Benefit Plans

12 Months Ended

Dec. 31, 2020

Retirement Benefits [Abstract]

Benefit Plans

BENEFIT PLANS (Note 12)

Pension Plan

The Bank has a non-contributory defined benefit plan (qualified plan) covering most of its employees. The qualified plan benefits are based upon years of credited service and the employee’s highest average compensation as defined. Additionally, the Bank has a supplemental non-qualified, non-funded retirement plan, which is designed to supplement the pension plan for key officers, and Valley has a non-qualified, non-funded directors’ retirement plan (both of these plans are referred to as the “non-qualified plans” below).

Effective December 31, 2013, the benefits earned under the qualified and non-qualified plans were frozen. As a result, Valley re-measured the projected benefit obligation of the affected plans and the funded status of each plan at June 30, 2013. Consequently, participants in each plan will not accrue further benefits and their pension benefits will be determined based on their compensation and service as of December 31, 2013. Plan benefits will not increase for any compensation or service earned after such date. All participants were immediately vested in their frozen accrued benefits if they were employed by the Bank as of December 31, 2013.

The following table sets forth the change in the projected benefit obligation, the change in fair value of plan assets and the funded status and amounts recognized in Valley’s consolidated financial statements for the qualified and non-qualified plans at December 31, 2020 and 2019: 

	2020		2019
	(in thousands)
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	175,405	$	157,364
Interest cost	4,941		6,113
Actuarial loss	18,813		20,001
Benefits paid	(8,310)		(8,073)
Projected benefit obligation at end of year	$	190,849	$	175,405
Change in fair value of plan assets:
Fair value of plan assets at beginning of year	$	236,621	$	210,508
Actual return on plan assets	30,987		32,835
Employer contributions	1,353		1,351
Benefits paid	(8,310)		(8,073)
Fair value of plan assets at end of year*	$	260,651	$	236,621
Funded status of the plan
Asset recognized	$	69,802	$	61,216
Accumulated benefit obligation	190,849		175,405

*    Includes accrued interest receivable of $623 thousand and $641 thousand as of December 31, 2020 and 2019, respectively.

Amounts recognized as a component of accumulated other comprehensive loss as of year-end that have not been recognized as a component of the net periodic pension expense for Valley’s qualified and non-qualified plans are presented in the following table. Valley expects to recognize approximately $1.5 million of the net actuarial loss reported in the following table as of December 31, 2020 as a component of net periodic pension expense during 2021. 

	2020		2019
	(in thousands)
Net actuarial loss	$	50,272	$	46,248
Prior service cost	321		357
Deferred tax benefit	(14,132)		(13,168)
Total	$	36,461	$	33,437

The non-qualified plans had a projected benefit obligation, accumulated benefit obligation, and fair value of plan assets as follows: 

	2020		2019
	(in thousands)
Projected benefit obligation	$	20,513	$	20,081
Accumulated benefit obligation	20,513		20,081
Fair value of plan assets	—		—

In determining discount rate assumptions, management looks to current rates on fixed-income corporate debt securities that receive a rating of AA or higher from either Moody’s or S&P with durations equal to the expected benefit payments streams required of each plan. The weighted average discount rate used in determining the actuarial present value of benefit obligations for the qualified and non-qualified plans was 2.52 percent and 3.32 percent as of December 31, 2020 and 2019, respectively. 

The net periodic pension income for the qualified and non-qualified plans reported within other non-interest expense included the following components for the years ended December 31, 2020, 2019 and 2018: 

	2020		2019		2018
	(in thousands)
Interest cost	$	4,941	$	6,113	$	5,542
Expected return on plan assets	(17,200)		(16,453)		(15,912)
Amortization of net loss	1,003		264		625
Total net periodic pension income	$	(11,256)	$	(10,076)	$	(9,745)

Valley estimated the interest cost component of net periodic pension income (as shown in the table above) using a spot rate approach for the plans by applying the specific spot rates along the yield curve to the relevant projected cash flows. Valley believes this provides a better estimate of interest costs than a single weighted average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the applicable period.

Other changes in the qualified and non-qualified plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31, 2020 and 2019 were as follows: 

	2020		2019
	(in thousands)
Net loss	$	5,026	$	3,619
Amortization of prior service cost	(136)		(35)
Amortization of actuarial loss	(1,003)		(264)
Total recognized in other comprehensive income	$	3,887	$	3,320
Total recognized in net periodic pension income and other comprehensive income (before tax)	$	(7,233)	$	(6,721)

The benefit payments, which reflect expected future service, as appropriate, expected to be paid in future years are presented in the following table: 

Year	Amount
	(in thousands)
2021	$	8,889
2022	9,123
2023	9,389
2024	9,579
2025	9,726
Thereafter	49,314

The weighted average discount rate, expected long-term rate of return on assets and rate of compensation increase used in determining Valley’s pension expense for the years ended December 31, 2020, 2019 and 2018 were as follows: 

	2020		2019		2018
Discount rate - projected benefit obligation	3.29	%	4.30	%	3.69	%
Discount rate - interest cost	2.62	%	3.99	%	3.31	%
Expected long-term return on plan assets	7.50	%	7.50	%	7.50	%
Rate of compensation increase	N/A		N/A		N/A

The expected rate of return on plan assets assumption is based on the concept that it is a long-term assumption independent of the current economic environment and changes would be made in the expected return only when long-term inflation expectations change, asset allocations change materially or when asset class returns are expected to change for the long-term.

In accordance with Section 402 (c) of ERISA, the qualified plan’s investment managers are granted full discretion to buy, sell, invest and reinvest the portions of the portfolio assigned to them consistent with the Bank’s Pension Committee’s policy and guidelines. The target asset allocation set for the qualified plan is an approximate equal weighting of 50 percent fixed income securities and 50 percent equity securities. Although much depends upon market conditions, the absolute investment objective for the equity portion is to earn at least a mid-to-high single digit return, after adjustment by the Consumer Price Index (CPI), over rolling five-year periods. Relative performance should be above the median of a suitable grouping of other equity portfolios and a suitable index over rolling three-year periods. For the fixed income portion, the absolute objective is to earn a positive annual real return, after adjustment by the CPI, over rolling five-year periods. Relative performance should be better than the median performance of bonds when judged against a suitable index of other fixed income portfolios and above the Merrill Lynch Intermediate Government/Corporate Index over rolling three-year periods. Cash equivalents will be invested in money market funds or in other high quality instruments approved by the Trustees of the qualified plan.

The exposure of the plan assets of the qualified plan to risk is limited by the Bank’s Pension Committee’s diversification of the investments into various investment options with multiple asset managers. The Pension Committee engages an investment management advisory firm that regularly monitors the performance of the asset managers and ensures they are within compliance of the policies adopted by the Trustees. If the risk profile and overall return of assets managed are not in line with the risk objectives or expected return benchmarks for the qualified plan, the advisory firm may recommend the termination of an asset manager to the Pension Committee. In general, the plan assets of the qualified plan are investment securities that are well-diversified in terms of industry, capitalization and asset class.

The following table presents the qualified plan weighted-average asset allocations by asset category that are measured at fair value on a recurring basis by level within the fair value hierarchy under ASC Topic 820. Financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. See Note 3 for further details regarding the fair value hierarchy. 

					Fair Value Measurements at Reporting Date Using:
	% of Total Investments		December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	($ in thousands)
Assets:
Investments:
Equity securities	37	%	$	94,434	$	94,434	$	—	$	—
U.S. Treasury securities	20		52,549		52,549		—		—
Corporate bonds	20		51,410		—		51,410		—
Mutual funds	18		48,041		48,041		—		—
U.S. government agency securities	3		8,174		—		8,174		—
Cash and money market funds	2		5,420		5,420		—		—
Total investments	100	%	$	260,028	$	200,444	$	59,584	$	—

					Fair Value Measurements at Reporting Date Using:
	% of Total Investments		December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	($ in thousands)
Assets:
Investments:
Equity securities	32	%	$	75,633	$	75,633	$	—	$	—
U.S. Treasury securities	22		51,732		51,732		—		—
Corporate bonds	21		51,221		—		51,221		—
Mutual funds	18		42,119		42,119		—		—
U.S. government agency securities	3		6,263		—		6,263		—
Cash and money market funds	4		9,013		9,013		—		—
Total investments	100	%	$	235,981	$	178,497	$	57,484	$	—

The following is a description of the valuation methodologies used for assets measured at fair value:

Equity securities, U.S. Treasury securities and cash and money market funds are valued at fair value in the table above utilizing exchange quoted prices in active markets for identical instruments (Level 1 inputs). Mutual funds are measured at their respective net asset values, which represents fair values of the securities held in the funds based on exchange quoted prices available in active markets (Level 1 inputs).

Corporate bonds and U.S. government agency securities are reported at fair value utilizing Level 2 inputs. The prices for these investments are derived from market quotations and matrix pricing obtained through an independent pricing service. Such 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.

Based upon actuarial estimates, Valley does not expect to make any contributions to the qualified plan. Funding requirements for subsequent years are uncertain and will significantly depend on whether the plan’s actuary changes any assumptions used to calculate plan funding levels, the actual return on plan assets, changes in the employee groups covered by the plan, and any legislative or regulatory changes affecting plan funding requirements. For tax planning, financial planning, cash flow management or cost reduction purposes, Valley may increase, accelerate, decrease or delay contributions to the plan to the extent permitted by law.

Other Qualified Plan

On December 1, 2019, Valley assumed obligations under Oritani’s Pentegra Defined Benefit Plan for Financial Institutions (“Pentegra DB Plan”). The Pentegra DB Plan's Employer Identification Number is 13-5645888 and the Plan Number is 333. The Pentegra DB Plan is a tax-qualified defined-benefit multiple-employer plan. Under the Pentegra DB Plan, contributions made by a participating employer may be used to provide benefits to participants of other participating employers. The Pentegra DB Plan was frozen as of December 31, 2008. During 2020, Valley withdrew from the Pentegra DB Plan and distributed annuities to participants based on the actuarial computation of their pension benefit. Valley recognized approximately $1.1 million of expense included in other non-interest expense related to the final contribution to the Pentegra DB Plan and distribution of the annuities for the year ended December 31, 2020.

Other Non-Qualified Plans

Valley maintains separate non-qualified plans for former directors and senior management of Merchants Bank of New York acquired in January of 2001. At December 31, 2020 and 2019, the remaining obligations under these plans were $1.4 million and $1.6 million, respectively, of which $399 thousand and $451 thousand, respectively, were funded by Valley. As of December 31, 2020 and 2019, all of the obligations were included in other liabilities and $731 thousand (net of a $286 thousand tax benefit) and $803 thousand (net of a $314 thousand tax benefit), respectively, were recorded in accumulated other comprehensive loss. The $1.0 million in accumulated other comprehensive loss will be reclassified to expense on a straight-line basis over the remaining benefit periods of these non-qualified plans.

Valley assumed, in the Oritani acquisition on December 1, 2019, certain obligations under non-qualified retirement plans described below:

•Non-qualified benefit equalization plans (BEP) that provided supplemental benefits to certain eligible executives and officers. The BEP plans were terminated on November 30, 2019 and the funded obligation under the BEP plans totaled $26.8 million on December 31, 2019. The accrued benefits were fully distributed to the participants on July 1, 2020.

•Non-qualified benefit equalization pension plan that provided benefits to certain officers who were disallowed certain benefits under former Oritani’s qualified pension plan. This plan was terminated on November 30, 2019 and the accrued benefits are payable to plan participants in five equal installments beginning annually on December 1, 2020 through December 1, 2024. The funded obligation under this plan totaled $1.3 million and $1.6 million at December 31, 2020 and 2019, respectively.

•Supplemental Executive Retirement Income Agreement (the SERP) for the former CEO of Oritani. The SERP is a retirement benefit with a minimum payment period of 20 years upon death, disability, normal retirement, early retirement or separation from service after a change in control. Distributions from the plan began on July 1, 2020. The funded obligation under the SERP totaled $13.6 million and $13.0 million at December 31, 2020 and 2019, respectively. Valley recorded $1.5 million of expenses related to the SERP for the year ended December 31, 2020.

The above Oritani non-qualified plans are secured by investments in money market mutual funds which are held in a trust and classified as equity securities on the consolidated statements of financial condition at both December 31, 2020 and 2019.

Valley also assumed an Executive Group Life Insurance Replacement (“Split-Dollar”) Plan from Oritani. The Split-Dollar plan provides life insurance benefits to certain eligible employees upon death while employed or following termination of employment due to disability, retirement or change in control. Participants in the Split-Dollar plan are entitled to up to two times their base annual salary, as defined by the plan. The accrued liability for the Split-Dollar plan totaled $1.8 million and $961 thousand at December 31, 2020 and 2019, respectively. Valley recorded $812 thousand of expenses related to the Split-Dollar plan for the year ended December 31, 2020.

Bonus Plan

Valley National Bank and its subsidiaries may award cash incentive and merit bonuses to its officers and employees based upon a percentage of the covered employees’ compensation as determined by the achievement of certain performance objectives. Amounts charged to salary expense were $25.1 million, $19.1 million and $18.8 million during 2020, 2019 and 2018, respectively.

Savings and Investment Plan

Valley National Bank maintains a 401(k) plan that covers eligible employees of the Bank and its subsidiaries and allows employees to contribute a percentage of their salary, with the Bank matching a certain percentage of the employee contribution in cash invested in accordance with each participant’s investment elections. The Bank recorded $10.1 million, $8.6 million and $8.5 million in expense for contributions to the plan for the years ended December 31, 2020, 2019 and 2018, respectively.

Deferred Compensation Plan

Valley has a non-qualified, unfunded deferred compensation plan maintained for the purpose of providing deferred compensation for selected employees participating in the 401(k) plan whose contributions are limited as a result of the limitations under section 401(a)(17) of the IRS Code. Each participant in the plan is permitted to defer per calendar year, up to five percent of the portion of the participant’s salary and cash bonus above the limit in effect under the Company's 401(k) plan and receive employer matching contributions that become fully vested after two years of participation in the plan. Plan participants also receive an annual interest crediting on their balances held as of December 31 each year. Benefits are generally paid to a participant in a single lump sum following the participant’s separation from service with Valley. Valley recorded plan expenses of $372 thousand, $273 thousand and $262 thousand for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020 and 2019, Valley had an unsecured general liability of $1.7 million and $1.0 million, respectively, included in accrued expenses and other liabilities in connection with this plan.

Stock Based Compensation

Valley currently has one active employee stock plan, the 2016 Long-Term Stock Incentive Plan (the 2016 Plan), adopted by Valley’s Board of Directors on January 29, 2016 and approved by its shareholders on April 28, 2016. The 2016 Plan is administered by the Compensation and Human Resources Committee (the Committee) appointed by Valley’s Board of Directors. The Committee can grant awards to officers and key employees of Valley. The primary purposes of the 2016 Plan are 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 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 December 31, 2020, 3.0 million shares of common stock were available for issuance under the 2016 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.

On January 26, 2021, the Board of Directors approved the Valley National Bancorp 2021 Incentive Compensation Plan (the 2021 Plan). The 2021 Plan is subject to approval by Valley shareholders at the Annual Meeting of Shareholders on April 19, 2021. The 2021 Plan would authorize the Committee to issue up to 9 million shares to Valley's employees and directors. Awards under the 2021 Plan will be granted in substantially the same manner as the 2016 Plan. The 2021 Plan is described in more detail in Valley's 2021 definitive proxy statement.

Valley recorded total stock-based compensation expense of $16.5 million, $15.0 million and $19.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. The stock-based compensation expense for 2020, 2019 and 2018 included $1.5 million, $2.1 million and $4.3 million, respectively, related to stock awards granted to retirement eligible employees. In 2020 and 2019, compensation expense for these awards was amortized monthly over a one year period after the grant date. Prior to 2019, award grantees who were eligible for retirement did not have a service period requirement and the expense was immediately recognized. The fair values of all other stock awards are expensed over the shorter of the vesting or required service period. As of December 31, 2020, the unrecognized amortization expense for all stock-based compensation totaled approximately $17.8 million and will be recognized over an average remaining vesting period of approximately 1.76 years.

Restricted Stock Units (RSUs). Restricted stock units are awarded as (1) performance-based RSUs and (2) time-based RSUs. Performance based RSUs vest based on (i) growth in tangible book value per share plus dividends and (ii) total shareholder return as compared to our peer group. The performance based RSUs "cliff" vest after three years based on the cumulative performance of Valley during that time period. Generally, time-based RSUs vest ratably one-third each year over a three-year vesting period. The RSUs earn dividend equivalents (equal to cash dividends paid on Valley's common share) over the applicable performance or service period. Dividend equivalents, per the terms of the agreements, are accumulated and paid to the grantee at the vesting date, or forfeited if the applicable performance or service conditions are not met. The grant date fair value of the performance-based RSUs was $10.82, $10.43 and $12.36 per share for the years ended December 31, 2020, 2019, and 2018, respectively. The grant date fair value of time-based RSUs was $10.29 and $10.32 for the years ended December 31, 2020 and 2019, respectively. Valley did not award time-based restricted stock units during 2018.

The following table sets forth the changes in RSUs outstanding for the years ended December 31, 2020, 2019 and 2018: 

	Restricted Stock Units Outstanding
	2020	2019	2018
Outstanding at beginning of year	2,158,255	1,378,886	1,114,962
Acquired in business combinations	—	—	336,379
Granted	2,030,026	1,412,941	509,725
Vested	(879,085)	(500,204)	(503,879)
Forfeited	(80,537)	(133,368)	(78,301)
Outstanding at end of year	3,228,659	2,158,255	1,378,886

Restricted Stock.  Restricted stock is awarded to key employees providing for the immediate award of our common stock subject to certain vesting and restrictions under the 2016 Plan. Compensation expense is measured based on the grant-date fair value of the shares.

The following table sets forth the changes in restricted stock awards (RSAs) outstanding for the years ended December 31, 2020, 2019 and 2018: 

	Restricted Stock Awards Outstanding
	2020	2019	2018
Outstanding at beginning of year	1,058,681	1,720,968	1,771,702
Granted	—	—	1,263,144
Vested	(610,607)	(547,653)	(1,128,521)
Forfeited	(34,373)	(114,634)	(185,357)
Outstanding at end of year	413,701	1,058,681	1,720,968

Valley did not award any shares of restricted stock during 2020 and 2019. Included in the RSAs granted (in the table above) during 2018 are 60 thousand shares issued to Valley directors, which are fully vested.

Stock Options.  The fair value of each option granted on the date of grant is estimated using a binomial option pricing model. The fair values are estimated using assumptions for dividend yield based on the annual dividend rate; the stock volatility, based on Valley’s historical and implied stock price volatility; the risk-free interest rates, based on the U.S. Treasury constant maturity bonds, in effect on the actual grant dates, with a remaining term approximating the expected term of the options; and expected exercise term calculated based on Valley’s historical exercise experience.

The following table summarizes stock options activity as of December 31, 2020, 2019 and 2018 and changes during the years ended on those dates: 

	2020			2019			2018
		Weighted Average Exercise			Weighted Average Exercise			Weighted Average Exercise
Stock Options	Shares	Price		Shares	Price		Shares	Price
Outstanding at beginning of year	3,453,516	$	8	1,051,787	$	7	446,980	$	13
Acquired in business combinations	—	—		3,130,171	8		1,803,165	5
Exercised	(249,308)	8		(716,920)	7		(975,325)	5
Forfeited or expired	(217,861)	11		(11,522)	8		(223,033)	14
Outstanding at end of year	2,986,347	7		3,453,516	8		1,051,787	7
Exercisable at year-end	2,986,347	7		3,339,517	8		604,003	7

The following table summarizes information about stock options outstanding and exercisable at December 31, 2020: 

Options Outstanding and Exercisable
Range of Exercise Prices	Number of Options	Weighted Average Remaining Contractual Life in Years	Weighted Average Exercise Price
$2-$4	91,500	1.6	$	3
4-6	149,248	4.3	5
6-8	2,687,999	0.9	7
8-10	32,000	7.3	10
10-12	25,600	7.7	10
	2,986,347	1.3	7