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Loans and Allowance for Credit Losses for Loans
 3 Months Ended
Mar. 31, 2021
Receivables [Abstract]  
Loans and Allowance for Credit Losses for Loans Loans and Allowance for Credit Losses for Loans
The detail of the loan portfolio as of March 31, 2021 and December 31, 2020 was as follows: 
 March 31, 2021December 31, 2020
 (in thousands)
Loans:
Commercial and industrial:
Commercial and industrial $4,784,017 $4,709,569 
Commercial and industrial PPP loans *2,364,627 2,152,139 
Total commercial and industrial loans7,148,644 6,861,708 
Commercial real estate:
Commercial real estate16,923,627 16,724,998 
Construction1,786,331 1,745,825 
Total commercial real estate loans18,709,958 18,470,823 
Residential mortgage4,060,492 4,183,743 
Consumer:
Home equity409,576 431,553 
Automobile1,444,883 1,355,955 
Other consumer912,863 913,330 
Total consumer loans2,767,322 2,700,838 
Total loans$32,686,416 $32,217,112 
*Represents SBA Paycheck Protection Program (PPP) loans, net of unearned fees totaling $57.2 million and $43.2 million at March 31, 2021 and December 31, 2020, respectively.

Total loans includes net unearned discounts and deferred loan fees of $108.6 million and $95.8 million at March 31, 2021 and December 31, 2020, respectively. Net unearned discounts and deferred loan fees include the non-credit discount on purchased credit deterioration (PCD) loans and net unearned fees related to PPP loans at March 31, 2021 and December 31, 2020.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $92.4 million and $90.2 million at March 31, 2021 and December 31, 2020, respectively, and is presented separately in the consolidated statements of financial condition.

Valley transferred and sold approximately $30.0 million of residential mortgage loans from the loan portfolio to loans held for sale during the three months ended March 31, 2020. Excluding the loan transfers, there were no other sales of loans from the held for investment portfolio during the three months ended March 31, 2021 and 2020.

Credit Risk Management

For all of its loan types, Valley adheres to a credit policy designed to minimize credit risk while generating the maximum income given the level of risk appetite. Management reviews and approves these policies and procedures on a regular basis with subsequent approval by the Board of Directors annually. Credit authority relating to a significant dollar percentage of the overall portfolio is centralized and controlled by the Credit Risk Management Division and by the Credit Committee. A reporting system supplements the management review process by providing management with frequent reports concerning loan production, loan quality, internal loan classification,
concentrations of credit, loan delinquencies, non-performing, and potential problem loans. Loan portfolio diversification is an important factor utilized by Valley to manage its risk across business sectors and through cyclical economic circumstances. See Valley’s Annual Report on Form 10-K for the year ended December 31, 2020 for further details.

Credit Quality

The following table presents past due, current and non-accrual loans without an allowance for credit losses by loan portfolio class at March 31, 2021 and December 31, 2020:
Past Due and Non-Accrual Loans
 30-59  Days 
Past Due Loans		60-89  Days 
Past Due Loans		90 Days or More
Past Due Loans		Non-Accrual Loans
Total Past Due Loans
Current Loans
Total Loans		Non-Accrual Loans Without Allowance for Credit Losses
 (in thousands)
March 31, 2021
Commercial and industrial
$3,763 $1,768 $2,515 $108,988 $117,034 $7,031,610 $7,148,644 $10,618 
Commercial real estate:
Commercial real estate
11,655 5,455 — 54,004 71,114 16,852,513 16,923,627 41,706 
Construction— — — 71 71 1,786,260 1,786,331 — 
Total commercial real estate loans11,655 5,455 — 54,075 71,185 18,638,773 18,709,958 41,706 
Residential mortgage16,004 2,233 2,472 33,655 54,364 4,006,128 4,060,492 17,218 
Consumer loans:
Home equity737 147 — 6,411 7,295 402,281 409,576 48 
Automobile4,421 770 390 368 5,949 1,438,934 1,444,883 — 
Other consumer322 104 27 513 966 911,897 912,863 — 
Total consumer loans
5,480 1,021 417 7,292 14,210 2,753,112 2,767,322 48 
Total$36,902 $10,477 $5,404 $204,010 $256,793 $32,429,623 $32,686,416 $69,590 
 Past Due and Non-Accrual Loans  
 
30-59
Days
Past Due Loans		60-89 
Days
Past Due Loans		90 Days or More
Past Due Loans		Non-Accrual Loans
Total Past Due Loans
Current Loans		Total LoansNon-Accrual Loans Without Allowance for Credit Losses
(in thousands)
December 31, 2020
Commercial and industrial$6,393 $2,252 $9,107 $106,693 $124,445 $6,737,263 $6,861,708 $4,075 
Commercial real estate:
Commercial real estate35,030 1,326 993 46,879 84,228 16,640,770 16,724,998 32,416 
Construction315 — — 84 399 1,745,426 1,745,825 — 
Total commercial real estate loans35,345 1,326 993 46,963 84,627 18,386,196 18,470,823 32,416 
Residential mortgage17,717 10,351 3,170 25,817 57,055 4,126,688 4,183,743 11,610 
Consumer loans:
Home equity953 492 — 4,936 6,381 425,172 431,553 50 
Automobile8,056 1,107 245 338 9,746 1,346,209 1,355,955 — 
Other consumer1,248 224 26 535 2,033 911,297 913,330 — 
Total consumer loans10,257 1,823 271 5,809 18,160 2,682,678 2,700,838 50 
Total$69,712 $15,752 $13,541 $185,282 $284,287 $31,932,825 $32,217,112 $48,151 

Credit quality indicators. Valley utilizes an internal loan classification system as a means of reporting problem loans within commercial and industrial, commercial real estate, and construction loan portfolio classes. Under Valley’s internal risk rating system, loan relationships could be classified as "Pass," "Special Mention," "Substandard," "Doubtful," and "Loss." Substandard loans include loans that exhibit well-defined weakness and are characterized by the distinct possibility that Valley will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, based on currently existing facts, conditions and values, highly questionable and improbable. Loans classified as Loss are those considered uncollectible with insignificant value and are charged-off immediately to the allowance for loan losses, and, therefore, not presented in the table below. Loans that do not currently pose a sufficient risk to warrant classification in one of the aforementioned categories but pose weaknesses that deserve management’s close attention are deemed Special Mention. Loans rated as Pass do not currently pose any identified risk and can range from the highest to average quality, depending on the degree of potential risk. Risk ratings are updated any time the situation warrants.
The following table presents the internal loan classification risk by loan portfolio class by origination year based on the most recent analysis performed at March 31, 2021 and December 31, 2020:
 Term Loans  
Amortized Cost Basis by Origination Year
March 31, 202120212020201920182017Prior to 2017Revolving Loans Amortized Cost BasisRevolving Loans Converted to Term LoansTotal
 (in thousands)
Commercial and industrial
Risk Rating:
Pass$1,091,421 $2,438,605 $560,364 $515,645 $191,930 $454,483 $1,637,014 $296 $6,889,758 
Special Mention1,027 1,599 8,714 6,874 3,365 17,601 66,443 37 105,660 
Substandard975 15,664 4,870 9,704 1,226 4,217 25,264 361 62,281 
Doubtful— — 2,742 — 16,844 71,359 — — 90,945 
Total commercial and industrial$1,093,423 $2,455,868 $576,690 $532,223 $213,365 $547,660 $1,728,721 $694 $7,148,644 
Commercial real estate
Risk Rating:
Pass$703,940 $3,102,368 $3,001,631 $2,148,025 $1,691,885 $5,314,508 $195,069 $14,597 $16,172,023 
Special Mention— 55,142 74,513 44,406 45,899 193,439 1,235 — 414,634 
Substandard576 22,623 17,031 38,564 74,244 181,107 2,531 92 336,768 
Doubtful— — — — — 202 — — 202 
Total commercial real estate$704,516 $3,180,133 $3,093,175 $2,230,995 $1,812,028 $5,689,256 $198,835 $14,689 $16,923,627 
Construction
Risk Rating:
Pass$55,347 $154,819 $99,815 $106,566 $15,422 $42,957 $1,229,949 $— $1,704,875 
Special Mention— — 1,035 — — 6,265 48,111 — 55,411 
Substandard— 32 21 246 — 17,842 7,904 — 26,045 
Total construction$55,347 $154,851 $100,871 $106,812 $15,422 $67,064 $1,285,964 $— $1,786,331 
 Term Loans  
Amortized Cost Basis by Origination Year
December 31, 202020202019201820172016Prior to 2016Revolving Loans Amortized Cost BasisRevolving Loans Converted to Term LoansTotal
 (in thousands)
Commercial and industrial
Risk Rating:
Pass$3,058,596 $605,112 $556,284 $212,215 $162,483 $337,484 $1,677,559 $350 $6,610,083 
Special Mention819 10,236 2,135 9,502 10,228 14,165 49,883 51 97,019 
Substandard5,215 3,876 12,481 1,798 4,215 12,965 18,913 462 59,925 
Doubtful— 5,203 1 17,010 2,596 69,871 — — 94,681 
Total commercial and industrial$3,064,630 $624,427 $570,901 $240,525 $179,522 $434,485 $1,746,355 $863 $6,861,708 
Commercial real estate
Risk Rating:
Pass$3,096,549 $3,052,076 $2,230,047 $1,767,528 $1,798,137 $3,916,990 $199,145 $15,532 $16,076,004 
Special Mention50,193 68,203 44,336 48,813 66,845 109,295 1,705 — 389,390 
Substandard18,936 17,049 30,997 59,618 11,541 118,725 2,531 — 259,397 
Doubtful— — — — — 207 — — 207 
Total commercial real estate$3,165,678 $3,137,328 $2,305,380 $1,875,959 $1,876,523 $4,145,217 $203,381 $15,532 $16,724,998 
Construction
Risk Rating:
Pass$145,246 $120,800 $111,174 $15,497 $47,971 $20,029 $1,199,034 $— $1,659,751 
Special Mention— 1,043 — — 9,996 17,414 47,311 — 75,764 
Substandard— 26 246 2,628 17 380 7,013 — 10,310 
Total construction$145,246 $121,869 $111,420 $18,125 $57,984 $37,823 $1,253,358 $— $1,745,825 
For residential mortgages, automobile, home equity and other consumer loan portfolio classes, Valley also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the amortized cost in those loan classes based on payment activity by origination year as of March 31, 2021 and December 31, 2020.
 Term Loans  
Amortized Cost Basis by Origination Year
March 31, 202120212020201920182017Prior to 2017Revolving Loans Amortized Cost BasisRevolving Loans Converted to Term LoansTotal
 (in thousands)
Residential mortgage
Performing$219,558 $732,027 $725,885 $594,844 $508,177 $1,212,780 $44,041 $— $4,037,312 
90 days or more past due— 2,478 2,814 2,489 3,645 11,754 — — 23,180 
Total residential mortgage $219,558 $734,505 $728,699 $597,333 $511,822 $1,224,534 $44,041 $— $4,060,492 
Consumer loans
Home equity
Performing$1,890 $8,179 $9,917 $10,612 $7,550 $17,181 $304,404 $48,364 $408,097 
90 days or more past due— — — — — 96 573 810 1,479 
Total home equity1,890 8,179 9,917 10,612 7,550 17,277 304,977 49,174 409,576 
Automobile
Performing214,566 411,821 397,409 240,852 128,960 50,506 — — 1,444,114 
90 days or more past due— 42 141 247 208 131 — — 769 
Total automobile214,566 411,863 397,550 241,099 129,168 50,637 — — 1,444,883 
Other Consumer
Performing7,230 7,056 5,375 6,552 1,076 5,613 879,552 — 912,454 
90 days or more past due— — — — — — 1 408 409 
Total other consumer7,230 7,056 5,375 6,552 1,076 5,613 879,553 408 912,863 
Total Consumer$223,686 $427,098 $412,842 $258,263 $137,794 $73,527 $1,184,530 $49,582 $2,767,322 
 Term Loans  
Amortized Cost Basis by Origination Year
December 31, 202020202019201820172016Prior to 2016Revolving Loans Amortized Cost BasisRevolving Loans Converted to Term LoansTotal
 (in thousands)
Residential mortgage
Performing$730,764 $778,161 $684,761 $582,650 $380,723 $943,616 $64,798 $— $4,165,473 
90 days or more past due— 3,085 4,212 3,464 4,144 3,365 — — 18,270 
Total residential mortgage $730,764 $781,246 $688,973 $586,114 $384,867 $946,981 $64,798 $— $4,183,743 
Consumer loans
Home equity
Performing$8,580 $10,634 $11,756 $8,886 $5,340 $15,393 $318,869 $50,879 $430,337 
90 days or more past due— — — — 25 83 378 730 1,216 
Total home equity8,580 10,634 11,756 8,886 5,365 15,476 319,247 51,609 431,553 
Automobile
Performing426,121 438,181 272,075 151,523 50,853 16,550 — — 1,355,303 
90 days or more past due19 108 173 223 35 94 — — 652 
Total automobile426,140 438,289 272,248 151,746 50,888 16,644 — — 1,355,955 
Other Consumer
Performing12,271 5,558 6,815 1,112 1,077 5,314 880,748 — 912,895 
90 days or more past due— — — — — 22 5 408 435 
Total other consumer12,271 5,558 6,815 1,112 1,077 5,336 880,753 408 913,330 
Total Consumer$446,991 $454,481 $290,819 $161,744 $57,330 $37,456 $1,200,000 $52,017 $2,700,838 
Troubled debt restructured loans. From time to time, Valley may extend, restructure, or otherwise modify the terms of existing loans, on a case-by-case basis, to remain competitive and retain certain customers, as well as assist other customers who may be experiencing financial difficulties. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan (TDR).
Generally the concessions made for TDRs involve lowering the monthly payments on loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. The concessions may also involve payment deferrals but rarely result in the forgiveness of principal or accrued interest. In addition, Valley frequently obtains additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms of the loan and Valley’s underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.
Performing TDRs (not reported as non-accrual loans) totaled $67.1 million and $57.4 million as of March 31, 2021 and December 31, 2020, respectively. Non-performing TDRs totaled $91.5 million and $92.8 million as of March 31, 2021 and December 31, 2020, respectively.
The following table presents the pre- and post-modification amortized cost of loans by loan class modified as TDRs during the three months ended March 31, 2021 and 2020. Post-modification amounts are presented as of March 31, 2021 and 2020.
Three Months Ended March 31,
20212020
Troubled Debt RestructuringsNumber
of
Contracts		Pre-Modification
Amortized Carrying Amount		Post-Modification
Amortized Carrying Amount		Number
of
Contracts		Pre-Modification
Amortized Carrying Amount		Post-Modification
Amortized Carrying Amount
 ($ in thousands)
Commercial and industrial5 $13,744 $13,307 16 $13,144 $12,630 
Commercial real estate2 4,197 4,185 1 3,863 3,855 
Residential mortgage6 1,528 1,518 — — — 
Consumer1 170 168 — — — 
Total14 $19,639 $19,178 17 $17,007 $16,485 

The total TDRs presented in the above table had allocated allowance for loan losses of $3.4 million and $7.9 million at March 31, 2021 and 2020, respectively. There were $5.1 million and $791 thousand of charge-offs mainly related to TDRs for the three months ended March 31, 2021 and 2020, respectively. Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the three months ended March 31, 2021 and 2020.

Loans modified as TDRs within the previous 12 months and for which there was a payment default (90 or more days past due) for the three months ended March 31, 2021 and 2020 were as follows:
 Three Months Ended March 31,
20212020
Troubled Debt Restructurings Subsequently DefaultedNumber of
Contracts		Amortized CostNumber of
Contracts		Recorded
Investment
 ($ in thousands)
Commercial and industrial16 $12,384 — $— 
Residential mortgage3 655 1 154 
Total19 $13,039 1 $154 

Forbearance. In response to the COVID-19 pandemic and its economic impact to certain customers, Valley implemented short-term loan modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant, when requested by customers. Generally, the modification terms allow for a deferral of payments for up to 90 days, which Valley may extend for an additional 90 days. Any extensions beyond this period were done in accordance with applicable regulatory guidance. As of March 31, 2021, Valley had approximately $284 million of outstanding loans remaining in their payment deferral period under short-term modifications as compared to $361 million of loans in deferral at December 31, 2020. Under the applicable guidance, none of these loans were classified as TDRs at March 31, 2021 and December 31, 2020.

Loans in Process of Foreclosure. Other real estate owned (OREO) totaled $4.5 million and $5.1 million at March 31, 2021 and December 31, 2020, respectively. OREO included foreclosed residential real estate properties totaling $413 thousand and $1.0 million at March 31, 2021 and December 31, 2020, respectively. Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $1.8 million and $1.9 million at March 31, 2021 and December 31, 2020, respectively.

Collateral dependent loans. Loans are collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. When Valley determines that foreclosure is probable, the collateral dependent loan balances are written down to the estimated
current fair value (less estimated selling costs) resulting in an immediate charge-off to the allowance, excluding any consideration for personal guarantees that may be pursued in the Bank’s collection process.
The following table presents collateral dependent loans by class as of March 31, 2021 and December 31, 2020:
 March 31,
2021		December 31,
2020
 (in thousands)
Commercial and industrial$110,169 $106,239 
Commercial real estate60,647 41,562 
Residential mortgage32,144 28,176 
Home equity49 50 
Total $203,009 $176,027 

Commercial and industrial loans are primarily collateralized by taxi medallions in the table above.

Allowance for Credit Losses for Loans
The following table summarizes the allowance for credit losses for loans at March 31, 2021 and December 31, 2020: 
March 31,
2021		December 31,
2020
 (in thousands)
Components of allowance for credit losses for loans:
Allowance for loan losses$342,880 $340,243 
Allowance for unfunded credit commitments11,433 11,111 
Total allowance for credit losses for loans$354,313 $351,354 

The following table summarizes the provision for credit losses for loans for the periods indicated:
 Three Months Ended
March 31,
 20212020
 (in thousands)
Components of provision for credit losses for loans:
Provision for loan losses$8,692 $33,851 
Provision for unfunded credit commitments322 73 
Total provision for credit losses for loans$9,014 $33,924 
The following table details the activity in the allowance for loan losses by loan portfolio segment for the three months ended March 31, 2021 and 2020: 
Commercial
and Industrial		Commercial
Real Estate		Residential
Mortgage		ConsumerTotal
 (in thousands)
Three Months Ended
March 31, 2021
Allowance for loan losses:
Beginning balance$131,070 $164,113 $28,873 $16,187 $340,243 
Loans charged-off(7,142)(382)(138)(1,138)(8,800)
Charged-off loans recovered 1,589 69 157 930 2,745 
Net (charge-offs) recoveries(5,553)(313)19 (208)(6,055)
Provision for loan losses891 10,436 (1,720)(915)8,692 
Ending balance$126,408 $174,236 $27,172 $15,064 $342,880 
Three Months Ended
March 31, 2020
Allowance for losses:
Beginning balance$104,059 $45,673 $5,060 $6,967 $161,759 
Impact of ASU 2016-13 adoption*15,169 49,797 20,575 6,990 92,531 
Beginning balance, adjusted119,228 95,470 25,635 13,957 254,290 
Loans charged-off (3,360)(44)(336)(2,565)(6,305)
Charged-off loans recovered 569 93 50 794 1,506 
Net (charge-offs) recoveries(2,791)49 (286)(1,771)(4,799)
Provision for loan losses11,000 16,066 4,107 2,678 33,851 
Ending balance$127,437 $111,585 $29,456 $14,864 $283,342 
*    Includes a $61.6 million increase representing the estimated expected credit losses for PCD loans as a result of the ASU 2016-13 adoption on January 1, 2020.
    
The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the allowance measurement methodology at March 31, 2021 and December 31, 2020.
Commercial
and Industrial		Commercial
Real Estate		Residential
Mortgage		ConsumerTotal
 (in thousands)
March 31, 2021
Allowance for loan losses:
Individually evaluated for credit losses
$73,574 $4,663 $773 $516 $79,526 
Collectively evaluated for credit losses
52,834 169,573 26,399 14,548 263,354 
Total$126,408 $174,236 $27,172 $15,064 $342,880 
Loans:
Individually evaluated for credit losses
$144,101 $80,234 $39,488 $2,936 $266,759 
Collectively evaluated for credit losses
7,004,543 18,629,724 4,021,004 2,764,386 32,419,657 
Total$7,148,644 $18,709,958 $4,060,492 $2,767,322 $32,686,416 
December 31, 2020
Allowance for loan losses:
Individually evaluated for credit losses
$73,063 $1,338 $1,206 $264 $75,871 
Collectively evaluated for credit losses
58,007 162,775 27,667 15,923 264,372 
Total$131,070 $164,113 $28,873 $16,187 $340,243 
Loans:
Individually evaluated for credit losses
$131,057 $61,754 $35,151 $1,631 $229,593 
Collectively evaluated for credit losses
6,730,651 18,409,069 4,148,592 2,699,207 31,987,519 
Total$6,861,708 $18,470,823 $4,183,743 $2,700,838 $32,217,112