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Derivative Instruments and Hedging Activities
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities
Valley enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest and currency rates.
Cash Flow Hedges of Interest Rate Risk. Valley’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, Valley has used interest rate swaps, from time to time, as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the payment of either fixed or variable-rate amounts in exchange for the receipt of variable or fixed rate amounts from a counterparty, respectively.
Fair Value Hedges of Fixed Rate Assets and Liabilities. Valley is exposed to changes in the fair value of certain fixed rate assets and liabilities due to changes in interest rates and uses interest rate swaps to manage the exposure to changes in fair value. For derivatives that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the loss or gain on the hedged item attributable to the hedged risk are recognized in earnings.
During the second quarter 2026, Valley entered into four interest rate swap agreements with a combined notional value of $204.3 million to hedge the fair value of certain fixed rate brokered time deposits. Valley will receive fixed rate amounts ranging from 3.73 percent to 3.93 percent, in exchange for variable rate payments based on the Floating SOFR Overnight Indexed Swap compound rate. The swaps have expiration dates ranging from December 2026 through August 2028.
During the second quarter 2026, 6 of 11 forward-starting interest rate swap agreements executed in 2024, with a combined notional value of $269.5 million, expired. The remaining five swap agreements executed in 2024 have a combined notional value of $210.8 million and expiration dates ranging from April 2027 to June 2027. Additionally, an interest rate swap agreement with a notional amount of $300 million to hedge the change in the fair value of Valley's 3.00 percent fixed-to-floating rate subordinated notes expired on June 15, 2026. See Note 14 to Valley's Annual Report for additional information regarding Valley's fair value hedges.
Subsequent Fair Value Hedge Transactions
In July 2026, Valley entered into five interest rate swap agreements with a combined notional value of $239.0 million to hedge the fair value of certain fixed rate brokered time deposits. Valley will receive fixed rate amounts ranging from 3.93 percent to 4.16 percent, in exchange for variable rate payments based on the Floating SOFR Overnight Indexed Swap compound rate. The swaps have expiration dates ranging from February 2027 through December 2027.
Non-designated Hedges. Derivatives not designated as hedges may be used to manage Valley’s exposure to interest rate movements or to provide a service to customers but do not meet the requirements for hedge accounting under GAAP. Derivatives not designated as hedges are not entered into for speculative purposes. Valley executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Valley executes with a third party, such that Valley minimizes its net risk exposure resulting from such transactions. As these interest rate swaps do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.
Valley sometimes enters into risk participation agreements with external lenders where the banks share the risk of default on the interest rate swaps on participated loans. Valley either pays or receives a fee depending on the type of participation. Risk participation agreements are credit derivatives not designated as hedges. Credit derivatives are not speculative and are not used to manage interest rate risk in assets or liabilities. Changes in the fair value of credit derivatives are recognized directly in earnings. At June 30, 2026, Valley had 91 credit swaps with an aggregate notional amount of $972.1 million related to risk participation agreements.
At June 30, 2026, Valley had two “steepener” swaps, each with a current notional amount of $10.4 million where the receive rate on the swap mirrors the pay rate on the brokered deposits and the rates paid on these types of hybrid instruments are based on a formula derived from the spread between the long and short ends of the Constant Maturity Swap rate curve. Although these types of instruments do not meet the hedge accounting requirements, the change in fair value of both the bifurcated derivative and the stand-alone swap tends to move in opposite directions with changes in the three-month Term SOFR rate and, therefore, provide an effective economic hedge.
Valley regularly enters into mortgage banking derivatives which are not designated as hedges. These derivatives include interest rate lock commitments provided to customers to fund certain residential mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. Valley enters into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on Valley's commitments to fund the loans as well as on its portfolio of mortgage loans held for sale.
Valley enters into foreign currency forward and option contracts primarily to accommodate customers. These derivatives are not designated as hedging instruments. Upon the origination of certain foreign currency denominated transactions (including foreign currency holdings and non-U.S. dollar denominated loans) with a client, we enter into a respective hedging contract with a third-party financial institution to mitigate the economic impact of foreign currency exchange rate fluctuation.
During 2024, Valley entered into a credit default swap related to approximately $1.5 billion in automobile loans primarily to enhance the risk profile of these assets for regulatory capital purposes. The covered loans have a total remaining balance of $471.9 million within Valley's $2.2 billion automobile loan portfolio at June 30, 2026. The credit default swap is a free-standing contract measured at fair value with resulting gains or losses recognized in non-interest expense. The premium amortization expense associated with the credit protection totaling $881 thousand and $1.8 million for the three months ended June 30, 2026 and 2025, respectively, and $1.6 million and $3.8 million for the six months ended June 30, 2026 and 2025, respectively, was recorded within other expense reported in non-interest expense.
Amounts included in the consolidated statements of financial condition related to the fair value of Valley’s derivative financial instruments were as follows: 
June 30, 2026December 31, 2025
Fair ValueFair Value
Other AssetsOther LiabilitiesNotional AmountOther AssetsOther LiabilitiesNotional Amount
(in thousands)
Derivatives designated as hedging instruments:
Fair value hedge interest rate swaps $932 $263 $415,088 $1,319 $4,088 $780,322 
Derivatives not designated as hedging instruments:
Interest rate swaps and other contracts*
$238,836 $238,692 $19,540,317 $162,191 $161,911 $18,685,777 
Foreign currency derivatives25,575 25,082 3,133,435 19,140 18,031 2,343,733 
Mortgage banking derivatives27 125 28,350 23 78 25,718 
Credit default swap— 52 471,914 — 54 653,459 
Total derivatives not designated as hedging instruments$264,438 $263,951 $23,174,016 $181,354 $180,074 $21,708,687 
Total derivative financial instruments$265,370 $264,214 $23,589,104 $182,673 $184,162 $22,489,009 
* Other derivative contracts include risk participation agreements.
Gains included in the consolidated statements of income and other comprehensive loss, on a pre-tax basis, related to previously terminated interest rate derivatives designated as hedges of cash flows were as follows: 
Three Months Ended
June 30,		Six Months Ended
June 30,
2026202520262025
(in thousands)
Amount of gain reclassified from accumulated other comprehensive loss to interest income$173 $304 $344 $605 
The accumulated after-tax gains related to the previously terminated cash flow hedges included in accumulated other comprehensive loss were $172 thousand and $420 thousand at June 30, 2026 and December 31, 2025, respectively. The entire after-tax gain of $172 thousand will be reclassified from accumulated other comprehensive loss to interest income during the remainder of 2026.
Gains (losses) included in the consolidated statements of income related to interest rate derivatives designated as hedges of fair value were as follows: 
Three Months Ended
June 30,		Six Months Ended
June 30,
2026202520262025
(in thousands)
Derivative - interest rate swaps:
Interest expense$541 $2,155 764 6,724 
Hedged items - loans, time deposits and subordinated debt:
Interest income$— $(161)$— $(322)
Interest expense(731)(2,194)(919)(6,726)
The changes in the fair value of the hedged item designated as a qualifying hedge are captured as an adjustment to the carrying amount of the hedged item (basis adjustment). The following table presents the hedged item related to interest rate derivatives designated as fair value hedges and the cumulative basis fair value adjustment included in the net carrying amount of the hedged item at June 30, 2026 and December 31, 2025.
Line Item in the Statement of Financial Condition in Which the Hedged Item is IncludedNet Carrying Amount of the Hedged Asset/ LiabilityCumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Asset/Liability
(in thousands)
June 30, 2026
Time deposits$415,244 $173 
December 31, 2025
Time deposits$483,348 $3,044 
Long-term borrowings *295,842 (3,790)
*    Net carrying amount includes unamortized debt issuance costs of $368 thousand at December 31, 2025.
The net (losses) gains included in the consolidated statements of income related to derivative instruments not designated as hedging instruments were as follows: 
Three Months Ended
June 30,		Six Months Ended
June 30,
2026202520262025
(in thousands)
Non-designated hedge interest rate swaps and credit derivatives
Other non-interest expense$(102)$(1,930)$795 $(4,989)
Capital markets income reported in non-interest income included fee income related to non-designated hedge derivative interest rate swaps executed with commercial loan customers and foreign exchange contracts (not designated as hedging instruments) with a combined total of $9.6 million and $8.3 million for the three months ended June 30, 2026 and 2025, respectively, and $19.2 million and $14.0 million for the six months ended June 30, 2026 and 2025, respectively.
Collateral Requirements and Credit Risk Related Contingent Features. By using derivatives, Valley is exposed to credit risk if counterparties to the derivative contracts do not perform as expected. Management attempts to minimize counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral where appropriate. Credit risk exposure associated with derivative contracts is managed at Valley in conjunction with Valley’s consolidated counterparty risk management process. Valley’s counterparties and the risk limits monitored by management are periodically reviewed and approved by the Board.
Valley has agreements with its derivative counterparties providing that if Valley defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Valley could also be declared in default on its derivative counterparty agreements. Additionally, Valley has an agreement with several of its derivative counterparties that contains provisions that require Valley’s debt to maintain an investment grade credit rating from each of the major credit rating agencies from which it receives a credit rating. If Valley’s credit rating is reduced below investment grade, or such rating is withdrawn or suspended, then the counterparties could terminate the derivative positions, and Valley would be required to settle its obligations under the agreements. As of June 30, 2026, Valley was in compliance with all of the provisions of its derivative counterparty agreements. The total combined fair value of all derivative financial instruments with credit risk-related contingent features was in a net asset position at June 30, 2026. Valley has derivative counterparty agreements that require minimum collateral posting thresholds for certain counterparties.