Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

The changes in the carrying amount of goodwill as allocated to Valley's business segments, or reporting units thereof, for goodwill impairment analysis were:


	Business Segment / Reporting Unit *
	Wealth Management		Consumer Lending		Commercial Lending		Total
	(in thousands)
Balance at December 31, 2021	$	36,399	$	284,366	$	1,138,243	$	1,459,008
Goodwill from business combinations	15,564		85		396,848		412,497
Balance at June 30, 2022	$	51,963	$	284,451	$	1,535,091	$	1,871,505

* Valley’s Wealth Management Division is comprised of trust, asset management, brokerage, insurance, and tax credit advisory services. This reporting unit is included in the Consumer Lending segment for financial reporting purposes.

During the second quarter 2022, Valley performed the annual goodwill impairment test at its normal assessment date. The results of the 2022 annual impairment test resulted in no impairment. As discussed in Note 14, Valley made changes to its operating structure and strategy during the second quarter 2022 (and subsequent to the annual goodwill impairment test), which resulted in changes in its operating segments and reporting units to reflect how the CEO, who is the chief operating decision maker, intends to manage Valley, allocate resources and measure performance. Goodwill balances were reallocated across the new operating segments and reporting units (as reflected in the table above) based on their relative fair values using the valuation performed during the second quarter 2022.

The goodwill from business combinations set forth in the above table during the six months ended June 30, 2022, related to the acquisitions of Bank Leumi USA and Landmark totaled $403.2 million and $4.4 million, respectively. The goodwill from Landmark transaction was allocated entirely to the Wealth Management reporting unit. During the six months ended June 30, 2022, Valley recorded $5.0 million of additional goodwill reflecting an adjustment to the deferred tax assets acquired from Westchester as of the acquisition date. See Note 2 for details related to these acquisitions.

The following table summarizes other intangible assets as of June 30, 2022 and December 31, 2021:


	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
	(in thousands)
June 30, 2022
Loan servicing rights	$	119,142	$	(93,697)	$	25,445
Core deposits	223,670		(76,447)		147,223
Other	51,299		(5,325)		45,974
Total other intangible assets	$	394,111	$	(175,469)	$	218,642
December 31, 2021
Loan servicing rights	$	114,636	$	(90,951)	$	23,685
Core deposits	109,290		(65,488)		43,802
Other	6,092		(3,193)		2,899
Total other intangible assets	$	230,018	$	(159,632)	$	70,386

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. There was no net impairment recognized during the three and six months ended June 30, 2022. Valley recorded net recoveries of impairment charges on its loan servicing rights totaling $42 thousand and $833 thousand for the three and six months ended June 30, 2021.

Core deposits are amortized using an accelerated method over a period of 10 years. Valley recorded $114.4 million of core deposit intangibles resulting from the Bank Leumi USA acquisition.

The line item labeled “Other” included in the table above primarily consists of customer lists, certain financial asset servicing contracts 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 13.3 years. Valley recorded $39.0 million and $6.2 million of other intangible assets during the six months ended June 30, 2022 resulting from the Bank Leumi USA and Landmark acquisitions, respectively.

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, 2022 and 2021.

The following table presents the estimated future amortization expense of other intangible assets for the remainder of 2022 through 2026:


	Loan Servicing Rights		Core Deposits		Other
	(in thousands)
2022	$	1,792	$	16,039	$	3,509
2023	3,253		28,746		6,522
2024	2,849		24,897		5,951
2025	2,483		21,048		5,380
2026	2,153		17,223		4,805

Valley recognized amortization expense on other intangible assets totaling approximately $11.4 million and $5.4 million (including net recoveries of impairment charges on loan servicing rights) for the three months ended June 30, 2022 and 2021, respectively, and $15.8 million and $11.5 million for the six months ended June 30, 2022 and 2021, respectively.