VLY filing — read by section

Item 1. Financial Statements

Item 1. Financial Statements 
 
 VALLEY NATIONAL BANCORP 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 
 (in thousands, except for share data) 
 March 31,
2023 December 31,
2022 
 Assets (Unaudited) 
 Cash and due from banks $ 444,690 $ 444,325 
 Interest bearing deposits with banks 5,260,998 503,622 
 Investment securities: 
 Equity securities 50,152 48,731 
 Trading debt securities 6,855 13,438 
 Available for sale debt securities 1,259,236 1,261,397 
 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 
 Total investment securities 5,161,822 5,150,904 
 Loans held for sale, at fair value 17,218 18,118 
 Loans 48,659,966 46,917,200 
 Less: Allowance for loan losses ( 436,898 ) ( 458,655 ) 
 Net loans 48,223,068 46,458,545 
 Premises and equipment, net 365,313 358,556 
 Lease right of use assets 302,740 306,352 
 Bank owned life insurance 717,339 717,177 
 Accrued interest receivable 223,608 196,606 
 Goodwill 1,868,936 1,868,936 
 Other intangible assets, net 187,171 197,456 
 Other assets 1,536,670 1,242,152 
 Total Assets $ 64,309,573 $ 57,462,749 
 Liabilities 
 Deposits: 
 Non-interest bearing $ 13,576,116 $ 14,463,645 
 Interest bearing: 
 Savings, NOW and money market 22,903,424 23,616,812 
 Time 11,111,376 9,556,457 
 Total deposits 47,590,916 47,636,914 
 Short-term borrowings 6,413,056 138,729 
 Long-term borrowings 2,197,656 1,543,058 
 Junior subordinated debentures issued to capital trusts 56,847 56,760 
 Lease liabilities 355,020 358,884 
 Accrued expenses and other liabilities 1,184,497 1,327,602 
 Total Liabilities 57,797,992 51,061,947 
 Shareholders’ Equity 
 Preferred stock, no par value; 50,000,000 authorized shares: 
 
 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 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 shares at March 31, 2023 and December 31, 2022) 
 178,186 178,185 
 Surplus 4,967,662 4,980,231 
 Retained earnings 1,300,980 1,218,445 
 Accumulated other comprehensive loss ( 143,647 ) ( 164,002 ) 
 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 ) 
 Total Shareholders’ Equity 6,511,581 6,400,802 
 Total Liabilities and Shareholders’ Equity $ 64,309,573 $ 57,462,749 

 See accompanying notes to consolidated financial statements. 
 2 
 
 

 
 
 

 VALLEY NATIONAL BANCORP 
 CONSOLIDATED STATEMENTS OF INCOME (Unaudited) 
 (in thousands, except for per share data) 
 Three Months Ended
March 31, 
 2023 2022 
 Interest Income 
 Interest and fees on loans $ 655,226 $ 317,365 
 Interest and dividends on investment securities: 
 Taxable 32,289 18,439 
 Tax-exempt 5,325 2,517 
 Dividends 5,185 1,676 
 Interest on federal funds sold and other short-term investments 22,205 461 
 Total interest income 720,230 340,458 
 Interest Expense 
 Interest on deposits: 
 Savings, NOW and money market 150,766 9,627 
 Time 80,298 2,831 
 Interest on short-term borrowings 33,948 806 
 Interest on long-term borrowings and junior subordinated debentures 19,198 9,525 
 Total interest expense 284,210 22,789 
 Net Interest Income 436,020 317,669 
 
 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 
 Net Interest Income After Provision for Credit Losses 421,583 314,112 
 Non-Interest Income 
 Wealth management and trust fees 9,587 5,131 
 Insurance commissions 2,420 1,859 
 Capital markets 10,892 14,360 
 Service charges on deposit accounts 10,476 6,212 
 Gains (losses) on securities transactions, net 378 ( 1,072 ) 
 
 Fees from loan servicing 2,671 2,781 
 Gains on sales of loans, net 489 986 
 
 Bank owned life insurance 2,584 2,046 
 Other 14,802 6,967 
 Total non-interest income 54,299 39,270 
 Non-Interest Expense 
 Salary and employee benefits expense 144,986 107,733 
 Net occupancy expense 23,256 21,991 
 Technology, furniture and equipment expense 36,508 26,015 
 FDIC insurance assessment 9,155 4,158 
 Amortization of other intangible assets 10,519 4,437 
 Professional and legal fees 16,814 14,749 
 
 
 Amortization of tax credit investments 4,253 2,896 
 Other 26,675 15,361 
 Total non-interest expense 272,166 197,340 
 Income Before Income Taxes 203,716 156,042 
 Income tax expense 57,165 39,314 
 Net Income 146,551 116,728 
 Dividends on preferred stock 3,874 3,172 
 Net Income Available to Common Shareholders $ 142,677 $ 113,556 
 
 
 
 Earnings Per Common Share: 
 Basic $ 0.28 $ 0.27 
 Diluted 0.28 0.27 
 
 
 
 

 See accompanying notes to consolidated financial statements. 
 3 
 
 

 
 
 

 VALLEY NATIONAL BANCORP 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) 
 (in thousands) 
 
 
 Three Months Ended
March 31, 
 2023 2022 
 Net income $ 146,551 $ 116,728 
 Other comprehensive income (loss), net of tax: 
 Unrealized gains and losses on available for sale securities 
 Net gains (losses) arising during the period 17,170 ( 38,892 ) 
 Less reclassification adjustment for net gains included in net income — ( 10 ) 
 Total 17,170 ( 38,902 ) 
 
 
 
 
 Unrealized gains and losses on derivatives (cash flow hedges) 
 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 and postretirement benefit plans 
 
 Amortization of actuarial net loss 8 132 
 
 Total other comprehensive income (loss) 20,355 ( 38,166 ) 
 Total comprehensive income $ 166,906 $ 78,562 

 See accompanying notes to consolidated financial statements. 
 
 
 4 
 
 

 
 
 

 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) 
 
 
 For the Three Months Ended March 31, 2023 
 
 Common Stock Accumulated 
 Preferred Stock Shares Amount Surplus Retained
Earnings Other
Comprehensive
Loss Treasury
Stock Total
Shareholders’
Equity 
 (in thousands) 
 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 income, net of tax — — — — — 20,355 — 20,355 
 Cash dividends declared: 
 Preferred stock, Series A, $ 0.39 per share 
 — — — — ( 1,797 ) — — ( 1,797 ) 
 Preferred stock, Series B, $ 0.52 per share 
 — — — — ( 2,077 ) — — ( 2,077 ) 
 Common stock, $ 0.11 per share 
 — — — — ( 56,488 ) — — ( 56,488 ) 
 Effect of stock incentive plan, net 
 — 1,061 1 ( 12,569 ) ( 3,994 ) — 16,057 ( 505 ) 
 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 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) (continued) 
 
 
 For the Three Months Ended March 31, 2022 
 
 Common Stock Accumulated 
 Preferred Stock Shares Amount Surplus Retained
Earnings Other
Comprehensive
Loss Treasury
Stock Total
Shareholders’
Equity 
 (in thousands) 
 Balance - December 31, 2021 $ 209,691 421,437 $ 148,482 $ 3,883,035 $ 883,645 $ ( 17,932 ) $ ( 22,855 ) $ 5,084,066 
 Net income — — — — 116,728 — — 116,728 
 Other comprehensive loss, net of tax — — — — — ( 38,166 ) — ( 38,166 ) 
 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 
 — — — — ( 46,803 ) — — ( 46,803 ) 
 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 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 See accompanying notes to consolidated financial statements. 
 5 
 
 

 
 
 

 VALLEY NATIONAL BANCORP 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 
 (in thousands) 
 
 
 
 Three Months Ended
March 31, 
 2023 2022 
 Cash flows from operating activities: 
 Net income $ 146,551 $ 116,728 
 Adjustments to reconcile net income to net cash (used in) provided by operating activities: 
 Depreciation and amortization 11,515 7,486 
 Stock-based compensation 8,093 7,263 
 Provision for credit losses 14,437 3,557 
 Net amortization of premiums and accretion of discounts on securities and borrowings ( 397 ) 7,487 
 Amortization of other intangible assets 10,519 4,437 
 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 
 Gains on sales of loans, net ( 489 ) ( 986 ) 
 Originations of loans held for sale ( 26,588 ) ( 144,485 ) 
 (Gains) losses on sales of assets, net ( 125 ) 64 
 
 Net change in: 
 Fair value of borrowings hedged by derivative transactions 4,219 ( 14,696 ) 
 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 ) 
 Accrued interest receivable ( 27,002 ) ( 5,785 ) 
 Other assets ( 298,076 ) 20,156 
 Accrued expenses and other liabilities ( 147,705 ) 265,029 
 Net cash (used in) provided by operating activities ( 269,682 ) 496,003 
 Cash flows from investing activities: 
 Net loan originations and purchases ( 1,774,024 ) ( 1,210,754 ) 
 Equity securities: 
 Purchases ( 1,594 ) ( 662 ) 
 Sales 409 848 
 Held to maturity debt securities: 
 Purchases ( 79,961 ) ( 545,462 ) 
 
 Maturities, calls and principal repayments 61,213 136,024 
 Available for sale debt securities: 
 Purchases — ( 15,000 ) 
 
 Maturities, calls and principal repayments 22,264 73,008 
 Death benefit proceeds from bank owned life insurance 2,773 2,369 
 Proceeds from sales of real estate property and equipment 125 5,692 
 
 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 ) 
 Net cash used in investing activities ( 1,784,558 ) ( 1,585,293 ) 
 

 6 
 
 

 
 

 
 VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)
(in thousands) 
 
 Three Months Ended
March 31, 
 2023 2022 
 Cash flows from financing activities: 
 Net change in deposits $ ( 45,998 ) $ 14,924 
 Net change in short-term borrowings 6,274,327 ( 171,545 ) 
 Proceeds from issuance of long-term borrowings, net 1,000,000 — 
 Repayments of long-term borrowings ( 350,000 ) — 
 Cash dividends paid to preferred shareholders ( 3,874 ) ( 3,172 ) 
 Cash dividends paid to common shareholders ( 57,612 ) ( 46,205 ) 
 Purchase of common shares to treasury ( 8,599 ) ( 23,627 ) 
 Common stock issued, net 3,750 95 
 Other, net ( 13 ) ( 180 ) 
 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 ) 
 Cash and cash equivalents at beginning of year 947,947 2,049,920 
 Cash and cash equivalents at end of period $ 5,705,688 $ 730,920 
 
 Supplemental disclosures of cash flow information: 
 Cash payments for: 
 Interest on deposits and borrowings $ 244,246 $ 19,682 
 Federal and state income taxes 8,782 6,842 
 Supplemental schedule of non-cash investing activities: 
 Transfer of loans to other real estate owned $ 903 $ — 
 
 Lease right of use assets obtained in exchange for operating lease liabilities 7,461 6,836 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Non-cash net assets acquired — 8,607 
 
 

 
 
 See accompanying notes to consolidated financial statements. 
 7 
 
 

 
 
 

 VALLEY NATIONAL BANCORP 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Unaudited) 
 
 Note 1. Basis of Presentation 
 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. generally accepted accounting principles (U.S. GAAP) and general practices within the financial services industry. 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. 
 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. GAAP and industry practice have been condensed or omitted pursuant to rules and regulations of the SEC. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Valley’s Annual Report on Form 10-K for the year ended December 31, 2022. 
 Significant Estimates. In preparing the unaudited consolidated financial statements in conformity with U.S. GAAP, management has made estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of financial condition and results of operations for the periods indicated. Material estimates that require application of management’s most difficult, subjective or complex judgment and are particularly susceptible to change include: the allowance for credit losses, the evaluation of goodwill and other intangible assets for impairment and income taxes. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual amounts or results could differ significantly from those estimates. The current economic environment has increased the degree of uncertainty inherent in these material estimates. Actual results may differ from those estimates. Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date . 
 
 Note 2. Business Combinations 
 Acquisitions 
 Bank Leumi Le-Israel Corporation. On April 1, 2022, Valley completed its acquisition of Bank Leumi Le-Israel Corporation, the U.S. subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA, collectively referred to as "Bank Leumi USA". Bank Leumi USA maintained its headquarters in New York City with commercial banking offices in Chicago, Los Angeles, Palo Alto, and Aventura, Florida. The common shareholders of Bank Leumi USA received 3.8025 shares of Valley common stock and $ 5.08 in cash for each Bank Leumi USA common share that they owned. As a result, Valley issued approximately 85 million shares of common stock and paid $ 113.4 million in cash in the transaction. Based on Valley’s closing stock price on March 31, 2022, the transaction was valued at $ 1.2 billion, inclusive of the value of options. As a result of the acquisition, Bank Leumi Le-Israel B.M. owned approximately 14 percent of Valley's common stock as of April 1, 2022 . 
 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. 
 
 
 8 
 
 

 
 

 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: 
 
 April 1, 2022 
 (in thousands) 
 Assets acquired: 
 Cash and cash equivalents $ 443,588 
 Equity securities 6,239 
 Available for sale debt securities 505,928 
 Held to maturity debt securities 806,627 
 Loans 5,914,389 
 Allowance for loan losses ( 70,319 ) 
 Loans, net 5,844,070 
 Premises and equipment 38,827 
 Lease right of use assets 49,273 
 Bank owned life insurance 126,861 
 Accrued interest receivable 25,717 
 Goodwill 400,582 
 Other intangible assets 153,380 
 Other assets 160,921 
 Total assets acquired $ 8,562,013 
 Liabilities assumed: 
 Deposits: 
 Non-interest bearing $ 4,511,537 
 Interest bearing: 
 Savings, NOW and money market 2,224,834 
 Time 293,626 
 Total deposits 7,029,997 
 Short-term borrowings 103,794 
 Lease liabilities 79,683 
 Accrued expense and other liabilities 117,269 
 Total liabilities assumed $ 7,330,743 
 Common stock issued in acquisition 1,117,829 
 Cash paid in acquisition 113,441 

 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. 
 
 
 
 
 
 
 
 
 9 
 
 

 
 
 

 Note 3. Earnings Per Common Share 
 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
March 31, 
 2023 2022 
 (in thousands, except for share and per share data) 
 Net income available to common shareholders $ 142,677 $ 113,556 
 Basic weighted average number of common shares outstanding 
 507,111,295 421,573,843 
 Plus: Common stock equivalents 2,545,135 1,932,707 
 Diluted weighted average number of common shares outstanding 
 509,656,430 423,506,550 
 Earnings per common share: 
 Basic $ 0.28 $ 0.27 
 Diluted 0.28 0.27 

 Common stock equivalents represent the dilutive effect of additional common shares issuable upon the assumed vesting or exercise, if applicable, of restricted stock units and common stock options to purchase Valley’s common shares. 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 totaled approximately 1.6 million and 113 thousand for the three months ended March 31, 2023 and 2022, respectively. 
 
 
 
 Note 4. 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 months ended March 31, 2023: 
 
 
 
 Components of Accumulated Other Comprehensive Loss Total
Accumulated
Other
Comprehensive
Loss 
 Unrealized Gains
and Losses on
Available for Sale
(AFS) Securities Unrealized Gains
and Losses on
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 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 ) 

 
 
 10 
 
 

 
 

 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
Accumulated Other Comprehensive Loss 
 Three Months Ended
March 31, 
 Components of Accumulated Other Comprehensive Loss 2023 2022 Income Statement Line Item 
 (in thousands) 
 Unrealized gains on AFS securities before tax $ — $ 14 Gains (losses) on securities transactions, net 
 Tax effect — ( 4 ) 
 Total net of tax — 10 
 
 
 
 
 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 and postretirement benefit plans: 
 Amortization of actuarial net loss ( 11 ) ( 183 ) * 
 
 Tax effect 3 51 
 Total net of tax ( 8 ) ( 132 ) 
 Total reclassifications, net of tax $ ( 387 ) $ ( 508 ) 

 
 

 
 * Amortization of actuarial net loss is included in the computation of net periodic pension cost recognized within other non-interest expense. 

 
 Note 5. New Authoritative Accounting Guidance 
 New Accounting Guidance Adopted in 2023 
 Accounting Standards Update (ASU) No. 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging –Portfolio Layer Method” expands and clarifies the current guidance on accounting for fair value hedge basis adjustments under the portfolio layer method for both single-layer and multiple-layer hedges. This method allows entities to designate multiple hedging relationships with a single closed portfolio, and therefore a larger portion of the interest rate risk associated with such a portfolio is eligible to be hedged. ASU No. 2022-01 also clarifies that no assets may be added to a closed portfolio once it is designated in a portfolio layer method hedge. 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. 
 ASU No. 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 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. 2022-02 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 
 ASU No. 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 
 11 
 
 

 
 

 disclosures for investments in certain tax credit structures. ASU No. 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. ASU No. 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. 
 
 Note 6. Fair Value Measurement of Assets and Liabilities 
 ASC Topic 820, “Fair Value Measurements” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: 
 
 
 • Level 1 - Unadjusted exchange quoted prices in active markets for identical assets or liabilities, or identical liabilities traded as assets that the reporting entity has the ability to access at the measurement date. 
 • Level 2 - Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly (i.e., quoted prices on similar assets) for substantially the full term of the asset or liability. 
 • Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). 
 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 March 31, 2023 and December 31, 2022. 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). 
 12 
 
 

 
 

 
 March 31,
2023 Fair Value Measurements at Reporting Date Using: 
 Quoted Prices
in Active Markets
for Identical
Assets (Level 1) Significant
Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) 
 (in thousands) 
 Recurring fair value measurements: 
 Assets 
 Investment securities: 
 Equity securities $ 23,635 $ 23,635 $ — $ — 
 Equity securities at net asset value (NAV) 
 10,175 — — — 
 Trading debt securities 6,855 3,477 3,378 — 
 Available for sale debt securities: 
 U.S. Treasury securities 286,745 286,745 — — 
 U.S. government agency securities 26,352 — 26,352 — 
 Obligations of states and political subdivisions 152,775 — 152,775 — 
 Residential mortgage-backed securities 619,776 — 619,776 — 
 Corporate and other debt securities 173,588 — 173,588 — 
 Total available for sale debt securities 1,259,236 286,745 972,491 — 
 Loans held for sale (1) 
 17,218 — 17,218 — 
 Other assets (2) 
 446,749 — 446,749 — 
 Total assets $ 1,763,868 $ 313,857 $ 1,439,836 $ — 
 Liabilities 
 Other liabilities (2) 
 $ 494,552 $ — $ 494,552 $ — 
 Total liabilities $ 494,552 $ — $ 494,552 $ — 
 Non-recurring fair value measurements: 
 
 Collateral dependent loans $ 81,267 $ — $ — $ 81,267 
 
 Foreclosed assets 1,752 — — 1,752 
 Total $ 83,019 $ — $ — $ 83,019 

 
 13 
 
 

 
 

 
 Fair Value Measurements at Reporting Date Using: 
 December 31,
2022 Quoted Prices
in Active Markets
for Identical
Assets (Level 1) Significant
Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) 
 (in thousands) 
 Recurring fair value measurements: 
 Assets 
 Investment securities: 
 Equity securities $ 23,494 $ 23,494 $ — $ — 
 Equity securities at net asset value (NAV) 
 10,099 — — — 
 Trading debt securities 13,438 3,282 10,156 — 
 Available for sale debt securities: 
 U.S. Treasury securities 279,498 279,498 — — 
 U.S. government agency securities 26,964 — 26,964 — 
 Obligations of states and political subdivisions 146,811 — 146,811 — 
 Residential mortgage-backed securities 629,818 — 629,818 — 
 
 Corporate and other debt securities 178,306 — 178,306 — 
 Total available for sale debt securities 1,261,397 279,498 981,899 — 
 
 Loans held for sale (1) 
 18,118 — 18,118 — 
 Other assets (2) 
 467,127 — 467,127 — 
 Total assets $ 1,793,673 $ 306,274 $ 1,477,300 $ — 
 Liabilities 
 Other liabilities (2) 
 $ 607,237 $ — $ 607,237 $ — 
 Total liabilities $ 607,237 $ — $ 607,237 $ — 
 Non-recurring fair value measurements: 
 Collateral dependent loans $ 92,923 $ — $ — $ 92,923 
 Foreclosed assets 1,937 — — 1,937 
 Total $ 94,860 $ — $ — $ 94,860 

 
 

 (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 
 The following valuation techniques were used for financial instruments measured at fair value on a recurring basis. All the valuation techniques described below apply to the unpaid principal balance, excluding any accrued interest or dividends at the measurement date. 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 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. 
 14 
 
 

 
 

 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 . 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. U.S. Treasury securities are reported at fair value utilizing Level 1 inputs. The majority of other investment securities are reported at fair value utilizing Level 2 inputs. The prices for these instruments are obtained through an independent pricing service or dealer market participants with whom Valley has historically transacted both purchases and sales of investment securities. Prices obtained from these sources include prices derived from market quotations and matrix pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. 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. In addition, Valley reviews the volume and level of activity for all available for sale debt securities and attempts to identify transactions which may not be orderly or reflective of a significant level of activity and volume. 
 Loans held for sale. Residential mortgage loans originated for sale are reported at fair value using Level 2 inputs. The fair values were calculated utilizing quoted prices for similar assets in active markets. 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 March 31, 2023 and December 31, 2022 based on the short duration these assets were held, and the credit quality of these loans. 
 Derivatives. 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 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 March 31, 2023 and December 31, 2022. 
 Assets and Liabilities Measured at Fair Value on a Non-recurring Basis 
 The following valuation techniques were used for certain non-financial assets measured at fair value on a non-recurring basis, including collateral dependent loans reported at the fair value of the underlying collateral and foreclosed assets, which are reported at fair value upon initial recognition or subsequent impairment as described below. 
 Collateral dependent loans . Collateral dependent loans are loans when foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and substantially all of the repayment is expected from the collateral. Collateral dependent loans are reported at the fair value of the underlying collateral. Collateral values are estimated using Level 3 inputs, consisting of individual third-party appraisals that may be adjusted based on certain discounting criteria. Certain real estate appraisals may be discounted based on specific market data by location and property type. 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 
 15 
 
 

 
 

 collateral. 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 March 31, 2023 and December 31, 2022 . 
 Other Fair Value Disclosures 
 ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. 
 The fair value estimates presented in the following table were based on pertinent market data and relevant information on the financial instruments available as of the valuation date. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire portfolio of financial instruments. Because no market exists for a portion of the financial instruments, fair value estimates may be based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. 
 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 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. 
 16 
 
 

 
 

 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: 
 
 Fair Value
Hierarchy March 31, 2023 December 31, 2022 
 Carrying
Amount Fair Value Carrying
Amount Fair Value 
 (in thousands) 
 Financial assets 
 Cash and due from banks Level 1 $ 444,690 $ 444,690 $ 444,325 $ 444,325 
 Interest bearing deposits with banks Level 1 5,260,998 5,260,998 503,622 503,622 
 Equity securities (1) 
 Level 3 16,342 16,342 15,138 15,138 
 Held to maturity debt securities: 
 U.S. Treasury securities Level 1 66,747 66,182 66,911 65,889 
 U.S. government agency securities Level 2 300,614 255,640 260,392 212,712 
 Obligations of states and political subdivisions Level 2 473,597 452,919 480,298 453,195 
 Residential mortgage-backed securities Level 2 2,893,505 2,525,568 2,909,106 2,495,797 
 Trust preferred securities Level 2 37,048 29,992 37,043 31,106 
 Corporate and other debt securities Level 2 75,701 70,183 75,234 70,771 
 Total held to maturity debt securities (2) 
 3,847,212 3,400,484 3,828,984 3,329,470 
 Net loans Level 3 48,223,068 47,389,743 46,458,545 44,910,049 
 Accrued interest receivable Level 1 223,608 223,608 196,606 196,606 
 Federal Reserve Bank and Federal Home Loan Bank stock (3) 
 Level 2 547,686 547,686 238,056 238,056 
 Financial liabilities 
 Deposits without stated maturities Level 1 36,479,540 36,479,540 38,080,457 38,080,457 
 Deposits with stated maturities Level 2 11,111,376 11,040,582 9,556,457 9,443,253 
 Short-term borrowings Level 1 6,413,056 6,392,459 138,729 138,729 
 Long-term borrowings Level 2 2,197,656 2,110,305 1,543,058 1,395,991 
 Junior subordinated debentures issued to capital trusts 
 Level 2 56,847 55,042 56,760 50,923 
 Accrued interest payable (4) 
 Level 1 85,581 85,581 45,617 45,617 

 
 

 (1) Represents equity securities without a readily determinable fair value measured at cost less impairment, if any. 
 (2) The carrying amount is presented gross without the allowance for credit losses. 
 (3) Included in other assets. 
 (4) Included in accrued expenses and other liabilities. 
 
 Note 7. Investment Securities 
 Equity Securities 
 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 $ 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 gains of $ 402 thousand and net trading losses of $ 1.1 million for the three months ended March 31, 2023 and 2022, respectively. 
 17 
 
 

 
 

 Available for Sale Debt Securities 
 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: 
 
 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value 
 (in thousands) 
 March 31, 2023 
 U.S. Treasury securities $ 309,524 $ — $ ( 22,779 ) $ 286,745 
 U.S. government agency securities 28,394 46 ( 2,088 ) 26,352 
 Obligations of states and political subdivisions: 
 Obligations of states and state agencies 10,649 — ( 652 ) 9,997 
 Municipal bonds 171,219 — ( 28,441 ) 142,778 
 Total obligations of states and political subdivisions 181,868 — ( 29,093 ) 152,775 
 Residential mortgage-backed securities 699,214 60 ( 79,498 ) 619,776 
 
 Corporate and other debt securities 193,007 — ( 19,419 ) 173,588 
 Total $ 1,412,007 $ 106 $ ( 152,877 ) $ 1,259,236 
 December 31, 2022 
 U.S. Treasury securities $ 308,137 $ — $ ( 28,639 ) $ 279,498 
 U.S. government agency securities 29,494 47 ( 2,577 ) 26,964 
 Obligations of states and political subdivisions: 
 Obligations of states and state agencies 10,899 — ( 493 ) 10,406 
 Municipal bonds 171,586 — ( 35,181 ) 136,405 
 Total obligations of states and political subdivisions 182,485 — ( 35,674 ) 146,811 
 Residential mortgage-backed securities 719,868 64 ( 90,114 ) 629,818 
 
 Corporate and other debt securities 197,927 — ( 19,621 ) 178,306 
 
 Total $ 1,437,911 $ 111 $ ( 176,625 ) $ 1,261,397 

 
 
 18 
 
 

 
 

 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 
 Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses 
 (in thousands) 
 March 31, 2023 
 U.S. Treasury securities $ 286,745 $ ( 22,779 ) $ — $ — $ 286,745 $ ( 22,779 ) 
 U.S. government agency securities 12,003 ( 1,238 ) 11,371 ( 850 ) 23,374 ( 2,088 ) 
 Obligations of states and political subdivisions: 
 
 Obligations of states and state agencies 
 2,231 ( 17 ) 7,766 ( 635 ) 9,997 ( 652 ) 
 Municipal bonds 114,299 ( 20,463 ) 28,229 ( 7,978 ) 142,528 ( 28,441 ) 
 Total obligations of states and political subdivisions 
 116,530 ( 20,480 ) 35,995 ( 8,613 ) 152,525 ( 29,093 ) 
 Residential mortgage-backed securities 34,170 ( 1,506 ) 582,739 ( 77,992 ) 616,909 ( 79,498 ) 
 
 Corporate and other debt securities 108,625 ( 9,446 ) 64,964 ( 9,973 ) 173,589 ( 19,419 ) 
 Total $ 558,073 $ ( 55,449 ) $ 695,069 $ ( 97,428 ) $ 1,253,142 $ ( 152,877 ) 
 December 31, 2022 
 U.S. Treasury securities $ 279,498 $ ( 28,639 ) $ — $ — $ 279,498 $ ( 28,639 ) 
 U.S. government agency securities 22,831 ( 2,538 ) 1,116 ( 39 ) 23,947 ( 2,577 ) 
 Obligations of states and political subdivisions: 
 
 Obligations of states and state agencies 
 2,943 ( 54 ) 7,462 ( 439 ) 10,405 ( 493 ) 
 Municipal bonds 112,029 ( 26,044 ) 24,127 ( 9,137 ) 136,156 ( 35,181 ) 
 Total obligations of states and political subdivisions 
 114,972 ( 26,098 ) 31,589 ( 9,576 ) 146,561 ( 35,674 ) 
 Residential mortgage-backed securities 311,836 ( 27,152 ) 314,834 ( 62,962 ) 626,670 ( 90,114 ) 
 
 Corporate and other debt securities 144,924 ( 12,581 ) 33,382 ( 7,040 ) 178,306 ( 19,621 ) 
 
 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 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. 
 19 
 
 

 
 

 
 March 31, 2023 
 Amortized
Cost Fair
Value 
 (in thousands) 
 Due in one year $ 3,852 $ 3,834 
 Due after one year through five years 282,224 270,503 
 Due after five years through ten years 173,459 154,742 
 Due after ten years 253,258 210,381 
 Residential mortgage-backed securities 699,214 619,776 
 Total $ 1,412,007 $ 1,259,236 

 
 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 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 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. 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 
 20 
 
 

 
 

 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 March 31, 2023 and December 31, 2022 were as follows: 
 
 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value Allowance for Credit Losses Net Carrying Value 
 (in thousands) 
 March 31, 2023 
 U.S. Treasury securities $ 66,747 $ — $ ( 565 ) $ 66,182 $ — $ 66,747 
 U.S. government agency securities 300,614 25 ( 44,999 ) 255,640 — 300,614 
 Obligations of states and political subdivisions: 
 Obligations of states and state agencies 96,693 341 ( 4,149 ) 92,885 257 96,436 
 Municipal bonds 376,904 112 ( 16,982 ) 360,034 86 376,818 
 Total obligations of states and political subdivisions 473,597 453 ( 21,131 ) 452,919 343 473,254 
 Residential mortgage-backed securities 2,893,505 2,752 ( 370,689 ) 2,525,568 — 2,893,505 
 Trust preferred securities 37,048 1 ( 7,057 ) 29,992 775 36,273 
 Corporate and other debt securities 75,701 — ( 5,518 ) 70,183 515 75,186 
 Total $ 3,847,212 $ 3,231 $ ( 449,959 ) $ 3,400,484 $ 1,633 $ 3,845,579 
 December 31, 2022 
 U.S. Treasury securities $ 66,911 $ — $ ( 1,022 ) $ 65,889 $ — $ 66,911 
 U.S. government agency securities 260,392 — ( 47,680 ) 212,712 — 260,392 
 Obligations of states and political subdivisions: 
 Obligations of states and state agencies 99,238 305 ( 3,869 ) 95,674 252 98,986 
 Municipal bonds 381,060 76 ( 23,615 ) 357,521 41 381,019 
 Total obligations of states and political subdivisions 480,298 381 ( 27,484 ) 453,195 293 480,005 
 Residential mortgage-backed securities 2,909,106 1,723 ( 415,032 ) 2,495,797 — 2,909,106 
 Trust preferred securities 37,043 1 ( 5,938 ) 31,106 888 36,155 
 Corporate and other debt securities 75,234 — ( 4,463 ) 70,771 465 74,769 
 Total $ 3,828,984 $ 2,105 $ ( 501,619 ) $ 3,329,470 $ 1,646 $ 3,827,338 

 21 
 
 

 
 

 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
Losses Fair Value Unrealized
Losses Fair Value Unrealized
Losses 
 (in thousands) 
 March 31, 2023 
 U.S. Treasury securities $ 66,182 $ ( 565 ) $ — $ — $ 66,182 $ ( 565 ) 
 U.S. government agency securities 211,526 ( 44,773 ) 2,925 ( 226 ) 214,451 ( 44,999 ) 
 Obligations of states and political subdivisions: 
 
 Obligations of states and state agencies 
 20,457 ( 789 ) 39,627 ( 3,360 ) 60,084 ( 4,149 ) 
 Municipal bonds 226,278 ( 13,671 ) 26,411 ( 3,311 ) 252,689 ( 16,982 ) 
 Total obligations of states and political subdivisions 
 246,735 ( 14,460 ) 66,038 ( 6,671 ) 312,773 ( 21,131 ) 
 Residential mortgage-backed securities 
 381,802 ( 33,941 ) 1,944,360 ( 336,748 ) 2,326,162 ( 370,689 ) 
 Trust preferred securities — — 28,990 ( 7,057 ) 28,990 ( 7,057 ) 
 Corporate and other debt securities 37,579 ( 2,122 ) 24,604 ( 3,396 ) 62,183 ( 5,518 ) 
 Total $ 943,824 $ ( 95,861 ) $ 2,066,917 $ ( 354,098 ) $ 3,010,741 $ ( 449,959 ) 
 December 31, 2022 
 U.S. Treasury securities $ 65,889 $ ( 1,022 ) $ — $ — $ 65,889 $ ( 1,022 ) 
 U.S. government agency securities 209,863 ( 47,508 ) 1,673 ( 172 ) 211,536 ( 47,680 ) 
 Obligations of states and political subdivisions: 
 
 Obligations of states and state agencies 62,443 ( 2,020 ) 18,231 ( 1,849 ) 80,674 ( 3,869 ) 
 Municipal bonds 251,970 ( 20,457 ) 15,534 ( 3,158 ) 267,504 ( 23,615 ) 
 Total obligations of states and political subdivisions 
 314,413 ( 22,477 ) 33,765 ( 5,007 ) 348,178 ( 27,484 ) 
 Residential mortgage-backed securities 
 962,690 ( 109,532 ) 1,413,590 ( 305,500 ) 2,376,280 ( 415,032 ) 
 Trust preferred securities — — 30,105 ( 5,938 ) 30,105 ( 5,938 ) 
 Corporate and other debt securities 
 57,245 ( 2,989 ) 13,525 ( 1,474 ) 70,770 ( 4,463 ) 
 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 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. 
 
 
 
 
 
 
 
 
 
 
 
 
 22 
 
 

 
 

 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. 
 
 March 31, 2023 
 Amortized
Cost Fair
Value 
 (in thousands) 
 Due in one year $ 63,872 $ 63,355 
 Due after one year through five years 169,205 165,906 
 Due after five years through ten years 96,385 92,034 
 Due after ten years 624,245 553,621 
 Residential mortgage-backed securities 2,893,505 2,525,568 
 Total $ 3,847,212 $ 3,400,484 

 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 11.67 years at March 31, 2023. 
 23 
 
 

 
 

 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 March 31, 2023 and December 31, 2022. 
 
 AAA/AA/A Rated BBB rated Non-investment grade rated Non-rated Total 
 (in thousands) 
 March 31, 2023 
 U.S. Treasury securities $ 66,747 $ — $ — $ — $ 66,747 
 U.S. government agency securities 300,614 — — — 300,614 
 Obligations of states and political subdivisions: 
 Obligations of states and state agencies 73,278 — 5,437 17,978 96,693 
 Municipal bonds 328,202 — — 48,702 376,904 
 Total obligations of states and political subdivisions 
 401,480 — 5,437 66,680 473,597 
 Residential mortgage-backed securities 2,893,505 — — — 2,893,505 
 Trust preferred securities — — — 37,048 37,048 
 Corporate and other debt securities — 6,000 — 69,701 75,701 
 Total $ 3,662,346 $ 6,000 $ 5,437 $ 173,429 $ 3,847,212 
 December 31, 2022 
 U.S. Treasury securities $ 66,911 $ — $ — $ — $ 66,911 
 U.S. government agency securities 260,392 — — — 260,392 
 Obligations of states and political subdivisions: 
 Obligations of states and state agencies 74,943 — 5,497 18,798 99,238 
 Municipal bonds 333,488 — — 47,572 381,060 
 Total obligations of states and political subdivisions 
 408,431 — 5,497 66,370 480,298 
 Residential mortgage-backed securities 2,909,106 — — — 2,909,106 
 Trust preferred securities — — — 37,043 37,043 
 Corporate and other debt securities 2,000 6,000 — 67,234 75,234 
 Total $ 3,646,840 $ 6,000 $ 5,497 $ 170,647 $ 3,828,984 

 
 Obligations of states and political subdivisions include municipal bonds and revenue bonds issued by various municipal corporations. 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 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 
 Valley has a zero-loss expectation for certain securities within the held to maturity portfolio, and therefore it is not required to estimate an allowance for credit losses related to these securities under the CECL standard. After an evaluation of qualitative factors, Valley identified the following securities types which it believes qualify for this exclusion: U.S. Treasury securities, U.S. 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 
 24 
 
 

 
 

 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
March 31, 
 2023 2022 
 (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. 
 
 Note 8. Loans and Allowance for Credit Losses for Loans 
 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) 
 Loans: 
 
 
 
 Commercial and industrial $ 9,043,946 $ 8,804,830 
 Commercial real estate: 
 Commercial real estate 27,051,111 25,732,033 
 Construction 3,725,967 3,700,835 
 Total commercial real estate loans 30,777,078 29,432,868 
 Residential mortgage 5,486,280 5,364,550 
 Consumer: 
 Home equity 516,592 503,884 
 Automobile 1,717,141 1,746,225 
 Other consumer 1,118,929 1,064,843 
 Total consumer loans 3,352,662 3,314,952 
 Total loans $ 48,659,966 $ 46,917,200 
 
 
 
 
 
 
 
 

 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. 
 
 
 25 
 
 

 
 

 Credit Risk Management 
 For all of its loan types, Valley adheres to a credit policy designed to minimize credit risk while generating the maximum income given the level of risk appetite. Management reviews and approves these policies and procedures on a regular basis with subsequent approval by the Board of Directors annually. Credit authority relating to a significant dollar percentage of the overall portfolio is centralized and controlled by the Credit Risk Management Division and by the Credit Committee. 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. 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 March 31, 2023 and December 31, 2022: 
 
 Past Due and Non-Accrual Loans 
 30-59 Days 
Past Due Loans 60-89 Days 
Past Due Loans 90 Days or More
Past Due Loans Non-Accrual Loans 
 Total Past Due Loans 
 Current Loans 
 Total Loans Non-Accrual Loans Without Allowance for Loan Losses 
 (in thousands) 
 March 31, 2023 
 Commercial and industrial 
 $ 20,716 $ 24,118 $ 8,927 $ 78,606 $ 132,367 $ 8,911,579 $ 9,043,946 $ 6,675 
 Commercial real estate: 
 
 Commercial real estate 
 13,580 — — 67,938 81,518 26,969,593 27,051,111 66,587 
 Construction — — 6,450 68,649 75,099 3,650,868 3,725,967 15,791 
 Total commercial real estate loans 13,580 — 6,450 136,587 156,617 30,620,461 30,777,078 82,378 
 Residential mortgage 12,599 2,133 1,668 23,483 39,883 5,446,397 5,486,280 18,694 
 Consumer loans: 
 Home equity 412 287 48 2,965 3,712 512,880 516,592 — 
 Automobile 4,598 502 282 262 5,644 1,711,497 1,717,141 — 
 Other consumer 2,835 730 417 91 4,073 1,114,856 1,118,929 — 
 Total consumer loans 7,845 1,519 747 3,318 13,429 3,339,233 3,352,662 — 
 Total $ 54,740 $ 27,770 $ 17,792 $ 241,994 $ 342,296 $ 48,317,670 $ 48,659,966 $ 107,747 

 
 
 26 
 
 

 
 

 
 Past Due and Non-Accrual Loans 
 
 30-59
Days 
Past Due Loans 60-89 
Days
Past Due Loans 90 Days or More
Past Due Loans Non-Accrual Loans 
 Total Past Due Loans 
 Current Loans Total Loans Non-Accrual Loans Without Allowance for Loan Losses 
 (in thousands) 
 December 31, 2022 
 Commercial and industrial $ 11,664 $ 12,705 $ 18,392 $ 98,881 $ 141,642 $ 8,663,188 $ 8,804,830 $ 5,659 
 Commercial real estate: 
 Commercial real estate 6,638 3,167 2,292 68,316 80,413 25,651,620 25,732,033 66,066 
 Construction — — 3,990 74,230 78,220 3,622,615 3,700,835 16,120 
 Total commercial real estate loans 6,638 3,167 6,282 142,546 158,633 29,274,235 29,432,868 82,186 
 Residential mortgage 16,146 3,315 1,866 25,160 46,487 5,318,063 5,364,550 14,224 
 Consumer loans: 
 Home equity 955 254 — 2,810 4,019 499,865 503,884 117 
 Automobile 5,974 630 1 271 6,876 1,739,349 1,746,225 — 
 Other consumer 2,158 695 46 93 2,992 1,061,851 1,064,843 — 
 Total consumer loans 9,087 1,579 47 3,174 13,887 3,301,065 3,314,952 117 
 Total $ 43,535 $ 20,766 $ 26,587 $ 269,761 $ 360,649 $ 46,556,551 $ 46,917,200 $ 102,186 

 
 
 
 Credit quality indicators. Valley utilizes an internal loan classification system as a means of reporting problem loans within commercial and industrial, commercial real estate, and construction loan portfolio classes. Under Valley’s internal risk rating system, loan relationships could be classified as "Pass," "Special Mention," "Substandard," "Doubtful," and "Loss." Substandard loans include loans that exhibit well-defined weakness and are characterized by the distinct possibility that Valley will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, based on currently existing facts, conditions and values, highly questionable and improbable. Loans classified as Loss are those considered uncollectible with insignificant value and are charged-off immediately to the allowance for loan losses, and, therefore, not presented in the table below. Loans that do not currently pose a sufficient risk to warrant classification in one of the aforementioned categories but pose weaknesses that deserve management’s close attention are deemed Special Mention. Pass rated loans do not currently pose any identified risk and can range from the highest to average quality, depending on the degree of potential risk. Risk ratings are updated any time the situation warrants. 
 27 
 
 

 
 

 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: 
 
 Term Loans 
 Amortized Cost Basis by Origination Year 
 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) 
 Commercial and industrial 
 Risk Rating: 
 Pass $ 435,733 $ 1,418,804 $ 1,021,874 $ 549,408 $ 304,137 $ 628,117 $ 4,450,850 $ 130 $ 8,809,053 
 Special Mention 1,573 27,386 2,591 19,260 3,658 7,443 61,455 7 123,373 
 Substandard 10 517 2,832 2,617 1,203 6,904 25,847 — 39,930 
 Doubtful — 777 1,552 — 2,683 63,707 2,871 — 71,590 
 
 Total commercial and industrial $ 437,316 $ 1,447,484 $ 1,028,849 $ 571,285 $ 311,681 $ 706,171 $ 4,541,023 $ 137 $ 9,043,946 
 Commercial real estate 
 Risk Rating: 
 Pass $ 1,607,961 $ 6,740,087 $ 5,201,027 $ 3,287,689 $ 2,520,271 $ 6,316,475 $ 490,136 $ 3,407 $ 26,167,053 
 Special Mention 26,512 55,889 46,317 63,647 71,474 251,353 6,720 — 521,912 
 Substandard — 33,613 35,924 30,090 34,765 219,838 7,916 — 362,146 
 
 
 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 
 Construction 
 Risk Rating: 
 Pass $ 120,282 $ 928,489 $ 415,212 $ 70,371 $ 15,502 $ 36,863 $ 2,079,911 $ — $ 3,666,630 
 
 Substandard — 13 12,290 — 964 17,600 7,351 — 38,218 
 Doubtful 447 8,341 670 11,661 — — — — 21,119 
 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 

 
 
 
 
 28 
 
 

 
 

 
 Term Loans 
 Amortized Cost Basis by Origination Year 
 December 31, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total 
 (in thousands) 
 Commercial and industrial 
 Risk Rating: 
 Pass $ 1,600,747 $ 1,089,386 $ 590,406 $ 322,564 $ 250,031 $ 386,085 $ 4,307,163 $ 144 $ 8,546,526 
 Special Mention 31,557 3,367 19,492 4,732 4,369 3,558 51,021 7 118,103 
 Substandard 288 1,734 4,121 1,412 4,256 4,879 31,698 — 48,388 
 Doubtful 886 20,844 — 2,692 — 64,158 3,233 — 91,813 
 
 Total commercial and industrial $ 1,633,478 $ 1,115,331 $ 614,019 $ 331,400 $ 258,656 $ 458,680 $ 4,393,115 $ 151 $ 8,804,830 
 Commercial real estate 
 Risk Rating: 
 Pass $ 6,815,115 $ 5,168,127 $ 3,246,885 $ 2,672,223 $ 1,536,327 $ 5,027,128 $ 452,461 $ 3,504 $ 24,921,770 
 Special Mention 93,286 48,007 60,169 45,447 62,111 125,414 8,188 — 442,622 
 Substandard 15,088 34,475 32,630 34,622 59,337 183,341 7,986 — 367,479 
 Doubtful — — — — — 162 — — 162 
 
 Total commercial real estate $ 6,923,489 $ 5,250,609 $ 3,339,684 $ 2,752,292 $ 1,657,775 $ 5,336,045 $ 468,635 $ 3,504 $ 25,732,033 
 Construction 
 Risk Rating: 
 Pass $ 942,380 $ 512,046 $ 61,131 $ 22,845 $ 8,676 $ 20,599 $ 2,040,866 $ — $ 3,608,543 
 Special Mention — — — — — — 14,268 — 14,268 
 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 

 
 29 
 
 

 
 

 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 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: 
 
 Term Loans 
 Amortized Cost Basis by Origination Year 
 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) 
 Residential mortgage 
 Performing $ 222,494 $ 1,317,372 $ 1,521,543 $ 572,064 $ 478,014 $ 1,300,107 $ 66,947 $ — $ 5,478,541 
 90 days or more past due — 1,473 1,754 — 499 4,013 — — 7,739 
 Total residential mortgage $ 222,494 $ 1,318,845 $ 1,523,297 $ 572,064 $ 478,513 $ 1,304,120 $ 66,947 $ — $ 5,486,280 
 Consumer loans 
 Home equity 
 Performing $ 7,251 $ 46,566 $ 12,085 $ 4,448 $ 4,891 $ 18,499 $ 383,948 $ 37,984 $ 515,672 
 90 days or more past due — — — — — — 285 635 920 
 Total home equity 7,251 46,566 12,085 4,448 4,891 18,499 384,233 38,619 516,592 
 Automobile 
 Performing 141,743 687,328 480,634 181,994 144,130 80,995 — — 1,716,824 
 90 days or more past due — 1 51 19 105 141 — — 317 
 Total automobile 141,743 687,329 480,685 182,013 144,235 81,136 — — 1,717,141 
 Other consumer 
 Performing 4,898 23,313 9,056 8,020 7,374 2,615 1,063,356 — 1,118,632 
 90 days or more past due — 28 — 2 — 38 229 — 297 
 Total other consumer 4,898 23,341 9,056 8,022 7,374 2,653 1,063,585 — 1,118,929 
 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 

 
 
 
 30 
 
 

 
 

 
 Term Loans 
 Amortized Cost Basis by Origination Year 
 December 31, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total 
 (in thousands) 
 Residential mortgage 
 Performing $ 1,302,279 $ 1,502,622 $ 571,390 $ 500,197 $ 338,062 $ 1,073,995 $ 66,706 $ — $ 5,355,251 
 90 days or more past due — 197 217 1,835 2,876 4,174 — — 9,299 
 Total residential mortgage $ 1,302,279 $ 1,502,819 $ 571,607 $ 502,032 $ 340,938 $ 1,078,169 $ 66,706 $ — $ 5,364,550 
 Consumer loans 
 Home equity 
 Performing $ 47,084 $ 12,432 $ 4,592 $ 5,024 $ 5,581 $ 13,007 $ 376,608 $ 38,570 $ 502,898 
 90 days or more past due — — — — — — 276 710 986 
 Total home equity 47,084 12,432 4,592 5,024 5,581 13,007 376,884 39,280 503,884 
 Automobile 
 Performing 724,557 525,017 204,578 166,103 80,012 45,415 — — 1,745,682 
 90 days or more past due 38 116 36 180 101 72 — — 543 
 Total automobile 724,595 525,133 204,614 166,283 80,113 45,487 — — 1,746,225 
 Other consumer 
 Performing 24,140 10,144 8,206 7,435 7,406 15,736 991,737 — 1,064,804 
 90 days or more past due — — — — — 38 1 — 39 
 Total other consumer 24,140 10,144 8,206 7,435 7,406 15,774 991,738 — 1,064,843 
 Total consumer $ 795,819 $ 547,709 $ 217,412 $ 178,742 $ 93,100 $ 74,268 $ 1,368,622 $ 39,280 $ 3,314,952 

 
 
 
 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. 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. 
 31 
 
 

 
 

 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) 
 Commercial and industrial $ 1,281 $ 523 $ 1,804 
 Commercial real estate 46,328 — 46,328 
 Residential mortgage 213 — 213 
 Consumer 60 — 60 
 Total $ 47,882 $ 523 $ 48,405 

 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
of
Contracts Pre-Modification
Outstanding Recorded Investment Post-Modification
Outstanding Recorded Investment 
 ($ in thousands) 
 Commercial and industrial 11 $ 9,684 $ 9,662 
 
 Commercial real estate 2 5,260 5,251 
 
 
 Residential mortgage 1 121 117 
 
 Total 14 $ 15,065 $ 15,030 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 32 
 
 

 
 

 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 
 ($ in thousands) 
 Commercial and industrial 2 $ 1,850 
 
 
 Construction 2 17,599 
 
 
 
 Total 4 $ 19,449 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 Loans in process of foreclosure. 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. Loans are collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. 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 March 31, 2023 and December 31, 2022: 
 
 March 31,
2023 December 31,
2022 
 (in thousands) 
 Collateral dependent loans: 
 Commercial and industrial * $ 74,481 $ 94,433 
 
 Commercial real estate 144,892 130,199 
 
 
 Residential mortgage 18,694 33,865 
 Home equity — 195 
 Total $ 238,067 $ 258,692 

 
 

 * Commercial and industrial loans presented in the table above are primarily collateralized by taxi medallions. 
 33 
 
 

 
 

 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 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: 
 
 March 31,
2023 December 31,
2022 
 (in thousands) 
 Components of allowance for credit losses for loans: 
 Allowance for loan losses $ 436,898 $ 458,655 
 Allowance for unfunded credit commitments 24,071 24,600 
 Total allowance for credit losses for loans $ 460,969 $ 483,255 

 The following table summarizes the provision for credit losses for loans for the periods indicated: 
 
 Three Months Ended
March 31, 
 2023 2022 
 (in thousands) 
 Components of provision for credit losses for loans: 
 Provision for loan losses $ 9,979 $ 3,258 
 (Credit) provision for unfunded credit commitments ( 529 ) 242 
 Total provision for credit losses for loans $ 9,450 $ 3,500 

 34 
 
 

 
 

 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: 
 
 Commercial
and Industrial Commercial
Real Estate Residential
Mortgage Consumer Total 
 (in thousands) 
 Three Months Ended
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. 2022-02 * 
 ( 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 (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 
 Ending balance $ 127,992 $ 243,332 $ 41,708 $ 23,866 $ 436,898 
 Three Months Ended
March 31, 2022 
 Allowance for loan losses: 
 Beginning balance $ 103,090 $ 217,490 $ 25,120 $ 13,502 $ 359,202 
 
 
 Loans charged-off ( 1,571 ) ( 173 ) ( 26 ) ( 825 ) ( 2,595 ) 
 Charged-off loans recovered 824 107 457 1,257 2,645 
 Net (charge-offs) recoveries ( 747 ) ( 66 ) 431 432 50 
 (Credit) provision for loan losses ( 1,140 ) 2,525 2,638 ( 765 ) 3,258 
 Ending balance $ 101,203 $ 219,949 $ 28,189 $ 13,169 $ 362,510 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 35 
 
 

 
 

 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 March 31, 2023 and December 31, 2022. 
 
 Commercial and Industrial Commercial
Real Estate Residential
Mortgage Consumer Total 
 (in thousands) 
 March 31, 2023 
 Allowance for loan losses: 
 Individually evaluated for credit losses $ 46,151 $ 13,445 $ 34 $ — $ 59,630 
 Collectively evaluated for credit losses 81,841 229,887 41,674 23,866 377,268 
 Total $ 127,992 $ 243,332 $ 41,708 $ 23,866 $ 436,898 
 Loans: 
 Individually evaluated for credit losses $ 74,625 $ 144,892 $ 12,028 $ 6,929 $ 238,474 
 Collectively evaluated for credit losses 8,969,321 30,632,186 5,474,252 3,345,733 48,421,492 
 Total $ 9,043,946 $ 30,777,078 $ 5,486,280 $ 3,352,662 $ 48,659,966 
 December 31, 2022 
 Allowance for loan losses: 
 Individually evaluated for credit losses $ 68,745 $ 13,174 $ 337 $ 4,338 $ 86,594 
 Collectively evaluated for credit losses 71,196 246,234 38,683 15,948 372,061 
 Total $ 139,941 $ 259,408 $ 39,020 $ 20,286 $ 458,655 
 Loans: 
 Individually evaluated for credit losses $ 117,644 $ 213,522 $ 28,869 $ 14,058 $ 374,093 
 Collectively evaluated for credit losses 8,687,186 29,219,346 5,335,681 3,300,894 46,543,107 
 Total $ 8,804,830 $ 29,432,868 $ 5,364,550 $ 3,314,952 $ 46,917,200 

 
 Note 9. Goodwill and Other Intangible Assets 
 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 * 
 Wealth
Management Consumer
Banking Commercial
Banking Total 
 (in thousands) 
 
 
 $ 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. 
 36 
 
 

 
 

 The following table summarizes other intangible assets as of March 31, 2023 and December 31, 2022: 
 
 Gross
Intangible
Assets Accumulated
Amortization Net
Intangible
Assets 
 (in thousands) 
 March 31, 2023 
 Loan servicing rights $ 120,177 $ ( 97,332 ) $ 22,845 
 Core deposits 215,620 ( 92,048 ) 123,572 
 Other 50,393 ( 9,639 ) 40,754 
 Total other intangible assets $ 386,190 $ ( 199,019 ) $ 187,171 
 December 31, 2022 
 Loan servicing rights $ 119,943 $ ( 96,136 ) $ 23,807 
 Core deposits 223,670 ( 92,486 ) 131,184 
 Other 51,299 ( 8,834 ) 42,465 
 Total other intangible assets $ 394,912 $ ( 197,456 ) $ 197,456 

 
 
 Loan servicing rights are accounted for using the amortization method. Under this method, Valley amortizes the loan servicing assets over the period of the economic life of the assets arising from estimated net servicing revenues. On a quarterly basis, Valley stratifies its loan servicing assets into groupings based on risk characteristics and assesses each group for impairment based on fair value. 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 months ended March 31, 2023 and 2022. 
 Core deposits are amortized using an accelerated method over a period of 10.0 years. 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 evaluates core deposits and other intangibles for impairment when an indication of impairment exists. 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: 
 
 Year Loan Servicing
Rights Core
Deposits Other 
 (in thousands) 
 2023 $ 2,365 $ 21,135 $ 4,810 
 2024 2,813 24,897 5,951 
 2025 2,461 21,048 5,380 
 2026 2,143 17,223 4,805 
 2027 1,861 13,544 4,205 

 
 
 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 . 
 
 
 37 
 
 

 
 
 

 Note 10. Deposits 
 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: 
 
 Year Amount 
 (in thousands) 
 2023 6,859,391 
 2024 2,578,459 
 2025 61,015 
 2026 120,032 
 2027 45,077 
 Thereafter 1,447,402 
 Total time deposits $ 11,111,376 

 
 Note 11. Borrowed Funds 
 
 
 Short-Term Borrowings 
 Short-term borrowings at March 31, 2023 and December 31, 2022 consisted of the following: 
 
 
 
 March 31, 2023 December 31, 2022 
 (in thousands) 
 FHLB advances $ 6,300,000 $ 24,035 
 
 Securities sold under agreements to repurchase 113,056 114,694 
 Total short-term borrowings $ 6,413,056 $ 138,729 

 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 March 31, 2023 and December 31, 2022 consisted of the following: 
 
 
 
 March 31, 2023 December 31, 2022 
 (in thousands) 
 FHLB advances, net (1) 
 $ 1,438,361 $ 788,419 
 Subordinated debt, net (2) 
 759,295 754,639 
 
 Total long-term borrowings $ 2,197,656 $ 1,543,058 

 
 

 
 (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. 
 

 
 
 38 
 
 

 
 

 FHLB Advances. 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 March 31, 2023 are scheduled for contractual balance repayments as follows: 
 
 Year Amount 
 (in thousands) 
 
 2024 $ 165,000 
 2025 273,000 
 2026 350,000 
 2027 425,000 
 Thereafter 225,000 
 Total long-term FHLB advances $ 1,438,000 

 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. 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. 
 
 Note 12. Stock–Based Compensation 
 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. 
 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 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 
 39 
 
 

 
 

 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. 
 
 Note 13. 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. Valley is exposed to changes in the fair value of fixed-rate subordinated debt due to changes in interest rates. Valley uses interest rate swaps to manage its exposure to changes in fair value on fixed rate debt instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the receipt of variable rate payments from a counterparty in exchange for Valley making fixed rate payments over the life of the agreements without the exchange of the underlying notional amount. 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. 
 Non-designated Hedges. Derivatives not designated as hedges may be used to manage Valley’s exposure to interest rate movements or to provide a service to customers but do not meet the requirements for hedge accounting under U.S. GAAP. Derivatives not designated as hedges are not entered into for speculative purposes. Valley executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Valley executes with a third party, such that Valley minimizes its net risk exposure resulting from such transactions. As these interest rate swaps do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. 
 Valley sometimes enters into risk participation agreements with external lenders where the banks are sharing their risk of default on the interest rate swaps on participated loans. Valley either pays or receives a fee depending on the participation type. Risk participation agreements are credit derivatives not designated as hedges. Credit derivatives are not speculative and are not used to manage interest rate risk in assets or liabilities. Changes in the fair value in credit derivatives are recognized directly in earnings. At March 31, 2023, Valley had 33 credit swaps with an aggregate notional amount of $ 409.2 million related to risk participation agreements. 
 40 
 
 

 
 

 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. 
 Valley regularly enters into mortgage banking derivatives which are non-designated hedges. These derivatives include interest rate lock commitments provided to customers to fund certain residential mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. Valley enters into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rate on Valley's commitments to fund the loans as well as on its portfolio of mortgage loans held for sale. 
 Valley enters into foreign currency forward and option contracts, primarily to accommodate 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. dollar denominated loans) with a client, we enter into a respective hedging contract with a third party financial institution to mitigate the economic impact of foreign currency exchange rate fluctuation. 
 Amounts included in the consolidated statements of financial condition related to the fair value of Valley’s derivative financial instruments were as follows: 
 
 March 31, 2023 December 31, 2022 
 Fair Value Fair Value 
 Other Assets Other Liabilities Notional Amount Other Assets Other Liabilities Notional Amount 
 (in thousands) 
 Derivatives designated as hedging instruments: 
 
 Cash flow hedge interest rate swaps 
 $ 7,866 $ — $ 600,000 $ 3,971 $ 4 $ 600,000 
 Fair value hedge interest rate swaps — 27,858 300,000 — 29,794 300,000 
 Total derivatives designated as hedging instruments $ 7,866 $ 27,858 $ 900,000 $ 3,971 $ 29,798 $ 900,000 
 Derivatives not designated as hedging instruments: 
 
 Interest rate swaps and other contracts * 
 $ 429,195 $ 457,508 $ 15,298,441 $ 449,280 $ 564,678 $ 14,753,330 
 Foreign currency derivatives 9,540 8,944 1,848,883 13,709 12,604 1,273,735 
 Mortgage banking derivatives 148 242 51,106 167 157 31,299 
 Total derivatives not designated as hedging instruments 
 $ 438,883 $ 466,694 $ 17,198,430 $ 463,156 $ 577,439 $ 16,058,364 

 
 

 * 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 March 31, 2023 and December 31, 2022 in the table above. 
 41 
 
 

 
 

 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
March 31, 
 2023 2022 
 (in thousands) 
 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 $ 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
March 31, 
 2023 2022 
 (in thousands) 
 Derivative - interest rate swap: 
 
 Interest expense $ 4,692 $ 530 
 Hedged item - subordinated debt 
 
 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 March 31, 2023 and December 31, 2022, respectively. 
 
 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. 
 42 
 
 

 
 

 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
March 31, 
 2023 2022 
 (in thousands) 
 Non-designated hedge interest rate swaps and credit derivatives 
 Other non-interest expense $ 208 $ ( 2,797 ) 

 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. Management attempts to minimize counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral where appropriate. Credit risk exposure associated with derivative contracts is managed at Valley in conjunction with Valley’s consolidated counterparty risk management process. Valley’s counterparties and the risk limits monitored by management are periodically reviewed and approved by the Board of Directors. 
 Valley has agreements with its derivative counterparties providing that if Valley defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Valley could also be declared in default on its derivative counterparty agreements. Additionally, Valley has an agreement with several of its derivative counterparties that contains provisions that require Valley’s debt to maintain an investment grade credit rating from each of the major credit rating agencies from which it receives a credit rating. If Valley’s credit rating is reduced below investment grade, or such rating is withdrawn or suspended, then the counterparties could terminate the derivative positions and Valley would be required to settle its obligations under the agreements. As of 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. 
 
 Note 14. Balance Sheet Offsetting 
 Certain financial instruments, including certain over-the-counter (OTC) derivatives (mostly interest rate swaps) and repurchase agreements (accounted for as secured long-term borrowings), may be eligible for offset in the consolidated statements of financial condition and/or subject to master netting arrangements or similar agreements. OTC derivatives include interest rate swaps executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house (presented in the table below). The credit risk associated with bilateral OTC derivatives is managed through obtaining collateral and enforceable master netting agreements. 
 Valley is party to master netting arrangements with its financial institution counterparties; however, Valley does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of cash or marketable investment securities, is posted by the counterparty with net liability positions in accordance with contract thresholds. Master repurchase agreements which include “right of set-off” provisions generally have a legally enforceable right to offset recognized amounts. In such cases, the collateral would be used to settle the fair value of the swap or repurchase agreement should Valley be in default. The total amount of collateral held or pledged cannot exceed the net derivative fair values with the counterparty. 
 43 
 
 

 
 

 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 
 Gross Amounts
Recognized Gross Amounts
Offset Net Amounts
Presented Financial
Instruments Cash
Collateral * Net
Amount 
 (in thousands) 
 March 31, 2023 
 Assets 
 Interest rate swaps $ 437,061 $ — $ 437,061 $ 30,473 $ ( 301,740 ) $ 165,794 
 Liabilities 
 Interest rate swaps $ 485,366 $ — $ 485,366 $ ( 30,473 ) $ ( 681 ) $ 454,212 
 
 
 December 31, 2022 
 Assets 
 Interest rate swaps $ 453,251 $ — $ 453,251 $ 12,766 $ ( 342,480 ) $ 123,537 
 Liabilities 
 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 an asset/liability position. 
 44 
 
 

 
 
 

 Note 15. 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 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. These tax credits and deductions are recognized as a reduction of income tax expense. 
 Valley’s tax credit investments are carried in other assets on the consolidated statements of financial condition. 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. 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 March 31, 2023 and December 31, 2022: 
 
 March 31,
2023 December 31,
2022 
 (in thousands) 
 Other Assets: 
 Affordable housing tax credit investments, net $ 22,813 $ 24,198 
 Other tax credit investments, net 53,812 56,551 
 Total tax credit investments, net 
 $ 76,625 $ 80,749 
 Other Liabilities: 
 Unfunded affordable housing tax credit commitments $ 1,338 $ 1,338 
 
 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 months ended March 31, 2023 and 2022: 
 
 Three Months Ended
March 31, 
 2023 2022 
 (in thousands) 
 Components of Income Tax Expense: 
 Affordable housing tax credits and other tax benefits $ 1,459 $ 744 
 Other tax credit investment credits and tax benefits 3,221 2,551 
 Total reduction in income tax expense 
 $ 4,680 $ 3,295 
 Amortization of Tax Credit Investments: 
 Affordable housing tax credit investment losses $ 937 $ 415 
 Affordable housing tax credit investment impairment losses 
 448 262 
 Other tax credit investment losses 6 309 
 Other tax credit investment impairment losses 2,862 1,910 
 Total amortization of tax credit investments recorded in non-interest expense $ 4,253 $ 2,896 

 
 
 45 
 
 

 
 
 

 Note 16. Operating Segments 
 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 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. The average weighted life of the automobile loans within the portfolio is relatively unaffected by movements in the market level of interest rates. 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 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 and Commercial Banking 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 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. GAAP. 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 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. 
 
 
 46 
 
 

 
 

 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 
 Consumer
Banking Commercial
Banking Treasury and Corporate Other Total 
 ($ in thousands) 
 Average interest earning assets 
 $ 8,768,482 $ 39,090,889 $ 7,503,419 $ 55,362,790 
 
 Interest income $ 85,316 $ 569,910 $ 65,004 $ 720,230 
 Interest expense 43,006 191,723 49,481 284,210 
 Net interest income 42,310 378,187 15,523 436,020 
 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 
 Non-interest income 14,290 15,747 24,262 54,299 
 Non-interest expense 18,249 35,723 218,194 272,166 
 Internal transfer expense (income) 30,883 131,595 ( 162,478 ) — 
 Income (loss) before income taxes $ 1,024 $ 223,610 $ ( 20,918 ) $ 203,716 
 Return on average interest earning assets (pre-tax) 
 0.05 % 2.29 % ( 1.12 ) % 1.47 % 

 
 
 
 Three Months Ended March 31, 2022 
 Consumer
Banking Commercial
Banking Treasury and Corporate Other Total 
 ($ in thousands) 
 Average interest earning assets 
 $ 7,638,942 $ 26,984,460 $ 5,659,646 $ 40,283,048 
 
 Interest income $ 59,459 $ 257,906 $ 23,093 $ 340,458 
 Interest expense 3,207 11,327 8,255 22,789 
 Net interest income 56,252 246,579 14,838 317,669 
 Provision for credit losses 1,873 1,627 57 3,557 
 Net interest income after provision for credit losses 54,379 244,952 14,781 314,112 
 Non-interest income 13,817 16,880 8,573 39,270 
 Non-interest expense 16,568 25,085 155,687 197,340 
 Internal transfer expense (income) 28,647 99,916 ( 128,563 ) — 
 Income (loss) before income taxes $ 22,981 $ 136,831 $ ( 3,770 ) $ 156,042 
 Return on average interest earning assets (pre-tax) 
 1.20 % 2.03 % ( 0.27 ) % 1.55 % 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 47
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
VALLEY NATIONAL BANCORP 10-Q

Item 1. Financial Statements
