VALLEY NATIONAL BANCORP 10-Q

Item 2. Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations The following MD&A should be read in conjunction with the consolidated financial statements and notes thereto appearing in Part I, Item 1 of this report. The MD&A contains supplemental financial information, described in the sections that follow, which has been determined by methods other than GAAP that management uses in its analysis of our performance. Management believes these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance, our business and performance trends and facilitate comparisons with the performance of others in the financial services industry. These non-GAAP financial measures should not be considered in isolation, as a substitute for or superior to financial measures calculated in accordance with GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies. Cautionary Statement Concerning Forward-Looking Statements The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about our business, new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as “intend,” “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “would,” “could,” “typically,” “usually,” “anticipate,” “may,” “estimate,” “outlook,” “project” or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking 46 statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to: • the impact of market interest rates and monetary and fiscal policies of the U.S. federal government and its agencies in connection with prolonged inflationary pressures, which could have a material adverse effect on our clients, our business, our employees, and our ability to provide services to our customers; • the impact of unfavorable macroeconomic conditions or downturns, including instability or volatility in financial markets resulting from the impact of tariffs, any retaliatory actions, related market uncertainty, or other factors; debt default or rating downgrade; unanticipated loan delinquencies; loss of collateral; decreased service revenues; increased business disruptions or failures; reductions in employment; and other potential negative effects on our business, employees or clients caused by factors outside of our control, such as legislation and policy changes under the new U.S. presidential administration, geopolitical instabilities or events, natural and other disasters, including severe weather events, health emergencies, acts of terrorism, or other external events; • the impact of any potential instability within the U.S. financial sector or future bank failures, including the possibility of a run on deposits by a coordinated deposit base, and the impact of the actual or perceived soundness, or concerns about the creditworthiness, of other financial institutions, including any resulting disruption within the financial markets, increased expenses, including FDIC insurance assessments, or adverse impact on our stock price, deposits or our ability to borrow or raise capital; • the impact of negative public opinion regarding Valley or banks in general that damages our reputation and adversely impacts business and revenues; • changes in the statutes, regulations, policies, or enforcement priorities of the federal bank regulatory agencies; • the loss of or decrease in lower-cost funding sources within our deposit base; • damage verdicts or settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent, trademark or other intellectual property infringement, misappropriation or other violation, employment related claims, and other matters; • a prolonged downturn and contraction in the economy, as well as an unexpected decline in commercial real estate values collateralizing a significant portion of our loan portfolio; • higher or lower than expected income tax expense or tax rates, including increases or decreases resulting from changes in uncertain tax position liabilities, tax laws, regulations, and case law; • the inability to grow customer deposits to keep pace with the level of loan growth; • a material change in our allowance for credit losses under CECL due to forecasted economic conditions and/or unexpected credit deterioration in our loan and investment portfolios; • the need to supplement debt or equity capital to maintain or exceed internal capital thresholds; • changes in our business, strategy, market conditions or other factors that may negatively impact the estimated fair value of our goodwill and other intangible assets and result in future impairment charges; • greater than expected technology-related costs due to, among other factors, prolonged or failed implementations, additional project staffing and obsolescence caused by continuous and rapid market innovations; • increased competitive challenges, including our ability to stay current with rapid technological changes in the financial services industry; • cyberattacks, ransomware attacks, computer viruses, malware or other cybersecurity incidents that may breach the security of our websites or other systems or networks to obtain unauthorized access to personal, confidential, proprietary or sensitive information, destroy data, disable or degrade service, or sabotage our systems or networks, and the increasing sophistication of such attacks; • results of examinations by the OCC, the FRB, the CFPB and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities; 47 • application of the OCC heightened regulatory standards for certain large insured national banks, and the expenses we will incur to develop policies, programs, and systems that comply with the enhanced standards applicable to us; • our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements, or a decision to increase capital by retaining more earnings; • unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other public health crises, acts of terrorism or other external events; • our ability to successfully execute our business plan and strategic initiatives; and • unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, risk mitigation strategies, changes in regulatory lending guidance or other factors. A detailed dis cussion of factors that could affect our results is included in our SEC filings, including Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2024. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations, except as required by law. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Critical Accounting Estimates Valley’s accounting policies are fundamental to understanding management’s discussion and analysis of its financial condition and results of operations. In preparing the consolidated financial statements, management has made estimates, judgments and assumptions in accordance with these policies 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. At March 31, 2025, we identified our policies on the allowance for credit losses, goodwill and other intangible assets, and income taxes to be critical accounting policies because management has to make subjective and/or complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Management has reviewed the application of these policies and estimates with the Audit Committee of Valley’s Board. Our critical accounting policies and estimates are described in detail in Part II, Item 7 in Valley’s Annual Report, and there have been no material changes in such policies and estimates since the date of Valley’s Annual Report. New Authoritative Accounting Guidance See Note 4 to the consolidated financial statements for a description of new authoritative accounting guidance, including the dates of adoption and effects on results of operations and financial condition. Executive Summary Company Overview. At March 31, 2025, Valley had consolidated total assets of approximately $61.9 billion, total net loans of $48.1 billion, total deposits of $50.0 billion and total shareholders’ equity of $7.5 billion. Valley operates many convenient branch office locations and commercial banking offices in northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn and Queens, Long Island, Westchester County, New York, Florida, California, Alabama, and Illinois. Of our current 229 branch network, 55 percent, 18 percent, and 18 percent of the branches are located in New Jersey, New York, and Florida, respectively, with the remaining 9 percent of the branches in Alabama, California, and Illinois combined. 48 Financial Condition. During the first quarter 2025, we continued to strengthen our balance sheet to best perform in the current uncertain economic environment, while also prudently managing and reducing the overall risk of our loan portfolio. The following items, including key balance sheet initiatives, are highlights at March 31, 2025. • Commercial Real Estate Loan Concentration: Total commercial real estate loans (including construction loans) totaled $29.1 billion, or 59.8 percent of total loans at March 31, 2025 as compared to $29.6 billion, or 60.7 percent of total loans at December 31, 2024. The decrease was mostly due to normal repayment activity and selective originations as we continue to proactively diversify our loan portfolio by reducing new originations of certain types of transactional commercial real estate lending, such as non-owner occupied and multifamily loans to single-product borrowers. As a result, our CRE loan concentration ratio declined to approximately 353 percent at March 31, 2025 from 362 percent at December 31, 2024. Our current balance sheet goal is to reduce CRE concentration ratio to below 350 percent by December 31, 2025. See further details of our loan activities under the “Loan Portfolio” section below. • Regulatory Capital and Shareholders' Equity: Total shareholders' equity increased $64.8 million to $7.5 billion at March 31, 2025 as compared to December 31, 2024. Valley's total risk-based capital, common equity Tier 1 capital, Tier 1 capital and Tier 1 leverage capital ratios were 13.91 percent, 10.80 percent, 11.53 percent, and 9.41 percent, respectively, at March 31, 2025 as compared to 13.87 percent, 10.82 percent, 11.55 percent and 9.16 percent, respectively, at December 31, 2024. Currently, we expect that Valley's common equity Tier 1 capital will gradually increase to approximately 11 percent by December 31, 2025 largely through projected growth in our retained earnings and continuous management of the overall regulatory risk weighted asset profile of our balance sheet, including the goal to reduce our commercial real estate loan concentration. See the "Capital Adequacy" section below for more information. • Allowance for Credit Losses for Loans : The ACL for loans totaled $594.1 million and $573.3 million at March 31, 2025 and December 31, 2024, respectively, representing 1.22 percent and 1.17 percent of total loans at each respective date. The increase reflects, among other factors, an increase in quantitative reserves and continued growth in the commercial and industrial loan portfolio. Given our current projections for continued growth in our commercial and industrial loan portfolio and credit trends within our loan portfolio, we anticipate the ACL could continue to migrate towards approximately 1.25 percent of total loans by December 31, 2025. See the “Allowance for Credit Losses" section for additional information. • Credit Quality: Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) decreased $47.5 million to $51.7 million, or 0.11 percent of total loans, at March 31, 2025 as compared to $99.2 million, or 0.20 of total loans, at December 31, 2024. Non-accrual loans totaled $346.5 million, or 0.71 percent of total loans, at March 31, 2025 as compared to $359.5 million, or 0.74 percent of total loans, at December 31, 2024. See the “Non-Performing Assets” section for additional information. • Liquid Assets: Our liquid assets totaled $5.1 billion at March 31, 2025, representing 9.1 percent of interest earning assets as compared with $5.5 billion, or 9.6 percent of interest earning assets at December 31, 2024. We continue to maintain significant access to readily available, diverse funding sources to fulfill both short-term and long-term funding needs. See the “Bank Liquidity” section for additional information. • Deposits: Non-interest bearing deposits increased $199.9 million to $11.6 billion at March 31, 2025 from December 31, 2024 largely due to higher inflows of commercial customer deposits during the first quarter 2025. Savings, NOW, and money market deposits increased $108.6 million to $26.4 billion at March 31, 2025 from December 31, 2024 mostly due to new deposits from our online savings deposit product offerings. Total actual deposit balances decreased $110.0 million to $50.0 billion at March 31, 2025 as compared to $50.1 billion at December 31, 2024 as the increases in our direct customer deposits were offset by a $726.5 million decrease in indirect customer deposits (consisting largely of brokered CDs) during the first quarter 2025. See the "Deposits" section below for more details. • Investment Securities: Total investment securities increased $305.6 million to $7.3 billion, or 11.8 percent of total assets, at March 31, 2025 as compared to December 31, 2024 mainly due to targeted purchases of residential mortgage backed securities primarily issued by Ginnie Mae (with a risk-weighting of zero for 49 regulatory capital purposes) that were classified as AFS. See the “Investment Securities Portfolio” section for more details. Quarterly Results. Net income for the first quarter 2025 was $106.1 million, or $0.18 per diluted common share, as compared to $96.3 million, or $0.18 per diluted common share, for the first quarter 2024. The $9.8 million increase in quarterly net income as compared to the same quarter one year ago was mainly due to the following changes: • a $26.6 million increase in net interest income mainly driven by lower interest rates on most interest bearing deposit products in the first quarter 2025 and additional interest income from investment security purchases, partially offset by lower yields on adjustable-rate loans; and • a $3.7 million decrease in non-interest expense primarily due to decreases in technology, furniture and equipment expense and FDIC assessment fees, largely offset by higher amortization of tax credit investments and other expense; Which were partially offset by: • a $17.5 million increase in our provision for credit losses largely due to higher quantitative reserves allocated to commercial real estate loans, significant growth within the commercial and industrial loan category and the impact of loan charge-offs; and • a $3.1 million decrease in non-interest income that was mainly driven by lower gains on sales of assets and decreases in tax advisory fees (within wealth management and trust fees) and other income, partially offset by moderate increases in several other categories. See the “Net Interest Income,” “Non-Interest Income,” “Non-Interest Expense” and “Income Taxes” sections below for more details on the impact of the items above and other infrequent non-core items impacting our first quarter 2025 results. U.S. Economic Conditions. D uring the first quarter 2025, real gross GDP decreased at an estimated annual rate of 0.3 percent as compared to an increase of 2.5 percent during the fourth quarter 2024. The contraction in GDP was primarily driven by a significant increase in imports likely caused by businesses and consumers stockpiling goods before potential tariffs take effect, as well as a reduction in government spending. These movements were partially offset by increases in investment, consumer spending and net exports. In addition, most measures of inflation continued to reflect a moderation in price pressures during the first quarter 2025. The rate of inflation declined to 2.4 percent in the first quarter 2025 as compared to 2.9 percent for the fourth quarter 2024. Over the last four months of 2024 at its Federal Open Market Committee meetings, the Federal Reserve lowered the target range for the federal funds rate from 5.25 – 5.50 percent to 4.25 – 4.50 percent. The latest projections from the Committee’s last meeting in March indicate two rate cuts in 2025. With inflation remaining somewhat elevated in recent months, unpredictability regarding U.S. government tariff plans, and overall uncertainty around the economic outlook, the Committee held rates steady in March 2025. Additionally, the Committee indicated it will slow the pace of its securities runoff to $5 billion per month starting in April, down from its prior reductions of $25 billion per month. The 10-year U.S. Treasury note yield ended the first quarter 2025 at 4.23 percent, or 35 basis points lower as compared to the fourth quarter 2024 , and the 2-year U.S. Treasury note yield ended the first quarter 2025 at 3.89 percent, or 36 basis points lower as compared to the fourth quarter 2024 . For all commercial banks in the U.S., total loans and leases grew 1.0 percent from December 31, 2024 to March 31, 2025. Commercial and industrial lending decreased 0.3 percent and commercial real estate lending increased 0.4 percent during the same period . For the first quarter of 2025, banks reported continued easing of underwriting standards for most commercial and industrial loan products, as well as commercial real estate loans. Banks reported a continued increase in demand for commercial and industrial loans and a modest increase in demand for 50 commercial real estate loans, as investor activity picked up in the first quarter 2025 due to the decline in market interest rates. Entering the first quarter of 2025, there was a general sense of an economic recovery and improving operating environment, and the Federal Reserve started to see modest progress in their efforts to combat inflation. However, more recent economic and political developments, such as new tariff policies, strict immigration enforcement, government spending cuts, a potentially weakening job market, continued elevated market interest rates, and ongoing geopolitical conflicts has weakened the current economic outlook. As a result of these factors, many market analysts have increased the likelihood of a recession in the coming year in their forecasts, and foresee an overall challenging bank operating environment. Should these conditions persist or further deteriorate, they may adversely impact our banking clients and our financial results, as highlighted elsewhere in this MD&A. Deposits and Other Borrowings We define cumulative deposit beta as the change in our cost of total deposits relative to the change in the average Fed Funds (upper bound) rate. We differentiate between the cumulative deposit beta during the rate increase cycle, which began in the first quarter of 2022 and ended in the second quarter of 2024, and the cumulative deposit beta during the rate decrease cycle which started in the third quarter of 2024. Our cumulative deposit beta in the interest rate increase cycle (between December 31, 2021 and June 30, 2024) was approximately 58 percent. The Federal Reserve started an interest rate decrease cycle during the third quarter 2024. Our cumulative deposit beta in this current interest rate decrease cycle (between June 30, 2024 and March 31, 2025) was 53 percent as compared to 34 percent (between June 30, 2024 and December 31, 2024) one quarter ago. The continued increase of our cumulative deposit beta in the first quarter 2025 was mainly driven by a full quarter’s impact of the Federal Reserve's rate cuts in November and December 2024, and our ability to broadly reduce costs of interest bearing deposit products coupled with a reduction of higher cost indirect customer CDs. See the "Net Interest Income" section for additional details on the changes in our cost of deposits during the first quarter 2025. Total average deposits decreased by $1.6 billion to $49.1 billion for the first quarter 2025 as compared to the fourth quarter 2024. Average time deposits balances decreased $2.0 billion from the fourth quarter 2024 largely due to the maturity and repayment of higher cost indirect customer (i.e., brokered) CDs, partially offset by new direct retail customer CDs during the first quarter 2025. Average savings, NOW and money market deposits increased $417.8 million to $26.3 billion for the first quarter 2025 as compared to the fourth quarter 2024. Average non-interest-bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 23 percent, 54 percent, and 24 percent of total deposits for the first quarter 2025, respectively, as compared to 22 percent, 51 percent, and 27 percent of total deposits for the fourth quarter 2024, respectively . Actual ending balances for deposits decreased $110.0 million to $50.0 billion at March 31, 2025 from December 31, 2024 mainly due to a $418.5 million decrease in time deposits, partially offset by increases of $199.9 million and $108.6 million in non-interest bearing deposits and savings, NOW and money market deposits, respectively. The decrease in time deposit balances was mainly driven by a decline of approximately $661 million in indirect customer CDs, partially offset by deposit inflows from new retail CD offerings during the first quarter 2025. The increase in non-interest bearing was mostly due to higher commercial customer deposit inflows late in the first quarter 2025. Savings, NOW and money market deposit balances increased at March 31, 2025 from December 31, 2024 largely due to new deposits from our online savings deposit product offerings, partially offset by lower governmental deposits account balances. Total indirect customer deposits (including both brokered money market and time deposits) totaled $6.3 billion and $7.0 billion in March 31, 2025 and December 31, 2024, respectively. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 23 percent, 53 percent, and 24 percent of total deposits as of March 31, 2025, respectively, as compared to 23 percent, 52 percent, and 25 percent of total deposits as of December 31, 2024, respectively. 51 The following table summarizes CDs included in time deposits in excess of the FDIC insurance limit by maturity at March 31, 2025: March 31, 2025 (in thousands) Less than three months $ 914,809 Three to six months 572,701 Six to twelve months 757,780 More than twelve months 133,083 Total $ 2,378,373 Total estimated uninsured deposits, excluding collateralized government deposits and intercompany deposits (i.e., deposits eliminated in consolidation), totaled approximately $13.0 billion, or 26 percent of total deposits, at March 31, 2025 as compared to $12.6 billion, or 25 percent of total deposits, at December 31, 2024. While we maintained a diversified commercial and consumer deposit base at March 31, 2025, deposit gathering initiatives and our current direct customer deposit base could be challenged due to market competition, attractive non-deposit investment alternatives in the financial markets and other factors. As a result, we cannot guarantee that we will be able to maintain deposit levels at or near those reported at March 31, 2025. Management continuously monitors liquidity and all available funding sources including non-deposit borrowings discussed below. See the “Liquidity and Cash Requirements” section of this MD&A for additional information. The following table presents average short-term and long-term borrowings for the periods indicated : Three Months Ended March 31, 2025 December 31, 2024 March 31, 2024 (in thousands) Average short-term borrowings: FHLB advances $ 241,944 $ 6,087 $ 1,470,879 Securities sold under repurchase agreements 60,693 65,221 67,000 Federal funds purchased 5,000 1,196 — Total $ 307,637 $ 72,504 $ 1,537,879 Average long-term borrowings: FHLB advances $ 2,300,093 $ 2,529,895 $ 1,930,702 Subordinated debt 648,738 646,957 638,008 Junior subordinated debentures issued to capital trusts 57,500 57,412 57,152 Total $ 3,006,331 $ 3,234,264 $ 2,625,862 Average short-term borrowings increased by $235.1 million and decreased $1.2 billion during the first quarter 2025 as compared to the fourth quarter 2024 and first quarter 2024, respectively. The decrease from the first quarter 2024 was mostly driven by a shift from the use of short-term FHLB advances to primarily indirect customer deposits in our average mix of funding sources since the second quarter 2024. Average long-term borrowings (including junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition) decreased $227.9 million as compared to the fourth quarter 2024 and increased $380.5 million as compared to the first quarter 2024. The increase as compared to the first quarter 2024 was partly due to new FHLB advances totaling $1.0 billion issued in early March 2024, partially offset by the maturity and repayment of $273 million of FHLB advances in January 2025. 52 Actual ending balances for short-term borrowings, consisting of securities sold under agreements to repurchase, decreased $13.7 million to $59.0 million at March 31, 2025 from December 31, 2024. Long-term borrowings totaled $2.9 billion at March 31, 2025 and decreased $269.6 million as compared to December 31, 2024 due to the aforementioned repayment of FHLB advances in January 2025. Non-GAAP Financial Measures The table below presents selected performance indicators, their comparative non-GAAP measures and the (non-GAAP) efficiency ratio for the periods indicated. Valley believes that the non-GAAP financial measures provide useful supplemental information to both management and investors in understanding Valley's underlying operational performance, business, and performance trends, and may facilitate comparisons of our current and prior performance with the performance of others in the financial services industry. Management utilizes these measures for internal planning, forecasting, and analysis purposes. Management believes that Valley’s presentation and discussion of this supplemental information, together with the accompanying reconciliations to the GAAP financial measures, also allows investors to view performance in a manner similar to management. These non-GAAP financial measures should not be considered in isolation, as a substitute for or superior to financial measures calculated in accordance with GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies. The following table presents our annualized performance ratios : Three Months Ended March 31, 2025 2024 Selected Performance Indicators ($ in thousands) GAAP measures: Net income, as reported $ 106,058 $ 96,280 Return on average assets 0.69 % 0.63 % Return on average shareholders’ equity 5.69 5.73 Non-GAAP measures: Net income, as adjusted $ 106,066 $ 99,448 Return on average assets, as adjusted 0.69 % 0.65 % Return on average shareholders' equity, as adjusted 5.69 5.91 Return on average tangible shareholders' equity (ROATE) 7.76 8.19 ROATE, as adjusted 7.76 8.46 Efficiency ratio, as adjusted 55.87 59.10 March 31, 2025 December 31, 2024 Common Equity Per Share Data: Book value per common share (GAAP) $ 12.76 $ 12.67 Tangible book value per common share (non-GAAP) 9.21 9.10 53 Non-GAAP Reconciliations to GAAP Financial Measures Adjusted net income is computed as follows: Three Months Ended March 31, 2025 2024 (in thousands) Net income, as reported (GAAP) $ 106,058 $ 96,280 Non-GAAP adjustments: Add: FDIC special assessment (1) — 7,394 Add: Losses on available for sale and held to maturity debt securities, net (2) 11 7 Less: Restructuring charge (3) — 620 Less: Gain on sale of commercial premium finance lending division (4) — (3,629) Total non-GAAP adjustments to net income $ 11 $ 4,392 Income tax adjustments related to non-GAAP adjustments (5) (3) (1,224) Net income, as adjusted (non-GAAP) $ 106,066 $ 99,448 (1) Included in the FDIC insurance assessment. (2) Included in gains on securities transactions, net. (3) Represents severance expense related to workforce reductions within salary and employee benefits expense. (4) Included in gains on sales of assets, net. (5) Calculated using the appropriate blended statutory tax rate for the applicable period. In addition to the items used to calculate net income, as adjusted, in the table above, our net income is, from time to time, impacted by fluctuations in the overall level of net gains on sales of loans, wealth management and trust fees, and capital markets fees. These amounts can vary widely from period to period due to, among other factors, the amount and timing of residential mortgage loans originated for sale, brokerage and tax credit investment advisory activities and commercial loan customer demand for certain interest rate swap products. See the “Non-Interest Income” section below for more details. Adjusted annualized return on average assets is computed by dividing adjusted net income by average assets, as follows: Three Months Ended March 31, 2025 2024 ($ in thousands) Net income, as adjusted (non-GAAP) $ 106,066 $ 99,448 Average assets (GAAP) $ 61,502,768 $ 61,256,868 Annualized return on average assets, as adjusted (non-GAAP) 0.69 % 0.65 % 54 Adjusted annualized return on average shareholders' equity is computed by dividing adjusted net income by average shareholders' equity, as follows: Three Months Ended March 31, 2025 2024 ($ in thousands) Net income, as adjusted (non-GAAP) $ 106,066 $ 99,448 Average shareholders' equity (GAAP) $ 7,458,177 $ 6,725,695 Annualized return on average shareholders' equity, as adjusted (non-GAAP) 5.69 % 5.91 % ROATE and adjusted ROATE are computed by dividing net income and adjusted net income, respectively, by average shareholders’ equity less average goodwill and average other intangible assets, as follows: Three Months Ended March 31, 2025 2024 ($ in thousands) Net income, as reported (GAAP) $ 106,058 $ 96,280 Net income, as adjusted (non-GAAP) $ 106,066 $ 99,448 Average shareholders’ equity (GAAP) $ 7,458,177 $ 6,725,695 Less: Average goodwill and other intangible assets (GAAP) 1,994,061 2,024,999 Average tangible shareholders’ equity (non-GAAP) $ 5,464,116 $ 4,700,696 Annualized ROATE (non-GAAP) 7.76 % 8.19 % Annualized ROATE, as adjusted (non-GAAP) 7.76 % 8.46 % The efficiency ratio is computed as follows: Three Months Ended March 31, 2025 2024 ($ in thousands) Total non-interest expense, as reported (GAAP) $ 276,618 $ 280,310 Less: FDIC special assessment (1) — 7,394 Less: Restructuring charge (2) — 620 Less: Amortization of tax credit investments 9,320 5,562 Total non-interest expense, as adjusted (non-GAAP) $ 267,298 $ 266,734 Net interest income, as reported (GAAP) 420,105 393,548 Total non-interest income, as reported (GAAP) 58,294 61,415 Add: Losses on available for sale and held to maturity debt securities, net (3) 11 7 Less: Gain on sale of commercial premium finance lending division (4) — (3,629) Gross operating income, as adjusted (non-GAAP) $ 478,410 $ 451,341 Efficiency ratio (non-GAAP) 55.87 % 59.10 % (1) Included in the FDIC insurance expense. (2) Represents severance expense related to workforce reductions within salary and employee benefits expense. (3) Included in gains on securities transactions, net. (4) Included in gains on sales of assets, net. 55 Tangible book value per common share is computed by dividing shareholders’ equity less preferred stock, goodwill and other intangible assets by common shares outstanding, as follows: March 31, 2025 December 31, 2024 ($ in thousands, except for share data) Common shares outstanding 560,028,101 558,786,093 Shareholders’ equity (GAAP) $ 7,499,897 $ 7,435,127 Less: Preferred stock 354,345 354,345 Less: Goodwill and other intangible assets 1,990,276 1,997,597 Tangible common shareholders’ equity (non-GAAP) $ 5,155,276 $ 5,083,185 Book value per common share (GAAP) $ 12.76 $ 12.67 Tangible book value per common share (non-GAAP) $ 9.21 $ 9.10 Net Interest Income Net interest income on a tax equivalent basis of $421.4 million for the first quarter 2025 decreased $2.9 million compared to the fourth quarter 2024 and increased $26.5 million as compared to the first quarter 2024. Interest income on a tax equivalent basis decreased $50.1 million to $786.0 million for the first quarter 2025 as compared to the fourth quarter 2024. The decrease was mostly driven by the impact of (i) two less days in the first quarter 2025, (ii) the bulk sale of certain performing CRE loans during the fourth quarter 2024, and (iii) downward repricing on adjustable rate loans. Total interest expense decreased $47.2 million to $364.6 million for the first quarter 2025 as compared to the fourth quarter 2024 mainly due to (i) the aforementioned reduction in day count, (ii) a $2.0 billion decrease in average time deposit balances (primarily related to the maturity and repayment of higher cost indirect customer CDs) and (iii) lower interest rates on many interest bearing deposit products in the first quarter 2025. Average interest earning assets increased $272.9 million to $56.9 billion for the first quarter 2025 as compared to the first quarter 2024 mainly due to a $2.0 billion increase in average taxable investments largely resulting from purchases of residential mortgage-backed securities classified as available for sale over the past 12 months, largely offset by lower average loan balances. Compared to the fourth quarter 2024, average interest earning assets decreased by $1.3 billion during the first quarter 2025 . The decrease was mainly driven by decreases of $1.1 billion and $831.1 million in average loans and overnight interest bearing cash balances, respectively, partially offset by an increase of $596.9 million in average taxable investments. The decrease in average loan balances to $48.7 billion for the first quarter 2025 was mostly due to the bulk sale of certain performing CRE loans during the fourth quarter 2024 and continued CRE loan repayment activity. The decline in average overnight interest bearing cash balances was largely the result of excess funds from both loan sales and issuance of common stock in the fourth quarter 2024 used, in part, to repay maturing indirect customer time deposits and purchase taxable investment securities in the first quarter 2025. Average interest bearing liabilities decreased $325.9 million to $41.2 billion for the first quarter 2025 as compared to the first quarter 2024 primarily due to a decrease of $1.2 billion in average short-term borrowings, partially offset by increases of $523.9 million and $380.5 million in average interest bearing deposits and long-term borrowings, respectively. The $1.2 billion decrease in average short-term borrowings was mostly the result of a shift from the use of short-term FHLB advances to indirect customer time deposits in our mix of liquidity funding sources starting in the second quarter 2024. As compared to the fourth quarter 2024, average interest bearing liabilities decreased by $1.5 billion for the first quarter 2025 largely due to a decrease in average time deposit balances caused by the aforementioned repayment of maturing indirect customer time deposits. See additional information under “ Deposits and Other Borrowings ” in the Executive Summary section above. Net interest margin on a tax equivalent basis of 2.96 percent for the first quarter 2025 increased by 4 basis points from 2.92 percent for the fourth quarter 2024 and increased 17 basis points from 2.79 percent for the first quarter 2024. The increase as compared to the fourth quarter 2024 was mostly due to the 29 basis point decline in our cost of total average deposits, largely offset by the lower yield on average interest earning assets. T he yield on average 56 interest earning assets decreased by 22 basis points to 5.53 percent on a linked quarter basis largely due to downward repricing of our adjustable rate loans and two less days in the first quarter 2025, partially offset by higher yielding investment purchases. The overall cost of average interest bearing liabilities decreased 31 basis points to 3.54 percent for the first quarter 2025 as compared to the fourth quarter 2024 largely due to a decrease in higher cost time deposits and lower interest rates on most deposit products. Our cost of total average deposits was 2.65 percent for the first quarter 2025 as compared to 2.94 percent and 3.16 percent for the fourth quarter 2024 and the first quarter 2024, respectively. In Valley's Annual Report, we provided guidance that we anticipated net interest income growth of approximately 9 to 12 percent for the full year of 2025 as compared to $1.6 billion reported for 2024. Based upon our current projections, we now expect the growth of our net interest income for 2025 to fall within the low-end of the 9 to 12 percent range largely due to lower anticipated loan growth and continued lending spread compression. Our forecasts include additional assumptions and, therefore, we cannot provide any assurances that our future net interest income or margin will meet our current estimates or remain near the levels reported for the first quarter 2025. For a detailed discussion on the risks related to interest rates please refer to Part I, Item 1A. “Risk Factors” in Valley's Annual Report. 57 The following table reflects the components of net interest income for the three months ended March 31, 2025, December 31, 2024 and March 31, 2024: Quarterly Analysis of Average Assets, Liabilities and Shareholders’ Equity and Net Interest Income on a Tax Equivalent Basis Three Months Ended March 31, 2025 December 31, 2024 March 31, 2024 Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate ($ in thousands) Assets Interest earning assets: Loans (1)(2) $ 48,654,921 $ 703,632 5.78 % $ 49,730,130 $ 750,690 6.04 % $ 50,246,591 $ 771,577 6.14 % Taxable investments (3) 7,100,958 69,562 3.92 6,504,106 61,843 3.80 5,094,978 42,625 3.35 Tax-exempt investments (1)(3) 552,291 5,952 4.31 565,877 6,080 4.30 579,842 6,071 4.19 Interest bearing deposits with banks 583,521 6,879 4.72 1,414,670 17,513 4.95 697,386 9,682 5.55 Total interest earning assets 56,891,691 786,025 5.53 58,214,783 836,126 5.75 56,618,797 829,955 5.86 Allowance for credit losses (577,551) (551,304) (450,331) Cash and due from banks 418,806 427,777 439,176 Other assets 4,950,547 4,886,157 4,805,001 Unrealized gains (losses) on securities available for sale, net (180,725) (112,075) (155,775) Total assets $ 61,502,768 $ 62,865,338 $ 61,256,868 Liabilities and Shareholders’ Equity Interest bearing liabilities: Savings, NOW and money market deposits $ 26,345,983 $ 200,221 3.04 % $ 25,928,201 $ 214,489 3.31 % $ 24,793,452 $ 232,506 3.75 % Time deposits 11,570,758 125,069 4.32 13,530,980 158,716 4.69 12,599,395 151,065 4.80 Total interest bearing deposits 37,916,741 325,290 3.43 39,459,181 373,205 3.78 37,392,847 383,571 4.10 Short-term borrowings 307,637 2,946 3.83 72,504 293 1.62 1,537,879 20,612 5.36 Long-term borrowings (4) 3,006,331 36,411 4.84 3,234,264 38,351 4.74 2,625,862 30,925 4.71 Total interest bearing liabilities 41,230,709 364,647 3.54 42,765,949 411,849 3.85 41,556,588 435,108 4.19 Non-interest bearing deposits 11,222,562 11,266,899 11,183,127 Other liabilities 1,591,320 1,577,331 1,791,458 Shareholders’ equity 7,458,177 7,255,159 6,725,695 Total liabilities and shareholders’ equity $ 61,502,768 $ 62,865,338 $ 61,256,868 Net interest income/interest rate spread (5) $ 421,378 1.99 % $ 424,277 1.90 % $ 394,847 1.67 % Tax equivalent adjustment (1,273) (1,300) (1,299) Net interest income, as reported $ 420,105 $ 422,977 $ 393,548 Net interest margin (6) 2.95 % 2.91 % 2.78 % Tax equivalent effect 0.01 0.01 0.01 Net interest margin on a fully tax equivalent basis (6) 2.96 % 2.92 % 2.79 % _____________ (1) Interest income is presented on a tax equivalent basis using a 21 percent federal tax rate. (2) Loans are stated net of unearned income and include non-accrual loans. (3) The yield for securities that are classified as AFS is based on the average historical amortized cost. (4) Includes junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition. 58 (5) Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis. (6) Net interest income as a percentage of total average interest earning assets. The following table demonstrates the relative impact on net interest income of changes in the volume of interest earning assets and interest bearing liabilities and changes in rates earned and paid by Valley on such assets and liabilities. Variances resulting from a combination of changes in volume and rates are allocated to the categories in proportion to the absolute dollar amounts of the change in each category. Change in Net Interest Income on a Tax Equivalent Basis Three Months Ended March 31, 2025 Compared to March 31, 2024 Change Due to Volume Change Due to Rate Total Change (in thousands) Interest Income: Loans* $ (23,940) $ (44,005) $ (67,945) Taxable investments 18,782 8,155 26,937 Tax-exempt investments* (294) 175 (119) Federal funds sold and other interest bearing deposits (1,457) (1,346) (2,803) Total decrease in interest income (6,909) (37,021) (43,930) Interest Expense: Savings, NOW and money market deposits 13,874 (46,159) (32,285) Time deposits (11,783) (14,213) (25,996) Short-term borrowings (13,019) (4,647) (17,666) Long-term borrowings and junior subordinated debentures 4,587 899 5,486 Total de crease in interest expense (6,341) (64,120) (70,461) Total (decrease) increase in net interest income $ (568) $ 27,099 $ 26,531 * Interest income is presented on a tax equivalent basis using 21 percent as the federal tax rate. Non-Interest Income Non-interest income represented 12.2 percent and 13.5 percent of total net interest income plus non-interest income for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025, non-interest income decreased $3.1 million as compared to the same quarter in 2024 mainly driven by lower gains on sales of assets and decreases in wealth management and trust fees and other income, partially offset by moderate increases in several other categories. See further details below. 59 The following table presents the components of non-interest income for the three months ended March 31, 2025 and 2024: Three Months Ended March 31, 2025 2024 (in thousands) Wealth management and trust fees $ 15,031 $ 17,930 Insurance commissions 3,402 2,251 Capital markets 6,940 5,670 Service charges on deposit accounts 12,726 11,249 Gains on securities transactions, net 46 49 Fees from loan servicing 3,215 3,188 Gains on sales of loans, net 2,197 1,618 Gains on sales of assets, net 43 3,694 Bank owned life insurance 4,777 3,235 Other 9,917 12,531 Total non-interest income $ 58,294 $ 61,415 Wealth management and trust fee income decreased $2.9 million for the three months ended March 31, 2025 as compared to the same quarter in 2024 mainly due to a decrease of $3.0 million in tax credit advisory service fees due to a lower volume of transactions. Capital markets income increased $1.3 million for the three months ended March 31, 2025 as compared to the same quarter in 2024 mostly due to an increase in the volume of interest rate swap transactions related to commercial lending activities. Service charges on deposit accounts increased $1.5 million for the three months ended March 31, 2025 as compared to the same quarter in 2024 mainly due to additional treasury service related fees for commercial deposit accounts. Net gains on sales of assets decreased $3.7 million for the three months ended March 31, 2025 as compared to the same quarter in 2024 primarily as a result of a $3.6 million net gain realized on the sale of our commercial premium finance lending business during the first quarter 2024. Bank owned life insurance income increased $1.5 million for the three months ended March 31, 2025 as compared to the same quarter in 2024 due to higher returns on the underlying investment securities. Other non-interest income decreased $2.6 million for the three months ended March 31, 2025 as compared to the same period in 2024 partly due to a decrease in gains realized on the change in the fair value of equity securities. Non-Interest Expense Non-interest expense decreased $3.7 million for the three months ended March 31, 2025 as compared to the same quarter in 2024 mainly due to decreases in technology, furniture and equipment expense and FDIC insurance assessment fees, largely offset by higher amortization of tax credit investments and increased other expense. See further details below. 60 The following table presents the components of non-interest expense for the three months ended March 31, 2025 and 2024: Three Months Ended March 31, 2025 2024 (in thousands) Salary and employee benefits expense $ 142,618 $ 141,831 Net occupancy expense 25,888 24,323 Technology, furniture and equipment expense 29,896 35,462 FDIC insurance assessment 12,867 18,236 Amortization of other intangible assets 8,019 9,412 Professional and legal fees 15,670 16,465 Amortization of tax credit investments 9,320 5,562 Other 32,340 29,019 Total non-interest expense $ 276,618 $ 280,310 Net occupancy expense increased $1.6 million for the three months ended March 31, 2025 compared to the same quarter in 2024 mainly due to incremental increases in rent expense, cleaning and maintenance and property tax expenses. Technology, furniture and equipment expense decreased $5.6 million for the three months ended March 31, 2025 as compared to the same quarter of 2024, mostly due to a decrease in software licensing costs, as well as lower depreciation expense and telecommunication related expense. FDIC insurance assessment expense decreased $5.4 million for the three months ended March 31, 2025 as compared to the same quarter of 2024 primari ly due to FDIC special assessment expenses of $7.4 million recorded in the first quarter of 2024 . Amortization of other intangibles decreased $1.4 million for the three months ended March 31, 2025 as compared to the same quarter of 2024 mainly due to a decline in amortization expense related to core deposits and loan servicing rights. Amortization of tax credit investments increased $3.8 million for the three months ended March 31, 2025 as compared to the same quarter of 2024 mainly due to large purchases of tax-advantaged investments over the last twelve months. See Note 14 for more details regarding our tax credit investments. Other non-interest expense increased $3.3 million for the three months ended March 31, 2025 as compared to the same quarter in 2024 largely due to a $2.9 million loss from the sale of one commercial real estate OREO property, as well as additional costs related to a loan credit risk transfer transaction, consisting of a credit default swap, executed in June 2024. The premium expense and other transaction costs associated with this credit protection totaled $2.0 million for the three months ended March 31, 2025. These increases were partially offset by a $1.9 million decrease in advertising expense. Income Taxes Income tax expense totaled $33.1 million for the first quarter 2025 as compared to an income tax benefit of $26.7 million for the fourth quarter 2024 and income tax expense of $33.2 million for the first quarter 2024. Our effective tax rate was 23.8 percent, negative 29.9 percent and 25.6 percent for the first quarter 2025, fourth quarter 2024 and first quarter 2024, respectively. The tax benefit and negative effective tax rate fourth quarter 2024 reflected a $46.4 million total reduction in uncertain tax liability positions and related accrued interest due to statute of limitation expirations. The decrease in the effective tax rate from the first quarter 2024 was primarily due to a higher level of investment in tax credits. 61 GAAP requires that any change in judgment or change in measurement of a tax position taken in a prior annual period be recognized as a discrete event in the quarter in which it occurs, rather than being recognized as a change in effective tax rate for the current year. Our adherence to these tax guidelines may result in volatile effective income tax rates in future quarterly and annual periods. Factors that could impact management’s judgment include changes in income, tax laws and regulations, and tax planning strategies. Based on the current information available, we anticipate that our effective tax rate will be approximately within the 23 to 25 percent range for the remainder of 2025. 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. 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 those of 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. See Note 1 5 to the consolidated financial statements for additional details. The following tables present the financial data for Valley's operating segments, and Treasury and Corporate Other for the three months ended March 31, 2025 and 2024: Three Months Ended March 31, 2025 Consumer Banking Commercial Banking Treasury and Corporate Other Total ($ in thousands) Average interest earning assets $ 10,210,226 $ 38,444,695 $ 8,236,770 $ 56,891,691 Interest income $ 122,463 $ 579,896 $ 82,393 $ 784,752 Interest expense 65,442 246,411 52,794 364,647 Net interest income 57,021 333,485 29,599 420,105 (Credit) provision for credit losses (8,733) 71,408 (14) 62,661 Net interest income after provision for credit losses 65,754 262,077 29,613 357,444 Non-interest income 34,354 19,002 4,938 58,294 Non-interest expense Salary and employee benefits expense 31,974 102,990 7,654 142,618 Net occupancy expense 4,705 17,457 3,726 25,888 Technology, furniture, and equipment expense 6,237 19,853 3,806 29,896 FDIC insurance assessment 2,700 10,167 — 12,867 Professional and legal fees 2,899 10,943 1,828 15,670 Other segment items * 14,286 15,443 19,950 49,679 Total non-interest expense $ 62,801 $ 176,853 $ 36,964 $ 276,618 Income (loss) before income taxes $ 37,307 $ 104,226 $ (2,413) $ 139,120 Return on average interest earning assets (pre-tax) 1.46 % 1.08 % (0.12) % 0.98 % Net interest margin 2.24 % 3.47 % 1.44 % 2.95 % 62 Three Months Ended March 31, 2024 Consumer Banking Commercial Banking Treasury and Corporate Other Total ($ in thousands) Average interest earning assets $ 9,796,681 $ 40,449,910 $ 6,372,206 $ 56,618,797 Interest income $ 113,762 $ 657,791 $ 57,103 $ 828,656 Interest expense 75,286 310,852 48,970 435,108 Net interest income 38,476 346,939 8,133 393,548 Provision (credit) for credit losses 3,072 42,202 (74) 45,200 Net interest income after provision for credit losses 35,404 304,737 8,207 348,348 Non-interest income 33,165 23,130 5,120 61,415 Non-interest expense Salary and employee benefits expense 28,658 101,858 11,315 141,831 Net occupancy expense 4,268 17,363 2,692 24,323 Technology, furniture, and equipment expense 6,537 25,264 3,661 35,462 FDIC insurance assessment 2,114 8,728 7,394 18,236 Professional and legal fees 2,827 12,082 1,556 16,465 Other segment items * 12,591 13,203 18,199 43,993 Total non-interest expense $ 56,995 $ 178,498 $ 44,817 $ 280,310 Income (loss) before income taxes $ 11,574 $ 149,369 $ (31,490) $ 129,453 Return on average interest earning assets (pre-tax) 0.47 % 1.48 % (1.98) % 0.91 % Net interest margin 1.57 % 3.43 % 0.51 % 2.78 % * Other segment items include amortization of intangible assets, amortization of tax credit investments and other general operating expenses. Consumer Banking Segment The Consumer Banking segment represented 19.3 percent of our loan portfolio at March 31, 2025, and was mainly comprised of residential mortgage loans and automobile loans, and to a lesser extent, home equity loans, secured personal lines of credit and other consumer loans (including credit card loans). The duration of the residential mortgage loan portfolio (which represented 11.6 percent of our loan portfolio at March 31, 2025) is subject to movements in the market level of interest rates and forecasted prepayment speeds. The weighted average life of the automobile loans portfolio (which represented 4.2 percent of total loans at March 31, 2025) 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 asset management advisory, brokerage, trust, personal and title insurance, tax credit advisory services, and our international and domestic private banking businesses. Consumer Banking’s average interest earning assets increased $413.5 million to $10.2 billion for t he first quarter 2025 as compared to the same period of 2024 . The increase was mostly due to strong growth in our automobile loan portfolio over the last 12-month period and, to a much lesser extent, higher average home equity and residential mortgage loan balances. These increases were partially offset by a decline in average other consumer loans mainly driven by lower secured personal lines of credit balances. Income before income taxes generated by the Consumer Banking segment increased $25.7 million to $37.3 million for the first quarter 2025 as compared to the first quarter 2024. The increase was mainly driven by a combination of an increase in net interest income and a lower provision for loan losses, partially offset by an increase in non- 63 interest expense. Net interest income for this segment increased $18.5 million mainly due to the aforementioned growth in average loans coupled with lower funding costs. The provision for loan losses decreased $11.8 million for the first quarter 2025 as compared to the first quarter 2024 mainly due to lower quantitative reserves within the residential mortgage loan portfolio based on continued high levels of credit performance. Non-interest expense increased $5.8 million for the first quarter 2025 mainly due to higher salary and employee benefits expense. Net interest margin on the Consumer Banking portfolio increased 67 basis points to 2.24 percent for the first quarter 2025 as compared to the first quarter 2024 mainly due to a 16 basis point increase in the yield on average loa ns, combined with a 51 basis point decrease in the costs associated with our funding sou rces. The 16 basis point increase in loan yield was largely due to higher yielding new loan volumes over most of the last 12-month period. The decrease in our fu nding costs w as mainly driven by a decrease in higher cost time deposits and lower interest rates on most deposit products during the first quarter 2025. Our cost of total average deposits was 2.65 percent for the first quarter 2025 as compared to 3.16 percent for the first quarter 2024. See the “Net Interest Income” section above for more details on our net interest margin and funding sources. Commercial Banking Segment The Commercial Banking segment is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans. Due to the portfolio’s interest rate characteristics, Commercial Banking is Valley’s operating segment that is most sensitive to movements in market interest rates. Commercial and industrial loans totaled approximately $10.2 billion and represented 20.9 percent of the total loan portfolio at March 31, 2025. Commercial real estate and construction loans totaled $29.1 billion and represented 59.8 percent of the total loan portfolio at March 31, 2025. Average interest earning assets in Commercial Banking segment decreased $2.0 billion to $38.4 billion for the first quarter 2025 as compared to the first quarter 2024. The decrease was mostly due to the bulk sales of certain performing CRE loans during both late March 2024 and the fourth quarter 2024, as well as continued CRE loan repayment activity. Income before income taxes for Commercial Banking decreased $45.1 million to $104.2 million for the first quarter 2025 as compared to the same period of 2024 mainly due to a decrease in net interest income combined with a higher provision for credit losses. Net interest income for this segment decreased $13.5 million to $333.5 million for the first quarter 2025 as compared to the same period in 2024 largely due to a $77.9 million decrease in interest income mainly driven by lower average loan balances in this segment, partially offset by a decrease in interest expense. The provision for credit losses increased $29.2 million to $71.4 million as compared to the same period in 2024 mainly due to higher quantitative reserves allocated to commercial real estate loans and the reserve build required for our continued solid commercial and industrial loan growth. See details in the “Allowance for Credit Losses for Loans ” section of this MD&A. In addition, a $4.1 million decrease in non-interest income, mainly driven by a decrease in net gains on sales of assets and lower swap fees related to commercial lending, also negatively impacted income before taxes for this operating segment for the first quarter 2025. See further details in the “Non-Interest Income” section of this MD&A. The net interest margin for this segment increased 4 basis poin ts to 3.47 percent for the first quarter 2025 as compared to the first quarter 2024 due to a 51 basis point decrease in the cost of our funding sources, largely offset by a 47 basis point decrease in the yield on average loans. Treasury and Corporate Other Treasury and Corporate Other largely consists of the Treasury managed HTM debt securities and AFS debt securities portfolios mainly utilized for the liquidity management needs of our lending segments and income and expense items resulting from support functions not directly attributable to a specific segment. Interest income is generated through investments in various types of securities (mainly comprised of fixed rate securities) and interest-bearing deposits with other banks (primarily the Federal Reserve Bank of New York). Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are 64 allocated from Treasury and Corporate Other to operating segments. Other non-interest income items and general expenses are allocated from Treasury and Corporate Other to each operating segment utilizing a methodology that involves an allocation of operating and funding costs based on each segment's respective mix of average interest earning assets outstanding for the period, number of deposits, or direct allocations to the segments based on the nature of income and expense. U nallocated items included in Treasury and Corporate Other mainly consist of net gains and losses on AFS and HTM securities transactions, amortization of tax credit investments, as well as other non-core items, including FDIC special assessment and corporate restructuring charges. Treasury and Corporate Other's average interest earning assets increased $1.9 billion to $8.2 billion for the first quarter 2025 primarily due to increase in average taxable investments largely resulting from additional purchases of residential mortgage-backed securities classified as AFS over the last 12-month period. For the first quarter 2025 , loss before income taxes totaled $2.4 million compared to $31.5 million of income before taxes for the same period in 2024. The $29.1 million decrease in the pre-tax loss from the first quarter 2024 was mainly driven by a $21.5 million increase in net interest income largely due to the additional interest income generated by higher average taxable investments. In addition, n on-interest expense decreased $7.9 million to $37.0 million for the first quarter 2025 as compared to the same period in 2024 largely due to a $7.4 million decrease in the FDIC insurance special assessment allocated to our Treasury activities . See further details in the “Non-Interest Expense” section of this MD&A. Treasury and Corporate Other's net interest margin increased 93 basis points to 1.44 percent for the first quarter 2025 as compared to the first quarter 2024 due to a 42 basis point increase in the yield on average investments due to the higher yielding new investment securities purchased over the last 12 months coupled with a 51 basis point decrease in the cost of our funding sources. ASSET/LIABILITY MANAGEMENT Interest Rate Risk Our success is largely dependent upon our ability to manage interest rate risk. Interest rate risk can be defined as the exposure of our interest rate sensitive assets and liabilities to the movement in interest rates. Our Asset/Liability Management Committee is responsible for managing such risks and establishing policies that monitor and coordinate our sources and uses of funds. Asset/Liability management is a continuous process due to the constant change in interest rate risk factors. In assessing the appropriate interest rate risk levels for us, management weighs the potential benefit of each risk management activity within the desired parameters of liquidity, capital levels and management’s tolerance for exposure to income fluctuations. Many of the actions undertaken by management utilize fair value analysis and attempt to achieve consistent accounting and economic benefits for financial assets and their related funding sources. We have predominantly focused on managing our interest rate risk by attempting to match the inherent risk and cash flows of financial assets and liabilities. Specifically, management employs multiple risk management activities, such as optimizing the level of new residential mortgage originations retained in our mortgage portfolio through increasing or decreasing loan sales in the secondary market, product pricing levels, the desired maturity levels for new originations, the composition levels of both our interest earning assets and interest bearing liabilities, as well as several other risk management activities. We use a simulation model to analyze net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on various interest rate scenarios over a 12-month period. The model is based on the actual maturity and re-pricing characteristics of rate sensitive assets and liabilities. The model incorporates certain assumptions which management believes to be reasonable regarding the impact of changing interest rates, non-maturity deposit betas, and the prepayment assumptions of certain assets and liabilities as of March 31, 2025. The model assumes immediate changes in interest rates without any proactive change in the composition or size of the balance sheet, or other future actions that management might undertake to mitigate this risk. In the model, the forecasted shape of the yield curve remains static as of March 31, 2025. The impact of interest rate derivatives, such as interest rate swaps, is also included in the model. 65 Our simulation model is based on market interest rates and prepayment speeds prevalent in the market as of March 31, 2025. Although the size of Valley’s balance sheet is forecast to remain static as of March 31, 2025, in our model, the composition is adjusted to reflect new interest earning assets and funding originations coupled with rate spreads utilizing our actual originations during the first quarter 2025. The model utilizes an immediate parallel shift in market interest rates at March 31, 2025. The assumptions used in the net interest income simulation are inherently uncertain. Actual results may differ significantly from those presented in the table below, due to the frequency and timing of changes in interest rates and changes in spreads between maturity and re-pricing categories. Overall, our net interest income is affected by changes in interest rates and cash flows from our loan and investment portfolios. We actively manage these cash flows in conjunction with our liability mix, duration, and interest rates to optimize the net interest income, while structuring the balance sheet in response to actual or potential changes in interest rates. Additionally, our net interest income is impacted by the level of competition within our marketplace. Competition can negatively impact the level of interest rates attainable on loans and increase the cost of deposits, which may result in downward pressure on our net interest margin in future periods. Other factors, including, but not limited to, the slope of the yield curve and projected cash flows will impact our net interest income results and may increase or decrease the level of asset sensitivity of our balance sheet. Convexity is a measure of how the duration of a financial instrument changes as market interest rates change. Potential movements in the convexity of bonds held in our investment portfolio, as well as the duration of the loan portfolio may have a positive or negative impact on our net interest income in varying interest rate environments. As a result, the increase or decrease in forecast net interest income may not have a linear relationship to the results reflected in the table below. Management cannot provide any assurance about the actual effect of changes in interest rates on our net interest income. The following table reflects management’s expectations of the change in our net interest income over the next 12- month period considering the aforementioned assumptions. While an instantaneous and severe shift in interest rates was used in this simulation model, we believe that any actual shift in interest rates would likely be more gradual and would therefore have a more modest impact than shown in the table below. Estimated Change in Future Net Interest Income Changes in Interest Rates Dollar Change Percentage Change (in basis points) ($ in thousands) +300 $ 129,311 7.23 % +200 87,591 4.90 +100 43,924 2.46 –100 (45,444) (2.54) –200 (93,092) (5.21) –300 (135,960) (7.60) As noted in the table above, a 100 basis point immediate decrease in interest rates combined with a static balance sheet where the size, mix, and proportions of assets and liabilities remain unchanged, is projected to decrease net interest income over the next 12-month period by 2.54 percent. Management believes the interest rate sensitivity of our balance sheet remains within a n expected t olerance range at March 31, 2025. However, the level of net interest income sensitivity may increase or decrease in the future as a result of several factors, including potential changes in our balance sheet strategies, the slope of the yield curve and projected cash flows. 66 Liquidity and Cash Requirements Bank Liquidity Liquidity measures Valley's ability to satisfy its current and future cash flow needs. Our objective is to have liquidity available to fulfill loan demands, repay deposits and other liabilities, and execute balance sheet strategies in all market conditions while adhering to internal controls and income targets. Valley's liquidity program is managed by the Treasury Department and routinely monitored by the Asset and Liability Management Committee and Board Risk Committee. Among other actions, the Treasury Department actively monitors Valley's current liquidity profile, sources and stability of funding, availability of assets for pledging or sale, opportunities to gather additional funds, and anticipated future funding needs, including the level of unfunded commitments. The Bank adheres to certain internal liquidity measures including ratios of loans to deposits below 110 percent and wholesale funding to total funding below 25 percent, as summarized in the table below. Management maintains flexibility to temporarily exceed these internal limits in certain operating environments but also strives to outperform these limits when possible. The Bank was in compliance with the foregoing policies at March 31, 2025 . The following table presents Valley's loans to deposits and wholesale funding to total funding ratios at March 31, 2025 and December 31, 2024: March 31, 2025 December 31, 2024 Loans to deposits 97.4 % 97.5 % Wholesale funding to total funding 17.7 18.7 Valley's short and long-term cash requirements include contractual obligations under borrowings, deposits, payments related to leases, capital expenditures and other purchase commitments. In the ordinary course of operations, the Bank also enters into various financial obligations, including contractual obligations that may require future cash payments. Management believes the Bank has the ability to generate and obtain adequate amounts of cash to meet its short-term and long-term obligations as they come due by utilizing various cash resources described below. On the asset side of the balance sheet, the Bank has numerous sources of liquid funds in the form of cash and due from banks, interest bearing deposits with banks (including the FRB of New York) and other sources. The following table summarizes Valley's sources of liquid assets: March 31, 2025 December 31, 2024 (in thousands) Cash and due from banks $ 508,887 $ 411,412 Interest bearing deposits with banks 714,810 1,478,713 Held to maturity debt securities (1) 226,775 220,056 Available for sale debt securities (2) 3,658,704 3,369,724 Loans held for sale 27,377 25,681 Total liquid assets $ 5,136,553 $ 5,505,586 (1) Represents securities that are maturing within 90 days or would otherwise qualify as maturities if sold (i.e., 85 percent of original cost basis has been repaid) within the held to maturity debt security portfolio. (2) Includes a pproximately $902.5 million and $1.8 billion of various investment securities that were pledged to counterparties to support our earning asset funding strategies at March 31, 2025 and December 31, 2024, respectively. Total liquid assets represented 9.1 percent and 9.6 percent of interest earning assets at March 31, 2025 and December 31, 2024, respectively. T he level of cash liquidity on the balance sheet decreased to a more normalized 67 level at March 31, 2025 from December 31, 2024 as part of our liquidity management, including the repayment of maturing higher cost indirect customer CDs during the first quarter 2025 as noted elsewhere in this MD&A. Other sources of funds on the asset side are derived from scheduled loan payments of principal and interest, as well as prepayments received. At March 31, 2025, estimated cash inflows from total loans are projected to be approximatel y $16.2 billion over the next 12-month period. As a contingency plan for any liquidity constraints, liquidity could also be derived from the sale of conforming residential mortgages from our loan portfolio or alleviated from the temporary curtailment of lending activities. We anticipate the receipt of approximately $954.0 million in principal payments from securities in the total investment portfolio at March 31, 2025 over the next 12-month period due to normally scheduled principal repayments and expected prepayments of certain securities, primarily residential mortgage-backed securities. On the liability side of the balance sheet, we utilize multiple sources of funds to meet liquidity needs, including commercial and consumer deposits, fully FDIC-insured indirect customer deposits, collateralized municipal deposits, and short-term and long-term borrowings. Our core deposit base, which generally excludes all fully insured indirect customer deposits, as well as retail certificates of deposit over $250 thousand, represents the largest of these source s. Average core deposits totaled approximately $41.5 billion and $39.1 billion for the three months ended March 31, 2025 and for the year ended December 31, 2024, respectively, representing 72.9 percent and 68.3 percent of average interest earning assets for the respective periods. The level of interest bearing deposits is affected by interest rates offered, which is often influenced by our need for funds, rates prevailing in the capital markets, competition, and the need to manage interest rate risk sensitivity. In addition to customer deposits, the Bank has access to readily available borrowing sources to supplement its current and projected funding needs. The following table presents short-term borrowings outstanding at March 31, 2025 and December 31, 2024: March 31, 2025 December 31, 2024 (in thousands) Securities sold under agreements to repurchase $ 59,026 $ 72,718 Total short-term borrowings $ 59,026 $ 72,718 The following table summarizes the Bank's estimated unused available non-deposit borrowing capacities at March 31, 2025 and December 31, 2024: March 31, 2025 December 31, 2024 (in thousands) FHLB borrowing capacity* $ 5,861,000 $ 5,853,596 Unused FRB discount window* 10,224,000 11,509,000 Unused federal funds lines available from commercial banks 1,610,000 2,140,000 Unencumbered investment securities 4,727,166 3,415,834 Total $ 22,422,166 $ 22,918,430 * Used and unused FHLB and FRB borrowings are collateralized by certain pledged securities, including but not limited to U.S. government and agency mortgage-backed securities and blanket qualifying first lien on certain real estate and residential mortgage secured loans. Corporation Liquidity Valley’s recurring cash requirements primarily consist of dividends to preferred and common shareholders and interest expense on subordinated notes and junior subordinated debentures issued to capital trusts. As part of our ongoing asset/liability management strategies, Valley could also use cash to repurchase shares of its outstanding common stock under its share repurchase program or redeem its callable junior subordinated debentures and 68 subordinated notes. Valley's cash needs are routinely satisfied by dividends collected from the Bank. Projected cash flows from the Bank are expected to be adequate to pay preferred and common dividends, if declared, and interest expense payable to subordinated note holders and capital trusts, given the current capital levels and current profitable operations of the Bank. In addition to dividends received from the Bank, Valley can satisfy its cash requirements by utilizing its own cash and potential new funds borrowed from outside sources or capital issuances, such as the undistributed net proceeds of our most recent common stock offering in November 2024. Valley also has the right to defer interest payments on the junior subordinated debentures, and therefore distributions on its trust preferred securities for consecutive quarterly periods of up to five years, but not beyond the stated maturity dates, and subject to other conditions. Investment Securities Portfolio As of March 31, 2025, we had $74.4 million, $3.7 billion, and $3.5 billion in equity, AFS debt and HTM debt securities, respectively. The AFS and HTM debt securities portfolios, which comprise the majority of the securities we own, include: U.S. Treasury securities, U.S. government agency securities, tax-exempt and taxable issuances of states and political subdivisions, residential mortgage-backed securities, single-issuer trust preferred securities principally issued by bank holding companies and high quality corporate bonds. Among other securities, our AFS debt securities include securities such as bank issued and other corporate bonds, as well as municipal special revenue bonds, which may pose a higher risk of future impairment charges to us as a result of the uncertain economic environment and its potential negative effect on the future performance of the security issuers. The equity securities consist of two publicly traded mutual funds, CRA investments and several other equity investments that we have made in companies that develop new financial technologies and in partnerships that invest in such companies. Our CRA and other equity investments are a mix of both publicly traded entities and privately held entities. The primary purpose of our AFS and HTM investment portfolios is to provide a source of earnings and liquidity, as well as serve as a tool for managing interest rate risk. The decision to purchase or sell securities is based upon the current assessment of long and short-term economic and financial conditions, including the interest rate environment and other components of statement of financial condition. See additional information under “Interest Rate Sensitivity,” “Liquidity and Cash Requirements” and “Capital Adequacy” sections elsewhere in this MD&A. We continually evaluate our investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, and the level of interest rate risk to which we are exposed. These evaluations may cause us to change the level of funds we deploy into investment securities, change the composition of our investment securities portfolio, and change the proportion of investments primarily made into the AFS and HTM debt securities portfolios. Allowance for Credit Losses and Impairment Analysis Available for sale debt securities. AFS debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. In assessing whether a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes. We have evaluated all AFS debt securities that are in an unrealized loss position as of March 31, 2025 and December 31, 2024 and determined that the declines in fair value were mainly attributable to interest rates, credit spreads, market volatility and liquidity conditions, not credit quality or other factors . There was no impairment recognized within the AFS debt securities portfolio during the three months ended March 31, 2025 and March 31, 2024. 69 Valley does not intend to sell any of its AFS debt securities in an unrealized loss position prior to recovery of our 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 our amortized cost basis. None of the AFS debt securities were past due as of March 31, 2025 and there was no allowance for credit losses for AFS debt securities at March 31, 2025 and December 31, 2024 . Held to maturity debt securities. Valley estimates the expected credit losses on HTM debt securities that have loss expectations using a discounted cash flow model developed by a third party. Valley has a zero-loss expectation for certain securities within the HTM portfolio, including U.S. Treasury securities, U.S. 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, we utilize a third- party discounted cash flow model. The assumptions used in the model for pools of securities with common risk characteristics include the historical lifetime probability of default and severity of loss in the event of default, with the model incorporating several economic cycles of loss history data to calculate expected credit losses given default at the individual security level. HTM debt securities were carried net of an allowance for credit losses totaling approximately $633 thousand and $647 thousand at March 31, 2025 and December 31, 2024, respectively. There were no net charge-offs of HTM debt securities during the three months ended March 31, 2025 and March 31, 2024. Investment grades. The investment grades in the table below reflect the most current independent analysis performed by third parties of each security as of the date presented and not necessarily the investment grades at the date of our purchase of the securities. For many securities, the rating agencies may not have performed an independent analysis of the tranches owned by us, but rather an analysis of the entire investment pool. For this and other reasons, we believe the assigned investment grades may not accurately reflect the actual credit quality of each security and should not be viewed in isolation as a measure of the quality of our investment portfolio. The following table presents the available for sale and held to maturity debt investment securities portfolios by investment grades at March 31, 2025: March 31, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in thousands) Available for sale investment grades: * AAA/AA/A Rated $ 3,582,382 $ 16,263 $ (150,565) $ 3,448,080 BBB Rated 96,233 63 (2,320) 93,976 Not rated 125,545 248 (9,145) 116,648 Total $ 3,804,160 $ 16,574 $ (162,030) $ 3,658,704 Held to maturity investment grades: * AAA/AA/A Rated $ 3,383,621 $ 5,049 $ (442,107) $ 2,946,563 BBB Rated 6,000 — (124) 5,876 Not rated 156,340 8 (11,153) 145,195 Total $ 3,545,961 $ 5,057 $ (453,384) $ 3,097,634 Allowance for credit losses 633 — — 633 Total, net of allowance for credit losses $ 3,545,328 $ 5,057 $ (453,384) $ 3,097,001 * Rated using external rating agencies. Ratings categories include entire range. For example, “A Rated” includes A+, A, and A-. Split rated securities with two ratings are categorized at the higher of the rating levels. The unrealized losses in the AAA/AA/A rated categories of both the AFS and HTM debt securities portfolios (in the above table) were largely related to residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac and continue to be driven by the higher market interest rate environment. The investment securities AFS and HTM portfolios included investments with carrying values of $116.6 million and $156.3 million, respectively, at March 31, 2025 not rated by the rating agencies with aggregate unrealized losses of $9.1 million and 70 $11.2 million, respectively. The unrealized losses within non-rated AFS debt securities mostly related to several large corporate bonds negatively impacted by rising interest rates and not changes in underlying credit. The unrealized losses within non-rated HTM debt securities mainly related to four single-issuer bank trust preferred issuances with a combined amortized cost of $36.1 million with $6.6 million gross unrealized losses and several corporate debt securities that were negatively impacted by rising interest rates, and not changes in their underlying credit. See Note 6 to the consolidated financial statements for additional information regarding our investment securities portfolio. Loan Portfolio The following table reflects the composition of the loan portfolio as of the dates presented: March 31, 2025 December 31, 2024 ($ in thousands) Loans Commercial and industrial $ 10,150,205 $ 9,931,400 Commercial real estate: Non-owner occupied 11,945,222 12,344,355 Multifamily (1) 8,420,385 8,299,250 Owner occupied 5,722,014 5,886,620 Total 26,087,621 26,530,225 Construction 3,026,935 3,114,733 Total commercial real estate 29,114,556 29,644,958 Residential mortgage 5,636,407 5,632,516 Consumer: Home equity 602,161 604,433 Automobile 2,041,227 1,901,065 Other consumer 1,112,572 1,085,339 Total consumer loans 3,755,960 3,590,837 Total loans (2) $ 48,657,128 $ 48,799,711 As a percentage of total loans: Commercial and industrial 20.9 % 20.4 % Commercial real estate: Non-owner occupied 24.5 25.2 Multifamily 17.3 17.0 Owner occupied 11.8 12.1 Construction 6.2 6.4 Total commercial real estate 59.8 60.7 Residential mortgage 11.6 11.5 Consumer loans 7.7 7.4 Total 100.0 % 100.0 % (1) Includes loans collateralized by properties that are greater than 50 percent rent regulated totaling approximately $577 million and $553 million at March 31, 2025 and December 31, 2024, respectively. (2) Includes net unearned discount and deferred loan fees of $30.1 million and $45.3 million at March 31, 2025 and December 31, 2024, respectively. Total loans decreased $142.6 million, or 1.2 percent on an annualized basis, to $48.7 billion at March 31, 2025 from December 31, 2024 mostly due to normal repayment activity and selective originations within the commercial real estate loan portfolio. Loans held for sale are presented separately from total loans on the consolidated statements of 71 financial condition and totaled $27.4 million and $25.7 million at March 31, 2025 and December 31, 2024 , respectively. Commercial and industrial loans grew by $218.8 million, or 8.8 percent on an annualized basis, to $10.2 billion at March 31, 2025 from December 31, 2024 largely due to our continued strategic focus on growth within this category. New loan volumes continue to be a diverse range of relationship-driven middle market businesses largely located in our primary markets, as well as some nationwide businesses. Commercial real estate loans (excluding construction loans) decreased $442.6 million to $26.1 billion at March 31, 2025 from December 31, 2024. The decrease was largely driven by repayment activity and continued selective origination activity within this portfolio. As a result, our CRE loan concentration ratio declined to approximately 353 percent at March 31, 2025 from 362 percent at December 31, 2024. The decreases in non-owner occupied and owner occupied categories were partially offset by a $121.1 million increase in multifamily portfolio mainly due to the migration of several completed construction loan projects to permanent financing. Overall, commercial real estate loans are well-diversified across our footprint areas in Florida, Alabama, New Jersey, New York and Manhattan with a combined weighted average loan to value ratio of 58 percent and debt service coverage ratio of 1.67 at March 31, 2025. Both of these ratios remained relatively unchanged from December 31, 2024. Commercial real estate collateralized by office buildings totaled approximately $3.0 billion at March 31, 2025 as compared to $3.1 billion at December 31, 2024. Our loans collateralized by office buildings had a combined weighted average loan to value rate of 62 percent and debt service coverage ratio of 1.77 at March 31, 2025. Both of these ratios also remained relatively unchanged from December 31, 2024. Construction loans decreased $87.8 million to $3.0 billion at March 31, 2025 from December 31, 2024 mainly due to the migration of completed projects to permanent financing within the multifamily loan category during the first quarter 2025, partially offset by new advances. Additionally, a non-performing loan totaling $10.2 million, net of $638 thousand of charge-offs, was transferred to loans held for sale at March 31, 2025. Residential mortgage loans totaled $5.6 billion at March 31, 2025 and increased only $3.9 million from December 31, 2024 as new volumes of loans held for investment were mostly offset by normal repayment activity. New and refinanced residential mortgage loan originations totaled $132.8 million for the first quarter 2025 as compared to $182.0 million and $115.0 million for the fourth quarter 2024 and first quarter 2024, respectively. We retained approximately 71.8 percent and 71.3 percent of the total residential mortgage originations in our held for investment loan portfolio during the first quarter 2025 and the fourth quarter 2024, respectively. Consumer loans increased $165.1 million, or 18.4 percent on an annualized basis, to $3.8 billion at March 31, 2025 as compared to December 31, 2024 mainly due to increases in the automobile and other consumer loan portfolios. Automobile loans increased by $140.2 million, or 29.5 percent on an annualized basis, to $2.0 billion at March 31, 2025 as compared to December 31, 2024 mainly due to (i) efforts to expand our indirect auto dealer network within our market areas, (ii) continued strong high-quality consumer demand that was likely elevated further by the potential negative impact of tariffs on future auto prices, and (iii) low levels of prepayment activity within the portfolio during the first quarter 2025. Auto loan originations totaled $375.5 million for the first quarter 2025 as compared to $291.3 million for the fourth quarter 2024. Other consumer loans increased $27.2 million to $1.1 billion at March 31, 2025 as compared to December 31, 2024 primarily due to higher demand and usage of collateralized personal lines of credit. A significant part of our lendin g is in northern and central New Jersey, New York City, Long Island and Florida. To mitigate our geographic risks , we make efforts to maintain a diversified portfolio as to type of borrower and loan to guard against a potential downward turn in any one economic sector. We continue to proactively diversify our loan portfolio by reducing new originations of certain types of commercial real estate lending, such as non-owner occupied and multifamily loans through highly selective new loan origination. We also remain significantly focused on the growth of our commercial and industrial loan portfolio. In Valley's Annual Report, we provided guidance that we anticipated loan growth for 2025, net of continued runoff from scheduled maturities of commercial real estate non-owner occupied and multifamily loans, in the range of 3 to 72 5 percent as compared to total loans of $48.8 billion at December 31, 2024. Based upon our current projections, we now expect total loan growth for 2025 to fall within the low-end of the 3 to 5 percent range due to the current level of competition for high quality commercial loans, an expected decline in business investment due to the impact of tariffs and any retaliatory actions, as well as other factors. However, there can be no assurance that we will achieve such growth levels given the potential for unforeseen changes in the market and other conditions detailed in our risk factors set forth under Item 1A. Risk Factors of Valley's Annual Report. Non-performing Assets NPAs include non-accrual loans, OREO, and other repossessed assets (which consist of automobiles and taxi medallions) at March 31, 2025. Loans are generally placed on non-accrual status when they become past due in excess of 90 days as to payment of principal or interest and/or the full and timely collection of principal and interest becomes uncertain. Exceptions to the non-accrual policy may be permitted if the loan is sufficiently collateralized and in the process of collection. OREO is acquired through foreclosure on loans secured by land or real estate. OREO and other repossessed assets are reported at lower of cost or fair value, less estimated cost to sell. Our NPAs decreased $17.1 million to $356.2 million at March 31, 2025 as compared to December 31, 2024 mainly due to lower non-accrual commercial and industrial loans coupled with a decrease in OREO, partially offset by an increase in non-accrual commercial real estate loans. NPAs as a percentage of total loans and NPAs totaled 0.73 percent and 0.76 percent at March 31, 2025 and December 31, 2024, respectively (as shown in the table below). We believe our total NPAs have remained relatively low as a percentage of the total loan portfolio and NPAs, which is reflective of our consistent approach to the loan underwriting criteria for both Valley originated loans and loans purchased from third parties. For additional details, see the “Credit quality indicators” section in Note 7 to the consolidated financial statements. Our lending strategy is based on underwriting standards designed to maintain high credit quality, and we remain optimistic regarding the overall future performance of our loan portfolio. During the three months ended March 31, 2025, the majority of our borrowers continued to demonstrate resilience despite the impact of higher borrowing costs, inflation, labor costs and other factors. We continue to proactively monitor our commercial loans for potential negative trends/borrower weakness due to the current operating environment, including the potential negative impact of the recent tariff actions, and internally risk rate them accordingly. Based on our most recent portfolio review, we believe that we have relatively modest direct exposure to customer businesses most influenced by changing tariff policies. However, management cannot provide assurance that the NPAs will not increase from the levels reported at March 31, 2025 due to the aforementioned or other factors potentially impacting our lending customers. 73 The following table sets forth by loan category accruing past due and NPAs at the dates indicated in conjunction with our asset quality ratios: March 31, 2025 December 31, 2024 ($ in thousands) Accruing past due loans: 30 to 59 days past due: Commercial and industrial $ 3,609 $ 2,389 Commercial real estate 170 20,902 Residential mortgage 16,747 21,295 Total consumer 12,887 12,552 Total 30 to 59 days past due 33,413 57,138 60 to 89 days past due: Commercial and industrial 420 1,007 Commercial real estate — 24,903 Residential mortgage 7,700 5,773 Total consumer 2,408 4,484 Total 60 to 89 days past due 10,528 36,167 90 or more days past due: Commercial and industrial — 1,307 Residential mortgage 6,892 3,533 Total consumer 864 1,049 Total 90 or more days past due 7,756 5,889 Total accruing past due loans $ 51,697 $ 99,194 Non-accrual loans: Commercial and industrial $ 110,146 $ 136,675 Commercial real estate 172,011 157,231 Construction 24,275 24,591 Residential mortgage 35,393 36,786 Total consumer 4,626 4,215 Total non-accrual loans 346,451 359,498 Other real estate owned (OREO) 7,714 12,150 Other repossessed assets 2,054 1,681 Total non-performing assets (NPAs) $ 356,219 $ 373,329 Total non-accrual loans as a % of loans 0.71 % 0.74 % Total NPAs as a % of loans and NPAs 0.73 0.76 Total accruing past due and non-accrual loans as a % of loans 0.82 0.94 Allowance for loan losses as a % of non-accrual loans 166.89 155.45 Loans 30 to 59 days past due decreased $23.7 million to $33.4 million at March 31, 2025 as compared to December 31, 2024 largely due to a previously reported delinquent commercial real estate loan totaling $15.1 million that was current to its contractual payments at March 31, 2025, a $2.4 million commercial real estate loan that was reclassified to the non-accrual category during the first quarter 2025, as well as a general improvement in residential mortgage loan delinquencies in this category. Loans 60 to 89 days past due decreased $25.6 million to $10.5 million at March 31, 2025 as compared to December 31, 2024 mostly due to the renewal of an $18.6 million matured performing commercial real estate loan reported in this delinquency category at December 31, 2024 and a $4.5 million commercial real estate loan that was reclassified to the non-accrual category during the first quarter 2025. 74 Loans 90 days or more past due and still accruing interest increased $1.9 million to $7.8 million at March 31, 2025 as compared to December 31, 2024 mainly due to an increase in residential mortgage loans delinquencies. All loans 90 days or more past due and still accruing interest are well-secured and in the process of collection. Non-accrual loans decreased $13.0 million to $346.5 million at March 31, 2025 as compared to $359.5 million at December 31, 2024, largely driven by partial charge-offs of two non-performing commercial and industrial loan relationships during the first quarter 2025, partially offset by a moderate increase in non-performing commercial real estate loans at March 31, 2025. Non-accrual commercial and industrial loans decreased $26.5 million at March 31, 2025 as compared to December 31, 2024 largely driven by a $24.1 million of partial and full charge-offs during the first quarter 2025 related to two non-performing loan relationships with combined allocated reserves of $16.0 million at December 31, 2024. Non-accrual commercial real estate loans increased $14.8 million at March 31, 2025 as compared to December 31, 2024 mostly driven by additional non-performing loan relationships, including two loan relationships totaling $6.9 million that were reclassified from the aforementioned past due categories during the first quarter 2025. Non-performing taxi medallion loans included in non-accrual commercial and industrial loans totaled $49.2 million at March 31, 2025 and had related reserves of $25.6 million, or 52.1 percent of such loans, within the allowance for loan losses as compared to $49.5 million of loans with related reserves of $25.8 million at December 31, 2024 . Further potential declines in the market valuation of taxi medallions and the current operating environment mainly within New York City may negatively impact the performance of this portfolio. OREO decreased $4.4 million to $7.7 million at March 31, 2025 from December 31, 2024, mostly due to the sale of one commercial real estate property, which resulted in a $2.9 millio n loss f or the first quarter 2025 . See Note 7 to the consolidated financial statements for additional information. Although the timing of collection is uncertain, management believes that the majority of the non-accrual loans at March 31, 2025 are well secured and largely collectable, based in part on our quarterly review of collateral dependent loans and the valuation of the underlying collateral, if applicable. Any estimated shortfall in the net realizable value for collateral dependent loans is charged-off when a loan is 90 or 120 days past due or sooner if it is probable that a loan may not be fully collectable. For performing non-accrual loans, the collateral valuation shortfall results in an allocation of specific reserves within our allowance for credit losses for loans. Allowance for Credit Losses for Loans The ACL for loans includes the allowance for loan losses and the reserve for unfunded credit commitments. Under CECL, our methodology to establish the allowance for loan losses has two basic components: (i) a collective reserve component for estimated expected credit losses for pools of loans that share common risk characteristics and (ii) an individually evaluated reserve component for loans that do not share risk characteristics, consisting of collateral dependent loans. Valley also maintains a separate allowance for unfunded credit commitments mainly consisting of undisbursed non-cancellable lines of credit, new loan commitments and commercial standby letters of credit. Valley estimates the collective ACL using a current expected credit losses methodology which is based on relevant information about historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the loan balances. In estimating the component of the allowance on a collective basis, we use a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by using probability of default and loss given default metrics. The probability of default and loss given default metrics are adjusted using a scaling factor to incorporate a full economic cycle. The expected life of loan loss percentages are determined by analyzing the migration of loans within the commercial and industrial loan categories from performing to loss by credit quality rating or delinquency categories using historical life-of-loan data for each loan portfolio pool, and by assessing the severity of loss based on the aggregate net lifetime losses incurred. The expected credit losses based on loss history are adjusted for qualitative factors. Among other things, these adjustments include and account for differences in: (i) the impact of the reasonable and supportable economic forecast, relative probability weightings and economic variables under each scenario and reversion period, (ii) other asset specific risks to the extent that they do not exist in the historical loss 75 information, and (iii) net expected recoveries of charged-off loan balances. These adjustments are based on qualitative factors not reflected in the transition matrix but are likely to impact the measurement of estimated credit losses. The expected lifetime loss rate is the life of loan loss percentage from the transition matrix model plus the impact of the adjustments for qualitative factors. The expected credit losses are the product of multiplying the model’s expected lifetime loss rate by the exposure at default at period end on an undiscounted basis. Valley utilizes a two-year reasonable and supportable forecast period followed by a one-year period over which estimated losses revert to historical loss experience on a straight-line basis for the remaining life of the loan. The forecast consists of multi-scenario economic forecasts to estimate future credit losses and are governed by a cross-functional committee. The committee meets each quarter to determine which economic scenarios developed by Moody's will be incorporated into the model, as well as the relative probability weightings of the selected scenarios, based upon all readily available information. The model projects economic variables under each scenario based on detailed statistical analyses. We have identified and selected key variables that most closely correlated to our historical credit performance, which include GDP, unemployment and the Case-Shiller Home Price Index. Valley maintained the majority of its probability weighting used in the economic forecast to the Moody’s Baseline scenario with less emphasis on the S-3 downside and S-1 upside scenarios. The probability weightings were unchanged from December 31, 2024. At March 31, 2025, the standalone Moody's Baseline scenario, reflected a moderately weaker outlook as compared to December 31, 2024 in terms of most metrics highlighted below. At March 31, 2025, Moody's Baseline forecast included the following specific assumptions: • GDP expansion by about 1.7 percent in the second quarter 2025; • Unemployment of 4.0 percent in the second quarter 2025 and 4.1 to 4.4 percent over the remainder of the forecast period ending in the first quarter 2027; • The target federal funds rate range of 4.25 - 4.50 percent was unchanged from December 31, 2024 with two possible 25 basis point cuts in 2025; • Inflation was at 2.4 percent in the March 31, 2025 driven by elevated shelter inflation. The inflation rate is expected to continue to grow at a slow rate during the year and to reach 2.7 percent by the end of 2025 and is projected to be around 2.3 percent in 2027; and • A decline in business investment due to deceleration in GDP and the potential negative impact of tariffs and other uncertainty related to ongoing trade wars. See more details regarding our allowance for credit losses for loans in Note 7 to the consolidated financial statements. 76 The table below summarizes the relationship among loans, loans charged-off, loan recoveries, the provision for credit losses and the allowance for credit losses for loans for the periods indicated: Three Months Ended March 31, 2025 December 31, 2024 March 31, 2024 ($ in thousands) Allowance for credit losses for loans Beginning balance $ 573,328 $ 564,671 $ 465,550 Loans charged-off: Commercial and industrial (28,456) (31,784) (14,293) Commercial real estate (12,260) (69,218) (1,204) Construction (1,163) — (7,594) Residential mortgage — (29) — Total consumer (2,140) (2,621) (1,809) Total loans charged-off (44,019) (103,652) (24,900) Charged-off loans recovered: Commercial and industrial 810 1,452 682 Commercial real estate 249 3,138 241 Residential mortgage 168 81 25 Total consumer 843 673 397 Total loans recovered 2,070 5,344 1,345 Total net loan charge-offs (41,949) (98,308) (23,555) Provision charged for credit losses 62,675 106,965 45,274 Ending balance $ 594,054 $ 573,328 $ 487,269 Components of allowance for credit losses for loans: Allowance for loan losses $ 578,200 $ 558,850 $ 469,248 Allowance for unfunded credit commitments 15,854 14,478 18,021 Allowance for credit losses for loans $ 594,054 $ 573,328 $ 487,269 Components of provision for credit losses for loans: Provision for credit losses for loans $ 61,299 $ 108,831 $ 46,723 Provision (credit) for unfunded credit commitments 1,376 (1,866) (1,449) Total provision for credit losses for loans $ 62,675 $ 106,965 $ 45,274 Allowance for credit losses for loans as a % of total loans 1.22 % 1.17 % 0.98 % 77 The following table presents the relationship among net loans charged-off and recoveries, and average loan balances outstanding for the periods indicated: Three Months Ended March 31, 2025 December 31, 2024 March 31, 2024 ($ in thousands) Net loan (charge-offs) recoveries Commercial and industrial $ (27,646) $ (30,332) $ (13,611) Commercial real estate (12,011) (66,080) (963) Construction (1,163) — (7,594) Residential mortgage 168 52 25 Total consumer (1,297) (1,948) (1,412) Total $ (41,949) $ (98,308) $ (23,555) Average loans outstanding Commercial and industrial $ 9,996,024 $ 9,907,638 $ 9,235,707 Commercial real estate 26,328,971 26,845,025 28,259,701 Construction 3,054,230 3,779,916 3,693,343 Residential mortgage 5,639,313 5,685,802 5,600,135 Total consumer 3,636,383 3,511,749 3,457,705 Total $ 48,654,921 $ 49,730,130 $ 50,246,591 Annualized net loan charge-offs (recoveries) to average loans outstanding Commercial and industrial 1.11% 1.22% 0.59% Commercial real estate 0.18 0.98 0.01 Construction 0.15 0.00 0.82 Residential mortgage (0.01) 0.00 0.00 Total consumer 0.14 0.22 0.16 Total annualized net loan charge-offs to total average loans outstanding 0.34 0.79 0.19 Net loan charge-offs totaled $41.9 million for the first quarter 2025 as compared to $98.3 million and $23.6 million for the fourth quarter 2024 and first quarter 2024, respectively. Gross loan charge-offs for the first quarter 2025 included $24.1 million of partial and full charge-offs related to two non-performing commercial and industrial loan relationships with combined allocated reserves of $16.0 million at December 31, 2024. Net loan charge-offs (as presented in the above table) declined from the fourth quarter 2024 and continued to trend within management's expectations for the credit quality of the loan portfolio at March 31, 2025. 78 The following table summarizes the allocation of the allowance for credit losses for loans to loan portfolio categories and the allocations as a percentage of each loan category: March 31, 2025 December 31, 2024 March 31, 2024 Allowance Allocation Allocation as a % of Loan Category Allowance Allocation Allocation as a % of Loan Category Allowance Allocation Allocation as a % of Loan Category ($ in thousands) Loan Category: Commercial and industrial loans $ 184,700 1.82 % $ 173,002 1.74 % $ 138,593 1.52 % Commercial real estate loans: Commercial real estate 266,938 1.02 251,351 0.95 209,355 0.74 Construction 54,724 1.81 52,797 1.70 56,492 1.59 Total commercial real estate loans 321,662 1.10 304,148 1.03 265,847 0.84 Residential mortgage loans 48,906 0.87 58,895 1.05 44,377 0.79 Consumer loans: Home equity 3,401 0.56 3,379 0.56 2,809 0.50 Auto and other consumer 19,531 0.62 19,426 0.65 17,622 0.60 Total consumer loans 22,932 0.61 22,805 0.64 20,431 0.58 Allowance for loan losses 578,200 1.19 558,850 1.15 469,248 0.94 Allowance for unfunded credit commitments 15,854 14,478 18,021 Total allowance for credit losses for loans $ 594,054 $ 573,328 $ 487,269 Allowance for credit losses for loans as a % of total loans 1.22 % 1.17 % 0.98 % The allowance for credit losses for loans, comprised of our allowance for loan losses and unfunded credit commitments, as a percentage of total loans was 1.22 percent at March 31, 2025, 1.17 percent at December 31, 2024, and 0.98 percent at March 31, 2024. For the first quarter 2025, the provision for credit losses for loans totaled $62.7 million as compared to $107.0 million and $45.3 million for the fourth quarter 2024 and first quarter 2024, respectively. The first quarter 2025 provision reflects, among other factors, the impact of loan charge-offs, increased quantitative reserves and continued growth in the commercial and industrial loan portfolio, partially offset by a decrease in specific reserves associated with collateral dependent loans at March 31, 2025. Capital Adequacy A significant measure of the strength of a financial institution is its shareholders’ equity. At March 31, 2025 and December 31, 2024, shareholders' equity totaled approximately $7.5 billion and $7.4 billion, respectively, which represented 12.1 percent and 11.9 percent of total assets, respectively. During the three months ended March 31, 2025, total shareholders’ equity increased by approximately $64.8 million primarily due to the following: • net income of $106.1 million, • other comprehensive income of $27.1 million, • a $3.2 million increase attributable to the effect of our stock incentive plan, partially offset by • cash dividends declared on common and preferred stock totaling a combined $69.4 million and • repurchases of $2.2 million of our common stock held in treasury stock. Valley and the Bank are subject to the regulatory capital requirements administered by the FRB and the OCC. Quantitative measures established by regulation to ensure capital adequacy require Valley and the Bank to maintain 79 minimum amounts and ratios of common equity Tier 1 capital, total and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets, as defined in the regulations. Valley is required to maintain a common equity Tier 1 capital to risk-weighted assets ratio of 4.5 percent, Tier 1 capital to risk-weighted assets ratio of 6.0 percent, ratio of total capital to risk-weighted assets of 8.0 percent, and a minimum leverage ratio of 4.0 percent, plus a 2.5 percent capital conservation buffer added to the minimum requirements for capital adequacy purposes. As of March 31, 2025 and December 31, 2024, Valley and Valley National Bank exceeded all capital adequacy requirements (see table below). The following table presents Valley’s and Valley National Bank’s actual capital positions and ratios under Basel III risk-based capital guidelines at March 31, 2025 and December 31, 2024: Actual Minimum Capital Requirements To Be Well Capitalized Under Prompt Corrective Action Provision Amount Ratio Amount Ratio Amount Ratio ($ in thousands) As of March 31, 2025 Total Risk-based Capital Valley $ 6,775,675 13.91 % $ 5,114,800 10.50 % N/A N/A Valley National Bank 6,685,727 13.74 5,110,514 10.50 $ 4,867,156 10.00 % Common Equity Tier 1 Capital Valley 5,261,305 10.80 3,409,867 7.00 N/A N/A Valley National Bank 6,149,462 12.63 3,407,009 7.00 3,163,651 6.50 Tier 1 Risk-based Capital Valley 5,615,372 11.53 4,140,553 8.50 N/A N/A Valley National Bank 6,149,462 12.63 4,137,083 8.50 3,163,651 8.00 Tier 1 Leverage Capital Valley 5,615,372 9.41 2,387,732 4.00 N/A N/A Valley National Bank 6,149,462 10.31 2,385,981 4.00 2,982,476 5.00 As of December 31, 2024 Total Risk-based Capital Valley $ 6,703,186 13.87 % $ 5,076,004 10.50 % N/A N/A Valley National Bank 6,535,892 13.53 5,071,696 10.50 $ 4,830,187 10.00 % Common Equity Tier 1 Capital Valley 5,230,632 10.82 3,384,002 7.00 N/A N/A Valley National Bank 6,041,434 12.51 3,381,131 7.00 3,139,621 6.50 Tier 1 Risk-based Capital Valley 5,584,699 11.55 4,109,146 8.50 N/A N/A Valley National Bank 6,041,434 12.51 4,105,659 8.50 3,864,149 8.00 Tier 1 Leverage Capital Valley 5,584,699 9.16 2,438,649 4.00 N/A N/A Valley National Bank 6,041,434 9.91 2,438,511 4.00 3,048,139 5.00 For regulatory capital purposes, in accordance with the Federal Reserve Board’s final rule as of August 26, 2020, we deferred 100 percent of the CECL Day 1 impact to shareholders' equity plus 25 percent of the reserve build (i.e., provision for credit losses less net charge-offs) for a two-year period ending January 1, 2022. On January 1, 2022, the deferral amount totaling $47.3 million after-tax started to be phased-in by 25 percent and increased 25 percent per year until fully phased-in on January 1, 2025. As of March 31, 2025, the full deferral amount was recognized as 80 a reduction to regulatory capital. As a result, the full impact decreased our risk-based capital ratios by approximately 11 basis points at March 31, 2025 compared to 9 basis points at December 31, 2024. Typically, our primary source of capital growth is through retention of earnings. Our rate of earnings retention is derived by dividing undistributed earnings per common share by earnings (or net income available to common shareholders) per common share. Our retention ratio was approximately 38.9 percent for the three months ended March 31, 2025 as compared to 36.2 percent for the full year ended December 31, 2024. Cash dividends declared amounted to $0.11 per common share for each of the three months ended March 31, 2025 and 2024. The Board is committed to examining and weighing relevant facts and considerations, including its commitment to shareholder value, each time it makes a cash dividend decision. The Federal Reserve has cautioned all bank holding companies about distributing dividends which may reduce the level of capital or not allow capital to grow considering the increased capital levels required under the Basel III rules. Prior to the date of this filing, Valley has received no objection or adverse guidance from the Federal Reserve or the OCC regarding the current level of its quarterly common stock dividend. However, the Federal Reserve has reiterated its long-standing guidance in recent years that banking organizations should consult them before declaring dividends in excess of earnings for the corresponding quarter. See Item 1A. Risk Factors of Valley's Annual Report for additional information. Off-Balance Sheet Arrangements, Contractual Obligations and Other Matters For a discussion of Valley’s off-balance sheet arrangements and contractual obligations see information included in Valley’s Annual Report in the MD&A section “Liquidity and Cash Requirements” and Notes 1 2 and 13 to the consolidated financial statements included in this report. Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices, and commodity prices. Valley’s market risk is composed primarily of interest rate risk. See pa ge 65 for a discussion of interest rate risk.