What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-02-28 · 511 added, 477 removed, 790 unchanged (56% of the section changed)

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Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about our business, new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations.

These statements may be identified by such forward-looking terminology as “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “typically,” “usually,” “anticipate,” "may," "estimate," or similar statements or variations of such terms.

Such forward-looking statements involve certain risks and uncertainties and our actual results may differ materially from such forward-looking statements.

These statements may be identified by such forward-looking terminology as “intend,” “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “typically,” “usually,” “anticipate,” “may,” “estimate,” “outlook,” “project” or similar statements or variations of such terms.

Such forward-looking statements involve certain risks and uncertainties.

Actual results may differ materially from such forward-looking statements.

Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements in addition to those risk factors listed under the “Risk Factors” section in Part1, Item 1A of this Annual Report on Form 10-K include, but are not limited to:

• failure to obtain the remaining regulatory approvals for the acquisition of Bank Leumi USA on the anticipated terms and within the anticipated timeframe;

• the inability to realize expected cost savings and synergies from the Bank Leumi USA acquisition in amounts or in the timeframe anticipated;

• greater than expected costs or difficulties relating to Bank Leumi USA integration matters;

• the inability to retain customers and qualified employees of Bank Leumi USA;

• changes in estimates of non-recurring charges related to the Bank Leumi USA acquisition;

• the continued impact of COVID-19 on the U.S.

and global economies, including business disruptions, reductions in employment and an increase in business failures, specifically among our clients;

• the continued impact of COVID-19 on our employees and our ability to provide services to our customers and respond to their needs as more cases of COVID-19 may arise in our primary markets;

• the impact of unfavorable macroeconomic conditions or downturns, instability or volatility in financial markets and other events and factors outside of our control, such as U.S.

and global recession concerns, geopolitical concerns including the

2022 Form 10-K

• the impact of forbearances or deferrals we are required or agree to as a result of customer requests and/or government actions, including, but not limited to our potential inability to recover fully deferred payments from the borrower or the collateral;

• the risks related to the discontinuation of the London Interbank Offered Rate and other reference rates, including increased expenses and litigation and the effectiveness of hedging strategies;

conflict between Russia and Ukraine, inflationary pressures, labor market volatility, supply chain issues, and the COVID-19 pandemic or other public health crisis;

• risks associated with our acquisition of Bank Leumi USA, including the inability to realize expected cost savings and synergies from the acquisition in the amounts or timeframe anticipated, greater than expected costs or difficulties relating to integration matters, any inability to retain customers and qualified employees of Bank Leumi USA, and the potential for greater than expected non-recurring charges related to the acquisition;

• the impact of COVID-19 and any future resurgences on the U.S.

and global economies, including business disruptions, reductions in employment, supply chain interruptions, inflation, Federal Reserve actions impacting the level of market interest rates and increases in business failures, specifically among our clients, as well as on our business, our employees and our ability to provide services to our customers;

• the loss of or decrease in lower-cost funding sources within our deposit base, including our inability to achieve deposit retention targets under Valley's branch transformation strategy;

• the impact of forbearances or deferrals we are required to, or agree to as a result of customer requests and/or government actions, including, but not limited to our potential inability to recover fully deferred payments from the borrower or the collateral;

• the risks related to the replacement of the London Interbank Offered Rate with Secured Overnight Financing Rate and other reference rates, including increased expenses and litigation and the effectiveness of hedging strategies;

• damage verdicts or settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent or trademark infringement, employment related claims, and other matters;

• a prolonged downturn in the economy, mainly in New Jersey, New York, Florida and Alabama, as well as an unexpected decline in commercial real estate values within our market areas;

• a prolonged downturn in the economy, mainly in New Jersey, New York, Florida, Alabama, California, and Illinois, as well as an unexpected decline in commercial real estate values within our market areas;

• higher or lower than expected income tax expense or tax rates, including increases or decreases resulting from changes in uncertain tax position liabilities, tax laws, regulations and case law;

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• greater than expected technology related costs due to, among other factors, prolonged or failed implementations, additional project staffing and obsolescence caused by continuous and rapid market innovations;

• the loss of or decrease in lower-cost funding sources within our deposit base, including our inability to achieve deposit retention targets under Valley's branch transformation strategy;

• cyber-attacks, ransomware attacks, computer viruses or other malware that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems;

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• our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements or a decision to increase capital by retaining more earnings;

• unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, the COVID-19 pandemic or other external events;

• unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other public health crises, acts of terrorism or other external events;

• unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors.

Critical Accounting Policies and Estimates

Critical Accounting Estimates

Our accounting and reporting policies conform, in all material respects, to U.S.

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Valley’s accounting policies are fundamental to understanding management’s discussion and analysis of its financial condition and results of operations.

Our significant accounting policies are presented in Note 1 to the consolidated financial statements.

Our significant accounting policies are presented in Note 1 to the consolidated financial

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We identified our policies for the allowance for credit losses, goodwill and other intangible assets, and income taxes to be critical because management has to make subjective and/or complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.

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Specifically, subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in material changes in the allowance for credit losses in future periods, and the inability to collect on outstanding loans could result in increased loan losses.

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Allowance for Credit Losses .

Determining the allowance for credit losses for loans has historically been identified as a critical accounting estimate.

On January 1, 2020, we ado pted new accounting guidance which requires entities to estimate and recognize an allowance for lifetime expected credit losses for loans, unfunded credit commitments and held to maturity debt securities measured at amortized cost.

Prior to 2020, an allowance for credit losses for loans was recognized based on probable incurred losses.

We estimate and recognize an allowance for lifetime expected credit losses for loans, unfunded credit commitments and held to maturity debt securities measured at amortized cost.

See Notes 1, 4 and 5 to the consolidated financial statements for further discussion of our accounting policies and methodologies for establishing the allowance for credit losses.

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However, management believes the following discussion may enable investors to better understand the variables that drive the allowance for credit losses for loans, which totaled $483.3 million and $375.7 million at December 31, 2022 and 2021, respectively.

On April 1, 2022, Valley recorded reserves of $70.3 million in the allowance for credit losses for loans related to purchased credit deteriorated (PCD) loans acquired from Bank Leumi USA, and an additional second quarter 2022 provision of $41.0 million related to non-PCD loans and unfunded credit commitments also acquired from Bank Leumi USA.

As discussed further in the “Allowance for Credit Losses” section in this MD&A, we incorporated a multi-scenario economic forecast for estimating lifetime expected credit losses at December 31, 2022 and 2021.

Due to continuous actual and expected improvements in economic conditions during 2021, including a significant decrease in the uncertain impact of the COVID-19 pandemic since December 31, 2020, we decreased our probability weighting for the most severe economic scenario at December 31, 2021.

As a result, the qualitative economic component of our reserves at December 31, 2021 declined by more than $34 million as compared to December 31, 2020.

Other qualitative non-economic reserves largely based upon management judgements about the uncertain impact of the COVID-19 pandemic on the performance of our loan portfolio declined by approximately $7 million as compared to December 31, 2020.

The positive developments in these significant judgmental factors during 2021 were more than offset by increases in the quantitative portion of our allowance based upon a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by generating probability of default and loss given default metrics.

Due to the building inflationary pressures during most of 2022, aggressive interest rate hikes by the Federal Reserve and other global political and economic factors, Valley's CECL model incorporated a more pessimistic economic outlook in terms of GDP growth, unemployment levels and potential near term negative economic impacts, given such uncertain economic conditions at December 31, 2022 as compared to December 31, 2021.

As a result, the qualitative economic component of our reserves at December 31, 2022 increased to approximately 16 percent of total allowance for credit losses for loans at December 31, 2022 as compared to 6 percent at December 31, 2021.

Other qualitative non-economic reserves, largely based upon management judgements about certain inherent factors in acquired loan portfolios not reflected in our quantitative reserves, increased to approximately 20 percent of total allowance for credit losses for loans at December 31, 2022 as compared to 10 percent at

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December 31, 2021.

The increased level of reserves resulting from the higher percentage of these significant judgmental factors during 2022 was partly mitigated by decreases in the quantitative portion of our allowance based upon a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by generating probability of default and loss given default metrics.

Specific reserves totaling $86.6 million and $71.5 million, respectively, within the allowance at December 31, 2022 and 2021 are also largely based upon management's valuation of collateral for collateral dependent loans and the present value of expected cash flows for certain troubled debt restructured loans.

The majority of these reserves at both December 31, 2021 and 2020 related to New York City taxi medallion loan valuations based on the estimated value of the underlying medallions.

These specific reserves include $42.2 million and $58.5 million at December 31, 2022 and 2021, respectively, related to New York City taxi medallion loan valuations based on the estimated value of the underlying medallions.

The valuation of the underlying medallions could be adversely impacted by further illiquidity or dislocation in the market, resulting in depressed market valuations of the underlying collateral, thus leading to additional provisions for loan losses.

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We have significant goodwill and other intangible assets related to our acquisitions totaling $1.9 billion and $197.5 million at December 31, 2022, respectively.

We record all acquired assets, including goodwill and other intangible assets, and assumed liabilities in purchase acquisitions at fair value as of the acquisition date, and

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expense all acquisition related costs as incurred as required by ASC Topic 805, “Business Combinations.” The initial recording of goodwill and other intangible assets requires subjective judgments concerning estimates of the fair value of the acquired assets and assumed liabilities.

We record all acquired assets, including goodwill and other intangible assets, and assumed liabilities in purchase acquisitions at fair value as of the acquisition date, and expense all acquisition related costs as incurred as required by ASC Topic 805, “Business Combinations.” The initial recording of goodwill and other intangible assets requires subjective judgments concerning estimates of the fair value of the acquired assets and assumed liabilities.

Goodwill is subject to annual tests for impairment or more often, if events or circumstances indicate it may be impaired.

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Such evaluation of other intangible assets is based on undiscounted cash flow projections.

On January 1, 2020, we adopted ASU No.

2017-04 intended to simplify the goodwill impairment test by eliminating a second step which required an entity to determine the implied fair value of the reporting unit’s goodwill.

Instead, an impairment loss is now recognized if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill recorded.

An impairment loss is recognized if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill recorded.

We perform our annual goodwill impairment test in the second quarter of each year, or more often if events or circumstances warrant.

In addition to the annual impairment test, we assessed the impact of the COVID-19 pandemic on macroeconomic variables and economic forecasts and how those might impact the fair value of our reporting units each quarter end.

After consideration of these variables and other possible triggering events or circumstances, as well as our operating results, we determined it was more-likely-than-not that the fair values of our four reporting units, wealth management, consumer lending, commercial lending, and investment management, were in excess of their carrying values during 2021.

In addition to the annual impairment test, we assessed the impact of the lingering effects of the COVID-19 pandemic and other factors on macroeconomic variables and economic forecasts and how those might impact the fair value of our reporting units each quarter end.

After consideration of these variables and other possible triggering events or circumstances, as well as our operating results, we determined it was more-likely-than-not that the fair values of our three reporting units, Wealth Management, Consumer Banking, and Commercial Banking, were in excess of their carrying values during 2022.

Therefore, we concluded there were no triggering events that would require additional goodwill impairment test of the reporting units during 2022.

Based upon Valley’s 2021 annual goodwill impairment testing, the fair values of its four reporting units were in excess of their carrying values.

In 2022, we will continue to monitor and evaluate the impact of COVID-19 and its impact on our market capitalization, overall economic conditions, and any triggering events that may indicate a possible impairment of goodwill allocated to our reporting units.

Based upon Valley’s 2022 annual goodwill impairment testing, the fair values of its three reporting units were in excess of their carrying values.

In 2023, we will continue to monitor and evaluate the impact of the pandemic and the overall economic conditions that may impact our market capitalization and any triggering events that may indicate a possible impairment of goodwill allocated to our reporting units.

While not expected at this time, we may be required to record a charge to earnings should there be a deficiency in our estimated fair value of one or more of our reporting units during our subsequent annual (or more frequent) impairment tests.

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Estimated cash flows may extend far into the future and, by their nature, are difficult to determine over an extended timeframe.

Factors that may materially affect the estimates include, among others, impact of the COVID-19 pandemic on macroeconomic variables and economic forecasts, competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures and technology, and changes in discount rates, growth rate, terminal values, and specific industry or market sector conditions.

Factors that may materially affect the estimates include, among others, impact of the pandemic on macroeconomic variables and economic forecasts, competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures and technology, and changes in discount rates, growth rate, terminal values, and specific industry or market sector conditions.

To assist in assessing the impact of potential goodwill or other intangible assets impairment charges at December 31, 2022, the impact of a five percent impairment charge on these intangible assets would result in a reduction in pre-tax income of approximately $103.3 million.

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In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently complex tax laws to our business activities, as well as the timing of when certain items may affect taxable income.

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Our interpretations may be subject to review during examination by taxing authorities and disputes may arise over the respective tax positions.

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These reviews include management’s estimates and assumptions regarding future taxable income, which also incorporate various tax planning strategies.

In connection with these reviews, if we determine that a

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portion of the deferred tax asset is not realizable, a valuation allowance is established.

In connection with these reviews, if we determine that a portion of the deferred tax asset is not realizable, a valuation allowance is established.

Management determined it is more likely than not that Valley will realize its net deferred tax assets, except for immaterial valuation allowances, as of December 31, 2022 and 2021.

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At December 31, 2022, Valley had consolidated total assets of $57.5 billion, total net loans of $46.5 billion, total deposits of $47.6 billion and total shareholders’ equity of $6.4 billion.

Our commercial bank operations include branch office locations in northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn and Queens, Long Island, Westchester County, New York, Florida and Alabama.

Of our curr ent 232 branch network, 56 percent, 19 percent, 18 percent and 7 percent of th e branches are located in New Jersey, New York, Florida and Alabama, respectively.

Despite targeted branch consolidation activity, w e have significantly grown both in asset size and locations over the past several years primarily both through organic efforts and through bank acquisitions discussed below and elsewhere in this report.

The Westchester Bank Holding Corporation.

On December 1, 2021, Valley completed its acquisition of The Westchester Bank Holding Corporation (Westchester) and its principal subsidiary, The Westchester Bank, which was headquartered in White Plains, New York.

Westchester had approximately $1.4 billion in assets, $915.0 million in loans, and $1.2 billion in deposits, after purchase accounting adjustments, and a branch network of seven locations in Westchester County, New York.

The acquisition represented a significan t addition to Valley's New York franchise, and enabled Valley to expand into the Westchester County, New York market.

Full systems integration was completed in February 2022 with minimal disruption to our customers.

However, some normal post-systems integration matters involving back-office and other functions were still underway at the filing date of this report.

Dudley Venture s.

On October 8, 2021, Valley acquired certain subsidiaries of Arizona-based Dudley Ventures (DV), an advisory firm specializing in the investment and management of tax credits.

The transaction price included $11.3 million of cash at the closing date, fixed future stock consideration totaling $3.8 million, and contingent cash earn-out payments based upon revenue growth of the acquired entities over a five-year period.

On November 16, 2021, Valley also acquired DV Financial Services, a registered broker-dealer regulated by FINRA, which is largely inactive.

The DV related acquisitions are expected to support our efforts to build differentiated sources of non-interest income.

Of our current 231 branch network, 55 percent, 18 percent, and 18 percent of the branches are located in New Jersey, New York, and Florida, respectively, with the remaining 8 percent of the branches in Alabama, California and Illinois combined.

Despite targeted branch consolidation activity, we have significantly grown both in asset size and locations over the past several years primarily both through organic efforts and through bank acquisitions.

Our most recent bank acquisition is discussed below.

Bank Leumi Le-Israel Corporation.

On September 23, 2021, Valley announced that it will acquire Bank Leumi Le-Israel Corporation, the U.S.

subsidiary of Bank Leumi Le-Israel B.

M., and parent company of Bank Leumi USA, and collectively referred to as "Bank Leumi USA".

Bank Leumi USA maintains its headquarters in New York City and also has commercial banking offices in Chicago, Los Angeles, Palo Alto, and Aventura, Florida.

As of December 31, 2021, Bank Leumi USA had total assets of $8.3 billion, total deposits of $7.1 billion, and gross loans of $5.8 billion.

Valley has received regulatory approval from the FRB and OCC, as well as Valley shareholder approval of the issuance of Valley common stock in connection with the acquisition.

The acquisition remains subject to regulatory approval by the New York State Department of Financial Services, as well as other customary closing conditions.

The acquisition is anticipated to close in the second quarter of 2022.

See Note 2 to the consolidated financial statements for additional details regarding these recent and pending acquisitions.

On April 1, 2022, Valley completed its acquisition of Bank Leumi Le-Israel Corporation, the U.S.

subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA, collectively referred to as “Bank Leumi USA”.

At the acquisition date, Bank Leumi USA had approximately $8.1 billion in assets, $5.9 billion of loans and $7.0 billion of deposits, after purchase accounting adjustments.

Valley issued approximately 85 million shares of common stock and paid $113.4 million in cash in the transaction.

The consideration for the acquisition totaled approximately $1.2 billion, inclusive of the value of stock options.

The transaction resulted in $403.2 million of goodwill and $153.4 million of combined core deposit and other intangible assets subject to amortization.

See Note 2 to the consolidated financial statements for additional details regarding the acquisition of Bank Leumi USA and other recent acquisition activities.

Impact of COVID-19.

Economic activity and businesses continued to improve in the second half of 2021, although the emergence of the Omicron variant of the COVID-19 virus, which spread rapidly both globally and in the U.S., cast some uncertainty on the strength of the economic recovery.

is experiencing significant global supply chain disruptions and labor shortages which have contributed to a spike in inflation.

W e continue to monitor the impact of COVID-19 closely, including its impact on our employees, customers, communities and results of operations and other government stimulus or

Over the last three years, the novel coronavirus (COVID-19) exposed the vulnerability of global supply chains and our dependence on countries like China for essential consumer goods.

During 2022, the COVID-19 pandemic continued to have a severe disruptive impact on the U.S.

and global economy, particularly due to supply chain disruptions and labor shortages.

While the U.S.

experienced an economic rebound since 2021, partly due to the large scale vaccinations efforts, the first half of 2022 brought new global outbreaks of the COVID variants and a significant rise in inflation.

As a result, worldwide inflationary concerns outweigh the other negative impacts of COVID-19 during the second half of 2022 and continued into 2023.

Additionally, the reversal of China's “zero COVID” policy in December 2022 resulted in a massive wave of new infections in China, which is expected to suppress economic growth.

China's economy slowdown could have prolonged negative consequences for the global economy as China exports up to one-third of the world's intermediate goods.

We continue to closely monitor the impact of COVID-19 and the emergence of new variants, as well as its impact on our

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Federal Reserve actions.

The extent to which the COVID-19 pandemic will impact our operations and financial results during 2022 and beyond is highly uncertain.

We continue to closely monitor local conditions in the areas we serve and will take actions as circumstances warrant and will follow proper protocols designed to ensure safety of our employees and customers.

See the "Operating Environment" section of MD&A for more details.

associates, customers, communities and results of operations and other government or Federal Reserve actions.

Risk Factors" and the “Operating Environment” section of MD&A for more details.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act and additional legislation that followed including the Consolidated Appropriations Act and the American Rescue Plan Act of 2021 provided funding for the SBA's Paycheck Protection Program (PPP) and established rules for qualifying borrowers to receive loan forgiveness by the SBA under this program.

Valley extended a total of $3.2 billion PPP loans under the program, of which $2.8 billion of these loans have received forgiveness from the SBA, most of which occurred during 2021.

As of December 31, 2021, we had $436 million of PPP loans still outstanding.

In response to the COVID-19 pandemic and its economic impact on certain customers and in accordance with provisions set forth by the CARES Act, 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.

As of December 31, 2021, Valley had approximately $28.0 million of outstanding loans remaining in their payment deferral periods under short-term modifications representing approximately 0.1 percent of our total loan portfolio at December 31, 2021 as compared to approximately $361 million, or 1.1 percent of total loans at December 31, 2020.

Valley extended a total of $3.2 billion PPP loans under the program and the vast majority of these loans received forgiveness from the SBA during 2022 and 2021.

As o f December 31, 2022, we had only $33.6 million of PPP loans outstanding (including $6.9 million acquired from Bank Leumi USA).

Annual Results .

Net income totaled $473.8 million, or $1.12 per diluted common share, for the year ended December 31, 2021 compared to $390.6 million in 2020, or $0.93 per diluted common share.

The increase in net income in 2021 compared to 2020 was largely due to:

• a $91.0 million, or 8.1 percent, increase in our net interest income primarily driven by (i) lower rates on our deposit products combined with a continued customer shift to deposits without stated maturities, (ii) run-off of higher cost time deposits, (iii) lower average other borrowings due to normal maturities of FHLB advances and long-term repos, as well as our prepayments of certain long-term FHLB borrowings in December 2020 and June 2021 and (iv) a $1.2 billion increase in average earnings assets largely due to solid organic loan growth, partially offset by lower yields on average loans and investments;

• a $93.1 million decrease in our provision for credit losses mostly due to improvements in the economic forecast component of our CECL model during 2021;

partially offset by:

• a $28.0 million decrease in non-interest income due to the combination of lower gains on sales of residential mortgage loans and lower fee income related to derivative interest rate swaps executed with commercial lending customers, partially offset by moderate increases in several other fee categories;

• a $45.4 million increase in non-interest expense largely due to salary and benefit costs which, among other things, was driven higher by strategic increases in our headcount to enhance lending and operations, increases in our branch compensation, higher medical insurance costs, as well as $7.6 million of merger expenses associated with our 2021 merger activities;

• a $27.4 million increase in income tax expense mostly caused by higher 2021 pre-tax income.

See the “Net Interest Income,” “Non-Interest Income,” “Non-Interest Expense,” and “Income Taxes” sections in this MD&A for more details on the items above and other infrequent items, including merger expenses and the loss on extinguishment of debt, impacting our 2021 annual results.

Net income for the year ended December 31, 2022 was $568.9 million, or $1.14 per diluted common share as compared to $473.8 million, or $1.12 per diluted common share for 2021.

The $95.0 million increase in net income as compared to the same period one year ago was mainly due to the following changes:

• a $445.7 million increase in net interest income mainly due to higher average loan balances driven by both acquired and organic loan volumes and increased yields on new and adjustable-rate loans;

• a $51.8 million increase in non-interest income driven by increases in wealth management and trust fees and service charges on deposit accounts totaling $19.8 million and $15.5 million, respectively, primarily related to brokerage fee and deposit growth resulting from the Bank Leumi USA acquisition, and a $11.7 million increase in other income related to higher swap fee income and growth due to the acquisition, partially offset by a decrease in net gains on sales of residential mortgage loans;

These items were partially offset by:

• a $24.2 million increase in our provision for credit losses;

• a $333.4 million increase in non-interest e xpense largely due to increases in salary and employee benefits;

technology, furniture and equipment expenses;

and net occupancy caused by our expanded banking operations resulting from the acquisitions of Bank Leumi USA on April 1, 2022 and The Westchester Bank Holding Corporation (Westchester) on December 1, 2021;

• a $44.9 million increase in income tax expense mostly due to higher pre-tax income for the year ended December 31, 2022.

See the “Net Interest Income,” “Non-Interest Income,” “Non-Interest Expense,” and “Income Taxes” sections in this MD&A for more details on the items above and other infrequent items, including merger related expenses, impacting our 2022 annual results.

Operating Environment.

Durin g 2021, real gross domestic product increased 5.7 percent compared to a decline of 3.4 percent in 2020.

Growth was driven by increases in household consumption (particularly for services), business fixed investment and inventory restocking.

Demand in these categories more than offset the decline in net exports and slowing government consumption.

To support economic activity, the Federal Reserve maintained the target range for the federal funds rate between zero and 0.25 percent.

In addition, the Federal Reserve continued to purchase Treasury securities and agency residential and commercial mortgage-backed securities.

The Federal Reserve indicated at its recent meeting that it expects to reduce accommodation, though it will continue to monitor the impact of incoming information on the economic outlook in their decisions.

The year ended December 31, 2022 was defined by volatile markets as a result of higher interest rates and inflation, Russia’s war in Ukraine, and fears of a recession.

It was also a year of aggressive monetary tightening, with the Federal Reserve increasing rates by a cumulative 4.25 percent throughout the year.

During 2022, real gross domestic product increased 2.1 percent compared to an increase of 5.9 percent in 2021.

The increase in economic activity was driven in large part by household spending on goods and services, and a favorable mix of export activity outpacing imports.

Residential fixed investments declined as mortgage rates increased causing potential home buyers to hold back and wait for affordability to improve.

Business fixed investment, inventory restocking and government spending increased at a tepid rate.

During 2022, the Federal Reserve took unprecedented action to restrain inflation and improve the stability of the economy.

The Federal Reserve raised the federal funds rate seven consecutive times ranging from 25 basis points in the beginning of the year to 75 basis points toward the end of the year and brought its benchmark interest rate up by a collective 4.25 percent.

In addition, the Federal Reserve has continued to reduce its holdings of Treasury securities and agency residential and commercial mortgage-backed securities.

The Federal Reserve is strongly committed to returning inflation to its 2 percent objective.

The 10-year U.S.

Treasury note yield ended 2021 at 1.52 percent, 59 basis points higher than at December 31, 2020.

The spread between the 2- and 10-year U.S.

Treasury note yields ended the year at 0.79 percent, 1 basis point lower compared to the end of 2020.

Treasury note yield ended 2022 at 3.88 percent, 236 basis points higher compared with December 31, 2021.

Meanwhile, the spread between the 2- and 10-year U.S.

Treasury note yields ended the year at a negative (0.53) percent, 132 basis point lower compared to the end of 2021.

For all commercial banks in the U.S., loans and leases increased approximately 11.3 percent from December 31, 2021 to December 31, 2022.

For the industry, banks reported that demand for commercial and industrial loans, particularly among large and middle-market firms, had increased sharply compared to the prior year.

Alternatively, demand for commercial real estate lending was challenged, particularly those related to construction and land development.

While overall industry loan growth

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For all commercial banks in the U.S., loans and leases grew approximately 4.1 percent from December 31, 2020 to December 31, 2021.

For the industry, banks reported that demand for most commercial loan products increased sharply compared to 2020.

The increase was broad-based across commercial real estate lending and for loans to middle market firms.

Overall, the industry reported that underwriting standards remained mostly unchanged for commercial loan products.

Our loan originations were strong across most products and geographies as economic activity expanded during 2021.

While the outlook for the economy and our industry remain mostly positive for 2022, many difficult to predict adverse factors largely resulting from the prolonged COVID-19 pandemic, or geopolitical events, could weigh on the economy and, as a result, our financial operations and results, as highlighted in the remaining MD&A discussion below.

Total loans increased $1.9 billion to $34.2 billion at December 31, 2021 from December 31, 2020 in spite of a $1.7 billion decrease in PPP loans within the commercial and industrial loan category caused by SBA loan forgiveness.

The overall increase in non-PPP loans was mainly due to strong organic growth during the year and $915 million of loans that we acquired from Westchester.

Excluding acquired loans from Westchester, commercial real estate (including construction), non-PPP commercial and industrial, residential mortgage and automobile loans increased 9.3 percent, 8.7 percent, 7.9 percent, and 15.8 respectively, during the year ended December 31, 2021.

Additionally, we originated $1.0 billion of residential mortgage loans for sale rather than held for investment.

was strong during the year, banks reported that demand for most commercial and consumer loan products had declined notably in the fourth quarter of 2022.

Higher interest rates drove up cost of capital further constraining new construction and overall housing demand.

Additionally, the industry reported increasing underwriting standards across both commercial and consumer loan products.

Further expected increases in market interest rates, persistently high inflation and geopolitical tensions, which continued to exacerbate supply chain issues, and tight labor market conditions, among other factors, have added a higher level of uncertainty to the future path of the U.S.

economy and an elevated risk of a recession.

Additionally, further increases in the market interest rates may cause firms to restrain investment and related borrowings, and Valley and its financial results could be adversely impacted, as highlighted in the remaining MD&A discussion below.

Total loans increased $12.8 billion to $46.9 billion at December 31, 2022 as compared to December 31, 2021 largely due to a combination of $5.9 billion of acquired loans from Bank Leumi USA, strong commercial loan volumes and an increase in new residential mortgage loans originated for investment rather than sale, partially offset by a decline in PPP loans.

The PPP loans included within the commercial and industrial loan category decreased $476.0 million from December 31, 2021 as result of SBA loan forgiveness.

Excluding acquired loans from Bank Leumi USA, commercial real estate (including construction), non-PPP commercial and industrial, residential mortgage and automobile loans increased 24.5 percent, 20.0 percent, 17.7 percent, and 11.2 percent, respectively, during the year ended December 31, 2022.

Loans held for sale totaled $18.1 million and $139.5 million at December 31, 2022 and 2021, respectively.

For 2022, we are targeting net loan growth in the range of 7 to 9 percent based on gross non-PPP loans of approximately $33.7 billion at December 31, 2021, excluding PPP loans of $436 million at December 31, 2021.

For 2023, we are targeting net loan growth in the range of 7 to 9 percent based on the gross loans of $46.9 billion at December 31, 2022.

However, there can be no assurance that we will achieve such levels given the potential for unforeseen changes in the market and other conditions detailed in our risk factors set forth under Item 1A.

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Asset Quality.

Total non-performing assets (NPAs), consisting of non-accrual loans, other real estate owned (OREO), other repossessed assets and non-accrual debt securities increased $50.8 million, or 26.1 percent to $245.4 million at December 31, 2021 as compared to December 31, 2020.

This increase was largely due to higher non-accrual loans in the commercial real estate, construction and residential mortgage loan categories.

Total non-performing assets (NPAs), consisting of non-accrual loans, other real estate owned (OREO) and other repossessed assets increased $26.6 million, or 10.8 percent to $272.0 million at December 31, 2022 as compared to December 31, 2021.

This increase was largely due to higher non-accrual construction loans (including acquired loans from Bank Leumi USA), partially offset by lower non-accrual commercial real estate loans and residential mortgage loans.

Non-accrual loans totaled $269.8 million, or 0.57 percent of our entire loan portfolio of $46.9 billion, at December 31, 2022 as compared to $240.2 million, or 0.70 percent of total loans, at December 31, 2021.

Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) decreased $43.1 million to $55.9 million, or 0.16 percent of total loans at December 31, 2021 as compared to $99.0 million, or 0.31 percent of total loans, at December 31, 2020.

The decrease was largely due to lower early stage delinquencies in the commercial real estate, residential mortgage and total consumer loan categories reported at December 31, 2021.

Our lending strategy is based on underwriting standards designed to maintain high credit quality and we remain optimistic regarding the overall future performance of our loan portfolio.

However, due to the potential for future credit deterioration caused by the downturn in economic conditions impacted by the COVID-19 pandemic or other factors, management cannot provide assurance that our non-performing assets will not increase substantially from the levels reported at December 31, 2021.

See the “Non-performing Assets” section below for further analysis of our asset quality.

Net loan charge-offs totaled $19.1 million and $15.1 million for the years ended December 31, 2022 and 2021, respectively.

Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) increased $35.0 million to $90.9 million, or 0.19 percent of total loans at December 31, 2022 as compared to $55.9 million, or 0.16 percent of total loans, at December 31, 2021.

The increase was largely due to increases in commercial and industrial, and commercial real estate loans in the 69 to 89 days past due and 90 or more days past due delinquency categories.

See further details in the “Non-performing Assets” section below.

Deposits and Borrowings .

Overall, average deposits increased by $2.5 billion to $33.2 billion for the year ended December 31, 2021 as compared to 2020 largely due to continued growth in both commercial and retail customer balances.

Average non-interest bearing deposits represented approximately 31 percent of total average deposits for the year ended December 31, 2021, whereas savings, NOW and money market accounts were 55 percent and time deposits were 14 percent of total average deposits for the year ended December 31, 2021.

Average non-interest bearing deposits, savings, NOW and money market accounts, and time deposits were 27 percent, 47 percent, and 26 percent, respectively, for the year ended December 31, 2020.

Our mix of total deposits at December 31, 2021 as compared to December 31, 2020 reflects the shift in customer preference for deposits without stated maturities resulting from the low interest rates offered on our time deposits, as well as some funding from maturing retail CDs continued to migrate to the more liquid deposit products categories.

Ending balances of brokered deposits were $1.4 billion at December 31, 2021, consisting of money market deposit accounts, as compared to $3.1 billion at December 31, 2020.

The decline was largely due to the maturity and repayment of all brokered CDs throughout 2021 as organic deposit growth outweighed the need for wholesale funding sources.

While we believe the current operating environment will likely continue to be favorable for Valley’s deposit gathering initiatives, we cannot guarantee that we will be able to maintain deposit levels at or near those reported at December 31, 2021.

Overall, average deposits increased by $9.2 billion to $42.5 billion for the year ended December 31, 2022 as compared to 2021 largely due to $7.0 billion of deposits assumed from Bank Leumi USA, growth in average non-maturity deposits balances, as well as $1.2 billion in deposits assumed from Westchester Bank Holding Corporation (Westchester) on December 1, 2021.

The average non-interest bearing deposits and savings, NOW and money market account and time deposits balances increased by $4.3 billion, $4.4 billion, and $435.0 million, respectively, for the year ended December 31, 2022 as compared to 2021.

Average non-interest-bearing deposits;

savings, NOW and money market deposits;

and time deposits represented approximately 35 percent, 53 percent and 12 percent of total deposits at December 31, 2022 , respectively.

Actual ending balances for deposits increased $12.0 billion to $47.6 billion at December 31, 2022 as compared to 2021 mostly due to the assumed deposits from Bank Leumi USA and Westchester, commercial customer deposit organic growth, and increased utilization of brokered deposits, consisting of money market and time deposit accounts, in our funding mix.

Non-interest bearing deposits increased $2.8 billion at December 31, 2022 as compared to 2021 largely due to deposits assumed from Bank Leumi USA, partially offset by some migration of both commercial and retail balances to interest bearing deposit products during the second half of 2022.

Total brokered deposits increased to $5.9 billion at December 31, 2022 as compared to $1.4 billion to December 31, 2021 as we increased our utilization of such funds in the second half of 2022 as a favorable alternative to other borrowings.

Non-interest bearing deposits;

savings, NOW, money market deposits;

and time deposits represented approximately 30 percent, 50 percent and 20 percent of total deposits as of December 31, 2022, respectively.

While our overall deposit levels benefited from organic growth and acquired deposits during 2022, we believe the current operating environment will likely remain very challenging for Valley’s deposit gathering initiatives due to, among other factors, the high

2022 Form 10-K

level of short-term interest rates and additional forecasted interest rate hikes by the Federal Reserve to tame inflation.

As a result, we cannot guarantee that we will be able to maintain deposit levels at or near those reported at December 31, 2022.

The following table presents average short-term and long-term borrowings for the years ended December 31, 2022 and 2021:

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Total $ 1,504,111 $ 1,897,343

Average short-term borrowings presented in the above table decreased largely due to the success of our retail, commercial and government deposit gathering efforts in 2021.

Average long-term borrowings decreased largely due the combination of (i) $534 million and $248 million of FHLB advances which were prepaid in December 2020 and June 2021, respectively, (ii) normal repayments upon the maturities of FHLB advances and (iii) $300 million of long-term repurchase agreements which matured during the third quarter 2021.

These decreases were partially offset by $300 million of subordinated notes issued in May 2021.

See the “Net Interest Income” section below and Note 10 to the consolidated financial statements for additional details on our borrowed funds.

Selected Performance Indicators.

Average short-term borrowings increased $132.4 million at December 31, 2022 as compared to 2021 mostly due to increased use of federal funds purchased as a part of our overall funding strategy, partially offset by lower utilization of FHLB advances.

Average long-term borrowings (including junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition) decreased $393.2 million at December 31, 2022 as compared to 2021 largely due to the repayment of long-term repurchase agreements during the third quarter 2021 and, to a lesser extent, maturities of FHLB advances over the last 12 months.

The average balance of subordinated debt increased due to the issuance of $150 million of 6.25 percent fixed-to-floating rate subordinated notes during the third quarter 2022 .

Actual ending balances for short-term borrowings decreased $517.0 million to $138.7 million at December 31, 2022 as compared to 2021 largely due to the maturity of FHLB advances during 2022 and lower repo balances at December 31, 2022.

Long-term borrowings increased $119.4 million to $1.5 billion at December 31, 2022 as compared to $1.4 billion at December 31, 2021 primarily due to the aforementioned issuance of subordinated notes during the third quarter 2022.

See the “Net Interest Income” section below and Note 10 to the consolidated financial state ments for additional details on our borrowed funds.

Non-GAAP Financial Measures.

The table below presents selected performance indicators, their comparative non-GAAP measures and the (non-GAAP) efficiency ratio for the periods indicated.

The Company believes that the non-GAAP financial measures provide useful supplemental information to both management and investors in understanding Valley’s underlying operational performance, business, and performance trends, and may facilitate comparisons of our current and prior performance with the performance of others in the financial services industry.

Management utilizes these measures for internal planning, forecasting and analysis purposes.

Management believes that Valley’s presentation and discussion of this supplemental information, together with the accompanying reconciliations to the GAAP financial measures, also allows investors to view performance in a manner similar to management.

These non-GAAP financial measures should not be considered in isolation, as a substitute for or superior to financial measures calculated in accordance with U.S.

These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.

2022 Form 10-K

The following table presents our annualized performance ratios for the three years ended December 31, 2022, 2021 and 2020:

2022 2021 2020

Selected Performance Indicators ($ in thousands, except for %)

GAAP measures:

Net income, as reported $ 568,851 $ 473,840 $ 390,606

Return on average assets 1.09 % 1.14 % 0.96 %

Return on average assets, as adjusted 1.18 0.99 0.98

Return on average shareholders’ equity 9.50 9.98 8.68

Non-GAAP measures:

Net income, as adjusted $ 650,452 $ 492,148 $ 401,738

Return on average assets, as adjusted 1.25 % 1.19 % 0.99 %

Return on average shareholders’ equity, as adjusted 10.87 10.37 8.93

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ROATE, as adjusted 16.10 14.96 13.19

Adjusted return on average assets, adjusted return on average shareholders' equity, ROATE and adjusted ROATE included in the table above are non-GAAP measures.

Management believes these measures provide information useful to management and investors in understanding our underlying operational performance, business and performance trends, and that these measures facilitate comparisons of our prior performance with the performance of others in the financial services industry.

These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with U.S.

These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.

The non-GAAP measure reconciliations are presented below.

2021 Form 10-K

Efficiency ratio 50.55 % 48.46 % 47.39 %

As of December 31,

Common Equity Per Share Data:

2022 2021 2020

Book value per common share $ 12.23 $ 11.57 $ 10.85

Tangible book value per common share 8.15 7.94 7.25

Non-GAAP Reconciliations to GAAP Financial Measures

Adjusted net income for the three years ended December 31, 2022, 2021 and 2020 was computed as follows:

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(in thousands)

Net income, as reported $ 473,840 $ 390,606 $ 309,793

Net income, as reported (GAAP) $ 568,851 $ 473,840 $ 390,606

Loss on extinguishment of debt (net of tax) — 6,024 8,649

Net impairment losses on securities (net of tax) — — 2,104

(Gains) losses on available for sale and held to maturity securities transactions (net of tax) (1)

Gains on available for sale and held to maturity securities transactions (net of tax) (1)

(69) (390) (377)

Severance expense (net of tax) (2)

Provision for credit losses (net of tax) (2)

29,282 4,471 —

Tax credit investment impairment (net of tax) (3)

Severance expense (mainly branch transformation, net of tax) (3)

Merger related expenses (net of tax) (4)

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Litigation reserve (net of tax) (5)

Income tax expense (6)

Gain on sale-leaseback transaction (net of tax) (7)

Net income, as adjusted 487,677 401,738 326,858

(1) Included in gains on securities transactions, net.

Net income, as adjusted (non-GAAP) $ 650,452 $ 492,148 $ 401,738

(1) Included in (losses) gains on securities transactions, net.

(2) Primarily represents provision for credit losses for non-PCD loans and unfunded credit commitments acquired in bank acquisitions.

(3) Severance expense is included in salary and employee benefits expense.

(3) Impairment is included in the amortization of tax credit investments.

(4) Merger related expenses are primarily within salary and employee benefits expense, professional and legal fees, and other non-interest expenses.

(5) Litigation reserve included in professional and legal fees.

(6) Income tax expense related to reserves for uncertain tax positions initially recorded in 2019.

(7) The gain on sale leaseback transactions is included in net gains on the sales of assets within other non-interest income.

In addition to the items used to calculate net income, as adjusted, in the tables above, our net income is, from time to time, impacted by fluctuations in the level of net gains on sales of loans and swap fees recognized from commercial loan customer transactions.

These amounts can vary widely from period to period due to, among other factors, the amount of residential mortgage loans originated for sale, loan portfolio sales and commercial loan customer demand for certain products.

(4) M erger related expenses are primarily within salary and employee benefits expense, technology, furniture and equipment expense, professional and legal fees, and other expense.

(5) Included in professional and legal fees.

In addition to the items used to calculate net income, as adjusted, in the tables above, our net income is, from time to time, impacted by fluctuations in the level of net gains on sales of loans, wealth management fees, and swap fees recognized from commercial loan customer transactions.

These amounts can vary widely from period to period due to, among other factors, the amount of residential mortgage loans originated for sale, loan portfolio sales, brokerage fees, and commercial loan customer demand for certain products.

See the “Non-Interest Income” section below for more details.

Adjusted annualized return on average assets for the three years ended December 31, 2021, 2020 and 2019 was computed by dividing adjusted net income by average assets, as follows:

2022 Form 10-K

Adjusted annualized return on average assets for the three years ended December 31, 2022, 2021 and 2020 is computed by dividing adjusted net income by average assets, as follows:

2022 2021 2020

($ in thousands)

Net income, as adjusted $ 487,677 $ 401,738 $ 326,858

Average assets 41,475,682 40,557,326 33,442,738

Return on average assets, as adjusted 1.18 % 0.99 % 0.98 %

Adjusted annualized return on average shareholders' equity for the three years ended December 31, 2021, 2020 and 2019 was computed by dividing adjusted net income by average shareholders' equity, as follows:

Net income, as adjusted (non-GAAP) $ 650,452 $ 492,148 $ 401,738

Average assets (GAAP) $ 52,182,310 $ 41,475,682 $ 40,557,326

Annualized return on average assets, as adjusted (non-GAAP) 1.25 % 1.19 % 0.99 %

Adjusted annualized return on average shareholders' equity for the three years ended December 31, 2022, 2021 and 2020 is computed by dividing adjusted net income by average shareholders' equity, as follows:

2022 2021 2020

($ in thousands)

Net income, as adjusted $ 487,677 $ 401,738 $ 326,858

Average shareholders' equity 4,747,745 4,500,067 3,555,483

Return on average shareholders' equity, as adjusted 10.27 % 8.93 % 9.19 %

Net income, as adjusted (non-GAAP) $ 650,452 $ 492,148 $ 401,738

Average shareholders' equity (GAAP) $ 5,985,236 $ 4,747,745 $ 4,500,067

Annualized return on average shareholders' equity, as adjusted (non-GAAP) 10.87 % 10.37 % 8.93 %

ROATE and adjusted ROATE for the three years ended December 31, 2022, 2021 and 2020 are computed by dividing net income and adjusted net income, respectively, by average shareholders’ equity less average goodwill and average other intangible assets, as follows:

2022 2021 2020

($ in thousands)

Net income, as reported (GAAP) $ 568,851 $ 473,840 $ 390,606

Net income, as adjusted (non-GAAP) $ 650,452 $ 492,148 $ 401,738

Average shareholders’ equity (GAAP) $ 5,985,236 $ 4,747,745 $ 4,500,067

Average goodwill and other intangible assets (GAAP) 1,944,503 1,457,519 1,454,349

Average tangible shareholders’ equity (non-GAAP) $ 4,040,733 $ 3,290,226 $ 3,045,718

Annualized ROATE (non-GAAP) 14.08 % 14.40 % 12.82 %

Annualized ROATE, as adjusted (non-GAAP) 16.10 % 14.96 % 13.19 %

2022 Form 10-K

ROATE and adjusted ROATE for the three years ended December 31, 2021, 2020 and 2019 were computed by dividing net income and adjusted net income, respectively, by average shareholders’ equity less average goodwill and average other intangible assets, as follows:

The following table presents our efficiency ratio and a reconciliation of the efficiency ratio adjusted for such items during the years ended December 31, 2022, 2021 and 2020:

2022 2021 2020

($ in thousands)

Net income $ 473,840 $ 390,606 $ 309,793

Net income, as adjusted $ 487,677 $ 401,738 $ 326,858

Average shareholders’ equity $ 4,747,745 $ 4,500,067 $ 3,555,483

Average goodwill and other intangible assets

Total non-interest expense, as reported (GAAP) $ 1,024,949 $ 691,542 $ 646,148

Loss on extinguishment of debt (pre-tax) — 8,406 12,036

Amortization of tax credit investments (pre-tax) 12,407 10,910 13,335

Merger related expenses (pre-tax) (1)

71,203 8,900 1,907

Average tangible shareholders’ equity $ 3,290,226 $ 3,045,718 $ 2,373,343

ROATE 14.40 % 12.82 % 13.05 %

ROATE, as adjusted 14.82 % 13.19 % 13.77 %

Litigation reserve (pre-tax) (2)

Severance expense (mainly branch transformation, pre-tax) (3)

Total non-interest expense, as adjusted (non-GAAP) 941,339 661,226 616,798

Net interest income, as reported (GAAP) 1,655,640 1,209,901 1,118,904

Total non-interest income, as reported (GAAP) 206,793 155,013 183,032

Gains on available for sale and held to maturity debt securities transactions, net (pre-tax) (4)

(95) (545) (524)

Total net interest income and non-interest income, as adjusted (non-GAAP) $ 206,698 $ 154,468 $ 182,508

Gross operating income, as adjusted (non-GAAP) $ 1,862,338 $ 1,364,369 $ 1,301,412

Efficiency ratio, (non-GAAP) 50.55 % 48.46 % 47.39 %

(1) Included primarily within salary and employee benefits expense, technology, furniture and equipment expense, professional and legal fees, and other expense.

(2) Included in professional and legal fees.

(3) Severance expenses are included in salary and employee benefits expense.

(4) Included in (losses) gains on securities transactions, net.

Tangible book value per common share is computed by dividing shareholders’ equity less preferred stock, goodwill and other intangible assets by common shares outstanding for the two years ended December 31, 2022 and 2021, as follows:

($ in thousands, except for share data)

Common shares outstanding 506,374,478 421,437,068

Shareholders’ equity (GAAP) $ 6,400,802 $ 5,084,066

Preferred stock 209,691 209,691

Goodwill and other intangible assets 2,066,392 1,529,394

Tangible common shareholders’ equity (non-GAAP) $ 4,124,719 $ 3,344,981

Tangible book value per common share (non-GAAP) 8.15 7.94

Book value per common share (GAAP) $ 12.23 $ 11.57

Net Interest Income

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Net interest income on a tax equivalent basis increased by $447.4 million to $1.7 billion for 2022 as compared to 2021.

Interest expense decreased $140.5 million to $124.3 million for 2021 mainly driven by (i) lower rates on our deposit products combined with a continued customer shift to deposits without stated maturities, (ii) run-off of higher cost time deposits, and (iii) lower average other borrowings due to normal debt maturities and our prepayments of $534 million and $248 million of long-term FHLB borrowings in December 2020 and June 2021, respectively.

Interest income on a tax equivalent basis decreased $50.3 million to $1.3 billion for 2021 largely due to lower overall yields on average loans and investments, partially offset by a $1.2 billion increase in average earnings assets largely due to solid organic loan growth.

Interest and fee income related to PPP loans totaled $84.9 million for 2021 as compared to $43.6 million for 2020.

The net interest margin on a tax equivalent basis was 3.17 percent for the year ended December 31, 2021 and increased 14 basis points as compared to 2020.

The yield on average interest earning assets decreased 25 basis points mainly attributable to decreased yields on average loans and average taxable investments.

The yield on average loans decreased 21 basis points to 3.83 percent for 2021 as compared to 4.04 percent in 2020 largely due to new and refinanced loan originations at lower market interest rates, loan prepayments, and interest rates resetting on adjustable rate loans throughout 2021.

Our average taxable investment portfolio yield decreased 45 basis points during 2021 as compared to the prior year due to our reinvestment of principal repayments at lower rates.

More than offsetting the decrease in the yield on average interest earning assets, the cost of average interest bearing liabilities decreased 50 basis points to 0.49 percent for 2021 as compared to the prior year.

The decrease in the overall cost as compared to 2020 was mainly due to our ability to reprice our sources of funding at lower rates.

Average interest earning assets totaling $38.2 billion for the year ended December 31, 2021 increased $1.2 billion, or 3.3 percent, as compared to 2020.

Average loan balances increased $1.0 billion to $32.8 billion in 2021 and partially offset the decrease in interest income driven by the lower yields on average loans and taxable investments as compared to 2020.

The growth in average loans during 2021 was due in large part, to organic loan growth in a number of non-PPP loan categories, which was significantly offset by a $1.7 billion decrease in PPP loans caused by SBA forgiveness during the year ended December 31, 2021.

The new loan production in 2021 came from a blend of new and existing customer relationships with significant geographic and product diversification across our primary markets.

Average interest bearing liabilities decreased $1.3 billion to $25.6 billion for the year ended December 31, 2021 from the same period in 2020 mainly due to the strong growth we experienced in deposits from both commercial and retail customers and the customer shift from time deposits to transactional deposits without stated maturities.

The average non-interest bearing deposits and savings, NOW and money market account balances increased by $2.2 billion and $3.9 billion, respectively, and were partially offset by a $3.6 billion decrease in average time deposits for the year ended December 31, 2021 as compared to the prior year.

Average short-term and long-term borrowings decreased by $729.7 million and $952.9 million, respectively, in 2021, as compared to 2020 due, in part, to strong growth in deposits which provided excess liquidity and enabled us to reduce our other sources of funds.

Interest income on a tax equivalent basis increased $644.1 million to $2.0 billion for 2022 as compared to 2021 mostly due to an $9.8 billion increase in average interest earning assets caused by a blend of organic and acquired loan growth, as well as increased loan yields on new originations and adjustable rate loans.

Partially offsetting these positive events, interest and fee income related to PPP loans decreased $72.2 million to $12.8 million for 2022 as compared to 2021, as expected, from continued SBA loan forgiveness.

Additionally, interest expense increased $196.7 million to $321.0 million for 2022 as compared to 2021 largely due to higher interest rates on deposits and a $4.6 billion increase in average interest bearing liabilities.

2022 Form 10-K

Average interest earning assets totaling $48.1 billion for the year ended December 31, 2022 increased $9.8 billion, or 25.7 percent, as compared to 2021 primarily driven by a $9.1 billion increase in average loan balances to $41.9 billion.

Average loans mainly increased due to $5.9 billion and $908.0 million of loans acquired from Bank Leumi USA and Westchester, respectively, and organic loan growth in the non-PPP loan categories over the 12-month period, partially offset by a $402.4 million decrease in PPP loans caused by SBA forgiveness during 2022.

Average interest bearing liabilities increased $4.6 billion to $30.2 billion for the year ended December 31, 2022 as compared to 2021 mainly due to $2.5 billion and $727.2 million of interest bearing deposits assumed from Bank Leumi USA and Westchester, respectively, and organic commercial and retail growth in average non-maturity interest bearing deposits.

Average short-term borrowings increased $132.4 million and long-term borrowings decreased $393.2 million in 2022 as compared to 2021.

See additional information under "Deposits and Other Borrowings" in the Executive Summary section above.

The net interest margin on a tax equivalent basis was 3.45 percent for the year ended December 31, 2022 and increased 28 basis points as compared to 2021.

The yield on average interest earning assets increased 62 basis points mainly attributable to higher yields on average loans and investments.

The yield on average loans increased 53 basis points to 4.36 percent for 2022 as compared to 3.83 percent in 2021 largely due to new loan originations at higher market interest rates and repricing within our adjustable rate loan portfolio.

The yields on average taxable and non-taxable investments also increased 60 basis points and 68 basis points, respectively, as compared to 2021 largely due to investment maturities and prepayments redeployed into new higher yielding securities, as well as lower premium amortization expense caused by a decline in prepayments on mortgage-backed securities during the second half of 2022.

The overall cost of interest bearing liabilities increased 57 basis points to 1.06 percent for 2022 as compared to the prior year primarily due to higher market driven pricing of non-maturity deposits combined with greater utilization of brokered and retail CDs and short-term borrowings in our loan funding mix during 2022.

Fourth Quarter 2022.

Net interest income on a tax equivalent basis totaling $467.2 million for the fourth quarter 2022 increased $11.9 million and $151.2 million as compared to the third quarter 2022 and fourth quarter 2021, respectively.

Interest income on a tax equivalent basis increased $11.2 million to $340.7 million for the fourth quarter 2021 as compared to the third quarter 2021 due to (i) increases of $639.7 million and $248.6 million in average loans and investment securities, respectively, (ii) a $2.4 million increase in periodic non-PPP loan fees and interest recovery income, and (iii) an $877 thousand increase in PPP loan related interest and fees caused by loan forgiveness in the fourth quarter 2021.

Interest expense of $24.7 million for the fourth quarter 2021 decreased $3.1 million as compared to the third quarter 2021 as we continue to reduce our cost of funding from both deposits and the repayment of other borrowings, primarily FHLB advances.

The net interest margin on a tax equivalent basis of 3.23 percent for the fourth quarter 2021 increased 8 basis points as compared to 3.15 percent for the third quarter 2021, and increased 17 basis points from 3.06 percent for the fourth quarter 2020.

The yield on average interest earning assets increased by 4 basis points on a linked quarter basis mostly due to the higher yield on averages loans.

The yields on average loans increased to 3.83 percent for the fourth quarter 2021 from 3.79 percent for the third quarter 2021 largely due to the increases in non-PPP loan fees, interest recovery income, and PPP interest and fees combined with a $493 million decline in average PPP loans during the fourth quarter 2021.

The overall cost of average interest-bearing liabilities decreased by 5 basis points to 0.39 percent for the fourth quarter 2021 as compared to the linked third quarter 2021 due to the continued customer shift to lower cost deposits, as well as lower average short and long-term borrowings caused by normal repayments funded by excess liquidity.

Interest income on a tax equivalent basis increased $109.9 million to $648.0 million for the fourth quarter 2022 as compared to the third quarter 2022.

The increase was mostly due to higher average loan balances driven by our organic loan growth and increased yields on both new originations and adjustable rate loans in our portfolio.

Interest expense of $180.7 million for the fourth quarter 2022 increased $98.0 million as compared to the third quarter 2022 largely due to higher interest rates on both non-maturity and new time deposits, as well as a $2.4 billion increase in average time deposits.

Net interest margin on a tax equivalent basis of 3.57 percent for the fourth quarter 2022 decreased 3 basis points as compared to 3.60 percent for the third quarter 2022, and increased 34 basis points from 3.23 percent for the fourth quarter 2021.

The yield on average interest earning assets increased by 69 basis points on a linked quarter basis mostly due to the aforementioned higher yields on new and adjustable rate loans in the fourth quarter 2022 as compared to third quarter 2022.

The yield on average loans increased to 5.20 percent for the fourth quarter 2022 from 4.48 percent for the third quarter 2022 largely due to the higher level of market interest rates.

The overall cost of average interest-bearing liabilities increased by 109 basis points to 2.15 percent for the fourth quarter 2022 as compared to the linked third quarter 2022 primarily due to higher interest rates on both non-maturity and new time deposits.

Our cost of total average deposits was 1.36 percent for the fourth quarter 2022 as compared to 0.59 percent for the third quarter 2022.

Many financial market participants currently anticipate higher interest rates in 2022 as compared to 2021.

Higher levels of market interest rates would benefit certain interest earning assets on our balance sheet and likely provide us the opportunity to reinvest excess liquidity at higher rates.

Under this scenario, we would also anticipate a lag in higher funding costs given the significant excess liquidity currently present in the U.S.

banking system.

Based upon our estimates at December 31, 2021, we anticipate net interest income growth of approximately 5 to 7 percent for the full year of 2022 as compared to 2021, excluding the impact of the Bank Leumi USA acquisition expected to close in the second quarter of 2022.

The increased cost of funds was mainly due to higher interest rates on most of our interest bearing deposit products combined with greater utilization of brokered and retail CDs in our funding mix during the fourth quarter 2022.

Based upon our estimates at December 31, 2022, we anticipated net interest income growth of approximately 16 to 18 percent for the full year of 2023 as compared to 2022.

While our 2023 outlook for our net interest income is positive, we cannot provide any assurances with respect to the future trajectory of market interest rates or that our net interest margin or income will remain at the levels reported for the fourth quarter 2022.

2022 Form 10-K

75 unchanged sentences

(11,545) 7,757 (3,788) (25,271) 5,042 (20,229)

Total (decrease) increase in interest expense (47,500) (92,990) (140,490) 58,665 (216,802) (158,137)

Increase (decrease) in net interest income

$ 82,647 $ 7,593 $ 90,240 $ 179,719 $ 40,477 $ 220,196

Total increase (decrease) in interest expense 4,694 192,024 196,718 (47,500) (92,990) (140,490)

Increase in net interest income $ 410,462 $ 36,891 $ 447,353 $ 82,647 $ 7,593 $ 90,240

* Interest income is presented on a tax equivalent basis using a 21 percent federal tax rate.

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Non-interest income represented 9.5 percent and 10.4 percent of total interest income plus non-interest income for 2022 and 2021, respectively.

For the year ended December 31, 2021, non-interest income decreased $28.0 million as compared to the year ended December 31, 2020 largely due to both lower gains on sales of loans and swap fee income derived from new commercial loan transactions.

For the year ended December 31, 2022, non-interest income increased $51.8 million as compared to the year ended December 31, 2021 largely due to i ncreases resulting from the acquisition of Bank Leumi USA and higher swap fee income derived from new commercial loan transactions.

See further details below.

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(in thousands)

Trust and investment services $ 14,910 $ 12,415 $ 12,646

Wealth management and trust fees $ 34,709 $ 14,910 $ 12,415

Insurance commissions 11,975 7,810 7,398

Capital markets 52,362 27,377 58,962

Service charges on deposit accounts 36,930 21,424 18,257

Gains (losses) on securities transactions, net 1,758 524 (150)

Net impairment losses on securities recognized in earnings — — (2,928)

(Losses) gains on securities transactions, net (1,230) 1,758 524

Fees from loan servicing 11,273 11,651 10,352

Gains on sales of loans, net 6,418 26,669 42,251

Gains (losses) on sales of assets, net 901 (1,891) 78,333

Bank owned life insurance 8,040 8,817 10,083

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Total non-interest income $ 206,793 $ 155,013 $ 183,032

Wealth management and trust fees income increased by $19.8 million for the year ended December 31, 2022 as compared to 2021 mostly due to brokerage fees resulting from the acquisition of Bank Leumi USA and its wholly owned broker dealer subsidiary now legally named Valley Financial Man agement, Inc.

The brokerage fees totaled $8.6 million for the year ended

2022 Form 10-K

Trust and investment services income increased $2.5 million for the year ended December 31, 2021 from $12.4 million in 2020 mainly due to higher fees generated by the Bank's asset management subsidiary due to appreciation in customer balances as well as investment advisory fees generated by DV in the fourth quarter 2021.

Service charges on deposit accounts which increased $3.2 million for the year ended December 31, 2021 as compared to 2020 are mostly attributable to a reduction in waived fees related to COVID-19 customer relief efforts.

Gains on securities transactions, net increased by $1.2 million for the year ended December 31, 2021 as compared to 2020 mainly due to net trading gains from the launch of our new municipal bond trading platform in the first quarter 2021.

Fees from loan servicing increased $1.3 million for the year ended December 31, 2021 from $10.4 million in 2020 mainly due to additional fees from mortgage servicing rights on loans originated and sold by us during the year ended December 31, 2021.

The aggregate principal balances of residential mortgage loans serviced by us for others increased approximately $76 million to $3.6 billion at December 31, 2021 from $3.5 billion at December 31, 2020.

Net gains on sales of loans decreased $15.6 million for the year ended December 31, 2021 as compared to 2020.

Our net gains on sales of loans for each period are comprised of both gains on sales of residential mortgages and the net change in the mark to market gains and losses on our loans held for sale carried at fair value at each period end.

The change in the fair value of loans held for sale totaled $11.8 million of net losses for the year ended December 31, 2021 as compared to the net gains of $13.5 million the year ended December 31, 2020.

Excluding the effect of the change in the fair value, the net gain on actual sales of loans increased $9.7 million or the year ended December 31, 2021 as compared to 2020.

This increase was mainly due to higher volume of loans sold in 2021, as well as improved spreads on the sales of individual loans which were on average approximately 21 basis points higher as compared to the prior year.

During 2021, we sold $1.2 billion of residential mortgages as compared to $1.0 billion of residential mortgage loans sold during 2020.

Residential mortgage loan originations (including both new and refinanced loans) increased 32.2 percent to $2.6 billion for the year ended December 31, 2021 as compared to $1.9 billion in 2020.

See further discussions of our residential mortgage loan origination activity under “Loans” in the "Executive Summary" section of this MD&A above and Note 3 to the consolidated financial statements for details about the fair value methodology.

Net gains on sales of assets increased $2.8 million for the year ended December 31, 2021 as compared to $1.9 million net losses in 2020 primarily due to the net gains on the sale of a few former branch properties and other repossessed assets during 2021.

In addition, the net losses recorded during 2020 included impairment charges recognized on certain technology assets.

Other non-interest income decreased $22.6 million for the year ended December 31, 2021 as compared to 2020 mainly due to a $32.1 million decrease in swap fee income caused by lower transaction volume of interest rate swaps executed with commercial lending customers.

December 31, 2022.

Trust and investment services income increased $11.2 million for the year ended December 31, 2022 as compared to 2021 and was mainly driven by additional revenues from our advisory firm, Dudley Ventures, LLC, specializing in the investment and management of tax credit investments, which we acquired in October 2021 (See Note 2 to the consolidated financial statements).

Insurance commissions increased $4.2 million for the year ended December 31, 2022 as compared to the same period in 2021 mostly due to stronger business volumes generated by the Bank's insurance agency subsidiary.

Capital market income increased $25.0 million for the year ended December 31, 2022 as compared to 2021.

The increase was largely driven by higher fee income from transactions executed for commercial customers related interest rate swaps and, to a lesser extent, foreign exchange fees .

Swap fee income totaled $43.1 million and $26.9 million for the years ended December 31, 2022 and 2021, respectively.

The decrease in swap fee income was partially offset by moderately higher fees and income in various other categories, including a $2.8 million increase in credit card and debit card fees mainly driven by greater card utilization.

While we believe our commercial loan swap based product will remain attractive to borrowers in the current interest rate environment, we can provide no assurance that our swap fees will remain at the level reported for the year ended December 31, 2022.

Foreign excha nge fees totaled $5.7 million for the year ended December 31, 2022 and largely related to new relationships acquired from Bank Leumi USA.

Foreign exchange fees were not material prior to 2022.

Service charges on deposit accounts increased $15.5 million for the year ended December 31, 2022 as compared to 2021 largely due to revenues related to deposit accounts acquired from Bank Leumi USA.

Net losses and gains on securities transactions for the years ended December 31, 2022 and 2021 were mostly due to net trading losses and gains related to our municipal bond trading platform launched in the first quarter 2021.

The net gains on sales of loans for each period are comprised of both gains on sales of residential mortgages and the net change in the mark to market gains and losses on our loans held for sale carried at fair value at each period end.

Net gains on sales of loans decreased $20.3 million for the year ended December 31, 2022 as compared to 2021.

The decrease was mostly due to lower loan sale volumes as we sold approximately $385.5 million of residential mortgage loans in 2022 compared to $1.2 billion of such loans sold in 2021.

The mark to market change on loans held for sale at fair value resulted in net losses totaling $3.0 million and $11.8 million for the year ended December 31, 2022 and 2021, respectively.

Our ability to generate net gains on sales of loans could continue to be challenged by a number of factors, including the higher level of market interest rates, lower customer demand for conforming loan products and our decision to originate certain residential mortgage loans for investment in our loan portfolio rather than sale.

See further discussions of our residential mortgage loan origination activity under the “Loan Portfolio” section of this MD&A below and Note 3 to the consolidated financial statements for details about the fair value methodology.

Other non-interest income increased $11.7 million for the year ended December 31, 2022 as compared to 2021 due, in part to $5.6 million increase in standby letter of credit and unfunded commitments fees as well as incremental increases in other operating non-interest income during 2022 as compared to 2021.

Non-Interest Expense

Non-interest expense increased $45.4 million to $691.5 million for the year ended December 31, 2021 as compared to 2020 mainly driven by higher salary and employee benefits expense, as well as higher professional and legal fees.

Non-interest expense increased $333.4 million to $1.0 billion for the year ended December 31, 2022 as compared to 2021 mainly driven by organic and acquired growth in our operations, ongoing technology transformation efforts and merger related expenses.

See further details below.

2022 Form 10-K

The following table presents the components of non-interest expense for the years ended December 31, 2022, 2021 and 2020:

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Salary and employee benefits expense $ 526,737 $ 375,865 $ 333,221

Net occupancy and equipment expense 132,098 129,002 118,191

Net occupancy expense 94,352 79,355 81,538

Technology, furniture and equipment expense 161,752 89,221 76,889

FDIC insurance assessment 22,836 14,183 18,949

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Amortization of tax credit investments 12,407 10,910 13,335

Telecommunication expense 11,409 10,737 9,883

Other 86,422 53,343 53,187

Total non-interest expense $ 1,024,949 $ 691,542 $ 646,148

2021 Form 10-K

Salary and employee benefits expense increased $150.9 million for the year ended December 31, 2022 as compared to 2021.

The increase was primarily due to the combination of strategic increases in our headcount to enhance lending and operations, and increases in our branch compensation to preserve staffing and service levels, and to keep pace with the increases in wage demand across the industry.

In addition, higher cash and stock-based incentive compensation accruals and health insurance costs also attributed to the 2021 increase.

Change in control, severance and retention expenses related to our 2021 merger activities was $6.5 million for the year ended December 31, 2021.

Severance costs related to operational restructuring efforts and our branch transformation strategy totaled $2.1 million for the year ended December 31, 2020.

Net occupancy and equipment expenses increased $3.1 million for the year ended December 31, 2021 as compared to 2020 largely due to higher cleaning, maintenance and repair costs.

The FDIC insurance assessment of $14.2 million decreased $4.8 million during 2021 as compared to the prior year largely due to the Bank's improved capital position and overall risk profile.

Amortization of other intangibles decreased $2.8 million for the year ended December 31, 2021 as compared to 2020 largely due to lower amortization expense of core deposit intangibles, as well as a full impairment adjustment recovery of the $865 thousand valuation allowance on loan servicing rights at December 31, 2020.

The increase in 2022 was largely due to strategic expansion of our headcount to enhance lending and operations (including additions to staff related to the Bank Leumi USA and Westchester acquisitions), increases in our branch compensation to preserve staffing and service levels, and to keep pace with the increases in wage demand across the industry.

In addition, salary and employee benefits expense included approximately $28.1 million of merger related expenses for the year ended December 31, 2022.

The merger expenses, primarily consisted of change in control and severance payments, related to Bank Leumi USA during the second quarter 2022.

We had $6.5 million in 2021 mainly related to Westchester acquisition.

Net occupancy expenses increased $15.0 million for the year ended December 31, 2022 as compared to 2021 mainly due to increases in lease and depreciation expense totaling $7.4 million and $2.0 million, respectively, mostly caused by additional branches and office facilities acquired from Bank Leumi USA and Westchester.

In addition, repair and maintenance costs increased $2.8 million during the year ended December 31, 2022 as compared to 2021.

The merger related expenses within this category totaled $1.5 million for the year ended December 31, 2022.

Technology, furniture and equipment expense increased $72.5 million for the year ended December 31, 2022 as compared to 2021.

The increase is largely driven by higher data processing costs related to the acquisitions of Bank Leumi USA and Westchester and additional investments in technology and equipment, and higher depreciation expense.

Within this expense category, merger related expense totaled $24.2 million for the year ended December 31, 2022.

FDIC insurance assessment expense increased $8.7 million for the year ended December 31, 2022 as compared to 2021 mainly due to the bank acquisitions, as well as the organic growth of our balance sheet.

Amortization of other intangibles increased $16.0 million for the year ended December 31, 2022 as compared to 2021 mostly due to higher amortization expense of core deposits and intangible assets, partially offset by a decrease in amortization of loan servicing rights.

Amortization expense of core deposits and intangible assets increased $15.3 million and $5.3 million, respectively, during 2022 as compared to 2021 and was mainly due to the intangible assets resulting from the Bank Leumi USA acquisition.

See Note 8 to the consolidated financial statements for additional information.

Professional and legal fees increased $44.2 million for the year ended December 31, 2022 as compared to 2021.

T he increase was largely attributable to (i) h igher consulting expenses mostly related to our technology transformation efforts and new product initiati ves, (ii) a $2.1 million accrual for general litigation reserves, an d (iii) $1.7 million of me rger related costs during the year ended December 31, 2021.

Loss on extinguishment of debt totaling $8.4 million for the year ended December 31, 2021 reflects the prepayment of approximately $248 million of long-term FHLB advances during the second quarter 2021.

During the year ended December 31, 2020, we also incurred a loss on extinguishment of debt totaling $12.0 million related to prepayments of long-term FHLB advances and institutional repo borrowings totaling $534.3 million and $50 million, respectively.

All of the prepayments were funded by excess cash liquidity at the Bank.

See Note 10 to the consolidated financial statements for additional information.

Amortization of tax credit investments decreased $2.4 million for the year ended December 31, 2021 as compared to 2020 mainly due to lower amortization on low income and new market tax credits and is attributable to differences in the timing and amount of such investments and recognition of the related tax credits.

Tax credit investments, while negatively impacting the level of our operating expenses and efficiency ratio, directly reduce our income tax expense and effective tax rate.

See Note 14 to the consolidated financial statements for additional information.

The increases were primarily due to higher consulting expense mainly related to technology transformation and new product initiatives and increased managed services.

Within this expense category, merger related costs totaled $11.5 million and $1.7 million for the year ended December 31, 2022 and 2021, respectively.

Loss on extinguishment of debt totaling $8.4 million for the year ended December 31, 2021 related to the prepayment of approximately $248 million of long-term FHLB advances during the second quarter 2021.

Other non-interest expense increased $33.1 million for the year ended December 31, 2022 as compared to 2021.

The net increase in this expense category was largely due to a $4.7 million increase in data processing costs and incrementally higher operating expenses in several categories stemming from increased loan originations and expansion of our operations.

Efficiency Ratio.

The efficiency ratio measures total non-interest expense as a percentage of net interest income plus total non-interest income.

We believe this non-GAAP measure provides a meaningful comparison of our operational performance and facilitates investors’ assessments of business performance and trends in comparison to our peers in the banking industry.

Our overall efficiency ratio, and its comparability to some of our peers, is negatively impacted primarily by the amortization of tax credit investments, as well as infrequent charges within non-interest income and expense, including, but not limited to the loss on extinguishment of debt, merger expenses and the net gain on sale-leaseback transactions.

These increases within this expense category mostly related to incrementally higher operating expenses due to the expansion of our operations, including acquisitions of Bank Leumi USA and Westchester.

In addition, the year ended December 31, 2022 included a $2.0 million c ontribution to the Valley Bank Charitable Fund.

2022 Form 10-K

The following table presents our efficiency ratio and a reconciliation of the efficiency ratio adjusted for such items during the years ended December 31, 2021, 2020 and 2019:

2021 2020 2019

($ in thousands)

Total non-interest expense, as reported $ 691,542 $ 646,148 $ 631,555

Loss on extinguishment of debt (pre-tax) 8,406 12,036 31,995

Amortization of tax credit investments (pre-tax) 10,910 13,335 20,392

Merger related expenses (pre-tax) (1)

8,900 1,907 16,579

Litigation reserve (pre-tax) (2)

Severance expense (mainly branch transformation, pre-tax) (3)

— 2,072 4,838

Total non-interest expense, as adjusted 661,226 616,798 557,751

Net interest income 1,209,901 1,118,904 898,048

Total non-interest income, as reported 155,013 183,032 214,520

(Gains) losses on available for sale and held to maturity debt securities transactions, net (pre-tax) (545) (524) 150

Net impairment losses on securities (pre-tax) — — 2,928

Gain on sale leaseback transaction (pre-tax) (4)

Total non-interest income, as adjusted $ 154,468 $ 182,508 $ 139,093

Gross operating income, as adjusted $ 1,364,369 $ 1,301,412 $ 1,037,141

Efficiency ratio 50.67 % 49.63 % 56.77 %

Efficiency ratio, adjusted 48.46 % 47.39 % 53.78 %

(1) Merger related expenses are primarily within salary and employee benefits expense, professional and legal fees, and other expense.

(2) Litigation reserve included in professional and legal fees.

(3) Severance expenses are included in salary and employee benefits expense.

(4) The gain on sale leaseback transactions is included in net gains on the sales of assets within other non-interest income.

Management continuously monitors its expenses in an effort to optimize Valley's performance.

Based upon these efforts and our revenue goals, we achieved an efficiency ratio of 50.67 percent and adjusted efficiency ratio (as shown in the table above) of 48.46 percent for 2021.

We will strive to preserve our adjusted efficiency ratio at or below 50 percent during 2022, however, we can provide no assurance that our adjusted efficiency ratio will remain at the level reported for 2021.

Income tax expense was $211.8 million for the year ended December 31, 2022, reflecting an effective tax rate of 27.1 percent, as compared to $166.9 million for the year ended December 31, 2021, reflecting an effective tax rate of 26.0 percent.

The increase in income tax expense during 2021 as compared to 2020 was mainly driven by higher pre-tax income.

The increase in effective tax rate during 2022 as compared to 2021 was mainly attributable to higher disallowed permanent adjustments.

The CARES Act did not have a material impact on our reported income tax expense for the years ended December 31, 2022 and 2021.

Our uncertain tax liability positions totaling $30.4 million and $31.9 million at December 31, 2021 and 2020, respectively, relate to renewable energy tax credits and other tax benefits previously recognized from our investments in mobile generators sold and leased back by DC Solar and its affiliates.

Our uncertain tax liability positions totaling $30.4 million remains unchanged at December 31, 2022 and relate to renewable energy tax credits and other tax benefits previously recognized from our investments in mobile generators sold and leased back by DC Solar and its affiliates.

GAAP requires that any change in judgment or change in measurement of a tax position taken in a prior annual period be recognized as a discrete event in the quarter in which it occurs, rather than being recognized as a change in effective tax rate for the current year.

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See additional information regarding our income taxes under our “Critical Accounting Policies and Estimates” section above, as well as Note 13 to the consolidated financial statements.

2021 Form 10-K

Business Segments

We have four business segments that we monitor and report on to manage our business operations.

These segments are consumer lending, commercial lending, investment management, and corporate and other adjustments.

Our reportable segments have been determined based upon Valley’s internal structure of operations and lines of business.

Each business segment is reviewed routinely for its asset growth, contribution to income before income taxes and return on average interest earning assets and impairment (if events or circumstances indicate a possible inability to realize the carrying amount).

Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are allocated from the corporate and other adjustments segment to each of the other three business segments.

Interest expense and internal transfer expense (for general corporate expenses) are allocated to each business segment utilizing a transfer pricing methodology, which

involves the allocation of operating and funding costs based on each segment's respective mix of average earning assets and/or liabilities outstanding for the period.

The financial reporting for each segment contains allocations and reporting in line with our operations, which may not necessarily be comparable to any other financial institution.

Operating Segments

Prior to the second quarter 2022, Valley operated as four reportable segments:

Consumer Lending, Commercial Lending, Investment Management, and Corporate and Other Adjustments.

Valley re-evaluated its segment reporting during the second quarter 2022 to consider the Bank Leumi USA acquisition on April 1, 2022 along with other factors, including changes in the internal structure of operations, discrete financial information reviewed by key decision-makers, balance sheet management strategies and personnel.

As a result, Valley determined it operated reportable segments consisting of Consumer Banking, Commercial Banking and Treasury and Corporate Other at December 31, 2022.

Treasury and Corporate Other was reorganized to consolidate Treasury and other corporate-wide functions, including the Treasury managed investment securities portfolios and overnight interest earning cash balances formerly reported under Investment Management.

The discrete financial information related to the activities previously reported in the Investment Management segment is no longer provided to Valley's CEO, who is the chief operating decision maker.

Each operating segment is reviewed routinely for its asset growth, contribution to income before income taxes and return on average interest earning assets and impairment (if events or circumstances indicate a possible inability to realize the carrying amount).

Valley regularly assesses its strategic plans, operations, and reporting structures to identify its reportable segments.

There were no additional changes to Valley's reportable segments at December 31, 2022.

The accounting for each segment includes internal accounting policies designed to measure consistent and reasonable financial reporting and may result in income and expense measurements that differ from amounts under U.S.

Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.

Consumer lending.

The consumer lending segment represented 22.0 percent of the total loan portfolio at December 31, 2021, and was mainly comprised of residential mortgage loans and automobile loans, and to a lesser extent, home equity loans, secured personal lines of credit and other consumer loans (including credit card loans).

The 2021 period balances reflect reclassifications to conform the presentation of the current operating segment structure.

Valley's consolidated results were not impacted by the changes discussed above and remain unchanged for all periods presented.

The following tables present the financial data for Valley's operating segment for the year ended December 31, 2022 and 2021:

December 31, 2022

Banking Commercial

Banking Treasury and Corporate Other Total

($ in thousands)

Average interest earning assets $ 8,133,665 $ 33,796,688 $ 6,137,028 $ 48,067,381

Income before income taxes 64,753 787,047 (71,133) 780,667

Annualized return on average interest earning assets (before tax)

0.80 % 2.33 % (1.16) % 1.62 %

2022 Form 10-K

December 31, 2021

Banking Commercial

Banking Treasury and Corporate Other Total

($ in thousands)

Average interest earning assets $ 7,262,808 $ 25,554,177 $ 5,410,830 $ 38,227,815

Income (loss) before income taxes 138,192 552,394 (49,847) 640,739

Annualized return on average interest earning assets (before tax)

1.90 % 2.16 % (0.92) % 1.68 %

Consumer Banking.

The Consumer Banking segment represented 18.5 percent of the total loan portfolio at December 31, 2022, and was mainly comprised of residential mortgage loans and automobile loans, and to a lesser extent, home equity loans, secured personal lines of credit and other consumer loans (including credit card loans).

The duration of the residential mortgage loan portfolio (which represented 11.4 percent of our total loan portfolio at December 31, 2022) is subject to movements in the market level of interest rates and forecasted prepayment speeds.

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However, the average life may be impacted by new loans as a result of the availability of credit within the automobile marketplace and consumer demand for purchasing new or used automobiles.

The consumer lending segment also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, insurance and tax credit advisory services.

Average interest earning assets in this segment increased $102.0 million to $7.3 billion for the year ended December 31, 2021 as compared to 2020.

The increase was largely due to strong consumer demand for new vehicles which generated strong loan volume through our indirect auto loan channel, particularly during the first half of 2021.

Also, to a lesser extent, we experienced growth in our residential mortgage portfolio held for investment and customer usage of personal lines of credit secured by the cash surrender value of life insurance.

However, we continued to originate a high volume of residential mortgage loans for sale rather than investment during 2021, which led to only moderate growth in average assets for the consumer segment.

Income before income taxes generated by the consumer lending segment increased $14.1 million to $138.2 million for the year ended December 31, 2021 as compared to $124.1 million for the year ended December 31, 2020 largely due to an increase of $10.1 million in net interest income coupled with a $6.8 million credit recorded to our provision for loan losses, partially offset by a $9.4 million decrease in non-interest income.

The increase in net interest income from 2020 was mostly due to the combination of a decline in our funding cost and higher average interest earning assets in 2021, which more than offset the lower yield on average interest earning assets in the consumer segment.

The credit to our provision for loan losses was mainly due to improvement in the economic forecast component of our CECL model in 2021 as general conditions and uncertainty from the COVID-19 pandemic improved from December 31, 2020.

The consumer banking segment also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, insurance and tax credit advisory services.

Consumer Banking's average interest earning assets increased $870.9 million to $8.1 billion for the year ended December 31, 2022 as compared to 2021.

The increase was largely due to new residential mortgage loan volumes originated for investment rather than sale over the last 12-month period, as well as growth in automobile loans and secured personal lines of credit.

Income before income taxes generated by the Consumer Banking segment decreased $64.8 million to $73.4 million for the year ended December 31, 2022 as compared to $138.2 million for the year ended December 31, 2021 largely due to a $39.8 million increase in the internal transfer expense, higher provision for loan losses and a decline in non-interest income.

The provision for loan losses increased $27.7 million for the year ended December 31, 2022 from $6.8 million credit (negative) provision for the same period of 2021.

The increase in provision was mainly due to higher reserves resulting from residential loan growth, as well as a more pessimistic economic forecast component within our CECL model as compared to one year ago.

See further details in the “Allowance for Credit Losses” section of this MD&A.

The lower non-interest income was largely due to lower gains on sales of residential mortgage loans mostly resulting from a decline in the fair value adjustment on loans held for sale as of December 31, 2021 as compared to December 31, 2020.

The net interest margin on the consumer lending portfolio increased 11 basis points to 3.03 percent for the year ended December 31, 2021 as compared to 2020 due to a 41 basis point decrease in the costs associated with our funding sources, partially offset by a 30 basis point decrease in the yield on average loans.

The decrease in our funding costs was mainly due to a greater mix of non-interest bearing deposits, deposits continuing to reprice at lower interest rates, maturity of higher cost time deposits and borrowings, and prepayment of certain long-term borrowings.

The 30 basis point decrease in loan yield was largely due to lower yielding new loan volumes and normal loan repayments .

Non-interest income decreased $15.6 million mostly due to a decline in net gains on sales of residential mortgage loans fo r the year ended December 31, 2022 as compared to 2021 mainly caused by a steep decline in customer refinance activity and greater use of non-conforming loan products in a rising interest rate environment.

Net interest income increased $3.9 million due to additional income generated from higher average loan balances and yields on new loan originations.

Net interest margin on the Consumer Banking portfolio decreased 28 basis points to 2.75 percent for the year ended December 31, 2022 as compared to 2021 mainly due to a 34 basis point increase in the costs associated with our funding sources, partially offset by a 6 basis point increase in the yield on average loans.

The increase in our funding costs was mainly due to higher interest rates on most of our interest bearing commercial and retail deposit products, increased utilization of brokered deposits, some migration of non-interest bearing deposits to interest bearing products, and higher cost short-term borrowings due to the rising interest rate environment in 2022.

The 6 basis point increase in loan yiel d was largely due to higher yielding new loan volumes and adjustable rate loans in our portfolio.

See the “Executive Summary” and the “Net Interest Income” sections above for more details on our loans, deposits and other borrowings.

The return on average interest earning assets before income taxes for the consumer lending segment was 1.90 percent for 2021 compared to 1.73 percent for 2020.

Commercial lending.

The commercial lending segment is mainly comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans.

2021 Form 10-K 52

Due to the portfolio’s interest rate characteristics, commercial lending is Valley’s business segment that is most sensitive to movements in market interest rates.

The return on average interest earning assets before income taxes for the consumer banking segment was 0.80 percent for 2022 compared to 1.90 percent for 2021.

Commercial Banking.

Commercial Banking is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans.

Due to the portfolio’s interest rate characteristics, Commercial Banking is Valley’s business segment that is most sensitive to movements in market interest rates.

Commercial and industrial loans totaled approximately $8.8 billion and represented 18.8 percent of the total loan portfolio at December 31, 2022.

Commercial real estate loans and construction loans totaled $29.4 billion and represented 62.7 percent of the total loan portfolio at December 31, 2022.

Average interest earning assets in this segment increased $929.1 million to $25.6 billion for the year ended December 31, 2021 as compared to 2020.

The increase was mainly due to the strong organic commercial real estate loan growth across the markets and geographies of our franchise, partially offset by significant PPP loan forgiveness mostly in the second half of 2021.

For the year ended December 31, 2021, income before income taxes for the commercial lending segment increased $103.8 million to $552.4 million as compared to 2020 mainly driven by an increase in net interest income and a lower provision for loan losses.

Net interest income increased $87.7 million to $951.4 million for the year ended December 31, 2021 as compared to 2020 mainly due to the $96.8 million decrease in interest expense caused by the reduction in our cost of funds, increased PPP loan fees and the higher average commercial loan balances during 2021.

The $73.9 million decrease in the provision for credit losses to $39.7 million for the year ended December 31, 2021 as compared to 2020 was mainly due to an improvement in the economic forecast component of the allowance for loan losses and a reduction in other qualitative factors related to the COVID-19 pandemic.

See the "Allowance for Credit Losses" section below for further details.

Non-interest income decreased $29.2 million for the year ended December 31, 2021 as compared to 2020 primarily due to lower fee income related to derivative interest rate swaps executed with commercial loan customers which totaled $26.9 million for the year ended December 31, 2021 as compared to $59.0 million in 2020.

Non-interest expense and internal transfer expense increased $9.9 million and $18.7 million, respectively, during 2021 as compared to the prior year.

The increase is non-interest expenses was due to higher general and administrative loan expenses and internal transfer expense allocation was higher, mostly due to higher averages assets for the year ended December 31, 2021 as compared to 2020.

The net interest margin for this segment increased 23 basis points to 3.73 percent during 2021 as compared to 2020 due to a 41 basis point decrease in the cost of our funding sources, partially offset by a 18 basis point decrease in the yield on average loans.

The return on average interest earning assets before income taxes for this segment was 2.16 percent for 2021 compared to 1.82 percent for the prior year period.

Investment management.

The investment management segment generates a large portion of our income through investments in various types of securities and interest-bearing deposits with other banks.

These investments are mainly comprised of fixed rate securities and, depending on our liquid cash position, federal funds sold and interest-bearing deposits with banks (primarily the Federal Reserve Bank of New York) as part of our asset/liability management strategies.

The fixed rate investments are one of Valley’s least sensitive assets to changes in market interest rates.

However, a portion of the investment portfolio is invested in shorter-duration securities to maintain the overall asset sensitivity of our balance sheet.

See the “Asset/Liability Management” section below for further analysis.

Average interest earning assets increased $185.8 million to $5.4 billion for the year ended December 31, 2021 as compared to 2020 primarily due to a $431.3 million increase in average interest bearing deposits with banks, partially offset by a $245.5 million decline in average investment securities.

The increase in our excess liquidity held in overnight interest bearing deposits with banks was mainly caused by strong deposits growth over the 12-month period and management's slower rate of reinvestment principal repayments in investment securities throughout 2021 due to the low interest rate environment.

For the year ended December 31, 2021, income before income taxes for the investment management segment decreased $7.2 million to $12.4 million as compared to 2020 mainly due to lower net interest income and higher internal transfer and non-interest expenses.

Net interest income decreased $2.3 million for the year ended December 31, 2021 as compared to 2020 due to lower yields on both the taxable and non-taxable investment portfolios, largely offset by the positive effect of the lower cost of funding.

Internal transfer and non-interest expenses increased $3.8 million and $2.5 million, respectively, for the year ended December 31, 2021 as compared to 2020.

The net interest margin for this segment decreased 8 basis points to 1.22 percent during the year ended December 31, 2021 as compared to 2020 due to a 49 basis point decrease in the yield on average investments, partially offset by a 41 basis point decrease in costs associated with our funding sources.

The decrease in the yield on average investments during 2021 as compared to one year ago was mainly due to higher levels of excess liquidity held in low yielding overnight investments and lower yielding new investment securities.

The return on average interest earning assets before income taxes for this segment was 0.23 percent for 2021 compared to 0.37 percent for 2020.

Average interest earning assets in Commercial Banking increased $8.2 billion to $33.8 billion for the year ended December 31, 2022 as compared to the same period in 2021.

This increase was primarily due to the strong organic loan growth

2022 Form 10-K

Corporate and other adjustments.

The amounts disclosed as “corporate and other adjustments” represent income and expense items not directly attributable to a specific segment, including net gains and losses on available for sale and held to maturity securities transactions, not reported in the investment management segment above, interest expense related to subordinated notes, amortization and impairment of tax credit investments, as well as non-core items, including merger expenses.

The pre-tax net loss for the corporate segment totaled $62.3 million for the year ended December 31, 2021 was relatively unchanged as compared to $62.2 million in 2020.

The net loss in 2021 was driven by fluctuations in various income and expense components.

Non-interest income increased $10.1 million to $36.8 million for the year ended December 31, 2021 from 2020 due to higher fees and income in several categories, including investment management, service charges, and gains on sales of assets.

Non-interest expense increased $31.8 million to $500.5 million for the year ended December 31, 2021 as compared to 2020 largely due to increases in salaries and employee benefits expenses and professional and legal fees.

over the 12-month period ended December 31, 2022 , as well as commercial loans acquired from Bank Leumi USA and Westchester .

For the year ended December 31, 2022, income before income taxes for Commercial Banking increased $234.7 million to $787.0 million as compared 2021 mainly driven by increases in net interest income and non-interest income, partially offset by higher internal transfer expense.

Net interest income increased $401.8 million to $1.4 billion for the year ended December 31, 2022 as compared to 2021 mainly due to higher average commercial loan balances and new and adjustable loan yields during 2022 .

Non-interest income increased $44.1 million for the year ended December 31, 2022 as compared to 2021 mainly due to higher service charges on commercial deposit accounts, a $16.2 million increase in fee income related to derivative interest rate swaps executed with commercial loan customers and a $5.6 million increase in foreign exchange fees.

Internal transfer expense increased $205.2 million to $491.5 million for the year ended December 31, 2022 as compared to the same period in 2021 largely due to the significant acquired and organic expansion of our operations over the last 12-month period.

The provision for credit losses decreased $4.2 million to $35.5 million during the year ended December 31, 2022 as compared to $39.7 million for 2021.

See the “Allowance for Credit Losses for Loans” section below for further details.

The net interest margin for this segment increased 27 basis points to 4 percent for the year ended December 31, 2022 as compared to the same period in 2021 due to a 61 basis point increase in the yield on average loans, partially offset by a 34 basis point increase in the cost of our funding sources.

The return on average interest earning assets before income taxes for the consumer banking segment was 2.33 percent for 2022 compared to 2.16 percent for 2021.

Treasury and Corporate Other.

Treasury and Corporate Other largely consists of the Treasury managed held to maturity and available for sale debt securities portfolios mainly utilized in the liquidity management needs of our lending segments and income and expense items resulting from support functions not directly attributable to a specific segment.

Interest income is generated through investments in various types of securities (mainly comprised of fixed rate securities) and interest-bearing deposits with other banks (primarily the Federal Reserve Bank of New York).

Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are allocated from Treasury and Corporate Other to the Consumer and Commercial Banking segments.

Interest expense and internal transfer expense (for general corporate expenses) are allocated to each business segment utilizing a transfer pricing methodology, which involves the allocation of operating and funding costs based on each segment's respective mix of average earning assets and/or liabilities outstanding for the period.

Other items disclosed in this segment include net gains and losses on available for sale and held to maturity securities transactions, interest expense related to subordinated notes, amortization (and impairment) of tax credit investments, as well as other non-core items, including merger expenses.

Treasury and Corporate Other's average interest earning assets increased $726.2 million to $6.1 billion for the year ended December 31, 2022 as compared to 2021.

Within the category, a $1.5 billion increase in investment securities was partially offset by a $738.7 million decrease in average interest bearing deposits with banks.

The increase in average investment securities was mainly du e to $1.3 billion of investment securities acquired from Bank Leumi USA.

The lower level of excess liquidity carried within interest bearing deposits with banks during 2022 was mainly due to the strong organic loan growth over the last 12-month period and a reduction in the surge of customer deposits experienced in 2021 .

For the year ended December 31, 2022, loss before income taxes in this segment totaled $71.1 million for the year ended December 31, 2022 compared to $49.8 million for 2021.

The $21.3 million increase in pre-tax loss was mainly due to higher non-interest expense, partially offset by increases in internal transfer income and net interest income.

Non-interest expense increased $328.8 million to $832.9 million for the year ended December 31, 2022 as compared to the same period in 2021, partially due to a $62.3 million increase in merger related expenses, as well as other additional expenses related to our expanded banking operations and organic business growth including higher salary and employee benefits expense, net occupancy, professional and legal fees and other.

However, the comparative 2021 period also included an $8.4 million pre-tax l oss on extinguishment of debt.

See further details in the “Non-Interest Expense” section in this MD&A.

Internal transfer income increased $26.1 million to $428.3 million for the year ended December 31, 2021 as compared to the same period in 2020 largely due to general increases related to our growth.

Internal transfer income increased $245.0 million to $612.7 million for the year ended December 31, 2022 as compared to the same period in 2021 due to the higher allocation of non-interest expense over the same period.

Treasury and Corporate Other's net interest margin increased 65 basis points to 1.81 percent for the year ended December 31, 2022 as compared to the same period in 2021 due to a 99 basis point increase in the yield on average investments, partially offset by a 34 basis point increase in cost of our funding sources.

The increase in the yield on average investments as compared to the same period in 2021 was largely driven by new higher yielding investments and lower premium amortization expense caused, in part, by slower principal repayments in the rising interest rate environment of 2022.

2022 Form 10-K

ASSET/LIABILITY MANAGEMENT

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Convexity is a measure of how the duration of a financial instrument changes as market interest rates change.

Potential movements in the convexity of bonds held in our investment portfolio, as well as the duration of the loan portfolio may have a

2021 Form 10-K 54

positive or negative impact on our net interest income in varying interest rate environments.

Potential movements in the convexity of bonds held in our investment portfolio, as well as the duration of the loan portfolio may have a positive or negative impact on our net interest income in varying interest rate environments.

As a result, the increase or decrease in forecasted net interest income may not have a linear relationship to the results reflected in the table below.

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While an instantaneous and severe shift in interest rates was used in this simulation model, we believe that any actual shift in interest rates would likely be more gradual and would therefore have a more modest impact than shown in the table below.

2022 Form 10-K

Estimated Change in

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- 100 (42,380) (2.22)

- 200 (92,003) (4.82)

- 300 (124,661) (6.54)

As noted in the table above, a 100 basis point immediate increase in interest rates combined with a static balance sheet where the size, mix, and proportions of assets and liabilities remain unchanged is projected to increase net interest income over the next 12-month period by 2.61 percent.

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How ever, the level of net interest income sensitivity may increase or decrease in the future as a result of several factors, including potential changes in our balance sheet strategies, the slope of the yield curve and projected cash flows.

2021 Form 10-K

The following table sets forth the amounts of interest earning assets and interest bearing liabilities that were outstanding at December 31, 2022 and their associated fair values.

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0.53:1 3.05:1 97.48:1 75.99:1 62.49:1 23.04:1 1.51:1 1.45:1

The above table provides an approximation of the projected re-pricing of assets and liabilities at December 31, 2021 based on the contractual maturities, adjusted for anticipated prepayments of principal (including anticipated call dates on long-term borrowings and junior subordinated debentures), and scheduled rate adjustments.

The above table provides an approximation of the projected re-pricing of assets and liabilities at December 31, 2022 based on the contractual maturities, adjusted for anticipated prepayments of principal (including anticipated call dates on long-

2022 Form 10-K

term borrowings and junior subordinated debentures), and scheduled rate adjustments.

The prepayment experience reflected herein is based on historical experience combined with market consensus expectations derived from independent external sources.

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While all non-maturity deposit liabilities are reflected in the 2023 column in the table above, management controls the re-pricing of the vast majority of the interest-bearing instruments within these liabilities.

Our cash flow derivatives are designed to protect us from upward movement in interest rates on certain deposits and other borrowings.

During 2022, we executed $600 million of cash flow interest rate swaps.

These derivatives are designed to protect us from the impact of potential downward movements in interest rates on certain variable rate loans.

The interest rate sensitivity table reflects the sensitivity at current interest rates.

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Management does not view our one-year gap position as of December 31, 2022 as presenting an unusually high risk potential, although no assurances can be given that we are not at risk from interest rate increases or decreases.

2021 Form 10-K 56

Liquidity and Cash Requirements

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Such commitments are subject to the same credit policies and approval process accorded to loans made by the Bank.

We enter 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 Bank's commitments to fund the loans, as well as on its portfolio of mortgage loans held for sale.

We enter 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

2022 Form 10-K

future changes in interest rates on Bank's commitments to fund the loans, as well as on its portfolio of mortgage loans held for sale.

Commitments to extend credit and standby letters of credit are subject to change since many of these commitments are expected to expire unused or only partially used based upon our historical experience, the total amounts of these commitments do not necessarily reflect future cas h requirements.

At December 31, 2022 our off-balance sheet commitments totaled $13.2 billion, inclusive of commitments of $7.0 billion due in 12 months or less.

See Note 15 to t he consolidated financial statements for further details.

See Note 15 to the consolidated financial statements for further details.

Management believes the Bank has the ability to generate and obtain adequate amounts of cash to meet its short-term and long-term obligations as they come due by utilizing various cash resources described below.

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Of the $2.4 billion of liquid assets at December 31, 2022, approximately $333.3 million of various investment securities were pledged to counterparties to support our earning asset funding strategies.

We anticipate the receipt of approximately $736.0 million in principal from securities in the total investment portfolio over the next 12-month period due to

2021 Form 10-K

normally scheduled principal repayments and expected prepayments of certain securities, primarily residential mortgage-backed securities.

We anticipate the receipt of approximately $583.1 million in principal from securities in the total investment portfolio over the next 12-month period due to normally scheduled principal repayments and expected prepayments of certain securities, primarily residential mortgage-backed securities.

Additional liquidity is derived from scheduled loan payments of principal and interest, as well as prepayments received.

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Furthermore, we are able to obtain overnight borrowings from the Federal Reserve Bank of New York via the discount window as a contingency for additional liquidity.

At December 31, 2021, our borrowing capacity (excluding added capacity available to us by pledging PPP loans), under the Federal Reserve Bank's discount window was approximately $1.9 billion.

At December 31, 2022, our borrowing capacity under the Federal Reserve Bank's discount window was approximately $2.1 billion.

2022 Form 10-K

We also have access to other short-term and long-term borrowing sources to support our asset base, such as repos (i.e., securities sold under agreements to repurchase).

Short-term borrowings (consisting of FHLB advances, repos, and from time to time, federal funds purchased ) decreased $492.2 million to $655.7 million at December 31, 2021 from December 31, 2020 mainly due to a decrease in short-term FHLB advances utilized as a funding source due to deposit growth and excess liquidity in 2021.

Short-term borrowings (consisting of FHLB advances, repos, and from time to time, federal funds purchased ) decreased $517.0 million to $138.7 million at December 31, 2022 from December 31, 2021 largely due to the maturity of FHLB advances during 2022 and lower repo balances at December 31, 2022.

Corporation Liquidity.

Valley’s recurring cash requirements primarily consist of dividends to preferred and common shareholders and interest expense on subordinated notes and junior subordinated debentures issued to capital trusts.

As part of our on-going asset/liability management strategies, Valley could also use cash to repurchase shares of its outstanding common stock under its share repurchase program or redeem its callable junior subordinated debentures and subordinated notes.

As part of our ongoing asset/liability management strategies, Valley could also use cash to repurchase shares of its outstanding common stock under its share repurchase program or redeem its callable junior subordinated debentures and subordinated notes.

These cash needs are routinely satisfied by dividends collected from the Bank.

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In addition to dividends received from the Bank, Valley can satisfy its cash requirements by utilizing its own cash and potential new funds borrowed from outside sources or capital issuances.

Valley also has the right to defer interest payments on the junior subordinated debentures, and therefore distributions on its trust preferred securities for consecutive quarterly periods up to five years, but not beyond the stated maturity dates, and subject to other conditions.

During the second quarter 2021, Valley redeemed $60 million of callable subordinated notes and issued $300 million of 3.00 percent subordinated notes.

See Note 10 to the consolidated financial statements for additional information.

2021 Form 10-K 58

Valley also has the right to defer interest payments on the junior subordinated debentures, and therefore distributions on its trust preferred securities for consecutive quarterly periods of up to five years, but not beyond the stated maturity dates, and subject to other conditions.

Investment Securities Portfolio

As of December 31, 2022, our investment securities portfolio consisted of equity and debt securities, with the debt securities classified as either trading, available for sale or held to maturity.

The equity securities consisted of one publicly traded mutual fund, CRA investments and several other equity investments we have made in companies that develop new financial technologies and in a partnership that invests in such companies.

The equity securities consisted of two publicly traded mutual funds, CRA investments and several other equity investments we have made in companies that develop new financial technologies and in a partnership that invests in such companies.

Our CRA and other equity investments are a mixture of both publicly traded and privately held entities.

Our trading debt securities portfolio wholly consists of investment grade municipal bonds .

Held to maturity and available for sale debt securities portfolios which comprise the majority of the securities we own include U.S.

Our trading debt securities portfolio consists of investment grade municipal bonds and U.S.

Treasury securities .

The available for sale and held to maturity debt securities portfolios, wh ich comprise of the majority securities we own include:

Treasury securities, U.S.

government agency securities, tax-exempt and taxable issuances of states and political subdivisions, residential mortgage-backed securities, single-issuer trust preferred securities principally issued by bank holding companies, and high quality corporate bonds.

Among other securities, our available for sale debt securities include securities such as bank issued and other corporate bonds, as well as municipal special revenue bonds, that may pose a higher risk of future impairment charges to us as a result of the uncertain economic environment and its potential negative effect on the future performance of the security issuers.

government agency securities, tax-exempt and taxable issuances of state and political subdivisions, residential mortgage-backed securities, single-issuer trust preferred securities principally issued by bank holding companies, and high quality corporate bonds.

Among other securities, our available for sale debt securities include securities such as bank issued, corporate, and municipal special revenue bonds which may pose a higher risk of future impairment charges to us as a result of the uncertain economic environment and its potential negative effect on the future performance of the security issuers.

The primary purpose of our held to maturity and available for sale investment portfolios is to provide a source of earnings and liquidity, as well as serve as a tool for managing interest rate risk.

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See additional information under “Interest Rate Sensitivity,” “Liquidity and Cash Requirements” and “Capital Adequacy” sections elsewhere in this MD&A.

2022 Form 10-K

Investment securities at December 31, 2022 and 2021 were as follows:

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Total investment securities $ 5,150,904 $ 3,870,944

During the year ended 2021, we purchased approximately $1.5 million of residential mortgage backed securities mainly within the held to maturity portfolio.

The purchases were largely to reinvest continued repayments and prepayments within both

2021 Form 10-K

the available for sale and held to maturity portfolios, as well as utilize excess liquidity from our operations.

The decrease in states and municipal obligations was due to a combination of several large call provisions exercised by the securities issuers, principal paydowns and maturities.

Treasury securities in our available for sale portfolio at December 31, 2020 were sold during 2021 and resulted in a gain of $825 thousand for the year ended December 31, 2021.

As of December 31, 2022, total investments increased $1.3 billion or 34 percent as compared to 2021 largely due to securities acquired from Bank Leumi USA and purchases of approximately $838 million of residential mortgage-backed securities classified as held to maturity, partially offset by repayments, prepayments and calls.

We acquired $6.2 million of equity securities, $505.9 million of available for sale debt securities (mostly U.S.

government agency securities and U.S.

Treasury securities) and $806.6 million of held to maturity debt securities (primarily U.S.

government agency securities and municipal bonds) from Bank Leumi USA on April 1, 2022.

At December 31, 2022, we had $2.9 billion and $629.8 million of residential mortgage-backed securities classified as held to maturity and available for sale, respectively.

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The remainder of our outstanding residential mortgage-backed security balances at December 31, 2022 were issued by Freddie Mac.

2022 Form 10-K

The following table presents the weighted-average yields, calculated on a yield-to-maturity basis, on the remaining contractual maturities (unadjusted for expected prepayments) of held to maturity debt securities at December 31, 2022:

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(1) Average yields on obligations of states and political subdivisions are generally tax-exempt and calculated on a tax-equivalent basis using a statutory federal income tax rate of 21 percent.

(2) Residential mortgage-backed securities yields are shown using stated final maturity dates.

(2) Residential mortgage-backed securities yields are shown using stated contractual maturity dates.

The residential mortgage-backed securities portfolio is a significant source of our liquidity through the monthly cash flow of principal and interest.

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If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount the fair value is less than amortized cost basis.

Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes.

We have evalua ted all available for sale debt securities that are in an unrealized loss position as of December 31, 2022 and December 31, 2021 and determined that the declines in fair value are mainly attributable to changes in market volatility, due to factors such as interest rates and spread factors, but not attributable to credit quality or other factors.

Based on a comparison of the present value of expected cash flows to the amortized cost, management recognized no impairment charges during the years ended December 31, 2021 and 2020 and, as a result, there was no allowance for credit losses for available for sale debt

2021 Form 10-K 60

securities at December 31, 2021 and December 31, 2020.

During 2019, Valley recognized a $2.9 million impairment charge under the other-than-temporary impairment model on one special revenue bond classified as available for sale included in the states and state agencies category.

Based on a comparison of the present value of expected cash flows to the amortized cost, management recognized no impairment charges during the years ended December 31, 2022, 2021 and 2020, and, as a result, there was no allowance for credit losses for available for sale debt securities at December 31, 2022 and December 31, 2021.

Held to maturity debt securities.

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Held to maturity debt securities were carried net of an all owance for credit losses totaling $1.6 million and $1.2 million at December 31, 2022 and 2021, respectively.

We recorded a net credit of $263 thousand for the year ended December 31, 2021 and a provision of $635 thousand for the year ended December 31, 2020.

The net credit to provision for credit losses in 2021 was mostly a result of our improved economic forecast component of the CECL model at December 31, 2021 as compared to December 31, 2020.

The provision in 2020 reflected the negative economic forecast incorporated within the allowance model from the onset of the COVID-19 pandemic in 2020 (which anticipated elevated levels of defaults, particularly on corporate bonds).

There were no net charge-offs of held to maturity debt securities during 2021 and 2020.

We recorded provisions of $481 thousand and $635 thousand for the years ended December 31, 2022 and 2020, respectively, and a net credit to the

2022 Form 10-K

provision of $263 thousand for the year ended December 31, 2021.

There were no net charge-offs of held to maturity debt securities during the years ended December 31, 2022, 2021 and 2020.

Investment grades .

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For this and other reasons, we believe the assigned investment grades may not accurately reflect the actual credit quality of each security and should not be viewed in isolation as a measure of the quality of our investment portfolio.

The following table presents the held to maturity and available for sale debt investment securities portfolios by investment grades at December 31, 2021.

The following table presents available for sale and held to maturity debt investment securities by investment grades at December 31, 2022.

December 31, 2022

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BBB Rated 79,747 — (7,844) 71,903

Non-investment grade 4,997 — (15) 4,982

Not rated 104,476 — (9,669) 94,807

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Split rated securities with two ratings are categorized at the higher of the rating levels.

2021 Form 10-K

The unrealized losses in the AAA rated category of the held to maturity debt securities (in the above table) are mainly related to residential mortgage-backed securities issued by Ginnie Mae and Fannie Mae.

The debt securities held to maturity portfolio included $147.9 million in investments not rated by the rating agencies with aggregate unrealized losses of $5.5 million at December 31, 2021 mostly related to four single-issuer bank trust preferred issuances with a combined amortized cost of $36.0 million.

The unrealized losses in the AAA and AA rated categories of both the available for sale and held to maturity debt securities (in the above table) were mainly related to residential mortgage-backed securities issued by Ginnie Mae and Fannie Mae and continued to be driven by the rising interest rate environment during 2022.

Available for sale and held to maturity debt securities included $104.5 million and $170.6 million, respectively, of investments not rated by the rating agencies with aggregate unrealized losses of $9.7 million and $11.1 million, respectively, at December 31, 2022.

The unrealized losses within non-rated available for sale debt securities was mostly related to several large corporate bonds negatively impacted by rising interest rates during 2022, and not changes in underlying credit.

The unrealized losses within non-rated held to maturity debt securities mostly related to four single-issuer bank trust preferred issuances with a combined amortized cost of $36.0 million.

See Note 4 to the consolidated financial statements for additional information regarding our investment securities portfolio.

2022 Form 10-K

Loan Portfolio

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* Includes net unearned discount and deferred loan fees of $120.5 million and $78.5 million at December 31, 2022 and 2021, respectively.

Net unearned discounts and deferred loans fees at December 31, 2021 include the non-credit discount on purchased credit deteriorated (PCD) loans, and $12.1 million and $43.2 million of net unearned fees related to PPP loans at December 31, 2021 and 2020, respectively.

Total loans increased by $1.9 billion, or 6.0 percent to $34.2 billion at December 31, 2021 from December 31, 2020 largely due to a combination of strong organic loan growth and $915 million in loans acquired from Westchester, partially offset by a $1.7 billion decline in PPP loans.

During 2021, Valley also originated $1.0 billion of residential mortgage loans for sale rather than investment.

Net unearned discounts and deferred loans fees at December 31, 2022 include the non-credit discount on PCD loans.

Net unearned fees related to PPP loans totaled $667 thousand and $12.1 million at December 31, 2022 and 2021, respectively.

Total loans increased by $12.8 billion, or 37.4 percent to $46.9 billion at December 31, 2022 from December 31, 2021 largely due to a combination of strong organic loan growth and acquired loans from Bank Leumi USA totaling $5.9 billion, partially offset by a $402.4 million decline in PPP loans.

Excluding acquired loans from Bank Leumi USA, commercial real estate (including construction), non-PPP commercial and industrial, residential mortgage and automobile loans increased 24.5 percent, 20.0 percent, 17.7 percent and 11.2 percent, respectively, during the year ended December 31, 2022 from December 31, 2021 .

During 2022, Valley also originated $267.2 million of residential mortgage loans for sale rather than investment.

Loans held for sale totaled $18.1 million and $139.5 million at December 31, 2022 and 2021, respectively.

See additional information regarding our residential mortgage loan activities below.

Commercial and industrial loans decreased $1.0 billion to $5.8 billion at December 31, 2021 from December 31, 2020 due to $1.7 billion of PPP loans that were forgiven by the SBA during 2021 .

Non- PPP commercial and industrial loans increas ed $702.0 million largely due, in part, to expansion of our commercial lending team during 2021, solid demand in certain customer segments, including healthcare lending, and approximately $293 million of acquired loans from Westchester.

Valley expects the vast majority of the remaining $436 million of PPP loans at December 31, 2021 to qualify for forgiveness under the guidelines of the SBA program, which is expected to negatively impact our ability to organically grow this segment of the portfolio in the early stages of 2022.

Commercial and industrial loans increased $3.0 billion to $8.8 billion at December 31, 2022 from December 31, 2021.

Excluding $2.3 billion of loans acquired from Bank Leumi USA and the $402.4 million decline in PPP loans due to SBA loan forgiveness, commercial and industrial loan organically increased by $1.1 billion or 20.0 percent during 2022.

The organic growth was mainly a result of the solid new loan volumes amongst our pre-existing long-term customer base across most of our geographic footprints driven by several factors, including direct calling efforts of our growing commercial banking team.

Commercial real estate loans (excluding construction loans) increased $6.8 billion to $25.7 billion at December 31, 2022 from December 31, 2021 reflecting solid organic growth mainly due to demand for non-owner occupied loans across our geographic footprint, as well as $2.9 billion of acquired loans from bank Leumi USA.

Our organic approach to growth is a balance of loan production through expansion of lending with our existing clients and establishing new relationships with key players in our marketplace s.

During 2022, we also continued to grow our commercial lending activities from out of market expansion efforts in states such as Georgia and Tennessee, as well as our relatively new markets in California and Illinois.

In addition, our commercial real estate production remained strong in loans secured by multi-family dwellings, warehouses and healthcare facilities.

Construction loans totaled $3.7 billion at December 31, 2022 and increased $1.8 billion from December 31, 2021 mainly driven by demand for commercial and residential construction projects in New Jersey, New York and Florida.

Bank Leumi USA acquisition contributed $630.8 million of acquired loans to the construction loan portfolio during

2022 Form 10-K

Commercial real estate loans (excluding construction loans) increased $2.2 billion to $18.9 billion at December 31, 2021 from December 31, 2020 reflecting solid organic growth mainly due to demand for non-owner occupied loans across our geographic footprint, as well as $579 million of acquired loans from Westchester.

Our organic approach to growth is a balance of loan production through expansion of lending with our existing clients and establishing new relationships with key players in our marketplaces.

During 2021, our commercial real estate production exhibited particular strength in loans secured by multi-family dwellings, warehouses and healthcare facilities.

During 2021, we also modestly expanded our commercial lending activities beyond our primary markets into other select areas of Pennsylvania, Georgia and Tennessee.

We believe this expansion, and the expansion which is expected to result from our pending acquisition of Bank Leumi USA, will provide both growth and further diversification of our commercial real estate and other commercial lending portfolios.

Construction loans totaled $1.9 billion at December 31, 2021 and increased $108.8 million from December 31, 2020, mainly driven by demand for commercial and residential construction projects.

The Westchester acquisition contributed only $22 million of acquired loans to the construction loan portfolio during December 2021.

December 2022.

The growth in new construction loans was partially offset by the run-off of completed existing projects, and, to a lesser extent, migration of such completed projects to permanent financing during 2022.

Construction demand in our Florida markets was particularly robust in 2021 and partly due to a faster paced reopening during the COVID-19 pandemic.

We continue to be strategically competitive for the strongest borrowers and projects in all our primary markets.

Residential mortgage loans totaled $4.5 billion at December 31, 2021 and increased by $361.3 million from December 31, 2020 largely due to a 32 percent increase in origination of new and refinanced residential mortgage loans totaling $2.6 billion for the year ended December 31, 2021 as compared to $1.9 billion in 2020.

The Westchester acquisition contributed only $30 million of acquired loans to the residential mortgage loan portfolio during December 2021.

Florida originations totaled approximately $681 million and represented 26.6 percent of total originations during 2021.

During 2021, we sold $1.2 billion of residential mortgages as compared to $1.0 billion of residential mortgage loans sold during 2020 and may continue to sell a large portion of our new fixed rate residential mortgage loan originations during 2022 based upon normal management of the interest rate risk and mix of the interest earning assets on our balance sheet.

We retain mortgage originations based on credit criteria and loan to value levels, the composition of our interest earning assets and interest bearing liabilities and our ability to manage the interest rate risk associated with certain levels of these instruments.

Residential mortgage loans totaled $5.4 billion at December 31, 2022 and increased $819.5 million from December 31, 2021 primarily due to new loan activity in the purchased home market and an increase in such loans originated for investment rather than sale.

Residential mortgage loans acquired from Bank Leumi USA were not material.

New and refinanced residential mortgage loan originations totaled $1.7 billion for the year ended December 31, 2022 as compared to $2.6 billion in 2021.

Florida originations totaled $604.6 million and represented 34.6 percent of total residential mortgage loan originations in 2022.

Of the total originations in 2022, only $267.2 million of residential mortgage loans were originated for sale rather than held for investment as compared to $1.0 billion during 2021.

During 2022, we retained approximately 85 percent of the total residential mortgages originations in our held for investment loan portfolio.

We may continue to retain a higher percentage of new loan volumes during the first quarter 2023 due to several factors, including consumer demand and preferences for certain mortgage products and our management of the interest rate risk and the mix of the interest earning assets on our balance sheet.

Additionally, the volume of both new and refinanced loan applications has continued to decline in the early stages of the first quarter 2023 due to the increase in the level of mortgage interest rates and may challenge our ability to grow this loan category.

From time to time, we purchase residential mortgage loans originated by, and sometimes serviced by, other financial institutions based on several factors, including current loan origination volumes, market interest rates, excess liquidity, CRA and other asset/liability management strategies.

Purchased residential mortgage loans are generally selected using Valley’s normal underwriting criteria at the time of purchase and are sometimes partially or fully guaranteed by third parties or insured by government agencies such as the Federal Housing Administration.

Valley purchased approximately $58.3 million a nd $24.3 million of 1-4 family loans, qualifying for CRA purposes during 2021 and 2020, respectively.

Consumer loans increased $270.1 million to $3.0 billion at December 31, 2021 from December 31, 2020 mainly due to higher volumes of automobile loans and personal lines of credit.

The Westchester acquisition contributed only $5 million of acquired loans to the consumer loan portfolio during December 2021.

Automobile loans increased $214.1 million or 15.8 percent to $1.6 billion at December 31, 2021 from December 31, 2020 driven by strong consumer demand for new and used vehicles .

We originated $872 million in auto loans through our dealership network during 2021 as compared to $492 million in 2020 .

Of the total originations, our Florida dealership network con tributed approximately 16 percent and 17 percent of Valley's total new auto loan production for 2021 and 2020, respectively.

Valley purchased approximately $38.4 million and $58.3 million of 1-4 family loans, qualifying for CRA purposes during 2022 and 2021, respectively.

Consumer loans increased $344.0 million to $3.3 billion at December 31, 2022 from December 31, 2021 largely due to higher volumes of automobile loans.

Consumer loans acquired from Bank Leumi USA were not material.

Automobile loans increased $176.2 million or 11.2 percent to $1.7 billion at December 31, 2022 from December 31, 2021 as loan originations volumes outpaced loan repayments during 2022 .

We originated $820 million in auto loans through our dealership network during 2022 as compared to $872 million i n 2021.

Of the total originations, our Florida dealership network contributed approximately 16 percent of Valley's total new auto loan production for both 2022 and 2021, respectively.

However, loan originations slowed significantly during the second half of 2022 as demand for new and used vehicle financing declined due to the higher interest rate environment.

Despite increased n ew automobile inventories available to consumers, we anticipate that the increase in average new vehicle prices coupled with rising interest rates could have a negative impact on our ability to grow this loan category during the first quarter 2023.

Home equity loans increased $103.1 million to $503.9 million at December 31, 2022 from $400.8 million at December 31, 2021.

However, new home equity loan volumes and customer usage of existing home equity lines of credit continue to be modest and growth in this loan category continues to be challenged by the unfavorable rising interest rate environment.

Other consumer loans increased $64.7 million to $1.1 billion at December 31, 2022 as compared to 2021 mainly due to both higher usage and demand within our collateralized personal lines of credit portfolio.

Home equity loans decreased $30.8 million in 2021 from $431.6 million at December 31, 2020.

For 2022, we anticipate strong organic non-PPP loan growth of between 7 to 9 percent.

In the early stages of the first quarter 2022, we are encouraged that our loan origination pipelines remain robust and overall non-PPP loan growth should remain well-diversified across our markets and most loan categories.

However, there can be no assurance that those positive trends will continue, or balances will not decline from December 31, 2021 given the uncertain economic environment.

A significant part of our lending is in northern and central New Jersey, New York City, Long Island and Florida.

To mitigate our geographic risks, we make efforts to maintain a diversified portfolio as to type of borrower and loan to guard against a potential downward turn in any one economic sector.

For 2023, we anticipate organic commercial and industrial and commercial real estate loan growth to continue in the first quarter 2023.

Based upon current projections, we anticipate a range of 7 to 9 percent annualized loan growth for 2023.

However, there can be no assurance that those positive trends will continue, or balances will not decline from December 31, 2022 due to several factors, including, but not limited to persistently high inflation, the Federal Reserve's monetary policy tightening, and the ongoing negative impact of Russia-Ukraine war on the global economy.

In addition, w e anticipate that residential mortgage and other consumer loan activity will continue to slow in the early stages of the first quarter of 2023.

2022 Form 10-K

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OREO and other repossessed assets are reported at the lower of cost or fair value, less cost to sell.

Non-performing assets totaling $245.4 million at December 31, 2021 increased $50.8 million, or 26.1 percent, from December 31, 2020 (as shown in the table below) mainly due to higher non-accrual loans in the commercial real estate, construction and residential mortgage categories, partially offset by a decrease in the commercial and industrial loan category and lower OREO bala nces.

NPA s as a percentage of total loans and NPAs totaled 0.71 percent and 0.60 percent at December 31, 2021 and 2020, respectively.

We believe our total NPAs has remained relatively low as a percentage of the total loan portfolio over the past two years, despite the uptick in non-accrual borrowers mainly caused by the COVID-19 pandemic.

The level of NPAs is reflective of our consistent approach to the loan underwriting criteria for both Valley originated loans and loans purchased from third parties.

Non-performing assets totaling $272.0 million at December 31, 2022 increased $26.6 million, or 10.8 percent, from December 31, 2021 (as shown in the table below).

The non-performing assets at December 31, 2022 included $48.1 million of acquired non-accrual loans from Bank Leumi USA.

Excluding the impact of the Bank Leumi USA acquisition, non-performing assets decreased $21.5 million mainly due to lower non-accrual commercial real estate loans and residential mortgage loans caused by both loan repayments and charge-offs during 2022 .

NPAs as a percentage of total loans and NPAs totaled 0.58 percent and 0.71 percent at December 31, 2022 and 2021, respectively.

We believe our total NPAs has remained relatively low as a percentage of the total loan portfolio and the level of NPAs is reflective of our consistent approach to the loan underwriting criteria for both Valley originated loans and loans purchased from third parties.

For additional details, see the “Credit quality indicators” section in Note 5 to the consolidated financial statements.

Our lending strategy is based on underwriting standards designed to maintain high credit quality and we remain optimistic regarding the overall future performance of our loan portfolio.

During 2021, our overall credit trends remained stable, and our business and borrowers continued to demonstrate resilience and growth despite the continuing challenges of the COVID-19 pandemic.

However, management cannot provide assurance that the non-performing assets will not increase substantially from the levels reported at December 31, 2021 due to the continuing economic uncertainty and potentially for credit deterioration.

In addition, a few borrowers are still performing under forbearance agreements at December 31, 2021 as discussed under the "Loan Forbearance" section below.

During 2022 , our overall credit trends have remained stable, and our business and borrowers continued to demonstrate resilience and growth despite the challenges of the global supply chain issues, high inflation and the overall uncertain economy.

However, management cannot provide assurance that the non-performing assets will not materially increase from the levels reported at December 31, 2022 due to the aforementioned or other factors potentially impacting our lending customers.

2022 Form 10-K

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Commercial real estate 2,292 32

Construction 3,990 —

Residential mortgage 1,866 677

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Other repossessed assets 1,937 2,931

Non-accrual debt securities — 815

Total non-performing assets (NPAs) $ 271,984 $ 245,406

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170.02 149.53

Loans past due 30 to 59 days decreased $28.8 million at December 31, 2021 as compared to December 31, 2020 partially due to two commercial real estate loans totaling $20.7 million reported in this delinquency category on December 31, 2020 that migrated to non-accrual status during 2021.

The residential mortgage loan and consumer loan delinquencies within this category decreased by $6.7 million and $3.4 million, respectively, from December 31, 2020 mainly due to improved performance and the results of our 2021 collection efforts.

Loans past due 30 to 59 days increased $2.6 million to $43.5 million at December 31, 2022 as compared to December 31, 2021.

The increase was largely driven by a few large commercial and industrial loans and higher residential mortgage loan delinquencies.

We do not believe that the increased level of residential mortgage delinquencies at December 31, 2022 represents any material negative trend within our total loan portfolio.

Loans past due 60 to 89 days increased $8.6 million to $20.8 million at December 31, 2022 as compared to December 31, 2021 mostly due to higher commercial and industrial and commercial real estate loans in this delinquency category.

2022 Form 10-K

Loans past due 60 to 89 days decreased $3.5 million to $12.2 million at December 31, 2021 as compared to December 31, 2020 mostly due to lower residential mortgage loan delinquencies, partially offset by an increase in commercial and industrial loan delinquencies in this category.

Residential loans past due 60 to 89 days decreased by $7.0 million as compared to December 31, 2020 due, in part, to loans that migrated to non-accrual status.

Loans 90 days or more past due and still accruing decreased $10.8 million to $2.8 million at December 31, 2021 as compared to December 31, 2020 partly due to premium finance loans (related to two insurance carriers) totaling $6.1 million in the commercial and industrial category reclassified to non-accrual status in 2021.

Commercial and industrial loan delinquencies increased $4.8 million at December 31, 2022 and included several loans that are well secured.

Commercial real estate loan delinquencies at December 31, 2022 included one $2.6 million matured loan in the normal process of renewal.

Loans 90 days or more past due and still accruing increased $23.8 million to $26.6 million at December 31, 2022 as compared to December 31, 2021 mainly due to increases in most loan categories.

Commercial and industrial loan delinquencies increased $17.1 million as compared to 2021 manly due to several large loans included in this category at December 31, 2021.

Commercial real estate loan delinquencies within this category at December 31, 2022 consisted of one matured loan in the normal process of renewal.

All the loans past due 90 days or more and still accruing are considered to be well secured and in the process of collection.

Non-accrual loans increased $54.9 million to $240.2 million at December 31, 2021 as compared to December 31, 2020.

The increase was partially attributable to three loans totaling $31.0 million and one loan totaling $10.3 million that migrated to non-accrual status from the 30-59 days and 60 to 89 days past due categories during 2021.

These non-accrual loans totaling $41.1 million have allocated reserv es of $2.0 millio n within our allowance for loan losses at December 31, 2021.

In addition, non-accrual construction loans increased $17.6 million at December 31, 2021 as compared to December 31, 2020 and related to one construction borrower relationship with allocated reserves of $1.4 million at December 31, 2021.

Partially offsetting these increases, non-accrual commercial and industrial loans decreased $6.8 million mostly due to full and partial charge-offs of certain taxi medallion loans during 2021.

See further discussion of our taxi medallion loan portfolio below.

Although the timing of collection is uncertain, management believes that most of the non-accrual loans at December 31, 2021, are well secured and largely collectible based on, in part, our quarterly review of collateral dependent loans and the valuation of the underlying collateral, if applicable.

Non-accrual loans increased $29.5 million to $269.8 million at December 31, 2022 as compared to December 31, 2021 mainly driven by a $56.6 million increase in construction loans mostly related to three large loan relationships.

P artially offsetting this increase, non-accrual commercial real estate and residential mortgage loans decreased $15.3 million and $10.0 million, respectively.

The decrease in non-accrual commercial real estate loans was due, in part, to the full repayment of a $12 million loan during 2022.

Although the timing of collection is uncertain, management believes that the majority of the non-accrual loans at December 31, 2022, are well secured and largely collectible based on, in part, our quarterly review of collateral dependent loans and the valuation of the underlying collateral, if applicable.

Any estimated shortfall in each collateral valuation results in an allocation of specific reserves within our allowance for credit losses for loans.

If interest on non-accrual loans had been accrued in accordance with the original contractual terms, such interest income would have amounted to approximately $21.7 million , $7.1 million and $6.2 million for the years ended December 31, 2022, 2021 and 2020, respectively;

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However, the severe decline in the market valuation of taxi medallions over the last several years has adversely affected the estimated fair valuation of these loans.

During 2021, we closely monitored the performance of our New York City and Chicago taxi medallion loans.

Due to continued negative trends in estimated fair valuations of the underlying taxi medallion collateral, a weak operating environment for ride services and uncertain borrower performance, all of the taxi medallion loans remain on non-accrual status at December 31, 2021.

At December 31, 2021, taxi medallion loans totaling $86.0 million had related reserves of $58.5 million, or 68.0 percent of such loans, within the allowance for loan losses as compared to $97.5 million of loans with related reserves of $66.4 million December 31, 2020.

Potential declines in the market valuation of taxi medallions and the stressed operating environment mainly within New York City due to the COVID-19 pandemic could negatively impact future performance of this portfolio.

For example, a 25 percent further decline in our current estimated market value of the taxi medallions would require additional allocated reserves of $5.7 million within the allowance for loan losses based upon the taxi medallion loan balances at December 31, 2021.

OREO (which consisted mostly of commercial properties) decreased to $2.3 million at December 31, 2021 as compared to $5.1 million at December 31, 2020.

OREO sales resulted in total proceeds of approximately $2.9 million and net losses of $152 thousand for the year ended December 31, 2021 as compared to total proceeds of $9.0 million and net gains of $674 thousand for the year ended December 31, 2020.

See Notes 1 and 3 to the consolidated financial statements for additional information regarding OREO and other repossessed assets, including our foreclosed asset activity.

During 2022, we closely monitored the performance of our taxi medallion loans (primarily collateralized by New York City medallions).

Due to the challenging operating environment for ride services and uncertain borrower performance, all of the taxi medallion loans remain on non-accrual status at December 31, 2022.

At December 31, 2022, taxi medallion loans totaling $66.5 million had related reserves of $42.2 million, or 63.4 percent of such loans, within the allowance for loan losses as compared to $86.0 million of loans with related reserves of $58.5 million at December 31, 2021 .

The $19.5 million decrease was mostly due to negotiated loan repayments during 2022 and, to a lesser extent, loan-charge-offs (See further details under the "Allowance for Credit Losses" section below).

Potential further declines in the market valuation of taxi medallions and the current operating environment mainly within New York City may negatively impact the performance of this portfolio.

For example, a 25 percent further decline in our current estimated market value of the taxi medallions would require additional allocated reserves of $2.9 million withi n the allowance for loan losses based upon the taxi medallion loan balances at December 31, 2022.

TDRs represent loan modifications for customers experiencing financial difficulties where a concession has been granted.

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See Note 5 to the consolidated financial statements for additional disclosures regarding our TDRs.

Loan 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, when requested by customers , all of which were insignificant.

Generally, the modification terms allow for a deferral of payments for up to 90 days, which Valley could extend for an additional 90 days.

Any extensions beyond this period were provided in accordance with applicable regulatory guidance.

Und er the applicable guidance, none of these loans were classified

2021 Form 10-K 66

as TDRs at December 31, 2021 and December 31, 2020 .

Vall ey had approximately $28 million of outstanding loans remaining in their payment deferral periods under short-term modifications representing approximately 0.1 percent of our total loan portfolio at December 31, 2021 as compared to approximately $361 million, or 1.1 percent of total loans at December 31, 2020.

Asset Concentration and Risk Elements

Most of our lendin g is in northern and central New Jersey, New York City , Long Island, Westchester County, New York, Florida and Alabama, except for smaller auto and residential mortgage loan portfolios derived from other neighborin g states of New Jersey.

Most of our lendin g is within our primary markets located in northern and central New Jersey, New York City , Long Island, Westchester County, New York and Florida, and, to a lesser extent, Alabama, California and Illinois .

As part of our business strategy, we have expanded commercial real estate lending to new customers in a few targeted states beyond our geographic footprint.

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However, each loan or group of loans made outside of our primary markets poses different geographic risks based upon the economy of that particular region.

2022 Form 10-K

For our commercial loan portfolio, comprised of commercial and industrial loans, commercial real estate loans, and construction loans, a separate credit department is responsible for risk assessment and periodically evaluating overall creditworthiness of a borrower.

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However, loans collateralized by real estate represent approximately 75 percent of total loans at December 31, 2022.

Most of the loans collateralized by real estate are in northern and central New Jersey, New York City and Florida presenting a geographical credit risk if there was a further significant broad-based deterioration in economic conditions within these regions impacted by COVID-19 pandemic.

Risk Factors -"Risks Related to the COVID-19 Pandemic".

Most of the loans collateralized by real estate are in New Jersey, New York and Florida presenting a geographical credit risk if there was a further significant broad-based deterioration in economic conditions within these regions.

Risk Factors - "Risks Related to the Operating Environment and the COVID-19 Pandemic".

Consumer loans are comprised of residential mortgage loans, home equity loans, automobile loans and other consumer loans.

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Allowance for Credit Losses

The allowance for credit losses (ACL) includes the allowance for loan losses and the reserve for unfunded credit commitments.

The allowance for credit losses (ACL) for loans includes the allowance for loan losses and the reserve for unfunded credit commitments.

Under CECL, our methodology to establish the allowance for loan losses has two basic components:

(1) a collective reserve component for estimated expected credit losses for pools of loans that share common risk characteristics and (2) an individual reserve component for loans that do not share risk characteristics, consisting of collateral dependent, TDR, and expected TDR loans.

(i) a collective reserve component for estimated expected credit losses for pools of loans that share common risk characteristics and (ii) an individual reserve component for loans that do not share risk characteristics, consisting of collateral dependent, TDR, and expected TDR loans.

Valley also maintains a separate allowance for unfunded credit commitments mainly consisting of undisbursed non-cancellable lines of credit, new loan commitments and commercial standby letters of credit.

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In estimating the component of the allowance on a collective basis we use a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by generating probability of default and loss given default metrics.

The metrics are based on the migration of loans from performing to loss by credit quality rating or delinquency categories using historical life-of-loan analysis periods for each loan portfolio pool and the severity of loss based on the aggregate net lifetime losses.

The metrics are based on the migration of loans within the commercial and industrial loan categories from performing to loss by credit quality rating or delinquency categories using historical life-of-loan analysis periods for each loan portfolio pool and the severity of loss based on the aggregate net lifetime losses.

The model's expected losses based on loss history are adjusted for qualitative factors.

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(i) the impact of the reasonable and supportable economic forecast, relative probability weightings and reversion period, (ii) other asset specific risks to the extent they do not exist in the historical loss information, and (iii) net expected recoveries of charged-off loan balances.

These adjustments are

2021 Form 10-K

based on qualitative factors not reflected in the quantitative model but are likely to impact the measurement of estimated credit losses.

These adjustments are based on qualitative factors not reflected in the quantitative model but are likely to impact the measurement of estimated credit losses.

The expected lifetime loss rate is the life of loan loss percentage from the transition matrix model plus the impact of the adjustments for qualitative factors.

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GDP, unemployment and the Case-Shiller Home Price Index.

At December 31, 2020, Valley maintained a higher combined weighting on the S-3 and S-4 alternative downside scenarios as compared to the Moody's Baseline scenario to reflect downside risk factors.

During 2021, we discontinued the use of the S-4 (most adverse) downside scenario as a result of the continued actual and expected economic recovery, increased vaccination levels, strong housing and labor market conditions during 2021, and began to incorporate the S-1 moderate upside scenario.

At December 31, 2021, Valley maintained the majority of its probability weighting to the Moody’s Baseline scenario with less emphasis on the S-3 downside and S-1 upside scenarios .

The Baseline weighting and the S-1 scenario reflect the positive economic outlook including higher GDP growth and lower unemployment levels that are expected to improve labor market conditions and promote stronger economic growth during 2022.

However, this positive outlook could still be tempered by, among other factors, the uncertainty associated with the COVID-19 pandemic, acceleration in consumer prices caused by elevated levels of inflation, as well as continuing supply chain issues contributing to a downside risk to the near-term forecast.

At December 31, 2021, the Moody's Baseline forecas t included the following specific assumptions:

• GDP expansion by over 5.4 percent in the first quarter 2022;

• Unemployment of 4.5 percent in the fourth quarter 2021 and improving to 3.9 percent in the first quarter 2022 and around 3.5 percent over the remainder of the forecast period ending fourth quarter 2023;

• Strong U.S.

economic growth driven by continued consumer spending.

Valley maintained the majority of its probability weighting to the Moody’s Baseline scenario with less emphasis on the S-3 downside and S-1 upside scenarios at December 31, 2021.

The Baseline weighting and the S-1 scenario reflected the

2022 Form 10-K

positive economic outlook including higher GDP growth and lower unemployment levels.

During 2022, we removed our modest weighting to the Moody's S-1 upside scenario and added weighting to the S-4 adverse scenario due to the greater uncertainty caused by new developments, including, but not limited to persistently high inflation, the Federal Reserve's monetary policy actions, the Russia-Ukraine war and the unknown impact of economic sanctions on Russia that could further negatively impact the supply chain in the U.S.

At December 31, 2022, our scenario weightings, as well as the standalone Moody's Baseline scenario, reflects a less optimistic outlook as compared at December 31, 2021 in terms of GDP growth, unemployment levels and potential near term negative economic impacts, given present uncertain economic conditions.

At December 31, 2022, the Moody's Baseline forecast included the following specific assumptions:

• GDP expansion by about 0.1 percent in the first quarter 2023;

• Unemployment of 3.8 percent in the first quarter 2023 and 3.9 to 4.1 percent over the remainder of the forecast period ending in the fourth quarter 2024;

• Continued concerns about increased federal debt burden pushed by rising interest rates, high inflation, and elevated house prices;

• The Federal Reserve will continue its tightening monetary policy, including an increase of 25 (to 50) basis points at its February 2023 meeting;

• Despite inflation slowing down during the fourth quarter 2022, Federal Reserve intends to keep rates higher through 2023 with no reductions until 2024.

The allowance for credit losses for loans methodology and accounting policy are fully described in Note 1 to the consolidated financial statements.

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Impact of the adoption of ASU No.

2016-13 * — 37,989 —

Allowance for purchased credit deteriorated (PCD) loans * 6,542 61,643 —

Beginning balance, adjusted 375,702 351,354 264,236

Allowance for purchased credit deteriorated (PCD) loans (2)

70,319 6,542 —

Loans charged-off:

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(1) The adjustment for the year ended December 31, 2020 represents an increase in the allowance for credit losses for loans as a result of the adoption of ASU 2016-13 effective January 1, 2020.

See Note 5 to the consolidated financial statements for additional information regarding our allowance for credit losses for loans.

It includes allowance for PCD loans totaling $61.6 million.

(2) Represents the allowance for acquired PCD loans.

For 2022, the allowance for acquired PCD loans is net of PCD loan charge-offs totaling $62.4 million in the second quarter 2022.

2022 Form 10-K

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Total consumer 0.03 0.01 0.22

Our net loan charge-offs decreased $22.9 million to $15.1 million in 2021 as compared to $38.0 million in 2020 mainly due to lower net charge-offs related to borrowers impacted by the COVID-19 pandemic (largely within the commercial and industrial loan category).

Partial loan charge-offs of taxi medallion loans totaled $4.8 million and $12.5 million, respectively, within the commercial and industrial loan category for the years ended December 31, 2021 and 2020.

The overall level of net loan charge-offs (as presented in the above table) continued to trend within management's expectations for the credit quality of the loan portfolio for 2021.

While we have a positive outlook for the future performance of the loan portfolio, there can be no assurance that our levels of net charge-offs will not deteriorate in 2022, given the uncertain path of the recovery from the COVID-19 pandemic.

Our net loan charge-offs increased $4.0 million to $19.1 million in 2022 as compared to $15.1 million in 2021.

Gross loan charge-offs (excluding $62.4 million of Day 1 PCD loan charge-offs related to the Bank Leumi USA acquisition) $41.9 million for the year ended December 31, 2022 partly related to the $20.8 million partial loan charge-off of a single non-performing commercial and industrial loan participation during the fourth quarter 2022.

The partially charged-off loan had related allowance reserves totaling $30.0 million at September 30, 2022 (i.e., prior to the fourth quarter 2022 charge-off).

Gross loan charge-offs also included partial charge-offs of taxi medallion loans totaling $6.0 million and $4.8 million for the years ended December 31, 2022 and 2021, respectively, within the commercial and industrial loan category.

The increase in gross recoveries during the year ended December 31, 2022 as compared to 2021 was mainly driven by two commercial and industrial loan relationships with combined recoveries totaling $11.2 million.

The overall level of net loan charge-offs (as presented in the above table) continued to trend well within management's expectations for the credit quality of the loan portfolio for 2022.

Given high inflation and the uncertain path of the future economy, there can be no assurance that our levels of net charge-offs will not deteriorate in 2023.

2022 Form 10-K

The following table summarizes the allocation of the allowance for credit losses to specific loan portfolio categories for the years ended December 31,:

The following table summarizes the allocation of the allowance for credit losses to specific loan portfolio categories for the years ended December 31, 2022 and 2021:

Allocation Percent of Loan Category to total loans Allowance

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The allowance for credit losses for loans, comprised of our allowance for loan losses and unfunded credit commitments (including letters of credit), as a percentage of total loans was 1.03 percent at December 31, 2022 and 1.10 percent at December 31, 2021.

The allowance for credit losses for loans increased $24.3 million at December 31, 2021 as compared to December 31, 2020 due, in large part, to higher quantitative reserves, particularly for non-owner occupied loans within the commercial real estate loan portfolio during 2021.

During the fourth quarter 2021, we also recorded a $6.5 million increase to the allowance of credit losses for loans related to PCD loans acquired from Westchester and our provision for credit losses for loans included $6.2 million for non-PCD loans and unfunded credit commitments acquired from Westchester.

These items were partially offset by decreases in both the economic forecast and non-economic qualitative reserve components of our CECL model largely due to improved economic outlook and lower levels of uncertainty related to the impact of the COVID-19 pandemic on credit quality of our loan portfolio at December 31, 2021 as compared to December 31, 2020.

The allowance for credit losses for loans increased $107.6 million at December 31, 2022 as compared to December 31, 2021 due, in large part, to (i) a net $70.3 million allowance for credit losses for PCD loans acquired from Bank Leumi USA recorded at the acquisition date, (ii) higher provision for credit losses for loans during 2022, and (iii) overall, an increased economic forecast reserve component of our CECL model (driven by a more pessimistic outlook incorporated into the updated Moody's scenarios), partially offset by (iv) net charge-offs and (v) a decline in expected quantitative loss experience largely within certain segments of the commercial real estate portfolio.

The provision for credit losses for loans totaled $56.3 million and $32.9 million at December 31, 2022 and 2021, respectively.

The increase in 2022 provision was primarily due to a $36.3 million and $4.7 million of provision related to non-PCD loans and unfunded credit commitments, respectively, acquired from Bank Leumi USA.

See Note 5 to the consolidated financial statements for additional information regarding our allowance for credit losses for loans.

Loan Repurchase Contingencies

We engage in the origination of residential mortgages for sale into the secondary market.

Our loan sales totaled approximately $1.2 billion, $1.0 billion and $935 million for 2021, 2020 and 2019, respectively.

Over the last three years, loan sales increased significantly, as new loan originations and refinance activity strengthened due to the favorably low interest rate environment complemented, from time to time, by sales from the held for investment portfolio.

Our loan sales totaled approximately $385.5 million, $1.2 billion and $1.0 billion for 2022, 2021 and 2020, respectively.

The level of loan sales is impacted by several factors, including consumer demand and preferences for certain mortgage products and our management of the interest rate risk and the mix of the interest earning assets on our balance sheet.

During 2021 and 2020, loan sales were significantly higher than 2022, as new and refinanced loan originations were heavily supported by the favorably low interest rate environment.

In connection with loan sales, we make representations and warranties, which, if breached, may require us to repurchase such loans, substitute other loans or indemnify the purchasers of such loans for actual losses incurred due to such loans.

However, the performance of our loans sold has been historically strong due to our strict underwriting standards and procedures.

Over the past several years, we have experienced a nominal amount of repurchase requests, only a few of which have actually resulted in repurchases by Valley (only five loan repurcha ses in 2021 and two loan repurchases in 2020).

Over the past several years, we have experienced a nominal amount of repurchase requests, only a few of which have actually resulted in repurchases by Valley (only nine loan repurchases in 2022 and five loan repurchases in 2021 ).

None of the loan repurchases resulted in material loss.

Accordingly, no reserves pertaining to loans sold were established on our consolidated financial statements at December 31, 2021 and 2020.

Ac cordingly, no reserves pertaining to loans sold were established on our consolidated financial statements at December 31, 2022 and 2021.

Risk Factors - “We may incur future losses in connection with repurchases and indemnification payments related to mortgages that we have sold into the secondary market” of this report for additional information.

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At December 31, 2022 and 2021, shareholders’ equity totaled approximately $6.4 billion and $5.1 billion, or 11.1 percent and 11.7 percent of total assets, respectively.

During 2021, total shareholders’ equity increased by $491.9 million primarily due to (i) net income of $473.8 million, (ii) the additional capital issued in the Westchester acquisition totaling $211.1 million, (iii) a $35.4 million increase attributable to the effect of share issuances under our stock incentive plan.

These positive changes were partially offset by (i) cash dividends declared on common and preferred stock totaling a combined $195.1 million (ii) a net loss of $10.2 million recorded in accumulated comprehensive loss and (ii) repurchases of $23.1 million or our common stock with these shares held as treasury stock.

During 2022, total shareholders’ equity increased by $1.3 billion primarily due to (i) net income of $568.9 million,

2022 Form 10-K

(ii) the additional capital issued in the Bank Leumi USA acquisition totaling $1.1 billion, (iii) an $18.3 million increase attributable to the effect of share issuances under our stock incentive plan.

These positive changes were partially offset by (i) cash dividends declared on common and preferred stock totaling a combined $228.7 million (ii) a net loss of $146.1 million recorded in accumulated comprehensive loss and (ii) repurchases of $13.5 million of our common stock with these shares held as treasury stock.

Valley and Valley National Bank are subject to the regulatory capital requirements administered by the Federal Reserve Bank and the OCC.

Quantitative measures established by regulation to ensure capital adequacy require Valley and Valley National Bank to maintain minimum amounts and ratios of common equity Tier 1 capital, total and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets, as defined in the regulations.

We are required to maintain common equity Tier 1 capital to risk-weighted assets ratio of 4.5 percent, Tier 1 capital to risk-weighted assets of 6.0 percent, ratio of total capital to risk-weighted assets of 8.0 percent, and minimum leverage ratio of 4.0 percent, plus a 2.5 percent capital conservation buffer added to the minimum requirements for capital adequacy purposes.

We are required to maintain common equityTier 1 capital to risk-weighted assets ratio of 4.5 percent, Tier 1 capital to risk-weighted assets of 6.0 percent, ratio of total capital to risk-weighted assets of 8.0 percent, and minimum leverage ratio of 4.0 percent, plus a 2.5 percent capital conservation buffer added to the minimum requirements for capital adequacy purposes.

As of December 31, 2022 and 2021, Valley and Valley National Bank exceeded all capital adequacy requirements.

See Note 17 to the consolidated financial statements for Valley’s and Valley National Bank’s regulatory capital positions and capital ratios at December 31, 2022 and 2021.

For regulatory capital purposes, in accordance with the Federal Reserve Board’s final interim rule as of April 3, 2020, 100 percent of the CECL Day 1 impact to shareholders' equity equaling $28.2 million after-tax was deferred for a two-year period ending January 1, 2022, and will be phased in on a pro-rata basis over a three-year period ending January 1, 2025.

Additionally, 25 percent, or $19.1 million on an after tax basis of the reserve build (i.e., provision for credit losses less net charge-offs) since CECL adoption through December 31, 2021 is being phased in over the same time frame.

We estimate these deferrals when fully phased in will reduce our risk based capital ratios by approximately 14 basis points.

For regulatory capital purposes, in accordance with the Federal Reserve Board’s final interim rule as of April 3, 2020, we deferred 100 percent of the CECL Day 1 impact to shareholders' equity plus 25 percent of the reserve build (i.e., provision for credit losses less net charge-offs) for a two-year period ending January 1, 2022.

On January 1, 2022, the deferral amount totaling $47.3 million after-tax started to be phased-in by 25 percent and will increase 25 percent per year until fully phased-in on January 1, 2025.

As of December 31, 2022, approximately $11.8 million of the $47.3 million deferral amount was recognized as a reduction to regulatory capital and, as a result, decreased our risk-based capital ratios by approximately 3 basis points.

Typically, our primary source of capital growth is through retention of earnings.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis