VALLEY NATIONAL BANCORP 10-Q

Item 1. Financial Statements VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (in thousands, except for share data) September 30, 2024 December 31, 2023 Assets (Unaudited) Cash and due from banks $ 511,945 $ 284,090 Interest bearing deposits with banks 527,960 607,135 Investment securities: Equity securities 73,071 64,464 Trading debt securities 3,996 3,973 Available for sale debt securities 2,602,260 1,296,576 Held to maturity debt securities (net of allowance for credit losses of $ 1,076 at September 30, 2024 and $ 1,205 at December 31, 2023) 3,573,960 3,739,208 Total investment securities 6,253,287 5,104,221 Loans held for sale (includes fair value of $ 17,153 at September 30, 2024 and $ 20,640 at December 31, 2023 for loans originated for sale) 843,201 30,640 Loans 49,355,319 50,210,295 Less: Allowance for loan losses ( 548,327 ) ( 446,080 ) Net loans 48,806,992 49,764,215 Premises and equipment, net 356,649 381,081 Lease right of use assets 335,032 343,461 Bank owned life insurance 730,081 723,799 Accrued interest receivable 250,131 245,498 Goodwill 1,868,936 1,868,936 Other intangible assets, net 135,478 160,331 Other assets 1,472,640 1,421,567 Total Assets $ 62,092,332 $ 60,934,974 Liabilities Deposits: Non-interest bearing $ 11,153,754 $ 11,539,483 Interest bearing: Savings, NOW and money market 25,069,405 24,526,622 Time 14,172,807 13,176,724 Total deposits 50,395,966 49,242,829 Short-term borrowings 58,268 917,834 Long-term borrowings 3,274,340 2,328,375 Junior subordinated debentures issued to capital trusts 57,368 57,108 Lease liabilities 394,971 403,781 Accrued expenses and other liabilities 939,039 1,283,656 Total Liabilities 55,119,952 54,233,583 Shareholders’ Equity Preferred stock, no par value; 50,000,000 authorized shares: Series A ( 4,600,000 shares issued at September 30, 2024 and December 31, 2023) 111,590 111,590 Series B ( 4,000,000 shares issued at September 30, 2024 and December 31, 2023) 98,101 98,101 Series C ( 6,000,000 shares issued at September 30, 2024) 144,654 — Common stock ( no par value, authorized 650,000,000 shares; issued 509,252,936 shares at September 30, 2024 and 507,896,910 shares at December 31, 2023) 178,661 178,187 Surplus 5,002,718 4,989,989 Retained earnings 1,551,428 1,471,371 Accumulated other comprehensive loss ( 114,772 ) ( 146,456 ) Treasury stock, at cost ( 186,983 common shares at December 31, 2023) — ( 1,391 ) Total Shareholders’ Equity 6,972,380 6,701,391 Total Liabilities and Shareholders’ Equity $ 62,092,332 $ 60,934,974 See accompanying notes to consolidated financial statements. 3 VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except for per share data) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Interest Income Interest and fees on loans $ 786,680 $ 753,638 $ 2,329,197 $ 2,124,036 Interest and dividends on investment securities: Taxable 49,700 32,383 125,957 96,591 Tax-exempt 4,855 4,585 14,450 15,485 Dividends 5,929 5,299 19,098 18,001 Interest on federal funds sold and other short-term investments 13,385 17,113 33,969 66,594 Total interest income 860,549 813,018 2,522,671 2,320,707 Interest Expense Interest on deposits: Savings, NOW and money market 235,371 201,916 699,474 517,524 Time 174,741 164,336 486,248 370,398 Interest on short-term borrowings 451 5,189 21,754 89,345 Interest on long-term borrowings and junior subordinated debentures 39,488 29,159 109,464 75,237 Total interest expense 450,051 400,600 1,316,940 1,052,504 Net Interest Income 410,498 412,418 1,205,731 1,268,203 (Credit) provision for credit losses for available for sale and held to maturity securities ( 14 ) ( 30 ) ( 129 ) 4,675 Provision for credit losses for loans 75,038 9,147 202,423 24,929 Net Interest Income After Provision for Credit Losses 335,474 403,301 1,003,437 1,238,599 Non-Interest Income Wealth management and trust fees 15,125 11,417 46,191 32,180 Insurance commissions 2,880 2,336 9,089 7,895 Capital markets 6,347 7,141 19,796 35,000 Service charges on deposit accounts 12,826 10,952 35,287 31,970 Gains (losses) on securities transactions, net 47 ( 398 ) 99 197 Fees from loan servicing 3,443 2,681 9,322 8,054 (Losses) gains on sales of loans, net ( 3,644 ) 2,023 ( 1,142 ) 3,752 Gains on sales of assets, net 55 6,653 3,747 6,938 Bank owned life insurance 5,387 2,709 13,167 7,736 Other 18,205 13,150 37,743 39,316 Total non-interest income 60,671 58,664 173,299 173,038 Non-Interest Expense Salary and employee benefits expense 138,832 137,292 421,478 431,872 Net occupancy expense 26,973 24,675 75,548 73,880 Technology, furniture and equipment expense 28,962 37,320 99,627 106,304 FDIC insurance assessment 14,792 7,946 47,474 27,527 Amortization of other intangible assets 8,692 9,741 26,672 30,072 Professional and legal fees 14,118 17,109 48,521 55,329 Amortization of tax credit investments 5,853 4,191 17,206 13,462 Other 31,249 28,859 90,752 83,824 Total non-interest expense 269,471 267,133 827,278 822,270 Income Before Income Taxes 126,674 194,832 349,458 589,367 Income tax expense 28,818 53,486 84,898 162,410 Net Income 97,856 141,346 264,560 426,957 Dividends on preferred stock 6,117 4,127 14,344 12,031 Net Income Available to Common Shareholders $ 91,739 $ 137,219 $ 250,216 $ 414,926 Earnings Per Common Share: Basic $ 0.18 $ 0.27 $ 0.49 $ 0.82 Diluted 0.18 0.27 0.49 0.81 See accompanying notes to consolidated financial statements. 4 VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income $ 97,856 $ 141,346 $ 264,560 $ 426,957 Other comprehensive gain (loss), net of tax: Unrealized gains and losses on available for sale securities Net gains (losses) arising during the period 48,023 ( 37,115 ) 32,218 ( 37,996 ) Less reclassification adjustment for net losses included in net income 1 5 9 5 Total 48,024 ( 37,110 ) 32,227 ( 37,991 ) Unrealized gains and losses on derivatives (cash flow hedges) Net losses on derivatives arising during the period — — — ( 775 ) Less reclassification adjustment for net (gains) losses included in net income ( 219 ) ( 43 ) ( 651 ) 852 Total ( 219 ) ( 43 ) ( 651 ) 77 Defined benefit pension and postretirement benefit plans Amortization of actuarial net loss 36 8 108 24 Total other comprehensive income (loss) 47,841 ( 37,145 ) 31,684 ( 37,890 ) Total comprehensive income $ 145,697 $ 104,201 $ 296,244 $ 389,067 See accompanying notes to consolidated financial statements. 5 VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) For the Nine Months Ended September 30, 2024 Common Stock Accumulated Preferred Stock Shares Amount Surplus Retained Earnings Other Comprehensive Loss Treasury Stock Total Shareholders’ Equity ($ in thousands) Balance - December 31, 2023 $ 209,691 507,710 $ 178,187 $ 4,989,989 $ 1,471,371 $ ( 146,456 ) $ ( 1,391 ) $ 6,701,391 Net income — — — — 96,280 — — 96,280 Other comprehensive loss, net of tax — — — — — ( 10,392 ) — ( 10,392 ) Cash dividends declared: Preferred stock, Series A, $ 0.39 per share — — — — ( 1,797 ) — — ( 1,797 ) Preferred stock, Series B, $ 0.58 per share — — — — ( 2,322 ) — — ( 2,322 ) Common stock, $ 0.11 per share — — — — ( 56,794 ) — — ( 56,794 ) Effect of stock incentive plan, net — 1,183 348 ( 966 ) — — 1,391 773 Balance - March 31, 2024 $ 209,691 508,893 $ 178,535 $ 4,989,023 $ 1,506,738 $ ( 156,848 ) $ — $ 6,727,139 Net income — — — — 70,424 — — 70,424 Other comprehensive loss, net of tax — — — — — ( 5,765 ) — ( 5,765 ) Cash dividends declared: Preferred stock, Series A, $ 0.39 per share — — — — ( 1,797 ) — ` ( 1,797 ) Preferred stock, Series B, $ 0.58 per share — — — — ( 2,311 ) — — ( 2,311 ) Common stock, $ 0.11 per share — — — — ( 56,678 ) — — ( 56,678 ) Effect of stock incentive plan, net — 312 110 6,615 — — — 6,725 Balance - June 30, 2024 $ 209,691 509,205 $ 178,645 $ 4,995,638 $ 1,516,376 $ ( 162,613 ) $ — $ 6,737,737 Net income — — — — 97,856 — — 97,856 Other comprehensive income, net of tax — — — — — 47,841 — 47,841 Cash dividends declared: Preferred stock, Series A, $ 0.39 per share — — — — ( 1,797 ) — — ( 1,797 ) Preferred stock, Series B, $ 0.60 per share — — — — ( 2,395 ) — — ( 2,395 ) Preferred stock, Series C, $ 0.32 per share — — — — ( 1,925 ) — — ( 1,925 ) Common stock, $ 0.11 per share — — — ( 56,687 ) — — ( 56,687 ) Preferred Stock Issued 144,654 — 144,654 Effect of stock incentive plan, net — 48 16 7,080 — — — 7,096 Balance - September 30, 2024 $ 354,345 509,253 $ 178,661 $ 5,002,718 $ 1,551,428 $ ( 114,772 ) $ — $ 6,972,380 6 For the Nine Months Ended September 30, 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 Net income — — — — 139,060 — — 139,060 Other comprehensive loss, net of tax — — — — — ( 21,100 ) — ( 21,100 ) Cash dividends declared: Preferred stock, Series A, $ 0.39 per share — — — — ( 1,797 ) — — ( 1,797 ) Preferred stock, Series B, $ 0.56 per share — — — — ( 2,233 ) — — ( 2,233 ) Common stock, $ 0.11 per share — — — — ( 56,474 ) — — ( 56,474 ) Effect of stock incentive plan, net — 157 1 6,845 ( 2 ) — 1,395 8,239 Common stock repurchased — ( 300 ) — — — — ( 2,092 ) ( 2,092 ) Balance - June 30, 2023 $ 209,691 507,619 $ 178,187 $ 4,974,507 $ 1,379,534 $ ( 164,747 ) $ ( 1,988 ) $ 6,575,184 Net income — — — — 141,346 — — 141,346 Other comprehensive loss, net of tax — — — — — ( 37,145 ) — ( 37,145 ) Cash dividends declared: Preferred stock, Series A, $ 0.39 per share — — — — ( 1,797 ) — — ( 1,797 ) Preferred stock, Series B, $ 0.58 per share — — — — ( 2,330 ) — — ( 2,330 ) Common stock, $ 0.11 per share — — — — ( 56,459 ) — — ( 56,459 ) Effect of stock incentive plan, net — 42 — 8,241 ( 10 ) — 269 8,500 Balance - September 30, 2023 $ 209,691 507,661 $ 178,187 $ 4,982,748 $ 1,460,284 $ ( 201,892 ) $ ( 1,719 ) $ 6,627,299 See accompanying notes to consolidated financial statements. 7 VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net income $ 264,560 $ 426,957 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 31,245 32,134 Stock-based compensation 22,995 25,365 Provision for credit losses 202,294 29,604 Net accretion of discounts and amortization of premium on securities and borrowings ( 2,143 ) ( 28 ) Amortization of other intangible assets 26,672 30,072 Losses on available for sale and held to maturity debt securities, net 12 476 Proceeds from sales of loans held for sale at fair value 155,863 154,720 Losses (gains) on sales of loans, net 1,142 ( 3,752 ) Originations of loans held for sale ( 148,294 ) ( 158,566 ) Gains on sales of assets, net ( 3,747 ) ( 6,938 ) Net change in: Fair value of financial instruments hedged by derivative transactions 20,452 ( 916 ) Trading debt securities ( 23 ) 9,997 Lease right of use assets 8,421 ( 45,767 ) Cash surrender value of bank owned life insurance ( 13,167 ) ( 7,736 ) Accrued interest receivable ( 4,633 ) ( 41,180 ) Other assets ( 55,675 ) ( 308,879 ) Accrued expenses and other liabilities ( 349,630 ) 521,214 Net cash provided by operating activities 156,344 656,777 Cash flows from investing activities: Net loan originations and purchases ( 408,268 ) ( 3,235,439 ) Equity securities: Purchases ( 8,295 ) ( 12,745 ) Sales 1,146 1,113 Held to maturity debt securities: Purchases ( 60,585 ) ( 235,667 ) Maturities, calls and principal repayments 224,349 262,734 Available for sale debt securities: Purchases ( 1,410,651 ) ( 59,380 ) Sales — 17,910 Maturities, calls and principal repayments 154,021 63,060 Death benefit proceeds from bank owned life insurance 6,852 5,218 Proceeds from sales of real estate property and equipment 3,702 18,403 Proceeds from sales of loans not originated for sale 230,666 — Proceeds from sale of commercial premium finance lending division 98,060 — Purchases of real estate property and equipment ( 9,724 ) ( 71,571 ) Net cash used in investing activities ( 1,178,727 ) ( 3,246,364 ) 8 VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) (in thousands) Nine Months Ended September 30, 2024 2023 Cash flows from financing activities: Net change in deposits $ 1,144,039 $ 2,248,400 Net change in short-term borrowings ( 859,566 ) ( 48,927 ) Proceeds from issuance of long-term borrowings, net 1,001,800 1,250,000 Repayments of long-term borrowings ( 65,000 ) ( 475,000 ) Proceeds from issuance of preferred stock, net 144,654 — Cash dividends paid to preferred shareholders ( 16,141 ) ( 12,031 ) Cash dividends paid to common shareholders ( 170,321 ) ( 169,488 ) Purchase of common shares to treasury ( 8,477 ) ( 11,274 ) Common stock issued, net 78 3,799 Other, net ( 3 ) ( 16 ) Net cash provided by financing activities 1,171,063 2,785,463 Net change in cash and cash equivalents 148,680 195,876 Cash and cash equivalents at beginning of year 891,225 947,947 Cash and cash equivalents at end of period $ 1,039,905 $ 1,143,823 Supplemental disclosures of cash flow information: Cash payments for: Interest on deposits and borrowings $ 1,348,751 $ 942,237 Federal and state income taxes 82,712 172,835 Supplemental schedule of non-cash investing activities: Transfer of loans to other real estate owned, net $ 7,172 $ 974 Transfer of loans to loans held for sale, net 823,091 10,000 Lease right of use assets obtained in exchange for operating lease liabilities 15,429 81,727 See accompanying notes to consolidated financial statements. 9 VALLEY NATIONAL BANCORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Basis of Presentation The unaudited consolidated financial state ments of Valley include the accounts of the Bank and all other entities in which Valley has a controlling financial interest. All inter-company transactions and balances have been eliminated. The accounting and reporting policies of Valley conform to GAAP and general practices within the financial services industry. In accordance with GAAP, 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 September 30, 2024 and for all periods presented have been made. The results of operations for the three and nine months ended September 30, 2024 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 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. Significant Estimates. In preparing the unaudited consolidated financial statements in conformit y with 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 . Preferred Stock Series C Issuance. On August 5, 2024, Valley issued 6.0 million shares of its Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series C, no par value per share, with a liquidation preference of $ 25 per share for aggregate consideration of $ 150 million. Dividends on the preferred stock accrue and are payable quarterly in arrears, at a fixed rate per annum equal to 8.250 % from the date of original issue to, but excluding September 30, 2029, and thereafter at a rate per annum equal to the five-year U.S. treasury rate as of the most recent dividend payment date plus 4.182 percent. Net proceeds to Valley after deducting underwriting discounts, commissions and offering expenses were $ 144.7 million. Common Stock Issuance. On November 12, 2024, Valley issued and sold 49,197,860 shares of its common stock in a registered public offering, including 6,417,112 shares purchased under an over-allotment option exercised in full by the underwriters at the public offering price of $ 9.35 per share. The net proceeds of the offering, after deducting underwriting discounts and commissions and offering expenses payable by Valley, were $ 448.9 million and are expected to be used for general corporate purposes and investments in the Bank as regulatory capital. 10 Note 2. Earnings Per Common Share The following table shows the calculation of both basic and diluted earnings per common share for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands, except for share and per share data) Net income available to common shareholders $ 91,739 $ 137,219 $ 250,216 $ 414,926 Basic weighted average number of common shares outstanding 509,227,538 507,650,668 508,904,353 507,580,197 Plus: Common stock equivalents 2,115,394 1,605,931 1,808,852 1,623,854 Diluted weighted average number of common shares outstanding 511,342,932 509,256,599 510,713,205 509,204,051 Earnings per common share: Basic $ 0.18 $ 0.27 $ 0.49 $ 0.82 Diluted 0.18 0.27 0.49 0.81 Common stock equivalents represent the dilutive effect of additional common shares issuable upon the assumed vesting or exercise, if applicab le, of RSUs and common stock options to purchase Valley’s common shares. Common stock options with exercise prices that exceed the average market price 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 RSUs. Pote ntial anti-dilutive weighted common shares totaled approximately 3.6 million and 2.8 million for the three months ended September 30, 2024 and 2023, respectively, and 4.0 million and 2.6 million for the nine months ended September 30, 2024 and 2023, respectively. Note 3. Accumulated Other Comprehensive Loss The following tables present the after-tax changes in the balances of each component of accumulated other comprehensive loss for th e three and nine months ended September 30, 2024 and 2023: Components of Accumulated Other Comprehensive Loss Total Accumulated Other Comprehensive Loss Unrealized Gains and Losses on AFS Securities Unrealized Gains and Losses on Derivatives Defined Benefit Pension and Postretirement Benefit Plans (in thousands) June 30, 2024 $ ( 131,299 ) $ 1,682 $ ( 32,996 ) $ ( 162,613 ) Other comprehensive income before reclassification 48,023 — — 48,023 Amounts reclassified from other comprehensive income 1 ( 219 ) 36 ( 182 ) Other comprehensive income (loss) , net 48,024 ( 219 ) 36 47,841 September 30, 2024 $ ( 83,275 ) $ 1,463 $ ( 32,960 ) $ ( 114,772 ) June 30, 2023 $ ( 128,699 ) $ 2,353 $ ( 38,401 ) $ ( 164,747 ) Other comprehensive loss before reclassification ( 37,115 ) — — ( 37,115 ) Amounts reclassified from other comprehensive loss 5 ( 43 ) 8 ( 30 ) Other comprehensive (loss) income, net ( 37,110 ) ( 43 ) 8 ( 37,145 ) September 30, 2023 $ ( 165,809 ) $ 2,310 $ ( 38,393 ) $ ( 201,892 ) 11 Components of Accumulated Other Comprehensive Loss Total Accumulated Other Comprehensive Loss Unrealized Gains and Losses on AFS Securities Unrealized Gains and Losses on Derivatives Defined Benefit Pension and Postretirement Benefit Plans (in thousands) December 31, 2023 $ ( 115,502 ) $ 2,114 $ ( 33,068 ) $ ( 146,456 ) Other comprehensive income before reclassification 32,218 — — 32,218 Amounts reclassified from other comprehensive income 9 ( 651 ) 108 ( 534 ) Other comprehensive income (loss), net 32,227 ( 651 ) 108 31,684 September 30, 2024 $ ( 83,275 ) $ 1,463 $ ( 32,960 ) $ ( 114,772 ) December 31, 2022 $ ( 127,818 ) $ 2,233 $ ( 38,417 ) $ ( 164,002 ) Other comprehensive loss before reclassification ( 37,996 ) ( 775 ) — ( 38,771 ) Amounts reclassified from other comprehensive loss 5 852 24 881 Other comprehensive (loss) income, net ( 37,991 ) 77 24 ( 37,890 ) September 30, 2023 $ ( 165,809 ) $ 2,310 $ ( 38,393 ) $ ( 201,892 ) The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three and nine months ended September 30, 2024 and 2023: Amounts Reclassified from Accumulated Other Comprehensive Loss Three Months Ended September 30, Nine Months Ended September 30, Components of Accumulated Other Comprehensive Loss 2024 2023 2024 2023 Income Statement Line Item (in thousands) Unrealized losses on AFS securities before tax $ ( 1 ) $ ( 6 ) $ ( 12 ) $ ( 6 ) Gains (losses) on securities transactions, net Tax effect — 1 3 1 Total net of tax ( 1 ) ( 5 ) ( 9 ) ( 5 ) Unrealized gains (losses) on derivatives (cash flow hedges) before tax 302 63 899 ( 1,193 ) Interest income Tax effect ( 83 ) ( 20 ) ( 248 ) 341 Total net of tax 219 43 651 ( 852 ) Defined benefit pension and postretirement benefit plans: Amortization of actuarial net loss ( 50 ) ( 11 ) ( 149 ) ( 33 ) * Tax effect 14 3 41 9 Total net of tax ( 36 ) ( 8 ) ( 108 ) ( 24 ) Total reclassifications, net of tax $ 182 $ 30 $ 534 $ ( 881 ) * Amortization of actuarial net loss is included in the computation of net periodic pension cost recognized within other non-interest expense. Note 4. New Authoritative Accounting Guidance New Accounting Guidance Adopted in the First Quarter 2024 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 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 became effective on 12 January 1, 2024 and did not have a significant impact on Valley's consolidated financial statements. Under the new guidance, Valley did not elect to apply the proportional amortization method as an accounting policy for its eligible tax credit investments and, as a result, there were no adjustments from adoption recognized in earnings on the date of adoption. See additional disclosures regarding Valley's tax credit investments in Note 14 . ASU No. 2022-03, “Fair Value Measurement of Equity Securities subject to Contractual Sale Restrictions,” updates guidance in ASC Topic 820, Fair Value Measurement and clarifies that a contractual sale restriction should not be considered in measuring fair value. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities including (i) the nature and remaining duration of the restriction; (ii) the circumstances that could cause a lapse in restrictions; and (iii) the fair value of the securities with contractual sale restrictions. ASU No. 2022-03 became effective on January 1, 2024 and Valley's adoption did not have a significant impact on its consolidated financial statements. New Accounting Guidance Effective at December 31, 2024 ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” requires public entities to disclose detailed information about a reportable segment’s expenses on both an annual and interim basis. ASU No. 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in ASU No. 2023-07 should be applied retrospectively to all periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The adoption of ASU No. 2023-07 is not expected to have a significant impact on Valley's consolidated financial statements, other than enhanced disclosures. Note 5. Fair Value Measurement of Assets and Liabilities ASC Topic 820, “Fair Value Measurement,” 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 September 30, 2024 and December 31, 2023. 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). 13 September 30, 2024 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 $ 23,985 $ 23,985 $ — $ — Equity securities at net asset value (NAV) 11,507 — — — Trading debt securities 3,996 3,996 — — Available for sale debt securities: U.S. Treasury securities 296,061 296,061 — — U.S. government agency securities 23,212 — 23,212 — Obligations of states and political subdivisions 201,846 — 201,846 — Residential mortgage-backed securities 1,895,868 — 1,895,868 — Corporate and other debt securities 185,273 — 185,273 — Total available for sale debt securities 2,602,260 296,061 2,306,199 — Loans held for sale (1) 17,153 — 17,153 — Other assets (2) 305,429 — 305,429 — Total assets $ 2,964,330 $ 324,042 $ 2,628,781 $ — Liabilities Other liabilities (2) $ 313,791 $ — $ 313,791 $ — Total liabilities $ 313,791 $ — $ 313,791 $ — Non-recurring fair value measurements: Commercial real estate loans held for sale: Performing $ 817,298 $ — $ 817,298 $ — Non-performing 8,750 — 8,750 — Total commercial real estate loans held for sale (3) 826,048 — 826,048 — Collateral dependent loans 119,767 — — 119,767 Foreclosed assets 8,783 — — 8,783 Total $ 954,598 $ — $ 826,048 $ 128,550 14 Fair Value Measurements at Reporting Date Using: December 31, 2023 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 $ 23,307 $ 23,307 $ — $ — Equity securities at net asset value (NAV) 12,126 — — — Trading debt securities 3,973 3,973 — — Available for sale debt securities: U.S. Treasury securities 288,157 288,157 — — U.S. government agency securities 23,702 — 23,702 — Obligations of states and political subdivisions 191,690 — 191,690 — Residential mortgage-backed securities 626,572 — 626,572 — Corporate and other debt securities 166,455 — 166,455 — Total available for sale debt securities 1,296,576 288,157 1,008,419 — Loans held for sale (1) 20,640 — 20,640 — Other assets (2) 466,227 — 466,227 — Total assets $ 1,822,849 $ 315,437 $ 1,495,286 $ — Liabilities Other liabilities (2) $ 488,103 $ — $ 488,103 $ — Total liabilities $ 488,103 $ — $ 488,103 $ — Non-recurring fair value measurements: Non-performing loan held for sale (3) $ 10,000 $ — $ 10,000 $ — Collateral dependent loans 90,580 — — 90,580 Foreclosed assets 1,444 — — 1,444 Total $ 102,024 $ — $ 10,000 $ 92,024 (1) Represents residential mortgage loans held for sale that are carried at fair value and had contractual unpaid principal balances totaling $ 16.9 million and $ 20.1 million at September 30, 2024 and December 31, 2023, respectively. (2) Derivative financial instruments are included in this category. (3) Reported at lower of cost or fair value . 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 securities . The equity securities consisted of two publicly traded mutual funds, CRA inves tments and a publicly traded financial technology company. These investments are reported at fair value utilizing Level 1 inputs. Equity securities at NAV . Valley also has privately held CRA funds and investments in limited liability companies and partnerships at fair value measured at NAV using the most recently available financial information from the 15 investee. Certain equity investments without readily determinable fair values are measured at NAV per share (or its equivalent) as a practical expedient, which 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, are reported at fair value utilizing Level 1 inputs at September 30, 2024 and December 31, 2023 . Man agement 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 a ll AFS debt s ecurities 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 September 30, 2024 and December 31, 2023 based on the short duration these assets were held and their credit quality. 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 SOFR curve at September 30, 2024. The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at September 30, 2024 and December 31, 2023), is determined based on the current market prices for similar instruments. The fair value of a credit default swap related to a portion of Valley's automobile loan portfolio is based on estimated discounted cash flows that incorporate market data for auto credit loss forecasts and anticipated cash outflows for the instrument's premium payments. The fair value of most of the derivatives incorporate credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, to account for potential nonperformance risk of Valley and its counterparties. The credit valuation adjustments were not significant to the overall valuation of Valley’s derivatives at September 30, 2024 and December 31, 2023. See Note 12 for additional details on Valley's derivatives. 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. Performing commercial real estate loans held for sale. During the three months ended September 30, 2024 , Valley transferred certain performing commercial real estate loans totaling $ 823.1 million, net of unearned fees, to loans held for sale. The fair value of the loans was determined using level 2 inputs, based on the terms of a sale agreement executed in October 2024 with an unrelated third party selected from a broker-led bidding process. The fair value mark on the performing loans totaled a $ 5.8 million loss and was recorded within net losses on sales of loans for the three months ended September 30, 2024. Valley expects the sale of the loans to close in the fourth quarter 2024. 16 Non-performing commercial real estate loan held for sale . Du ring the year ended December 31, 2023 , Valley transferred a non-performing construction loan totaling $ 10.0 million, net of charge-offs, to loans held for sale. The transfer at the loan's fair value resulted in a $ 4.2 million charge-off to the allowance of loan losses. The fair value of the loan was determined using Level 2 inputs, including bids from a third-party broker engaged to solicit interest from potential purchasers. The broker coordinated loan level due diligence with interested parties and established a bidding process in which each participant was required to provide an indicative non-binding bid. Fair value was determined based on a non-binding sale agreement selected by Valley in the bidding process. During the nine months ended September 30, 2024, an additional $ 1.2 million write-down was recorded to reflect the loan's current estimated fair value of $ 8.8 million at September 30, 2024. Collateral dependent loans . Collateral dependent loans are loans where foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and substantially all 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 September 30, 2024, collateral dependent loans were individually re-measured and reported at fair value through direct loan charge-offs to the allowance for loan losses based on the fair value of the underlying collateral. At September 30, 2024, collateral dependent loans with a total amortized cost of $ 177.3 million, including taxi medallion loans totaling $ 52.2 million, were reduced by specific allowance for loan losses allocations totaling $ 57.5 million to a reported total net carrying amount of $ 119.8 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 an asset occur, the a sset is re-measured and reported at fair value through a write-down recorded in non-interest expense. There were no adjustments to the appraisals of foreclosed assets at September 30, 2024 and December 31, 2023. 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. 17 The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at September 30, 2024 and December 31, 2023 were as follows: Fair Value Hierarchy September 30, 2024 December 31, 2023 Carrying Amount Fair Value Carrying Amount Fair Value (in thousands) Financial assets Cash and due from banks Level 1 $ 511,945 $ 511,945 $ 284,090 $ 284,090 Interest bearing deposits with banks Level 1 527,960 527,960 607,135 607,135 Equity securities (1) Level 3 37,579 37,579 29,031 29,031 Held to maturity debt securities: U.S. Treasury securities Level 1 25,671 25,682 26,232 25,978 U.S. government agency securities Level 2 303,200 269,208 305,996 261,555 Obligations of states and political subdivisions Level 2 380,653 364,290 405,470 387,527 Residential mortgage-backed securities Level 2 2,742,188 2,432,867 2,885,303 2,521,926 Trust preferred securities Level 2 37,076 29,774 37,062 30,650 Corporate and other debt securities Level 2 86,248 82,675 80,350 74,676 Total held to maturity debt securities (2) 3,575,036 3,204,496 3,740,413 3,302,312 Net loans Level 3 48,806,992 47,796,832 49,764,215 47,981,499 Accrued interest receivable Level 1 250,131 250,131 245,498 245,498 FRB and FHLB stock (3) Level 2 327,645 327,645 320,727 320,727 Financial liabilities Deposits without stated maturities Level 1 36,223,159 36,223,159 36,066,105 36,066,105 Deposits with stated maturities Level 2 14,172,807 14,227,913 13,176,724 13,103,381 Short-term borrowings Level 2 58,268 45,079 917,834 901,617 Long-term borrowings Level 2 3,274,340 3,291,136 2,328,375 2,256,997 Junior subordinated debentures issued to capital trusts Level 2 57,368 47,879 57,108 47,374 Accrued interest payable (4) Level 1 127,685 127,685 159,496 159,496 (1) Represents equity securities without a readily determinable fair value, which are measured based on the price at which the investment was acquired plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments. Total changes in the valuation of equity securities for the nine months ended September 30, 2024 and for the year ended December 31, 2023 were immaterial. (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 6. Investment Securities Equity Securities Equity securities totaled $ 73.1 million and $ 64.5 million at September 30, 2024 and December 31, 2023, respectively. See Note 5 for further details on equity securities. Trading Debt Securities The fair value of trading debt securities totaled $ 4.0 million at both September 30, 2024 and December 31, 2023. Net trading gains and losses are included in net gains and losses on securities transactions within non-interest income. We recorded net trading gains of $ 111 thousand and $ 673 thousand for the nine months ended September 18 30, 2024 and 2023, respectively. The net trading gains were immaterial for both three months ended September 30, 2024 and 2023. Available for Sale Debt Securities The amortized cost, gross unrealized gains and losses and fair value of AFS debt securities at September 30, 2024 and December 31, 2023 were as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in thousands) September 30, 2024 U.S. Treasury securities $ 318,090 $ — $ ( 22,029 ) $ 296,061 U.S. government agency securities 24,634 24 ( 1,446 ) 23,212 Obligations of states and political subdivisions: Obligations of states and state agencies 47,235 — ( 504 ) 46,731 Municipal bonds 180,001 — ( 24,886 ) 155,115 Total obligations of states and political subdivisions 227,236 — ( 25,390 ) 201,846 Residential mortgage-backed securities 1,943,569 17,293 ( 64,994 ) 1,895,868 Corporate and other debt securities 202,591 54 ( 17,372 ) 185,273 Total $ 2,716,120 $ 17,371 $ ( 131,231 ) $ 2,602,260 December 31, 2023 U.S. Treasury securities $ 313,772 $ — $ ( 25,615 ) $ 288,157 U.S. government agency securities 25,967 19 ( 2,284 ) 23,702 Obligations of states and political subdivisions: Obligations of states and state agencies 48,283 — ( 588 ) 47,695 Municipal bonds 170,260 — ( 26,265 ) 143,995 Total obligations of states and political subdivisions 218,543 — ( 26,853 ) 191,690 Residential mortgage-backed securities 703,875 728 ( 78,031 ) 626,572 Corporate and other debt securities 192,282 — ( 25,827 ) 166,455 Total $ 1,454,439 $ 747 $ ( 158,610 ) $ 1,296,576 Accrued interest on investments , which is excluded from the amortized cost of AFS debt securities, totaled $ 10.1 million and $ 5.9 million at September 30, 2024 and December 31, 2023, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition. 19 The age of unrealized losses and fair value of the related AFS debt securities at September 30, 2024 and December 31, 2023 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) September 30, 2024 U.S. Treasury securities $ — $ — $ 296,061 $ ( 22,029 ) $ 296,061 $ ( 22,029 ) U.S. government agency securities — — 21,927 ( 1,446 ) 21,927 ( 1,446 ) Obligations of states and political subdivisions: Obligations of states and state agencies — — 6,631 ( 504 ) 6,631 ( 504 ) Municipal bonds — — 146,966 ( 24,886 ) 146,966 ( 24,886 ) Total obligations of states and political subdivisions — — 153,597 ( 25,390 ) 153,597 ( 25,390 ) Residential mortgage-backed securities 260,237 ( 514 ) 537,074 ( 64,480 ) 797,311 ( 64,994 ) Corporate and other debt securities — — 175,220 ( 17,372 ) 175,220 ( 17,372 ) Total $ 260,237 $ ( 514 ) $ 1,183,879 $ ( 130,717 ) $ 1,444,116 $ ( 131,231 ) December 31, 2023 U.S. Treasury securities $ — $ — $ 288,156 $ ( 25,615 ) $ 288,156 $ ( 25,615 ) U.S. government agency securities — — 22,364 ( 2,284 ) 22,364 ( 2,284 ) Obligations of states and political subdivisions: Obligations of states and state agencies — — 8,276 ( 588 ) 8,276 ( 588 ) Municipal bonds 1,019 ( 4 ) 142,976 ( 26,261 ) 143,995 ( 26,265 ) Total obligations of states and political subdivisions 1,019 ( 4 ) 151,252 ( 26,849 ) 152,271 ( 26,853 ) Residential mortgage-backed securities 9,010 ( 3 ) 569,629 ( 78,028 ) 578,639 ( 78,031 ) Corporate and other debt securities 4,977 ( 23 ) 161,478 ( 25,804 ) 166,455 ( 25,827 ) Total $ 15,006 $ ( 30 ) $ 1,192,879 $ ( 158,580 ) $ 1,207,885 $ ( 158,610 ) Within the AFS debt securities portfolio, the total number of security positions in an unrealized loss position was 656 and 687 at September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, the fair value of AFS securities that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $ 2.1 billion. 20 The contractual maturities of AFS debt securities at September 30, 2024 are set forth in the following table. Contractual maturities may differ from actual maturities as borrowers may have the right to call or repay obligations with or without call or prepayment penalties. Residential mortgage-backed securities are not included in the maturity categories in the following maturity summary as actual maturities may differ from contractual maturities because the underlying mortgages may be called or prepaid without penalties. September 30, 2024 Amortized Cost Fair Value (in thousands) Due in one year $ 349 $ 349 Due after one year through five years 293,486 286,672 Due after five years through ten years 185,908 167,814 Due after ten years 292,808 251,557 Residential mortgage-backed securities 1,943,569 1,895,868 Total $ 2,716,120 $ 2,602,260 The weighted average remaining expected life for residential mortgage-backed securities AFS was 6.90 years at September 30, 2024. Impairment Analysis of Available For Sale Debt Securities Valley's AFS debt securities portfolio includes corporate bonds and revenue bonds, among other securities. These types of securities may pose a higher risk of future impairment charges by Valley as a result of the unpredictable nature of the U.S. economy and its potential negative effect on the future performance of the security issuers. AFS debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis. Valley also evaluated AFS debt securities that were in an unrealized loss position as of September 30, 2024 included in the tables 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. Based on a comparison of the present value of expected cash flows to the amortized cost, th ere was no impairment recognized during the three and nine months ended September 30, 2024. During the first quarter 2023 , Valley recognized a credit related impairment of one corporate bond issued by Signature Bank resulting in both a provision for credit losses and full charge-off of the security totaling $ 5.0 million based on a comparison of the present value of expected cash flows to the amortized cost. The bond was subsequently sold and the sale resulted in a $ 869 thousand gain during the fourth quarter 2023. Valley does not intend to sell any of its AFS 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 AFS debt securities were past due as of September 30, 2024. As a result, there was no allowance for credit los ses for AFS debt securities at September 30, 2024, December 31, 2023, and September 30, 2023. 21 Held to Maturity Debt Securities The amortized cost, gross unrealized gains and losses and fair value of HTM debt securities at September 30, 2024 and December 31, 2023 were as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Allowance for Credit Losses Net Carrying Value (in thousands) September 30, 2024 U.S. Treasury securities $ 25,671 $ 11 $ — $ 25,682 $ — $ 25,671 U.S. government agency securities 303,200 — ( 33,992 ) 269,208 — 303,200 Obligations of states and political subdivisions: Obligations of states and state agencies 75,529 273 ( 3,536 ) 72,266 389 75,140 Municipal bonds 305,124 42 ( 13,142 ) 292,024 45 305,079 Total obligations of states and political subdivisions 380,653 315 ( 16,678 ) 364,290 434 380,219 Residential mortgage-backed securities 2,742,188 6,946 ( 316,267 ) 2,432,867 — 2,742,188 Trust preferred securities 37,076 — ( 7,302 ) 29,774 440 36,636 Corporate and other debt securities 86,248 35 ( 3,608 ) 82,675 202 86,046 Total $ 3,575,036 $ 7,307 $ ( 377,847 ) $ 3,204,496 $ 1,076 $ 3,573,960 December 31, 2023 U.S. Treasury securities $ 26,232 $ — $ ( 254 ) $ 25,978 $ — $ 26,232 U.S. government agency securities 305,996 — ( 44,441 ) 261,555 — 305,996 Obligations of states and political subdivisions: Obligations of states and state agencies 88,556 552 ( 4,155 ) 84,953 395 88,161 Municipal bonds 316,914 40 ( 14,380 ) 302,574 49 316,865 Total obligations of states and political subdivisions 405,470 592 ( 18,535 ) 387,527 444 405,026 Residential mortgage-backed securities 2,885,303 6,059 ( 369,436 ) 2,521,926 — 2,885,303 Trust preferred securities 37,062 — ( 6,412 ) 30,650 506 36,556 Corporate and other debt securities 80,350 — ( 5,674 ) 74,676 255 80,095 Total $ 3,740,413 $ 6,651 $ ( 444,752 ) $ 3,302,312 $ 1,205 $ 3,739,208 Accrued interest on investments , which is excluded from the amortized cost of HTM debt securities, totaled $ 12.3 million and $ 13.9 million at September 30, 2024 and December 31, 2023, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition. HTM debt securities are carried net of an allowance for credit losses. 22 The age of unrealized losses and fair value of related HTM debt securities at September 30, 2024 and December 31, 2023 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) September 30, 2024 U.S. government agency securities $ 24,075 $ ( 12 ) $ 244,032 $ ( 33,980 ) $ 268,107 $ ( 33,992 ) Obligations of states and political subdivisions: Obligations of states and state agencies 6,656 ( 59 ) 46,408 ( 3,477 ) 53,064 ( 3,536 ) Municipal bonds 23,968 ( 258 ) 208,824 ( 12,884 ) 232,792 ( 13,142 ) Total obligations of states and political subdivisions 30,624 ( 317 ) 255,232 ( 16,361 ) 285,856 ( 16,678 ) Residential mortgage-backed securities 2,402 ( 22 ) 2,071,415 ( 316,245 ) 2,073,817 ( 316,267 ) Trust preferred securities — — 28,774 ( 7,302 ) 28,774 ( 7,302 ) Corporate and other debt securities — — 63,640 ( 3,608 ) 63,640 ( 3,608 ) Total $ 57,101 $ ( 351 ) $ 2,663,093 $ ( 377,496 ) $ 2,720,194 $ ( 377,847 ) December 31, 2023 U.S. Treasury securities $ — $ — $ 25,978 $ ( 254 ) $ 25,978 $ ( 254 ) U.S. government agency securities 43,664 ( 151 ) 216,759 ( 44,290 ) 260,423 ( 44,441 ) Obligations of states and political subdivisions: Obligations of states and state agencies 10,700 ( 102 ) 48,149 ( 4,053 ) 58,849 ( 4,155 ) Municipal bonds 11,958 ( 121 ) 207,520 ( 14,259 ) 219,478 ( 14,380 ) Total obligations of states and political subdivisions 22,658 ( 223 ) 255,669 ( 18,312 ) 278,327 ( 18,535 ) Residential mortgage-backed securities 57,085 ( 505 ) 2,164,704 ( 368,931 ) 2,221,789 ( 369,436 ) Trust preferred securities 938 ( 63 ) 29,712 ( 6,349 ) 30,650 ( 6,412 ) Corporate and other debt securities 12,575 ( 426 ) 59,102 ( 5,248 ) 71,677 ( 5,674 ) Total $ 136,920 $ ( 1,368 ) $ 2,751,924 $ ( 443,384 ) $ 2,888,844 $ ( 444,752 ) Within the HTM securities portfolio, the total number of security positions in an unrealized loss position was 733 and 762 at September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, the fair value of debt securities HTM that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law was $ 2.7 billion. 23 The contractual maturities of investments in HTM debt securities at September 30, 2024 are set forth in the table below. Contractual maturities may differ from actual maturities as borrowers may have the right to call or repay obligations with or without call or prepayment penalties. Residential mortgage-backed securities are not included in the maturity categories in the following maturity summary as actual maturities may differ from contractual maturities because the underlying mortgages may be called or prepaid without penalties. September 30, 2024 Amortized Cost Fair Value (in thousands) Due in one year $ 41,841 $ 41,814 Due after one year through five years 83,350 82,404 Due after five years through ten years 173,008 164,021 Due after ten years 534,649 483,390 Residential mortgage-backed securities 2,742,188 2,432,867 Total $ 3,575,036 $ 3,204,496 The weighted-average remaining expected life for residential mortgage-backed securitie s HTM was 9.21 years at September 30, 2024. 24 Credit Quality Indicators Valley monitors the credit quality of the HTM debt securities utilizing the most c urrent credit ratings from external rating agencies. The following table summarizes the amortized cost of HTM debt securities by external credit rating at September 30, 2024 and December 31, 2023. AAA/AA/A Rated BBB rated Non-investment grade rated Non-rated Total (in thousands) September 30, 2024 U.S. Treasury securities $ 25,671 $ — $ — $ — $ 25,671 U.S. government agency securities 303,200 — — — 303,200 Obligations of states and political subdivisions: Obligations of states and state agencies 54,810 — 5,190 15,529 75,529 Municipal bonds 278,339 — — 26,785 305,124 Total obligations of states and political subdivisions 333,149 — 5,190 42,314 380,653 Residential mortgage-backed securities 2,742,188 — — — 2,742,188 Trust preferred securities — — — 37,076 37,076 Corporate and other debt securities — 6,000 — 80,248 86,248 Total $ 3,404,208 $ 6,000 $ 5,190 $ 159,638 $ 3,575,036 December 31, 2023 U.S. Treasury securities $ 26,232 $ — $ — $ — $ 26,232 U.S. government agency securities 305,996 — — — 305,996 Obligations of states and political subdivisions: Obligations of states and state agencies 66,502 — 5,330 16,724 88,556 Municipal bonds 283,441 — — 33,473 316,914 Total obligations of states and political subdivisions 349,943 — 5,330 50,197 405,470 Residential mortgage-backed securities 2,885,303 — — — 2,885,303 Trust preferred securities — — 37,062 37,062 Corporate and other debt securities — 6,000 — 74,350 80,350 Total $ 3,567,474 $ 6,000 $ 5,330 $ 161,609 $ 3,740,413 Obligations of states and political subdivisions include municipal bonds and revenue bonds issued by various municipal corporations. At September 30, 2024, most of the obligations of states and political subdivisions were rated investment grade and a large portion of the “non-rated” category included municipal bonds secured by Ginnie Mae securities. Trust preferred securities consist of non-rated single-issuer securities issued by bank holding companies. Corporate bonds consist of debt primarily issued by banks. Allowance for Credit Losses for Held to Maturity Debt Securities Valley has a zero loss expectation for certain securities within the HTM 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 security 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 collateralized municipal bonds. To measure the expected credit losses on HTM debt securities that have loss expectations, Valley estimates the expected credit losses using a discounted cash flow model developed by a third-party. 25 The following table details the activity in the allowance for credit losses for HTM securities for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Beginning balance $ 1,090 $ 1,351 $ 1,205 $ 1,646 Credit for credit losses ( 14 ) ( 30 ) ( 129 ) ( 325 ) Ending balance $ 1,076 $ 1,321 $ 1,076 $ 1,321 Note 7. Loans and Allowance for Credit Losses for Loans The detail of the loan portfolio as of September 30, 2024 and December 31, 2023 was as follows: September 30, 2024 December 31, 2023 (in thousands) Loans: Commercial and industrial $ 9,799,287 $ 9,230,543 Commercial real estate: Commercial real estate 26,914,732 28,243,239 Construction 3,487,464 3,726,808 Total commercial real estate loans 30,402,196 31,970,047 Residential mortgage 5,684,079 5,569,010 Consumer: Home equity 581,181 559,152 Automobile 1,823,738 1,620,389 Other consumer 1,064,838 1,261,154 Total consumer loans 3,469,757 3,440,695 Total loans $ 49,355,319 $ 50,210,295 Total loans include net unearned discounts and deferred loan fees of $ 48.1 million and $ 85.4 million at September 30, 2024 and December 31, 2023, respectively. Accrued interest on loans , which is excluded from the amortized cost of loans held for investment, totaled $ 221.3 million and $ 222.2 million at September 30, 2024 and December 31, 2023, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition. Loans Portfolio Sales and Transfers to Loans Held for Sale Valley sells residential mortgage loans originated for sale (at fair value) primarily to Fannie Mae and Freddie Mac in the normal course of business. Under certain circumstances, Valley may decide to sell loans that were not originated with the intent to sell. During the first quarter 2024, Valley sold $ 151.0 million and $ 45.6 million of commercial real estate and construction loans, respectively, at par value through loan participation agreements with a related party, Bank Leumi Le-Israel B.M . (BLITA). During the first quarter 2024, Valley also transferred $ 34.1 million of construction loans from loans held for investment to loans held for sale as of March 31, 2024. These loans were subsequently sold at par value through loan participation agreements with BLITA in April 2024. During the third quarter 2024, Valley transferred performing commercial real estate loans totaling $ 823.1 million, net of unearned fees, to loans held for sale at September 30, 2024. On October 23, 2024, the Bank entered into an agreement to sell these loans to an unrelated third party, and the sale is expected to close in the fourth quarter 2024. See Note 5 for additional information regarding this transaction. 26 In February 2024, Valley completed the sale of its commercial premium finance lending business for $ 96.8 million. This asset sale included $ 95.5 million of assets, mainly consisting of $ 93.6 million of loans, and $ 2.8 million of related liabilities. The transaction generated a $ 3.6 million net gain for the first quarter 2024. Valley continues to hold certain commercial premium finance loans totaling $ 20.9 million at September 30, 2024 which are mostly expected to run-off at their scheduled maturity dates. There were no sales or transfers of loans from the held for investment portfolio (other than those described above) during the three and nine months ended September 30, 2024 and September 30, 2023. Credit Risk Management For all 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 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 for further details. Credit Quality The following table presents past due, current, and non-accrual loans without an allowance for loan losses by loan portfolio class at September 30, 2024 and December 31, 2023: 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) September 30, 2024 Commercial and industrial $ 4,537 $ 1,238 $ 1,786 $ 120,575 $ 128,136 $ 9,671,151 $ 9,799,287 $ 25,626 Commercial real estate: Commercial real estate 76,370 43,926 — 113,752 234,048 26,680,684 26,914,732 67,610 Construction — — — 24,657 24,657 3,462,807 3,487,464 2,223 Total commercial real estate loans 76,370 43,926 — 138,409 258,705 30,143,491 30,402,196 69,833 Residential mortgage 19,549 6,892 1,931 33,075 61,447 5,622,632 5,684,079 19,819 Consumer loans: Home equity 1,967 987 — 3,997 6,951 574,230 581,181 681 Automobile 8,666 1,128 831 234 10,859 1,812,879 1,823,738 — Other consumer 4,039 617 232 29 4,917 1,059,921 1,064,838 — Total consumer loans 14,672 2,732 1,063 4,260 22,727 3,447,030 3,469,757 681 Total $ 115,128 $ 54,788 $ 4,780 $ 296,319 $ 471,015 $ 48,884,304 $ 49,355,319 $ 115,959 27 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, 2023 Commercial and industrial $ 9,307 $ 5,095 $ 5,579 $ 99,912 $ 119,893 $ 9,110,650 $ 9,230,543 $ 6,594 Commercial real estate: Commercial real estate 3,008 1,257 — 99,739 104,004 28,139,235 28,243,239 81,282 Construction — — 3,990 60,851 64,841 3,661,967 3,726,808 12,007 Total commercial real estate loans 3,008 1,257 3,990 160,590 168,845 31,801,202 31,970,047 93,289 Residential mortgage 26,345 8,200 2,488 26,986 64,019 5,504,991 5,569,010 14,654 Consumer loans: Home equity 1,687 613 — 3,539 5,839 553,313 559,152 — Automobile 11,850 1,855 576 212 14,493 1,605,896 1,620,389 — Other consumer 7,017 2,247 512 632 10,408 1,250,746 1,261,154 589 Total consumer loans 20,554 4,715 1,088 4,383 30,740 3,409,955 3,440,695 589 Total $ 59,214 $ 19,267 $ 13,145 $ 291,871 $ 383,497 $ 49,826,798 $ 50,210,295 $ 115,126 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. 28 The following table presents the internal loan classification risk by loan portfolio class by origination year based on the most recent analysis performed at September 30, 2024 and December 31, 2023, as well as the gross loan charge-offs by year of origination for the nine months ended September 30, 2024 and for the year ended December 31, 2023: Term Loans Amortized Cost Basis by Origination Year September 30, 2024 2024 2023 2022 2021 2020 Prior to 2020 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total (in thousands) Commercial and industrial Risk Rating: Pass $ 1,348,640 $ 929,724 $ 778,008 $ 529,959 $ 271,271 $ 541,718 $ 4,776,972 $ 10,865 $ 9,187,157 Special Mention 17,974 5,769 61,307 2,131 5,081 15,369 111,758 4,025 223,414 Substandard 14,938 80,428 12,945 15,347 3,486 16,767 158,661 22,665 325,237 Doubtful 25,891 5,245 11 928 — 27,186 4,218 — 63,479 Total commercial and industrial $ 1,407,443 $ 1,021,166 $ 852,271 $ 548,365 $ 279,838 $ 601,040 $ 5,051,609 $ 37,555 $ 9,799,287 Commercial real estate Risk Rating: Pass $ 1,387,811 $ 3,122,589 $ 5,507,668 $ 4,108,362 $ 2,408,835 $ 6,536,122 $ 661,967 $ 107,833 $ 23,841,187 Special Mention 83,281 418,398 306,716 222,191 85,499 295,662 116,488 — 1,528,235 Substandard 64,870 141,986 319,252 259,489 208,213 496,874 41,592 1,532,276 Doubtful — 3,060 — — 9,904 70 — — 13,034 Total commercial real estate $ 1,535,962 $ 3,686,033 $ 6,133,636 $ 4,590,042 $ 2,712,451 $ 7,328,728 $ 820,047 $ 107,833 $ 26,914,732 Construction Risk Rating: Pass $ 477,695 $ 764,741 $ 501,433 $ 140,941 $ 22,325 $ 40,011 $ 1,339,753 $ 58,767 $ 3,345,666 Special Mention 1,591 — 10,685 5,090 — — 41,245 — 58,611 Substandard 9,058 — 9,016 4,942 — — 42,075 — 65,091 Doubtful — — 10,824 — 7,272 — — — 18,096 Total construction $ 488,344 $ 764,741 $ 531,958 $ 150,973 $ 29,597 $ 40,011 $ 1,423,073 $ 58,767 $ 3,487,464 Gross loan charge-offs $ 191 $ 15,144 $ 6,841 $ 25,943 $ 30,669 $ 21,417 $ 3,930 $ 1,657 $ 105,792 29 Term Loans Amortized Cost Basis by Origination Year December 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 $ 1,494,417 $ 1,047,513 $ 765,335 $ 377,047 $ 211,504 $ 523,430 $ 4,382,361 $ 29,798 $ 8,831,405 Special Mention 70,807 73,423 15,296 358 1,870 915 99,981 139 262,789 Substandard 3,100 1,837 2,629 1,714 1,221 5,900 29,569 4,225 50,195 Doubtful 11,658 595 1,166 ( 22 ) 2,653 57,817 12,287 — 86,154 Total commercial and industrial $ 1,579,982 $ 1,123,368 $ 784,426 $ 379,097 $ 217,248 $ 588,062 $ 4,524,198 $ 34,162 $ 9,230,543 Commercial real estate Risk Rating: Pass $ 4,088,835 $ 6,630,322 $ 4,791,190 $ 2,789,275 $ 2,329,385 $ 5,385,809 $ 618,056 $ 104,839 $ 26,737,711 Special Mention 125,296 82,917 248,900 184,720 69,949 358,059 26 183 1,070,050 Substandard 58,115 25,709 12,122 48,506 70,439 214,095 4,415 2,077 435,478 Total commercial real estate $ 4,272,246 $ 6,738,948 $ 5,052,212 $ 3,022,501 $ 2,469,773 $ 5,957,963 $ 622,497 $ 107,099 $ 28,243,239 Construction Risk Rating: Pass $ 753,759 $ 655,198 $ 267,336 $ 10,318 $ 40,584 $ 43,560 $ 1,762,890 $ 139,599 $ 3,673,244 Substandard 6,721 — 9,276 — — 17,668 — — 33,665 Doubtful — 19,899 — — — — — — 19,899 Total construction $ 760,480 $ 675,097 $ 276,612 $ 10,318 $ 40,584 $ 61,228 $ 1,762,890 $ 139,599 $ 3,726,808 Gross loan charge-offs $ 307 $ 12,919 $ 28,438 $ 6,946 $ 5,031 $ 13,446 $ 3,729 $ 145 $ 70,961 30 For residential mortgages, home equity, automobile and other consumer loan portfolio classes, Valley evaluates credit quality based on the aging status of the loan and by payment activity. The following table presents the amortized cost in those loan classes based on payment activity by origination year as of September 30, 2024 and December 31, 2023, as well as the gross loan charge-offs by year of origination for the nine months ended September 30, 2024 and for the year ended December 31, 2023: Term Loans Amortized Cost Basis by Origination Year September 30, 2024 2024 2023 2022 2021 2020 Prior to 2020 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Total (in thousands) Residential mortgage Performing $ 340,089 $ 447,576 $ 1,302,396 $ 1,459,396 $ 507,022 $ 1,528,196 $ 77,107 $ 1,635 $ 5,663,417 90 days or more past due 724 — 1,049 1,022 1,937 15,930 — 20,662 Total residential mortgage $ 340,813 $ 447,576 $ 1,303,445 $ 1,460,418 $ 508,959 $ 1,544,126 $ 77,107 $ 1,635 $ 5,684,079 Consumer loans Home equity Performing $ 13,599 $ 31,397 $ 40,102 $ 10,473 $ 3,455 $ 51,126 $ 418,884 $ 11,253 $ 580,289 90 days or more past due — — 51 13 — 783 — 45 892 Total home equity 13,599 31,397 40,153 10,486 3,455 51,909 418,884 11,298 581,181 Automobile Performing $ 650,027 $ 379,091 $ 405,626 $ 244,751 $ 73,367 $ 69,827 $ — $ — $ 1,822,689 90 days or more past due 84 272 191 115 85 302 — — 1,049 Total automobile 650,111 379,363 405,817 244,866 73,452 70,129 — — 1,823,738 Other consumer Performing $ 14,202 $ 26,957 $ 16,451 $ 1,965 $ 510 $ 51,843 $ 932,609 $ 20,189 $ 1,064,726 90 days or more past due — 6 67 — — 38 — 1 112 Total other consumer 14,202 26,963 16,518 1,965 510 51,881 932,609 20,190 1,064,838 Total consumer $ 677,912 $ 437,723 $ 462,488 $ 257,317 $ 77,417 $ 173,919 $ 1,351,493 $ 31,488 $ 3,469,757 Gross loan charge-offs $ 419 $ 1,331 $ 1,254 $ 740 $ 437 $ 1,344 $ — $ 143 $ 5,668 31 Term Loans Amortized Cost Basis by Origination Year December 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 $ 467,178 $ 1,304,026 $ 1,505,133 $ 538,853 $ 435,669 $ 1,244,986 $ 57,052 $ 1,771 $ 5,554,668 90 days or more past due — 1,968 1,681 1,357 3,391 5,945 — — 14,342 Total residential mortgage $ 467,178 $ 1,305,994 $ 1,506,814 $ 540,210 $ 439,060 $ 1,250,931 $ 57,052 $ 1,771 $ 5,569,010 Consumer loans Home equity Performing $ 40,599 $ 44,893 $ 14,948 $ 4,096 $ 4,850 $ 46,274 $ 396,960 $ 4,608 $ 557,228 90 days or more past due — 51 13 — — 1,132 — 728 1,924 Total home equity 40,599 44,944 14,961 4,096 4,850 47,406 396,960 5,336 559,152 Automobile Performing $ 468,152 $ 531,728 $ 356,144 $ 121,658 $ 86,147 $ 34,504 $ 20,227 $ 763 $ 1,619,323 90 days or more past due 90 284 54 92 237 309 — — 1,066 Total automobile 468,242 532,012 356,198 121,750 86,384 34,813 20,227 763 1,620,389 Other consumer Performing $ 32,662 $ 20,376 $ 2,986 $ 1,722 $ 10,381 $ 52,659 $ 1,120,863 $ 18,655 $ 1,260,304 90 days or more past due 10 79 — — — 628 — 133 850 Total other consumer 32,672 20,455 2,986 1,722 10,381 53,287 1,120,863 18,788 1,261,154 Total consumer $ 541,513 $ 597,411 $ 374,145 $ 127,568 $ 101,615 $ 135,506 $ 1,538,050 $ 24,887 $ 3,440,695 Gross loan charge-offs $ 296 $ 903 $ 357 $ 232 $ 752 $ 1,921 $ 31 $ — $ 4,492 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. 32 The following tables present the amortized cost basis of loans to borrowers experiencing financial difficulty at September 30, 2024 that were modified during the three and nine months ended September 30, 2024 and 2023, disaggregated by class of financing receivable and type of modification. Interest rate reduction Term extension Term extension and interest rate reduction Other than Insignificant Payment Delay Total % of Total Loan Class ($ in thousands) Three Months Ended September 30, 2024 Commercial and industrial $ 924 $ 7,556 $ — $ — $ 8,480 0.09 % Commercial real estate 3,232 36,800 — 107,972 148,004 0.55 Total $ 4,156 $ 44,356 $ — $ 107,972 $ 156,484 0.32 % Three Months Ended September 30, 2023 Commercial and industrial $ 920 $ 17,670 $ 56 $ — $ 18,646 0.20 % Commercial real estate — 38,345 — — 38,345 0.14 Home equity — 31 — $ — 31 0.01 Total $ 920 $ 56,046 $ 56 $ — $ 57,022 0.10 % Nine Months Ended September 30, 2024 Commercial and industrial $ 924 $ 87,427 $ 133 $ — $ 88,484 0.90 % Commercial real estate 3,232 37,006 16,221 107,972 164,431 0.61 Residential mortgage — 869 — — 869 0.02 Total $ 4,156 $ 125,302 $ 16,354 $ 107,972 $ 253,784 0.51 % Nine Months Ended September 30, 2023 Commercial and industrial $ 920 $ 56,322 $ 2,281 $ — $ 59,523 0.65 % Commercial real estate — 76,394 3,739 — 80,133 0.28 Residential mortgage — 768 — — 768 0.01 Home equity — 31 — — 31 0.01 Other consumer — 48 — — 48 — Total $ 920 $ 133,563 $ 6,020 $ — $ 140,503 0.28 % 33 The following tables describe the types of modifications made to borrowers experiencing financial difficulty. Types of Modifications Three and Nine months ended September 30, 2024 Commercial and industrial 3 to 24 month term extensions 24 month term extensions combined with a reduction in interest rate from 2.10 percent to 1.00 percent Five reductions in interest rate one from 7.50 percent and four from 6.09 percent to 4.88 percent and 1.83 percent, respectively Commercial real estate 2 to 36 month term extensions 12 to 18 month term extensions combined with a reduction in interest rate from 8.06 percent to 7.00 percent Five other than insignificant payment delays, consisting of 12 month moratoriums on contractual principal payments Residential mortgage 50 month term extensions Home equity 120 month term extension Three and Nine months ended September 30, 2023 Commercial and industrial 12 month term extensions Two 12 month term extensions combined with a reduction in interest rate from 9.50 percent to 6.50 percent Two reductions in interest rate from 1.84 percent and 1.83 percent to 1.00 percent, respectively Commercial real estate 6 - 36 month term extensions 9 month term extension combined with a reduction in interest rate from 8.75 percent to 6.00 percent Residential mortgage 12 month term extensions Home equity 120 month term extension Consumer 60 month term extensions Valley closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the aging analysis of loans that have been modified within the previous 12 months. At September 30, 2024 Current 30-89 Days Past Due 90 Days or More Past Due * Total ($ in thousands) Commercial and industrial $ 91,411 $ — $ — $ 91,411 Commercial real estate 210,565 180 2,153 212,898 Residential mortgage 869 — — 869 Total $ 302,845 $ 180 $ 2,153 $ 305,178 * All loan balances in this delinquency category were non-accrual loans at September 30, 2024. Valley did not extend any commitments to lend additional funds to borrowers experiencing financial difficulty whose loans had been modified during the three and nine months ended September 30, 2024 and 2023. Loans in process of foreclosure. OREO balance totaled $ 7.2 million at September 30, 2024 and included one commercial property and one immaterial foreclosed residential property. The balance of OREO was not material at December 31, 2023 with no f oreclosed residential real estate. Residential mortgage and consumer loans secured by 34 residential real estate properties for which formal foreclosure proceedings are in process totaled $ 4.2 million and $ 1.6 million at September 30, 2024 and December 31, 2023, 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 September 30, 2024 and December 31, 2023: September 30, 2024 December 31, 2023 (in thousands) Collateral dependent loans: Commercial and industrial * $ 135,786 $ 96,827 Commercial real estate 114,216 98,785 Construction 15,841 46,634 Total commercial real estate loans 130,057 145,419 Residential mortgage 20,075 21,843 Home equity 681 — Consumer — 589 Total $ 286,599 $ 264,678 * Includes non-accrual loans collateralized by taxi medallions totaling $ 52.2 million and $ 62.3 million at September 30, 2024 and December 31, 2023, respectively. Allowance for Credit Losses for Loans The allowance for credit losses for loans consists of the allowance for loan losses and the allowance for unfunded credit commitments. The following table summarizes the ACL for loans at September 30, 2024 and December 31, 2023: September 30, 2024 December 31, 2023 (in thousands) Components of allowance for credit losses for loans: Allowance for loan losses $ 548,327 $ 446,080 Allowance for unfunded credit commitments 16,344 19,470 Total allowance for credit losses for loans $ 564,671 $ 465,550 The following table summarizes the provision for credit losses for loans for the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Components of provision for credit losses for loans: Provision for loan losses $ 71,925 $ 11,221 $ 205,549 $ 29,359 Provision (credit) for unfunded credit commitments 3,113 ( 2,074 ) ( 3,126 ) ( 4,430 ) Total provision for credit losses for loans $ 75,038 $ 9,147 $ 202,423 $ 24,929 35 The following tables detail the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2024 and 2023: Commercial and Industrial Commercial Real Estate Residential Mortgage Consumer Total (in thousands) Three Months Ended September 30, 2024 Allowance for loan losses: Beginning balance $ 149,243 $ 301,093 $ 47,697 $ 21,277 $ 519,310 Loans charged-off ( 7,501 ) ( 38,123 ) — ( 2,597 ) ( 48,221 ) Charged-off loans recovered 3,162 1,601 29 521 5,313 Net (charge-offs) recoveries ( 4,339 ) ( 36,522 ) 29 ( 2,076 ) ( 42,908 ) Provision for loan losses 21,461 44,457 3,819 2,188 71,925 Ending balance $ 166,365 $ 309,028 $ 51,545 $ 21,389 $ 548,327 Three Months Ended September 30, 2023 Allowance for loan losses: Beginning balance $ 128,245 $ 239,695 $ 44,153 $ 24,339 $ 436,432 Loans charged-off ( 7,487 ) ( 255 ) ( 20 ) ( 1,156 ) ( 8,918 ) Charged-off loans recovered 3,043 5 30 362 3,440 Net (charge-offs) recoveries ( 4,444 ) ( 250 ) 10 ( 794 ) ( 5,478 ) Provision (credit) for loan losses 10,187 5,602 458 ( 5,026 ) 11,221 Ending balance $ 133,988 $ 245,047 $ 44,621 $ 18,519 $ 442,175 Nine Months Ended September 30, 2024 Allowance for loan losses: Beginning balance $ 133,359 $ 249,598 $ 42,957 $ 20,166 $ 446,080 Loans charged-off ( 36,515 ) ( 69,277 ) — ( 5,668 ) ( 111,460 ) Charged-off loans recovered 4,586 1,992 59 1,521 8,158 Net (charge-offs) recoveries ( 31,929 ) ( 67,285 ) 59 ( 4,147 ) ( 103,302 ) Provision for loan losses 64,935 126,715 8,529 5,370 205,549 Ending balance $ 166,365 $ 309,028 $ 51,545 $ 21,389 $ 548,327 Nine Months Ended September 30, 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 ( 37,399 ) ( 12,226 ) ( 169 ) ( 3,024 ) ( 52,818 ) Charged-off loans recovered 6,615 33 186 1,513 8,347 Net (charge-offs) recoveries ( 30,784 ) ( 12,193 ) 17 ( 1,511 ) ( 44,471 ) Provision (credit) for loan losses 25,570 ( 1,579 ) 5,596 ( 228 ) 29,359 Ending balance $ 133,988 $ 245,047 $ 44,621 $ 18,519 $ 442,175 36 The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the allowance measurement methodology at September 30, 2024 and December 31, 2023. Commercial and Industrial Commercial Real Estate Residential Mortgage Consumer Total (in thousands) September 30, 2024 Allowance for loan losses: Individually evaluated for credit losses $ 46,015 $ 11,454 $ 28 $ — $ 57,497 Collectively evaluated for credit losses 120,350 297,574 51,517 21,389 490,830 Total $ 166,365 $ 309,028 $ 51,545 $ 21,389 $ 548,327 Loans: Individually evaluated for credit losses $ 135,786 $ 130,057 $ 20,075 $ 681 $ 286,599 Collectively evaluated for credit losses 9,663,501 30,272,139 5,664,004 3,469,076 49,068,720 Total $ 9,799,287 $ 30,402,196 $ 5,684,079 $ 3,469,757 $ 49,355,319 December 31, 2023 Allowance for loan losses: Individually evaluated for credit losses $ 55,993 $ 17,987 $ 235 $ — $ 74,215 Collectively evaluated for credit losses 77,366 231,611 42,722 20,166 371,865 Total $ 133,359 $ 249,598 $ 42,957 $ 20,166 $ 446,080 Loans: Individually evaluated for credit losses $ 96,827 $ 145,419 $ 21,843 $ 589 $ 264,678 Collectively evaluated for credit losses 9,133,716 31,824,628 5,547,167 3,440,106 49,945,617 Total $ 9,230,543 $ 31,970,047 $ 5,569,010 $ 3,440,695 $ 50,210,295 Note 8. Goodwill and Other Intangible Assets The carrying amounts of goodwill allocated to Valley's reporting units at both September 30, 2024 and December 31, 2023, were as follows: Reporting Unit * Wealth Management Consumer Banking Commercial Banking Total (in thousands) $ 78,142 $ 349,646 $ 1,441,148 $ 1,868,936 * The Wealth Management and Consumer Banking reporting units are both components of the overall Consumer Banking operating segment, which is further described in Note 15 . During the second quarter 2024, Valley performed the annual goodwill impairment test at its normal assessment date. The results of the 2024 annual impairment test resulted in no impairment of goodwill. During the nine months ended September 30, 2024 , there were no triggering events that would more likely than not reduce the fair value of any reporting unit below its carrying amount. There was no imp airment of goodwill recognized during the three and nine months ended September 30, 2024 and 2023. 37 The following table summarizes other intangible assets as of September 30, 2024 and December 31, 2023: Gross Intangible Assets Accumulated Amortization Net Intangible Assets (in thousands) September 30, 2024 Loan servicing rights $ 124,405 $ ( 103,929 ) $ 20,476 Core deposits 215,620 ( 132,060 ) 83,560 Other 50,393 ( 18,951 ) 31,442 Total other intangible assets $ 390,418 $ ( 254,940 ) $ 135,478 December 31, 2023 Loan servicing rights $ 122,586 $ ( 100,636 ) $ 21,950 Core deposits 215,620 ( 113,183 ) 102,437 Other 50,393 ( 14,449 ) 35,944 Total other intangible assets $ 388,599 $ ( 228,268 ) $ 160,331 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 impairment of loan servicing rights recognized during the three and nine months ended September 30, 2024 and 2023. 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 13.5 years. Valley evaluates core deposits and other intangibles for impairment when an indication of impairment exists. There was no impairment of core deposits and other intangibles recognized during the three and nine months ended September 30, 2024 and 2023. The following table presents the estimated future amortization expense of other intangible assets for the remainder of 2024 through 2028: Year Loan Servicing Rights Core Deposits Other (in thousands) 2024 $ 693 $ 6,020 $ 1,448 2025 2,602 21,048 5,380 2026 2,288 17,223 4,805 2027 1,991 13,544 4,205 2028 1,736 10,117 3,633 Valley recognized amortization expense on other intangible assets totaling approximately $ 8.7 million and $ 9.7 million for the three months ended September 30, 2024 and 2023, respectively, and $ 26.7 million and $ 30.1 million for the nine months ended September 30, 2024 and 2023, respectively. 38 Note 9. Deposits Included in time deposits are certificates of deposit over $250 thousand totaling $ 2.2 billion and $ 2.6 billion at September 30, 2024 and December 31, 2023, respectively. Interest expense on time deposits of over $250 thousand total ed $ 24.4 million and $ 5.4 million for the three months ended September 30, 2024 and 2023, respectively, and $ 72.4 million and $ 12.9 million for the nine months ended September 30, 2024 and 2023, respectively. The scheduled maturities of time deposits as of September 30, 2024 were as follows: Year Amount (in thousands) 2024 $ 4,720,823 2025 6,900,796 2026 1,346,234 2027 1,144,759 2028 23,399 Thereafter 36,796 Total time deposits $ 14,172,807 Note 10. Borrowed Funds Short-Term Borrowings Short-term borrowings at September 30, 2024 and December 31, 2023 consisted of the following: September 30, 2024 December 31, 2023 (in thousands) FHLB advances $ — $ 850,000 Securities sold under agreements to repurchase 58,268 67,834 Total short-term borrowings $ 58,268 $ 917,834 The weighted average interest rate for short-term FHLB advances was 5.62 percent at December 31, 2023. Long-Term Borrowings Long-term borrowings at September 30, 2024 and December 31, 2023 consisted of the following: September 30, 2024 December 31, 2023 (in thousands) FHLB advances, net (1) $ 2,626,660 $ 1,690,013 Subordinated debt, net (2) 647,680 638,362 Total long-term borrowings $ 3,274,340 $ 2,328,375 (1) FHLB advances are presented net of unamortized premiums totaling $ 56 thousand and $ 209 thousand at September 30, 2024 and December 31, 2023, respectively. (2) Subordinated debt is presented net of unamortized debt issuance costs totaling $ 4.0 million and $ 5.2 million at September 30, 2024 and December 31, 2023, respectively. FHLB advances. Long-term FHLB advances had a weighted average interest rate of 4.10 percent and 3.75 percent at September 30, 2024 and December 31, 2023, 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 39 blanket assignment of qualifying first lien mortgage loans, consisting of both residential mortgage and commercial real estate loans. The long-term FHLB advances at September 30, 2024 are scheduled for contractual balance repayments as follows: Year Amount (in thousands) 2024 $ 100,000 2025 273,000 2026 601,804 2027 926,800 2028 475,000 Thereafter 250,000 Total long-term FHLB advances $ 2,626,604 The FHLB advances reported in the table above are not callable for early redemption. Subordinated debt. There were no new issuances of subordinated debt during the nine months ended September 30, 2024. See Note 10 in Valley’s Annual Report for additional information on the outstanding subordinated debt at September 30, 2024. Note 11. Stock–Based Compensation Valley maintains an incentive compensation plan to provide additional long-term incentives to employees, directors and officers whose contributions are essential to the continued growth and success of Valley. Under the plan, Valley may issue awards to its officers, employees and non-employee directors in amounts up to 14.5 million, subject to certain adjustments. As of September 30, 2024, 9.3 million shares of common stock were available for issuance under the plan. RSUs are awarded as performance-based RSUs and time-based RSUs. The performance-based RSU awards are granted to certain officers and include RSUs subject to vesting conditions based upon certain levels of growth in Valley's tangible book value per share, plus dividends; and RSUs subject to vesting conditions based upon Valley's total shareholder return as compared to its peer group. The table below summarizes RSU awards granted and average grant date fair values for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands, except per share data) Award shares granted: Performance-based RSUs — — 958 723 Time-based RSUs 196 111 3,183 1,842 Average grant date fair value per share: Performance-based RSUs $ — $ — $ 7.88 $ 12.80 Time-based RSUs $ 8.11 $ 9.26 $ 8.44 $ 11.41 Stock award fair values are expensed over the shorter of the vesting or required service period. Valley recorded total stock-based compensation expense of approximately $ 7.3 million and $ 8.6 million for the three months ended September 30, 2024 and 2023, respectively, and $ 23.0 million and $ 25.4 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the unrecognized amortization expense for all stock-based employee compensation totaled approximately $ 37.0 million. This expense will be recognized over 40 an average remaining vesting period of approximately 1.9 years. See Note 12 in Valley’s Annual Report for additional information on the stock-based compensation awards. Note 12. 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. Fair Value Hedges of Fixed Rate Assets and Liabilities. Valley is exposed to changes in the fair value of certain fixed-rate assets and liabilities due to changes in interest rates and interest rate swaps to manage its exposure to changes in fair value. For derivatives that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. During the third quarter 2024, Valley terminated interest rate swaps with a total notional amount of $ 500 million used to hedge the fair value of certain fixed rate residential loans. The terminated swaps had original maturity dates in the fourth quarter 2025. The carrying amount of the hedged assets included an immaterial cumulative loss adjustment at the date of termination that will be amortized to earnings through the fourth quarter 2025. During the nine months ended September 30, 2024, Valley entered into 11 forward-starting interest rate swap agreements with notional amounts totaling $ 480.3 million to hedge the changes in fair value of certain fixed rate brokered time deposits. Commencing in first quarter of 2025, Valley will receive fixed rate amounts ranging from approximately 4.12 percent to 4.65 percent, in exchange for variable-rate payments based on the Floating SOFR Overnight Indexed Swap compound rate. The swaps have expiration dates ranging from April 2026 to June 2027. Non-designated Hedges. Derivatives not designated as hedges may be used to manage Valley’s exposure to interest rate movements or to provide a service to customers but do not meet the requirements for hedge accounting under GAAP. Derivatives not designated as hedges are not entered into for speculative purposes. Valley executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Valley executes with a third- party, such that Valley minimizes its net risk exposure resulting from such transactions. As these interest rate swaps do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. Valley sometimes enters into risk participation agreements with external lenders where the banks 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 September 30, 2024, Valley had 47 credit swaps with an aggregate notional amount of $ 596.3 million related to risk participation agreements. At September 30, 2024, Valley had two “steepener” swaps, each with a current notional amount of $ 10.4 million where the receive rate on the swap mirrors the pay rate on the brokered deposits and the rates paid on these types of hybrid instruments are based on a formula derived from the spread between the long and short ends of the Constant Maturity Swap rate curve. Although these types of instruments do not meet the hedge accounting requirements, the change in fair value of both the bifurcated derivative and the stand alone swap tend to move in opposite directions with changes in the three-month Term SOFR rate and, therefore, provide an effective economic hedge. 41 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 rates on Valley's commitments to fund the loans as well as on its portfolio of mortgage loans held for sale. Valley enters into foreign currency forward and option contracts, primarily to accommodate our customers, that are not designated as hedging instruments. Upon the origination of certain foreign currency denominated transactions (including foreign currency holdings and non-U.S. dollar denominated loans) with a client, we enter into a respective hedging contract with a third party financial institution to mitigate the economic impact of foreign currency exchange rate fluctuation. During June 2024, Valley entered into a credit default swap related to approximately $ 1.5 billion of automobile loans primarily to enhance the risk profile of these assets for regulatory capital purposes. The covered loans have a total remaining balance of approximately $ 1.3 billion within Valley's $ 1.8 billion automobile loan portfolio at September 30, 2024. The credit default swap is a freestanding contract measured at fair value with resulting gains or losses recognized in non-interest expense. The premium amortization expense and other transaction costs associated with the credit protection totaled $ 3.2 million and $ 4.7 million for the three and nine months ended September 30, 2024 and were recorded in other expense reported in non-interest expense. Amounts included in the consolidated statements of financial condition related to the fair value of Valley’s derivative financial instruments were as follows: September 30, 2024 December 31, 2023 Fair Value Fair Value Other Assets Other Liabilities Notional Amount Other Assets Other Liabilities Notional Amount (in thousands) Derivatives designated as hedging instruments: Fair value hedge interest rate swaps $ 7,719 $ 16,899 $ 780,322 $ — $ 21,460 $ 800,000 Derivatives not designated as hedging instruments: Interest rate swaps and other contracts * $ 290,291 $ 289,877 $ 15,515,102 $ 458,129 $ 457,885 $ 16,282,279 Foreign currency derivatives 7,384 6,718 1,450,097 8,024 8,286 1,557,167 Mortgage banking derivatives 35 279 42,712 74 472 38,797 Credit default swap — 18 1,287,149 — — — Total derivatives not designated as hedging instruments $ 297,710 $ 296,892 $ 18,295,060 $ 466,227 $ 466,643 $ 17,878,243 Total derivative financial instruments $ 305,429 $ 313,791 $ 19,075,382 $ 466,227 $ 488,103 $ 18,678,243 * Other derivative contracts include risk participation agreements. 42 Gains (losses) included in the consolidated statements of income and other comprehensive loss, on a pre-tax basis, related to interest rate derivatives designated as hedges of cash flows were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Amount of gain (loss) reclassified from accumulated other comprehensive loss to interest income $ 302 $ 63 $ 899 $ ( 1,193 ) Amount of loss recognized in other comprehensive loss — — — ( 1,093 ) The accumulated after-tax gains related to effective cash flow hedges included in accumulated other comprehensive loss were $ 1.5 million and $ 2.1 million at September 30, 2024 and December 31, 2023, respectively. Amounts reported in accumulated other comprehensive loss related to cash flow interest rate derivatives are reclassified to interest income. The reclassification amoun t for the three and nine months ended September 30, 2024 and the three months ended September 30, 2023 represents amortization of a gain recognized from the termination of six interest rate swaps during the second quarter 2023. Valley estimates that $ 1.2 million (before tax) will be reclassified as an increase to interest income over the next 12 months. Gains (losses) included in the consolidated statements of income related to interest rate derivatives designated as hedges of fair value were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Derivative - interest rate swap: Interest income $ ( 2,385 ) $ — $ 3,170 $ — Interest expense 15,244 ( 52 ) 16,957 850 Hedged items - loans, brokered deposits and subordinated debt: Interest income $ 2,391 $ — $ ( 3,235 ) $ — Interest expense ( 15,537 ) 61 ( 17,217 ) ( 759 ) The changes in the fair value of the hedged item designated as a qualifying hedge are captured as an adjustment to the carrying amount of the hedged item (basis adjustment). The following table presents the hedged item related to interest rate derivatives designated as fair value hedges and the cumulative basis fair value adjustment included in the net carrying amount of the hedged item at September 30, 2024 and December 31, 2023, respectively. Line Item in the Statement of Financial Condition in Which the Hedged Item is Included Net Carrying Amount of the Hedged Asset/ Liability Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Asset/Liability (in thousands) September 30, 2024 Time deposits $ 489,401 $ 9,097 Long-term borrowings * 285,297 ( 13,326 ) December 31, 2023 Loans $ 503,877 $ 3,877 Long-term borrowings * 276,572 ( 21,445 ) * Net carrying amount includes unamortized debt issuance costs of $ 1.4 million and $ 2.0 million at September 30, 2024 and December 31, 2023, respectively. 43 The net (losses) gains included in the consolidated statements of income related to derivative instruments not designated as hedging instruments were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Non-designated hedge interest rate swaps and credit derivatives Other non-interest expense $ ( 2,802 ) $ 455 $ ( 3,528 ) $ 615 Capital markets income reported in non-interest income included fee income related to non-designated hedge derivative interest rate swaps executed with commer cial loan customers and foreign exchange contracts (not designated as hedging instruments) with a combined total of $ 5.7 million for both the three months ended September 30, 2024 and 2023 and $ 17.0 million and $ 29.7 million for the nine months ended September 30, 2024 and 2023, respectively. Collateral Requirements and Credit Risk Related Contingent Features . By using derivati ves, Valley is exposed to credit risk if counterparties to the derivative contracts do not perform as expected. Management attempts to minimize counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral where appropriate. Credit risk exposure associated with derivative contracts is managed at Valley in conjunction with Valley’s consolidated counterparty risk management process. Valley’s counterparties and the risk limits monitored by management are periodically reviewed and approved by the Board. Valley has agreements with its derivative counterparties providing that if Valley defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Valley could also be declared in default on its derivative counterparty agreements. Additionally, Valley has an agreement with several of its derivative counterparties that contains provisions that require Valley’s debt to maintain an investment grade credit rating from each of the major credit rating agencies from which it receives a credit rating. If Valley’s credit rating is reduced below investment grade, or such rating is withdrawn or suspended, then the counterparties could terminate the derivative positions and Valley would be required to settle its obligations under the agreements. As of September 30, 2024, 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 was in a net asset position at September 30, 2024. Valley has derivative counterparty agreements that require minimum collateral posting thresholds for certain counterparties. Note 13. Balance Sheet Offsetting Certain financial instruments, including certain 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 or received from the counterparty with net liability or asset positions, respectively, 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 44 to settle the fair value of the swap or repurchase agreement should Valley be in default. Total amount of collateral held or pledged cannot exceed the net derivative fair values with the counterparty. The table below presents information about Valley’s financial instruments eligible for offset in the consolidated statements of financial condition as of September 30, 2024 and December 31, 2023. Gross Amounts Not Offset Gross Amounts Recognized Gross Amounts Offset Net Amounts Presented Financial Instruments Cash Collateral * Net Amount (in thousands) September 30, 2024 Assets Interest rate swaps and other contracts $ 298,010 $ — $ 298,010 $ 51,815 $ ( 172,500 ) $ 177,325 Liabilities Interest rate swaps and other contracts $ 306,776 $ — $ 306,776 $ ( 51,815 ) $ — $ 254,961 December 31, 2023 Assets Interest rate swaps and other contracts $ 458,129 $ — $ 458,129 $ 53,780 $ ( 302,180 ) $ 209,729 Liabilities Interest rate swaps and other contracts $ 479,345 $ — $ 479,345 $ ( 53,780 ) $ — $ 425,565 * Cash collateral received from or pledged to our counterparties in relation to market value exposures of OTC derivative contracts in an asset/liability position. Note 14. Tax Credit Investments Valley’s tax credit investments are primarily related to investments promoting qualified affordable housing projects, and other investments related to community development and renewable energy sources. Some of these tax-advantaged investments support Valley’s regulatory compliance with the CRA. 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. 45 The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at September 30, 2024 and December 31, 2023: September 30, 2024 December 31, 2023 (in thousands) Other Assets: Affordable housing tax credit investments, net $ 21,272 $ 22,158 Other tax credit investments, net 261,798 117,659 Total tax credit investments, net $ 283,070 $ 139,817 Other Liabilities: Unfunded affordable housing tax credit commitments $ — $ 1,305 Total unfunded tax credit commitments $ — $ 1,305 The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Components of Income Tax Expense: Affordable housing tax credits and other tax benefits $ 1,330 $ 1,485 $ 3,989 $ 4,404 Other tax credit investment credits and tax benefits 9,376 3,176 22,405 9,827 Total reduction in income tax expense $ 10,706 $ 4,661 $ 26,394 $ 14,231 Amortization of Tax Credit Investments: Affordable housing tax credit investment losses $ 875 $ 523 $ 2,626 $ 2,398 Affordable housing tax credit investment impairment losses 246 954 737 1,850 Other tax credit investment losses 1,422 374 3,702 1,099 Other tax credit investment impairment losses 3,310 2,340 10,141 8,115 Total amortization of tax credit investments recorded in non-interest expense $ 5,853 $ 4,191 $ 17,206 $ 13,462 Note 15. Operating Segments Valley manages its business operations under operating segments consisting of Consumer Banking and Commercial Banking. Activities not assigned to the operating segments are included in 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 operating segments and no changes to Valley's operating segments were determined necessary d uring the three and nine months ended September 30, 2024 . The Consumer Banking segment 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, as well as Valley's international and domestic private banking businesses. 46 The Commercial Banking segment is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as adjustable and 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 HTM debt securities and AFS 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 FRB 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 interest earning assets and or liabilities outstanding for the period. The accounting for each operating segment and Treasury and Corporate Other 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 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. Certain prior period amounts have been reclassified to conform to the current presentation for each operating segment and Treasury and Corporate Other. The following tables represent the financial data for Valley’s operating segments and Treasury and Corporate Other for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, 2024 Consumer Banking Commercial Banking Treasury and Corporate Other Total ($ in thousands) Average interest earning assets $ 9,929,693 $ 40,197,270 $ 7,524,687 $ 57,651,650 Interest income $ 122,419 $ 664,261 $ 73,869 $ 860,549 Interest expense 75,373 305,156 69,522 450,051 Net interest income 47,046 359,105 4,347 410,498 Provision (credit) for credit losses 6,007 69,031 ( 14 ) 75,024 Net interest income after provision for credit losses 41,039 290,074 4,361 335,474 Non-interest income 26,239 9,259 25,173 60,671 Non-interest expense 24,243 44,662 200,566 269,471 Internal transfer expense (income) 29,709 121,053 ( 150,762 ) — Income (loss) before income taxes $ 13,326 $ 133,618 $ ( 20,270 ) $ 126,674 Return on average interest earning assets (pre-tax) 0.54 % 1.33 % ( 1.08 ) % 0.88 % 47 Three Months Ended September 30, 2023 Consumer Banking Commercial Banking Treasury and Corporate Other Total ($ in thousands) Average interest earning assets $ 9,681,379 $ 40,338,035 $ 6,783,151 $ 56,802,565 Interest income $ 106,384 $ 647,258 $ 59,376 $ 813,018 Interest expense 65,987 274,377 60,236 400,600 Net interest income 40,397 372,881 ( 860 ) 412,418 (Credit) provision for credit losses ( 4,568 ) 13,715 ( 30 ) 9,117 Net interest income after provision for credit losses 44,965 359,166 ( 830 ) 403,301 Non-interest income 21,035 13,015 24,614 58,664 Non-interest expense 20,796 40,248 206,089 267,133 Internal transfer expense (income) 30,104 121,878 ( 151,982 ) — Income before income taxes $ 15,100 $ 210,055 $ ( 30,323 ) $ 194,832 Return on average interest earning assets (pre-tax) 0.62 % 2.08 % ( 1.79 ) % 1.37 % Nine Months Ended September 30, 2024 Consumer Banking Commercial Banking Treasury and Corporate Other Total ($ in thousands) Average interest earning assets $ 9,855,089 $ 40,276,379 $ 6,885,322 $ 57,016,790 Interest income $ 354,718 $ 1,974,478 $ 193,475 $ 2,522,671 Interest expense 221,246 904,202 191,492 1,316,940 Net interest income 133,472 1,070,276 1,983 1,205,731 Provision (credit) for credit losses 13,899 188,524 ( 129 ) 202,294 Net interest income after provision for credit losses 119,573 881,752 2,112 1,003,437 Non-interest income 77,780 38,051 57,468 173,299 Non-interest expense 68,260 136,653 622,365 827,278 Internal transfer expense (income) 91,782 374,903 ( 466,685 ) — Income (loss) before income taxes $ 37,311 $ 408,247 $ ( 96,100 ) $ 349,458 Return on average interest earning assets (pre-tax) 0.50 % 1.35 % ( 1.86 ) % 0.82 % 48 Nine Months Ended September 30, 2023 Consumer Banking Commercial Banking Treasury and Corporate Other Total ($ in thousands) Average interest earning assets $ 9,599,359 $ 39,520,794 $ 7,390,844 $ 56,510,997 Interest income $ 305,025 $ 1,819,015 $ 196,667 $ 2,320,707 Interest expense 172,202 708,961 171,341 1,052,504 Net interest income 132,823 1,110,054 25,326 1,268,203 Provision for credit losses 5,368 19,561 4,675 29,604 Net interest income after provision for credit losses 127,455 1,090,493 20,651 1,238,599 Non-interest income 59,858 43,105 70,075 173,038 Non-interest expense 65,595 127,810 628,865 822,270 Internal transfer expense (income) 90,460 372,426 ( 462,886 ) — Income (loss) before income taxes $ 31,258 $ 633,362 $ ( 75,253 ) $ 589,367 Return on average interest earning assets (pre-tax) 0.43 % 2.14 % ( 1.36 ) % 1.39 %