Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

Leases

Lessor Arrangements

Valley's lessor arrangements primarily consist of direct financing and sales-type leases for equipment included in the commercial and industrial loan portfolio. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

At September 30, 2019, the total net investment in direct financing and sales-type leases was $422.0 million, comprised of $420.7 million in lease receivables and $1.3 million in unguaranteed residuals. Total lease income was $5.0 million and $3.6 million for the three months ended September 30, 2019 and 2018, respectively, and $13.9 million and $10.8 million for the nine months ended September 30, 2019 and 2018, respectively.

Lessee Arrangements

Valley's lessee arrangements predominantly consist of operating and finance leases for premises and equipment. The majority of the operating leases include one or more options to renew that can significantly extend the lease terms. Valley’s leases have a wide range of lease expirations through the year 2062. 

Operating and finance leases are recognized as right of use (ROU) assets and lease liabilities in the consolidated statements of financial position. The ROU assets represent the right to use underlying assets for the lease terms and

lease liabilities represent Valley’s obligations to make lease payments arising from the lease. The ROU assets include any prepaid lease payments and initial direct costs, less any lease incentives. At the commencement dates of leases, ROU assets and lease liabilities are initially recognized based on their net present values with the lease terms including options to extend or terminate the lease when Valley is reasonably certain that the options will be exercised to extend. ROU assets are amortized into net occupancy and equipment expense over the expected lives of the leases.

Lease liabilities are discounted to their net present values on the balance sheet based on incremental borrowing rates as determined at the lease commencement dates using quoted interest rates for readily available borrowings, such as fixed rate FHLB advances, with similar terms as the lease obligations. Lease liabilities are reduced by actual lease payments.

In March 2019, Valley closed a sale-leaseback transaction for 26 properties, consisting of 25 branches and 1 corporate office, for an aggregate sales price of $100.5 million. As a result, Valley recorded a pre-tax net gain totaling $78.5 million during the first quarter of 2019. Additionally, Valley recorded ROU assets and lease obligations totaling $78.4 million, respectively, for the lease of the 26 properties with an expected term of 12 years. The lease was determined to be an operating lease and Valley expects to record lease costs of approximately $7.9 million within occupancy and equipment expense on a straight-line basis annually over the term of the lease. 

The following table presents the components of ROU assets and lease liabilities by lease type at September 30, 2019.

	September 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	286,014
Finance leases	946
Total	$	286,960
Lease liabilities:
Operating leases	$	309,228
Finance leases	1,917
Total	$	311,145

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and nine months ended September 30, 2019:

	Three Months Ended			Nine Months Ended
	September 30, 2019			September 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	72		$	218
Interest on lease liabilities	47			148
Operating lease cost	9,096			25,019
Short-term lease cost	134			268
Variable lease cost	723			2,695
Sublease income	(779		)	(2,465		)
Total lease cost (included in net occupancy and equipment expense)	$	9,293		$	25,883

The following table presents supplemental cash flow information related to leases for the nine months ended September 30, 2019:

	Nine Months Ended
	September 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25,813
Operating cash flows from finance leases	148
Financing cash flows from finance leases	365

The following table presents supplemental information related to leases at September 30, 2019:

	September 30, 2019
Weighted-average remaining lease term
Operating leases	12.95 years
Finance leases	3.25 years
Weighted-average discount rate
Operating leases	3.69	%
Finance leases	8.25	%

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of September 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	34,982		$	8,865		$	171
2020	125,406			35,660			684
2021	107,213			35,068			684
2022	84,768			33,520			684
2023	61,462			30,124			—
Thereafter	48,374			253,421			—
Total lease payments	462,205			396,658			2,223
Less: present value discount	(40,201		)	(87,430		)	(306		)
Total	$	422,004		$	309,228		$	1,917

The following table presents minimum aggregate lease payments in accordance with Topic 840 at September 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	6,916	$	556	$	6,360
2019	27,781		2,196		25,585
2020	27,930		2,152		25,778
2021	27,103		2,086		25,017
2022	26,100		1,970		24,130
Thereafter	273,997		8,707		265,290
Total lease payments	$	389,827	$	17,667	$	372,160

Net occupancy and equipment expense included lease cost of $7.9 million and $24.3 million, net of sublease income of $871 thousand and $2.7 million, for the three and nine months ended September 30, 2018, respectively.

Leases

Leases

Lessor Arrangements

Valley's lessor arrangements primarily consist of direct financing and sales-type leases for equipment included in the commercial and industrial loan portfolio. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

At September 30, 2019, the total net investment in direct financing and sales-type leases was $422.0 million, comprised of $420.7 million in lease receivables and $1.3 million in unguaranteed residuals. Total lease income was $5.0 million and $3.6 million for the three months ended September 30, 2019 and 2018, respectively, and $13.9 million and $10.8 million for the nine months ended September 30, 2019 and 2018, respectively.

Lessee Arrangements

Valley's lessee arrangements predominantly consist of operating and finance leases for premises and equipment. The majority of the operating leases include one or more options to renew that can significantly extend the lease terms. Valley’s leases have a wide range of lease expirations through the year 2062. 

Operating and finance leases are recognized as right of use (ROU) assets and lease liabilities in the consolidated statements of financial position. The ROU assets represent the right to use underlying assets for the lease terms and

lease liabilities represent Valley’s obligations to make lease payments arising from the lease. The ROU assets include any prepaid lease payments and initial direct costs, less any lease incentives. At the commencement dates of leases, ROU assets and lease liabilities are initially recognized based on their net present values with the lease terms including options to extend or terminate the lease when Valley is reasonably certain that the options will be exercised to extend. ROU assets are amortized into net occupancy and equipment expense over the expected lives of the leases.

Lease liabilities are discounted to their net present values on the balance sheet based on incremental borrowing rates as determined at the lease commencement dates using quoted interest rates for readily available borrowings, such as fixed rate FHLB advances, with similar terms as the lease obligations. Lease liabilities are reduced by actual lease payments.

In March 2019, Valley closed a sale-leaseback transaction for 26 properties, consisting of 25 branches and 1 corporate office, for an aggregate sales price of $100.5 million. As a result, Valley recorded a pre-tax net gain totaling $78.5 million during the first quarter of 2019. Additionally, Valley recorded ROU assets and lease obligations totaling $78.4 million, respectively, for the lease of the 26 properties with an expected term of 12 years. The lease was determined to be an operating lease and Valley expects to record lease costs of approximately $7.9 million within occupancy and equipment expense on a straight-line basis annually over the term of the lease. 

The following table presents the components of ROU assets and lease liabilities by lease type at September 30, 2019.

	September 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	286,014
Finance leases	946
Total	$	286,960
Lease liabilities:
Operating leases	$	309,228
Finance leases	1,917
Total	$	311,145

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and nine months ended September 30, 2019:

	Three Months Ended			Nine Months Ended
	September 30, 2019			September 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	72		$	218
Interest on lease liabilities	47			148
Operating lease cost	9,096			25,019
Short-term lease cost	134			268
Variable lease cost	723			2,695
Sublease income	(779		)	(2,465		)
Total lease cost (included in net occupancy and equipment expense)	$	9,293		$	25,883

The following table presents supplemental cash flow information related to leases for the nine months ended September 30, 2019:

	Nine Months Ended
	September 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25,813
Operating cash flows from finance leases	148
Financing cash flows from finance leases	365

The following table presents supplemental information related to leases at September 30, 2019:

	September 30, 2019
Weighted-average remaining lease term
Operating leases	12.95 years
Finance leases	3.25 years
Weighted-average discount rate
Operating leases	3.69	%
Finance leases	8.25	%

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of September 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	34,982		$	8,865		$	171
2020	125,406			35,660			684
2021	107,213			35,068			684
2022	84,768			33,520			684
2023	61,462			30,124			—
Thereafter	48,374			253,421			—
Total lease payments	462,205			396,658			2,223
Less: present value discount	(40,201		)	(87,430		)	(306		)
Total	$	422,004		$	309,228		$	1,917

The following table presents minimum aggregate lease payments in accordance with Topic 840 at September 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	6,916	$	556	$	6,360
2019	27,781		2,196		25,585
2020	27,930		2,152		25,778
2021	27,103		2,086		25,017
2022	26,100		1,970		24,130
Thereafter	273,997		8,707		265,290
Total lease payments	$	389,827	$	17,667	$	372,160

Net occupancy and equipment expense included lease cost of $7.9 million and $24.3 million, net of sublease income of $871 thousand and $2.7 million, for the three and nine months ended September 30, 2018, respectively.

Leases

Leases

Lessor Arrangements

Valley's lessor arrangements primarily consist of direct financing and sales-type leases for equipment included in the commercial and industrial loan portfolio. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

At September 30, 2019, the total net investment in direct financing and sales-type leases was $422.0 million, comprised of $420.7 million in lease receivables and $1.3 million in unguaranteed residuals. Total lease income was $5.0 million and $3.6 million for the three months ended September 30, 2019 and 2018, respectively, and $13.9 million and $10.8 million for the nine months ended September 30, 2019 and 2018, respectively.

Lessee Arrangements

Valley's lessee arrangements predominantly consist of operating and finance leases for premises and equipment. The majority of the operating leases include one or more options to renew that can significantly extend the lease terms. Valley’s leases have a wide range of lease expirations through the year 2062. 

Operating and finance leases are recognized as right of use (ROU) assets and lease liabilities in the consolidated statements of financial position. The ROU assets represent the right to use underlying assets for the lease terms and

lease liabilities represent Valley’s obligations to make lease payments arising from the lease. The ROU assets include any prepaid lease payments and initial direct costs, less any lease incentives. At the commencement dates of leases, ROU assets and lease liabilities are initially recognized based on their net present values with the lease terms including options to extend or terminate the lease when Valley is reasonably certain that the options will be exercised to extend. ROU assets are amortized into net occupancy and equipment expense over the expected lives of the leases.

Lease liabilities are discounted to their net present values on the balance sheet based on incremental borrowing rates as determined at the lease commencement dates using quoted interest rates for readily available borrowings, such as fixed rate FHLB advances, with similar terms as the lease obligations. Lease liabilities are reduced by actual lease payments.

In March 2019, Valley closed a sale-leaseback transaction for 26 properties, consisting of 25 branches and 1 corporate office, for an aggregate sales price of $100.5 million. As a result, Valley recorded a pre-tax net gain totaling $78.5 million during the first quarter of 2019. Additionally, Valley recorded ROU assets and lease obligations totaling $78.4 million, respectively, for the lease of the 26 properties with an expected term of 12 years. The lease was determined to be an operating lease and Valley expects to record lease costs of approximately $7.9 million within occupancy and equipment expense on a straight-line basis annually over the term of the lease. 

The following table presents the components of ROU assets and lease liabilities by lease type at September 30, 2019.

	September 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	286,014
Finance leases	946
Total	$	286,960
Lease liabilities:
Operating leases	$	309,228
Finance leases	1,917
Total	$	311,145

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and nine months ended September 30, 2019:

	Three Months Ended			Nine Months Ended
	September 30, 2019			September 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	72		$	218
Interest on lease liabilities	47			148
Operating lease cost	9,096			25,019
Short-term lease cost	134			268
Variable lease cost	723			2,695
Sublease income	(779		)	(2,465		)
Total lease cost (included in net occupancy and equipment expense)	$	9,293		$	25,883

The following table presents supplemental cash flow information related to leases for the nine months ended September 30, 2019:

	Nine Months Ended
	September 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25,813
Operating cash flows from finance leases	148
Financing cash flows from finance leases	365

The following table presents supplemental information related to leases at September 30, 2019:

	September 30, 2019
Weighted-average remaining lease term
Operating leases	12.95 years
Finance leases	3.25 years
Weighted-average discount rate
Operating leases	3.69	%
Finance leases	8.25	%

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of September 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	34,982		$	8,865		$	171
2020	125,406			35,660			684
2021	107,213			35,068			684
2022	84,768			33,520			684
2023	61,462			30,124			—
Thereafter	48,374			253,421			—
Total lease payments	462,205			396,658			2,223
Less: present value discount	(40,201		)	(87,430		)	(306		)
Total	$	422,004		$	309,228		$	1,917

The following table presents minimum aggregate lease payments in accordance with Topic 840 at September 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	6,916	$	556	$	6,360
2019	27,781		2,196		25,585
2020	27,930		2,152		25,778
2021	27,103		2,086		25,017
2022	26,100		1,970		24,130
Thereafter	273,997		8,707		265,290
Total lease payments	$	389,827	$	17,667	$	372,160

Net occupancy and equipment expense included lease cost of $7.9 million and $24.3 million, net of sublease income of $871 thousand and $2.7 million, for the three and nine months ended September 30, 2018, respectively.

Leases

Leases

Lessor Arrangements

Valley's lessor arrangements primarily consist of direct financing and sales-type leases for equipment included in the commercial and industrial loan portfolio. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

At September 30, 2019, the total net investment in direct financing and sales-type leases was $422.0 million, comprised of $420.7 million in lease receivables and $1.3 million in unguaranteed residuals. Total lease income was $5.0 million and $3.6 million for the three months ended September 30, 2019 and 2018, respectively, and $13.9 million and $10.8 million for the nine months ended September 30, 2019 and 2018, respectively.

Lessee Arrangements

Valley's lessee arrangements predominantly consist of operating and finance leases for premises and equipment. The majority of the operating leases include one or more options to renew that can significantly extend the lease terms. Valley’s leases have a wide range of lease expirations through the year 2062. 

Operating and finance leases are recognized as right of use (ROU) assets and lease liabilities in the consolidated statements of financial position. The ROU assets represent the right to use underlying assets for the lease terms and

lease liabilities represent Valley’s obligations to make lease payments arising from the lease. The ROU assets include any prepaid lease payments and initial direct costs, less any lease incentives. At the commencement dates of leases, ROU assets and lease liabilities are initially recognized based on their net present values with the lease terms including options to extend or terminate the lease when Valley is reasonably certain that the options will be exercised to extend. ROU assets are amortized into net occupancy and equipment expense over the expected lives of the leases.

Lease liabilities are discounted to their net present values on the balance sheet based on incremental borrowing rates as determined at the lease commencement dates using quoted interest rates for readily available borrowings, such as fixed rate FHLB advances, with similar terms as the lease obligations. Lease liabilities are reduced by actual lease payments.

In March 2019, Valley closed a sale-leaseback transaction for 26 properties, consisting of 25 branches and 1 corporate office, for an aggregate sales price of $100.5 million. As a result, Valley recorded a pre-tax net gain totaling $78.5 million during the first quarter of 2019. Additionally, Valley recorded ROU assets and lease obligations totaling $78.4 million, respectively, for the lease of the 26 properties with an expected term of 12 years. The lease was determined to be an operating lease and Valley expects to record lease costs of approximately $7.9 million within occupancy and equipment expense on a straight-line basis annually over the term of the lease. 

The following table presents the components of ROU assets and lease liabilities by lease type at September 30, 2019.

	September 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	286,014
Finance leases	946
Total	$	286,960
Lease liabilities:
Operating leases	$	309,228
Finance leases	1,917
Total	$	311,145

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and nine months ended September 30, 2019:

	Three Months Ended			Nine Months Ended
	September 30, 2019			September 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	72		$	218
Interest on lease liabilities	47			148
Operating lease cost	9,096			25,019
Short-term lease cost	134			268
Variable lease cost	723			2,695
Sublease income	(779		)	(2,465		)
Total lease cost (included in net occupancy and equipment expense)	$	9,293		$	25,883

The following table presents supplemental cash flow information related to leases for the nine months ended September 30, 2019:

	Nine Months Ended
	September 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25,813
Operating cash flows from finance leases	148
Financing cash flows from finance leases	365

The following table presents supplemental information related to leases at September 30, 2019:

	September 30, 2019
Weighted-average remaining lease term
Operating leases	12.95 years
Finance leases	3.25 years
Weighted-average discount rate
Operating leases	3.69	%
Finance leases	8.25	%

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of September 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	34,982		$	8,865		$	171
2020	125,406			35,660			684
2021	107,213			35,068			684
2022	84,768			33,520			684
2023	61,462			30,124			—
Thereafter	48,374			253,421			—
Total lease payments	462,205			396,658			2,223
Less: present value discount	(40,201		)	(87,430		)	(306		)
Total	$	422,004		$	309,228		$	1,917

The following table presents minimum aggregate lease payments in accordance with Topic 840 at September 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	6,916	$	556	$	6,360
2019	27,781		2,196		25,585
2020	27,930		2,152		25,778
2021	27,103		2,086		25,017
2022	26,100		1,970		24,130
Thereafter	273,997		8,707		265,290
Total lease payments	$	389,827	$	17,667	$	372,160

Net occupancy and equipment expense included lease cost of $7.9 million and $24.3 million, net of sublease income of $871 thousand and $2.7 million, for the three and nine months ended September 30, 2018, respectively.

Leases

Leases

Lessor Arrangements

Valley's lessor arrangements primarily consist of direct financing and sales-type leases for equipment included in the commercial and industrial loan portfolio. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

At September 30, 2019, the total net investment in direct financing and sales-type leases was $422.0 million, comprised of $420.7 million in lease receivables and $1.3 million in unguaranteed residuals. Total lease income was $5.0 million and $3.6 million for the three months ended September 30, 2019 and 2018, respectively, and $13.9 million and $10.8 million for the nine months ended September 30, 2019 and 2018, respectively.

Lessee Arrangements

Valley's lessee arrangements predominantly consist of operating and finance leases for premises and equipment. The majority of the operating leases include one or more options to renew that can significantly extend the lease terms. Valley’s leases have a wide range of lease expirations through the year 2062. 

Operating and finance leases are recognized as right of use (ROU) assets and lease liabilities in the consolidated statements of financial position. The ROU assets represent the right to use underlying assets for the lease terms and

lease liabilities represent Valley’s obligations to make lease payments arising from the lease. The ROU assets include any prepaid lease payments and initial direct costs, less any lease incentives. At the commencement dates of leases, ROU assets and lease liabilities are initially recognized based on their net present values with the lease terms including options to extend or terminate the lease when Valley is reasonably certain that the options will be exercised to extend. ROU assets are amortized into net occupancy and equipment expense over the expected lives of the leases.

Lease liabilities are discounted to their net present values on the balance sheet based on incremental borrowing rates as determined at the lease commencement dates using quoted interest rates for readily available borrowings, such as fixed rate FHLB advances, with similar terms as the lease obligations. Lease liabilities are reduced by actual lease payments.

In March 2019, Valley closed a sale-leaseback transaction for 26 properties, consisting of 25 branches and 1 corporate office, for an aggregate sales price of $100.5 million. As a result, Valley recorded a pre-tax net gain totaling $78.5 million during the first quarter of 2019. Additionally, Valley recorded ROU assets and lease obligations totaling $78.4 million, respectively, for the lease of the 26 properties with an expected term of 12 years. The lease was determined to be an operating lease and Valley expects to record lease costs of approximately $7.9 million within occupancy and equipment expense on a straight-line basis annually over the term of the lease. 

The following table presents the components of ROU assets and lease liabilities by lease type at September 30, 2019.

	September 30, 2019
	(in thousands)
ROU assets:
Operating leases	$	286,014
Finance leases	946
Total	$	286,960
Lease liabilities:
Operating leases	$	309,228
Finance leases	1,917
Total	$	311,145

The following table presents the components by lease type, of total lease cost recognized in the consolidated statement of income for the three and nine months ended September 30, 2019:

	Three Months Ended			Nine Months Ended
	September 30, 2019			September 30, 2019
	(in thousands)
Finance lease cost:
Amortization of ROU assets	$	72		$	218
Interest on lease liabilities	47			148
Operating lease cost	9,096			25,019
Short-term lease cost	134			268
Variable lease cost	723			2,695
Sublease income	(779		)	(2,465		)
Total lease cost (included in net occupancy and equipment expense)	$	9,293		$	25,883

The following table presents supplemental cash flow information related to leases for the nine months ended September 30, 2019:

	Nine Months Ended
	September 30, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25,813
Operating cash flows from finance leases	148
Financing cash flows from finance leases	365

The following table presents supplemental information related to leases at September 30, 2019:

	September 30, 2019
Weighted-average remaining lease term
Operating leases	12.95 years
Finance leases	3.25 years
Weighted-average discount rate
Operating leases	3.69	%
Finance leases	8.25	%

The following table presents a maturity analysis of lessor and lessee arrangements outstanding as of September 30, 2019:

	Lessor			Lessee
	Direct Financing and Sales-Type Leases			Operating Leases			Finance Leases
	(in thousands)
2019	$	34,982		$	8,865		$	171
2020	125,406			35,660			684
2021	107,213			35,068			684
2022	84,768			33,520			684
2023	61,462			30,124			—
Thereafter	48,374			253,421			—
Total lease payments	462,205			396,658			2,223
Less: present value discount	(40,201		)	(87,430		)	(306		)
Total	$	422,004		$	309,228		$	1,917

The following table presents minimum aggregate lease payments in accordance with Topic 840 at September 30, 2018:

	Gross Rents		Sublease Income		Net Rents
	(in thousands)
2018	$	6,916	$	556	$	6,360
2019	27,781		2,196		25,585
2020	27,930		2,152		25,778
2021	27,103		2,086		25,017
2022	26,100		1,970		24,130
Thereafter	273,997		8,707		265,290
Total lease payments	$	389,827	$	17,667	$	372,160

Net occupancy and equipment expense included lease cost of $7.9 million and $24.3 million, net of sublease income of $871 thousand and $2.7 million, for the three and nine months ended September 30, 2018, respectively.