortens the amortization period for certain callable debt securities held at a premium. ASU No. 2017-08 requires the premium to be amortized to the earliest call date. The accounting for

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securities held at a discount does not change and the discount continues to be amortized as an adjustment to yield over the contractual life (to maturity) of the instrument. ASU No. 2017-08 was effective for Valley on January 1, 2019 and was applied using the modified retrospective method, resulting in a cumulative-effect adjustment to the opening balance of retained earnings totaling $1.4 million (net of tax) as of January 1, 2019. ASU No. 2017-08 did not have a significant impact on Valley's consolidated financial statements.

ASU No. 2019-01, "Leases (Topic 842): Codification Improvements" reinstates the fair value exception in ASC 840, in which lessors will measure fair value, at lease commencement, as cost, reflecting any applicable volume or trade discounts. ASU No. 2019-01 also requires lessors that are depository or lending institutions in the scope of Topic 842 to classify the principal portion of lease payments received under sales-type and direct financing leases as cash flows from investing activities. The interest portion of those and all lease payments received under operating leases are classified as cash flows from operating activities. Effective January 1, 2019, Valley early adopted ASU No. 2019-01 concurrent with its adoption of Topic 842. The adoption of ASU No. 2019-01 did not have a material impact on Valley's consolidated financial statements.

New Accounting Guidance Not Yet Adopted

ASU No. 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief" provides transition relief for entities adopting the credit losses standard, ASU No. 2016-13. Specifically, this update amends ASU No. 2016-13 to allow companies to irrevocably elect, upon adoption of ASU No. 2016-13, the fair value option for financial instruments that (1) were previously recorded at amortized cost, (2) are within the scope of the credit losses guidance in Topic 326-20, (3) are eligible for the fair value option under Topic 825-10, and (4) are not held-to-maturity debt securities. ASU No. 2019-05 is effective for Valley for reporting periods beginning January 1, 2020. Management is currently evaluating the impact of the ASU on Valley’s consolidated financial statements.

ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments" clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement. The most significant provisions of the ASU relate to how companies will estimate expected credit losses under Topic 326 by incorporating (1) expected recoveries of financial assets, including recoveries of amounts expected to be written off and those previously written off, and (2) clarifying that contractual extensions or renewal options that are not unconditionally cancellable by the lender are considered when determining the contractual term over which expected credit losses are measured. ASU No. 2019-04 is effective for Valley for reporting periods beginning January 1, 2020. Management is currently evaluating the impact of the ASU on Valley’s consolidated financial statements. See more details regarding our current implementation of Topic 326 and ASU No. 2016-13 below.

ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test guidance) to measure a goodwill impairment charge. Instead, an entity will be required to record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on Step 1 of the current guidance). In addition, ASU No. 2017-04 eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. However, an entity will be required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 is effective for Valley for its annual or any interim goodwill impairment tests in fiscal years beginning January 1, 2020 and is not expected to have a significant impact on the presentation of Valley's consolidated financial statements. Early adoption is permitted for annual and interim goodwill impairment testing dates.

ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" amends the accounting guidance on the impairment of financial instruments. ASU No. 2016-13 adds to U.S. GAAP an impairment model (known as the current expected credit loss (CECL) model) that is based on all

13

expected losses over the lives of the assets rather than incurred losses. Under the new guidance, an entity is required to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

ASU No. 2016-13 is effective for Valley for reporting periods beginning January 1, 2020 and Management is currently evaluating the impact of the ASU on Valley’s consolidated financial statements. Valley’s implementation effort is managed through several cross-functional working groups. These groups continue to evaluate the requirements of the new standard, assess its impact on current operational processes, and develop loss models that accurately project lifetime expected loss estimates. Valley expects that the adoption of ASU No. 2016-13 will result in an increase in its allowance for credit losses due to several factors, including: (i) the allowance related to Valley loans will increase to include credit losses over the full remaining expected life of the portfolio, and will consider expected future changes in macroeconomic conditions, (ii) the non-accretable difference (as defined in Note 7) on PCI loans will be recognized as an allowance, offset by an increase in the carrying value of the related loans, and (iii) an allowance will be established for estimated credit losses on investment securities classified as held to maturity. The extent of the increase is under evaluation but will depend upon the nature and characteristics of Valley's loan and investment portfolios at the adoption date, and the economic conditions and forecasts at that date.

During the second quarter of 2019, Valley began the process of performing parallel runs for CECL alongside the current allowance process. Management will continue to refine and validate the new methodologies and models throughout 2019.

Note 5. Fair Value Measurement of Assets and Liabilities

ASC Topic 820, “Fair Value Measurements and Disclosures,” 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).

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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 nonrecurring basis by level within the fair value hierarchy as reported on the consolidated statements of financial condition at June 30, 2019 and December 31, 2018. The assets presented under “nonrecurring 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, 2019		Fair Value Measurements at Reporting Date Using:
			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Available for sale:
U.S. Treasury securities	$	50,741	$	50,741	$	—	$	—
U.S. government agency securities	33,028		—		33,028		—
Obligations of states and political subdivisions	186,697		—		186,017		680
Residential mortgage-backed securities	1,372,979		—		1,372,979		—
Corporate and other debt securities	35,905		—		35,905		—
Total available for sale	1,679,350		50,741		1,627,929		680
Loans held for sale (1)	36,641		—		36,641		—
Other assets (2)	140,496		—		140,496		—
Total assets	$	1,856,487	$	50,741	$	1,805,066	$	680
Liabilities
Other liabilities (2)	$	33,502	$	—	$	33,502	$	—
Total liabilities	$	33,502	$	—	$	33,502	$	—
Non-recurring fair value measurements:
Collateral dependent impaired loans (3)	$	43,707	$	—	$	—	$	43,707
Foreclosed assets	5,587		—		—		5,587
Total	$	49,294	$	—	$	—	$	49,294

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			Fair Value Measurements at Reporting Date Using:
	December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Available for sale:
U.S. Treasury securities	$	49,306	$	49,306	$	—	$	—
U.S. government agency securities	36,277		—		36,277		—
Obligations of states and political subdivisions	197,092		—		197,092		—
Residential mortgage-backed securities	1,429,782		—		1,429,782		—
Corporate and other debt securities	37,087		—		37,087		—
Total available for sale	1,749,544		49,306		1,700,238		—
Loans held for sale (1)	35,155		—		35,155		—
Other assets (2)	48,979		—		48,979		—
Total assets	$	1,833,678	$	49,306	$	1,784,372	$	—
Liabilities
Other liabilities (2)	$	23,681	$	—	$	23,681	$	—
Total liabilities	$	23,681	$	—	$	23,681	$	—
Non-recurring fair value measurements:
Collateral dependent impaired loans (3)	$	45,245	$	—	$	—	$	45,245
Loan servicing rights	273		—		—		273
Foreclosed assets	5,673		—		—		5,673
Total	$	51,191	$	—	$	—	$	51,191

(1) Represents residential mortgage loans originated for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately $35.6 million and $34.6 million at June 30, 2019 and December 31, 2018, respectively.

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

(3) Excludes PCI loans.

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.

Available for sale securities. All U.S. Treasury securities, certain corporate and other debt securities, and certain preferred equity 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.

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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 calculating the fair value of one impaired special revenue bond (within obligations of states and political subdivisions in the table above) under Level 3, Valley prepared its best estimate of the present value of the cash flows to determine an internal price estimate. In determining the internal price, Valley utilized recent financial information and developments provided by the issuer, as well as other unobservable inputs which reflect Valley’s own assumptions about the inputs that market participants would use in pricing of the defaulted security. A quoted price received from an independent pricing service was weighted with the internal price estimate to determine the fair value of the instrument at June 30, 2019. See Note 6 for additional information regarding this impaired security.

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 30, 2019 and December 31, 2018 based on the short duration these assets were held, and the high 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 and Overnight Index Swap rate curves. The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at June 30, 2019 and December 31, 2018), 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 30, 2019 and December 31, 2018.

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 nonrecurring basis, including impaired 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.

Impaired loans. Certain impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral and are commonly referred to as “collateral dependent impaired loans.” Collateral values are estimated using Level 3 inputs, consisting of individual appraisals that may be adjusted based on certain discounting criteria. At June 30, 2019, certain appraisals were discounted based on specific market data by location and property type. During the quarter ended June 30, 2019, collateral dependent impaired loans were individually re-measured and reported at fair value through direct loan charge-offs to the allowance for loan losses and/or a specific valuation allowance allocation based on the fair value of the underlying collateral. The collateral dependent loan charge-offs to the allowance for loan losses totaled $938 thousand for the three and six months ended June 30, 2019. The collateral dependent loan charge-offs to the allowance for loan losses for the three and six months ended June 30, 2018 were immaterial. At June 30, 2019, collateral dependent impaired loans with a total recorded investment of $73.4 million were reduced by specific valuation allowance allocations totaling $29.7 million to a reported total net carrying amount of $43.7 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

17

inflation. The prepayment speed and the discount rate are considered two of the most significant inputs in the model. At June 30, 2019, the fair value model used a blended prepayment speed (stated as constant prepayment rates) of 11.0 percent and a discount rate of 9.5 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 30, 2019, loan servicing rights were not re-measured at fair value and were carried at amortized cost. Valley recorded net recoveries of impairment charges on its loan servicing rights totaling $107 thousand and $84 thousand for the three and six months ended June 30, 2019, respectively, as compared to net impairment charges totaling $90 thousand and $317 thousand for the three and six months ended June 30, 2018, respectively.

Foreclosed assets. Certain foreclosed assets (consisting of other real estate owned and other repossessed assets), upon initial recognition and transfer from loans, are re-measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the foreclosed assets. The fair value of a foreclosed asset, upon initial recognition, is typically estimated using Level 3 inputs, consisting of an appraisal that is adjusted based on certain discounting criteria, similar to the criteria used for impaired loans described above. There were no discount adjustments of the appraisals of foreclosed assets at June 30, 2019. At June 30, 2019, foreclosed assets included $5.6 million of assets that were measured at fair value upon initial recognition or subsequently re-measured at June 30, 2019. The foreclosed assets charge-offs to the allowance for the loan losses totaled $653 thousand and $649 thousand for the three months ended June 30, 2019 and 2018, respectively, and $1.4 million and $1.2 million for the six months ended June 30, 2019 and 2018, respectively. The re-measurement of foreclosed assets at fair value subsequent to their initial recognition resulted in net losses of $160 thousand and $145 thousand for the within non-interest expense for the six months ended June 30, 2019 and 2018, respectively. The net loss from re-measurement of foreclosed assets at fair value subsequent to their initial recognition for the three months ended June 30, 2019 and 2018 was immaterial.

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.

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The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at June 30, 2019 and December 31, 2018 were as follows: 

	Fair Value Hierarchy	June 30, 2019				December 31, 2018
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets
Cash and due from banks	Level 1	$	276,291	$	276,291	$	251,541	$	251,541
Interest bearing deposits with banks	Level 1	178,905		178,905		177,088		177,088
Investment securities held to maturity:
U.S. Treasury securities	Level 1	138,436		144,655		138,517		142,049
U.S. government agency securities	Level 2	8,049		8,092		8,721		8,641
Obligations of states and political subdivisions	Level 2	536,778		549,050		585,656		586,033
Residential mortgage-backed securities	Level 2	1,415,409		1,419,066		1,266,770		1,235,605
Trust preferred securities	Level 2	37,314		31,372		37,332		31,486
Corporate and other debt securities	Level 2	32,250		32,557		31,250		31,129
Total investment securities held to maturity		2,168,236		2,184,792		2,068,246		2,034,943
Net loans	Level 3	25,647,057		25,207,831		24,883,610		24,068,755
Accrued interest receivable	Level 1	99,065		99,065		95,296		95,296
Federal Reserve Bank and Federal Home Loan Bank stock (1)	Level 1	260,490		260,490		232,080		232,080
Financial liabilities
Deposits without stated maturities	Level 1	17,435,741		17,435,741		17,388,990		17,388,990
Deposits with stated maturities	Level 2	7,338,188		7,338,945		7,063,984		7,005,573
Short-term borrowings	Level 1	2,387,784		2,388,299		2,118,914		2,091,892
Long-term borrowings	Level 2	1,800,182		1,840,862		1,654,268		1,751,194
Junior subordinated debentures issued to capital trusts	Level 2	55,544		57,040		55,370		55,692
Accrued interest payable (2)	Level 1	36,031		36,031		25,762		25,762

(1) Included in other assets.

(2) Included in accrued expenses and other liabilities.

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Note 6. Investment Securities

Held to Maturity

The amortized cost, gross unrealized gains and losses and fair value of securities held to maturity at June 30, 2019 and December 31, 2018 were as follows: 

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2019
U.S. Treasury securities	$	138,436	$	6,219	$	—		$	144,655
U.S. government agency securities	8,049		69		(26		)	8,092
Obligations of states and political subdivisions:
Obligations of states and state agencies	314,878		7,680		(992		)	321,566
Municipal bonds	221,900		5,640		(56		)	227,484
Total obligations of states and political subdivisions	536,778		13,320		(1,048		)	549,050
Residential mortgage-backed securities	1,415,409		13,242		(9,585		)	1,419,066
Trust preferred securities	37,314		62		(6,004		)	31,372
Corporate and other debt securities	32,250		399		(92		)	32,557
Total investment securities held to maturity	$	2,168,236	$	33,311	$	(16,755	)	$	2,184,792
December 31, 2018
U.S. Treasury securities	$	138,517	$	3,532	$	—		$	142,049
U.S. government agency securities	8,721		55		(135		)	8,641
Obligations of states and political subdivisions:
Obligations of states and state agencies	341,702		4,332		(5,735		)	340,299
Municipal bonds	243,954		3,141		(1,361		)	245,734
Total obligations of states and political subdivisions	585,656		7,473		(7,096		)	586,033
Residential mortgage-backed securities	1,266,770		3,203		(34,368		)	1,235,605
Trust preferred securities	37,332		77		(5,923		)	31,486
Corporate and other debt securities	31,250		96		(217		)	31,129
Total investment securities held to maturity	$	2,068,246	$	14,436	$	(47,739	)	$	2,034,943

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The age of unrealized losses and fair value of related securities held to maturity at June 30, 2019 and December 31, 2018 were as follows: 

	Less than Twelve Months					More than Twelve Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
June 30, 2019
U.S. government agency securities	$	—	$	—		$	5,675	$	(26	)	$	5,675	$	(26	)
Obligations of states and political subdivisions:
Obligations of states and state agencies	—		—			45,843		(992		)	45,843		(992		)
Municipal bonds	4,968		(27		)	4,331		(29		)	9,299		(56		)
Total obligations of states and political subdivisions	4,968		(27		)	50,174		(1,021		)	55,142		(1,048		)
Residential mortgage-backed securities	3,445		(7		)	674,804		(9,578		)	678,249		(9,585		)
Trust preferred securities	—		—			29,957		(6,004		)	29,957		(6,004		)
Corporate and other debt securities	—		—			4,908		(92		)	4,908		(92		)
Total	$	8,413	$	(34	)	$	765,518	$	(16,721	)	$	773,931	$	(16,755	)
December 31, 2018
U.S. government agency securities	$	—	$	—		$	6,074	$	(135	)	$	6,074	$	(135	)
Obligations of states and political subdivisions:
Obligations of states and state agencies	16,098		(266		)	138,437		(5,469		)	154,535		(5,735		)
Municipal bonds	3,335		(37		)	60,078		(1,324		)	63,413		(1,361		)
Total obligations of states and political subdivisions	19,433		(303		)	198,515		(6,793		)	217,948		(7,096		)
Residential mortgage-backed securities	72,240		(852		)	846,671		(33,516		)	918,911		(34,368		)
Trust preferred securities	—		—			30,055		(5,923		)	30,055		(5,923		)
Corporate and other debt securities	9,948		(52		)	4,835		(165		)	14,783		(217		)
Total	$	101,621	$	(1,207	)	$	1,086,150	$	(46,532	)	$	1,187,771	$	(47,739	)

The unrealized losses on investment securities held to maturity are primarily due to changes in interest rates (including, in certain cases, changes in credit spreads) and, in some cases, lack of liquidity in the marketplace. Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 127 at June 30, 2019 and 378 at December 31, 2018.

The unrealized losses within the residential mortgage-backed securities category of the held to maturity portfolio at June 30, 2019 mostly related to investment grade securities issued by Ginnie Mae and Fannie Mae.

The unrealized losses existing for more than twelve months for trust preferred securities at June 30, 2019 primarily related to four non-rated single-issuer trust preferred securities issued by bank holding companies. All single-issuer trust preferred securities classified as held to maturity are paying in accordance with their terms, have no deferrals of interest or defaults and, if applicable, the issuers meet the regulatory capital requirements to be considered “well-capitalized institutions” at June 30, 2019.

As of June 30, 2019, the fair value of investments held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $1.3 billion.

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The contractual maturities of investments in debt securities held to maturity at June 30, 2019 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, 2019
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	30,122	$	30,109
Due after one year through five years	237,783		243,951
Due after five years through ten years	242,178		253,387
Due after ten years	242,744		238,279
Residential mortgage-backed securities	1,415,409		1,419,066
Total investment securities held to maturity	$	2,168,236	$	2,184,792

Actual maturities of 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 6.6 years at June 30, 2019.

Available for Sale

The amortized cost, gross unrealized gains and losses and fair value of securities available for sale at June 30, 2019 and December 31, 2018 were as follows: 

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2019
U.S. Treasury securities	$	50,963	$	—	$	(222	)	$	50,741
U.S. government agency securities	32,525		521		(18		)	33,028
Obligations of states and political subdivisions:
Obligations of states and state agencies	87,473		465		(222		)	87,716
Municipal bonds	98,305		899		(223		)	98,981
Total obligations of states and political subdivisions	185,778		1,364		(445		)	186,697
Residential mortgage-backed securities	1,373,033		8,303		(8,357		)	1,372,979
Corporate and other debt securities	35,416		489		—			35,905
Total investment securities available for sale	$	1,677,715	$	10,677	$	(9,042	)	$	1,679,350
December 31, 2018
U.S. Treasury securities	$	50,975	$	—	$	(1,669	)	$	49,306
U.S. government agency securities	36,844		71		(638		)	36,277
Obligations of states and political subdivisions:
Obligations of states and state agencies	100,777		18		(3,682		)	97,113
Municipal bonds	101,207		209		(1,437		)	99,979
Total obligations of states and political subdivisions	201,984		227		(5,119		)	197,092
Residential mortgage-backed securities	1,469,059		1,484		(40,761		)	1,429,782
Corporate and other debt securities	37,542		213		(668		)	37,087
Total investment securities available for sale	$	1,796,404	$	1,995	$	(48,855	)	$	1,749,544

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The age of unrealized losses and fair value of related securities available for sale at June 30, 2019 and December 31, 2018 were as follows: 

	Less than Twelve Months					More than Twelve Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
June 30, 2019
U.S. Treasury securities	$	—	$	—		$	50,741	$	(222	)	$	50,741	$	(222	)
U.S. government agency securities	—		—			2,488		(18		)	2,488		(18		)
Obligations of states and political subdivisions:
Obligations of states and state agencies	—		—			43,868		(222		)	43,868		(222		)
Municipal bonds	1,986		(34		)	20,335		(189		)	22,321		(223		)
Total obligations of states and political subdivisions	1,986		(34		)	64,203		(411		)	66,189		(445		)
Residential mortgage-backed securities	220		(3		)	703,691		(8,354		)	703,911		(8,357		)
Total	$	2,206	$	(37	)	$	821,123	$	(9,005	)	$	823,329	$	(9,042	)
December 31, 2018
U.S. Treasury securities	$	—	$	—		$	49,306	$	(1,669	)	$	49,306	$	(1,669	)
U.S. government agency securities	2,120		(20		)	26,775		(618		)	28,895		(638		)
Obligations of states and political subdivisions:
Obligations of states and state agencies	17,560		(95		)	75,718		(3,587		)	93,278		(3,682		)
Municipal bonds	5,018		(106		)	70,286		(1,331		)	75,304		(1,437		)
Total obligations of states and political subdivisions	22,578		(201		)	146,004		(4,918		)	168,582		(5,119		)
Residential mortgage-backed securities	119,645		(668		)	1,221,942		(40,093		)	1,341,587		(40,761		)
Corporate and other debt securities	12,339		(161		)	12,397		(507		)	24,736		(668		)
Total	$	156,682	$	(1,050	)	$	1,456,424	$	(47,805	)	$	1,613,106	$	(48,855	)

The unrealized losses on investment securities available for sale are primarily due to changes in interest rates (including, in certain cases, changes in credit spreads) and, in some cases, lack of liquidity in the marketplace. The total number of security positions in the securities available for sale portfolio in an unrealized loss position at June 30, 2019 was 294 as compared to 545 at December 31, 2018.

The unrealized losses for the residential mortgage-backed securities category of the available for sale portfolio at June 30, 2019 largely related to several investment grade residential mortgage-backed securities mainly issued by Ginnie Mae, Fannie Mae, and Freddie Mac.

As of June 30, 2019, the fair value of securities available for sale that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $1.1 billion.

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The contractual maturities of debt securities available for sale at June 30, 2019 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, 2019
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	9,121	$	9,117
Due after one year through five years	125,530		125,671
Due after five years through ten years	66,064		67,046
Due after ten years	103,967		104,537
Residential mortgage-backed securities	1,373,033		1,372,979
Total investment securities available for sale	$	1,677,715	$	1,679,350

Actual maturities of 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 6.7 years at June 30, 2019.

Other-Than-Temporary Impairment Analysis

Valley records impairment charges on its investment securities when the decline in fair value is considered other-than-temporary. Numerous factors, including lack of liquidity for re-sales of certain investment securities; decline in the creditworthiness of the issuer; absence of reliable pricing information for investment securities; adverse changes in business climate; adverse actions by regulators; or unanticipated changes in the competitive environment could have a negative effect on Valley’s investment portfolio and may result in other-than-temporary impairment on certain investment securities in future periods.

During the three months ended June 30, 2019, Valley recognized a $2.9 million other-than-temporary credit impairment charge on one special revenue bond classified as available for sale (within the obligations of states and state agencies in the tables above). The credit impairment was due to severe credit deterioration disclosed by the issuer in the second quarter of 2019, as well as the issuer's default on its contractual payment. At June 30, 2019, the impaired security had an adjusted amortized cost and fair value of $680 thousand after recognition of the credit impairment. Comparatively, there were no other-than-temporary impairment losses on securities recognized in earnings for the three and six months ended June 30, 2018.

The obligations of states and political subdivisions include special revenue bonds which had an aggregated amortized cost and fair value of $306.5 million and $308.5 million, respectively, at June 30, 2019. The gross unrealized losses associated with the special revenue bonds totaled $1.4 million as of June 30, 2019. The special revenue bonds were largely issued by the states of (or municipalities within) Utah, Minnesota, Florida, other state housing authorities, as well the Port Authority of New York. As part of Valley’s pre-purchase analysis and on-going quarterly assessment of impairment of the obligations of states and political subdivisions, our Credit Risk Management Department conducts a financial analysis and risk rating assessment of each security issuer based on the issuer’s most recently issued financial statements and other publicly available information. Exclusive of the impaired security, these investments are a mix of bonds with investment grade ratings or not rated paying in accordance with their contractual terms. The vast majority of the bonds not rated by the rating agencies are state housing finance agency revenue bonds secured by Ginnie Mae securities that are commonly referred to as Tax Exempt Mortgage Securities (TEMS). Valley will continue to closely monitor the special revenue bond portfolio as part of its quarterly impairment analysis.

The impaired special revenue bond was not accruing interest as of June 30, 2019. Valley discontinues the recognition of interest on debt securities if the securities meet both of the following criteria: (i) regularly scheduled interest payments

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have not been paid or have been deferred by the issuer, and (ii) full collection of all contractual principal and interest payments is not deemed to be the most likely outcome, resulting in the recognition of other-than-temporary impairment of the security.

Management does not believe that any individual unrealized loss as of June 30, 2019 included in the investment portfolio tables above represents other-than-temporary impairment, as management mainly attributes the declines in fair value to changes in interest rates and 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 believes there are no credit losses on any other securities, except for the impaired special revenue bond discussed above.

Note 7. Loans

The detail of the loan portfolio as of June 30, 2019 and December 31, 2018 was as follows: 

	June 30, 2019						December 31, 2018
	Non-PCI Loans		PCI Loans		Total		Non-PCI Loans		PCI Loans		Total
	(in thousands)
Loans:
Commercial and industrial	$	3,918,894	$	696,871	$	4,615,765	$	3,590,375	$	740,657	$	4,331,032
Commercial real estate:
Commercial real estate	10,470,127		2,327,890		12,798,017		9,912,309		2,494,966		12,407,275
Construction	1,288,417		240,551		1,528,968		1,122,348		365,784		1,488,132
Total commercial real estate loans	11,758,544		2,568,441		14,326,985		11,034,657		2,860,750		13,895,407
Residential mortgage	3,694,463		377,987		4,072,450		3,682,984		428,416		4,111,400
Consumer:
Home equity	385,987		115,659		501,646		371,340		145,749		517,089
Automobile	1,362,143		323		1,362,466		1,319,206		365		1,319,571
Other consumer	910,174		12,676		922,850		846,821		14,149		860,970
Total consumer loans	2,658,304		128,658		2,786,962		2,537,367		160,263		2,697,630
Total loans	$	22,030,205	$	3,771,957	$	25,802,162	$	20,845,383	$	4,190,086	$	25,035,469

Total loans include net unearned premiums and deferred loan costs of $19.6 million and $21.5 million at June 30, 2019 and December 31, 2018, respectively. The outstanding balances (representing contractual balances owed to Valley) for PCI loans totaled $4.0 billion and $4.4 billion at June 30, 2019 and December 31, 2018, respectively.

Valley transferred $216.2 million and $263.3 million of residential mortgage loans from the loan portfolio to loans held for sale during the six months ended June 30, 2019 and 2018, respectively. There were no other sales of loans from the held for investment portfolio during the six months ended June 30, 2019 and 2018.

Purchased Credit-Impaired Loans

PCI loans are accounted for in accordance with ASC Subtopic 310-30 and are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance (i.e., the allowance for loan losses), and aggregated and accounted for as pools of loans based on common risk characteristics. The difference between the undiscounted cash flows expected at acquisition and the initial carrying amount (fair value) of the PCI loans, or the “accretable yield,” is recognized as interest income utilizing the level-yield method over the life of each pool. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non-accretable difference,” are not recognized as a yield adjustment, as a loss accrual or a valuation allowance. Reclassifications of the non-accretable difference to the accretable yield may occur subsequent to the loan acquisition dates due to increases in expected cash flows of the loan pools.

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The following table presents changes in the accretable yield for PCI loans during the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(in thousands)
Balance, beginning of period	$	890,771		$	691,086		$	875,958		$	282,009
Acquisition	—			—			—			474,208
Accretion	(55,014		)	(60,536		)	(108,506		)	(125,667		)
Net increase in expected cash flows	18,130			—			86,435			—
Balance, end of period	$	853,887		$	630,550		$	853,887		$	630,550

The net increase in expected cash flows for certain pools of loans (included in the table above) is recognized prospectively as an adjustment to the yield over the estimated remaining life of the individual pools. Based upon the most recent reforecasted cash flows during the first half of 2019, the net increase in expected cash flows for the three and six months ended June 30, 2019 was largely driven by additional advances on acquired lines of credit coupled with lower prospective loss expectations.

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.

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Credit Quality

The following table presents past due, non-accrual and current loans (excluding PCI loans, which are accounted for on a pool basis) by loan portfolio class at June 30, 2019 and December 31, 2018: 

	Past Due and Non-Accrual Loans
	30-59 Days Past Due Loans		60-89 Days Past Due Loans		Accruing Loans 90 Days or More Past Due		Non-Accrual Loans		Total Past Due Loans		Current Non-PCI Loans		Total Non-PCI Loans
	(in thousands)
June 30, 2019
Commercial and industrial	$	14,119	$	4,135	$	3,298	$	76,216	$	97,768	$	3,821,126	$	3,918,894
Commercial real estate:
Commercial real estate	6,202		354		—		6,231		12,787		10,457,340		10,470,127
Construction	—		1,342		—		—		1,342		1,287,075		1,288,417
Total commercial real estate loans	6,202		1,696		—		6,231		14,129		11,744,415		11,758,544
Residential mortgage	19,131		3,635		1,054		12,069		35,889		3,658,574		3,694,463
Consumer loans:
Home equity	673		82		—		1,630		2,385		383,602		385,987
Automobile	7,221		925		328		148		8,622		1,353,521		1,362,143
Other consumer	4,038		477		31		221		4,767		905,407		910,174
Total consumer loans	11,932		1,484		359		1,999		15,774		2,642,530		2,658,304
Total	$	51,384	$	10,950	$	4,711	$	96,515	$	163,560	$	21,866,645	$	22,030,205
December 31, 2018
Commercial and industrial	$	13,085	$	3,768	$	6,156	$	70,096	$	93,105	$	3,497,270	$	3,590,375
Commercial real estate:
Commercial real estate	9,521		530		27		2,372		12,450		9,899,859		9,912,309
Construction	2,829		—		—		356		3,185		1,119,163		1,122,348
Total commercial real estate loans	12,350		530		27		2,728		15,635		11,019,022		11,034,657
Residential mortgage	16,576		2,458		1,288		12,917		33,239		3,649,745		3,682,984
Consumer loans:
Home equity	872		40		—		2,156		3,068		368,272		371,340
Automobile	7,973		1,299		308		80		9,660		1,309,546		1,319,206
Other consumer	895		47		33		419		1,394		845,427		846,821
Total consumer loans	9,740		1,386		341		2,655		14,122		2,523,245		2,537,367
Total	$	51,751	$	8,142	$	7,812	$	88,396	$	156,101	$	20,689,282	$	20,845,383

Impaired loans. Impaired loans, consisting of non-accrual commercial and industrial loans and commercial real estate loans over $250 thousand and all loans which were modified in troubled debt restructuring, are individually evaluated for impairment. PCI loans are not classified as impaired loans because they are accounted for on a pool basis.

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The following table presents information about impaired loans by loan portfolio class at June 30, 2019 and December 31, 2018:

	Recorded Investment With No Related Allowance		Recorded Investment With Related Allowance		Total Recorded Investment		Unpaid Contractual Principal Balance		Related Allowance
	(in thousands)
June 30, 2019
Commercial and industrial	$	13,008	$	90,018	$	103,026	$	115,602	$	31,128
Commercial real estate:
Commercial real estate	20,707		26,258		46,965		49,067		2,604
Construction	354		—		354		354		—
Total commercial real estate loans	21,061		26,258		47,319		49,421		2,604
Residential mortgage	6,046		6,448		12,494		13,531		668
Consumer loans:
Home equity	221		519		740		838		50
Total consumer loans	221		519		740		838		50
Total	$	40,336	$	123,243	$	163,579	$	179,392	$	34,450
December 31, 2018
Commercial and industrial	$	8,339	$	89,513	$	97,852	$	104,007	$	29,684
Commercial real estate:
Commercial real estate	16,732		25,606		42,338		44,337		2,615
Construction	803		457		1,260		1,260		13
Total commercial real estate loans	17,535		26,063		43,598		45,597		2,628
Residential mortgage	7,826		6,078		13,904		14,948		600
Consumer loans:
Home equity	125		1,146		1,271		1,366		113
Total consumer loans	125		1,146		1,271		1,366		113
Total	$	33,825	$	122,800	$	156,625	$	165,918	$	33,025

The following table presents, by loan portfolio class, the average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2019 and 2018: 

	Three Months Ended June 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Commercial and industrial	$	105,633	$	443	$	87,674	$	212
Commercial real estate:
Commercial real estate	46,234		547		52,729		563
Construction	354		—		2,244		16
Total commercial real estate loans	46,588		547		54,973		579
Residential mortgage	12,254		95		12,914		185
Consumer loans:
Home equity	747		10		1,794		33
Total consumer loans	747		10		1,794		33
Total	$	165,222	$	1,095	$	157,355	$	1,009

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	Six Months Ended June 30, 2018
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Commercial and industrial	$	111,329	$	1,014	$	88,865	$	926
Commercial real estate:
Commercial real estate	45,515		1,266		54,104		1,179
Construction	587		—		2,230		39
Total commercial real estate loans	46,102		1,266		56,334		1,218
Residential mortgage	13,072		239		13,502		350
Consumer loans:
Home equity	940		21		1,910		66
Total consumer loans	940		21		1,910		66
Total	$	171,443	$	2,540	$	160,611	$	2,560

Interest income recognized on a cash basis (included in the table above) was immaterial for the three and six months ended June 30, 2019 and 2018.

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). Valley’s PCI loans are excluded from the TDR disclosures below because they are evaluated for impairment on a pool by pool basis. When an individual PCI loan within a pool is modified as a TDR, it is not removed from its pool. All TDRs are classified as impaired loans and are included in the impaired loan disclosures above.

The majority of 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 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 $74.4 million and $77.2 million as of June 30, 2019 and December 31, 2018, respectively. Non-performing TDRs totaled $67.8 million and $55.0 million as of June 30, 2019 and December 31, 2018, respectively.

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The following table presents non-PCI loans by loan class modified as TDRs during the three and six months ended June 30, 2019 and 2018. The pre-modification and post-modification outstanding recorded investments disclosed in the tables below represent the loan carrying amounts immediately prior to the modification and the carrying amounts at June 30, 2019 and 2018, respectively. 

	Three Months Ended June 30,
	2019					2018
Troubled Debt Restructurings	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	($ in thousands)
Commercial and industrial	17	$	14,663	$	14,187	11	$	8,822	$	8,575
Commercial real estate:
Commercial real estate	1	3,067		3,067		5	3,975		3,971
Construction	—	—		—		1	532		491
Total commercial real estate	1	3,067		3,067		6	4,507		4,462
Residential mortgage	1	155		155		2	393		389
Total	19	$	17,885	$	17,409	19	$	13,722	$	13,426

	Six Months Ended June 30,
	2019					2018
Troubled Debt Restructurings	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	($ in thousands)
Commercial and industrial	53	$	38,216	$	37,428	15	$	10,554	$	10,170
Commercial real estate:
Commercial real estate	2	4,665		4,665		6	4,170		4,164
Construction	—	—		—		2	564		503
Total commercial real estate	2	4,665		4,665		8	4,734		4,667
Residential mortgage	1	155		155		5	980		963
Consumer	—	—		—		1	88		85
Total	56	$	43,036	$	42,248	29	$	16,356	$	15,885

The total TDRs presented in the above table had allocated specific reserves for loan losses of approximately $11.7 million and $5.3 million at June 30, 2019 and 2018, respectively. These specific reserves are included in the allowance for loan losses for loans individually evaluated for impairment disclosed in the "Impaired Loans" section above. There were $1.1 million and $2.0 million of partial charge-offs related to TDR modifications during the three and six months ended June 30, 2019, respectively, and no charge-offs for such loans during the three and six months ended June 30, 2018.

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The non-PCI loans modified as TDRs within the previous 12 months and for which there was a payment default (90 or more days past due) for the three and six months ended June 30, 2019 and 2018 were as follows:

	Three Months Ended June 30,
	2019			2018
Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	($ in thousands)
Commercial and industrial	18	$	12,322	4	$	3,212
Commercial real estate	1	383		—	—
Total	19	$	12,705	4	$	3,212

	Six Months Ended June 30,
	2019			2018
Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	($ in thousands)
Commercial and industrial	18	$	12,322	4	$	3,212
Commercial real estate	1	383		—	—
Residential mortgage	2	215		—	—
Consumer	1	18		—	—
Total	22	$	12,938	4	$	3,212

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.

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The following table presents the credit exposure by internally assigned risk rating by class of loans (excluding PCI loans) at June 30, 2019 and December 31, 2018 based on the most recent analysis performed:

Credit exposure - by internally assigned risk rating	Pass		Special Mention		Substandard		Doubtful		Total Non-PCI Loans
	(in thousands)
June 30, 2019
Commercial and industrial	$	3,733,252	$	40,412	$	75,853	$	69,377	$	3,918,894
Commercial real estate	10,362,538		63,116		43,564		909		10,470,127
Construction	1,286,278		1,785		354		—		1,288,417
Total	$	15,382,068	$	105,313	$	119,771	$	70,286	$	15,677,438
December 31, 2018
Commercial and industrial	$	3,399,426	$	31,996	$	92,320	$	66,633	$	3,590,375
Commercial real estate	9,828,744		30,892		51,710		963		9,912,309
Construction	1,121,321		215		812		—		1,122,348
Total	$	14,349,491	$	63,103	$	144,842	$	67,596	$	14,625,032

At June 30, 2019 and December 31, 2018, the commercial and industrial loans rated substandard and doubtful in the above table included performing TDR taxi medallion loans and non-accrual (but mostly performing to their contractual terms) taxi medallion loans, respectively.

For residential mortgages, automobile, home equity and other consumer loan portfolio classes (excluding PCI loans), 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 recorded investment in those loan classes based on payment activity as of June 30, 2019 and December 31, 2018: 

Credit exposure - by payment activity	Performing Loans		Non-Performing Loans		Total Non-PCI Loans
	(in thousands)
June 30, 2019
Residential mortgage	$	3,682,394	$	12,069	$	3,694,463
Home equity	384,357		1,630		385,987
Automobile	1,361,995		148		1,362,143
Other consumer	909,953		221		910,174
Total	$	6,338,699	$	14,068	$	6,352,767
December 31, 2018
Residential mortgage	$	3,670,067	$	12,917	$	3,682,984
Home equity	369,184		2,156		371,340
Automobile	1,319,126		80		1,319,206
Other consumer	846,402		419		846,821
Total	$	6,204,779	$	15,572	$	6,220,351

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Valley evaluates the credit quality of its PCI loan pools based on the expectation of the underlying cash flows of each pool, derived from the aging status and by payment activity of individual loans within the pool. The following table presents the recorded investment in PCI loans by class based on individual loan payment activity as of June 30, 2019 and December 31, 2018:

Credit exposure - by payment activity	Performing Loans		Non-Performing Loans		Total PCI Loans
	(in thousands)
June 30, 2019
Commercial and industrial	$	668,887	$	27,984	$	696,871
Commercial real estate	2,309,294		18,596		2,327,890
Construction	239,926		625		240,551
Residential mortgage	372,531		5,456		377,987
Consumer	126,234		2,424		128,658
Total	$	3,716,872	$	55,085	$	3,771,957
December 31, 2018
Commercial and industrial	$	710,045	$	30,612	$	740,657
Commercial real estate	2,478,990		15,976		2,494,966
Construction	364,815		969		365,784
Residential mortgage	421,609		6,807		428,416
Consumer	158,502		1,761		160,263
Total	$	4,133,961	$	56,125	$	4,190,086

Other real estate owned (OREO) totaled $7.2 million and $9.5 million at June 30, 2019 and December 31, 2018, respectively. OREO included foreclosed residential real estate properties totaling $1.2 million and $852 thousand at June 30, 2019 and December 31, 2018, respectively. Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $1.7 million and $1.8 million at June 30, 2019 and December 31, 2018, respectively.

Note 8. Allowance for Credit Losses

The allowance for credit losses consists of the allowance for loan losses and the allowance for unfunded letters of credit. Management maintains the allowance for credit losses at a level estimated to absorb probable loan losses of the loan portfolio and unfunded letter of credit commitments at the balance sheet date. The allowance for loan losses is based on ongoing evaluations of the probable estimated losses inherent in the loan portfolio, including unexpected additional credit impairment of PCI loan pools subsequent to acquisition. There was no allowance allocation for PCI loan losses at June 30, 2019 and December 31, 2018.

The following table summarizes the allowance for credit losses at June 30, 2019 and December 31, 2018: 

	June 30, 2019		December 31, 2018
	(in thousands)
Components of allowance for credit losses:
Allowance for loan losses	$	155,105	$	151,859
Allowance for unfunded letters of credit	2,974		4,436
Total allowance for credit losses	$	158,079	$	156,295

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
	(in thousands)
Components of provision for credit losses:
Provision for loan losses	$	3,706		$	6,592	$	11,562		$	17,294
Provision for unfunded letters of credit	(1,606		)	550		(1,462		)	796
Total provision for credit losses	$	2,100		$	7,142	$	10,100		$	18,090

The following tables detail activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2019 and 2018:

	Commercial and Industrial			Commercial Real Estate			Residential Mortgage			Consumer			Total
	(in thousands)
Three Months Ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	94,630		$	47,762		$	5,139		$	6,850		$	154,381
Loans charged-off	(3,073		)	—			—			(1,752		)	(4,825		)
Charged-off loans recovered	1,195			22			9			617			1,843
Net (charge-offs) recoveries	(1,878		)	22			9			(1,135		)	(2,982		)
Provision for loan losses	1,632			1,194			71			809			3,706
Ending balance	$	94,384		$	48,978		$	5,219		$	6,524		$	155,105
Three Months Ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	66,546		$	56,679		$	4,100		$	5,537		$	132,862
Loans charged-off	(642		)	(38		)	(99		)	(1,422		)	(2,201		)
Charged-off loans recovered	819			15			180			495			1,509
Net recoveries (charge-offs)	177			(23		)	81			(927		)	(692		)
Provision for loan losses	7,534			(2,844		)	443			1,459			6,592
Ending balance	$	74,257		$	53,812		$	4,624		$	6,069		$	138,762

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	Commercial and Industrial			Commercial Real Estate			Residential Mortgage			Consumer			Total
	(in thousands)
Six Months Ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	90,956		$	49,650		$	5,041		$	6,212		$	151,859
Loans charged-off	(7,355		)	—			(15		)	(3,780		)	(11,150		)
Charged-off loans recovered	1,678			43			10			1,103			2,834
Net (charge-offs) recoveries	(5,677		)	43			(5		)	(2,677		)	(8,316		)
Provision for loan losses	9,105			(715		)	183			2,989			11,562
Ending balance	$	94,384		$	48,978		$	5,219		$	6,524		$	155,105
Six Months Ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	57,232		$	54,954		$	3,605		$	5,065		$	120,856
Loans charged-off	(773		)	(348		)	(167		)	(2,633		)	(3,921		)
Charged-off loans recovered	2,926			384			260			963			4,533
Net recoveries (charge-offs)	2,153			36			93			(1,670		)	612
Provision for loan losses	14,872			(1,178		)	926			2,674			17,294
Ending balance	$	74,257		$	53,812		$	4,624		$	6,069		$	138,762

The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the impairment methodology at June 30, 2019 and December 31, 2018. Loans individually evaluated for impairment represent Valley's impaired loans. Loans acquired with discounts related to credit quality represent Valley's PCI loans.

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	Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total
	(in thousands)
June 30, 2019
Allowance for loan losses:
Individually evaluated for impairment	$	31,128	$	2,604	$	668	$	50	$	34,450
Collectively evaluated for impairment	63,256		46,374		4,551		6,474		120,655
Total	$	94,384	$	48,978	$	5,219	$	6,524	$	155,105
Loans:
Individually evaluated for impairment	$	103,026	$	47,319	$	12,494	$	740	$	163,579
Collectively evaluated for impairment	3,815,868		11,711,225		3,681,969		2,657,564		21,866,626
Loans acquired with discounts related to credit quality	696,871		2,568,441		377,987		128,658		3,771,957
Total	$	4,615,765	$	14,326,985	$	4,072,450	$	2,786,962	$	25,802,162
December 31, 2018
Allowance for loan losses:
Individually evaluated for impairment	$	29,684	$	2,628	$	600	$	113	$	33,025
Collectively evaluated for impairment	61,272		47,022		4,441		6,099		118,834
Total	$	90,956	$	49,650	$	5,041	$	6,212	$	151,859
Loans:
Individually evaluated for impairment	$	97,852	$	43,598	$	13,904	$	1,271	$	156,625
Collectively evaluated for impairment	3,492,523		10,991,059		3,669,080		2,536,096		20,688,758
Loans acquired with discounts related to credit quality	740,657		2,860,750		428,416		160,263		4,190,086
Total	$	4,331,032	$	13,895,407	$	4,111,400	$	2,697,630	$	25,035,469

Note 9. 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 June 30, 2019, the total net investment in direct financing and sales-type leases was $377.3 million, comprised of $1.1 million in lease receivables and $376.2 million in unguaranteed residuals. Total lease income was $4.6 million and $3.5 million for the three months ended June 30, 2019 and 2018, respectively, and $8.9 million and $7.2 million for the six months ended June 30, 2019 and 2018, respectively.

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

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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 June 30, 2019.

	June 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	282,329
Finance leases	1,019
Total	$	283,348
Lease liabilities:
Operating leases	$	305,364
Finance leases	2,041
Total	$	307,405

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and six months ended June 30, 2019:

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73		$	146
Interest on lease liabilities	49			101
Operating lease cost	8,949			15,923
Short-term lease cost	59			134
Variable lease cost	1,024			1,972
Sublease income	(783		)	(1,686		)
Total lease cost (included in net occupancy and equipment expense)	$	9,371		$	16,590

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The following table presents supplemental cash flow information related to leases for the six months ended June 30, 2019:

	Six Months Ended
	June 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	16,896
Operating cash flows from finance leases	102
Financing cash flows from finance leases	240

The following table presents supplemental information related to leases at June 30, 2019:

	June 30, 2019
Weighted-average remaining lease term
Operating leases	13.08 years
Finance leases	3.50 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 June 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	63,085		$	17,594		$	341
2020	108,188			35,006			684
2021	91,950			34,169			684
2022	70,058			32,625			684
2023	47,744			29,222			—
Thereafter	33,007			244,762			—
Total lease payments	414,032			393,378			2,393
Less: present value discount	(36,769		)	(88,014		)	(352		)
Total	$	377,263		$	305,364		$	2,041

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The following table presents minimum aggregate lease payments in accordance with Topic 840 at June 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	13,731	$	1,092	$	12,639
2019	27,640		2,124		25,516
2020	27,785		2,077		25,708
2021	26,955		2,009		24,946
2022	25,948		1,891		24,057
Thereafter	271,054		8,130		262,924
Total lease payments	$	393,113	$	17,323	$	375,790

Net occupancy and equipment expense included lease cost of $8.2 million and $16.4 million, net of sublease income of $874 thousand and $1.8 million, for the three and six months ended June 30, 2018, respectively.

Note 10. Goodwill and Other Intangible Assets

Goodwill totaled $1.1 billion at June 30, 2019 and December 31, 2018. 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, 2018). There was no impairment of goodwill during the three and six months ended June 30, 2019 and 2018.

The following table summarizes other intangible assets as of June 30, 2019 and December 31, 2018: 

	Gross Intangible Assets		Accumulated Amortization			Valuation Allowance			Net Intangible Assets
	(in thousands)
June 30, 2019
Loan servicing rights	$	89,732	$	(66,406	)	$	—		$	23,326
Core deposits	80,470		(34,640		)	—			45,830
Other	3,945		(2,516		)	—			1,429
Total other intangible assets	$	174,147	$	(103,562	)	$	—		$	70,585
December 31, 2018
Loan servicing rights	$	87,354	$	(63,161	)	$	(83	)	$	24,110
Core deposits	80,470		(29,136		)	—			51,334
Other	3,945		(2,399		)	—			1,546
Total other intangible assets	$	171,769	$	(94,696	)	$	(83	)	$	76,990

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. See the "Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis" section of Note 5 for additional information regarding the fair valuation and impairment of loan servicing rights.

Core deposits are amortized using an accelerated method and have a weighted average amortization period of 8.2 years. The line item labeled “Other” included in the table above primarily consists of customer lists and covenants not to compete, which are amortized over their expected lives generally using a straight-line method and have a weighted average amortization period of approximately 7.6 years. Valley evaluates core deposits and other

39

intangibles for impairment when an indication of impairment exists. No impairment was recognized during the three and six months ended June 30, 2019 and 2018.

The following table presents the estimated future amortization expense of other intangible assets for the remainder of 2019 through 2023: 

	Loan Servicing Rights		Core Deposits		Other
	(in thousands)
2019	$	2,056	$	5,457	$	117
2020	3,603		9,607		220
2021	3,007		8,252		206
2022	2,513		6,898		191
2023	2,097		5,544		131

Valley recognized amortization expense on other intangible assets, including net impairment (or recovery of impairment) charges on loan servicing rights, totaling approximately $4.2 million and $4.6 million for the three months ended June 30, 2019 and 2018, respectively, and $8.5 million and $8.9 million for the six months ended June 30, 2019 and 2018, respectively.

Note 11. Stock–Based Compensation

Valley currently has one active employee stock plan, the 2016 Long-Term Stock Incentive Plan (the “2016 Stock Plan”), adopted by Valley’s Board of Directors on January 29, 2016 and approved by its shareholders on April 28, 2016. The primary purpose of the 2016 Stock Plan is to provide additional incentive 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 competent and dedicated officers and other key employees whose efforts will result in the continued and long-term growth of Valley’s business.

Under the 2016 Stock Plan, Valley may award shares of common stock in the form of stock appreciation rights, both incentive and non-qualified stock options, restricted stock and restricted stock units (RSUs) to its employees and non-employee directors (for acting in their roles as board members). As of June 30, 2019, 4.3 million shares of common stock were available for issuance under the 2016 Stock Plan. The essential features of each award are described in the award agreement relating to that award. The grant, exercise, vesting, settlement or payment of an award may be based upon the fair value of Valley’s common stock on the last sale price reported for Valley’s common stock on such date or the last sale price reported preceding such date, except for performance-based awards with a market condition. The grant date fair values of performance-based awards that vest based on a market condition are determined by a third party specialist using a Monte Carlo valuation model.

Restricted Stock. Prior to January 1, 2019, restricted stock was awarded to key employees, providing for the immediate award of our common stock subject to certain vesting and restrictions under the 2016 Stock Plan. Compensation expense is measured based on the grant-date fair value of the shares. Valley did not award any restricted stock shares during the six months ended June 30, 2019 as compared to 1.2 million shares of time-based restricted stock awarded during the six months ended June 30, 2018 to executive officers, key employees and directors of Valley. The majority of the awards have vesting periods of three years. Generally, the restrictions on such awards lapse at an annual rate of one-third of the total award commencing with the first anniversary of the date of grant. The average grant date fair value of the restricted stock awards granted during the six months ended June 30, 2018 was $11.86 per share.

Restricted Stock Units (RSUs). Valley granted 532 thousand and 446 thousand shares of performance-based RSUs to certain executive officers for the six months ended June 30, 2019 and 2018, 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 our 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

40

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 RSUs granted during the six months ended June 30, 2019 and 2018 was $10.43 per share and $12.35 per share, respectively.

Valley recorded total stock-based compensation expense of $4.2 million and $4.2 million for the three months ended June 30, 2019 and 2018, respectively, and $8.3 million and $12.2 million for the six months ended June 30, 2019 and 2018, respectively. The fair values of stock awards are expensed over the shorter of the vesting or required service period. As of June 30, 2019, the unrecognized amortization expense for all stock-based employee compensation totaled approximately $21.9 million and will be recognized over an average remaining vesting period of 2.15 years.

Note 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.

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.

Fair Value Hedges of Fixed Rate Assets and Liabilities. Valley is exposed to changes in the fair value of certain of its fixed rate assets or liabilities due to changes in benchmark interest rates based on one-month LIBOR. From time to time, Valley has used interest rate swaps to manage its exposure to changes in fair value. 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. Valley includes the gain or loss on the hedged items in the same income statement line item as the loss or gain on the related derivatives.

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.

Under a program, 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 the interest rate swaps associated with this program 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 30, 2019, Valley had 20 credit swaps with an aggregate notional amount of $127.3 million related to risk participation agreements. 

At June 30, 2019, Valley had one "steepener" swap with a total 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

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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, 2019						December 31, 2018
	Fair Value						Fair Value
	Other Assets		Other Liabilities		Notional Amount		Other Assets		Other Liabilities		Notional Amount
	(in thousands)
Derivatives designated as hedging instruments:
Cash flow hedge interest rate swaps	$	—	$	2,159	$	255,000	$	—	$	27	$	332,000
Fair value hedge interest rate swaps	—		337		7,411		—		347		7,536
Total derivatives designated as hedging instruments	$	—	$	2,496	$	262,411	$	—	$	374	$	339,536
Derivatives not designated as hedging instruments:
Interest rate swaps and embedded derivatives	$	139,893	$	30,337	$	3,469,497	$	48,642	$	22,533	$	3,390,578
Mortgage banking derivatives	603		669		140,306		337		774		105,247
Total derivatives not designated as hedging instruments	$	140,496	$	31,006	$	3,609,803	$	48,979	$	23,307	$	3,495,825

The Chicago Mercantile Exchange and London Clearing House variation margins are classified as a single-unit of account with the fair value of certain cash flow and non-designated derivative instruments. As a result, the fair value of the designated cash flow interest rate swaps assets and designated and non-designated interest rate swaps liabilities were offset by variation margins posted by (with) the applicable counterparties and reported in the table above on a net basis at June 30, 2019 and December 31, 2018.

Gains (Losses) included in the consolidated statements of income and in 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,
	2019			2018			2019			2018
	(in thousands)
Amount of loss reclassified from accumulated other comprehensive loss to interest expense	$	(383	)	$	(866	)	$	(673	)	$	(2,317	)
Amount of (loss) gain recognized in other comprehensive income (loss)	(962		)	637			(1,512		)	3,388

The accumulated net after-tax losses related to effective cash flow hedges included in accumulated other comprehensive loss were $4.6 million and $4.0 million at June 30, 2019 and December 31, 2018, respectively.

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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 $2.6 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,
	2019			2018			2019			2018
	(in thousands)
Derivative - interest rate swaps:
Interest income	$	49		$	88		$	73		$	219
Hedged item - loans:
Interest income	$	(49	)	$	(88	)	$	(73	)	$	(219	)

Fee income related to derivative interest rate swaps executed with commercial loan customers totaled $5.4 million and $4.4 million for the three months ended June 30, 2019 and 2018, respectively, and $9.5 million and $7.7 million for the six months ended June 30, 2019 and 2018, respectively, and was included in other non-interest income.

The following table presents the hedged items related to interest rate derivatives designated as hedges of fair value and the cumulative basis fair value adjustment included in the net carrying amount of the hedged items at June 30, 2019 and December 31, 2018.

Line Item in the Statement of Financial Position in Which the Hedged Item is Included	Carrying Amount of the Hedged Asset				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Asset
	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(in thousands)
Loans	$	7,748	$	7,882	$	337	$	346

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,
	2019			2018		2019			2018
	(in thousands)
Non-designated hedge interest rate derivatives
Other non-interest expense	$	(347	)	$	230	$	(757	)	$	448

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

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could terminate the derivative positions and Valley would be required to settle its obligations under the agreements. As of June 30, 2019, Valley was in compliance with all of the provisions of its derivative counterparty agreements. As of June 30, 2019, 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 $17.2 million. Valley has derivative counterparty agreements that require minimum collateral posting thresholds for certain counterparties.

Note 13. Balance Sheet Offsetting

Certain financial instruments, including derivatives (consisting of interest rate swaps and caps) and repurchase agreements (accounted for as secured long-term borrowings), may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements or similar 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 repurchase agreement should Valley be in default. The table below presents information about Valley’s financial instruments that are eligible for offset in the consolidated statements of financial condition as of June 30, 2019 and December 31, 2018.

							Gross Amounts Not Offset
	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments			Cash Collateral				Net Amount
	(in thousands)
June 30, 2019
Assets:
Interest rate swaps	$	139,893	$	—	$	139,893	$	(13,385	)	$	—			$	126,508
Liabilities:
Interest rate swaps	$	32,833	$	—	$	32,833	$	(13,385	)	$	(15,211	)	(1)	$	4,237
Repurchase agreements	150,000		—		150,000		—			(150,000		)	(2)	—
Total	$	182,833	$	—	$	182,833	$	(13,385	)	$	(165,211	)		$	4,237
December 31, 2018
Assets:
Interest rate swaps and caps	$	48,642	$	—	$	48,642	$	(1,214	)	$	—			$	47,428
Liabilities:
Interest rate swaps and caps	$	22,907	$	—	$	22,907	$	(1,214	)	$	(1,852	)	(1)	$	19,841
Repurchase agreements	150,000		—		150,000		—			(150,000		)	(2)	—
Total	$	172,907	$	—	$	172,907	$	(1,214	)	$	(151,852	)		$	19,841

(1) Represents the amount of collateral posted with derivative counterparties that offsets net liability positions.

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

Note 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.

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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 of 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 other-than-temporary impairments, if applicable (See "Other-Than-Temporary Impairment Analysis" section below).

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at June 30, 2019 and December 31, 2018:

	June 30, 2019		December 31, 2018
	(in thousands)
Other Assets:
Affordable housing tax credit investments, net	$	27,738	$	36,961
Other tax credit investments, net	58,215		68,052
Total tax credit investments, net	$	85,953	$	105,013
Other Liabilities:
Unfunded affordable housing tax credit commitments	$	2,696	$	4,520
Unfunded other tax credit commitments	5,139		8,756
Total unfunded tax credit commitments	$	7,835	$	13,276

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and six months ended June 30, 2019 and 2018: 

	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
	(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$	1,708	$	1,429		$	3,421	$	3,250
Other tax credit investment credits and tax benefits	2,158		5,680			4,961		11,165
Total reduction in income tax expense	$	3,866	$	7,109		$	8,382	$	14,415
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	$	593	$	(319	)	$	1,266	$	667
Affordable housing tax credit investment impairment losses	794		515			1,524		1,102
Other tax credit investment losses	2,509		1,253			3,496		1,790
Other tax credit investment impairment losses	967		3,021			5,750		6,185
Total amortization of tax credit investments recorded in non-interest expense	$	4,863	$	4,470		$	12,036	$	9,744

Other-Than-Temporary Impairment Analysis

An impairment loss is recognized when the fair value of the tax credit investment is less than its carrying value. The determination of whether a decline in value of a tax credit investment is other-than-temporary requires significant judgment and is performed separately for each investment. The tax credit investments are reviewed for impairment quarterly, or whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. These circumstances can include, but are not limited to, the following factors:

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• Evidence that we do not have the ability to recover the carrying amount of the investment;

• The inability of the investee to sustain earnings;

• A current fair value of the investment based upon cash flow projections that is less than the carrying amount; and

• Change in the economic or technological environment that could adversely affect the investee’s operations

On a quarterly basis, Valley obtains financial reporting on its underlying tax credit investment assets for each fund from the fund manager who is independent of us and the Fund Sponsor. The financial reporting is reviewed for deterioration in the financial condition of the fund, the level of cash flows and any significant losses or impairment charges. Valley also regularly reviews the condition and continuing prospects of the underlying operations of the investment with the fund manager, including any observations from site visits and communications with the fund sponsor, if available. Annually, Valley obtains the audited financial statements prepared by an independent accounting firm for each investment, as well as the annual tax returns. Generally, none of the aforementioned review factors are individually conclusive and the relative importance of each factor will vary based on facts and circumstances. However, the longer the expected period of recovery, the stronger and more objective the positive evidence needs to be in order to overcome the presumption that the impairment is other than temporary. If management determines that a decline in value is other than temporary per its quarterly and annual reviews, including current probable cash flow projections, the applicable tax credit investment is written down to its fair value through an impairment charge to earnings, which establishes the new cost basis of the investment.

The aggregate unamortized investment related to three federal renewable energy tax credit funds sponsored by DC Solar represented approximately $2.4 million (or approximately $800 thousand for each fund) of the $68.1 million of net other tax credit investments reported as of December 31, 2018. These funds are disclosed in detail in Note 15. During the first quarter of 2019, Valley determined that future cash flows related to the remaining investments in all three funds were not probable based upon new information available, including the sponsor’s bankruptcy proceedings which were reclassified to Chapter 7 from Chapter 11 in late March 2019. As a result, we recognized an other-than-temporary impairment charge for the entire aggregate unamortized investment of $2.4 million during the first quarter, which is included within amortization of tax credit investments for the six months ended June 30, 2019.

Note 15. Income Taxes

The federal energy investment tax credit (FEITC) program encourages the use of renewable energy, including solar energy. The energy program reduces federal income taxes by offering a 30 percent tax credit to owners of energy property that meets established performance and quality standards. In addition, there are other returns from tax losses and cash flows generated by the investment. Typically, an owner and the tax credit investor, such as Valley, establish a limited partnership. The tax credit investor usually has a substantial, but passive, interest in the partnership and the owner of the solar energy property has a small interest. The ownership structure permits the tax benefits to pass through to the tax credit investor with an expected exit from ownership after five years.

The amount of the FEITC is calculated based on the total cost of a renewable energy property. From 2013 to 2015, Valley invested in three FEITC funds (Fund VI, Fund XII and Fund XIX) sponsored by DC Solar to purchase a total of 512 mobile solar generator units. The valuation of the unit price of the solar units was supported by an appraisal prepared by a well-recognized national appraisal firm. The total tax credits of $22.8 million were used to reduce Valley’s federal income taxes payable in its consolidated financial statements from 2013 to 2015.

The full value of the FEITC is earned immediately when a solar energy property is placed in service. However, the tax credit is subject to recapture for federal tax purposes for a five-year compliance period, if the property ceases to remain eligible for the tax credit. A property may become ineligible during the compliance period due to (i) a sale or disposal of the property, (ii) lease of the property to a tax exempt entity or (3) its removal from service (i.e., no longer available for lease). During the first year after the property has been placed in service, the recapture rate is 100 percent of the tax credit. The rate declines by 20 percent each year thereafter until the end of the fifth year. The compliance period expires at the end of the fifth year after the property has been placed in service. All three funds

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leased the mobile solar generator units to DC Solar Distributions, which stated its intention to sublease the units to third parties.

An entity shall initially recognize the financial statement effects of a tax position when it is more likely than not (or a likelihood of more than 50 percent), based on the technical merits, that the position will be sustained upon examination. The level of evidence that is necessary and appropriate to support an entity's assessment of the technical merits of a tax position is a matter of judgment that depends on all available information. At each of the investment dates, Valley obtained two tax opinions from national law firms that, based upon the facts recited, support the recognition of the tax credits in its tax returns. Based upon management's review of the tax opinions on the investment’s legal structure, Valley recognized and measured each tax position at 100 percent of the tax credit.

Valley's subsequent measurement of a tax position is based on management’s best judgment given the facts, circumstances, and information available at the latest quarterly reporting date. A change in judgment that results in subsequent derecognition or change in measurement of a tax position taken in a prior annual period (including any related interest and penalties) is recognized as a discrete item in the period in which the change occurs.

In late February 2019, Valley learned of Federal Bureau of Investigation (FBI) allegations of fraudulent conduct by DC Solar, including information about asset seizures of DC Solar property and assets of its principals and ongoing federal investigations. Since learning of the allegations, Valley has conducted an ongoing investigation coordinated with other DC Solar fund investors, investors' outside counsel and a third party specialist. The facts uncovered to date by the investor group impact each investor differently, affecting their likelihood of loss and the ultimate amount of tax benefit likely to be recaptured. To date, over 93 percent of the 512 solar generator units purchased by Valley's three funds have been positively identified by a third party specialist at several leasee and other locations throughout the United States. Valley has also learned through its investigation that the IRS has challenged the valuation appraisals of similar solar generator units that were used to determine the federal renewable energy tax credits related to another DC Solar fund owned by an unrelated investor.

Given the circumstances at this time, including the aforementioned IRS challenge of the appraisals similar units used by an unrelated fund investor, and management's best judgments regarding the settlement of the tax positions that it would ultimately accept with the IRS, Valley currently expects a partial loss and tax benefit recapture. As a result of this quarterly assessment, our net income for the three and six months ended June 30, 2019 includes an increase to our provision for income taxes of $223 thousand and $12.3 million, respectively, reflecting the reserve for uncertain tax liability positions (shown in the table below) related to renewable energy tax credits and other tax benefits previously recognized from the investments in the DC Solar funds plus interest. Valley can provide no assurance that it will not recognize additional tax provisions related to this uncertain tax liability as management learns and analyzes additional facts and information, or that Valley will not ultimately incur a complete loss on the related tax positions, which is currently estimated to be $29.4 million (inclusive of tax provisions totaling $12.3 million for the six months ended June 30, 2019).

A reconciliation of Valley’s gross unrecognized tax benefits at June 30, 2019 and 2018 are presented in the table below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Beginning balance	$	12,100	$	4,238	$	—	$	4,238
Additions based on tax positions related to current year	223		—		12,323		—
Ending balance	$	12,323	$	4,238	$	12,323	$	4,238

The entire balance of unrecognized tax benefits, if recognized, would favorably affect our effective income tax rate. Valley’s policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Accrued interest associated with uncertain tax positions totaled approximately $2.1 million and $1.8 million at June 30, 2019 and December 31, 2018, respectively.

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Valley monitors its tax positions for the underlying facts, circumstances, and information available including the federal investigation of DC Solar and changes in tax laws, case law and regulations that may necessitate subsequent de-recognition of previous tax benefits.

Note 16. Business Segments

The information under the caption “Business Segments” in Management’s Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference.

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 elsewhere in 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 new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as “should,” “expect,” “believe,” “view,” “will,” “opportunity,” “allow,” “continues,” “reflects,” “typically,” “usually,” “anticipate,” 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 in addition to those risk factors disclosed in Valley’s Annual Report on Form 10-K for the year ended December 31, 2018, include, but are not limited to:

• failure to obtain shareholder or regulatory approval for the acquisition of Oritani Financial Corp. or to satisfy other conditions to the merger on the proposed terms and within the proposed timeframe;

• the inability to realize expected cost savings and synergies from the Oritani merger in amounts or in the timeframe anticipated;

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

• material adverse changes in Valley’s or Oritani’s operations or earnings;

• the inability to retain customers and qualified employees of Oritani;

• the inability to repay $635 million of higher cost FHLB borrowings in conjunction with the Oritani merger;

• developments in the DC Solar bankruptcy and federal investigations that, after careful analysis by management, could require the recognition of additional tax provision charges related to uncertain tax liability positions;

• due diligence issues or other matters that prevent or delay the expected sale and leaseback of three branch properties or expenses that reduce the additional pre-tax net gain expected to be recognized in the second half of 2019;

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• 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;

• weakness or a decline in the economy, mainly in New Jersey, New York, Florida and Alabama;

• a decline in commercial real estate values within our market areas, including the potential negative impact of recent changes to New York City's rent laws;

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

• an increase in our allowance for credit losses due to higher than expected loan losses within one or more segments of our loan portfolio;

• less than expected cost savings from Valley's branch transformation strategy;

• 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, 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 OCC, the FRB, the 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;

• damage verdicts or settlements or restrictions related to existing or potential litigations arising from claims of breach of fiduciary responsibility, negligence, fraud, contractual claims, environmental laws, patent or trademark infringement, employment related claims, discrimination claims, and other matters;

• changes in accounting policies or accounting standards, including the new authoritative accounting guidance (known as the current expected credit loss (CECL) model) which may increase the level of our allowance for credit losses after adoption on January 1, 2020;

• 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 or other external events;

• 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.

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 30, 2019, we identified our policies on the allowance for loan losses, purchased credit-impaired loans, goodwill and other intangible assets, and income taxes to be critical 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, 2018.

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New Authoritative Accounting Guidance

See Note 4 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 30, 2019, Valley had consolidated total assets of approximately $33.0 billion, total net loans of $25.6 billion, total deposits of $24.8 billion and total shareholders’ equity of $3.5 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 219 branch network, 56 percent, 17 percent, 20 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, including our acquisition of USAmeriBancorp, Inc. ("USAB") on January 1, 2018.

Oritani Financial Corp. Merger. On June 26, 2019, Valley announced that it will acquire Oritani Financial Corp. (“Oritani”) and its principal subsidiary, Oritani Bank, headquartered in Washington Township, New Jersey. Oritani has approximately $4.1 billion in assets, $3.5 billion in loans, $2.9 billion in deposits, and maintains a branch network of 26 offices in New Jersey. The merger will double Valley's market share in demographically attractive Bergen County and enhance its presence in Hudson County.

The common shareholders of Oritani will receive 1.60 shares of Valley common stock for each Oritani share they own. The transaction is valued at an estimated $740 million, based on Valley’s closing stock price on June 25, 2019. The transaction is expected to close in the fourth quarter of 2019. The merger is subject to a number of pending conditions, including customary regulatory approvals and Valley and Oritani shareholder approvals.

Branch Transformation and Sale Leaseback. As previously disclosed, Valley has embarked on a strategy to overhaul its retail network. Approximately one year ago, we established the foundation of what the transformation of our branch network would look like in coming years. At that time, we identified 74 branches that did not meet certain internal performance measures, including 20 branches that were closed and consolidated by the end of the first quarter of 2019. For the remaining 54 branches, we implemented tailored action plans focused on improving profitability and deposit levels, as well as upgrades in staffing and training, within a defined timeline.

At June 30, 2019, the majority of the 54 branches have seen measurable success in terms of relative cost of deposits, deposit mix and overall balance growth. However, some locations have not met our established performance targets. As such, we expect to close approximately 10 branches by the end of the second quarter of 2020. 

For the remaining branch network, we continue to monitor the operating performance of each branch and implement tailored action plans focused on improving profitability and deposit levels for those branches that underperform.

During March 2019, Valley closed a sale-leaseback transaction for 26 of its previously announced 29 properties to be sold resulting in a pre-tax gain of $78.5 million for the first quarter of 2019. Valley expects to close the sale of the remaining three properties, which remain subject to the buyer's due diligence, during the second half of 2019. The sale of the remaining properties is expected to result in a pre-tax net gain of more than $3 million.

Investment in DC Solar Funds. From 2013 to 2015, Valley invested in three federal renewable energy tax credit funds sponsored by DC Solar and claimed the related federal tax credit benefits of approximately $22.8 million in its consolidated financial statements during these periods. In late February 2019, we learned of allegations of fraudulent conduct by DC Solar, including information about asset seizures of DC Solar property and assets of its principals and ongoing federal investigations. We referred to these matters in our Annual Report on Form 10-K for

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2018. Since learning of the allegations, Valley has conducted an ongoing investigation coordinated with other DC Solar fund investors, investors' outside counsel and a third party specialist.

Given the circumstances that we are aware of at this time and management's best judgments regarding the settlement of the tax positions that it would ultimately accept with the IRS, we currently expect a partial loss and tax benefit recapture. As a result of this quarterly assessment, our net income for the three and six months ended June 30, 2019 includes an increase to our provision for income taxes of $223 thousand and $12.3 million, respectively, reflecting the reserve for uncertain tax liability positions related to renewable energy tax credits and other tax benefits previously recognized from the investments in the DC Solar funds plus interest. During the first quarter of 2019, we also recognized a full write down of the related unamortized investments totaling $2.4 million (previously presented in other assets) due to other than temporary impairment losses. We can provide no assurance that we will not recognize additional tax provisions related to this uncertain tax liability as we learn and analyze additional facts and information, or that we will not ultimately incur a complete loss on the related tax positions, which is currently estimated to be $29.4 million (inclusive of the $12.3 million provision during the six months ended June 30, 2019). See Notes 14 and 15 to the consolidated financial statements for additional information related to our tax credit investments and reserves for uncertain tax liability positions.

Quarterly Results. Net income for the second quarter of 2019 was $76.5 million, or $0.22 per diluted common share, compared to $72.8 million, or $0.21 per diluted common share, for the second quarter of 2018. The $3.7 million increase in quarterly net income as compared to the same quarter one year ago was largely due to: (i) a $9.5 million increase in our net interest income mostly due to higher average loan balances driven by strong organic loan growth over the last 12 months and higher loan yield, (ii) an $8.2 million decrease in non-interest expense partly due to decreases in the FDIC insurance assessment, salaries and employee benefits and professional and legal fees, (iii) a $5.0 million decrease in our provision for credit losses, partially offset by (iv) a $10.4 million decrease in non-interest income partly related to the other-than-temporary impairment of securities and lower net gains on sales of loans, and (v) an $8.6 million increase in income tax expense largely due to higher pre-tax income. 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 quarter 2019 results, as well as other items discussed elsewhere in this MD&A.

Operating Environment. During the second quarter of 2019, real gross domestic product expanded 2.1 percent compared to 3.1 percent in the first quarter of 2019. The contribution from household consumption of goods and services supported economic activity but was more than offset by weaker net exports, inventory restocking and nonresidential investment.

During 2018, the Federal Reserve gradually increased the target range for the federal funds rate four times throughout the year. As a result, the target range increased from 1.25 percent to 1.50 percent as of January 1, 2018 to 2.25 percent to 2.50 percent at December 31, 2018. However, the Federal Reserve cut the federal funds rate to a target range of 2.00 to 2.25 percent on July 31, 2019, citing concern about the implications of global developments for the economic outlook as well as muted inflation pressures. The cut was later characterized as a midcycle adjustment by the Federal Reserve Chairman.

The 10-year U.S. Treasury note yield ended the second quarter at 2.00 percent, 41 basis points lower compared with March 31, 2019. The spread between the 2- and 10-year U.S. Treasury note yields ended the second quarter of 2019 at 0.25 percent, 11 basis points higher compared to the end of the first quarter of 2019 and 8 basis points lower compared to June 30, 2018.

For all domestically chartered commercial banks in the U.S. excluding the largest 25 banks by assets as reported by the Board of Governors of the Federal Reserve System, loan growth was approximately 4.9 percent on an annual basis during the second quarter of 2019. For the industry, banks reported waning demand for commercial and industrial loan products to large and middle market firms and demand for most commercial real estate loans secured by nonfarm nonresidential structures weakened during the quarter. However, we continued to see solid demand and new loan origination volumes for commercial and industrial, commercial real estate and construction loans across our geographies in the second quarter of 2019 (See "Loans" section below). While we are encouraged by our

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continued loan growth during the second quarter, the level of demand for commercial loans, strong competition for deposits, and a difficult yield curve environment may challenge our business operations and results, as highlighted throughout the remaining MD&A discussion below.

Loans. Loans increased $379.0 million, or 6.0 percent on an annualized basis to approximately $25.8 billion at June 30, 2019 from March 31, 2019. The increase was mainly due to continued strong quarter over quarter organic growth in commercial and industrial loans and commercial real estate loans, as well as an increase in construction loan advances during the second quarter of 2019. During the second quarter of 2019, we originated $111.3 million of residential mortgage loans for sale rather than held for investment and sold approximately $116.3 million of pre-existing loans from our residential mortgage loan portfolio. Residential mortgage loans held for sale totaled $36.6 million and $31.9 million at June 30, 2019 and March 31, 2019, respectively.

For the full year of 2019, we have established a goal to grow our overall loan portfolio in the range of 6 to 8 percent. However, there can be no assurance that we will achieve such levels given the potential for unforeseen changes in the market and other conditions. See further details on our loan activities under the “Loan Portfolio” section below.

Asset Quality. Our past due loans and non-accrual loans discussed further below exclude PCI loans. Under U.S. GAAP, PCI loans (acquired at a discount that is due, in part, to credit quality) are accounted for on a pool basis and are not subject to delinquency classification in the same manner as loans originated by Valley. Our PCI loan portfolio totaled $3.8 billion, or 14.6 percent, of our total loan portfolio at June 30, 2019.

Total non-performing assets (NPAs), consisting of non-accrual loans, other real estate owned (OREO), other repossessed assets and non-accrual debt securities increased $3.4 million to $106.7 million at June 30, 2019 as compared to March 31, 2019 mainly due to an increase of $3.1 million in non-accrual loans during the second quarter of 2019. Non-accrual loans increased largely due to two new non-performing loans within the commercial real estate loan category at June 30, 2019. However, non-accrual loans represented 0.37 percent of total loans at June 30, 2019 which percentage remained unchanged as compared to March 31, 2019.

Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) were $67.0 million, or 0.26 percent of total loans, at June 30, 2019 as compared to $82.0 million, or 0.32 percent of total loans, at March 31, 2019. The $15.0 million decrease from March 31, 2019 was mainly due to a decline in loans 30 to 59 days past due. The decrease in loans 30 to 59 days past due was mostly driven by better performance in the commercial real estate portfolio and the normal renewal of a $15.0 million matured performing loan reported in this delinquency category at March 31, 2019.

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. However, management cannot provide assurance that our non-performing assets will not increase from the levels reported as of June 30, 2019. See the "Non-Performing Assets" section below for further analysis of our asset quality.

Deposits and Other Borrowings. Our mix of the deposit categories of total average deposits for the second quarter of 2019 remained relatively unchanged as compared to the first quarter of 2019 with a slight shift to time deposits. Average non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 26 percent, 45 percent and 29 percent of total deposits as of June 30, 2019, respectively. Overall, average deposits totaled $24.7 billion for the second quarter of 2019 and decreased by $83.5 million as compared to the first quarter of 2019. Actual ending balances for deposits decreased $133.6 million to approximately $24.8 billion at June 30, 2019 from March 31, 2019. The decrease in average deposit balances were largely due to decreases in money market deposits and time deposits, partially offset by an increase non-interest bearing deposits. Ending brokered deposit balances (consisting of both time and money market deposit accounts) totaled approximately $3.2 billion at June 30, 2019 which remained relatively unchanged from March 31, 2019.

Average short-term borrowings increased $368.9 million to $2.4 billion for the second quarter of 2019 as compared to the first quarter of 2019 largely due to greater use of short-term FHLB borrowings for loan funding and liquidity purposes and a decline in deposits. Average long-term borrowings (including junior subordinated debentures issued

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to capital trusts which are presented separately on the consolidated statements of condition) decreased by $59.7 million to $1.6 billion for the second quarter of 2019 as compared to the first quarter of 2019 mainly due to the repayment of matured FHLB borrowings in the first quarter. Actual ending balances for long-term borrowings increased $300.5 million to $1.8 billion at June 30, 2019 as compared to March 31, 2019 due to new FHLB borrowings also used to fund loan growth.

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,
	2019		2018		2019		2018
Return on average assets	0.94	%	0.98	%	1.17	%	0.78	%
Return on average assets, as adjusted	0.96		1.01		0.95		0.93
Return on average shareholders’ equity	8.79		8.88		11.04		6.99
Return on average shareholders’ equity, as adjusted	9.05		9.17		8.94		8.33
Return on average tangible shareholders’ equity (ROATE)	13.16		13.76		16.65		10.82
ROATE, as adjusted	13.55		14.21		13.48		12.91

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,
	2019			2018		2019			2018
	(in thousands)
Net income, as reported	$	76,468		$	72,802	$	189,798		$	114,767
Add: Net impairment losses on securities (net of tax)	2,078			—		2,078			—
Add: (Gains) losses on securities transactions (net of tax)	(8		)	26		15			574
Add: Severance expense (net of tax) (1)	—			—		3,433			—
Add: Tax credit investment impairment (net of tax) (2)	—			—		1,757			—
Add: Legal expenses (litigation reserve impact only, net of tax)	—			—		—			7,520
Add: Merger related expenses (net of tax) (3)	—			2,326		—			12,014
Add: Income Tax Expense (4)	223			—		12,323			2,000
Less: Gain on sale-leaseback transaction (net of tax) (5)	—			—		(55,707		)	—
Net income, as adjusted	$	78,761		$	75,154	$	153,697		$	136,875

(1)    Severance expense is included in salary and employee benefits expense.

(2)    Impairment is included in the amortization of tax credit investments.

(3)    Merger related expenses are primarily within salary and employee benefits and other expense.

(4) Income tax expense related to reserves for uncertain tax positions in 2019 and a USAB charge in 2018.

(5) The gain on sale leaseback transactions is included in gains on the sales of assets within other non-interest income.

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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,
	2019			2018			2019			2018
	($ in thousands)
Net income, as adjusted	$	78,761		$	75,154		$	153,697		$	136,875
Average assets	$	32,707,144		$	29,778,210		$	32,502,744		$	29,536,301
Annualized return on average assets, as adjusted	0.96		%	1.01		%	0.95		%	0.93		%

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,
	2019			2018			2019			2018
	($ in thousands)
Net income, as adjusted	$	78,761		$	75,154		$	153,697		$	136,875
Average shareholders' equity	$	3,481,519		$	3,279,616		$	3,438,344		$	3,284,687
Annualized return on average shareholders' equity, as adjusted	9.05		%	9.17		%	8.94		%	8.33		%

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,
	2019			2018			2019			2018
	($ in thousands)
Net income	$	76,468		$	72,802		$	189,798		$	114,767
Net income, as adjusted	$	78,761		$	75,154		$	153,697		$	136,875
Average shareholders’ equity	$	3,481,519		$	3,279,616		$	3,438,344		$	3,284,687
Less: Average goodwill and other intangible assets	1,156,703			1,163,575			1,158,596			1,163,901
Average tangible shareholders’ equity	$	2,324,816		$	2,116,041		$	2,279,748		$	2,120,786
Annualized ROATE	13.16		%	13.76		%	16.65		%	10.82		%
Annualized ROATE, as adjusted	13.55		%	14.21		%	13.48		%	12.91		%

In addition to the items used to calculate net income, as adjusted, in the tables above, our net income is, from time to time, impacted by net gains on sales of loans and net impairment losses on securities recognized in non-interest income. These amounts can vary widely from period to period due to, among other factors, the amount of residential mortgage loans originated for sale and the results of our quarterly impairment analysis of the held to maturity and available for sale investment portfolios. See the “Non-Interest Income" section below for more details.

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 $221.4 million for the second quarter of 2019 increased $9.1 million as compared to the second quarter of 2018 and increased $1.5 million as compared to the first quarter of 2019. The increase as compared to the first quarter of 2019 was largely due to a combination of higher loan yield and average loan balances, partly offset by higher costs of deposits and lower interest income from investment securities mainly

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caused by higher premium amortization and repayments of higher yielding securities. Interest income on a tax equivalent basis increased $7.4 million to $328.9 million for the second quarter of 2019 as compared to the first quarter of 2019 mainly due to an 8 basis point increase in yield on average loans and a $297.7 million increase in average loans. Interest expense of $107.5 million for the second quarter of 2019 increased $5.9 million as compared to the first quarter of 2019 largely due to higher costs for both money market and certificate of deposit accounts.

Average interest earning assets increased $2.6 billion to $29.9 billion for the second quarter of 2019 as compared to the second quarter of 2018 due to strong organic loan growth over the last 12-month period. Compared to the first quarter of 2019, average interest earning assets increased by $314.5 million from $29.6 billion due to continued organic loan growth during the six months ended June 30, 2019 and a moderate increase in investment securities balances, partially offset by lower average overnight funds. Average loans increased $297.7 million to $25.6 billion for the second quarter of 2019 from the first quarter of 2019 mainly due to solid loan growth within the commercial and industrial loan, commercial real estate loan and construction loan portfolios.

Average interest bearing liabilities increased $2.2 billion to $22.3 billion for the second quarter of 2019 as compared to the second quarter of 2018 mainly due to both retail and brokered time deposit growth, partly due to our use of brokered CDs as a cost effective alternative to shorter term FHLB borrowings in our funding and liquidity strategy since the second half of 2018. Compared to the first quarter of 2019, average interest bearing liabilities moderately decreased by $15.5 million in the second quarter of 2019. Declines in both average deposits and long-term borrowings were mostly offset by an increase in average short-term borrowings caused by a greater use of short-term FHLB borrowings during the second quarter of 2019. See additional information under "Deposits and Other Borrowings" in the Executive Summary section above.

Our net interest margin on a tax equivalent basis of 2.96 percent for the second quarter of 2019 decreased by 15 basis points and 2 basis points from 3.11 percent and 2.98 percent for the second quarter of 2018 and first quarter of 2019, respectively, largely due to time deposits repricing at higher market rates in the early stages of the second quarter of 2019 and other increased funding costs. The yield on average interest earning assets increased by 5 basis points on a linked quarter basis mostly due to the increase in the yield on loans. The yield on average loans increased by 8 basis points to 4.65 percent for the second quarter of 2019 as compared to the first quarter of 2019 largely due to higher yield on new loan volumes, accretable yield on PCI loans and a modest increase in loan prepayment penalties in the second quarter of 2019. The overall cost of average interest bearing liabilities increased 11 basis points to 1.93 percent for the second quarter of 2019 as compared to the linked first quarter of 2019 due to 11 and 6 basis point increases in the cost of average interest bearing deposits and long-term borrowings, respectively. The increase in deposit costs was largely due to the aforementioned time deposits repricing in the second quarter of 2019. The increase in the cost of long-term borrowings was mostly caused by the maturity of a few lower cost borrowings. Our cost of total average deposits was 1.27 percent for the second quarter of 2019 as compared to 1.20 percent for the first quarter of 2019.

Looking forward, we expect the interest rate pressures on the level of our net interest margin to remain during the third quarter of 2019 due, in part, to the recent decline in market interest rates and its immediate impact to the adjustable rate loans within our loan portfolio. The 25 basis point cut in the target federal funds rate is expected to have a positive impact on repricing deposits and other borrowings, but at a more gradual pace for the remainder of 2019. For the full year of 2019, we anticipate net interest income growth of approximately 4.5 to 6.5 percent. However, our actual net interest margin and net interest income for the third quarter of 2019 and the full year of 2019, respectively, could materially differ from our expected results due to a multitude of other conditional and sometimes unpredictable factors.

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The following table reflects the components of net interest income for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018:

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

Net Interest Income on a Tax Equivalent Basis

	Three Months Ended
	June 30, 2019								March 31, 2019								June 30, 2018
	Average Balance			Interest			Average Rate		Average Balance			Interest			Average Rate		Average Balance			Interest			Average Rate
	($ in thousands)
Assets
Interest earning assets:
Loans (1)(2)	$	25,552,415		$	296,934		4.65	%	$	25,254,733		$	288,277		4.57	%	$	22,840,235		$	247,691		4.34	%
Taxable investments (3)	3,453,676			25,284			2.93		3,390,609			26,050			3.07		3,438,842			25,950			3.02
Tax-exempt investments (1)(3)	658,727			5,514			3.35		689,675			6,081			3.53		750,896			7,138			3.80
Interest bearing deposits with banks	212,566			1,168			2.20		227,890			1,093			1.92		226,986			839			1.48
Total interest earning assets	29,877,384			328,900			4.40		29,562,907			321,501			4.35		27,256,959			281,618			4.13
Allowance for loan losses	(156,747		)						(152,961		)						(134,741		)
Cash and due from banks	265,015								287,449								274,557
Other assets	2,744,661								2,643,727								2,428,459
Unrealized (losses) gains on securities available for sale, net	(23,169		)						(45,052		)						(47,024		)
Total assets	$	32,707,144							$	32,296,070							$	29,778,210
Liabilities and shareholders’ equity
Interest bearing liabilities:
Savings, NOW and money market deposits	$	11,293,885		$	38,020		1.35	%	$	11,450,943		$	36,283		1.27	%	$	10,978,067		$	24,756		0.90	%
Time deposits	7,047,319			40,331			2.29		7,214,863			38,171			2.12		4,700,456			16,635			1.42
Total interest bearing deposits	18,341,204			78,351			1.71		18,665,806			74,454			1.60		15,678,523			41,391			1.06
Short-term borrowings	2,380,294			14,860			2.50		2,011,428			12,549			2.50		2,166,837			10,913			2.01
Long-term borrowings (4)	1,607,046			14,297			3.56		1,666,794			14,573			3.50		2,284,132			17,062			2.99
Total interest bearing liabilities	22,328,544			107,508			1.93		22,344,028			101,576			1.82		20,129,492			69,366			1.38
Non-interest bearing deposits	6,358,034								6,116,953								6,168,059
Other liabilities	539,047								440,401								201,043
Shareholders’ equity	3,481,519								3,394,688								3,279,616
Total liabilities and shareholders’ equity	$	32,707,144							$	32,296,070							$	29,778,210
Net interest income/interest rate spread (5)				$	221,392		2.47	%				$	219,925		2.53	%				$	212,252		2.75	%
Tax equivalent adjustment				(1,158		)						(1,277		)						(1,500		)
Net interest income, as reported				$	220,234							$	218,648							$	210,752
Net interest margin (6)							2.95	%							2.96	%							3.09	%
Tax equivalent effect							0.01	%							0.02	%							0.02	%
Net interest margin on a fully tax equivalent basis (6)							2.96	%							2.98	%							3.11	%

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The following table reflects the components of net interest income for the six months ended June 30, 2019 and 2018:

Analysis of Average Assets, Liabilities and Shareholders’ Equity and

Net Interest Income on a Tax Equivalent Basis

	Six Months Ended
	June 30, 2019								June 30, 2018
	Average Balance			Interest			Average Rate		Average Balance			Interest			Average Rate
	($ in thousands)
Assets
Interest earning assets:
Loans (1)(2)	$	25,404,396		$	585,211		4.61	%	$	22,573,097		$	485,278		4.30	%
Taxable investments (3)	3,422,317			51,334			3.00		3,420,395			49,212			2.88
Tax-exempt investments (1)(3)	674,116			11,595			3.44		745,976			14,380			3.86
Interest bearing deposits with banks	220,186			2,261			2.05		265,813			1,765			1.33
Total interest earning assets	29,721,015			650,401			4.38		27,005,281			550,635			4.08
Allowance for loan losses	(154,864		)						(129,181		)
Cash and due from banks	276,170								266,916
Other assets	2,694,473								2,426,020
Unrealized (losses) gains on securities available for sale, net	(34,050		)						(32,735		)
Total assets	$	32,502,744							$	29,536,301
Liabilities and shareholders’ equity
Interest bearing liabilities:
Savings, NOW and money market deposits	$	11,371,980		$	74,303		1.31	%	$	11,076,478		$	47,073		0.85	%
Time deposits	7,130,628			78,502			2.20		4,647,705			31,251			1.34
Total interest bearing deposits	18,502,608			152,805			1.65		15,724,183			78,324			1.00
Short-term borrowings	2,196,880			27,409			2.50		1,828,932			16,645			1.82
Long-term borrowings (4)	1,636,755			28,870			3.53		2,357,928			34,294			2.91
Total interest bearing liabilities	22,336,243			209,084			1.87		19,911,043			129,263			1.30
Non-interest bearing deposits	6,238,159								6,140,027
Other liabilities	489,998								200,544
Shareholders’ equity	3,438,344								3,284,687
Total liabilities and shareholders’ equity	$	32,502,744							$	29,536,301
Net interest income/interest rate spread (5)				$	441,317		2.51	%				$	421,372		2.78	%
Tax equivalent adjustment				(2,435		)						(3,022		)
Net interest income, as reported				$	438,882							$	418,350
Net interest margin (6)							2.95	%							3.10	%
Tax equivalent effect							0.02	%							0.02	%
Net interest margin on a fully tax equivalent basis (6)							2.97	%							3.12	%

(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.

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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, 2019 Compared to June 30, 2018									Six Months Ended June 30, 2019 Compared to June 30, 2018
	Change Due to Volume			Change Due to Rate			Total Change			Change Due to Volume			Change Due to Rate			Total Change
	(in thousands)
Interest Income:
Loans*	$	30,726		$	18,517		$	49,243		$	63,640		$	36,293		$	99,933
Taxable investments	112			(778		)	(666		)	28			2,094			2,122
Tax-exempt investments*	(823		)	(801		)	(1,624		)	(1,315		)	(1,470		)	(2,785		)
Interest bearing deposits with banks	(56		)	385			329			(343		)	839			496
Total increase in interest income	29,959			17,323			47,282			62,010			37,756			99,766
Interest Expense:
Savings, NOW and money market deposits	732			12,532			13,264			1,288			25,942			27,230
Time deposits	10,598			13,098			23,696			21,547			25,704			47,251
Short-term borrowings	1,150			2,797			3,947			3,785			6,979			10,764
Long-term borrowings and junior subordinated debentures	(5,645		)	2,880			(2,765		)	(11,805		)	6,381			(5,424		)
Total increase in interest expense	6,835			31,307			38,142			14,815			65,006			79,821
Total increase in net interest income	$	23,124		$	(13,984	)	$	9,140		$	47,195		$	(27,250	)	$	19,945

* Interest income is presented on a tax equivalent basis using 21 percent as the federal tax rate for 2019 and 2018.

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Non-Interest Income

Non-interest income increased $7.5 million and $67.9 million for the three and six months ended June 30, 2019 as compared to the same periods of 2018, respectively. The following table presents the components of non-interest income for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(in thousands)
Trust and investment services	$	3,096		$	3,262		$	6,000		$	6,492
Insurance commissions	2,649			4,026			5,174			7,847
Service charges on deposit accounts	5,827			6,679			11,730			13,932
Gains (losses) on securities transactions, net	11			(36		)	(21		)	(801		)
Other-than-temporary impairment losses on securities	(2,928		)	—			(2,928		)	—
Portion recognized in other comprehensive income (before taxes)	—			—			—			—
Net impairment losses on securities recognized in earnings	(2,928		)	—			(2,928		)	—
Fees from loan servicing	2,367			2,045			4,797			4,268
Gains on sales of loans, net	3,930			7,642			8,506			14,395
(Losses) gains on sales of assets, net	(564		)	(125		)	77,156			(222		)
Bank owned life insurance	2,205			2,652			4,092			4,415
Other	11,010			11,924			20,770			19,994
Total non-interest income	$	27,603		$	38,069		$	135,276		$	70,320

Insurance commissions decreased $1.4 million and $2.7 million for the three and six months ended June 30, 2019, respectively, as compared to the same periods in 2018 mainly due to lower volumes of business generated by the Bank's insurance agency subsidiary.

Service charges on deposit accounts decreased $852 thousand and $2.2 million for the three and six months ended June 30, 2019, respectively, as compared to the same periods of 2018 due to lower checking and ATM fees.

Other-than-temporary impairment losses on securities for the three and six months ended June 30, 2019 relates to one special revenue bond in default of its contractual payments during the second quarter of 2019. See the “Investment Securities Portfolio” section of this MD&A and Note 6 to the consolidated financial statements for further details on our investment securities impairment analysis.

Our 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. Net gains on sales of loans decreased $3.7 million and $5.9 million for the three and six months ended June 30, 2019, respectively, as compared to the same periods of 2018 partially due to the lower volume of residential mortgage loan sales. During the second quarter of 2019, we sold $223.0 million of residential mortgage loans as compared to $308.2 million sold during the second quarter of 2018, including $116.2 million and $112.8 million of pre-existing loans sold from our residential mortgage loan portfolio, respectively. During the six months ended June 30, 2019, we sold $416.2 million of residential mortgage loans as compared to $692.9 million for the same period one year ago. In addition, the net gains on sales of loans for the six months ended June 30, 2019 included a gain of $1.1 million on the sale of our retail credit card portfolio totaling approximately $6.2 million in loans. See further discussions of our residential mortgage loan origination activity under the “Loan Portfolio” section of this MD&A below.

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Net gains on sales of assets increased $77.4 million for the six months ended June 30, 2019 primarily due to a $78.5 million gain on the sale (and leaseback) of 26 locations recognized during the first quarter of 2019.

Non-Interest Expense

Non-interest expense decreased $8.2 million and $34.1 million for the three and six months ended June 30, 2019 as compared to the same periods of 2018, respectively. The following table presents the components of non-interest expense for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(in thousands)
Salary and employee benefits expense	$	76,183	$	78,944	$	159,288	$	172,236
Net occupancy and equipment expense	29,700		26,901		57,586		54,825
FDIC insurance assessment	4,931		8,044		11,052		13,542
Amortization of other intangible assets	4,170		4,617		8,481		8,910
Professional and legal fees	4,145		5,337		9,416		22,384
Amortization of tax credit investments	4,863		4,470		12,036		9,744
Telecommunications expense	2,351		3,015		4,619		6,609
Other	15,394		18,588		27,054		35,418
Total non-interest expense	$	141,737	$	149,916	$	289,532	$	323,668

Salary and employee benefits expense decreased $2.8 million and $12.9 million for the three and six months ended June 30, 2019 as compared to the same periods of 2018 partially due to lower headcount caused by our recent branch transformation and other operational improvements. The decrease for the first half of 2019 was also due to $9.6 million of change in control, severance and retention expenses related to the USAB acquisition recognized in the first quarter of 2018, partially offset by severance expense of $4.8 million for the first quarter of 2019.

Net occupancy and equipment increased approximately $2.8 million for both the three and six months ended June 30, 2019 as compared to the same periods of 2018. The increase was mostly due to higher rental expense resulting from the sale leaseback transaction for 26 locations in the first quarter of 2019 and higher repair and equipment expense.

Professional and legal fees decreased $1.2 million and $13.0 million for the three and six months ended June 30, 2019, respectively, as compared to the same periods of 2018. The second quarter decrease was largely due to lower legal fees related to general corporate matters and litigation. The six month period decrease was mainly driven by a $10.5 million litigation reserve charge recognized in the first quarter of 2018.

Amortization of tax credit investments increased $2.3 million for the six months ended June 30, 2019 as compared to the same period of 2018. The increase was primarily due to a $2.4 million other-than-temporary impairment charge related to investments in three federal renewable energy tax credit funds. See Note 14 to the consolidated financial statements for more details. Tax credit investments, while negatively impacting the level of our operating expenses and efficiency ratio, produce tax credits that reduce our income tax expense and effective tax rate.

Telecommunications expense decreased $664 thousand and $2.0 million for the three and six months ended June 30, 2019, respectively, as compared to the same periods of 2018 partly due to branch reductions and other operating efficiencies.

Other non-interest expense decreased $3.2 million and $8.4 million for the three and six months ended June 30, 2019, respectively, as compared to the same periods of 2018. The six month period decrease was due, in part, to $2.2 million of USAB merger related charges recognized during the first quarter of 2018 and a $1.7 million increase in net gains on sale of OREO properties during the first half of 2019. In addition, several significant components of

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other expense declined as compared to the same period of 2018 partly due to the integration of USAB's operations completed in the second quarter of 2018, branch closures and other cost reduction initiatives.

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 by the amortization of tax credit investments, as well as infrequent charges within non-interest income and expense.

The following table presents our efficiency ratio and a reconciliation of the efficiency ratio adjusted for certain items during the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	($ in thousands)
Total non-interest expense	$	141,737		$	149,916		$	289,532		$	323,668
Less: Severance expense (pre-tax)	—			—			4,838			—
Less: Amortization of tax credit investments (pre-tax)	4,863			4,470			12,036			9,744
Less: Legal expenses (litigation reserve impact only, pre-tax)	—			—			—			10,500
Less: Merger related expenses (pre-tax)	—			3,248			—			16,776
Total non-interest expense, adjusted	$	136,874		$	142,198		$	272,658		$	286,648
Net interest income	$	220,234		$	210,752		$	438,882		$	418,350
Total non-interest income	27,603			38,069			135,276			70,320
Less: Gain on sale-leaseback transaction (pre-tax)	—			—			78,505			—
Add: Losses on securities transactions, net (pre-tax)	(11		)	36			21			801
Add: Net impairment losses on securities (pre-tax)	2,928			—			2,928			—
Total net interest income and non-interest income	$	250,754		$	248,857		$	498,602		$	489,471
Efficiency ratio	57.19		%	60.25		%	50.43		%	66.23		%
Efficiency ratio, adjusted	54.58		%	57.14		%	54.68		%	58.56		%

Management continuously monitors its expenses in an effort to optimize Valley's performance. Based upon these efforts and our revenue goals, we seek to achieve an adjusted efficiency ratio (as shown in the table above) below 55 percent for 2019. However, we can provide no assurance that our adjusted efficiency ratio will meet our target or remain at the level reported for the second quarter of 2019.

Income Taxes

Income tax expense totaled $27.5 million for the second quarter of 2019 as compared to $57.2 million and $19.0 million for the first quarter of 2019 and second quarter of 2018, respectively. Our effective tax rate was 26.5 percent, 33.5 percent, and 20.7 percent for the second quarter of 2019, first quarter of 2019, and second quarter of 2018, respectively. The first quarter of 2019 effective tax rate reflected an additional provision for income taxes of $12.1 million related to uncertain tax liability positions. Our uncertain tax liabilities totaled $12.3 million at June 30, 2019 and relate to renewable energy tax credits and other tax benefits previously recognized from investments in the DC Solar funds. See additional information regarding our uncertain tax liability positions at Note 15 of the consolidated financial statements.

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

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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 2019, 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 our subsidiary 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 “pool funding” methodology, which involves the allocation of uniform funding cost based on each segment's average earning assets 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 30, 2019 and 2018:

	Three Months Ended June 30, 2019
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	6,756,322		$	18,796,093		$	4,324,969		$	—		$	29,877,384
Income (loss) before income taxes	18,658			90,652			6,917			(12,227		)	104,000
Annualized return on average interest earning assets (before tax)	1.10		%	1.93		%	0.64		%	N/A			1.39		%

 

	Three Months Ended June 30, 2018
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	6,005,266		$	16,834,969		$	4,416,724		$	—		$	27,256,959
Income (loss) before income taxes	15,713			78,640			11,761			(14,351		)	91,763
Annualized return on average interest earning assets (before tax)	1.05		%	1.87		%	1.07		%	N/A			1.35		%

Consumer Lending

This segment, representing approximately 26.6 percent of our loan portfolio at June 30, 2019, is 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 15.8 percent of our loan portfolio at June 30, 2019) is subject to movements in the market level of interest rates and forecasted prepayment speeds. The weighted average life of the automobile loans

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(representing 5.3 percent of total loans at June 30, 2019) 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 increased $751.1 million to $6.8 billion for the three months ended June 30, 2019 as compared to the second quarter of 2018. The increase was largely due to loan growth from new and refinanced residential mortgage loan originations, including a higher level of non-conforming jumbo mortgages held for investment over the last 12 month period, as well as growth in both automobile loans and collateralized personal lines of credit.

Income before income taxes generated by the consumer lending segment increased $2.9 million to $18.7 million for the second quarter of 2019 as compared to the second quarter of 2018. Net interest income increased $3.3 million and was mainly driven by the increase in average loans, partially offset by higher funding costs. Non-interest expense decreased $5.2 million for the second quarter of 2019 as compared to the same quarter of 2018 partly due to lower residential mortgage commission expense caused by lower origination volume and commission rates. The positive impact of the aforementioned items was partially offset by a $6.2 million decrease in non-interest income for the second quarter of 2019 as compared to the second quarter of 2018 largely due to a decline in net gains on sales of residential mortgage loans.

The net interest margin on the consumer lending portfolio decreased 12 basis points to 2.61 percent for the second quarter of 2019 as compared to the second quarter of 2018, mainly due to a 43 basis point increase in the costs associated with our funding sources, partially offset by a 31 basis point increase in the yield on average loans. The increase in our cost of funds was mainly due to increased short-term interest rates resulting from the Federal Reserve's gradual increase in short-term interest rates during 2018 (commencing in late March 2018) and strong competition for deposits which increased the level of interest rates on many of our interest bearing deposit products and other wholesale funding. The increase in loan yield was mainly due to higher market interest rates on new loan volumes. See the "Executive Summary" and the "Net Interest Income" sections above for more details on our deposits and other borrowings.

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 $4.6 billion and represented 17.9 percent of the total loan portfolio at June 30, 2019. Commercial real estate loans and construction loans totaled $14.3 billion and represented 55.5 percent of the total loan portfolio at June 30, 2019.

Average interest earning assets in this segment increased approximately $2.0 billion to $18.8 billion for the three months ended June 30, 2019 as compared to the second quarter of 2018. The increase was mostly due to strong organic loan growth within the commercial and industrial loan and commercial real estate loan portfolios over the last 12-month period.

For the three months ended June 30, 2019, income before income taxes for the commercial lending segment increased $12.0 million to $90.7 million as compared to the same quarter of 2018 mainly due to higher net interest income and lower provision for loan losses. Net interest income increased $12.2 million to $164.2 million for the second quarter of 2019 as compared to the same quarter in 2018 largely due to higher average balances. The provision for credit losses decreased $3.9 million to $1.2 million during the three months ended June 30, 2019 as compared to $5.1 million for the second quarter of 2018 mainly due a negative (credit) provision for unfunded letters of credit, lower net charge-offs during the second quarter and moderate declines in the expected incurred losses in commercial loan categories. The positive impact of the aforementioned items was partially offset by a $5.7

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million increase in non-interest expense for the second quarter of 2019 as compared to the second quarter of 2018 largely due to higher salaries and employee benefits expenses for this business segment caused, in part, by expansion of our commercial lending teams.

The net interest margin for this segment decreased 12 basis points to 3.49 percent for the second quarter of 2019 as compared to the second quarter of 2018 largely due to a 43 basis point increase in the cost of our funding sources, partially offset by a 31 basis point increase 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 $91.8 million during the second quarter of 2019 as compared to the second quarter of 2018 largely due a decrease in non-taxable investments, caused by normal investment maturities and repayments within our investment portfolio, coupled with lower levels of excess liquidity (maintained overnight funds and interest bearing deposits). Investments and overnight funds both declined due to the strong organic loan growth over the last 12-month period.

For the quarter ended June 30, 2019, income before income taxes for the investment management segment decreased $4.8 million to $6.9 million as compared to the second quarter of 2018. The decline was largely due to a $6.3 million decrease in net interest income caused by lower average investment balances for the three months ended June 30, 2019 and lower yields on investments, partially offset by a $1.4 million decrease in internal transfer expense.

The net interest margin for this segment decreased 54 basis points to 1.57 percent for the second quarter of 2019 as compared to the same quarter of 2018 largely due to a 43 basis point increase in costs associated with our funding sources and an 11 basis point decrease in the yield on average investments. The decrease in the yield on average investments was partly due to maturities of higher yielding securities over the last 12 months.

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, including net impairment losses, not reported in the investment management segment above, interest expense related to subordinated notes, amortization of tax credit investments, as well as non-core items, including merger expenses, litigation reserves and the gain on the sale leaseback transaction.

The corporate segment recognized pre-tax loss of $12.2 million for the three months ended June 30, 2019 as compared to $14.4 million for the second quarter of 2018 mainly due to a decrease in non-interest expense, partially offset by a decrease in non-interest income. Non-interest expense decreased $8.5 million to $96.8 million for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018 largely due to declines in several expense categories, including salaries and employee benefits, legal and professional fees, and other non-interest expense. Non-interest income decreased $5.9 million to $4.3 million for the three months ended June 30, 2019 as compared to the second quarter in 2018 primarily due to lower net gains sales of loans and net impairment losses on securities of $2.9 million recognized during the second quarter of 2019. See further details in the "Non-Interest Income" and "Non-Interest Expense" sections of this MD&A.

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The following tables present the financial data for each business segment for the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30, 2019
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
	($ in thousands)
Average interest earning assets	$	6,788,511		$	18,615,885		$	4,316,619		$	—	$	29,721,015
Income (loss) before income taxes	37,713			173,164			15,659			47,990		274,526
Annualized return on average interest earning assets (before tax)	1.11		%	1.86		%	0.73		%	N/A		1.85		%

 

	Six Months Ended June 30, 2018
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	5,953,524		$	16,619,573		$	4,432,184		$	—		$	27,005,281
Income (loss) before income taxes	30,760			145,606			20,830			(50,284		)	146,912
Annualized return on average interest earning assets (before tax)	1.03		%	1.75		%	0.94		%	N/A			1.09		%

Consumer Lending

Average interest earning assets in this segment increased $835.0 million to $6.8 billion for the six months ended June 30, 2019 as compared to the same period in 2018. The increase was largely due to loan growth from new and refinanced residential mortgage loan originations held for investment and collateralized personal lines of credit over the last 12 months.

Income before income taxes generated by the consumer lending segment increased $7.0 million to $37.7 million for the six months ended June 30, 2019 as compared to the same period in 2018 largely due to an increase of $7.2 million in net interest income. The increased net interest income was mostly due to higher average loans and yields on new loan volumes. Non-interest expense also decreased $8.4 million for the six months ended June 30, 2019 as compared to the same period in 2018 mainly due to lower salaries and employee benefits expenses, but was more than offset by an $8.7 million decrease in non-interest income for the six months ended June 30, 2019. The decrease in non-interest income was largely due to lower gains on sales of loans and a decline in wealth management revenues.

The net interest margin on the consumer lending portfolio decreased 12 basis point to 2.65 percent for the six months ended June 30, 2019 as compared to the same period one year ago mainly due to a 45 basis point increase in the costs associated with our funding sources, partially offset by a 33 basis point increase in the yield on average loans. The increase in our cost of funds was primarily due to greater use of wholesale and brokered deposit funding and higher rates on most deposit products. Although the operating and interest rate environment remains volatile, we did see average deposit costs peak in May 2019 and decline in June 2019. This trend has continued during the early stages of the third quarter of 2019 and we are optimistic that competition will allow this trend to continue in the second half of 2019. See the "Executive Summary" and the "Net Interest Income" sections above for more details on our deposits and other borrowings.

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Commercial Lending

Average interest earning assets in this segment increased $2.0 billion to $18.6 billion for the six months ended June 30, 2019 as compared to the same period in 2018. This increase was mostly due to organic loan growth during the last 12 months.

For the six months ended June 30, 2019, income before income taxes for the commercial lending segment increased $27.6 million to $173.2 million as compared to the same period in 2018. Net interest income increased $22.3 million to $323.6 million for the six months ended June 30, 2019 as compared to the same period in 2018 largely due to higher average balances and an increase in yield on new loan originations, partially offset by higher interest expense. Non-interest income also increased $3.2 million for the six months ended June 30, 2019 as compared to the same period in 2018 due, in part, to a $1.8 million increase in fee income related to derivative interest rate swaps executed with commercial loan customers which totaled $9.5 million and $7.7 million for the six months ended June 30, 2019 and 2018, respectively. The provision for credit losses decreased $7.2 million to $7.1 million during the six months ended June 30, 2019 as compared to $14.4 million for the same period in 2018. See further details in the "Allowance for Credit Losses" section in this MD&A.

The net interest margin for this segment decreased 15 basis point to 3.48 percent for the six months ended June 30, 2019 as compared to the same period in 2018 as a 45 basis point increase in the cost of our funding sources was partially offset by a 30 basis point increase in yield on average loans.

Investment Management

Average interest earning assets in this segment decreased $115.6 million during the six months ended June 30, 2019 as compared to the same period in 2018. The decrease was largely due to declines of $71.9 million and $45.6 million in average non-taxable investments and federal funds sold and other interest bearing deposits, respectively, for the six months ended June 30, 2019 as compared to the same period in 2018.

For the six months ended June 30, 2019, income before income taxes for the investment management segment decreased $5.2 million to $15.7 million as compared to the same period in 2018 mainly due to a $9.4 million decrease in net interest income, partially offset by a $3.6 million decrease in the internal transfer expense. The decrease in net interest income was mainly driven by the lower average investment balances and normal repayment of higher yielding securities during the six months ended June 30, 2019 as compared to the same period of 2018.

The net interest margin for this segment decreased 38 basis points to 1.67 percent for the six months ended June 30, 2019 as compared to the same period in 2018 largely due to a 45 basis point increase in costs associated with our funding sources, partially offset by a 7 basis point increase in the yield on average investments.

Corporate and other adjustments

The pre-tax net income for the corporate segment totaled $48.0 million for the six months ended June 30, 2019 as compared to the net loss of $50.3 million for the same period in 2018. The positive change of $98.3 million was mainly due to an increase in non-interest income, coupled with a decrease in non-interest expense. The non-interest income increased $70.2 million to $89.3 million for the six months ended June 30, 2019 as compared to the same period in 2018 primarily due to a $78.5 million gain on the sale (and leaseback) of 26 locations recognized during the first quarter of 2019. The non-interest expense decreased $30.1 million to $200.6 million for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. This decrease was largely due to salaries and employee benefits expenses related to the pre-operations conversion of the USAB acquisition, USAB merger expenses and professional and legal fees for litigation reserves recognized during the first half of 2018 (See further details in the "Non-Interest Expense" section above). Internal transfer income increased $2.5 million to $169.7 million for the six months ended June 30, 2019 as compared to the same period in 2018.

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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 predominately 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 30, 2019. 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 30, 2019. 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 30, 2019. Although the size of Valley’s balance sheet is forecasted to remain static as of June 30, 2019 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 quarter of 2019. The model also utilizes an immediate parallel shift in the market interest rates at June 30, 2019.

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.

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The following table reflects management’s expectations of the change in our net interest income over the next 12- month period in light of 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
Changes in Interest Rates	Dollar Change			Percentage Change
(in basis points)	($ in thousands)
+200	$	1,272		0.15	%
+100	4,245			0.49
–100	(21,190		)	(2.42	)
–200	(29,515		)	(3.37	)

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 moderately

increase net interest income over the next 12 months by 0.49 percent. The Bank’s sensitivity to changes in market

rates moderately decreased as compared to December 31, 2018 (which projected an increase of 1.04 percent in net interest income over a 12 month period). Future changes including, but not limited to, deposit and borrowings strategies, the slope of the yield curve and projected cash flows will affect our net interest income results and may increase or decrease the level of net interest income sensitivity.

Liquidity

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 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 of 125 percent or reliance on wholesale funding greater than 30 percent of total funding. The Bank was in compliance with the foregoing policies at June 30, 2019.

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 available for sale, loans held for sale, and, from time to time, federal funds sold and receivables related to unsettled securities transactions. These liquid assets totaled approximately $2.3 billion, representing 7.6 percent of earning assets, at June 30, 2019 and $2.3 billion, representing 8.0 percent of earning assets, at December 31, 2018. Of the $2.3 billion of liquid assets at June 30, 2019, approximately $1.1 billion of various investment securities were pledged to counterparties to support our earning asset funding strategies. We anticipate the receipt of approximately $1.0 billion in principal payments from securities in the total investment portfolio over the next 12 months due to normally scheduled principal repayments and expected prepayments of certain securities, primarily residential mortgage-backed securities.

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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 30, 2019) are projected to be approximately $6.3 billion over the next 12 months. As a contingency plan for significant funding needs, liquidity could also be derived from the sale of conforming residential mortgages from our loan portfolio, or 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 $20.3 billion and $18.1 billion for the six months ended June 30, 2019 and for the year ended December 31, 2018, respectively, representing 68.5 percent and 65.3 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 correspondent banks. While there are no firm lending commitments currently in place, management believes that we could borrow approximately $817 million for a short term 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. Furthermore, we can obtain overnight borrowings from the Federal Reserve Bank via the discount window as a contingency for additional liquidity. At June 30, 2019, our borrowing capacity under the Federal Reserve's discount window was $1.2 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) increased approximately $268.9 million to $2.4 billion at June 30, 2019 as compared to December 31, 2018. The increase was mostly due to new FHLB borrowings used for loan growth funding and additional liquidity purposes during the second quarter of 2019, partially offset by a $125 million decrease in overnight federal funds purchased at June 30, 2019.

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. These 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.

Investment Securities Portfolio

As of June 30, 2019, we had $2.2 billion and $1.7 billion in held to maturity and available for sale investment securities, respectively. Our total investment portfolio was comprised of U.S. Treasury securities, U.S. government agency securities, tax-exempt and taxable issuances of states and political subdivisions (including special revenue bonds), residential mortgage-backed securities, single-issuer trust preferred securities principally issued by bank

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holding companies, and high quality corporate bonds issued by banks at June 30, 2019. 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, Fannie Mae and Freddie Mac.

Among other securities, our investments in the trust preferred securities, bank issued corporate bonds and special revenue bonds 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 and, if applicable, the underlying mortgage loan collateral of the security.

Other-Than-Temporary Impairment Analysis

We may be required to record impairment charges on our investment securities if they suffer a decline in value that is considered other-than-temporary. Numerous factors, including lack of liquidity for re-sales of certain investment securities, absence of reliable pricing information for investment securities, adverse changes in business climate, adverse actions by regulators, or unanticipated changes in the competitive environment could have a negative effect on our investment portfolio and may result in other-than temporary impairment on our investment securities in future periods. See our Annual Report on Form 10-K for the year ended December 31, 2018 for additional information regarding our impairment analysis by security type.

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 investment securities portfolios by investment grades at June 30, 2019:

	June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Held to maturity investment grades: *
AAA Rated	$	1,756,431	$	25,396	$	(9,636	)	$	1,772,191
AA Rated	267,312		6,763		(34		)	274,041
A Rated	30,619		555		—			31,174
BBB Rated	5,000		281		—			5,281
Not rated	108,874		316		(7,085		)	102,105
Total investment securities held to maturity	$	2,168,236	$	33,311	$	(16,755	)	$	2,184,792
Available for sale investment grades: *
AAA Rated	$	1,516,160	$	9,521	$	(8,653	)	$	1,517,028
AA Rated	78,736		525		(106		)	79,155
A Rated	21,092		179		(30		)	21,241
BBB Rated	17,985		350		—			18,335
Non-investment grade	7,498		—		(139		)	7,359
Not rated	36,244		102		(114		)	36,232
Total investment securities available for sale	$	1,677,715	$	10,677	$	(9,042	)	$	1,679,350

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* Rated using external rating agencies (primarily S&P and Moody’s). 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 (in the above table) in both held to maturity and available for sale investment securities are mainly related to residential mortgage-backed securities mainly issued by Ginnie Mae, Fannie Mae, and Freddie Mac. The held to maturity portfolio includes $108.9 million in investments not rated by the rating agencies with aggregate unrealized losses of $7.1 million at June 30, 2019. The unrealized losses for this category included $6.0 million of unrealized losses related to four single-issuer bank trust preferred issuances with a combined amortized cost of $36.0 million. All single-issuer trust preferred securities classified as held to maturity, including the aforementioned four securities, are paying in accordance with their terms and have no deferrals of interest or defaults. Additionally, we analyze the performance of each issuer on a quarterly basis, including a review of performance data from the issuer’s most recent bank regulatory report to assess the company's credit risk and the probability of impairment of the contractual cash flows of the applicable security. Based upon our quarterly review at June 30, 2019, all of the issuers appear to meet the regulatory capital minimum requirements to be considered a “well-capitalized” financial institution and/or have maintained performance levels adequate to support the contractual cash flows of the security.

During the three months ended June 30, 2019, Valley recognized a $2.9 million other-than-temporary credit impairment charge related to one special revenue bond classified as available for sale (within obligations of states and state agencies reported in Note 6 of the consolidated financial statements). The credit impairment was due to severe credit deterioration disclosed by the issuer in the second quarter of 2019, as well as the issuer's default to its contractual payment during the period. At June 30, 2019, the impaired security had an adjusted amortized cost and fair value of $680 thousand after recognition of the credit impairment and is reported in the "non-investment grade" category in the table above. Comparatively, there were no other-than-temporary impairment losses on securities recognized in earnings for the three and six months ended June 30, 2018. See additional information regarding our other-than-temporary impairment analysis and special revenue bond portfolio at Note 6 to the consolidated financial statements.

The impaired municipal bond discussed above was not accruing interest as of June 30, 2019. Valley discontinues the recognition of interest on debt securities if the securities meet both of the following criteria: (i) regularly scheduled interest payments have not been paid or have been deferred by the issuer, and (ii) full collection of all contractual principal and interest payments is not deemed to be the most likely outcome, resulting in the recognition of other-than-temporary impairment of the security.

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Loan Portfolio

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

	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	($ in thousands)
Loans
Commercial and industrial	$	4,615,765		$	4,504,927		$	4,331,032		$	4,015,280		$	3,829,525
Commercial real estate:
Commercial real estate	12,798,017			12,665,425			12,407,275			12,251,231			11,913,830
Construction	1,528,968			1,454,199			1,488,132			1,416,259			1,376,732
Total commercial real estate	14,326,985			14,119,624			13,895,407			13,667,490			13,290,562
Residential mortgage	4,072,450			4,071,237			4,111,400			3,782,972			3,528,682
Consumer:
Home equity	501,646			513,066			517,089			521,797			520,849
Automobile	1,362,466			1,347,759			1,319,571			1,288,902			1,281,735
Other consumer	922,850			866,505			860,970			834,849			783,363
Total consumer loans	2,786,962			2,727,330			2,697,630			2,645,548			2,585,947
Total loans *	$	25,802,162		$	25,423,118		$	25,035,469		$	24,111,290		$	23,234,716
As a percent of total loans:
Commercial and industrial	17.9		%	17.7		%	17.3		%	16.7		%	16.5		%
Commercial real estate	55.5			55.6			55.5			56.6			57.2
Residential mortgage	15.8			16.0			16.4			15.7			15.2
Consumer loans	10.8			10.7			10.8			11.0			11.1
Total	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

* Includes net unearned premiums and deferred loan costs of $19.6 million, $20.5 million, $21.5 million, $16.7 million and $18.7 million at June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018, respectively.

Loans increased $379.0 million to approximately $25.8 billion at June 30, 2019 from March 31, 2019. The increase was mainly due to strong quarter over quarter growth in commercial real estate loans and commercial and industrial loans as well as an increase in construction loan advances. During the second quarter of 2019, we originated $111.3 million of residential mortgage loans for sale rather than held for investment and we also sold approximately $116 million of pre-existing loans from our residential mortgage loan portfolio. Residential mortgage loans held for sale totaled $36.6 million and $35.2 million at June 30, 2019 and December 31, 2018, respectively.

Total commercial and industrial loans increased $110.8 million, or 9.8 percent on an annualized basis, from March 31, 2019 to approximately $4.6 billion at June 30, 2019. The increase was mostly driven by new small to middle market lending relationships within our markets largely established by focused calling efforts by our experienced lending teams and, to a lesser extent, by increased business investment by existing relationships.

Commercial real estate loans (excluding construction loans) increased $132.6 million, or 4.2 percent on an annualized basis to $12.8 billion at June 30, 2019 from March 31, 2019. Exclusive of a $148.1million decline in PCI loans commercial real estate loans increased $280.7 million, or 11 percent on an annualized basis during the second quarter of 2019. The increase was mainly due to strong loan volumes in our primary markets in Florida, targeted growth in New Jersey and New York and some migration of completed construction projects to permanent financing.

Construction loans increased $74.8 million to $1.5 billion at June 30, 2019 from March 31, 2019. Exclusive of the decline in PCI loans, the non-PCI construction loans increased $88.7 million or 29.6 percent on an annualized basis,

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during the second quarter of 2019 due, in part, to strong demand for investor occupied projects within our primary markets.

Total residential mortgage loans increased $1.2 million to approximately $4.1 billion at June 30, 2019 from March 31, 2019. The loan growth was mostly offset by the sale of pre-existing loans totaling $116 million and a $32.3 million decline in PCI loans during the second quarter of 2019. New and refinanced residential mortgage loan originations totaled approximately $347.1 million for the second quarter of 2019 as compared to $254.1 million and $437.2 million for the first quarter of 2019 and second quarter of 2018, respectively.

Home equity loans totaling $501.6 million at June 30, 2019 decreased by $11.4 million as compared to March 31, 2019 mainly due to a $16.2 million decline in PCI loans caused by normal repayments.

Automobile loans increased by $14.7 million to $1.4 billion at June 30, 2019 as compared to March 31, 2019. The second quarter annualized growth was 4.4 percent due to higher application volumes as compared to the first quarter of 2019. Our Florida dealership network contributed $39.3 million in auto loan originations, representing approximately 23 percent of Valley's total new auto loan production during the second quarter of 2019 and was relatively consistent with the linked first quarter of 2019.

Other consumer loans increased $56.3 million to $922.9 million at June 30, 2019 as compared to $866.5 million at March 31, 2019 mostly due to higher volumes of new collateralized personal lines of credit as compared to the first quarter of 2019.

Most of our lending is in northern and central New Jersey, New York City, Long Island and Florida, except for smaller auto and residential mortgage loan portfolios derived from other neighboring states of New Jersey, which could present a geographic and credit risk if there was another significant broad based economic downturn within these regions. 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.

Purchased Credit-Impaired Loans

PCI loans decreased $418.1 million to $3.8 billion at June 30, 2019 from $4.2 billion at December 31, 2018, mainly due to normal repayment activity. Our PCI loans include loans acquired in business combinations subsequent to 2011 and, to a much lesser extent, covered loans in which we will share losses with the FDIC under loss-sharing agreements. Covered loans, consisting of residential mortgage and other consumer loans, totaled $24.9 million and $27.6 million at June 30, 2019 and December 31, 2018, respectively.

As required by U.S. GAAP, all of our PCI loans are accounted for under ASC Subtopic 310-30. This accounting guidance requires PCI loans to be aggregated and accounted for as pools of loans based on common risk characteristics. A pool is accounted for as one asset with a single composite interest rate, aggregate fair value and expected cash flows. For PCI loan pools accounted for under ASC Subtopic 310-30, the difference between the contractually required payments due and the cash flows expected to be collected, considering the impact of prepayments, is referred to as the non-accretable difference. The contractually required payments due represent the total undiscounted amount of all uncollected principal and interest payments. Contractually required payments due may increase or decrease for a variety of reasons, e.g. when the contractual terms of the loan agreement are modified, when interest rates on variable rate loans change, or when principal and/or interest payments are received. The Bank estimates the undiscounted cash flows expected to be collected by incorporating several key assumptions, including probability of default, loss given default, and the amount of actual prepayments after the acquisition dates. The non-accretable difference, which is neither accreted into income nor recorded on our consolidated balance sheet, reflects estimated future credit losses and uncollectable contractual interest expected to be incurred over the life of the loans. The excess of the undiscounted cash flows expected at the acquisition date over the carrying amount (fair value) of PCI loans is referred to as the accretable yield. This amount is accreted into interest income over the remaining life of the loans, or pool of loans, using the level yield method. The accretable yield is affected by changes in interest rate indices for variable rate loans, changes in prepayment assumptions, and changes in expected principal and interest payments over the estimated lives of the loans. Prepayments affect the estimated

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life of PCI loans and could change the amount of interest income, and possibly principal, expected to be collected. Reclassifications of the non-accretable difference to the accretable yield may occur subsequent to the loan acquisition dates due to increases in expected cash flows of the loan pools.

At acquisition, we use a third party service provider to assist with our assessment of the contractual and estimated cash flows. During subsequent annual evaluation periods, Valley uses a third party software application to assess the contractual and estimated cash flows. Using updated loan-level information derived from Valley’s main operating system, contractually required loan payments and expected cash flows for each pool level, the software reforecasts both the contractual cash flows and cash flows expected to be collected. The loan-level information used to reforecast the cash flows is subsequently aggregated on a pool basis. The expected payment data, discount rates, impairment data and changes to the accretable yield are reviewed by Valley to determine whether this information is accurate and the resulting financial statement effects are reasonable.

Similar to contractual cash flows, we reevaluate expected cash flows on a quarterly basis. Unlike contractual cash flows which are determined based on known factors, significant management assumptions are necessary in forecasting the estimated cash flows. We attempt to ensure the forecasted expectations are reasonable based on the information currently available; however, due to the uncertainties inherent in the use of estimates, actual cash flow results may differ from our forecast and the differences may be significant. To mitigate such differences, we carefully prepare and review the assumptions utilized in forecasting estimated cash flows.

On a quarterly basis, Valley analyzes the actual cash flow versus the forecasts at the loan pool level and variances are reviewed to determine their cause. In re-forecasting future estimated cash flow, Valley will adjust the credit loss expectations for loan pools, as necessary. These adjustments are based, in part, on actual loss severities recognized for each loan type, as well as changes in the probability of default. For periods in which Valley does not reforecast estimated cash flows, the prior reporting period’s estimated cash flows are adjusted to reflect the actual cash received and credit events which transpired during the current reporting period.

The following tables summarize the changes in the carrying amounts of PCI loans and the accretable yield on these loans for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,
	2019						2018
	Carrying Amount			Accretable Yield			Carrying Amount			Accretable Yield
	(in thousands)
PCI loans:
Balance, beginning of the period	$	4,004,340		$	890,771		$	4,915,833		$	691,086
Accretion	55,014			(55,014		)	60,536			(60,536		)
Payments received	(286,204		)	—			(328,620		)	—
Net increase in expected cash flows	—			18,130			—			—
Transfers to other real estate owned	(1,193		)	—			(48		)	—
Balance, end of the period	$	3,771,957		$	853,887		$	4,647,701		$	630,550

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	Six Months Ended June 30,
	2019						2018
	Carrying Amount			Accretable Yield			Carrying Amount			Accretable Yield
	(in thousands)
PCI loans:
Balance, beginning of the period	$	4,190,086		$	875,958		$	1,387,215		$	282,009
Acquisition	—			—			3,744,682			474,208
Accretion	108,506			(108,506		)	125,667			(125,667		)
Payments received	(524,834		)	—			(609,670		)	—
Net increase in expected cash flows	—			86,435			—			—
Transfers to other real estate owned	(1,801		)	—			(193		)	—
Balance, end of the period	$	3,771,957		$	853,887		$	4,647,701		$	630,550

The net increase in expected cash flows for certain pools of loans (included in the tables above) is recognized prospectively as an adjustment to the yield over the estimated remaining life of the individual pools. Based upon the reforecasted cash flows during the first half of 2019, the net increase in expected cash flows for the three and six months ended June 30, 2019 was largely driven by additional advances on acquired lines of credit coupled with lower prospective credit loss expectations.

Non-performing Assets

Non-performing assets (excluding PCI loans) include non-accrual loans, other real estate owned (OREO), other repossessed assets (which consist of automobiles and taxi cab medallions) and non-accrual debt securities at June 30, 2019. 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 cost to sell at the time of acquisition and at the lower of cost or fair value, less estimated costs to sell, thereafter. Our non-performing assets totaling $106.7 million at June 30, 2019 increased 3.2 percent from March 31, 2019 and increased 9.9 percent from June 30, 2018, respectively (as shown in the table below). The $3.4 million increase in non-performing assets at June 30, 2019 as compared to March 31, 2019 was mainly due to increases of $3.1 million and $680 thousand in non-accrual loans and non-accrual debt securities, respectively, during the second quarter of 2019, partially offset by a decline in repossessed assets and OREO balances. Non-performing assets as a percentage of total loans and non-performing assets totaled 0.41 percent at June 30, 2019 as compared to 0.40 percent at March 31, 2019. Past due loans and non-accrual loans in the table below exclude PCI loans. Under U.S. GAAP, the PCI loans (acquired at a discount that is due, in part, to credit quality) are accounted for on a pool basis and are not subject to delinquency classification in the same manner as loans originated by Valley. For details regarding performing and non-performing PCI loans, see the "Credit quality indicators" section in Note 7 to the consolidated financial statements.

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

	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	($ in thousands)
Accruing past due loans: *
30 to 59 days past due:
Commercial and industrial	$	14,119		$	5,120		$	13,085		$	9,462		$	6,780
Commercial real estate	6,202			39,362			9,521			3,387			4,323
Construction	—			1,911			2,829			15,576			175
Residential mortgage	19,131			15,856			16,576			10,058			7,961
Total Consumer	11,932			6,647			9,740			7,443			6,573
Total 30 to 59 days past due	51,384			68,896			51,751			45,926			25,812
60 to 89 days past due:
Commercial and industrial	4,135			1,756			3,768			1,431			1,533
Commercial real estate	354			2,156			530			2,502			—
Construction	1,342			—			—			36			—
Residential mortgage	3,635			3,635			2,458			3,270			1,978
Total Consumer	1,484			990			1,386			1,249			860
Total 60 to 89 days past due	10,950			8,537			8,142			8,488			4,371
90 or more days past due:
Commercial and industrial	3,298			2,670			6,156			1,618			560
Commercial real estate	—			—			27			27			27
Residential mortgage	1,054			1,402			1,288			1,877			2,324
Total Consumer	359			523			341			282			198
Total 90 or more days past due	4,711			4,595			7,812			3,804			3,109
Total accruing past due loans	$	67,045		$	82,028		$	67,705		$	58,218		$	33,292
Non-accrual loans: *
Commercial and industrial	$	76,216		$	76,270		$	70,096		$	52,929		$	53,596
Commercial real estate	6,231			2,663			2,372			7,103			7,452
Construction	—			378			356			—			1,100
Residential mortgage	12,069			11,921			12,917			16,083			19,303
Total Consumer	1,999			2,178			2,655			2,248			3,003
Total non-accrual loans	96,515			93,410			88,396			78,363			84,454
Other real estate owned (OREO)	7,161			7,317			9,491			9,863			11,760
Other repossessed assets	2,358			2,628			744			445			864
Non-accrual debt securities **	680			—			—			—			—
Total non-performing assets (NPAs)	$	106,714		$	103,355		$	98,631		$	88,671		$	97,078
Performing troubled debt restructured loans	$	74,385		$	73,081		$	77,216		$	81,141		$	83,694
Total non-accrual loans as a % of loans	0.37		%	0.37		%	0.35		%	0.33		%	0.36		%
Total NPAs as a % of loans and NPAs	0.41			0.40			0.39			0.37			0.42
Total accruing past due and non-accrual loans as a % of loans	0.63			0.69			0.62			0.57			0.51
Allowance for loan losses as a % of non-accrual loans	160.71			165.27			171.79			184.99			164.30

*     Past due loans and non-accrual loans exclude PCI loans that are accounted for on a pool basis.

** Includes other-than-temporarily impaired special revenue bond classified as available for sale presented at carrying value at June 30, 2019.

Loans past due 30 to 59 days decreased $17.5 million to $51.4 million at June 30, 2019 as compared to March 31, 2019 largely due to a decrease in commercial real estate loan delinquencies, partially offset by an increase in commercial and industrial loan delinquencies. Commercial real estate loan delinquencies decreased $33.2 million

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during the second quarter of 2019 as compared to March 31, 2019 partly due to a $15.0 million matured performing commercial real estate loan that was in the normal process of renewal at March 31, 2019, as well as a few other large loans within this past due category that are now current to their contractual payments. Commercial and industrial loan delinquencies increased $9.0 million at June 30, 2019 as compared to March 31, 2019 largely due a $10.0 million matured performing loan that was in the normal process of renewal at June 30, 2019.

Loans past due 60 to 89 days increased $2.4 million to $11.0 million at June 30, 2019 as compared to March 31, 2019 largely due to moderate increases in commercial and industrial and construction loans within this delinquency category. An increase in construction loans was due to a $1.3 million matured performing loan that was in the normal process of renewal included in this delinquency category at June 30, 2019.

Loans past due 90 days or more and still accruing interest increased $116 thousand to $4.7 million at June 30, 2019 as compared to $4.6 million at March 31, 2019. All of the loans past due 90 days or more and still accruing are considered to be well secured and in the process of collection.

Non-accrual loans increased $3.1 million to $96.5 million at June 30, 2019 as compared to $93.4 million at March 31, 2019. The increase was primarily due to two new non-performing loans within the commercial real estate loan category at June 30, 2019. Non-accrual loans represented 0.37 percent of total loans at June 30, 2019 which as a percentage remained unchanged from March 31, 2019.

During the second quarter of 2019, we continued to closely monitor our New York City and Chicago taxi medallion loans totaling $113.2 million and $7.8 million, respectively, within the commercial and industrial loan portfolio at June 30, 2019. While most of the taxi medallion loans are currently performing, negative trends in market valuations of the underlying taxi medallion collateral could impact the future performance and internal classification of this portfolio. At June 30, 2019, the medallion portfolio included impaired loans totaling $78.3 million with related reserves of $29.5 million within the allowance for loan losses as compared to impaired loans totaling $79.6 million with related reserves of $29.6 million at March 31, 2019. At June 30, 2019, the impaired taxi medallion loans largely consisted of $67.7 million of non-accrual loans and $10.6 million of performing troubled debt restructured (TDR) loans classified as substandard loans.

Valley's historical taxi medallion lending criteria had been conservative regarding capping the loan amounts in relation to market valuations, as well as obtaining personal guarantees and other collateral in certain instances. However, the severe decline in the market valuation of taxi medallions has adversely affected the estimated fair valuation of these loans and, as a result, increased the level of our allowance for loan losses at June 30, 2019 (See the "Allowance for Credit Losses" section below). Potential further declines in the market valuation of taxi medallions could also negatively impact the future performance of this portfolio. For example, a 25 percent decline in our current estimated market value of the taxi medallions would require additional allocated reserves of $11.3 million within the allowance for loan losses based upon the impaired taxi medallion loan balances at June 30, 2019.

Valley currently has $13.7 million of performing non-impaired taxi medallion loans which matured in June 2019 and are in the normal process of renewal, and $14.0 million that mature between 2023 and 2028. If the matured loans became TDRs upon renewal, an additional reserve of $5.8 million would be required based on the allowance methodology at June 30, 2019. 

OREO properties decreased $156 thousand to $7.2 million at June 30, 2019 from $7.3 million at March 31, 2019. Net gains on sales of OREO totaled $857 thousand and $1.7 million for the three and six months ended June 30, 2019, respectively. The net gains on sale of OREO were immaterial during the three and six months ended June 30, 2018. The residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $1.7 million at June 30, 2019.

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) increased $1.3 million to $74.4 million at June 30, 2019 as compared to $73.1 million at March 31, 2019. Performing TDRs consisted of 113 loans (primarily in the commercial and industrial loan and commercial real

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estate portfolios) at June 30, 2019. On an aggregate basis, the $74.4 million in performing TDRs at June 30, 2019 had a modified weighted average interest rate of approximately 5.55 percent as compared to a pre-modification weighted average interest rate of 5.42 percent.

Allowance for Credit Losses

The allowance for credit losses includes the allowance for loan losses and the reserve for unfunded commercial letters of credit. Management maintains the allowance for credit losses at a level estimated to absorb probable losses inherent in the loan portfolio and unfunded letter of credit commitments at the balance sheet dates, based on ongoing evaluations of the loan portfolio. Our methodology for evaluating the appropriateness of the allowance for loan losses includes:

• segmentation of the loan portfolio based on the major loan categories, which consist of commercial and industrial, commercial real estate (including construction), residential mortgage, and other consumer loans (including automobile and home equity loans);

• tracking the historical levels of classified loans and delinquencies;

• assessing the nature and trend of loan charge-offs;

• providing specific reserves on impaired loans; and

• evaluating the PCI loan pools for additional credit impairment subsequent to the acquisition dates.

Additionally, the qualitative factors, such as the volume of non-performing loans, concentration risks by size, type, and geography, new markets, collateral adequacy, credit policies and procedures, staffing, underwriting consistency, loan review and economic conditions are taken into consideration when evaluating the adequacy of the allowance for credit losses. The allowance for credit loss methodology and accounting policy are fully described in Part II, Item 7 and Note 1 to the consolidated financial statements in Valley’s Annual Report on Form 10-K for the year ended December 31, 2018.

While management utilizes its best judgment and information available, the ultimate adequacy of the allowance for credit losses is dependent upon a variety of factors largely beyond our control, including the view of the OCC toward loan classifications, performance of the loan portfolio, and the economy. The OCC may require, based on their judgments about information available to them at the time of their examination, that certain loan balances be charged off or require that adjustments be made to the allowance for loan losses when their credit evaluations differ from those of management.

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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 the periods indicated.

	Three Months Ended									Six Months Ended
	June 30, 2019			March 31, 2019			June 30, 2018			June 30, 2019			June 30, 2018
	($ in thousands)
Average loans outstanding	$	25,552,415		$	25,254,733		$	22,840,235		$	25,404,396		$	22,573,097
Beginning balance - Allowance for credit losses	158,961			156,295			136,704			156,295			124,452
Loans charged-off:
Commercial and industrial	(3,073		)	(4,282		)	(642		)	(7,355		)	(773		)
Commercial real estate	—			—			(38		)	—			(348		)
Construction	—			—			—			—			—
Residential mortgage	—			(15		)	(99		)	(15		)	(167		)
Total Consumer	(1,752		)	(2,028		)	(1,422		)	(3,780		)	(2,633		)
Total charge-offs	(4,825		)	(6,325		)	(2,201		)	(11,150		)	(3,921		)
Charged-off loans recovered:
Commercial and industrial	1,195			483			819			1,678			2,926
Commercial real estate	22			21			15			43			384
Construction	—			—			—			—			—
Residential mortgage	9			1			180			10			260
Total Consumer	617			486			495			1,103			963
Total recoveries	1,843			991			1,509			2,834			4,533
Net (charge-offs) recoveries	(2,982		)	(5,334		)	(692		)	(8,316		)	612
Provision charged for credit losses	2,100			8,000			7,142			10,100			18,090
Ending balance - Allowance for credit losses	$	158,079		$	158,961		$	143,154		$	158,079		$	143,154
Components of allowance for credit losses:
Allowance for loan losses	$	155,105		$	154,381		$	138,762		$	155,105		$	138,762
Allowance for unfunded letters of credit	2,974			4,580			4,392			2,974			4,392
Allowance for credit losses	$	158,079		$	158,961		$	143,154		$	158,079		$	143,154
Components of provision for credit losses:
Provision for losses on loans	$	3,706		$	7,856		$	6,592		$	11,562		$	17,294
Provision for unfunded letters of credit	(1,606		)	144			550			(1,462		)	796
Provision for credit losses	$	2,100		$	8,000		$	7,142		$	10,100		$	18,090
Annualized ratio of net charge-offs (recoveries) to average loans outstanding	0.05		%	0.08		%	0.01		%	0.07		%	(0.01		)%
Allowance for credit losses as a % of non-PCI loans	0.72			0.74			0.77			0.72			0.77
Allowance for credit losses as a % of total loans	0.61			0.63			0.62			0.61			0.62

Net loan charge-offs totaled $3.0 million for the second quarter of 2019 as compared to $5.3 million for the first quarter of 2019, and $692 thousand during the second quarter of 2018. The decrease in net loan charge-offs as compared to the first quarter of 2019 was mainly due to better performance within the commercial and industrial loan category in the second quarter of 2019. However, gross loan charge-offs related to taxi medallion loans within the commercial and industrial category were $2.3 million for the second quarter of 2019 as compared to $1.3 million for the first quarter of 2019. There were no tax medallion loan charge-offs in the second quarter of 2018. The overall level

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of loan charge-offs (as presented in the above table) continues to trend within management's expectations for the credit quality of the loan portfolio.

During the second quarter of 2019, we recorded a $2.1 million provision for credit losses as compared to $8.0 million and $7.1 million for the first quarter of 2019 and the second quarter of 2018, respectively. The second quarter of 2019 provision was largely due to loan growth. The provision declined as compared to the first quarter of 2019 partly due to a $1.6 million decrease in reserves for unfunded letters of credit (reported in the commercial and industrial loans category in the table above) and lower reserves for internally criticized loans, as well as moderate declines in the expected incurred losses in several loan categories.

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

	June 30, 2019				March 31, 2019				June 30, 2018
	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*	$	97,358	2.11	%	$	99,210	2.20	%	$	78,649	2.05	%
Commercial real estate loans:
Commercial real estate	23,796		0.19	%	24,261		0.19	%	33,234		0.28	%
Construction	25,182		1.65	%	23,501		1.62	%	20,578		1.49	%
Total commercial real estate loans	48,978		0.34	%	47,762		0.34	%	53,812		0.40	%
Residential mortgage loans	5,219		0.13	%	5,139		0.13	%	4,624		0.13	%
Consumer loans:
Home equity	505		0.10	%	523		0.10	%	604		0.12	%
Auto and other consumer	6,019		0.26	%	6,327		0.29	%	5,465		0.26	%
Total consumer loans	6,524		0.23	%	6,850		0.25	%	6,069		0.23	%
Total allowance for credit losses	$	158,079	0.61	%	$	158,961	0.63	%	$	143,154	0.62	%

* Includes the reserve for unfunded letters of credit.

At June 30, 2019, our allowance allocations for losses as a percentage of total loans remained relatively stable as compared to March 31, 2019 for most loan categories, however, the allocation for commercial and industrial loans declined 0.09 percent partly due to the aforementioned decrease in the reserves for unfunded letters of credit. Our allowance for credit losses as a percentage of total non-PCI loans (excluding PCI loans with carrying values totaling approximately $3.8 billion) was 0.72 percent, 0.74 percent and 0.77 percent at June 30, 2019, March 31, 2019 and June 30, 2018, respectively. PCI loans are accounted for on a pool basis and initially recorded net of fair valuation discounts related to credit which may be used to absorb future losses on such loans before any allowance for loan losses is recognized subsequent to acquisition. Due to the adequacy of such discounts, there were no allowance reserves related to PCI loans at June 30, 2019, March 31, 2019 and June 30, 2018.

Capital Adequacy

A significant measure of the strength of a financial institution is its shareholders’ equity. At June 30, 2019 and December 31, 2018, shareholders’ equity totaled approximately $3.5 billion and $3.4 billion, and represented 10.6 percent and 10.5 percent of total assets, respectively. During the six months ended June 30, 2019, total shareholders’ equity increased by $153.7 million primarily due to (i) net income of $189.8 million, (ii) other comprehensive income increase of $34.3 million, (iii) a $6.3 million increase attributable to the effect of our stock incentive plan, and (iv) a $3.0 million net cumulative effect adjustment to retained earnings for the adoption of new accounting guidance as of January 1, 2019. These positive changes were partially offset by cash dividends declared on common and preferred stock totaling a combined $79.7 million for the six months ended June 30, 2019.

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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.

Effective January 1, 2016, the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) new rules required a 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. The rule changes also included the implementation of a 2.5 percent capital conservation buffer added to the minimum requirements for capital adequacy purposes, subject to a three-year phase-in period. On January 1, 2019, the capital conservation buffer was fully phased-in. As of June 30, 2019, and December 31, 2018, Valley and Valley National Bank exceeded all capital adequacy requirements (see tables below).

The following tables present Valley’s and Valley National Bank’s actual capital positions and ratios under Basel III risk-based capital guidelines at June 30, 2019 and December 31, 2018:

	Actual				Minimum Capital Requirements				To Be Well Capitalized Under Prompt Corrective Action Provision
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	($ in thousands)
As of June 30, 2019
Total Risk-based Capital
Valley	$	2,913,740	11.39	%	$	2,686,127	10.500	%	N/A		N/A
Valley National Bank	2,839,065		11.11		2,683,597		10.500		$	2,555,806	10.00	%
Common Equity Tier 1 Capital
Valley	2,196,856		8.59		1,790,752		7.000		N/A		N/A
Valley National Bank	2,580,986		10.10		1,789,064		7.000		1,661,274		6.50
Tier 1 Risk-based Capital
Valley	2,411,661		9.43		2,174,484		8.500		N/A		N/A
Valley National Bank	2,580,986		10.10		2,172,435		8.500		2,044,645		8.00
Tier 1 Leverage Capital
Valley	2,411,661		7.62		1,265,166		4.00		N/A		N/A
Valley National Bank	2,580,986		8.17		1,264,404		4.00		1,580,505		5.00
As of December 31, 2018
Total Risk-based Capital
Valley	$	2,786,971	11.34	%	$	2,426,975	9.875	%	N/A		N/A
Valley National Bank	2,698,654		10.99		2,424,059		9.875		$	2,454,743	10.00	%
Common Equity Tier 1 Capital
Valley	2,071,871		8.43		1,566,781		6.375		N/A		N/A
Valley National Bank	2,442,359		9.95		1,564,899		6.375		1,595,583		6.50
Tier 1 Risk-based Capital
Valley	2,286,676		9.30		1,935,435		7.875		N/A		N/A
Valley National Bank	2,442,359		9.95		1,933,110		7.875		1,963,794		8.00
Tier 1 Leverage Capital
Valley	2,286,676		7.57		1,208,882		4.00		N/A		N/A
Valley National Bank	2,442,359		8.09		1,207,039		4.00		1,508,798		5.00

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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, 2019		December 31, 2018
	($ in thousands, except for share data)
Common shares outstanding	331,788,149		331,431,217
Shareholders’ equity	$	3,504,118	$	3,350,454
Less: Preferred stock	209,691		209,691
Less: Goodwill and other intangible assets	1,155,250		1,161,655
Tangible common shareholders’ equity	$	2,139,177	$	1,979,108
Tangible book value per common share	$	6.45	$	5.97
Book value per common share	$	9.93	$	9.48

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 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 stockholders) per common share. Our retention ratio was 60.1 percent for the six months ended June 30, 2019 as compared to 32.5 percent for the year ended December 31, 2018. Our retention ratio increased from the year ended December 31, 2018 mainly due to an increase in earnings that was partly driven by the net gain from our sale leaseback transaction and continued implementation of operational improvement strategies.

Cash dividends declared amounted to $0.22 per common share for each of the six months ended June 30, 2019 and 2018. 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. The Federal Reserve has cautioned all bank holding companies about distributing dividends which may reduce the level of capital or not allow capital to grow considering the increased capital levels as required under the Basel III rules. Prior to the date of this filing, Valley has received no objection or adverse guidance from the FRB or the OCC regarding the current level of its quarterly common stock dividend.

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, 2018 in the MD&A section - “Off-Balance Sheet Arrangements” and Notes 12 and 13 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 67 for a discussion of interest rate sensitivity.

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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, 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 Securities Exchange Act of 1934, as amended, 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 are effective as of the end of the period covered by this report.

(b) Changes in internal controls over financial reporting. Valley’s CEO and CFO have also concluded that there have not been any changes in Valley’s internal control over financial reporting in the quarter ended June 30, 2019 that has materially affected, or is reasonably likely to materially affect, Valley’s internal control over financial reporting.

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 may be a party to various outstanding legal proceedings and claims. There have been no material changes in the legal proceedings previously disclosed under Part I, Item 3 and Note 15 to the consolidated financial statements within Valley’s Annual Report on Form 10-K for the year ended December 31, 2018.

Item 1A. Risk Factors

There has been no material change in the risk factors previously disclosed under Part I, Item 1A of Valley’s Annual Report on Form 10-K for the year ended December 31, 2018.

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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 30, 2019 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, 2019 to April 30, 2019	599	$	9.81	—	4,112,465
May 1, 2019 to May 31, 2019	8,464	10.27		—	4,112,465
June 1, 2019 to June 30, 2019	223	9.82		—	4,112,465
Total	9,286	$	10.23	—

(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 30, 2019.

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 November 7, 2017.
	(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 23, 2018.
(10)	Material Contracts
	(10.1)	Agreement and Plan of Merger, dated as of June 25, 2019, between Valley National Bank and Oritani Financial Corp., incorporated herein by reference to Exhibit 10.3 to the Registrant's Form 8-K Current Report filed on June 26, 2019.
(31.1)	Certification pursuant to Securities Exchange Rule 13a-14(a)/15d-14(a) signed by Ira Robbins, President and Chief Executive Officer of the Company.*
(31.2)	Certification pursuant to Securities Exchange Rule 13a-14(a)/15d-14(a) signed by Alan D. Eskow, Senior Executive Vice President and Chief Financial Officer of the Company.*
(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, President and Chief Executive Officer of the Company, and Alan D. Eskow, 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.

84

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 8, 2019	Ira Robbins
	Chairman of the Board, President
	and Chief Executive Officer
Date:	/s/ Alan D. Eskow
August 8, 2019	Alan D. Eskow
	Senior Executive Vice President and
	Chief Financial Officer

85

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Ira Robbins, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Valley National Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2019

/s/ Ira Robbins

Ira Robbins

Chairman of the Board, President and

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

I, Alan D. Eskow, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Valley National Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2019

/s/ Alan D. Eskow

Alan D. Eskow

Senior Executive Vice President and

Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION OF CEO AND CFO PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Valley National Bancorp (the “Company”) for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Ira Robbins, as Chief Executive Officer of the Company, and Alan D. Eskow, as Chief Financial Officer of the Company, each hereby certify, pursuant to 18 U.S.C. (section) 1350, as adopted pursuant to (section) 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ira Robbins

Ira Robbins

Chairman of the Board, President and

Chief Executive Officer

August 8, 2019

/s/ Alan D. Eskow

Alan D. Eskow

Senior Executive Vice President and

Chief Financial Officer

August 8, 2019

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2019	Aug. 06, 2019
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2019
Entity File Number	1-11277
Entity Registrant Name	Valley National Bancorp
Entity Incorporation, State or Country Code	NJ
Entity Tax Identification Number	22-2477875
Entity Address, Address Line One	One Penn Plaza
Entity Address, City or Town	New York,
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10119
City Area Code	973
Local Phone Number	305-8800
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		331,792,538
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Period Period Focus	Q2
Entity Central Index Key	0000714310
Current Fiscal Year End Date	--12-31
Common Stock
Entity Information [Line Items]
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	VLY
Security Exchange Name	NASDAQ
Non-Cumulative Perpetual Preferred Stock, Series A
Entity Information [Line Items]
Title of 12(b) Security	Non-Cumulative Perpetual Preferred Stock, Series A, no par value
Trading Symbol	VLYPP
Security Exchange Name	NASDAQ
Non-Cumulative Perpetual Preferred Stock, Series B
Entity Information [Line Items]
Title of 12(b) Security	Non-Cumulative Perpetual Preferred Stock, Series B, no par value
Trading Symbol	VLYPO
Security Exchange Name	NASDAQ

XML

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets
Cash and due from banks	$ 276,291	$ 251,541
Interest bearing deposits with banks	178,905	177,088
Investment securities:
Held to maturity (fair value of $2,184,792 at June 30, 2019 and $2,034,943 at December 31, 2018)	2,168,236	2,068,246
Available for sale	1,679,350	1,749,544
Total investment securities	3,847,586	3,817,790
Loans held for sale, at fair value	36,641	35,155
Loans	25,802,162	25,035,469
Less: Allowance for loan losses	(155,105)	(151,859)
Net loans	25,647,057	24,883,610
Premises and equipment, net	312,627	341,630
Lease right of use assets	283,348
Bank owned life insurance	442,343	439,602
Accrued interest receivable	99,065	95,296
Goodwill	1,084,665	1,084,665
Other intangible assets, net	70,585	76,990
Other assets	748,628	659,721
Total Assets	33,027,741	31,863,088
Deposits:
Non-interest bearing	6,327,789	6,175,495
Interest bearing:
Savings, NOW and money market	11,107,952	11,213,495
Time	7,338,188	7,063,984
Total deposits	24,773,929	24,452,974
Short-term borrowings	2,387,784	2,118,914
Long-term borrowings	1,800,182	1,654,268
Junior subordinated debentures issued to capital trusts	55,544	55,370
Lease liabilities	307,405	3,125
Accrued expenses and other liabilities	198,779	227,983
Total Liabilities	29,523,623	28,512,634
Shareholders’ Equity
Common stock (no par value, authorized 450,000,000 shares; issued 332,101,525 shares at June 30, 2019 and 331,634,951 shares at December 31, 2018)	116,571	116,240
Surplus	2,804,059	2,796,499
Retained earnings	412,190	299,642
Accumulated other comprehensive loss	(35,131)	(69,431)
Treasury stock, at cost (313,376 common shares at June 30, 2019 and 203,734 common shares at December 31, 2018)	(3,262)	(2,187)
Total Shareholders’ Equity	3,504,118	3,350,454
Total Liabilities and Shareholders’ Equity	33,027,741	31,863,088
Series A
Shareholders’ Equity
Preferred stock, no par value; authorized 50,000,000 shares	111,590	111,590
Series B
Shareholders’ Equity
Preferred stock, no par value; authorized 50,000,000 shares	$ 98,101	$ 98,101

XML

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Held to maturity, fair value	$ 2,184,792	$ 2,034,943
Preferred stock, par value (usd per share)	$ 0	$ 0
Preferred stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, par value (usd per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	450,000,000	450,000,000
Common stock, shares issued (in shares)	332,101,525	331,634,951
Treasury stock, shares (in shares)	313,376	203,734
Series A
Preferred stock, shares issued (in shares)	4,600,000	4,600,000
Series B
Preferred stock, shares issued (in shares)	4,000,000	4,000,000

XML

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interest Income
Interest and fees on loans	$ 296,934	$ 247,690	$ 585,211	$ 485,276
Interest and dividends on investment securities:
Taxable	22,489	22,222	45,365	43,545
Tax-exempt	4,356	5,639	9,160	11,360
Dividends	2,795	3,728	5,969	5,667
Interest on federal funds sold and other short-term investments	1,168	839	2,261	1,765
Total interest income	327,742	280,118	647,966	547,613
Interest on deposits:
Savings, NOW and money market	38,020	24,756	74,303	47,073
Time	40,331	16,635	78,502	31,251
Interest on short-term borrowings	14,860	10,913	27,409	16,645
Interest on long-term borrowings and junior subordinated debentures	14,297	17,062	28,870	34,294
Total interest expense	107,508	69,366	209,084	129,263
Net Interest Income	220,234	210,752	438,882	418,350
Provision for credit losses	2,100	7,142	10,100	18,090
Net Interest Income After Provision for Credit Losses	218,134	203,610	428,782	400,260
Non-Interest Income
Insurance commissions	2,649	4,026	5,174	7,847
Gains (losses) on securities transactions, net	11	(36)	(21)	(801)
Other-than-temporary impairment losses on securities	(2,928)	0	(2,928)	0
Portion recognized in other comprehensive income (before taxes)	0	0	0	0
Net impairment losses on securities recognized in earnings	(2,928)	0	(2,928)	0
Fees from loan servicing	2,367	2,045	4,797	4,268
Gains on sales of loans, net	3,930	7,642	8,506	14,395
(Losses) gains on sales of assets, net	(564)	(125)	77,156	(222)
Bank owned life insurance	2,205	2,652	4,092	4,415
Other	11,010	11,924	20,770	19,994
Total non-interest income	27,603	38,069	135,276	70,320
Non-Interest Expense
Salary and employee benefits expense	76,183	78,944	159,288	172,236
Net occupancy and equipment expense	29,700	26,901	57,586	54,825
FDIC insurance assessment	4,931	8,044	11,052	13,542
Amortization of other intangible assets	4,170	4,617	8,481	8,910
Professional and legal fees	4,145	5,337	9,416	22,384
Amortization of tax credit investments	4,863	4,470	12,036	9,744
Telecommunication expense	2,351	3,015	4,619	6,609
Other	15,394	18,588	27,054	35,418
Total non-interest expense	141,737	149,916	289,532	323,668
Income Before Income Taxes	104,000	91,763	274,526	146,912
Income tax expense	27,532	18,961	84,728	32,145
Net Income	76,468	72,802	189,798	114,767
Dividends on preferred stock	3,172	3,172	6,344	6,344
Net Income Available to Common Shareholders	$ 73,296	$ 69,630	$ 183,454	$ 108,423
Earnings Per Common Share:
Basic (usd per share)	$ 0.22	$ 0.21	$ 0.55	$ 0.33
Diluted (usd per share)	0.22	0.21	0.55	0.33
Cash Dividends Declared per Common Share (usd per share)	$ 0.11	$ 0.11	$ 0.22	$ 0.22
Weighted Average Number of Common Shares Outstanding:
Basic (in shares)	331,748,552	331,318,381	331,675,313	331,024,531
Diluted (in shares)	332,959,802	332,895,483	332,929,359	332,599,991
Trust and investment services
Non-Interest Income
Revenue from contracts with customer	$ 3,096	$ 3,262	$ 6,000	$ 6,492
Service charges on deposit accounts
Non-Interest Income
Revenue from contracts with customer	$ 5,827	$ 6,679	$ 11,730	$ 13,932

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 76,468	$ 72,802	$ 189,798	$ 114,767
Unrealized gains and losses on available for sale securities
Net gains (losses) arising during the period	18,488	(6,249)	34,755	(27,446)
Less reclassification adjustment for net (gains) losses included in net income	(8)	42	18	574
Total	18,480	(6,207)	34,773	(26,872)
Unrealized gains and losses on derivatives (cash flow hedges)
Net (losses) gains on derivatives arising during the period	(683)	455	(1,065)	2,415
Less reclassification adjustment for net losses included in net income	274	619	482	1,655
Total	(409)	1,074	(583)	4,070
Defined benefit pension plan
Amortization of net loss	55	112	110	224
Total other comprehensive income (loss)	18,126	(5,021)	34,300	(22,578)
Total comprehensive income	$ 94,594	$ 67,781	$ 224,098	$ 92,189

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Preferred Series A	Preferred Series B	Common stock	Preferred Stock	Common stock	Surplus	Retained Earnings	Retained Earnings Preferred Series A	Retained Earnings Preferred Series B	Retained Earnings Common stock	Accumulated Other Comprehensive Loss	Treasury Stock
Beginning Balance, Adjusted	$ 2,515,554				$ 209,691	$ 92,727	$ 2,060,356	$ 199,663				$ (46,546)	$ (337)
Beginning balance at Dec. 31, 2017	2,533,165				209,691	$ 92,727	2,060,356	216,733				(46,005)	(337)
Beginning balance (in shares) at Dec. 31, 2017						264,469
Net income	41,965							41,965
Other comprehensive income, net of tax	(17,557)											(17,557)
Cash dividends declared:
Cash dividends declared on preferred stock		$ (1,797)	$ (1,375)						$ (1,797)	$ (1,375)
Cash dividends declared on common stock				$ (36,635)							$ (36,635)
Effect of stock incentive plan, net (in shares)						1,714
Effect of stock incentive plan, net	6,637					$ 355	8,717	(2,266)					(169)
Common stock issued (in shares)						65,007
Common stock issued	738,211					$ 22,742	715,121						348
Ending balance at Mar. 31, 2018	3,245,003				209,691	$ 115,824	2,784,194	199,555				(64,103)	(158)
Ending balance (in shares) at Mar. 31, 2018						331,190
Beginning balance at Dec. 31, 2017	2,533,165				209,691	$ 92,727	2,060,356	216,733				(46,005)	(337)
Beginning balance (in shares) at Dec. 31, 2017						264,469
Net income	114,767
Ending balance at Jun. 30, 2018	3,277,312				209,691	$ 116,027	2,789,190	232,593				(69,124)	(1,065)
Ending balance (in shares) at Jun. 30, 2018						331,454
Beginning balance at Mar. 31, 2018	3,245,003				209,691	$ 115,824	2,784,194	199,555				(64,103)	(158)
Beginning balance (in shares) at Mar. 31, 2018						331,190
Net income	72,802							72,802
Other comprehensive income, net of tax	(5,021)											(5,021)
Cash dividends declared:
Cash dividends declared on preferred stock		(1,797)	(1,375)						(1,797)	(1,375)
Cash dividends declared on common stock				(36,534)							(36,534)
Effect of stock incentive plan, net (in shares)						264
Effect of stock incentive plan, net	4,234					$ 203	4,996	(58)					(907)
Ending balance at Jun. 30, 2018	3,277,312				209,691	$ 116,027	2,789,190	232,593				(69,124)	(1,065)
Ending balance (in shares) at Jun. 30, 2018						331,454
Beginning Balance, Adjusted	3,353,422				209,691	$ 116,240	2,796,499	302,610				(69,431)	(2,187)
Beginning balance at Dec. 31, 2018	3,350,454				209,691	$ 116,240	2,796,499	299,642				(69,431)	(2,187)
Beginning balance (in shares) at Dec. 31, 2018						331,431
Net income	113,330							113,330
Other comprehensive income, net of tax	16,174											16,174
Cash dividends declared:
Cash dividends declared on preferred stock		(1,797)	(1,375)						(1,797)	(1,375)
Cash dividends declared on common stock				(36,686)							(36,686)
Effect of stock incentive plan, net (in shares)						302
Effect of stock incentive plan, net	1,811					$ 226	2,935	(99)					(1,251)
Ending balance at Mar. 31, 2019	3,444,879				209,691	$ 116,466	2,799,434	375,983				(53,257)	(3,438)
Ending balance (in shares) at Mar. 31, 2019						331,733
Beginning balance at Dec. 31, 2018	3,350,454				209,691	$ 116,240	2,796,499	299,642				(69,431)	(2,187)
Beginning balance (in shares) at Dec. 31, 2018						331,431
Net income	189,798
Ending balance at Jun. 30, 2019	3,504,118				209,691	$ 116,571	2,804,059	412,190				(35,131)	(3,262)
Ending balance (in shares) at Jun. 30, 2019						331,788
Beginning balance at Mar. 31, 2019	3,444,879				209,691	$ 116,466	2,799,434	375,983				(53,257)	(3,438)
Beginning balance (in shares) at Mar. 31, 2019						331,733
Net income	76,468							76,468
Other comprehensive income, net of tax	18,126											18,126
Cash dividends declared:
Cash dividends declared on preferred stock		$ (1,797)	$ (1,375)						$ (1,797)	$ (1,375)
Cash dividends declared on common stock				$ (36,712)							$ (36,712)
Effect of stock incentive plan, net (in shares)						55
Effect of stock incentive plan, net	4,529					$ 105	4,625	(377)					176
Ending balance at Jun. 30, 2019	$ 3,504,118				$ 209,691	$ 116,571	$ 2,804,059	$ 412,190				$ (35,131)	$ (3,262)
Ending balance (in shares) at Jun. 30, 2019						331,788

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Parenthetical) - $ / shares	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018
Cash dividends declared (usd per share)	$ 0.11		$ 0.11
Preferred Series A
Cash dividends declared (usd per share)	0.39	$ 0.39	0.39	$ 0.39
Preferred Series B
Cash dividends declared (usd per share)	0.34	0.34	0.34	0.34
Common stock
Cash dividends declared (usd per share)	$ 0.11	$ 0.11	$ 0.11	$ 0.11

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net income	$ 189,798	$ 114,767
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	25,240	13,783
Stock-based compensation	8,282	12,153
Provision for credit losses	10,100	18,090
Net amortization of premiums and accretion of discounts on securities and borrowings	14,287	17,212
Amortization of other intangible assets	8,481	8,910
Losses on securities transactions, net	21	801
Proceeds from sales of loans held for sale	421,730	437,876
Gains on sales of loans, net	(8,506)	(14,395)
Net impairment losses on securities, recognized in earnings	2,928	0
Originations of loans held for sale	(200,877)	(446,849)
(Gains) losses on sales of assets, net	(77,156)	222
Net change in:
Cash surrender value of bank owned life insurance	(4,092)	(4,415)
Accrued interest receivable	(3,769)	(2,042)
Other assets	(186,674)	(55,464)
Accrued expenses and other liabilities	65,970	(16,281)
Net cash provided by operating activities	265,763	84,368
Cash flows from investing activities:
Net loan originations and purchases	(992,236)	(1,158,514)
Investment securities held to maturity:
Purchases	(261,446)	(100,160)
Maturities, calls and principal repayments	155,002	120,876
Investment securities available for sale:
Purchases	0	(239,226)
Sales	0	38,625
Maturities, calls and principal repayments	109,045	124,635
Death benefit proceeds from bank owned life insurance	1,350	2,652
Proceeds from sales of real estate property and equipment	102,500	9,773
Purchases of real estate property and equipment	(9,336)	(12,811)
Cash and cash equivalents acquired in acquisition	0	156,612
Net cash used in investing activities	(895,121)	(1,057,538)
Cash flows from financing activities:
Net change in deposits	320,955	(77,533)
Net change in short-term borrowings	268,870	1,479,305
Advances of long-term borrowings	400,000	0
Repayments of long-term borrowings	(255,000)	(300,027)
Cash dividends paid to preferred shareholders	(3,172)	(6,344)
Cash dividends paid to common shareholders	(73,546)	(65,989)
Purchase of common shares to treasury	(1,462)	(2,598)
Common stock issued, net	(480)	2,512
Other, net	(240)	0
Net cash provided by financing activities	655,925	1,029,326
Net change in cash and cash equivalents	26,567	56,156
Cash and cash equivalents at beginning of year	428,629	416,110
Cash and cash equivalents at end of period	455,196	472,266
Cash payments for:
Interest on deposits and borrowings	198,815	124,816
Federal and state income taxes	80,116	29,280
Supplemental schedule of non-cash investing activities:
Transfer of loans to other real estate owned	1,016	672
Transfer of loans to loans held for sale	216,211	263,324
Lease right of use assets obtained in exchange for operating lease liabilities	296,064
Non-cash assets acquired:
Loans	0	3,736,984
Premises and equipment	0	62,066
Bank owned life insurance	0	49,052
Accrued interest receivable	0	12,123
Goodwill	0	394,028
Other intangible assets	0	45,906
Other assets	0	100,059
Total non-cash assets acquired	0	4,922,820
Liabilities assumed:
Deposits	0	3,564,843
Short-term borrowings	0	649,979
Long-term borrowings	0	87,283
Junior subordinated debentures issued to capital trusts	0	13,249
Accrued expenses and other liabilities	0	26,848
Total liabilities assumed	0	4,342,202
Net non-cash assets acquired	0	580,618
Net cash and cash equivalents acquired in acquisition	0	156,612
Common stock issued in acquisition	0	737,230
Investment securities held to maturity
Non-cash assets acquired:
Investment securities	0	214,217
Investment securities available for sale
Non-cash assets acquired:
Investment securities	$ 0	$ 308,385

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Basis of Presentation

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

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 30, 2019 and for all periods presented have been made. The results of operations for the three and six months ended on June 30, 2019 are not necessarily indicative of the results to be expected for the entire fiscal year.

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 are particularly susceptible to change are: the allowance for loan losses, purchased credit impaired loans, 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.

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, 2018.

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Earnings Per Common Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

The following table shows the calculation of both basic and diluted earnings per common share for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(in thousands, except for share data)
Net income available to common shareholders	$	73,296	$	69,630	$	183,454	$	108,423
Basic weighted average number of common shares outstanding	331,748,552		331,318,381		331,675,313		331,024,531
Plus: Common stock equivalents	1,211,250		1,577,102		1,254,046		1,575,460
Diluted weighted average number of common shares outstanding	332,959,802		332,895,483		332,929,359		332,599,991
Earnings per common share:
Basic	$	0.22	$	0.21	$	0.55	$	0.33
Diluted	0.22		0.21		0.55		0.33

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

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

common stock options equaled approximately 482 thousand and 494 thousand shares for the three and six months ended June 30, 2019, respectively. Anti-dilutive warrants and common stock options equaled 2.9 million shares for both the three and six months ended June 30, 2018. All of Valley's outstanding warrants expired unexercised in the fourth quarter of 2018.

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Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Accumulated Other Comprehensive Loss

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 months ended June 30, 2019: 

	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 March 31, 2019	$	(17,266	)	$	(4,205	)	$	(31,786	)	$	(53,257	)
Other comprehensive income (loss) before reclassification	18,488			(683		)	—			17,805
Amounts reclassified from other comprehensive income (loss)	(8		)	274			55			321
Other comprehensive income (loss), net	18,480			(409		)	55			18,126
Balance at June 30, 2019	$	1,214		$	(4,614	)	$	(31,731	)	$	(35,131	)

	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, 2018	$	(33,559	)	$	(4,031	)	$	(31,841	)	$	(69,431	)
Other comprehensive income (loss) before reclassification	34,755			(1,065		)	—			33,690
Amounts reclassified from other comprehensive income (loss)	18			482			110			610
Other comprehensive income (loss), net	34,773			(583		)	110			34,300
Balance at June 30, 2019	$	1,214		$	(4,614	)	$	(31,731	)	$	(35,131	)

The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three and six months ended June 30, 2019 and 2018:

	Amounts Reclassified from Accumulated Other Comprehensive Loss
	Three Months Ended June 30,						Six Months Ended June 30,
Components of Accumulated Other Comprehensive Loss	2019			2018			2019			2018			Income Statement Line Item
	(in thousands)
Unrealized gains (losses) on AFS securities before tax	$	11		$	(52	)	$	(21	)	$	(795	)	Gains (losses) on securities transactions, net
Tax effect	(3		)	10			3			221
Total net of tax	8			(42		)	(18		)	(574		)
Unrealized losses on derivatives (cash flow hedges) before tax	(383		)	(866		)	(673		)	(2,317		)	Interest expense
Tax effect	109			247			191			662
Total net of tax	(274		)	(619		)	(482		)	(1,655		)
Defined benefit pension plan:
Amortization of net loss	(78		)	(157		)	(156		)	(314		)	*
Tax effect	23			45			46			90
Total net of tax	(55		)	(112		)	(110		)	(224		)
Total reclassifications, net of tax	$	(321	)	$	(773	)	$	(610	)	$	(2,453	)

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

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New Authoritative Accounting Guidance

6 Months Ended

Jun. 30, 2019

Accounting Changes and Error Corrections [Abstract]

New Authoritative Accounting Guidance

New Authoritative Accounting Guidance

New Accounting Guidance Adopted in 2019

Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842)” and subsequent related updates require lessees to recognize leases on balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use model that requires lessees to recognize a right of use (ROU) asset and related lease liability for all leases with a term longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize right of use assets and lease liabilities. Leases will continue to be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

Effective January 1, 2019, Valley adopted ASU No. 2016-02 (and subsequent related updates) and recorded ROU assets of approximately $216 million (net of the reversal of the deferred rent liability at such date) and lease obligations of approximately $241 million. Valley elected the "package of practical expedients," as permitted under the transition guidance within Topic 842.  The practical expedients enable Valley to carry forward lease classifications under the prior accounting guidance (Topic 840). Additionally, the expedients enable the use of hindsight, through which Valley reassessed the likelihood of extending leases under extension clauses available to Valley. This shortened the expected lives of certain leases. As a result, Valley recorded a $4.4 million (net of tax) credit adjustment to the opening balance of retained earnings as of January 1, 2019. Valley also made accounting policy elections to (i) separate non-lease components from its lease obligations with the non-lease components being charged to earnings when incurred and to (ii) exclude short-term leases of 12 months or less from the balance sheet. The comparative periods prior to the adoption date of Topic 842 will continue to be presented in the financial statements in accordance with prior GAAP (Topic 840). See Note 9 for the additional required disclosures.

ASU No. 2017-08, "Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities" shortens the amortization period for certain callable debt securities held at a premium. ASU No. 2017-08 requires the premium to be amortized to the earliest call date. The accounting for

securities held at a discount does not change and the discount continues to be amortized as an adjustment to yield over the contractual life (to maturity) of the instrument. ASU No. 2017-08 was effective for Valley on January 1, 2019 and was applied using the modified retrospective method, resulting in a cumulative-effect adjustment to the opening balance of retained earnings totaling $1.4 million (net of tax) as of January 1, 2019. ASU No. 2017-08 did not have a significant impact on Valley's consolidated financial statements.

ASU No. 2019-01, "Leases (Topic 842): Codification Improvements" reinstates the fair value exception in ASC 840, in which lessors will measure fair value, at lease commencement, as cost, reflecting any applicable volume or trade discounts. ASU No. 2019-01 also requires lessors that are depository or lending institutions in the scope of Topic 842 to classify the principal portion of lease payments received under sales-type and direct financing leases as cash flows from investing activities. The interest portion of those and all lease payments received under operating leases are classified as cash flows from operating activities. Effective January 1, 2019, Valley early adopted ASU No. 2019-01 concurrent with its adoption of Topic 842. The adoption of ASU No. 2019-01 did not have a material impact on Valley's consolidated financial statements.

New Accounting Guidance Not Yet Adopted

ASU No. 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief" provides transition relief for entities adopting the credit losses standard, ASU No. 2016-13. Specifically, this update amends ASU No. 2016-13 to allow companies to irrevocably elect, upon adoption of ASU No. 2016-13, the fair value option for financial instruments that (1) were previously recorded at amortized cost, (2) are within the scope of the credit losses guidance in Topic 326-20, (3) are eligible for the fair value option under Topic 825-10, and (4) are not held-to-maturity debt securities. ASU No. 2019-05 is effective for Valley for reporting periods beginning January 1, 2020. Management is currently evaluating the impact of the ASU on Valley’s consolidated financial statements.

ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments" clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement. The most significant provisions of the ASU relate to how companies will estimate expected credit losses under Topic 326 by incorporating (1) expected recoveries of financial assets, including recoveries of amounts expected to be written off and those previously written off, and (2) clarifying that contractual extensions or renewal options that are not unconditionally cancellable by the lender are considered when determining the contractual term over which expected credit losses are measured. ASU No. 2019-04 is effective for Valley for reporting periods beginning January 1, 2020. Management is currently evaluating the impact of the ASU on Valley’s consolidated financial statements. See more details regarding our current implementation of Topic 326 and ASU No. 2016-13 below.

ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test guidance) to measure a goodwill impairment charge. Instead, an entity will be required to record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on Step 1 of the current guidance). In addition, ASU No. 2017-04 eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. However, an entity will be required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 is effective for Valley for its annual or any interim goodwill impairment tests in fiscal years beginning January 1, 2020 and is not expected to have a significant impact on the presentation of Valley's consolidated financial statements. Early adoption is permitted for annual and interim goodwill impairment testing dates.

ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" amends the accounting guidance on the impairment of financial instruments. ASU No. 2016-13 adds to U.S. GAAP an impairment model (known as the current expected credit loss (CECL) model) that is based on all

expected losses over the lives of the assets rather than incurred losses. Under the new guidance, an entity is required to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

ASU No. 2016-13 is effective for Valley for reporting periods beginning January 1, 2020 and Management is currently evaluating the impact of the ASU on Valley’s consolidated financial statements. Valley’s implementation effort is managed through several cross-functional working groups. These groups continue to evaluate the requirements of the new standard, assess its impact on current operational processes, and develop loss models that accurately project lifetime expected loss estimates. Valley expects that the adoption of ASU No. 2016-13 will result in an increase in its allowance for credit losses due to several factors, including: (i) the allowance related to Valley loans will increase to include credit losses over the full remaining expected life of the portfolio, and will consider expected future changes in macroeconomic conditions, (ii) the non-accretable difference (as defined in Note 7) on PCI loans will be recognized as an allowance, offset by an increase in the carrying value of the related loans, and (iii) an allowance will be established for estimated credit losses on investment securities classified as held to maturity. The extent of the increase is under evaluation but will depend upon the nature and characteristics of Valley's loan and investment portfolios at the adoption date, and the economic conditions and forecasts at that date.

During the second quarter of 2019, Valley began the process of performing parallel runs for CECL alongside the current allowance process. Management will continue to refine and validate the new methodologies and models throughout 2019.

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Fair Value Measurement of Assets and Liabilities

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurement of Assets and Liabilities

Fair Value Measurement of Assets and Liabilities

ASC Topic 820, “Fair Value Measurements and Disclosures,” 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 nonrecurring basis by level within the fair value hierarchy as reported on the consolidated statements of financial condition at June 30, 2019 and December 31, 2018. The assets presented under “nonrecurring 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, 2019		Fair Value Measurements at Reporting Date Using:
			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Available for sale:
U.S. Treasury securities	$	50,741	$	50,741	$	—	$	—
U.S. government agency securities	33,028		—		33,028		—
Obligations of states and political subdivisions	186,697		—		186,017		680
Residential mortgage-backed securities	1,372,979		—		1,372,979		—
Corporate and other debt securities	35,905		—		35,905		—
Total available for sale	1,679,350		50,741		1,627,929		680
Loans held for sale (1)	36,641		—		36,641		—
Other assets (2)	140,496		—		140,496		—
Total assets	$	1,856,487	$	50,741	$	1,805,066	$	680
Liabilities
Other liabilities (2)	$	33,502	$	—	$	33,502	$	—
Total liabilities	$	33,502	$	—	$	33,502	$	—
Non-recurring fair value measurements:
Collateral dependent impaired loans (3)	$	43,707	$	—	$	—	$	43,707
Foreclosed assets	5,587		—		—		5,587
Total	$	49,294	$	—	$	—	$	49,294

			Fair Value Measurements at Reporting Date Using:
	December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Available for sale:
U.S. Treasury securities	$	49,306	$	49,306	$	—	$	—
U.S. government agency securities	36,277		—		36,277		—
Obligations of states and political subdivisions	197,092		—		197,092		—
Residential mortgage-backed securities	1,429,782		—		1,429,782		—
Corporate and other debt securities	37,087		—		37,087		—
Total available for sale	1,749,544		49,306		1,700,238		—
Loans held for sale (1)	35,155		—		35,155		—
Other assets (2)	48,979		—		48,979		—
Total assets	$	1,833,678	$	49,306	$	1,784,372	$	—
Liabilities
Other liabilities (2)	$	23,681	$	—	$	23,681	$	—
Total liabilities	$	23,681	$	—	$	23,681	$	—
Non-recurring fair value measurements:
Collateral dependent impaired loans (3)	$	45,245	$	—	$	—	$	45,245
Loan servicing rights	273		—		—		273
Foreclosed assets	5,673		—		—		5,673
Total	$	51,191	$	—	$	—	$	51,191

(1) Represents residential mortgage loans originated for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately $35.6 million and $34.6 million at June 30, 2019 and December 31, 2018, respectively.

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

(3) Excludes PCI loans.

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.

Available for sale securities. All U.S. Treasury securities, certain corporate and other debt securities, and certain preferred equity 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 calculating the fair value of one impaired special revenue bond (within obligations of states and political subdivisions in the table above) under Level 3, Valley prepared its best estimate of the present value of the cash flows to determine an internal price estimate. In determining the internal price, Valley utilized recent financial information and developments provided by the issuer, as well as other unobservable inputs which reflect Valley’s own assumptions about the inputs that market participants would use in pricing of the defaulted security. A quoted price received from an independent pricing service was weighted with the internal price estimate to determine the fair value of the instrument at June 30, 2019. See Note 6 for additional information regarding this impaired security.

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 30, 2019 and December 31, 2018 based on the short duration these assets were held, and the high 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 and Overnight Index Swap rate curves. The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at June 30, 2019 and December 31, 2018), 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 30, 2019 and December 31, 2018.

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 nonrecurring basis, including impaired 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.

Impaired loans. Certain impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral and are commonly referred to as “collateral dependent impaired loans.” Collateral values are estimated using Level 3 inputs, consisting of individual appraisals that may be adjusted based on certain discounting criteria. At June 30, 2019, certain appraisals were discounted based on specific market data by location and property type. During the quarter ended June 30, 2019, collateral dependent impaired loans were individually re-measured and reported at fair value through direct loan charge-offs to the allowance for loan losses and/or a specific valuation allowance allocation based on the fair value of the underlying collateral. The collateral dependent loan charge-offs to the allowance for loan losses totaled $938 thousand for the three and six months ended June 30, 2019. The collateral dependent loan charge-offs to the allowance for loan losses for the three and six months ended June 30, 2018 were immaterial. At June 30, 2019, collateral dependent impaired loans with a total recorded investment of $73.4 million were reduced by specific valuation allowance allocations totaling $29.7 million to a reported total net carrying amount of $43.7 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 30, 2019, the fair value model used a blended prepayment speed (stated as constant prepayment rates) of 11.0 percent and a discount rate of 9.5 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 30, 2019, loan servicing rights were not re-measured at fair value and were carried at amortized cost. Valley recorded net recoveries of impairment charges on its loan servicing rights totaling $107 thousand and $84 thousand for the three and six months ended June 30, 2019, respectively, as compared to net impairment charges totaling $90 thousand and $317 thousand for the three and six months ended June 30, 2018, respectively.

Foreclosed assets. Certain foreclosed assets (consisting of other real estate owned and other repossessed assets), upon initial recognition and transfer from loans, are re-measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the foreclosed assets. The fair value of a foreclosed asset, upon initial recognition, is typically estimated using Level 3 inputs, consisting of an appraisal that is adjusted based on certain discounting criteria, similar to the criteria used for impaired loans described above. There were no discount adjustments of the appraisals of foreclosed assets at June 30, 2019. At June 30, 2019, foreclosed assets included $5.6 million of assets that were measured at fair value upon initial recognition or subsequently re-measured at June 30, 2019. The foreclosed assets charge-offs to the allowance for the loan losses totaled $653 thousand and $649 thousand for the three months ended June 30, 2019 and 2018, respectively, and $1.4 million and $1.2 million for the six months ended June 30, 2019 and 2018, respectively. The re-measurement of foreclosed assets at fair value subsequent to their initial recognition resulted in net losses of $160 thousand and $145 thousand for the within non-interest expense for the six months ended June 30, 2019 and 2018, respectively. The net loss from re-measurement of foreclosed assets at fair value subsequent to their initial recognition for the three months ended June 30, 2019 and 2018 was immaterial.

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 30, 2019 and December 31, 2018 were as follows: 

	Fair Value Hierarchy	June 30, 2019				December 31, 2018
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets
Cash and due from banks	Level 1	$	276,291	$	276,291	$	251,541	$	251,541
Interest bearing deposits with banks	Level 1	178,905		178,905		177,088		177,088
Investment securities held to maturity:
U.S. Treasury securities	Level 1	138,436		144,655		138,517		142,049
U.S. government agency securities	Level 2	8,049		8,092		8,721		8,641
Obligations of states and political subdivisions	Level 2	536,778		549,050		585,656		586,033
Residential mortgage-backed securities	Level 2	1,415,409		1,419,066		1,266,770		1,235,605
Trust preferred securities	Level 2	37,314		31,372		37,332		31,486
Corporate and other debt securities	Level 2	32,250		32,557		31,250		31,129
Total investment securities held to maturity		2,168,236		2,184,792		2,068,246		2,034,943
Net loans	Level 3	25,647,057		25,207,831		24,883,610		24,068,755
Accrued interest receivable	Level 1	99,065		99,065		95,296		95,296
Federal Reserve Bank and Federal Home Loan Bank stock (1)	Level 1	260,490		260,490		232,080		232,080
Financial liabilities
Deposits without stated maturities	Level 1	17,435,741		17,435,741		17,388,990		17,388,990
Deposits with stated maturities	Level 2	7,338,188		7,338,945		7,063,984		7,005,573
Short-term borrowings	Level 1	2,387,784		2,388,299		2,118,914		2,091,892
Long-term borrowings	Level 2	1,800,182		1,840,862		1,654,268		1,751,194
Junior subordinated debentures issued to capital trusts	Level 2	55,544		57,040		55,370		55,692
Accrued interest payable (2)	Level 1	36,031		36,031		25,762		25,762

(1) Included in other assets.

(2)

Included in accrued expenses and other liabilities.

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Investment Securities

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment Securities

Held to Maturity

The amortized cost, gross unrealized gains and losses and fair value of securities held to maturity at June 30, 2019 and December 31, 2018 were as follows: 

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2019
U.S. Treasury securities	$	138,436	$	6,219	$	—		$	144,655
U.S. government agency securities	8,049		69		(26		)	8,092
Obligations of states and political subdivisions:
Obligations of states and state agencies	314,878		7,680		(992		)	321,566
Municipal bonds	221,900		5,640		(56		)	227,484
Total obligations of states and political subdivisions	536,778		13,320		(1,048		)	549,050
Residential mortgage-backed securities	1,415,409		13,242		(9,585		)	1,419,066
Trust preferred securities	37,314		62		(6,004		)	31,372
Corporate and other debt securities	32,250		399		(92		)	32,557
Total investment securities held to maturity	$	2,168,236	$	33,311	$	(16,755	)	$	2,184,792
December 31, 2018
U.S. Treasury securities	$	138,517	$	3,532	$	—		$	142,049
U.S. government agency securities	8,721		55		(135		)	8,641
Obligations of states and political subdivisions:
Obligations of states and state agencies	341,702		4,332		(5,735		)	340,299
Municipal bonds	243,954		3,141		(1,361		)	245,734
Total obligations of states and political subdivisions	585,656		7,473		(7,096		)	586,033
Residential mortgage-backed securities	1,266,770		3,203		(34,368		)	1,235,605
Trust preferred securities	37,332		77		(5,923		)	31,486
Corporate and other debt securities	31,250		96		(217		)	31,129
Total investment securities held to maturity	$	2,068,246	$	14,436	$	(47,739	)	$	2,034,943

The age of unrealized losses and fair value of related securities held to maturity at June 30, 2019 and December 31, 2018 were as follows: 

	Less than Twelve Months					More than Twelve Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
June 30, 2019
U.S. government agency securities	$	—	$	—		$	5,675	$	(26	)	$	5,675	$	(26	)
Obligations of states and political subdivisions:
Obligations of states and state agencies	—		—			45,843		(992		)	45,843		(992		)
Municipal bonds	4,968		(27		)	4,331		(29		)	9,299		(56		)
Total obligations of states and political subdivisions	4,968		(27		)	50,174		(1,021		)	55,142		(1,048		)
Residential mortgage-backed securities	3,445		(7		)	674,804		(9,578		)	678,249		(9,585		)
Trust preferred securities	—		—			29,957		(6,004		)	29,957		(6,004		)
Corporate and other debt securities	—		—			4,908		(92		)	4,908		(92		)
Total	$	8,413	$	(34	)	$	765,518	$	(16,721	)	$	773,931	$	(16,755	)
December 31, 2018
U.S. government agency securities	$	—	$	—		$	6,074	$	(135	)	$	6,074	$	(135	)
Obligations of states and political subdivisions:
Obligations of states and state agencies	16,098		(266		)	138,437		(5,469		)	154,535		(5,735		)
Municipal bonds	3,335		(37		)	60,078		(1,324		)	63,413		(1,361		)
Total obligations of states and political subdivisions	19,433		(303		)	198,515		(6,793		)	217,948		(7,096		)
Residential mortgage-backed securities	72,240		(852		)	846,671		(33,516		)	918,911		(34,368		)
Trust preferred securities	—		—			30,055		(5,923		)	30,055		(5,923		)
Corporate and other debt securities	9,948		(52		)	4,835		(165		)	14,783		(217		)
Total	$	101,621	$	(1,207	)	$	1,086,150	$	(46,532	)	$	1,187,771	$	(47,739	)

The unrealized losses on investment securities held to maturity are primarily due to changes in interest rates (including, in certain cases, changes in credit spreads) and, in some cases, lack of liquidity in the marketplace. Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 127 at June 30, 2019 and 378 at December 31, 2018.

The unrealized losses within the residential mortgage-backed securities category of the held to maturity portfolio at June 30, 2019 mostly related to investment grade securities issued by Ginnie Mae and Fannie Mae.

The unrealized losses existing for more than twelve months for trust preferred securities at June 30, 2019 primarily related to four non-rated single-issuer trust preferred securities issued by bank holding companies. All single-issuer trust preferred securities classified as held to maturity are paying in accordance with their terms, have no deferrals of interest or defaults and, if applicable, the issuers meet the regulatory capital requirements to be considered “well-capitalized institutions” at June 30, 2019.

As of June 30, 2019, the fair value of investments held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $1.3 billion.

The contractual maturities of investments in debt securities held to maturity at June 30, 2019 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, 2019
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	30,122	$	30,109
Due after one year through five years	237,783		243,951
Due after five years through ten years	242,178		253,387
Due after ten years	242,744		238,279
Residential mortgage-backed securities	1,415,409		1,419,066
Total investment securities held to maturity	$	2,168,236	$	2,184,792

Actual maturities of 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 6.6 years at June 30, 2019.

Available for Sale

The amortized cost, gross unrealized gains and losses and fair value of securities available for sale at June 30, 2019 and December 31, 2018 were as follows: 

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2019
U.S. Treasury securities	$	50,963	$	—	$	(222	)	$	50,741
U.S. government agency securities	32,525		521		(18		)	33,028
Obligations of states and political subdivisions:
Obligations of states and state agencies	87,473		465		(222		)	87,716
Municipal bonds	98,305		899		(223		)	98,981
Total obligations of states and political subdivisions	185,778		1,364		(445		)	186,697
Residential mortgage-backed securities	1,373,033		8,303		(8,357		)	1,372,979
Corporate and other debt securities	35,416		489		—			35,905
Total investment securities available for sale	$	1,677,715	$	10,677	$	(9,042	)	$	1,679,350
December 31, 2018
U.S. Treasury securities	$	50,975	$	—	$	(1,669	)	$	49,306
U.S. government agency securities	36,844		71		(638		)	36,277
Obligations of states and political subdivisions:
Obligations of states and state agencies	100,777		18		(3,682		)	97,113
Municipal bonds	101,207		209		(1,437		)	99,979
Total obligations of states and political subdivisions	201,984		227		(5,119		)	197,092
Residential mortgage-backed securities	1,469,059		1,484		(40,761		)	1,429,782
Corporate and other debt securities	37,542		213		(668		)	37,087
Total investment securities available for sale	$	1,796,404	$	1,995	$	(48,855	)	$	1,749,544

The age of unrealized losses and fair value of related securities available for sale at June 30, 2019 and December 31, 2018 were as follows: 

	Less than Twelve Months					More than Twelve Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
June 30, 2019
U.S. Treasury securities	$	—	$	—		$	50,741	$	(222	)	$	50,741	$	(222	)
U.S. government agency securities	—		—			2,488		(18		)	2,488		(18		)
Obligations of states and political subdivisions:
Obligations of states and state agencies	—		—			43,868		(222		)	43,868		(222		)
Municipal bonds	1,986		(34		)	20,335		(189		)	22,321		(223		)
Total obligations of states and political subdivisions	1,986		(34		)	64,203		(411		)	66,189		(445		)
Residential mortgage-backed securities	220		(3		)	703,691		(8,354		)	703,911		(8,357		)
Total	$	2,206	$	(37	)	$	821,123	$	(9,005	)	$	823,329	$	(9,042	)
December 31, 2018
U.S. Treasury securities	$	—	$	—		$	49,306	$	(1,669	)	$	49,306	$	(1,669	)
U.S. government agency securities	2,120		(20		)	26,775		(618		)	28,895		(638		)
Obligations of states and political subdivisions:
Obligations of states and state agencies	17,560		(95		)	75,718		(3,587		)	93,278		(3,682		)
Municipal bonds	5,018		(106		)	70,286		(1,331		)	75,304		(1,437		)
Total obligations of states and political subdivisions	22,578		(201		)	146,004		(4,918		)	168,582		(5,119		)
Residential mortgage-backed securities	119,645		(668		)	1,221,942		(40,093		)	1,341,587		(40,761		)
Corporate and other debt securities	12,339		(161		)	12,397		(507		)	24,736		(668		)
Total	$	156,682	$	(1,050	)	$	1,456,424	$	(47,805	)	$	1,613,106	$	(48,855	)

The unrealized losses on investment securities available for sale are primarily due to changes in interest rates (including, in certain cases, changes in credit spreads) and, in some cases, lack of liquidity in the marketplace. The total number of security positions in the securities available for sale portfolio in an unrealized loss position at June 30, 2019 was 294 as compared to 545 at December 31, 2018.

The unrealized losses for the residential mortgage-backed securities category of the available for sale portfolio at June 30, 2019 largely related to several investment grade residential mortgage-backed securities mainly issued by Ginnie Mae, Fannie Mae, and Freddie Mac.

As of June 30, 2019, the fair value of securities available for sale that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $1.1 billion.

The contractual maturities of debt securities available for sale at June 30, 2019 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, 2019
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	9,121	$	9,117
Due after one year through five years	125,530		125,671
Due after five years through ten years	66,064		67,046
Due after ten years	103,967		104,537
Residential mortgage-backed securities	1,373,033		1,372,979
Total investment securities available for sale	$	1,677,715	$	1,679,350

Actual maturities of 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 6.7 years at June 30, 2019.

Other-Than-Temporary Impairment Analysis

Valley records impairment charges on its investment securities when the decline in fair value is considered other-than-temporary. Numerous factors, including lack of liquidity for re-sales of certain investment securities; decline in the creditworthiness of the issuer; absence of reliable pricing information for investment securities; adverse changes in business climate; adverse actions by regulators; or unanticipated changes in the competitive environment could have a negative effect on Valley’s investment portfolio and may result in other-than-temporary impairment on certain investment securities in future periods.

During the three months ended June 30, 2019, Valley recognized a $2.9 million other-than-temporary credit impairment charge on one special revenue bond classified as available for sale (within the obligations of states and state agencies in the tables above). The credit impairment was due to severe credit deterioration disclosed by the issuer in the second quarter of 2019, as well as the issuer's default on its contractual payment. At June 30, 2019, the impaired security had an adjusted amortized cost and fair value of $680 thousand after recognition of the credit impairment. Comparatively, there were no other-than-temporary impairment losses on securities recognized in earnings for the three and six months ended June 30, 2018.

The obligations of states and political subdivisions include special revenue bonds which had an aggregated amortized cost and fair value of $306.5 million and $308.5 million, respectively, at June 30, 2019. The gross unrealized losses associated with the special revenue bonds totaled $1.4 million as of June 30, 2019. The special revenue bonds were largely issued by the states of (or municipalities within) Utah, Minnesota, Florida, other state housing authorities, as well the Port Authority of New York. As part of Valley’s pre-purchase analysis and on-going quarterly assessment of impairment of the obligations of states and political subdivisions, our Credit Risk Management Department conducts a financial analysis and risk rating assessment of each security issuer based on the issuer’s most recently issued financial statements and other publicly available information. Exclusive of the impaired security, these investments are a mix of bonds with investment grade ratings or not rated paying in accordance with their contractual terms. The vast majority of the bonds not rated by the rating agencies are state housing finance agency revenue bonds secured by Ginnie Mae securities that are commonly referred to as Tax Exempt Mortgage Securities (TEMS). Valley will continue to closely monitor the special revenue bond portfolio as part of its quarterly impairment analysis.

The impaired special revenue bond was not accruing interest as of June 30, 2019. Valley discontinues the recognition of interest on debt securities if the securities meet both of the following criteria: (i) regularly scheduled interest payments

have not been paid or have been deferred by the issuer, and (ii) full collection of all contractual principal and interest payments is not deemed to be the most likely outcome, resulting in the recognition of other-than-temporary impairment of the security.

Management does not believe that any individual unrealized loss as of June 30, 2019 included in the investment portfolio tables above represents other-than-temporary impairment, as management mainly attributes the declines in fair value to changes in interest rates and 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 believes there are no credit losses on any other securities, except for the impaired special revenue bond discussed above.

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Loans

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Loans

Loans

The detail of the loan portfolio as of June 30, 2019 and December 31, 2018 was as follows: 

	June 30, 2019						December 31, 2018
	Non-PCI Loans		PCI Loans		Total		Non-PCI Loans		PCI Loans		Total
	(in thousands)
Loans:
Commercial and industrial	$	3,918,894	$	696,871	$	4,615,765	$	3,590,375	$	740,657	$	4,331,032
Commercial real estate:
Commercial real estate	10,470,127		2,327,890		12,798,017		9,912,309		2,494,966		12,407,275
Construction	1,288,417		240,551		1,528,968		1,122,348		365,784		1,488,132
Total commercial real estate loans	11,758,544		2,568,441		14,326,985		11,034,657		2,860,750		13,895,407
Residential mortgage	3,694,463		377,987		4,072,450		3,682,984		428,416		4,111,400
Consumer:
Home equity	385,987		115,659		501,646		371,340		145,749		517,089
Automobile	1,362,143		323		1,362,466		1,319,206		365		1,319,571
Other consumer	910,174		12,676		922,850		846,821		14,149		860,970
Total consumer loans	2,658,304		128,658		2,786,962		2,537,367		160,263		2,697,630
Total loans	$	22,030,205	$	3,771,957	$	25,802,162	$	20,845,383	$	4,190,086	$	25,035,469

Total loans include net unearned premiums and deferred loan costs of $19.6 million and $21.5 million at June 30, 2019 and December 31, 2018, respectively. The outstanding balances (representing contractual balances owed to Valley) for PCI loans totaled $4.0 billion and $4.4 billion at June 30, 2019 and December 31, 2018, respectively.

Valley transferred $216.2 million and $263.3 million of residential mortgage loans from the loan portfolio to loans held for sale during the six months ended June 30, 2019 and 2018, respectively. There were no other sales of loans from the held for investment portfolio during the six months ended June 30, 2019 and 2018.

Purchased Credit-Impaired Loans

PCI loans are accounted for in accordance with ASC Subtopic 310-30 and are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance (i.e., the allowance for loan losses), and aggregated and accounted for as pools of loans based on common risk characteristics. The difference between the undiscounted cash flows expected at acquisition and the initial carrying amount (fair value) of the PCI loans, or the “accretable yield,” is recognized as interest income utilizing the level-yield method over the life of each pool. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non-accretable difference,” are not recognized as a yield adjustment, as a loss accrual or a valuation allowance. Reclassifications of the non-accretable difference to the accretable yield may occur subsequent to the loan acquisition dates due to increases in expected cash flows of the loan pools.

The following table presents changes in the accretable yield for PCI loans during the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(in thousands)
Balance, beginning of period	$	890,771		$	691,086		$	875,958		$	282,009
Acquisition	—			—			—			474,208
Accretion	(55,014		)	(60,536		)	(108,506		)	(125,667		)
Net increase in expected cash flows	18,130			—			86,435			—
Balance, end of period	$	853,887		$	630,550		$	853,887		$	630,550

The net increase in expected cash flows for certain pools of loans (included in the table above) is recognized prospectively as an adjustment to the yield over the estimated remaining life of the individual pools. Based upon the most recent reforecasted cash flows during the first half of 2019, the net increase in expected cash flows for the three and six months ended June 30, 2019 was largely driven by additional advances on acquired lines of credit coupled with lower prospective loss expectations.

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.

Credit Quality

The following table presents past due, non-accrual and current loans (excluding PCI loans, which are accounted for on a pool basis) by loan portfolio class at June 30, 2019 and December 31, 2018: 

	Past Due and Non-Accrual Loans
	30-59 Days Past Due Loans		60-89 Days Past Due Loans		Accruing Loans 90 Days or More Past Due		Non-Accrual Loans		Total Past Due Loans		Current Non-PCI Loans		Total Non-PCI Loans
	(in thousands)
June 30, 2019
Commercial and industrial	$	14,119	$	4,135	$	3,298	$	76,216	$	97,768	$	3,821,126	$	3,918,894
Commercial real estate:
Commercial real estate	6,202		354		—		6,231		12,787		10,457,340		10,470,127
Construction	—		1,342		—		—		1,342		1,287,075		1,288,417
Total commercial real estate loans	6,202		1,696		—		6,231		14,129		11,744,415		11,758,544
Residential mortgage	19,131		3,635		1,054		12,069		35,889		3,658,574		3,694,463
Consumer loans:
Home equity	673		82		—		1,630		2,385		383,602		385,987
Automobile	7,221		925		328		148		8,622		1,353,521		1,362,143
Other consumer	4,038		477		31		221		4,767		905,407		910,174
Total consumer loans	11,932		1,484		359		1,999		15,774		2,642,530		2,658,304
Total	$	51,384	$	10,950	$	4,711	$	96,515	$	163,560	$	21,866,645	$	22,030,205
December 31, 2018
Commercial and industrial	$	13,085	$	3,768	$	6,156	$	70,096	$	93,105	$	3,497,270	$	3,590,375
Commercial real estate:
Commercial real estate	9,521		530		27		2,372		12,450		9,899,859		9,912,309
Construction	2,829		—		—		356		3,185		1,119,163		1,122,348
Total commercial real estate loans	12,350		530		27		2,728		15,635		11,019,022		11,034,657
Residential mortgage	16,576		2,458		1,288		12,917		33,239		3,649,745		3,682,984
Consumer loans:
Home equity	872		40		—		2,156		3,068		368,272		371,340
Automobile	7,973		1,299		308		80		9,660		1,309,546		1,319,206
Other consumer	895		47		33		419		1,394		845,427		846,821
Total consumer loans	9,740		1,386		341		2,655		14,122		2,523,245		2,537,367
Total	$	51,751	$	8,142	$	7,812	$	88,396	$	156,101	$	20,689,282	$	20,845,383

Impaired loans. Impaired loans, consisting of non-accrual commercial and industrial loans and commercial real estate loans over $250 thousand and all loans which were modified in troubled debt restructuring, are individually evaluated for impairment. PCI loans are not classified as impaired loans because they are accounted for on a pool basis.

The following table presents information about impaired loans by loan portfolio class at June 30, 2019 and December 31, 2018:

	Recorded Investment With No Related Allowance		Recorded Investment With Related Allowance		Total Recorded Investment		Unpaid Contractual Principal Balance		Related Allowance
	(in thousands)
June 30, 2019
Commercial and industrial	$	13,008	$	90,018	$	103,026	$	115,602	$	31,128
Commercial real estate:
Commercial real estate	20,707		26,258		46,965		49,067		2,604
Construction	354		—		354		354		—
Total commercial real estate loans	21,061		26,258		47,319		49,421		2,604
Residential mortgage	6,046		6,448		12,494		13,531		668
Consumer loans:
Home equity	221		519		740		838		50
Total consumer loans	221		519		740		838		50
Total	$	40,336	$	123,243	$	163,579	$	179,392	$	34,450
December 31, 2018
Commercial and industrial	$	8,339	$	89,513	$	97,852	$	104,007	$	29,684
Commercial real estate:
Commercial real estate	16,732		25,606		42,338		44,337		2,615
Construction	803		457		1,260		1,260		13
Total commercial real estate loans	17,535		26,063		43,598		45,597		2,628
Residential mortgage	7,826		6,078		13,904		14,948		600
Consumer loans:
Home equity	125		1,146		1,271		1,366		113
Total consumer loans	125		1,146		1,271		1,366		113
Total	$	33,825	$	122,800	$	156,625	$	165,918	$	33,025

The following table presents, by loan portfolio class, the average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2019 and 2018: 

	Three Months Ended June 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Commercial and industrial	$	105,633	$	443	$	87,674	$	212
Commercial real estate:
Commercial real estate	46,234		547		52,729		563
Construction	354		—		2,244		16
Total commercial real estate loans	46,588		547		54,973		579
Residential mortgage	12,254		95		12,914		185
Consumer loans:
Home equity	747		10		1,794		33
Total consumer loans	747		10		1,794		33
Total	$	165,222	$	1,095	$	157,355	$	1,009

	Six Months Ended June 30, 2018
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Commercial and industrial	$	111,329	$	1,014	$	88,865	$	926
Commercial real estate:
Commercial real estate	45,515		1,266		54,104		1,179
Construction	587		—		2,230		39
Total commercial real estate loans	46,102		1,266		56,334		1,218
Residential mortgage	13,072		239		13,502		350
Consumer loans:
Home equity	940		21		1,910		66
Total consumer loans	940		21		1,910		66
Total	$	171,443	$	2,540	$	160,611	$	2,560

Interest income recognized on a cash basis (included in the table above) was immaterial for the three and six months ended June 30, 2019 and 2018.

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). Valley’s PCI loans are excluded from the TDR disclosures below because they are evaluated for impairment on a pool by pool basis. When an individual PCI loan within a pool is modified as a TDR, it is not removed from its pool. All TDRs are classified as impaired loans and are included in the impaired loan disclosures above.

The majority of 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 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 $74.4 million and $77.2 million as of June 30, 2019 and December 31, 2018, respectively. Non-performing TDRs totaled $67.8 million and $55.0 million as of June 30, 2019 and December 31, 2018, respectively.

The following table presents non-PCI loans by loan class modified as TDRs during the three and six months ended June 30, 2019 and 2018. The pre-modification and post-modification outstanding recorded investments disclosed in the tables below represent the loan carrying amounts immediately prior to the modification and the carrying amounts at June 30, 2019 and 2018, respectively. 

	Three Months Ended June 30,
	2019					2018
Troubled Debt Restructurings	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	($ in thousands)
Commercial and industrial	17	$	14,663	$	14,187	11	$	8,822	$	8,575
Commercial real estate:
Commercial real estate	1	3,067		3,067		5	3,975		3,971
Construction	—	—		—		1	532		491
Total commercial real estate	1	3,067		3,067		6	4,507		4,462
Residential mortgage	1	155		155		2	393		389
Total	19	$	17,885	$	17,409	19	$	13,722	$	13,426

	Six Months Ended June 30,
	2019					2018
Troubled Debt Restructurings	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	($ in thousands)
Commercial and industrial	53	$	38,216	$	37,428	15	$	10,554	$	10,170
Commercial real estate:
Commercial real estate	2	4,665		4,665		6	4,170		4,164
Construction	—	—		—		2	564		503
Total commercial real estate	2	4,665		4,665		8	4,734		4,667
Residential mortgage	1	155		155		5	980		963
Consumer	—	—		—		1	88		85
Total	56	$	43,036	$	42,248	29	$	16,356	$	15,885

The total TDRs presented in the above table had allocated specific reserves for loan losses of approximately $11.7 million and $5.3 million at June 30, 2019 and 2018, respectively. These specific reserves are included in the allowance for loan losses for loans individually evaluated for impairment disclosed in the "Impaired Loans" section above. There were $1.1 million and $2.0 million of partial charge-offs related to TDR modifications during the three and six months ended June 30, 2019, respectively, and no charge-offs for such loans during the three and six months ended June 30, 2018.

The non-PCI loans modified as TDRs within the previous 12 months and for which there was a payment default (90 or more days past due) for the three and six months ended June 30, 2019 and 2018 were as follows:

	Three Months Ended June 30,
	2019			2018
Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	($ in thousands)
Commercial and industrial	18	$	12,322	4	$	3,212
Commercial real estate	1	383		—	—
Total	19	$	12,705	4	$	3,212

	Six Months Ended June 30,
	2019			2018
Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	($ in thousands)
Commercial and industrial	18	$	12,322	4	$	3,212
Commercial real estate	1	383		—	—
Residential mortgage	2	215		—	—
Consumer	1	18		—	—
Total	22	$	12,938	4	$	3,212

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 credit exposure by internally assigned risk rating by class of loans (excluding PCI loans) at June 30, 2019 and December 31, 2018 based on the most recent analysis performed:

Credit exposure - by internally assigned risk rating	Pass		Special Mention		Substandard		Doubtful		Total Non-PCI Loans
	(in thousands)
June 30, 2019
Commercial and industrial	$	3,733,252	$	40,412	$	75,853	$	69,377	$	3,918,894
Commercial real estate	10,362,538		63,116		43,564		909		10,470,127
Construction	1,286,278		1,785		354		—		1,288,417
Total	$	15,382,068	$	105,313	$	119,771	$	70,286	$	15,677,438
December 31, 2018
Commercial and industrial	$	3,399,426	$	31,996	$	92,320	$	66,633	$	3,590,375
Commercial real estate	9,828,744		30,892		51,710		963		9,912,309
Construction	1,121,321		215		812		—		1,122,348
Total	$	14,349,491	$	63,103	$	144,842	$	67,596	$	14,625,032

At June 30, 2019 and December 31, 2018, the commercial and industrial loans rated substandard and doubtful in the above table included performing TDR taxi medallion loans and non-accrual (but mostly performing to their contractual terms) taxi medallion loans, respectively.

For residential mortgages, automobile, home equity and other consumer loan portfolio classes (excluding PCI loans), 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 recorded investment in those loan classes based on payment activity as of June 30, 2019 and December 31, 2018: 

Credit exposure - by payment activity	Performing Loans		Non-Performing Loans		Total Non-PCI Loans
	(in thousands)
June 30, 2019
Residential mortgage	$	3,682,394	$	12,069	$	3,694,463
Home equity	384,357		1,630		385,987
Automobile	1,361,995		148		1,362,143
Other consumer	909,953		221		910,174
Total	$	6,338,699	$	14,068	$	6,352,767
December 31, 2018
Residential mortgage	$	3,670,067	$	12,917	$	3,682,984
Home equity	369,184		2,156		371,340
Automobile	1,319,126		80		1,319,206
Other consumer	846,402		419		846,821
Total	$	6,204,779	$	15,572	$	6,220,351

Valley evaluates the credit quality of its PCI loan pools based on the expectation of the underlying cash flows of each pool, derived from the aging status and by payment activity of individual loans within the pool. The following table presents the recorded investment in PCI loans by class based on individual loan payment activity as of June 30, 2019 and December 31, 2018:

Credit exposure - by payment activity	Performing Loans		Non-Performing Loans		Total PCI Loans
	(in thousands)
June 30, 2019
Commercial and industrial	$	668,887	$	27,984	$	696,871
Commercial real estate	2,309,294		18,596		2,327,890
Construction	239,926		625		240,551
Residential mortgage	372,531		5,456		377,987
Consumer	126,234		2,424		128,658
Total	$	3,716,872	$	55,085	$	3,771,957
December 31, 2018
Commercial and industrial	$	710,045	$	30,612	$	740,657
Commercial real estate	2,478,990		15,976		2,494,966
Construction	364,815		969		365,784
Residential mortgage	421,609		6,807		428,416
Consumer	158,502		1,761		160,263
Total	$	4,133,961	$	56,125	$	4,190,086

Other real estate owned (OREO) totaled $7.2 million and $9.5 million at June 30, 2019 and December 31, 2018, respectively. OREO included foreclosed residential real estate properties totaling $1.2 million and $852 thousand at June 30, 2019 and December 31, 2018, respectively. Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $1.7 million and $1.8 million at June 30, 2019 and December 31, 2018, respectively.

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Allowance for Credit Losses

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Allowance for Credit Losses

Allowance for Credit Losses

The allowance for credit losses consists of the allowance for loan losses and the allowance for unfunded letters of credit. Management maintains the allowance for credit losses at a level estimated to absorb probable loan losses of the loan portfolio and unfunded letter of credit commitments at the balance sheet date. The allowance for loan losses is based on ongoing evaluations of the probable estimated losses inherent in the loan portfolio, including unexpected additional credit impairment of PCI loan pools subsequent to acquisition. There was no allowance allocation for PCI loan losses at June 30, 2019 and December 31, 2018.

The following table summarizes the allowance for credit losses at June 30, 2019 and December 31, 2018: 

	June 30, 2019		December 31, 2018
	(in thousands)
Components of allowance for credit losses:
Allowance for loan losses	$	155,105	$	151,859
Allowance for unfunded letters of credit	2,974		4,436
Total allowance for credit losses	$	158,079	$	156,295

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
	(in thousands)
Components of provision for credit losses:
Provision for loan losses	$	3,706		$	6,592	$	11,562		$	17,294
Provision for unfunded letters of credit	(1,606		)	550		(1,462		)	796
Total provision for credit losses	$	2,100		$	7,142	$	10,100		$	18,090

The following tables detail activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2019 and 2018:

	Commercial and Industrial			Commercial Real Estate			Residential Mortgage			Consumer			Total
	(in thousands)
Three Months Ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	94,630		$	47,762		$	5,139		$	6,850		$	154,381
Loans charged-off	(3,073		)	—			—			(1,752		)	(4,825		)
Charged-off loans recovered	1,195			22			9			617			1,843
Net (charge-offs) recoveries	(1,878		)	22			9			(1,135		)	(2,982		)
Provision for loan losses	1,632			1,194			71			809			3,706
Ending balance	$	94,384		$	48,978		$	5,219		$	6,524		$	155,105
Three Months Ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	66,546		$	56,679		$	4,100		$	5,537		$	132,862
Loans charged-off	(642		)	(38		)	(99		)	(1,422		)	(2,201		)
Charged-off loans recovered	819			15			180			495			1,509
Net recoveries (charge-offs)	177			(23		)	81			(927		)	(692		)
Provision for loan losses	7,534			(2,844		)	443			1,459			6,592
Ending balance	$	74,257		$	53,812		$	4,624		$	6,069		$	138,762

	Commercial and Industrial			Commercial Real Estate			Residential Mortgage			Consumer			Total
	(in thousands)
Six Months Ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	90,956		$	49,650		$	5,041		$	6,212		$	151,859
Loans charged-off	(7,355		)	—			(15		)	(3,780		)	(11,150		)
Charged-off loans recovered	1,678			43			10			1,103			2,834
Net (charge-offs) recoveries	(5,677		)	43			(5		)	(2,677		)	(8,316		)
Provision for loan losses	9,105			(715		)	183			2,989			11,562
Ending balance	$	94,384		$	48,978		$	5,219		$	6,524		$	155,105
Six Months Ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	57,232		$	54,954		$	3,605		$	5,065		$	120,856
Loans charged-off	(773		)	(348		)	(167		)	(2,633		)	(3,921		)
Charged-off loans recovered	2,926			384			260			963			4,533
Net recoveries (charge-offs)	2,153			36			93			(1,670		)	612
Provision for loan losses	14,872			(1,178		)	926			2,674			17,294
Ending balance	$	74,257		$	53,812		$	4,624		$	6,069		$	138,762

The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the impairment methodology at June 30, 2019 and December 31, 2018. Loans individually evaluated for impairment represent Valley's impaired loans. Loans acquired with discounts related to credit quality represent Valley's PCI loans.

	Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total
	(in thousands)
June 30, 2019
Allowance for loan losses:
Individually evaluated for impairment	$	31,128	$	2,604	$	668	$	50	$	34,450
Collectively evaluated for impairment	63,256		46,374		4,551		6,474		120,655
Total	$	94,384	$	48,978	$	5,219	$	6,524	$	155,105
Loans:
Individually evaluated for impairment	$	103,026	$	47,319	$	12,494	$	740	$	163,579
Collectively evaluated for impairment	3,815,868		11,711,225		3,681,969		2,657,564		21,866,626
Loans acquired with discounts related to credit quality	696,871		2,568,441		377,987		128,658		3,771,957
Total	$	4,615,765	$	14,326,985	$	4,072,450	$	2,786,962	$	25,802,162
December 31, 2018
Allowance for loan losses:
Individually evaluated for impairment	$	29,684	$	2,628	$	600	$	113	$	33,025
Collectively evaluated for impairment	61,272		47,022		4,441		6,099		118,834
Total	$	90,956	$	49,650	$	5,041	$	6,212	$	151,859
Loans:
Individually evaluated for impairment	$	97,852	$	43,598	$	13,904	$	1,271	$	156,625
Collectively evaluated for impairment	3,492,523		10,991,059		3,669,080		2,536,096		20,688,758
Loans acquired with discounts related to credit quality	740,657		2,860,750		428,416		160,263		4,190,086
Total	$	4,331,032	$	13,895,407	$	4,111,400	$	2,697,630	$	25,035,469

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Leases

6 Months Ended

Jun. 30, 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 June 30, 2019, the total net investment in direct financing and sales-type leases was $377.3 million, comprised of $1.1 million in lease receivables and $376.2 million in unguaranteed residuals. Total lease income was $4.6 million and $3.5 million for the three months ended June 30, 2019 and 2018, respectively, and $8.9 million and $7.2 million for the six months ended June 30, 2019 and 2018, respectively.

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 June 30, 2019.

	June 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	282,329
Finance leases	1,019
Total	$	283,348
Lease liabilities:
Operating leases	$	305,364
Finance leases	2,041
Total	$	307,405

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and six months ended June 30, 2019:

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73		$	146
Interest on lease liabilities	49			101
Operating lease cost	8,949			15,923
Short-term lease cost	59			134
Variable lease cost	1,024			1,972
Sublease income	(783		)	(1,686		)
Total lease cost (included in net occupancy and equipment expense)	$	9,371		$	16,590

The following table presents supplemental cash flow information related to leases for the six months ended June 30, 2019:

	Six Months Ended
	June 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	16,896
Operating cash flows from finance leases	102
Financing cash flows from finance leases	240

The following table presents supplemental information related to leases at June 30, 2019:

	June 30, 2019
Weighted-average remaining lease term
Operating leases	13.08 years
Finance leases	3.50 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 June 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	63,085		$	17,594		$	341
2020	108,188			35,006			684
2021	91,950			34,169			684
2022	70,058			32,625			684
2023	47,744			29,222			—
Thereafter	33,007			244,762			—
Total lease payments	414,032			393,378			2,393
Less: present value discount	(36,769		)	(88,014		)	(352		)
Total	$	377,263		$	305,364		$	2,041

The following table presents minimum aggregate lease payments in accordance with Topic 840 at June 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	13,731	$	1,092	$	12,639
2019	27,640		2,124		25,516
2020	27,785		2,077		25,708
2021	26,955		2,009		24,946
2022	25,948		1,891		24,057
Thereafter	271,054		8,130		262,924
Total lease payments	$	393,113	$	17,323	$	375,790

Net occupancy and equipment expense included lease cost of $8.2 million and $16.4 million, net of sublease income of $874 thousand and $1.8 million, for the three and six months ended June 30, 2018, respectively.

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 June 30, 2019, the total net investment in direct financing and sales-type leases was $377.3 million, comprised of $1.1 million in lease receivables and $376.2 million in unguaranteed residuals. Total lease income was $4.6 million and $3.5 million for the three months ended June 30, 2019 and 2018, respectively, and $8.9 million and $7.2 million for the six months ended June 30, 2019 and 2018, respectively.

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 June 30, 2019.

	June 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	282,329
Finance leases	1,019
Total	$	283,348
Lease liabilities:
Operating leases	$	305,364
Finance leases	2,041
Total	$	307,405

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and six months ended June 30, 2019:

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73		$	146
Interest on lease liabilities	49			101
Operating lease cost	8,949			15,923
Short-term lease cost	59			134
Variable lease cost	1,024			1,972
Sublease income	(783		)	(1,686		)
Total lease cost (included in net occupancy and equipment expense)	$	9,371		$	16,590

The following table presents supplemental cash flow information related to leases for the six months ended June 30, 2019:

	Six Months Ended
	June 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	16,896
Operating cash flows from finance leases	102
Financing cash flows from finance leases	240

The following table presents supplemental information related to leases at June 30, 2019:

	June 30, 2019
Weighted-average remaining lease term
Operating leases	13.08 years
Finance leases	3.50 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 June 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	63,085		$	17,594		$	341
2020	108,188			35,006			684
2021	91,950			34,169			684
2022	70,058			32,625			684
2023	47,744			29,222			—
Thereafter	33,007			244,762			—
Total lease payments	414,032			393,378			2,393
Less: present value discount	(36,769		)	(88,014		)	(352		)
Total	$	377,263		$	305,364		$	2,041

The following table presents minimum aggregate lease payments in accordance with Topic 840 at June 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	13,731	$	1,092	$	12,639
2019	27,640		2,124		25,516
2020	27,785		2,077		25,708
2021	26,955		2,009		24,946
2022	25,948		1,891		24,057
Thereafter	271,054		8,130		262,924
Total lease payments	$	393,113	$	17,323	$	375,790

Net occupancy and equipment expense included lease cost of $8.2 million and $16.4 million, net of sublease income of $874 thousand and $1.8 million, for the three and six months ended June 30, 2018, respectively.

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 June 30, 2019, the total net investment in direct financing and sales-type leases was $377.3 million, comprised of $1.1 million in lease receivables and $376.2 million in unguaranteed residuals. Total lease income was $4.6 million and $3.5 million for the three months ended June 30, 2019 and 2018, respectively, and $8.9 million and $7.2 million for the six months ended June 30, 2019 and 2018, respectively.

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 June 30, 2019.

	June 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	282,329
Finance leases	1,019
Total	$	283,348
Lease liabilities:
Operating leases	$	305,364
Finance leases	2,041
Total	$	307,405

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and six months ended June 30, 2019:

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73		$	146
Interest on lease liabilities	49			101
Operating lease cost	8,949			15,923
Short-term lease cost	59			134
Variable lease cost	1,024			1,972
Sublease income	(783		)	(1,686		)
Total lease cost (included in net occupancy and equipment expense)	$	9,371		$	16,590

The following table presents supplemental cash flow information related to leases for the six months ended June 30, 2019:

	Six Months Ended
	June 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	16,896
Operating cash flows from finance leases	102
Financing cash flows from finance leases	240

The following table presents supplemental information related to leases at June 30, 2019:

	June 30, 2019
Weighted-average remaining lease term
Operating leases	13.08 years
Finance leases	3.50 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 June 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	63,085		$	17,594		$	341
2020	108,188			35,006			684
2021	91,950			34,169			684
2022	70,058			32,625			684
2023	47,744			29,222			—
Thereafter	33,007			244,762			—
Total lease payments	414,032			393,378			2,393
Less: present value discount	(36,769		)	(88,014		)	(352		)
Total	$	377,263		$	305,364		$	2,041

The following table presents minimum aggregate lease payments in accordance with Topic 840 at June 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	13,731	$	1,092	$	12,639
2019	27,640		2,124		25,516
2020	27,785		2,077		25,708
2021	26,955		2,009		24,946
2022	25,948		1,891		24,057
Thereafter	271,054		8,130		262,924
Total lease payments	$	393,113	$	17,323	$	375,790

Net occupancy and equipment expense included lease cost of $8.2 million and $16.4 million, net of sublease income of $874 thousand and $1.8 million, for the three and six months ended June 30, 2018, respectively.

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 June 30, 2019, the total net investment in direct financing and sales-type leases was $377.3 million, comprised of $1.1 million in lease receivables and $376.2 million in unguaranteed residuals. Total lease income was $4.6 million and $3.5 million for the three months ended June 30, 2019 and 2018, respectively, and $8.9 million and $7.2 million for the six months ended June 30, 2019 and 2018, respectively.

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 June 30, 2019.

	June 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	282,329
Finance leases	1,019
Total	$	283,348
Lease liabilities:
Operating leases	$	305,364
Finance leases	2,041
Total	$	307,405

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and six months ended June 30, 2019:

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73		$	146
Interest on lease liabilities	49			101
Operating lease cost	8,949			15,923
Short-term lease cost	59			134
Variable lease cost	1,024			1,972
Sublease income	(783		)	(1,686		)
Total lease cost (included in net occupancy and equipment expense)	$	9,371		$	16,590

The following table presents supplemental cash flow information related to leases for the six months ended June 30, 2019:

	Six Months Ended
	June 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	16,896
Operating cash flows from finance leases	102
Financing cash flows from finance leases	240

The following table presents supplemental information related to leases at June 30, 2019:

	June 30, 2019
Weighted-average remaining lease term
Operating leases	13.08 years
Finance leases	3.50 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 June 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	63,085		$	17,594		$	341
2020	108,188			35,006			684
2021	91,950			34,169			684
2022	70,058			32,625			684
2023	47,744			29,222			—
Thereafter	33,007			244,762			—
Total lease payments	414,032			393,378			2,393
Less: present value discount	(36,769		)	(88,014		)	(352		)
Total	$	377,263		$	305,364		$	2,041

The following table presents minimum aggregate lease payments in accordance with Topic 840 at June 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	13,731	$	1,092	$	12,639
2019	27,640		2,124		25,516
2020	27,785		2,077		25,708
2021	26,955		2,009		24,946
2022	25,948		1,891		24,057
Thereafter	271,054		8,130		262,924
Total lease payments	$	393,113	$	17,323	$	375,790

Net occupancy and equipment expense included lease cost of $8.2 million and $16.4 million, net of sublease income of $874 thousand and $1.8 million, for the three and six months ended June 30, 2018, respectively.

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 June 30, 2019, the total net investment in direct financing and sales-type leases was $377.3 million, comprised of $1.1 million in lease receivables and $376.2 million in unguaranteed residuals. Total lease income was $4.6 million and $3.5 million for the three months ended June 30, 2019 and 2018, respectively, and $8.9 million and $7.2 million for the six months ended June 30, 2019 and 2018, respectively.

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 June 30, 2019.

	June 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	282,329
Finance leases	1,019
Total	$	283,348
Lease liabilities:
Operating leases	$	305,364
Finance leases	2,041
Total	$	307,405

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and six months ended June 30, 2019:

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73		$	146
Interest on lease liabilities	49			101
Operating lease cost	8,949			15,923
Short-term lease cost	59			134
Variable lease cost	1,024			1,972
Sublease income	(783		)	(1,686		)
Total lease cost (included in net occupancy and equipment expense)	$	9,371		$	16,590

The following table presents supplemental cash flow information related to leases for the six months ended June 30, 2019:

	Six Months Ended
	June 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	16,896
Operating cash flows from finance leases	102
Financing cash flows from finance leases	240

The following table presents supplemental information related to leases at June 30, 2019:

	June 30, 2019
Weighted-average remaining lease term
Operating leases	13.08 years
Finance leases	3.50 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 June 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	63,085		$	17,594		$	341
2020	108,188			35,006			684
2021	91,950			34,169			684
2022	70,058			32,625			684
2023	47,744			29,222			—
Thereafter	33,007			244,762			—
Total lease payments	414,032			393,378			2,393
Less: present value discount	(36,769		)	(88,014		)	(352		)
Total	$	377,263		$	305,364		$	2,041

The following table presents minimum aggregate lease payments in accordance with Topic 840 at June 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	13,731	$	1,092	$	12,639
2019	27,640		2,124		25,516
2020	27,785		2,077		25,708
2021	26,955		2,009		24,946
2022	25,948		1,891		24,057
Thereafter	271,054		8,130		262,924
Total lease payments	$	393,113	$	17,323	$	375,790

Net occupancy and equipment expense included lease cost of $8.2 million and $16.4 million, net of sublease income of $874 thousand and $1.8 million, for the three and six months ended June 30, 2018, respectively.

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Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill totaled $1.1 billion at June 30, 2019 and December 31, 2018. 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, 2018). There was no impairment of goodwill during the three and six months ended June 30, 2019 and 2018.

The following table summarizes other intangible assets as of June 30, 2019 and December 31, 2018: 

	Gross Intangible Assets		Accumulated Amortization			Valuation Allowance			Net Intangible Assets
	(in thousands)
June 30, 2019
Loan servicing rights	$	89,732	$	(66,406	)	$	—		$	23,326
Core deposits	80,470		(34,640		)	—			45,830
Other	3,945		(2,516		)	—			1,429
Total other intangible assets	$	174,147	$	(103,562	)	$	—		$	70,585
December 31, 2018
Loan servicing rights	$	87,354	$	(63,161	)	$	(83	)	$	24,110
Core deposits	80,470		(29,136		)	—			51,334
Other	3,945		(2,399		)	—			1,546
Total other intangible assets	$	171,769	$	(94,696	)	$	(83	)	$	76,990

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. See the "Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis" section of Note 5 for additional information regarding the fair valuation and impairment of loan servicing rights.

Core deposits are amortized using an accelerated method and have a weighted average amortization period of 8.2 years. The line item labeled “Other” included in the table above primarily consists of customer lists and covenants not to compete, which are amortized over their expected lives generally using a straight-line method and have a weighted average amortization period of approximately 7.6 years. Valley evaluates core deposits and other

intangibles for impairment when an indication of impairment exists. No impairment was recognized during the three and six months ended June 30, 2019 and 2018.

The following table presents the estimated future amortization expense of other intangible assets for the remainder of 2019 through 2023: 

	Loan Servicing Rights		Core Deposits		Other
	(in thousands)
2019	$	2,056	$	5,457	$	117
2020	3,603		9,607		220
2021	3,007		8,252		206
2022	2,513		6,898		191
2023	2,097		5,544		131

Valley recognized amortization expense on other intangible assets, including net impairment (or recovery of impairment) charges on loan servicing rights, totaling approximately $4.2 million and $4.6 million for the three months ended June 30, 2019 and 2018, respectively, and $8.5 million and $8.9 million for the six months ended June 30, 2019 and 2018, respectively.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock–Based Compensation

Valley currently has one active employee stock plan, the 2016 Long-Term Stock Incentive Plan (the “2016 Stock Plan”), adopted by Valley’s Board of Directors on January 29, 2016 and approved by its shareholders on April 28, 2016. The primary purpose of the 2016 Stock Plan is to provide additional incentive 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 competent and dedicated officers and other key employees whose efforts will result in the continued and long-term growth of Valley’s business.

Under the 2016 Stock Plan, Valley may award shares of common stock in the form of stock appreciation rights, both incentive and non-qualified stock options, restricted stock and restricted stock units (RSUs) to its employees and non-employee directors (for acting in their roles as board members). As of June 30, 2019, 4.3 million shares of common stock were available for issuance under the 2016 Stock Plan. The essential features of each award are described in the award agreement relating to that award. The grant, exercise, vesting, settlement or payment of an award may be based upon the fair value of Valley’s common stock on the last sale price reported for Valley’s common stock on such date or the last sale price reported preceding such date, except for performance-based awards with a market condition. The grant date fair values of performance-based awards that vest based on a market condition are determined by a third party specialist using a Monte Carlo valuation model.

Restricted Stock. Prior to January 1, 2019, restricted stock was awarded to key employees, providing for the immediate award of our common stock subject to certain vesting and restrictions under the 2016 Stock Plan. Compensation expense is measured based on the grant-date fair value of the shares. Valley did not award any restricted stock shares during the six months ended June 30, 2019 as compared to 1.2 million shares of time-based restricted stock awarded during the six months ended June 30, 2018 to executive officers, key employees and directors of Valley. The majority of the awards have vesting periods of three years. Generally, the restrictions on such awards lapse at an annual rate of one-third of the total award commencing with the first anniversary of the date of grant. The average grant date fair value of the restricted stock awards granted during the six months ended June 30, 2018 was $11.86 per share.

Restricted Stock Units (RSUs). Valley granted 532 thousand and 446 thousand shares of performance-based RSUs to certain executive officers for the six months ended June 30, 2019 and 2018, 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 our 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 RSUs granted during the six months ended June 30, 2019 and 2018 was $10.43 per share and $12.35 per share, respectively.

Valley recorded total stock-based compensation expense of $4.2 million and $4.2 million for the three months ended June 30, 2019 and 2018, respectively, and $8.3 million and $12.2 million for the six months ended June 30, 2019 and 2018, respectively. The fair values of stock awards are expensed over the shorter of the vesting or required service period. As of June 30, 2019, the unrecognized amortization expense for all stock-based employee compensation totaled approximately $21.9 million and will be recognized over an average remaining vesting period of 2.15 years.

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Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

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.

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.

Fair Value Hedges of Fixed Rate Assets and Liabilities. Valley is exposed to changes in the fair value of certain of its fixed rate assets or liabilities due to changes in benchmark interest rates based on one-month LIBOR. From time to time, Valley has used interest rate swaps to manage its exposure to changes in fair value. 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. Valley includes the gain or loss on the hedged items in the same income statement line item as the loss or gain on the related derivatives.

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.

Under a program, 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 the interest rate swaps associated with this program 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 30, 2019, Valley had 20 credit swaps with an aggregate notional amount of $127.3 million related to risk participation agreements. 

At June 30, 2019, Valley had one "steepener" swap with a total 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, 2019						December 31, 2018
	Fair Value						Fair Value
	Other Assets		Other Liabilities		Notional Amount		Other Assets		Other Liabilities		Notional Amount
	(in thousands)
Derivatives designated as hedging instruments:
Cash flow hedge interest rate swaps	$	—	$	2,159	$	255,000	$	—	$	27	$	332,000
Fair value hedge interest rate swaps	—		337		7,411		—		347		7,536
Total derivatives designated as hedging instruments	$	—	$	2,496	$	262,411	$	—	$	374	$	339,536
Derivatives not designated as hedging instruments:
Interest rate swaps and embedded derivatives	$	139,893	$	30,337	$	3,469,497	$	48,642	$	22,533	$	3,390,578
Mortgage banking derivatives	603		669		140,306		337		774		105,247
Total derivatives not designated as hedging instruments	$	140,496	$	31,006	$	3,609,803	$	48,979	$	23,307	$	3,495,825

The Chicago Mercantile Exchange and London Clearing House variation margins are classified as a single-unit of account with the fair value of certain cash flow and non-designated derivative instruments. As a result, the fair value of the designated cash flow interest rate swaps assets and designated and non-designated interest rate swaps liabilities were offset by variation margins posted by (with) the applicable counterparties and reported in the table above on a net basis at June 30, 2019 and December 31, 2018.

Gains (Losses) included in the consolidated statements of income and in 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,
	2019			2018			2019			2018
	(in thousands)
Amount of loss reclassified from accumulated other comprehensive loss to interest expense	$	(383	)	$	(866	)	$	(673	)	$	(2,317	)
Amount of (loss) gain recognized in other comprehensive income (loss)	(962		)	637			(1,512		)	3,388

The accumulated net after-tax losses related to effective cash flow hedges included in accumulated other comprehensive loss were $4.6 million and $4.0 million at June 30, 2019 and December 31, 2018, 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 $2.6 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,
	2019			2018			2019			2018
	(in thousands)
Derivative - interest rate swaps:
Interest income	$	49		$	88		$	73		$	219
Hedged item - loans:
Interest income	$	(49	)	$	(88	)	$	(73	)	$	(219	)

Fee income related to derivative interest rate swaps executed with commercial loan customers totaled $5.4 million and $4.4 million for the three months ended June 30, 2019 and 2018, respectively, and $9.5 million and $7.7 million for the six months ended June 30, 2019 and 2018, respectively, and was included in other non-interest income.

The following table presents the hedged items related to interest rate derivatives designated as hedges of fair value and the cumulative basis fair value adjustment included in the net carrying amount of the hedged items at June 30, 2019 and December 31, 2018.

Line Item in the Statement of Financial Position in Which the Hedged Item is Included	Carrying Amount of the Hedged Asset				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Asset
	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(in thousands)
Loans	$	7,748	$	7,882	$	337	$	346

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,
	2019			2018		2019			2018
	(in thousands)
Non-designated hedge interest rate derivatives
Other non-interest expense	$	(347	)	$	230	$	(757	)	$	448

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 30, 2019, Valley was in compliance with all of the provisions of its derivative counterparty agreements. As of June 30, 2019, 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 $17.2 million. Valley has derivative counterparty agreements that require minimum collateral posting thresholds for certain counterparties.

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Balance Sheet Offsetting

6 Months Ended

Jun. 30, 2019

Offsetting [Abstract]

Balance Sheet Offsetting

Balance Sheet Offsetting

Certain financial instruments, including derivatives (consisting of interest rate swaps and caps) and repurchase agreements (accounted for as secured long-term borrowings), may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements or similar 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 repurchase agreement should Valley be in default. The table below presents information about Valley’s financial instruments that are eligible for offset in the consolidated statements of financial condition as of June 30, 2019 and December 31, 2018.

							Gross Amounts Not Offset
	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments			Cash Collateral				Net Amount
	(in thousands)
June 30, 2019
Assets:
Interest rate swaps	$	139,893	$	—	$	139,893	$	(13,385	)	$	—			$	126,508
Liabilities:
Interest rate swaps	$	32,833	$	—	$	32,833	$	(13,385	)	$	(15,211	)	(1)	$	4,237
Repurchase agreements	150,000		—		150,000		—			(150,000		)	(2)	—
Total	$	182,833	$	—	$	182,833	$	(13,385	)	$	(165,211	)		$	4,237
December 31, 2018
Assets:
Interest rate swaps and caps	$	48,642	$	—	$	48,642	$	(1,214	)	$	—			$	47,428
Liabilities:
Interest rate swaps and caps	$	22,907	$	—	$	22,907	$	(1,214	)	$	(1,852	)	(1)	$	19,841
Repurchase agreements	150,000		—		150,000		—			(150,000		)	(2)	—
Total	$	172,907	$	—	$	172,907	$	(1,214	)	$	(151,852	)		$	19,841

(1) Represents the amount of collateral posted with derivative counterparties that offsets net liability positions.

(2)

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

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Tax Credit Investments

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Tax Credit Investments

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 of 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 other-than-temporary impairments, if applicable (See "Other-Than-Temporary Impairment Analysis" section below).

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at June 30, 2019 and December 31, 2018:

	June 30, 2019		December 31, 2018
	(in thousands)
Other Assets:
Affordable housing tax credit investments, net	$	27,738	$	36,961
Other tax credit investments, net	58,215		68,052
Total tax credit investments, net	$	85,953	$	105,013
Other Liabilities:
Unfunded affordable housing tax credit commitments	$	2,696	$	4,520
Unfunded other tax credit commitments	5,139		8,756
Total unfunded tax credit commitments	$	7,835	$	13,276

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and six months ended June 30, 2019 and 2018: 

	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
	(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$	1,708	$	1,429		$	3,421	$	3,250
Other tax credit investment credits and tax benefits	2,158		5,680			4,961		11,165
Total reduction in income tax expense	$	3,866	$	7,109		$	8,382	$	14,415
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	$	593	$	(319	)	$	1,266	$	667
Affordable housing tax credit investment impairment losses	794		515			1,524		1,102
Other tax credit investment losses	2,509		1,253			3,496		1,790
Other tax credit investment impairment losses	967		3,021			5,750		6,185
Total amortization of tax credit investments recorded in non-interest expense	$	4,863	$	4,470		$	12,036	$	9,744

Other-Than-Temporary Impairment Analysis

An impairment loss is recognized when the fair value of the tax credit investment is less than its carrying value. The determination of whether a decline in value of a tax credit investment is other-than-temporary requires significant judgment and is performed separately for each investment. The tax credit investments are reviewed for impairment quarterly, or whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. These circumstances can include, but are not limited to, the following factors:

• Evidence that we do not have the ability to recover the carrying amount of the investment;

• The inability of the investee to sustain earnings;

• A current fair value of the investment based upon cash flow projections that is less than the carrying amount; and

• Change in the economic or technological environment that could adversely affect the investee’s operations

On a quarterly basis, Valley obtains financial reporting on its underlying tax credit investment assets for each fund from the fund manager who is independent of us and the Fund Sponsor. The financial reporting is reviewed for deterioration in the financial condition of the fund, the level of cash flows and any significant losses or impairment charges. Valley also regularly reviews the condition and continuing prospects of the underlying operations of the investment with the fund manager, including any observations from site visits and communications with the fund sponsor, if available. Annually, Valley obtains the audited financial statements prepared by an independent accounting firm for each investment, as well as the annual tax returns. Generally, none of the aforementioned review factors are individually conclusive and the relative importance of each factor will vary based on facts and circumstances. However, the longer the expected period of recovery, the stronger and more objective the positive evidence needs to be in order to overcome the presumption that the impairment is other than temporary. If management determines that a decline in value is other than temporary per its quarterly and annual reviews, including current probable cash flow projections, the applicable tax credit investment is written down to its fair value through an impairment charge to earnings, which establishes the new cost basis of the investment.

The aggregate unamortized investment related to three federal renewable energy tax credit funds sponsored by DC Solar represented approximately $2.4 million (or approximately $800 thousand for each fund) of the $68.1 million of net other tax credit investments reported as of December 31, 2018. These funds are disclosed in detail in Note 15. During the first quarter of 2019, Valley determined that future cash flows related to the remaining investments in all three funds were not probable based upon new information available, including the sponsor’s bankruptcy proceedings which were reclassified to Chapter 7 from Chapter 11 in late March 2019. As a result, we recognized an other-than-temporary impairment charge for the entire aggregate unamortized investment of $2.4 million during the first quarter, which is included within amortization of tax credit investments for the six months ended June 30, 2019.

Income Taxes

The federal energy investment tax credit (FEITC) program encourages the use of renewable energy, including solar energy. The energy program reduces federal income taxes by offering a 30 percent tax credit to owners of energy property that meets established performance and quality standards. In addition, there are other returns from tax losses and cash flows generated by the investment. Typically, an owner and the tax credit investor, such as Valley, establish a limited partnership. The tax credit investor usually has a substantial, but passive, interest in the partnership and the owner of the solar energy property has a small interest. The ownership structure permits the tax benefits to pass through to the tax credit investor with an expected exit from ownership after five years.

The amount of the FEITC is calculated based on the total cost of a renewable energy property. From 2013 to 2015, Valley invested in three FEITC funds (Fund VI, Fund XII and Fund XIX) sponsored by DC Solar to purchase a total of 512 mobile solar generator units. The valuation of the unit price of the solar units was supported by an appraisal prepared by a well-recognized national appraisal firm. The total tax credits of $22.8 million were used to reduce Valley’s federal income taxes payable in its consolidated financial statements from 2013 to 2015.

The full value of the FEITC is earned immediately when a solar energy property is placed in service. However, the tax credit is subject to recapture for federal tax purposes for a five-year compliance period, if the property ceases to remain eligible for the tax credit. A property may become ineligible during the compliance period due to (i) a sale or disposal of the property, (ii) lease of the property to a tax exempt entity or (3) its removal from service (i.e., no longer available for lease). During the first year after the property has been placed in service, the recapture rate is 100 percent of the tax credit. The rate declines by 20 percent each year thereafter until the end of the fifth year. The compliance period expires at the end of the fifth year after the property has been placed in service. All three funds

leased the mobile solar generator units to DC Solar Distributions, which stated its intention to sublease the units to third parties.

An entity shall initially recognize the financial statement effects of a tax position when it is more likely than not (or a likelihood of more than 50 percent), based on the technical merits, that the position will be sustained upon examination. The level of evidence that is necessary and appropriate to support an entity's assessment of the technical merits of a tax position is a matter of judgment that depends on all available information. At each of the investment dates, Valley obtained two tax opinions from national law firms that, based upon the facts recited, support the recognition of the tax credits in its tax returns. Based upon management's review of the tax opinions on the investment’s legal structure, Valley recognized and measured each tax position at 100 percent of the tax credit.

Valley's subsequent measurement of a tax position is based on management’s best judgment given the facts, circumstances, and information available at the latest quarterly reporting date. A change in judgment that results in subsequent derecognition or change in measurement of a tax position taken in a prior annual period (including any related interest and penalties) is recognized as a discrete item in the period in which the change occurs.

In late February 2019, Valley learned of Federal Bureau of Investigation (FBI) allegations of fraudulent conduct by DC Solar, including information about asset seizures of DC Solar property and assets of its principals and ongoing federal investigations. Since learning of the allegations, Valley has conducted an ongoing investigation coordinated with other DC Solar fund investors, investors' outside counsel and a third party specialist. The facts uncovered to date by the investor group impact each investor differently, affecting their likelihood of loss and the ultimate amount of tax benefit likely to be recaptured. To date, over 93 percent of the 512 solar generator units purchased by Valley's three funds have been positively identified by a third party specialist at several leasee and other locations throughout the United States. Valley has also learned through its investigation that the IRS has challenged the valuation appraisals of similar solar generator units that were used to determine the federal renewable energy tax credits related to another DC Solar fund owned by an unrelated investor.

Given the circumstances at this time, including the aforementioned IRS challenge of the appraisals similar units used by an unrelated fund investor, and management's best judgments regarding the settlement of the tax positions that it would ultimately accept with the IRS, Valley currently expects a partial loss and tax benefit recapture. As a result of this quarterly assessment, our net income for the three and six months ended June 30, 2019 includes an increase to our provision for income taxes of $223 thousand and $12.3 million, respectively, reflecting the reserve for uncertain tax liability positions (shown in the table below) related to renewable energy tax credits and other tax benefits previously recognized from the investments in the DC Solar funds plus interest. Valley can provide no assurance that it will not recognize additional tax provisions related to this uncertain tax liability as management learns and analyzes additional facts and information, or that Valley will not ultimately incur a complete loss on the related tax positions, which is currently estimated to be $29.4 million (inclusive of tax provisions totaling $12.3 million for the six months ended June 30, 2019).

A reconciliation of Valley’s gross unrecognized tax benefits at June 30, 2019 and 2018 are presented in the table below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Beginning balance	$	12,100	$	4,238	$	—	$	4,238
Additions based on tax positions related to current year	223		—		12,323		—
Ending balance	$	12,323	$	4,238	$	12,323	$	4,238

The entire balance of unrecognized tax benefits, if recognized, would favorably affect our effective income tax rate. Valley’s policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Accrued interest associated with uncertain tax positions totaled approximately $2.1 million and $1.8 million at June 30, 2019 and December 31, 2018, respectively.

Valley monitors its tax positions for the underlying facts, circumstances, and information available including the federal investigation of DC Solar and changes in tax laws, case law and regulations that may necessitate subsequent de-recognition of previous tax benefits.

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

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 of 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 other-than-temporary impairments, if applicable (See "Other-Than-Temporary Impairment Analysis" section below).

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at June 30, 2019 and December 31, 2018:

	June 30, 2019		December 31, 2018
	(in thousands)
Other Assets:
Affordable housing tax credit investments, net	$	27,738	$	36,961
Other tax credit investments, net	58,215		68,052
Total tax credit investments, net	$	85,953	$	105,013
Other Liabilities:
Unfunded affordable housing tax credit commitments	$	2,696	$	4,520
Unfunded other tax credit commitments	5,139		8,756
Total unfunded tax credit commitments	$	7,835	$	13,276

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and six months ended June 30, 2019 and 2018: 

	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
	(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$	1,708	$	1,429		$	3,421	$	3,250
Other tax credit investment credits and tax benefits	2,158		5,680			4,961		11,165
Total reduction in income tax expense	$	3,866	$	7,109		$	8,382	$	14,415
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	$	593	$	(319	)	$	1,266	$	667
Affordable housing tax credit investment impairment losses	794		515			1,524		1,102
Other tax credit investment losses	2,509		1,253			3,496		1,790
Other tax credit investment impairment losses	967		3,021			5,750		6,185
Total amortization of tax credit investments recorded in non-interest expense	$	4,863	$	4,470		$	12,036	$	9,744

Other-Than-Temporary Impairment Analysis

An impairment loss is recognized when the fair value of the tax credit investment is less than its carrying value. The determination of whether a decline in value of a tax credit investment is other-than-temporary requires significant judgment and is performed separately for each investment. The tax credit investments are reviewed for impairment quarterly, or whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. These circumstances can include, but are not limited to, the following factors:

• Evidence that we do not have the ability to recover the carrying amount of the investment;

• The inability of the investee to sustain earnings;

• A current fair value of the investment based upon cash flow projections that is less than the carrying amount; and

• Change in the economic or technological environment that could adversely affect the investee’s operations

On a quarterly basis, Valley obtains financial reporting on its underlying tax credit investment assets for each fund from the fund manager who is independent of us and the Fund Sponsor. The financial reporting is reviewed for deterioration in the financial condition of the fund, the level of cash flows and any significant losses or impairment charges. Valley also regularly reviews the condition and continuing prospects of the underlying operations of the investment with the fund manager, including any observations from site visits and communications with the fund sponsor, if available. Annually, Valley obtains the audited financial statements prepared by an independent accounting firm for each investment, as well as the annual tax returns. Generally, none of the aforementioned review factors are individually conclusive and the relative importance of each factor will vary based on facts and circumstances. However, the longer the expected period of recovery, the stronger and more objective the positive evidence needs to be in order to overcome the presumption that the impairment is other than temporary. If management determines that a decline in value is other than temporary per its quarterly and annual reviews, including current probable cash flow projections, the applicable tax credit investment is written down to its fair value through an impairment charge to earnings, which establishes the new cost basis of the investment.

The aggregate unamortized investment related to three federal renewable energy tax credit funds sponsored by DC Solar represented approximately $2.4 million (or approximately $800 thousand for each fund) of the $68.1 million of net other tax credit investments reported as of December 31, 2018. These funds are disclosed in detail in Note 15. During the first quarter of 2019, Valley determined that future cash flows related to the remaining investments in all three funds were not probable based upon new information available, including the sponsor’s bankruptcy proceedings which were reclassified to Chapter 7 from Chapter 11 in late March 2019. As a result, we recognized an other-than-temporary impairment charge for the entire aggregate unamortized investment of $2.4 million during the first quarter, which is included within amortization of tax credit investments for the six months ended June 30, 2019.

Income Taxes

The federal energy investment tax credit (FEITC) program encourages the use of renewable energy, including solar energy. The energy program reduces federal income taxes by offering a 30 percent tax credit to owners of energy property that meets established performance and quality standards. In addition, there are other returns from tax losses and cash flows generated by the investment. Typically, an owner and the tax credit investor, such as Valley, establish a limited partnership. The tax credit investor usually has a substantial, but passive, interest in the partnership and the owner of the solar energy property has a small interest. The ownership structure permits the tax benefits to pass through to the tax credit investor with an expected exit from ownership after five years.

The amount of the FEITC is calculated based on the total cost of a renewable energy property. From 2013 to 2015, Valley invested in three FEITC funds (Fund VI, Fund XII and Fund XIX) sponsored by DC Solar to purchase a total of 512 mobile solar generator units. The valuation of the unit price of the solar units was supported by an appraisal prepared by a well-recognized national appraisal firm. The total tax credits of $22.8 million were used to reduce Valley’s federal income taxes payable in its consolidated financial statements from 2013 to 2015.

The full value of the FEITC is earned immediately when a solar energy property is placed in service. However, the tax credit is subject to recapture for federal tax purposes for a five-year compliance period, if the property ceases to remain eligible for the tax credit. A property may become ineligible during the compliance period due to (i) a sale or disposal of the property, (ii) lease of the property to a tax exempt entity or (3) its removal from service (i.e., no longer available for lease). During the first year after the property has been placed in service, the recapture rate is 100 percent of the tax credit. The rate declines by 20 percent each year thereafter until the end of the fifth year. The compliance period expires at the end of the fifth year after the property has been placed in service. All three funds

leased the mobile solar generator units to DC Solar Distributions, which stated its intention to sublease the units to third parties.

An entity shall initially recognize the financial statement effects of a tax position when it is more likely than not (or a likelihood of more than 50 percent), based on the technical merits, that the position will be sustained upon examination. The level of evidence that is necessary and appropriate to support an entity's assessment of the technical merits of a tax position is a matter of judgment that depends on all available information. At each of the investment dates, Valley obtained two tax opinions from national law firms that, based upon the facts recited, support the recognition of the tax credits in its tax returns. Based upon management's review of the tax opinions on the investment’s legal structure, Valley recognized and measured each tax position at 100 percent of the tax credit.

Valley's subsequent measurement of a tax position is based on management’s best judgment given the facts, circumstances, and information available at the latest quarterly reporting date. A change in judgment that results in subsequent derecognition or change in measurement of a tax position taken in a prior annual period (including any related interest and penalties) is recognized as a discrete item in the period in which the change occurs.

In late February 2019, Valley learned of Federal Bureau of Investigation (FBI) allegations of fraudulent conduct by DC Solar, including information about asset seizures of DC Solar property and assets of its principals and ongoing federal investigations. Since learning of the allegations, Valley has conducted an ongoing investigation coordinated with other DC Solar fund investors, investors' outside counsel and a third party specialist. The facts uncovered to date by the investor group impact each investor differently, affecting their likelihood of loss and the ultimate amount of tax benefit likely to be recaptured. To date, over 93 percent of the 512 solar generator units purchased by Valley's three funds have been positively identified by a third party specialist at several leasee and other locations throughout the United States. Valley has also learned through its investigation that the IRS has challenged the valuation appraisals of similar solar generator units that were used to determine the federal renewable energy tax credits related to another DC Solar fund owned by an unrelated investor.

Given the circumstances at this time, including the aforementioned IRS challenge of the appraisals similar units used by an unrelated fund investor, and management's best judgments regarding the settlement of the tax positions that it would ultimately accept with the IRS, Valley currently expects a partial loss and tax benefit recapture. As a result of this quarterly assessment, our net income for the three and six months ended June 30, 2019 includes an increase to our provision for income taxes of $223 thousand and $12.3 million, respectively, reflecting the reserve for uncertain tax liability positions (shown in the table below) related to renewable energy tax credits and other tax benefits previously recognized from the investments in the DC Solar funds plus interest. Valley can provide no assurance that it will not recognize additional tax provisions related to this uncertain tax liability as management learns and analyzes additional facts and information, or that Valley will not ultimately incur a complete loss on the related tax positions, which is currently estimated to be $29.4 million (inclusive of tax provisions totaling $12.3 million for the six months ended June 30, 2019).

A reconciliation of Valley’s gross unrecognized tax benefits at June 30, 2019 and 2018 are presented in the table below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Beginning balance	$	12,100	$	4,238	$	—	$	4,238
Additions based on tax positions related to current year	223		—		12,323		—
Ending balance	$	12,323	$	4,238	$	12,323	$	4,238

The entire balance of unrecognized tax benefits, if recognized, would favorably affect our effective income tax rate. Valley’s policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Accrued interest associated with uncertain tax positions totaled approximately $2.1 million and $1.8 million at June 30, 2019 and December 31, 2018, respectively.

Valley monitors its tax positions for the underlying facts, circumstances, and information available including the federal investigation of DC Solar and changes in tax laws, case law and regulations that may necessitate subsequent de-recognition of previous tax benefits.

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Business Segments

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Business Segments

Business Segments

The information under the caption “Business Segments” in Management’s Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference.

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New Authoritative Accounting Guidance (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Changes and Error Corrections [Abstract]

New Accounting Guidance Adopted and Not Yet Adopted

New Accounting Guidance Adopted in 2019

Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842)” and subsequent related updates require lessees to recognize leases on balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use model that requires lessees to recognize a right of use (ROU) asset and related lease liability for all leases with a term longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize right of use assets and lease liabilities. Leases will continue to be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

Effective January 1, 2019, Valley adopted ASU No. 2016-02 (and subsequent related updates) and recorded ROU assets of approximately $216 million (net of the reversal of the deferred rent liability at such date) and lease obligations of approximately $241 million. Valley elected the "package of practical expedients," as permitted under the transition guidance within Topic 842.  The practical expedients enable Valley to carry forward lease classifications under the prior accounting guidance (Topic 840). Additionally, the expedients enable the use of hindsight, through which Valley reassessed the likelihood of extending leases under extension clauses available to Valley. This shortened the expected lives of certain leases. As a result, Valley recorded a $4.4 million (net of tax) credit adjustment to the opening balance of retained earnings as of January 1, 2019. Valley also made accounting policy elections to (i) separate non-lease components from its lease obligations with the non-lease components being charged to earnings when incurred and to (ii) exclude short-term leases of 12 months or less from the balance sheet. The comparative periods prior to the adoption date of Topic 842 will continue to be presented in the financial statements in accordance with prior GAAP (Topic 840). See Note 9 for the additional required disclosures.

ASU No. 2017-08, "Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities" shortens the amortization period for certain callable debt securities held at a premium. ASU No. 2017-08 requires the premium to be amortized to the earliest call date. The accounting for

securities held at a discount does not change and the discount continues to be amortized as an adjustment to yield over the contractual life (to maturity) of the instrument. ASU No. 2017-08 was effective for Valley on January 1, 2019 and was applied using the modified retrospective method, resulting in a cumulative-effect adjustment to the opening balance of retained earnings totaling $1.4 million (net of tax) as of January 1, 2019. ASU No. 2017-08 did not have a significant impact on Valley's consolidated financial statements.

ASU No. 2019-01, "Leases (Topic 842): Codification Improvements" reinstates the fair value exception in ASC 840, in which lessors will measure fair value, at lease commencement, as cost, reflecting any applicable volume or trade discounts. ASU No. 2019-01 also requires lessors that are depository or lending institutions in the scope of Topic 842 to classify the principal portion of lease payments received under sales-type and direct financing leases as cash flows from investing activities. The interest portion of those and all lease payments received under operating leases are classified as cash flows from operating activities. Effective January 1, 2019, Valley early adopted ASU No. 2019-01 concurrent with its adoption of Topic 842. The adoption of ASU No. 2019-01 did not have a material impact on Valley's consolidated financial statements.

New Accounting Guidance Not Yet Adopted

ASU No. 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief" provides transition relief for entities adopting the credit losses standard, ASU No. 2016-13. Specifically, this update amends ASU No. 2016-13 to allow companies to irrevocably elect, upon adoption of ASU No. 2016-13, the fair value option for financial instruments that (1) were previously recorded at amortized cost, (2) are within the scope of the credit losses guidance in Topic 326-20, (3) are eligible for the fair value option under Topic 825-10, and (4) are not held-to-maturity debt securities. ASU No. 2019-05 is effective for Valley for reporting periods beginning January 1, 2020. Management is currently evaluating the impact of the ASU on Valley’s consolidated financial statements.

ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments" clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement. The most significant provisions of the ASU relate to how companies will estimate expected credit losses under Topic 326 by incorporating (1) expected recoveries of financial assets, including recoveries of amounts expected to be written off and those previously written off, and (2) clarifying that contractual extensions or renewal options that are not unconditionally cancellable by the lender are considered when determining the contractual term over which expected credit losses are measured. ASU No. 2019-04 is effective for Valley for reporting periods beginning January 1, 2020. Management is currently evaluating the impact of the ASU on Valley’s consolidated financial statements. See more details regarding our current implementation of Topic 326 and ASU No. 2016-13 below.

ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test guidance) to measure a goodwill impairment charge. Instead, an entity will be required to record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on Step 1 of the current guidance). In addition, ASU No. 2017-04 eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. However, an entity will be required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 is effective for Valley for its annual or any interim goodwill impairment tests in fiscal years beginning January 1, 2020 and is not expected to have a significant impact on the presentation of Valley's consolidated financial statements. Early adoption is permitted for annual and interim goodwill impairment testing dates.

ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" amends the accounting guidance on the impairment of financial instruments. ASU No. 2016-13 adds to U.S. GAAP an impairment model (known as the current expected credit loss (CECL) model) that is based on all

expected losses over the lives of the assets rather than incurred losses. Under the new guidance, an entity is required to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

ASU No. 2016-13 is effective for Valley for reporting periods beginning January 1, 2020 and Management is currently evaluating the impact of the ASU on Valley’s consolidated financial statements. Valley’s implementation effort is managed through several cross-functional working groups. These groups continue to evaluate the requirements of the new standard, assess its impact on current operational processes, and develop loss models that accurately project lifetime expected loss estimates. Valley expects that the adoption of ASU No. 2016-13 will result in an increase in its allowance for credit losses due to several factors, including: (i) the allowance related to Valley loans will increase to include credit losses over the full remaining expected life of the portfolio, and will consider expected future changes in macroeconomic conditions, (ii) the non-accretable difference (as defined in Note 7) on PCI loans will be recognized as an allowance, offset by an increase in the carrying value of the related loans, and (iii) an allowance will be established for estimated credit losses on investment securities classified as held to maturity. The extent of the increase is under evaluation but will depend upon the nature and characteristics of Valley's loan and investment portfolios at the adoption date, and the economic conditions and forecasts at that date.

During the second quarter of 2019, Valley began the process of performing parallel runs for CECL alongside the current allowance process. Management will continue to refine and validate the new methodologies and models throughout 2019.

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Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table shows the calculation of both basic and diluted earnings per common share for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(in thousands, except for share data)
Net income available to common shareholders	$	73,296	$	69,630	$	183,454	$	108,423
Basic weighted average number of common shares outstanding	331,748,552		331,318,381		331,675,313		331,024,531
Plus: Common stock equivalents	1,211,250		1,577,102		1,254,046		1,575,460
Diluted weighted average number of common shares outstanding	332,959,802		332,895,483		332,929,359		332,599,991
Earnings per common share:
Basic	$	0.22	$	0.21	$	0.55	$	0.33
Diluted	0.22		0.21		0.55		0.33

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Schedule of 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 months ended June 30, 2019: 

	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 March 31, 2019	$	(17,266	)	$	(4,205	)	$	(31,786	)	$	(53,257	)
Other comprehensive income (loss) before reclassification	18,488			(683		)	—			17,805
Amounts reclassified from other comprehensive income (loss)	(8		)	274			55			321
Other comprehensive income (loss), net	18,480			(409		)	55			18,126
Balance at June 30, 2019	$	1,214		$	(4,614	)	$	(31,731	)	$	(35,131	)

	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, 2018	$	(33,559	)	$	(4,031	)	$	(31,841	)	$	(69,431	)
Other comprehensive income (loss) before reclassification	34,755			(1,065		)	—			33,690
Amounts reclassified from other comprehensive income (loss)	18			482			110			610
Other comprehensive income (loss), net	34,773			(583		)	110			34,300
Balance at June 30, 2019	$	1,214		$	(4,614	)	$	(31,731	)	$	(35,131	)

Reclassification from Each Component of Accumulated Other Comprehensive Loss

The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three and six months ended June 30, 2019 and 2018:

	Amounts Reclassified from Accumulated Other Comprehensive Loss
	Three Months Ended June 30,						Six Months Ended June 30,
Components of Accumulated Other Comprehensive Loss	2019			2018			2019			2018			Income Statement Line Item
	(in thousands)
Unrealized gains (losses) on AFS securities before tax	$	11		$	(52	)	$	(21	)	$	(795	)	Gains (losses) on securities transactions, net
Tax effect	(3		)	10			3			221
Total net of tax	8			(42		)	(18		)	(574		)
Unrealized losses on derivatives (cash flow hedges) before tax	(383		)	(866		)	(673		)	(2,317		)	Interest expense
Tax effect	109			247			191			662
Total net of tax	(274		)	(619		)	(482		)	(1,655		)
Defined benefit pension plan:
Amortization of net loss	(78		)	(157		)	(156		)	(314		)	*
Tax effect	23			45			46			90
Total net of tax	(55		)	(112		)	(110		)	(224		)
Total reclassifications, net of tax	$	(321	)	$	(773	)	$	(610	)	$	(2,453	)

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

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Fair Value Measurement of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

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 nonrecurring basis by level within the fair value hierarchy as reported on the consolidated statements of financial condition at June 30, 2019 and December 31, 2018. The assets presented under “nonrecurring 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, 2019		Fair Value Measurements at Reporting Date Using:
			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Available for sale:
U.S. Treasury securities	$	50,741	$	50,741	$	—	$	—
U.S. government agency securities	33,028		—		33,028		—
Obligations of states and political subdivisions	186,697		—		186,017		680
Residential mortgage-backed securities	1,372,979		—		1,372,979		—
Corporate and other debt securities	35,905		—		35,905		—
Total available for sale	1,679,350		50,741		1,627,929		680
Loans held for sale (1)	36,641		—		36,641		—
Other assets (2)	140,496		—		140,496		—
Total assets	$	1,856,487	$	50,741	$	1,805,066	$	680
Liabilities
Other liabilities (2)	$	33,502	$	—	$	33,502	$	—
Total liabilities	$	33,502	$	—	$	33,502	$	—
Non-recurring fair value measurements:
Collateral dependent impaired loans (3)	$	43,707	$	—	$	—	$	43,707
Foreclosed assets	5,587		—		—		5,587
Total	$	49,294	$	—	$	—	$	49,294

			Fair Value Measurements at Reporting Date Using:
	December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Available for sale:
U.S. Treasury securities	$	49,306	$	49,306	$	—	$	—
U.S. government agency securities	36,277		—		36,277		—
Obligations of states and political subdivisions	197,092		—		197,092		—
Residential mortgage-backed securities	1,429,782		—		1,429,782		—
Corporate and other debt securities	37,087		—		37,087		—
Total available for sale	1,749,544		49,306		1,700,238		—
Loans held for sale (1)	35,155		—		35,155		—
Other assets (2)	48,979		—		48,979		—
Total assets	$	1,833,678	$	49,306	$	1,784,372	$	—
Liabilities
Other liabilities (2)	$	23,681	$	—	$	23,681	$	—
Total liabilities	$	23,681	$	—	$	23,681	$	—
Non-recurring fair value measurements:
Collateral dependent impaired loans (3)	$	45,245	$	—	$	—	$	45,245
Loan servicing rights	273		—		—		273
Foreclosed assets	5,673		—		—		5,673
Total	$	51,191	$	—	$	—	$	51,191

(1) Represents residential mortgage loans originated for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately $35.6 million and $34.6 million at June 30, 2019 and December 31, 2018, respectively.

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

(3) Excludes PCI loans.

Carrying Amounts and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at June 30, 2019 and December 31, 2018 were as follows: 

	Fair Value Hierarchy	June 30, 2019				December 31, 2018
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets
Cash and due from banks	Level 1	$	276,291	$	276,291	$	251,541	$	251,541
Interest bearing deposits with banks	Level 1	178,905		178,905		177,088		177,088
Investment securities held to maturity:
U.S. Treasury securities	Level 1	138,436		144,655		138,517		142,049
U.S. government agency securities	Level 2	8,049		8,092		8,721		8,641
Obligations of states and political subdivisions	Level 2	536,778		549,050		585,656		586,033
Residential mortgage-backed securities	Level 2	1,415,409		1,419,066		1,266,770		1,235,605
Trust preferred securities	Level 2	37,314		31,372		37,332		31,486
Corporate and other debt securities	Level 2	32,250		32,557		31,250		31,129
Total investment securities held to maturity		2,168,236		2,184,792		2,068,246		2,034,943
Net loans	Level 3	25,647,057		25,207,831		24,883,610		24,068,755
Accrued interest receivable	Level 1	99,065		99,065		95,296		95,296
Federal Reserve Bank and Federal Home Loan Bank stock (1)	Level 1	260,490		260,490		232,080		232,080
Financial liabilities
Deposits without stated maturities	Level 1	17,435,741		17,435,741		17,388,990		17,388,990
Deposits with stated maturities	Level 2	7,338,188		7,338,945		7,063,984		7,005,573
Short-term borrowings	Level 1	2,387,784		2,388,299		2,118,914		2,091,892
Long-term borrowings	Level 2	1,800,182		1,840,862		1,654,268		1,751,194
Junior subordinated debentures issued to capital trusts	Level 2	55,544		57,040		55,370		55,692
Accrued interest payable (2)	Level 1	36,031		36,031		25,762		25,762

(1) Included in other assets.

(2)

Included in accrued expenses and other liabilities.

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Investment Securities (Tables)

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Amortized Cost, Gross Unrealized Gains and Losses and Fair Value of Securities Held to Maturity

The amortized cost, gross unrealized gains and losses and fair value of securities held to maturity at June 30, 2019 and December 31, 2018 were as follows: 

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2019
U.S. Treasury securities	$	138,436	$	6,219	$	—		$	144,655
U.S. government agency securities	8,049		69		(26		)	8,092
Obligations of states and political subdivisions:
Obligations of states and state agencies	314,878		7,680		(992		)	321,566
Municipal bonds	221,900		5,640		(56		)	227,484
Total obligations of states and political subdivisions	536,778		13,320		(1,048		)	549,050
Residential mortgage-backed securities	1,415,409		13,242		(9,585		)	1,419,066
Trust preferred securities	37,314		62		(6,004		)	31,372
Corporate and other debt securities	32,250		399		(92		)	32,557
Total investment securities held to maturity	$	2,168,236	$	33,311	$	(16,755	)	$	2,184,792
December 31, 2018
U.S. Treasury securities	$	138,517	$	3,532	$	—		$	142,049
U.S. government agency securities	8,721		55		(135		)	8,641
Obligations of states and political subdivisions:
Obligations of states and state agencies	341,702		4,332		(5,735		)	340,299
Municipal bonds	243,954		3,141		(1,361		)	245,734
Total obligations of states and political subdivisions	585,656		7,473		(7,096		)	586,033
Residential mortgage-backed securities	1,266,770		3,203		(34,368		)	1,235,605
Trust preferred securities	37,332		77		(5,923		)	31,486
Corporate and other debt securities	31,250		96		(217		)	31,129
Total investment securities held to maturity	$	2,068,246	$	14,436	$	(47,739	)	$	2,034,943

Age of Unrealized Losses and Fair Value of Related Securities Held to Maturity

The age of unrealized losses and fair value of related securities held to maturity at June 30, 2019 and December 31, 2018 were as follows: 

	Less than Twelve Months					More than Twelve Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
June 30, 2019
U.S. government agency securities	$	—	$	—		$	5,675	$	(26	)	$	5,675	$	(26	)
Obligations of states and political subdivisions:
Obligations of states and state agencies	—		—			45,843		(992		)	45,843		(992		)
Municipal bonds	4,968		(27		)	4,331		(29		)	9,299		(56		)
Total obligations of states and political subdivisions	4,968		(27		)	50,174		(1,021		)	55,142		(1,048		)
Residential mortgage-backed securities	3,445		(7		)	674,804		(9,578		)	678,249		(9,585		)
Trust preferred securities	—		—			29,957		(6,004		)	29,957		(6,004		)
Corporate and other debt securities	—		—			4,908		(92		)	4,908		(92		)
Total	$	8,413	$	(34	)	$	765,518	$	(16,721	)	$	773,931	$	(16,755	)
December 31, 2018
U.S. government agency securities	$	—	$	—		$	6,074	$	(135	)	$	6,074	$	(135	)
Obligations of states and political subdivisions:
Obligations of states and state agencies	16,098		(266		)	138,437		(5,469		)	154,535		(5,735		)
Municipal bonds	3,335		(37		)	60,078		(1,324		)	63,413		(1,361		)
Total obligations of states and political subdivisions	19,433		(303		)	198,515		(6,793		)	217,948		(7,096		)
Residential mortgage-backed securities	72,240		(852		)	846,671		(33,516		)	918,911		(34,368		)
Trust preferred securities	—		—			30,055		(5,923		)	30,055		(5,923		)
Corporate and other debt securities	9,948		(52		)	4,835		(165		)	14,783		(217		)
Total	$	101,621	$	(1,207	)	$	1,086,150	$	(46,532	)	$	1,187,771	$	(47,739	)

Contractual Maturities of Debt Securities Held to Maturity

The contractual maturities of investments in debt securities held to maturity at June 30, 2019 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, 2019
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	30,122	$	30,109
Due after one year through five years	237,783		243,951
Due after five years through ten years	242,178		253,387
Due after ten years	242,744		238,279
Residential mortgage-backed securities	1,415,409		1,419,066
Total investment securities held to maturity	$	2,168,236	$	2,184,792

Amortized Cost, Gross Unrealized Gains and Losses and Fair Value of Securities Available for Sale

The amortized cost, gross unrealized gains and losses and fair value of securities available for sale at June 30, 2019 and December 31, 2018 were as follows: 

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2019
U.S. Treasury securities	$	50,963	$	—	$	(222	)	$	50,741
U.S. government agency securities	32,525		521		(18		)	33,028
Obligations of states and political subdivisions:
Obligations of states and state agencies	87,473		465		(222		)	87,716
Municipal bonds	98,305		899		(223		)	98,981
Total obligations of states and political subdivisions	185,778		1,364		(445		)	186,697
Residential mortgage-backed securities	1,373,033		8,303		(8,357		)	1,372,979
Corporate and other debt securities	35,416		489		—			35,905
Total investment securities available for sale	$	1,677,715	$	10,677	$	(9,042	)	$	1,679,350
December 31, 2018
U.S. Treasury securities	$	50,975	$	—	$	(1,669	)	$	49,306
U.S. government agency securities	36,844		71		(638		)	36,277
Obligations of states and political subdivisions:
Obligations of states and state agencies	100,777		18		(3,682		)	97,113
Municipal bonds	101,207		209		(1,437		)	99,979
Total obligations of states and political subdivisions	201,984		227		(5,119		)	197,092
Residential mortgage-backed securities	1,469,059		1,484		(40,761		)	1,429,782
Corporate and other debt securities	37,542		213		(668		)	37,087
Total investment securities available for sale	$	1,796,404	$	1,995	$	(48,855	)	$	1,749,544

Age of Unrealized Losses and Fair Value of Related Securities Available for Sale

The age of unrealized losses and fair value of related securities available for sale at June 30, 2019 and December 31, 2018 were as follows: 

	Less than Twelve Months					More than Twelve Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
June 30, 2019
U.S. Treasury securities	$	—	$	—		$	50,741	$	(222	)	$	50,741	$	(222	)
U.S. government agency securities	—		—			2,488		(18		)	2,488		(18		)
Obligations of states and political subdivisions:
Obligations of states and state agencies	—		—			43,868		(222		)	43,868		(222		)
Municipal bonds	1,986		(34		)	20,335		(189		)	22,321		(223		)
Total obligations of states and political subdivisions	1,986		(34		)	64,203		(411		)	66,189		(445		)
Residential mortgage-backed securities	220		(3		)	703,691		(8,354		)	703,911		(8,357		)
Total	$	2,206	$	(37	)	$	821,123	$	(9,005	)	$	823,329	$	(9,042	)
December 31, 2018
U.S. Treasury securities	$	—	$	—		$	49,306	$	(1,669	)	$	49,306	$	(1,669	)
U.S. government agency securities	2,120		(20		)	26,775		(618		)	28,895		(638		)
Obligations of states and political subdivisions:
Obligations of states and state agencies	17,560		(95		)	75,718		(3,587		)	93,278		(3,682		)
Municipal bonds	5,018		(106		)	70,286		(1,331		)	75,304		(1,437		)
Total obligations of states and political subdivisions	22,578		(201		)	146,004		(4,918		)	168,582		(5,119		)
Residential mortgage-backed securities	119,645		(668		)	1,221,942		(40,093		)	1,341,587		(40,761		)
Corporate and other debt securities	12,339		(161		)	12,397		(507		)	24,736		(668		)
Total	$	156,682	$	(1,050	)	$	1,456,424	$	(47,805	)	$	1,613,106	$	(48,855	)

Contractual Maturities of Debt Securities Available for Sale

The contractual maturities of debt securities available for sale at June 30, 2019 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, 2019
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	9,121	$	9,117
Due after one year through five years	125,530		125,671
Due after five years through ten years	66,064		67,046
Due after ten years	103,967		104,537
Residential mortgage-backed securities	1,373,033		1,372,979
Total investment securities available for sale	$	1,677,715	$	1,679,350

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Loans (Tables)

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Schedule of Loan Portfolio

The detail of the loan portfolio as of June 30, 2019 and December 31, 2018 was as follows: 

	June 30, 2019						December 31, 2018
	Non-PCI Loans		PCI Loans		Total		Non-PCI Loans		PCI Loans		Total
	(in thousands)
Loans:
Commercial and industrial	$	3,918,894	$	696,871	$	4,615,765	$	3,590,375	$	740,657	$	4,331,032
Commercial real estate:
Commercial real estate	10,470,127		2,327,890		12,798,017		9,912,309		2,494,966		12,407,275
Construction	1,288,417		240,551		1,528,968		1,122,348		365,784		1,488,132
Total commercial real estate loans	11,758,544		2,568,441		14,326,985		11,034,657		2,860,750		13,895,407
Residential mortgage	3,694,463		377,987		4,072,450		3,682,984		428,416		4,111,400
Consumer:
Home equity	385,987		115,659		501,646		371,340		145,749		517,089
Automobile	1,362,143		323		1,362,466		1,319,206		365		1,319,571
Other consumer	910,174		12,676		922,850		846,821		14,149		860,970
Total consumer loans	2,658,304		128,658		2,786,962		2,537,367		160,263		2,697,630
Total loans	$	22,030,205	$	3,771,957	$	25,802,162	$	20,845,383	$	4,190,086	$	25,035,469

Changes in Accretable Yield for PCI Loans

The following table presents changes in the accretable yield for PCI loans during the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(in thousands)
Balance, beginning of period	$	890,771		$	691,086		$	875,958		$	282,009
Acquisition	—			—			—			474,208
Accretion	(55,014		)	(60,536		)	(108,506		)	(125,667		)
Net increase in expected cash flows	18,130			—			86,435			—
Balance, end of period	$	853,887		$	630,550		$	853,887		$	630,550

Past Due, Non-Accrual and Current Loans by Loan Portfolio Class

The following table presents past due, non-accrual and current loans (excluding PCI loans, which are accounted for on a pool basis) by loan portfolio class at June 30, 2019 and December 31, 2018: 

	Past Due and Non-Accrual Loans
	30-59 Days Past Due Loans		60-89 Days Past Due Loans		Accruing Loans 90 Days or More Past Due		Non-Accrual Loans		Total Past Due Loans		Current Non-PCI Loans		Total Non-PCI Loans
	(in thousands)
June 30, 2019
Commercial and industrial	$	14,119	$	4,135	$	3,298	$	76,216	$	97,768	$	3,821,126	$	3,918,894
Commercial real estate:
Commercial real estate	6,202		354		—		6,231		12,787		10,457,340		10,470,127
Construction	—		1,342		—		—		1,342		1,287,075		1,288,417
Total commercial real estate loans	6,202		1,696		—		6,231		14,129		11,744,415		11,758,544
Residential mortgage	19,131		3,635		1,054		12,069		35,889		3,658,574		3,694,463
Consumer loans:
Home equity	673		82		—		1,630		2,385		383,602		385,987
Automobile	7,221		925		328		148		8,622		1,353,521		1,362,143
Other consumer	4,038		477		31		221		4,767		905,407		910,174
Total consumer loans	11,932		1,484		359		1,999		15,774		2,642,530		2,658,304
Total	$	51,384	$	10,950	$	4,711	$	96,515	$	163,560	$	21,866,645	$	22,030,205
December 31, 2018
Commercial and industrial	$	13,085	$	3,768	$	6,156	$	70,096	$	93,105	$	3,497,270	$	3,590,375
Commercial real estate:
Commercial real estate	9,521		530		27		2,372		12,450		9,899,859		9,912,309
Construction	2,829		—		—		356		3,185		1,119,163		1,122,348
Total commercial real estate loans	12,350		530		27		2,728		15,635		11,019,022		11,034,657
Residential mortgage	16,576		2,458		1,288		12,917		33,239		3,649,745		3,682,984
Consumer loans:
Home equity	872		40		—		2,156		3,068		368,272		371,340
Automobile	7,973		1,299		308		80		9,660		1,309,546		1,319,206
Other consumer	895		47		33		419		1,394		845,427		846,821
Total consumer loans	9,740		1,386		341		2,655		14,122		2,523,245		2,537,367
Total	$	51,751	$	8,142	$	7,812	$	88,396	$	156,101	$	20,689,282	$	20,845,383

Impaired Loans by Loan Portfolio Class

The following table presents information about impaired loans by loan portfolio class at June 30, 2019 and December 31, 2018:

	Recorded Investment With No Related Allowance		Recorded Investment With Related Allowance		Total Recorded Investment		Unpaid Contractual Principal Balance		Related Allowance
	(in thousands)
June 30, 2019
Commercial and industrial	$	13,008	$	90,018	$	103,026	$	115,602	$	31,128
Commercial real estate:
Commercial real estate	20,707		26,258		46,965		49,067		2,604
Construction	354		—		354		354		—
Total commercial real estate loans	21,061		26,258		47,319		49,421		2,604
Residential mortgage	6,046		6,448		12,494		13,531		668
Consumer loans:
Home equity	221		519		740		838		50
Total consumer loans	221		519		740		838		50
Total	$	40,336	$	123,243	$	163,579	$	179,392	$	34,450
December 31, 2018
Commercial and industrial	$	8,339	$	89,513	$	97,852	$	104,007	$	29,684
Commercial real estate:
Commercial real estate	16,732		25,606		42,338		44,337		2,615
Construction	803		457		1,260		1,260		13
Total commercial real estate loans	17,535		26,063		43,598		45,597		2,628
Residential mortgage	7,826		6,078		13,904		14,948		600
Consumer loans:
Home equity	125		1,146		1,271		1,366		113
Total consumer loans	125		1,146		1,271		1,366		113
Total	$	33,825	$	122,800	$	156,625	$	165,918	$	33,025

Average Recorded Investment and Interest Income Recognized on Impaired Loans

The following table presents, by loan portfolio class, the average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2019 and 2018: 

	Three Months Ended June 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Commercial and industrial	$	105,633	$	443	$	87,674	$	212
Commercial real estate:
Commercial real estate	46,234		547		52,729		563
Construction	354		—		2,244		16
Total commercial real estate loans	46,588		547		54,973		579
Residential mortgage	12,254		95		12,914		185
Consumer loans:
Home equity	747		10		1,794		33
Total consumer loans	747		10		1,794		33
Total	$	165,222	$	1,095	$	157,355	$	1,009

	Six Months Ended June 30, 2018
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Commercial and industrial	$	111,329	$	1,014	$	88,865	$	926
Commercial real estate:
Commercial real estate	45,515		1,266		54,104		1,179
Construction	587		—		2,230		39
Total commercial real estate loans	46,102		1,266		56,334		1,218
Residential mortgage	13,072		239		13,502		350
Consumer loans:
Home equity	940		21		1,910		66
Total consumer loans	940		21		1,910		66
Total	$	171,443	$	2,540	$	160,611	$	2,560

Pre-Modification and Post-Modification Outstanding Recorded Investments and Non-PCI Loans that Subsequently Defaulted

The non-PCI loans modified as TDRs within the previous 12 months and for which there was a payment default (90 or more days past due) for the three and six months ended June 30, 2019 and 2018 were as follows:

	Three Months Ended June 30,
	2019			2018
Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	($ in thousands)
Commercial and industrial	18	$	12,322	4	$	3,212
Commercial real estate	1	383		—	—
Total	19	$	12,705	4	$	3,212

	Six Months Ended June 30,
	2019			2018
Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	($ in thousands)
Commercial and industrial	18	$	12,322	4	$	3,212
Commercial real estate	1	383		—	—
Residential mortgage	2	215		—	—
Consumer	1	18		—	—
Total	22	$	12,938	4	$	3,212

The following table presents non-PCI loans by loan class modified as TDRs during the three and six months ended June 30, 2019 and 2018. The pre-modification and post-modification outstanding recorded investments disclosed in the tables below represent the loan carrying amounts immediately prior to the modification and the carrying amounts at June 30, 2019 and 2018, respectively. 

	Three Months Ended June 30,
	2019					2018
Troubled Debt Restructurings	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	($ in thousands)
Commercial and industrial	17	$	14,663	$	14,187	11	$	8,822	$	8,575
Commercial real estate:
Commercial real estate	1	3,067		3,067		5	3,975		3,971
Construction	—	—		—		1	532		491
Total commercial real estate	1	3,067		3,067		6	4,507		4,462
Residential mortgage	1	155		155		2	393		389
Total	19	$	17,885	$	17,409	19	$	13,722	$	13,426

	Six Months Ended June 30,
	2019					2018
Troubled Debt Restructurings	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	($ in thousands)
Commercial and industrial	53	$	38,216	$	37,428	15	$	10,554	$	10,170
Commercial real estate:
Commercial real estate	2	4,665		4,665		6	4,170		4,164
Construction	—	—		—		2	564		503
Total commercial real estate	2	4,665		4,665		8	4,734		4,667
Residential mortgage	1	155		155		5	980		963
Consumer	—	—		—		1	88		85
Total	56	$	43,036	$	42,248	29	$	16,356	$	15,885

Risk Category of Loans

The following table presents the credit exposure by internally assigned risk rating by class of loans (excluding PCI loans) at June 30, 2019 and December 31, 2018 based on the most recent analysis performed:

Credit exposure - by internally assigned risk rating	Pass		Special Mention		Substandard		Doubtful		Total Non-PCI Loans
	(in thousands)
June 30, 2019
Commercial and industrial	$	3,733,252	$	40,412	$	75,853	$	69,377	$	3,918,894
Commercial real estate	10,362,538		63,116		43,564		909		10,470,127
Construction	1,286,278		1,785		354		—		1,288,417
Total	$	15,382,068	$	105,313	$	119,771	$	70,286	$	15,677,438
December 31, 2018
Commercial and industrial	$	3,399,426	$	31,996	$	92,320	$	66,633	$	3,590,375
Commercial real estate	9,828,744		30,892		51,710		963		9,912,309
Construction	1,121,321		215		812		—		1,122,348
Total	$	14,349,491	$	63,103	$	144,842	$	67,596	$	14,625,032

Recorded Investment in Loan Classes Based on Payment Activity

The following table presents the recorded investment in those loan classes based on payment activity as of June 30, 2019 and December 31, 2018: 

Credit exposure - by payment activity	Performing Loans		Non-Performing Loans		Total Non-PCI Loans
	(in thousands)
June 30, 2019
Residential mortgage	$	3,682,394	$	12,069	$	3,694,463
Home equity	384,357		1,630		385,987
Automobile	1,361,995		148		1,362,143
Other consumer	909,953		221		910,174
Total	$	6,338,699	$	14,068	$	6,352,767
December 31, 2018
Residential mortgage	$	3,670,067	$	12,917	$	3,682,984
Home equity	369,184		2,156		371,340
Automobile	1,319,126		80		1,319,206
Other consumer	846,402		419		846,821
Total	$	6,204,779	$	15,572	$	6,220,351

The following table presents the recorded investment in PCI loans by class based on individual loan payment activity as of June 30, 2019 and December 31, 2018:

Credit exposure - by payment activity	Performing Loans		Non-Performing Loans		Total PCI Loans
	(in thousands)
June 30, 2019
Commercial and industrial	$	668,887	$	27,984	$	696,871
Commercial real estate	2,309,294		18,596		2,327,890
Construction	239,926		625		240,551
Residential mortgage	372,531		5,456		377,987
Consumer	126,234		2,424		128,658
Total	$	3,716,872	$	55,085	$	3,771,957
December 31, 2018
Commercial and industrial	$	710,045	$	30,612	$	740,657
Commercial real estate	2,478,990		15,976		2,494,966
Construction	364,815		969		365,784
Residential mortgage	421,609		6,807		428,416
Consumer	158,502		1,761		160,263
Total	$	4,133,961	$	56,125	$	4,190,086

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Allowance for Credit Losses (Tables)

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Summary of Allowance for Credit Losses

The following table summarizes the allowance for credit losses at June 30, 2019 and December 31, 2018: 

	June 30, 2019		December 31, 2018
	(in thousands)
Components of allowance for credit losses:
Allowance for loan losses	$	155,105	$	151,859
Allowance for unfunded letters of credit	2,974		4,436
Total allowance for credit losses	$	158,079	$	156,295

Summary of Provision for Credit Losses

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
	(in thousands)
Components of provision for credit losses:
Provision for loan losses	$	3,706		$	6,592	$	11,562		$	17,294
Provision for unfunded letters of credit	(1,606		)	550		(1,462		)	796
Total provision for credit losses	$	2,100		$	7,142	$	10,100		$	18,090

Summary of Activity in Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2019 and 2018:

	Commercial and Industrial			Commercial Real Estate			Residential Mortgage			Consumer			Total
	(in thousands)
Three Months Ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	94,630		$	47,762		$	5,139		$	6,850		$	154,381
Loans charged-off	(3,073		)	—			—			(1,752		)	(4,825		)
Charged-off loans recovered	1,195			22			9			617			1,843
Net (charge-offs) recoveries	(1,878		)	22			9			(1,135		)	(2,982		)
Provision for loan losses	1,632			1,194			71			809			3,706
Ending balance	$	94,384		$	48,978		$	5,219		$	6,524		$	155,105
Three Months Ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	66,546		$	56,679		$	4,100		$	5,537		$	132,862
Loans charged-off	(642		)	(38		)	(99		)	(1,422		)	(2,201		)
Charged-off loans recovered	819			15			180			495			1,509
Net recoveries (charge-offs)	177			(23		)	81			(927		)	(692		)
Provision for loan losses	7,534			(2,844		)	443			1,459			6,592
Ending balance	$	74,257		$	53,812		$	4,624		$	6,069		$	138,762

	Commercial and Industrial			Commercial Real Estate			Residential Mortgage			Consumer			Total
	(in thousands)
Six Months Ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	90,956		$	49,650		$	5,041		$	6,212		$	151,859
Loans charged-off	(7,355		)	—			(15		)	(3,780		)	(11,150		)
Charged-off loans recovered	1,678			43			10			1,103			2,834
Net (charge-offs) recoveries	(5,677		)	43			(5		)	(2,677		)	(8,316		)
Provision for loan losses	9,105			(715		)	183			2,989			11,562
Ending balance	$	94,384		$	48,978		$	5,219		$	6,524		$	155,105
Six Months Ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	57,232		$	54,954		$	3,605		$	5,065		$	120,856
Loans charged-off	(773		)	(348		)	(167		)	(2,633		)	(3,921		)
Charged-off loans recovered	2,926			384			260			963			4,533
Net recoveries (charge-offs)	2,153			36			93			(1,670		)	612
Provision for loan losses	14,872			(1,178		)	926			2,674			17,294
Ending balance	$	74,257		$	53,812		$	4,624		$	6,069		$	138,762

Summary of Allocation of Allowance for Loan Losses and Related Loans by Loan Portfolio Segment Disaggregated Based on Impairment Methodology

The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the impairment methodology at June 30, 2019 and December 31, 2018. Loans individually evaluated for impairment represent Valley's impaired loans. Loans acquired with discounts related to credit quality represent Valley's PCI loans.

	Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total
	(in thousands)
June 30, 2019
Allowance for loan losses:
Individually evaluated for impairment	$	31,128	$	2,604	$	668	$	50	$	34,450
Collectively evaluated for impairment	63,256		46,374		4,551		6,474		120,655
Total	$	94,384	$	48,978	$	5,219	$	6,524	$	155,105
Loans:
Individually evaluated for impairment	$	103,026	$	47,319	$	12,494	$	740	$	163,579
Collectively evaluated for impairment	3,815,868		11,711,225		3,681,969		2,657,564		21,866,626
Loans acquired with discounts related to credit quality	696,871		2,568,441		377,987		128,658		3,771,957
Total	$	4,615,765	$	14,326,985	$	4,072,450	$	2,786,962	$	25,802,162
December 31, 2018
Allowance for loan losses:
Individually evaluated for impairment	$	29,684	$	2,628	$	600	$	113	$	33,025
Collectively evaluated for impairment	61,272		47,022		4,441		6,099		118,834
Total	$	90,956	$	49,650	$	5,041	$	6,212	$	151,859
Loans:
Individually evaluated for impairment	$	97,852	$	43,598	$	13,904	$	1,271	$	156,625
Collectively evaluated for impairment	3,492,523		10,991,059		3,669,080		2,536,096		20,688,758
Loans acquired with discounts related to credit quality	740,657		2,860,750		428,416		160,263		4,190,086
Total	$	4,331,032	$	13,895,407	$	4,111,400	$	2,697,630	$	25,035,469

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

ROU Assets and Lease Liabilities By Lease Type

The following table presents the components of ROU assets and lease liabilities by lease type at June 30, 2019.

	June 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	282,329
Finance leases	1,019
Total	$	283,348
Lease liabilities:
Operating leases	$	305,364
Finance leases	2,041
Total	$	307,405

Components of Lease, Supplemental Cash Flow and Supplemental Information

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and six months ended June 30, 2019:

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	73		$	146
Interest on lease liabilities	49			101
Operating lease cost	8,949			15,923
Short-term lease cost	59			134
Variable lease cost	1,024			1,972
Sublease income	(783		)	(1,686		)
Total lease cost (included in net occupancy and equipment expense)	$	9,371		$	16,590

The following table presents supplemental cash flow information related to leases for the six months ended June 30, 2019:

	Six Months Ended
	June 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	16,896
Operating cash flows from finance leases	102
Financing cash flows from finance leases	240

The following table presents supplemental information related to leases at June 30, 2019:

	June 30, 2019
Weighted-average remaining lease term
Operating leases	13.08 years
Finance leases	3.50 years
Weighted-average discount rate
Operating leases	3.72	%
Finance leases	8.25	%

Sales-type Leases

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of June 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	63,085		$	17,594		$	341
2020	108,188			35,006			684
2021	91,950			34,169			684
2022	70,058			32,625			684
2023	47,744			29,222			—
Thereafter	33,007			244,762			—
Total lease payments	414,032			393,378			2,393
Less: present value discount	(36,769		)	(88,014		)	(352		)
Total	$	377,263		$	305,364		$	2,041

Direct Financing Leases

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of June 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	63,085		$	17,594		$	341
2020	108,188			35,006			684
2021	91,950			34,169			684
2022	70,058			32,625			684
2023	47,744			29,222			—
Thereafter	33,007			244,762			—
Total lease payments	414,032			393,378			2,393
Less: present value discount	(36,769		)	(88,014		)	(352		)
Total	$	377,263		$	305,364		$	2,041

Finance Leases Maturity

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of June 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	63,085		$	17,594		$	341
2020	108,188			35,006			684
2021	91,950			34,169			684
2022	70,058			32,625			684
2023	47,744			29,222			—
Thereafter	33,007			244,762			—
Total lease payments	414,032			393,378			2,393
Less: present value discount	(36,769		)	(88,014		)	(352		)
Total	$	377,263		$	305,364		$	2,041

Operating Lease Maturity

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of June 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	63,085		$	17,594		$	341
2020	108,188			35,006			684
2021	91,950			34,169			684
2022	70,058			32,625			684
2023	47,744			29,222			—
Thereafter	33,007			244,762			—
Total lease payments	414,032			393,378			2,393
Less: present value discount	(36,769		)	(88,014		)	(352		)
Total	$	377,263		$	305,364		$	2,041

Minimum Aggregate Lease Payments In Accordance With Topic 840

The following table presents minimum aggregate lease payments in accordance with Topic 840 at June 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	13,731	$	1,092	$	12,639
2019	27,640		2,124		25,516
2020	27,785		2,077		25,708
2021	26,955		2,009		24,946
2022	25,948		1,891		24,057
Thereafter	271,054		8,130		262,924
Total lease payments	$	393,113	$	17,323	$	375,790

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Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Other Intangible Assets

The following table summarizes other intangible assets as of June 30, 2019 and December 31, 2018: 

	Gross Intangible Assets		Accumulated Amortization			Valuation Allowance			Net Intangible Assets
	(in thousands)
June 30, 2019
Loan servicing rights	$	89,732	$	(66,406	)	$	—		$	23,326
Core deposits	80,470		(34,640		)	—			45,830
Other	3,945		(2,516		)	—			1,429
Total other intangible assets	$	174,147	$	(103,562	)	$	—		$	70,585
December 31, 2018
Loan servicing rights	$	87,354	$	(63,161	)	$	(83	)	$	24,110
Core deposits	80,470		(29,136		)	—			51,334
Other	3,945		(2,399		)	—			1,546
Total other intangible assets	$	171,769	$	(94,696	)	$	(83	)	$	76,990

Estimated Future Amortization Expense

The following table presents the estimated future amortization expense of other intangible assets for the remainder of 2019 through 2023: 

	Loan Servicing Rights		Core Deposits		Other
	(in thousands)
2019	$	2,056	$	5,457	$	117
2020	3,603		9,607		220
2021	3,007		8,252		206
2022	2,513		6,898		191
2023	2,097		5,544		131

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Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Consolidated Statements of Financial Condition Related to Fair Value of Derivative Financial Instruments

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, 2019						December 31, 2018
	Fair Value						Fair Value
	Other Assets		Other Liabilities		Notional Amount		Other Assets		Other Liabilities		Notional Amount
	(in thousands)
Derivatives designated as hedging instruments:
Cash flow hedge interest rate swaps	$	—	$	2,159	$	255,000	$	—	$	27	$	332,000
Fair value hedge interest rate swaps	—		337		7,411		—		347		7,536
Total derivatives designated as hedging instruments	$	—	$	2,496	$	262,411	$	—	$	374	$	339,536
Derivatives not designated as hedging instruments:
Interest rate swaps and embedded derivatives	$	139,893	$	30,337	$	3,469,497	$	48,642	$	22,533	$	3,390,578
Mortgage banking derivatives	603		669		140,306		337		774		105,247
Total derivatives not designated as hedging instruments	$	140,496	$	31,006	$	3,609,803	$	48,979	$	23,307	$	3,495,825

(Losses) Gains Related to Interest Rate Derivatives Designated as Hedges of Cash Flows

Gains (Losses) included in the consolidated statements of income and in 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,
	2019			2018			2019			2018
	(in thousands)
Amount of loss reclassified from accumulated other comprehensive loss to interest expense	$	(383	)	$	(866	)	$	(673	)	$	(2,317	)
Amount of (loss) gain recognized in other comprehensive income (loss)	(962		)	637			(1,512		)	3,388

Gains (Losses) Related to Interest Rate Derivatives Designated as Hedges of Fair Value

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,
	2019			2018			2019			2018
	(in thousands)
Derivative - interest rate swaps:
Interest income	$	49		$	88		$	73		$	219
Hedged item - loans:
Interest income	$	(49	)	$	(88	)	$	(73	)	$	(219	)

Interest Rate Derivatives Designated as Hedges

The following table presents the hedged items related to interest rate derivatives designated as hedges of fair value and the cumulative basis fair value adjustment included in the net carrying amount of the hedged items at June 30, 2019 and December 31, 2018.

Line Item in the Statement of Financial Position in Which the Hedged Item is Included	Carrying Amount of the Hedged Asset				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Asset
	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(in thousands)
Loans	$	7,748	$	7,882	$	337	$	346

Net Gains (Losses) Related to Derivative Instruments Not Designated as Hedging Instruments

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,
	2019			2018		2019			2018
	(in thousands)
Non-designated hedge interest rate derivatives
Other non-interest expense	$	(347	)	$	230	$	(757	)	$	448

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Balance Sheet Offsetting (Tables)

6 Months Ended

Jun. 30, 2019

Offsetting [Abstract]

Offsetting Assets

The table below presents information about Valley’s financial instruments that are eligible for offset in the consolidated statements of financial condition as of June 30, 2019 and December 31, 2018.

							Gross Amounts Not Offset
	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments			Cash Collateral				Net Amount
	(in thousands)
June 30, 2019
Assets:
Interest rate swaps	$	139,893	$	—	$	139,893	$	(13,385	)	$	—			$	126,508
Liabilities:
Interest rate swaps	$	32,833	$	—	$	32,833	$	(13,385	)	$	(15,211	)	(1)	$	4,237
Repurchase agreements	150,000		—		150,000		—			(150,000		)	(2)	—
Total	$	182,833	$	—	$	182,833	$	(13,385	)	$	(165,211	)		$	4,237
December 31, 2018
Assets:
Interest rate swaps and caps	$	48,642	$	—	$	48,642	$	(1,214	)	$	—			$	47,428
Liabilities:
Interest rate swaps and caps	$	22,907	$	—	$	22,907	$	(1,214	)	$	(1,852	)	(1)	$	19,841
Repurchase agreements	150,000		—		150,000		—			(150,000		)	(2)	—
Total	$	172,907	$	—	$	172,907	$	(1,214	)	$	(151,852	)		$	19,841

(1) Represents the amount of collateral posted with derivative counterparties that offsets net liability positions.

(2)

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

Offsetting Liabilities

The table below presents information about Valley’s financial instruments that are eligible for offset in the consolidated statements of financial condition as of June 30, 2019 and December 31, 2018.

							Gross Amounts Not Offset
	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments			Cash Collateral				Net Amount
	(in thousands)
June 30, 2019
Assets:
Interest rate swaps	$	139,893	$	—	$	139,893	$	(13,385	)	$	—			$	126,508
Liabilities:
Interest rate swaps	$	32,833	$	—	$	32,833	$	(13,385	)	$	(15,211	)	(1)	$	4,237
Repurchase agreements	150,000		—		150,000		—			(150,000		)	(2)	—
Total	$	182,833	$	—	$	182,833	$	(13,385	)	$	(165,211	)		$	4,237
December 31, 2018
Assets:
Interest rate swaps and caps	$	48,642	$	—	$	48,642	$	(1,214	)	$	—			$	47,428
Liabilities:
Interest rate swaps and caps	$	22,907	$	—	$	22,907	$	(1,214	)	$	(1,852	)	(1)	$	19,841
Repurchase agreements	150,000		—		150,000		—			(150,000		)	(2)	—
Total	$	172,907	$	—	$	172,907	$	(1,214	)	$	(151,852	)		$	19,841

(1) Represents the amount of collateral posted with derivative counterparties that offsets net liability positions.

(2)

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

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Tax Credit Investments (Tables)

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Affordable Housing Tax Credit Investments, Other Tax Credit Investments, and Related Unfunded Commitments

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at June 30, 2019 and December 31, 2018:

	June 30, 2019		December 31, 2018
	(in thousands)
Other Assets:
Affordable housing tax credit investments, net	$	27,738	$	36,961
Other tax credit investments, net	58,215		68,052
Total tax credit investments, net	$	85,953	$	105,013
Other Liabilities:
Unfunded affordable housing tax credit commitments	$	2,696	$	4,520
Unfunded other tax credit commitments	5,139		8,756
Total unfunded tax credit commitments	$	7,835	$	13,276

Affordable Housing Tax Credit Investments and Other Tax Credit Investments

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and six months ended June 30, 2019 and 2018: 

	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
	(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$	1,708	$	1,429		$	3,421	$	3,250
Other tax credit investment credits and tax benefits	2,158		5,680			4,961		11,165
Total reduction in income tax expense	$	3,866	$	7,109		$	8,382	$	14,415
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	$	593	$	(319	)	$	1,266	$	667
Affordable housing tax credit investment impairment losses	794		515			1,524		1,102
Other tax credit investment losses	2,509		1,253			3,496		1,790
Other tax credit investment impairment losses	967		3,021			5,750		6,185
Total amortization of tax credit investments recorded in non-interest expense	$	4,863	$	4,470		$	12,036	$	9,744

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Summary of Reconciliation of Gross Unrecognized Tax Benefits

A reconciliation of Valley’s gross unrecognized tax benefits at June 30, 2019 and 2018 are presented in the table below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Beginning balance	$	12,100	$	4,238	$	—	$	4,238
Additions based on tax positions related to current year	223		—		12,323		—
Ending balance	$	12,323	$	4,238	$	12,323	$	4,238

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Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share Reconciliation
Net income available to common shareholders	$ 73,296	$ 69,630	$ 183,454	$ 108,423
Basic weighted average number of common shares outstanding (in shares)	331,748,552	331,318,381	331,675,313	331,024,531
Plus: Common stock equivalents (in shares)	1,211,250	1,577,102	1,254,046	1,575,460
Diluted weighted average number of common shares outstanding (in shares)	332,959,802	332,895,483	332,929,359	332,599,991
Earnings per common share:
Basic (usd per share)	$ 0.22	$ 0.21	$ 0.55	$ 0.33
Diluted (usd per share)	$ 0.22	$ 0.21	$ 0.55	$ 0.33
Anti-dilutive common stock options and warrants (in shares)	482,000		494,000	2,900,000

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Accumulated Other Comprehensive Loss - Components of AOCI (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accumulated Other Comprehensive Income (Loss)
Beginning balance	$ 3,444,879	$ 3,245,003	$ 3,350,454	$ 2,533,165
Other comprehensive (loss) income before reclassifications	17,805		33,690
Amounts reclassified from other comprehensive (loss) income	321	773	610	2,453
Total other comprehensive income (loss)	18,126	(5,021)	34,300	(22,578)
Ending balance	3,504,118	3,277,312	3,504,118	3,277,312
Unrealized Gains and Losses on Available for Sale (AFS) Securities
Accumulated Other Comprehensive Income (Loss)
Beginning balance	(17,266)		(33,559)
Other comprehensive (loss) income before reclassifications	18,488		34,755
Amounts reclassified from other comprehensive (loss) income	(8)		18
Total other comprehensive income (loss)	18,480		34,773
Ending balance	1,214		1,214
Unrealized Gains and (Losses) on Derivatives
Accumulated Other Comprehensive Income (Loss)
Beginning balance	(4,205)		(4,031)
Other comprehensive (loss) income before reclassifications	(683)		(1,065)
Amounts reclassified from other comprehensive (loss) income	274		482
Total other comprehensive income (loss)	(409)		(583)
Ending balance	(4,614)		(4,614)
Defined Benefit Pension Plan
Accumulated Other Comprehensive Income (Loss)
Beginning balance	(31,786)		(31,841)
Other comprehensive (loss) income before reclassifications	0		0
Amounts reclassified from other comprehensive (loss) income	55	112	110	224
Total other comprehensive income (loss)	55		110
Ending balance	(31,731)		(31,731)
Total Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income (Loss)
Beginning balance	(53,257)	(64,103)	(69,431)	(46,005)
Ending balance	$ (35,131)	$ (69,124)	$ (35,131)	$ (69,124)

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Accumulated Other Comprehensive Loss - Reclassifications from AOCI (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Reclassification Out Of Accumulated Other Comprehensive Loss
Gains (losses) on securities transactions, net	$ 11		$ (36)		$ (21)	$ (801)
Tax effect	(27,532)		(18,961)		(84,728)	(32,145)
Total net of tax	76,468	$ 113,330	72,802	$ 41,965	189,798	114,767
Interest expense	(107,508)		(69,366)		(209,084)	(129,263)
Total reclassifications, net of tax	(321)		(773)		(610)	(2,453)
Unrealized gains (losses) on AFS securities before tax
Reclassification Out Of Accumulated Other Comprehensive Loss
Total reclassifications, net of tax	8				(18)
Unrealized losses on derivatives (cash flow hedges) before tax
Reclassification Out Of Accumulated Other Comprehensive Loss
Total reclassifications, net of tax	(274)				(482)
Defined Benefit Pension Plan
Reclassification Out Of Accumulated Other Comprehensive Loss
Amortization of net loss	(78)		(157)		(156)	(314)
Tax effect	23		45		46	90
Total reclassifications, net of tax	(55)		(112)		(110)	(224)
Reclassification Out of Accumulated Other Comprehensive Income (Loss)
Reclassification Out Of Accumulated Other Comprehensive Loss
Interest expense	(383)		(866)		(673)	(2,317)
Reclassification Out of Accumulated Other Comprehensive Income (Loss) | Unrealized gains (losses) on AFS securities before tax
Reclassification Out Of Accumulated Other Comprehensive Loss
Gains (losses) on securities transactions, net	11		(52)		(21)	(795)
Tax effect	(3)		10		3	221
Total net of tax	8		(42)		(18)	(574)
Reclassification Out of Accumulated Other Comprehensive Income (Loss) | Unrealized losses on derivatives (cash flow hedges) before tax
Reclassification Out Of Accumulated Other Comprehensive Loss
Tax effect	109		247		191	662
Total net of tax	(274)		(619)		(482)	(1,655)
Interest expense	$ (383)		$ (866)		$ (673)	$ (2,317)

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New Authoritative Accounting Guidance (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lease right of use assets	$ 283,348
Lease liabilities	$ 307,405		$ 3,125
ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lease right of use assets		$ 216,000
Lease liabilities		241,000
Cumulative effect adjustment to retained earnings		4,414
ASU 2016-02 | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment to retained earnings		4,414
ASU 2017-08
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment to retained earnings		(1,446)
ASU 2017-08 | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment to retained earnings		$ (1,446)

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Fair Value Measurement of Assets and Liabilities - Recurring and Non-Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Investment securities
Available for sale	$ 1,679,350	$ 1,749,544
Non-recurring fair value measurements:
Unpaid principal balances of loans held for sale	35,600	34,600
U.S. Treasury securities
Investment securities
Available for sale	50,741	49,306
U.S. government agency securities
Investment securities
Available for sale	33,028	36,277
Obligations of states and political subdivisions
Investment securities
Available for sale	186,697	197,092
Residential mortgage-backed securities
Investment securities
Available for sale	1,372,979	1,429,782
Corporate and other debt securities
Investment securities
Available for sale	35,905	37,087
Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring fair value measurements
Investment securities
Available for sale	50,741	49,306
Loans held for sale	0	0
Other assets	0	0
Total assets	50,741	49,306
Liabilities
Other liabilities	0	0
Total liabilities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring fair value measurements | U.S. Treasury securities
Investment securities
Available for sale	50,741	49,306
Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring fair value measurements | U.S. government agency securities
Investment securities
Available for sale	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring fair value measurements | Obligations of states and political subdivisions
Investment securities
Available for sale	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring fair value measurements | Residential mortgage-backed securities
Investment securities
Available for sale	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring fair value measurements | Corporate and other debt securities
Investment securities
Available for sale	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Non-recurring fair value measurements
Non-recurring fair value measurements:
Collateral dependent impaired loans	0	0
Loan servicing rights		0
Foreclosed assets	0	0
Total	0	0
Significant Other Observable Inputs (Level 2) | Recurring fair value measurements
Investment securities
Available for sale	1,627,929	1,700,238
Loans held for sale	36,641	35,155
Other assets	140,496	48,979
Total assets	1,805,066	1,784,372
Liabilities
Other liabilities	33,502	23,681
Total liabilities	33,502	23,681
Significant Other Observable Inputs (Level 2) | Recurring fair value measurements | U.S. Treasury securities
Investment securities
Available for sale	0	0
Significant Other Observable Inputs (Level 2) | Recurring fair value measurements | U.S. government agency securities
Investment securities
Available for sale	33,028	36,277
Significant Other Observable Inputs (Level 2) | Recurring fair value measurements | Obligations of states and political subdivisions
Investment securities
Available for sale	186,017	197,092
Significant Other Observable Inputs (Level 2) | Recurring fair value measurements | Residential mortgage-backed securities
Investment securities
Available for sale	1,372,979	1,429,782
Significant Other Observable Inputs (Level 2) | Recurring fair value measurements | Corporate and other debt securities
Investment securities
Available for sale	35,905	37,087
Significant Other Observable Inputs (Level 2) | Non-recurring fair value measurements
Non-recurring fair value measurements:
Collateral dependent impaired loans	0	0
Loan servicing rights		0
Foreclosed assets	0	0
Total	0	0
Significant Unobservable Inputs (Level 3) | Recurring fair value measurements
Investment securities
Available for sale	680	0
Loans held for sale	0	0
Other assets	0	0
Total assets	680	0
Liabilities
Other liabilities	0	0
Total liabilities	0	0
Significant Unobservable Inputs (Level 3) | Recurring fair value measurements | U.S. Treasury securities
Investment securities
Available for sale	0	0
Significant Unobservable Inputs (Level 3) | Recurring fair value measurements | U.S. government agency securities
Investment securities
Available for sale	0	0
Significant Unobservable Inputs (Level 3) | Recurring fair value measurements | Obligations of states and political subdivisions
Investment securities
Available for sale	680	0
Significant Unobservable Inputs (Level 3) | Recurring fair value measurements | Residential mortgage-backed securities
Investment securities
Available for sale	0	0
Significant Unobservable Inputs (Level 3) | Recurring fair value measurements | Corporate and other debt securities
Investment securities
Available for sale	0	0
Significant Unobservable Inputs (Level 3) | Non-recurring fair value measurements
Non-recurring fair value measurements:
Collateral dependent impaired loans	43,707	45,245
Loan servicing rights		273
Foreclosed assets	5,587	5,673
Total	49,294	51,191
Fair Value | Recurring fair value measurements
Investment securities
Available for sale	1,679,350	1,749,544
Loans held for sale	36,641	35,155
Other assets	140,496	48,979
Total assets	1,856,487	1,833,678
Liabilities
Other liabilities	33,502	23,681
Total liabilities	33,502	23,681
Fair Value | Recurring fair value measurements | U.S. Treasury securities
Investment securities
Available for sale	50,741	49,306
Fair Value | Recurring fair value measurements | U.S. government agency securities
Investment securities
Available for sale	33,028	36,277
Fair Value | Recurring fair value measurements | Obligations of states and political subdivisions
Investment securities
Available for sale	186,697	197,092
Fair Value | Recurring fair value measurements | Residential mortgage-backed securities
Investment securities
Available for sale	1,372,979	1,429,782
Fair Value | Recurring fair value measurements | Corporate and other debt securities
Investment securities
Available for sale	35,905	37,087
Fair Value | Non-recurring fair value measurements
Non-recurring fair value measurements:
Collateral dependent impaired loans	43,707	45,245
Loan servicing rights		273
Foreclosed assets	5,587	5,673
Total	$ 49,294	$ 51,191

XML

Fair Value Measurement of Assets and Liabilities - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Fair Value Disclosures [Abstract]
Impaired collateral dependent loans, charge-offs	$ 938,000	$ 0	$ 938,000	$ 0
Collateral dependent impaired loans, recorded investment	73,400,000		73,400,000
Specific valuation allowance allocations	29,700,000		29,700,000
Reported net carrying amount of impaired loans	43,700,000		$ 43,700,000
Valuation of loan servicing rights, prepayment rate			11.00%
Valuation of loan servicing rights, discount rate			9.50%
Net recoveries of net impairment charges	107,000	90,000	$ 84,000	317,000
Foreclosed assets measured at fair value upon initial recognition			5,600,000
Foreclosed asset charge-offs	653,000	649,000	1,400,000	1,200,000
Loss due to re-measurement of repossessed assets	$ 0	$ 0	$ 160,000	$ 145,000

XML

Fair Value Measurement of Assets and Liabilities - Carrying Amounts and Estimated Fair Values (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest bearing deposits with banks	$ 178,905	$ 177,088
Total investment securities held to maturity	2,184,792	2,034,943
Accrued interest receivable	99,065	95,296
Deposits with stated maturities	7,338,188	7,063,984
Carrying Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	2,168,236	2,068,246
Carrying Amount | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and due from banks	276,291	251,541
Interest bearing deposits with banks	178,905	177,088
Accrued interest receivable	99,065	95,296
Federal Reserve Bank and Federal Home Loan Bank stock	260,490	232,080
Deposits without stated maturities	17,435,741	17,388,990
Short-term borrowings	2,387,784	2,118,914
Accrued interest payable	36,031	25,762
Carrying Amount | Level 1 | U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	138,436	138,517
Carrying Amount | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deposits with stated maturities	7,338,188	7,063,984
Long-term borrowings	1,800,182	1,654,268
Junior subordinated debentures issued to capital trusts	55,544	55,370
Carrying Amount | Level 2 | U.S. government agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	8,049	8,721
Carrying Amount | Level 2 | Obligations of states and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	536,778	585,656
Carrying Amount | Level 2 | Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	1,415,409	1,266,770
Carrying Amount | Level 2 | Trust preferred securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	37,314	37,332
Carrying Amount | Level 2 | Corporate and other debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	32,250	31,250
Carrying Amount | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net loans	25,647,057	24,883,610
Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	2,184,792	2,034,943
Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and due from banks	276,291	251,541
Interest bearing deposits with banks	178,905	177,088
Accrued interest receivable	99,065	95,296
Federal Reserve Bank and Federal Home Loan Bank stock	260,490	232,080
Deposits without stated maturities	17,435,741	17,388,990
Short-term borrowings	2,388,299	2,091,892
Accrued interest payable	36,031	25,762
Fair Value | Level 1 | U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	144,655	142,049
Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deposits with stated maturities	7,338,945	7,005,573
Long-term borrowings	1,840,862	1,751,194
Junior subordinated debentures issued to capital trusts	57,040	55,692
Fair Value | Level 2 | U.S. government agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	8,092	8,641
Fair Value | Level 2 | Obligations of states and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	549,050	586,033
Fair Value | Level 2 | Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	1,419,066	1,235,605
Fair Value | Level 2 | Trust preferred securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	31,372	31,486
Fair Value | Level 2 | Corporate and other debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment securities held to maturity	32,557	31,129
Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net loans	$ 25,207,831	$ 24,068,755

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Investment Securities - Amortized Cost, Held to Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Schedule of Held-to-maturity Securities
Amortized Cost	$ 2,168,236	$ 2,068,246
Gross Unrealized Gains	33,311	14,436
Gross Unrealized Losses	(16,755)	(47,739)
Fair Value	2,184,792	2,034,943
U.S. Treasury securities
Schedule of Held-to-maturity Securities
Amortized Cost	138,436	138,517
Gross Unrealized Gains	6,219	3,532
Gross Unrealized Losses	0	0
Fair Value	144,655	142,049
U.S. government agency securities
Schedule of Held-to-maturity Securities
Amortized Cost	8,049	8,721
Gross Unrealized Gains	69	55
Gross Unrealized Losses	(26)	(135)
Fair Value	8,092	8,641
Obligations of states and state agencies
Schedule of Held-to-maturity Securities
Amortized Cost	314,878	341,702
Gross Unrealized Gains	7,680	4,332
Gross Unrealized Losses	(992)	(5,735)
Fair Value	321,566	340,299
Municipal bonds
Schedule of Held-to-maturity Securities
Amortized Cost	221,900	243,954
Gross Unrealized Gains	5,640	3,141
Gross Unrealized Losses	(56)	(1,361)
Fair Value	227,484	245,734
Obligations of states and political subdivisions
Schedule of Held-to-maturity Securities
Amortized Cost	536,778	585,656
Gross Unrealized Gains	13,320	7,473
Gross Unrealized Losses	(1,048)	(7,096)
Fair Value	549,050	586,033
Residential mortgage-backed securities
Schedule of Held-to-maturity Securities
Amortized Cost	1,415,409	1,266,770
Gross Unrealized Gains	13,242	3,203
Gross Unrealized Losses	(9,585)	(34,368)
Fair Value	1,419,066	1,235,605
Trust preferred securities
Schedule of Held-to-maturity Securities
Amortized Cost	37,314	37,332
Gross Unrealized Gains	62	77
Gross Unrealized Losses	(6,004)	(5,923)
Fair Value	31,372	31,486
Corporate and other debt securities
Schedule of Held-to-maturity Securities
Amortized Cost	32,250	31,250
Gross Unrealized Gains	399	96
Gross Unrealized Losses	(92)	(217)
Fair Value	$ 32,557	$ 31,129

XML

Investment Securities - Unrealized Losses and Fair Value of Held to Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value
Less than Twelve Months	$ 8,413	$ 101,621
More than Twelve Months, Fair Value	765,518	1,086,150
Total	773,931	1,187,771
Unrealized Losses
Less than Twelve Months	(34)	(1,207)
More than Twelve Months	(16,721)	(46,532)
Total	(16,755)	(47,739)
U.S. government agency securities
Fair Value
Less than Twelve Months	0	0
More than Twelve Months, Fair Value	5,675	6,074
Total	5,675	6,074
Unrealized Losses
Less than Twelve Months	0	0
More than Twelve Months	(26)	(135)
Total	(26)	(135)
Obligations of states and state agencies
Fair Value
Less than Twelve Months	0	16,098
More than Twelve Months, Fair Value	45,843	138,437
Total	45,843	154,535
Unrealized Losses
Less than Twelve Months	0	(266)
More than Twelve Months	(992)	(5,469)
Total	(992)	(5,735)
Municipal bonds
Fair Value
Less than Twelve Months	4,968	3,335
More than Twelve Months, Fair Value	4,331	60,078
Total	9,299	63,413
Unrealized Losses
Less than Twelve Months	(27)	(37)
More than Twelve Months	(29)	(1,324)
Total	(56)	(1,361)
Obligations of states and political subdivisions
Fair Value
Less than Twelve Months	4,968	19,433
More than Twelve Months, Fair Value	50,174	198,515
Total	55,142	217,948
Unrealized Losses
Less than Twelve Months	(27)	(303)
More than Twelve Months	(1,021)	(6,793)
Total	(1,048)	(7,096)
Residential mortgage-backed securities
Fair Value
Less than Twelve Months	3,445	72,240
More than Twelve Months, Fair Value	674,804	846,671
Total	678,249	918,911
Unrealized Losses
Less than Twelve Months	(7)	(852)
More than Twelve Months	(9,578)	(33,516)
Total	(9,585)	(34,368)
Trust preferred securities
Fair Value
Less than Twelve Months	0	0
More than Twelve Months, Fair Value	29,957	30,055
Total	29,957	30,055
Unrealized Losses
Less than Twelve Months	0	0
More than Twelve Months	(6,004)	(5,923)
Total	(6,004)	(5,923)
Corporate and other debt securities
Fair Value
Less than Twelve Months	0	9,948
More than Twelve Months, Fair Value	4,908	4,835
Total	4,908	14,783
Unrealized Losses
Less than Twelve Months	0	(52)
More than Twelve Months	(92)	(165)
Total	$ (92)	$ (217)

XML

Investment Securities - Additional Information (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($) security	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) security	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($) security
Investment Securities [Line Items]
Number of security positions in the securities held to maturity portfolio in an unrealized loss position (in security) | security	127		127		378
Fair value of investments held to maturity pledged as collateral	$ 1,300,000,000		$ 1,300,000,000
Weighted-average remaining expected life of residential mortgage-backed securities held to maturity, years			6 years 7 months 6 days
Number of security positions in the securities available for sale portfolio in an unrealized loss position (in security) | security	294		294		545
Fair value of securities available for sale pledged as collateral	$ 1,100,000,000		$ 1,100,000,000
Weighted-average remaining expected life of residential mortgage-backed securities available for sale, years			6 years 8 months 12 days
Amortized cost	1,677,715,000		$ 1,677,715,000		$ 1,796,404,000
Other than temporary impairment losses recognized in earnings	2,900,000	$ 0		$ 0
Fair Value	1,679,350,000		1,679,350,000		1,749,544,000
Gross unrealized losses	$ 9,042,000		$ 9,042,000		$ 48,855,000
Single Issuer Trust Preferred Securities | Non-Rated
Investment Securities [Line Items]
Number of security positions in the securities held to maturity portfolio in an unrealized loss position (in security) | security	4		4
US States and Political Subdivisions Debt Securities, Special Revenue Bonds, Impaired Securities
Investment Securities [Line Items]
Amortized cost	$ 680,000		$ 680,000
Fair Value	680,000		680,000
US States and Political Subdivisions Debt Securities, Special Revenue Bonds
Investment Securities [Line Items]
Amortized cost	306,500,000		306,500,000
Fair Value	308,500,000		308,500,000
Gross unrealized losses	$ 1,400,000		$ 1,400,000

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Investment Securities - Contractual Maturities of Held to Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Amortized Cost
Due in one year	$ 30,122
Due after one year through five years	237,783
Due after five years through ten years	242,178
Due after ten years	242,744
Residential mortgage-backed securities	1,415,409
Amortized Cost	2,168,236	$ 2,068,246
Fair Value
Due in one year	30,109
Due after one year through five years	243,951
Due after five years through ten years	253,387
Due after ten years	238,279
Residential mortgage-backed securities	1,419,066
Total investment securities held to maturity	$ 2,184,792	$ 2,034,943

XML

Investment Securities - Amortized Cost, Securities Available for Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 1,677,715	$ 1,796,404
Gross Unrealized Gains	10,677	1,995
Gross Unrealized Losses	(9,042)	(48,855)
Fair Value	1,679,350	1,749,544
U.S. Treasury securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	50,963	50,975
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(222)	(1,669)
Fair Value	50,741	49,306
U.S. government agency securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	32,525	36,844
Gross Unrealized Gains	521	71
Gross Unrealized Losses	(18)	(638)
Fair Value	33,028	36,277
Obligations of states and state agencies
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	87,473	100,777
Gross Unrealized Gains	465	18
Gross Unrealized Losses	(222)	(3,682)
Fair Value	87,716	97,113
Municipal bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	98,305	101,207
Gross Unrealized Gains	899	209
Gross Unrealized Losses	(223)	(1,437)
Fair Value	98,981	99,979
Obligations of states and political subdivisions
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	185,778	201,984
Gross Unrealized Gains	1,364	227
Gross Unrealized Losses	(445)	(5,119)
Fair Value	186,697	197,092
Residential mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	1,373,033	1,469,059
Gross Unrealized Gains	8,303	1,484
Gross Unrealized Losses	(8,357)	(40,761)
Fair Value	1,372,979	1,429,782
Corporate and other debt securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	35,416	37,542
Gross Unrealized Gains	489	213
Gross Unrealized Losses	0	(668)
Fair Value	$ 35,905	$ 37,087

XML

Investment Securities - Unrealized Losses and Fair Value Available for Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value
Less than Twelve Months	$ 2,206	$ 156,682
More than Twelve Months	821,123	1,456,424
Total	823,329	1,613,106
Unrealized Losses
Less than Twelve Months	(37)	(1,050)
More than Twelve Months	(9,005)	(47,805)
Total	(9,042)	(48,855)
U.S. Treasury securities
Fair Value
Less than Twelve Months	0	0
More than Twelve Months	50,741	49,306
Total	50,741	49,306
Unrealized Losses
Less than Twelve Months	0	0
More than Twelve Months	(222)	(1,669)
Total	(222)	(1,669)
U.S. government agency securities
Fair Value
Less than Twelve Months	0	2,120
More than Twelve Months	2,488	26,775
Total	2,488	28,895
Unrealized Losses
Less than Twelve Months	0	(20)
More than Twelve Months	(18)	(618)
Total	(18)	(638)
Obligations of states and state agencies
Fair Value
Less than Twelve Months	0	17,560
More than Twelve Months	43,868	75,718
Total	43,868	93,278
Unrealized Losses
Less than Twelve Months	0	(95)
More than Twelve Months	(222)	(3,587)
Total	(222)	(3,682)
Municipal bonds
Fair Value
Less than Twelve Months	1,986	5,018
More than Twelve Months	20,335	70,286
Total	22,321	75,304
Unrealized Losses
Less than Twelve Months	(34)	(106)
More than Twelve Months	(189)	(1,331)
Total	(223)	(1,437)
Obligations of states and political subdivisions
Fair Value
Less than Twelve Months	1,986	22,578
More than Twelve Months	64,203	146,004
Total	66,189	168,582
Unrealized Losses
Less than Twelve Months	(34)	(201)
More than Twelve Months	(411)	(4,918)
Total	(445)	(5,119)
Residential mortgage-backed securities
Fair Value
Less than Twelve Months	220	119,645
More than Twelve Months	703,691	1,221,942
Total	703,911	1,341,587
Unrealized Losses
Less than Twelve Months	(3)	(668)
More than Twelve Months	(8,354)	(40,093)
Total	$ (8,357)	(40,761)
Corporate and other debt securities
Fair Value
Less than Twelve Months		12,339
More than Twelve Months		12,397
Total		24,736
Unrealized Losses
Less than Twelve Months		(161)
More than Twelve Months		(507)
Total		$ (668)

XML

Investment Securities - Contractual Maturities of Available for Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Amortized Cost
Due in one year	$ 9,121
Due after one year through five years	125,530
Due after five years through ten years	66,064
Due after ten years	103,967
Residential mortgage-backed securities	1,373,033
Amortized Cost	1,677,715	$ 1,796,404
Fair Value
Due in one year	9,117
Due after one year through five years	125,671
Due after five years through ten years	67,046
Due after ten years	104,537
Residential mortgage-backed securities	1,372,979
Total investment securities available for sale	$ 1,679,350	$ 1,749,544

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Loans - Non-Covered and Covered PCI Loans and Non-PCI Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable
Loans	$ 25,802,162	$ 25,035,469
Commercial and industrial
Accounts, Notes, Loans and Financing Receivable
Loans	4,615,765	4,331,032
Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Loans	14,326,985	13,895,407
Commercial real estate | Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Loans	12,798,017	12,407,275
Commercial real estate | Construction
Accounts, Notes, Loans and Financing Receivable
Loans	1,528,968	1,488,132
Residential mortgage
Accounts, Notes, Loans and Financing Receivable
Loans	4,072,450	4,111,400
Consumer
Accounts, Notes, Loans and Financing Receivable
Loans	2,786,962	2,697,630
Consumer | Home equity
Accounts, Notes, Loans and Financing Receivable
Loans	501,646	517,089
Consumer | Automobile
Accounts, Notes, Loans and Financing Receivable
Loans	1,362,466	1,319,571
Consumer | Other consumer
Accounts, Notes, Loans and Financing Receivable
Loans	922,850	860,970
Non-PCI Loans
Accounts, Notes, Loans and Financing Receivable
Loans	22,030,205	20,845,383
Non-PCI Loans | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable
Loans	3,918,894	3,590,375
Non-PCI Loans | Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Loans	11,758,544	11,034,657
Non-PCI Loans | Commercial real estate | Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Loans	10,470,127	9,912,309
Non-PCI Loans | Commercial real estate | Construction
Accounts, Notes, Loans and Financing Receivable
Loans	1,288,417	1,122,348
Non-PCI Loans | Residential mortgage
Accounts, Notes, Loans and Financing Receivable
Loans	3,694,463	3,682,984
Non-PCI Loans | Consumer
Accounts, Notes, Loans and Financing Receivable
Loans	2,658,304	2,537,367
Non-PCI Loans | Consumer | Home equity
Accounts, Notes, Loans and Financing Receivable
Loans	385,987	371,340
Non-PCI Loans | Consumer | Automobile
Accounts, Notes, Loans and Financing Receivable
Loans	1,362,143	1,319,206
Non-PCI Loans | Consumer | Other consumer
Accounts, Notes, Loans and Financing Receivable
Loans	910,174	846,821
PCI Loans
Accounts, Notes, Loans and Financing Receivable
Loans	3,771,957	4,190,086
PCI Loans | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable
Loans	696,871	740,657
PCI Loans | Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Loans	2,568,441	2,860,750
PCI Loans | Commercial real estate | Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Loans	2,327,890	2,494,966
PCI Loans | Commercial real estate | Construction
Accounts, Notes, Loans and Financing Receivable
Loans	240,551	365,784
PCI Loans | Residential mortgage
Accounts, Notes, Loans and Financing Receivable
Loans	377,987	428,416
PCI Loans | Consumer
Accounts, Notes, Loans and Financing Receivable
Loans	128,658	160,263
PCI Loans | Consumer | Home equity
Accounts, Notes, Loans and Financing Receivable
Loans	115,659	145,749
PCI Loans | Consumer | Automobile
Accounts, Notes, Loans and Financing Receivable
Loans	323	365
PCI Loans | Consumer | Other consumer
Accounts, Notes, Loans and Financing Receivable
Loans	$ 12,676	$ 14,149

XML

Loans - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable
Non-covered loans net of unearned premiums and deferred loan fees	$ 19,600,000		$ 19,600,000		$ 21,500,000
Outstanding balances for PCI loans	4,000,000,000.0		4,000,000,000.0		4,400,000,000
Transfer of loans to loans held for sale			216,211,000	$ 263,324,000
Sales of loans			0	0
Impaired loans	250,000		$ 250,000
Number of consecutive months for performing restructured loans to be put on accrual status			6 months
TDRs not reported as non-accrual loans	74,400,000		$ 74,400,000		77,200,000
Non-performing TDRs	67,800,000		67,800,000		55,000,000.0
Specific reserves for loan losses			11,700,000	5,300,000
Loan charge-offs related to loans modified as TDRs	$ 1,100,000	$ 0	$ 2,000,000.0	$ 0
Days past due to place on payment default	90 days	90 days	90 days	90 days
Other real estate owned	$ 7,200,000		$ 7,200,000		9,500,000
Residential real estate properties
Accounts, Notes, Loans and Financing Receivable
Other real estate owned	1,200,000		1,200,000		852,000
In formal foreclosure proceedings
Accounts, Notes, Loans and Financing Receivable
Residential mortgage and consumer loans secured by residential real estate properties	$ 1,700,000		1,700,000		$ 1,800,000
Residential mortgage
Accounts, Notes, Loans and Financing Receivable
Transfer of loans to loans held for sale			$ 216,200,000	$ 263,300,000

XML

Loans - Changes in Accretable Yield (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Balance, beginning of period	$ 890,771	$ 691,086	$ 875,958	$ 282,009
Acquisition	0	0	0	474,208
Accretion	(55,014)	(60,536)	(108,506)	(125,667)
Net increase in expected cash flows	18,130	0	86,435	0
Balance, end of period	$ 853,887	$ 630,550	$ 853,887	$ 630,550

XML

Loans - Past Due, Non-Accrual and Current Non-Covered Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	$ 96,515	$ 88,396
Total Past Due Loans	163,560	156,101
Current Non-PCI Loans	21,866,645	20,689,282
Total Non-PCI Loans	22,030,205	20,845,383
30-59 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	51,384	51,751
60-89 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	10,950	8,142
Accruing Loans 90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	4,711	7,812
Commercial and industrial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	76,216	70,096
Total Past Due Loans	97,768	93,105
Current Non-PCI Loans	3,821,126	3,497,270
Total Non-PCI Loans	3,918,894	3,590,375
Commercial and industrial | 30-59 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	14,119	13,085
Commercial and industrial | 60-89 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	4,135	3,768
Commercial and industrial | Accruing Loans 90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	3,298	6,156
Commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	6,231	2,728
Total Past Due Loans	14,129	15,635
Current Non-PCI Loans	11,744,415	11,019,022
Total Non-PCI Loans	11,758,544	11,034,657
Commercial real estate | 30-59 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	6,202	12,350
Commercial real estate | 60-89 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	1,696	530
Commercial real estate | Accruing Loans 90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	0	27
Commercial real estate | Commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	6,231	2,372
Total Past Due Loans	12,787	12,450
Current Non-PCI Loans	10,457,340	9,899,859
Total Non-PCI Loans	10,470,127	9,912,309
Commercial real estate | Commercial real estate | 30-59 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	6,202	9,521
Commercial real estate | Commercial real estate | 60-89 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	354	530
Commercial real estate | Commercial real estate | Accruing Loans 90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	0	27
Commercial real estate | Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	0	356
Total Past Due Loans	1,342	3,185
Current Non-PCI Loans	1,287,075	1,119,163
Total Non-PCI Loans	1,288,417	1,122,348
Commercial real estate | Construction | 30-59 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	0	2,829
Commercial real estate | Construction | 60-89 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	1,342	0
Commercial real estate | Construction | Accruing Loans 90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	0	0
Residential mortgage
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	12,069	12,917
Total Past Due Loans	35,889	33,239
Current Non-PCI Loans	3,658,574	3,649,745
Total Non-PCI Loans	3,694,463	3,682,984
Residential mortgage | 30-59 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	19,131	16,576
Residential mortgage | 60-89 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	3,635	2,458
Residential mortgage | Accruing Loans 90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	1,054	1,288
Consumer loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	1,999	2,655
Total Past Due Loans	15,774	14,122
Current Non-PCI Loans	2,642,530	2,523,245
Total Non-PCI Loans	2,658,304	2,537,367
Consumer loans | 30-59 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	11,932	9,740
Consumer loans | 60-89 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	1,484	1,386
Consumer loans | Accruing Loans 90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	359	341
Consumer loans | Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	1,630	2,156
Total Past Due Loans	2,385	3,068
Current Non-PCI Loans	383,602	368,272
Total Non-PCI Loans	385,987	371,340
Consumer loans | Home equity | 30-59 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	673	872
Consumer loans | Home equity | 60-89 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	82	40
Consumer loans | Home equity | Accruing Loans 90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	0	0
Consumer loans | Automobile
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	148	80
Total Past Due Loans	8,622	9,660
Current Non-PCI Loans	1,353,521	1,309,546
Total Non-PCI Loans	1,362,143	1,319,206
Consumer loans | Automobile | 30-59 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	7,221	7,973
Consumer loans | Automobile | 60-89 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	925	1,299
Consumer loans | Automobile | Accruing Loans 90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	328	308
Consumer loans | Other consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	221	419
Total Past Due Loans	4,767	1,394
Current Non-PCI Loans	905,407	845,427
Total Non-PCI Loans	910,174	846,821
Consumer loans | Other consumer | 30-59 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	4,038	895
Consumer loans | Other consumer | 60-89 Days Past Due Loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	477	47
Consumer loans | Other consumer | Accruing Loans 90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	$ 31	$ 33

XML

Loans - Impaired Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Related Allowance	$ 40,336	$ 33,825
Recorded Investment With Related Allowance	123,243	122,800
Total Recorded Investment	163,579	156,625
Unpaid Contractual Principal Balance	179,392	165,918
Related Allowance	34,450	33,025
Commercial and industrial
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Related Allowance	13,008	8,339
Recorded Investment With Related Allowance	90,018	89,513
Total Recorded Investment	103,026	97,852
Unpaid Contractual Principal Balance	115,602	104,007
Related Allowance	31,128	29,684
Commercial real estate
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Related Allowance	21,061	17,535
Recorded Investment With Related Allowance	26,258	26,063
Total Recorded Investment	47,319	43,598
Unpaid Contractual Principal Balance	49,421	45,597
Related Allowance	2,604	2,628
Commercial real estate | Commercial real estate
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Related Allowance	20,707	16,732
Recorded Investment With Related Allowance	26,258	25,606
Total Recorded Investment	46,965	42,338
Unpaid Contractual Principal Balance	49,067	44,337
Related Allowance	2,604	2,615
Commercial real estate | Construction
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Related Allowance	354	803
Recorded Investment With Related Allowance	0	457
Total Recorded Investment	354	1,260
Unpaid Contractual Principal Balance	354	1,260
Related Allowance	0	13
Residential mortgage
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Related Allowance	6,046	7,826
Recorded Investment With Related Allowance	6,448	6,078
Total Recorded Investment	12,494	13,904
Unpaid Contractual Principal Balance	13,531	14,948
Related Allowance	668	600
Consumer loans
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Related Allowance	221	125
Recorded Investment With Related Allowance	519	1,146
Total Recorded Investment	740	1,271
Unpaid Contractual Principal Balance	838	1,366
Related Allowance	50	113
Consumer loans | Home equity
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Related Allowance	221	125
Recorded Investment With Related Allowance	519	1,146
Total Recorded Investment	740	1,271
Unpaid Contractual Principal Balance	838	1,366
Related Allowance	$ 50	$ 113

XML

Loans - Average Recorded Investment and Interest Income on Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accounts, Notes, Loans and Financing Receivable
Average Recorded Investment	$ 165,222	$ 157,355	$ 171,443	$ 160,611
Interest Income Recognized	1,095	1,009	2,540	2,560
Commercial and industrial
Accounts, Notes, Loans and Financing Receivable
Average Recorded Investment	105,633	87,674	111,329	88,865
Interest Income Recognized	443	212	1,014	926
Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Average Recorded Investment	46,588	54,973	46,102	56,334
Interest Income Recognized	547	579	1,266	1,218
Commercial real estate | Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Average Recorded Investment	46,234	52,729	45,515	54,104
Interest Income Recognized	547	563	1,266	1,179
Commercial real estate | Construction
Accounts, Notes, Loans and Financing Receivable
Average Recorded Investment	354	2,244	587	2,230
Interest Income Recognized	0	16	0	39
Residential mortgage
Accounts, Notes, Loans and Financing Receivable
Average Recorded Investment	12,254	12,914	13,072	13,502
Interest Income Recognized	95	185	239	350
Consumer loans
Accounts, Notes, Loans and Financing Receivable
Average Recorded Investment	747	1,794	940	1,910
Interest Income Recognized	10	33	21	66
Consumer loans | Home equity
Accounts, Notes, Loans and Financing Receivable
Average Recorded Investment	747	1,794	940	1,910
Interest Income Recognized	$ 10	$ 33	$ 21	$ 66

XML

Loans - Pre-Modification and Post-Modification (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($) contract	Jun. 30, 2018 USD ($) contract	Jun. 30, 2019 USD ($) contract	Jun. 30, 2018 USD ($) contract
Troubled Debt Restructurings
Number of contracts, troubled restructurings (in contract) | contract	19	19	56	29
Pre-Modification Outstanding Recorded Investment	$ 17,885	$ 13,722	$ 43,036	$ 16,356
Post-Modification Outstanding Recorded Investment	$ 17,409	$ 13,426	$ 42,248	$ 15,885
Number of contracts, troubled debt restructurings subsequently defaulted (in contract) | contract	19	4	22	4
Recorded Investment	$ 12,705	$ 3,212	$ 12,938	$ 3,212
Commercial and industrial
Troubled Debt Restructurings
Number of contracts, troubled restructurings (in contract) | contract	17	11	53	15
Pre-Modification Outstanding Recorded Investment	$ 14,663	$ 8,822	$ 38,216	$ 10,554
Post-Modification Outstanding Recorded Investment	$ 14,187	$ 8,575	$ 37,428	$ 10,170
Number of contracts, troubled debt restructurings subsequently defaulted (in contract) | contract	18	4	18	4
Recorded Investment	$ 12,322	$ 3,212	$ 12,322	$ 3,212
Commercial real estate
Troubled Debt Restructurings
Number of contracts, troubled restructurings (in contract) | contract	1	6	2	8
Pre-Modification Outstanding Recorded Investment	$ 3,067	$ 4,507	$ 4,665	$ 4,734
Post-Modification Outstanding Recorded Investment	$ 3,067	$ 4,462	$ 4,665	$ 4,667
Number of contracts, troubled debt restructurings subsequently defaulted (in contract) | contract	1	0	1	0
Recorded Investment	$ 383	$ 0	$ 383	$ 0
Commercial real estate | Commercial real estate
Troubled Debt Restructurings
Number of contracts, troubled restructurings (in contract) | contract	1	5	2	6
Pre-Modification Outstanding Recorded Investment	$ 3,067	$ 3,975	$ 4,665	$ 4,170
Post-Modification Outstanding Recorded Investment	$ 3,067	$ 3,971	$ 4,665	$ 4,164
Commercial real estate | Construction
Troubled Debt Restructurings
Number of contracts, troubled restructurings (in contract) | contract	0	1	0	2
Pre-Modification Outstanding Recorded Investment	$ 0	$ 532	$ 0	$ 564
Post-Modification Outstanding Recorded Investment	$ 0	$ 491	$ 0	$ 503
Residential mortgage
Troubled Debt Restructurings
Number of contracts, troubled restructurings (in contract) | contract	1	2	1	5
Pre-Modification Outstanding Recorded Investment	$ 155	$ 393	$ 155	$ 980
Post-Modification Outstanding Recorded Investment	$ 155	$ 389	$ 155	$ 963
Number of contracts, troubled debt restructurings subsequently defaulted (in contract) | contract			2	0
Recorded Investment			$ 215	$ 0
Consumer
Troubled Debt Restructurings
Number of contracts, troubled restructurings (in contract) | contract			0	1
Pre-Modification Outstanding Recorded Investment			$ 0	$ 88
Post-Modification Outstanding Recorded Investment			$ 0	$ 85
Number of contracts, troubled debt restructurings subsequently defaulted (in contract) | contract			1	0
Recorded Investment			$ 18	$ 0

XML

Loans - Risk Category of Loans (Details) - Non-PCI Loans - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	$ 15,677,438	$ 14,625,032
Commercial and industrial
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	3,918,894	3,590,375
Commercial real estate | Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	10,470,127	9,912,309
Commercial real estate | Construction
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	1,288,417	1,122,348
Pass
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	15,382,068	14,349,491
Pass | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	3,733,252	3,399,426
Pass | Commercial real estate | Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	10,362,538	9,828,744
Pass | Commercial real estate | Construction
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	1,286,278	1,121,321
Special Mention
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	105,313	63,103
Special Mention | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	40,412	31,996
Special Mention | Commercial real estate | Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	63,116	30,892
Special Mention | Commercial real estate | Construction
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	1,785	215
Substandard
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	119,771	144,842
Substandard | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	75,853	92,320
Substandard | Commercial real estate | Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	43,564	51,710
Substandard | Commercial real estate | Construction
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	354	812
Doubtful
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	70,286	67,596
Doubtful | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	69,377	66,633
Doubtful | Commercial real estate | Commercial real estate
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	909	963
Doubtful | Commercial real estate | Construction
Accounts, Notes, Loans and Financing Receivable
Credit exposure - by internally assigned risk rating	$ 0	$ 0

XML

Loans - Recorded Investment Based on Payment Activity (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Non-PCI Loans
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	$ 6,352,767	$ 6,220,351
Non-PCI Loans | Residential mortgage
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	3,694,463	3,682,984
Non-PCI Loans | Consumer | Home equity
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	385,987	371,340
Non-PCI Loans | Consumer | Automobile
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	1,362,143	1,319,206
Non-PCI Loans | Consumer | Other consumer
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	910,174	846,821
Non-PCI Loans | Performing Loans
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	6,338,699	6,204,779
Non-PCI Loans | Performing Loans | Residential mortgage
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	3,682,394	3,670,067
Non-PCI Loans | Performing Loans | Consumer | Home equity
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	384,357	369,184
Non-PCI Loans | Performing Loans | Consumer | Automobile
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	1,361,995	1,319,126
Non-PCI Loans | Performing Loans | Consumer | Other consumer
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	909,953	846,402
Non-PCI Loans | Non-Performing Loans
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	14,068	15,572
Non-PCI Loans | Non-Performing Loans | Residential mortgage
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	12,069	12,917
Non-PCI Loans | Non-Performing Loans | Consumer | Home equity
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	1,630	2,156
Non-PCI Loans | Non-Performing Loans | Consumer | Automobile
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	148	80
Non-PCI Loans | Non-Performing Loans | Consumer | Other consumer
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	221	419
PCI Loans
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	3,771,957	4,190,086
PCI Loans | Residential mortgage
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	377,987	428,416
PCI Loans | Consumer
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	128,658	160,263
PCI Loans | Commercial and industrial
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	696,871	740,657
PCI Loans | Commercial real estate | Commercial real estate
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	2,327,890	2,494,966
PCI Loans | Commercial real estate | Construction
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	240,551	365,784
PCI Loans | Performing Loans
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	3,716,872	4,133,961
PCI Loans | Performing Loans | Residential mortgage
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	372,531	421,609
PCI Loans | Performing Loans | Consumer
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	126,234	158,502
PCI Loans | Performing Loans | Commercial and industrial
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	668,887	710,045
PCI Loans | Performing Loans | Commercial real estate | Commercial real estate
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	2,309,294	2,478,990
PCI Loans | Performing Loans | Commercial real estate | Construction
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	239,926	364,815
PCI Loans | Non-Performing Loans
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	55,085	56,125
PCI Loans | Non-Performing Loans | Residential mortgage
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	5,456	6,807
PCI Loans | Non-Performing Loans | Consumer
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	2,424	1,761
PCI Loans | Non-Performing Loans | Commercial and industrial
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	27,984	30,612
PCI Loans | Non-Performing Loans | Commercial real estate | Commercial real estate
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	18,596	15,976
PCI Loans | Non-Performing Loans | Commercial real estate | Construction
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans	$ 625	$ 969

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Allowance for Credit Losses - Allowance for Credit Losses (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Receivables [Abstract]
Allowance for loan losses	$ 155,105	$ 154,381	$ 151,859	$ 138,762	$ 132,862	$ 120,856
Allowance for unfunded letters of credit	2,974		4,436
Total allowance for credit losses	$ 158,079		$ 156,295

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Allowance for Credit Losses - Provision for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Receivables [Abstract]
Provision for loan losses	$ 3,706	$ 6,592	$ 11,562	$ 17,294
Provision for unfunded letters of credit	(1,606)	550	(1,462)	796
Total provision for credit losses	$ 2,100	$ 7,142	$ 10,100	$ 18,090

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Allowance for Credit Losses - Activity in Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	$ 154,381	$ 132,862	$ 151,859	$ 120,856
Loans charged-off	(4,825)	(2,201)	(11,150)	(3,921)
Charged-off loans recovered	1,843	1,509	2,834	4,533
Net (charge-offs) recoveries	(2,982)	(692)	(8,316)	612
Provision for loan losses	3,706	6,592	11,562	17,294
Ending balance	155,105	138,762	155,105	138,762
Commercial and Industrial
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	94,630	66,546	90,956	57,232
Loans charged-off	(3,073)	(642)	(7,355)	(773)
Charged-off loans recovered	1,195	819	1,678	2,926
Net (charge-offs) recoveries	(1,878)	177	(5,677)	2,153
Provision for loan losses	1,632	7,534	9,105	14,872
Ending balance	94,384	74,257	94,384	74,257
Commercial Real Estate
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	47,762	56,679	49,650	54,954
Loans charged-off	0	(38)	0	(348)
Charged-off loans recovered	22	15	43	384
Net (charge-offs) recoveries	22	(23)	43	36
Provision for loan losses	1,194	(2,844)	(715)	(1,178)
Ending balance	48,978	53,812	48,978	53,812
Residential Mortgage
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	5,139	4,100	5,041	3,605
Loans charged-off	0	(99)	(15)	(167)
Charged-off loans recovered	9	180	10	260
Net (charge-offs) recoveries	9	81	(5)	93
Provision for loan losses	71	443	183	926
Ending balance	5,219	4,624	5,219	4,624
Consumer
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	6,850	5,537	6,212	5,065
Loans charged-off	(1,752)	(1,422)	(3,780)	(2,633)
Charged-off loans recovered	617	495	1,103	963
Net (charge-offs) recoveries	(1,135)	(927)	(2,677)	(1,670)
Provision for loan losses	809	1,459	2,989	2,674
Ending balance	$ 6,524	$ 6,069	$ 6,524	$ 6,069

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Allowance for Credit Losses - Allocation of Allowance for Loan Losses and Related Loans by Segment (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Allowance for loan losses:
Individually evaluated for impairment	$ 34,450		$ 33,025
Collectively evaluated for impairment	120,655		118,834
Total	155,105	$ 154,381	151,859	$ 138,762	$ 132,862	$ 120,856
Individually evaluated for impairment	163,579		156,625
Collectively evaluated for impairment	21,866,626		20,688,758
Total	25,802,162		25,035,469
Loans acquired with discounts related to credit quality
Allowance for loan losses:
Total	3,771,957		4,190,086
Commercial and Industrial
Allowance for loan losses:
Individually evaluated for impairment	31,128		29,684
Collectively evaluated for impairment	63,256		61,272
Total	94,384	94,630	90,956	74,257	66,546	57,232
Individually evaluated for impairment	103,026		97,852
Collectively evaluated for impairment	3,815,868		3,492,523
Total	4,615,765		4,331,032
Commercial and Industrial | Loans acquired with discounts related to credit quality
Allowance for loan losses:
Total	696,871		740,657
Commercial Real Estate
Allowance for loan losses:
Individually evaluated for impairment	2,604		2,628
Collectively evaluated for impairment	46,374		47,022
Total	48,978	47,762	49,650	53,812	56,679	54,954
Individually evaluated for impairment	47,319		43,598
Collectively evaluated for impairment	11,711,225		10,991,059
Total	14,326,985		13,895,407
Commercial Real Estate | Loans acquired with discounts related to credit quality
Allowance for loan losses:
Total	2,568,441		2,860,750
Residential Mortgage
Allowance for loan losses:
Individually evaluated for impairment	668		600
Collectively evaluated for impairment	4,551		4,441
Total	5,219	5,139	5,041	4,624	4,100	3,605
Individually evaluated for impairment	12,494		13,904
Collectively evaluated for impairment	3,681,969		3,669,080
Total	4,072,450		4,111,400
Residential Mortgage | Loans acquired with discounts related to credit quality
Allowance for loan losses:
Total	377,987		428,416
Consumer
Allowance for loan losses:
Individually evaluated for impairment	50		113
Collectively evaluated for impairment	6,474		6,099
Total	6,524	$ 6,850	6,212	$ 6,069	$ 5,537	$ 5,065
Individually evaluated for impairment	740		1,271
Collectively evaluated for impairment	2,657,564		2,536,096
Total	2,786,962		2,697,630
Consumer | Loans acquired with discounts related to credit quality
Allowance for loan losses:
Total	$ 128,658		$ 160,263

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Leases - Narrative (Details) $ in Thousands	1 Months Ended	3 Months Ended			6 Months Ended		12 Months Ended
	Mar. 31, 2019 USD ($) property	Jun. 30, 2019 USD ($) branch corporate_location	Mar. 31, 2019 USD ($) property	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) branch corporate_location	Jun. 30, 2018 USD ($)	Dec. 31, 2019 USD ($)
Sale Leaseback Transaction [Line Items]
Sales-type and direct financing leases total net investment		$ 377,263			$ 377,263
Sales-type and direct financing leases receivables		1,100			1,100
Sales-type and direct financing leases unguaranteed residuals		376,200			376,200
Lease income		4,600		$ 3,500	8,900	$ 7,200
Operating leases, ROU assets		282,329			282,329
Operating leases, liabilities		305,364			305,364
Expected lease costs		$ 8,949			$ 15,923
Lease costs				8,200		16,400
Sublease income				$ 874		$ 1,800
Sale leaseback transaction, March 2019
Sale Leaseback Transaction [Line Items]
Sale-leaseback, number of properties | property	26		26
Sale-leaseback, number of branches | branch		25			25
Sale-leaseback, number of corporate offices | corporate_location		1			1
Sale-leaseback sale price	$ 100,500
Pre-tax net gain sale-leaseback			$ 78,500
Operating leases, ROU assets	78,400		78,400
Operating leases, liabilities	$ 78,400		$ 78,400
Operating lease, term of contract	12 years		12 years
Sale leaseback transaction, March 2019 | Scenario, forecast
Sale Leaseback Transaction [Line Items]
Expected lease costs							$ 7,900

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Leases - Components of ROU Assets and Lease Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Leases [Abstract]
Operating leases, ROU assets	$ 282,329
Finance leases, ROU assets	1,019
Total ROU assets	283,348
Operating leases, liabilities	305,364
Finance leases, liabilities	2,041
Lease liabilities	$ 307,405	$ 3,125

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Leases - Components of Total Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Leases [Abstract]
Amortization of ROU assets	$ 73	$ 146
Interest on lease liabilities	49	101
Operating lease cost	8,949	15,923
Short-term lease cost	59	134
Variable lease cost	1,024	1,972
Sublease income	(783)	(1,686)
Total lease cost (included in net occupancy and equipment expense)	$ 9,371	$ 16,590

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Leases - Supplemental Cash Flow Information (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Leases [Abstract]
Operating cash flows from operating leases	$ 16,896
Operating cash flows from finance leases	102
Financing cash flows from finance leases	$ 240

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Leases - Supplemental Lease Information (Details)	Jun. 30, 2019
Leases [Abstract]
Weighted-average remaining lease term, operating lease	13 years 29 days
Weighted-average remaining lease term, finance lease	3 years 6 months
Weighted-average discount rate, operating lease	3.72%
Weighted-average discount rate, finance lease	8.25%

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Leases - Maturity Analysis of Lessor and Lessee Arrangements (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Sales-type and Direct Financing Leases, Lease Receivable, Fiscal Year Maturity [Abstract]
2019	$ 63,085
2020	108,188
2021	91,950
2022	70,058
2023	47,744
Thereafter	33,007
Total lease payments	414,032
Less: present value discount	(36,769)
Total	377,263
Operating Lease Liabilities, Payments Due [Abstract]
2019	17,594
2020	35,006
2021	34,169
2022	32,625
2023	29,222
Thereafter	244,762
Total lease payments	393,378
Less: present value discount	(88,014)
Total	305,364
Finance Lease Liabilities, Payments, Due [Abstract]
2019	341
2020	684
2021	684
2022	684
2023	0
Thereafter	0
Total lease payments	2,393
Less: present value discount	(352)
Total	$ 2,041

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Leases - Leases under ASC 840 (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Leases [Abstract]
Gross Rents, 2018	$ 13,731
Gross Rents, 2019	27,640
Gross Rents, 2020	27,785
Gross Rents, 2021	26,955
Gross Rents, 2022	25,948
Gross Rents, Thereafter	271,054
Gross Rents, Total Lease Payments	393,113
Sublease Income, 2018	1,092
Sublease Income, 2019	2,124
Sublease Income, 2020	2,077
Sublease Income, 2021	2,009
Sublease Income, 2022	1,891
Sublease Income, Thereafter	8,130
Sublease Income, Total Lease Payments	17,323
Net Rents, 2018	12,639
Net Rents, 2019	25,516
Net Rents, 2020	25,708
Net Rents, 2021	24,946
Net Rents, 2022	24,057
Net Rents, Thereafter	262,924
Net Rents, Total Lease Payments	$ 375,790

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Goodwill and Other Intangible Assets - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Goodwill	$ 1,084,665,000		$ 1,084,665,000		$ 1,084,665,000
Goodwill impairment	0	$ 0	0	$ 0
Amortization of other intangible assets	4,170,000	4,617,000	$ 8,481,000	8,910,000
Core Deposits
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period, years			8 years 2 months 12 days
Other
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period, years			7 years 7 months 6 days
Core Deposits and Other
Finite-Lived Intangible Assets [Line Items]
Impairment of core deposits and other intangibles	$ 0	$ 0	$ 0	$ 0

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Goodwill and Other Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Gross Intangible Assets	$ 174,147	$ 171,769
Accumulated Amortization	(103,562)	(94,696)
Valuation Allowance	0	(83)
Net Intangible Assets	70,585	76,990
Loan servicing rights
Finite-Lived Intangible Assets [Line Items]
Gross Intangible Assets	89,732	87,354
Accumulated Amortization	(66,406)	(63,161)
Valuation Allowance	0	(83)
Net Intangible Assets	23,326	24,110
Core deposits
Finite-Lived Intangible Assets [Line Items]
Gross Intangible Assets	80,470	80,470
Accumulated Amortization	(34,640)	(29,136)
Valuation Allowance	0	0
Net Intangible Assets	45,830	51,334
Other
Finite-Lived Intangible Assets [Line Items]
Gross Intangible Assets	3,945	3,945
Accumulated Amortization	(2,516)	(2,399)
Valuation Allowance	0	0
Net Intangible Assets	$ 1,429	$ 1,546

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Goodwill and Other Intangible Assets - Future Amortization Expense (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Loan Servicing Rights
Finite-Lived Intangible Assets [Line Items]
2019	$ 2,056
2020	3,603
2021	3,007
2022	2,513
2023	2,097
Core Deposits
Finite-Lived Intangible Assets [Line Items]
2019	5,457
2020	9,607
2021	8,252
2022	6,898
2023	5,544
Other
Finite-Lived Intangible Assets [Line Items]
2019	117
2020	220
2021	206
2022	191
2023	$ 131

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Stock-Based Compensation (Details) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) employee_stock_plan $ / shares shares	Jun. 30, 2018 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of active employee stock plans | employee_stock_plan			1
Number of shares available for grant (in shares)	4,300,000		4,300,000
Stock-based compensation expense (in USD) | $	$ 4.2	$ 4.2	$ 8.3	$ 12.2
Stock-based compensation amortization expense unrecognized (in USD) | $	$ 21.9		$ 21.9
Average remaining vesting period (in years)			2 years 1 month 24 days
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares granted during the period (in shares)			0	1,200,000
Award vesting period (in years)			3 years
Award vesting rights as a percentage			33.33%
Average grant date fair value (usd per share) | $ / shares				$ 11.86
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares granted during the period (in shares)			532,000	446,000
Award vesting period (in years)			3 years
Average grant date fair value (usd per share) | $ / shares			$ 10.43	$ 12.35

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Derivative Instruments and Hedging Activities - Additional Information (Details) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($) swap	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) swap	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Derivative [Line Items]
Number of credit swaps | swap	20		20
Derivative instrument not designated as hedging instruments, liability	$ 10.4		$ 10.4
Aggregate fair value of net liability position	17.2		17.2
Interest rate swaps
Derivative [Line Items]
Accumulated net after-tax losses related to effective cash flow hedges	4.6		4.6		$ 4.0
Estimated amount of interest rate derivatives to be reclassified to interest expense			2.6
Fair value hedge | Noninterest Income | Interest rate swaps
Derivative [Line Items]
Fee income related to derivative interest rate swaps executed with commercial loan customers	5.4	$ 4.4	9.5	$ 7.7
Derivatives not designated as hedging instruments
Derivative [Line Items]
Aggregate notional amount of derivative asset	$ 127.3		$ 127.3

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Derivative Instruments and Hedging Activities - Balance Sheet Disclosures (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Interest rate swaps
Derivative [Line Items]
Other Assets	$ 0	$ 0
Other Liabilities	32,833	22,907
Derivatives designated as hedging instruments
Derivative [Line Items]
Other Assets	0	0
Other Liabilities	2,496	374
Notional Amount	262,411	339,536
Derivatives designated as hedging instruments | Cash flow hedge interest rate swaps | Interest rate swaps
Derivative [Line Items]
Other Assets	0	0
Other Liabilities	2,159	27
Notional Amount	255,000	332,000
Derivatives designated as hedging instruments | Fair value hedge interest rate swaps | Interest rate swaps
Derivative [Line Items]
Other Assets	0	0
Other Liabilities	337	347
Notional Amount	7,411	7,536
Derivatives not designated as hedging instruments
Derivative [Line Items]
Other Assets	140,496	48,979
Other Liabilities	31,006	23,307
Notional Amount	3,609,803	3,495,825
Derivatives not designated as hedging instruments | Interest rate swaps
Derivative [Line Items]
Other Assets	139,893	48,642
Other Liabilities	30,337	22,533
Notional Amount	3,469,497	3,390,578
Derivatives not designated as hedging instruments | Mortgage banking derivatives
Derivative [Line Items]
Other Assets	603	337
Other Liabilities	669	774
Notional Amount	$ 140,306	$ 105,247

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Derivative Instruments and Hedging Activities - Interest Rate Derivatives Designated as Cash Flow Hedges (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Amounts Related To Interest Rate Derivatives Included In Income Designated As Hedges Of Cash Flows [Line Items]
Amount of loss reclassified from accumulated other comprehensive loss to interest expense	$ (107,508)	$ (69,366)	$ (209,084)	$ (129,263)
Amount of (loss) gain recognized in other comprehensive income (loss)	(962)	637	(1,512)	3,388
Reclassification Out of Accumulated Other Comprehensive Income (Loss)
Amounts Related To Interest Rate Derivatives Included In Income Designated As Hedges Of Cash Flows [Line Items]
Amount of loss reclassified from accumulated other comprehensive loss to interest expense	$ (383)	$ (866)	$ (673)	$ (2,317)

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Derivative Instruments and Hedging Activities - Gains (Losses) on Interest Rate Derivatives Designated as Fair Value Hedges (Details) - Fair value hedge - Interest income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interest rate swaps
Gain Loss On Fair Value Hedges Recognized In Earnings [Line Items]
Gain (loss) related to derivative interest rate swaps	$ 49	$ 88	$ 73	$ 219
Loans | Derivatives designated as hedging instruments
Gain Loss On Fair Value Hedges Recognized In Earnings [Line Items]
Gain (loss) related to hedged loans	$ (49)	$ (88)	$ (73)	$ (219)

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Derivative Instruments and Hedging Activities - Interest Rate Derivatives Designated as Hedges (Details) - Fair value hedge - Derivatives designated as hedging instruments - Interest rate swaps - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Derivative [Line Items]
Carrying Amount of the Hedged Asset	$ 7,748	$ 7,882
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Asset	$ 337	$ 346

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Derivative Instruments and Hedging Activities - (Losses) Gains Related to Derivatives Not Designated as Hedges (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Non-designated hedge interest rate derivatives
Other non-interest expense	$ (347)	$ 230	$ (757)	$ 448

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Balance Sheet Offsetting (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Offsetting Liabilities
Gross Amounts Recognized	$ 182,833	$ 172,907
Gross Amounts Offset	0	0
Net Amounts Presented	182,833	172,907
Gross Amounts Not Offset, Financial Instruments	(13,385)	(1,214)
Gross Amounts Not Offset, Cash Collateral	(165,211)	(151,852)
Net Amount	4,237	19,841
Repurchase agreements
Offsetting Repurchase Agreement Liabilities
Gross Amounts Recognized	150,000	150,000
Gross Amounts Offset	0	0
Net Amounts Presented	150,000	150,000
Gross Amounts Not Offset, Financial Instruments	0	0
Gross Amounts Not Offset, Cash Collateral	(150,000)	(150,000)
Net Amount	0	0
Interest rate swaps
Offsetting Assets
Gross Amounts Recognized	139,893	48,642
Gross Amounts Offset	0	0
Net Amounts Presented	139,893	48,642
Gross Amounts Not Offset, Financial Instruments	(13,385)	(1,214)
Gross Amounts Not Offset, Cash Collateral	0	0
Net Amount	126,508	47,428
Offsetting Liabilities
Gross Amounts Recognized	32,833	22,907
Gross Amounts Offset	0	0
Net Amounts Presented	32,833	22,907
Gross Amounts Not Offset, Financial Instruments	(13,385)	(1,214)
Gross Amounts Not Offset, Cash Collateral	(15,211)	(1,852)
Net Amount	$ 4,237	$ 19,841

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Tax Credit Investments - Balance Sheet Disclosures (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Other Assets:
Other tax credit investments, net		$ 68,100
Other Assets
Other Assets:
Affordable housing tax credit investments, net	$ 27,738	36,961
Other tax credit investments, net	58,215	68,052
Total tax credit investments, net	85,953	105,013
Other Liabilities
Other Liabilities:
Unfunded affordable housing tax credit commitments	2,696	4,520
Unfunded other tax credit commitments	5,139	8,756
Total unfunded tax credit commitments	$ 7,835	$ 13,276

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Tax Credit Investments - Income Statement Disclosures (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$ 1,708	$ 1,429	$ 3,421	$ 3,250
Other tax credit investment credits and tax benefits	2,158	5,680	4,961	11,165
Total reduction in income tax expense	3,866	7,109	8,382	14,415
Non-Interest Expenses
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	593	(319)	1,266	667
Affordable housing tax credit investment impairment losses	794	515	1,524	1,102
Other tax credit investment losses	2,509	1,253	3,496	1,790
Other tax credit investment impairment losses	967	3,021	5,750	6,185
Total amortization of tax credit investments recorded in non-interest expense	$ 4,863	$ 4,470	$ 12,036	$ 9,744

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Tax Credit Investments - Narrative (Details) $ in Thousands	3 Months Ended	12 Months Ended	36 Months Ended
	Mar. 31, 2019 USD ($) fund	Dec. 31, 2018 USD ($) fund	Dec. 31, 2015 fund
Income Tax Disclosure [Abstract]
Number of federal renewable energy tax credit funds | fund	3	3	3
Federal renewable energy tax credit investments, net		$ 2,400
Federal renewable energy tax credit investments, net, amount per fund		800
Other tax credit investments, net		$ 68,100
Other than temporary impairment, other tax credit investments	$ 2,400

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Income Taxes - Additional Information (Details) $ in Thousands	3 Months Ended		6 Months Ended	12 Months Ended	36 Months Ended
	Jun. 30, 2019 USD ($) solar_generator_unit	Mar. 31, 2019 fund	Jun. 30, 2019 USD ($) solar_generator_unit	Dec. 31, 2018 USD ($) fund	Dec. 31, 2015 USD ($) fund tax_opinion
Income Tax Disclosure [Abstract]
Number of federal renewable energy tax credit funds | fund		3		3	3
Number of solar generator units | solar_generator_unit	512		512
Federal tax credit benefit					$ 22,800
Number of tax opinions | tax_opinion					2
Tax credit recognized and measured for each tax position (as a percent)			100.00%
Percentage of solar generator units positively identified (over)			93.00%
Increase to the provision for income taxes	$ 223		$ 12,300
Estimated loss on the related tax positions			29,400
Uncertain tax position, accrued interest	$ 2,100		$ 2,100	$ 1,800

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Income Taxes Income Taxes - Summary of Reconciliation of Gross Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Reconciliation of Gross Unrecognized Tax Benefits
Beginning balance	$ 12,100	$ 4,238	$ 0	$ 4,238
Additions based on tax positions related to current year	223	0	12,323	0
Ending balance	$ 12,323	$ 4,238	$ 12,323	$ 4,238

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Label	Element	Value
Accounting Standards Update 2016-01 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 0
Accounting Standards Update 2016-01 [Member] | AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	(480,000)
Accounting Standards Update 2016-01 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	480,000
Accounting Standards Update 2016-16 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	(17,611,000)
Accounting Standards Update 2016-16 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	(17,611,000)
Accounting Standards Update 2017-02 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	0
Accounting Standards Update 2017-02 [Member] | AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	(61,000)
Accounting Standards Update 2017-02 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 61,000