XML 38 R21.htm IDEA: XBRL DOCUMENT v3.22.4
Benefit Plans
 12 Months Ended
Dec. 31, 2022
Retirement Benefits [Abstract]  
Benefit Plans
BENEFIT PLANS (Note 12)
Defined Benefit Pension and Postretirement Benefit Plans
The Bank had offered a qualified non-contributory defined benefit plan and non-qualified supplement retirement plan to eligible employees and key executives who met certain age and service requirements, as well as a non-qualified directors' retirement plan. The qualified and non-qualified plans were frozen effective December 31, 2013. Consequently, participants in
each plan will not accrue further benefits and their pension benefits were immediately vested and determined based on their compensation and service as of December 31, 2013.
On April 1, 2022, Valley assumed a qualified non-contributory defined benefit pension plan (frozen to both benefits and new participants) covering certain former employees of Bank Leumi USA. Valley also assumed other post-employment medical and life insurance benefit (OPEB) plans from Bank Leumi USA covering certain retired employees. The OPEB plans are active, but closed to new participants.
Collectively, all qualified and non-qualified plans are referred to as the "Pension" in the tables below unless indicated otherwise.
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 Pension and OPEB plans at December 31, 2022 and 2021, if applicable: 
PensionOPEB
202220212022
 (in thousands)
Change in projected benefit obligation:
Projected benefit obligation at beginning of year$180,204 $190,849 $— 
Acquisition (1)
49,008 — 7,445 
Interest cost5,373 3,510 174 
Actuarial loss (48,109)(5,418)(975)
Benefits paid(10,980)(8,737)(663)
Projected benefit obligation at end of year$175,496 $180,204 $5,981 
Change in fair value of plan assets:
Fair value of plan assets at beginning of year$278,420 $260,651 $— 
Acquisition53,433 — — 
Actual return on plan assets(47,029)25,057 — 
Employer contributions1,562 1,449 663 
Benefits paid(10,980)(8,737)(663)
Fair value of plan assets at end of year (2)
$275,406 $278,420 $— 
Funded status of the plan
Assets (liabilities) recognized$99,910 $98,216 $(5,981)
Accumulated benefit obligation175,496 180,204 $5,981 
(1)    Beginning balances of the Pension and OPEB plans assumed from Bank Leumi USA are presented as of April 1, 2022, based on the actuarial valuation by the plan administrator.
(2)    Pension includes accrued interest receivable of $710 thousand and $783 thousand as of December 31, 2022 and 2021, respectively.

Amounts recognized as a component of accumulated other comprehensive loss at end of year that have not been recognized as a component of the net periodic pension expense for Valley’s Pension and OPEB plans are presented in the following table:
PensionOPEB
202220212022
 (in thousands)
Net actuarial loss (gain)$53,400 $34,623 $(881)
Prior service cost251 286 — 
Deferred (benefit) tax expense(15,116)(9,703)249 
Total$38,535 $25,206 $(632)
The non-qualified plans presented within Pension in the tables above had a projected benefit obligation, accumulated benefit obligation, and fair value of plan assets as follows: 
20222021
 (in thousands)
Projected benefit obligation$14,899 $18,911 
Accumulated benefit obligation14,899 18,911 
Fair value of plan assets— — 
In determining the 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 Pension plans was 5.31 percent and 2.87 percent as of December 31, 2022 and 2021, respectively, and 5.29 percent for the OPEB plans as of December 31, 2022.
The net periodic benefit (income) cost for the Pension and OPEB plans were reported within other non-interest expense included the following components for the years ended December 31, 2022, 2021 and 2020: 
PensionOPEB
2022202120202022
 (in thousands)
Interest cost$5,373 $3,510 $4,941 174 
Expected return on plan assets(20,858)(16,364)(17,200)— 
Amortization of net loss (gain)1,000 1,538 1,003 (95)
Amortization of prior service cost135135 135 — 
Net periodic benefit (income) cost$(14,350)$(11,181)$(11,121)$79 
Valley estimated the interest cost component of net periodic benefit (income) cost (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 plan assets and benefit obligations recognized in other comprehensive loss for the years ended December 31, 2022 and 2021 were as follows: 
PensionOPEB
202220212022
 (in thousands)
Net actuarial loss (gain) $19,777 $(14,111)$(976)
Amortization of prior service cost(135)(135)— 
Amortization of actuarial (loss) gain(1,000)(1,538)95 
Total recognized in other comprehensive loss$18,642 $(15,784)$(881)
Total recognized in net periodic benefit (income) cost and other comprehensive loss (before tax)$4,292 $(26,965)$(802)
The benefit payments, which reflect expected future service, as appropriate, expected to be paid in future years are presented in the following table: 
YearPensionOPEB
(in thousands)
2023$9,362 $533 
20249,547 461
20259,778 421
202610,075 390
202710,179 383
Thereafter49,889 1,784 
The weighted average assumptions used to determine net periodic benefit (income) cost for the years ended December 31, 2022, 2021 and 2020 were as follows: 
PensionOPEB
2022202120202022
Discount rate - projected benefit obligation2.85 %2.50 %3.29 %2.85 %
Discount rate - service costN/AN/AN/A2.85 %
Discount rate - interest cost2.49 %1.88 %2.62 %2.85 %
Expected long-term return on plan assets6.79 %6.75 %7.50 %N/A
Rate of compensation increaseN/AN/AN/AN/A
Assumed healthcare cost trend rate *N/AN/AN/A5.75 %
*    The assumed healthcare cost trend rate used to measure the expected cost of benefits covered by the OPEB plans for 2023 is 5.75 percent. The rate to which the healthcare cost trend rate is assumed to decline (ultimate trend rate) along with the year that the ultimate trend rate will be reached is 4.50 percent in 2028.
The expected long-term rate of return on plans assets is the average rate of return expected to be realized on funds invested or expected to be invested to provide for the benefits included in the benefit obligation. The expected long-term rate of return on plans assets is established at the beginning of the year based upon historical and projected returns for each asset category. 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 investment management advisory firm and individual asset managers, if applicable, of both defined benefit pension plans 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 plans are 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 risk exposure of the qualified plan assets is managed by the Bank’s Pension Committee and diversification of the investments into various investment options, including plan assets managed by several asset managers. The Pension Committee engages an investment management advisory firm that regularly monitors the performance of the plan assets and the individual asset managers to ensure they are compliant with the policies adopted by the Pension 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 weighted-average asset allocations by asset category for the defined benefit pension plans that are measured at fair value by level within the fair value hierarchy. See Note 3 for further details regarding the fair value hierarchy. 
   Fair Value Measurements at Reporting Date Using:
 % of Total
Investments		December 31, 2022Quoted Prices
in Active Markets
for Identical
Assets (Level 1)		Significant
Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
 ($ in thousands)
Assets:
Investments:
Mutual funds30 %$78,712 $78,712 $— $— 
U.S. Treasury securities20 57,587 57,587 — — 
Equity securities20 55,157 55,157 — — 
Corporate bonds17 46,839 — 46,839 — 
Commingled fund9 23,395 — 23,395 — 
U.S. government agency securities3 9,271 — 9,271 — 
Cash and money market funds1 3,735 3,735 — — 
Total investments100 %$274,696 $195,191 $79,505 $— 

   Fair Value Measurements at Reporting Date Using:
 % of Total
Investments		December 31, 2021Quoted Prices
in Active Markets
for Identical
Assets (Level 1)		Significant
Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
 ($ in thousands)
Assets:
Investments:
Mutual funds28 %$79,462 $79,462 $— $— 
U.S. Treasury securities22 59,931 59,931 — — 
Equity securities21 57,987 57,987 — — 
Corporate bonds23 64,715 — 64,715 — 
U.S. government agency securities4 10,590 — 10,590 — 
Cash and money market funds2 4,952 4,952 — — 
Total investments100 %$277,637 $202,332 $75,305 $— 
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 tables 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 represent 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.
Commingled funds are valued based on the NAV as reported by the trustee of the funds. The funds' underlying investments, which primarily comprise fixed-income debt securities and open-end mutual funds, are valued using quoted market prices in active markets or unobservable inputs for similar assets. Therefore, commingled funds are classified as Level 2 within the fair value hierarchy. Transactions may occur daily within the fund.
Based upon actuarial estimates, Valley does not expect to make any contributions to the defined benefit pension plans. Funding requirements for subsequent years are uncertain and will significantly depend on whether the plans' actuary changes
any assumptions used to calculate plan funding levels, the actual return on plan assets, changes in the employee groups covered by the plans, 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 plans to the extent permitted by law.
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, 2022 and 2021, the remaining obligations under these plans were $1.1 million and $1.3 million, respectively, of which $297 thousand and $348 thousand, respectively, were funded by Valley. As of December 31, 2022 and 2021, all of the obligations were included in other liabilities and $585 thousand (net of a $231 thousand tax benefit) and $660 thousand (net of a $257 thousand tax benefit), respectively, were recorded in accumulated other comprehensive loss. The $817 thousand 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 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 $653 thousand and $979 thousand at December 31, 2022 and 2021, 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 $12.3 million and $13.9 million at December 31, 2022 and 2021, respectively. Valley recorded net benefit income of $1.8 million and $357 thousand related to the valuation of the SERP for the years ended December 31, 2022 and 2021, respectively, and net benefit expense of $1.5 million 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, 2022 and 2021.
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 $1.6 million and $1.7 million at December 31, 2022 and 2021, respectively. Valley recorded $121 thousand, $104 thousand and $812 thousand of expenses related to the Split-Dollar plan for the years ended December 31, 2022 , 2021 and 2020 respectively.
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 $54.6 million, $29.0 million and $25.1 million during 2022, 2021 and 2020, 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 $14.0 million, $10.7 million and $10.1 million in expense for contributions to the plan for the years ended December 31, 2022, 2021 and 2020, 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 Internal Revenue 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 $447 thousand, $415 thousand and $372 thousand for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022 and 2021, Valley had an unsecured general liability of $2.5 million and $2.4 million, respectively, included in accrued expenses and other liabilities in connection with this plan.
Stock Based Compensation
On April 19, 2021, Valley's shareholders approved the Valley National Bancorp 2021 Incentive Compensation Plan (the 2021 Plan) administered by the Compensation and Human Capital Management Committee (the Committee) as appointed by Valley's Board of Directors. The purpose of the 2021 Plan is to provide additional incentives 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 officers, other employees and non-employee directors whose efforts will result in the continued and long-term growth of Valley's business. Upon shareholder approval of the 2021 Plan, Valley ceased granting new awards under the Valley National Bancorp 2016 Long-Term Stock Incentive Plan (the 2016 Plan).
Under the 2021 Plan, Valley may issue awards to its officers, employees and non-employee directors in amounts up to 9 million shares of common stock (less one share for every share granted after December 31, 2020 under the 2016 Plan) in the form of stock appreciation rights, both incentive and non-qualified stock options, restricted stock and restricted stock units (RSUs). If after December 31, 2020 any award granted under the 2016 Plan is forfeited, expires, settled for cash, withheld for tax obligations, or otherwise does not result in the issuance of all or a portion of the shares subject to such award, the shares will be added to the 2021 Plan's share reserve. As of December 31, 2022, 5.0 million shares of common stock were available for issuance under the 2021 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.
Valley recorded total stock-based compensation expense of $28.8 million, $20.9 million and $16.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. The stock-based compensation expense for 2022, 2021 and 2020 included $2.3 million, $1.6 million and $1.5 million, respectively, related to stock awards granted to retirement eligible employees. Compensation expense for awards to retirement eligible employees is amortized monthly over a one year required service period after the grant date. The fair values of all other stock awards are expensed over the shorter of the vesting or required service period. As of December 31, 2022, the unrecognized amortization expense for all stock-based compensation totaled approximately $33.6 million and will be recognized over an average remaining vesting period of approximately 1.9 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 $14.72, $12.36 and $10.99 per share for the years ended December 31, 2022, 2021, and 2020, respectively. The grant date fair value of time-based RSUs was $13.22, $12.01 and $10.29 for the years ended December 31, 2022, 2021, and 2020, respectively.
The following table sets forth the changes in RSUs outstanding for the years ended December 31, 2022, 2021 and 2020: 
Restricted Stock Units Outstanding
 202220212020
Outstanding at beginning of year3,889,756 3,228,659 2,158,255 
Granted3,426,181 1,999,376 2,030,026 
Vested(1,833,739)(1,239,797)(879,085)
Forfeited(285,589)(98,482)(80,537)
Outstanding at end of year5,196,609 3,889,756 3,228,659 
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 outstanding for the years ended December 31, 2022, 2021 and 2020: 
Restricted Stock Awards Outstanding
 202220212020
Outstanding at beginning of year213,908 413,701 1,058,681 
Vested(208,663)(191,104)(610,607)
Forfeited— (8,689)(34,373)
Outstanding at end of year5,245 213,908 413,701 
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.
On April 1, 2022, Valley issued replacement options for the pre-existing and fully vested stock awards consisting of Bank Leumi USA options for 2.7 million shares of Valley common stock at a weighted average exercise price of $8.47. The stock plan under which the original Bank Leumi stock awards were issued is no longer active at the acquisition date.
The following table summarizes stock options activity as of December 31, 2022, 2021 and 2020 and changes during the years ended on those dates: 
 202220212020
Weighted
Average
Exercise		Weighted
Average
Exercise		Weighted
Average
Exercise
Stock OptionsSharesPriceSharesPriceSharesPrice
Outstanding at beginning of year217,555 $7 2,986,347 $7 3,453,516 $8 
Acquired in business combinations2,726,113 8 — — — — 
Exercised(16,637)6 (2,768,792)7 (249,308)8 
Forfeited or expired— — — — (217,861)11 
Outstanding at end of year2,927,031 8 217,555 7 2,986,347 7 
Exercisable at year-end2,927,031 8 217,555 7 2,986,347 7 
The following table summarizes information about stock options outstanding and exercisable at December 31, 2022: 
Options Outstanding and Exercisable
Range of Exercise PricesNumber of OptionsWeighted Average
Remaining Contractual
Life in Years		Weighted Average
Exercise Price
$4-6
48,452 3.2$6 
6-8
94,866 4.27 
8-10
2,758,113 2.98 
10-12
25,600 5.710 
2,927,031 3.08