What changed in this filing

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Item 1. Financial Statements

2023-05-08 compared with 2022-11-08 · 342 added, 625 removed, 1064 unchanged (48% of the section changed)

3 unchanged sentences

(in thousands, except for share data)

September 30,

2023 December 31,

6 unchanged sentences

Available for sale debt securities 1,259,236 1,261,397

Held to maturity debt securities (net of allowance for credit losses of $ 1,696 at September 30, 2022 and $ 1,165 at December 31, 2021)

Held to maturity debt securities (net of allowance for credit losses of $ 1,633 at March 31, 2023 and $ 1,646 at December 31, 2022)

3,845,579 3,827,338

26 unchanged sentences

50,000,000 authorized shares:

Series A ( 4,600,000 shares issued at September 30, 2022 and December 31, 2021)

Series A ( 4,600,000 shares issued at March 31, 2023 and December 31, 2022)

111,590 111,590

Series B ( 4,000,000 shares issued at September 30, 2022 and December 31, 2021)

Series B ( 4,000,000 shares issued at March 31, 2023 and December 31, 2022)

98,101 98,101

Common stock ( no par value, authorized 650,000,000 shares;

issued 507,896,910 and 423,034,027 shares at September 30, 2022 and December 31, 2021)

issued 507,896,910 shares at March 31, 2023 and December 31, 2022)

178,186 178,185

2 unchanged sentences

Accumulated other comprehensive loss ( 143,647 ) ( 164,002 )

Treasury stock, at cost ( 1,545,408 common shares at September 30, 2022 and 1,596,959 common shares at December 31, 2021)

Treasury stock, at cost ( 134,552 common shares at March 31, 2023 and 1,522,432 common shares at December 31, 2022)

( 1,291 ) ( 21,748 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except for share data)

(in thousands, except for per share data)

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Interest Income

14 unchanged sentences

Net Interest Income 436,020 317,669

Provision (credit) for credit losses for held to maturity securities 188 35 531 ( 353 )

Provision for credit losses for available for sale and held to maturity securities 4,987 57

Provision for credit losses for loans 9,450 3,500

3 unchanged sentences

Insurance commissions 2,420 1,859

Capital markets 10,892 14,360

Service charges on deposit accounts 10,476 6,212

12 unchanged sentences

Professional and legal fees 16,814 14,749

Loss on extinguishment of debt — — — 8,406

Amortization of tax credit investments 4,253 2,896

6 unchanged sentences

Net Income Available to Common Shareholders $ 142,677 $ 113,556

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (continued)

(in thousands, except for share data)

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Earnings Per Common Share:

1 unchanged sentence

Diluted 0.28 0.27

Cash Dividends Declared per Common Share 0.11 0.11 0.33 0.33

Weighted Average Number of Common Shares Outstanding:

Basic 506,342,200 406,824,160 478,383,342 405,986,114

Diluted 508,690,997 409,238,001 480,625,357 408,509,767

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net income $ 146,551 $ 116,728

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Unrealized gains and losses on available for sale securities

Net losses arising during the period ( 57,242 ) ( 3,953 ) ( 148,403 ) ( 15,860 )

Net gains (losses) arising during the period 17,170 ( 38,892 )

Less reclassification adjustment for net gains included in net income — ( 10 )

1 unchanged sentence

Unrealized gains and losses on derivatives (cash flow hedges)

Net (losses) gains on derivatives arising during the period ( 85 ) ( 96 ) 110 ( 69 )

Less reclassification adjustment for net (gains) losses included in net income ( 13 ) 743 293 1,928

Net gains on derivatives arising during the period 2,798 218

Less reclassification adjustment for net losses included in net income 379 386

Total 3,177 604

Defined benefit pension plan

Defined benefit pension and postretirement benefit plans

Amortization of actuarial net loss 8 132

Total other comprehensive loss ( 57,220 ) ( 3,640 ) ( 147,625 ) ( 13,657 )

Total other comprehensive income (loss) 20,355 ( 38,166 )

Total comprehensive income $ 166,906 $ 78,562

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the Nine Months Ended September 30, 2022

For the Three Months Ended March 31, 2023

Common Stock Accumulated

6 unchanged sentences

Balance - December 31, 2022 $ 209,691 506,374 $ 178,185 $ 4,980,231 $ 1,218,445 $ ( 164,002 ) $ ( 21,748 ) $ 6,400,802

Adjustment due to the adoption of ASU 2022-02 — — — — 990 — — 990

Balance - January 1, 2023 209,691 506,374 178,185 4,980,231 1,219,435 ( 164,002 ) ( 21,748 ) 6,401,792

Net income — — — — 146,551 — — 146,551

Other comprehensive loss, net of tax

— — — — — ( 38,166 ) — ( 38,166 )

Other comprehensive income, net of tax — — — — — 20,355 — 20,355

Cash dividends declared:

7 unchanged sentences

— 1,061 1 ( 12,569 ) ( 3,994 ) — 16,057 ( 505 )

Purchase of treasury stock — ( 1,015 ) — — — — ( 13,517 ) ( 13,517 )

Common stock issued — 327 — — ( 650 ) — 4,400 3,750

Balance - March 31, 2023 $ 209,691 507,762 $ 178,186 $ 4,967,662 $ 1,300,980 $ ( 143,647 ) $ ( 1,291 ) $ 6,511,581

Net income — — — — 96,413 — — 96,413

Other comprehensive loss, net of tax — — — — — ( 52,239 ) — ( 52,239 )

Cash dividends declared:

Preferred stock, Series A, $ 0.39 per share

— — — — ( 1,797 ) — — ( 1,797 )

Preferred stock, Series B, $ 0.34 per share

— — — — ( 1,375 ) — — ( 1,375 )

Common stock, $ 0.11 per share

— — — — ( 56,211 ) — — ( 56,211 )

Effect of stock incentive plan, net

— 72 1 5,125 ( 109 ) — 892 5,909

Common stock issued in acquisition — 84,863 29,702 1,088,127 — — — 1,117,829

Balance - June 30, 2022 209,691 506,329 178,185 4,965,488 982,146 ( 108,337 ) ( 22,260 ) 6,204,913

Net income — — — — 178,119 — — 178,119

Other comprehensive loss, net of tax — — — — — ( 57,220 ) — ( 57,220 )

Cash dividends declared:

Preferred stock, Series A, $ 0.39 per share

— — — — ( 1,797 ) — — ( 1,797 )

Preferred stock, Series B, $ 0.34 per share

— — — — ( 1,375 ) — — ( 1,375 )

Common stock, $ 0.11 per share

— — — — ( 56,242 ) — — ( 56,242 )

Effect of stock incentive plan, net

— 23 — 7,244 ( 13 ) — 200 7,431

Balance - September 30, 2022 $ 209,691 506,352 $ 178,185 $ 4,972,732 $ 1,100,838 $ ( 165,557 ) $ ( 22,060 ) $ 6,273,829

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) (continued)

For the Nine Months Ended September 30, 2021

For the Three Months Ended March 31, 2022

Common Stock Accumulated

16 unchanged sentences

Effect of stock incentive plan, net — 972 — ( 10,799 ) ( 5,173 ) — 13,220 ( 2,752 )

Purchase of treasury stock — ( 1,015 ) — — — — ( 13,517 ) ( 13,517 )

Balance - March 31, 2022 $ 209,691 421,394 $ 148,482 $ 3,872,236 $ 945,225 $ ( 56,098 ) $ ( 23,152 ) $ 5,096,384

Net income — — — — 120,512 — — 120,512

Other comprehensive loss, net of tax — — — — — ( 730 ) — ( 730 )

Cash dividends declared:

Preferred stock, Series A, $ 0.39 per share

— — — — ( 1,797 ) — — ( 1,797 )

Preferred stock, Series B, $ 0.34 per share

— — — — ( 1,375 ) — — ( 1,375 )

Common stock, $ 0.11 per share

— — — — ( 45,093 ) — — ( 45,093 )

Effect of stock incentive plan, net — 286 115 6,688 ( 130 ) — ( 53 ) 6,620

Balance - June 30, 2021 209,691 406,084 142,550 3,658,636 744,768 ( 17,735 ) ( 103 ) 4,737,807

Net income — — — — 122,580 — — 122,580

Other comprehensive income, net of tax — — — — — ( 3,640 ) — ( 3,640 )

Cash dividends declared:

Preferred stock, Series A, $ 0.39 per share

— — — — ( 1,797 ) — — ( 1,797 )

Preferred stock, Series B, $ 0.34 per share

— — — — ( 1,375 ) — — ( 1,375 )

Common stock, $ 0.11 per share

— — — — ( 45,228 ) — — ( 45,228 )

Effect of stock incentive plan, net — 1,230 426 13,831 ( 168 ) — 62 14,151

Balance - September 30, 2021 $ 209,691 407,314 $ 142,976 $ 3,672,467 $ 818,780 $ ( 21,375 ) $ ( 41 ) $ 4,822,498

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net income $ 146,551 $ 116,728

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization 11,515 7,486

3 unchanged sentences

Amortization of other intangible assets 10,519 4,437

Losses (gains) on securities transactions, net 1,058 ( 1,263 )

Losses on available for sale and held to maturity debt securities, net 24 9

Proceeds from sales of loans held for sale 27,743 204,628

1 unchanged sentence

Originations of loans held for sale ( 26,588 ) ( 144,485 )

Losses (gains) on sales of assets, net 372 ( 380 )

Loss on extinguishment of debt — 8,406

(Gains) losses on sales of assets, net ( 125 ) 64

Net change in:

1 unchanged sentence

Trading debt securities 6,583 26,391

Lease right of use assets 3,600 766

Cash surrender value of bank owned life insurance ( 2,584 ) ( 2,046 )

2 unchanged sentences

Accrued expenses and other liabilities ( 147,705 ) 265,029

Net cash provided by operating activities 1,230,598 583,042

Net cash (used in) provided by operating activities ( 269,682 ) 496,003

Cash flows from investing activities:

8 unchanged sentences

Purchases — ( 15,000 )

Sales 12,846 91,978

Maturities, calls and principal repayments 22,264 73,008

1 unchanged sentence

Proceeds from sales of real estate property and equipment 125 5,692

Proceeds from sales of loans held for investment — 4,498

Purchases of real estate property and equipment ( 18,263 ) ( 22,749 )

Cash distribution from tax credit investments 2,500 —

Cash and cash equivalent acquired in acquisitions, net — ( 8,607 )

3 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from financing activities:

8 unchanged sentences

Other, net ( 13 ) ( 180 )

Net cash provided by financing activities 2,771,384 329,467

Net cash provided by (used in) financing activities 6,811,981 ( 229,710 )

Net change in cash and cash equivalents 4,757,741 ( 1,319,000 )

8 unchanged sentences

Lease right of use assets obtained in exchange for operating lease liabilities 7,461 6,836

Acquisitions:

Non-cash assets acquired:

Equity securities 6,239 —

Investment securities available for sale 505,928 —

Investment securities held to maturity 806,627 —

Loans, net 5,844,070 —

Premises and equipment, net 38,827 —

Lease right of use assets 49,434 —

Bank owned life insurance 126,861 —

Accrued interest receivable 25,717 —

Goodwill 407,522 —

Other intangible assets, net 159,587 —

Other assets 158,352 —

Total non-cash assets acquired $ 8,129,164 $ —

Liabilities assumed:

Deposits 7,029,997 —

Short-term borrowings 103,794 —

Lease liabilities 79,844 —

Accrued expenses and other liabilities 119,240 —

Total liabilities assumed $ 7,332,875 $ —

Non-cash net assets acquired — 8,607

Net cash and cash equivalents acquired in acquisition $ 321,540 $ —

Common stock issued in acquisition $ 1,117,829 $ —

See accompanying notes to consolidated financial statements.

2 unchanged sentences

Basis of Presentation

The unaudited consolidated financial statements of Valley National Bancorp, a New Jersey corporation (Valley), include the accounts of its commercial bank subsidiary, Valley National Bank (the Bank), and all other entities in which Valley has a controlling financial interest.

All inter-company transactions and balances have been eliminated.

The unaudited consolidated financial state ments of Valley National Bancorp, a New Jersey Corporation (Valley) include the accounts of Valley National Bank (the Bank) and all other entities in which Valley has a controlling financial interest.

All inter-company transactions and balances have been e liminated.

The accounting and reporting policies of Valley conform to U.S.

2 unchanged sentences

In accordance with applicable accounting standards, Valley does not consolidate statutory trusts established for the sole purpose of issuing trust preferred securities and related trust common securities.

Certain prior period amounts have been reclassified to conform to the current presentation, including changes to our segment reporting structure, as further discussed in Note 9 and Note 15.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly Valley’s financial position, results of operations, changes in shareholders' equity and cash flows at September 30, 2022 and for all periods presented have been made.

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year or any subsequent interim period.

Certain prior period amounts have been reclassified to conform to the current presentation.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly Valley’s financial position, results of operations, changes in shareholders' equity and cash flows at March 31, 2023 and for all periods presented have been made.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the entire fiscal year or any subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

21 unchanged sentences

owned approximately 14 percent of Valley's common stock as of April 1, 2022 .

The transaction was accounted for under the acquisition method of accounting and accordingly the results of Bank Leumi USA's operations have been included in Valley's consolidated financial statements for the three and nine months ended September 30, 2022 from the date of the acquisition .

Merger expenses, primarily consisting of salary and employee benefit expense, totaled $ 4.1 million and $ 4.4 million for the three months ended March 31, 2023 and 2022, respectively.

The following table sets forth assets acquired and liabilities assumed in the Bank Leumi USA acquisition, at their estimated fair values as of the closing date of the transaction:

28 unchanged sentences

Cash paid in acquisition 113,441

The determination of the fair value of the assets acquired and liabilities assumed required management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change.

The fair value estimates are subject to change for up to one year after the closing date of the transaction if additional information (existing at the date of closing) relative to closing date fair values becomes available .

Fair Value Measurement of Assets Acquired and Liabilities Assumed

Described below are the methods used to determine the fair values of the significant assets acquired and liabilities assumed in the Bank Leumi USA acquisition.

Cash and cash equivalents.

The estimated fair values of cash and cash equivalents approximate their stated face amounts, as these financial instruments are either due on demand or have short-term maturities.

Investment securities .

The estimated fair value of equity securities, which represents a privately held Community Reinvestment Act (CRA) fund, was measured at net asset value (NAV).

Other investment securities acquired from Bank Leumi USA were classified as available for sale and held to maturity debt securities based on Valley's intent at the acquisition date.

Their estimated fair values were calculated utilizing Level 2 inputs similar to the valuation techniques used for Valley's investment portfolios detailed in Note 6.

The acquired loan portfolio was recorded at its estimated fair value based on a discounted cash flow methodology.

The acquired loan portfolio was segregated into categories for valuation purposes primarily based on loan type and loan risk rating.

The estimated fair value incorporates adjustments related to market loss assumptions and prevailing market interest rates for comparable assets and other market factors such as liquidity from a market participant perspective.

Management estimated the cash flows expected to be collected at the acquisition date by using valuation models that incorporated loan contractual characteristics (such as payment type, amortization type, and term to maturity) as well as estimates of key valuation assumptions (such as prepayment speeds, default rates, and loss severity rates).

The expected cash flows from the acquired loan portfolios were discounted to present value based on estimated market rates.

The market rates were estimated using a buildup approach based on the following components:

funding cost, servicing cost, and consideration of liquidity premium.

In addition, coupon rates for recently originated loans and available market data regarding origination rates were also considered in the analysis.

The methods used to estimate the Level 3 fair values of loans are sensitive to the assumptions and estimates used.

While management attempted to use assumptions and estimates that best reflected the acquired loan portfolios and current market conditions, a greater degree of subjectivity is inherent in these values than in those determined in active markets.

The acquired loans were also evaluated upon acquisition to determine whether they represented purchased credit-deteriorated (PCD) loans, defined as loans which have experienced a more-than-insignificant deterioration in credit quality since origination.

Valley considered a variety of factors in assessing loans the PCD classification, including but not limited to risk grades, delinquency, non-performing status, current or previous troubled debt restructurings, watch list credits and other qualitative factors that indicated a deterioration in credit quality since origination.

For PCD loans, an initial allowance was determined based on Valley’s CECL methodology and was added to the acquisition date fair value of each PCD loan to establish its initial amortized cost basis.

The difference between the unpaid principal balance of loans and the calculated amortized cost basis resulted in a net non-credit discount totaling $ 18.8 million.

This net discount will be accreted into interest income over the loan's remaining life using the effective interest method .

The following table provides a reconciliation of the unpaid principal balance and fair value of loans identified as PCD acquired from Bank Leumi USA:

April 1, 2022

($ in thousands)

Unpaid Principal Balance of PCD loans $ 1,922,272

Allowance for credit losses at acquisition * ( 70,319 )

Non-credit discount at acquisition ( 18,814 )

Fair value of acquired PCD loans $ 1,833,139

* Represents the initial reserve for PCD loans, reported net of an additional $ 62.4 million charge-offs recognized at the date of acquisition in accordance with Valley's charge-off policy.

Other intangible assets.

Other intangible assets recorded consist of core deposit intangibles (CDI) and other acquired client relationships.

CDI assets are measures of the value of non-maturity checking, savings, NOW and

money market customer deposits that are acquired in a business combination.

The fair value for CDI was estimated based on a discounted cash flow methodology considering expected customer attrition rates, net maintenance cost of the deposit base, alternative costs of funds, and the interest costs associated with the customer deposits.

The CDI is amortized using an accelerated amortization method over an estimated useful life of 10 years.

For other acquired client relationships, fair value is measured using the multi-period excess earnings methodology under the income approach.

This method measures the future economic income that can be attributed to the existing client relationships acquired, after considering revenue and expense assumptions, expected client attrition rates, and subtracting returns for other complementary assets that contribute to the income over their expected remaining useful lives.

The resulting net cash flows are discounted to present value using an estimated intangible asset discount rate.

The other acquired client relationships are amortized using an accelerated amortization method over an estimated remaining useful life of 14 years .

The fair values of deposit liabilities with no stated maturity (i.e., non-interest bearing accounts and savings, NOW and money market accounts) are equal to the carrying amounts payable on demand.

The fair values of certificates of deposit represent contractual cash flows, discounted to present value using interest rates currently offered on deposits with similar characteristics and remaining maturities.

Supplemental Pro Forma Financial Information (Unaudited).

The following table summarizes supplemental pro forma financial information giving effect to the merger as if it had been completed on January 1, 2021:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

Net interest income $ 453,992 $ 371,178 $ 1,261,442 $ 1,099,597

Non-interest income 56,194 58,931 175,488 164,458

Net income 178,119 139,666 478,891 351,489

The supplemental pro forma financial information does not necessarily reflect the results of operations that would have occurred had Valley merged with Bank Leumi USA on January 1, 2021.

Costs savings and other business synergies related to the merger are not included in the supplemental pro forma financial information.

Other Recent Acquisitions

L andmark Insurance of the Palm Beaches .

On February 1, 2022, the Bank's insurance agency subsidiary, Valley Insurance Services, acquired Landmark Insurance of the Palm Beaches Inc.

(Landmark) agency.

The purchase price included $ 8.6 million in cash and $ 1.0 million in contingent consideration.

Goodwill and other intangible assets totaled $ 4.4 million and $ 6.2 million, respectively.

The transaction was accounted for under the acquisition method of accounting and accordingly the results of Landmark's operations have been included in Valley's consolidated financial statements for the three and nine months ended September 30, 2022 from the date of acquisition.

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.

As of December 1, 2021, 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 common shareholders of Westchester received 229.645 shares of Valley common stock for each Westchester share they owned prior to the merger.

The total consideration for the merger was $ 211.1 million, consisting of approximately 15.7 million shares of Valley common stock.

During the nine months ended September 30, 2022, Valley revised the estimated fair values of the acquired assets as of the acquisition date of Westchester based upon additional information obtained that existed as of December 1, 2021.

The adjustments related to the fair value of deferred tax assets and resulted in a $ 5.0 million increase in goodwill (see Note 9 for more information).

If additional information (that existed as of the acquisition date)

becomes available, the fair value estimates for acquired assets and assumed liabilities are subject to change for up to one year after the acquisition date.

Merger expenses mainly related to the Bank Leumi USA acquisition ab ove totaled $ 4.7 million and $ 63.8 million for the three and nine months ended September 30, 2022, respectively.

The merger expenses largely consisted of salaries and benefits expense;

technology, furniture and equipment expense;

and professional and legal fees within non-interest expense on the consolidated statements of income.

Valley incurred merger related expenses of $ 1.3 million during the three and nine months ended September 30, 2021.

Incremental merger expenses related to this acquisition are expected to be incurred in future periods, including professional fees, technology and other expenses related to back office consolidation of the Bank operations.

There were no changes to the fair value estimates during the three months ended March 31, 2023.

Dudley Ventures.

On October 8, 2021, Valley acquired certain subsidiaries of Dudley Ventures, 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 and fixed future stock consideration totaling $ 3.75 million, which resulted in the issuance of 327,083 shares of Valley common stock to the former principals of Dudley Ventures in February 2023.

Earnings Per Common Share

The following table shows the calculation of both basic and diluted earnings per common share for the three and nine months ended September 30, 2022 and 2021:

The following table shows the calculation of both basic and diluted earnings per common share for the three months ended March 31, 2023 and 2022:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands, except for share data)

(in thousands, except for share and per share data)

Net income available to common shareholders $ 142,677 $ 113,556

9 unchanged sentences

Common stock options with exercise prices that exceed the average market price per share of Valley’s common stock during the periods presented may have an anti-dilutive effect on the diluted earnings per common share calculation and therefore are excluded from the diluted earnings per share calculation along with restricted stock units.

Potential anti-dilutive weighted common shares w ere immaterial for the three and nine months ended September 30, 2022 and 2021.

Potential anti-dilutive weighted common shares totaled approximately 1.6 million and 113 thousand for the three months ended March 31, 2023 and 2022, respectively.

Accumulated Other Comprehensive Loss

The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the three and nine months ended September 30, 2022:

Components of Accumulated Other Comprehensive Loss Total

Comprehensive

Unrealized Gains

and Losses on

Available for Sale

(AFS) Securities Unrealized Gains

and Losses on

Derivatives Defined

(in thousands)

Balance at June 30, 2022 $ ( 81,985 ) $ ( 831 ) $ ( 25,521 ) $ ( 108,337 )

Other comprehensive loss before reclassification ( 57,242 ) ( 85 ) — ( 57,327 )

Amounts reclassified from other comprehensive (loss) income ( 12 ) ( 13 ) 132 107

Other comprehensive (loss) income, net ( 57,254 ) ( 98 ) 132 ( 57,220 )

Balance at September 30, 2022 $ ( 139,239 ) $ ( 929 ) $ ( 25,389 ) $ ( 165,557 )

The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the three months ended March 31, 2023:

Components of Accumulated Other Comprehensive Loss Total

5 unchanged sentences

and Losses on

Derivatives Defined

Derivatives Defined Benefit

Pension and Postretirement Benefit Plans

(in thousands)

Balance at December 31, 2022 $ ( 127,818 ) $ 2,233 $ ( 38,417 ) $ ( 164,002 )

Other comprehensive (loss) gain before reclassification ( 148,403 ) 110 — ( 148,293 )

Amounts reclassified from other comprehensive (loss) income ( 22 ) 293 397 668

Other comprehensive (loss) income, net ( 148,425 ) 403 397 ( 147,625 )

Balance at September 30, 2022 $ ( 139,239 ) $ ( 929 ) $ ( 25,389 ) $ ( 165,557 )

The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three and nine months ended September 30, 2022 and 2021:

Other comprehensive gain before reclassification 17,170 2,798 — 19,968

Amounts reclassified from other comprehensive income — 379 8 387

Other comprehensive income, net 17,170 3,177 8 20,355

Balance at March 31, 2023 $ ( 110,648 ) $ 5,410 $ ( 38,409 ) $ ( 143,647 )

The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three months ended March 31, 2023 and 2022:

Amounts Reclassified from

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

Components of Accumulated Other Comprehensive Loss 2023 2022 Income Statement Line Item

3 unchanged sentences

Total net of tax — 10

Unrealized gains (losses) on derivatives (cash flow hedges) before tax 21 ( 1,044 ) ( 405 ) ( 2,708 ) Interest expense

Unrealized losses on derivatives (cash flow hedges) before tax ( 531 ) ( 542 ) Interest expense

Tax effect 152 156

Total net of tax ( 379 ) ( 386 )

Defined benefit pension plan:

Defined benefit pension and postretirement benefit plans:

Amortization of actuarial net loss ( 11 ) ( 183 ) *

6 unchanged sentences

Accounting Standards Update (ASU) No.

2021-01 "Reference Rate Reform (Topic 848)" extends some o f Accounting Standards Codification Topic 848’s optional expedients to derivative contracts impacted by the discounting transition, including for derivatives that do not reference LIBOR or other reference rates that are expected to be discontinued.

2021-01 is effective for all entities immediately upon issuance and may be elected retrospectively to eligible modifications as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications made on or after any date within the interim period including January 7, 2021 and it can be applied through December 31, 2022, similar to the other reference rate reform relief provided under Topic 848.

2021-01 is not expected to have a significant impact on Valley’s consolidated financial statements.

2021-05 "Lessors – Certain Leases with Variable Lease Payments" updates guidance in ASC 842, Leases and requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an

operating lease at lease commencement if:

(i) the lease would have been classified as a sales-type lease or direct financing lease under ASC 842 classification criteria;

and (ii) the lessor would have recognized a selling loss at lease commencement.

Valley adopted ASU No.

2021-05 on January 1, 2022, and the new guidance did not have a significant impact on Valley’s consolidated financial statements.

New Accounting Guidance Issued in 2022

2022-01, “Derivatives and Hedging (Topic 815):

2 unchanged sentences

2022-01 also clarifies that no assets may be added to a closed portfolio once it is designated in a portfolio layer method hedge.

2022-01 will be effective for Valley on January 1, 2023.

Valley is currently evaluating the impact of ASU No.

2022-01 but it is not expected to have a significant impact on Valley's consolidated financial statements.

Valley adopted ASU No.

2022-01 on January 1, 2023 and the guidance did not have a significant impact on Valley's consolidated financial statements.

2022-02, “Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures” eliminates the troubled debt restructuring (TDR) accounting model for creditors, such as Valley, that have adopted Topic 326, “Financial Instruments – Credit Losses.” ASU No.

2022-02 will require all loan modifications to be accounted for under the general loan modification guidance in Subtopic 310-20.

On a prospective basis, entities will also be subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty.

Public business entities within the scope of the Topic 326 vintage disclosure requirements also will be required to prospectively disclose current-period gross write-off information by vintage.

However, gross recoveries will not be required.

2022-02 will be effective for Valley on January 1, 2023, with early adoption permitted.

Valley is currently evaluating the impact of ASU No.

2022-02 on its consolidated financial statements.

2022-03, "Fair Value Measurement of Equity Securities subject to Contractual Sale Restrictions” updates guidance in ASC 820, Fair Value Measurement and clarifies that a contractual sale restriction should not be considered in measuring fair value.

It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities including (i) the nature and remaining duration of the restriction;

(ii) the circumstances that could cause a lapse in restrictions;

and (iii) the fair value of the securities with contractual sale restrictions.

2022-03 will be effective for Valley on January 1, 2024, and it can be applied prospectively, with any adjustments resulting from adoption recognized in earnings on the date of adoption.

2022-02 requires all loan modifications to be accounted for under the general loan modification guidance in Subtopic 310-20.

On a prospective basis, entities are subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty.

Public business entities within the scope of the Topic 326 vintage disclosure requirements are also required to prospectively disclose current-period gross write-off information by vintage.

Entities can elect to adopt the guidance on TDRs using either a prospective or modified retrospective transition method.

Valley adopted ASU No.

2022-02 on January 1, 2023 and elected to apply the modified retrospective transition method.

The adoption of ASU No.

2022-03 is not expected to have a significant impact on Valley's consolidated financial statements.

2022-02 resulted in a $ 1.4 million decrease in the allowance for loan losses, and a $ 990 thousand increase to retained earnings, net of taxes.

See Note 8 for required disclosures.

New Accounting Guidance Issued in 2023

2023-02, Investments –“Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method,” is intended to improve the accounting and

disclosures for investments in certain tax credit structures.

2023-02 allows the option to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met.

2023-02 will be effective on January 1, 2024 and it can be early adopted in any interim period.

The new guidance can also be applied either on a modified retrospective or a retrospective basis, with any adjustments resulting from adoption recognized in earnings on the date of adoption.

Valley is currently evaluating the impact of ASU No.

2023-02, but it is not expected to have a significant impact on Valley's consolidated financial statements.

Fair Value Measurement of Assets and Liabilities

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Assets and Liabilities Measured at Fair Value on a Recurring and Non-Recurring Basis

The following tables present the assets and liabilities that are measured at fair value on a recurring and non-recurring basis by level within the fair value hierarchy as reported on the consolidated statements of financial condition at September 30, 2022 and December 31, 2021.

The assets presented under “non-recurring fair value measurements” in the tables below are not measured at fair value on an ongoing basis but are subject to fair value adjustments under certain circumstances (e.g., when an impairment loss is recognized).

September 30,

2023 Fair Value Measurements at Reporting Date Using:

9 unchanged sentences

Equity securities $ 23,635 $ 23,635 $ — $ —

$ 34,942 $ 23,917 $ — $ —

Equity securities at net asset value (NAV)

Trading debt securities 6,855 3,477 3,378 —

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Equity securities $ 23,494 $ 23,494 $ — $ —

$ 32,844 $ 21,284 $ — $ —

Equity securities at net asset value (NAV)

Trading debt securities 13,438 3,282 10,156 —

Available for sale debt securities:

Treasury securities 279,498 279,498 — —

government agency securities 26,964 — 26,964 —

15 unchanged sentences

Total $ 94,860 $ — $ — $ 94,860

(1) Includes equity securities measured at net asset value (NAV) per share (or its equivalent) as a practical expedient totaling $ 11.0 million and $ 11.6 million at September 30, 2022 and December 31, 2021, respectively.

These securities have not been classified in the fair value hierarchy.

(2) Represents residential mortgage loans held for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately $ 6.2 million and $ 136.3 million at September 30, 2022 and December 31, 2021, respectively.

(3) Derivative financial instruments are included in this categor y.

(1) Represents residential mortgage loans held for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately $ 17.1 million and $ 17.9 million at March 31, 2023 and December 31, 2022, respectively.

(2) Derivative financial instruments are included in this category.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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Interest income and expense are recorded within the consolidated statements of income depending on the nature of the instrument using the effective interest method based on acquired discount or premium.

Equity securities.

The fair value of equity securities consists of a publicly traded mutual fund, a CRA investment fund and an investment related to the development of new financial technologies that are carried at quoted prices in active markets.

Valley also has privately held CRA funds measured at NAV, which are excluded from fair value hierarchy levels in the tables above.

Equity securitie s.

The fair value of equity securities consists of a publicly traded mutual fund, a Community Reinvestment Act (CRA) investment fund and an investment related to the development of new financial technologies that are carried at quoted prices in active markets.

Equity securities at NAV .

Valley also has privately held CRA funds at fair value measured at NAV using the most recently available financial information from the investee.

Investments measured at NAV (or its equivalent) as a practical expedient are excluded from fair value hierarchy levels in the tables above.

Trading debt securities .

Trading debt securities consist of U.S Treasury securities and municipal bonds reported at fair value utilizing Level 1 and Level 2 inputs, respectively.

The prices for municipal bonds are derived from market quotations and matrix pricing obtained through an independent pricing service.

Management reviews the data and

assumptions used in pricing the securities by its third-party provider to ensure the highest level of significant inputs are derived from market observable data.

The fair value of trading debt securitie s, consisting of U.S.

Treasury securities and municipal bonds are reported at fair value utilizing Level 1 and Level 2 inputs, respectively.

The prices for municipal bonds investments are derived from market quotations and matrix pricing obtained through an independent pricing service.

Management reviews the data and assumptions used in pricing the securities by its third-party provider to ensure the highest level of significant inputs are derived from market observable data.

Available for sale debt securities.

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The market prices represent a delivery price, which reflects the underlying price each institution would pay Valley for an immediate sale of an aggregate pool of mortgages.

Non-performance risk did not materially impact the fair value of mortgage loans held for sale at September 30, 2022 and December 31, 2021 based on the short duration these assets were held, and the credit quality of these loans.

Non-performance risk did not materially impact the fair value of mortgage loans held for sale at March 31, 2023 and December 31, 2022 based on the short duration these assets were held, and the credit quality of these loans.

Derivatives are reported at fair value utilizing Level 2 inputs.

The fair values of Valley’s derivatives are determined using third-party prices that are based on discounted cash flow analysis using observed market inputs, such as the LIBOR, Overnight Index Swap and Secured Overnight Financing Rate (SOFR) curves for all cleared derivatives.

The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at September 30, 2022 and December 31, 2021), is determined based on the current market prices for similar instruments.

The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at March 31, 2023 and December 31, 2022), is determined based on the current market prices for similar instruments.

The fair values of most of the derivatives incorporate credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, to account for potential nonperformance risk of Valley and its counterparties.

The credit valuation adjustments were not significant to the overall valuation of Valley’s derivatives at September 30, 2022 and December 31, 2021.

The credit valuation adjustments were not significant to the overall valuation of Valley’s derivatives at March 31, 2023 and December 31, 2022.

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

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Certain real estate appraisals may be discounted based on specific market data by location and property type.

At September 30, 2022, collateral dependent loans were individually re-measured and reported at fair value through direct loan charge-offs to the allowance for loan losses based on the fair value of the underlying collateral.

At September 30, 2022, collateral dependent loans with a total amortized cost of $ 171.3 million, including our taxi medallion loan portfolio, were reduced by specific allowance for loan losses allocations totaling $ 98.2 million to a reported total net carrying amount of $ 73.1 million.

At March 31, 2023, collateral dependent loans were individually re-measured and reported at fair value through direct loan charge-offs to the allowance for loan losses based on the fair value of the underlying

At March 31, 2023, collateral dependent loans with a total amortized cost of $ 140.1 million, including our taxi medallion loan portfolio, were reduced by specific allowance for loan losses allocations totaling $ 58.8 million to a reported total net carrying amount of $ 81.3 million.

Foreclosed assets .

Certain foreclosed assets (consisting of other real estate owned and other repossessed assets included in other assets), upon initial recognition and transfer from loans, are re-measured and reported at fair value

using Level 3 inputs, consisting of a third-party appraisal less estimated cost to sell.

When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for loan losses.

If further declines in the estimated fair value of the asset occur, an asset is re-measured and reported at fair value through a write-down recorded in non-interest expense.

There were no adjustments to the appraisals of foreclosed assets at September 30, 2022.

There were no adjustments to the appraisals of foreclosed assets at March 31, 2023 and December 31, 2022 .

Other Fair Value Disclosures

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Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.

For instance, Valley has certain fee-generating business lines (e.g., its mortgage servicing operation, trust and investment management departments) that were not considered in these estimates since these activities are not financial instruments.

For instance, Valley has certain fee-generating business lines (e.g., its mortgage servicing operations, trust and investment management departments) that were not considered in these estimates since these activities are not financial instruments.

In addition, the tax implications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at September 30, 2022 and December 31, 2021 were as follows:

Hierarchy September 30, 2022 December 31, 2021

The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at March 31, 2023 and December 31, 2022 were as follows:

Hierarchy March 31, 2023 December 31, 2022

Amount Fair Value Carrying

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Equity Securities

Equity securities totaled $ 43.3 million and $ 36.5 million at September 30, 2022 and December 31, 2021, respectively.

Equity securities totaled $ 50.2 million and $ 48.7 million at March 31, 2023 and December 31, 2022, respectively.

See Note 6 for further details on equity securities.

Trading Debt Securities

The fair value of trading debt securities totaled $ 4.1 million and $ 38.1 million at September 30, 2022 and December 31, 2021, respectively.

The fair value of trading debt securities totaled $ 6.9 million and $ 13.4 million at March 31, 2023 and December 31, 2022, respectively.

Net trading gains and losses were included in net gains and losses on securities transactions within non-interest income.

We recorded net trading losses of $ 1.2 million and net trading gains of $ 705 thousand for the nine months ended September 30, 2022 and 2021, respectively.

The net trading gains and losses for the three months ended September 30, 2022 and 2021 were not material.

We recorded net trading gains of $ 402 thousand and net trading losses of $ 1.1 million for the three months ended March 31, 2023 and 2022, respectively.

Available for Sale Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of available for sale debt securities at September 30, 2022 and December 31, 2021 were as follows:

The amortized cost, gross unrealized gains and losses and fair value of available for sale debt securities at March 31, 2023 and December 31, 2022 were as follows:

Losses Fair Value

(in thousands)

September 30, 2022

March 31, 2023

Treasury securities $ 309,524 $ — $ ( 22,779 ) $ 286,745

8 unchanged sentences

December 31, 2022

Treasury securities $ 308,137 $ — $ ( 28,639 ) $ 279,498

government agency securities 29,494 47 ( 2,577 ) 26,964

6 unchanged sentences

Total $ 1,437,911 $ 111 $ ( 176,625 ) $ 1,261,397

The age of unrealized losses and fair value of the related available for sale debt securities at September 30, 2022 and December 31, 2021 were as follows:

Twelve Months More than

Twelve Months Total

The age of unrealized losses and fair value of the related available for sale debt securities at March 31, 2023 and December 31, 2022 were as follows:

Less than 12 Months More than 12 Months Total

Value Unrealized

2 unchanged sentences

(in thousands)

September 30, 2022

March 31, 2023

Treasury securities $ 286,745 $ ( 22,779 ) $ — $ — $ 286,745 $ ( 22,779 )

10 unchanged sentences

December 31, 2022

Treasury securities $ 279,498 $ ( 28,639 ) $ — $ — $ 279,498 $ ( 28,639 )

government agency securities 22,831 ( 2,538 ) 1,116 ( 39 ) 23,947 ( 2,577 )

8 unchanged sentences

Total $ 874,061 $ ( 97,008 ) $ 380,921 $ ( 79,617 ) $ 1,254,982 $ ( 176,625 )

Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was 743 and 139 at September 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022, the fair value of available for sale debt securities that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law was $ 348.1 million.

The contractual maturities of available for sale debt securities at September 30, 2022 are set forth in the following table.

Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was 715 and 730 at March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023, the fair value of available for sale debt securities that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law was $ 870.4 million.

The contractual maturities of available for sale debt securities at March 31, 2023 are set forth in the following table.

Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties.

Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.

September 30, 2022

March 31, 2023

(in thousands)

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Actual maturities of available for sale debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty.

The weighted average remaining expected life for residential mortgage-backed securities available for sale was 6.6 years at September 30, 2022.

The weighted average remaining expected life for residential mortgage-backed securities available for sale was 8.91 years at March 31, 2023.

Impairment Analysis of Available For Sale Debt Securities

Valley's available for sale debt securities portfolio includes corporate bonds and revenue bonds, among other securities.

These types of securities may pose a higher risk of future impairment charges by Valley as a result of the unpredictable nature of the U.S.

economy and its potential negative effect on the future performance of the security issuers, including due to current economic conditions and the effects of the COVID-19 pandemic.

These types of securities may pose a higher risk of future impairment charges by Valley as a result of the changes in market interest rates, unpredictable nature of the U.S.

economy and their potential negative effect on the future performance of the security issuers.

Available for sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis.

Val ley has evaluated available for sale debt securities that are in an unrealized loss position as of September 30, 2022 included in the table above and has determined that the declines in fair value are mainly attributable to market volatility, not 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 during the three and nine months ended September 30, 2022 and 2021.

There was no allowance for credit losses for available for sale debt securities at September 30, 2022 and December 31, 2021.

Based on a comparison of the present value of expected cash flows to the amortized cost, Valley recognized a credit related impairment of one corporate bond issued by Signature Bank resulting in a provision for credit losses and full charge-off of the bond totaling $ 5.0 million during the three months ended March 31, 2023.

Valley also evaluated available for sale debt securities that are in an unrealized loss position as of March 31, 2023 included in the table above and has determined that the declines in fair value are mainly attributable to interest rates, credit spreads, market volatility and liquidity conditions, not credit quality or other factors.

There was no impairment recognized during the three months ended March 31, 2022.

Accrued interest on investments, which is excluded from the amortized cost of available for sale debt securities, totaled $ 5.1 million and $ 5.6 million at March 31, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition.

The following table details the activity in the allowance for credit losses for the three months ended March 31, 2023.

Three Months Ended

March 31, 2023

(in thousands)

Beginning balance $ —

Provision for credit losses 5,000

Charge-offs ( 5,000 )

Ending balance $ —

Valley does not intend to sell any of its available for sale debt securities in an unrealized loss position prior to recovery of their amortized cost basis, and it is more likely than not that Valley will not be required to sell any of its securities prior to recovery of their amortized cost basis.

None of the available for sale debt securities were past due

as of March 31, 2023 and there was no allowance for credit losses for available for sale debt securities at March 31, 2023, December 31, 2022 and March 31, 2022.

Held to Maturity Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of debt securities held to maturity at September 30, 2022 and December 31, 2021 were as follows:

Losses Fair Value

The amortized cost, gross unrealized gains and losses and fair value of debt securities held to maturity at March 31, 2023 and December 31, 2022 were as follows:

Losses Fair Value Allowance for Credit Losses Net Carrying Value

(in thousands)

September 30, 2022

March 31, 2023

Treasury securities $ 66,747 $ — $ ( 565 ) $ 66,182 $ — $ 66,747

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Total $ 3,828,984 $ 2,105 $ ( 501,619 ) $ 3,329,470 $ 1,646 $ 3,827,338

The age of unrealized losses and fair value of related debt securities held to maturity at September 30, 2022 and December 31, 2021 were as follows:

Twelve Months More than

Twelve Months Total

The age of unrealized losses and fair value of related debt securities held to maturity at March 31, 2023 and December 31, 2022 were as follows:

Less than 12 Months More than 12 Months Total

Fair Value Unrealized

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(in thousands)

September 30, 2022

March 31, 2023

Treasury securities $ 66,182 $ ( 565 ) $ — $ — $ 66,182 $ ( 565 )

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December 31, 2022

Treasury securities $ 65,889 $ ( 1,022 ) $ — $ — $ 65,889 $ ( 1,022 )

government agency securities 209,863 ( 47,508 ) 1,673 ( 172 ) 211,536 ( 47,680 )

Obligations of states and political subdivisions:

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Total $ 1,610,100 $ ( 183,528 ) $ 1,492,658 $ ( 318,091 ) $ 3,102,758 $ ( 501,619 )

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 826 and 108 at September 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022, the fair value of debt securities held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law was $ 619.5 million.

The contractual maturities of investments in debt securities held to maturity at September 30, 2022 are set forth in the table below.

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 766 and 802 at March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023, the fair value of debt securities held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law was $ 2.5 billion.

The contractual maturities of investments in debt securities held to maturity at March 31, 2023 are set forth in the table below.

Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties.

Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.

September 30, 2022

March 31, 2023

(in thousands)

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Actual maturities of held to maturity debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty.

The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was 8.8 years at September 30, 2022.

The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was 11.67 years at March 31, 2023.

Credit Quality Indicators

Valley monitors the credit quality of the held to maturity debt securities through the use of the most current credit ratings from external rating agencies.

The following table summarizes the amortized cost of held to maturity debt securities by external credit rating at September 30, 2022 and December 31, 2021.

The following table summarizes the amortized cost of held to maturity debt securities by external credit rating at March 31, 2023 and December 31, 2022.

AAA/AA/A Rated BBB rated Non-investment grade rated Non-rated Total

(in thousands)

September 30, 2022

March 31, 2023

Treasury securities $ 66,747 $ — $ — $ — $ 66,747

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Obligations of states and political subdivisions include municipal bonds and revenue bonds issued by various municipal corporations.

At September 30, 2022, most of the obligations of states and political subdivisions were rated investment grade and a large portion of the "non-rated" category included TEMS securities secured by Ginnie Mae securities.

At March 31, 2023, most of the obligations of states and political subdivisions were rated investment grade and a large portion of the "non-rated" category included tax exempt mortgage securities (TEMS) secured by Ginnie Mae securities.

Trust preferred securities consist of non-rated single-issuer securities, issued by bank holding companies.

Corporate bonds consist of debt primarily issued by banks.

Corporate and other debt securities in the non-rated category mostly consist of high quality foreign issued bonds.

Allowance for Credit Losses for Held to Maturity Debt Securities

2 unchanged sentences

Treasury securities, U.S.

government agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and collateralized municipal bonds called TEMS.

Held to maturity debt securities were carried net of allowance for credit losses totaling $ 1.7 million at September 30, 2022, and $ 1.2 million at December 31, 2021.

Valley recorded a provision for credit losses of $ 188 thousand and $ 531 thousand for the three and nine months ended September 30, 2022, respectively.

Valley recorded

a provision for credit losses of $ 35 thousand and a credit (negative) provision for credit losses of $ 353 thousand for the three and nine months ended September 30, 2021, respectively.

There were no charge-offs for all the respective periods of 2022 and 2021.

government agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and TEMS collateralized municipal bonds.

Accrued interest on investments, which is excluded from the amortized cost of held to maturity debt securities, totaled $ 12.7 million and $ 13.5 million at March 31, 2023 and December 31, 2022, respectively, and is presented

within total accrued interest receivable on the consolidated statements of financial condition.

Held to maturity debt securities are carried net of an allowance for credit losses.

The following table details the activity in the allowance for credit losses for the three months ended March 31, 2023 and 2022:

Three Months Ended

(in thousands)

Beginning balance $ 1,646 $ 1,165

(Credit) provision for credit losses ( 13 ) 57

Ending balance $ 1,633 $ 1,222

There were no sales of available for sale and held to maturity debt securities debt securities during the three months ended March 31, 2023 and 2022, respectively.

Loans and Allowance for Credit Losses for Loans

The detail of the loan portfolio as of September 30, 2022 and December 31, 2021 was as follows:

September 30, 2022 December 31, 2021

The detail of the loan portfolio as of March 31, 2023 and December 31, 2022 was as follows:

March 31, 2023 December 31, 2022

(in thousands)

Commercial and industrial $ 9,043,946 $ 8,804,830

Commercial and industrial $ 8,615,557 $ 5,411,601

Commercial and industrial PPP loans * 85,820 435,950

Total commercial and industrial loans 8,701,377 5,847,551

Commercial real estate:

8 unchanged sentences

Total loans $ 48,659,966 $ 46,917,200

* Represents SBA Paycheck Protection Program (PPP) loans, net of unearned fees totaling $ 1.4 million and $ 12.1 million at September 30, 2022 and December 31, 2021, respectively.

Total loans include net unearned discounts and deferre d loan fees of $ 136.5 million an d $ 78.5 million at September 30, 2022 and December 31, 2021, respectively.

The increase in total loans at September 30, 2022 is partially attributed to $ 5.9 billion of loans acquired in the Bank Leumi USA acquisition, which was inclusive of a $ 98.6 million net purchase discount at the acquisition date.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 139.6 million and $ 83.7 million at September 30, 2022 and December 31, 2021, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition .

There were no sales of loans from the held for investment portfolio during the three and nine months ended September 30, 2022 and 2021.

Total loans include net unearned discounts and deferred loan fees of $ 125.4 million and $ 120.5 million at March 31, 2023 and December 31, 2022, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 192.6 million and $ 175.9 million at March 31, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition.

There were no sales of loans from the held for investment portfolio during the three months ended March 31, 2023 and 2022.

Credit Risk Management

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A reporting system supplements the management review process by providing management with frequent reports concerning loan production, loan quality, internal loan classification, concentrations of credit, loan delinquencies, non-performing, and potential problem loans.

Loan portfolio diversification is an important factor utilized by Valley to manage its risk across business sectors and through

cyclical economic circumstances.

Loan portfolio diversification is an important factor utilized by Valley to manage its risk across business sectors and through cyclical economic circumstances.

Additionally, Valley does not accept crypto assets as loan collateral for any of its loan portfolio classes.

See Valley’s Annual Report on Form 10-K for the year ended December 31, 2022 for further details.

Credit Quality

The following table presents past due, current and non-accrual loans without an allowance for loan losses by loan portfolio class at September 30, 2022 and December 31, 2021:

The following table presents past due, current and non-accrual loans without an allowance for loan losses by loan portfolio class at March 31, 2023 and December 31, 2022:

Past Due and Non-Accrual Loans

6 unchanged sentences

(in thousands)

September 30, 2022

March 31, 2023

Commercial and industrial

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Risk ratings are updated any time the situation warrants.

The following table presents the internal loan classification risk by loan portfolio class by origination year based on the most recent analysis performed at September 30, 2022 and December 31, 2021:

The following table presents the internal loan classification risk by loan portfolio class by origination year based on the most recent analysis performed at March 31, 2023 and December 31, 2022, as well as the gross loan charge-offs by year of origination for the three months ended March 31, 2023:

Amortized Cost Basis by Origination Year

September 30, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

March 31, 2023 2023 2022 2021 2020 2019 Prior to 2019 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

(in thousands)

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Substandard — 33,613 35,924 30,090 34,765 219,838 7,916 — 362,146

Doubtful — — — — — 170 — — 170

Total commercial real estate $ 1,634,473 $ 6,829,589 $ 5,283,268 $ 3,381,426 $ 2,626,510 $ 6,787,666 $ 504,772 $ 3,407 $ 27,051,111

Pass $ 120,282 $ 928,489 $ 415,212 $ 70,371 $ 15,502 $ 36,863 $ 2,079,911 $ — $ 3,666,630

Special Mention 12,917 — — — — 13,084 — 26,001

Substandard — 13 12,290 — 964 17,600 7,351 — 38,218

1 unchanged sentence

Total construction $ 120,729 $ 936,843 $ 428,172 $ 82,032 $ 16,466 $ 54,463 $ 2,087,262 $ — $ 3,725,967

Gross loan charge-offs $ — $ 6,035 $ 20,286 $ 123 $ 72 $ 1,636 $ 3,593 $ — $ 31,745

Amortized Cost Basis by Origination Year

16 unchanged sentences

Substandard 12,969 12,601 — 974 — 17,599 20,138 — 64,281

Doubtful — — — — — 13,743 — — 13,743

Total construction $ 955,349 $ 524,647 $ 61,131 $ 23,819 $ 8,676 $ 51,941 $ 2,075,272 $ — $ 3,700,835

For residential mortgages, automobile, home equity and other consumer loan portfolio classes, Valley also evaluates credit quality based on the aging status of the loan and by payment activity.

The following table presents the amortized cost in those loan classes based on payment activity by origination year as of September 30, 2022 and December 31, 2021.

The following table presents the amortized cost in those loan classes based on payment activity, by origination year as of March 31, 2023 and December 31, 2022, as well as the gross loan charge-offs by year of origination for the three months ended March 31, 2023:

Amortized Cost Basis by Origination Year

September 30, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

March 31, 2023 2023 2022 2021 2020 2019 Prior to 2019 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total

(in thousands)

15 unchanged sentences

Total consumer $ 153,892 $ 757,236 $ 501,826 $ 194,483 $ 156,500 $ 102,288 $ 1,447,818 $ 38,619 $ 3,352,662

Gross loan charge-offs $ — $ 146 $ 109 $ 4 $ 170 $ 388 $ 11 $ — $ 828

Amortized Cost Basis by Origination Year

17 unchanged sentences

Total consumer $ 795,819 $ 547,709 $ 217,412 $ 178,742 $ 93,100 $ 74,268 $ 1,368,622 $ 39,280 $ 3,314,952

Troubled debt restructured loans .

Loan modifications to borrowers experiencing financial difficulty.

From time to time, Valley may extend, restructure, or otherwise modify the terms of existing loans, on a case-by-case basis, to remain competitive and retain certain customers, as well as assist other customers who may be experiencing financial difficulties.

If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan (TDR).

Generally, the concessions made for TDRs involve lowering the monthly payments on loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods.

The concessions may also involve payment deferrals but rarely result in the forgiveness of principal or accrued interest.

In addition, Valley frequently obtains additional collateral or guarantor support when modifying such loans.

If the borrower has demonstrated performance under the previous terms of the loan and Valley’s underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest.

Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

Performing TDRs (not reported as non-accrual loans) totaled $ 69.7 million and $ 71.3 million as of September 30, 2022 and December 31, 2021, respectively.

Non-performing TDRs totaled $ 155.7 million and $ 117.2 million as of September 30, 2022 and December 31, 2021, respectively.

The following tables present the pre- and post-modification amortized cost of loans by loan class modified as TDRs during the three and nine months ended September 30, 2022 and 2021.

Post-modification amounts are presented as of September 30, 2022 and 2021.

Three Months Ended September 30,

Troubled Debt Restructurings Number

Contracts Pre-Modification

Outstanding Recorded Investment Post-Modification

Outstanding Recorded Investment Number

Contracts Pre-Modification

Outstanding Recorded Investment Post-Modification

Outstanding Recorded Investment

Prior to 2023, a loan was classified as a troubled debt restructuring (TDR) if the borrower was experiencing financial difficulties and a concession has been made at the time of such modification.

Effective January 1, 2023, Valley adopted ASU No.

2022-02 which eliminated the accounting guidance for TDR loans while enhancing disclosure requirements for certain loan modifications by creditors when a borrower is experiencing financial difficulty.

Valley adopted ASU No.

2022-02 using the modified retrospective transition method.

At the date of adoption, Valley was no longer required to utilize a loan-level discounted cash flow approach for determining the allowance for certain modified loans previously classified as TDR loans.

As a result, Valley elected to utilize its collective reserve methodology for pools of loans that share common risk characteristic for determining the reserves for the modified loans formerly classified as TDR loans.

This change resulted in the recognition of a cumulative-effect adjustment which decreased the allowance for loan losses with an offsetting entry to retained earnings, net of deferred taxes, at January 1, 2023.

The following table shows the amortized cost basis of loans to borrowers experiencing financial difficulty at March 31, 2023 that were modified during the three months ended March 31, 2023, disaggregated by class of financing receivable and type of modification.

Each of the types of modifications was less than one percent of their respective loan categories.

Three Months Ended March 31,

Term extension Term extension and interest rate reduction Total

($ in thousands)

1 unchanged sentence

Commercial real estate 46,328 — 46,328

Commercial real estate 1 2,187 2,187 5 14,473 14,539

Construction 2 11,025 7,811 2 17,599 17,599

Total commercial real estate

3 13,212 9,998 7 32,072 32,138

Residential mortgage 213 — 213

Consumer 60 — 60

Total $ 47,882 $ 523 $ 48,405

Nine Months Ended September 30,

The following table describes the types of modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023:

Types of Modifications

Commercial and industrial 12 month term extensions;

and 12 month term extensions combined with interest rate reductions from 2.11 percent to 1 percent

Commercial real estate 6 - 36 month term extensions

Residential mortgage 12 month term extensions

Consumer 60 month term extensions

Valley closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of modification efforts.

All loans to borrowers experiencing financial difficulty that have been modified during the three months ended March 31, 2023 were current to their contractual payments as of March 31, 2023.

Valley did not extend any commitments to lend additional funds to borrowers experiencing financial difficulty whose loans had been modified during the three months ended March 31, 2023.

Troubled debt restructured loans.

The following tables present the pre- and post-modification amortized cost of TDR loans by loan class during the three months ended March 31, 2022.

Post-modification amounts are presented as of March 31, 2022 using the allowance methodology for TDRs prior to the adoption of ASU 2022-02.

Three Months Ended March 31, 2022

Troubled Debt Restructurings Number

1 unchanged sentence

Outstanding Recorded Investment Post-Modification

Outstanding Recorded Investment Number

Contracts Pre-Modification

Outstanding Recorded Investment Post-Modification

Outstanding Recorded Investment

2 unchanged sentences

Commercial real estate 2 5,260 5,251

Commercial real estate 4 16,259 15,660 11 26,710 26,730

Construction 2 11,025 7,811 2 17,599 17,599

Total commercial real estate

6 27,284 23,471 13 44,309 44,329

Residential mortgage 1 121 117

Consumer 1 125 123 1 170 163

Total 14 $ 15,065 $ 15,030

The total TDRs presented in the above tables had allocated allowance for loan losses of $ 71.5 million and $ 8.2 million at September 30, 2022 and 2021, respectively.

There were $ 3.8 million and $ 5.4 million in charge-offs related to TDRs for the three and nine months ended September 30, 2022.

There were charge-offs of $ 206 thousand and $ 6.0 million related to TDRs for the three and nine months ended September 30, 2021, respectively.

Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the three and nine months ended September 30, 2022 and 2021.

Loans modified as TDRs within the previous 12 months and for which there was a payment default ( 90 or more days past due) for the three and nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended September 30,

Troubled Debt Restructurings Subsequently Defaulted Number of

Contracts Recorded Investment Number of

Contracts Recorded

($ in thousands)

Commercial and industrial 1 $ 42,771 — $ —

Commercial real estate 2 5,207 1 419

Residential mortgage 1 1,071 1 129

Total 4 $ 49,049 2 $ 548

Nine Months Ended September 30,

The total TDRs presented in the above tables had allocated allowance for loan losses of $ 7.8 million at March 31, 2022.

There were no charge-offs related to TDRs for the three months ended March 31, 2022.

Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the three months ended March 31, 2022.

Performing TDRs (not reported as non-accrual loans) and non-performing TDRs totaled $ 56.5 million and $ 104.7 million as of March 31, 2022.

Loans modified as TDRs within the previous 12 months and for which there was a payment default ( 90 or more days past due) for the three months ended March 31, 2022 were as follows:

Three Months Ended March 31, 2022

Troubled Debt Restructurings Subsequently Defaulted Number of

Contracts Recorded Investment Number of

Contracts Recorded

1 unchanged sentence

Commercial and industrial 2 $ 1,850

Commercial real estate 2 5,207 1 419

Residential mortgage 1 1,071 1 129

Construction 2 17,599

Total 4 $ 19,449

Loans in process of foreclosure.

Other real estate owned (OREO) totaled $ 286 thousand and $ 2.3 million at September 30, 2022 and December 31, 2021, respectively.

There were no forec losed residential real estate properties included in OREO at September 30, 2022 and December 31, 2021.

Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $ 1.9 million and $ 2.5 million at September 30, 2022 and December 31, 2021, respectively.

Other real estate owned (OREO) totaled $ 1.2 million and $ 286 thousand at March 31, 2023 and December 31, 2022, respectively.

There were no foreclosed residential real estate properties included in OREO at March 31, 2023 and December 31, 2022.

Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $ 1.5 million and $ 2.6 million at March 31, 2023 and December 31, 2022, respectively.

Collateral dependent loans.

1 unchanged sentence

When Valley determines that foreclosure is probable, the collateral dependent loan balances are written down to the estimated current fair value (less estimated selling costs) resulting in an immediate charge-off to the allowance, excluding any consideration for personal guarantees that may be pursued in the Bank’s collection process.

The following table presents collateral dependent loans by class as of September 30, 2022 and December 31, 2021:

September 30,

The following table presents collateral dependent loans by class as of March 31, 2023 and December 31, 2022:

2023 December 31,

3 unchanged sentences

Commercial real estate 144,892 130,199

Commercial real estate 73,862 110,174

Construction 41,726 —

Total commercial real estate loans 115,588 110,174

Residential mortgage 18,694 33,865

1 unchanged sentence

Total $ 238,067 $ 258,692

* The majority of the loans are collateralized by taxi medallions for all periods.

* Commercial and industrial loans presented in the table above are primarily collateralized by taxi medallions.

Allowance for Credit Losses for Loans

The allowance for credit losses (ACL) for loans consists of the allowance for loan losses and the allowance for unfunded credit commitments.

The ACL for loans at September 30, 2022 increased $ 122.7 million from December 31, 2021 largely reflecting a net ACL of $ 70.3 million for PCD loans acquired from Bank Leumi USA that was recorded at April 1, 2022 and recognition of a $ 41.0 million provision related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA during the three months ended June 30, 2022.

Overall, an increased economic forecast reserve component of our CECL model caused by elevated uncertainty in economic conditions was largely offset by lower expected quantitative loss experience at September 30, 2022 as compared to December 31, 2021.

The following table summarizes the ACL for loans at September 30, 2022 and December 31, 2021:

September 30,

The ACL for loans decreased $ 22.3 million at March 31, 2023 as compared to December 31, 2022.

The following table summarizes the ACL for loans at March 31, 2023 and December 31, 2022:

2023 December 31,

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

1 unchanged sentence

Provision for loan losses $ 9,979 $ 3,258

Provision for unfunded credit commitments 520 — 6,164 3,289

(Credit) provision for unfunded credit commitments ( 529 ) 242

Total provision for credit losses for loans $ 9,450 $ 3,500

The following table details the activity in the allowance for loan losses by loan portfolio segment for the three and nine months ended September 30, 2022 and 2021:

The following table details the activity in the allowance for loan losses by loan portfolio segment for the three months ended March 31, 2023 and 2022:

and Industrial Commercial

3 unchanged sentences

Three Months Ended

September 30, 2022

March 31, 2023

Allowance for loan losses:

Beginning balance $ 139,941 $ 259,408 $ 39,020 $ 20,286 $ 458,655

Impact of the adoption of ASU No.

( 739 ) ( 589 ) ( 12 ) ( 28 ) ( 1,368 )

Beginning balance, adjusted $ 139,202 $ 258,819 $ 39,008 $ 20,258 $ 457,287

Loans charged-off ( 26,047 ) ( 5,698 ) — ( 828 ) ( 32,573 )

Charged-off loans recovered 1,399 24 21 761 2,205

Net recoveries (charge-offs) 8,203 ( 2,271 ) 163 ( 485 ) 5,610

Net (charge-offs) recoveries ( 24,648 ) ( 5,674 ) 21 ( 67 ) ( 30,368 )

Provision (credit) for loan losses 13,438 ( 9,813 ) 2,679 3,675 9,979

1 unchanged sentence

Three Months Ended

September 30, 2021

Allowance for loan losses:

Beginning balance $ 109,689 $ 189,139 $ 25,303 $ 15,193 $ 339,324

Loans charged-off ( 1,248 ) — — ( 771 ) ( 2,019 )

Charged-off loans recovered 514 29 228 955 1,726

Net (charge-offs) recoveries ( 734 ) 29 228 184 ( 293 )

(Credit) provision for loan losses ( 5,078 ) 10,553 ( 799 ) ( 1,180 ) 3,496

Ending balance $ 103,877 $ 199,721 $ 24,732 $ 14,197 $ 342,527

and Industrial Commercial

Real Estate Residential

Mortgage Consumer Total

(in thousands)

Nine Months Ended

September 30, 2022

Allowance for loan losses:

Beginning balance $ 103,090 $ 217,490 $ 25,120 $ 13,502 $ 359,202

Allowance for PCD loans * 33,452 36,618 206 43 70,319

Loans charged-off ( 11,144 ) ( 4,173 ) ( 27 ) ( 2,513 ) ( 17,857 )

Charged-off loans recovered 16,012 2,060 694 2,431 21,197

Net recoveries (charge-offs) 4,868 ( 2,113 ) 667 ( 82 ) 3,340

Provision for loan losses 12,641 15,785 10,164 4,293 42,883

Ending balance $ 154,051 $ 267,780 $ 36,157 $ 17,756 $ 475,744

Nine Months Ended

September 30, 2021

March 31, 2022

Allowance for loan losses:

5 unchanged sentences

Ending balance $ 101,203 $ 219,949 $ 28,189 $ 13,169 $ 362,510

* Represents the allowance for acquired PCD loans, net of PCD loan charge-offs totaling $ 62.4 million in the second quarter 2022 related to the Bank Leumi USA acquisition.

The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the allowance measurement methodology at September 30, 2022 and December 31, 2021.

and Industrial Commercial

Commercial and Industrial Commercial

Real Estate Residential

1 unchanged sentence

(in thousands)

September 30, 2022

March 31, 2023

Allowance for loan losses:

Individually evaluated for credit losses $ 46,151 $ 13,445 $ 34 $ — $ 59,630

$ 89,822 $ 8,544 $ 4,592 $ 100 $ 103,058

Collectively evaluated for credit losses 81,841 229,887 41,674 23,866 377,268

64,229 259,236 31,565 17,656 372,686

Total $ 127,992 $ 243,332 $ 41,708 $ 23,866 $ 436,898

Individually evaluated for credit losses $ 74,625 $ 144,892 $ 12,028 $ 6,929 $ 238,474

$ 151,415 $ 149,775 $ 42,911 $ 1,507 $ 345,608

Collectively evaluated for credit losses 8,969,321 30,632,186 5,474,252 3,345,733 48,421,492

8,549,962 27,915,488 5,134,217 3,240,489 44,840,156

Total $ 9,043,946 $ 30,777,078 $ 5,486,280 $ 3,352,662 $ 48,659,966

2 unchanged sentences

Individually evaluated for credit losses $ 68,745 $ 13,174 $ 337 $ 4,338 $ 86,594

$ 64,359 $ 6,277 $ 470 $ 390 $ 71,496

Collectively evaluated for credit losses 71,196 246,234 38,683 15,948 372,061

38,731 211,213 24,650 13,112 287,706

Total $ 139,941 $ 259,408 $ 39,020 $ 20,286 $ 458,655

Individually evaluated for credit losses $ 117,644 $ 213,522 $ 28,869 $ 14,058 $ 374,093

$ 119,760 $ 134,135 $ 42,469 $ 2,431 $ 298,795

Collectively evaluated for credit losses 8,687,186 29,219,346 5,335,681 3,300,894 46,543,107

5,727,791 20,655,931 4,502,595 2,968,545 33,854,862

Total $ 8,804,830 $ 29,432,868 $ 5,364,550 $ 3,314,952 $ 46,917,200

Goodwill and Other Intangible Assets

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

The carrying amounts of goodwill allocated to Valley's business segments, or reporting units thereof, for goodwill impairment analysis at both March 31, 2023 and December 31, 2022 were as follows:

Business Segment / Reporting Unit *

Management Consumer

Lending Commercial

Lending Total

Banking Commercial

Banking Total

(in thousands)

Balance at December 31, 2021 $ 38,851 $ 222,390 $ 1,197,767 $ 1,459,008

Goodwill from business combinations 10,984 62,875 338,638 412,497

Balance at September 30, 2022 $ 49,835 $ 285,265 $ 1,536,405 $ 1,871,505

* Valley’s Wealth Management Division is comprised of trust, asset management, brokerage, insurance, and tax credit advisory services.

This reporting unit is included in the Consumer Lending segment for financial reporting purposes.

During the second quarter 2022, Valley performed the annual goodwill impairment test at its normal assessment date.

There was no i mpairment of goodwill recognized during the three and nine months ended September 30, 2022 and 2021.

As discussed in Note 15, Valley made changes to its operating structure and strategy during the second quarter 2022 (and subsequent to the annual goodwill impairment test), which resulted in changes in its operating segments and reporting units to reflect how the CEO, who is the chief operating decision maker, intends to manage Valley, allocate resources and measure performance.

Goodwill balances were reallocated across the new operating segments and reporting units (as reflected in the table above) based on their relative fair values using the valuation performed during the second quarter 2022.

The goodwill from business combinations set forth in the above table during the nine months ended September 30, 2022, related to the acquisitions of Bank Leumi USA and Landmark totaled $ 403.2 million and $ 4.4 million, respectively.

The goodwill from Landmark transaction was allocated entirely to the Wealth Management reporting unit.

During the nine months ended September 30, 2022, Valley recorded $ 5.0 million of additional goodwill reflecting an adjustment to the deferred tax assets acquired from Westchester as of the acquisition date.

See Note 2 for details related to these acquisitions.

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

$ 49,767 $ 284,873 $ 1,534,296 $ 1,868,936

* Valley’s Wealth Management and Insurance Division is comprised of trust, asset management, brokerage, insurance and tax credit advisory services.

This reporting unit is included in the Consumer Banking segment for financial reporting purposes.

During the three months ended March 31, 2023, there were no triggering events that would more likely than not

reduce the fair value of any reporting unit below its carrying amount.

There w as no impair ment of goodwill recognized during the three months ended March 31, 2023 and 2022.

The following table summarizes other intangible assets as of March 31, 2023 and December 31, 2022:

Assets Accumulated

1 unchanged sentence

(in thousands)

September 30, 2022

March 31, 2023

Loan servicing rights $ 120,177 $ ( 97,332 ) $ 22,845

11 unchanged sentences

Impairment charges on loan servicing rights are recognized in earnings when the book value of a stratified group of loan servicing rights exceeds its estimated fair value.

There was no net impairment recognized during the three and nine months ended September 30, 2022.

Valley recorded net recoveries of impairment charges on its loan servicing rights totaling $ 32 thousand and $ 864 thousand for the three and nine months ended September 30, 2021, respectively.

There was no net impairment recognized during the three months ended March 31, 2023 and 2022.

Core deposits are amortized using an accelerated method over a period of 10.0 years.

Valley recorded $ 114.4 million of core deposit intangibles resulting from the Bank Leumi USA acquisition.

The line item labeled “Other” included in the table above primarily consists of customer lists, certain financial asset servicing contracts and covenants not to compete, which are amortized over their expected lives generally using a straight-line method and have a weighted average amortization period of approximately 13.4 years.

Valley recorded $ 39.0 million and $ 6.2 million of other intangible assets during the nine months ended September 30, 2022 resulting from the Bank Leumi USA and Landmark acquisitions, respectively.

Valley evaluates core deposits and other intangibles for impairment when an indication of impairment exists.

No impairment was recognized during the three and nine months ended September 30, 2022 and 2021.

No impairment was recognized during the three months ended March 31, 2023 and 2022.

The following table presents the estimated future amortization expense of other intangible assets for the remainder of 2023 through 2027:

Loan Servicing

Year Loan Servicing

Deposits Other

5 unchanged sentences

2027 1,861 13,544 4,205

Valley recognized amortization expense on other intangible assets (including net recoveries of impairment charges on loan servicing rights) totaling approximately $ 11.1 million and $ 5.3 million for the three months ended September 30, 2022 and 2021, respectively, and $ 26.9 million and $ 16.8 million for the nine months ended September 30, 2022 and 2021, respectively.

Valley recognized amortization expense on other intangible assets totaling approximately $ 10.5 million and $ 4.4 million for the three months ended March 31, 2023 and 2022, respectively .

Included in time deposits are certificates of deposit over $250 thousand totaling $ 1.7 billion and $ 1.8 billion at March 31, 2023 and December 31, 2022, respectively.

Interest expense on time deposits of $250 thousand or more total ed $ 2.8 million and $ 107 thousand for the three months ended March 31, 2023 and 2022, respectively.

The scheduled maturities of time deposits as of March 31, 2023 were as follows:

(in thousands)

2023 6,859,391

2024 2,578,459

Thereafter 1,447,402

Total time deposits $ 11,111,376

Borrowed Funds

Short-Term Borrowings

Short-term borrowings at September 30, 2022 and December 31, 2021 consisted of the following:

September 30, 2022 December 31, 2021

Short-term borrowings at March 31, 2023 and December 31, 2022 consisted of the following:

March 31, 2023 December 31, 2022

(in thousands)

2 unchanged sentences

Total short-term borrowings $ 6,413,056 $ 138,729

The weighted average interest rate for short-term FHLB advances was 3.21 percent and 0.37 percent at September 30, 2022 and December 31, 2021, respectively.

The weighted average interest rate for short-term FHLB advances was 5.18 percent and 1.6 percent at March 31, 2023 and December 31, 2022, respectively.

Long-Term Borrowings

Long-term borrowings at September 30, 2022 and December 31, 2021 consisted of the following:

September 30, 2022 December 31, 2021

Long-term borrowings at March 31, 2023 and December 31, 2022 consisted of the following:

March 31, 2023 December 31, 2022

(in thousands)

4 unchanged sentences

Total long-term borrowings $ 2,197,656 $ 1,543,058

(1) FHLB advances are presented net of unamortized premiums totaling $ 574 thousand and $ 1.0 million at September 30, 2022 and December 31, 2021, respectively.

(2) Subordinated debt is presented net of unamortized debt issuance costs totaling $ 7.3 million and $ 5.8 million at September 30, 2022 and December 31, 2021, respectively.

(1) FHLB advances are presented net of unamortized premiums totaling $ 361 thousand and $ 419 thousand at March 31, 2023 and December 31, 2022, respectively.

(2) Subordinated debt is presented net of unamortized debt issuance costs totaling $ 6.5 million and $ 6.9 million at March 31, 2023 and December 31, 2022, respectively.

FHLB Advances.

Long-term FHLB advances had a weighted average interest rate of 1.88 percent at both September 30, 2022 and December 31, 2021.

Long-term FHLB advances had a weighted average interest rate of 3.66 percent and 1.88 percent at March 31, 2023 and December 31, 2022, respectively.

FHLB advances are secured by pledges of certain eligible collateral, including but not limited to, U.S.

government and agency mortgage-backed securities and a blanket assignment of qualifying first lien mortgage loans, consisting of both residential mortgage and commercial real estate loans.

The long-term FHLB advances at September 30, 2022 are scheduled for contractual balance repayments as follows:

The long-term FHLB advances at March 31, 2023 are scheduled for contractual balance repayments as follows:

(in thousands)

2024 $ 165,000

Thereafter 225,000

Total long-term FHLB advances $ 1,438,000

There are no FHLB advances with scheduled repayments in years 2023 and thereafter, reported in the table above, which are callable for early redemption by the FHLB during the next 12 months.

There a re no FHLB advances reported in the table above, which are callable for early redemption by the FHLB during the next 12 months.

Subordinated debt.

On September 20, 2022, Valley issued $ 150 million of 6.25 percent fixed-to-floating rate subordinated notes due September 30, 2032.

Interest on the subordinated notes during the initial five year term through September 30, 2027, is payable semi-annually in arrears on March 30 and September 30, commencing on March 30, 2023.

Thereafter, interest is expected to be set based on three-month Secured Overnight Financing Rate (SOFR) plus 278 basis points and paid quarterly through maturity of the notes.

At September 30, 2022, the subordinated notes had a carrying value of $ 147.5 million, net of unamortized debt issuance costs.

Valley also had the following subordinated debt outstanding at September 30, 2022:

• $ 125 million aggregate principal amount of 5.125 percent subordinated notes due September 27, 2023 with no call dates or prepayments allowed except upon the occurrence of certain events;

• $ 100 million aggregate principal amount of 4.55 percent subordinated notes due June 30, 2025 with no call dates or prepayments allowed except upon the occurrence of certain events;

• $ 115 million aggregate principal amount of 5.25 percent fixed-to-floating rate subordinated notes due June 15, 2030 and callable in whole or in part on or after June 15, 2025 or upon the occurrence of certain events;

• $ 300 million aggregate principal amount of 3.00 percent fixed-to-floating rate subordinated notes due June 15, 2031 and are callable in whole or in part on or after June 15, 2026 or upon the occurrence of certain events.

There were no new issuances of the subordinated debt during the three months ended March 31, 2023.

See Note 10 in Valley’s Annual Report on Form 10-K for the year ended December 31, 2022 for details on the outstanding subordinated debt.

Stock–Based Compensation

On April 19, 2021, Valley's shareholders approved the Valley National Bancorp 2021 Incentive Compensation Plan (the 2021 Plan) administered by the Compensation and Human Capital Management Committee as appointed by Valley's Board of Directors.

The purposes of the 2021 Plan are to provide additional incentives to officers and key employees of Valley and its subsidiaries, whose substantial contributions are essential to the continued growth and success of Valley, and to attract and retain officers, other employees and non-employee directors whose efforts will result in the continued and long-term growth of Valley's business.

As of September 30, 2022 , 5.1 million shares of common stock were available for issuance under the 2021 Plan.

The essential features of each award are described in the award agreement relating to that award.

The grant, exercise, vesting, settlement or payment of an award may be based upon the fair value of Valley's common stock on the last sale price reported for Valley's common stock on such date or the last sale price reported preceding such date, except for performance-based awards with a market condition.

On April 25, 2023, Valley's shareholders approved the Valley National Bancorp 2023 Incentive Compensation Plan (the 2023 Plan).

The purpose of the 2023 Plan is to provide additional long-term incentives to employees, directors and officers whose contributions are essential to the continued growth and success of Valley.

Upon shareholder approval of the 2023 Plan, Valley ceased granting awards under the Valley National Bancorp 2021 Incentive Compensation Plan (the 2021 Plan).

Under the 2023 Plan, Valley may issue awards to its officers, employees and non-employee directors in amounts up to 14.5 million shares of common stock, less one share for every share granted after December 31, 2022 under the 2021 Plan.

These awards may be in the form of stock appreciation rights, incentive and non-qualified stock options, restricted stock, and restricted stock units (RSUs).

If after December 31, 2022, share awards granted under the 2021 Plan are forfeited, expire, settled for cash, withheld for tax obligations, or otherwise not issued, the shares will be added to the 2023 Plan's share reserve.

The grant, exercise, vesting, settlement, or payment of an award may be based upon the fair value of Valley's common stock on the last sale price reported for Valley's common stock on such date;

or the last sale price reported preceding such date.

Performance-based awards may also be based on a market condition.

The grant date fair values of performance-based awards that vest based on a market condition are determined by a third-party specialist using a Monte Carlo valuation model.

On April 1, 2022, Valley issued replacement options for the pre-existing and fully vested stock awards consisting of Bank Leumi USA options for 2.7 million shares of Valley common stock (which all remained outstanding at

September 30, 2022) at a weighted average exercise price of $ 8.47 .

The stock plan under which the original Bank Leumi stock awards were issued is no longer active at the acquisition date.

Valley granted 234 thousand and 30 thousand of time-based restricted stock units (RSUs) during the three months ended September 30, 2022 and 2021, respectively, and 2.3 million and 1.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Valley granted 1.5 million and 1.2 million time-based RSUs during the three months ended March 31, 2023 and 2022, respectively.

Generally, time-based RSUs vest ratably over a three-year period.

The average grant date fair value of the RSUs granted during the nine months ended September 30, 2022 and 2021 was $ 13.31 per share and $ 11.98 per share, respectively.

Valley granted 619 thousand and 604 thousand of performance-based RSUs to certain officers for the nine months ended September 30, 2022 and 2021, respectively.

The performance-based RSU awards include RSUs with vesting conditions based upon certain levels of growth in Valley's tangible book value per share plus dividends and RSUs with vesting conditions based upon Valley's total shareholder return as compared to its peer group.

The average grant date fair value of the RSUs granted during the three months ended March 31, 2023 and 2022 was $ 11.91 per share and $ 14.05 per share, respectively.

Valley granted 723 thousand and 567 thousand performance-based RSUs to certain officers for the three months ended March 31, 2023 and 2022, respectively.

The performance-based RSU awards include RSUs with vesting conditions based upon certain levels of growth in Valley's tangible book value per share, plus dividends;

and RSUs, with vesting conditions based upon Valley's total shareholder return as compared to its peer group.

The RSUs “cliff” vest after three years based on the cumulative performance of Valley during that time period.

The RSUs earn dividend equivalents (equal to cash dividends paid on Valley's common stock) over the applicable performance period.

Dividend equivalents are accumulated and paid to the grantee at the vesting date or forfeited if the performance conditions are not met.

The grant date fair value of the performance-based RSUs granted during the nine months ended September 30, 2022 and 2021 was $ 14.72 per share and $ 12.36 per share, respectively.

Valley recorded total stock-based compensation expense of $ 7.6 million and $ 5.2 million for the three months ended September 30, 2022 and 2021, respectively, and $ 21.0 million and $ 15.9 million for the nine months ended September 30, 2022 and 2021, respectively.

The fair values of stock awards are expensed over the shorter of the vesting or required service period.

As of September 30, 2022, the unrecognized amortization expense for all stock-based employee compensation totaled approximately $ 40.0 million and will be recognized over an average remaining vesting period of approximately 2.1 years.

The RSUs earn

dividend equivalents (equal to cash dividends paid on Valley's common stock) over the applicable performance period.

Dividend equivalents accumulate and are paid to the grantee at the vesting date, or forfeited if the performance conditions are not met.

The grant date fair value of the performance-based RSUs granted during the three months ended March 31, 2023 and 2022 was $ 12.80 per share and $ 14.82 per share, respectively.

Valley recorded total stock-based compensation expense of $ 8.1 million and $ 7.3 million for the three months ended March 31, 2023 and 2022, respectively.

Stock award fair values are expensed over the shorter of the vesting or required service period.

As of March 31, 2023, the unrecognized amortization expense for all stock-based employee compensation totaled approximately $ 56.6 million.

This expense will be recognized over an average remaining vesting period of approximately 2.2 years.

Derivative Instruments and Hedging Activities

Valley enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest and currency rates.

Cash Flow Hedges of Interest Rate Risk.

Valley’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.

To accomplish this objective, Valley uses interest rate swaps as part of its interest rate risk management strategy.

Interest rate swaps designated as cash flow hedges involve the payment of either fixed or variable-rate amounts in exchange for the receipt of variable or fixed-rate amounts from a counterparty, respectively.

At March 31, 2023, Valley had six interest rate swaps with a total notional amount of $ 600 million, to hedge the changes in cash flows associated with certain variable rate loans.

Valley is required to pay variable rate amounts based on one-month CME Term SOFR and receives fixed rate payments based on the tenor of each swap.

Expiration dates for the swaps range from November 2024 to November 2026.

Fair Value Hedges of Fixed Rate Assets and Liabilities.

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For derivatives that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the loss or gain on the hedged item attributable to the hedged risk are recognized in earnings.

Cash Flow Hedges of Interest Rate Risk .

Valley’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.

To accomplish this objective, Valley uses interest rate swaps as part of its interest rate risk management strategy.

Valley had six interest rate swaps with a total notional amount of $ 700 million that matured during the nine months ended September 30, 2022.

These swaps were used to hedge the changes in cash flows associated with certain short-term FHLB advances and brokered deposits.

Non-designated Hedges.

Derivatives not designated as hedges are used to manage Valley’s exposure to interest rate movements, foreign currency risk, credit risk, and to provide services to customers or for other purposes.

derivatives do not meet the requirements for hedge accounting under U.S.

Derivatives not designated as hedges may be used to manage Valley’s exposure to interest rate movements or to provide a service to customers but do not meet the requirements for hedge accounting under U.S.

Derivatives not designated as hedges are not entered into for speculative purposes.

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Changes in the fair value in credit derivatives are recognized directly in earnings.

At September 30, 2022, Valley had 28 credit swaps with an aggregate notional amount of $ 290.7 million related to risk participation agreements.

At September 30, 2022, Valley had two “steepener” swaps, each with a current notional amount of $ 10.4 million where the receive rate on the swap mirrors the pay rate on the brokered deposits and the rates paid on these types of hybrid instruments are based on a formula derived from the spread between the long and short ends of the constant maturity swap (CMS) rate curve.

At March 31, 2023, Valley had 33 credit swaps with an aggregate notional amount of $ 409.2 million related to risk participation agreements.

At March 31, 2023, Valley had two “steepener” swaps, each with a current notional amount of $ 10.4 million where the receive rate on the swap mirrors the pay rate on the brokered deposits and the rates paid on these types of hybrid instruments are based on a formula derived from the spread between the long and short ends of the constant maturity swap (CMS) rate curve.

Although these types of instruments do not meet the hedge accounting requirements, the change in fair value of both the bifurcated derivative and the stand alone swap tend to move in opposite directions with changes in the three-month LIBOR rate and therefore provide an effective economic hedge.

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Valley enters into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rate on Valley's commitments to fund the loans as well as on its portfolio of mortgage loans held for sale.

Valley enters foreign currency forward and option contracts, primarily to accommodate our customers, that are not designated as hedging instruments.

Valley enters into foreign currency forward and option contracts, primarily to accommodate our customers, that are not designated as hedging instruments.

Upon the origination of a certain foreign currency denominated transactions (including foreign currency holdings and non-U.S.

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Amounts included in the consolidated statements of financial condition related to the fair value of Valley’s derivative financial instruments were as follows:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Fair Value Fair Value

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$ 438,883 $ 466,694 $ 17,198,430 $ 463,156 $ 577,439 $ 16,058,364

* I ncludes risk participation agreements.

* Other derivative contracts include risk participation agreements.

The Chicago Mercantile Exchange and London Clearing House variation margins are classified as a single-unit of account as settlements of the cash flow hedges and other non-designated derivative instruments.

As a result, the fair value of the applicable derivative assets and liabilities are reported net of variation margin at September 30, 2022 and December 31, 2021 in the table above .

Gains (losses) included in the consolidated statements of income and other comprehensive loss, on a pre-tax basis, elated to interest rate derivatives designated as hedges of cash flows were as follows:

As a result, the fair value of the applicable derivative assets and liabilities are reported net of variation margin at March 31, 2023 and December 31, 2022 in the table above.

Gains (losses) included in the consolidated statements of income and other comprehensive loss, on a pre-tax basis, related to interest rate derivatives designated as hedges of cash flows were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

Amount of gain (loss) reclassified from accumulated other comprehensive loss to interest expense $ 21 $ ( 1,044 ) $ ( 405 ) $ ( 2,708 )

Amount of (loss) gain recognized in other comprehensive loss ( 6 ) ( 144 ) 435 ( 125 )

The accumulated after-tax losses related to effective cash flow hedges included in accumulated other comprehensive loss were $ 929 thousand and $ 1.3 million at September 30, 2022 and December 31, 2021, respectively.

Amount of loss reclassified from accumulated other comprehensive loss to interest expense $ ( 531 ) $ ( 542 )

Amount of gain recognized in other comprehensive loss 3,898 320

The accumulated after-tax gains related to effective cash flow hedges included in accumulated other comprehensive loss were $ 5.4 million and $ 2.2 million at March 31, 2023 and December 31, 2022, respectively.

Amounts reported in accumulated other comprehensive loss related to cash flow interest rate derivatives are reclassified to interest expense as interest payments are made on the hedged variable interest rate liabilities.

Valley estimates that $ 995 thousand before tax will be reclassified as an increase to interest expense over the next 12 months.

Valley estimates that $ 2.1 million before tax will be reclassified as an increase to interest expense over the next 12 months.

Gains (losses) included in the consolidated statements of income related to interest rate derivatives designated as hedges of fair value were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

Derivative - interest rate swap:

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Interest expense $ ( 4,772 ) $ ( 530 )

The changes in the fair value of the hedged item designated as a qualifying hedge are captured as an

adjustment to the carrying amount of the hedged item (basis adjustment).

The following table presents the hedged item related to interest rate derivatives designated as fair value hedges and the cumulative basis fair value adjustment included in the net carrying amount of the hedged item at September 30, 2022.

Line Item in the Statement of Financial Position in Which the Hedged Item is Included Carrying Amount of the Hedged Liability Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability

The changes in the fair value of the hedged item designated as a qualifying hedge are captured as an adjustment to the carrying amount of the hedged item (basis adjustment).

Line Item in the Statement of Financial Position in Which the Hedged Item is Included Net Carrying Amount of the Hedged Liability * Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability

(in thousands)

March 31, 2023

Long-term borrowings $ 272,051 $ ( 25,360 )

December 31, 2022

Long-term borrowings $ 267,076 $ ( 30,132 )

* Net carrying amount includes unamortized debt issuance costs of $ 2.6 million and $ 2.8 million at March 31, 2023 and December 31, 2022, respectively.

The net losses (gains) included in the consolidated statements of income related to derivative instruments not designated as hedging instruments were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

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Other non-interest expense $ 208 $ ( 2,797 )

Other non-interest income included fee income related to non-designated hedge derivative interest rate swaps (not designated as hedging instruments) executed with commercial loan customers totaling $ 10.7 million and $ 8.8 million for the three months ended September 30, 2022 and 2021, respectively, and $ 35.8 million and $ 22.6 million for the nine months ended September 30, 2022 and 2021, respectively.

Credit Risk Related Contingent Features.

Capital markets income reported in non-interest income included fee income related to non-designated hedge derivative interest rate swaps (not designated as hedging instruments) executed with commercial loan customers and foreign exchange fees with a combined total of $ 9.9 million and $ 14.4 million for the three months ended March 31, 2023 and 2022, respectively.

Collateral Requirements and Credit Risk Related Contingent Features .

By using derivatives, Valley is exposed to credit risk if counterparties to the derivative contracts do not perform as expected.

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Additionally, Valley has an agreement with several of its derivative counterparties that contains provisions that require Valley’s debt to maintain an investment grade credit rating from each of the major credit rating agencies from which it receives a credit rating.

If Valley’s credit rating is reduced below investment grade, or such rating is withdrawn or suspended, then the counterparty could terminate the derivative positions and Valley would be required to settle its obligations under the agreements.

As of September 30, 2022, Valley was in compliance with all of the provisions of its derivative counterparty agreements.

As of September 30, 2022, there were no derivatives in an aggregate net liability position.

If Valley’s credit rating is reduced below investment grade, or such rating is withdrawn or suspended, then the counterparties could terminate the derivative positions and Valley would be required to settle its obligations under the agreements.

As of March 31, 2023, Valley was in compliance with all of the provisions of its derivative counterparty agreements.

The aggregate fair value of all derivative financial instruments with credit risk-related contingent features in a net liability position at March 31, 2023 was not material.

Valley has derivative counterparty agreements that require minimum collateral posting thresholds for certain counterparties.

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The total amount of collateral held or pledged cannot exceed the net derivative fair values with the counterparty.

The table below presents information about Valley’s financial instruments eligible for offset in the consolidated statements of financial condition as of September 30, 2022 and December 31, 2021.

The table below presents information about Valley’s financial instruments eligible for offset in the consolidated statements of financial condition as of March 31, 2023 and December 31, 2022.

Gross Amounts Not Offset

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(in thousands)

September 30, 2022

March 31, 2023

Interest rate swaps $ 437,061 $ — $ 437,061 $ 30,473 $ ( 301,740 ) $ 165,794

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Interest rate swaps $ 594,476 $ — $ 594,476 $ ( 12,766 ) $ ( 432 ) $ 581,278

* Cash collateral received from or pledged to our counterparties in relation to market value exposures of OTC derivative contacts in a liability position.

* Cash collateral received from or pledged to our counterparties in relation to market value exposures of OTC derivative contacts in an asset/liability position.

Tax Credit Investments

Valley’s tax credit investments are primarily related to investments promoting qualified affordable housing projects, and other investments related to community development and renewable energy sources.

Some of these tax-advantaged investments support Valley’s regulatory compliance with the CRA.

Some of these tax-advantaged investments support Valley’s regulatory compliance with the Community Reinvestment Act.

Valley’s investments in these entities generate a return primarily through the realization of federal income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods.

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Valley’s unfunded capital and other commitments related to the tax credit investments are carried in accrued expenses and other liabilities on the consolidated statements of financial condition.

Valley recognizes amortization

of tax credit investments, including impairment losses, within non-interest expense in the consolidated statements of income using the equity method of accounting.

Valley recognizes amortization of tax credit investments, including impairment losses, within non-interest expense in the consolidated statements of income using the equity method of accounting.

After initial measurement, the carrying amounts of tax credit investments with non-readily determinable fair values are increased to reflect Valley's share of income of the investee and are reduced to reflect its share of losses of the investee, dividends received and impairments, if applicable.

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at September 30, 2022 and December 31, 2021:

September 30,

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at March 31, 2023 and December 31, 2022:

2023 December 31,

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Total unfunded tax credit commitments $ 1,338 $ 1,338

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and nine months ended September 30, 2022 and 2021:

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three months ended March 31, 2023 and 2022:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

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Affordable housing tax credit investment impairment losses

266 387 891 1,159

Other tax credit investment losses 6 309

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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 Lending, Commercial Lending and Treasury and Corporate Other at June 30, 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.

At March 31, 2023 and December 31, 2022, Valley managed its business operations under reportable segments consisting of Consumer Banking, Commercial Banking and Treasury and Corporate Other.

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 September 30, 2022.

Consumer Lending is mainly comprised of residential mortgages and automobile loans, and to a lesser extent, secured personal lines of credit, home equity loans and other consumer loans.

Valley regularly assesses its strategic plans, operations and reporting structures to identify its reportable segments and no changes to the reportable segments were determined necessary during the first quarter 2023.

Consumer Banking is mainly comprised of residential mortgages and automobile loans, and to a lesser extent, secured personal lines of credit, home equity loans and other consumer loans.

The duration of the residential mortgage loan portfolio 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.

Consumer Lending also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, brokerage, insurance and tax credit advisory services.

Commercial Lending 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 lending is Valley’s operating segment that is most sensitive to movements in market interest rates.

Consumer Banking also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, brokerage, insurance and tax credit advisory services.

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 operating segment that is most sensitive to movements in market interest rates.

Treasury and Corporate Other largely consists of the Treasury managed held to maturity debt securities 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 Lending and Commercial Lending segments.

Interest expense and internal transfer expense (for general corporate expenses) are allocated to each operating 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 Valley’s operations, which may not necessarily be comparable to any other financial institution.

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.

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

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

The prior period balances presented in the tables below reflect reclassifications to conform the presentation in those periods to 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 represent the financial data for Valley’s operating segments for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, 2022

Lending Commercial

Lending Treasury and Corporate Other Total

($ in thousands)

Average interest earning assets

$ 8,307,993 $ 36,033,901 $ 6,189,348 $ 50,531,242

Interest income $ 70,590 $ 425,930 $ 40,208 $ 536,728

Interest expense 12,288 53,294 17,154 82,736

Net interest income 58,302 372,636 23,054 453,992

Provision (credit) for credit losses 7,182 ( 5,347 ) 188 2,023

Net interest income after provision for credit losses 51,120 377,983 22,866 451,969

Non-interest income 19,637 23,510 13,047 56,194

Non-interest expense 24,352 31,759 205,528 261,639

Internal transfer expense (income) 26,268 113,932 ( 140,200 ) —

Income before income taxes $ 20,137 $ 255,802 $ ( 29,415 ) $ 246,524

Return on average interest earning assets (pre-tax)

0.97 % 2.84 % ( 1.90 ) % 1.95 %

Three Months Ended September 30, 2021

Lending Commercial

Lending Treasury and Corporate Other Total

The balances presented for the three months ended March 31, 2022 in the tables below reflect reclassifications to conform with the presentation of the current operating segment structure, which was implemented in the second quarter 2022.

These reclassifications did not impact Valley's consolidated results.

See Valley's Form 10-K for the year ended December 31, 2022 for additional information.

The following tables represent the financial data for Valley’s operating segments for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31, 2023

Banking Commercial

Banking Treasury and Corporate Other Total

($ in thousands)

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Net interest income 42,310 378,187 15,523 436,020

(Credit) provision for credit losses ( 4,614 ) 8,110 35 3,531

Provision for credit losses 6,444 3,006 4,987 14,437

Net interest income after provision for credit losses 35,866 375,181 10,536 421,583

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0.05 % 2.29 % ( 1.12 ) % 1.47 %

Nine Months Ended September 30, 2022

Lending Commercial

Lending Treasury and Corporate Other Total

Three Months Ended March 31, 2022

Banking Commercial

Banking Treasury and Corporate Other Total

($ in thousands)

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Internal transfer expense (income) 28,647 99,916 ( 128,563 ) —

Income before income taxes $ 56,796 $ 519,640 $ ( 40,905 ) $ 535,531

Return on average interest earning assets (pre-tax)

0.95 % 2.13 % ( 0.90 ) % 1.53 %

Nine Months Ended September 30, 2021

Lending Commercial

Lending Treasury and Corporate Other Total

($ in thousands)

Average interest earning assets

$ 7,176,086 $ 25,465,276 $ 5,261,185 $ 37,902,547

Interest income $ 179,151 $ 759,097 $ 55,999 $ 994,247

Interest expense 15,639 55,497 28,511 99,647

Net interest income 163,512 703,600 27,488 894,600

(Credit) provision for credit losses ( 6,538 ) 27,825 ( 353 ) 20,934

Net interest income after provision for credit losses 170,050 675,775 27,841 873,666

Non-interest income 47,445 29,144 40,201 116,790

Non-interest expense 53,161 80,276 373,591 507,028

Internal transfer expense (income) 60,026 212,931 ( 272,957 ) —

Income (loss) before income taxes $ 22,981 $ 136,831 $ ( 3,770 ) $ 156,042

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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-Q

Item 1. Financial Statements