

	September 30, 2019						December 31, 2018
	Non-PCI Loans		PCI Loans		Total		Non-PCI Loans		PCI Loans		Total
	(in thousands)
Loans:
Commercial and industrial	$	4,038,064	$	657,544	$	4,695,608	$	3,590,375	$	740,657	$	4,331,032
Commercial real estate:
Commercial real estate	11,121,325		2,244,129		13,365,454		9,912,309		2,494,966		12,407,275
Construction	1,385,070		152,520		1,537,590		1,122,348		365,784		1,488,132
Total commercial real estate loans	12,506,395		2,396,649		14,903,044		11,034,657		2,860,750		13,895,407
Residential mortgage	3,770,500		362,831		4,133,331		3,682,984		428,416		4,111,400
Consumer:
Home equity	382,079		107,729		489,808		371,340		145,749		517,089
Automobile	1,436,313		295		1,436,608		1,319,206		365		1,319,571
Other consumer	896,640		12,120		908,760		846,821		14,149		860,970
Total consumer loans	2,715,032		120,144		2,835,176		2,537,367		160,263		2,697,630
Total loans	$	23,029,991	$	3,537,168	$	26,567,159	$	20,845,383	$	4,190,086	$	25,035,469

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.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(in thousands)
Balance, beginning of period	$	853,887		$	630,550		$	875,958		$	282,009
Acquisition	—			—			—			474,208
Accretion	(47,475		)	(54,367		)	(155,981		)	(180,034		)
Net (decrease) increase in expected cash flows	(58,268		)	23,983			28,167			23,983
Balance, end of period	$	748,144		$	600,166		$	748,144		$	600,166

The net increase in expected cash flows for certain pools of loans (included in the tables above) during the nine months ended September 30, 2019 is recognized prospectively as an adjustment to the yield over the estimated remaining life of the individual pools. Based upon reforecasted cash flows, the net increase for the nine months ended September 30, 2019 was largely driven by additional advances on acquired lines of credit coupled with lower prospective loss expectations, partially offset by higher loan prepayments. The net decrease in expected cash flows for the three months ended September 30, 2019 was largely due to the high volume of contractual principal prepayments caused by the low level of market interest rates.

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.



	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)
September 30, 2019
Commercial and industrial	$	5,702	$	3,158	$	4,133	$	75,311	$	88,304	$	3,949,760	$	4,038,064
Commercial real estate:
Commercial real estate	20,851		735		1,125		9,560		32,271		11,089,054		11,121,325
Construction	11,523		7,129		—		356		19,008		1,366,062		1,385,070
Total commercial real estate loans	32,374		7,864		1,125		9,916		51,279		12,455,116		12,506,395
Residential mortgage	12,945		4,417		1,347		13,772		32,481		3,738,019		3,770,500
Consumer loans:
Home equity	362		249		—		1,625		2,236		379,843		382,079
Automobile	9,118		1,220		648		207		11,193		1,425,120		1,436,313
Other consumer	3,599		108		108		218		4,033		892,607		896,640
Total consumer loans	13,079		1,577		756		2,050		17,462		2,697,570		2,715,032
Total	$	64,100	$	17,016	$	7,361	$	101,049	$	189,526	$	22,840,465	$	23,029,991
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



	Recorded Investment With No Related Allowance		Recorded Investment With Related Allowance		Total Recorded Investment		Unpaid Contractual Principal Balance		Related Allowance
	(in thousands)
September 30, 2019
Commercial and industrial	$	12,661	$	97,878	$	110,539	$	123,876	$	35,730
Commercial real estate:
Commercial real estate	23,857		25,913		49,770		51,676		1,287
Construction	354		—		354		354		—
Total commercial real estate loans	24,211		25,913		50,124		52,030		1,287
Residential mortgage	6,752		4,904		11,656		12,740		525
Consumer loans:
Home equity	186		549		735		836		57
Total consumer loans	186		549		735		836		57
Total	$	43,810	$	129,244	$	173,054	$	189,482	$	37,599
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



	Three Months Ended September 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Commercial and industrial	$	114,233	$	763	$	87,414	$	422
Commercial real estate:
Commercial real estate	49,608		551		50,809		556
Construction	354		—		987		15
Total commercial real estate loans	49,962		551		51,796		571
Residential mortgage	11,592		76		14,112		152
Consumer loans:
Home equity	738		11		2,454		17
Total consumer loans	738		11		2,454		17
Total	$	176,525	$	1,401	$	155,776	$	1,162



	Nine Months Ended September 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Commercial and industrial	$	112,308	$	1,777	$	88,376	$	1,348
Commercial real estate:
Commercial real estate	46,894		1,817		52,993		1,735
Construction	509		—		1,811		54
Total commercial real estate loans	47,403		1,817		54,804		1,789
Residential mortgage	12,574		315		13,707		502
Consumer loans:
Home equity	872		32		2,093		83
Total consumer loans	872		32		2,093		83
Total	$	173,157	$	3,941	$	158,980	$	3,722

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.

The following table presents non-PCI loans by loan class modified as TDRs during the three and nine months ended September 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 September 30, 2019 and 2018, respectively.



	Three Months Ended September 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	$	42,902	$	41,772	6	$	3,970	$	3,751
Commercial real estate:
Commercial real estate	1	75		75		1	233		231
Total commercial real estate	1	75		75		1	233		231
Consumer	1	19		19		—	—		—
Total	55	$	42,996	$	41,866	7	$	4,203	$	3,982



	Nine Months Ended September 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	104	$	78,601	$	72,183	22	$	14,719	$	13,904
Commercial real estate:
Commercial real estate	3	4,740		4,699		6	4,207		4,504
Construction	—	—		—		2	565		285
Total commercial real estate	3	4,740		4,699		8	4,772		4,789
Residential mortgage	1	155		154		5	980		952
Consumer	1	19		19		1	88		83
Total	109	$	83,515	$	77,055	36	$	20,559	$	19,728

The total TDRs presented in the above table had allocated specific reserves for loan losses of $29.6 million and $6.3 million at September 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 no partial charge-offs related to TDR loan modifications during the three months ended September 30, 2019 as compared to $2.0 million of partial charge-offs for the nine months ended September 30, 2019. There were no charge-offs related to TDR loan modifications during the three and nine months ended September 30, 2018.



	Nine Months Ended September 30,
	2019			2018
Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	($ in thousands)
Commercial and industrial	19	$	12,235	8	$	6,770
Commercial real estate	1	283		—	—
Residential mortgage	3	369		5	1,015
Consumer	1	18		—	—
Total	24	$	12,905	13	$	7,785

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.



Credit exposure - by internally assigned risk rating	Pass		Special Mention		Substandard		Doubtful		Total Non-PCI Loans
	(in thousands)
September 30, 2019
Commercial and industrial	$	3,866,300	$	32,858	$	71,483	$	67,423	$	4,038,064
Commercial real estate	11,000,256		74,046		46,137		886		11,121,325
Construction	1,384,715		—		355		—		1,385,070
Total	$	16,251,271	$	106,904	$	117,975	$	68,309	$	16,544,459
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

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 September 30, 2019 and December 31, 2018:



Credit exposure - by payment activity	Performing Loans		Non-Performing Loans		Total Non-PCI Loans
	(in thousands)
September 30, 2019
Residential mortgage	$	3,756,728	$	13,772	$	3,770,500
Home equity	380,454		1,625		382,079
Automobile	1,436,106		207		1,436,313
Other consumer	896,422		218		896,640
Total	$	6,469,710	$	15,822	$	6,485,532
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 September 30, 2019 and December 31, 2018:



Credit exposure - by payment activity	Performing Loans		Non-Performing Loans		Total PCI Loans
	(in thousands)
September 30, 2019
Commercial and industrial	$	628,545	$	28,999	$	657,544
Commercial real estate	2,221,154		22,975		2,244,129
Construction	149,870		2,650		152,520
Residential mortgage	356,413		6,418		362,831
Consumer	117,664		2,480		120,144
Total	$	3,473,646	$	63,522	$	3,537,168
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 $6.4 million and $9.5 million at September 30, 2019 and December 31, 2018, respectively. OREO included foreclosed residential real estate properties totaling $1.5 million and $852 thousand at September 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 September 30, 2019 and December 31, 2018, respectively.