UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended ~~September 30, 2022~~March 31, 2023


☐			Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-11277

Valley National Bancorp

(Exact name of registrant as specified in its charter)

New Jersey

22-2477875

(State or other jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification Number)

One Penn Plaza

New York,

10119

(Address of principal executive office)

(Zip code)

973-305-8800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols	Name of exchange on which registered
Common Stock, no par value	VLY	The Nasdaq Stock Market LLC
Non-Cumulative Perpetual Preferred Stock, Series A, no par value	VLYPP	The Nasdaq Stock Market LLC
Non-Cumulative Perpetual Preferred Stock, Series B, no par value	VLYPO	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange ~~Act (check one):~~Act:

Large accelerated filer

☒

Accelerated filer

☐

Smaller reporting company

☐

Non-accelerated filer

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock (no par value), of which ~~506,356,727~~507,875,088 shares were outstanding as of ~~November 7, 2022.~~May 3, 2023.

TABLE OF CONTENTS


		Page Number
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022	2
	Consolidated Statements of Income for the Three ~~and Nine~~ Months Ended ~~September 30, 2022 and 2021~~March 31, 2023	3
	Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	54
	Consolidated Statements of Changes in Shareholders' Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	65
	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	86
	Notes to Consolidated Financial Statements	108

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5248

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8982

Item 4.	Controls and Procedures	8982

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	9083

Item 1A.	Risk Factors	9083

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9084

Item 5.	Other Items	9084

Item 6.	Exhibits	9184

SIGNATURES		9185

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

/VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except for share data)

September 30,
2022 December 31,
2021
Assets (Unaudited)
Cash and due from banks $ 431,471 $ 205,156
Interest bearing deposits with banks 686,877 1,844,764
Investment securities:
Equity securities 43,318 36,473
Trading debt securities 4,100 38,130
Available for sale debt securities 1,271,854 1,128,809
Held to maturity debt securities (net of allowance for credit losses of $1,696 at September 30, 2022 and $1,165 at December 31, 2021) 3,720,324 2,667,532
Total investment securities 5,039,596 3,870,944
Loans held for sale, at fair value 6,073 139,516
Loans 45,185,764 34,153,657
Less: Allowance for loan losses (475,744) (359,202)
Net loans 44,710,020 33,794,455
Premises and equipment, net 362,203 326,306
Lease right of use assets 314,511 259,117
Bank owned life insurance 714,649 566,770
Accrued interest receivable 159,406 96,882
Goodwill 1,871,505 1,459,008
Other intangible assets, net 208,226 70,386
Other assets 1,422,964 813,139
Total Assets $ 55,927,501 $ 43,446,443
Liabilities
Deposits:
Non-interest bearing $ 15,420,625 $ 11,675,748
Interest bearing:
Savings, NOW and money market 23,559,662 20,269,620
Time 6,328,556 3,687,044
Total deposits 45,308,843 35,632,412
Short-term borrowings 919,283 655,726
Long-term borrowings 1,541,097 1,423,676
Junior subordinated debentures issued to capital trusts 56,673 56,413
Lease liabilities 367,428 283,106
Accrued expenses and other liabilities 1,460,348 311,044
Total Liabilities 49,653,672 38,362,377
Shareholders’ Equity
Preferred stock, no par value; 50,000,000 authorized shares:
Series A (4,600,000 shares issued at September 30, 2022 and December 31, 2021) 111,590 111,590
Series B (4,000,000 shares issued at September 30, 2022 and December 31, 2021) 98,101 98,101
Common stock (no par value, authorized 650,000,000 shares; issued 507,896,910 and 423,034,027 shares at September 30, 2022 and December 31, 2021) 178,185 148,482
Surplus 4,972,732 3,883,035
Retained earnings 1,100,838 883,645
Accumulated other comprehensive loss (165,557) (17,932)
Treasury stock, at cost (1,545,408 common shares at September 30, 2022 and 1,596,959 common shares at December 31, 2021) (22,060) (22,855)
Total Shareholders’ Equity 6,273,829 5,084,066
Total Liabilities and Shareholders’ Equity $ 55,927,501 $ 43,446,443


	March 31, 2023		December 31, 2022
Assets	(Unaudited)
Cash and due from banks	$	444,690	$	444,325
Interest bearing deposits with banks	5,260,998		503,622
Investment securities:
Equity securities	50,152		48,731
Trading debt securities	6,855		13,438
Available for sale debt securities	1,259,236		1,261,397
Held to maturity debt securities (net of allowance for credit losses of $1,633 at March 31, 2023 and $1,646 at December 31, 2022)	3,845,579		3,827,338
Total investment securities	5,161,822		5,150,904
Loans held for sale, at fair value	17,218		18,118
Loans	48,659,966		46,917,200
Less: Allowance for loan losses	(436,898)		(458,655)
Net loans	48,223,068		46,458,545
Premises and equipment, net	365,313		358,556
Lease right of use assets	302,740		306,352
Bank owned life insurance	717,339		717,177
Accrued interest receivable	223,608		196,606
Goodwill	1,868,936		1,868,936
Other intangible assets, net	187,171		197,456
Other assets	1,536,670		1,242,152
Total Assets	$	64,309,573	$	57,462,749
Liabilities
Deposits:
Non-interest bearing	$	13,576,116	$	14,463,645
Interest bearing:
Savings, NOW and money market	22,903,424		23,616,812
Time	11,111,376		9,556,457
Total deposits	47,590,916		47,636,914
Short-term borrowings	6,413,056		138,729
Long-term borrowings	2,197,656		1,543,058
Junior subordinated debentures issued to capital trusts	56,847		56,760
Lease liabilities	355,020		358,884
Accrued expenses and other liabilities	1,184,497		1,327,602
Total Liabilities	57,797,992		51,061,947
Shareholders’ Equity
Preferred stock, no par value; 50,000,000 authorized shares:
Series A (4,600,000 shares issued at March 31, 2023 and December 31, 2022)	111,590		111,590
Series B (4,000,000 shares issued at March 31, 2023 and December 31, 2022)	98,101		98,101
Common stock (no par value, authorized 650,000,000 shares; issued 507,896,910 shares at March 31, 2023 and December 31, 2022)	178,186		178,185
Surplus	4,967,662		4,980,231
Retained earnings	1,300,980		1,218,445
Accumulated other comprehensive loss	(143,647)		(164,002)
Treasury stock, at cost (134,552 common shares at March 31, 2023 and 1,522,432 common shares at December 31, 2022)	(1,291)		(21,748)
Total Shareholders’ Equity	6,511,581		6,400,802
Total Liabilities and Shareholders’ Equity	$	64,309,573	$	57,462,749

See accompanying notes to consolidated financial statements.

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except for per share data)

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Interest Income
Interest and fees on loans $ 496,520 $ 309,753 $ 1,229,462 $ 938,248
Interest and dividends on investment securities:
Taxable 28,264 14,292 74,416 40,174
Tax-exempt 5,210 2,609 12,739 9,181
Dividends 2,738 1,505 7,490 5,543
Interest on federal funds sold and other short-term investments 3,996 642 6,026 1,101
Total interest income 536,728 328,801 1,330,133 994,247
Interest Expense
Interest on deposits:
Savings, NOW and money market 50,674 10,605 77,423 32,896
Time 15,174 4,394 21,274 21,766
Interest on short-term borrowings 5,160 1,464 10,049 4,390
Interest on long-term borrowings and junior subordinated debentures 11,728 11,312 31,566 40,595
Total interest expense 82,736 27,775 140,312 99,647
Net Interest Income 453,992 301,026 1,189,821 894,600
Provision (credit) for credit losses for held to maturity securities 188 35 531 (353)
Provision for credit losses for loans 1,835 3,496 49,047 21,287
Net Interest Income After Provision for Credit Losses 451,969 297,495 1,140,243 873,666
Non-Interest Income
Wealth management and trust fees 9,281 3,550 23,989 10,411
Insurance commissions 3,750 1,610 9,072 5,805
Service charges on deposit accounts 10,338 5,428 26,617 15,614
Gains (losses) on securities transactions, net 323 787 (1,058) 1,263
Fees from loan servicing 3,138 2,894 8,636 8,980
Gains on sales of loans, net 922 6,442 5,510 20,016
Bank owned life insurance 1,681 2,018 5,840 6,824
Other 26,761 19,702 75,391 47,877
Total non-interest income 56,194 42,431 153,997 116,790
Non-Interest Expense
Salary and employee benefits expense 134,572 93,992 397,103 273,190
Net occupancy expense 26,486 19,941 70,906 59,171
Technology, furniture and equipment expense 39,365 21,007 115,245 64,956
FDIC insurance assessment 6,500 3,644 16,009 10,294
Amortization of other intangible assets 11,088 5,298 26,925 16,753
Professional and legal fees 17,840 13,492 62,998 27,250
Loss on extinguishment of debt — — — 8,406
Amortization of tax credit investments 3,105 3,079 9,194 8,795
Other 22,683 14,469 60,329 38,213
Total non-interest expense 261,639 174,922 758,709 507,028
Income Before Income Taxes 246,524 165,004 535,531 483,428
Income tax expense 68,405 42,424 144,271 124,626
Net Income 178,119 122,580 391,260 358,802
Dividends on preferred stock 3,172 3,172 9,516 9,516
Net Income Available to Common Shareholders $ 174,947 $ 119,408 $ 381,744 $ 349,286

~~VALLEY NATIONAL BANCORP~~

~~CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (continued)~~

~~(in thousands, except for share data)~~


											Three Months Ended March 31,
											2023		2022
Interest Income										Interest Income
Interest and fees on loans										Interest and fees on loans	$	655,226	$	317,365
Interest and dividends on investment securities:										Interest and dividends on investment securities:
Taxable										Taxable	32,289		18,439
Tax-exempt										Tax-exempt	5,325		2,517
Dividends										Dividends	5,185		1,676
Interest on federal funds sold and other short-term investments										Interest on federal funds sold and other short-term investments	22,205		461
Total interest income										Total interest income	720,230		340,458
Interest Expense										Interest Expense
Interest on deposits:										Interest on deposits:
Savings, NOW and money market										Savings, NOW and money market	150,766		9,627
Time										Time	80,298		2,831
Interest on short-term borrowings										Interest on short-term borrowings	33,948		806
Interest on long-term borrowings and junior subordinated debentures										Interest on long-term borrowings and junior subordinated debentures	19,198		9,525
Total interest expense										Total interest expense	284,210		22,789
Net Interest Income										Net Interest Income	436,020		317,669

Provision for credit losses for available for sale and held to maturity securities										Provision for credit losses for available for sale and held to maturity securities	4,987		57
Provision for credit losses for loans										Provision for credit losses for loans	9,450		3,500
Net Interest Income After Provision for Credit Losses										Net Interest Income After Provision for Credit Losses	421,583		314,112
Non-Interest Income										Non-Interest Income
Wealth management and trust fees										Wealth management and trust fees	9,587		5,131
Insurance commissions										Insurance commissions	2,420		1,859
Capital markets										Capital markets	10,892		14,360
Service charges on deposit accounts										Service charges on deposit accounts	10,476		6,212
Gains (losses) on securities transactions, net										Gains (losses) on securities transactions, net	378		(1,072)

Fees from loan servicing										Fees from loan servicing	2,671		2,781
Gains on sales of loans, net										Gains on sales of loans, net	489		986

Bank owned life insurance										Bank owned life insurance	2,584		2,046
Other										Other	14,802		6,967
Total non-interest income										Total non-interest income	54,299		39,270
Non-Interest Expense										Non-Interest Expense
Salary and employee benefits expense										Salary and employee benefits expense	144,986		107,733
Net occupancy expense										Net occupancy expense	23,256		21,991
Technology, furniture and equipment expense										Technology, furniture and equipment expense	36,508		26,015
FDIC insurance assessment										FDIC insurance assessment	9,155		4,158
Amortization of other intangible assets										Amortization of other intangible assets	10,519		4,437
Professional and legal fees										Professional and legal fees	16,814		14,749

Amortization of tax credit investments										Amortization of tax credit investments	4,253		2,896
Other										Other	26,675		15,361
Total non-interest expense										Total non-interest expense	272,166		197,340
Income Before Income Taxes										Income Before Income Taxes	203,716		156,042
Income tax expense										Income tax expense	57,165		39,314
Net Income										Net Income	146,551		116,728
Dividends on preferred stock										Dividends on preferred stock	3,874		3,172
Net Income Available to Common Shareholders										Net Income Available to Common Shareholders	$	142,677	$	113,556

		Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021
Earnings Per Common Share:	Earnings Per Common Share:									Earnings Per Common Share:
Basic	Basic	$	0.35	$	0.29	$	0.80	$	0.86	Basic	$	0.28	$	0.27
Diluted	Diluted	0.34		0.29		0.79		0.86		Diluted	0.28		0.27
Cash Dividends Declared per Common Share		0.11		0.11		0.33		0.33
Weighted Average Number of Common Shares Outstanding:
Basic		506,342,200		406,824,160		478,383,342		405,986,114
Diluted		508,690,997		409,238,001		480,625,357		408,509,767

See accompanying notes to consolidated financial statements.

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(in thousands)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Net income	Net income	$	178,119	$	122,580	$	391,260	$	358,802	Net income	$	146,551	$	116,728
Other comprehensive loss, net of tax:
Other comprehensive income (loss), net of tax:										Other comprehensive income (loss), net of tax:
Unrealized gains and losses on available for sale securities	Unrealized gains and losses on available for sale securities									Unrealized gains and losses on available for sale securities
Net losses arising during the period		(57,242)		(3,953)		(148,403)		(15,860)
Net gains (losses) arising during the period										Net gains (losses) arising during the period	17,170		(38,892)
Less reclassification adjustment for net gains included in net income	Less reclassification adjustment for net gains included in net income	(12)		(613)		(22)		(493)		Less reclassification adjustment for net gains included in net income	—		(10)
Total	Total	(57,254)		(4,566)		(148,425)		(16,353)		Total	17,170		(38,902)

Unrealized gains and losses on derivatives (cash flow hedges)	Unrealized gains and losses on derivatives (cash flow hedges)									Unrealized gains and losses on derivatives (cash flow hedges)
Net (losses) gains on derivatives arising during the period		(85)		(96)		110		(69)
Less reclassification adjustment for net (gains) losses included in net income		(13)		743		293		1,928
Net gains on derivatives arising during the period										Net gains on derivatives arising during the period	2,798		218
Less reclassification adjustment for net losses included in net income										Less reclassification adjustment for net losses included in net income	379		386
Total	Total	(98)		647		403		1,859		Total	3,177		604
Defined benefit pension plan
Defined benefit pension and postretirement benefit plans										Defined benefit pension and postretirement benefit plans

Amortization of actuarial net loss	Amortization of actuarial net loss	132		279		397		837		Amortization of actuarial net loss	8		132
Total other comprehensive loss		(57,220)		(3,640)		(147,625)		(13,657)

Total other comprehensive income (loss)										Total other comprehensive income (loss)	20,355		(38,166)
Total comprehensive income	Total comprehensive income	$	120,899	$	118,940	$	243,635	$	345,145	Total comprehensive income	$	166,906	$	78,562

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the ~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023


				Common Stock							Accumulated									Common Stock							Accumulated
		Preferred Stock		Shares	Amount		Surplus		Retained Earnings		Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity			Preferred Stock		Shares	Amount		Surplus		Retained Earnings		Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity
		(in thousands)																(in thousands)
Balance - December 31, 2021		$	209,691	421,437	$	148,482	$	3,883,035	$	883,645	$	(17,932)	$	(22,855)	$	5,084,066
Balance - December 31, 2022																	Balance - December 31, 2022	$	209,691	506,374	$	178,185	$	4,980,231	$	1,218,445	$	(164,002)	$	(21,748)	$	6,400,802
Adjustment due to the adoption of ASU 2022-02																	Adjustment due to the adoption of ASU 2022-02	—		—	—		—		990		—		—		990
Balance - January 1, 2023																	Balance - January 1, 2023	209,691		506,374	178,185		4,980,231		1,219,435		(164,002)		(21,748)		6,401,792
Net income	Net income	—		—	—		—		116,728		—		—		116,728		Net income	—		—	—		—		146,551		—		—		146,551
Other comprehensive loss, net of tax		—		—	—		—		—		(38,166)		—		(38,166)
Other comprehensive income, net of tax																	Other comprehensive income, net of tax	—		—	—		—		—		20,355		—		20,355
Cash dividends declared:	Cash dividends declared:																Cash dividends declared:
Preferred stock, Series A, $0.39 per share	Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)		Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share		—		—	—		—		(1,375)		—		—		(1,375)
Preferred stock, Series B, $0.52 per share																	Preferred stock, Series B, $0.52 per share	—		—	—		—		(2,077)		—		—		(2,077)
Common stock, $0.11 per share	Common stock, $0.11 per share	—		—	—		—		(46,803)		—		—		(46,803)		Common stock, $0.11 per share	—		—	—		—		(56,488)		—		—		(56,488)
Effect of stock incentive plan, net	Effect of stock incentive plan, net	—		972	—		(10,799)		(5,173)		—		13,220		(2,752)		Effect of stock incentive plan, net	—		1,061	1		(12,569)		(3,994)		—		16,057		(505)
Common stock issued																	Common stock issued	—		327	—		—		(650)		—		4,400		3,750

Purchase of treasury stock		—		(1,015)	—		—		—		—		(13,517)		(13,517)
Balance - March 31, 2022		209,691		421,394	148,482		3,872,236		945,225		(56,098)		(23,152)		5,096,384
Net income		—		—	—		—		96,413		—		—		96,413
Other comprehensive loss, net of tax		—		—	—		—		—		(52,239)		—		(52,239)
Cash dividends declared:
Preferred stock, Series A, $0.39 per share		—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share		—		—	—		—		(1,375)		—		—		(1,375)
Common stock, $0.11 per share		—		—	—		—		(56,211)		—		—		(56,211)
Effect of stock incentive plan, net		—		72	1		5,125		(109)		—		892		5,909
Common stock issued in acquisition		—		84,863	29,702		1,088,127		—		—		—		1,117,829
Balance - June 30, 2022		209,691		506,329	178,185		4,965,488		982,146		(108,337)		(22,260)		6,204,913
Net income		—		—	—		—		178,119		—		—		178,119
Other comprehensive loss, net of tax		—		—	—		—		—		(57,220)		—		(57,220)
Cash dividends declared:
Preferred stock, Series A, $0.39 per share		—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share		—		—	—		—		(1,375)		—		—		(1,375)
Common stock, $0.11 per share		—		—	—		—		(56,242)		—		—		(56,242)
Effect of stock incentive plan, net		—		23	—		7,244		(13)		—		200		7,431
Balance - September 30, 2022		$	209,691	506,352	$	178,185	$	4,972,732	$	1,100,838	$	(165,557)	$	(22,060)	$	6,273,829
Balance - March 31, 2023																	Balance - March 31, 2023	$	209,691	507,762	$	178,186	$	4,967,662	$	1,300,980	$	(143,647)	$	(1,291)	$	6,511,581

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

For the ~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022


				Common Stock							Accumulated									Common Stock							Accumulated
		Preferred Stock		Shares	Amount		Surplus		Retained Earnings		Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity			Preferred Stock		Shares	Amount		Surplus		Retained Earnings		Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity
		(in thousands)																(in thousands)
Balance - December 31, 2020		$	209,691	403,859	$	141,746	$	3,637,468	$	611,158	$	(7,718)	$	(225)	$	4,592,120
Balance - December 31, 2021																	Balance - December 31, 2021	$	209,691	421,437	$	148,482	$	3,883,035	$	883,645	$	(17,932)	$	(22,855)	$	5,084,066
Net income	Net income	—		—	—		—		115,710		—		—		115,710		Net income	—		—	—		—		116,728		—		—		116,728
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—		—	—		—		—		(9,287)		—		(9,287)		Other comprehensive loss, net of tax	—		—	—		—		—		(38,166)		—		(38,166)
Cash dividends declared:	Cash dividends declared:																Cash dividends declared:
Preferred stock, Series A, $0.39 per share	Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)		Preferred stock, Series A, $0.39 per share	—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share	Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)		Preferred stock, Series B, $0.34 per share	—		—	—		—		(1,375)		—		—		(1,375)
Common stock, $0.11 per share	Common stock, $0.11 per share	—		—	—		—		(45,281)		—		—		(45,281)		Common stock, $0.11 per share	—		—	—		—		(46,803)		—		—		(46,803)
Effect of stock incentive plan, net	Effect of stock incentive plan, net	—		1,939	689		14,480		(5,764)		—		175		9,580		Effect of stock incentive plan, net	—		972	—		(10,799)		(5,173)		—		13,220		(2,752)
Purchase of treasury stock																	Purchase of treasury stock	—		(1,015)	—		—		—		—		(13,517)		(13,517)

Balance - March 31, 2021		209,691		405,798	142,435		3,651,948		672,651		(17,005)		(50)		4,659,670
Net income		—		—	—		—		120,512		—		—		120,512
Other comprehensive loss, net of tax		—		—	—		—		—		(730)		—		(730)
Cash dividends declared:
Preferred stock, Series A, $0.39 per share		—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share		—		—	—		—		(1,375)		—		—		(1,375)
Common stock, $0.11 per share		—		—	—		—		(45,093)		—		—		(45,093)
Effect of stock incentive plan, net		—		286	115		6,688		(130)		—		(53)		6,620
Balance - March 31, 2022																	Balance - March 31, 2022	$	209,691	421,394	$	148,482	$	3,872,236	$	945,225	$	(56,098)	$	(23,152)	$	5,096,384

Balance - June 30, 2021		209,691		406,084	142,550		3,658,636		744,768		(17,735)		(103)		4,737,807
Net income		—		—	—		—		122,580		—		—		122,580
Other comprehensive income, net of tax		—		—	—		—		—		(3,640)		—		(3,640)
Cash dividends declared:
Preferred stock, Series A, $0.39 per share		—		—	—		—		(1,797)		—		—		(1,797)
Preferred stock, Series B, $0.34 per share		—		—	—		—		(1,375)		—		—		(1,375)
Common stock, $0.11 per share		—		—	—		—		(45,228)		—		—		(45,228)
Effect of stock incentive plan, net		—		1,230	426		13,831		(168)		—		62		14,151
Balance - September 30, 2021		$	209,691	407,314	$	142,976	$	3,672,467	$	818,780	$	(21,375)	$	(41)	$	4,822,498

See accompanying notes to consolidated financial statements.

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income	$	146,551	$	116,728
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	11,515		7,486
Stock-based compensation	8,093		7,263
Provision for credit losses	14,437		3,557
Net amortization of premiums and accretion of discounts on securities and borrowings	(397)		7,487
Amortization of other intangible assets	10,519		4,437
Losses on available for sale and held to maturity debt securities, net	24		9
Proceeds from sales of loans held for sale	27,743		204,628
Gains on sales of loans, net	(489)		(986)
Originations of loans held for sale	(26,588)		(144,485)
(Gains) losses on sales of assets, net	(125)		64

Net change in:
Fair value of borrowings hedged by derivative transactions	4,219		(14,696)
Trading debt securities	6,583		26,391
Lease right of use assets	3,600		766
Cash surrender value of bank owned life insurance	(2,584)		(2,046)
Accrued interest receivable	(27,002)		(5,785)
Other assets	(298,076)		20,156
Accrued expenses and other liabilities	(147,705)		265,029
Net cash (used in) provided by operating activities	(269,682)		496,003
Cash flows from investing activities:
Net loan originations and purchases	(1,774,024)		(1,210,754)
Equity securities:
Purchases	(1,594)		(662)
Sales	409		848
Held to maturity debt securities:
Purchases	(79,961)		(545,462)

Maturities, calls and principal repayments	61,213		136,024
Available for sale debt securities:
Purchases	—		(15,000)

Maturities, calls and principal repayments	22,264		73,008
Death benefit proceeds from bank owned life insurance	2,773		2,369
Proceeds from sales of real estate property and equipment	125		5,692

Purchases of real estate property and equipment	(18,263)		(22,749)
Cash distribution from tax credit investments	2,500		—
Cash and cash equivalent acquired in acquisitions, net	—		(8,607)
Net cash used in investing activities	(1,784,558)		(1,585,293)


VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) (in thousands)

	Three Months Ended March 31,
	2023		2022
Cash flows from financing activities:
Net change in deposits	$	(45,998)	$	14,924
Net change in short-term borrowings	6,274,327		(171,545)
Proceeds from issuance of long-term borrowings, net	1,000,000		—
Repayments of long-term borrowings	(350,000)		—
Cash dividends paid to preferred shareholders	(3,874)		(3,172)
Cash dividends paid to common shareholders	(57,612)		(46,205)
Purchase of common shares to treasury	(8,599)		(23,627)
Common stock issued, net	3,750		95
Other, net	(13)		(180)
Net cash provided by (used in) financing activities	6,811,981		(229,710)
Net change in cash and cash equivalents	4,757,741		(1,319,000)
Cash and cash equivalents at beginning of year	947,947		2,049,920
Cash and cash equivalents at end of period	$	5,705,688	$	730,920

Supplemental disclosures of cash flow information:
Cash payments for:
Interest on deposits and borrowings	$	244,246	$	19,682
Federal and state income taxes	8,782		6,842
Supplemental schedule of non-cash investing activities:
Transfer of loans to other real estate owned	$	903	$	—

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




















Non-cash net assets acquired	—		8,607

See accompanying notes to consolidated financial statements.

VALLEY NATIONAL BANCORP

~~CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)~~

~~(in thousands)~~

Nine Months Ended
September 30,
2022 2021
Cash flows from operating activities:
Net income $ 391,260 $ 358,802
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 52,545 40,799
Stock-based compensation 20,978 15,852
Provision for credit losses 49,578 20,934
Net amortization of premiums and accretion of discounts on securities and borrowings 10,603 22,145
Amortization of other intangible assets 26,925 16,753
Losses (gains) on securities transactions, net 1,058 (1,263)
Proceeds from sales of loans held for sale 378,216 932,274
Gains on sales of loans, net (5,510) (20,016)
Originations of loans held for sale (244,441) (774,443)
Losses (gains) on sales of assets, net 372 (380)
Loss on extinguishment of debt — 8,406
Net change in:
Fair value of borrowings hedged by derivative transactions (30,585) —
Trading debt securities 34,030 (4,797)
Cash surrender value of bank owned life insurance (5,840) (6,824)
Accrued interest receivable (36,807) 8,157
Other assets (402,391) 97,341
Accrued expenses and other liabilities 990,607 (130,698)
Net cash provided by operating activities 1,230,598 583,042
Cash flows from investing activities:
Net loan originations and purchases (5,114,908) (405,204)
Equity securities:
Purchases (4,148) (3,163)
Sales 1,725 1,227
Held to maturity debt securities:
Purchases (666,188) (1,062,202)
Maturities, calls and principal repayments 410,760 633,272
Available for sale debt securities:
Purchases (49,618) (367,866)
Sales 12,846 91,978
Maturities, calls and principal repayments 192,868 376,875
Death benefit proceeds from bank owned life insurance 4,680 3,850
Proceeds from sales of real estate property and equipment 7,400 4,982
Proceeds from sales of loans held for investment — 4,498
Purchases of real estate property and equipment (50,511) (19,805)
Cash and cash equivalent acquired in acquisitions, net 321,540 —
Net cash used in investing activities (4,933,554) (741,558)

VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)
(in thousands)
Nine Months Ended
September 30,
2022 2021
Cash flows from financing activities:
Net change in deposits $ 2,646,434 $ 1,697,003
Net change in short-term borrowings 159,763 (364,612)
Proceeds from issuance of long-term borrowings, net 147,508 295,922
Repayments of long-term borrowings — (1,168,465)
Cash dividends paid to preferred shareholders (9,516) (9,516)
Cash dividends paid to common shareholders (148,345) (134,860)
Purchase of common shares to treasury (24,013) (699)
Common stock issued, net 106 15,199
Other, net (553) (505)
Net cash provided by financing activities 2,771,384 329,467
Net change in cash and cash equivalents (931,572) 170,951
Cash and cash equivalents at beginning of year 2,049,920 1,329,205
Cash and cash equivalents at end of period $ 1,118,348 $ 1,500,156
Supplemental disclosures of cash flow information:
Cash payments for:
Interest on deposits and borrowings $ 129,504 $ 109,661
Federal and state income taxes 122,170 148,674
Supplemental schedule of non-cash investing activities:
Transfer of loans to other real estate owned $ — $ 141
Lease right of use assets obtained in exchange for operating lease liabilities 32,604 40,296
Acquisitions:
Non-cash assets acquired:
Equity securities 6,239 —
Investment securities available for sale 505,928 —
Investment securities held to maturity 806,627 —
Loans, net 5,844,070 —
Premises and equipment, net 38,827 —
Lease right of use assets 49,434 —
Bank owned life insurance 126,861 —
Accrued interest receivable 25,717 —
Goodwill 407,522 —
Other intangible assets, net 159,587 —
Other assets 158,352 —
Total non-cash assets acquired $ 8,129,164 $ —
Liabilities assumed:
Deposits 7,029,997 —
Short-term borrowings 103,794 —
Lease liabilities 79,844 —
Accrued expenses and other liabilities 119,240 —
Total liabilities assumed $ 7,332,875 $ —
Non-cash net assets acquired $ 796,289 $ —
Net cash and cash equivalents acquired in acquisition $ 321,540 $ —
Common stock issued in acquisition $ 1,117,829 $ —

~~See accompanying notes to consolidated financial statements.~~

~~VALLEY NATIONAL BANCORP~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The unaudited consolidated financial ~~statements~~statements of Valley National Bancorp, a New Jersey ~~corporation~~Corporation (Valley), include the accounts of ~~its commercial bank subsidiary,~~ Valley National Bank (the Bank), and all other entities in which Valley has a controlling financial interest. All inter-company transactions and balances have been ~~eliminated.~~eliminated. The accounting and reporting policies of Valley conform to U.S. generally accepted accounting principles (U.S. GAAP) and general practices within the financial services industry. In accordance with applicable accounting standards, Valley does not consolidate statutory trusts established for the sole purpose of issuing trust preferred securities and related trust common securities. Certain prior period amounts have been reclassified to conform to the current ~~presentation, including changes to our segment reporting structure, as further discussed in Note 9 and Note 15.~~presentation.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly Valley’s financial position, results of operations, changes in shareholders' equity and cash flows at ~~September 30, 2022~~March 31, 2023 and for all periods presented have been made. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results to be expected for the entire fiscal year or any subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP and industry practice have been condensed or omitted pursuant to rules and regulations of the SEC. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Valley’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Significant Estimates. In preparing the unaudited consolidated financial statements in conformity with U.S. GAAP, management has made estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of financial condition and results of operations for the periods indicated. Material estimates that require application of management’s most difficult, subjective or complex judgment and are particularly susceptible to change include: the allowance for credit losses, the evaluation of goodwill and other intangible assets for impairment and income taxes. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual amounts or results could differ significantly from those estimates. The current economic environment has increased the degree of uncertainty inherent in these material estimates. Actual results may differ from those estimates. Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date.

Note 2. Business Combinations

Acquisitions

Bank Leumi Le-Israel Corporation. On April 1, 2022, Valley completed its acquisition of Bank Leumi Le-Israel Corporation, the U.S. subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA, collectively referred to as "Bank Leumi USA". Bank Leumi USA maintained its headquarters in New York City with commercial banking offices in Chicago, Los Angeles, Palo Alto, and Aventura, Florida. The common shareholders of Bank Leumi USA received 3.8025 shares of Valley common stock and $5.08 in cash for each Bank Leumi USA common share that they owned. As a result, Valley issued approximately 85 million shares of common stock and paid $113.4 million in cash in the transaction. Based on Valley’s closing stock price on March 31, 2022, the transaction was valued at $1.2 billion, inclusive of the value of options. As a result of the acquisition, Bank Leumi Le-Israel B.M. owned approximately 14 percent of Valley's common stock as of April 1, ~~2022.~~2022.

~~The transaction was accounted for under the acquisition method~~Merger expenses, primarily consisting of ~~accounting~~salary and ~~accordingly the results of Bank Leumi USA's operations have been included in Valley's consolidated financial statements~~ employee benefit expense, totaled $4.1 million and $4.4 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~from the date of the acquisition~~respectively.

108

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


	April 1, 2022
	(in thousands)
Assets acquired:
Cash and cash equivalents	$	443,588
Equity securities	6,239
Available for sale debt securities	505,928
Held to maturity debt securities	806,627
Loans	5,914,389
Allowance for loan losses	(70,319)
Loans, net	5,844,070
Premises and equipment	38,827
Lease right of use assets	49,273
Bank owned life insurance	126,861
Accrued interest receivable	25,717
Goodwill	~~403,151~~400,582
Other intangible assets	153,380
Other assets	~~158,352~~160,921
Total assets acquired	$	8,562,013
Liabilities assumed:
Deposits:
Non-interest bearing	$	4,511,537
Interest bearing:
Savings, NOW and money market	2,224,834
Time	293,626
Total deposits	7,029,997
Short-term borrowings	103,794
Lease liabilities	79,683
Accrued expense and other liabilities	117,269
Total liabilities assumed	$	7,330,743
Common stock issued in acquisition	1,117,829
Cash paid in acquisition	113,441

There were no

~~The determination of~~changes to the fair value ofestimates during the assets acquired and liabilities assumed required management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change. The fair value estimates are subject to change for up to one year after the closing date of the transaction if additional information (existing at the date of closing) relative to closing date fair values becomes available.three months ended March 31, 2023.

~~Fair Value Measurement~~Dudley Ventures. On October 8, 2021, Valley acquired certain subsidiaries of ~~Assets Acquired and Liabilities Assumed~~

~~Described below are the methods used to determine the fair values of the significant assets acquired and liabilities assumed~~Dudley Ventures, an advisory firm specializing in the ~~Bank Leumi USA acquisition.~~

~~Cash~~investment and ~~cash equivalents.~~management of tax credits. The ~~estimated fair values~~transaction price included $11.3 million of cash ~~and cash equivalents approximate their stated face amounts, as these financial instruments are either due on demand or have short-term maturities.~~

~~Investment securities~~. The estimated fair value of equity securities, which represents a privately held Community Reinvestment Act (CRA) fund, was measured at net asset value (NAV). Other investment securities acquired from Bank Leumi USA were classified as available for sale and held to maturity debt securities based on Valley's intent at the ~~acquisition date. Their estimated fair values were calculated utilizing Level 2 inputs similar to the valuation techniques used for Valley's investment portfolios detailed in Note 6.~~

~~Loans.~~ The acquired loan portfolio was recorded at its estimated fair value based on a discounted cash flow methodology. The acquired loan portfolio was segregated into categories for valuation purposes primarily based on loan typeclosing date and loan risk rating. The estimated fair value incorporates adjustments related to market loss assumptions and prevailing market interest rates for comparable assets and other market factors such as liquidity from a market participant perspective. Management estimated the cash flows expected to be collected at the acquisition date by using valuation models that incorporated loan contractual characteristics (such as payment type, amortization type, and term to maturity) as well as estimates of key valuation assumptions (such as prepayment speeds, default rates, and loss severity rates).

The expected cash flows from the acquired loan portfolios were discounted to present value based on estimated market rates. The market rates were estimated using a buildup approach based on the following components: funding cost, servicing cost, andfixed future stock consideration ~~of liquidity premium. In addition, coupon rates for recently originated loans and available market data regarding origination rates were also considered~~totaling $3.75 million, which resulted in the ~~analysis. The methods used to estimate the Level 3 fair values~~issuance of loans are sensitive to the assumptions and estimates used. While management attempted to use assumptions and estimates that best reflected the acquired loan portfolios and current market conditions, a greater degree of subjectivity is inherent in these values than in those determined in active markets.

The acquired loans were also evaluated upon acquisition to determine whether they represented purchased credit-deteriorated (PCD) loans, defined as loans which have experienced a more-than-insignificant deterioration in credit quality since origination. Valley considered a variety of factors in assessing loans the PCD classification, including but not limited to risk grades, delinquency, non-performing status, current or previous troubled debt restructurings, watch list credits and other qualitative factors that indicated a deterioration in credit quality since origination.

For PCD loans, an initial allowance was determined based on Valley’s CECL methodology and was added to the acquisition date fair value of each PCD loan to establish its initial amortized cost basis. The difference between the unpaid principal balance of loans and the calculated amortized cost basis resulted in a net non-credit discount totaling $18.8 million. ~~This net discount will be accreted into interest income over the loan's remaining life using the effective interest method~~.

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


	~~April 1, 2022~~
	~~($ in thousands)~~
~~Unpaid Principal Balance of PCD loans~~	$	~~1,922,272~~
Allowance for credit losses at acquisition *	~~(70,319)~~
~~Non-credit discount at acquisition~~	~~(18,814)~~
~~Fair value of acquired PCD loans~~	$	~~1,833,139~~

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

~~Other intangible assets.~~ ~~Other intangible assets recorded consist of core deposit intangibles (CDI) and other acquired client relationships. CDI assets are measures of the value of non-maturity checking, savings, NOW and~~

money market customer deposits that are acquired in a business combination. The fair value for CDI was estimated based on a discounted cash flow methodology considering expected customer attrition rates, net maintenance cost of the deposit base, alternative costs of funds, and the interest costs associated with the customer deposits. The CDI is amortized using an accelerated amortization method over an estimated useful life of 10 years. For other acquired client relationships, fair value is measured using the multi-period excess earnings methodology under the income approach. This method measures the future economic income that can be attributed to the existing client relationships acquired, after considering revenue and expense assumptions, expected client attrition rates, and subtracting returns for other complementary assets that contribute to the income over their expected remaining useful lives. The resulting net cash flows are discounted to present value using an estimated intangible asset discount rate. The other acquired client relationships are amortized using an accelerated amortization method over an estimated remaining useful life of 14 years.

~~Deposits.~~ The fair values of deposit liabilities with no stated maturity (i.e., non-interest bearing accounts and savings, NOW and money market accounts) are equal to the carrying amounts payable on demand. The fair values of certificates of deposit represent contractual cash flows, discounted to present value using interest rates currently offered on deposits with similar characteristics and remaining maturities.

~~Supplemental Pro Forma Financial Information (Unaudited).~~ ~~The following table summarizes supplemental pro forma financial information giving effect to the merger as if it had been completed on January 1, 2021:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(in thousands)
Net interest income $ 453,992 $ 371,178 $ 1,261,442 $ 1,099,597
Non-interest income 56,194 58,931 175,488 164,458
Net income 178,119 139,666 478,891 351,489

The supplemental pro forma financial information does not necessarily reflect the results of operations that would have occurred had Valley merged with Bank Leumi USA on January 1, 2021. Costs savings and other business synergies related to the merger are not included in the supplemental pro forma financial information.

~~Other Recent Acquisitions~~

L~~andmark Insurance of the Palm Beaches~~. On February 1, 2022, the Bank's insurance agency subsidiary, Valley Insurance Services, acquired Landmark Insurance of the Palm Beaches Inc. (Landmark) agency. The purchase price included $8.6 million in cash and $1.0 million in contingent consideration. Goodwill and other intangible assets totaled $4.4 million and $6.2 million, respectively. The transaction was accounted for under the acquisition method of accounting and accordingly the results of Landmark's operations have been included in Valley's consolidated financial statements for the three and nine months ended September 30, 2022 from the date of acquisition.

~~The Westchester Bank Holding Corporation.~~ On December 1, 2021, Valley completed its acquisition of The Westchester Bank Holding Corporation (Westchester) and its principal subsidiary, The Westchester Bank, which was headquartered in White Plains, New York. As of December 1, 2021, Westchester had approximately $1.4 billion in assets, $915.0 million in loans, and $1.2 billion in deposits, after purchase accounting adjustments, and a branch network of seven locations in Westchester County, New York. The common shareholders of Westchester received 229.645327,083 shares of Valley common stock ~~for each Westchester share they owned prior~~ to the ~~merger. The total consideration for the merger was $211.1 million, consisting~~former principals of ~~approximately 15.7 million shares of Valley common stock.~~Dudley Ventures in February 2023.

~~During the~~

~~nine months ended September 30, 2022,~~

Valley revised the estimated fair values of the acquired assets as of the acquisition date of Westchester based upon additional information obtained that existed as of December 1, 2021. The adjustments related to the fair value of deferred tax assets and resulted in a

~~$5.0 million~~ ~~increase in goodwill (see Note 9 for more information). If additional information (that existed as of the acquisition date)~~

139

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

~~Merger expenses mainly related to the Bank Leumi USA acquisition ab~~ove totaled $4.7 million and $63.8 million for the three and nine months ended September 30, 2022, respectively. The merger expenses largely consisted of salaries and benefits expense; technology, furniture and equipment expense; and professional and legal fees within non-interest expense on the consolidated statements of income. ~~Valley incurred merger related expenses of~~ ~~$1.3 million~~ ~~during the three and nine months ended September 30, 2021.~~ Incremental merger expenses related to this acquisition are expected to be incurred in future periods, including professional fees, technology and other expenses related to back office consolidation of the Bank operations.

Note 3. Earnings Per Common Share

The following table shows the calculation of both basic and diluted earnings per common share for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(in thousands, except for share data)
Net income available to common shareholders $ 174,947 $ 119,408 $ 381,744 $ 349,286
Basic weighted average number of common shares outstanding 506,342,200 406,824,160 478,383,342 405,986,114
Plus: Common stock equivalents 2,348,797 2,413,841 2,242,015 2,523,653
Diluted weighted average number of common shares outstanding 508,690,997 409,238,001 480,625,357 408,509,767
Earnings per common share:
Basic $ 0.35 $ 0.29 $ 0.80 $ 0.86
Diluted 0.34 0.29 0.79 0.86


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

Common stock equivalents represent the dilutive effect of additional common shares issuable upon the assumed vesting or exercise, if applicable, of restricted stock units and common stock options to purchase Valley’s common shares. Common stock options with exercise prices that exceed the average market price per share of Valley’s common stock during the periods presented may have an anti-dilutive effect on the diluted earnings per common share calculation and therefore are excluded from the diluted earnings per share calculation along with restricted stock units. Potential anti-dilutive weighted common shares wtotaled approximately 1.6 million and~~ere immaterial~~ 113 thousand for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021.~~respectively.

Note 4. Accumulated Other Comprehensive Loss

The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the three ~~and nine~~ months ended ~~September 30, 2022:~~March 31, 2023:

Components of Accumulated Other Comprehensive Loss Total
Accumulated
Other
Comprehensive
Loss
Unrealized Gains
and Losses on
Available for Sale
(AFS) Securities Unrealized Gains
and Losses on
Derivatives Defined
Benefit
Pension Plan
(in thousands)
Balance at June 30, 2022 $ (81,985) $ (831) $ (25,521) $ (108,337)
Other comprehensive loss before reclassification (57,242) (85) — (57,327)
Amounts reclassified from other comprehensive (loss) income (12) (13) 132 107
Other comprehensive (loss) income, net (57,254) (98) 132 (57,220)
Balance at September 30, 2022 $ (139,239) $ (929) $ (25,389) $ (165,557)


	Components of Accumulated Other Comprehensive Loss						Total Accumulated Other Comprehensive Loss
	Unrealized Gains and Losses on Available for Sale (AFS) Securities		Unrealized Gains and Losses on Derivatives		Defined Benefit Pension and Postretirement Benefit Plans
	(in thousands)
Balance at December 31, 2022	$	(127,818)	$	2,233	$	(38,417)	$	(164,002)
Other comprehensive gain before reclassification	17,170		2,798		—		19,968
Amounts reclassified from other comprehensive income	—		379		8		387
Other comprehensive income, net	17,170		3,177		8		20,355
Balance at March 31, 2023	$	(110,648)	$	5,410	$	(38,409)	$	(143,647)

1410

Components of Accumulated Other Comprehensive Loss Total
Accumulated
Other
Comprehensive
Loss
Unrealized Gains
and Losses on
Available for Sale
(AFS) Securities Unrealized Gains
and Losses on
Derivatives Defined
Benefit
Pension Plan
(in thousands)
Balance at December 31, 2021 $ 9,186 $ (1,332) $ (25,786) $ (17,932)
Other comprehensive (loss) gain before reclassification (148,403) 110 — (148,293)
Amounts reclassified from other comprehensive (loss) income (22) 293 397 668
Other comprehensive (loss) income, net (148,425) 403 397 (147,625)
Balance at September 30, 2022 $ (139,239) $ (929) $ (25,389) $ (165,557)

The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Amounts Reclassified from Accumulated Other Comprehensive Loss										Amounts Reclassified from Accumulated Other Comprehensive Loss
		Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
Components of Accumulated Other Comprehensive Loss	Components of Accumulated Other Comprehensive Loss	2022		2021		2022		2021		Income Statement Line Item	Components of Accumulated Other Comprehensive Loss	2023		2022		Income Statement Line Item
		(in thousands)										(in thousands)
Unrealized gains on AFS securities before tax	Unrealized gains on AFS securities before tax	$	16	$	825	$	30	$	663	Gains (losses) on securities transactions, net	Unrealized gains on AFS securities before tax	$	—	$	14	Gains (losses) on securities transactions, net
Tax effect	Tax effect	(4)		(212)		(8)		(170)			Tax effect	—		(4)
Total net of tax	Total net of tax	12		613		22		493			Total net of tax	—		10

Unrealized gains (losses) on derivatives (cash flow hedges) before tax		21		(1,044)		(405)		(2,708)		Interest expense
Unrealized losses on derivatives (cash flow hedges) before tax											Unrealized losses on derivatives (cash flow hedges) before tax	(531)		(542)		Interest expense
Tax effect	Tax effect	(8)		301		112		780			Tax effect	152		156
Total net of tax	Total net of tax	13		(743)		(293)		(1,928)			Total net of tax	(379)		(386)
Defined benefit pension plan:
Defined benefit pension and postretirement benefit plans:											Defined benefit pension and postretirement benefit plans:
Amortization of actuarial net loss	Amortization of actuarial net loss	(183)		(388)		(550)		(1,163)		*	Amortization of actuarial net loss	(11)		(183)		*

Tax effect	Tax effect	51		109		153		326			Tax effect	3		51
Total net of tax	Total net of tax	(132)		(279)		(397)		(837)			Total net of tax	(8)		(132)
Total reclassifications, net of tax	Total reclassifications, net of tax	$	(107)	$	(409)	$	(668)	$	(2,272)		Total reclassifications, net of tax	$	(387)	$	(508)


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

Note 5. New Authoritative Accounting Guidance

New Accounting Guidance Adopted in ~~2022~~2023

Accounting Standards Update (ASU) ~~No. 2021-01~~ ~~"Reference Rate Reform (Topic 848)" extends some o~~f Accounting Standards Codification Topic 848’s optional expedients to derivative contracts impacted by the discounting transition, including for derivatives that do not reference LIBOR or other reference rates that are expected to be discontinued. ASU No. 2021-01 is effective for all entities immediately upon issuance and may be elected retrospectively to eligible modifications as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications made on or after any date within the interim period including January 7, 2021 and it can be applied through December 31, 2022, similar to the other reference rate reform relief provided under Topic 848. ASU No. 2021-01 is not expected to have a significant impact on Valley’s consolidated financial statements.

ASU No. 2021-05 "Lessors – Certain Leases with Variable Lease Payments" updates guidance in ASC 842, Leases and requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an

operating lease at lease commencement if: (i) the lease would have been classified as a sales-type lease or direct financing lease under ASC 842 classification criteria; and (ii) the lessor would have recognized a selling loss at lease commencement. Valley adopted ASU No. 2021-05 on January 1, 2022, and the new guidance did not have a significant impact on Valley’s consolidated financial statements.

~~New Accounting Guidance Issued in 2022~~

~~ASU~~ No. 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging –Portfolio Layer Method” expands and clarifies the current guidance on accounting for fair value hedge basis adjustments under the portfolio layer method for both single-layer and multiple-layer hedges. This method allows entities to designate multiple hedging relationships with a single closed portfolio, and therefore a larger portion of the interest rate risk associated with such a portfolio is eligible to be hedged. ASU No. 2022-01 also clarifies that no assets may be added to a closed portfolio once it is designated in a portfolio layer method hedge. Valley adopted ASU No. 2022-01 ~~will be effective for Valley~~ on January 1, ~~2023. Valley is currently evaluating~~2023 and the ~~impact of ASU No. 2022-01 but it is~~guidance did not ~~expected to~~ have a significant impact on Valley's consolidated financial statements.

ASU No. 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” eliminates the troubled debt restructuring (TDR) accounting model for creditors, such as Valley, that have adopted Topic 326, “Financial Instruments – Credit Losses.” ASU No. 2022-02 ~~will require~~requires all loan modifications to be accounted for under the general loan modification guidance in Subtopic 310-20. On a prospective basis, entities ~~will also be~~are subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty. Public business entities within the scope of the Topic 326 vintage disclosure requirements are also ~~will be~~ required to prospectively disclose current-period gross write-off information by vintage. ~~However, gross recoveries will not be required.~~Entities can elect to adopt the guidance on TDRs using either a prospective or modified retrospective transition method. Valley adopted ASU No. 2022-02 ~~will be effective for Valley~~ on January 1, 2023 ~~with early~~and elected to apply the modified retrospective transition method. The adoption ~~permitted. Valley is currently evaluating the impact~~ of ASU No. 2022-02 ~~on its consolidated financial statements.~~resulted in a $1.4 million decrease in the allowance for loan losses, and a $990 thousand increase to retained earnings, net of taxes. See Note 8 for required disclosures.

New Accounting Guidance Issued in 2023

ASU No. 2023-02, Investments –“Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method,” is intended to improve the accounting and

disclosures for investments in certain tax credit structures. ASU No. ~~2022-03, "Fair Value Measurement~~2023-02 allows the option to apply the proportional amortization method to account for investments made primarily for the purpose of ~~Equity Securities subject to Contractual Sale Restrictions” updates guidance in ASC 820, Fair Value Measurement~~receiving income tax credits and clarifies that a contractual sale restriction should not be considered in measuring fair value. It also requires entities with investments in equity securities subject to contractual sale restrictions to discloseother income tax benefits when certain qualitative and quantitative information about such securities including (i) the nature and remaining duration of the restriction; (ii) the circumstances that could cause a lapse in restrictions; and (iii) the fair value of the securities with contractual sale restrictions.requirements are met. ASU No. ~~2022-03~~2023-02 will be effective ~~for Valley~~ on January 1, 2024 and it can be early adopted in any interim period. The new guidance can also be applied ~~prospectively,~~either on a modified retrospective or a retrospective basis, with any adjustments resulting from adoption recognized in earnings on the date of adoption. ~~The adoption~~Valley is currently evaluating the impact of ASU No. ~~2022-03~~2023-02, but it is not expected to have a significant impact on Valley's consolidated financial statements.

Note 6. Fair Value Measurement of Assets and Liabilities

ASC Topic 820, “Fair Value Measurements” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

•Level 1 - Unadjusted exchange quoted prices in active markets for identical assets or liabilities, or identical liabilities traded as assets that the reporting entity has the ability to access at the measurement date.

•Level 2 - Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly (i.e., quoted prices on similar assets) for substantially the full term of the asset or liability.

•Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

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

The following tables present the assets and liabilities that are measured at fair value on a recurring and non-recurring basis by level within the fair value hierarchy as reported on the consolidated statements of financial condition at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The assets presented under “non-recurring fair value measurements” in the tables below are not measured at fair value on an ongoing basis but are subject to fair value adjustments under certain circumstances (e.g., when an impairment loss is recognized).

September 30,
2022 Fair Value Measurements at Reporting Date Using:
Quoted Prices
in Active Markets
for Identical
Assets (Level 1) Significant
Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
(in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Equity securities (1)
$ 34,942 $ 23,917 $ — $ —
Trading debt securities 4,100 2,915 1,185 —
Available for sale debt securities:
U.S. Treasury securities 277,902 277,902 — —
U.S. government agency securities 26,821 — 26,821 —
Obligations of states and political subdivisions 141,563 — 141,563 —
Residential mortgage-backed securities 646,665 — 646,665 —
Corporate and other debt securities 178,903 — 178,903 —
Total available for sale debt securities 1,271,854 277,902 993,952 —
Loans held for sale (2)
6,073 — 6,073 —
Other assets (3)
594,116 — 594,116 —
Total assets $ 1,911,085 $ 304,734 $ 1,595,326 $ —
Liabilities
Other liabilities (3)
$ 625,656 $ — $ 625,656 $ —
Total liabilities $ 625,656 $ — $ 625,656 $ —
Non-recurring fair value measurements:
Collateral dependent loans $ 73,108 $ — $ — $ 73,108
Foreclosed assets 1,122 — — 1,122
Total $ 74,230 $ — $ — $ 74,230

1712


				Fair Value Measurements at Reporting Date Using:							March 31, 2023		Fair Value Measurements at Reporting Date Using:
		December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)					Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(in thousands)									(in thousands)
Recurring fair value measurements:	Recurring fair value measurements:									Recurring fair value measurements:
Assets	Assets									Assets
Investment securities:	Investment securities:									Investment securities:
Equity securities ~~(1)~~	Equity securities ~~(1)~~	$	32,844	$	21,284	$	—	$	—	Equity securities ~~(1)~~	$	23,635	$	23,635	$	—	$	—
Equity securities at net asset value (NAV)										Equity securities at net asset value (NAV)	10,175		—		—		—
Trading debt securities	Trading debt securities	38,130		—		38,130		—		Trading debt securities	6,855		3,477		3,378		—
Available for sale debt securities:	Available for sale debt securities:									Available for sale debt securities:

U.S. Treasury securities										U.S. Treasury securities	286,745		286,745		—		—
U.S. government agency securities	U.S. government agency securities	20,925		—		20,925		—		U.S. government agency securities	26,352		—		26,352		—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	79,890		—		79,890		—		Obligations of states and political subdivisions	152,775		—		152,775		—
Residential mortgage-backed securities	Residential mortgage-backed securities	904,502		—		904,502		—		Residential mortgage-backed securities	619,776		—		619,776		—

Corporate and other debt securities	Corporate and other debt securities	123,492		—		123,492		—		Corporate and other debt securities	173,588		—		173,588		—
Total available for sale debt securities	Total available for sale debt securities	1,128,809		—		1,128,809		—		Total available for sale debt securities	1,259,236		286,745		972,491		—

Loans held for sale (2)		139,516		—		139,516		—
Other assets (3)		181,500		—		181,500		—
Loans held for sale (1)										Loans held for sale (1)	17,218		—		17,218		—
Other assets (2)										Other assets (2)	446,749		—		446,749		—
Total assets	Total assets	$	1,520,799	$	21,284	$	1,487,955	$	—	Total assets	$	1,763,868	$	313,857	$	1,439,836	$	—
Liabilities	Liabilities									Liabilities
Other liabilities (3)		$	52,376	$	—	$	52,376	$	—
Other liabilities (2)										Other liabilities (2)	$	494,552	$	—	$	494,552	$	—
Total liabilities	Total liabilities	$	52,376	$	—	$	52,376	$	—	Total liabilities	$	494,552	$	—	$	494,552	$	—
Non-recurring fair value measurements:	Non-recurring fair value measurements:									Non-recurring fair value measurements:

Collateral dependent loans	Collateral dependent loans	$	47,871	$	—	$	—	$	47,871	Collateral dependent loans	$	81,267	$	—	$	—	$	81,267

Foreclosed assets	Foreclosed assets	2,931		—		—		2,931		Foreclosed assets	1,752		—		—		1,752
Total	Total	$	50,802	$	—	$	—	$	50,802	Total	$	83,019	$	—	$	—	$	83,019


			Fair Value Measurements at Reporting Date Using:
	December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Equity securities	$	23,494	$	23,494	$	—	$	—
Equity securities at net asset value (NAV)	10,099		—		—		—
Trading debt securities	13,438		3,282		10,156		—
Available for sale debt securities:
U.S. Treasury securities	279,498		279,498		—		—
U.S. government agency securities	26,964		—		26,964		—
Obligations of states and political subdivisions	146,811		—		146,811		—
Residential mortgage-backed securities	629,818		—		629,818		—

Corporate and other debt securities	178,306		—		178,306		—
Total available for sale debt securities	1,261,397		279,498		981,899		—

Loans held for sale (1)	18,118		—		18,118		—
Other assets (2)	467,127		—		467,127		—
Total assets	$	1,793,673	$	306,274	$	1,477,300	$	—
Liabilities
Other liabilities (2)	$	607,237	$	—	$	607,237	$	—
Total liabilities	$	607,237	$	—	$	607,237	$	—
Non-recurring fair value measurements:
Collateral dependent loans	$	92,923	$	—	$	—	$	92,923
Foreclosed assets	1,937		—		—		1,937
Total	$	94,860	$	—	$	—	$	94,860

(1)Includes equity securities measured at net asset value (NAV) per share (or its equivalent) as a practical expedient totaling $11.0 million and $11.6 million at September 30, 2022 and December 31, 2021, respectively. These securities have not been classified in the fair value hierarchy.

~~(2)~~Represents residential mortgage loans held for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately ~~$6.2~~$17.1 million and ~~$136.3~~$17.9 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

~~(3)~~(2)Derivative financial instruments are included in this ~~categor~~y.category.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following valuation techniques were used for financial instruments measured at fair value on a recurring basis. All the valuation techniques described below apply to the unpaid principal balance, excluding any accrued interest or dividends at the measurement date. Interest income and expense are recorded within the consolidated statements of income depending on the nature of the instrument using the effective interest method based on acquired discount or premium.

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

Equity securities at NAV. Valley also has privately held CRA funds at fair value measured at NAV ~~which~~using the most recently available financial information from the investee. Investments measured at NAV (or its equivalent) as a practical expedient are excluded from fair value hierarchy levels in the tables above.

~~Trading debt securities.~~Trading debt securities ~~consist~~. The fair value of ~~U.S~~trading debt securities, consisting of U.S. Treasury securities and municipal bonds are reported at fair value utilizing Level 1 and Level 2 inputs, respectively. The prices for municipal bonds investments are derived from market quotations and matrix pricing obtained through an independent pricing service. Management reviews the data and

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

Available for sale debt securities. U.S. Treasury securities are reported at fair value utilizing Level 1 inputs. The majority of other investment securities are reported at fair value utilizing Level 2 inputs. The prices for these instruments are obtained through an independent pricing service or dealer market participants with whom Valley has historically transacted both purchases and sales of investment securities. Prices obtained from these sources include prices derived from market quotations and matrix pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Management reviews the data and assumptions used in pricing the securities by its third-party provider to ensure the highest level of significant inputs are derived from market observable data. In addition, Valley reviews the volume and level of activity for all available for sale debt securities and attempts to identify transactions which may not be orderly or reflective of a significant level of activity and volume.

Loans held for sale. Residential mortgage loans originated for sale are reported at fair value using Level 2 inputs. The fair values were calculated utilizing quoted prices for similar assets in active markets. The market prices represent a delivery price, which reflects the underlying price each institution would pay Valley for an immediate sale of an aggregate pool of mortgages. Non-performance risk did not materially impact the fair value of mortgage loans held for sale at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 based on the short duration these assets were held, and the credit quality of these loans.

Derivatives. Derivatives are reported at fair value utilizing Level 2 inputs. The fair values of Valley’s derivatives are determined using third-party prices that are based on discounted cash flow analysis using observed market inputs, such as the LIBOR, Overnight Index Swap and Secured Overnight Financing Rate (SOFR) curves for all cleared derivatives. The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021)~~2022), is determined based on the current market prices for similar instruments. The fair values of most of the derivatives incorporate credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, to account for potential nonperformance risk of Valley and its counterparties. The credit valuation adjustments were not significant to the overall valuation of Valley’s derivatives at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~

2022.

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

The following valuation techniques were used for certain non-financial assets measured at fair value on a non-recurring basis, including collateral dependent loans reported at the fair value of the underlying collateral and foreclosed assets, which are reported at fair value upon initial recognition or subsequent impairment as described below.

Collateral dependent loans. Collateral dependent loans are loans when foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and substantially all of the repayment is expected from the collateral. Collateral dependent loans are reported at the fair value of the underlying collateral. Collateral values are estimated using Level 3 inputs, consisting of individual third-party appraisals that may be adjusted based on certain discounting criteria. Certain real estate appraisals may be discounted based on specific market data by location and property type. At ~~September 30, 2022,~~March 31, 2023, collateral dependent loans were individually re-measured and reported at fair value through direct loan charge-offs to the allowance for loan losses based on the fair value of the underlying

collateral. At ~~September 30, 2022,~~March 31, 2023, collateral dependent loans with a total amortized cost of ~~$171.3~~$140.1 million, including our taxi medallion loan portfolio, were reduced by specific allowance for loan losses allocations totaling ~~$98.2~~$58.8 million to a reported total net carrying amount of ~~$73.1~~$81.3 million.

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

using Level 3 inputs, consisting of a third-party appraisal less estimated cost to sell. When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for loan losses. If further declines in the estimated fair value of the asset occur, an asset is re-measured and reported at fair value through a write-down recorded in non-interest expense. There were no adjustments to the appraisals of foreclosed assets at ~~September 30, 2022.~~

March 31, 2023
and December 31, 2022.

Other Fair Value Disclosures

ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.

The fair value estimates presented in the following table were based on pertinent market data and relevant information on the financial instruments available as of the valuation date. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire portfolio of financial instruments. Because no market exists for a portion of the financial instruments, fair value estimates may be based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For instance, Valley has certain fee-generating business lines (e.g., its mortgage servicing ~~operation,~~operations, trust and investment management departments) that were not considered in these estimates since these activities are not financial instruments. In addition, the tax implications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

2016

The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		Fair Value Hierarchy	September 30, 2022				December 31, 2021					Fair Value Hierarchy	March 31, 2023				December 31, 2022
			Carrying Amount		Fair Value		Carrying Amount		Fair Value				Carrying Amount		Fair Value		Carrying Amount		Fair Value
			(in thousands)										(in thousands)
Financial assets	Financial assets										Financial assets
Cash and due from banks	Cash and due from banks	Level 1	$	431,471	$	431,471	$	205,156	$	205,156	Cash and due from banks	Level 1	$	444,690	$	444,690	$	444,325	$	444,325
Interest bearing deposits with banks	Interest bearing deposits with banks	Level 1	686,877		686,877		1,844,764		1,844,764		Interest bearing deposits with banks	Level 1	5,260,998		5,260,998		503,622		503,622
Equity securities (1)	Equity securities (1)	Level 3	8,376		8,376		3,629		3,629		Equity securities (1)	Level 3	16,342		16,342		15,138		15,138
Held to maturity debt securities:	Held to maturity debt securities:										Held to maturity debt securities:
U.S. Treasury securities	U.S. Treasury securities	Level 1	67,075		66,030		67,558		71,661		U.S. Treasury securities	Level 1	66,747		66,182		66,911		65,889
U.S. government agency securities	U.S. government agency securities	Level 2	259,869		214,314		6,265		6,378		U.S. government agency securities	Level 2	300,614		255,640		260,392		212,712
Obligations of states and political subdivisions	Obligations of states and political subdivisions	Level 2	471,189		430,134		337,962		344,164		Obligations of states and political subdivisions	Level 2	473,597		452,919		480,298		453,195
Residential mortgage-backed securities	Residential mortgage-backed securities	Level 2	2,811,582		2,373,581		2,166,142		2,152,301		Residential mortgage-backed securities	Level 2	2,893,505		2,525,568		2,909,106		2,495,797
Trust preferred securities	Trust preferred securities	Level 2	37,038		31,417		37,020		31,916		Trust preferred securities	Level 2	37,048		29,992		37,043		31,106
Corporate and other debt securities	Corporate and other debt securities	Level 2	75,267		71,176		53,750		54,185		Corporate and other debt securities	Level 2	75,701		70,183		75,234		70,771
Total held to maturity debt securities (2)	Total held to maturity debt securities (2)		3,722,020		3,186,652		2,668,697		2,660,605		Total held to maturity debt securities (2)		3,847,212		3,400,484		3,828,984		3,329,470
Net loans	Net loans	Level 3	44,710,020		41,945,829		33,794,455		33,283,251		Net loans	Level 3	48,223,068		47,389,743		46,458,545		44,910,049
Accrued interest receivable	Accrued interest receivable	Level 1	159,406		159,406		96,882		96,882		Accrued interest receivable	Level 1	223,608		223,608		196,606		196,606
Federal Reserve Bank and Federal Home Loan Bank stock (3)	Federal Reserve Bank and Federal Home Loan Bank stock (3)	Level 2	267,319		267,319		206,450		206,450		Federal Reserve Bank and Federal Home Loan Bank stock (3)	Level 2	547,686		547,686		238,056		238,056
Financial liabilities	Financial liabilities										Financial liabilities
Deposits without stated maturities	Deposits without stated maturities	Level 1	38,980,287		38,980,287		31,945,368		31,945,368		Deposits without stated maturities	Level 1	36,479,540		36,479,540		38,080,457		38,080,457
Deposits with stated maturities	Deposits with stated maturities	Level 2	6,328,556		6,194,389		3,687,044		3,670,113		Deposits with stated maturities	Level 2	11,111,376		11,040,582		9,556,457		9,443,253
Short-term borrowings	Short-term borrowings	Level 1	919,283		883,100		655,726		637,490		Short-term borrowings	Level 1	6,413,056		6,392,459		138,729		138,729
Long-term borrowings	Long-term borrowings	Level 2	1,541,097		1,424,946		1,423,676		1,404,184		Long-term borrowings	Level 2	2,197,656		2,110,305		1,543,058		1,395,991
Junior subordinated debentures issued to capital trusts	Junior subordinated debentures issued to capital trusts	Level 2	56,673		56,543		56,413		46,306		Junior subordinated debentures issued to capital trusts	Level 2	56,847		55,042		56,760		50,923
Accrued interest payable (4)	Accrued interest payable (4)	Level 1	16,519		16,519		4,909		4,909		Accrued interest payable (4)	Level 1	85,581		85,581		45,617		45,617

(1)Represents equity securities without a readily determinable fair value measured at cost less impairment, if any.

(2)The carrying amount is presented gross without the allowance for credit losses.

(3)Included in other assets.

(4)Included in accrued expenses and other liabilities.

Note 7. Investment Securities

Equity Securities

Equity securities totaled ~~$43.3~~$50.2 million and ~~$36.5~~$48.7 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. See Note 6 for further details on equity securities.

Trading Debt Securities

The fair value of trading debt securities totaled ~~$4.1~~$6.9 million and ~~$38.1~~$13.4 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Net trading gains and losses were included in net gains and losses on securities transactions within non-interest income. We recorded net trading ~~losses~~gains of ~~$1.2 million~~$402 thousand and net trading ~~gains~~losses of ~~$705 thousand for the nine months ended September 30, 2022and 2021, respectively. The net trading gains and losses~~$1.1 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and~~ ~~2021 were not material.~~ respectively.

2117

Available for Sale Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of available for sale debt securities at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
		(in thousands)									(in thousands)
September 30, 2022
March 31, 2023										March 31, 2023
U.S. Treasury securities	U.S. Treasury securities	$	306,748	$	—	$	(28,846)	$	277,902	U.S. Treasury securities	$	309,524	$	—	$	(22,779)	$	286,745
U.S. government agency securities	U.S. government agency securities	29,529		50		(2,758)		26,821		U.S. government agency securities	28,394		46		(2,088)		26,352
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:									Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	12,576		—		(565)		12,011		Obligations of states and state agencies	10,649		—		(652)		9,997
Municipal bonds	Municipal bonds	173,574		—		(44,022)		129,552		Municipal bonds	171,219		—		(28,441)		142,778
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	186,150		—		(44,587)		141,563		Total obligations of states and political subdivisions	181,868		—		(29,093)		152,775
Residential mortgage-backed securities	Residential mortgage-backed securities	744,547		66		(97,948)		646,665		Residential mortgage-backed securities	699,214		60		(79,498)		619,776

Corporate and other debt securities	Corporate and other debt securities	197,847		15		(18,959)		178,903		Corporate and other debt securities	193,007		—		(19,419)		173,588
Total	Total	$	1,464,821	$	131	$	(193,098)	$	1,271,854	Total	$	1,412,007	$	106	$	(152,877)	$	1,259,236
December 31, 2021

December 31, 2022										December 31, 2022
U.S. Treasury securities										U.S. Treasury securities	$	308,137	$	—	$	(28,639)	$	279,498
U.S. government agency securities	U.S. government agency securities	$	20,323	$	608	$	(6)	$	20,925	U.S. government agency securities	29,494		47		(2,577)		26,964
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:									Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	26,088		132		(93)		26,127		Obligations of states and state agencies	10,899		—		(493)		10,406
Municipal bonds	Municipal bonds	53,530		349		(116)		53,763		Municipal bonds	171,586		—		(35,181)		136,405
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	79,618		481		(209)		79,890		Total obligations of states and political subdivisions	182,485		—		(35,674)		146,811
Residential mortgage-backed securities	Residential mortgage-backed securities	895,279		14,986		(5,763)		904,502		Residential mortgage-backed securities	719,868		64		(90,114)		629,818

Corporate and other debt securities	Corporate and other debt securities	120,871		3,177		(556)		123,492		Corporate and other debt securities	197,927		—		(19,621)		178,306

Total	Total	$	1,116,091	$	19,252	$	(6,534)	$	1,128,809	Total	$	1,437,911	$	111	$	(176,625)	$	1,261,397

2218

The age of unrealized losses and fair value of the related available for sale debt securities at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		Less than Twelve Months				More than Twelve Months				Total					Less than 12 Months				More than 12 Months				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
		(in thousands)													(in thousands)
September 30, 2022
March 31, 2023														March 31, 2023
U.S. Treasury securities	U.S. Treasury securities	$	277,902	$	(28,846)	$	—	$	—	$	277,902	$	(28,846)	U.S. Treasury securities	$	286,745	$	(22,779)	$	—	$	—	$	286,745	$	(22,779)
U.S. government agency securities	U.S. government agency securities	22,614		(2,720)		1,142		(38)		23,756		(2,758)		U.S. government agency securities	12,003		(1,238)		11,371		(850)		23,374		(2,088)
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:													Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	4,402		(56)		7,610		(509)		12,012		(565)		Obligations of states and state agencies	2,231		(17)		7,766		(635)		9,997		(652)
Municipal bonds	Municipal bonds	119,722		(40,475)		9,305		(3,547)		129,027		(44,022)		Municipal bonds	114,299		(20,463)		28,229		(7,978)		142,528		(28,441)
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	124,124		(40,531)		16,915		(4,056)		141,039		(44,587)		Total obligations of states and political subdivisions	116,530		(20,480)		35,995		(8,613)		152,525		(29,093)
Residential mortgage-backed securities	Residential mortgage-backed securities	376,683		(39,604)		266,591		(58,344)		643,274		(97,948)		Residential mortgage-backed securities	34,170		(1,506)		582,739		(77,992)		616,909		(79,498)

Corporate and other debt securities	Corporate and other debt securities	160,743		(14,670)		15,145		(4,289)		175,888		(18,959)		Corporate and other debt securities	108,625		(9,446)		64,964		(9,973)		173,589		(19,419)
Total	Total	$	962,066	$	(126,371)	$	299,793	$	(66,727)	$	1,261,859	$	(193,098)	Total	$	558,073	$	(55,449)	$	695,069	$	(97,428)	$	1,253,142	$	(152,877)
December 31, 2021

December 31, 2022														December 31, 2022
U.S. Treasury securities														U.S. Treasury securities	$	279,498	$	(28,639)	$	—	$	—	$	279,498	$	(28,639)
U.S. government agency securities	U.S. government agency securities	$	—	$	—	$	1,326	$	(6)	$	1,326	$	(6)	U.S. government agency securities	22,831		(2,538)		1,116		(39)		23,947		(2,577)
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:													Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	10,549		(93)		—		—		10,549		(93)		Obligations of states and state agencies	2,943		(54)		7,462		(439)		10,405		(493)
Municipal bonds	Municipal bonds	19,100		(116)		—		—		19,100		(116)		Municipal bonds	112,029		(26,044)		24,127		(9,137)		136,156		(35,181)
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	29,649		(209)		—		—		29,649		(209)		Total obligations of states and political subdivisions	114,972		(26,098)		31,589		(9,576)		146,561		(35,674)
Residential mortgage-backed securities	Residential mortgage-backed securities	371,256		(4,770)		25,960		(993)		397,216		(5,763)		Residential mortgage-backed securities	311,836		(27,152)		314,834		(62,962)		626,670		(90,114)

Corporate and other debt securities	Corporate and other debt securities	59,039		(556)		—		—		59,039		(556)		Corporate and other debt securities	144,924		(12,581)		33,382		(7,040)		178,306		(19,621)

Total	Total	$	459,944	$	(5,535)	$	27,286	$	(999)	$	487,230	$	(6,534)	Total	$	874,061	$	(97,008)	$	380,921	$	(79,617)	$	1,254,982	$	(176,625)

Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was ~~743~~715 and ~~139~~730 at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

As of ~~September 30, 2022,~~March 31, 2023, the fair value of available for sale debt securities that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law was ~~$348.1~~$870.4 million.

The contractual maturities of available for sale debt securities at ~~September 30, 2022~~March 31, 2023 are set forth in the following table. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.

September 30, 2022
Amortized
Cost Fair
Value
(in thousands)
Due in one year $ 8,593 $ 8,553
Due after one year through five years 184,748 174,982
Due after five years through ten years 271,404 246,134
Due after ten years 255,529 195,520
Residential mortgage-backed securities 744,547 646,665
Total $ 1,464,821 $ 1,271,854


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

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

The weighted average remaining expected life for residential mortgage-backed securities available for sale was ~~6.6~~8.91 years at ~~September 30, 2022.~~March 31, 2023.

Impairment Analysis of Available For Sale Debt Securities

Valley's available for sale debt securities portfolio includes corporate bonds and revenue bonds, among other securities. These types of securities may pose a higher risk of future impairment charges by Valley as a result of the changes in market interest rates, unpredictable nature of the U.S. economy and ~~its~~their potential negative effect on the future performance of the security ~~issuers, including due to current economic conditions and the effects of the COVID-19 pandemic.~~issuers.

Available for sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis. ~~Valley has~~Based on a comparison of the present value of expected cash flows to the amortized cost, Valley recognized a credit related impairment of one corporate bond issued by Signature Bank resulting in a provision for credit losses and full charge-off of the bond totaling $5.0 million during the three months ended March 31, 2023. Valley also evaluated available for sale debt securities that are in an unrealized loss position as of ~~September 30, 2022~~March 31, 2023 included in the table above and has determined that the declines in fair value are mainly attributable to interest rates, credit spreads, market volatility and liquidity conditions, not credit quality or other factors. ~~Based~~There was no impairment recognized during the three months ended March 31, 2022.

Accrued interest on ~~a comparison of the present value of expected cash flows to~~investments, which is excluded from the amortized cost ~~management recognized no impairment during~~of available for sale debt securities, totaled $5.1 million and $5.6 million at March 31, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition.

The following table details the activity in the allowance for credit losses for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023.


	Three Months Ended March 31, 2023

	(in thousands)
Beginning balance	$	—
Provision for credit losses	5,000
Charge-offs	(5,000)
Ending balance	$	—

Valley does not intend to sell any of its available for sale debt securities in an unrealized loss position prior to recovery of their amortized cost basis, and ~~2021. There~~it is more likely than not that Valley will not be required to sell any of its securities prior to recovery of their amortized cost basis. None of the available for sale debt securities were past due

as of March 31, 2023 and there was no allowance for credit losses for available for sale debt securities at ~~September 30,~~March 31, 2023, December 31, 2022 and ~~December~~March 31, ~~2021.~~

2022.

Held to Maturity Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of debt securities held to maturity at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses		Net Carrying Value
		(in thousands)									(in thousands)
September 30, 2022
March 31, 2023										March 31, 2023
U.S. Treasury securities	U.S. Treasury securities	$	67,075	$	—	$	(1,045)	$	66,030	U.S. Treasury securities	$	66,747	$	—	$	(565)	$	66,182	$	—	$	66,747
U.S. government agency securities	U.S. government agency securities	259,869		—		(45,555)		214,314		U.S. government agency securities	300,614		25		(44,999)		255,640		—		300,614
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:									Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	88,276		16		(5,127)		83,165		Obligations of states and state agencies	96,693		341		(4,149)		92,885		257		96,436
Municipal bonds	Municipal bonds	382,913		17		(35,961)		346,969		Municipal bonds	376,904		112		(16,982)		360,034		86		376,818
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	471,189		33		(41,088)		430,134		Total obligations of states and political subdivisions	473,597		453		(21,131)		452,919		343		473,254
Residential mortgage-backed securities	Residential mortgage-backed securities	2,811,582		250		(438,251)		2,373,581		Residential mortgage-backed securities	2,893,505		2,752		(370,689)		2,525,568		—		2,893,505
Trust preferred securities	Trust preferred securities	37,038		1		(5,622)		31,417		Trust preferred securities	37,048		1		(7,057)		29,992		775		36,273
Corporate and other debt securities	Corporate and other debt securities	75,267		—		(4,091)		71,176		Corporate and other debt securities	75,701		—		(5,518)		70,183		515		75,186
Total	Total	$	3,722,020	$	284	$	(535,652)	$	3,186,652	Total	$	3,847,212	$	3,231	$	(449,959)	$	3,400,484	$	1,633	$	3,845,579
December 31, 2021
December 31, 2022										December 31, 2022
U.S. Treasury securities	U.S. Treasury securities	$	67,558	$	4,103	$	—	$	71,661	U.S. Treasury securities	$	66,911	$	—	$	(1,022)	$	65,889	$	—	$	66,911
U.S. government agency securities	U.S. government agency securities	6,265		113		—		6,378		U.S. government agency securities	260,392		—		(47,680)		212,712		—		260,392
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:									Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	141,015		3,065		(312)		143,768		Obligations of states and state agencies	99,238		305		(3,869)		95,674		252		98,986
Municipal bonds	Municipal bonds	196,947		3,536		(87)		200,396		Municipal bonds	381,060		76		(23,615)		357,521		41		381,019
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	337,962		6,601		(399)		344,164		Total obligations of states and political subdivisions	480,298		381		(27,484)		453,195		293		480,005
Residential mortgage-backed securities	Residential mortgage-backed securities	2,166,142		14,599		(28,440)		2,152,301		Residential mortgage-backed securities	2,909,106		1,723		(415,032)		2,495,797		—		2,909,106
Trust preferred securities	Trust preferred securities	37,020		5		(5,109)		31,916		Trust preferred securities	37,043		1		(5,938)		31,106		888		36,155
Corporate and other debt securities	Corporate and other debt securities	53,750		559		(124)		54,185		Corporate and other debt securities	75,234		—		(4,463)		70,771		465		74,769
Total	Total	$	2,668,697	$	25,980	$	(34,072)	$	2,660,605	Total	$	3,828,984	$	2,105	$	(501,619)	$	3,329,470	$	1,646	$	3,827,338

2521

The age of unrealized losses and fair value of related debt securities held to maturity at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		Less than Twelve Months				More than Twelve Months				Total					Less than 12 Months				More than 12 Months				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
		(in thousands)													(in thousands)
September 30, 2022
March 31, 2023														March 31, 2023
U.S. Treasury securities	U.S. Treasury securities	$	66,030	$	(1,045)	$	—	$	—	$	66,030	$	(1,045)	U.S. Treasury securities	$	66,182	$	(565)	$	—	$	—	$	66,182	$	(565)
U.S. government agency securities	U.S. government agency securities	213,129		(45,555)		—		—		213,129		(45,555)		U.S. government agency securities	211,526		(44,773)		2,925		(226)		214,451		(44,999)
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:													Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	69,161		(3,397)		12,403		(1,730)		81,564		(5,127)		Obligations of states and state agencies	20,457		(789)		39,627		(3,360)		60,084		(4,149)
Municipal bonds	Municipal bonds	284,323		(34,193)		7,674		(1,768)		291,997		(35,961)		Municipal bonds	226,278		(13,671)		26,411		(3,311)		252,689		(16,982)
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	353,484		(37,590)		20,077		(3,498)		373,561		(41,088)		Total obligations of states and political subdivisions	246,735		(14,460)		66,038		(6,671)		312,773		(21,131)
Residential mortgage-backed securities	Residential mortgage-backed securities	1,354,304		(200,314)		1,007,883		(237,937)		2,362,187		(438,251)		Residential mortgage-backed securities	381,802		(33,941)		1,944,360		(336,748)		2,326,162		(370,689)
Trust preferred securities	Trust preferred securities	—		—		30,416		(5,622)		30,416		(5,622)		Trust preferred securities	—		—		28,990		(7,057)		28,990		(7,057)
Corporate and other debt securities	Corporate and other debt securities	57,181		(3,336)		7,245		(755)		64,426		(4,091)		Corporate and other debt securities	37,579		(2,122)		24,604		(3,396)		62,183		(5,518)
Total	Total	$	2,044,128	$	(287,840)	$	1,065,621	$	(247,812)	$	3,109,749	$	(535,652)	Total	$	943,824	$	(95,861)	$	2,066,917	$	(354,098)	$	3,010,741	$	(449,959)
December 31, 2021

December 31, 2022														December 31, 2022
U.S. Treasury securities														U.S. Treasury securities	$	65,889	$	(1,022)	$	—	$	—	$	65,889	$	(1,022)
U.S. government agency securities														U.S. government agency securities	209,863		(47,508)		1,673		(172)		211,536		(47,680)
Obligations of states and political subdivisions:	Obligations of states and political subdivisions:													Obligations of states and political subdivisions:
Obligations of states and state agencies	Obligations of states and state agencies	$	17,000	$	(254)	$	5,517	$	(58)	$	22,517	$	(312)	Obligations of states and state agencies	62,443		(2,020)		18,231		(1,849)		80,674		(3,869)
Municipal bonds	Municipal bonds	9,403		(87)		—		—		9,403		(87)		Municipal bonds	251,970		(20,457)		15,534		(3,158)		267,504		(23,615)
Total obligations of states and political subdivisions	Total obligations of states and political subdivisions	26,403		(341)		5,517		(58)		31,920		(399)		Total obligations of states and political subdivisions	314,413		(22,477)		33,765		(5,007)		348,178		(27,484)
Residential mortgage-backed securities	Residential mortgage-backed securities	1,381,405		(22,365)		206,520		(6,075)		1,587,925		(28,440)		Residential mortgage-backed securities	962,690		(109,532)		1,413,590		(305,500)		2,376,280		(415,032)
Trust preferred securities	Trust preferred securities	—		—		30,912		(5,109)		30,912		(5,109)		Trust preferred securities	—		—		30,105		(5,938)		30,105		(5,938)
Corporate and other debt securities	Corporate and other debt securities	32,627		(124)		—		—		32,627		(124)		Corporate and other debt securities	57,245		(2,989)		13,525		(1,474)		70,770		(4,463)
Total	Total	$	1,440,435	$	(22,830)	$	242,949	$	(11,242)	$	1,683,384	$	(34,072)	Total	$	1,610,100	$	(183,528)	$	1,492,658	$	(318,091)	$	3,102,758	$	(501,619)

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was ~~826~~766 and ~~108~~802 at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

As of ~~September 30, 2022,~~March 31, 2023, the fair value of debt securities held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law was ~~$619.5 million.~~

$2.5 billion.

2622

The contractual maturities of investments in debt securities held to maturity at ~~September 30, 2022~~March 31, 2023 are set forth in the table below. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.


		September 30, 2022					March 31, 2023
		Amortized Cost		Fair Value			Amortized Cost		Fair Value
		(in thousands)					(in thousands)
Due in one year	Due in one year	$	31,783	$	31,721	Due in one year	$	63,872	$	63,355
Due after one year through five years	Due after one year through five years	195,679		191,824		Due after one year through five years	169,205		165,906
Due after five years through ten years	Due after five years through ten years	86,011		79,844		Due after five years through ten years	96,385		92,034
Due after ten years	Due after ten years	596,965		509,682		Due after ten years	624,245		553,621
Residential mortgage-backed securities	Residential mortgage-backed securities	2,811,582		2,373,581		Residential mortgage-backed securities	2,893,505		2,525,568
Total	Total	$	3,722,020	$	3,186,652	Total	$	3,847,212	$	3,400,484

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

The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was ~~8.8~~11.67 years at ~~September 30, 2022.~~

March 31, 2023.

2723

Credit Quality Indicators

Valley monitors the credit quality of the held to maturity debt securities through the use of the most current credit ratings from external rating agencies. The following table summarizes the amortized cost of held to maturity debt securities by external credit rating at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

AAA/AA/A Rated BBB rated Non-investment grade rated Non-rated Total
(in thousands)
September 30, 2022
U.S. Treasury securities $ 67,075 $ — $ — $ — $ 67,075
U.S. government agency securities 259,869 — — — 259,869
Obligations of states and political subdivisions:
Obligations of states and state agencies 63,434 — 5,517 19,325 88,276
Municipal bonds 348,330 — — 34,583 382,913
Total obligations of states and political subdivisions 411,764 — 5,517 53,908 471,189
Residential mortgage-backed securities 2,811,582 — — — 2,811,582
Trust preferred securities — — — 37,038 37,038
Corporate and other debt securities 2,000 6,000 — 67,267 75,267
Total $ 3,552,290 $ 6,000 $ 5,517 $ 158,213 $ 3,722,020
December 31, 2021
U.S. Treasury securities $ 67,558 $ — $ — $ — $ 67,558
U.S. government agency securities 6,265 — — — 6,265
Obligations of states and political subdivisions:
Obligations of states and state agencies 118,368 — 5,576 17,071 141,015
Municipal bonds 148,854 — — 48,093 196,947
Total obligations of states and political subdivisions 267,222 — 5,576 65,164 337,962
Residential mortgage-backed securities 2,166,142 — — — 2,166,142
Trust preferred securities — — — 37,020 37,020
Corporate and other debt securities 2,000 6,000 — 45,750 53,750
Total $ 2,509,187 $ 6,000 $ 5,576 $ 147,934 $ 2,668,697


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

Obligations of states and political subdivisions include municipal bonds and revenue bonds issued by various municipal corporations. At ~~September 30, 2022,~~March 31, 2023, most of the obligations of states and political subdivisions were rated investment grade and a large portion of the "non-rated" category included ~~TEMS~~tax exempt mortgage securities (TEMS) secured by Ginnie Mae securities. Trust preferred securities consist of non-rated single-issuer securities, issued by bank holding companies. Corporate ~~bonds~~and other debt securities in the non-rated category mostly consist of ~~debt primarily~~high quality foreign issued ~~by banks.~~

bonds.

Allowance for Credit Losses for Held to Maturity Debt Securities

Valley has a zero-loss expectation for certain securities within the held to maturity portfolio, and therefore it is not required to estimate an allowance for credit losses related to these securities under the CECL standard. After an evaluation of qualitative factors, Valley identified the following securities types which it believes qualify for this exclusion: U.S. Treasury securities, U.S. government agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and TEMS collateralized municipal ~~bonds called TEMS.~~bonds.

~~Held~~Accrued interest on investments, which is excluded from the amortized cost of held to maturity debt securities, ~~were carried net of allowance for credit losses totaling $1.7~~totaled $12.7 million and $13.5 million at ~~September 30, 2022,~~ March 31, 2023 and ~~$1.2 million~~ at December 31, ~~2021. Valley recorded a provision for credit losses of $188 thousand~~2022, respectively, and ~~$531 thousand for the three and nine months ended September 30, 2022, respectively. Valley recorded~~is presented

2824

~~a provision~~within total accrued interest receivable on the consolidated statements of financial condition. Held to maturity debt securities are carried net of an allowance for credit losses.

The following table details the activity in the allowance for credit losses ~~of $35 thousand and a credit (negative) provision for credit losses of $353 thousand~~ for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~ March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Beginning balance	$	1,646	$	1,165
(Credit) provision for credit losses	(13)		57
Ending balance	$	1,633	$	1,222

There were no ~~charge-offs~~sales of available for ~~all~~ sale and held to maturity debt securities debt securities during the ~~respective periods of~~three months ended March 31, 2023 and 2022, ~~and 2021.~~respectively.

Note 8. Loans and Allowance for Credit Losses for Loans

The detail of the loan portfolio as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was as follows:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(in thousands)
Loans:	Loans:					Loans:
Commercial and industrial:

Commercial and industrial	Commercial and industrial	$	8,615,557	$	5,411,601	Commercial and industrial	$	9,043,946	$	8,804,830
Commercial and industrial PPP loans *		85,820		435,950
Total commercial and industrial loans		8,701,377		5,847,551
Commercial real estate:	Commercial real estate:					Commercial real estate:
Commercial real estate	Commercial real estate	24,493,445		18,935,486		Commercial real estate	27,051,111		25,732,033
Construction	Construction	3,571,818		1,854,580		Construction	3,725,967		3,700,835
Total commercial real estate loans	Total commercial real estate loans	28,065,263		20,790,066		Total commercial real estate loans	30,777,078		29,432,868
Residential mortgage	Residential mortgage	5,177,128		4,545,064		Residential mortgage	5,486,280		5,364,550
Consumer:	Consumer:					Consumer:
Home equity	Home equity	467,135		400,779		Home equity	516,592		503,884
Automobile	Automobile	1,711,086		1,570,036		Automobile	1,717,141		1,746,225
Other consumer	Other consumer	1,063,775		1,000,161		Other consumer	1,118,929		1,064,843
Total consumer loans	Total consumer loans	3,241,996		2,970,976		Total consumer loans	3,352,662		3,314,952
Total loans	Total loans	$	45,185,764	$	34,153,657	Total loans	$	48,659,966	$	46,917,200

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

Total loans include net unearned discounts and ~~deferre~~ddeferred loan fees of ~~$136.5~~$125.4 million an~~d $78.5~~ and $120.5 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The increase in total loans at September 30, 2022 is partially attributed to $5.9 billion of loans acquired in the Bank Leumi USA acquisition, which was inclusive of a $98.6 million net purchase discount at the acquisition date.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled ~~$139.6~~$192.6 million and ~~$83.7~~$175.9 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial ~~condition~~.

condition.

There were no sales of loans from the held for investment portfolio during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Credit Risk Management

For all of its loan types, Valley adheres to a credit policy designed to minimize credit risk while generating the maximum income given the level of risk appetite. Management reviews and approves these policies and procedures on a regular basis with subsequent approval by the Board of Directors annually. Credit authority relating to a significant dollar percentage of the overall portfolio is centralized and controlled by the Credit Risk Management Division and by the Credit Committee. A reporting system supplements the management review process by providing management with frequent reports concerning loan production, loan quality, internal loan classification, concentrations of credit, loan delinquencies, non-performing, and potential problem loans. Loan portfolio diversification is an important factor utilized by Valley to manage its risk across business sectors and through

cyclical economic circumstances. Additionally, Valley does not accept crypto assets as loan collateral for any of its loan portfolio classes. See Valley’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for further details.

Credit Quality

The following table presents past due, current and non-accrual loans without an allowance for loan losses by loan portfolio class at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		Past Due and Non-Accrual Loans																	Past Due and Non-Accrual Loans
		30-59 Days Past Due Loans		60-89 Days Past Due Loans		90 Days or More Past Due Loans		Non-Accrual Loans		Total Past Due Loans		Current Loans		Total Loans		Non-Accrual Loans Without Allowance for Loan Losses			30-59 Days Past Due Loans		60-89 Days Past Due Loans		90 Days or More Past Due Loans		Non-Accrual Loans		Total Past Due Loans		Current Loans		Total Loans		Non-Accrual Loans Without Allowance for Loan Losses
		(in thousands)																	(in thousands)
September 30, 2022
March 31, 2023																		March 31, 2023
Commercial and industrial	Commercial and industrial	$	19,526	$	2,188	$	15,072	$	135,187	$	171,973	$	8,529,404	$	8,701,377	$	5,043	Commercial and industrial	$	20,716	$	24,118	$	8,927	$	78,606	$	132,367	$	8,911,579	$	9,043,946	$	6,675
Commercial real estate:	Commercial real estate:																	Commercial real estate:
Commercial real estate	Commercial real estate	6,196		383		15,082		67,319		88,980		24,404,465		24,493,445		64,260		Commercial real estate	13,580		—		—		67,938		81,518		26,969,593		27,051,111		66,587
Construction	Construction	—		12,969		—		61,098		74,067		3,497,751		3,571,818		14,941		Construction	—		—		6,450		68,649		75,099		3,650,868		3,725,967		15,791
Total commercial real estate loans	Total commercial real estate loans	6,196		13,352		15,082		128,417		163,047		27,902,216		28,065,263		79,201		Total commercial real estate loans	13,580		—		6,450		136,587		156,617		30,620,461		30,777,078		82,378
Residential mortgage	Residential mortgage	13,045		5,947		550		26,564		46,106		5,131,022		5,177,128		14,378		Residential mortgage	12,599		2,133		1,668		23,483		39,883		5,446,397		5,486,280		18,694
Consumer loans:	Consumer loans:																	Consumer loans:
Home equity	Home equity	321		168		312		2,845		3,646		463,489		467,135		123		Home equity	412		287		48		2,965		3,712		512,880		516,592		—
Automobile	Automobile	4,999		702		109		286		6,096		1,704,990		1,711,086		—		Automobile	4,598		502		282		262		5,644		1,711,497		1,717,141		—
Other consumer	Other consumer	876		304		—		96		1,276		1,062,499		1,063,775		—		Other consumer	2,835		730		417		91		4,073		1,114,856		1,118,929		—
Total consumer loans	Total consumer loans	6,196		1,174		421		3,227		11,018		3,230,978		3,241,996		123		Total consumer loans	7,845		1,519		747		3,318		13,429		3,339,233		3,352,662		—
Total	Total	$	44,963	$	22,661	$	31,125	$	293,395	$	392,144	$	44,793,620	$	45,185,764	$	98,745	Total	$	54,740	$	27,770	$	17,792	$	241,994	$	342,296	$	48,317,670	$	48,659,966	$	107,747

3026


		Past Due and Non-Accrual Loans																	Past Due and Non-Accrual Loans
		30-59 Days Past Due Loans		60-89 Days Past Due Loans		90 Days or More Past Due Loans		Non-Accrual Loans		Total Past Due Loans		Current Loans		Total Loans		Non-Accrual Loans Without Allowance for Loan Losses			30-59 Days Past Due Loans		60-89 Days Past Due Loans		90 Days or More Past Due Loans		Non-Accrual Loans		Total Past Due Loans		Current Loans		Total Loans		Non-Accrual Loans Without Allowance for Loan Losses
		(in thousands)																	(in thousands)
December 31, 2021
December 31, 2022																		December 31, 2022
Commercial and industrial	Commercial and industrial	$	6,717	$	7,870	$	1,273	$	99,918	$	115,778	$	5,731,773	$	5,847,551	$	9,066	Commercial and industrial	$	11,664	$	12,705	$	18,392	$	98,881	$	141,642	$	8,663,188	$	8,804,830	$	5,659
Commercial real estate:	Commercial real estate:																	Commercial real estate:
Commercial real estate	Commercial real estate	14,421		—		32		83,592		98,045		18,837,441		18,935,486		70,719		Commercial real estate	6,638		3,167		2,292		68,316		80,413		25,651,620		25,732,033		66,066
Construction	Construction	1,941		—		—		17,641		19,582		1,834,998		1,854,580		—		Construction	—		—		3,990		74,230		78,220		3,622,615		3,700,835		16,120
Total commercial real estate loans	Total commercial real estate loans	16,362		—		32		101,233		117,627		20,672,439		20,790,066		70,719		Total commercial real estate loans	6,638		3,167		6,282		142,546		158,633		29,274,235		29,432,868		82,186
Residential mortgage	Residential mortgage	10,999		3,314		677		35,207		50,197		4,494,867		4,545,064		20,401		Residential mortgage	16,146		3,315		1,866		25,160		46,487		5,318,063		5,364,550		14,224
Consumer loans:	Consumer loans:																	Consumer loans:
Home equity	Home equity	242		98		—		3,517		3,857		396,922		400,779		4		Home equity	955		254		—		2,810		4,019		499,865		503,884		117
Automobile	Automobile	6,391		656		271		240		7,558		1,562,478		1,570,036		—		Automobile	5,974		630		1		271		6,876		1,739,349		1,746,225		—
Other consumer	Other consumer	178		266		518		101		1,063		999,098		1,000,161		—		Other consumer	2,158		695		46		93		2,992		1,061,851		1,064,843		—
Total consumer loans	Total consumer loans	6,811		1,020		789		3,858		12,478		2,958,498		2,970,976		4		Total consumer loans	9,087		1,579		47		3,174		13,887		3,301,065		3,314,952		117
Total	Total	$	40,889	$	12,204	$	2,771	$	240,216	$	296,080	$	33,857,577	$	34,153,657	$	100,190	Total	$	43,535	$	20,766	$	26,587	$	269,761	$	360,649	$	46,556,551	$	46,917,200	$	102,186

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

3127

The following table presents the internal loan classification risk by loan portfolio class by origination year based on the most recent analysis performed at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022, as well as the gross loan charge-offs by year of origination for the three months ended March 31, 2023:


		Term Loans																			Term Loans
		Amortized Cost Basis by Origination Year																			Amortized Cost Basis by Origination Year
September 30, 2022		2022		2021		2020		2019		2018		Prior to 2018		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
March 31, 2023																				March 31, 2023	2023		2022		2021		2020		2019		Prior to 2019		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
		(in thousands)																			(in thousands)
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	1,451,283	$	1,193,937	$	663,575	$	352,556	$	279,803	$	395,216	$	4,076,834	$	159	$	8,413,362	Pass	$	435,733	$	1,418,804	$	1,021,874	$	549,408	$	304,137	$	628,117	$	4,450,850	$	130	$	8,809,053
Special Mention	Special Mention	15,224		3,433		20,292		5,246		9,320		3,852		56,973		9		114,349		Special Mention	1,573		27,386		2,591		19,260		3,658		7,443		61,455		7		123,373
Substandard	Substandard	—		2,279		5,285		2,082		4,467		5,312		71,792		—		91,217		Substandard	10		517		2,832		2,617		1,203		6,904		25,847		—		39,930
Doubtful	Doubtful	—		—		—		2,701		2,636		77,112		—		—		82,449		Doubtful	—		777		1,552		—		2,683		63,707		2,871		—		71,590

Total commercial and industrial	Total commercial and industrial	$	1,466,507	$	1,199,649	$	689,152	$	362,585	$	296,226	$	481,492	$	4,205,599	$	168	$	8,701,377	Total commercial and industrial	$	437,316	$	1,447,484	$	1,028,849	$	571,285	$	311,681	$	706,171	$	4,541,023	$	137	$	9,043,946
Commercial real estate	Commercial real estate																			Commercial real estate
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	5,326,845	$	5,193,267	$	3,280,227	$	2,733,365	$	1,553,479	$	5,161,982	$	284,891	$	3,599	$	23,537,657	Pass	$	1,607,961	$	6,740,087	$	5,201,027	$	3,287,689	$	2,520,271	$	6,316,475	$	490,136	$	3,407	$	26,167,053
Special Mention	Special Mention	102,150		63,572		90,429		43,812		75,328		155,873		15,074		—		546,239		Special Mention	26,512		55,889		46,317		63,647		71,474		251,353		6,720		—		521,912
Substandard	Substandard	17,641		31,910		37,797		40,394		63,254		210,011		8,372		—		409,379		Substandard	—		33,613		35,924		30,090		34,765		219,838		7,916		—		362,146
Doubtful		—		—		—		—		—		170		—		—		170

Total commercial real estate	Total commercial real estate	$	5,446,636	$	5,288,749	$	3,408,453	$	2,817,571	$	1,692,061	$	5,528,036	$	308,337	$	3,599	$	24,493,445	Total commercial real estate	$	1,634,473	$	6,829,589	$	5,283,268	$	3,381,426	$	2,626,510	$	6,787,666	$	504,772	$	3,407	$	27,051,111
Construction	Construction																			Construction
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	743,720	$	607,441	$	120,837	$	30,246	$	10,572	$	17,069	$	1,952,786	$	—	$	3,482,671	Pass	$	120,282	$	928,489	$	415,212	$	70,371	$	15,502	$	36,863	$	2,079,911	$	—	$	3,666,630
Special Mention		12,917		—		—		—				—		13,084		—		26,001

Substandard	Substandard	—		11,376		—		982				17,599		20,183		—		50,140		Substandard	—		13		12,290		—		964		17,600		7,351		—		38,218
Doubtful	Doubtful	—		643		—		—				12,364		—		—		13,006		Doubtful	447		8,341		670		11,661		—		—		—		—		21,119
Total construction	Total construction	$	756,637	$	619,460	$	120,837	$	31,228	$	10,572	$	47,032	$	1,986,053	$	—	$	3,571,818	Total construction	$	120,729	$	936,843	$	428,172	$	82,032	$	16,466	$	54,463	$	2,087,262	$	—	$	3,725,967
Gross loan charge-offs																				Gross loan charge-offs	$	—	$	6,035	$	20,286	$	123	$	72	$	1,636	$	3,593	$	—	$	31,745

3228


		Term Loans																			Term Loans
		Amortized Cost Basis by Origination Year																			Amortized Cost Basis by Origination Year
December 31, 2021		2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
December 31, 2022																				December 31, 2022	2022		2021		2020		2019		2018		Prior to 2018		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
		(in thousands)																			(in thousands)
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	1,563,050	$	743,165	$	461,022	$	362,748	$	143,753	$	337,713	$	1,968,513	$	247	$	5,580,211	Pass	$	1,600,747	$	1,089,386	$	590,406	$	322,564	$	250,031	$	386,085	$	4,307,163	$	144	$	8,546,526
Special Mention	Special Mention	4,182		1,195		3,217		14,143		1,726		9,869		102,145		40		136,517		Special Mention	31,557		3,367		19,492		4,732		4,369		3,558		51,021		7		118,103
Substandard	Substandard	8,248		4,823		3,139		7,077		910		408		19,642		109		44,356		Substandard	288		1,734		4,121		1,412		4,256		4,879		31,698		—		48,388
Doubtful	Doubtful	—		—		2,733		—		16,355		67,379		—		—		86,467		Doubtful	886		20,844		—		2,692		—		64,158		3,233		—		91,813

Total commercial and industrial	Total commercial and industrial	$	1,575,480	$	749,183	$	470,111	$	383,968	$	162,744	$	415,369	$	2,090,300	$	396	$	5,847,551	Total commercial and industrial	$	1,633,478	$	1,115,331	$	614,019	$	331,400	$	258,656	$	458,680	$	4,393,115	$	151	$	8,804,830
Commercial real estate	Commercial real estate																			Commercial real estate
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	4,517,917	$	2,983,140	$	2,702,580	$	1,734,922	$	1,474,770	$	4,557,011	$	195,851	$	13,380	$	18,179,571	Pass	$	6,815,115	$	5,168,127	$	3,246,885	$	2,672,223	$	1,536,327	$	5,027,128	$	452,461	$	3,504	$	24,921,770
Special Mention	Special Mention	7,700		50,019		46,911		44,187		65,623		143,540		50,168		—		408,148		Special Mention	93,286		48,007		60,169		45,447		62,111		125,414		8,188		—		442,622
Substandard	Substandard	735		34,655		29,029		41,231		70,941		169,041		1,949		—		347,581		Substandard	15,088		34,475		32,630		34,622		59,337		183,341		7,986		—		367,479
Doubtful	Doubtful	—		—		—		—		—		186		—		—		186		Doubtful	—		—		—		—		—		162		—		—		162

Total commercial real estate	Total commercial real estate	$	4,526,352	$	3,067,814	$	2,778,520	$	1,820,340	$	1,611,334	$	4,869,778	$	247,968	$	13,380	$	18,935,486	Total commercial real estate	$	6,923,489	$	5,250,609	$	3,339,684	$	2,752,292	$	1,657,775	$	5,336,045	$	468,635	$	3,504	$	25,732,033
Construction	Construction																			Construction
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	274,097	$	98,609	$	48,555	$	32,781	$	6,061	$	28,419	$	1,313,555	$	—	$	1,802,077	Pass	$	942,380	$	512,046	$	61,131	$	22,845	$	8,676	$	20,599	$	2,040,866	$	—	$	3,608,543
Special Mention	Special Mention	4,131		—		1,009		—		—		—		18,449		—		23,589		Special Mention	—		—		—		—		—		—		14,268		—		14,268
Substandard	Substandard	199		19		6		246		—		17,842		10,602		—		28,914		Substandard	12,969		12,601		—		974		—		17,599		20,138		—		64,281

Doubtful																				Doubtful	—		—		—		—		—		13,743		—		—		13,743
Total construction	Total construction	$	278,427	$	98,628	$	49,570	$	33,027	$	6,061	$	46,261	$	1,342,606	$	—	$	1,854,580	Total construction	$	955,349	$	524,647	$	61,131	$	23,819	$	8,676	$	51,941	$	2,075,272	$	—	$	3,700,835

3329

For residential mortgages, automobile, home equity and other consumer loan portfolio classes, Valley also evaluates credit quality based on the aging status of the loan and by payment activity. The following table presents the amortized cost in those loan classes based on payment activity, by origination year as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022, as well as the gross loan charge-offs by year of origination for the three months ended March 31, 2023:


		Term Loans																			Term Loans
		Amortized Cost Basis by Origination Year																			Amortized Cost Basis by Origination Year
September 30, 2022		2022		2021		2020		2019		2018		Prior to 2018		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
March 31, 2023																				March 31, 2023	2023		2022		2021		2020		2019		Prior to 2019		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
		(in thousands)																			(in thousands)
Residential mortgage	Residential mortgage																			Residential mortgage
Performing	Performing	$	1,040,542	$	1,508,300	$	586,418	$	505,502	$	351,579	$	1,113,157	$	63,694	$	—	$	5,169,192	Performing	$	222,494	$	1,317,372	$	1,521,543	$	572,064	$	478,014	$	1,300,107	$	66,947	$	—	$	5,478,541
90 days or more past due	90 days or more past due	—		—		129		1,508		2,526		3,773		—		—		7,936		90 days or more past due	—		1,473		1,754		—		499		4,013		—		—		7,739
Total residential mortgage	Total residential mortgage	$	1,040,542	$	1,508,300	$	586,547	$	507,010	$	354,105	$	1,116,930	$	63,694	$	—	$	5,177,128	Total residential mortgage	$	222,494	$	1,318,845	$	1,523,297	$	572,064	$	478,513	$	1,304,120	$	66,947	$	—	$	5,486,280
Consumer loans	Consumer loans																			Consumer loans
Home equity	Home equity																			Home equity
Performing	Performing	$	36,133	$	12,728	$	4,788	$	5,279	$	5,822	$	15,602	$	346,709	$	39,105	$	466,166	Performing	$	7,251	$	46,566	$	12,085	$	4,448	$	4,891	$	18,499	$	383,948	$	37,984	$	515,672
90 days or more past due	90 days or more past due	—		—		—		—		—		—		424		545		969		90 days or more past due	—		—		—		—		—		—		285		635		920
Total home equity	Total home equity	36,133		12,728		4,788		5,279		5,822		15,602		347,133		39,650		467,135		Total home equity	7,251		46,566		12,085		4,448		4,891		18,499		384,233		38,619		516,592
Automobile	Automobile																			Automobile
Performing	Performing	589,413		570,603		226,848		188,741		95,798		39,039		—		—		1,710,442		Performing	141,743		687,328		480,634		181,994		144,130		80,995		—		—		1,716,824
90 days or more past due	90 days or more past due	75		111		78		167		132		81		—		—		644		90 days or more past due	—		1		51		19		105		141		—		—		317
Total automobile	Total automobile	589,488		570,714		226,926		188,908		95,930		39,120		—		—		1,711,086		Total automobile	141,743		687,329		480,685		182,013		144,235		81,136		—		—		1,717,141
Other consumer	Other consumer																			Other consumer
Performing	Performing	21,110		2,934		7,262		7,476		7,560		16,546		1,000,795		—		1,063,683		Performing	4,898		23,313		9,056		8,020		7,374		2,615		1,063,356		—		1,118,632
90 days or more past due	90 days or more past due	—		—		—		—		—		—		92		—		92		90 days or more past due	—		28		—		2		—		38		229		—		297
Total other consumer	Total other consumer	21,110		2,934		7,262		7,476		7,560		16,546		1,000,887		—		1,063,775		Total other consumer	4,898		23,341		9,056		8,022		7,374		2,653		1,063,585		—		1,118,929
Total consumer	Total consumer	$	646,731	$	586,376	$	238,976	$	201,663	$	109,312	$	71,268	$	1,348,020	$	39,650	$	3,241,996	Total consumer	$	153,892	$	757,236	$	501,826	$	194,483	$	156,500	$	102,288	$	1,447,818	$	38,619	$	3,352,662
Gross loan charge-offs																				Gross loan charge-offs	$	—	$	146	$	109	$	4	$	170	$	388	$	11	$	—	$	828

3430


		Term Loans																			Term Loans
		Amortized Cost Basis by Origination Year																			Amortized Cost Basis by Origination Year
December 31, 2021		2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
December 31, 2022																				December 31, 2022	2022		2021		2020		2019		2018		Prior to 2018		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans		Total
		(in thousands)																			(in thousands)
Residential mortgage	Residential mortgage																			Residential mortgage
Performing	Performing	$	1,448,602	$	635,531	$	572,911	$	425,152	$	368,164	$	1,014,190	$	70,342	$	—	$	4,534,892	Performing	$	1,302,279	$	1,502,622	$	571,390	$	500,197	$	338,062	$	1,073,995	$	66,706	$	—	$	5,355,251
90 days or more past due	90 days or more past due	—		357		2,627		2,056		2,794		2,338		—		—		10,172		90 days or more past due	—		197		217		1,835		2,876		4,174		—		—		9,299
Total residential mortgage	Total residential mortgage	$	1,448,602	$	635,888	$	575,538	$	427,208	$	370,958	$	1,016,528	$	70,342	$	—	$	4,545,064	Total residential mortgage	$	1,302,279	$	1,502,819	$	571,607	$	502,032	$	340,938	$	1,078,169	$	66,706	$	—	$	5,364,550
Consumer loans	Consumer loans																			Consumer loans
Home equity	Home equity																			Home equity
Performing	Performing	$	13,847	$	5,723	$	6,994	$	7,384	$	5,359	$	13,597	$	303,888	$	42,822	$	399,614	Performing	$	47,084	$	12,432	$	4,592	$	5,024	$	5,581	$	13,007	$	376,608	$	38,570	$	502,898
90 days or more past due	90 days or more past due	—		—		—		—		—		35		536		594		1,165		90 days or more past due	—		—		—		—		—		—		276		710		986
Total home equity	Total home equity	13,847		5,723		6,994		7,384		5,359		13,632		304,424		43,416		400,779		Total home equity	47,084		12,432		4,592		5,024		5,581		13,007		376,884		39,280		503,884
Automobile	Automobile																			Automobile
Performing	Performing	735,446		309,856		278,828		157,450		72,753		15,171		—		—		1,569,504		Performing	724,557		525,017		204,578		166,103		80,012		45,415		—		—		1,745,682
90 days or more past due	90 days or more past due	129		—		78		163		81		81		—		—		532		90 days or more past due	38		116		36		180		101		72		—		—		543
Total automobile	Total automobile	735,575		309,856		278,906		157,613		72,834		15,252		—		—		1,570,036		Total automobile	724,595		525,133		204,614		166,283		80,113		45,487		—		—		1,746,225
Other consumer	Other consumer																			Other consumer
Performing	Performing	2,949		6,717		6,468		7,017		1,009		14,483		961,027		—		999,670		Performing	24,140		10,144		8,206		7,435		7,406		15,736		991,737		—		1,064,804
90 days or more past due	90 days or more past due	—		—		—		—		—		—		491		—		491		90 days or more past due	—		—		—		—		—		38		1		—		39
Total other consumer	Total other consumer	2,949		6,717		6,468		7,017		1,009		14,483		961,518		—		1,000,161		Total other consumer	24,140		10,144		8,206		7,435		7,406		15,774		991,738		—		1,064,843
Total consumer	Total consumer	$	752,371	$	322,296	$	292,368	$	172,014	$	79,202	$	43,367	$	1,265,942	$	43,416	$	2,970,976	Total consumer	$	795,819	$	547,709	$	217,412	$	178,742	$	93,100	$	74,268	$	1,368,622	$	39,280	$	3,314,952

~~Troubled debt restructured loans~~

Loan modifications to borrowers experiencing financial difficulty.. From time to time, Valley mayextend, restructure, or otherwise modify the terms of existing loans, on a case-by-case basis, to remain competitive and retain certain customers, as well as assist other customers who may be experiencing financial difficulties. IfPrior to 2023, a loan was classified as a troubled debt restructuring (TDR) if the borrower iswas experiencing financial difficulties and a concession has been made at the time of such ~~modification,~~modification.

Effective January 1, 2023, Valley adopted ASU No. 2022-02 which eliminated the accounting guidance for TDR loans while enhancing disclosure requirements for certain loan modifications by creditors when a borrower is experiencing financial difficulty. Valley adopted ASU No. 2022-02 using the modified retrospective transition method. At the date of adoption, Valley was no longer required to utilize a loan-level discounted cash flow approach for determining the allowance for certain modified loans previously classified as TDR loans. As a ~~troubled debt restructured loan (TDR).~~

~~Generally,~~result, Valley elected to utilize its collective reserve methodology for pools of loans that share common risk characteristic for determining the ~~concessions made~~reserves for ~~TDRs involve lowering~~ the ~~monthly payments on~~modified loans ~~through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected~~formerly classified as TDR loans. This change resulted in the ~~interest rate, or~~recognition of a ~~combination~~cumulative-effect adjustment which decreased the allowance for loan losses with an offsetting entry to retained earnings, net of these two methods. The concessions may also involve payment deferrals but rarely result in the forgiveness of principal or accrued interest. In addition, Valley frequently obtains additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms of the loan and Valley’s underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally ~~six~~ ~~consecutive months of payments) and both principal and interest are deemed collectible.~~

Performing TDRs (not reported as non-accrual loans) totaled $69.7 million and $71.3 million as of September 30, 2022 and December 31, 2021, respectively. Non-performing TDRs totaled $155.7 million and $117.2 million as of September 30, 2022 and December 31, 2021, respectively.

deferred taxes, at January 1, 2023.

3531

The following table shows the amortized cost basis of loans to borrowers experiencing financial difficulty at March 31, 2023 that were modified during the three months ended March 31, 2023, disaggregated by class of financing receivable and type of modification. Each of the types of modifications was less than one percent of their respective loan categories.


	Three Months Ended March 31,
	Term extension		Term extension and interest rate reduction		Total
	($ in thousands)
Commercial and industrial	$	1,281	$	523	$	1,804
Commercial real estate	46,328		—		46,328
Residential mortgage	213		—		213
Consumer	60		—		60
Total	$	47,882	$	523	$	48,405

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

Types of Modifications

Commercial and industrial

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

Commercial real estate

6 - 36 month term extensions

Residential mortgage

12 month term extensions

Consumer

60 month term extensions

Valley closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of modification efforts. All loans to borrowers experiencing financial difficulty that have been modified during the three months ended March 31, 2023 were current to their contractual payments as of March 31, 2023.

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

Troubled debt restructured loans. The following tables present the pre- and post-modification amortized cost of TDR loans by loan class ~~modified as TDRs~~ during the three ~~and nine~~ months ended ~~September 30, 2022 and 2021.~~March 31, 2022. Post-modification amounts are presented as of ~~September 30,~~March 31, 2022 ~~and 2021.~~using the allowance methodology for TDRs prior to the adoption of ASU 2022-02.


		Three Months Ended September 30,
		2022					2021						Three Months Ended March 31, 2022
Troubled Debt Restructurings	Troubled Debt Restructurings	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Troubled Debt Restructurings	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
		($ in thousands)											($ in thousands)
Commercial and industrial	Commercial and industrial	65	$	54,586	$	54,747	4	$	2,446	$	2,414	Commercial and industrial	11	$	9,684	$	9,662
Commercial real estate:

Commercial real estate	Commercial real estate	1	2,187		2,187		5	14,473		14,539		Commercial real estate	2	5,260		5,251
Construction		2	11,025		7,811		2	17,599		17,599
Total commercial real estate		3	13,212		9,998		7	32,072		32,138

Residential mortgage	Residential mortgage	1	44		44		4	356		350		Residential mortgage	1	121		117

Total	Total	69	$	67,842	$	64,789	15	$	34,874	$	34,902	Total	14	$	15,065	$	15,030

Nine Months Ended September 30,
2022 2021
Troubled Debt Restructurings Number
of
Contracts Pre-Modification
Outstanding Recorded Investment Post-Modification
Outstanding Recorded Investment Number
of
Contracts Pre-Modification
Outstanding Recorded Investment Post-Modification
Outstanding Recorded Investment
($ in thousands)
Commercial and industrial 79 $ 109,779 $ 105,495 16 $ 21,822 $ 19,060
Commercial real estate:
Commercial real estate 4 16,259 15,660 11 26,710 26,730
Construction 2 11,025 7,811 2 17,599 17,599
Total commercial real estate 6 27,284 23,471 13 44,309 44,329
Residential mortgage 9 5,135 5,116 12 2,974 2,909
Consumer 1 125 123 1 170 163
Total 95 $ 142,323 $ 134,205 42 $ 69,275 $ 66,461

The total TDRs presented in the above tables had allocated allowance for loan losses of ~~$71.5~~$7.8 million ~~and $8.2 million~~at ~~September 30, 2022 and 2021, respectively.~~March 31, 2022. There were ~~$3.8 million and $5.4 million in~~no charge-offs related to TDRs for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022. ~~There were charge-offs of $206 thousand and $6.0 million related to TDRs for the three and nine months ended September 30, 2021, respectively.~~ Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2022.

Performing TDRs (not reported as non-accrual loans) and ~~2021.~~

non-performing TDRs totaled $56.5 million and $104.7 million as of March 31, 2022.

Loans modified as TDRs within the previous 12 months and for which there was a payment default (90 or more days past due) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 ~~and 2021~~ were as follows:


		Three Months Ended September 30,
		2022			2021				Three Months Ended March 31, 2022
Troubled Debt Restructurings Subsequently Defaulted	Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment
		($ in thousands)							($ in thousands)
Commercial and industrial	Commercial and industrial	1	$	42,771	—	$	—	Commercial and industrial	2	$	1,850

Commercial real estate		2	5,207		1	419

Construction								Construction	2	17,599

Residential mortgage		1	1,071		1	129

Total	Total	4	$	49,049	2	$	548	Total	4	$	19,449

Nine Months Ended September 30,
2022 2021
Troubled Debt Restructurings Subsequently Defaulted Number of
Contracts Recorded Investment Number of
Contracts Recorded
Investment
($ in thousands)
Commercial and industrial 1 $ 42,771 — $ —
Commercial real estate 2 5,207 1 419
Residential mortgage 1 1,071 1 129
Total 4 $ 49,049 2 $ 548

Loans in ~~Process~~process of ~~Foreclosure.~~foreclosure. Other real estate owned (OREO) totaled $1.2 million and $286 thousand ~~and $2.3 million~~ at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. There were no ~~foreclosed~~foreclosed residential real estate properties included in OREO at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled ~~$1.9~~$1.5 millionand ~~$2.5~~$2.6 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Collateral dependent loans. Loans are collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. When Valley determines that foreclosure is probable, the collateral dependent loan balances are written down to the estimated current fair value (less estimated selling costs) resulting in an immediate charge-off to the allowance, excluding any consideration for personal guarantees that may be pursued in the Bank’s collection process.

The following table presents collateral dependent loans by class as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(in thousands)
Collateral dependent loans:	Collateral dependent loans:					Collateral dependent loans:
Commercial and industrial *	Commercial and industrial *	$	129,776	$	95,335	Commercial and industrial *	$	74,481	$	94,433
Commercial real estate:

Commercial real estate	Commercial real estate	73,862		110,174		Commercial real estate	144,892		130,199
Construction		41,726		—
Total commercial real estate loans		115,588		110,174

Residential mortgage	Residential mortgage	32,487		35,745		Residential mortgage	18,694		33,865
Home equity	Home equity	—		4		Home equity	—		195
Total	Total	$	277,851	$	241,258	Total	$	238,067	$	258,692

* ~~The majority of~~Commercial and industrial loans presented in the ~~loans~~table above are primarily collateralized by taxi ~~medallions for all periods.~~

medallions.

3733

Allowance for Credit Losses for Loans

The allowance for credit losses (ACL) for loans consists of the allowance for loan losses and the allowance for unfunded credit commitments. The ACL for loans decreased $22.3 million at ~~September 30, 2022 increased $122.7 million from December~~March 31, 2021 largely reflecting a net ACL of $70.3 million for PCD loans acquired from Bank Leumi USA that was recorded at April 1, 2022 and recognition of a $41.0 million provision related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA during the three months ended June 30, 2022. Overall, an increased economic forecast reserve component of our CECL model caused by elevated uncertainty in economic conditions was largely offset by lower expected quantitative loss experience at September 30, 20222023 as compared to December 31, ~~2021.~~

2022.

The following table summarizes the ACL for loans at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

September 30,
2022 December 31,
2021
(in thousands)
Components of allowance for credit losses for loans:
Allowance for loan losses $ 475,744 $ 359,202
Allowance for unfunded credit commitments 22,664 16,500
Total allowance for credit losses for loans $ 498,408 $ 375,702


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

The following table summarizes the provision for credit losses for loans for the periods indicated:

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(in thousands)
Components of provision for credit losses for loans:
Provision for loan losses $ 1,315 $ 3,496 $ 42,883 $ 17,998
Provision for unfunded credit commitments 520 — 6,164 3,289
Total provision for credit losses for loans $ 1,835 $ 3,496 $ 49,047 $ 21,287


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

3834

The following table details the activity in the allowance for loan losses by loan portfolio segment for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Commercial
and Industrial Commercial
Real Estate Residential
Mortgage Consumer Total
(in thousands)
Three Months Ended
September 30, 2022
Allowance for loan losses:
Beginning balance $ 144,539 $ 277,227 $ 29,889 $ 17,164 $ 468,819
Loans charged-off (5,033) (4,000) — (962) (9,995)
Charged-off loans recovered 13,236 1,729 163 477 15,605
Net recoveries (charge-offs) 8,203 (2,271) 163 (485) 5,610
Provision (credit) for loan losses 1,309 (7,176) 6,105 1,077 1,315
Ending balance $ 154,051 $ 267,780 $ 36,157 $ 17,756 $ 475,744
Three Months Ended
September 30, 2021
Allowance for loan losses:
Beginning balance $ 109,689 $ 189,139 $ 25,303 $ 15,193 $ 339,324
Loans charged-off (1,248) — — (771) (2,019)
Charged-off loans recovered 514 29 228 955 1,726
Net (charge-offs) recoveries (734) 29 228 184 (293)
(Credit) provision for loan losses (5,078) 10,553 (799) (1,180) 3,496
Ending balance $ 103,877 $ 199,721 $ 24,732 $ 14,197 $ 342,527


		Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total			Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total
		(in thousands)											(in thousands)
Nine Months Ended September 30, 2022
Three Months Ended March 31, 2023												Three Months Ended March 31, 2023
Allowance for loan losses:	Allowance for loan losses:											Allowance for loan losses:
Beginning balance	Beginning balance	$	103,090	$	217,490	$	25,120	$	13,502	$	359,202	Beginning balance	$	139,941	$	259,408	$	39,020	$	20,286	$	458,655
Allowance for PCD loans *		33,452		36,618		206		43		70,319
Impact of the adoption of ASU No. 2022-02 *												Impact of the adoption of ASU No. 2022-02 *	(739)		(589)		(12)		(28)		(1,368)
Beginning balance, adjusted												Beginning balance, adjusted	$	139,202	$	258,819	$	39,008	$	20,258	$	457,287
Loans charged-off	Loans charged-off	(11,144)		(4,173)		(27)		(2,513)		(17,857)		Loans charged-off	(26,047)		(5,698)		—		(828)		(32,573)
Charged-off loans recovered	Charged-off loans recovered	16,012		2,060		694		2,431		21,197		Charged-off loans recovered	1,399		24		21		761		2,205
Net recoveries (charge-offs)		4,868		(2,113)		667		(82)		3,340
Provision for loan losses		12,641		15,785		10,164		4,293		42,883
Net (charge-offs) recoveries												Net (charge-offs) recoveries	(24,648)		(5,674)		21		(67)		(30,368)
Provision (credit) for loan losses												Provision (credit) for loan losses	13,438		(9,813)		2,679		3,675		9,979
Ending balance	Ending balance	$	154,051	$	267,780	$	36,157	$	17,756	$	475,744	Ending balance	$	127,992	$	243,332	$	41,708	$	23,866	$	436,898
Nine Months Ended September 30, 2021
Three Months Ended March 31, 2022												Three Months Ended March 31, 2022
Allowance for loan losses:	Allowance for loan losses:											Allowance for loan losses:
Beginning balance	Beginning balance	$	131,070	$	164,113	$	28,873	$	16,187	$	340,243	Beginning balance	$	103,090	$	217,490	$	25,120	$	13,502	$	359,202

Loans charged-off	Loans charged-off	(19,283)		(382)		(139)		(3,389)		(23,193)		Loans charged-off	(1,571)		(173)		(26)		(825)		(2,595)
Charged-off loans recovered	Charged-off loans recovered	2,781		763		576		3,359		7,479		Charged-off loans recovered	824		107		457		1,257		2,645
Net (charge-offs) recoveries	Net (charge-offs) recoveries	(16,502)		381		437		(30)		(15,714)		Net (charge-offs) recoveries	(747)		(66)		431		432		50
(Credit) provision for loan losses	(Credit) provision for loan losses	(10,691)		35,227		(4,578)		(1,960)		17,998		(Credit) provision for loan losses	(1,140)		2,525		2,638		(765)		3,258
Ending balance	Ending balance	$	103,877	$	199,721	$	24,732	$	14,197	$	342,527	Ending balance	$	101,203	$	219,949	$	28,189	$	13,169	$	362,510

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

3935

The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the allowance measurement methodology at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


		Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total			Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total
		(in thousands)											(in thousands)
September 30, 2022
March 31, 2023												March 31, 2023
Allowance for loan losses:	Allowance for loan losses:											Allowance for loan losses:
Individually evaluated for credit losses	Individually evaluated for credit losses	$	89,822	$	8,544	$	4,592	$	100	$	103,058	Individually evaluated for credit losses	$	46,151	$	13,445	$	34	$	—	$	59,630
Collectively evaluated for credit losses	Collectively evaluated for credit losses	64,229		259,236		31,565		17,656		372,686		Collectively evaluated for credit losses	81,841		229,887		41,674		23,866		377,268
Total	Total	$	154,051	$	267,780	$	36,157	$	17,756	$	475,744	Total	$	127,992	$	243,332	$	41,708	$	23,866	$	436,898
Loans:	Loans:											Loans:
Individually evaluated for credit losses	Individually evaluated for credit losses	$	151,415	$	149,775	$	42,911	$	1,507	$	345,608	Individually evaluated for credit losses	$	74,625	$	144,892	$	12,028	$	6,929	$	238,474
Collectively evaluated for credit losses	Collectively evaluated for credit losses	8,549,962		27,915,488		5,134,217		3,240,489		44,840,156		Collectively evaluated for credit losses	8,969,321		30,632,186		5,474,252		3,345,733		48,421,492
Total	Total	$	8,701,377	$	28,065,263	$	5,177,128	$	3,241,996	$	45,185,764	Total	$	9,043,946	$	30,777,078	$	5,486,280	$	3,352,662	$	48,659,966
December 31, 2021
December 31, 2022												December 31, 2022
Allowance for loan losses:	Allowance for loan losses:											Allowance for loan losses:
Individually evaluated for credit losses	Individually evaluated for credit losses	$	64,359	$	6,277	$	470	$	390	$	71,496	Individually evaluated for credit losses	$	68,745	$	13,174	$	337	$	4,338	$	86,594
Collectively evaluated for credit losses	Collectively evaluated for credit losses	38,731		211,213		24,650		13,112		287,706		Collectively evaluated for credit losses	71,196		246,234		38,683		15,948		372,061
Total	Total	$	103,090	$	217,490	$	25,120	$	13,502	$	359,202	Total	$	139,941	$	259,408	$	39,020	$	20,286	$	458,655
Loans:	Loans:											Loans:
Individually evaluated for credit losses	Individually evaluated for credit losses	$	119,760	$	134,135	$	42,469	$	2,431	$	298,795	Individually evaluated for credit losses	$	117,644	$	213,522	$	28,869	$	14,058	$	374,093
Collectively evaluated for credit losses	Collectively evaluated for credit losses	5,727,791		20,655,931		4,502,595		2,968,545		33,854,862		Collectively evaluated for credit losses	8,687,186		29,219,346		5,335,681		3,300,894		46,543,107
Total	Total	$	5,847,551	$	20,790,066	$	4,545,064	$	2,970,976	$	34,153,657	Total	$	8,804,830	$	29,432,868	$	5,364,550	$	3,314,952	$	46,917,200

Note 9. Goodwill and Other Intangible Assets

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

Business Segment / Reporting Unit *
Wealth
Management Consumer
Lending Commercial
Lending Total
(in thousands)
Balance at December 31, 2021 $ 38,851 $ 222,390 $ 1,197,767 $ 1,459,008
Goodwill from business combinations 10,984 62,875 338,638 412,497
Balance at September 30, 2022 $ 49,835 $ 285,265 $ 1,536,405 $ 1,871,505


Business Segment / Reporting Unit *
Wealth Management		Consumer Banking		Commercial Banking		Total
(in thousands)


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

* Valley’s Wealth Management and Insurance Division is comprised of trust, asset management, brokerage, insurance and tax credit advisory services. This reporting unit is included in the Consumer ~~Lending~~Banking segment for financial reporting purposes.

During the ~~second quarter 2022, Valley performed~~three months ended March 31, 2023, there were no triggering events that would more likely than not

reduce the ~~annual goodwill impairment test at~~fair value of any reporting unit below its ~~normal assessment date.~~carrying amount. There ~~was~~ was no iimpair~~mpairment~~ment of goodwill recognized during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

As discussed in Note 15, Valley made changes to its operating structure and strategy during the second quarter 2022 (and subsequent to the annual goodwill impairment test), which resulted in changes in its operating segments and reporting units to reflect how the CEO, who is the chief operating decision maker, intends to manage Valley, allocate resources and measure performance. Goodwill balances were reallocated across the new operating segments and reporting units (as reflected in the table above) based on their relative fair values using the valuation performed during the second quarter 2022.

4036

The goodwill from business combinations set forth in the above table during the nine months ended September 30, 2022, related to the acquisitions of Bank Leumi USA and Landmark totaled $403.2 million and $4.4 million, respectively. The goodwill from Landmark transaction was allocated entirely to the Wealth Management reporting unit. During the nine months ended September 30, 2022, Valley recorded $5.0 million of additional goodwill reflecting an adjustment to the deferred tax assets acquired from Westchester as of the acquisition date. See Note 2 for details related to these acquisitions.

~~The~~ following table summarizes other intangible assets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		Gross Intangible Assets		Accumulated Amortization			Net Intangible Assets			Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
		(in thousands)				(in thousands)
September 30, 2022
March 31, 2023									March 31, 2023
Loan servicing rights	Loan servicing rights	$	119,813	$	(94,956)		$	24,857	Loan servicing rights	$	120,177	$	(97,332)	$	22,845
Core deposits	Core deposits	223,670		(84,511)			139,159		Core deposits	215,620		(92,048)		123,572
Other	Other	51,299		(7,089)			44,210		Other	50,393		(9,639)		40,754
Total other intangible assets	Total other intangible assets	$	394,782	$	(186,556)		$	208,226	Total other intangible assets	$	386,190	$	(199,019)	$	187,171
December 31, 2021
December 31, 2022									December 31, 2022
Loan servicing rights	Loan servicing rights	$	114,636	$	(90,951)		$	23,685	Loan servicing rights	$	119,943	$	(96,136)	$	23,807
Core deposits	Core deposits	109,290		(65,488)			43,802		Core deposits	223,670		(92,486)		131,184
Other	Other	6,092		(3,193)			2,899		Other	51,299		(8,834)		42,465
Total other intangible assets	Total other intangible assets	$	230,018	$	(159,632)		$	70,386	Total other intangible assets	$	394,912	$	(197,456)	$	197,456

Loan servicing rights are accounted for using the amortization method. Under this method, Valley amortizes the loan servicing assets over the period of the economic life of the assets arising from estimated net servicing revenues. On a quarterly basis, Valley stratifies its loan servicing assets into groupings based on risk characteristics and assesses each group for impairment based on fair value. Impairment charges on loan servicing rights are recognized in earnings when the book value of a stratified group of loan servicing rights exceeds its estimated fair value. There was no net no ~~net~~ impairment recognized during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022. ~~Valley recorded net recoveries of impairment charges on its loan servicing rights totaling $32 thousand and $864 thousand for the three and nine months ended September 30, 2021, respectively.~~

Core deposits are amortized using an accelerated method over a period of 1010.0 years. ~~Valley recorded $114.4 million of core deposit intangibles resulting from the Bank Leumi USA acquisition.~~

The line item labeled “Other” included in the table above primarily consists of customer lists, certain financial asset servicing contracts and covenants not to compete, which are amortized over their expected lives generally using a straight-line method and have a weighted average amortization period of approximately ~~13.3~~13.4 years. ~~Valley recorded $39.0 million and $6.2 million of other intangible assets during the nine months ended September 30, 2022 resulting from the Bank Leumi USA and Landmark acquisitions, respectively.~~

Valley evaluates core deposits and other intangibles for impairment when an indication of impairment exists. No impairment was recognized during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

The following table presents the estimated future amortization expense of other intangible assets for the remainder of ~~2022~~2023 through ~~2026:~~2027:


Year								Year	Loan Servicing Rights		Core Deposits		Other
		Loan Servicing Rights		Core Deposits		Other			(in thousands)
		(in thousands)
2022		$	865	$	7,975	$	1,745
2023	2023	3,195		28,746		6,522		2023	$	2,365	$	21,135	$	4,810
2024	2024	2,817		24,897		5,951		2024	2,813		24,897		5,951
2025	2025	2,471		21,048		5,380		2025	2,461		21,048		5,380
2026	2026	2,156		17,223		4,805		2026	2,143		17,223		4,805
2027								2027	1,861		13,544		4,205

Valley recognized amortization expense on other intangible assets ~~(including net recoveries of impairment charges on loan servicing rights)~~ totaling approximately ~~$11.1~~$10.5 million and ~~$5.3~~$4.4 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $26.9 million and $16.8 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

Note 10. Deposits

Included in time deposits are certificates of deposit over $250 thousand totaling $1.7 billion and $1.8 billion at March 31, 2023 and December 31, 2022, respectively. Interest expense on time deposits of $250 thousand or more totaled $2.8 million and $107 thousand for the three months ended March 31, 2023 and 2022, respectively.

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


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

Note 11. Borrowed Funds

Short-Term Borrowings

Short-term borrowings at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 consisted of the following:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(in thousands)
FHLB advances	FHLB advances	$	785,767	$	500,000	FHLB advances	$	6,300,000	$	24,035

Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	133,516		155,726		Securities sold under agreements to repurchase	113,056		114,694
Total short-term borrowings	Total short-term borrowings	$	919,283	$	655,726	Total short-term borrowings	$	6,413,056	$	138,729

The weighted average interest rate for short-term FHLB advances was ~~3.21~~5.18 percent and ~~0.37~~1.6 percent at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Long-Term Borrowings

Long-term borrowings at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 consisted of the following:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(in thousands)
FHLB advances, net (1)	FHLB advances, net (1)	$	788,574	$	789,033	FHLB advances, net (1)	$	1,438,361	$	788,419
Subordinated debt, net (2)	Subordinated debt, net (2)	752,523		634,643		Subordinated debt, net (2)	759,295		754,639

Total long-term borrowings	Total long-term borrowings	$	1,541,097	$	1,423,676	Total long-term borrowings	$	2,197,656	$	1,543,058


(1)			FHLB advances are presented net of unamortized premiums totaling ~~$574~~$361 thousand and ~~$1.0 million~~$419 thousand at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.
(2)			Subordinated debt is presented net of unamortized debt issuance costs totaling ~~$7.3~~$6.5 million and ~~$5.8~~$6.9 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

FHLB Advances. Long-term FHLB advances had a weighted average interest rate of 3.66 percent and 1.88 percent at ~~both September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022, respectively. FHLB advances are secured by pledges of certain eligible collateral, including but not limited to, U.S. government and agency mortgage-backed securities and a blanket assignment of qualifying first lien mortgage loans, consisting of both residential mortgage and commercial real estate loans.

The long-term FHLB advances at ~~September 30, 2022~~March 31, 2023 are scheduled for contractual balance repayments as follows:


Year	Year	Amount		Year	Amount
		(in thousands)			(in thousands)

2023		$	350,000
2024	2024	165,000		2024	$	165,000
2025	2025	273,000		2025	273,000

2026				2026	350,000
2027				2027	425,000
Thereafter				Thereafter	225,000
Total long-term FHLB advances	Total long-term FHLB advances	$	788,000	Total long-term FHLB advances	$	1,438,000

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

Subordinated debt. ~~On September 20,~~There were no new issuances of the subordinated debt during the three months ended March 31, 2023. See Note 10 in Valley’s Annual Report on Form 10-K for the year ended December 31, 2022 ~~Valley issued $150 million of 6.25 percent fixed-to-floating rate subordinated notes due September 30, 2032. Interest~~for details on the outstanding subordinated notes during the initial five year term through September 30, 2027, is payable semi-annually in arrears on March 30 and September 30, commencing on March 30, 2023. Thereafter, interest is expected to be set based on three-month Secured Overnight Financing Rate (SOFR) plus 278 basis points and paid quarterly through maturity of the notes. At September 30, 2022, the subordinated notes had a carrying value of $147.5 million, net of unamortized debt issuance costs.

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

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

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

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

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

debt.

Note ~~11.~~12. Stock–Based Compensation

On April ~~19, 2021,~~25, 2023, Valley's shareholders approved the Valley National Bancorp 2023 Incentive Compensation Plan (the 2023 Plan). The purpose of the 2023 Plan is to provide additional long-term incentives to employees, directors and officers whose contributions are essential to the continued growth and success of Valley. Upon shareholder approval of the 2023 Plan, Valley ceased granting awards under the Valley National Bancorp 2021 Incentive Compensation Plan (the 2021 Plan) ~~administered by~~.

Under the ~~Compensation~~2023 Plan, Valley may issue awards to its officers, employees and ~~Human Capital Management Committee as appointed by Valley's Board~~non-employee directors in amounts up to 14.5 million shares of ~~Directors. The purposes~~common stock, less one share for every share granted after December 31, 2022 under the 2021 Plan. These awards may be in the form of stock appreciation rights, incentive and non-qualified stock options, restricted stock, and restricted stock units (RSUs). If after December 31, 2022, share awards granted under the 2021 Plan are ~~to provide additional incentives to officers and key employees of Valley and its subsidiaries, whose substantial contributions are essential~~forfeited, expire, settled for cash, withheld for tax obligations, or otherwise not issued, the shares will be added to the continued growth and success of Valley, and to attract and retain officers, other employees and non-employee directors whose efforts will result in the continued and long-term growth of Valley's business.

~~As of~~ ~~September 30, 2022~~, ~~5.1 million~~ ~~shares of common stock were available for issuance under the 2021 Plan. The essential features of each award are described in the award agreement relating to that award.~~2023 Plan's share reserve. The grant, exercise, vesting, settlement, or payment of an award may be based upon the fair value of Valley's common stock on the last sale price reported for Valley's common stock on such ~~date~~date; or the last sale price reported preceding such ~~date, except for performance-based~~date. Performance-based awards ~~with~~may also be based on a market condition. The grant date fair values of performance-based awards that vest based on a market condition are determined by a third-party specialist using a Monte Carlo valuation model.

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

~~September 30, 2022) at a weighted average exercise price of $8.47. The stock plan under which the original Bank Leumi stock awards were issued is no longer active at the acquisition date.~~

Valley granted ~~234 thousand~~1.5 million and ~~30 thousand of~~1.2 million time-based ~~restricted stock units (RSUs)~~RSUs during the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and 2.3 million and 1.2 million for the nine months ended September 30, 2022 and 2021,~~ respectively. Generally, time-based RSUs vest ratably over a three-year period. The average grant date fair value of the RSUs granted during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ was ~~$13.31~~$11.91 per share and ~~$11.98~~$14.05 per share, respectively.

Valley granted ~~619~~723 thousand and ~~604~~567 thousand of performance-based RSUs to certain officers for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The performance-based RSU awards include RSUs with vesting conditions based upon certain levels of growth in Valley's tangible book value per share, plus ~~dividends~~dividends; and RSUs, with vesting conditions based upon Valley's total shareholder return as compared to its peer group. The RSUs “cliff” vest after three years based on the cumulative performance of Valley during that time period. The RSUs earn

dividend equivalents (equal to cash dividends paid on Valley's common stock) over the applicable performance period. Dividend equivalents accumulate and are ~~accumulated and~~ paid to the grantee at the vesting date, or forfeited if the performance conditions are not met. The grant date fair value of the performance-based RSUs granted during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ was ~~$14.72~~$12.80 per share and ~~$12.36~~$14.82 per share, respectively.

Valley recorded total stock-based compensation expense of ~~$7.6~~$8.1 million and ~~$5.2~~$7.3 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and2021, respectively, and $21.0 million and $15.9 million for the nine months ended September 30, 2022 and 2021,~~ respectively. ~~The~~Stock award fair values ~~of stock awards~~ are expensed over the shorter of the vesting or required service period. As of ~~September 30, 2022,~~March 31, 2023, the unrecognized amortization expense for all stock-based employee compensation totaled approximately ~~$40.0 million and~~$56.6 million. This expense will be recognized over an average remaining vesting period of approximately ~~2.1~~2.2 years.

Note ~~12.~~13. Derivative Instruments and Hedging Activities

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

Cash Flow Hedges of Interest Rate Risk. Valley’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, Valley uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the payment of either fixed or variable-rate amounts in exchange for the receipt of variable or fixed-rate amounts from a counterparty, respectively.

At March 31, 2023, Valley had six interest rate swaps with a total notional amount of $600 million, to hedge the changes in cash flows associated with certain variable rate loans. Valley is required to pay variable rate amounts based on one-month CME Term SOFR and receives fixed rate payments based on the tenor of each swap. Expiration dates for the swaps range from November 2024 to November 2026.

Fair Value Hedges of Fixed Rate Assets and ~~Liabilities~~Liabilities. . Valley is exposed to changes in the fair value of fixed-rate subordinated debt due to changes in interest rates. Valley uses interest rate swaps to manage its exposure to changes in fair value on fixed rate debt instruments attributable to changes in the designated benchmark interest ~~rate~~. rate. Interest rate swaps designated as fair value hedges involve the receipt of variable rate payments from a counterparty in exchange for Valley making fixed rate payments over the life of the agreements without the exchange of the underlying notional amount. For derivatives that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the loss or gain on the hedged item attributable to the hedged risk are recognized in earnings.

~~Cash Flow Hedges of Interest Rate Risk~~. Valley’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, Valley uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the payment of either fixed or variable-rate amounts in exchange for the receipt of variable or fixed-rate amounts from a counterparty, respectively.

Valley had six interest rate swaps with a total notional amount of $700 million that matured during the nine months ended September 30, 2022. These swaps were used to hedge the changes in cash flows associated with certain short-term FHLB advances and brokered deposits.

Non-designated Hedges. Derivatives not designated as hedges ~~are~~may be used to manage Valley’s exposure to interest rate movements ~~foreign currency risk, credit risk, and~~or to provide ~~services~~a service to customers ~~or for other purposes. These~~

~~derivatives~~but do not meet the requirements for hedge accounting under U.S. GAAP. Derivatives not designated as hedges are not entered into for speculative purposes.

Valley executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Valley executes with a third party, such that Valley minimizes its net risk exposure resulting from such transactions. As these interest rate swaps do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

Valley sometimes enters into risk participation agreements with external lenders where the banks are sharing their risk of default on the interest rate swaps on participated loans. Valley either pays or receives a fee depending on the participation type. Risk participation agreements are credit derivatives not designated as hedges. Credit derivatives are not speculative and are not used to manage interest rate risk in assets or liabilities. Changes in the fair value in credit derivatives are recognized directly in earnings. At ~~September 30, 2022,~~March 31, 2023, Valley had 2833 credit swaps with an aggregate notional amount of ~~$290.7~~$409.2 million related to risk participation agreements.

At ~~September 30, 2022,~~March 31, 2023, Valley had two “steepener” swaps, each with a current notional amount of $10.4 million where the receive rate on the swap mirrors the pay rate on the brokered deposits and the rates paid on these types of hybrid instruments are based on a formula derived from the spread between the long and short ends of the constant maturity swap (CMS) rate curve. Although these types of instruments do not meet the hedge accounting requirements, the change in fair value of both the bifurcated derivative and the stand alone swap tend to move in opposite directions with changes in the three-month LIBOR rate and therefore provide an effective economic hedge.

Valley regularly enters into mortgage banking derivatives which are non-designated hedges. These derivatives include interest rate lock commitments provided to customers to fund certain residential mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. Valley enters into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rate on Valley's commitments to fund the loans as well as on its portfolio of mortgage loans held for sale.

Valley enters into foreign currency forward and option contracts, primarily to accommodate our customers, that are not designated as hedging instruments. Upon the origination of a certain foreign currency denominated transactions (including foreign currency holdings and non-U.S. dollar denominated loans) with a client, we enter into a respective hedging contract with a third party financial institution to mitigate the economic impact of foreign currency exchange rate fluctuation.

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


		September 30, 2022						December 31, 2021							March 31, 2023						December 31, 2022
		Fair Value						Fair Value							Fair Value						Fair Value
		Other Assets		Other Liabilities		Notional Amount		Other Assets		Other Liabilities		Notional Amount			Other Assets		Other Liabilities		Notional Amount		Other Assets		Other Liabilities		Notional Amount
		(in thousands)													(in thousands)
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:													Derivatives designated as hedging instruments:
Cash flow hedge interest rate swaps	Cash flow hedge interest rate swaps	$	—	$	—	$	—	$	—	$	310	$	700,000	Cash flow hedge interest rate swaps	$	7,866	$	—	$	600,000	$	3,971	$	4	$	600,000
Fair value hedge interest rate swaps	Fair value hedge interest rate swaps	—		32,566		300,000		—		3,335		300,000		Fair value hedge interest rate swaps	—		27,858		300,000		—		29,794		300,000
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments	$	—	$	32,566	$	300,000	$	—	$	3,645	$	1,000,000	Total derivatives designated as hedging instruments	$	7,866	$	27,858	$	900,000	$	3,971	$	29,798	$	900,000
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:													Derivatives not designated as hedging instruments:
Interest rate swaps and other contracts*	Interest rate swaps and other contracts*	$	576,213	$	575,917	$	13,347,157	$	180,701	$	47,044	$	10,179,294	Interest rate swaps and other contracts*	$	429,195	$	457,508	$	15,298,441	$	449,280	$	564,678	$	14,753,330
Foreign currency derivatives	Foreign currency derivatives	17,873		17,142		1,205,558		311		233		122,166		Foreign currency derivatives	9,540		8,944		1,848,883		13,709		12,604		1,273,735
Mortgage banking derivatives	Mortgage banking derivatives	30		31		1,875		488		1,454		312,428		Mortgage banking derivatives	148		242		51,106		167		157		31,299
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	$	594,116	$	593,090	$	14,554,590	$	181,500	$	48,731	$	10,613,888	Total derivatives not designated as hedging instruments	$	438,883	$	466,694	$	17,198,430	$	463,156	$	577,439	$	16,058,364

* I~~ncludes~~Other derivative contracts include risk participation agreements.

The Chicago Mercantile Exchange and London Clearing House variation margins are classified as a single-unit of account as settlements of the cash flow hedges and other non-designated derivative instruments. As a result, the fair value of the applicable derivative assets and liabilities are reported net of variation margin at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 in the table ~~above~~.above.

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

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(in thousands)
Amount of gain (loss) reclassified from accumulated other comprehensive loss to interest expense $ 21 $ (1,044) $ (405) $ (2,708)
Amount of (loss) gain recognized in other comprehensive loss (6) (144) 435 (125)


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Amount of loss reclassified from accumulated other comprehensive loss to interest expense	$	(531)	$	(542)
Amount of gain recognized in other comprehensive loss	3,898		320

The accumulated after-tax ~~losses~~gains related to effective cash flow hedges included in accumulated other comprehensive loss were ~~$929 thousand~~$5.4 million and ~~$1.3~~$2.2 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Amounts reported in accumulated other comprehensive loss related to cash flow interest rate derivatives are reclassified to interest expense as interest payments are made on the hedged variable interest rate liabilities. Valley estimates that $~~995 thousand~~2.1 million before tax will be reclassified as an increase to interest expense over the next 12 months.

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
											(in thousands)
Derivative - interest rate swap:	Derivative - interest rate swap:									Derivative - interest rate swap:

Interest expense	Interest expense	$	(989)	$	(396)	$	(383)	$	(316)	Interest expense	$	4,692	$	530
Hedged item - subordinated debt	Hedged item - subordinated debt									Hedged item - subordinated debt

Interest expense	Interest expense	$	325	$	405	$	802	$	322	Interest expense	$	(4,772)	$	(530)

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

adjustment to the carrying amount of the hedged item (basis adjustment). The following table presents the hedged item related to interest rate derivatives designated as fair value hedges and the cumulative basis fair value adjustment included in the net carrying amount of the hedged item at ~~September 30, 2022.~~March 31, 2023 and December 31, 2022, respectively.


Line Item in the Statement of Financial Position in Which the Hedged Item is Included	Line Item in the Statement of Financial Position in Which the Hedged Item is Included	Carrying Amount of the Hedged Liability		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability		Line Item in the Statement of Financial Position in Which the Hedged Item is Included	Net Carrying Amount of the Hedged Liability *		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
		(in thousands)					(in thousands)
March 31, 2023						March 31, 2023
Long-term borrowings	Long-term borrowings	$	267,640	$	(32,360)	Long-term borrowings	$	272,051	$	(25,360)
December 31, 2022						December 31, 2022
Long-term borrowings						Long-term borrowings	$	267,076	$	(30,132)

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

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
		(in thousands)									(in thousands)
Non-designated hedge interest rate swaps and credit derivatives	Non-designated hedge interest rate swaps and credit derivatives									Non-designated hedge interest rate swaps and credit derivatives
Other non-interest expense	Other non-interest expense	$	463	$	216	$	(1,191)	$	(209)	Other non-interest expense	$	208	$	(2,797)

~~Other~~Capital markets income reported in non-interest income included fee income related to non-designated hedge derivative interest rate swaps (not designated as hedging instruments) executed with commercial loan customers ~~totaling $10.7~~and foreign exchange fees with a combined total of $9.9 million and ~~$8.8~~$14.4 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $35.8 million and $22.6 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

Collateral Requirements and Credit Risk Related Contingent ~~Features.~~Features. By using derivatives, Valley is exposed to credit risk if counterparties to the derivative contracts do not perform as expected. Management attempts to minimize counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral where appropriate. Credit risk exposure associated with derivative contracts is managed at Valley in conjunction with Valley’s consolidated counterparty risk management process. Valley’s counterparties and the risk limits monitored by management are periodically reviewed and approved by the Board of Directors.

Valley has agreements with its derivative counterparties providing that if Valley defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Valley could also be declared in default on its derivative counterparty agreements. Additionally, Valley has an agreement with several of its derivative counterparties that contains provisions that require Valley’s debt to maintain an investment grade credit rating from each of the major credit rating agencies from which it receives a credit rating. If Valley’s credit rating is reduced below investment grade, or such rating is withdrawn or suspended, then the ~~counterparty~~counterparties could terminate the derivative positions and Valley would be required to settle its obligations under the agreements. As of ~~September 30, 2022,~~March 31, 2023, Valley was in compliance with all of the provisions of its derivative counterparty agreements. AsThe aggregate fair value of ~~September 30, 2022, there were~~ no ~~derivatives~~all derivative financial instruments with credit risk-related contingent features in ~~an aggregate~~a net liability ~~position.~~ position at March 31, 2023 was not material. Valley has derivative counterparty agreements that require minimum collateral posting thresholds for certain counterparties.

Note ~~13.~~14. Balance Sheet Offsetting

Certain financial instruments, including certain over-the-counter (OTC) derivatives (mostly interest rate swaps) and repurchase agreements (accounted for as secured long-term borrowings), may be eligible for offset in the consolidated statements of financial condition and/or subject to master netting arrangements or similar agreements. OTC derivatives include interest rate swaps executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house (presented in the table below). The credit risk associated with bilateral OTC derivatives is managed through obtaining collateral and enforceable master netting agreements.

Valley is party to master netting arrangements with its financial institution counterparties; however, Valley does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of cash or marketable investment securities, is posted by the counterparty with net liability positions in accordance with contract thresholds. Master repurchase agreements which include “right of set-off” provisions generally have a legally enforceable right to offset recognized amounts. In such cases, the collateral would be used to settle the fair value of the swap or repurchase agreement should Valley be in default. The total amount of collateral held or pledged cannot exceed the net derivative fair values with the counterparty.

The table below presents information about Valley’s financial instruments eligible for offset in the consolidated statements of financial condition as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


								Gross Amounts Not Offset													Gross Amounts Not Offset
		Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral *		Net Amount			Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral *		Net Amount
		(in thousands)													(in thousands)
September 30, 2022
March 31, 2023														March 31, 2023
Assets	Assets													Assets
Interest rate swaps	Interest rate swaps	$	576,213	$	—	$	576,213	$	(914)	$	(374,030)	$	201,269	Interest rate swaps	$	437,061	$	—	$	437,061	$	30,473	$	(301,740)	$	165,794
Liabilities	Liabilities													Liabilities
Interest rate swaps	Interest rate swaps	$	608,483	$	—	$	608,483	$	(914)	$	(454)	$	607,115	Interest rate swaps	$	485,366	$	—	$	485,366	$	(30,473)	$	(681)	$	454,212

December 31, 2021
December 31, 2022														December 31, 2022
Assets	Assets													Assets
Interest rate swaps	Interest rate swaps	$	180,701	$	—	$	180,701	$	—	$	—	$	180,701	Interest rate swaps	$	453,251	$	—	$	453,251	$	12,766	$	(342,480)	$	123,537
Liabilities	Liabilities													Liabilities
Interest rate swaps	Interest rate swaps	$	50,689	$	—	$	50,689	$	—	$	(44,231)	$	6,458	Interest rate swaps	$	594,476	$	—	$	594,476	$	(12,766)	$	(432)	$	581,278

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

Note ~~14.~~15. Tax Credit Investments

Valley’s tax credit investments are primarily related to investments promoting qualified affordable housing projects, and other investments related to community development and renewable energy sources. Some of these tax-advantaged investments support Valley’s regulatory compliance with the ~~CRA.~~Community Reinvestment Act. Valley’s investments in these entities generate a return primarily through the realization of federal income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These tax credits and deductions are recognized as a reduction of income tax expense.

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

of tax credit investments, including impairment losses, within non-interest expense in the consolidated statements of income using the equity method of accounting. After initial measurement, the carrying amounts of tax credit investments with non-readily determinable fair values are increased to reflect Valley's share of income of the investee and are reduced to reflect its share of losses of the investee, dividends received and impairments, if applicable.

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

September 30,
2022 December 31,
2021
(in thousands)
Other Assets:
Affordable housing tax credit investments, net $ 25,139 $ 15,343
Other tax credit investments, net 52,749 57,006
Total tax credit investments, net $ 77,888 $ 72,349
Other Liabilities:
Unfunded affordable housing tax credit commitments $ 1,360 $ 1,360
Total unfunded tax credit commitments $ 1,360 $ 1,360


	March 31, 2023		December 31, 2022
	(in thousands)
Other Assets:
Affordable housing tax credit investments, net	$	22,813	$	24,198
Other tax credit investments, net	53,812		56,551
Total tax credit investments, net	$	76,625	$	80,749
Other Liabilities:
Unfunded affordable housing tax credit commitments	$	1,338	$	1,338

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

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~ 2022:


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$	1,459	$	744
Other tax credit investment credits and tax benefits	3,221		2,551
Total reduction in income tax expense	$	4,680	$	3,295
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	$	937	$	415
Affordable housing tax credit investment impairment losses	448		262
Other tax credit investment losses	6		309
Other tax credit investment impairment losses	2,862		1,910
Total amortization of tax credit investments recorded in non-interest expense	$	4,253	$	2,896

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits $ 1,184 $ 948 $ 3,542 $ 2,744
Other tax credit investment credits and tax benefits 2,557 2,702 7,647 8,130
Total reduction in income tax expense $ 3,741 $ 3,650 $ 11,189 $ 10,874
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses $ 598 $ 681 $ 1,666 $ 1,684
Affordable housing tax credit investment impairment losses 266 387 891 1,159
Other tax credit investment losses 308 256 1,003 780
Other tax credit investment impairment losses 1,933 1,755 5,634 5,172
Total amortization of tax credit investments recorded in non-interest expense $ 3,105 $ 3,079 $ 9,194 $ 8,795

Note ~~15.~~16. Operating Segments

~~activities previously reported in the Investment Management segment is no longer provided to Valley's CEO, who is the chief operating decision maker.~~Other. Each operating segment is reviewed routinely for its asset growth, contribution to income before income taxes and return on average interest earning assets and impairment (if events or circumstances indicate a possible inability to realize the carrying amount). Valley regularly assesses its strategic plans, operations and reporting structures to identify its reportable ~~segments. There were~~segments and no ~~additional~~ changes to ~~Valley's~~the reportable segments at ~~September 30, 2022.~~

were determined necessary during the first quarter 2023.

Consumer ~~Lending~~Banking is mainly comprised of residential mortgages and automobile loans, and to a lesser extent, secured personal lines of credit, home equity loans and other consumer loans. The duration of the residential mortgage loan portfolio is subject to movements in the market level of interest rates and forecasted prepayment speeds. The average weighted life of the automobile loans within the portfolio is relatively unaffected by movements in the market level of interest rates. However, the average life may be impacted by new loans as a result of the availability of credit within the automobile marketplace and consumer demand for purchasing new or used automobiles. Consumer ~~Lending~~Banking also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, brokerage, insurance and tax credit advisory services.

Treasury and Corporate Other largely consists of the Treasury managed held to maturity debt securities and available for sale debt securities portfolios mainly utilized in the liquidity management needs of our lending segments and income and expense items resulting from support functions not directly attributable to a specific segment. Interest income is generated through investments in various types of securities (mainly comprised of fixed rate securities) and interest-bearing deposits with other banks (primarily the Federal Reserve Bank of New York). Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are allocated from Treasury and Corporate Other to the Consumer ~~Lending~~ and Commercial ~~Lending~~Banking segments. Interest expense and internal transfer expense (for general corporate expenses) are allocated to each operating segment utilizing a transfer pricing methodology, which involves the allocation of operating and funding costs based on each segment's respective mix of average earning assets and or liabilities outstanding for the period.

~~The financial reporting for each segment contains allocations and reporting in line with Valley’s operations, which may not necessarily be comparable to any other financial institution.~~ The accounting for each segment includes internal accounting policies designed to measure consistent and reasonable financial reporting and may result in income and expense measurements that differ from amounts under U.S. GAAP. The financial reporting for each segment contains allocations and reporting in line with Valley’s operations, which may not necessarily be comparable to any other financial institution. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. The ~~prior period~~ balances presented for the three months ended March 31, 2022 in the tables below reflect reclassifications to conform with the presentation ~~in those periods to~~of the current operating segment ~~structure.~~structure, which was implemented in the second quarter 2022. These reclassifications did not impact Valley's consolidated ~~results were not impacted by~~results. See Valley's Form 10-K for the ~~changes discussed above and remain unchanged~~year ended December 31, 2022 for ~~all periods presented.~~

additional information.

5046

The following tables represent the financial data for Valley’s operating segments for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Three Months Ended September 30, 2022
Consumer
Lending Commercial
Lending Treasury and Corporate Other Total
($ in thousands)
Average interest earning assets $ 8,307,993 $ 36,033,901 $ 6,189,348 $ 50,531,242
Interest income $ 70,590 $ 425,930 $ 40,208 $ 536,728
Interest expense 12,288 53,294 17,154 82,736
Net interest income 58,302 372,636 23,054 453,992
Provision (credit) for credit losses 7,182 (5,347) 188 2,023
Net interest income after provision for credit losses 51,120 377,983 22,866 451,969
Non-interest income 19,637 23,510 13,047 56,194
Non-interest expense 24,352 31,759 205,528 261,639
Internal transfer expense (income) 26,268 113,932 (140,200) —
Income before income taxes $ 20,137 $ 255,802 $ (29,415) $ 246,524
Return on average interest earning assets (pre-tax) 0.97 % 2.84 % (1.90) % 1.95 %


		Three Months Ended September 30, 2021													Three Months Ended March 31, 2023
		Consumer Lending			Commercial Lending			Treasury and Corporate Other			Total				Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
		($ in thousands)													($ in thousands)
Average interest earning assets	Average interest earning assets	$	7,373,897		$	25,324,485		$	5,634,492		$	38,332,874		Average interest earning assets	$	8,768,482		$	39,090,889		$	7,503,419		$	55,362,790

Interest income	Interest income	$	58,887		$	250,866		$	19,048		$	328,801		Interest income	$	85,316		$	569,910		$	65,004		$	720,230
Interest expense	Interest expense	4,032			13,795			9,948			27,775			Interest expense	43,006			191,723			49,481			284,210
Net interest income	Net interest income	54,855			237,071			9,100			301,026			Net interest income	42,310			378,187			15,523			436,020
(Credit) provision for credit losses		(4,614)			8,110			35			3,531
Provision for credit losses														Provision for credit losses	6,444			3,006			4,987			14,437
Net interest income after provision for credit losses	Net interest income after provision for credit losses	59,469			228,961			9,065			297,495			Net interest income after provision for credit losses	35,866			375,181			10,536			421,583
Non-interest income	Non-interest income	11,845			11,611			18,975			42,431			Non-interest income	14,290			15,747			24,262			54,299
Non-interest expense	Non-interest expense	13,520			27,504			133,898			174,922			Non-interest expense	18,249			35,723			218,194			272,166
Internal transfer expense (income)	Internal transfer expense (income)	20,662			71,141			(91,803)			—			Internal transfer expense (income)	30,883			131,595			(162,478)			—
Income (loss) before income taxes	Income (loss) before income taxes	$	37,132		$	141,927		$	(14,055)		$	165,004		Income (loss) before income taxes	$	1,024		$	223,610		$	(20,918)		$	203,716
Return on average interest earning assets (pre-tax)	Return on average interest earning assets (pre-tax)	2.01		%	2.24		%	(1.00)		%	1.72		%	Return on average interest earning assets (pre-tax)	0.05		%	2.29		%	(1.12)		%	1.47		%


	Three Months Ended March 31, 2022
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,638,942		$	26,984,460		$	5,659,646		$	40,283,048

Interest income	$	59,459		$	257,906		$	23,093		$	340,458
Interest expense	3,207			11,327			8,255			22,789
Net interest income	56,252			246,579			14,838			317,669
Provision for credit losses	1,873			1,627			57			3,557
Net interest income after provision for credit losses	54,379			244,952			14,781			314,112
Non-interest income	13,817			16,880			8,573			39,270
Non-interest expense	16,568			25,085			155,687			197,340
Internal transfer expense (income)	28,647			99,916			(128,563)			—
Income (loss) before income taxes	$	22,981		$	136,831		$	(3,770)		$	156,042
Return on average interest earning assets (pre-tax)	1.20		%	2.03		%	(0.27)		%	1.55		%

Nine Months Ended September 30, 2022
Consumer
Lending Commercial
Lending Treasury and Corporate Other Total
($ in thousands)
Average interest earning assets $ 7,978,732 $ 32,551,062 $ 6,075,623 $ 46,605,417
Interest income $ 193,186 $ 1,036,276 $ 100,671 $ 1,330,133
Interest expense 20,218 84,356 35,738 140,312
Net interest income 172,968 951,920 64,933 1,189,821
Provision for credit losses 14,457 34,590 531 49,578
Net interest income after provision for credit losses 158,511 917,330 64,402 1,140,243
Non-interest income 50,540 54,815 48,642 153,997
Non-interest expense 59,711 81,292 617,706 758,709
Internal transfer expense (income) 92,544 371,213 (463,757) —
Income before income taxes $ 56,796 $ 519,640 $ (40,905) $ 535,531
Return on average interest earning assets (pre-tax) 0.95 % 2.13 % (0.90) % 1.53 %

Nine Months Ended September 30, 2021
Consumer
Lending Commercial
Lending Treasury and Corporate Other Total
($ in thousands)
Average interest earning assets $ 7,176,086 $ 25,465,276 $ 5,261,185 $ 37,902,547
Interest income $ 179,151 $ 759,097 $ 55,999 $ 994,247
Interest expense 15,639 55,497 28,511 99,647
Net interest income 163,512 703,600 27,488 894,600
(Credit) provision for credit losses (6,538) 27,825 (353) 20,934
Net interest income after provision for credit losses 170,050 675,775 27,841 873,666
Non-interest income 47,445 29,144 40,201 116,790
Non-interest expense 53,161 80,276 373,591 507,028
Internal transfer expense (income) 60,026 212,931 (272,957) —
Income (loss) before income taxes $ 104,308 $ 411,712 $ (32,592) $ 483,428
Return on average interest earning assets (pre-tax) 1.94 % 2.16 % (0.83) % 1.70 %

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 words "Valley," the "Company," "we," "our" and "us" refer to Valley National Bancorp and its subsidiaries, unless we indicate otherwise. Additionally, Valley’s principal subsidiary, Valley National Bank, is commonly referred to as the “Bank” in this MD&A.

The MD&A contains supplemental financial information, described in the sections that follow, which has been determined by methods other than U.S. generally accepted accounting principles (U.S. 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 or as a substitute for or superior to financial measures calculated in accordance with U.S. GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.

Cautionary Statement Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q, both in the MD&A and elsewhere, 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 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 ~~inability to realize expected cost savings and synergies from the Bank Leumi USA acquisition in the amounts or timeframe anticipated;~~

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

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

•~~greater than expected non-recurring charges related to the Bank Leumi USA acquisition;~~

•~~macroeconomic factors in the U.S. and globally due to COVID-19 or otherwise, including business disruptions, reductions in employment, supply chain interruptions, inflation,~~ Federal Reserve actions impacting the level of market interest rates and ~~an increase~~increases in business failures, specifically among our ~~clients;~~

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

•~~continued deterioration~~the potential impact of recent and possible future bank failures on the business environment in ~~general~~which we operate, including potential customer deposit withdrawals from Valley National Bank or business ~~and economic conditions~~disruptions or ~~turbulence in domestic or global financial markets;~~liquidity issues that may affect our customers;

•the impact of ~~forbearances~~unfavorable macroeconomic conditions or ~~deferrals we are required~~downturns, instability or ~~agree to~~volatility in financial markets, unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by and factors outside of our control, such as ~~a result~~geopolitical instabilities or events; natural and other disasters (including severe weather events) and health emergencies, acts of ~~customer requests and/~~terrorism or ~~government actions,~~other external events;

•risks associated with our acquisition of Bank Leumi Le-Israel Corporation (Bank Leumi USA), including ~~but not limited to our potential~~(i) the inability to ~~recover fully deferred payments~~realize expected cost savings and synergies from the ~~borrower~~acquisition in the amounts or timeframe anticipated and (ii) greater than expected costs or difficulties relating to integration matters;

•the ~~collateral;~~loss of or decrease in lower-cost funding sources within our deposit base;

•the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;

•the inability to attract new customer deposits to keep pace with loan growth strategies;

•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;

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

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

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

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

•~~a prolonged downturn~~changes to laws and regulations, including changes affecting oversight of the financial services industry; changes in the ~~economy, mainly~~enforcement and interpretation of such laws and regulations; and changes in ~~New Jersey, New York, Florida, Alabama, California,~~accounting and ~~Illinois, as well as an unexpected decline in commercial real estate values within our market areas;~~reporting standards;

•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 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;~~

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

•results of examinations by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank (FRB), the Consumer Financial Protection Bureau (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;

•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,~~a prolonged downturn in the economy, mainly in New Jersey, New York, Florida, Alabama, California, and ~~other potential negative effects on~~Illinois, as well as an unexpected decline in commercial real estate values within our ~~business caused by severe weather, the COVID-19 pandemic or other external events;~~market areas; and

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

A detailed discussion of factors that could affect our results is included in our SEC filings, including the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022, and in Part II, Item 1A of this Form 10-Q.

We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations. 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 ~~Policies and~~ 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 ~~September 30, 2022,~~March 31, 2023, 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 of Directors. Our critical accounting policies and estimates are described in detail in Part II, Item 7 in Valley’s Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, and there have been no material changes in such policies and estimates since the date of such report.

New Authoritative Accounting Guidance

See Note 5 to the consolidated financial statements for a description of new authoritative accounting guidance, including the respective dates of adoption and effects on results of operations and financial condition.

Executive Summary

Company Overview. At ~~September 30, 2022,~~March 31, 2023, Valley had consolidated total assets of approximately ~~$55.9~~$64.3 billion, total net loans of ~~$44.7~~$48.2 billion, total deposits of ~~$45.3~~$47.6 billion and total shareholders’ equity of ~~$6.3~~$6.5 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 ~~238~~230 branch network, 5556 percent, 1918 percent, and 18 percent of the branches are in New Jersey, New York and Florida, respectively, with the remaining 8 percent of the branches in Alabama, California, and Illinois combined. ~~Despite targeted branch consolidation activity, we~~We have grown significantly ~~grown~~ both in asset size and locations over the past several years both through organic efforts and bank acquisitions, including our acquisition of Bank Leumi USA on April 1, 2022.

Recent Industry Developments. ~~acquisitions.~~Recent events, including the bank failures in March and April 2023, the rising level of interest rates and recessionary pressures have heightened concerns in the bank sector. We have consistently operated the Bank with a focus on diversification to maintain stability through various cycles. During the first quarter of 2023, we continued to position our balance sheet to mitigate potential risks from the market turmoil affecting the banking industry in general and Valley, its clients and communities in particular.

•Total assets increased to $64.3 billion at March 31, 2023, an increase of 11.9 percent from December 31, 2022. Liquidity remained strong with total liquid assets of approximately $7.2 billion at March 31, 2023, representing 12.1 percent of earning assets. We continue to maintain the ability to access readily available, diverse funding sources to fulfill both short-term and long-term capital needs. See "Bank Liquidity" section for additional information.

•Total deposits were $47.6 billion at March 31, 2023 and remained relatively unchanged as compared to December 31, 2022. Our ~~most recent bank acquisition~~deposit base is ~~discussed below.~~highly diversified with 625 thousand commercial and retail deposit customers, an average account size of $58 thousand and an average customer relationship with Valley exceeding 10 years as of March 31, 2023. Approximately $32.0 billion of our $47.6 billion in deposits at March 31, 2023 are generated from our branch network. See the "Deposits and Other Borrowings" section for more details.

•Capital remained strong with ratios of both Valley and the Bank exceeding all capital adequacy requirements at March 31, 2023. Total shareholders' equity increased $110.8 million to $6.5 billion at March 31, 2023 as compared to December 31, 2022. See the "Capital Adequacy" section for additional details.

•Total loans increased $1.7 billion, or 14.9 percent on an annualized basis to $48.7 billion at March 31, 2023 from December 31, 2022 largely due to strong organic commercial loan volumes and slow prepayments. See "Loan Portfolio" section for more information.

5450

~~Bank Leumi Le-Israel Corporation.~~• ~~On April 1, 2022, Valley completed its acquisition~~Asset quality continued to reflect our disciplined underwriting and lending practices during the first quarter 2023. Non-performing assets (NPAs) as a percentage of Bank Leumi Le-Israel Corporation, the U.S. subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA, collectively referred to as "Bank Leumi USA". At the acquisition date, Bank Leumi USA had approximately $8.1 billion in assets, $5.9 billion oftotal loans and ~~$7.0 billion of deposits, after purchase accounting adjustments. Valley issued approximately 85 million shares of common stock~~NPAs totaled 0.50 percent and ~~paid $113.4 million in cash in~~0.58 percent at March 31, 2023 and December 31, 2022, respectively. See the transaction. The consideration for the acquisition totaled approximately $1.2 billion, inclusive of the value of stock options. The transaction resulted in $403.2 million of goodwill and $153.4 million of combined core deposit and other intangible assets subject to amortization. See Note 2 to the consolidated financial statements"Non-Performing Assets" section for additional ~~details regarding the acquisition of Bank Leumi USA and other recent acquisition activities.~~information.

~~Impact~~•Total investment securities were $5.2 billion, or 8.0 percent of ~~COVID-19.~~ ~~During the third quarter 2022, worldwide inflationary concerns continued~~total assets, at March 31, 2023 and remained relatively unchanged as compared to outweigh the other negative impacts of COVID-19. Among other factors, China's "zero COVID" policy has created disruption of China's manufacturing industry which could have prolonged negative consequences for the global economy as China exports up to one-third of the world's intermediate goods. We continue to monitor the impact of COVID-19 including the emergence of new variants closely, including its impact on our employees, customers, communities and results of operations and other government or Federal Reserve actions.December 31, 2022. See the ~~"Operating Environment"~~"Investment Securities Portfolio" section ~~of MD&A~~ for more details.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act and additional legislation that followed including the Consolidated Appropriations Act and the American Rescue Plan Act of 2021 provided funding for the SBA's Paycheck Protection Program (PPP) and established rules for qualifying borrowers to receive loan forgiveness by the SBA under this program. Valley extended a total of $3.2 billion PPP loans under the program, of wh~~ich $3.1 billion~~ ~~have received forgiveness from the SBA.~~ ~~As of~~ ~~September 30, 2022, we had~~ ~~$85.8 million~~ ~~(including $35.5 million acquired from Bank Leumi USA) of PPP loans still outstanding.~~

Quarterly Results. Net income for the ~~third~~first quarter ~~2022~~2023 was ~~$178.1~~$146.6 million, or ~~$0.34~~$0.28 per diluted common share as compared to ~~$122.6~~$116.7 million, or ~~$0.29~~$0.27 per diluted common share, for the ~~third~~first quarter ~~2021.~~2022. The ~~$55.5~~$29.8 million increase in quarterly net income as compared to the same quarter one year ago was mainly due to the following changes:

•a ~~$153.0~~$118.4 million increase in net interest income mainly due to higher average loan balances driven by both acquired and organic loan volumes and increased yields on new and adjustable-rate ~~loans;~~loans, partially offset by higher cost of deposits; and

•a ~~$13.8~~$15.0 million increase in non-interest income primarily ~~driven by increases~~due to bank acquisition-driven growth in wealth management and trust fees, service charges on deposit accounts and other income, ~~totaling $5.7 million, $4.9 million and $7.1 million, respectively, related to additional income resulting from the Bank Leumi USA acquisition,~~ partially offset by ~~lower net gains on sales of residential mortgage loans; and~~a decline in swap fee income within capital markets fees;

These items were partially offset by:

•a ~~$1.5~~$10.9 million ~~decrease~~increase in our provision for credit losses ~~partially offset by:~~due, in part, to a $5 million provision for credit losses on available for sale investment securities;

•~~an $86.7~~a $74.8 million increase in non-interest expense largely due to ~~increases in salary and employee benefits; technology, furniture and equipment expenses; and net occupancy caused by~~ our expanded banking operations ~~resulting from the acquisitions of Bank Leumi USA on April 1, 2022~~ and ~~The Westchester Bank Holding Corporation (Westchester) on December 1, 2021;~~higher FDIC insurance assessment expense; and

•a ~~$26.0~~$17.9 million increase in income tax expense mostly due to higher pre-tax income in the ~~third~~first quarter ~~2022~~2023.

See the ~~“Net~~"Net Interest ~~Income”~~Income", ~~“Non-Interest Income”~~"Non-Interest Income", ~~“Non-Interest Expense”,~~"Non-Interest Expense" and ~~“Income Taxes”~~"Income Taxes" sections below for more details on the impact of the items above on our ~~third~~first quarter ~~2022~~2023 results.

~~Operating Environment.~~U.S. Economic Conditions. During t~~During the third~~he first quarter ~~of 2022,~~2023, real gross domestic product (GDP) increased ~~2.8~~at an annual rate of 1.1 percent as compared to ~~a decline~~an increase of ~~0.6~~2.6 percent induring the ~~second~~fourth quarter of 2022. The 1.1 percent increase in ~~economic activity was driven in large part by household~~real GDP reflected higher consumer spending, ~~on goods~~exports, federal government spending, state and ~~services,~~local government spending, and ~~a favorable mix of export activity outpacing imports.~~

~~Residential fixed investments declined as mortgage rates increased markedly which weighed on the headline result. Business~~nonresidential fixed investment that were partly offset by decreases in private inventory ~~restocking~~investment and ~~government spending increased at a tepid rate.~~

residential fixed investment.

During the ~~third~~first quarter ~~2022,~~2023, the Federal Reserve raised the target range for the federal funds rate by ~~150 basis points to a target range of 3.00 percent to 3.25 percent at the end of the third quarter. Following its meeting in November, the Federal Reserve raised the federal fund rate by another~~ 75 basis points, bringing the target range to 4.75 to 5 percent at March 31, 2023, and by an additional 25 basis points in May 2023 to a ~~target~~current range of ~~3.75 percent~~5 to ~~4.00~~5.25 percent. ~~In addition, the Federal Reserve has continued to reduce its holdings of Treasury securities and agency debt and mortgage-backed securities.~~ Consistent with its previously announced plan, the Federal Reserve targeted a reduction of its Treasury and agency securities portfolio by $47.5 billion per month through September 21, 2022 and, effective September 22, 2022, raised its target reduction of securities to $95 billion per month. Thesethese actions reflect the Federal Reserve’s strong commitment to returning inflation to its 2 percent objective.

The Federal Open Market Committee has indicated it will continue to increase the federal funds rate, but at a slower pace, to stabilize pricing while remaining highly attentive toward the recent banking developments, and the delay in which the cumulative tightening of its monetary policy affects the economy.

The 10-year U.S. Treasury note yield ended the ~~third~~first quarter of ~~2022~~2023 at ~~3.83~~3.48 percent, 85or 40 basis points ~~higher~~lower as compared to ~~June 30, 2022. The spread between~~ the 2-fourth quarter 2022, and ~~10-year~~the 2-year U.S. Treasury note ~~yields~~yield ended the first quarter 2023 at ~~negative 0.39~~4.06 percent, ~~a 45~~or 35 basis ~~point decline from June 30,~~points lower as compared to the fourth quarter 2022.

For all commercial banks in the U.S., loans and leases increased approximately 2.5 percent from June 30, 2022 to September 30, 2022. While loan growth moderated somewhat during the quarter, survey data from the industry reported that demand for most commercial and industrial ~~loan products increased. Alternatively, demand for most real estate related~~ loans ~~declined, particularly for commercial real estate loans with construction and land development purposes. During the third quarter 2022, Valley’s new loan originations~~ decreased ~~across most product types~~approximately by 1.8 percent at March 31, 2023 as compared to ~~the second quarter, but loan growth remained at robust levels partly~~December 31, 2022 largely due to slower paydowns on existing loans due to the rising market interest rate environment. While confident in our commercial loan pipelines, we expect a more challenging overall loan origination environment moving forward, especially in the residential mortgage and consumer loan portfolios, due to the impact of higher market interest rates ondecreased customer ~~demand and selective tightening of certain underwriting standards by Valley.~~need for financing inventory

and accounts receivables, investment in property or equipment and mergers or acquisitions. Many banks increased the cost of credit lines through widening the spreads of loan rates over the costs of funds to firms of all sizes and increasing premiums for riskier loans, while a significant portion of banks also tightened loan covenants and collateralization requirements for firms of all sizes. A majority of banks that reported tightening standards or terms on commercial and industrial loans cited a less favorable or more uncertain economic outlook and reduced risk tolerance.

Further ~~expected~~ increases in market interest rates, persistently high inflation, heightened recessionary concerns and the ~~lingering impact of supply chain issues, tight labor market conditions, and global economic~~potential for additional fallout from the ~~Russia-Ukraine war,~~recent banking crisis, including bank regulatory actions, among other factors, ~~has~~have added a higher level of uncertainty to the future path of the U.S. economy and an elevated risk of a recession. Should economic conditions deteriorate, causing business activity, spending and investment to decline, it ~~would~~may adversely impact our financial results, as highlighted ~~below~~ in this MD&A.

~~Loans.~~ Total loans increased $1.6 billion to $45.2 billion at September 30, 2022 from June 30, 2022 primarily due to strong organic loan growth. Our loan portfolio increased 15 percent on an annualized basis during the third quarter 2022 from the second quarter 2022 as a result of solid commercial loan volumes and a continued increase in new residential mortgage loans originated for investment rather than sale. During the third quarter 2022, we sold only $48 million of residential mortgage loans. See further details on our loan activities under the “Loan Portfolio” section.

~~Asset Quality.~~ Non-accrual loans represented 0.65 percent and 0.72 percent of total loans at September 30, 2022 and June 30, 2022, respectively. Net recoveries of loan charge-offs totaled $5.6 million for the third quarter 2022 as compared to net loan charge-offs of $2.3 million for the second quarter 2022. Total accruing past due loans increased $25.2 million to $98.7 million, or 0.22 percent of total loans, at September 30, 2022 as compared to $73.5 million, or 0.17 percent of total loans, at June 30, 2022. See further details in the "Non-performing Assets" section below.

Deposits and Other Borrowings

.Overall, average deposits increased by ~~$1.9 billion~~$918.1 million to ~~$44.8~~$47.2 billion for the ~~third~~first quarter ~~2022~~2023 as compared to the ~~second~~fourth quarter 2022, mostly due to ~~growth in our retail and brokered CD portfolios. The retail growth resulted from strategic CD campaigns, while the brokered CD growth resulted from~~ ~~our~~higher time deposits driven by an increased utilization of fully insured brokered deposits, aspartially offset by a ~~favorable funding alternative, during the~~ ~~third quarter 2022~~.decrease in average non-interest bearing deposits. Average non-interest-bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 3630 percent, 5350 percent and 1221 percent of total deposits as of ~~September 30, 2022,~~March 31, 2023, respectively.

Actual ending balances for deposits decreased $46.0 million to approximately $47.6 billion at March 31, 2023 from December 31, 2022. Within the deposit categories, non-interest bearing deposits, and savings, NOW and money market deposits decreased $887.5 million and $713.4 million, respectively, and were mostly offset by an increase in time deposits. Time deposits increased ~~$1.4~~$1.6 billion to ~~approximately $45.3~~$11.1 billion within our overall deposit mix at ~~September 30, 2022~~March 31, 2023 from ~~June 30,~~December 31, 2022 largely due to ~~the increased utilization of~~higher fully FDIC-insured brokered CD balances at March 31, 2023. Total fully insured brokered deposits, consisting of ~~both~~time deposits and money market ~~and time deposit~~ accounts, ~~in our funding mix. Total brokered deposits~~ increased $1.2 billion to ~~$3.7~~$7.1 billion at ~~September 30, 2022~~March 31, 2023 as compared to ~~$2.3~~$5.9 billion at ~~June 30,~~December 31, 2022. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits ~~decreased $718.9 million at September 30, 2022~~represented approximately 29 percent, 48 percent and 23 percent of total deposits as of March 31, 2023, respectively, as compared to ~~June~~ 30 percent, 50 percent and 20 percent of total deposits as of December 31, 2022, ~~largely due to fluctuations in certain commercial customer balances, as well as some migration~~respectively.

The following table lists, by maturity, uninsured certificates of ~~both~~deposit at March 31, 2023:



	(in thousands)
Less than three months	$	349,067
Three to six months	97,841
Six to twelve months	77,179
More than twelve months	1,208,902
Total	$	1,732,989

Total estimated uninsured deposits were approximately $14.9 billion, or 31 percent of total deposits, at March 31, 2023.

While our diversified commercial and ~~retail balances to interest bearing~~consumer deposit ~~products. While our overall deposit levels increased~~base has remained stable during the ~~third~~early stages of the second quarter ~~2022,~~2023, we believe ~~the current operating environment will likely remain very challenging for Valley’s~~ deposit gathering ~~initiatives.~~initiatives may remain challenging due to market competition, attractive investment alternatives, such as U.S. Treasury securities, changes in customer behavior and other factors. As a result, we cannot guarantee that we will be able to maintain deposit levels at or near those reported at ~~September 30, 2022.~~March 31, 2023.

The following table presents average short-term and long-term borrowings for the periods indicated:


		Three Months Ended						Nine Months Ended					Three Months Ended
		September 30, 2022		June 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			March 31, 2023		December 31, 2022		March 31, 2022
		(in thousands)											(in thousands)
Average short-term borrowings:	Average short-term borrowings:											Average short-term borrowings:
FHLB advances	FHLB advances	$	438,267	$	822,913	$	690,217	$	565,222	$	797,070	FHLB advances	$	2,513,983	$	429,529	$	434,444
Securities sold under repurchase agreements	Securities sold under repurchase agreements	140,777		142,790		170,257		144,019		160,793		Securities sold under repurchase agreements	99,546		118,263		148,575
Federal funds purchased	Federal funds purchased	437,196		637,495		—		363,550		8,681		Federal funds purchased	190,214		332,823		11,278
Total	Total	$	1,016,240	$	1,603,198	$	860,474	$	1,072,791	$	966,544	Total	$	2,803,743	$	880,615	$	594,297

Average long-term borrowings:	Average long-term borrowings:											Average long-term borrowings:
FHLB advances	FHLB advances	$	788,651	$	788,803	$	814,224	$	788,802	$	1,253,785	FHLB advances	$	875,053	$	788,496	$	788,956
Subordinated debt	Subordinated debt	632,627		617,291		638,349		626,997		499,124		Subordinated debt	754,972		753,165		631,056
Securities sold under repurchase agreements		—		—		86,957		—		228,205

Junior subordinated debentures issued to capital trusts	Junior subordinated debentures issued to capital trusts	56,631		56,544		56,284		56,545		56,198		Junior subordinated debentures issued to capital trusts	56,805		56,718		56,457

Total	Total	$	1,477,909	$	1,462,638	$	1,595,814	$	1,472,344	$	2,037,312	Total	$	1,686,830	$	1,598,379	$	1,476,469

Average short-term borrowings increased ~~$155.8 million~~$2.2 billion during the ~~third~~first quarter ~~2022~~2023 as compared to the ~~third~~first quarter ~~2021~~2022 mostly due to ~~an increase in~~ the ~~balance of federal funds purchased as a part of our overall funding strategy, partially offset by less~~higher utilization of FHLB ~~advances. Average~~advances in March 2023 to prudently increase our excess liquidity position. Average long-term borrowings (including junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition) ~~decreased $117.9~~increased $210.4 million ~~from~~as compared to the ~~third~~first quarter ~~2021 largely~~2022 mainly due to the ~~repayment~~issuance of ~~long-term repurchase agreements~~$150 million of subordinated notes during the third quarter ~~2021~~2022 and ~~to a lesser extent, maturities of~~new FHLB advances ~~over~~issued during the ~~last 12 months.~~first quarter 2023.

Actual ending balances for short-term borrowings ~~decreased $603.5 million~~increased $6.3 billion to ~~$919.3 million~~$6.4 billion at ~~September 30, 2022~~March 31, 2023 as compared to ~~June 30, 2022 largely due to the maturity~~December 31, 2022. In March 2023, we significantly increased our short-term borrowings, mostly consisting of FHLB advances, ~~during~~to bolster our liquidity position out of an abundance of caution in the ~~third quarter 2022~~wake of the two recent bank failures. Since March 31, 2023, many of our short-term FHLB advances have matured and ~~our increased utilization of broker deposits, as~~been repaid, resulting in a ~~favorable alternative funding source,~~more normal liquidity position. We continue to closely monitor changes in ~~our funding mix at September 30, 2022.~~the current banking environment and have substantial access to additional liquidity. Long-term borrowings increased to approximately $2.2 billion at March 31, 2023 as compared to $1.5 billion at ~~September 30,~~December 31, 2022 ~~as compared to $1.4 billion at June 30, 2022 primarily~~mainly due to ~~the issuance of~~ new ~~subordinated notes~~FHLB advances also issued during the ~~third~~first quarter ~~2022. On September 20, 2022, Valley issued $150 million~~2023 as part of ~~6.25 percent fixed-to-floating rate subordinated notes due September 30, 2032. At September 30, 2022,~~our overall funding and liquidity strategies.

See the ~~subordinated notes had a carrying value of $147.5 million, net of unamortized debt issuance costs.~~"Bank Liquidity" section for more details on our available funding sources.

Non-GAAP Financial ~~Measures.~~Measures

The table below presents selected performance indicators, their comparative non-GAAP measures and the (non-GAAP) efficiency ratio for the periods indicated. ~~The Company~~Valley believes that the non-GAAP financial measures provide useful supplemental information to both management and investors in understanding ~~Valley’s~~its 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, or as a substitute for or superior to financial measures calculated in accordance with U.S. GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Selected Performance Indicators ($ in thousands, except for %)
GAAP measures:
Net income, as reported $ 178,119 $ 122,580 $ 391,260 $ 358,802
Return on average assets 1.30 % 1.18 % 1.03 % 1.16 %
Return on average shareholders’ equity 11.39 10.23 8.89 10.14
Non-GAAP measures:
Net income, as adjusted $ 181,455 $ 124,727 $ 467,571 $ 367,139
Return on average assets, as adjusted 1.32 % 1.20 % 1.23 % 1.19 %
Return on average shareholders' equity, as adjusted 11.60 10.41 10.62 10.37
Return on average tangible shareholders' equity (ROATE) 17.21 14.64 13.20 14.63
ROATE, as adjusted 17.54 14.90 15.77 14.97
Efficiency ratio 49.76 49.16 51.03 48.12

September 30,
2022 December 31,
2021
Common Equity Per Share Data:
Book value per common share (GAAP) $ 11.98 $ 11.57
Tangible book value per common share (non-GAAP) 7.87 7.94

The following table presents our annualize performance ratios:


	Three Months Ended March 31,
	2023			2022
Selected Performance Indicators	($ in thousands)
GAAP measures:
Net income, as reported	$	146,551		$	116,728
Return on average assets	0.98		%	1.07		%
Return on average shareholders’ equity	9.10			9.15
Non-GAAP measures:
Net income, as adjusted	$	154,530		$	120,313
Return on average assets, as adjusted	1.03		%	1.10		%
Return on average shareholders' equity, as adjusted	9.60			9.43
Return on average tangible shareholders' equity (ROATE)	13.39			13.09
ROATE, as adjusted	14.12			13.49
Efficiency ratio	53.79			53.18


	March 31, 2023		December 31, 2022
Common Equity Per Share Data:






Book value per common share (GAAP)	$	12.41	$	12.23
Tangible book value per common share (non-GAAP)	8.36		8.15

Non-GAAP Reconciliations to GAAP Financial Measures

Adjusted net income is computed as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(in thousands)
Net income, as reported (GAAP) $ 178,119 $ 122,580 $ 391,260 $ 358,802
Add: Loss on extinguishment of debt (net of tax) — — — 6,024
Less: Gains on available for sale and held to maturity securities transactions (net of tax) (a)
(24) (565) (74) (399)
Add: Provision for credit losses (net of tax) (b)
— — 29,282 —
Add: Merger related expenses (net of tax) (c)
3,360 1,207 47,103 1,207
Add: Litigation reserves (net of tax) (d)
— 1,505 — 1,505
Net income, as adjusted (non-GAAP) $ 181,455 $ 124,727 $ 467,571 $ 367,139


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Net income, as reported (GAAP)	$	146,551	$	116,728

Add: Losses on available for sale and held to maturity debt securities, net (net of tax) (a)	17		6

Add: Provision for credit losses for available for sale securities (b)	5,000		—
Add: Merger related expenses (net of tax) (c)	2,962		3,579


Net income, as adjusted (non-GAAP)	$	154,530	$	120,313

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

(b)~~Represents~~ Provision relates to one security fully charged off with no resulting tax benefit during the ~~provision for credit losses for non-PCD loans, unfunded credit commitments and held to maturity debt securities acquired from Bank Leumi USA on April 1, 2022.~~three months ended March 31, 2023.

(c) Merger related expenses are primarily within salary and employee benefits expense ~~technology, furniture and equipment expense, and professional and legal fees~~ for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022.

~~(d)~~ ~~Included in professional and legal fees.~~

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 level of net gains on sales of loans, wealth management fees, and swap fees recognized from commercial loan customer transactions. These amounts can vary widely from period to period due to, among other factors, the amount of residential mortgage loans originated for sale, loan portfolio sales, brokerage fees, and commercial loan customer demand for certain products. See the “Non-Interest Income” section below for more details.

Adjusted annualized return on average assets is computed by dividing adjusted net income by average assets, as follows:


	Three Months Ended March 31,
	2023			2022
	($ in thousands)
Net income, as adjusted (non-GAAP)	$	154,530		$	120,313
Average assets	$	59,867,002		$	43,570,251
Annualized return on average assets, as adjusted (non-GAAP)	1.03		%	1.10		%

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
($ in thousands)
Net income, as adjusted (non-GAAP) $ 181,455 $ 124,727 $ 467,571 $ 367,139
Average assets $ 54,858,306 $ 41,543,930 $ 50,588,010 $ 41,144,375
Annualized return on average assets, as adjusted (non-GAAP) 1.32 % 1.20 % 1.23 % 1.19 %

Adjusted annualized return on average shareholders' equity is computed by dividing adjusted net income by average shareholders' equity, as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
($ in thousands)
Net income, as adjusted (non-GAAP) $ 181,455 $ 124,727 $ 467,571 $ 367,139
Average shareholders' equity $ 6,256,767 $ 4,794,843 $ 5,869,736 $ 4,718,960
Annualized return on average shareholders' equity, as adjusted (non-GAAP) 11.60 % 10.41 % 10.62 % 10.37 %


	Three Months Ended March 31,
	2023			2022
	($ in thousands)
Net income, as adjusted (non-GAAP)	$	154,530		$	120,313
Average shareholders' equity	$	6,440,215		$	5,104,709
Annualized return on average shareholders' equity, as adjusted (non-GAAP)	9.60		%	9.43		%

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 September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2022			2021			2022			2021				2023			2022
		($ in thousands)													($ in thousands)
Net income, as reported (GAAP)	Net income, as reported (GAAP)	$	178,119		$	122,580		$	391,260		$	358,802		Net income, as reported (GAAP)	$	146,551		$	116,728
Net income, as adjusted (non-GAAP)	Net income, as adjusted (non-GAAP)	181,455			124,727			$	467,571		$	367,139		Net income, as adjusted (non-GAAP)	154,530			120,313
Average shareholders’ equity	Average shareholders’ equity	$	6,256,767		$	4,794,843		$	5,869,736		$	4,718,960		Average shareholders’ equity	$	6,440,215		$	5,104,709
Less: Average goodwill and other intangible assets	Less: Average goodwill and other intangible assets	2,117,818			1,446,760			1,917,217			1,449,285			Less: Average goodwill and other intangible assets	2,061,361			1,538,356
Average tangible shareholders’ equity	Average tangible shareholders’ equity	$	4,138,949		$	3,348,083		$	3,952,519		$	3,269,675		Average tangible shareholders’ equity	$	4,378,854		$	3,566,353
Annualized ROATE (non-GAAP)	Annualized ROATE (non-GAAP)	17.21		%	14.64		%	13.20		%	14.63		%	Annualized ROATE (non-GAAP)	13.39		%	13.09		%
Annualized ROATE, as adjusted (non-GAAP)	Annualized ROATE, as adjusted (non-GAAP)	17.54		%	14.90		%	15.77		%	14.97		%	Annualized ROATE, as adjusted (non-GAAP)	14.12		%	13.49		%

The efficiency ratio is computed as follows:


	Three Months Ended March 31,
	2023			2022
	($ in thousands)
Total non-interest expense, as reported (GAAP)	$	272,166		$	197,340


Less: Amortization of tax credit investments (pre-tax)	4,253			2,896
Less: Merger related expenses (pre-tax) (a)	4,133			4,628
Total non-interest expense, as adjusted (non-GAAP)	$	263,780		$	189,816
Net interest income, as reported (GAAP)	$	436,020		$	317,669
Total non-interest income, as reported (GAAP)	54,299			39,270
Add: Losses on available for sale and held to maturity debt securities, net (pre-tax) (b)	24			9
Total net interest income and non-interest income, as adjusted (non-GAAP)	$	490,343		$	356,948

Efficiency ratio (non-GAAP)	53.79		%	53.18		%

5955

~~The efficiency ratio is computed as follows:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
($ in thousands)
Total non-interest expense, as reported (GAAP) $ 261,639 $ 174,922 $ 758,709 $ 507,028
Less: Loss on extinguishment of debt (pre-tax) — — — 8,406
Less: Amortization of tax credit investments (pre-tax) 3,105 3,079 9,194 8,795
Less: Merger related expenses (pre-tax) (a)
4,707 1,287 63,831 1,287
Less: Litigation reserve (pre-tax) (b)
— 2,100 — 2,100
Total non-interest expense, as adjusted (non-GAAP) $ 253,827 $ 168,456 $ 685,684 $ 486,440
Net interest income, as reported (GAAP) $ 453,992 $ 301,026 $ 1,189,821 $ 894,600
Total non-interest income, as reported (GAAP) 56,194 42,431 153,997 116,790
Less: Gains on available for sale and held to maturity securities transactions, net (pre-tax) (c)
(33) (788) (102) (557)
Total net interest income and non-interest income, as adjusted (non-GAAP) $ 510,153 $ 342,669 $ 1,343,716 $ 1,010,833
Efficiency ratio (non-GAAP) 49.76 % 49.16 % 51.03 % 48.12 %

(a) ~~Included~~Merger related expenses are primarily within salary and employee benefits expense ~~technology, furniture and equipment expense, and professional and legal fees~~ for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022.

(b)~~Included in professional and legal fees.~~

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

Tangible book value per common share is computed by dividing shareholders’ equity less preferred stock, goodwill and other intangible assets by common shares outstanding, as follows:

September 30,
2022 December 31,
2021
($ in thousands, except for share data)
Common shares outstanding 506,351,502 421,437,068
Shareholders’ equity $ 6,273,829 $ 5,084,066
Less: Preferred stock 209,691 209,691
Less: Goodwill and other intangible assets 2,079,731 1,529,394
Tangible common shareholders’ equity $ 3,984,407 $ 3,344,981
Tangible book value per common share (non-GAAP) $ 7.87 $ 7.94
Book value per common share (GAAP) $ 11.98 $ 11.57


	March 31, 2023		December 31, 2022
	($ in thousands, except for share data)
Common shares outstanding	507,762,358		506,374,478
Shareholders’ equity	$	6,511,581	$	6,400,802
Less: Preferred stock	209,691		209,691
Less: Goodwill and other intangible assets	2,056,107		2,066,392
Tangible common shareholders’ equity	$	4,245,783	$	4,124,719
Book value per common share (GAAP)	$	12.41	$	12.23
Tangible book value per common share (non-GAAP)	$	8.36	$	8.15

Net Interest Income

Net interest income consists of interest income and dividends earned on interest earning assets, less interest expense on interest bearing liabilities, and represents the main source of income for Valley.

Net interest income on a tax equivalent basis totaling ~~$455.3~~$437.5 million for the ~~third~~first quarter ~~2022 increased $35.7~~2023 decreased $29.8 million as compared to the ~~second~~fourth quarter 2022 and increased ~~$153.6~~$119.1 million as compared to the first quarter 2022. The decrease as compared to the fourth quarter 2022 was mainly due to (i) the negative impact of the significant increase in our excess cash liquidity and other borrowings resulting from prudent and cautionary measures taken by us during the ~~third~~market turmoil of March 2023, (ii) higher interest rates on our average interest bearing deposits and other borrowings, as well as (iii) fewer days in the first quarter ~~2021.~~ 2023. Interest expense increased $103.5 million to $284.2 million for the first quarter 2023 as compared to the fourth quarter 2022 largely due to a $4.0 billion increase in average interest bearing liabilities, including increases of $2.1 billion and $1.9 billion in average time deposits and short-term borrowings, respectively. Interest income on a tax equivalent basis increased $73.7 million to $721.7 millionin the ~~third~~first quarter ~~2022 increased $83.7 million to $538.0 million~~2023 as compared to the ~~second~~fourth quarter 2022. The increase ~~was~~was mostly due to higher average loan balances driven by our organic new loan ~~growth~~volumes, slowing loan prepayments, and increased yields on both new originations and adjustable rate loans in our portfolio. Interest expense of $82.7 million for the third quarter 2022 increased $47.9 million as compared to the second quarter 2022 largely due to higher interest rates on both non-maturity deposits and short-term borrowings, as well as a $1.5 billion increase in average interest bearing liabilities.

Average interest earning assets increased ~~$12.2~~$15.1 billion to ~~$50.5~~$55.4 billion for the ~~third~~first quarter ~~2022~~2023 as compared to the ~~third~~first quarter ~~2021~~2022 ~~primarily~~mainly due to a $13.2 billion increase in average loan balances and higher average investment balances partly caused by the ~~acquisitions~~acquisition of Bank Leumi USA ~~and Westchester~~ on April 1, ~~2022 and December 1, 2021, respectively, as well as strong organic loan growth over the 12-month period ended~~ ~~September 30, 2022~~.2022. Compared to the ~~second~~fourth quarter 2022, average interest earning assets increased by ~~$1.6~~$3.0 billion during the ~~third~~first quarter ~~2022.~~2023. The increase was primarily driven by a $1.8 billion increase in average loan balances due to organic loan growth mainly in the commercial loan categories and $1.1 billion increase in average interest bearing cash held mainly overnight with the Federal Reserve Bank of New York as ~~well as residential mortgage loans.~~part of our liquidity management.

Average interest bearing liabilities increased ~~$5.9~~$11.5 billion to ~~$31.2~~$37.6 billion for the ~~third~~first quarter ~~2022~~2023 as compared to the ~~third~~first quarter ~~2021~~2022 mainly due to increases of $~~2.5~~9.1 billion ~~of interest bearing deposits assumed from Bank Leumi USA, growth~~and $2.2 billion in ~~commercial and retail customer deposit balances without stated maturities and brokered~~average time deposits and ~~$727 million~~short-term borrowings, respectively. The increases in average time deposits and short-term borrowings were largely due to the liquidity management efforts during March 2023, and our increased usage of ~~interest bearing deposits assumed from Westchester.~~fully FDIC-insured brokered CD and successful retail CD initiatives as part of our funding sources for loan growth over the last 12 months. As compared to the ~~second~~fourth quarter 2022, average interest bearing liabilities increased by ~~$1.5~~$4.0 billion in the ~~third~~first quarter ~~2022 mainly~~ 2023 largely due to ~~growth~~a $2.1 billion increase in ~~our retail and~~average time deposits mainly driven by the higher fully insured brokered CD ~~portfolios, partially offset by maturities~~balances and ~~less use of~~ additional FHLB advances within short-term ~~borrowings as a funding source. The retail growth resulted from successful targeted CD campaigns, while the brokered CD growth resulted from~~borrowings. ~~our increased utilization of such deposits as a cost-effective funding alternative.~~ ~~Total average deposits, including non-interest bearing deposits, increased $1.9 billion to $44.8 billion for the third quarter 2022 as compared to the second quarter 2022.~~ See additional information under "Deposits and Other Borrowings" in the Executive Summary section above.

~~Our net~~Net interest margin on a tax equivalent basis of ~~3.60~~3.16 percent for the ~~third~~first quarter ~~2022 increased~~2023 decreased by 1741 basis points ~~and 45 basis points~~ from ~~3.43 percent and 3.15~~3.57 percent for the ~~second~~fourth quarter 2022 and ~~third~~remained unchanged from the first quarter ~~2021, respectively.~~2022. The decrease as

compared to the fourth quarter was largely driven by (i) the net impact of the excess liquidity measures taken in March 2023 and (ii) two fewer days during the first quarter 2023, partially offset by higher yields on average interest earning assets. The yield on average interest earning assets increased by 5426 basis points on a linked quarter basis mostly due to the aforementioned higher yields on new and adjustable rate loans in the ~~third~~first quarter ~~2022~~2023 as compared to the ~~second~~fourth quarter 2022. The yield on average loans increased by 5728 basis points to ~~4.48~~5.48 percent for the ~~third~~first quarter ~~2022~~2023 as compared to the ~~second~~fourth quarter 2022 largely due to the higher level of market interest rates. The yields on average taxable and non-taxable investments also increased 912 basis points and 259 basis points, respectively, from the ~~second~~fourth quarter 2022, ~~largely~~largely due to investment maturities and ~~prepayments~~repayments redeployed into new higher yielding securities, as well as lower premium amortization expense caused by a decline in prepayments on mortgage-backed securities during the ~~third~~first quarter ~~2022.~~2023. Our cost of total average deposits increased to ~~0.59~~1.96 percent for the first quarter 2023 from 1.36 percent for the ~~third quarter 2022 from 0.19 percent for the second~~fourth quarter 2022. The overall cost of average interest bearing ~~liabilities~~liabilities also increased 5987 basis points to ~~1.06~~3.02 percent for the ~~third~~first quarter ~~2022~~2023 as compared to the second quarter 2022. The increased cost of funds was mainly due to higher interest rates on most of our interest bearing deposit products combined with greater utilization of brokered and retail CDs in our funding mix during the third quarter 2022.

The Federal Reserve continued to raise the federal funds rate by 75 basis points after each of their meetings in July, September, and November 2022 resulting in a current target range of 3.75 percent to 4.00 percent. The higher levels of market interest rates will benefit certain interest earning assets on our balance sheet and are likely to provide us the opportunity to reinvest any excess cash, including normal repayments of loans and investments, at higher rates. Funding costs also increased during the third quarter 2022 and the early stages of the fourth quarter 2022 ~~however~~largely due to a 148 basis point increase in cost of average short-term borrowings.

Based upon our revised estimates at ~~this time,~~March 31, 2023, we ~~expect a continued benefit to our~~anticipate net interest income growth of approximately 10 to 12 percent for the full year of 2023, down from 16 to 18 percent previously estimated in the ~~immediate repricing~~MD&A of ~~certain earning assets and a degree of lag in higher funding costs due to~~Valley's Form 10-K for the ~~current market and our ability to manage the balance sheet.~~year ended December 31, 2022. While our revised outlook for our net interest income ~~in the fourth quarter 2022 and beyond~~ is still positive, we cannot provide any assurances with respect to the future trajectory of market interest rates or that our net interest margin or income will remain at the levels reported for the ~~third~~ first quarter ~~2022.~~2023.

6157

The following table reflects the components of net interest income for the three months ended ~~September 30, 2022, June 30,~~March 31, 2023, December 31, 2022 and ~~September 30, 2021:~~March 31, 2022:

Quarterly Analysis of Average Assets, Liabilities and Shareholders’ Equity and

Net Interest Income on a Tax Equivalent Basis


		Three Months Ended																			Three Months Ended
		September 30, 2022						June 30, 2022						September 30, 2021							March 31, 2023						December 31, 2022						March 31, 2022
		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
		($ in thousands)																			($ in thousands)
Assets	Assets																			Assets
Interest earning assets:	Interest earning assets:																			Interest earning assets:
Loans (1)(2)	Loans (1)(2)	$	44,341,894	$	496,545	4.48	%	$	42,517,287	$	415,602	3.91	%	$	32,698,382	$	309,778	3.79	%	Loans (1)(2)	$	47,859,371	$	655,250	5.48	%	$	46,086,363	$	599,040	5.20	%	$	34,623,402	$	317,390	3.67	%
Taxable investments (3)	Taxable investments (3)	4,815,181		31,002		2.58		4,912,994		30,610		2.49		3,302,803		15,797		1.91		Taxable investments (3)	5,033,134		37,474		2.98		4,934,084		35,278		2.86		3,838,468		20,115		2.10
Tax-exempt investments (1)(3)	Tax-exempt investments (1)(3)	635,795		6,501		4.09		684,471		6,571		3.84		429,941		3,302		3.07		Tax-exempt investments (1)(3)	623,145		6,739		4.33		623,322		6,608		4.24		401,742		3,186		3.17
Interest bearing deposits with banks	Interest bearing deposits with banks	738,372		3,996		2.16		776,478		1,569		0.81		1,901,748		642		0.14		Interest bearing deposits with banks	1,847,140		22,205		4.81		761,832		7,038		3.70		1,419,436		461		0.13
Total interest earning assets	Total interest earning assets	50,531,242		538,044		4.26		48,891,230		454,352		3.72		38,332,874		329,519		3.44		Total interest earning assets	55,362,790		721,668		5.21		52,405,601		647,964		4.95		40,283,048		341,152		3.39
Allowance for credit losses	Allowance for credit losses	(486,747)						(428,193)						(346,437)						Allowance for credit losses	(466,837)						(483,580)						(367,989)
Cash and due from banks	Cash and due from banks	426,796						426,187						213,452						Cash and due from banks	445,005						408,891						281,883
Other assets	Other assets	4,499,739						4,362,789						3,314,308						Other assets	4,702,376						4,775,113						3,361,185
Unrealized gains on securities available for sale, net	Unrealized gains on securities available for sale, net	(112,724)						(40,591)						29,733						Unrealized gains on securities available for sale, net	(176,332)						(192,810)						12,124
Total assets	Total assets	$	54,858,306					$	53,211,422					$	41,543,930					Total assets	$	59,867,002					$	56,913,215					$	43,570,251
Liabilities and shareholders’ equity	Liabilities and shareholders’ equity																			Liabilities and shareholders’ equity
Interest bearing liabilities:	Interest bearing liabilities:																			Interest bearing liabilities:
Savings, NOW and money market deposits	Savings, NOW and money market deposits	$	23,541,694	$	50,674	0.86	%	$	23,027,347	$	17,122	0.30	%	$	18,771,619	$	10,605	0.23	%	Savings, NOW and money market deposits	$	23,389,569	$	150,766	2.58	%	$	23,476,111	$	109,286	1.86	%	$	20,522,629	$	9,627	0.19	%
Time deposits	Time deposits	5,192,896		15,174		1.17		3,601,088		3,269		0.36		4,126,253		4,394		0.43		Time deposits	9,738,608		80,298		3.30		7,641,769		48,417		2.53		3,554,520		2,831		0.32
Total interest bearing deposits	Total interest bearing deposits	28,734,590		65,848		0.92		26,628,435		20,391		0.31		22,897,872		14,999		0.26		Total interest bearing deposits	33,128,177		231,064		2.79		31,117,880		157,703		2.03		24,077,149		12,458		0.21
Short-term borrowings	Short-term borrowings	1,016,240		5,160		2.03		1,603,198		4,083		1.02		860,474		1,464		0.68		Short-term borrowings	2,803,743		33,948		4.84		880,615		7,404		3.36		594,297		806		0.54
Long-term borrowings (4)	Long-term borrowings (4)	1,477,909		11,728		3.17		1,462,638		10,313		2.82		1,595,814		11,312		2.84		Long-term borrowings (4)	1,686,830		19,198		4.55		1,598,379		15,624		3.91		1,476,469		9,525		2.58
Total interest bearing liabilities	Total interest bearing liabilities	31,228,739		82,736		1.06		29,694,271		34,787		0.47		25,354,160		27,775		0.44		Total interest bearing liabilities	37,618,750		284,210		3.02		33,596,874		180,731		2.15		26,147,915		22,789		0.35
Non-interest bearing deposits	Non-interest bearing deposits	16,035,778						16,267,946						10,701,948						Non-interest bearing deposits	14,024,742						15,116,977						11,686,534
Other liabilities	Other liabilities	1,337,022						1,010,220						692,979						Other liabilities	1,783,295						1,871,394						631,093
Shareholders’ equity	Shareholders’ equity	6,256,767						6,238,985						4,794,843						Shareholders’ equity	6,440,215						6,327,970						5,104,709
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	54,858,306					$	53,211,422					$	41,543,930					Total liabilities and shareholders’ equity	$	59,867,002					$	56,913,215					$	43,570,251
Net interest income/interest rate spread (5)	Net interest income/interest rate spread (5)			$	455,308	3.20	%			$	419,565	3.25	%			$	301,744	3.00	%	Net interest income/interest rate spread (5)			$	437,458	2.19	%			$	467,233	2.80	%			$	318,363	3.04	%
Tax equivalent adjustment	Tax equivalent adjustment			(1,316)						(1,405)						(718)				Tax equivalent adjustment			(1,438)						(1,414)						(694)
Net interest income, as reported	Net interest income, as reported			$	453,992					$	418,160					$	301,026			Net interest income, as reported			$	436,020					$	465,819					$	317,669
Net interest margin (6)	Net interest margin (6)					3.59	%					3.42	%					3.14	%	Net interest margin (6)					3.15	%					3.56	%					3.15	%
Tax equivalent effect	Tax equivalent effect					0.01						0.01						0.01		Tax equivalent effect					0.01						0.01						0.01
Net interest margin on a fully tax equivalent basis (6)	Net interest margin on a fully tax equivalent basis (6)					3.60	%					3.43	%					3.15	%	Net interest margin on a fully tax equivalent basis (6)					3.16	%					3.57	%					3.16	%

6258

~~The following table reflects the components of net interest income for the nine months ended September 30, 2022 and 2021:~~

Nine Months Ended
September 30, 2022 September 30, 2021
Average Balance Interest Average Rate Average Balance Interest Average Rate
($ in thousands)
Assets
Interest earning assets:
Loans (1)(2)
$ 40,529,794 $ 1,229,536 4.04 % $ 32,641,362 $ 938,323 3.83 %
Taxable investments (3)
4,525,323 81,906 2.41 % 3,191,930 45,717 1.91
Tax-exempt investments (1)(3)
574,699 16,079 3.73 % 480,599 11,621 3.22
Interest bearing deposits with banks 975,601 6,026 0.82 % 1,588,656 1,101 0.09
Total interest earning assets 46,605,417 1,333,547 3.82 % 37,902,547 996,762 3.51
Allowance for credit losses (428,078) (348,011)
Cash and due from banks 378,819 263,910
Other assets 4,078,903 3,290,439
Unrealized gains on securities available for sale, net (47,051) 35,490
Total assets $ 50,588,010 $ 41,144,375
Liabilities and shareholders’ equity
Interest bearing liabilities:
Savings, NOW and money market deposits $ 22,374,949 $ 77,423 0.46 % 17,730,438 32,896 0.25 %
Time deposits 4,122,169 21,274 0.69 4,853,891 21,766 0.60
Total interest bearing deposits 26,497,118 98,697 0.50 22,584,329 54,662 0.32
Short-term borrowings 1,072,791 10,049 1.25 966,544 4,390 0.61
Long-term borrowings (4)
1,472,344 31,566 2.86 2,037,312 40,595 2.66
Total interest bearing liabilities 29,042,253 140,312 0.64 25,588,185 99,647 0.52
Non-interest bearing deposits 14,679,354 10,147,130
Other liabilities 996,667 690,100
Shareholders’ equity 5,869,736 4,718,960
Total liabilities and shareholders’ equity $ 50,588,010 $ 41,144,375
Net interest income/interest rate spread (5)
$ 1,193,235 3.18 % $ 897,115 2.99 %
Tax equivalent adjustment (3,414) (2,515)
Net interest income, as reported $ 1,189,821 $ 894,600
Net interest margin (6)
3.40 % 3.15 %
Tax equivalent effect 0.01 0.01
Net interest margin on a fully tax equivalent basis (6)
3.41 % 3.16 %

_____________

(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 available for sale 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.

(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 us 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 September 30, 2022 Compared to September 30, 2021						Nine Months Ended September 30, 2022 Compared to September 30, 2021							Three Months Ended March 31, 2023 Compared to March 31, 2022
		Change Due to Volume		Change Due to Rate		Total Change		Change Due to Volume		Change Due to Rate		Total Change			Change Due to Volume		Change Due to Rate		Total Change
		(in thousands)													(in thousands)
Interest Income:	Interest Income:													Interest Income:
Loans*	Loans*	$	123,594	$	63,173	$	186,767	$	236,972	$	54,241	$	291,213	Loans*	$	147,471	$	190,389	$	337,860
Taxable investments	Taxable investments	8,660		6,546		15,206		22,185		14,004		36,189		Taxable investments	7,381		9,978		17,359
Tax-exempt investments*	Tax-exempt investments*	1,891		1,308		3,199		2,474		1,984		4,458		Tax-exempt investments*	2,141		1,412		3,553
Interest bearing deposits with banks	Interest bearing deposits with banks	(624)		3,978		3,354		(581)		5,506		4,925		Interest bearing deposits with banks	180		21,564		21,744
Total increase in interest income	Total increase in interest income	133,521		75,005		208,526		261,050		75,735		336,785		Total increase in interest income	157,173		223,343		380,516
Interest Expense:	Interest Expense:													Interest Expense:
Savings, NOW and money market deposits	Savings, NOW and money market deposits	3,323		36,745		40,068		10,350		34,177		44,527		Savings, NOW and money market deposits	1,531		139,608		141,139
Time deposits	Time deposits	1,392		9,388		10,780		(3,529)		3,037		(492)		Time deposits	12,150		65,317		77,467
Short-term borrowings	Short-term borrowings	309		3,387		3,696		531		5,128		5,659		Short-term borrowings	10,580		22,562		33,142
Long-term borrowings and junior subordinated debentures	Long-term borrowings and junior subordinated debentures	(874)		1,290		416		(11,929)		2,900		(9,029)		Long-term borrowings and junior subordinated debentures	1,520		8,153		9,673
Total increase (decrease) in interest expense		4,150		50,810		54,960		(4,577)		45,242		40,665
Total increase in interest expense														Total increase in interest expense	25,781		235,640		261,421
Total increase (decrease) in net interest income	Total increase (decrease) in net interest income	$	129,371	$	24,195	$	153,566	$	265,627	$	30,493	$	296,120	Total increase (decrease) in net interest income	$	131,392	$	(12,297)	$	119,095

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

Non-Interest Income

Non-interest income increased ~~$13.8 million and $37.2~~$15.0 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 as compared to the same ~~periods~~period of ~~2021.~~2022. The following table presents the components of non-interest income for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Wealth management and trust fees	$	9,587	$	5,131
Insurance commissions	2,420		1,859
Capital markets	10,892		14,360
Service charges on deposit accounts	10,476		6,212
Gains (losses) on securities transactions, net	378		(1,072)

Fees from loan servicing	2,671		2,781
Gains on sales of loans, net	489		986

Bank owned life insurance	2,584		2,046
Other	14,802		6,967
Total non-interest income	$	54,299	$	39,270

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(in thousands)
Wealth management and trust fees $ 9,281 $ 3,550 $ 23,989 $ 10,411
Insurance commissions 3,750 1,610 9,072 5,805
Service charges on deposit accounts 10,338 5,428 26,617 15,614
Gains (losses) on securities transactions, net 323 787 (1,058) 1,263
Fees from loan servicing 3,138 2,894 8,636 8,980
Gains on sales of loans, net 922 6,442 5,510 20,016
Bank owned life insurance 1,681 2,018 5,840 6,824
Other 26,761 19,702 75,391 47,877
Total non-interest income $ 56,194 $ 42,431 $ 153,997 $ 116,790

Wealth management and trust fees income increased ~~by $5.7 million and $13.6~~$4.5 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 as compared to the same ~~periods~~period in ~~2021 mostly~~2022 primarily due to higher brokerage fees resulting from the acquisition of Bank Leumi USA and its wholly owned broker dealer subsidiary ~~now legally named Valley Financial Management, Inc. The brokerage~~on April 1, 2022. Brokerage fees totaled ~~$3.9 million and $9.3~~$4.8 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively. The increases in both 2022 periods were also~~ ~~supplemented by additional revenues generated by our advisory firm, Dudley Ventures, LLC, specializing in the investment and management of tax credit investments, which we acquired in October 2021.~~March 31, 2023.

~~Insurance commissions increased $2.1 million and $3.3~~Capital markets income decreased $3.5 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 as compared to the same ~~periods~~quarter in ~~2021 mostly due to stronger business volumes generated~~2022. This decrease was largely driven by lower fee income from transactions executed for commercial customer related interest rate swaps, partially offset by an increase in foreign exchange fees. Swap fees income totaled $7.8 million and $14.0 million for the ~~Bank's insurance agency subsidiary.~~three months ended March 31, 2023 and 2022, respectively. Foreign exchange fees totaled $2.0 million and $369 thousand for the three months ended March 31, 2023 and 2022, respectively.

Service charges on deposit accounts increased by $4.9 million and $11.0 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021 largely related to revenues resulting from deposit accounts acquired from Bank Leumi USA.

~~Net losses on securities transactions of $1.1 million for the nine months ended September 30, 2022 were mostly due to net trading losses related to our trading municipal bond portfolio.~~

Net gains on sales of loans for each period are comprised of both gains on sales of residential mortgages and the net change in the mark to market gains and losses on our loans originated for sale and carried at fair value at each reporting period end. Net gains on sales of loans decreased $5.5 million and $14.5 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods of 2021. The third quarter 2022 decrease was mostly due to lower loan sale volumes as we sold approximately ~~$48.4 million~~ ~~of residential mortgage loans compared to~~ ~~$234.6 million~~ ~~during the third quarter 2021. The mark to market change on loans held for sale at fair value resulted in net losses totaling $116 thousand and $403 thousand for the three months ended~~ ~~September 30, 2022~~ ~~and2021, respectively, and~~ ~~$3.4 million~~ ~~and $10.4 million for the nine months ended~~ ~~September 30, 2022~~ ~~and~~2021, respectively. Our ability to generate net gains on sales of loans could continue to be challenged by a number of factors, including increases in market interest rates, lower customer demand for conforming loan products and our decision to originate certain residential mortgage loans for investment in our loan portfolio rather than sale. See further discussion of our residential mortgage loan origination activity under the “Loan Portfolio” section of this MD&A below.

~~Other non-interest income increased $7.1 million and $27.5 million for the three and nine months ended September 30, 2022 as compared to the same periods in 2021, respectively, partially due to~~ ~~higher fee income from derivative interest rate swaps executed with commercial lending customers caused by a greater volume of transactions and~~ ~~higher foreign exchange fees. Swap fee income totaled $10.7 million and $8.8~~$4.3 million for the three months ended March 31, 2023 as compared to the same period in ~~September 30,~~ 2022 largely related to higher checking account revenues resulting from additional deposit accounts acquired from Bank Leumi USA.

Net gains and ~~2021, respectively,~~losses on securities transactions for the three months ended March 31, 2023 and ~~$35.8 million~~2022 were almost entirely due to net trading gains and ~~$22.6~~losses related to our municipal bond trading portfolio.

Other non-interest income increased $7.8 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 as compared to the same quarter in 2022 mostly due to incremental increases in several operating non-interest income categories caused by the acquisition of Bank Leumi USA and~~2021, respectively. While we believe~~ organic growth of our ~~commercial loan swap based product will remain attractive to borrowers in~~business operations over the ~~current interest rate environment, we can provide no assurance that our swap fees will remain at the level reported for the third quarter 2022. Foreign exchange fees totaled $1.5 million and $4.0 million~~ ~~three and nine months ended September 30, 2022, respectively. Foreign exchange fees for the respective reporting periods in 2021 were not material.~~

last 12 months.

6560

Non-Interest Expense

Non-interest expense increased ~~$86.7 million and $251.7~~$74.8 million for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 as compared to the same ~~periods~~period in ~~2021, respectively.~~2022. The following table presents the components of non-interest expense for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
		(in thousands)									(in thousands)
Salary and employee benefits expense	Salary and employee benefits expense	$	134,572	$	93,992	$	397,103	$	273,190	Salary and employee benefits expense	$	144,986	$	107,733
Net occupancy expense	Net occupancy expense	26,486		19,941		70,906		59,171		Net occupancy expense	23,256		21,991
Technology, furniture and equipment expense	Technology, furniture and equipment expense	39,365		21,007		115,245		64,956		Technology, furniture and equipment expense	36,508		26,015
FDIC insurance assessment	FDIC insurance assessment	6,500		3,644		16,009		10,294		FDIC insurance assessment	9,155		4,158
Amortization of other intangible assets	Amortization of other intangible assets	11,088		5,298		26,925		16,753		Amortization of other intangible assets	10,519		4,437
Professional and legal fees	Professional and legal fees	17,840		13,492		62,998		27,250		Professional and legal fees	16,814		14,749
Loss on extinguishment of debt		—		—		—		8,406

Amortization of tax credit investments	Amortization of tax credit investments	3,105		3,079		9,194		8,795		Amortization of tax credit investments	4,253		2,896
Other	Other	22,683		14,469		60,329		38,213		Other	26,675		15,361
Total non-interest expense	Total non-interest expense	$	261,639	$	174,922	$	758,709	$	507,028	Total non-interest expense	$	272,166	$	197,340

Salary and employee benefits expense increased ~~$40.6 million and $123.9~~$37.3 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 as compared to the same period of 2022. The increase was primarily due to increases in our headcount to support our expansion of operations resulting from the Bank Leumi USA acquisition, significant organic growth in our operations, as well as inflationary pressures in the labor market. Salary and employee benefits expense also included $4.1 million of merger related expenses primarily consisting of severance and retention compensation for the three months ended March 31, 2023.

Net occupancy expense increased $1.3 million for the three months ended March 31, 2023 as compared to the same period of 2022 ~~respectively,~~mainly due to higher rent and depreciation expense, partially offset by lower repair and maintenance costs in the first quarter 2023.

Technology, furniture and equipment expense increased $10.5 million for the three months ended March 31, 2023 as compared to the same periods of ~~2021.~~2022. The increases in both 2022 periods were primarily due to strategic increases in our headcount to enhance lending and operations (including additions to staff due to the Bank Leumi USA and Westchester acquisitions), and increases in our branch compensation to preserve staffing and service levels, and to keep pace with the increases in wage demand across the industry. In addition, salary and employee benefits expense included approximately $1.3 million and ~~$29.3 mi~~llion of merger related expenses for the three and nine months ended September 30, 2022, respectively. The merger expenses, primarily consisted of change in control and severance payments, related to Bank Leumi USA during the second quarter 2022.

Net occupancy expense increased $6.5 million and $11.7 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods of 2021 mainly due to higher lease expense, depreciation expense and repair and maintenance costs, as well as $1.5 million of merger related expense for the third quarter 2022.

Technology, furniture and equipment expense increased $18.4 million and $50.3 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods of 2021. The increases areincrease was largely driven by ~~higher data processing costs related to the acquisitions of Bank Leumi USA and Westchester and~~ additional investments in technology and equipment and higher depreciation ~~expense. Within this~~ expense ~~category, merger related costs totaled $1.8 million and $17.1 million for~~in the ~~three and nine months ended September 30, 2022, respectively.~~first quarter 2023.

FDIC insurance assessment expense increased ~~$2.9 million and $5.7~~$5.0 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 as compared toto the same ~~periods~~period of ~~2021~~2022 mainly due to ~~the Bank Leumi USA acquisition,~~growth in our balance sheet, as well as ~~our balance sheet organic growth.~~a two basis point increase in the initial base rate effective for the first quarter 2023.

Amortization of other intangible assets increased ~~$5.8 million and $10.2~~$6.1 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 as compared to the same period of ~~2021 mostly~~2022 mainly due to ~~additional~~higher amortization expense of core ~~deposit~~deposits and other intangible assets resulting from ~~the~~ Bank Leumi USA acquisition. See ~~Notes 2 and~~ Note 9 to the consolidated financial statements for additional information.

Professional and legal fees increased ~~$4.3~~$2.1 million ~~and $35.7 million~~for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 as compared to the same ~~periods~~period of ~~2021.~~2022. The ~~increases were~~increase was primarily due to

higher consulting expense mainly related to technology transformation and new product initiatives, ~~and increased~~partially offset by lower managed ~~services. Within this~~services expense ~~category, merger related costs totaled $75 thousand and $11.5 million for~~in the ~~three and nine months ended September 30, 2022, respectively.~~

~~Loss on extinguishment of debt totaled $8.4 million for the nine months ended September 30, 2021 reflecting the~~

~~prepayment of approximately $248 million of long-term FHLB advances during the second~~first quarter ~~2021.~~

2023.

Other non-interest expense increased ~~$8.2 million and $22.1~~$11.3 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 as compared to the same ~~periods~~period of ~~2021. These~~2022 largely due to general increases ~~within this expense category mostly~~ related to ~~incrementally higher operating expenses due to~~ the ~~expansion of our operations, including acquisitions of~~ Bank Leumi ~~USA~~acquisition, advertising and ~~Westchester. In addition, the 2022 periods included a $2.0 million contribution~~charges related to ~~the Valley Bank Charitable Fund.~~collateral liabilities in connection with derivative transactions.

Income Taxes

Income tax expense totaled ~~$68.4 millionfor the third quarter 2022 as compared to $36.6~~$57.2 million and ~~$42.4~~$39.3 million for the ~~second quarter~~three months ended March 31, 2023 and 2022, ~~and third quarter 2021,~~ respectively. Our effective tax rate was ~~27.7 percent, 27.5~~28.1 percent and ~~25.7~~25.2 percent for the ~~third quarter~~three months ended March 31, 2023 and 2022, ~~second quarter 2022 and third quarter 2021,~~ respectively. The increase in the effective tax rate in the ~~third~~first quarter ~~2022~~2023 as compared to the ~~third quarter 2021~~same period of 2022 was ~~partly~~mainly due to a ~~$3.8 million~~smaller benefit in excess stock compensation ~~benefit recognized in the 2021 period.~~and a newly established valuation allowance against a loss provision on available for sale debt securities.

U.S. 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 range from 27 percent to 29 percent for the remainder of 2022, exclusive of pending potential tax rate increases.strategies.

Operating Segments

~~Prior to the second quarter~~At March 31, 2023 and December 31, 2022, Valley ~~operated as four reportable segments: Consumer Lending, Commercial Lending, Investment Management, and Corporate and Other Adjustments. Valley re-evaluated~~managed its ~~segment reporting during the second quarter 2022 to consider the Bank Leumi USA acquisition on April 1, 2022 along with other factors, including changes in the internal structure of~~business operations ~~discrete financial information reviewed by key decision-makers, balance sheet management strategies and personnel. As a result, Valley determined it operated~~under reportable segments consisting of Consumer ~~Lending,~~Banking, Commercial ~~Lending~~Banking and Treasury and Corporate Other at June 30, 2022. Treasury and Corporate Other was reorganized to consolidate Treasury and other corporate-wide functions, including the Treasury managed investment securities portfolios and overnight interest earning cash balances formerly reported under Investment Management. The discrete financial information related to the activities previously reported in the Investment Management segment is no longer provided to Valley's CEO, who is the chief operating decision maker.Other. Each operating segment is reviewed routinely for its asset growth, contribution to income before income taxes and return on average interest earning assets and impairment (if events or circumstances indicate a possible inability to realize the carrying amount). Valley regularly assesses its strategic plans, operations and reporting structures to identify its reportable ~~segments. There were~~segments and no ~~additional~~ changes to ~~Valley's~~the reportable segments at ~~September 30, 2022.~~were determined necessary during the first quarter 2023.

The accounting for each segment includes internal accounting policies designed to measure consistent and reasonable financial reporting and may result in income and expense measurements that differ from amounts under U.S. GAAP. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. The ~~prior-period~~ balances presented for three months ended March 31, 2022 in the tables below reflect reclassifications to conform with the presentation ~~in those periods to~~of the current operating segment ~~structure.~~structure implemented in the second quarter 2022. These reclassifications did not impact Valley's consolidated ~~results were not impacted by~~results. See Valley's Form 10-K for the ~~changes discussed above and remain unchanged~~year ended December 31, 2022 for ~~all periods presented.~~

additional information.

The following tables present the financial data for Valley's operating segments for the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Three Months Ended September 30, 2022
Consumer
Lending Commercial
Lending Treasury and Corporate Other Total
($ in thousands)
Average interest earning assets $ 8,307,993 $ 36,033,901 $ 6,189,348 $ 50,531,242
Income before income taxes 20,137 255,802 (29,415) 246,524
Annualized return on average interest earning assets (before tax) 0.97 % 2.84 % (1.90) % 1.95 %


		Three Months Ended September 30, 2021													Three Months Ended March 31, 2023
		Consumer Lending			Commercial Lending			Treasury and Corporate Other			Total				Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
		($ in thousands)													($ in thousands)
Average interest earning assets	Average interest earning assets	$	7,373,897		$	25,324,485		$	5,634,492		$	38,332,874		Average interest earning assets	$	8,768,482		$	39,090,889		$	7,503,419		$	55,362,790
Income (loss) before income taxes	Income (loss) before income taxes	37,132			141,927			(14,055)			165,004			Income (loss) before income taxes	1,024			223,610			(20,918)			203,716
Annualized return on average interest earning assets (before tax)	Annualized return on average interest earning assets (before tax)	2.01		%	2.24		%	(1.00)		%	1.72		%	Annualized return on average interest earning assets (before tax)	0.05		%	2.29		%	(1.12)		%	1.47		%


	Three Months Ended March 31, 2022
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,638,942		$	26,984,460		$	5,659,646		$	40,283,048
Income (loss) before income taxes	22,981			136,831			(3,770)			156,042
Annualized return on average interest earning assets (before tax)	1.20		%	2.03		%	(0.27)		%	1.55		%

See Note 1516 to the consolidated financial statements for additional details.

Consumer ~~Lending~~Banking

Consumer ~~Lending~~Banking represented ~~18.7~~18.2 percent of our loan portfolio at ~~September 30, 2022,~~March 31, 2023, 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 ~~11.5~~11.3 percentof our loan portfolio at ~~September 30, 2022)~~March 31, 2023) is subject to movements in the market level of interest rates and forecasted prepayment speeds. The weighted average life of the automobile loans ~~(representing 3.8~~(which represented 3.5 percent of total loans at ~~September 30, 2022)~~March 31, 2023) 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 ~~Lending~~Banking also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, brokerage, insurance and tax credit advisory services.

Average interest earning assets inwithin Consumer ~~Lending~~Banking increased ~~$934.1 million~~$1.1 billion to ~~$8.3~~$8.8 billion for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the ~~third quarter 2021.~~same period of 2022. The increase was ~~mostly~~largely due to new residential mortgage loan volumes originated for investment rather than sale over the last 12-month period, ~~as well as~~and, to a lesser extent, growth in automobile, ~~loans~~home equity and secured personal lines of credit. ~~Loans acquired from Bank Leumi USA on April 1, 2022 and Westchester on December 1, 2021 did not materially impact this operating segment.~~

Income before income taxes ~~generated by~~for Consumer ~~Lending~~ Banking decreased ~~$17.0~~$22.0 millionto ~~$20.1~~$1.0 millionfor the ~~third~~first quarter ~~2022~~2023 as compared to the ~~third~~first quarter ~~2021 largely due~~2022 mainly driven by lower net interest income, and, to a ~~$11.8 million increase~~lesser extent, increases in the provision for loan losses ~~a $5.6 million increase in the~~and internal transfer ~~expense and higher non-interest~~ expense. ~~The higher internal transfer expense and non-interest expense was mostly driven by~~ ~~general increases related to organic growth in our retail business and the recent bank acquisitions.~~ The increase in the provision for loan losses was mainly due to higher quantitative reserves for residential mortgage loans, loan growth, and qualitative reserve allocations related to Hurricane Ian in this category. The negative impact of these items was partially offset by a $7.8 million increase in non-interest income for the third quarter 2022 as compared to the third quarter 2021 largely due to increases in service charges on deposit accounts and brokerage fees within wealth management and trust fees, partially o~~ffset by~~

~~lower gains on sales of residential mortgage~~ ~~loans. The net~~Net interest income ~~also increased by a $3.4~~decreased $13.9 million in the ~~third~~first quarter ~~2022~~2023 as compared to the same ~~quarter~~period of 2022 due to additional interest expense generated from higher average deposit and other borrowing balances, as well as an increase in interest rates. The provision for loan losses increased $4.6 million for the three months ended March 31, 2023 due to additional reserves related to residential loan growth, as well as deterioration in our economic forecast component within our CECL model as compared to one year ago. See further details in the ~~prior year, mainly driven by higher~~“Allowance for Credit Losses” section of this MD&A. ~~average loan balances.~~Internal transfer expense increased $2.2 million for the first quarter 2023 as compared to the first quarter 2022.

~~The net~~Net interest margin on the Consumer ~~Lending~~Banking portfolio decreased 16101 basis points to ~~2.81~~1.93 percent for the ~~third~~first quarter ~~2022~~2023 as compared to the ~~third~~first quarter ~~2021~~2022 mainly due to a 37179 basis point increase in the costs associated with our funding sources, partially offset by a 2178 basis point increase in the yield on average loans. The increase in our funding costs was mainly ~~due to the rising market~~driven by higher interest ~~rate environment, additional funding sourced through~~rates on most of our interest bearing commercial and retail deposit products, increased utilization of fully FDIC-insured brokered deposits and ~~FHLB advances for loan growth and a shift in some customer preference to the interest-bearing deposit products from non-interest bearing~~higher cost of other borrowings held during the ~~third~~first quarter ~~2022~~2023. The 2178 basis point increase in loan yield was largely due to higher yielding new loan volumes and ~~normal repayments of lower yielding~~adjustable rate loans ~~over the last 12-month period.~~in our portfolio. See the "Executive Summary" and the "Net Interest Income" sections above for more details on our net interest margin and funding sources.

The return on average interest earning assets before income taxes for the consumer banking segment was 0.05 percent for the first quarter 2023 compared to 1.20 percent for the first quarter 2022.

Commercial ~~Lending~~Banking

Commercial ~~Lending~~Banking is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans. Due to the portfolio’s interest rate characteristics, Commercial ~~Lending~~Banking is Valley’s business segment that is most sensitive to movements in market interest rates. Commercial and industrial loans totaled approximately ~~$8.7~~$9.0 billionand represented ~~19.2~~18.6 percent of the total loan portfolio at ~~September 30, 2022.~~March 31, 2023. Commercial real estate loans and construction loans totaled ~~$28.1~~$30.8 billion and represented ~~62.1~~63.2 percentof the total loan portfolio at ~~September 30, 2022.~~March 31, 2023.

Average interest earning assets in ~~this segment~~Commercial Banking increased~~approximately$10.7~~ $12.1 billion to ~~$36.0~~$39.1 billion for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the ~~third~~first quarter ~~2021 mostly~~2022. This increase was primarily due to ~~acquired loans from~~ ~~Bank Leumi USA and~~ ~~Westchester and~~ strong ~~new~~ organic loan ~~originations primarily~~growth concentrated in the commercial real estate loan ~~portfolio. The increases were partially offset by continued run-off of~~portfolio as well as commercial ~~and industrial PPP~~ loans ~~which totaled only $85.8 million at September 30, 2022 as compared to $874.0 million at September 30, 2021, due to SBA loan forgiveness.~~acquired from Bank Leumi USA.

Income before income taxes for Commercial Banking increased $86.8 million to $223.6 million for the three months ended ~~September 30, 2022 for Commercial Lending increased $113.9 millionto $255.8 million~~March 31, 2023 as compared to the ~~third quarter 2021. The~~same period of 2022 mainly due to an increase ~~was mainly driven by increases~~ in ~~both~~ net interest income, ~~and non-interest income and lower~~ ~~provision for~~ ~~loan losses,~~ partially offset by ~~an increase in the~~higher internal transfer expense and non-interest expense. Net interest income for this segment increased ~~$135.6~~$131.6 million to ~~$372.6~~$378.2 million for the ~~third~~first quarter ~~2022~~2023 as compared to the same period in ~~2021~~2022 primarily due to ~~additional income generated on~~ higher average commercial loan balances and ~~loan yield. Non-interest income~~higher interest rates on new and adjustable loans. Internal transfer expense increased ~~$11.9~~$31.7 million to ~~$23.5~~$131.6 million for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the ~~third~~first quarter ~~2021. The increase was mostly~~2022 largely due to general ~~increases~~increases related to both organic and acquired growth in service charges on commercial deposit accounts, swap fee income from derivative interest rate swaps executed with commercial loan customers, foreign exchange fees and fee income from commercial letters of credit. our business operations over the last 12-month period. Non-interest expense also increased $10.6 million to $35.7 million for the three months ended March 31, 2023 as compared to the first quarter 2022. The provision for ~~loan~~credit losses ~~decreased by $13.5~~increased $1.4 million to $3.0 million as compared to the ~~second quarter 2021.~~same period in 2022 mainly due to a moderate increase in certain qualitative reserves. See details in the "Allowance for Credit Losses for Loans" section of this MD&A.~~Internal transfer expense increased $42.8 million for the third quarter 2022 as compared to the third quarter 2021 due to general increases related to both organic and acquired growth in our business.~~

The net interest margin for this segment increased 4022 basis ~~points~~points to ~~4.14~~3.87 percent for the ~~third~~first quarter ~~2022~~2023 as compared to the ~~third~~first quarter ~~2021~~2022 due to a 77201 basis point increase in the yield on average loans, partially offset by a 37179 basis point increase in the cost of our funding sources.

The return on average interest earning assets before income taxes for the consumer banking segment was 2.29 percent for the three months ended March 31, 2023 compared to 2.03 percent to the same period in 2022.

Treasury and Corporate Other

Treasury and Corporate Other largely consists of the Treasury managed held to maturity and available for sale debt securities portfolios mainly utilized in the liquidity management needs of our lending segments and income and expense items resulting from support functions not directly attributable to a specific segment. Interest income is generated through investments in various types of securities (mainly comprised of fixed rate securities) and interest-bearing deposits with other banks (primarily the Federal Reserve Bank of New York). Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are

allocated from Treasury and Corporate Other to the Consumer ~~Lending~~Banking and Commercial ~~Lending~~Banking segments. Interest expense and internal transfer expense (for general corporate expenses) are allocated to each business segment utilizing a transfer pricing methodology, which involves the allocation of operating and funding costs based on each segment's respective mix of average earning assets and/or liabilities outstanding for the period. Other items disclosed in this segment include net gains and losses on available for sale and held to maturity securities transactions, interest expense related to subordinated notes, amortization (and impairment) of tax credit investments, as well as other non-core items, including merger expenses.

Average interest earning assets ~~in this segment~~within Treasury and Corporate Other increased ~~$554.9 million during~~$1.8 billion to $7.5 billion for the three months ended ~~September 30, 2022~~March 31, 2023 mainly due to ~~an increase of $1.5 billion in average taxable investment securities,~~ ~~partially offset by lower average interest bearing deposits with banks. The increase in the average investment securities balance was mainly due to $1.3 billion of~~ investment securities acquired from Bank Leumi ~~USA.~~USA, as well as other select investment securities purchases largely classified as held to maturity over the last 12-month period. Average interest bearing deposits with banks ~~decreased $1.2 billion~~increased $427.7 million as compared to the same period in ~~2021 mainly~~2022 due to ~~continued funding of loan growth, fluctuations~~additional cash held as a cautionary liquidity management measure in ~~the timing of loan and investment activity and surge deposits from customers that drove higher levels of excess liquidity in the third quarter 2021.~~March 2023.

~~The pre-tax loss for this segment totaled $29.4 million for~~For the three months ended ~~September 30, 2022 as~~March 31, 2023, loss before income taxes in this segment totaled $20.9 million compared to ~~a $14.1~~$3.8 million for the same period in ~~2021.~~2022. The ~~$15.4~~$17.1 million increase in the pre-tax loss during the ~~2022~~first quarter 2023 period was mainly due to ~~increases in~~higher non-interest expense, ~~that were~~ partially offset by ~~an increase~~increases in internal transfer income and non-interest income. Non-interest expense increased ~~$71.6~~$62.5 million to ~~$205.5~~$218.2 million during the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period ~~a year ago~~in 2022 largely due to ~~increases in~~expenses related to our expanded banking operations and organic business growth including higher salary and employee benefits expense, net occupancy, technology, furniture and equipment, professional and ~~occupancy expense, as well as higher salaries~~legal fees and ~~employee benefit expenses incurred during the third quarter 2022 and our expanded banking operations resulting from the Bank Leumi USA acquisition~~. other. See further details in the "Non-Interest Income" and "Non-Interest Expense" sections of this MD&A. The internal transfer income increased ~~by $48.4~~$33.9 million to ~~$140.2~~$162.5 million for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period a year ago due to the higher allocation of non-interest expense over the same period. Non-interest income increased $15.7 million during the three months ended March 31, 2023 as compared to the same period in 2022 mostly due to ~~general~~incremental increases ~~related~~in several operating non-interest income categories caused by the acquisition of Bank Leumi

USA and organic growth of our business operations over the last 12-month period. Provision for credit losses increased $4.9 million mainly due to a corporate bond issued by Signature Bank within our ~~growth and recent acquisitions.~~AFS debt securities portfolio that was fully charged-off during the first quarter 2023.

The net interest margin for this segment increased 885 basis points to ~~2.01~~1.51 percent for the ~~for the third~~first quarter ~~2022~~2023 as compared to the ~~third~~first quarter ~~2021~~2022 due to a ~~125~~184 basis point increase in the yield on average investments, partially offset by a 37179 basis point increase in cost of our funding sources. The increase in the yield on average investments as compared to the third quarter 2021 was largely due to investment maturities and prepayments redeployed into new higher yielding securities, as well as lower premium amortization expense caused by a decline in prepayments on mortgage-backed securities during the third quarter 2022.

~~The following tables present the financial data for Valley's operating segment for the nine months ended September 30, 2022 and 2021:~~

Nine Months Ended September 30, 2022
Consumer
Lending Commercial
Lending Treasury and Corporate Other Total
($ in thousands)
Average interest earning assets $ 7,978,732 $ 32,551,062 $ 6,075,623 $ 46,605,417
Income before income taxes 56,796 519,640 (40,905) 535,531
Annualized return on average interest earning assets (before tax) 0.95 % 2.13 % (0.90) % 1.53 %

Nine Months Ended September 30, 2021
Consumer
Lending Commercial
Lending Treasury and Corporate Other Total
($ in thousands)
Average interest earning assets $ 7,176,086 $ 25,465,276 $ 5,261,185 $ 37,902,547
Income (loss) before income taxes 104,308 411,712 (32,592) 483,428
Annualized return on average interest earning assets (before tax) 1.94 % 2.16 % (0.83) % 1.70 %

~~Consumer Lending~~

Consumer Lending's average interest earning assets increased $802.6 million to $8.0 billion for the nine months ended September 30, 2022 as compared to the same period in 2021. The increase was largely due to new residential mortgage loan volumes originated for investment rather than sale over the last 12-month period, as well as growth in automobile loans and secured personal lines of credit.

~~Income before income taxes generated by Consumer Lending decreased $47.5 million to $56.8 million~~for the nine months ended September 30, 2022 as compared to the same period in 2021 largely due to a $32.5 million increase in the internal transfer expense coupled with a higher provision for loan losses and higher non-interest expense. The provision for loan losses increased $21.0 million for the nine months ended September 30, 2022 from $6.5 million credit (negative) provision for the same period of 2021. The increase in provision was mainly due to higher reserves related to residential loan growth. See further details in the "Allowance for Credit Losses" section of this MD&A. Net interest income increased $9.5 million primarily due to additional income generated on higher average loan balances. Non-interest income also increased $3.1 million mostly due to increases in wealth management and trust fees and service charges on deposit accounts caused by our recent acquisitions, partially offset by lower net gains on sales of residential mortgage loans for the nine months ended September 30, 2022 as compared to the same period in 2021.

~~Net interest margin on the Consumer Lending portfolio decreased 15 basis points to~~ ~~2.89 percent~~ ~~for the~~ ~~nine months ended September 30, 2022~~ as compared to the same period one year ago mainly due to a 10 basis point decrease in the yield on average loans and a 5 basis point increase in the costs associated with our funding sources. The 10 basis point decrease in loan yield was largely due to lower yielding new loan volumes prior to the second quarter 2022 and normal loan repayments. The increase in our funding costs was mainly ~~due to higher interest rates on most of our interest bearing deposit products, including brokered deposits, a lower mix of non-interest bearing deposits, and higher cost short-term borrowings due to the rising interest rate environment in 2022.~~

~~Commercial Lending~~

~~Average interest earning assets in Commercial Lending increased $7.1 billion to $32.6 billion for the nine months ended September 30, 2022 as compared to the same period in 2021. This increase was~~ ~~primarily due to strong organic loan growth over the 12-month period ended September 30, 2022, as well as loans acquired from Bank Leumi USA and Westchester.~~

For the nine months ended September 30, 2022, income before income taxes for Commercial Lending increased $107.9 million to $519.6 million as compared to the same period in 2021 mainly driven by increases net interest income and non-interest income, partially offset by higher i~~nternal transfer expense and~~ provision for loan losses. Net interest income increased $248.3 million to $951.9 million for the nine months ended September 30, 2022 as compared to the same period in 2021 mainly due to higher average commercial loan balances and loan yield during the 2022 period. ~~Non-interest income increased~~ ~~$25.7 million~~for the nine months ended September 30, 2022 as compared to the same period in 2021 mainly due to a $13.2 million increase in fee income related to derivative interest rate swaps executed with commercial loan customers, a $4.0 million increase in foreign exchange fees and ~~higher service charges on commercial deposit accounts~~. ~~Internal transfer expense increased $158.3 million to $371.2~~

~~million for the~~ ~~nine months ended September 30, 2022~~ ~~as compared to the same period in~~ ~~2021 largely due to the significant acquired and organic expansion of our operations over the last 12-month period. T~~he provision for credit losses increased $6.8 million to $34.6 million during the nine months ended September 30, 2022 as compared to $27.8 million for the same period in 2021 mainly due to the provision related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA on April 1, 2022. See the "Allowance for Credit Losses for Loans" section below for further details.

The net interest margin for this segment increased 22 basis points to 3.90 percent for the nine months ended September 30, 2022 as compared to the same period in 2021 due to a 27 basis point increase in yield on average loans, partially offset by a 5 basis point increase in the cost of our funding sources.

~~Treasury and Corporate Other~~

Treasury and Corporate Other's average interest earning assets increased $814.4 million during the nine months ended September 30, 2022 as compared to the same period in 2021. Within the category, a $1.3 billion increase in ~~taxable investment securities was partially offset by a~~ ~~$613.1 million decrease in average interest bearing deposits with banks. The increase in average taxable investment securities was mainly due to $1.3 billion of~~ ~~investment securities acquired from Bank Leumi USA.~~ ~~The lower levels of excess liquidity were mainly~~ ~~due to the strong organic loan growth over the last 12-month period and a reduction in the impact of surge customer deposits as compared to the 2021 period.~~

The pre-tax loss for this segment totaled $40.9 million for the nine months ended September 30, 2022 as compared to $32.6 million for the same period in 2021. The $8.3 million increase in pre-tax loss was mainly due to an increase in non-interest expense largely offset by higher in internal transfer income and net interest income. Non-interest expense increased $244.1 million to $617.7 million for the nine months ended September 30, 2022 as compared to the same period in 2021 partially due to a $62.6 million increase in merger related expenses, as well as other additional expenses related to our expanded banking operations and organic business growth. However, the comparative 2021 period also included an $8.4 million ~~pre-tax~~ l~~oss on extinguishment of debt.~~ See further details in the "Non-Interest Income" and "Non-Interest Expense" sections of this MD&A. Internal transfer income increased $190.8 million to $463.8 million for the nine months ended September 30, 2022 as compared to the same period in 2021 due to the higher allocation of non-interest expense over the same period.

Treasury and Corporate Other's net interest margin increased 74 basis points to 1.87 percent for the nine months ended September 30, 2022 as compared to the same period in 2021 due to a 79 basis point increase in the yield on average investments, and a 5 basis point increase in cost of our funding sources. The increase in the yield on average investments as compared to the same period ~~in 2021~~a year ago was largely driven by new higher yielding investments and ~~lower~~a reduction in premium amortization expense mostly caused ~~in part,~~ by slower principal repayments in the rising interest rate ~~environment of 2022.~~environment.

ASSET/LIABILITY MANAGEMENT

Interest Rate ~~Sensitivity~~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 and 24-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 and the prepayment assumptions of certain assets and liabilities as of ~~September 30, 2022.~~March 31, 2023. 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 ~~September 30, 2022.~~March 31, 2023. The impact of interest rate derivatives, such as interest rate swaps, is also included in the model.

Our simulation model is based on market interest rates and prepayment speeds prevalent in the market as of ~~September 30, 2022.~~March 31, 2023. Although the size of Valley’s balance sheet is forecasted to remain static as of ~~September 30, 2022~~March 31, 2023 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 ~~third~~first quarter ~~2022.~~2023. The model also utilizes an immediate parallel shift in market interest rates at ~~September 30, 2022.~~March 31, 2023.

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 forecasted 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					Estimated Change in Future Net Interest Income
Changes in Interest Rates	Changes in Interest Rates	Dollar Change		Percentage Change		Changes in Interest Rates	Dollar Change		Percentage Change
(in basis points)	(in basis points)	($ in thousands)				(in basis points)	($ in thousands)
+300	+300	$	343,087	17.72	%	+300	$	148,153	8.19	%
+200	+200	231,412		11.95		+200	98,911		5.47
+100	+100	117,300		6.06		+100	49,316		2.73
–100	–100	(109,262)		(5.64)		–100	(33,830)		(1.87)
–200	–200	(233,970)		(12.08)		–200	(75,645)		(4.18)
–300	–300	(378,853)		(19.57)		–300	(131,350)		(7.26)

As noted in the table above, a 100 basis point immediate increase in interest rates combined with a static balance sheet where the size, mix, and proportions of assets and liabilities remain unchanged is projected to increase net interest income over the next 12-month period by ~~6.06~~2.73 percent. Management believes the interest rate sensitivity of our balance sheet remains within an acceptable tolerance range at ~~September 30, 2022.~~March 31, 2023. 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.

Liquidity and Cash Requirements

Bank Liquidity

Liquidity measures the ability to satisfy current and future cash flow needs as they become due. A bank’s liquidity reflects its ability to meet loan demand, to accommodate possible outflows in deposits and to take advantage of interest rate opportunities in the marketplace. Liquidity management is carefully performed and routinely reported by our Treasury Department to two board committees. Among other actions, Treasury reviews historical funding requirements, our current liquidity position, sources and stability of funding, marketability of assets, options for attracting additional funds, and anticipated future funding needs, including the level of unfunded commitments. Our goal is to maintain sufficient liquidity to cover current and potential funding requirements.

The Bank ~~has no required regulatory liquidity ratios to maintain; however, it~~ adheres to ancertain internal liquidity ~~policy. The current policy maintains that we may not have a ratio~~guidelines including ratios of loans to deposits ~~in ex~~below~~cess of~~ 110 percent ~~or reliance on~~and wholesale funding ~~greater than~~to total funding below 25 percent. Management maintains flexibility to temporarily exceed these limits in certain operating environments. Our loan to deposits and wholesale funding to total funding ratios were approximately 102.2 percent and 26.9 percent at March 31, 2023, respectively. The level of ~~total funding. The Bank~~wholesale funding and resulting excess cash on our balance sheet at March 31, 2023 was mostly due to the cautionary liquidity actions taken in ~~compliance with the foregoing policies at September 30, 2022.~~March 2023.

Valley's short and long-term cash requirements include contractual obligations under borrowings, deposits, payment 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 Federal Reserve Bank of New York), investment securities held to maturity 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), investment securities classified as trading and available for sale, loans held for sale, and from time to time, federal funds sold and receivables related to unsettled securities transactions. Total liquid assets were approximately $~~2.6~~7.2 billion, representing ~~5.2~~12.1 percent of earning assets at ~~September 30, 2022~~March 31, 2023 and ~~$3.5~~$2.4 billion, representing ~~8.7~~4.6 percent of earning assets at December 31, ~~2021.~~2022. Of the $~~2.6~~7.2 billion of liquid assets at ~~September 30, 2022,~~March 31, 2023, approximately ~~$348~~$870 million of various investment securities were pledged to counterparties to support our earning asset funding strategies. We anticipate the receipt of approximately ~~$310~~$521.1 million in principal payments from securities in the total investment portfolio at ~~September 30, 2022~~March 31, 2023 over the

next 12-month period due to normally scheduled principal repayments and expected prepayments of certain securities, primarily residential mortgage-backed securities.

Additional liquidity is derived from scheduled loan payments of principal and interest, as well as prepayments received. Loan principal payments from total loans and loans held for sale at ~~September 30, 2022~~March 31, 2023 are projected ~~in accordance with their scheduled contractual terms~~ to be approximately ~~$11.2~~$16.8 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.

On the liability side of the balance sheet, we utilize multiple sources of funds to meet liquidity needs, including retail and commercial deposits, fully FDIC-insured brokered and municipal deposits, and short-term and long-term borrowings. Our core deposit base, which generally excludes all fully insured brokered deposits, ~~and both~~as well as retail ~~and brokered~~ certificates of deposit over $250 thousand, represents the largest of these sources. Average core deposits totaled approximately ~~$37.9~~$44.9 billion and ~~$29.4~~$38.1 billion for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and for the year ended December 31, ~~2021,~~2022, respectively, representing ~~81.4~~81.2 percent and ~~78.3~~79.2 percent of average 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 and the need to match the maturities of assets and liabilities.

Additional funding may be provided through deposit gathering networks and in the form of federal funds purchased through our well-established relationships with numerous banks. While these lending lines are uncommitted, management believes thatIn addition to direct customer deposits, the Bank ~~could borrow approximately $2.1 billion from these banks on a collective basis.~~has ample access to readily available, diverse funding sources to fulfill its current and projected capital needs. The Bank is ~~also~~ a member of the Federal Home Loan Bank of New York (FHLB) and has the ability to borrow from them in the form of FHLB advances secured by pledges of certain eligible collateral, including but not limited to U.S. government and agency mortgage-backed securities and a blanket assignment of qualifying first lien mortgage loans, consisting of both residential mortgage and commercial real estate loans. At March 31, 2023, available borrowing potential, above and beyond amounts already utilized, at these institutions totaled $11.8 billion, including borrowing capacity under the Federal Reserve Bank's discount window totaling $4.3 billion. Additional funding may be provided through deposit gathering networks and in the form of federal funds purchased through our well-established relationships with numerous banks. The Bank has access to approximately $1.5 billion of uncommitted lines for the purchase of federal funds from these banks on a collective basis. Additionally, Valley's collateral pledged to the FHLB may be used to obtain ~~Municipal Letters~~municipal letters of ~~Credit~~credit (MULOC) to collateralize certain municipal deposits held by Valley. At ~~September 30, 2022,~~March 31, 2023, Valley had ~~$1.6~~$1.0 billion of MULOCs ~~outstanding~~outstanding for this purpose. Furthermore, we can obtain overnight borrowings from the Federal Reserve Bank of New York via the discount window as a contingency for additional liquidity. At September 30, 2022, our borrowing capacity under the Federal Reserve Bank's discount window was $2.1 billion.

We also have access to other short-term and long-term borrowing sources to support our asset base, such as repos (i.e., securities sold under agreements to repurchase). Short-term borrowings ~~(consisting of FHLB advances, repos, and from time~~increased $6.3 billion to ~~time, federal funds purchased) increased approximately $263.6 million to $919.3 million~~$6.4 billion at ~~September 30, 2022~~March 31, 2023 as compared to December 31, ~~2021 mainly due a higher utilization~~2022. In March 2023, we increased our short-term borrowings out of an abundance of caution to prudently bolster our liquidity position in the wake of the two recent bank failures. Since March 31, 2023, short-term FHLB advances ~~partially offset by lower repo balances at September 30, 2022.~~have been allowed to mature resulting in a more normal liquidity

position. We continue to closely monitor changes in the current banking environment and have substantial access to additional liquidity as highlighted above.

Additionally, the Federal Reserve established the Bank Term Funding Program on March 12, 2023 as funding source for eligible depository institutions. The Program can provide short-term liquidity (up to one year) against the par value of certain high-quality collateral, such as U.S. Treasury securities, and eliminate the potential need for an institution to sell those securities in times of stress. Advances under the Program can be requested until March 11, 2024. As of March 31, 2023, Valley did not participate in this Program, but currently has this option as an available short-term liquidity source.

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 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. 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 ~~September 30, 2022,~~March 31, 2023, we had ~~$43.3~~$50.2 million, $1.3 billion, and ~~$3.7~~$3.8 billion in equity, available for sale debt securities and held to maturity debt securities, respectively. There were $4.1 million of trading debt securities at September 30, 2022 consisting of investment grade municipal bonds and U.S. Treasury securities. The equity securities consisted of two publicly traded mutual funds, CRA investments and several other equity investments we have made in companies that develop new financial technologies and in 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 available for sale and held to maturity debt securities portfolios, which comprise the majority of the securities we own, ~~include~~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 available for sale 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 consisted
of two publicly traded mutual funds, CRA investments and several other equity investments we have made in companies that develop new financial technologies and in partnerships that invest in such companies. Our CRA and other equity investments are a mix of both publicly traded entities and privately held entities. We also had $6.9 million of trading debt securities at March 31, 2023 consisting of investment grade municipal bonds and U.S. Treasury securities.

We ~~acquired $6.2 million, $505.9 million,~~continually evaluate our investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, and ~~$806.6 million~~the level of ~~equity~~interest rate risk to which we are exposed to. 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 available for sale ~~debt~~ and held to maturity debt securities ~~respectively, from Bank Leumi USA on April 1, 2022.~~portfolios.

Allowance for Credit Losses and Impairment Analysis

Available for sale debt securities. Available for sale 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 loss, net of applicable taxes.

We have evaluated all available for sale debt securities that are in an unrealized loss position as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 and determined that the declines in fair value were mainly attributable to changes in market ~~volatility,~~volatility, due to factors such as interest rates and spread factors, but not attributable to credit quality or other factors. Based on a comparison of the present value of expected cash flows to the amortized cost, ~~management~~Valley recognized noa credit related impairment ~~charges~~of one corporate bond issued by Signature Bank resulting in both a provision for credit losses and full charge-off of the security totaling $5.0 million during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023. There was no other impairment recognized within the available for sale debt securities portfolio during the three months ended March 31, 2023.

Valley does not intend to sell any of its available for sale 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 ~~year ended December~~available for sale debt securities were past due as of March 31, ~~2021. As a result, there~~2023 and there was no allowance for credit losses for available for sale debt securities at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Held to maturity debt securities. Valley estimates the expected credit losses on held to maturity 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 held to maturity 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 held to maturity debt securities that have loss expectations, Valley estimates the expected credit losses using a discounted cash flow model developed by a third party. 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. Held to maturity debt securities were carried net of an allowance for credit losses totaling approximately ~~$1.7 million and $1.2~~$1.6 million at ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021, respectively. There were no net charge-offs of held to maturity debt securities for the three and nine months ended September 30, 2022 and 2021.~~2022.

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 ~~and available for sale~~ debt investment securities portfolios by investment grades at ~~September 30, 2022:~~March 31, 2023:


		September 30, 2022									March 31, 2023
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
		(in thousands)									(in thousands)
Available for sale investment grades: *	Available for sale investment grades: *									Available for sale investment grades: *
AAA Rated	AAA Rated	$	1,116,870	$	116	$	(137,597)	$	979,389	AAA Rated	$	1,072,166	$	106	$	(109,683)	$	962,589
AA Rated	AA Rated	152,126		—		(38,172)		113,954		AA Rated	150,571		—		(24,559)		126,012
A Rated	A Rated	10,066		15		(984)		9,097		A Rated	10,111		—		(1,196)		8,915
BBB Rated	BBB Rated	84,667		—		(8,132)		76,535		BBB Rated	69,826		—		(6,072)		63,754

Not rated	Not rated	101,092		—		(8,213)		92,879		Not rated	104,333		—		(10,765)		93,568
Total	Total	$	1,464,821	$	131	$	(193,098)	$	1,271,854	Total	$	1,412,007	$	106	$	(152,877)	$	1,259,236
Held to maturity investment grades: *	Held to maturity investment grades: *									Held to maturity investment grades: *
AAA Rated	AAA Rated	$	3,290,361	$	258	$	(498,324)	$	2,792,295	AAA Rated	$	3,406,081	$	2,844	$	(422,459)	$	2,986,466
AA Rated	AA Rated	252,632		7		(25,167)		227,472		AA Rated	249,672		384		(12,288)		237,768
A Rated	A Rated	9,297		2		(204)		9,095		A Rated	6,593		2		(134)		6,461
BBB Rated	BBB Rated	6,000		—		(317)		5,683		BBB Rated	6,000		—		(647)		5,353
Non-investment grade	Non-investment grade	5,517		—		(1,061)		4,456		Non-investment grade	5,437		—		(833)		4,604
Not rated	Not rated	158,213		17		(10,579)		147,651		Not rated	173,429		1		(13,598)		159,832
Total	Total	$	3,722,020	$	284	$	(535,652)	$	3,186,652	Total	$	3,847,212	$	3,231	$	(449,959)	$	3,400,484
Allowance for credit losses	Allowance for credit losses	1,696		—		—		1,696		Allowance for credit losses	1,633		—		—		1,633
Total, net of allowance for credit losses	Total, net of allowance for credit losses	$	3,720,324	$	284	$	(535,652)	$	3,184,956	Total, net of allowance for credit losses	$	3,845,579	$	3,231	$	(449,959)	$	3,398,851


*			Rated using external rating agencies. Ratings categories include the 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 and AA rated categories of both the available for sale and held to maturity ~~and available for sale~~ debt securities portfolios (in the above table) were ~~mainly~~largely related to residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac and continued to be driven by the rising interest rate environment during the ~~third quarter 2022.~~last 12 months. The investment securities available for sale and held to maturity portfolio included ~~$158.2~~$104.3 million and $173.4 million, respectively, of investments not rated by the rating agencies with aggregate unrealized losses of ~~$10.6~~$10.8 million and $13.6 million, respectively, at ~~September 30, 2022~~March 31, 2023. The unrealized losses within non-rated available for sale debt securities was mostly related to several large corporate bonds negatively impacted by rising interest rates, and not changes in underlying credit. The unrealized losses within non-rated held to maturity debt securities mostly related to four single-issuer bank trust preferred issuances with a combined amortized cost of $36.0 million and several corporate and other debt securities.

See Note 7 to the consolidated financial statements for additional information regarding our investment securities portfolio.

7770

Loan Portfolio

The following table reflects the composition of the loan portfolio as of the dates presented:


		September 30, 2022			June 30, 2022			December 31, 2021					March 31, 2023			December 31, 2022
		($ in thousands)									($ in thousands)
Loans	Loans											Loans
Commercial and industrial:

Commercial and industrial	Commercial and industrial	$	8,615,557		$	8,378,454		$	5,411,601			Commercial and industrial	$	9,043,946		$	8,804,830
Commercial and industrial PPP loans		85,820			136,004			435,950
Total commercial and industrial *		8,701,377			8,514,458			5,847,551
Commercial real estate:	Commercial real estate:											Commercial real estate:
Commercial real estate	Commercial real estate	24,493,445			23,535,086			18,935,486				Commercial real estate	27,051,111			25,732,033
Construction	Construction	3,571,818			3,374,373			1,854,580				Construction	3,725,967			3,700,835
Total commercial real estate	Total commercial real estate	28,065,263			26,909,459			20,790,066				Total commercial real estate	30,777,078			29,432,868
Residential mortgage	Residential mortgage	5,177,128			5,005,069			4,545,064				Residential mortgage	5,486,280			5,364,550
Consumer:	Consumer:											Consumer:
Home equity	Home equity	467,135			431,455			400,779				Home equity	516,592			503,884
Automobile	Automobile	1,711,086			1,673,482			1,570,036				Automobile	1,717,141			1,746,225
Other consumer	Other consumer	1,063,775			1,026,854			1,000,161				Other consumer	1,118,929			1,064,843
Total consumer loans	Total consumer loans	3,241,996			3,131,791			2,970,976				Total consumer loans	3,352,662			3,314,952
Total loans*	Total loans*	$	45,185,764		$	43,560,777		$	34,153,657			Total loans*	$	48,659,966		$	46,917,200
As a percent of total loans:	As a percent of total loans:											As a percent of total loans:
Commercial and industrial	Commercial and industrial	19.2		%	19.5		%	17.1		%		Commercial and industrial	18.6		%	18.8		%
Commercial real estate	Commercial real estate	62.1			61.8			60.9				Commercial real estate	63.2			62.7
Residential mortgage	Residential mortgage	11.5			11.5			13.3				Residential mortgage	11.3			11.4
Consumer loans	Consumer loans	7.2			7.2			8.7				Consumer loans	6.9			7.1
Total	Total	100.0		%	100.0		%	100.0		%		Total	100.0		%	100.0		%

* Includes net unearned discount and deferred loan fees of ~~$136.5 million, $141.2~~$125.4 million and ~~$78.5~~$120.5 million at ~~September 30, 2022, June 30, 2022,~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. ~~The increases~~

Total loans increased $1.7 billion, or 14.9 percent on an annualized basis to $48.7 billion at March 31, 2023 from December 31, ~~2021 were largely~~2022 mainly due to ~~a $98 million net purchase discount associated with the loans acquired from Bank Leumi USA on April 1, 2022.~~

~~Loans increased $1.6 billion to approximately $45.2 billion at September 30, 2022 from June 30, 2022~~ ~~largely~~ ~~due to~~ ~~solid~~continued strong organic loan ~~originations~~growth in commercial loan categories and a slower ~~paydown~~loan prepayment activity ~~of existing loans. C~~within the loan portfolio during the ~~ommercial and industrial, total~~first quarter 2023. Total commercial real estate (including construction) and ~~residential mortgage~~commercial and industrial loans increased ~~9 percent, 17~~18.3 percent and 1410.9 percent, respectively, on an annualized basis during the ~~third~~first quarter ~~2022~~2023. .Residential mortgage loans held for sale at fair value totaled $17.2 million and $18.1 million at March 31, 2023 and December 31, 2022, respectively.

Commercial and industrial loans increased $~~186.9~~239.1 million to ~~$8.7~~$9.0 billion at ~~September 30, 2022~~March 31, 2023 as compared to ~~June 30,~~December 31, 2022. ~~Excluding PPP loans, the commercial and industrial loan~~The organic growth ~~totaled $237.1 million~~ ~~during~~was mainly a result of the ~~third quarter 2022 mainly due to~~ solid ~~organic~~new loan volumes ~~largely amongst~~from our pre-existing long-term customer base across most of our ~~primary market areas. In addition,~~geographic footprints, as well as the ~~new loan pipeline was driven by direct calling~~continued efforts of our commercial ~~lending team. SBA Paycheck Protection Program (PPP) loans decreased $50.2 million to $85.8 million at September 30, 2022 compared to~~ ~~$136.0 million~~ ~~at June 30, 2022 mainly due to loan forgiveness (repayments).~~banking relationship teams.

Commercial real estate loans (excluding construction loans) increased ~~$1.0~~$1.3 billion to ~~$24.5~~$27.1 billion at ~~September 30,~~March 31, 2023 from December 31, 2022 ~~from June 30, 2022 driven by~~ reflecting solid organic growth mainly ~~in the~~due to demand for non-owner occupied ~~and multifamily loan portfolios. The new loan volumes were generated~~loans across ~~most of~~ our geographic ~~footprints. Construction~~footprint. Our organic approach of loan production is primarily the expansion of lending with our existing clients while also establishing new relationships in our primary and new market areas. We continue to grow our commercial lending activities from out of market expansion efforts in states such as Pennsylvania, Georgia and Tennessee, as well as our relatively new markets in California and Illinois. In addition, our commercial real estate production remained strong in loans ~~increased~~secured by multi-family dwellings, warehouses and healthcare facilities. At March 31, 2023, commercial real estate loans collateralized by office buildings were approximately $3.1 billion of the $~~197.4 million~~27.1 billion portfolio. These loans are geographically disbursed largely across Florida, Alabama, New Jersey, New York, and Manhattan with a combined weighted average loan to ~~$3.6 billion at September 30, 2022 from June 30, 2022 mainly due to a high volume~~value ratio of ~~advances on new,~~54 percent and ~~to a lesser extent, pre-existing construction projects during the third quarter 2022.~~debt service coverage ratio of 1.90.

7871

Construction loans increased only $25.1 million to $3.7 billion at March 31, 2023 from December 31, 2022 mainly driven by advances on pre-exiting construction loan projects in New Jersey, New York and Florida. The growth in new construction loans was partially offset by the run-off of completed existing projects, and, to a lesser extent, migration of such completed projects to permanent financing.

Residential mortgage loans increased ~~$172.1~~$121.7 million, or ~~13.8~~9.1 percent on an annualized basis, during the ~~third~~first quarter ~~2022 primarily due to~~2023 as we largely originated new ~~loan activity in~~loans for the ~~purchased home market and an increase in such loans originated~~held for investment portfolio rather than for sale.New and refinanced residential mortgage loan originations totaled $~~342.9~~194.4 million for the ~~third~~first quarter ~~2022~~2023 as compared to ~~$540.7~~$309.1 million and ~~$622.1~~$552.6 million for the ~~second~~fourth quarter 2022 and ~~third~~first quarter ~~2021,~~2022, respectively. Florida originations totaled ~~$92.1~~$53.6 million and represented 2727.6 percent of total residential mortgage loan originations in the quarter. During the first quarter 2023, we retained approximately 86.3 percent of the total residential mortgage originations in our held for investment loan portfolio. Of the total originations in the ~~third~~first quarter ~~2022,~~2023, only ~~$36.7~~$26.6 million of residential mortgage loans were originated for sale rather than held for investment as compared to ~~$61.9~~$144.5 million during the ~~second~~first quarter ~~2022. During the third quarter~~ 2022 we retained approximately 89 percent of the total residential mortgages originations in our held for investment loan portfolio. We sold approximately $48.4 million of residential mortgage loans held for sale during the third quarter 2022.. We may continue to retain a higher percentage of new loan volumes during the ~~fourth~~second quarter ~~2022~~2023 mainly due to ~~several factors, including consumer demand and preferences for certain mortgage products and~~ our management of the interest rate risk and the mix of the interest earning assets on our balance sheet. Additionally, the volume of both new and refinanced loan applications ~~have continued to decline~~has remained relatively low in the early stages of the ~~fourth~~second quarter ~~2022~~2023 due to the ~~increase in the~~high level of mortgage interest rates and tight housing inventories and may challenge our ability to grow this loan category.

Home equity loans increased by ~~$35.7~~$12.7 million to ~~$467.1~~$516.6 million at ~~September 30, 2022~~March 31, 2023 compared to ~~June 30, 2022. However, new home equity loan volumes and customer usage~~December 31, 2022 as a result of ~~existing home equity lines of credit continue to be~~ modest ~~and we anticipate~~ growth in ~~this loan category~~new originations that continues to be challenged by the unfavorable ~~rising~~high interest rate environment.

Automobile loans ~~increased~~decreased by ~~$37.6~~$29.1 million, or ~~9.0~~6.7 percent on an annualized basis, to $1.7 billion at ~~September 30, 2022~~March 31, 2023 as compared to ~~June 30,~~December 31, 2022 ~~as loan originations volumes continued~~largely due to ~~outpace loan repayments during the~~ ~~third quarter 2022. However, loan originations slowed significantly during the third quarter 2022 as~~lower consumer demand for new and used vehicle financing ~~declined due to~~because of the higher interest rate environment. WeDuring the first quarter 2023, the interest rates on new car loans reached the highest level since 2008. We originated ~~$196.6~~$31.5 million in auto loans through our dealership network during the ~~third~~first quarter ~~2022~~2023 as compared to ~~$278.2~~$73.1 million in the ~~second~~fourth quarter 2022. Of the total originations, our Florida dealership network ~~contributed $33.7 million in auto loan originations, representing~~represented approximately 1718 percent of new loans, during the ~~third~~first quarter ~~2022.~~2023. Despite increased new automobile inventories available to consumers, we anticipate that the impact of inflation on average new vehicle prices coupled with rising interest rates could continue to have a negative impact on our ability to grow this loan category during the ~~fourth~~second quarter ~~2022.~~2023.

Other consumer loans increased ~~$36.9~~$54.1 million to $1.1 billion at ~~September 30,~~March 31, 2023 as compared to December 31, 2022 ~~from June 30, 2022.~~mainly due to moderate growth in our collateralized personal lines of credit portfolio.

A ~~large~~significant part of our lending is in northern and central New Jersey, New York City, Long Island and Florida. To mitigate our geographic risks, we make efforts to maintain a diversified portfolio as to type of borrower and loan to guard against a potential downward turn in any one economic sector.

~~Despite the moderate decline~~While confident in ~~new~~our commercial loan ~~originations for the third quarter 2022, we anticipate solid organic commercial~~pipelines and ~~industrial non-PPP~~diverse residential and ~~commercial real estate~~consumer loan ~~growth to continue in the fourth quarter 2022. Based upon current projections, we anticipate a range of 8 to 10 percent annualized loan growth for the fourth quarter 2022. However,~~ offerings, there can be no assurance that ~~those positive~~the growth trends experienced in most loan categories during the first quarter 2023 will continue, or loan balances will not decline from ~~September 30, 2022 due to several factors, including, but not limited to persistently high inflation,~~March 31, 2023. We expect a more challenging overall loan origination environment moving forward, especially in the ~~Federal Reserve's rapid monetary policy tightening, and the ongoing negative impact of Russia-Ukraine war on the global economy. In addition, we anticipate that~~ residential mortgage and ~~other~~ consumer loan ~~activity will continue~~portfolios, due to ~~slow meaningfully in~~ the ~~fourth quarter 2022.~~impact of higher market interest rates on customer demand and selective tightening of certain underwriting standards by Valley.

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Non-performing Assets

Non-performing assets (NPA) include non-accrual loans, other real estate owned (OREO), and other repossessed assets (which primarily ~~consists~~consist of automobiles and taxi medallions) at ~~September 30, 2022.~~March 31, 2023. 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. 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 ~~the~~ lower of cost or fair value, less estimated cost to sell.

Our NPAs decreased ~~$19.9~~$27.0 million to ~~$294.8~~$244.9 million at ~~September 30, 2022~~March 31, 2023 as compared to ~~June 30,~~December 31, 2022 ~~mostly~~mainly due to ~~declines in~~two large charge-offs within non-accrual commercial and industrial and ~~commercial real estate~~construction loans ~~mainly caused by a few large loan repayments, and, to a lesser extent, loan charge-offs~~ during the ~~third~~first quarter ~~2022.~~2023. NPAs as a percentage of total loans and NPAs totaled ~~0.65~~0.50 percent and ~~0.72~~0.58 percent at ~~September 30, 2022~~March 31, 2023 and ~~June 30,~~December 31, 2022, respectively (as shown in the table below). ~~We believe our~~Our total NPAs has remained relatively low as a percentage of the total loan portfolio and the level of 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 8 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 ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, our overall credit trends have remained stable, and our business and borrowers continued to demonstrate resilience and growth despite the unexpected challenges ofacross the ~~global supply chain issues, high~~banking system, slower economic growth, persistently elevated inflation and the overall uncertain economy ~~and the ongoing impact of COVID-19.~~. However, management cannot provide assurance that the non-performing assets will not materially increase from the levels reported at ~~September 30, 2022~~March 31, 2023 due to the aforementioned or other factors potentially impacting our lending customers.

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The following table sets forth by loan category accruing past due and non-performing assets at the dates indicated in conjunction with our asset quality ratios:


		September 30, 2022			June 30, 2022			March 31, 2021				March 31, 2023			December 31, 2022
		($ in thousands)										($ in thousands)
Accruing past due loans:	Accruing past due loans:										Accruing past due loans:
30 to 59 days past due:	30 to 59 days past due:										30 to 59 days past due:
Commercial and industrial	Commercial and industrial	$	19,526		$	7,143		$	6,723		Commercial and industrial	$	20,716		$	11,664
Commercial real estate	Commercial real estate	6,196			10,516			30,807			Commercial real estate	13,580			6,638
Construction		—			9,108			1,708

Residential mortgage	Residential mortgage	13,045			12,326			9,266			Residential mortgage	12,599			16,146
Total consumer	Total consumer	6,196			6,009			5,862			Total consumer	7,845			9,087
Total 30 to 59 days past due	Total 30 to 59 days past due	44,963			45,102			54,366			Total 30 to 59 days past due	54,740			43,535
60 to 89 days past due:	60 to 89 days past due:										60 to 89 days past due:
Commercial and industrial	Commercial and industrial	2,188			3,870			14,461			Commercial and industrial	24,118			12,705
Commercial real estate	Commercial real estate	383			630			6,314			Commercial real estate	—			3,167
Construction		12,969			3,862			3,125

Residential mortgage	Residential mortgage	5,947			2,410			2,560			Residential mortgage	2,133			3,315
Total consumer	Total consumer	1,174			702			554			Total consumer	1,519			1,579
Total 60 to 89 days past due	Total 60 to 89 days past due	22,661			11,474			27,014			Total 60 to 89 days past due	27,770			20,766
90 or more days past due:	90 or more days past due:										90 or more days past due:
Commercial and industrial	Commercial and industrial	15,072			15,470			9,261			Commercial and industrial	8,927			18,392
Commercial real estate	Commercial real estate	15,082			—			—			Commercial real estate	—			2,292

Construction											Construction	6,450			3,990
Residential mortgage	Residential mortgage	550			1,188			1,746			Residential mortgage	1,668			1,866
Total consumer	Total consumer	421			267			400			Total consumer	747			47
Total 90 or more days past due	Total 90 or more days past due	31,125			16,925			11,407			Total 90 or more days past due	17,792			26,587
Total accruing past due loans	Total accruing past due loans	$	98,749		$	73,501		$	92,787		Total accruing past due loans	$	100,302		$	90,888
Non-accrual loans:	Non-accrual loans:										Non-accrual loans:
Commercial and industrial	Commercial and industrial	$	135,187		$	148,404		$	96,631		Commercial and industrial	$	78,606		$	98,881
Commercial real estate	Commercial real estate	67,319			85,807			79,180			Commercial real estate	67,938			68,316
Construction	Construction	61,098			49,780			17,618			Construction	68,649			74,230
Residential mortgage	Residential mortgage	26,564			25,847			33,275			Residential mortgage	23,483			25,160
Total consumer	Total consumer	3,227			3,279			3,754			Total consumer	3,318			3,174
Total non-accrual loans	Total non-accrual loans	293,395			313,117			230,458			Total non-accrual loans	241,994			269,761

Other real estate owned (OREO)	Other real estate owned (OREO)	286			422			1,024			Other real estate owned (OREO)	1,189			286
Other repossessed assets	Other repossessed assets	1,122			1,200			1,176			Other repossessed assets	1,752			1,937
Total non-performing assets (NPAs)	Total non-performing assets (NPAs)	$	294,803		$	314,739		$	232,658		Total non-performing assets (NPAs)	$	244,935		$	271,984
Performing troubled debt restructured loans		$	69,748		$	67,274		$	56,538

Total non-accrual loans as a % of loans	Total non-accrual loans as a % of loans	0.65		%	0.72		%	0.65		%	Total non-accrual loans as a % of loans	0.50		%	0.57		%
Total NPAs as a % of loans and NPAs	Total NPAs as a % of loans and NPAs	0.65			0.72			0.65			Total NPAs as a % of loans and NPAs	0.50			0.58
Total accruing past due and non-accrual loans as a % of loans	Total accruing past due and non-accrual loans as a % of loans	0.87			0.89			0.91			Total accruing past due and non-accrual loans as a % of loans	0.70			0.77
Allowance for loan losses as a % of non-accrual loans	Allowance for loan losses as a % of non-accrual loans	162.15			149.73			157.30			Allowance for loan losses as a % of non-accrual loans	180.54			170.02

Loans past due 30 to 59 days ~~decreased~~ ~~$139 thousand~~increased $11.2 million to ~~$45.0~~$54.7 million at ~~September 30, 2022~~March 31, 2023 as compared to ~~June 30, 2022. Construction loans within this delinquency category decreased $9.1 million~~December 31, 2022 mostly due to several large commercial and industrial loans and one ~~loan acquired from Bank Leumi USA included in this category at~~ ~~June 30, 2022 that is reported as~~ ~~60 to 89 days past due at~~ ~~September 30, 2022.~~ ~~Commercial~~matured commercial real estate ~~loans past due 30 to 59 days decreased $4.3 million to $6.2 million at September 30, 2022 as compared to June 30, 2022 mainly due to one~~ loan ~~that became current as to all contractual payments at September 30, 2022. These decreases were largely offset by higher commercial and industrial loans~~

~~delinquencies mostly driven by matured loans~~ in the process of renewal included in this delinquency category at ~~September 30, 2022.~~March 31, 2023. These increases were partially offset by improved performance within the residential mortgage and consumer loan categories.

Loans past due 60 to 89 days increased ~~$11.2~~$7.0 million to ~~$22.7~~$27.8 million at ~~September 30, 2022~~March 31, 2023 as compared to ~~June 30,~~December 31, 2022 primarily due to higher commercial and industrial loans largely driven by a few large loans included in this delinquency category at March 31, 2023.

Loans 90 days or more past due and still accruing interest decreased $8.8 million to $17.8 million at March 31, 2023 as compared to December 31, 2022 mainly due to the ~~one aforementioned construction loan~~renewals in the normal course of two matured loans during the first quarter 2023 that ~~migrated to this delinquency category~~ ~~at September 30, 2022.~~

Loans past due 90 days or more and still accruing interest increased $14.2 million to $31.1 million at September 30, 2022 as compared to June 30, 2022. The increase was mainly driven by the two commercial real estate loan relationships totaling $9.7 million and $5.4 million, respectively,were previously included in this delinquency category at ~~September 30,~~December 31, 2022. All loans 90 days or more past due and still accruing interest are ~~considered~~ well-secured and in the process of collection.

Non-accrual loans decreased ~~$19.7~~$27.8 million to ~~$293.4~~$242.0 million at ~~September 30, 2022~~March 31, 2023 as compared to ~~$313.1~~$269.8 million at ~~June 30,~~December 31, 2022 mainly ~~due to~~driven by decreases in ~~non-performing commercial~~commercial and industrial loans and ~~commercial real estate loans, partially offset by one~~ construction ~~loan relationship totaling $12.7 million put on non-accrual status~~ ~~at September 30, 2022.~~

loans. Non-accrual commercial and industrial loans ~~totaled $135.2~~decreased $20.3 million ~~at September 30, 2022 and included~~ ~~non-performing~~ ~~taxi medallion loans totaling $76.3 million.~~ ~~Non-performing~~ ~~taxi medallion loans decreased $4.1 million from $80.4 million at June 30, 2022 mostly~~primarily due to ~~partial~~the charge-off of one loan ~~charge-offs totaling $3.8 million related to one borrower during the third quarter 2022. The partial loan charge-offs were~~participation that was fully reserved for in our allowance for loan losses at ~~June 30,~~December 31, 2022. The ~~At September 30,~~decrease of $5.6 million in construction loans is mostly related to the partial charge-off of one loan relationship during thefirst quarter 2023 that had related allowance reserves totaling $4.3 million at December 31, 2022.

Although the timing of collection is uncertain, management believes that the majority of the non-accrual loans at March 31, 2023, are well secured and largely collectible based in part, on our quarterly review of collateral dependent loans and the valuation of the underlying collateral, if applicable. Any estimated shortfall in each collateral valuation results in an allocation of specific reserves within our allowance for credit losses for loans.

Non-performing taxi medallion loans ~~(primarily collateralized by New York City medallions)~~totaled $66.0 million of the $78.6 million non-accrual commercial and industrial loans at March 31, 2023. At March 31, 2023, all taxi medallion loans in the loan portfolio were on non-accrual status and had related ~~reserve~~sreserves of ~~$51.4~~$41.9 million, or ~~67.3~~64.0 percent of such l~~oans.~~

loans, within the allowance for loan losses. Potential further declines in the market valuation of taxi medallions and the ~~stressed~~current operating environment mainly within New York City ~~due to the COVID-19 pandemic or general deterioration in economic conditions could~~may negatively impact the ~~future~~ performance of this portfolio. ~~For example, a 25 percent decline in our current estimated market value of the taxi medallions would require additional allocated~~ ~~reserves of $4.7 million within the~~ ~~allowance for loan losses based upon the taxi medallion loan balances at September 30, 2022. See the "Allowance for Credit Losses for Loans" section below for further details on our reserves.~~

OREO properties totaled ~~$286 thousand~~$1.2 million at ~~September 30, 2022~~March 31, 2023 and ~~declined $136~~increased $903 thousand as compared to ~~June 30,~~December 31, 2022. ~~During the third quarter 2022, OREO activity continues to trend downward as sales of owned properties outpaced new foreclosures. The~~There were no sales of OREO properties ~~resulted~~ in ~~net losses of $69 thousand and $692 thousand for~~ the ~~three and nine months ended September 30, 2022, respectively, and net losses of $67 thousand~~first quarter 2023 and net gains on sales of ~~$268 thousand for~~OREO in the ~~three and nine months ended September 30, 2021, respectively.~~first quarter 2022 were not material. The residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled ~~$1.9~~$1.5 million and $~~2.5~~2.6 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

TDRs represent loan modifications for customers experiencing financial difficulties where a concession has been granted. Performing TDRs (i.e., TDRs not reported as loans 90 days or more past due and still accruing interest or as non-accrual loans) totaled $69.7 million at September 30, 2022 as compared to $67.3 million at June 30, 2022. Performing TDRs consisted of 87 loans at September 30, 2022. On an aggregate basis, the $69.7 million in performing TDRs at September 30, 2022 had a modified weighted average interest rate of approximately 4.90 percent as compared to a pre-modification weighted average interest rate of 4.32 percent.

Allowance for Credit Losses for Loans

The allowance for credit losses (ACL) for loans includes the allowance for loan losses and the reserve for unfunded credit commitments. Under CECL, our methodology to establish the allowance for loan losses has two basic components: (i) a collective reserve component for estimated expected credit losses for pools of loans that share common risk characteristics and (ii) an individual reserve component for loans that do not share risk characteristics, consisting of collateral dependent ~~TDR, and expected TDR~~ loans. Valley also maintains a separate allowance for

unfunded credit commitments mainly consisting of undisbursed non-cancellable lines of credit, new loan commitments and commercial standby letters of credit.

Valley estimated 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 generating probability of default and loss given default metrics. The metrics are based on the migration of loans within the commercial and industrial loan categories from performing to loss by credit quality rating or delinquency categories using historical life-of-loan analysis periods for each loan portfolio pool and the severity of loss based on the aggregate net lifetime losses. The model's expected losses based on loss history are adjusted for qualitative factors. 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 reversion period, (ii) other asset specific risks to the extent that they do not exist in the historical loss information, and (iii) net expected recoveries of charged-off loan balances. These adjustments are based on qualitative factors not reflected in the quantitative model but are likely to impact the measurement of estimated credit losses. The expected lifetime loss rate is the life of loan loss percentage from the transition matrix model plus the impact of the adjustments for qualitative factors. 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 for the remaining life of the loan on a straight-line basis. The forecasts consist of a multi-scenario economic forecast model to estimate future credit losses and is 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.

~~For~~At March 31, 2023, the ~~third quarter 2022, we incorporated a~~ probability ~~weighted three-scenario~~weightings used in our economic forecast, ~~including~~inclusive of the Moody's Baseline, ~~S-3 and S-4 scenarios. At September 30, 2022, Valley moderately increased its probability weighting to the combined Moody's~~ S-3 downside and S-4 ~~(most adverse)~~adverse scenarios, remained unchanged from ~~the Moody's Baseline scenario as compared with such weighting in the~~ ~~June 30, 2022 ACL analysis. Our scenario weighting at September 30, 2022, as well as the~~December 31, 2022. The standalone Moody's Baseline scenario reflects a ~~less~~ slightly more optimistic outlook ~~than at June 30,~~as compared to December 31, 2022 in terms of GDP growth and unemployment levels, ~~and potential near term negative economic impacts, given present uncertain economic conditions~~. but the overall outlook remained relatively weak. The updated Moody's forecasts were not materially impacted by the recent bank failures, as they noted the failures did not appear to be symptomatic of serious broad-based issues in the financial system.

At ~~September 30, 2022,~~March 31, 2023, the Moody's Baseline forecast included the following specific assumptions:

•GDP expansion ~~by about 1.6~~approximately 1 percent in the ~~fourth~~second quarter ~~2022;~~2023;

•Unemployment of ~~3.7~~3.5 percent in the ~~fourth~~second quarter ~~2022~~2023 and ~~3.9~~3.7 to ~~4.1~~4.0 percent over the remainder of the forecast period ending in the ~~third~~first quarter 2025;

•Continued concerns about increased federal debt burden pushed by rising interest rates, high inflation, elevated house prices and lower consumer spending;

•The Federal Reserve continues its tightening monetary policy, including an increase of 25 basis points at its May 2023 meeting but intends to keep rates steady through 2023 with no reductions until 2024; and

•~~U.S. economic growth~~Inflation remains elevated but continues to trend downward, while reporting at approximately 5 percent in ~~2022; however, it is expected to be challenged by a strained supply chain, rising interest rates and elevated inflation that will negatively affect consumer spending.~~March 2023.

See more details regarding our allowance for credit losses for loans in Note 8 to the consolidated financial statements.

8376

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.~~indicated:


		Three Months Ended									Nine Months Ended							Three Months Ended
		September 30, 2022			June 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021				March 31, 2023			December 31, 2022			March 31, 2022
		($ in thousands)																($ in thousands)
Average loans outstanding		$	44,341,894		$	42,517,287		$	32,698,382		$	40,529,794		$	32,641,362

Allowance for credit losses for loans	Allowance for credit losses for loans																Allowance for credit losses for loans
Beginning balance	Beginning balance	$	490,963		$	379,252		$	353,724		$	375,702		$	351,354		Beginning balance	$	483,255		$	498,408		$	375,702
Allowance for purchased credit deteriorated (PCD) loans (1)		—			70,319			—			70,319			—
Impact of the adoption of ASU No. 2022-02 (1)																	Impact of the adoption of ASU No. 2022-02 (1)	(1,368)			—			—
Beginning balance, adjusted																	Beginning balance, adjusted	481,887			498,408			375,702
Loans charged-off:	Loans charged-off:																Loans charged-off:
Commercial and industrial	Commercial and industrial	(5,033)			(4,540)			(1,248)			(11,144)			(19,283)			Commercial and industrial	(26,047)			(22,106)			(1,571)
Commercial real estate	Commercial real estate	(4,000)			—			—			(4,173)			(382)			Commercial real estate	—			(388)			(173)

Construction																	Construction	(5,698)			—			—
Residential mortgage	Residential mortgage	—			(1)			—			(27)			(139)			Residential mortgage	—			(1)			(26)
Total consumer	Total consumer	(962)			(726)			(771)			(2,513)			(3,389)			Total consumer	(828)			(1,544)			(825)
Total charge-offs	Total charge-offs	(9,995)			(5,267)			(2,019)			(17,857)			(23,193)			Total charge-offs	(32,573)			(24,039)			(2,595)
Charged-off loans recovered:	Charged-off loans recovered:																Charged-off loans recovered:
Commercial and industrial	Commercial and industrial	13,236			1,952			514			16,012			2,781			Commercial and industrial	1,399			1,069			824
Commercial real estate	Commercial real estate	1,729			224			29			2,060			759			Commercial real estate	24			13			107
Construction		—			—			—			—			4

Residential mortgage	Residential mortgage	163			74			228			694			576			Residential mortgage	21			17			457
Total consumer	Total consumer	477			697			955			2,431			3,359			Total consumer	761			498			1,257
Total recoveries	Total recoveries	15,605			2,947			1,726			21,197			7,479			Total recoveries	2,205			1,597			2,645
Net loan recoveries (charge-offs)		5,610			(2,320)			(293)			3,340			(15,714)
Total net loan (charge-offs) recoveries																	Total net loan (charge-offs) recoveries	(30,368)			(22,442)			50
Provision charged for credit losses	Provision charged for credit losses	1,835			43,712			3,496			49,047			21,287			Provision charged for credit losses	9,450			7,289			3,500
Ending balance	Ending balance	$	498,408		$	490,963		$	356,927		$	498,408		$	356,927		Ending balance	$	460,969		$	483,255		$	379,252
Components of allowance for credit losses for loans:	Components of allowance for credit losses for loans:																Components of allowance for credit losses for loans:
Allowance for loan losses	Allowance for loan losses	$	475,744		$	468,819		$	342,527		$	475,744		$	342,527		Allowance for loan losses	$	436,898		$	458,655		$	362,510
Allowance for unfunded credit commitments	Allowance for unfunded credit commitments	22,664			22,144			14,400			22,664			14,400			Allowance for unfunded credit commitments	24,071			24,600			16,742
Allowance for credit losses for loans	Allowance for credit losses for loans	$	498,408		$	490,963		$	356,927		$	498,408		$	356,927		Allowance for credit losses for loans	$	460,969		$	483,255		$	379,252
Components of provision for credit losses for loans:	Components of provision for credit losses for loans:																Components of provision for credit losses for loans:
Provision for credit losses for loans (2)		$	1,315		$	38,310		$	3,496		$	42,883		$	17,998
Provision for unfunded credit commitments (2)		520			5,402			—			6,164			3,289
Provision for credit losses for loans																	Provision for credit losses for loans	$	9,979		$	5,353		$	3,258
Provision for unfunded credit commitments																	Provision for unfunded credit commitments	(529)			1,936			242
Total provision for credit losses for loans	Total provision for credit losses for loans	$	1,835		$	43,712		$	3,496		$	49,047		$	21,287		Total provision for credit losses for loans	$	9,450		$	7,289		$	3,500

Annualized ratio of net (recoveries) charge-offs to average loans outstanding		(0.05)		%	0.02		%	0.00		%	(0.01)		%	0.06		%

Allowance for credit losses for loans as a % of total loans																	Allowance for credit losses for loans as a % of total loans	0.95		%	1.03		%	1.07		%

(1) Represents the opening adjustment for the adoption of ASU No. 2022-02 effective January 1, 2023.

~~(1)~~ ~~Represents the allowance for acquired PCD loans, net of PCD loan charge-offs totaling $62.4 million in the second quarter 2022.~~

~~(2)~~ The three months ended June 30, 2022 and nine months ended September 30, 2022 both include $36.3 million and $4.7 million of provision related to non-PCD loans and unfunded credit commitments, respectively, acquired from Bank Leumi USA in the second quarter 2022.

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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 Nine Months Ended
September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
($ in thousands)
Net loan recoveries (charge-offs)
Commercial and industrial $ 8,203 $ (2,588) $ (734) $ 4,868 $ (16,502)
Commercial real estate (2,271) 224 29 (2,113) 377
Construction — — — — 4
Residential mortgage 163 73 228 667 437
Total consumer (485) (29) 184 (82) (30)
Total $ 5,610 $ (2,320) $ (293) $ 3,340 $ (15,714)
Average loans outstanding
Commercial and industrial $ 8,540,485 $ 8,304,822 $ 5,927,149 $ 7,529,507 $ 6,572,931
Commercial real estate 24,306,684 23,319,419 17,733,591 22,416,996 17,139,756
Construction 3,186,732 2,925,741 1,663,745 2,604,559 1,752,589
Residential mortgage 5,134,769 4,727,481 4,458,345 4,925,469 4,358,519
Total consumer 3,173,224 3,239,824 2,915,552 3,053,263 2,817,567
Total $ 44,341,894 $ 42,517,287 $ 32,698,382 $ 40,529,794 $ 32,641,362
Net loan (recoveries) charge-offs to average loans outstanding
Commercial and industrial (0.10)% 0.03% 0.01% (0.06)% 0.25%
Commercial real estate 0.01 0.00 0.00 0.01 0.00
Construction 0.00 0.00 0.00 0.00 0.00
Residential mortgage 0.00 0.00 (0.01) (0.01) (0.01)
Total consumer 0.02 0.00 (0.01) 0.00 0.00


	Three Months Ended
	March 31, 2023		December 31, 2022		March 31, 2022
	($ in thousands)
Net loan (charge-offs) recoveries
Commercial and industrial	$	(24,648)	$	(21,037)	$	(747)
Commercial real estate	24		(375)		(66)
Construction	(5,698)		—		—
Residential mortgage	21		16		431
Total consumer	(67)		(1,046)		432
Total	$	(30,368)	$	(22,442)	$	50
Average loans outstanding
Commercial and industrial	$	8,754,853	$	8,688,005	$	5,727,350
Commercial real estate	26,555,421		25,233,650		19,342,697
Construction	3,780,615		3,753,155		1,914,413
Residential mortgage	5,363,421		5,158,615		4,681,417
Total consumer	3,405,061		3,252,938		2,957,525
Total	$	47,859,371	$	46,086,363	$	34,623,402
Annualized net loan charge-offs (recoveries) to average loans outstanding
Commercial and industrial	1.13%		0.97%		0.05%
Commercial real estate	0.00		0.01		0.00
Construction	0.60		0.00		0.00
Residential mortgage	0.00		0.00		(0.04)
Total consumer	0.01		0.13		(0.06)
Total loans	0.25		0.19		0.00

Net ~~recoveries of~~ loan charge-offs totaled ~~$5.6~~$30.4 million for the ~~third~~first quarter ~~2022~~2023 as compared to ~~net loan charge-offs of $2.3~~$22.4 million ~~(excluding $62.4 million of Day 1 PCD loan charge-offs related to the Bank Leumi USA acquisition)~~ for the ~~second~~fourth quarter 2022 and ~~net loan charge-offs of $293 thousand for the third quarter 2021. The~~ net recoveries of loan charge-offs $50 thousand for the ~~third~~first quarter ~~2022 were~~2022. The first quarter 2023 net loan charge-offs largely ~~driven by two~~related to one commercial and industrial loan ~~relationships totaling $11.2 million~~participation charged-off. This loan was fully reserved for in ~~gross recoveries~~our allowance for ~~the period.~~

~~Partial~~ loan losses as of December 31, 2022 and its remaining balance, net of charge-offs, was immaterial at March 31, 2023. The amount of taxi medallion loans totaled $3.8 million within the commercial and industrial loan category for the third quarter 2022 as compared to $143 thousand and $1.9 million during the third quarter 2021 and second quarter 2022, respectively. The overall level ofnet loan charge-offs (as presented in the above table) and the low level of individual loan charge-offs for the first quarter 2023 continued to ~~remain very low and~~ trend ~~well~~ within management's expectations for the credit quality of the loan portfolio ~~for the third quarter 2022.~~

at March 31, 2023.

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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:


		September 30, 2022				June 30, 2022				September 30, 2021					March 31, 2023				December 31, 2022				March 31, 2022
		Allowance Allocation		Allocation as a % of Loan Category		Allowance Allocation		Allocation as a % of Loan Category		Allowance Allocation		Allocation as a % of Loan Category			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)													($ in thousands)
Loan Category:	Loan Category:													Loan Category:
Commercial and industrial loans	Commercial and industrial loans	$	154,051	1.77	%	$	144,539	1.70	%	$	103,877	1.84	%	Commercial and industrial loans	$	127,992	1.42	%	$	140,008	1.59	%	$	101,203	1.75	%
Commercial real estate loans:	Commercial real estate loans:													Commercial real estate loans:
Commercial real estate	Commercial real estate	217,124		0.89		227,457		0.97		178,206		0.99		Commercial real estate	190,420		0.70		200,248		0.78		189,927		0.96
Construction	Construction	50,656		1.42		49,770		1.47		21,515		1.19		Construction	52,912		1.42		58,987		1.59		30,022		1.38
Total commercial real estate loans	Total commercial real estate loans	267,780		0.95		277,227		1.03		199,721		1.01		Total commercial real estate loans	243,332		0.79		259,235		0.88		219,949		1.00
Residential mortgage loans	Residential mortgage loans	36,157		0.70		29,889		0.60		24,732		0.57		Residential mortgage loans	41,708		0.76		39,020		0.73		28,189		0.60
Consumer loans:	Consumer loans:													Consumer loans:
Home equity	Home equity	4,083		0.87		3,907		0.91		4,110		1.02		Home equity	4,417		0.86		4,332		0.86		3,656		0.93
Auto and other consumer	Auto and other consumer	13,673		0.49		13,257		0.49		10,087		0.40		Auto and other consumer	19,449		0.69		16,060		0.57		9,513		0.37
Total consumer loans	Total consumer loans	17,756		0.55		17,164		0.55		14,197		0.49		Total consumer loans	23,866		0.71		20,392		0.62		13,169		0.45
Allowance for loan losses	Allowance for loan losses	475,744		1.05		468,819		1.08		342,527		1.05		Allowance for loan losses	436,898		0.90		458,655		0.98		362,510		1.03
Allowance for unfunded credit commitments	Allowance for unfunded credit commitments	22,664				22,144				14,400				Allowance for unfunded credit commitments	24,071				24,600				16,742
Total allowance for credit losses for loans	Total allowance for credit losses for loans	$	498,408			$	490,963			$	356,927			Total allowance for credit losses for loans	$	460,969			$	483,255			$	379,252
Allowance for credit losses for loans as a % total loans	Allowance for credit losses for loans as a % total loans			1.10	%			1.13	%			1.09	%	Allowance for credit losses for loans as a % total loans			0.95	%			1.03	%			1.07	%

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 ~~1.10~~0.95 percent at ~~September 30, 2022~~March 31, 2023 as compared to ~~1.13~~1.03 percent and ~~1.09~~1.07 percent at ~~June 30,~~December 31, 2022 and ~~September 30, 2021, respectively~~. March 31, 2022, respectively. During the ~~third~~first quarter ~~2022,~~2023, the provision for credit losses for loans totaled ~~$1.8~~$9.5 million as compared to ~~$43.7~~$7.3 million and $3.5 million for the ~~second~~fourth quarter 2022 and ~~third quarter 2021, respectively. The second~~first quarter 2022, ~~provision was~~respectively. At March 31, 2023, our allowance for credit losses for loans as a percentage of total loans decreased as compared to December 31, 2022 largely ~~elevated~~ due to ~~$41 million~~the impact of ~~provision related to non-PCD~~the first quarter 2023 loan charge-offs with prior allocated reserves. The reduction in allocated reserves for specific loans was partially offset by a moderate uptick in non-economic qualitative reserves for commercial and ~~unfunded credit commitments acquired from Bank Leumi USA. Overall, an increased~~industrial loans within our CECL model at March 31, 2023. The economic ~~forecast reserve~~ component of our current CECL model ~~(driven by a more pessimistic outlook incorporated into the updated Moody's scenarios)~~ was ~~largely offset by lower expected quantitative loss experience at September 30, 2022~~relatively stable as compared to .December 31, 2022.

As part of our CECL model analysis at September 30, 2022, we closely assessed the expected credit losses in our Florida loan portfolio in the wake of Hurricane Ian. As a result, our management adjustment and allocated reserves related to the hurricane were immaterial at September 30, 2022. We will continue to support our impacted customers as they recover from the storm and diligently monitor our loss assessment for material changes.

Capital Adequacy

A significant measure of the strength of a financial institution is its shareholders’ equity. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, shareholders’ equity totaled approximately ~~$6.3~~$6.5 billion and ~~$5.1~~$6.4 billion, which represented ~~11.2~~10.1 percent and ~~11.7~~11.1 percent of total assets, respectively.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, total shareholders’ equity increased by approximately ~~$1.2 billion~~$110.8 million primarily due to:

•~~additional capital of~~ ~~$1.1 billion~~ ~~issued in the Bank Leumi USA acquisition,~~

•net income of ~~$391.3~~$146.6 million,

•other comprehensive income of $20.4 million,

•additional capital issued totaling $3.8 million,

•a ~~$10.6 million increase attributable~~$990 thousand net cumulative effect adjustment to retained earnings for the ~~effect~~adoption of ~~our stock incentive plan,~~ASU 2022-02, partially offset by

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•cash dividends declared on common and preferred stock totaling a combined $~~168.8 million,~~

•~~an other comprehensive loss of~~ ~~$147.6~~60.4 million and

•~~repurchases of $13.5 million~~a $505 thousand decrease attributable to the effect of our ~~common~~ stock ~~with these shares held as treasury stock.~~incentive plan.

Valley and Valley National Bank are subject to the regulatory capital requirements administered by the Federal Reserve Bank and the OCC. Quantitative measures established by regulation to ensure capital adequacy require Valley and Valley National Bank to maintain minimum amounts and ratios of common equity Tier 1 capital, total and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets, as defined in the regulations.

We are required to maintain common equity Tier 1 capital to risk-weighted assets ratio of 4.5 percent, Tier 1 capital to risk-weighted assets 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Valley and Valley National Bank exceeded all capital adequacy requirements (see table below).

For regulatory capital purposes, in accordance with the Federal Reserve Board’s final interim rule as of April 3, 2020, we deferred 100 percent of the CECL Day 1 impact to shareholders' equity plus 25 percent of the reserve build (i.e., provision for credit losses less net charge-offs) for a two-year period ending January 1, 2022. On January 1, 2022, the deferral amount totaling $47.3 million after-tax started to be phased-in by 25 percent and will increase 25 percent per year until fully phased-in on January 1, 2025. As of ~~September 30, 2022,~~March 31, 2023, approximately ~~$11.8~~$23.6 million of the $47.3 million deferral amount was recognized as a reduction to regulatory capital and, as a result, decreased our risk-based capital ratios by approximately 36 basis points.

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The following table presents Valley’s and Valley National Bank’s actual capital positions and ratios under Basel III risk-based capital guidelines at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		Actual				Minimum Capital Requirements				To Be Well Capitalized Under Prompt Corrective Action Provision					Actual				Minimum Capital Requirements				To Be Well Capitalized Under Prompt Corrective Action Provision
		Amount		Ratio		Amount		Ratio		Amount		Ratio			Amount		Ratio		Amount		Ratio		Amount		Ratio
		($ in thousands)													($ in thousands)
As of September 30, 2022
As of March 31, 2023														As of March 31, 2023
Total Risk-based Capital	Total Risk-based Capital													Total Risk-based Capital
Valley	Valley	$	5,439,636	11.84	%	$	4,825,155	10.50	%	N/A		N/A		Valley	$	5,656,193	11.58	%	$	5,126,496	10.50	%	N/A		N/A
Valley National Bank	Valley National Bank	5,503,746		11.99		4,820,817		10.50		$	4,591,254	10.00	%	Valley National Bank	5,736,909		11.75		5,125,168		10.50		$	4,881,112	10.00	%
Common Equity Tier 1 Capital	Common Equity Tier 1 Capital													Common Equity Tier 1 Capital
Valley	Valley	4,178,402		9.09		3,216,770		7.00		N/A		N/A		Valley	4,402,540		9.02		3,417,664		7.00		N/A		N/A
Valley National Bank	Valley National Bank	5,121,353		11.15		3,213,878		7.00		2,984,315		6.50		Valley National Bank	5,362,097		10.99		3,416,778		7.00		3,172,723		6.50
Tier 1 Risk-based Capital	Tier 1 Risk-based Capital													Tier 1 Risk-based Capital
Valley	Valley	4,393,243		9.56		3,906,078		8.50		N/A		N/A		Valley	4,617,381		9.46		4,150,021		8.50		N/A		N/A
Valley National Bank	Valley National Bank	5,121,353		11.15		3,902,566		8.50		3,673,004		8.00		Valley National Bank	5,362,097		10.99		4,148,945		8.50		3,904,890		8.00
Tier 1 Leverage Capital	Tier 1 Leverage Capital													Tier 1 Leverage Capital
Valley	Valley	4,393,243		8.31		2,114,427		4.00		N/A		N/A		Valley	4,617,381		7.96		2,319,296		4.00		N/A		N/A
Valley National Bank	Valley National Bank	5,121,353		9.69		2,114,252		4.00		2,642,815		5.00		Valley National Bank	5,362,097		9.25		2,319,185		4.00		2,898,982		5.00
As of December 31, 2021
As of December 31, 2022														As of December 31, 2022
Total Risk-based Capital	Total Risk-based Capital													Total Risk-based Capital
Valley	Valley	$	4,454,485	13.10	%	$	3,569,144	10.50	%	N/A		N/A		Valley	$	5,569,639	11.63	%	$	5,026,621	10.50	%	N/A		N/A
Valley National Bank	Valley National Bank	4,571,448		13.45		3,567,618		10.50		$	3,397,732	10.00	%	Valley National Bank	5,659,511		11.84		5,018,129		10.50		$	4,779,170	10.00	%
Common Equity Tier 1 Capital	Common Equity Tier 1 Capital													Common Equity Tier 1 Capital
Valley	Valley	3,417,930		10.06		2,379,429		7.00		N/A		N/A		Valley	4,315,659		9.01		3,351,080		7.00		N/A		N/A
Valley National Bank	Valley National Bank	4,308,734		12.68		2,378,412		7.00		2,208,526		6.50		Valley National Bank	5,284,372		11.06		3,345,419		7.00		3,106,461		6.50
Tier 1 Risk-based Capital	Tier 1 Risk-based Capital													Tier 1 Risk-based Capital
Valley	Valley	3,632,771		10.69		2,889,307		8.50		N/A		N/A		Valley	4,530,500		9.46		4,069,169		8.50		N/A		N/A
Valley National Bank	Valley National Bank	4,308,734		12.68		2,888,072		8.50		2,718,185		8.00		Valley National Bank	5,284,372		11.06		4,062,295		8.50		3,823,336		8.00
Tier 1 Leverage Capital	Tier 1 Leverage Capital													Tier 1 Leverage Capital
Valley	Valley	3,632,771		8.88		1,635,508		4.00		N/A		N/A		Valley	4,530,500		8.23		2,200,822		4.00		N/A		N/A
Valley National Bank	Valley National Bank	4,307,734		10.53		1,636,097		4.00		2,045,121		5.00		Valley National Bank	5,284,372		9.60		2,200,891		4.00		2,751,114		5.00

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 ~~58.2~~60.7 percent for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 as compared to ~~60.7~~61.4 percent for the year ended December 31, ~~2021.~~2022.

Cash dividends declared amounted to ~~$0.33~~$0.11 per common share for each of the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. 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.

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 on Form 10-K for the year ended December 31, ~~2021~~2022 in the MD&A section - “Liquidity and Cash Requirements” and Notes 1213 and 1314 to the consolidated financial statements included in this report.

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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 page 7265 for a discussion of interest rate ~~sensitivity.~~risk.


Item 4.			Controls and Procedures

(a) Disclosure controls and procedures. Valley maintains disclosure controls and procedures which, consistent with Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), are defined to mean controls and other procedures that are designed to ensure that information required to be disclosed in the reports that Valley files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that such information is accumulated and communicated to Valley’s management, including Valley’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

Valley’s CEO and CFO, with the assistance of other members of Valley’s management, have evaluated the effectiveness of Valley’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, Valley’s CEO and CFO have concluded that Valley’s disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) Changes in internal controls over financial reporting. Valley’s CEO and CFO have also concluded that there have not been any changes in Valley’s internal control over financial reporting in the quarter ended ~~September 30, 2022~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, Valley’s internal control over financial reporting.

Valley’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all errors and all fraud. A system of internal control, no matter how well conceived and operated, provides reasonable, not absolute, assurance that the objectives of the system of internal control are met. The design of a system of internal control reflects resource constraints and the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Valley have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns occur because of a simple error or mistake. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of internal control is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions; over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II - OTHER INFORMATION


Item 1.			Legal Proceedings

In the normal course of business, we are a party to various outstanding legal proceedings and claims. There have been no material changes in the legal proceedings, if any, previously disclosed under Part I, Item 3 of Valley’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.


Item 1A.			Risk Factors

There have been no material changes in the risk factors previously disclosed in the section titled "Risk Factors" in Part I, Item 1A of Valley’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022, except as described below:

Our financial results and condition may be adversely impacted by recent events in the banking industry or any future similar events.

Recent events impacting the banking industry, including the bank failures in March and April 2023, have resulted in significant disruption and volatility in the capital markets, reduced current valuations of bank securities, and decreased confidence in banks among depositors and other counterparties as well as investors. These events occurred in the context of rapidly rising interest rates which, among other things, have resulted in unrealized losses in longer duration debt securities and loans held by banks, increased competition for deposits and potentially increased the risk of recession. These events have had, and may continue to have, an adverse impact on the market price of our common stock.

While the Department of the Treasury, the Federal Reserve, and the FDIC took steps to ensure that depositors of recently failed banks would have access to their insured and uninsured deposits, and to facilitate sales of certain failed banks, there is no assurance that these or similar actions will restore customer confidence in the banking system, and we may be further impacted by concerns regarding the soundness of other financial institutions, or other future bank failures or disruptions. Any loss of client deposits or changes in our credit ratings could increase the cost of funding, limit access to capital markets or negatively impact our overall liquidity or capitalization. The cost of resolving the recent bank failures may also prompt the FDIC to increase its premiums above current levels or to issue additional special assessments.

These recent events and any future similar events may also result in changes to laws or regulations governing bank holding companies and banks, including higher capital requirements, or the imposition of restrictions through supervisory or enforcement activities, which could materially impact our business.


Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter, we did not sell any equity securities not registered under the Securities Act of 1933, as amended. Purchases of equity securities by the issuer and affiliated purchasers during the three months ended ~~September 30, 2022~~March 31, 2023 were as follows:

ISSUER PURCHASES OF EQUITY SECURITIES

Period Total Number of
Shares Purchased (1) Average
Price Paid
Per Share Total Number of Shares
Purchased as Part of
Publicly Announced
Plans (2) (3) Maximum Number of
Shares that May Yet Be
Purchased Under the Plans (3)
July 1, 2022 to July 31, 2022 1,916 $ 10.49 — 25,000,000
August 1, 2022 to August 31, 2022 7,971 11.69 — 25,000,000
September 1, 2022 to September 30, 2022 1,220 11.62 — 25,000,000
Total 11,107 $ 11.47 —


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares that May Yet Be Purchased Under the Plans (2)
January 1, 2023 to January 31, 2023	4,739	$	11.32	—	25,000,000
February 1, 2023 to February 28, 2023	711,344	11.91		—	25,000,000
March 1, 2023 to March 31, 2023	6,362	11.55		—	25,000,000
Total	722,445	$	11.90	—

(1)Includes repurchases made in connection with the vesting of employee restricted stock awards.

(2)On January 17, 2007, Valley publicly announced its intention to repurchase up to 4.7 million outstanding common shares in the open market or in privately negotiated transactions. On April 26, 2022, Valley terminated its 2007 stock repurchase plan.

~~(3)~~On April 26, 2022, Valley publicly announced a stock repurchase program for up to 25 million shares of Valley common stock. The authorization to repurchase will expire on April 25, 2024.


Item 5.			Other Items

None.


Item 6.			Exhibits


(3)	Articles of Incorporation and By-laws:
	(3.1)	Restated Certificate of Incorporation of the Registrant, incorporated herein by reference to Exhibit 3.1 to the Registrant's Form 10-Q Quarterly Report filed on August 7, 2020.
	(3.2)	By-laws of the Registrant, as amended and restated, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K Current Report filed on October 24, 2018.
~~(10)~~	~~Material Contracts:~~
	~~(10.1)~~	Second Supplemental Indenture, dated as of September 20, 2022, by and between Valley National Bancorp and U.S. Bank Trust Company, National Association (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on September 20, 2022).

(31.1)	Certification of Ira Robbins, Chairman of the Board and Chief Executive Officer of the Company, pursuant to Securities Exchange Rule 13a-14(a).*
(31.2)	Certification of Michael D. Hagedorn, Senior Executive Vice President and Chief Financial Officer of the Company, pursuant to Securities Exchange Rule 13a-14(a).*
(32)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Ira Robbins, Chairman of the Board and Chief Executive Officer of the Company, and Michael D. Hagedorn, Senior Executive Vice President and Chief Financial Officer of the Company.**
(101)	Interactive Data File (XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) **
(104)	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Filed herewith.
**			Furnished herewith

9184

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

VALLEY NATIONAL BANCORP

(Registrant)

Date:

/s/ Ira Robbins

~~November 8, 2022~~May 5, 2023

Ira Robbins

Chairman of the Board and

Chief Executive Officer

(Principal Executive Officer)

Date:

/s/ Michael D. Hagedorn

~~November 8, 2022~~May 5, 2023

Michael D. Hagedorn

Senior Executive Vice President and

Chief Financial Officer

(Principal Financial Officer)

9285


	Nine Months Ended September 30,
	2022					2021
Troubled Debt Restructurings	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	($ in thousands)
Commercial and industrial	79	$	109,779	$	105,495	16	$	21,822	$	19,060
Commercial real estate:
Commercial real estate	4	16,259		15,660		11	26,710		26,730
Construction	2	11,025		7,811		2	17,599		17,599
Total commercial real estate	6	27,284		23,471		13	44,309		44,329
Residential mortgage	9	5,135		5,116		12	2,974		2,909
Consumer	1	125		123		1	170		163
Total	95	$	142,323	$	134,205	42	$	69,275	$	66,461


	Three Months Ended September 30, 2022
	Consumer Lending			Commercial Lending			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	8,307,993		$	36,033,901		$	6,189,348		$	50,531,242

Interest income	$	70,590		$	425,930		$	40,208		$	536,728
Interest expense	12,288			53,294			17,154			82,736
Net interest income	58,302			372,636			23,054			453,992
Provision (credit) for credit losses	7,182			(5,347)			188			2,023
Net interest income after provision for credit losses	51,120			377,983			22,866			451,969
Non-interest income	19,637			23,510			13,047			56,194
Non-interest expense	24,352			31,759			205,528			261,639
Internal transfer expense (income)	26,268			113,932			(140,200)			—
Income before income taxes	$	20,137		$	255,802		$	(29,415)		$	246,524
Return on average interest earning assets (pre-tax)	0.97		%	2.84		%	(1.90)		%	1.95		%


	Nine Months Ended September 30, 2022
	Consumer Lending			Commercial Lending			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,978,732		$	32,551,062		$	6,075,623		$	46,605,417

Interest income	$	193,186		$	1,036,276		$	100,671		$	1,330,133
Interest expense	20,218			84,356			35,738			140,312
Net interest income	172,968			951,920			64,933			1,189,821
Provision for credit losses	14,457			34,590			531			49,578
Net interest income after provision for credit losses	158,511			917,330			64,402			1,140,243
Non-interest income	50,540			54,815			48,642			153,997
Non-interest expense	59,711			81,292			617,706			758,709
Internal transfer expense (income)	92,544			371,213			(463,757)			—
Income before income taxes	$	56,796		$	519,640		$	(40,905)		$	535,531
Return on average interest earning assets (pre-tax)	0.95		%	2.13		%	(0.90)		%	1.53		%


	Nine Months Ended September 30, 2021
	Consumer Lending			Commercial Lending			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,176,086		$	25,465,276		$	5,261,185		$	37,902,547

Interest income	$	179,151		$	759,097		$	55,999		$	994,247
Interest expense	15,639			55,497			28,511			99,647
Net interest income	163,512			703,600			27,488			894,600
(Credit) provision for credit losses	(6,538)			27,825			(353)			20,934
Net interest income after provision for credit losses	170,050			675,775			27,841			873,666
Non-interest income	47,445			29,144			40,201			116,790
Non-interest expense	53,161			80,276			373,591			507,028
Internal transfer expense (income)	60,026			212,931			(272,957)			—
Income (loss) before income taxes	$	104,308		$	411,712		$	(32,592)		$	483,428
Return on average interest earning assets (pre-tax)	1.94		%	2.16		%	(0.83)		%	1.70		%